-----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, WzmbFQ5q7qKl8HQaaxWQPIM2XKaydDtZQQ2Ppt9Z3MuusJw6hDoggRbo9vvAvdnc G9tlGyPvmLAbXdEYAf4HGA== 0000950130-96-000992.txt : 19960328 0000950130-96-000992.hdr.sgml : 19960328 ACCESSION NUMBER: 0000950130-96-000992 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP /DE/ CENTRAL INDEX KEY: 0000821202 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 311269627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09699 FILM NUMBER: 96539113 BUSINESS ADDRESS: STREET 1: HIGHWAY 73 CITY: GEISMAR STATE: LA ZIP: 70734 BUSINESS PHONE: 5046736121 MAIL ADDRESS: STREET 1: HIGHWAY 73 STREET 2: 180 EAST BROAD STREET 25TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43215 FORMER COMPANY: FORMER CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: DECEMBER 31, 1995 Commission file number: 1-9699 ----------------- ------ BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP Delaware 31-1269627 ----------------------- ------------------- (State of organization) (I.R.S. Employer Identification No.) Highway 73, Geismar, Louisiana 70734 (614) 225-4482 -------------------------------------------- -------------- (Address of principal executive offices) (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Depositary Units Representing New York Stock Exchange Common Units SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE __________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____. ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein. [x] __________________________________ Aggregate market value in thousands of the Common Units held by non- affiliates of the Registrant based upon the average sale price of such Units on February 9, 1996 was approximately $505 million. Number of Common Units outstanding as of the close of business on February 9, 1996: 36,750,000. ================================================================================ The Exhibit Index is located herein at sequential page 36. 1 PART I ITEM I. BUSINESS - ---------------- GENERAL Borden Chemicals and Plastics Limited Partnership (the "Company" or "Partnership") is a limited partnership formed in 1987 to acquire, own and operate polyvinyl chloride resins ("PVC"), methanol and other chemical plants located in Geismar, Louisiana, and Illiopolis, Illinois, that were previously owned and operated by Borden, Inc. ("Borden"). The three principal product groups manufactured at these facilities are (i) PVC Polymers Products, which consist of PVC resins and feedstocks (such as vinyl chloride monomer ("VCM") and acetylene), (ii) Methanol and Derivatives, which consist of methanol and formaldehyde, and (iii) Nitrogen Products, which consist of ammonia and urea. During 1995, PVC Polymers Products, Methanol and Derivatives and Nitrogen Products accounted for 61%, 25% and 14%, respectively, of the Company's revenues. The Company seeks to increase its productive capacity through selective expansions of its existing facilities and "debottlenecking" of production facilities at its plants. From 1988 to 1995, the Company increased overall capacity of the Geismar and Illiopolis plants by 22.5% through various expansions and "debottlenecking" projects at a cost of approximately $55 million. On May 2, 1995, the Company, through its subsidiary operating partnership (the "Operating Partnership"), completed the purchase of Occidental Chemical Corporation's ("OxyChem") Addis, Louisiana PVC manufacturing facility and related assets ("Addis Facility"). The Addis Facility has an annual proven production capacity of 450 million pounds per year, which increased the Company's stated annual capacity for PVC resin production by approximately 50%. The cash purchase price for the Addis Facility was $100.4 million (see "Acquisition"). The Company's production complex at Geismar, Louisiana, its plant at Illiopolis, Illinois, and the Addis Facility produce products for the following applications:
- ----------------------------------------------------------------------------- PRODUCTS LOCATION PRINCIPAL APPLICATIONS - ----------------------------------------------------------------------------- PVC POLYMERS PRODUCTS PVC Geismar Water distribution pipe, residential Illiopolis siding, wallcoverings, vinyl flooring Addis VCM Geismar Raw material for the Company's PVC operations METHANOL AND DERIVATIVES Methanol Geismar Formaldehyde, MTBE, adhesives and fibers or raw materials for the Company's formaldehyde operations Formaldehyde Geismar Pressed wood products, adhesives, fibers NITROGEN PRODUCTS Ammonia Geismar Fertilizers, fibers, plastics, explosives Urea Geismar Fertilizers, animal feeds, adhesives plastics
2 The Company's plants generally can be operated at rates in excess of stated capacity to take advantage of market opportunities without undue adverse effects. References to capacity assume normal operating conditions, including downtime and maintenance. The Company's objective is to operate the Geismar, Illiopolis and Addis plants at or near full capacity because of the reduced operating costs per unit of output at full operation. The integrated design of the Company's plants provides it with a high degree of flexibility to shift production volumes according to market conditions efficiently utilize by-product streams. The Company's products are produced through the highly integrated lines set below: PVC POLYMERS PRODUCTS PVC Resins - PVC is the second largest volume plastic material produced in the world. The Company produces general purpose and specialty purpose PVC resins at three plants - one located at the Geismar complex, one at Illiopolis and another at Addis - with stated annual capacities of 500 million, 380 million and 450 million pounds of PVC resins, respectively. The PVC resin plants operated at approximately 98% and 107% of combined capacity in 1995 and 1994, respectively. Although there have been year-to-year fluctuations in product mix, the Company has over time concentrated on the higher margin grades of PVC resin and reduced its dependence on commodity pipe grade PVC resins, which have historically experienced lower margins. Based on data from the Society of the Plastics Industry, the Company believes its production currently accounts for approximately 10% of total industry domestic capacity of PVC resins. The PVC resin industry experienced strong demand during 1994 and the first half of 1995. Producer inventories during this time were reduced to minimal levels, while plants were operating at maximum capacities. As a result, published prices for PVC resins increased from an average of $0.32 per pound during the fourth quarter of 1993 to an average of $0.40 per pound during the third quarter of 1995. Beginning in the fourth quarter of 1994, the continued buildup of PVC inventories worldwide by converters peaked resulting in reduced PVC purchases during the second half of 1995. This has caused the published prices of PVC resins to drop to approximately $0.31 per pound during the fourth quarter of 1995. The Company anticipates PVC pricing will improve during the second half of 1996. During 1995 and 1994, approximately 10% and 12%, respectively, of the Company's total production of PVC resins was sold to Borden for use in its downstream vinyl conversion operations. The balance was purchased by many customers, none of which accounted for more than 8% of total PVC sales dollars. Unless there is a shortage of PVC resin capacity in the industry, demand for PVC resins generally tends to be seasonal with higher demand during spring months and lower demand during winter months. Production Process. PVC resins are produced by the polymerization of VCM, a raw material produced by the Company. The production by the Company of certain specialty grades of PVC resins also involves the use of certain quantities (approximately 8.7 million pounds annually) of vinyl acetate monomer, a raw material not produced by the Company. The Company purchases quantities of vinyl acetate monomer from Borden (which in turn purchases such raw material in bulk from third parties) or from unrelated third parties. Purchases from Borden have been and will be at prices that do not exceed the market price of vinyl acetate monomer. All the VCM used by the Company's Geismar and Illiopolis PVC resin plants is obtained from the Company's two Geismar VCM plants discussed below. Substantially all of the production of such VCM plants is consumed by the Company's PVC resins 3 plants at Geismar and Illiopolis. The Geismar PVC resin plants obtain VCM from the Company's adjacent VCM plants in the Geismar complex and the Illiopolis PVC resin plant obtains VCM from the Company's Geismar plant via rail. The VCM requirement at the Addis Facility is currently supplied by OxyChem which has arranged for physical delivery to the Addis Facility by pipeline via exchange, but which may also be supplied by rail car from OxyChem's plant in Deer Park, Texas or from OxyChem's joint venture facility ("OxyMar") in Corpus Christi, Texas. VCM is principally used in the production of PVC resins. The Company produces VCM by two processes: an ethylene process and an acetylene process. The finished product of both of these processes is essentially identical but the production costs vary depending on the cost of raw materials and energy. The ability to produce VCM by either process allows the Company the flexibility of favoring the process that results in the lower cost at any particular time. Ethylene-Based VCM. Ethylene-based VCM ("VCM-E") is produced by the Company at a 630 million pound stated annual capacity plant at the Geismar complex. The plant operated at approximately 106% and 103% of capacity during 1995 and 1994, respectively. Substantially all of the production of the VCM-E plant is consumed by the Company's PVC resin plants at the Geismar complex and Illiopolis. Ethylene and chlorine constitute the principal feedstocks used in the production of VCM-E. Both feedstocks are purchased by the Geismar plant from outside sources. Acetylene-Based VCM. Acetylene-based VCM ("VCM-A") is produced at a 320 million pound stated annual capacity plant at the Geismar complex. During both 1995 and 1994, the plant operated at approximately 88% of capacity. All of the VCM-A produced at the Geismar complex is consumed by the PVC resin plants at Geismar and Illiopolis. The Geismar complex contains the only VCM-A plant in the United States. The integration of the VCM-A plant with the other plants on site provides stability, cost and efficiency benefits to the plants located at the Geismar complex. Although ethylene has generally been regarded as a lower cost feedstock for the production of VCM, the VCM-A plant reduces the overall processing costs of the Geismar complex because the acetylene plant produces as a by-product acetylene off-gas, which is used as a feedstock in the production of methanol. In addition, hydrochloric acid, a feedstock used in the production of VCM-A, is produced as a by-product by the adjacent VCM-E plant. Furthermore, certain industrial plants located near the Geismar complex have excess supplies of hydrochloric acid that the Company is generally able to purchase at relatively low cost. In addition to hydrochloric acid, acetylene is a primary feedstock used in the production of VCM-A. Acetylene. Acetylene is primarily used as a feedstock for VCM-A and for other chemical intermediates. The Company has a 50% interest in a 200 million pound stated annual capacity acetylene plant at the Geismar complex, with the remaining 50% interest held by BASF Corporation ("BASF"). During 1995 and 1994, the plant operated at approximately 103% and 96%, respectively, of capacity, with all production being consumed by either the Company or BASF. During 1995, approximately 58% of the total production of the acetylene plant was used internally as a principal feedstock of the Geismar VCM-A plant. BASF accounted for approximately 42% of the plant's 1995 production, less than its full 50% share of production. Acetylene not required by BASF is available to the Company at cost. 4 It is anticipated that excess acetylene will be available at cost to the Company through at least 1996. The principal feedstocks used in the production of acetylene are natural gas and oxygen. Oxygen is obtained from certain air separation units and related air compression systems, which are jointly owned by the Company, BASF and Air Liquide America Corporation pursuant to joint venture arrangements. For a description of the Company's arrangements for the purchase of natural gas, see "Raw Materials". - -------------- As long as a subsidiary of Borden is the general partner of the Company, the plant will be operated and managed by employees of such general partner pursuant to an operating agreement with BASF. The agreement provides that, if a Borden subsidiary ceases to be the general partner, BASF will have the exclusive right to become the operator of the plant and the personnel necessary to operate the plant will be encouraged to accept employment with BASF. The Company's interest in the acetylene plant and the air separation systems is subject to certain rights of first refusal and limitations on transfer. In addition, the Company and the third parties who hold the other interests in such assets have mutual rights under certain circumstances, to require the other party to purchase its interests. The Company's principal competitors in the sale of PVC include Shintech, Formosa Plastics, OxyChem and Geon. METHANOL AND DERIVATIVES Methanol - Methanol is used primarily as a feedstock in the production of other chemicals. Such chemicals include formaldehyde, which is used in the manufacture of wood building products and adhesives, and MTBE, which is used as a gasoline additive. During the fourth quarter of 1995, the Company completed an expansion of its existing methanol plant. This expansion increased the Company's stated annual capacity by 30 million gallons to 330 million gallons per year. During 1995 and 1994, the plant operated at approximately 108% and 102%, respectively, of capacity. From early 1994 through early 1995, market conditions for methanol improved significantly due to limited growth in the supply of methanol and industry consolidation during the past several years as well as strong demand for MTBE and formaldehyde. Methanol sales prices have declined since early 1995 and recent industry announcements indicated sales at contract prices in the range of $0.40 to $0.45 per gallon. The outlook for methanol continues to be uncertain, but the Company believes that its methanol sales prices during 1996 are likely to remain at current levels. The Company believes its stated annual capacity represents approximately 14% of total domestic capacity. The Company's main competitors in the sale of methanol include Methanex, Terra Industries, Hoechst Celanese and Lyondell. In 1995, approximately 42% of methanol production was sold to third parties (other than Borden). Borden accounted for approximately 28% of such production for its downstream formaldehyde production. Approximately 19% of production was used internally in the production of formaldehyde and the remaining approximately 11% was used primarily to satisfy tolling and exchange arrangements. No customer (other than Borden) accounted for more than 12% of total methanol sales dollars in 1995. The primary raw material feedstock used in the production of methanol is natural gas. The efficiency of the Geismar methanol plant has been enhanced by using the by-product of the Geismar acetylene plant, acetylene off-gas, as a partial substitute feedstock for purchased natural gas. Natural gas represented approximately 65% of the Company's total cost of producing methanol during 1995. Formaldehyde. Formaldehyde is a chemical intermediate used primarily in the production of plywood and other pressed wood products. The Company produces 50%- 5 concentration formaldehyde (which is 50% formaldehyde and 50% water) at three units at the Geismar complex. The formaldehyde plants have annual capacities of 270, 190 and 180 million pounds per year, respectively, for the 50%-concentration formaldehyde. During 1995 and 1994, the three plants operated at approximately 102% and 99%, respectively, of combined capacity. The smaller plant also is capable of producing urea-formaldehyde concentrate for the fertilizer industry. If operated for production of urea-formaldehyde, the smaller plant's stated annual capacity would be 125 million pounds. Formaldehyde demand generally is influenced by the construction industry and housing starts. Total United States production capacity of 50%-concentration formaldehyde is approximately 7.4 billion pounds, with the formaldehyde units at the Geismar complex representing 640 million pounds, approximately 9%, of such total. Major competitors of the Company include Georgia Pacific and Neste. During 1995, approximately 32% of formaldehyde production was sold to Borden and approximately 2% was utilized by the Company in the production of urea- formaldehyde concentrate for the fertilizer industry. The remaining 66% was purchased by an unaffiliated third party pursuant to a ten-year supply contract signed in 1989. The contract requires the Company to supply in the future up to 78% of its annual capacity to the third party to the extent necessary to satisfy that party's formaldehyde requirements. The principal feedstock used in the production of formaldehyde is methanol. The Geismar formaldehyde plants obtain all such feedstock from the adjacent methanol plant. Borden produces formaldehyde and urea-formaldehyde concentrate at other facilities located in the United States and facilities outside the United States. The Company does not have any interest in such other facilities and, accordingly, Borden may be a competitor of the Company with respect to formaldehyde and urea-formaldehyde concentrate. The Partnership Agreement provides that the Company may not significantly expand the capacity of the Geismar formaldehyde plants without special approval. The Company is intended to be a limited purpose partnership and the Partnership Agreement provides that the General Partner shall have no duty to propose or approve, and in its sole discretion may decline to propose or approve, any such expansion. NITROGEN PRODUCTS Ammonia. Ammonia is a commodity chemical used primarily for fertilizer applications and as an intermediate for other agricultural chemicals such as pesticides and herbicides. Approximately 85% of domestic ammonia production is consumed directly or indirectly in fertilizer applications. The Company produces ammonia at a 400,000 ton stated annual capacity plant located at the Geismar complex. During 1995 and 1994, the Company operated at approximately 109% and 96%, respectively, of capacity. In the latter half of 1993 and continuing throughout 1994 and 1995, the worldwide supply of ammonia experienced a series of disruptions and reductions due to plant shutdowns, operating problems and interruptions in the supply of natural gas, the primary feedstock in the production of ammonia. At the same time, demand for ammonia, particularly in Asia (China, India and Pakistan), increased for both industrial and fertilizer applications. These factors combined to cause occasional shortages of ammonia in the United States, which is a net importer of nitrogen products, and increase selling prices for ammonia. 6 Demand for ammonia is seasonal, with prices tending to be higher in the spring and fall months than during the remainder of the year. In addition, fertilizer demand is sharply affected by swings in crop acreage. During 1995, approximately 64% of ammonia production was sold to third parties (other than Borden), approximately 35% of production was used by the Company's adjacent urea plant, and approximately 1% of production was sold to Borden. During 1995, five customers accounted for approximately 60% of total ammonia sales dollars with no customer accounting for more than 22% of total ammonia sales dollars. The Company's stated annual capacity represents just under 2% of total North American capacity. The Company's major competitors include Arcadian, Farmland and Terra Industries. Urea. Urea is a commodity chemical which is used primarily in fertilizer applications. Approximately 80% of domestic production of urea is consumed in fertilizer applications. Urea's high nitrogen content (46%) makes it an effective and popular dry nitrogen fertilizer. In addition, urea is used in the production of urea-formaldehyde resins used in the wood building products industry. The Company produces granular urea at a 250,000 ton stated annual capacity plant at the Geismar complex. During 1995 and 1994, the plant operated at approximately 103% and 91%, respectively, of capacity. Because of the importance of the agricultural chemical industry as a market for urea, demand is affected sharply by swings in crop acreage. In addition, like ammonia, demand for urea is seasonal, with prices tending to be higher in the spring and fall months than during the remainder of the year. Worldwide urea production has expanded rapidly over the past 20 years, particularly in countries with abundant supplies of low cost natural gas. Like ammonia, urea demand has suffered during recent years from reduced United States fertilizer demand. It also has been affected even more severely than ammonia by imports from third world countries because storage and shipping of urea is easier and less costly than is the case with ammonia. Competition from imports has moderated recently as the declining value of the United States dollar has made United States markets less attractive. Urea prices remained stable in 1995 due to many of the same factors which influenced the price of ammonia. However, unlike ammonia, the supply of urea has increased during this time period as several new world scale plants came on stream. This factor has kept urea prices at relatively stable levels in spite of the increasing demand. During 1995, approximately 61% of the Company's urea was sold to third parties, approximately 38% to Borden, and the remaining approximately 1% was used internally by the Company in the production of urea-formaldehyde concentrate. The Company's stated annual capacity represents approximately 3% of total North American capacity. The Company's major competitors include Arcadian, Unocal and CF Industries. The principal feedstocks used in the production of urea are ammonia and carbon dioxide, which the Company obtains from its adjacent ammonia plant. RAW MATERIALS The principal purchased raw material used in the Company's operations is natural gas. In 1995, the Company purchased over 65 million MMBTUs of natural gas for feedstock and as an energy source. Currently, the Company is one of the largest industrial purchasers of natural gas in the state of Louisiana. Natural gas is 7 supplied by pipeline to the Geismar complex by six major natural gas suppliers. In 1995, natural gas represented 30%, 56% and 65% of total production costs for acetylene, ammonia and methanol, respectively, and 26% of the Company's total production costs. The Company purchases the majority of its natural gas under long-term, market sensitive supply contracts. The cost of purchasing natural gas is, in general, greater in winter months, reflecting increased demand for natural gas by consumers and industry during such months. Although the Company has diversified its suppliers and does not currently anticipate any difficulty in obtaining adequate natural gas supplies, there can be no assurance that the Company will in the future be able to purchase adequate supplies of natural gas at acceptable price levels. The Company purchases other raw materials for its operations, principally ethylene and chlorine. Ethylene is currently supplied by pipeline to the Geismar facility by several suppliers. Chlorine is supplied by rail car to the Geismar complex by various suppliers. The major raw material for the Illiopolis PVC plant, VCM, is supplied by rail car from the Geismar facility. In addition, in connection with the production of certain specialty grades of PVC resins, the Company purchases certain quantities of vinyl acetate monomer. See "-PVC Polymers Products-Production Process". The Company purchases its VCM requirements for the Addis Facility under a VCM supply agreement entered into with OxyChem at the closing of the Acquisition. The Company does not believe that the loss of any present supplier would have a material adverse effect on the production of any particular product because of numerous, competitive alternate suppliers. Because raw materials have accounted for a high percentage of the Company's total production costs, and are expected to continue to represent a high percentage of such costs for the Company, the Company's ability to pass on increases in costs of these raw material feedstocks will have a significant impact on operating results. The ability to pass on increases in feedstock and fuel costs is, to a large extent, dependent on the then existing market conditions. Because of the large volume of purchases of natural gas, any increase in the price of natural gas or a shortage in its availability could materially adversely affect the Company's income and cash flow from operations and its ability to service its debt obligations. INSURANCE The Company maintains property, business interruption and casualty insurance which it believes is in accordance with customary industry practices, but it is not fully insured against all potential hazards incident to its business. The Company also maintains pollution legal liability insurance coverage. However, because of the complex nature of environmental insurance coverage and the rapidly developing case law concerning such coverage, no assurance can be given concerning the extent to which its pollution legal liability insurance, or any other insurance that the Company has, may cover environmental claims against the Company. Insurance, however, generally does not cover penalties or the costs of obtaining permits. See "Legal Proceedings". The Company is included in Borden's master insurance program, which includes property damage and liability insurance. Under its risk retention program, Borden maintains deductibles of $2.5 million, $0.5 million and $0.5 million per occurrence for property and related damages at the Geismar, Illiopolis and Addis facilities, respectively, and deductibles ranging from $1.0 million to $3.0 million per event for liability insurance. 8 MARKETING The Company's PVC resin sales are conducted through a professional staff of nine trained personnel geographically located in nine territories, supported by a regional sales office located in Northbrook, Illinois. In addition to the regional sales managers, there are three product sales managers performing marketing functions. All are employees of Borden. The Company's other products are similarly marketing through a professional field sales organization of three Borden employees and two additional marketing managers under the management of the director of non-PVC resins sales and marketing located at Geismar. The professionals involved in this sales function are geographically positioned in three locations covering the United States. The Company's sales activity is based on customer contact on a regular basis to secure and maintain long-term supply relationships. A substantial portion of the Company's sales is made under contracts with annual negotiations relating to specific conditions of sales. UTILITIES The Geismar complex operates three high thermal efficiency co-generation units providing the site with low cost electricity, steam and high temperature reformer combustion air. Each unit is composed of a natural gas burning turbine/generator unit combined with a steam producing heat recovery system (i.e., the "co-generation" of electricity and steam). The co-generation units are designed to provide 100% of the electricity, a significant portion of the steam, and a portion of the reformer combustion air requirements of the Geismar complex at full production levels. These units have electrical outputs of 20, 35 and 35 megawatts, respectively. The electricity supplied by the units through a substation owned by Monochem, Inc. ("Monochem"), a corporation of which the Partnership owns 50% of the capital stock, usually exceeds the requirement of the Geismar complex with the excess production being sold to Gulf States Utilities at its "avoided cost" rate. The Company's interest in Monochem is subject to certain rights of first refusal and limitations on transfer. Water requirements at the Geismar complex are obtained through Monochem from the Mississippi River. At Illiopolis, a municipal water company supplies the facility with its water requirements. Because the Illiopolis facility represents a significant portion of the demand for water supply from the municipal water company, the Company manages the operations of the water company on a cost-reimbursed basis. The Addis Facility obtains its electricity and water requirements from local public utilities. Natural gas is purchased by pipeline from various intrastate suppliers. PURCHASE AND PROCESSING AGREEMENTS In connection with the formation of the Company in 1987, Borden entered into certain purchase agreements ("Purchase Agreements") and processing agreements ("Processing Agreements") with the Company covering the following products: PVC resins, methanol, ammonia, urea, formaldehyde and urea-formaldehyde concentrate. The Purchase and Processing Agreements expire in November 2002, subject to termination by Borden in the event BCPM ceases to be the general partner of the Company, other than by reason of (i) the withdrawal of BCPM as general partner under circumstances where such withdrawal violates the Partnership Agreement, (ii) removal of BCPM as general partner by the Unitholders under circumstances where cause exists or (iii) any other event except (x) voluntary withdrawal by BCPM as general partner of the Company under circumstances where such withdrawal does not violate the Partnership Agreement and such withdrawal is approved by a Majority Interest or (y) 9 the removal of BCPM as general partner of the Company by action of the Unitholders under circumstances where cause does not exist. The Purchase Agreements require Borden to purchase from the Company and the Company to supply to Borden, subject to certain monthly quantity limits, at least 85% (and at the option of Borden up to 100%) of the quantities of PVC resins, methanol, ammonia and urea required by Borden for use in its plants in the continental United States. Under the Purchase Agreements, the price for PVC resins, ammonia, urea and methanol generally will be an amount equal to the monthly weighted average price per unit that the Company charges its lowest- priced major customer (other than Borden). If the Company does not make any sales to any major customers other than Borden, then the price to Borden will be the lowest prevailing price in the relevant geographic area. The Purchase Agreements also provide that the Company is required to meet competitive third- party offers or let Borden purchase the lower-priced product from such third parties in lieu of purchases under the Purchase Agreements. The Processing Agreements for formaldehyde and urea-formaldehyde concentrate essentially require Borden to utilize the processing capacity of the formaldehyde plants so that the formaldehyde plants operate at no less than 90% of capacity, after taking into account the purchases of formaldehyde by an unaffiliated third party under a long-term requirements contract. Although such third party's current requirements for formaldehyde exceed 200 million pounds per year, in the event that such third party's annual requirements are less than such amount, Borden has the option of reducing or terminating its obligation to utilize such processing capacity. Under the Processing Agreements, Borden is required to pay the Company a fee for each pound of formaldehyde and urea- formaldehyde concentrate processed equal to the Company's processing costs plus a per pound charge. The per-pound charge is subject to increase or decrease based on changes in the Consumer Price Index from October 1987. The Processing Agreements also require the Company to meet competitive third party offers covering formaldehyde unless meeting such offer would impose a significant economic penalty on the Company, in which case Borden will be permitted to accept such offer and reduce its obligations under the Processing Agreements by a corresponding amount. The Company believes that the pricing formulas set forth in the Purchase and Processing Agreements have in the past provided aggregate prices and processing charges that Borden would have been able to obtain from unaffiliated suppliers, considering the magnitude of Borden's purchases, the long-term nature of such agreements and other factors. The Company believes that this will continue to be the case in the future. There may be conditions prevailing in the market at various times, however, under which the prices and processing charges set under the Purchase and Processing Agreements could be higher or lower than those obtainable from unaffiliated third parties. The Company is free to sell or otherwise dispose of, as it deems appropriate, any quantities of PVC resins, ammonia, urea, methanol or formaldehyde which Borden is not required to purchase. In addition, the Purchase and Processing Agreements do not cover acetylene, VCM or industrial gases, which are either consumed internally by the Company or have not been historically purchased by Borden. Because the foregoing Purchase and Processing Agreements are requirements contracts, sales of products thereunder are dependent on Borden's requirements for such products. Such requirements could be affected by a variety of factors, including a sale or other disposition by Borden of all or certain of its manufacturing plants to unaffiliated purchasers (in which event such agreements shall not apply to such purchasers unless otherwise agreed to by such purchasers). 10 In the event that, whether as a result of the change of control of Borden or otherwise, Borden were to sell or otherwise dispose of all or certain of its plants or otherwise reorient its businesses, Borden's requirements for products sold or processed by the Company under the Purchase and Processing Agreements could be diminished or eliminated. The Company anticipates that if Borden were to sell all or certain of its chemical manufacturing facilities, a purchaser may be interested in negotiating the continuation of all or certain of the Purchase and Processing Agreements. COMPETITION The business in which the Company operates is highly competitive. The Company competes with major chemical manufacturers and diversified companies, a number of which have revenues and capital resources exceeding those of the Company. Because of the commodity nature of the Company's products, the Company is not in a position to protect its position by product differentiation and is not able to pass on cost increases to its customers to the extent its competitors do not pass on such costs. In addition to price, other significant factors in the marketing of the products are delivery, quality and, in the case of PVC resins, technical service. The Company believes that the overall efficiency, integration and optimization of product mix of the facilities at Geismar, Illiopolis, and Addis make the Company well positioned to compete in the markets it serves. Borden has agreed that, so long as BCP Management, Inc. ("BCPM") is the general partner of the Company, Borden will not engage in the manufacture or sale in the United States of methanol, ammonia, urea, acetylene, VCM or PVC resins. However, if BCPM (i) is removed as general partner by the Unitholders under circumstances where cause exists or (ii) withdraws as general partner under circumstances where such withdrawal violates the existing partnership agreements ("Partnership Agreements"), Borden shall not engage in such manufacture or sale for a period of two years from the date of such removal or withdrawal. If Borden were to sell any of its manufacturing facilities to an unaffiliated purchaser that is not a successor to Borden, the purchasers of such facilities would be free to compete with the Company. TRADEMARKS The Company entered into a Use of Name and Trademark License Agreement ("Use of Name and Trademark License Agreement") with Borden pursuant to which the Company is permitted to use in its name the Borden name and logo. The Use of Name and Trademark License Agreement and the right to use the Borden name and logo shall terminate in the event that BCPM ceases to be the General Partner. MANAGEMENT The General Partner, BCPM, manages and controls the activities of the Company and the Holding Company and the General Partner's activities are limited to such management and control. Neither the Holding Company nor the Unitholders participate in the management or control of the Company. The General Partner has fiduciary duties to Unitholders. Notwithstanding any limitation on obligations or duties, the General Partner will be liable, as general partner, for all the debts of the Company (to the extent not paid by the Company) other than any debt incurred by the Company that is made specifically nonrecourse to the General Partner. The Company does not directly employ any of the persons responsible for managing or operating the business of the Company, but instead relies on the officers of the General Partner and employees of Borden who provide support to or perform services for the General Partner and reimburses Borden (on its own or on the General Partner's behalf) for their services. 11 ENVIRONMENTAL AND SAFETY REGULATIONS General. The Company's operations are subject to federal, state and local environmental, health and safety laws and regulations, including laws relating to air quality, hazardous and solid wastes, chemical management and water quality. The Company has expended substantial resources, both financial and managerial, to comply with environmental regulations and permitting requirements, and anticipates that it will continue to do so in the future. Although the Company believes that its operations generally are in material compliance with these requirements, there can be no assurance that significant costs, civil and criminal penalties, and liabilities will not be incurred. The Company holds various environmental permits for operations at each of its plants. In the event a governmental agency were to deny a permit application or permit renewal, or revoke or substantially modify an existing permit, such agency action could have a material adverse effect on the Company's ability to continue the affected plant operations. Plant expansions are subject to securing necessary environmental permits. Environmental laws and regulations have changed substantially and rapidly in recent years, and the Company anticipates continuing changes. The trend in environmental regulations is to place more restrictions and limitations on activities that may affect the environment, such as emissions of pollutants and the generation and disposal of wastes. Increasingly strict environmental regulations have resulted in increased operating costs for the Company, and it is possible that the costs of compliance with environmental, health and safety laws and regulations will continue to increase. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Environmental Expenditures." The Company maintains an environmental and industrial safety and health compliance program and conducts internal regulatory audits at its Geismar, Illiopolis and Addis plants. The Company's plants have had a history of involvement in regulatory, enforcement and variance proceedings in connection with safety, health and environmental matters. Risks of substantial costs and liabilities are inherent in certain plant operations and certain products found at and produced by the plants, as they are with other enterprises engaged in the chemical business, and there can be no assurance that significant costs and liabilities will not be incurred. Air Quality. The Geismar, Illiopolis and Addis plants emit air contaminants and are subject to the requirements of the Clean Air Act and comparable state statutes. Many of the existing requirements under these laws are embodied in permits issued to the plants by state environmental agencies. The Company believes that the Geismar, Illiopolis and Addis plants generally are in material compliance with these requirements. The 1990 Amendments to the Clean Air Act (the "1990 Clean Air Act Amendments") substantially revised and expanded the air pollution control requirements throughout the United States. As discussed below, certain of these new or revised requirements may impact the Geismar, Illiopolis and Addis plants. The 1990 Clean Air Act Amendments require more stringent controls on volatile organic compounds ("VOC") emissions in ozone non-attainment areas and also require, subject to certain exceptions, the control of nitrogen oxide ("NOx") emissions in such areas. The Geismar and Addis plants are located in a "nonattainment area" for ozone under the 1990 Clean Air Act Amendments. Additional capital expenditures may be required at the Geismar and Addis plants in order to upgrade existing pollution control equipment and/or install additional control equipment to comply with the new, more stringent regulations for VOC and NOx. 12 The 1990 Clean Air Act Amendments and state laws and regulations also require certain sources to control emissions of hazardous air pollutants, including vinyl chloride. In particular, the EPA promulgated a rule in April 1994, which may require the modification of the existing emission control equipment at the Geismar facility. Capital expenditures may be necessary to comply with these control standards. The 1990 Clean Air Act Amendments further require "enhanced monitoring" of the emissions from certain pieces of equipment. Although monitoring systems are already in place at the Geismar, Illiopolis and Addis plants, capital expenditures may be necessary to upgrade the systems to comply with the "enhanced monitoring" requirement. Based on the information currently available to the Company, the Company does not believe that the capital expenditures that may be required at the Geismar, Illiopolis and Addis plants to comply with the 1990 Clean Air Act Amendments and corresponding state regulations will be material. However, because all the regulatory requirements under the 1990 Clean Air Act Amendments are not yet final, and the Company is continuing to evaluate the impact of such amendments on it, there can be no assurance that the actual costs will not exceed the Company's estimates. The United States Department of Justice ("DOJ"), at the request of the Environmental Protection Agency ("EPA"), has brought an enforcement proceeding against the Company and BCPM for alleged violation of the Clean Air Act, and other environmental statutes, at the Geismar facility. See "Legal Proceedings". OSHA and Community Right to Know. The Geismar, Illiopolis and Addis plants are subject to the requirements of the federal Occupational Safety and Health Act ("OSHA") and comparable state statutes. The Company believes that the Geismar, Illiopolis, and Addis plants generally are in material compliance with OSHA requirements, including general industry standards, vinyl chloride exposure requirements, recordkeeping requirements and chemical process safety standards. It is possible that changes in safety and health regulations, or a finding of noncompliance with current regulations, could result in additional capital expenditures or operating expenses for the Geismar, Illiopolis and Addis plants. The OSHA hazard communication standard and the EPA community right-to-know regulations under the Emergency Planning and Community Right-to-Know Act ("EPCRA") require the Company to organize information about the hazardous materials in the plants and to communicate that information to employees and certain governmental authorities. The Company has prepared a detailed hazard communication program and will continue this program as a part of its industrial safety and health compliance program. The Company is a member of the Community Awareness and Emergency Response ("CAER") program of the Chemical Manufacturers Association, as well as the Association's Responsible Care initiative. At Geismar, membership in such programs includes participation in the Geismar Area Mutual Aid organization, which maintains a community warning system for notification of chemical releases through the local sheriff's department. The Company believes that it generally is in material compliance with EPCRA. The Company is currently subject to a proceeding for alleged violations at the Illiopolis facility of release reporting requirements under EPCRA. This proceeding is discussed under "Legal Proceedings". Solid and Hazardous Waste. The Geismar, Illiopolis and Addis plants generate hazardous and nonhazardous solid waste and are subject to the requirements of RCRA and comparable state statutes. The Company believes that the Geismar, Illiopolis and Addis plants generally are in material compliance with RCRA. However, see "Legal Proceedings". 13 A primary trigger for RCRA requirements is the designation of a substance as a "hazardous waste". It is anticipated that additional substances will in the future be designated as "hazardous waste", which likely would result in additional capital expenditures or operating expenses for the Company. The Geismar complex is operating under RCRA interim status and has filed a permanent RCRA permit application for its valorization of chlorinated residuals ("VCR") unit and related tanks. However, the Company does not believe that the Geismar facility must obtain a RCRA permit and is challenging the applicability of the RCRA permit requirements to it. The Company's challenge to those permit requirements, the potential permitting costs, civil penalties and corrective action costs that it may incur if that challenge is unsuccessful, are discussed under "Legal Proceedings". The DOJ, at the request of the EPA, has brought an enforcement proceeding against the Company and BCPM for alleged violations of RCRA, and other environmental statutes, at the Geismar facility. See "Legal Proceedings". During the early 1990s, the Company shipped partially depleted mercuric chloride catalyst to the facility of Thor Chemicals S.A. (PTY) Limited ("Thor") in Cato Ridge, South Africa for recovery of mercury. In 1993 the Louisiana Department of Environmental Quality ("LDEQ") determined that the partially depleted catalyst was not a hazardous waste, although LDEQ reversed this position in 1994. The Company disagrees with this reversal. See "Legal Proceedings." Superfund. CERCLA, also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and the companies that disposed, or arranged for the disposal of, the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances and for damages to natural resources. In the ordinary course of the Company's operations, substances are generated that fall within the CERCLA definition of "hazardous substance". If such wastes have been disposed of at sites which are targeted for cleanup by federal or state regulatory authorities, the Company may be among those responsible under CERCLA or analogous state laws for all or part of the costs of such cleanup. The Geismar, Illiopolis and Addis plants have in the past and are expected to continue to generate hazardous substances and dispose of such hazardous substances at various offsite disposal sites. The DOJ, at the request of the EPA, has brought an enforcement proceeding against the Company and BCPM for alleged violation of CERCLA's reporting requirements, and other environmental requirements, at the Geismar facility. See "Legal Proceedings". Toxic Substances Control Act. The Company is subject to the Toxic Substances Control Act ("TSCA"), which regulates the development, manufacture, processing, distribution, importation, use, and disposal of thousands of chemicals. Among other requirements, TSCA provides that a chemical cannot be manufactured, processed, imported or distributed in the United States until it has been included on the TSCA Chemical Inventory. Other important TSCA requirements govern recordkeeping and reporting. For example, TSCA requires a company to maintain records of allegations of significant adverse reactions to health or the environment caused by chemicals or chemical processes. The Company believes that it generally is in material compliance with TSCA. Violations of TSCA can result in significant penalties. 14 Water Quality. The Geismar, Illiopolis and Addis plants maintain wastewater discharge permits for their facilities pursuant to the Federal Water Pollution Control Act of 1972 and comparable state laws. See Item 3 "Legal Proceedings" for a discussion of the Company's challenge to a wastewater permit for the Geismar facility. Where required, the Company and the Addis Facility also have applied for permits to discharge stormwater. The Company believes that the Geismar, Illiopolis and Addis plants generally are in material compliance with the Federal Water Pollution Act of 1972 and comparable state laws. In cases where there are excursions from the permit requirements, the Geismar and Illiopolis plants are taking action to achieve compliance, are working in cooperation with the appropriate agency to achieve compliance or are in good faith pursuing their procedural rights in the permitting process. The EPA has issued effluent regulations specifying amounts of pollutants allowable in direct discharges and in discharges to publicly owned treatment works. The Geismar, Illiopolis and Addis plants manufacture or use as raw materials a number of chemicals subject to additional regulation. Both federal and state authorities continue to develop legislation and regulations to control the discharge of certain toxic water pollutants. Passage of such legislation or regulations could necessitate additional capital expenditures to reduce discharges of these substances into the environment either during routine or episodic events. The Company does not believe that these legislative developments would have a material adverse impact on the Company's operations. It is common for chemical plants from time to time to encounter areas of groundwater contamination during the ordinary course of business. Typically, some of these contamination events are historical and cannot be documented as to the causal circumstances. While some contamination events have been identified at the Company's plants, it is the Company's policy, where possible and appropriate, to address and resolve these contamination events. The Company believes that environmental indemnities available to it would cover a substantial portion of these known or unknown contamination events. The Company does not believe that the known contamination events will have material adverse impact on the Company's operations. The Company believes that the Geismar, Illiopolis and Addis plants generally are in material compliance with all laws with respect to known groundwater contamination events. At the Geismar complex, Borden and the Company have complied with the Settlement Agreement with the state of Louisiana for groundwater remediation. See "Legal Proceedings" for further discussion. Present and Future Environmental Capital Expenditures. Although it is the Company's policy to comply with all applicable environmental, health and safety laws and regulations, in many instances the implementing regulations have not been finalized. Even where regulations or standards have been adopted, they are subject to varying and conflicting interpretations and implementation. In many cases, compliance with environmental regulations or standards can only be achieved by capital expenditures, some of which may be significant. Capital expenditures for environmental control facilities were approximately $1.4 million in 1995 and $1.7 million in 1994. To the extent estimates are available, capital expenditures for environmental control facilities are expected to total approximately $4.2 million in 1996 (although such estimate could vary substantially depending on the outcome of the various proceedings and matters discussed herein, and no assurance can be given that greater expenditures on the part of the Company will not be required as to matters not covered by the environmental indemnity from Borden). BORDEN ENVIRONMENTAL INDEMNITY Under the Environmental Indemnity Agreement, subject to certain conditions, Borden has agreed to indemnify the Company and the Holding Company in respect of environmental liabilities arising from facts or circumstances that existed and 15 requirements in effect prior to November 30, 1987, the date of the initial sale by Borden of the Geismar and Illiopolis plants to the Company (the "Transfer Date"). The Company is responsible for environmental liabilities arising from facts or circumstances that existed and requirements in effect on or after the Transfer Date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after the Transfer Date, Borden and the Company will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the asset in question (to the extent relevant). No claims can be made under the Environmental Indemnity Agreement after November 30, 2002, and no claim can, with certain exceptions be made with respect to the first $0.5 million of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3.5 million in the aggregate. Excluded amounts under the Environmental Indemnity Agreement have aggregated approximately $3.0 million through December 31, 1995. If the United States is successful in requiring the Company to perform corrective action at the Geismar facility or the LDEQ requires the Company to take further remedial measures in connection with the Settlement Agreement (see "Legal Proceedings"), the Company anticipates that a substantial portion of its corrective action costs would be covered by the Environmental Indemnity Agreement. The extent to which any penalties or permit costs that the Company may incur as a result of pending environmental proceedings will be subject to the Environmental Indemnity Agreement will depend, in large part, on whether such penalties or costs are attributable to facts or circumstances that existed and requirements in effect prior to the Transfer Date. ADDIS ENVIRONMENTAL INDEMNITY OxyChem has indemnified the Company for environmental liabilities arising from the manufacture, generation, treatment, storage, handling, processing, disposal, discharge, loss, leak, escape or spillage of any product, waste or substance generated or handled by OxyChem prior to the closing of the Acquisition, any condition resulting therefrom relating to acts, omissions or operations of OxyChem prior to such date, and any duty, obligation or responsibility imposed on OxyChem prior to such date under environmental laws in effect prior to such date to address such condition. However, except with regard to claims arising from OxyChem's disposal of waste at sites other than the Addis Facility, OxyChem has no indemnification obligation if the claim for indemnification is the result of a change in applicable law after the closing of the Acquisition. OxyChem's obligation to indemnify the Company for environmental liabilities is subject to certain limitations. There can be no assurance that the indemnification provided by OxyChem will be sufficient to cover all environmental liabilities existing or arising at the Addis Facility. PRODUCT LIABILITY AND REGULATION As a result of the Company's manufacture, distribution and use of different chemicals, the Company is, and in the future may be, subject to various lawsuits and claims, such as product liability and toxic tort claims, which arise in the ordinary course of business and which seek compensation for physical injury, pain and suffering, costs of medical monitoring, property damage, and other alleged harms. See "Legal Proceedings-General Proceedings". New or different types of claims arising from the Company's various chemical operations may be made in the future. 16 The United States Food and Drug Administration ("FDA") is proposing new regulations providing for the safe use of vinyl chloride polymers in food- contact articles. According to the FDA, such regulations are required because vinyl chloride monomer, a component of vinyl chloride polymer, has been shown to be a carcinogen. However, the FDA concludes in its proposal that there is a reasonable certainty of no harm from the exposure to the small amounts of vinyl chloride monomer that may result from the use of vinyl chloride polymers in food packaging which complies with the FDA's proposed regulations. Thus, the FDA proposal would continue to allow substantially all presently allowable uses, including all products currently made using products produced by the Company. While the FDA has tentatively concluded that such action will not have a significant effect on the human environment, it is considering whether to develop a full environmental impact statement to consider the potential effect on the environment of the disposal of these food-contact articles. The EPA has authority with respect to the safe use of vinyl chloride polymer pipe in municipal water systems and has not imposed any restrictions on its use. It is possible, however, that the FDA, the EPA, or other federal and state agencies may seek to impose additional restrictions on the use or disposal of vinyl chloride polymer. Moreover, while Borden has agreed to indemnify the Company in respect of liabilities arising from products (including but not limited to vinyl chloride polymer) shipped prior to the Transfer Date, the Company will be responsible for any subsequent product liabilities. EMPLOYEES The Partnership does not directly employ any of the persons responsible for managing and operating the Partnership, but instead reimburses BCPM for their services. On December 31, 1995 BCPM employed approximately 850 individuals. CASH DISTRIBUTIONS The Partnership distributes 100% of its Available Cash as of the end of each quarter on or about 45 days after the end of such quarter to Unitholders of record as of the applicable record date and to the General Partner. "Available Cash" means generally, with respect to any quarter, the sum of all cash receipts of the Partnership plus net reductions to reserves established in prior quarters, less cash disbursements and net additions to reserves in such quarter. The General Partner has broad discretion in establishing reserves, and its decisions regarding reserves could have a significant impact on the amount of Available Cash. The timing and amounts of additions and reductions to reserves may impact the amount of incentive distributions payable to the General Partner. As a result, distributions to Unitholders may over time be reduced from levels which would have been distributed if the General Partner were not able to control the timing of additions and reductions to reserves. Distributions by the Partnership of Available Cash are generally made 98% to the Unitholders and 2% to the General Partner, subject to the payment of an incentive distribution to the General Partner to the extent that a target level of cash distributions to the Unitholders is achieved for any quarter. The Amended and Restated Agreement of Limited Partnership of the Partnership (the "Partnership Agreement") provides that, after an amount equal to $0.3647 per Unit (the "Target Distribution") has been distributed for any quarter to Unitholders, the General Partner will receive 20% of any then remaining Available Cash for such quarter as an incentive distribution (in addition to its 2% regular distribution). ITEM 2. PROPERTIES - ------------------ Construction of the Geismar complex began over thirty years ago. Acetylene, methanol and VCM-A plants were completed in the early 1960s and ammonia and urea 17 plants were added during the period 1965 to 1967. A VCM-E plant and a formaldehyde plant were added in the mid 1970s, a second formaldehyde plant was brought on stream in 1986, and a third formaldehyde plant was brought on stream in 1991. In 1983 Borden completed construction of a PVC resin plant at the Geismar complex. During the early 1980s, the methanol, ammonia, and urea plants were modernized, which reduced energy consumption and expanded capacity. The urea plant was further modified to produce granular rather than prill product in 1993. The PVC resin facility at Illiopolis became operational in 1962, and was significantly upgraded in the late 1980s. The Addis Facility began operations in 1979. The Geismar complex is located on approximately 490 acres in Ascension Parish, Louisiana, adjacent to the Mississippi River between Baton Rouge and New Orleans. The Illiopolis PVC resin facility is located on approximately 45 acres in central Illinois between Springfield and Decatur. The Addis Facility is located on approximately 40 acres of a 220 acre site adjacent to the Mississippi River, approximately 20 miles from the Geismar complex. The following table sets forth the approximate annual capacity of each of the principal manufacturing plants at the Geismar complex and the PVC plants at Illiopolis and Addis, all of which are owned by the Company except as noted.
1988 1995 ANNUAL STATED CAPACITY ANNUAL STATED CAPACITY 7 YEAR CAPACITY PLANTS (STATED IN MILLIONS) (STATED IN MILLIONS) PERCENTAGE INCREASE - ----------------------------- -------------------- ----------------------- -------------------- Geismar, LA: PV Polymers Products PVC Resins............... 400 lbs. 500 lbs. 25.0% Acetylene-based VCM(1).. 320 lbs. 320 lbs. -- Ethylene-based VCM....... 550 lbs. 630 lbs. 14.5% Acetylene................ 190 lbs. 200 lbs. 5.3% Methanol and Derivatives Methanol................. 230 gals. 330 gals. 43.5% Formaldehyde I........... 210 lbs. 270 lbs. 28.6% Formaldehyde II(2)....... 160 lbs. 180 lbs. 12.5% Formaldehyde III......... -- 190 lbs. N/M Nitrogen Products Ammonia.................. .40 tons .40 tons -- Urea..................... .22 tons .25 tons 13.6% Illiopolis, IL: PVC Resins................. 350 lbs. 380 lbs. 8.6% Addis, LA: PVC Resins................. 450 lbs. 450 lbs. -- Total equivalent lbs.(3)..... 5,395 6,608 22.5%
(1) 50% owned by the Company (2) Also capable of producing urea-formaldehyde concentrate at an annual stated capacity of 125 million pounds. (3) Equivalent pounds is based on 6.63 pounds per gallon of methanol. Item 3. Legal Proceedings - ------- ----------------- Louisiana Groundwater Remediation Settlement Agreement - ------------------------------------------------------ In 1985, LDEQ and Borden entered into a settlement agreement ("Settlement Agreement") that called for the implementation of a long-term groundwater and soil remediation program at the Geismar complex to address contaminants, including ethylene dichloride ("EDC"). Also during this time frame, Borden 18 commenced closure of various units identified to have been contributors to the EDC contamination underlying the Geismar complex. Borden and the Company have implemented the Settlement Agreement, and have worked in cooperation with the LDEQ to remediate the groundwater and soil contamination. The Settlement Agreement contemplated, among other things, that Borden would install a series of groundwater monitoring and recovery wells, and recovery trench systems. The Company is addressing issues raised by LDEQ concerning whether the extent of the groundwater contamination has been identified. Borden has paid substantially all of the costs to date associated with the Settlement Agreement. It is unknown how long the remediation program will continue or whether the LDEQ will require the Company to incur costs to take further remedial measures in response to data generated by the planned additional testing. If the LDEQ requires the Company to take further remedial measures, the Company anticipates that a portion of such costs would be covered by the Environmental Indemnity Agreement. The extent to which any costs for further remedial measures required by LDEQ will be covered by the Environmental Indemnity Agreement will depend, in large part, on whether such remedial measures respond to facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale by Borden of the Geismar and Illiopolis plants to the Partnership. See Item 1 "Borden Environmental Indemnity." Federal Environmental Enforcement Proceeding - -------------------------------------------- On October 27, 1994, the DOJ, acting at the request of the EPA, filed an action against the Operating Partnership, the Partnership, and the General Partner in the United States District Court for the Middle District of Louisiana ("Geismar Enforcement Proceeding"). The complaint seeks civil penalties for alleged violations of RCRA, CERCLA and the Clean Air Act at the Geismar facility, as well as corrective action at that facility. Prior to the filing of the complaint, the Company and DOJ had engaged in settlement discussions, and the Company expects that such discussion will continue. The federal government's primary allegations for which it seeks penalties include claims that (i) the Company's international export to South Africa of a partially depleted mercuric chloride catalyst for recycling violated RCRA; (ii) the Company should have applied for a RCRA permit for operation of its VCR unit and related tanks before August 1991; and (iii) the Company should have applied for a RCRA permit for the north trench sump at the Geismar complex because such sump allegedly stored, or disposed of, hazardous waste. The government's allegations include other claims related to these and other alleged RCRA violations, as well as claims of alleged violations of immediate release reporting requirements under CERCLA and requirements governing particulate matter emissions under the Clean Air Act. The Company plans to vigorously defend itself against all of the above allegations. During the early 1990's, the Company sent partially depleted mercuric chloride catalyst to a facility in South Africa for recovery of the mercury. See the following "Export of Partially Depleted Mercuric Chloride Catalyst." In 1993, ------------------------------------------------------- LDEQ had determined that the catalyst was not a hazardous waste. However, because of a belief by the EPA that the partially depleted catalyst could be a hazardous waste and a reversal of LDEQ's 1993 determination, and pending the outcome of the Geismar Enforcement Proceeding, the Company has ceased exporting the partially depleted mercuric chloride catalyst for recycling and is currently handling it as if it were a hazardous waste. Accordingly, even if a court should determine that the partially depleted catalyst was a hazardous waste when it was exported, the Company does not anticipate that it would incur material additional expenditures to continue to manage the partially depleted catalyst as a hazardous waste. 19 In 1991, as a protective filing, the Company applied for a hazardous waste permit for the VCR unit and related tanks. In January 1994, in response to a petition from the Company to LDEQ for a determination that the VCR unit does not require a RCRA permit, LDEQ determined that the VCR unit is subject to RCRA. The Company continues to maintain that the VCR unit is not subject to RCRA and has filed appeals of LDEQ's determination in Louisiana State Courts. In May 1994, the Company filed a Complaint for Declaratory Judgment in the U.S. District Court in Baton Rouge seeking a determination that (i) the partially depleted mercuric chloride catalyst was not a hazardous waste when it was exported for recycling, (ii) the materials entering the VCR unit and related tanks are not hazardous waste and (iii) the north trench sump does not require a RCRA permit. In May 1995, certain adjoining landowners at the Geismar complex filed a motion to intervene in the Geismar Enforcement Proceedings claiming rights under CERCLA and RCRA to protect their property interests. The court granted a limited intervention on November 15, 1995 and the Company is vigorously defending against this intervention. If the Company is unsuccessful in prosecuting its May 1994 Declaratory Judgment Action, or in defending itself against the Geismar Enforcement Proceedings, it could be subject to three types of costs: (i) penalties, (ii) corrective action, and (iii) costs needed to obtain a RCRA permit. As to penalties, although the maximum statutory penalties that would apply in a successful enforcement action by the United States would be in excess of $150.0 million, the Company believes that, assuming the Company is unsuccessful and based on information currently available to it and an analysis of relevant case law and administrative decisions, the more likely amount of any liability for civil penalties would not exceed several million dollars. If the Company is unsuccessful in either the Declaratory Judgement Action or the Geismar Enforcement Proceedings, it may also be subject to costs for corrective action. The federal government can also require corrective action for a facility subject to RCRA permit requirements. Corrective action could require the Company to conduct investigatory and remedial activities at the Geismar complex concurrently with the groundwater monitoring and remedial program that the Company is currently conducting under the Settlement Agreement with LDEQ. The DOJ is seeking facility-wide corrective action to address the contamination at the Geismar complex. EPA has indicated that it intends to evaluate the adequacy of the existing groundwater remediation project performed under the Settlement Agreement with LDEQ, and to determine the potential for other areas of contamination on or near the Geismar complex. The cost of any corrective action could be material, depending on the scope of such corrective action. However, the actual cost of a facility-wide corrective action cannot be identified until the EPA provides substantially more information to the Company or until additional studies are done. If the Company is unsuccessful in either proceeding concerning its challenge to the applicability of the RCRA permit requirements to the VCR unit and related tanks, or the north trench sump, it will have to incur additional permitting costs. The Company estimates that its costs to complete the permitting process for the VCR unit and related tanks would be approximately $1.0 million. The Company believes that the costs for amending its pending RCRA permit application to include the north trench sump would not be material. 20 Because of the complex nature of environmental insurance coverage and the rapidly developing case law concerning such coverage, no assurance can be given concerning the extent to which insurance may cover environmental claims against the Company. However, insurance generally does not cover penalties or the cost of obtaining permits. Export of Partially Depleted Mercuric Chloride Catalyst - ------------------------------------------------------- During the early 1990s, the Company shipped partially depleted mercuric chloride catalyst to the facility of Thor Chemicals S.A. (PTY) Limited ("Thor") in Cato Ridge, South Africa for recovery of mercury. In 1993 the LDEQ determined that the partially depleted catalyst was not a hazardous waste, although LDEQ reversed this position in 1994. The Company disagrees with this reversal. The Company did not send mercury-containing sludge to the Thor facility. The Company believes that Thor's operations have included the production of mercuric chloride catalyst and the recovery of mercury from partially depleted catalyst. Recovery of mercury at Thor's facility was discontinued in March 1994 when the Department of Health in South Africa refused to renew a temporary license that had been granted to Thor. At such time, there were approximately 2,900 drums of partially depleted catalyst at the facility which had been shipped by the Company to Thor. In addition, in the spring of 1994 there were approximately 7,400 drums of other materials at the Thor facility which the Company had not sent there. In February 1995, Thor and three of its management personnel were tried by South Africa for the common law crime of culpable homicide and a number of alleged violations of the Machinery Occupational Safety Act of 1983 ("MOSA"), because of the deaths of two Thor employees. The prosecution alleged that the deaths were the result of mercury poisoning. In exchange for a plea by Thor that it had violated provisions of MOSA, the prosecution dropped the homicide charges against Thor and all the charges against Thor's management personnel. The court has sentenced Thor to a fine of R13,500.00, which is equivalent to approximately $3,800. The Company is aware that relatives of two deceased Thor employees, and a Thor employee allegedly suffering from mercury poisoning, have filed suit in the United Kingdom against Thor's parent company for negligence. A Commission of Inquiry, appointed by the President of South Africa, commenced hearings in February 1996, and published the following terms of reference: (1) to investigate the history and background of the acquisition of mercury catalyst stockpiled by Thor as well as additional mercury-containing sludge on the premises and to report on the further utilization or disposal thereof; (2) to recommend the best practical environmental option to address the problem of mercury-containing catalyst and/or waste currently on Thor's premises; (3) to report the results of the Commission's inquiry to the President of the Republic of South Africa as soon as conveniently possible; (4) to investigate deficiencies in the regulation and enforcement relating to the monitoring and control of mercury processing; and (5) to recommend steps which could contribute to the minimization of risk and to the protection of workers and the environment. In addition, the Minister of Water Affairs and Forestry has instructed his department's regional office to investigate alleged water pollution at and near the Thor facility. The Government of South Africa has not made any allegations or asserted any claims against the Company. The contract between the Company and Thor provides that title to, risk of loss, and all other incidents of ownership of the partially depleted catalyst would pass from the Company to Thor when the catalyst reached South Africa. The Company does not believe that it is liable for disposing of the approximately 2,900 drums of partially depleted catalyst remaining at the Thor facility. 21 Nonetheless, in the event that the Company should be required to dispose of the approximately 2,900 drums at the facility shipped by the Company, the Company estimates that such cost would not be in excess of $4 million. With regard to the environmental condition of the Thor facility, the Company has not been notified by the Government of South Africa that the Company would be liable for any contamination or other conditions at that facility, although it is impossible to determine what, if any, allegations any party may make in connection with the Thor facility in the future. It is unclear under current South African environmental law as to whether any such allegations, if made, would be sustained against the Company, and the Company would vigorously defend against any such allegations. In connection with a federal grand jury investigation in the U.S. District Court in New Jersey, the Company is providing documents with respect to the partially depleted catalyst matter. Emergency Planning and Community Right-to-Know Act Proceeding - ------------------------------------------------------------- In February 1993, an EPA Administrative Law Judge held that the Illiopolis facility had violated CERCLA and EPCRA by failing to report certain relief valve releases, which occurred between February 1987 and July 1989, that the Company believes are exempt from CERCLA and EPCRA reporting. The Company's petition for reconsideration was denied, a penalty hearing will be scheduled, and further appeals are possible. Management does not believe that any ultimate penalty arising from this proceeding would have a material adverse effect on the results of operations for the Company. The proposed penalty in EPA's administrative complaint initiating this proceeding in 1991 was $1.0 million. Borden Environmental Indemnity - ------------------------------ Under the Environmental Indemnity Agreement ("EIA"), subject to certain conditions, Borden has agreed to indemnify the Company in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to the Company (the "Transfer Date"). The Company is responsible for environmental liabilities arising from facts or circumstances that existed and requirements in effect on or after the Transfer Date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after the Transfer Date, Borden and the Company will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the asset in question (to the extent relevant). No claims can be made under the EIA after November 30, 2002, and no claim can, with certain exceptions, be made with respect to the first $500,000 of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3.5 million in the aggregate. Excluded amounts under the EIA have aggregated approximately $3.0 million through December 31, 1995. If the United States is successful in requiring the Company to perform corrective action at the Geismar facility or the LDEQ requires the Company to take further remedial measures in connection with the Settlement Agreement, the Company anticipates that a substantial portion of its corrective action costs would be covered by the EIA. The extent to which any penalties or permit costs that the Company may incur as a result of pending environmental proceedings will 22 be subject to the EIA will depend, in large part, on whether such penalties or costs are attributable to facts or circumstances that existed and requirements in effect prior to the Transfer Date. Federal Wastewater Permit - ------------------------- The Geismar facility has a permit for each of its two wastewater outfalls. The Company is challenging conditions in one of these permits. As a result of the government's delay in responding to this challenge, the challenged permit has expired and, prior to the expiration, the Company applied for a new permit. Depending on the result of that permit application, the Company's current permit challenge may be irrelevant. Other Legal Proceedings - ----------------------- The Company manufactures, distributes and uses many different chemicals in its business. As a result of its chemical operations the Company is subject to various lawsuits in the ordinary course of business which seek compensation for physical injury, pain and suffering, costs of medical monitoring, property damage and other alleged harm. New or different damage claims arising from the Company's various chemical operations may be made in the future. In addition, the Company is subject to various other legal proceedings and claims which arise in the ordinary course of business. The management of the Company believes, based upon the information it presently possesses, that the realistic range of liability to the Partnership of these other matters, taking into account the Partnership's insurance coverage, including its risk retention program, and the EIA with Borden, would not have a material adverse effect on the financial position or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- No matter was submitted during the fourth quarter of 1995 to a vote of security holders, through the solicitation of proxies or otherwise. PART II Item 5 Market for the Registrant's Common Equity and Related - ------ ----------------------------------------------------- Stockholder Matters ------------------- The high and low sales prices for the Common Units on February 9, 1996 were $13 3/4 and $13 1/2, respectively. As of December 31, 1995, there were approximately 6,868 holders of record of Common Units. The following table sets forth the 1995 quarterly Common Unit data:
1995 Quarters -------------------------------- First Second Third Fourth ----- ------ ----- ------ Cash distribution declared $ 1.77 $ 1.42 $ .90 $ .57 Market price range: High 25 1/2 18 3/8 19 3/4 18 1/2 Low 15 1/8 15 1/2 16 12 1/4
23 The high and low prices for the Units during the first quarter of 1996 (through February 9) were $14 7/8 and $12 5/8, respectively.
1994 Quarters -------------------------------- First Second Third Fourth ----- ------ ----- ------ Cash distributions declared $ .21 $ .65 $ 1.02 $ 1.64 Market price range: High 13 1/4 15 1/8 25 7/8 26 3/8 Low 9 7/8 10 7/8 13 1/4 19 1/4
Item 6. Selected Financial Data - ------- ----------------------- The following table sets forth selected historical financial information for the Company for each of the five years ended December 31, 1995.
1995 1994 1993 1992 1991 -------- -------- --------- -------- -------- (in thousands except per Unit data, which is net of 1% General Partner interest) Net revenues $739,587 $657,752 $433,297 $401,803 $410,005 Income (loss) before extraordinary item 150,926 146,405 (1,435) 27,085 51,553 Net income (loss) 144,014 146,405 (1,435) 27,085 51,553 Income (loss) per unit before extra- ordinary item 4.07 3.94 (.04) .73 1.39 Net income (loss) per Unit 3.88 3.94 (.04) .73 1.39 Cash distributions declared per Unit 4.66 3.52 .78 1.59 1.98 Total assets 568,507 542,904 444,304 466,729 507,042 Long-term debt 200,000 120,000 150,000 150,000 150,000
Item 7. Management's Discussion and Analysis of Financial - ------- ------------------------------------------------- Condition and Results of Operations ----------------------------------- OVERVIEW AND OUTLOOK The Company's revenues are derived from three principal product groups: (1) PVC Polymers Products, which consist of PVC resins, VCM, the principal feedstock for PVC resins, and acetylene, (ii) Methanol and Derivatives and (iii) Nitrogen Products, which consist of ammonia and urea. The markets for and profitability of the Company's products have been, and are likely to continue to be, cyclical. Periods of high demand, high capacity utilization and increasing operating margins tend to result in new plant investment and increased production until supply exceeds demand, followed by periods of declining prices and declining capacity utilization until the cycle is repeated. In addition, markets for the Company's products are affected by general economic conditions and a downturn in the economy could have a material adverse effect on the Company, including, but not limited to, its ability to service its debt obligations. The demand for the Partnership's PVC products is 24 primarily dependent on the construction and automotive industries. Methanol demand is also dependent on the construction industry, as well as the demand for MTBE. Demand for the Company's Nitrogen Products is dependent primarily on the agricultural and industrial industries. The principal raw material feedstock for the Company's products is natural gas, the price of which has been volatile in recent years. The other principal feedstocks are ethylene and chlorine. Prices for these raw materials may change significantly from year to year. The Company experienced strong demand for its PVC Polymers Products in the first half of 1995, particularly for its rigid and general purpose resins. Increased activity in the construction industry resulted in increased demand for rigid grade resin for end use in pipe and siding production. The automotive industry requirements resulted in increased demand for general purpose resins. Beginning the fourth quarter of 1994, PVC customers began to build up their PVC inventory in anticipation of rising PVC sales prices. This inventory buildup peaked during the second quarter of 1995, resulting in reduced PVC purchases during the second half of 1995. This led to a sharp decrease in PVC sales prices which continued through the end of 1995. The Company anticipates PVC pricing will improve during the second half of 1996. During 1994, due to strength in the construction industry, the Company experienced increased demand for methanol and formaldehyde in downstream applications, such as adhesives for plywood and other pressed wood products. Methanol demand has also been affected by the use of MTBE to comply with certain requirements of the Clean Air Act. The Company expects continued strong demand for methanol products into 1996, subject to the extent of implementation and enforcement of the Clean Air Act and the substitution of other products for MTBE. Published methanol prices increased from approximately $0.47 per gallon during the fourth quarter of 1993 to approximately $1.50 per gallon during the fourth quarter of 1994, but there has been a sharp decline in methanol sales prices since early 1995 and current published methanol prices are in the range of $.40 to $.45 per gallon. The outlook for methanol continues to be uncertain, but the Company believes that its methanol sales prices during 1996 are likely to remain at current levels. In Nitrogen Products, ammonia selling prices increased significantly during 1994 due primarily to a tighter worldwide supply resulting from restricted production in the former Soviet Union. The decline in non-U.S. production has significantly increased the price of ammonia imported into the U.S., which is a net importer of ammonia, and has allowed domestically produced ammonia to rise significantly in price. In the second half of 1994, urea prices recovered from depressed levels in 1993 and early 1994 when competition from lower cost imports forced domestic prices lower. Increased urea purchases overseas, primarily by India and China, caused global and domestic prices to strengthen. Demand for ammonia and urea remained strong in 1995 with sales prices consistent with 1994 levels. The Company expects the foregoing factors to continue into 1996 and, accordingly, expects selling prices and volumes for its Nitrogen Products to remain strong into 1996. However, changes in the market outside of its control could adversely affect this outlook. The countries comprising the former Soviet Union control a large portion of worldwide ammonia production capacity. The unstable economies of these countries could force an increase from their current production levels in order to receive foreign currency, causing an increase in product available for import into the U.S. and resulting in downward pressure on selling prices. In addition, there can be no assurance that urea purchases by foreign countries will continue at current levels. 25 The cost of ethylene, the primary feedstock for PVC, rose during the first half of 1995 but has recently been falling. The Company believes that its PVC operations have lower exposure to ethylene price increases than many other manufacturers because the Company is able to produce a portion of its PVC raw material, VCM, from acetylene instead of ethylene. Acetylene-based VCM manufacturing accounts for approximately one-third of the Partnership's total VCM production. The primary raw material for acetylene, as well as for methanol and ammonia, is natural gas, thus the costs of these products are affected by changes in natural gas prices which, in 1995, declined on average 15% from 1994 levels. Chlorine is a feedstock for PVC resins and unit costs have varied significantly on a historical basis, as demonstrated in 1991 when chlorine had a negative value in the market due to an extreme oversupply situation. Recently, chlorine prices have remained relatively unchanged. Raw materials costs account for a high percentage of the Company's total production costs. The Company purchases its major raw materials - natural gas, ethylene and chlorine - under market sensitive supply contracts. Generally, prices under these contracts are adjusted on a monthly basis and, although the Company generally does not purchase raw materials at spot prices, its operating results are nevertheless subject to short-term fluctuations in raw material market prices. These raw materials are commodities in nature and fluctuate in price due to general economic conditions, seasonal factors and the supply/demand balance at any point in time. Natural gas prices vary primarily due to seasonal changes in residential demand for heating purposes. Ethylene is a derivative of the petroleum refining industry, with ethylene prices tending to follow supply and demand factors of ethylene's derivative products. Chlorine and its by-product caustic soda, a neutralizing agent in numerous manufacturing processes, are both derivatives of brine. Prices for each of these co-products are driven by supply and demand for each of the products themselves, as well as the supply and demand for the co-product such that either product can influence the price of the other. Unit costs for raw materials can vary significantly within short periods. For example, during the 1993-1995 period, monthly prices of natural gas have varied from $1.50 per million BTU to $2.50 per million BTU primarily due to seasonal variations in demand. Monthly prices of ethylene have varied from $0.15 per pound to $0.28 per pound and chlorine has varied from $110 per ton to $175 per ton. These fluctuations limit the ability to accurately forecast future raw material costs. On May 2, 1995, the Company, through its subsidiary operating partnership (the "Operating Partnership"), completed the purchase of OxyChem's Addis, Louisiana PVC manufacturing facility and related assets ("Addis facility"). The Addis facility has an annual proven production capacity of 450 million pounds per year, which increased the Company's stated annual capacity for PVC resin production by approximately 50%. The cash purchase price for the Addis facility was $100.4 million (see "Acquisition"). RESULTS OF OPERATIONS The following table sets forth the dollar amount of revenues and the percentage of total revenues for each of the principal product groups of the Company (in thousands):
1995 1994 1993 --------- ---------- ----------- PVC Polymers Products $449,657 61% $347,122 53% $261,342 60% Methanol and Derivatives 187,126 25% 236,032 36% 119,779 28 Nitrogen Products 102,804 14% 74,598 11% 52,176 12 -------- ---- -------- ---- -------- ---- Total Revenues $739,587 100% $657,752 100% $433,297 100% ======== ==== ======== ==== ======== ====
26 The following table summarizes indices of relative average selling prices received per unit of product sold per period for the three principal product groups of the Company and relative average raw material costs per unit for the principal raw materials (using 1985 = 100 as the base year for all products sold or purchased per period). The price indices in the table reflect changes in the mix and volume of individual products sold as well as changes in selling prices.
Year Ended December 31, 1995 1994 1993 ------- ------ ------ Average price received per unit sold PVC Polymers Products 133 124 106 Methanol and Derivatives 134 166 94 Nitrogen Products 149 120 85 Raw material costs per unit purchased Natural Gas 69 79 88 Ethylene 173 137 115 Chlorine 92 116 83 Production volumes (1) (in millions of pounds) PVC Polymers Products 2,312 2,067 1,849 Methanol and Derivatives 2,805 2,660 2,409 Nitrogen Products 1,389 1,221 1,207
- ---------------- (1) Includes the production of intermediate products. 1995 COMPARED TO 1994 Total Revenues Total revenues for 1995 increased $81.8 million or 12% to $739.6 million in 1995 from $657.8 million in 1994. This increase was the net result of a $102.5 million increase in revenues from PVC Polymers Products, a $48.9 million decrease in Methanol and Derivatives revenues and a $28.2 million increase in Nitrogen Products revenues. Total revenues for PVC Polymers Products increased 30% as a result of a 21% increase in sales volumes along with a 7% increase in selling prices. The increase in volume was mainly attributable to the acquisition of the Addis Facility during 1995. Total revenues for Methanol and Derivatives decreased 21% as a result of a 19% decrease in selling prices along with a 2% decrease in sales volumes. The decrease in selling price was due to the circumstances described above. Total revenues for Nitrogen Products increased 38% as a result of a 24% increase in selling prices and an 11% increase in sales volumes. Generally strong market conditions led to increased selling prices and volumes for ammonia and urea during 1995. Cost of Goods Sold 27 Total cost of goods sold increased 16% to $516.5 million in 1995 from $446.2 million in 1994. The increase resulted almost entirely from the additional sales volumes attributed to the acquisition of the Addis Facility. Expressed as a percentage of total revenues, cost of goods sold increased to 70% of total revenues in 1995 from 68% in 1994. Gross profit for PVC Polymers Products increased 32% as a result of the significant increase in sales volumes. Gross profit for Methanol and Derivatives decreased 27% from record level in 1994. Gross margins for Nitrogen Products almost tripled due to increased selling prices along with reduced natural gas cost. Incentive Distribution to General Partner During 1995, incentive distribution to the General Partner aggregated $29.8 million compared to $20.6 during 1994 reflecting overall higher quarterly results. Each quarter's distributions during 1995 exceeded $0.3647 per unit, the amount after which the General Partner receives 20% of the remaining distribution as an incentive distribution. Interest Expense Interest expense during 1995 increased 17% to $19.1 million due to the debt associated with the acquisition of the Addis Facility. Other Expense, Including Minority Interest Other (income) and expense decreased to $1.2 million in 1995 from $7.1 million in 1994 resulting primarily from the absence of the $4.0 million accrual incurred in 1994 relating to various environmental matters. Extraordinary Loss on Early Extinguishment of Debt The Partnership incurred a loss of $6.9 million, or 19 cents per Unit, in 1995 as a result of a prepayment premium on $150 million in debt retired during the year. See Acquisition and Financing and Notes to Consolidated Financial Statements, Note 3. 1994 VS. 1993 Total Revenues Total revenues for 1994 increased $224.5 million or 52% to $657.8 million from $433.3 million in 1993. This increase was the result of an $85.8 million increase in revenues from PVC Polymers Products, a $116.3 million increase in Methanol and Derivatives revenues and a $22.4 million increase in Nitrogen Products revenues. Total revenues for PVC Polymers Products increased 33% as a result of a 17% increase in selling prices and a 14% increase in sales volumes. These increases were due to increased demand for PVC resins resulting from strength in the construction and automotive industries, as well as other industries. 28 Total revenues for Methanol and Derivatives increased 97% as a result of a 76% increase in selling prices and a 12% increase in sales volumes. These increases were due to the worldwide tightness in the methanol market resulting from limited growth in methanol supply and industry consolidations in recent years and increased demand for methanol and formaldehyde in downstream applications such as MTBE and adhesives. Total revenues for Nitrogen Products increased 43% as a result of a 40% increase in selling prices and a 2% increase in sales volumes. Ammonia selling prices increased significantly fueled primarily by strong domestic demand and the worldwide tightness in the ammonia market. Urea volumes and selling prices showed modest improvements. Cost of Goods Sold Total cost of goods sold increased 12% to $446.2 million in 1994 from $397.8 million in 1993. The increase was a result of the increased volumes discussed above and an aggregate raw material cost increase of approximately 4% comprised of significant unit cost increases for chlorine and ethylene offset by reduced natural gas costs. Expressed as a percentage of total revenues, cost of good sold decreased to 68% of total revenues in 1994 from 92% in 1993, resulting in greatly improved gross margins and net income for the Company. Gross margins for PVC Polymers Products increased 182% as a result of the improved selling prices and volumes discussed above, partially offset by substantially higher chlorine and ethylene costs. Gross margins for Methanol and Derivatives increased 552% as a result of the increased volumes and significantly higher selling prices discussed above, combined with reduced natural gas costs. Gross margins for Nitrogen Products improved from a slightly negative position in 1993 to a profitable position in 1994 on the strength of the ammonia selling price increases and reduced natural gas costs discussed above. Incentive Distribution to General Partner An incentive distribution to the General Partner of $20.6 million was generated in 1994 as a result of improved operating performance. The quarterly distributions generated in 1993 did not result in incentive distribution to the General Partner. Other Expense, Including Minority Interest The net expense for 1994 was $7.1 million compared to $1.6 million in 1993. This increase was primarily due to a $4.0 million provision established in the third quarter 1994 for potential expenses related to environmental matters. See Notes to Consolidated Financial Statements, Note 8. The increase was also partially due to the increase in the minority interest in consolidated subsidiary due to the subsidiary's improved operating performance. Net Income (Loss) Net income was $146.4 million compared to a net loss of $1.4 million in 1993. As discussed above, the primary reasons for the improved operating performance were significant selling price increases in all product lines and 29 volume improvements in PVC resins and methanol, partially offset by increased raw material costs. LIQUIDITY AND CAPITAL RESOURCES Cash Flows from Operations. Cash provided by operations increased to $225.6 million for 1995, as compared to $164.2 million for 1994. Operating cash flows were positively affected by a decrease of $30.6 million in receivables along with an increase in payables, partially offset by a decrease in incentive distribution payable. Cash provided by operations for the year ended December 31, 1994 increased to $164.2 million, as compared to $38.3 million for the prior year. The increase was primarily attributable to an increase in net income and increased accruals for the incentive payable and other liabilities, partially offset by an increase in accounts receivable. Cash Flows from Investing Activities. The Partnership paid $100.4 million for the acquisition of a PVC manufacturing facility in 1995. See Acquisition and Financing. Capital expenditures for 1995 totaled $27.0 million. This amount included $13.6 million for the expansion of facilities (such as the methanol expansion project) and for other discretionary capital improvements. Non-discretionary capital expenditures totaled $13.4 million for 1995, which amount included a large number of relatively small projects. Capital expenditures during 1994 totaled $22.6 million, $6.8 million of which related to completion of the urea granulation and expansion project and other discretionary capital projects and $15.8 million of which related to non- discretionary projects, and environmental and safety related projects. Non- discretionary capital expenditures vary from year to year with normal equipment renovation requirements. Cash Flows from Financing Activities. The Partnership makes quarterly distributions to Unitholders and the General Partner of 100% of its Available Cash. Available Cash means generally, with respect to any quarter, the sum of all cash receipts of the Partnership plus net reductions to reserves established in prior quarters, less all of its cash distributions and net additions to reserves in such quarter. These reserves are retained to provide for the proper conduct of the Partnership's business, to stabilize distributions of cash to Unitholders and the General Partner and as necessary to comply with the terms of any agreement or obligation of the Partnership. Cash distributions of $213.1 million were made during 1995 compared to $76.6 million in 1994 and $33.8 million in 1993. As discussed under Item 1"Business" herein, there are various seasonality factors affecting results of operations and, therefore, cash distributions. In addition, the amount of Available Cash constituting Cash from Operations for any period does not necessarily correlate directly with net income for such period because various items and transactions affect net income and Available Cash constituting Cash from Operations differently. For example, depreciation reduces net income but does not affect Available Cash constituting Cash from Operations, while changes in working capital items (including receivables, accounts payable and other items) generally do not affect net income but do affect such Available Cash. Moreover, as provided for in the Partnership Agreements, certain reserves may be established which affect Available Cash constituting Cash from Operations but do not affect 30 cash balances in financial statements. Such reserves have generally been used to set cash aside for interest payments, capital expenditures and other accrued items. Acquisition and Financing On May 2, 1995, the Partnership, through the Operating Partnership, completed the purchase of Occidental Chemical Corporation's Addis, Louisiana PVC manufacturing facility and related assets. The Addis Facility has an annual proven production capacity of 450 million pounds per year, which will increase the Operating Partnership's stated annual capacity for PVC resin production by approximately 50%. The cash purchase price for the Addis assets was $100.4 million. On May 1, 1995, the Partnership issued $200 million aggregate principal amount of senior unsecured notes (the "Senior Notes"). The net proceeds from this offering were used to prepay $150 million aggregate principal amount of outstanding notes plus a related prepayment premium of $6.9 million reflected as an extraordinary loss in 1995, and accrued interest. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. Liquidity The Partnership expects to satisfy its cash requirements, including the requirements of the Addis Facility, through internally generated cash and borrowings. In connection with the acquisition of the Addis Facility, the Partnership entered into a Revolving Credit Facility which provides a $100.0 million line of credit for capital expenditures (including the acquisition), working capital and general partnership purposes. Borrowings under the Revolving Credit Facility were $40.0 million at December 31, 1995. The amount available under the facility reduces to $75.0 million on January 1, 1996, $50.0 million on January 1, 1997 and terminates December 31, 1997. The facility may be extended for one year with the consent of the lenders. The Partnership has terminated its previous $20.0 million credit facility. The revolving credit agreement along with the Senior Notes contain a number of financial and other covenants that management believes are customary in lending transactions of these types. Capital Expenditures The Partnership currently believes that the level of annual base capital expenditures over the next several years will be in the range of $20 to $25 million per year. Total capital expenditures for 1996 are anticipated to be approximately $20 to $25 million. Future capital expenditures would vary substantially if the Partnership is required to undertake corrective action or incur other environment compliance costs in connection with the proceedings discussed under Item 3 "Legal Proceedings." Environmental Expenditures Annual environmental capital expenditures for 1993-1995 ranged from $1.3 to $3.6 million. The 1996 budget for environmental capital expenditures is approximately $2.6 million, and is included in the budget of $20 to $25 million discussed above. Annual non-capital environmental expenditures for 1993-1995 ranged from $18.7 to $21.7 million. In connection with potential environmental matters, 31 an additional provision of $4.0 million was reflected in the operating results in 1994. The 1996 budget for non-capital environmental expenditures is approximately $21.8 million. The Partnership's actual level of spending would vary substantially if it is required to undertake corrective action or incur other environmental compliance costs in connection with the proceedings discussed under Item 3 "Legal Proceedings."
Item 8. Financial Statements and Supplementary Data - ------- ------------------------------------------- Sequential Index to Financial Statements Page - ----------------------------- ---------- Report of Independent Accountants 43 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993 44 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 45 Consolidated Balance Sheets as of December 31, 1995 and 1994 46 Consolidated Statements of Changes in Partners' Capital for the years ended December 31, 1995, 1994 and 1993 47 Notes to Consolidated Financial Statements 48-53
Selected Quarterly Financial Data (Unaudited) - --------------------------------------------- (in thousands except per Unit data, which is net of 1% General Partner interest)
1995 Quarters -------------------------------------- First Second Third Fourth -------- -------- -------- -------- Revenues $214,806 $187,663 $186,672 $150,446 Gross Profit 106,315 58,184 39,899 18,662 Income before extraordinary item 83,487 36,754 23,811 6,874 Net Income 83,487 29,842 23,811 6,874 Income per Unit before extraordinary loss 2.25 0.99 0.64 0.19 Net Income per Unit 2.25 0.80 0.64 0.19 1994 Quarters -------------------------------------- First Second Third Fourth -------- -------- -------- -------- Revenues $118,981 $149,671 $169,481 $219,619 Gross Profit 12,076 37,934 61,998 99,628 Net Income 3,628 25,264 40,646 76,867 Net Income per Unit 0.10 0.68 1.09 2.07
32 Item 9. Changes in and Disagreements with Accountants on Accounting - ------- ----------------------------------------------------------- and Financial Disclosure ------------------------ No Form 8-K was issued by the Company for the two most recent years ended December 31, 1995 reporting a change in or disagreement with accountants. PART III Item 10. Directors and Executive Officers of the Registrant - -------- -------------------------------------------------- The Partnership is a limited partnership (of which BCPM is the General Partner) and has no directors or officers. The directors, officers and employees of the General Partner perform management and non-supervisory functions for the Partnership. Management Organization - Joseph M. Saggese is Chairman, President and Chief Executive Officer of BCPM. He is also an Executive Vice President of Borden and President and Chief Executive Officer of Borden Chemicals, Inc. John L. Russ III and Wayne P. Leonard, who report directly to Mr. Saggese, are responsible for Partnership marketing and manufacturing operations, respectively. Independent Committee - BCPM is required to maintain an Independent Committee of its Board of Directors, which shall be composed of at least three directors, each of whom is neither an officer, employee or director of Borden nor an officer or employee of BCPM. Certain actions require special approval from the Independent Committee. Such actions include an expansion of the scope of business of the Partnership, the making of material capital expenditures, the material curtailment of operations of any plant, the material expansion of capacity of any plant, and the amendment of or entry into by the Partnership of any agreement with Borden. The members of the Independent Committee are Edward H. Jennings, and George W. Koch. Daniel M. Galbreath was a member of the Independent Committee until he passed away in September 1995. On March 5, 1996, Dr. E. Linn Draper, Jr. was appointed to this vacancy. As sole stockholder of BCPM, Borden elects directors of BCPM on an annual basis. Set forth below is certain information concerning the directors and officers of BCPM.
Served in Age on Present Position and Office Dec. 31, Position Name with General Partner 1995 Since - ---- -------------------- -------- --------- Joseph M. Saggese Director, Chairman, President and Chief Executive Officer 64 1990 Edward H. Jennings Director 58 1989 George W. Koch Director 69 1987 Dr. E. Linn Draper, Jr. Director 53 1996 William H. Carter Director 42 1995 Joan V. Stapleton Director and Vice President- Strategy 50 1987 *Wayne P. Leonard Executive Vice President - Operations 54 1987
33 *John L. Russ III Executive Vice President-Sales and Marketing 55 1987 *James O. Stevning Vice President, Chief Financial Officer and Treasurer 36 1996 Lawrence L. Dieker Vice President, Secretary, and General Counsel 57 1987 *John R. Beaver Controller and Principal Accounting Officer 34 1996
*Mr. Leonard, Mr. Russ, Mr. Stevning and Mr. Beaver were all elected to their current positions effective January 23, 1996. However, Mr. Leonard and Mr. Russ have served in substantially the same capacity since 1987. Joseph M. Saggese has been Chairman of the Board of Directors, President and Chief Executive Officer of BCPM since July 1990. He is also Executive Vice President of Borden and President and Chief Executive Officer of Borden Chemical, Inc., the successor to a major portion of the former PIP Division of Borden and its predecessor division, (collectively with the PIP Division the "Chemicals Division"). Positions he has held since July 1990. From January 1989 to August 1990 he served as Senior Group Vice President of the Chemicals Division. He served as a Senior Vice President of the Chemicals Division from October 1985 to January 1989. Edward H. Jennings is a director of BCPM. He is also a professor and President Emeritus of The Ohio State University. He served as president of The Ohio State University from 1981 to 1990. Mr. Jennings is also a director of Super Foods, Inc., a wholesale grocer, Lancaster Colony, Inc., a manufacturer and marketer of food, automotive and glass products, and Hymedia, Inc., a medical products company. George W. Koch is a director of BCPM. He is Of Counsel in the law firm of Kirkpatrick & Lockhart since January 1992. Prior to that he was a partner of Kirkpatrick & Lockhart since April 1990. From 1966 to April 1990, he was President and Chief Executive Officer of the Grocery Manufacturers of America, Inc., a non-profit organization of the leading grocery manufacturers in the United States. Mr. Koch is also a director of McCormick & Co., a food products company. Dr. E. Linn Draper, Jr. is a director of BCPM. He is also Chairman, President and Chief Executive Officer of American Electric Power Company, Inc. and American Electric Power Service Corporation, positions he has held since 1992. Dr. Draper is also President of Ohio Valley Electric Corporation. From 1987 to 1992, he was Chairman, President and Chief Executive Officer of Gulf States Utility Company. Dr. Draper is currently a director of VECTRA Technologies, Inc., the Nuclear Energy Institute and the Institute of Nuclear Power Operation. William H. Carter is a director of BCPM. He is also Executive Vice President and Chief Financial Officer of Borden, a position he has held since April 1995. Prior to joining Borden, he was a partner of Price Waterhouse LLP. Joan V. Stapleton is a director and a Vice President of BCPM. Prior to that, she was Vice President of the Chemicals Division, a position she had held since 1983. She has served in other capacities with the Borden PIP 34 Division since 1972, including assistant controller, manager of business planning/commercial development, and director of planning and development. Wayne P. Leonard is Executive Vice President of BCPM. From 1984 to 1987, he was Director of Manufacturing, Basic Chemicals Unit of the Chemicals Division. Prior thereto, he was manager of the vinyl products sector of the Basic Chemicals Unit of the Chemicals Division. He has served in the chemical business thirty years and at all such times he has worked at the Geismar complex. John L. Russ III is Executive Vice President of BCPM. From 1986 to 1987, he was General manager, Thermoplastics Units and Petrochemical Chemicals Division. He joined Borden in 1982 as director of sales and marketing for the Thermoplastics Unit of the Chemicals Division. He has served in the PVC resin business in sales and marketing capacities for over thirty years. James O. Stevning is Vice President, Chief Financial Officer and Treasurer of BCPM. From March 1994 until January 1996, he was Controller and Principal Accounting Officer of BCPM. Prior to that, he had been a Group Controller and an Assistant Controller of the Chemicals Division. Lawrence L. Dieker is Vice President, General Counsel and Secretary of BCPM. He is also a Vice President and General Counsel of Borden Chemical, Inc., a position he has held since January 1995. He was previously Assistant General Counsel of Borden, a position he held from 1982 to January 1995. John R. Beaver joined BCPM in November 1995 and was elected Controller and Principal Accounting Officer in January 1996. Prior thereto, he was Manager of Financial Reporting for Sterling Chemicals, Inc. and has served in the chemical business in various financial and accounting capacities for fifteen years. Item 11. Executive Compensation - -------- ---------------------- The Partnership has no directors or officers. The directors and officers of BCPM receive no direct compensation from the Partnership for services to the Partnership. The Partnership reimburses BCPM for all direct and indirect costs incurred in managing the Partnership. During 1995 the three independent directors of BCPM received a retainer of $15,000 per year plus a fee of $1,000 for each BCPM Board meeting attended. The Board functions in part through its Independent and Audit Committees. The three non-employee members of each of these committees are paid a meeting fee of $700 for each committee meeting attended. The committee chairman is also paid an additional $100 for each committee meeting attended in that capacity. During 1995, the Board met five times, and the Independent and Audit Committees met jointly four times. The Board of Directors of BCPM has approved a long-term incentive plan for management and employees of BCPM (and employees of Borden who provide support to or perform services for BCPM). The plan is intended to provide incentives to the management and employees of BCPM (and such employees of Borden) to enhance the market value of the Units. Under the plan, awards of "phantom" appreciation rights in the Holding Company are made to selected BCPM or Borden officers or employees on the basis of or in relation to services performed, directly or indirectly, for the benefit of the Company. Subject to certain restrictions, such grantees would be entitled to exercise all or any portion of the phantom appreciation rights granted to them. Upon exercise of any such rights, the grantee would be 35 entitled to receive from BCPM or Borden, an amount in cash calculated to award the grantee for any actual appreciation in the market value of the Units in the Holding Company and actual cash distributions made by the Holding Company in respect of the Units. The benefits under the plan may be in addition to, and not in lieu of, the benefits provided to management and employees of BCPM (and such employees of Borden) under existing plans or employee benefit arrangements. BCPM (or Borden, on behalf of BCPM) will be reimbursed by the Company for all payments made or expenses incurred by BCPM (or Borden, on behalf of BCPM) under the plan. Under the plan, an initial grant of approximately 61,500 phantom appreciation rights has been made. Item 12. Security Ownership of Certain Beneficial Owners and - -------- --------------------------------------------------- Management ---------- To the knowledge of BCPM, no person is the beneficial owner of more than five percent of the Partnership's Units. As of February 9, 1996 the beneficial ownership of Common Units by all directors and officers of BCPM as a group was approximately 36,000 Units, which represents less than one percent of the total Units outstanding. Item 13. Certain Relationships and Related Transactions - -------- ---------------------------------------------- The Partnership is managed by BCPM pursuant to the Amended and Restated Agreement of Limited Partnership (the "Agreement") dated December 15, 1988. Under the Agreement BCPM is entitled to reimbursement of certain costs of managing the Partnership. These costs include compensation and benefits payable to officers and employees of BCPM, payroll taxes, general and administrative costs and legal and professional fees. Note 3 of Notes to Consolidated Financial Statements of the Partnership contained on page 35 of this Form 10-K Annual Report contains information regarding relationships and related transactions. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports - -------- ---------------------------------------------------- on Form 8-K ----------- (a) 1. Financial Statements -------------------- a. The Consolidated Financial Statements, together with the report thereon of Price Waterhouse LLP dated January 23, 1996 are contained on pages 44 through 54 of this Form 10-K Annual Report. 2. Financial Statement Schedules ----------------------------- None required. 3. Exhibits -------- 2.1/(7)/ Asset Transfer Agreement dated as of August 12, 1994 and amended as of January 10, 1995, and March 16, 1995, between the Borden Chemicals and Plastics Operating Limited Partnership (the "Operating 36 Partnership") and Occidental Chemical Corporation ("OxyChem") and the forms of VCM Supply Agreement and PVC Tolling Agreement annexed thereto 2.1.1/(7)/ Third Amendment of Asset Transfer Agreement dated as of May 2, 1995 between the Operating Partnership and OxyChem 3.0/(8)/ Restated Certificate of Incorporation of BCPM 3.2/(2)/ By-Laws of BCPM 3.3/(1)/ Amended and Restated Certificate of Limited Partnership of the Partnership 3.4/(1)/ Amended and Restated Certificate of Limited Partnership of the Operating Partnership 3.5/(1)/ Amended and Restated Agreement of Limited Partnership of the Partnership dated as of December 15, 1988 3.6/(3)/ Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 30, 1987 4.1/(6)/ Form of Depositary Receipt for Common Units 10.1 Indenture dated as of May 1, 1995 of 9 1/2 Notes due 2005 between the Operating Partnership and The Chase Manhattan Bank (National Association), as Trustee 10.4 Revolving Credit Agreement, dated as of May 2, 1995, between the Operating Partnership and Credit Suisse, as Agent and as a lender and Other Lenders 10.5/(3)/ Service Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.6/(3)/ Intercompany Agreement, dated as of November 30, 1987, among Borden, BCPM, the Partnership and the Operating Partnership 10.7/(1)/ Borden and BCPM Coverant Agreement, dated as of December 15, 1988, among Borden and the Partnership 10.8/(1)/ Ethylene Dichloride/Vinyl Chloride Monomer Tolling Agreement, dated as of July 19, 1988, between the Operating Partnership and Vulcan Chemicals, a division of Vulcan Materials Company 10.9/(3)/ PVC Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 37 10.10/(3)/ Ammonia Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.10.1/(1)/ Amendment Agreement No. 1 to Ammonia Purchase Agreement, dated as of December 15, 1988, between Borden and the Operating Partnership 10.11/(3)/ Urea Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.11.1/(1)/ Amendment Agreement No. 1 to Urea Purchase Agreement, dated as of December 15, 1988, between Borden and the Operating Partnership 10.12/(3)/ Methanol Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.12.1/(1)/ Amendment Agreement No. 1 to Methanol Purchase Agreement, dated as of December 15, 1988, between Borden and the Operating Partnership 10.13/(3)/ Formaldehyde Processing Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.13.1/(1)/ Amendment Agreement No. 1 to Formaldehyde Processing Agreement, dated as of December 15, 1988 between Borden and the Operating Partnership 10.14/(3)/ Urea-Formaldehyde Concentrate Processing Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership 10.14.1/(1)/ Amendment Agreement No. 1 to Urea-Formaldehyde Concentrate Processing Agreement, dated as of December 15, 1988, between Borden and the Operating Partnership 10.15/(3)/ Use of Name and Trademark License Agreement, dated as of November 30, 1987, among Borden, the Partnership and the Operating Partnership 10.16/(3)/ Patent and Know-How Agreement, dated November 30, 1987, among Borden, the Partnership and the Operating Partnership 10.17/(3)/ Environmental Indemnity Agreement, dated as of November 30, 1987, among the Partnership, the Operating Partnership and Borden 10.18/(3)/ Lease Agreement, dated as of November 30, 1987, between the Operating Partnership and Borden 10.19/(2)/ Indenture, dated as of June 1, 1962, among Monochem, Inc., Borden and Uniroyal Chemical Company, Inc. (as successor to Uniroyal Inc., which was a successor to United States Rubber Company) 38 10.20/(2)/ Amendment to Indenture, dated as of December 30, 1981, among Monochem, Inc., Borden and Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) 10.21/(2)/ Restructuring Agreement, dated as of December 9, 1980, among Borden, Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc. 10.22/(2)/ Amendment to Restructuring Agreement, dated as of December 31, 1981, among Borden, Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc. 10.23/(2)/ Restated Basic Agreement, dated as of January 1, 1982, between Borden and Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) 10.24/(2)/ Restated Operating Agreement, dated as of January 1, 1982, among Borden, Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc. 10.25/(2)/ Restated Agreement to Amend Operating Agreement, dated as of January 1, 1983, among Borden, Uniroyal Chemical Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc. 10.26/(2)/ Operating Agreement for Oxygen and Acetylene Plants, dated April 1, 1982, between Borden and BASF Wyandotte Corporation (subsequently named BASF Corporation) ("BASF") 10.27/(2)/ Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated August 22, 1984, between Borden and BASF 10.28/(2)/ Second Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated December 14, 1984, between Borden and BASF 10.29/(2)/ Third Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated as of October 2, 1985, between Borden and BASF 10.30/(2)/ Fourth Amendment to Operating Agreement, dated August 25, 1987, between Borden and BASF 10.31/(2)/ Fifth Amendment to Operating Agreement, dated November 10, 1987, between Borden and BASF 10.32/(1)/ Sixth Amendment to Operating Agreement, dated February 11, 1988, between the Operating Partnership and BASF 10.33/(2)/ Third Purchase Agreement, dated August 25, 1987, between Borden and BASF 39 10.34/(2)/ Operating Agreement, dated December 14, 1984 among Borden, BASF, Liquid Air Corporation ("LAC") and LAI Properties, Inc. ("LAI") 10.35/(2)/ Amendment No. 1 to Operating Agreement, dated October 2, 1985, among Borden, BASF, LAC and LAI 10.36/(1)/ Amendment No. 2 to the Operating Agreement, dated February 11, 1988, among Borden, the Operating Partnership, BASF, LAC and LAI 10.37/(2)/ Second Operating Agreement, dated October 2, 1985, among Borden, BASF, LAC and LAI 10.38/(1)/ Restated Second Operating Agreement, dated February 11, 1988 among Borden, the Operating Partnership, BASF, LAC and LAI 10.39/(1)/ Acetylene Sales Agreement No. 1, dated February 11, 1988, between the Operating Partnership and BASF 10.40/(1)/ Acetylene Sales Agreement No. 2, dated February 11, 1988, between the Operating Partnership and BASF 10.41/(3)/ Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to ACF Industries, Incorporated Master Service Contract 10.42/(3)/ Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to Pullman Leasing Company Lease of Railroad Equipment 10.43/(3)/ Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to Union Tank Car Company Service Agreement 10.44/(3)/ Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to General Electric Railroad Service Corporation Car Leasing Agreement 10.45/(3)/ Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to General American Transportation Corporation Tank Car Service Contract 10.46/(3)/ Railroad Car Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership, relating to EHF Leasing Corporation Railroad Equipment Lease 10.47/(3)/ Railroad Car Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating 40 Partnership, relating to Bank of New York Lease of Railroad Equipment (as amended) 10.48/(2)/ Form of Rail Service Agreement between Borden and the Operating Partnership 10.49/(4)/ Form of Letter Agreement with Directors 10.50/(3)/ Illiopolis Indemnity Agreement 10.51/(3)/ 1995 Long-Term Incentive Plan __________________ /(1)/ Filed as an exhibit to the joint Registration Statement on Form S-1 and Form S-3 of the Partnership, Borden, Inc. and Borden Delaware Holdings, Inc. (File No. 33-25371) and is incorporated herein by reference in this Form 10-K Annual Report. /(2)/ Filed as an exhibit to the Partnership's Registration Statement on Form S-1 (File No. 33-17057) and is incorporated herein by reference in this Form 10-K Annual Report. /(3)/ Filed as an exhibit to the Partnership's Registration Statement on Form S-1 (File No. 33-18938) and is incorporated herein by reference in this Form 10-K Annual Report. /(4)/ Filed as an exhibit to the Registrant's 1989 Form 10-K Annual Report and is incorporated herein by reference in this Form 10-K Annual Report. /(5)/ Exhibits 10.8, 10.32, 10.36, 10.37 and 10.38, which were previously filed, contain information which has been deleted pursuant to an application for confidential treatment pursuant to Rule 406 of the Securities Act of 1933, with respect to which an order has been granted by the Commission. /(6)/ Filed as an exhibit to the Registrant's 1992 Form 10-K Annual Report and is incorporated herein by reference in this Form 10-K Annual Report. /(7)/ Filed as an exhibit to Borden Chemicals and Plastics Limited Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. Confidential treatment has been granted as to certain provisions. /(8)/ Filed as an exhibit to Borden Chemicals and Plastics Limited Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed by the Registrant during the fourth quarter 1995. 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP By BCP Management, Inc., General Partner By /s/ James O. Stevning ---------------------------- James O. Stevning Vice President, Chief Financial Officer and Treasurer By /s/ John R. Beaver --------------------------- John R. Beaver Controller and Principal Accounting Officer Date: February 9, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with BCP Management, Inc., General Partner) indicated, on the date set forth above. Signature Title --------- ----- /s/ Joseph M. Saggese Director, Chairman, President - ---------------------------- Joseph M. Saggese and Chief Executive Officer /s/ Edward H. Jennings Director - ---------------------------- Edward H. Jennings /s/ George W. Koch Director - ---------------------------- George W. Koch /s/ Joan V. Stapleton Director and Vice President - ---------------------------- Joan V. Stapleton /s/ William H. Carter Director - --------------------------- William H. Carter 42 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS OF BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in partners' capital and of cash flows present fairly, in all material respects, the financial position of Borden Chemicals and Plastics Limited Partnership at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Columbus, Ohio January 23, 1996 43 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 --------- --------- --------- REVENUES Net trade sales $608,070 $514,499 $349,200 Net affiliated sales 131,517 143,253 84,097 -------- -------- -------- Total revenues 739,587 657,752 433,297 -------- -------- -------- EXPENSES Cost of goods sold Trade 424,492 352,700 321,966 Affiliated 92,035 93,516 75,805 Marketing, general & administrative expense 22,127 21,092 18,993 Interest expense 19,066 16,342 16,356 General Partner incentive 29,783 20,616 0 Other expense, including minority interest 1,158 7,081 1,612 -------- -------- -------- Total expenses 588,661 511,347 434,732 -------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 150,926 146,405 (1,435) Extraordinary loss on early extinguish- ment of debt (6,912) 0 0 -------- -------- -------- NET INCOME (LOSS) 144,014 146,405 (1,435) Less 1% General Partner interest (1,440) (1,464) 14 -------- -------- -------- NET INCOME (LOSS) APPLICABLE TO LIMITED PARTNERS' INTEREST $142,574 $144,941 $ (1,421) ======== ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST Income (loss) per unit before extra- ordinary item $ 4.07 $3.94 $(0.04) Extraordinary loss per Unit (0.19) 0 0 -------- -------- -------- Net income (loss) per Unit $ 3.88 $3.94 $(0.04) ======== ======== ======== Average number of Units outstanding during the year 36,750 36,750 36,750 ======== ======== ======== Cash distributions declared per Unit $ 4.66 $ 3.52 $ .78 ======== ======== ========
See notes to consolidated financial statements 44 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, --------------------------------- 1995 1994 1993 ---------- ---------- --------- CASH FLOWS FROM OPERATIONS Net income (loss) $ 144,014 $ 146,405 $ (1,435) Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss on early extinguish- ment of debt 6,912 0 0 Depreciation 49,198 44,305 42,946 Decrease (increase) in receivables 30,641 (54,374) (11,821) (Increase) decrease in inventories (10,612) 1,126 (5,418) Increase in payables 14,186 6,298 13,698 (Decrease) increase in incentive distribution payable (9,955) 11,865 0 Increase in accrued interest 1,417 0 0 Other, net ( 213) 8,583 517 --------- --------- -------- 225,588 164,208 38,487 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition (100,376) 0 0 Capital expenditures ( 27,085) ( 22,578) (15,041) --------- --------- -------- (127,461) ( 22,578) (15,041) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of long- term debt 200,000 0 0 Proceeds from short-term borrowing (net) 40,000 0 0 Payment of debt issuance costs (9,815) 0 0 Repayment of long-term debt, including prepayment penalty (156,912) 0 0 Cash distributions paid (213,105) (76,558) (33,781) --------- --------- -------- (139,832) (76,558) (33,781) --------- --------- -------- (Decrease) increase in cash and equivalents (41,705) 65,072 (10,335) Cash and equivalents at beginning of year 74,126 9,054 19,389 --------- --------- -------- Cash and equivalents at end of year $ 32,421 $ 74,126 $ 9,054 ========= ========= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid during the year $ 17,649 $ 16,342 $ 16,356 ========= ========= ========
See notes to consolidated financial statements 45 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, DECEMBER 31, 1995 1994 ------------ ------------ ASSETS Cash and equivalents $ 32,421 $ 74,126 Accounts receivable (less allowance for doubtful accounts of $457 and $627, respectively) Trade 75,788 84,330 Affiliated 15,202 37,301 Inventories Finished and in process goods 33,418 19,591 Raw materials and supplies 9,654 8,540 Other current assets 3,541 2,831 ---------- --------- Total current assets 170,024 226,719 ---------- --------- Investments in and advances to affiliated companies 4,437 3,772 Other assets 39,415 29,094 ---------- --------- 43,852 32,866 ---------- --------- Land 14,106 12,051 Buildings 44,216 37,931 Machinery and equipment 633,484 523,517 ---------- --------- 691,806 573,499 Less accumulated depreciation ( 337,175) (290,180) ---------- --------- Total assets 354,631 283,319 ---------- --------- $ 568,507 $ 542,904 ========== ========= LIABILITIES AND PARTNERS' CAPITAL Accounts and drafts payable $ 64,892 $ 50,706 Cash distributions payable 21,179 60,999 Short-term borrowing 40,000 0 Current portion of long-term debt 0 30,000 Incentive distribution payable to General Partner 1,910 11,865 Accrued interest 3,262 1,845 Other accrued liabilities 13,468 14,330 ---------- --------- Total current liabilities 144,711 169,745 Long-term debt 200,000 120,000 Other liabilities 5,677 5,471 Minority interest in consolidated subsidiary 1,655 1,953 ---------- --------- Total liabilities 352,043 297,169 ---------- --------- Commitments and contingencies (See Note 8) Partners' capital Limited Partners 215,762 244,443 General Partner 702 1,292 ---------- --------- Total partners' capital 216,464 245,735 ---------- --------- $ 568,507 $ 542,904 ========== =========
See notes to consolidated financial statements 46 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (IN THOUSANDS)
PREFERENCES COMMON GENERAL UNITHOLDERS UNITHOLDERS PARTNER TOTAL ----------- ----------- ------- ----- Balances at December 31, 1992 $ 210,923 $ 48,025 $ 1,647 $ 260,595 Combination of Preference and (210,923) 210,923 Common units Net loss (1,421) (14) (1,435) Cash distributions declared (28,665) (290) (28,955) --------- --------- ------- --------- Balances at December 31, 1993 0 228,862 1,343 230,205 Net income 144,941 1,464 146,405 Cash distributions declared (129,360) (1,515) (130,875) --------- --------- ------- --------- Balances at December 31, 1994 0 244,443 1,292 245,735 Net income 142,574 1,440 144,014 Cash distributions declared (171,255) (2,030) (173,285) --------- --------- ------- --------- Balances at December 31, 1995 $ 0 $ 215,762 $ 702 $ 216,464 ========= ========= ======= =========
See notes to consolidated financial statements. 47 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP ------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (In thousands except Unit and per Unit data) 1. ORGANIZATION Borden Chemicals and Plastics Limited Partnership (the "Partnership"), a Delaware limited partnership, was formed in 1987 when the Partnership, through its subsidiary operating partnership, acquired the basic chemicals and polyvinyl chloride ("PVC") resins operations of Borden, Inc. ("Borden"). The operations are comprised of highly integrated plants in Geismar, Louisiana, which produce basic petrochemical products, PVC resins and industrial gases and a PVC resins plant located in Illiopolis, Illinois. In 1995, the Partnership, through its subsidiary operating partnership completed the purchase of a PVC manufacturing facility in Addis, Louisiana (the "Addis Facility"). See Acquisition and Financing Note 3. The Partnership conducts its activities through Borden Chemicals and Plastics Operating Limited Partnership (the "Operating Partnership"). The Partnership, as the sole limited partner, owns a 98.9899% interest and BCP Management, Inc. ("BCPM"), a Delaware corporation and wholly- owned subsidiary of Borden, owns a 1.0101% interest as the sole general partner ("General Partner") in the Operating Partnership. The General Partner's interest in the Operating Partnership is reflected in the accompanying consolidated financial statements as minority interest. BCPM also owns a 1% general partner interest in the partnership, resulting in an aggregate 2% interest in the partnerships. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies summarized below are in conformity with generally accepted accounting principles; however, this is not the basis for reporting taxable income to Unitholders. The preparation of financial statements in conformity with generally accepted accounting principles require the use of management's estimates. Principles of Consolidation - The consolidated financial statements include the accounts of the Partnership and the Operating Partnership after elimination of interpartnership accounts and transactions. Revenues - Sales and related cost of sales are recognized upon shipment of products. Net trade and net affiliated sales are net of sales discounts and product returns and allowances. Cash Equivalents - The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories - Inventories are stated at the lower of cost or market. Cost is determined using the average cost and first-in, first-out methods. Investments in and advances to affiliated companies - The Partnership's proportionate ownership of a joint venture that provides utilities to the Geismar complex is accounted for by the equity method. Utilities provided by the joint venture are allocated to joint venture partners at cost. The cost of the Partnership's proportionate share of utilities is included in cost of goods sold. 48 Other Assets - Included in Other Assets are spare parts totalling $22,182 and $19,643 at December 31, 1995 and 1994, respectively. Debt issuance costs are capitalized and are amortized over the term of the associated debt or credit agreement. Property and Equipment - The amount of the purchase price originally allocated by the Partnership at its formation to land, buildings, and machinery and equipment was based upon their relative fair values. Expenditures made subsequent to the formation of the Partnership have been capitalized at cost except that the purchase price for Addis assets (Note 3) have been allocated to properties based upon their relative fair values. Depreciation is recorded on the straight-line basis by charges to costs and expenses at rates based on the estimated useful lives of the proper ties (average rates for buildings - 4%; machinery and equipment - 8%). Major renewals and betterments are capitalized. Maintenance, repairs and minor renewals totaling $34,298 in 1995, $32,144 in 1994, and $29,905 in 1993 were expensed as incurred. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts. Income Taxes - The Partnership is not a separate taxable entity for Federal and state and local income tax purposes. Accordingly, any taxable income or loss, which may vary substantially from income or loss reported under generally accepted accounting principles, is included in the tax returns of the individual partners. Under current tax law the Partnership will be treated as a partnership until December 31, 1997; thereafter, it will be taxed as a corporation. Effective January 1, 1993 the Partnership adopted statement of Financial Accounting Standard ("SFAS") No. 109 "Accounting for Income Taxes." The adoption of this statement did not have a material effect on 1993 results. Because of available tax planning strategies which management intends to implement to "step up" the tax basis of partnership assets to the generally higher partners' basis in their units, no provision for deferred income taxes is required for the future reversal of temporary differences between the book and tax basis of partnership assets. 3. ACQUISITION AND FINANCING On May 2, 1995, the Partnership, through the Operating Partnership, completed the purchase of Occidental Chemical Corporation's Addis, Louisiana PVC manufacturing facility and related assets. The cash purchase price for the Addis assets was $100,400. On May 1, 1995, the Operating Partnership issued $200,000 aggregate principal amount of senior unsecured notes (the "Senior Notes"). The proceeds from this offering, net of $9,815 of debt issuance costs, were used to prepay $150,000 aggregate principal amount of outstanding notes plus a related $6,912 prepayment premium and accrued interest. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. A $100,000 revolving credit facility was obtained during the second quarter of 1995. Borrowing under this facility was $40,000 at December 31, 1995. 49 The following financial information presents the proforma effect of the acquisition and financing transactions discussed above on the historical results of operations for the twelve months ended December 31, 1995 and 1994, respectively, as if the transactions occurred on January 1, 1994.
TWELVE MONTHS ENDED ----------------------------------- DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- Total revenues $794,393 $795,075 Income before extraordinary item: Income $155,168 $149,606 Income per Unit, net of 1% General $ 4.18 $ 4.03 Partner interest
4. RELATED PARTY TRANSACTIONS The Partnership is managed by the General Partner. Under certain agreements, the General Partner and Borden are entitled to reimbursement of costs incurred relating to the business activities of the Partnership. The Partnership is engaged in various transactions with Borden and its affiliates in the ordinary course of business. Such transactions include, among other things, the sharing of certain general and administrative costs, sales of products to and purchases of raw materials from Borden or its affiliates, and usage of rail cars owned or leased by Borden. The employees of BCPM (together with employees of Borden providing support to or services for BCPM) operate the Partnership and participate in various Borden benefit plans including pension, retirement savings, and health and life insurance. Employee benefit plan expenses are determined by Borden's actuary based on annual employee census data. The Partnership is charged for general insurance expense, which includes liability and property damage insurance, based on calculations made by Borden's Risk Management Department. Under its risk retention program, Borden maintains deductibles of $2,500, $500 and $500 per occurrence for property and related damages at the Geismar, Illiopolis and Addis facilities, respectively, and deductibles ranging from $1,000 to $3,000 per event for liability insurance. The Partnership has first dollar liability insurance coverage from Borden. The cost of Borden's corporate information services and corporate staff department services is allocated to the Partnership based on usage of resources such as personnel and data processing equipment. The Partnership has no direct liability for postretirement benefits since the Partnership does not directly employ any of the persons responsible for managing and operating the Partnership, but instead reimburses Borden (on its own or BCPM's behalf) for their services. As a result of Borden's adoption of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions", 1995 and 1994 charges to the Partnership for such services were actuarially determined. The Partnership expensed the full amount of such charges but only reimbursed Borden (on its own or BCPM's behalf) for actual postretirement benefits paid. The difference between cash payments to Borden (on its own or BCPM's behalf) and postretirement expense is accrued on the Partnership's books. 50 Benefit plan and general insurance expenses, and allocation for usage of resources such as personnel and data processing equipment were $11,628 in 1995, $9,991 in 1994, $9,506 in 1993. Management believes the allocation methods used are reasonable. Although no specific analysis has been undertaken, if the Partnership were to directly provide such services and resources at the same cost as Borden, management believes the allocations would be indicative of costs that would be incurred on a stand-alone basis. The Partnership sells methanol, ammonia, urea and PVC resins to, and processes formaldehyde and urea-formaldehyde concentrate for, Borden and its affiliates at prices which approximate market. The Partnership entered into long-term agreements with Borden which require Borden to purchase from the Partnership at least 85% of Borden's requirements for PVC resins, ammonia, urea and methanol and to utilize specified percentages of the Partnership's capacity to process formaldehyde and urea-formaldehyde concentrate. 5. DEBT At December 31, long-term debt consists of the following:
1995 1994 -------- -------- 9.5% notes due 2005... $200,000 -- 10.7% note due 1997... -- $90,000 11.1% note due 1999... -- 60,000 -------- -------- 200,000 150,000 Less current portion.. -- 30,000 -------- -------- $200,000 $120,000 ======== ========
On May 1, 1995, the Operating Partnership issued $200,000 aggregate principal amount of senior unsecured notes. The net proceeds from this offering were used to prepay $150,000 aggregate principal amount of outstanding notes, plus a related prepayment premium of $6,912 reflected as an extraordinary loss in 1995, and accrued interest. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. The aggregate fair value of the Partnership's outstanding debt was $215,493 at December 31, 1995 and $152,914 at December 31, 1994, which was calculated based on current yields for debt with similar characteristics. The Partnership obtained a short-term working capital facility of up to $100,000 under a revolving credit agreement during 1995. Borrowings under this facility were $40,000 at December 31, 1995. The total amount available under the revolving credit agreement reduces to $75,000 on January 1, 1996 and $50,000 on January 1, 1997. The revolving credit agreement expires on December 31, 1997 at which time any outstanding balance is due. A commitment fee of .375% per annum is payable on the unused portion. Borrowings under the revolving credit agreement bear interest at rates fixed at the time of each borrowing. The average interest rate of these borrowings at December 31, 1995 was 7.5%. The Partnership's revolving credit agreement also allows an additional $20,000 of borrowings outside the agreement, none of which was utilized during 1995. It provides that no recourse is available against the General Partner. 51 The revolving credit agreement and the Senior Notes contain a number of financial and other covenants that management believes are customary in lending transactions of these types. 6. ALLOCATION OF INCOME AND LOSS Income and loss of the Partnership is allocated in proportion to the partners' percentage interests in the Partnership, provided that at least 1% of the income or loss of the Partnership and Operating Partnership is allocated to the General Partner. For income tax purposes, certain items are specially allocated to account for differences between the tax basis and fair market value of property contributed to the Partnership by Borden and to facilitate uniformity of Units. In addition, the Partnership Agreement generally provides for an allocation of gross income to the Unitholders and the General Partner to reflect disproportionate cash distributions, on a per Unit basis. 7. CASH DISTRIBUTIONS The Partnership makes quarterly distributions to Unitholders and the General Partner of 100% of its Available Cash. Available Cash each quarter generally consists of cash receipts less cash disbursements (excluding cash distributions to Unitholders and the General Partner) and reserves. Distributions of Available Cash are generally made 98% to the Unitholders and 2% to the General Partner, subject to the payment of an incentive distribution to the General Partner after a target level of cash distributions to the Unitholders is achieved for the quarter. The incentive distribution is 20% of any remaining Available Cash for the quarter (in addition to the General Partner's 2% regular distribution). Incentive distributions are accounted for as an expense of the Partnership. 8. CONTINGENCIES Environmental and Legal Proceedings On October 27, 1994, the U.S. Department of Justice ("DOJ"), at the request of the U.S. Environmental Protection Agency (the "EPA"), filed an action against the Company and BCPM in the U.S. District Court for the Middle District of Louisiana. The complaint seeks facility-wide corrective action and civil penalties for alleged violations of the federal Resource, Conservation and Recovery Act ("RCRA"), the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), and the Clean Air Act at the Geismar complex. If the Partnership is unsuccessful in this proceeding, or otherwise subject to RCRA permit requirements, it may be subject to three types of costs: (i) corrective action; (ii) penalties; and (iii) costs needed to obtain a RCRA permit, portions of each which could be subject to the Environmental Indemnity Agreement ("EIA") discussed below. As to penalties, although the maximum statutory penalties that would apply in a successful enforcement action by the United States would be in excess of $150,000, management believes that, assuming the Partnership is unsuccessful, based on information currently available, and an analysis of relevant case law and administrative decisions, the more likely amount of any liability for civil penalties would not exceed several million dollars. 52 The Partnership is subject to extensive federal, state and local environmental laws and regulations which impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage, transportation and disposal of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. The Partnership has expended substantial resources, both financial and managerial, and it anticipates that it will continue to do so in the future. Failure to comply with the extensive federal, state and local environmental laws and regulations could result in significant civil or criminal penalties, and remediation costs. Under the EIA, Borden has agreed, subject to certain specified limitations, to indemnify the Partnership in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to the Partnership. The Partnership is responsible for environmental liabilities arising from facts or circumstances that existed and requirements that become effective on or after such date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after such date, Borden and the Partnership will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the assets in question (to the extent relevant). No claims can be made under the EIA after November 30, 2002, and no claim can, with certain exceptions, be made with respect to the first $500 of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3,500 in the aggregate. Excluded amounts under the EIA have aggregated approximately $3,000 through December 31, 1995. In connection with potential environmental matters, a $4,000 provision has been included in the Partnership's 1994 operating results. Because of various factors (including the nature of any settlement with appropriate regulatory authorities or the outcome of any proceeding, actual environmental conditions, the scope of the application of the EIA and the timing of actions, if any, required to be taken by the Partnership), the Partnership cannot reasonably estimate the full range of costs it might incur with respect to the environmental matters discussed herein. The costs incurred in any quarter or year could be material to the Partnership's results of operations for such quarter or year, although, on the basis of the relevant facts and circumstances, management believes this to be unlikely. However, management believes that such costs should not have a material adverse effect on the Partnership's financial position. The Partnership is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of the management of the Partnership, the amount of the ultimate liability, taking into account its insurance coverage, including its risk retention program and Environmental Indemnity Agreement with Borden would not materially affect the financial position or results of operations of the Partnership. 53 EX-10.1 2 INDENTURE DATED MAY 1, 1995 ________________________________________________________________________________ BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP BCP FINANCE CORPORATION 9 1/2% Notes Due 2005 _______________________ INDENTURE Dated as of May 1, 1995 _______________________ THE CHASE MANHATTAN BANK (National Association), As Trustee ________________________________________________________________________________ CROSS-REFERENCE TABLE/1/ TIA Indenture Section Section ------- --------- 310(a)(1) ............................ 7.10 (a)(2) ............................ 7.10 (a)(3) ............................ N.A. (a)(4) ............................ N.A. (b) ............................ 7.08; 7.10 (c) ............................ N.A. 311(a) ............................ 7.11 (b) ............................ 7.11 (c) ............................ N.A. 312(a) ............................ 2.05 (b) ............................ 10.03 (c) ............................ 10.03 313(a) ............................ 7.06 (b)(1) ............................ N.A. (b)(2) ............................ 7.06 (c) ............................ 10.02 (d) ............................ 7.06 314(a) ............................ 4.02; 10.02 (b) ............................ N.A. (c)(1) ............................ 10.04 (c)(2) ............................ 10.04 (c)(3) ............................ N.A. (d) ............................ N.A. (e) ............................ 10.05 (f) ............................ 4.12 315(a) ............................ 7.01 (b) ............................ 7.05; 10.02 (c) ............................ 7.01 (d) ............................ 7.01 (e) ............................ 6.11 316(a)(last sentence) ............................ 10.06 (a)(1)(A) ............................ 6.05 (a)(1)(B) ............................ 6.04 (a)(2) ............................ N.A. (b) ............................ 6.07 317(a)(1) ............................ 6.08 (a)(2) ............................ 6.09 (b) ............................ 2.04 318(a) ............................ 10.01 N.A. means Not Applicable. __________________________ /1/ Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS Page ARTICLE I Definition and Incorporation by Reference SECTION 1.01. Definitions........................................... 1 SECTION 1.02. Other Definitions..................................... 16 SECTION 1.03. Incorporation by Reference of Trust Indenture Act..... 16 SECTION 1.04. Rules of Construction................................. 17 ARTICLE II The Securities SECTION 2.01. Form and Dating....................................... 18 SECTION 2.02. Execution and Authentication.......................... 18 SECTION 2.03. Registrar and Paying Agent............................ 18 SECTION 2.04. Paying Agent To Hold Money In Trust................... 19 SECTION 2.05. Securityholder Lists.................................. 19 SECTION 2.06. Transfer and Exchange................................. 20 SECTION 2.07. Replacement Securities................................ 20 SECTION 2.08. Outstanding Securities................................ 20 SECTION 2.09. Temporary Securities; Global Securities............... 21 SECTION 2.10. Cancellation.......................................... 22 SECTION 2.11. Defaulted Interest.................................... 22 ARTICLE III Redemption SECTION 3.01. Notices to Trustee.................................... 23 SECTION 3.02. Selection of Securities To Be Redeemed................ 23 SECTION 3.03. Notice of Redemption.................................. 23 SECTION 3.04. Effect of Notice of Redemption........................ 24 SECTION 3.05. Deposit of Redemption Price........................... 24 SECTION 3.06. Securities Redeemed in Part........................... 24 ARTICLE IV Covenants SECTION 4.01. Payment of Securities................................ 25 SECTION 4.02. SEC Reports.......................................... 25 SECTION 4.03. Limitation on Restricted Payments.................... 25 SECTION 4.04. Limitation on Debt................................... 28 SECTION 4.05. Limitation on Restrictions on Distributions from Subsidiaries......................................... 29 -i- SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock................................................ 29 SECTION 4.07. Limitation on Debt and Preferred Stock of Subsidiaries......................................... 32 SECTION 4.08. Limitation on Liens Securing Debt.................... 33 SECTION 4.09. Limitation on Sale and Leaseback Transactions........ 34 SECTION 4.10. Limitation on Transactions with Affiliates........... 34 SECTION 4.11. Change of Control.................................... 35 SECTION 4.12. Uncompleted Acquisition Offer........................ 36 SECTION 4.13. Compliance Certificate............................... 38 ARTICLE V Successors SECTION 5.01. When the Company May Merge or Transfer Assets........ 38 SECTION 5.02. When Finance Corp. May Merge or Transfer Assets...... 38 SECTION 5.03. Obligations After Merger or Transfer................. 39 ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default.................................... 40 SECTION 6.02. Acceleration......................................... 41 SECTION 6.03. Other Remedies....................................... 42 SECTION 6.04. Waiver of Past Defaults.............................. 42 SECTION 6.05. Control by Majority.................................. 42 SECTION 6.06. Limitation on Suits.................................. 43 SECTION 6.07. Rights of Holders to Receive Payment................. 43 SECTION 6.08. Collection Suit by Trustee........................... 43 SECTION 6.09. Trustee May File Proofs of Claim..................... 43 SECTION 6.10. Priorities........................................... 44 SECTION 6.11. Undertaking for Costs................................ 44 SECTION 6.12. Waiver of Stay or Extension Laws..................... 44 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee.................................... 45 SECTION 7.02. Rights of Trustee.................................... 46 SECTION 7.03. Individual Rights of Trustee......................... 47 SECTION 7.04. Trustee's Disclaimer................................. 47 SECTION 7.05. Notice of Defaults................................... 47 SECTION 7.06. Reports by Trustee to Holders........................ 47 SECTION 7.07. Compensation and Indemnity........................... 47 SECTION 7.08. Replacement of Trustee............................... 48 SECTION 7.09. Successor Trustee by Merger.......................... 49 (ii) SECTION 7.10. Eligibility; Disqualification........................ 49 SECTION 7.11. Preferential Collection of Claims Against Issuers.... 50 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance..... 50 SECTION 8.02. Conditions to Defeasance............................. 51 SECTION 8.03. Application of Trust Money........................... 52 SECTION 8.04. Repayment to the Company............................. 52 SECTION 8.05. Indemnity for Government Obligations................. 52 SECTION 8.06. Reinstatement........................................ 52 ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders........................... 53 SECTION 9.02. With Consent of Holders.............................. 53 SECTION 9.03. Compliance with Trust Indenture Act.................. 54 SECTION 9.04. Revocation and Effect of Consents and Waivers........ 54 SECTION 9.05. Notation on or Exchange of Securities................ 55 SECTION 9.06. Trustee to Sign Amendments........................... 55 ARTICLE X Miscellaneous SECTION 10.01. Trust Indenture Act Controls......................... 55 SECTION 10.02. Notices.............................................. 55 SECTION 10.03. Communication by Holders with Other Holders.......... 56 SECTION 10.04. Certificate and Opinion as to Conditions Precedent... 56 SECTION 10.05. Statement Required in Certificate or Opinion......... 56 SECTION 10.06. When Securities Disregarded.......................... 57 SECTION 10.07. Rules by Trustee, Paying Agent and Registrar......... 57 SECTION 10.08. Legal Holidays....................................... 57 SECTION 10.09. Governing Law........................................ 57 SECTION 10.10. No Recourse Against Others........................... 57 SECTION 10.11. Successors........................................... 58 SECTION 10.12. Multiple Originals................................... 58 SECTION 10.13. Table of Contents; Headings.......................... 58 EXHIBIT A [FORM OF SECURITY]................................... 60 (iii) INDENTURE dated as of May 1, 1995, among BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, BCP FINANCE CORPORATION, a Delaware corporation, and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national association organized under the laws of the United States of America. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the 9 1/2% Notes Due 2005 (the "Securities"): ARTICLE I Definition and Incorporation by Reference ----------------------------------------- SECTION 1.01. Definitions. ----------- "Accounts Receivable" means (i) any accounts receivable (whether or not earned by performance), chattel paper, instruments, documents, general intangibles, trade acceptances, any other rights to receive installment, rental or other payments for, or relating to amounts due or to become due on account of, goods or equipment sold or leased or to be sold or leased or services rendered or to be rendered or funds advanced or loaned or to be advanced or loaned and other similar rights to payment of any kind, (ii) any proceeds of any of the foregoing and (iii) any interest in any property or asset of any kind (whether of the obligor with respect to such accounts receivable or any other person securing the payment of any item listed in clause (i) above) . "Acquisition" means the purchase of the Addis Assets pursuant to the Asset Transfer Agreement. "Addis Assets" means a polyvinyl chloride production facility located in Addis, Louisiana and certain related assets to be purchased pursuant to the Asset Transfer Agreement. "Affiliate" of any person means (i) any person that, directly or indirectly, is in control of, is controlled by or is under common control with such person or (ii) any person who is a director or officer (A) of such person, (B) of any Subsidiary of such person or (C) of any person described in clause (i) above. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) of Capital Stock of a Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction, other than (i) a disposition by the Company or a Subsidiary to the Company or a Wholly Owned Subsidiary, (ii) a disposition of property or assets at fair market value in the ordinary course of business, (iii) a disposition of obsolete assets in the ordinary course of business, (iv) a disposition that constitutes a Restricted Payment or a sale and leaseback transaction and (v) any sale, transfer or other disposition by the Company or any Subsidiary of Accounts Receivable or of any Subsidiary substantially all the assets of which are Accounts Receivable, which sale, transfer or other disposition constitutes a "sale" under generally accepted accounting principles (as in effect at the time thereof). "Asset Transfer Agreement" means the Asset Transfer Agreement, dated as of August 12, 1994, as amended, between the Company and Occidental Petroleum Company. "Attributable Debt" in respect of a sale and leaseback arrangement means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such arrangement (including any period for which such lease has been extended). "Available Cash" has the meaning given to such term in the Amended and Restated Agreement of Limited Partnership of Borden Chemical and Plastics Operating Limited Partnership, dated as of November 30, 1987, as amended to the date of this Indenture. "Average Life" means, as of the date of determination, with respect to any Debt, the quotient obtained by dividing (a) the sum of the products of (i) the numbers of years from the date of determination to the dates of each successive scheduled principal payment or redemption or similar payment with respect to such Debt multiplied by (ii) the amount of such payment, by (b) the sum of all such payments. "BCPM" means BCP Management, Inc., a Delaware corporation, and its successors. "Board of Directors" means the Board of Directors of the Company (or, if the Company is a limited partnership or a general partnership, of any of its general partner or partners, respectively, authorized to act on behalf of such limited partnership or general partnership, as the case may be, in connection with this Indenture) or any committee thereof duly authorized to act on behalf of such Board. 2 "Borden" means Borden, Inc., a New Jersey corporation, and its successors (other than as a result of any transaction described in clause (a)(i) of the definition of "Change of Control" as if Borden, Inc. were deemed for such purposes to be the Company). "Business Day" means each day that is not a Legal Holiday. "Capital Lease Obligations" of a person means any obligation which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such person prepared in accordance with generally accepted accounting principles; the amount of such obligation shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles; and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) capital stock, including any preferred stock, and with respect to a partnership, any interest therein (whether general or limited) that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership; provided that Capital Stock shall not include any debt security that is convertible into or exchangeable for Capital Stock. A "Change of Control" occurs when (a) (i) any person or "group" for purposes of Section 13(d) of the Exchange Act (a "Group"), other than Permitted Holders, shall beneficially own, directly or indirectly, more than 50% of the total voting power of all classes of Voting Stock of BCPM, the Holding Company or the Company, (ii) (A) the Company shall sell, lease, convey or otherwise dispose of all or substantially all the Company's assets to any person or Group or (B) the Company shall consolidate with or merge into another person or another person shall consolidate with or merge into the Company, in case of either of the foregoing, in a transaction in which the outstanding Voting Stock of the Company is reclassified or changed into or exchanged for cash, securities or other property, other than, in the case of either of clauses (A) or (B), to, with or into, as applicable, one or more Permitted Holders or a person, more than 50% of the total voting power of all classes of Voting Stock of which, after giving effect to such transaction, is beneficially owned, directly or indirectly, by one or more Permitted Holders or (iii) the Company, the Holding Company or BCPM shall adopt a plan of liquidation or dissolution (unless all or substantially all the Company's assets are distributed 3 pursuant to such plan to one or more Permitted Holders) and (b) a Rating Decline occurs within the period of 60 days following the first public announcement of any of the events described in clause (a) (the "Announcement") (which period shall be extended if during such 60 days either both Rating Agencies shall have placed the Company on credit watch (with negative implications) or one of the Rating Agencies shall have placed the Company on credit watch (with negative implications) and the other Rating Agency shall have made the determination described in the definition of Rating Decline, until such time as it can be determined whether or not there has been a Rating Decline). A "Rating Decline" shall be deemed to have occurred (i) in the event the Securities are rated below Investment Grade by each Rating Agency on the day before the Announcement, if each such rating is reduced by more than one gradation (whether or not within the same Rating Category) and (ii) in the event the Securities are rated Investment Grade by either or both of the Rating Agencies on the day before the Announcement, if the Securities cease to be rated Investment Grade by at least one Rating Agency. "Rating Agency" means either Standard & Poor's Corporation and its successors ("S&P"), or Moody's Investors Service Inc. and its successors ("Moody's"), or if S&P and Moody's or both shall not make a rating of the Securities publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company which shall be substituted for S&P or Moody's or both, as the case may be; and "Rating Category" means each major rating category symbolized by (x) in the case of S&P, AAA, AA, A, BBB, BB, B, CCC, CC and C and each such Rating Category shall include pluses or minuses ("gradations") modifying such capital letters; (y) in the case of Moody's, Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C and each such Rating Category shall include added numerals such as 1, 2, or 3 ("gradations") modifying such letters; and (z) with respect to any other Rating Agency, equivalent symbols. "Investment Grade" means (i) with respect to S&P, any of the Rating Categories from and including AAA to and including BBB-and (ii) with respect to Moody's, any of the Rating Categories from and including Aaa to and including Baa3. "Company" means Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership, until a successor replaces it pursuant to the applicable provisions of this Indenture, and thereafter means the successor. "Consolidated EBITDA Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 5 days prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided however, that (1) if the Company or any Subsidiary has issued any Debt since the beginning of such period that remains outstanding as of such date of determination or if the transaction giving rise to the need to calculate the 4 Consolidated EBITDA Coverage Ratio is an issuance of Debt, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Debt as if such Debt has been issued on the first day of such period and the discharge of any other Debt repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Debt as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that were the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period, and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Debt or Preferred Stock of the Company or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Subsidiary or from which the Company or such continuing Subsidiary has been released by reason of the assumption thereof by the transferee of such Asset Disposition, in connection with such Asset Dispositions for such period (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Debt or Preferred Stock of such Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Debt or Preferred Stock after such sale), (3) if since the beginning of such period the Company or any Subsidiary (by merger or otherwise) shall have made an Investment in any Subsidiary (or any person which becomes a Subsidiary) or an acquisition or assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the issuance of any Debt) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition or Investment occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto, and the amount of Consolidated Interest Expense associated with any Debt or Preferred Stock issued in connection therewith, shall be determined on a pro forma basis in good faith by a responsible financial or accounting Officer of the Company. If any Debt 5 bears a floating rate of interest and is being given pro forma effect, the interest of such Debt shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Protection Agreement applicable to such Debt if such Interest Rate Protection Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Subsidiaries, including (i) interest expense attributable to Capital Lease Obligations, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest payments, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs under Interest Rate Protection Agreements (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with investments in discontinued operations and (ix) interest actually paid by the Company or any of its consolidated Subsidiaries under any guarantee of Debt or other obligation of any other person. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income of any person if such person is not a Subsidiary, except that (A) the Company's equity in the net income of any such person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such person during such period to the Company or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such person for such period shall be included in determining such Consolidated Net Income; (ii) any net income of any person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income of any Subsidiary that is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that (A) the Company's equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net 6 Income up to the aggregate amount of cash actually distributed by such Subsidiary during such period to the Company or another Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any person; and (v) the cumulative effect of a change in accounting principles. "Consolidated Net Tangible Assets" means the total assets of the Company and its Subsidiaries appearing on a consolidated balance sheet of the Company and its Subsidiaries (prepared in accordance with generally accepted accounting principles) as of any date selected by the Company not more than 90 days prior to the date of determination, after (i) adding thereto all Attributable Debt of the Company and its Subsidiaries in respect of any sale and leaseback arrangement not capitalized on such balance sheet, (ii) eliminating all intercompany transactions and all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries and (iii) deducting therefrom (without duplication of deductions): (a) all liabilities of the Company and its Subsidiaries other than Debt; (b) the net book amount of all assets, after deducting any reserves applicable thereto, which would be treated as intangible under generally accepted accounting principles, including such items as goodwill, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing, unamortized debt discount and expense and organization expenses; (c) any write-up in the book value of any asset on the books of the Company or any Subsidiary resulting from a revaluation thereof subsequent to the date of this Indenture (other than the write-up of the book value of an asset made in accordance with purchase accounting under generally accepted accounting principles in connection with the purchase of such asset); 7 (d) all deferred charges (other than prepaid expenses); and (e) all reserves, including, without limitation, reserves for deferred income taxes, liabilities (fixed or contingent), depreciation, obsolescence, depletion, insurance and inventory valuation, which appear or under generally accepted accounting principles are required to appear on such balance sheet. "Consolidated Net Worth" of any person means the total of the amounts shown on the balance sheet of such person and its consolidated Subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles, as of the end of the most recent fiscal quarter of such person ending at least 5 days prior to the taking of any action for the purpose of which the determination is being made, as (i) if such person is a partnership, the consolidated equity of the partners less (x) any amounts attributable to Redeemable Stock and (y) any amounts attributable to Exchangeable Stock and (ii) if such person is not a partnership, (A) the par or stated value of all outstanding Capital Stock of such person plus (B) paid-in capital or capital surplus relating to such Capital Stock plus (C) any retained earnings or earned surplus less (1) any accumulated deficit, (2) any amounts attributable to Redeemable Stock and (3) any amounts attributable to Exchangeable Stock. "Credit Facility" means the credit facility under that certain Revolving Credit Agreement, dated as of November 2, 1987, by and between the Company and Wachovia Bank and Trust Company, N.A., including any related notes, instruments and agreements executed in connection therewith, and which may be replaced with a facility between the Company and certain lenders, providing for up to $100.0 million of credit borrowings, including any related notes, instruments and agreements executed in connection therewith, in each as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Debt" of any person means, without duplication, (i) the principal of and premium, if any, in respect of (A) indebtedness of such person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such person is responsible or liable; (ii) all Capital Lease Obligations of such person; (iii) all obligations of such person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such person and all obligations of such person under any title retention 8 agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of any Redeemable Stock (but excluding any accrued dividends); (vi) all obligations of the type referred to in clauses (i) through (v) of other persons and all dividends of other persons for the payment of which, in either case, such person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any agreement which has the economic effect of a guarantee; and (vii) all obligations of the type referred to in clauses (i) through (vi) of other persons secured by any Lien on any property or asset of such person (whether or not such obligation is assumed by such person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. "Default" means any event that is, or after notice or passage of time or both would be, and Event of Default. "Depository" means, (i) with respect to any Global Security offered for sale solely outside of the United States, a common depository for Morgan Guaranty Trust Company of New York, Brussels office, operator of the Euro-clear System, and Centrale de Livraison de Valeurs Mobilieres. S.A., and (ii) with respect to any Global Security offered for sale in the United States, a clearing agency registered under the Exchange Act, which shall in either case be designated by the Company pursuant to Section 2.09. "Disqualified Capital Stock" means any Capital Stock that is Redeemable Stock or Exchangeable Stock. 9 "EBITDA" for any period means the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization expense and (v) all other noncash items reducing Consolidated Net Income, less all noncash items increasing Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchangeable Stock" means any Capital Stock that is exchangeable or convertible into another security (other than Capital Stock of the Company that is neither Exchangeable Stock nor Redeemable Stock). "Finance Corp." means BCP Finance Corporation, a Delaware corporation, and its successors. "Global Security" means a Security executed by the Company and authenticated and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with this Indenture including Section 2.09, and which shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, all the outstanding Securities or a portion thereof, in either case having the same terms as other Securities. "Global Security" shall include any temporary Global Security and any permanent Global Security. "Guarantee" means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Debt or other obligation of any person and any obligation, direct or indirect, contingent or otherwise, of such person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation of such person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Holding Company" means Borden Chemicals and Plastics Limited Partnership, a Delaware limited partnership, and its successors. 10 "Independent Committee" means a standing committee of the Board of Directors composed entirely of Independent Directors; provided that if there is no such standing committee, then "Independent Committee" means all the Independent Directors. "Independent Directors" means members of the Board of Directors who are neither officers nor employees of the Company or any of its Affiliates (or, if the Company is a limited or general partnership, of any general partner thereof or any of its Affiliates). "Indenture" means this Indenture as amended or supplemented from time to time. "Interest Rate Protection Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Subsidiary against fluctuations in interest rates. "Investment" in any person means any loan or advance to, any acquisition of Capital Stock, obligation or other security of, or capital contribution or other investment in, such person. "issue" means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Debt or Capital Stock or a person existing at the time such person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be issued by such Subsidiary at the time it become a Subsidiary. "Issuers" means the Company and Finance Corp., as joint and several obligors under the Securities. "Lien" means any mortgage, pledge, security interest, conditional sale or other title retention agreement or other similar lien. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and excluding any other consideration received in the form of assumption by the acquiring person of Debt or other obligations relating to such properties or assets or received in any other noncash form) therefrom, in each case net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under generally accepted accounting principles, as a consequence of such Asset Disposition, and in each case net of all payments made on any Debt which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any lien upon or 11 other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, and net of amounts thereof allocable to minority interest holders in Subsidiaries. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Principal Accounting Officer or the Secretary of the Company (or, if the Company is a limited partnership or a general partnership, of any of its general partners or partners, respectively, authorized to act on behalf of such limited partnership or general partnership, as the case may be, in connection with this Indenture) or of Finance Corp., as the case may be. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel, which may be an employee of or counsel to the Company or the Trustee. "Pari Passu Debt" means any Debt of the Company (other than the Securities), whether or not secured, that is pari passu in right of payment to the Securities. "Permitted Holders" means, as of the date of determination, any and all of (a) Borden and its Subsidiaries, (b) Kohlberg Kravis Roberts & Co., its successors and its Affiliates and (c) (i) any officer or other member of management employed by Borden, BCPM, the Company or any Subsidiary for the 12-month period prior to the date of determination; (ii) any persons described in clause (i) who have retired (including as the result of disability) after the initial date of this Indenture from the employment of Borden, BCPM, the Company or any Subsidiary in the ordinary course of business; (iii) family members or the relatives of the persons described in clauses (i) and (ii); (iv) any trusts created for the benefit of the persons described in clauses (i), (ii), (iii) or (v); (v) in the event of the incompetence or death of any of the persons described in clauses (i), (ii) and (iii), such person's estate, executor, administrator, committee or other personal representative, or beneficiaries, in each case who at any particular date shall beneficially own or have the right to acquire, directly or 12 indirectly, Capital Stock and (vi) any person, the management of which is controlled by one or more persons described in clause (i) or (ii); provided, however, that in connection with the transaction that otherwise would constitute a Change of Control were the persons described in this clause (c) not Permitted Holders, any Debt incurred as a result thereof shall not be recourse to any of the assets of the Company or any Subsidiary. The management of a person shall be deemed to be controlled by the chief executive officer (or equivalent executive) of such person. "Permitted Investments" shall mean (i) investments in direct obligations of the United States of America or any agency or instrumentality thereof maturing within one year of the date of acquisition thereof, (ii) investments in certificates of deposit maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States or any state thereof having capital, surplus and undivided profits aggregating in excess of $50.0 million or the debt of which is rated P-1 (or higher) by Moody's or A-1 (or higher) by S&P and (iii) investments in commercial paper given the highest rating by two established national credit rating agencies and maturing not more than nine months from the date of acquisition thereof. "Permitted Liens" means (i) Liens that exist on the date of this Indenture, (ii) Liens on property or assets (or any income or profits therefrom) existing at the time of acquisition of such property or assets, (iii) Liens on property or assets (or any income or profits therefrom) of a person existing at the time such person is merged into or consolidated with or acquired by the Company or its Subsidiaries, (iv) Liens in favor of any governmental authority to secure any payment obligation under any statute, (v) Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business, (vi) Liens incurred for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the property or assets subject to such Liens; provided, however, that such Lien shall not extend to or cover any other property or assets other than such property or assets or any improvements thereon and shall attach to such property, assets, or improvements within 180 days of the acquisition or construction thereof, (vii) Liens incurred to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety or appeal bonds, bids, leases, performance or return-of-money bonds, purchase, construction or sale contracts or other obligations of a like nature incurred in the ordinary course of business, (viii) Liens on Capital Stock of a Subsidiary and Liens on intercompany notes issued by such Subsidiary to the Company, in either case to secure Debt incurred by such Subsidiary in connection with the Company's acquisition of such Subsidiary or the business of such Subsidiary, (ix) Liens securing any Debt 13 owed to the Company or any Subsidiary, (x) Liens on any Accounts Receivable or inventory granted to secure Debt issued pursuant to the Credit Facility (or any Refinancing Agreement) referred to in clause (b)(1) or pursuant to clause (b)(5) of Section 4.04, (xi) Liens to secure any extension, renewal, refunding or refinancing (or successive extensions, renewals, refundings or refinancings), in whole or in part, of any Debt secured by Liens referred to in the foregoing clauses (i) through (x) so long as such Liens do not extend to any other property or assets and the aggregate principal amount of the Debt so secured is not increased, and (xii) Liens securing Debt of a person, the aggregate principal amount of which, together with the aggregate principal amount of all other Debt of such person secured by Liens (excluding Debt secured by Liens permitted in the foregoing clauses (i) through (xi)) and the aggregate amount of Attributable Debt deemed to be outstanding in respect of all sale and leaseback transactions permitted by clause (i) of Section 4.09 (excluding any such sale and leaseback transactions otherwise permitted by the foregoing clauses (i) through (xi)), does not exceed 5% of Consolidated Net Tangible Assets. "person" means any individual, corporation, partnership, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "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 as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such person, over the Capital Stock of any other class of such person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Redeemable Stock" means any Capital Stock that by its terms or otherwise is required to be redeemed prior to the first anniversary of the Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to the first anniversary of the Stated Maturity of the Securities. "Refinance" means, in respect of any Debt or Preferred Stock, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue Debt or Preferred Stock in exchange or replacement for, such Debt or Preferred Stock. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Agreement" means any credit agreement, indenture or other agreement pursuant to which the Company or any Subsidiary Refinances, in whole or in part, Debt of the Company 14 or any Subsidiary issued under clause (b)(1) of Section 4.04; provided, however, that the principal amount of the Refinancing Debt issued pursuant to such Refinancing Agreement may not exceed the principal amount of the Debt so Refinanced. "SEC" means the Securities and Exchange Commission. "Securities" means the Securities issued under this Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X as promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision. "Subordinated Obligation" means any Debt of the Company (whether outstanding on the date hereof or hereafter incurred) that is subordinate or junior in right of payment to the Securities. "Subsidiary" means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of the outstanding Capital Stock (or other interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, general partners, managers, managing members, managing partners or trustees thereof or, if such persons are not elected, to vote on any matter that is submitted to the vote of all persons holding ownership interests in such entity) is at the time owned or controlled, directly or indirectly, by (i) the Company, (ii) the Company and one or more Subsidiaries or (iii) one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS ------ 77aaa-77bbbb) as in effect on the date of this Indenture. "Total Debt" means, as of any date of determination, the total Debt of the Company and its consolidated Subsidiaries . "Trustee" means The Chase Manhattan Bank (National Association), until a successor replaces it pursuant to the applicable provisions of this Indenture, and thereafter means the successor. "Trust Officer" means the Chairman of the Board, the President or any officer or assistant officer of the 15 Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of any person means, with respect to a corporation, all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors or, with respect to a partnership (whether general or limited), any general partner interest in such partnership. "Wholly Owned Subsidiary" of any person means a Subsidiary of such person all the outstanding Capital Stock or other ownership interests or, in the case of a limited partnership, all the partners' Capital Stock (other than up to a 2% general partner interest), of which (other than directors' qualifying shares) shall at the time be owned by such person or by one or more Wholly Owned Subsidiaries of such person. SECTION 1.02. Other Definitions. -----------------
Defined in Term Section ---- ---------- "Bankruptcy Law"........................................... 6.01 "covenant defeasance option"............................... 8.01(b) "Custodian"................................................ 6.01 "Event of Default"......................................... 6.01 "legal defeasance option".................................. 8.01(b) "Legal Holiday"............................................ 10.08 "Paying Agent"............................................. 2.03 "Registrar"................................................ 2.03
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. ------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, the 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: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. 16 "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Issuers and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. 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 generally accepted accounting principles, and the term "generally accepted accounting principles" with respect to any determination required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such determination; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured debt shall not be deemed to be subordinate or junior to secured debt merely by virtue of its nature as unsecured debt; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance of principal on such security shall be deemed to be the issuance of Debt; and (8) the principal amount of Redeemable Stock shall be (i) the maximum liquidation value of such Redeemable Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Redeemable Stock, whichever is greater. 17 ARTICLE II The Securities -------------- SECTION 2.01. Form and Dating. The Securities and the Trustee's --------------- certificate of authentication with respect thereto shall be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuers are subject, if any, or usage (provided that any such notation legend or endorsement is in a form acceptable to the Issuers). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit A are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign ---------------------------- the Securities for each of the Issuers by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and deliver Securities for original issue in an aggregate principal amount of $200,000,000, upon a written order of the Company and Finance Corp. signed by two Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary of the Company and Finance Corp. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time shall not exceed such amount as provided in Section 2.07. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Issuers shall maintain -------------------------- an office or agency where Securities may be 18 presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a registrar of the Securities and of their transfer and exchange. The Issuers may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Issuers shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuers shall notify the Trustee of the name and address of any such agent. If the Issuers fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Subsidiary or Affiliate may act as Paying Agent, Registrar, co-registrar or transfer agent. The Issuers initially appoint the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due ----------------------------------- date of the principal and interest on any Security, the Issuers shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Issuers in making any such payment. If the Company or a domestically incorporated Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder 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 Securityholders. If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. 19 SECTION 2.06. Transfer and Exchange. The Securities shall be issued --------------------- in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(1) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Securities at the Registrar's or co-registrar's request. The Issuers may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges. The Issuers shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or any Securities 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Security, the Issuers, the Trustee, the Paying Agent, the Registrar or any co- registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. SECTION 2.07. Replacement Securities. If a mutilated Security is ---------------------- surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Issuers, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuers and the Trustee to protect the Issuers, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Issuers and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Issuers. SECTION 2.08. Outstanding Securities. Securities outstanding at any ---------------------- time are all Securities authenticated by the 20 Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Issuers receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities to be redeemed or maturing, as the case may be, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities; Global Securities. (a) Until --------------------------------------- definitive Securities are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Issuers consider appropriate for temporary Securities. Every temporary Security shall be executed by the Issuers and authenticated by the Trustee, and registered by the Registrar, upon the same conditions, and with like effect, as a definitive Security. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. All references herein to "definitive Securities" shall be deemed to apply equally to permanent Global Securities. (b) If the Issuers shall advise the Trustee that the Securities are to be issued as one or more Global Securities, then the Issuers shall execute and the Trustee shall, in accordance with Section 2.02, authenticate and deliver to the Depositary or pursuant to the Depositary's instruction one or more Global Securities. Each Global Security shall bear a legend substantially to the following effect: "Except as otherwise provided in Section 2.09 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor Depositary or to a nominee of successor Depositary." (c) Notwithstanding any other provision of this Section 2.09 or of Section 2.06, except for exchanges of Global Securities as provided in Section 2.09(e), a Global Security may be transferred, in whole but not in part and in the manner provided in Section 2.06, only to another nominee of the Depositary, or to a successor Depositary selected or approved by the Issuers or to a nominee of such successor Depositary. 21 (d) If at any time the Depositary notifies the Issuers that it is unwilling or unable to continue as Depositary or, with respect to a Depositary contemplated by clause (ii) of the definition thereof, if at any time the Depositary shall no longer be registered or in good standing under the Exchange Act or other applicable statute or regulation and, in any such case, a successor Depositary is not appointed by the Issuers within 90 days after the Issuers receive such notice or becomes aware of such condition, as the case may be, this Section 2.09 shall no longer be applicable to the Securities and the Issuers will execute, and the Trustee will authenticate and deliver, Securities in definitive form, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security. (e) Upon any exchange of a part of a temporary or permanent Global Security for definitive Securities, the temporary or permanent Global Security, as the case may be, shall be endorsed by the Trustee or an authenticating agent for the Trustee to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of definitive Securities so exchanged and endorsed. SECTION 2.10. Cancellation. The Issuers at any time may deliver ------------ Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver cancelled Securities to the Company. The Issuers may not issue new Securities to replace Securities they have redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Issuers default in a ------------------ payment of interest on the Securities, the Issuers shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuers may determine to pay the defaulted interest to the persons who are Securityholders on a subsequent special record date, which date shall be at least five Business Days prior the payment date. If the Issuers so determine, the Issuers shall fix or cause to be fixed any such special record date and payment date, and, at least 15 days before any such special record date, the Issuers shall mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. 22 ARTICLE III Redemption ---------- Section 3.01. Notices to Trustee. If the Issuers elect to redeem ------------------ Securities pursuant to paragraph 5 of the Securities, they shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Issuers shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date and at least 15 days prior to the notice mailed to Holders pursuant to Section 3.03, unless the Trustee consents to a shorter period, provided, however, that if the Issuers have incurred any obligation to repurchase the Securities pursuant to Section 4.11, then such notice to the Trustee or any Securityholder shall be given simultaneously with the notice given to the Securityholders relating to a Change of Control. Such notice shall be accompanied by an Officers' Certificate from the Company to the effect that such redemption will comply with the conditions herein. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Issuers given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than -------------------------------------- all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions thereof that the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Issuers promptly of the Securities or portions of Securities to be redeemed. Section 3.03. Notice of Redemption. At least 30 days but not more -------------------- than 60 days before a date for redemption of Securities, the Issuers shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed pursuant to paragraph 5 thereof and shall state: 23 (1) the redemption date; (2) the redemption price of and accrued and unpaid interest on such Securities; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Issuers default in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' name and at the Issuers' expense. In such event, the Issuers shall provide the Trustee with the information required by clauses (1) through (3). SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------ redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest to the redemption date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption --------------------------- date, the Issuers shall deposit with the Paying Agent (or, if the Company or a domestically incorporated Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Issuers to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a --------------------------- Security that is redeemed in part, the Issuers 24 shall execute and the Trustee shall authenticate for the Holder (at the Issuers's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV Covenants --------- SECTION 4.01. Payment of Securities. The Issuers shall promptly pay --------------------- the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Issuers shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and they shall pay interest on overdue installments of interest at the same rate to the extent lawful. The obligations of the Issuers under this Section 4.01 shall be joint and several. SECTION 4.02. SEC Reports. The Issuers shall file with the Trustee ----------- and provide Securityholders, within 15 days after they file them with the SEC, copies of their annual report or reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Issuers are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company or Finance Corp. is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had it continued to have been subject to such reporting requirements. In such event, such reports shall be provided at the times the Company or Finance Corp. would have been required to provide reports had it continued to have been subject to such reporting requirements. The Issuers also shall comply with the other provisions of TIA (S) 314(a). SECTION 4.03. Limitation on Restricted Payments. (a) The Company ---------------------------------- shall not, and shall not permit any of its Subsidiaries, directly or indirectly, to: (1) declare or pay any dividend or make any distribution on or in respect of its Capital Stock, including any payment in connection with any merger or consolidation involving the Company (except dividends or 25 distributions payable solely in its Capital Stock (other than Disqualified Capital Stock) or payable to the Company or a Subsidiary), (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or indirect parent of the Company, (3) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, and Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (4) make any Investment in any Affiliate of the Company other than a Subsidiary or a person which will become a Subsidiary as a result of any such Investment (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment"), unless, at the time of such Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Consolidated EBITDA Coverage Ratio exceeds 3.0 to 1; (iii) Total Debt does not exceed 60% of Consolidated Net Tangible Assets on a pro forma basis as of the end of the most recently completed fiscal quarter ending at least 5 days prior to the date on which such Restricted Payment is made; and (iv) such Restricted Payment (the amount of any such payment, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution in an Officers' Certificate from the Company delivered to the Trustee), together with the aggregate of all other Restricted Payments (other than any Restricted Payments permitted by the provisions of clauses (i), (ii) or (iii) of Section 4.03 (b)) made by the Company and its Subsidiaries in the fiscal quarter during which such Restricted Payment is made shall not exceed an amount equal to Available Cash of the Company for the immediately preceding fiscal quarter. (b) The provisions of this Section shall not prohibit: (i) Any purchase, redemption, repurchase, defeasance, other acquisition or retirement (a "purchase of redemption") of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of, Capital Stock of the Company (other than Disqualified 26 Capital Stock); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale (to the extent so used) shall be excluded in the calculation of the amount of Available Cash in clause Section 4.03 (a) (iv); (ii) Any purchase or redemption of Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of, Debt of the Company; provided, however, that such Debt shall be subordinated to the Securities to at least the same extent as the Subordinated Obligations so exchanged, purchased or redeemed, shall have a Stated Maturity later than the earlier of the Stated Maturity of the Securities and the Stated Maturity such Subordinated Obligations and shall have an Average Life greater than the lesser of the Average Life of the Securities and the Average Life of such Subordinated Obligations; provided further, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale (to the extent so used) shall be excluded in the calculation of the amount of Available Cash in Section 4.03(a) (iv); (iii) Any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted under Section 4.06; provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Available Cash from such sale (to the extent so used) shall be excluded from the definition of Available Cash in Section 4.03 (a) (iv); or (iv) Dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this provision; provided, however, that at the time of payment of such dividend, no further Default shall have occurred and be continuing (or would result therefrom); provided further, however, that such dividend shall be included (when paid, but not when declared) in the calculation of the amount of Restricted Payments. (c) Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate of the Company stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.03 were computed, which calculations may be based upon the Company's latest available financial statements. 27 SECTION 4.04. Limitation on Debt. (a) The Company shall not, and ------------------ shall not permit any of its Subsidiaries to, directly or indirectly, issue any Debt unless, at the time of such issuance, the Consolidated EBITDA Coverage Ratio as of the date such Debt is issued exceeds 2.5 to 1. (b) Notwithstanding the foregoing, the Company and its Subsidiaries may issue the following Debt: (1) (A) Commercial paper of the Company having a maturity of 12 months or less in an aggregate principal amount not to exceed $50.0 million outstanding at any time and (B) Debt issued pursuant to the Credit Facility (or any Refinancing Agreement); (2) Debt issued to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Debt (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of such Debt by the issuer thereof; (3) The Securities and Debt issued in exchange for, or the proceeds of which are used to Refinance, any Debt permitted by this clause (3); provided, however, that (i) the principal amount of the Debt so issued shall not exceed the principal amount of the Debt so Refinanced and (ii) the Debt so issued (A) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt so Refinanced and (B) shall have an Average Life no less than the remaining Average Life of the Debt so Refinanced; (4) Debt (other than Debt described in clause (1), (2) or (3) above) outstanding on the date on which the Securities were originally issued or Debt issued in exchange for, or the proceeds of which are used to Refinance, any Debt permitted by this clause (4) or permitted by clause (a) above; provided, however, that the principal amount of the Debt so issued shall not exceed the principal amount of the Debt so Refinanced and the Debt so issued (A) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt so Refinanced and (B) shall have an Average Life no less than the remaining Average Life of the Debt so Refinanced; and (5) Debt in an aggregate principal amount which, together with all other Debt of the Company then outstanding (other than Debt permitted by clauses (1) through (4) above or clause (a) above) does not exceed $20.0 million (less the amount of any Debt and Preferred Stock of Subsidiaries then 28 outstanding and incurred pursuant to clause (e) of Section 4.07). SECTION 4.05. Limitation on Restrictions on Distributions from ------------------------------------------------ Subsidiaries. The Company shall not permit any of its Subsidiaries to create or - ------------ permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (1) pay dividends or make any other distributions on its Capital Stock or pay any Debt or other obligation owed to the Company, (2) make any loans or advances to the Company or (3) transfer any of its tangible property or tangible assets to the Company, except: (a) Any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date the Securities are issued, including any encumbrance or restriction existing pursuant to the Credit Facility in effect on the date the Securities are issued; (b) Any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Debt issued by such Subsidiary on or prior to the date on which such Subsidiary was acquired by the Company (other than Debt issued as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company) and outstanding on such date; (c) Any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Debt issued pursuant to an agreement referred to in clause (a) or (b) of this Section 4.05 or contained in any amendment to an agreement referred to in such clause (a) or (b); provided, however, that the encumbrances and restrictions contained in any of such refinancing agreement or amendment are no less favorable to the Securityholders than encumbrances and restrictions contained in such agreements; (d) In the case of clause (3) above, any such encumbrance or restriction consisting of the covenant set forth in Section 4.10 or other, similar covenants or agreements; and (e) In the case of clause (3) above, restrictions contained in security agreements securing Debt of a Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements. SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. -------------------------------------------------- The Company shall not, and shall not permit any of its Subsidiaries to, make any Asset Disposition unless (i) 29 the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the Board of Directors or the board of directors of the relevant Subsidiary (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition and at lease 80% of the consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents or consists of assets in which the Company or such Subsidiary, as the case may be, would have been able to invest pursuant to the election set forth in clause (B) below, and (ii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Pari Passu Debt), to prepay, repay or purchase Pari Passu Debt or Debt of a Wholly Owned Subsidiary or such Subsidiary elects (or is required by the terms of any Pari Passu Debt) to prepay, repay or purchase Debt or Pari Passu Debt (in each case other than Debt owed to the Company or an Affiliate of the Company) within 60 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after any application in accordance with clause (A), at the election of the Company or such Subsidiary, as the case may be, to acquire assets to replace its assets that were the subject of such Asset Disposition or to acquire assets (or to make improvements to existing assets) that (as determined by the Board of Directors or the board of directors of such Subsidiary, as the case may be) will be used in the business of the Company and its Subsidiaries existing on the date of original issuance of the Securities or in businesses reasonably related thereto, in each case by the later of (x) the date that is 180 days from the date of such Asset Disposition or (y) the date of the receipt of such Net Available Cash (the later of (x) and (y) being hereinafter called the "New Asset Acquisition Date"); (C) third, to the extent of any balance of such Net Available Cash after application and in accordance with clauses (A) and (B), to make an offer (the "Net Available Cash Offer") pursuant to and subject to the conditions contained in this Indenture, to the holders of the Securities (and to holders of other Pari Passu Debt designated by the Company) to purchase Securities (and such other Pari Passu Debt) at a purchase price of 100% of the principal amount thereof (without premium) plus accrued and unpaid interest (or in respect of such other Pari Passu Debt such lesser price, if any, as may be provided for by the terms of such other Pari Passu Debt) (the aggregate amount of such purchase price being hereinafter called the "Net Available Cash Payment") and (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to any application not prohibited by this Indenture; provided, however, that in connection with any prepayment, repayment or purchase of Debt pursuant to clause (A) or (C) above, the Company or such Subsidiary shall retire such Debt and shall cause the related loan commitment (if any) to be 30 permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this paragraph, the Company and its Subsidiaries shall not be required to apply any Net Available Cash (other than Net Available Cash from an Asset Disposition consisting of a sale and leaseback transaction that the Company has elected to treat as an Asset Disposition pursuant to clause (ii) of Section 4.09) in accordance with this paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this paragraph exceeds $10.0 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments. Within 30 days after the New Asset Acquisition Date, the Company shall commence a Net Available Cash Offer by mailing a notice to the Trustee and each Holder stating: (i) that the Net Available Cash Offer is being made pursuant to this Section and that all Securities validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date notice is mailed) (the "Net Available Cash Payment Date"); (iii) that any Security not tendered will continue to accrue interest as provided in this Indenture; (iv) that, unless the Company defaults in the payment therefore, any Security accepted for payment pursuant to the Net Available Cash Offer shall cease to accrue interest after the Net Available Cash Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Net Available Cash Offer will be required to surrender the Security, together with the form entitled "Option of Holder to Elect Purchase" on the reverse side of the Security duly completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Net Available Cash Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Net Available Cash Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and 31 (vii) that Holders whose Securities are being purchased only in part will be issued new Securities of like tenor equal in principal amount to the unpurchased portion of the Securities surrendered; provided, however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. On or prior to the date notice is mailed to the Trustee and each Holder, the Company shall furnish the Trustee with an Officers' Certificate of the Company stating the amount of the Net Available Cash Payment. On the Net Available Cash Payment Date, the Company shall: (i) accept for payment on a pro rata basis Securities or portions thereof tendered pursuant to the Net Available Cash Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, Securities or portions thereof so accepted together with an Officers' Certificate of the Company specifying the Securities or portions thereof accepted for payment by the Company. The Company will publicly announce the results of the Net Available Cash Offer as soon as practicable after the Net Available Cash Payment Date. Notwithstanding the foregoing, the Company may modify the procedures set forth above for a Net Available Cash Offer in any manner not adverse to holders of the Securities. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this clause by virtue thereof. SECTION 4.07. Limitation on Debt and Preferred Stock of Subsidiaries. ------------------------------------------------------ The Company shall not permit any Subsidiary to issue, directly or indirectly, any Debt or Preferred Stock except: -32- (a) Debt or Preferred Stock issued to and held by the Company or a Wholly Owned Subsidiary; provided, however, that (i) any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or (ii) any subsequent transfer of such Debt or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of such Debt or Preferred Stock by the issuer thereof; (b) Debt or Preferred Stock of a Subsidiary issued and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Debt or Preferred Stock issued as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); (c) Any other Debt or Preferred Stock (other than any described in clause (a) or (b)) issued and outstanding on the date the Securities are issued; (d) Debt or Preferred Stock issued in exchange for, or the proceeds of which are used to Refinance, Debt or Preferred Stock referred to in the foregoing clause (b) or (c); provided, however, the principal amount or liquidation value of such Debt or Preferred Stock so issued shall not exceed the principal amount or the liquidation value of the Debt or Preferred stock so Refinanced and (ii) the Debt or Preferred Stock so issued (A) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt or Preferred Stock being exchanged or Refinanced and (B) shall have an Average Life no less than the remaining Average Life of the Debt or Preferred Stock being Refinanced; and (e) Debt and Preferred Stock in an aggregate principal amount which, together with any other Debt or Preferred stock of Subsidiaries then outstanding (other than Debt or Preferred Stock permitted by clauses (a) through (d) of this covenant) does not exceed $20.0 million (less the amount of any Debt then outstanding and incurred pursuant to Section 4.04(b)(5)). SECTION 4.08. Limitation on Liens Securing Debt. The Company shall --------------------------------- not, and shall not permit any Subsidiary to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien securing Debt of any kind (other than Permitted Liens) upon any of their respective property or assets, now owned or hereafter acquired, or any income or profits therefrom, unless the Company makes or causes to be made effective provision whereby payment of the principal and interest on the Securities will be secured by such -33- Lien equally and ratably with (or prior to) such Debt for so long as such Debt shall be secured; provided, however, that (i) in the event of any sale, transfer or other disposition by the Company or any Subsidiary of Accounts Receivable or of any Subsidiary substantially all the assets of which are Accounts Receivable, which sale, transfer or other disposition constitutes a "sale" under generally accepted accounting principles (as in effect at the time thereof), neither such sale, transfer or other disposition nor any recourse provided by the Company or any Subsidiary in connection therewith shall, in any event, constitute Debt or a Lien and (ii) neither the satisfaction and discharge of any Debt pursuant to any indenture or other instrument governing such Debt, nor the defeasance of any Debt pursuant to any indenture or other instrument governing such Debt, shall be deemed the creation, incurrence, assumption or existence of any Lien securing Debt. SECTION 4.09. Limitation on Sale and Leaseback Transactions. The --------------------------------------------- Company shall not, and shall not permit any Subsidiary to, enter into any arrangement with any person providing for the leasing by the Company or any Subsidiary of any real or tangible personal property (except for leases for a term of not more than one year (including renewal rights) or between the Company and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Company or such Subsidiary to such person in contemplation of such leasing, unless (i) the Company or such Subsidiary would be entitled to create a Lien on such property securing Debt in an amount equal to the Attributable Debt with respect to such arrangement without equally and ratably securing the Securities pursuant to Section 4.08 or (ii) the Company or such Subsidiary shall have received consideration from such arrangement at least equal to the fair market value of the property subject thereto (which shall be determined in good faith by the Board of Directors and evidenced by a resolution of the Board of Directors) and elects to treat the assets subject to such arrangement as an Asset Disposition subject to Section 4.06. SECTION 4.10. Limitation on Transactions with Affiliates. The Company ------------------------------------------ shall not, and shall not permit any Subsidiary to, conduct any business or enter into any transaction or series of similar transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (other than (i) a Wholly Owned Subsidiary or (ii) an employee stock ownership plan, unless the terms of such business, transaction or series of transactions are fair and reasonable to the Company. All such business, transaction or series of transactions that are approved by the Board of Directors (including by a majority of the Independent Committee of the Board of Directors) shall be deemed fair and reasonable to the Company. This Section, however, will not prohibit any management compensation arrangements consistent with industry practice, and all such business, transactions or -34- series of transactions that have been completed or with respect to which agreements have been entered into prior to the date of this Indenture shall be deemed fair and reasonable to the Company. SECTION 4.11. Change of Control. (a) Upon a Change of Control, each ----------------- Holder shall have the right to require that the Issuers repurchase such Holder's Securities (other than Securities called for redemption pursuant to Article III) at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the terms contemplated in this Section 4.11. (b) Within 30 days following any Change of Control, the Issuers shall mail a notice to each Holder (other than each Holder to which the Issuers have theretofore mailed a notice of redemption pursuant to Section 3.03 in connection with the redemption of all the Securities held by such Holder) with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Issuers to purchase such Holder's Securities (other than Floating Rate Securities called for redemption pursuant to Article III) at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; (2) the circumstances and relevant facts regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions, determined by the Issuers consistent with this Indenture, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased will be required to surrender the Security, with the attached form entitled "Option of Holder to Elect Purchase" duly completed, to the Issuers at the address specified in the notice referred to in paragraph (b) above at least 10 Business Days prior to the repurchase date. Holders will be entitled to withdraw their election if the Trustee or the Issuers receive, not later than three Business Days prior to the repurchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Issuers under this Section shall be delivered by the Trustee for cancellation, and the Issuers shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) The Issuers shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and -35- any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provision of any securities laws or regulations conflict with the provisions of this Section, the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations under this Section by virtue thereof. SECTION 4.12. Uncompleted Acquisition Offer. If the Company does not ----------------------------- consummate the Acquisition by June 15, 1995 (the "Uncompleted Acquisition Date"), the Issuers will be required to make an offer (the "Uncompleted Acquisition Offer"), pursuant to and subject to the conditions contained in this Indenture, to the holders of the Securities to purchase up to $35,000,000 principal amount of Securities at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. Within 30 days after the Uncompleted Acquisition Date, the Issuers shall commence an Uncompleted Acquisition Offer by mailing a notice to the Trustee and each Holder stating: (i) that the Uncompleted Acquisition Offer is being made pursuant to this Section and that all Securities validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date notice is mailed) (the "Uncompleted Acquisition Offer Payment Date"); (iii) that any Security not tendered will continue to accrue interest as provided in this Indenture; (iv) that, unless the Issuers default in the payment therefore, any Security accepted for payment pursuant to the Uncompleted Acquisition Offer shall cease to accrue interest after the Uncompleted Acquisition Offer Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer will be required to surrender the Security, together with the form entitled "Option of Holder to Elect Purchase" on the reverse side of the Security duly completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Uncompleted Acquisition Offer Payment Date; -36- (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Uncompleted Acquisition Offer Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be issued new Securities of like tenor equal in principal amount to the unpurchased portion of the Securities surrendered; provided, however, that each Security purchased and each new Security issued shall be in an original principal amount of $1,000 or integral multiples thereof. On or prior to the date notice is mailed to the Trustee and each Holder, the Company shall furnish the Trustee with an Officers' Certificate of the Company stating the amount of the payment. On the Uncompleted Acquisition Payment Date, the Company shall: (i) accept for payment on a pro rata basis Securities or portions thereof tendered pursuant to the Uncompleted Acquisition Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, Securities or portions thereof so accepted together with an Officers' Certificate of the Company specifying the Securities or portions thereof accepted for payment by the Company. Notwithstanding the foregoing, the Company may modify the procedures set forth above for an Uncompleted Acquisition Offer in any manner not adverse to holders of the Securities. The Issuers shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Issuers shall comply with the applicable securities laws and regulations and -37- shall not be deemed to have breached its obligations under this clause by virtue thereof. SECTION 4.13. Compliance Certificate. Each of the Issuers shall ---------------------- deliver to the Trustee within 120 days after the end of each fiscal year an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company or Finance Corp., as the case may be, they would normally have knowledge of any Default by the Company or Finance Corp., as the case may be, and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company or Finance Corp., as the case may be, is taking or purposes to take with respect thereto. ARTICLE V --------- Successors ---------- SECTION 5.01. When the Company May Merge or Transfer Assets. The --------------------------------------------- Company shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all its assets to, another person unless (i) the resulting, surviving or transferee person or lessee (if other than the Company) shall be a person organized and existing under the laws of the United States or any State thereof or the District of Columbia and such entity shall assume by supplemental indenture all the obligations of the Company under the Securities and this Indenture, (ii) immediately after giving effect to such transaction, no Default shall have happened and be continuing, (iii) immediately after giving effect to such transaction, the resulting, surviving or transferee person would be able to issue an additional $1.00 of Debt pursuant to the first sentence of Section 4.04, (iv) immediately after giving effect to such transaction, the resulting, surviving or transferee person has a Consolidated Net Worth which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction and (v) the Company shall have delivered to the Trustee an Officers' Certificate of the Company and an Opinion of Counsel of the Company, each stating that such consolidation, merger, sale, conveyance, transfer or lease and such supplemental indenture comply with this Indenture. SECTION 5.02. When Finance Corp. May Merge or Transfer Assets. ----------------------------------------------- Finance Corp. shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all its assets to, another person unless (i) the resulting, surviving or transferee person or lessee (if other than Finance Corp.) shall be an entity organized or existing under the laws of the United States or any state thereof or the District of Columbia and such entity expressly assumes by supplemental indenture all the obligations of the Company under the Securities -38- and this Indenture, (ii) immediately after giving effect to such transaction, no Default shall have happened and be continuing and (iii) Finance Corp. shall have delivered to the Trustee an Officers' Certificate of Finance Corp. and an Opinion of Counsel of Finance Corp., each stating that such consolidation, merger, sale, conveyance, transfer or lease and such supplemental indenture comply with this Indenture. SECTION 5.03. Obligations After Merger or Transfer. Upon any such ------------------------------------ consolidation, merger, sale, conveyance, transfer or lease, and following such an assumption by the resulting, surviving or transferee person or lessee, (i) such resulting, surviving or transferee person or lessee shall succeed to and be substituted for the Company or Finance Corp., as the case may be, with the same effect as if it had been named herein and (ii) the Company or Finance Corp., as the case may be, shall be released and discharged from all obligations and covenants under this Indenture; provided, however, that in the event of any such lease, the Company or Finance Corp., as the case may be, shall not, by operation of this Section 5.03, be released or discharged from its obligation to pay the principal of and interest on the Securities at the times, places and rate prescribed in this Indenture and the Securities. In the case of the Company or Finance Corp., as the case may be, such resulting, surviving or transferee person or lessee may cause to be signed, and may issue either in its own name or in the name of the Company or Finance Corp., as the case may be, prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company or Finance Corp., as the case may be, and delivered to the Trustee; and, upon the order of such resulting, surviving or transferee person or lessee instead of the Company or Finance Corp., and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company or Finance Corp. to the Trustee for authentication, and any Securities which such resulting, surviving or transferee person or lessee thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture. In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. -39- ARTICLE VI Defaults and Remedies --------------------- SECTION 6.01. Events of Default. An "Event of Default" occurs if: ----------------- (1) the Issuers default in any payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Issuers default in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise; (3) the Company or Finance Corp. fails to comply with Section 5.01; (4) the failure by the Company to comply for 30 days after notice with any of its obligations under Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.11 (other than a failure to purchase Securities); (5) the Issuers fail to comply with any of their respective agreements in the Securities or this Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below; (6) Debt of the Company, Finance Corp. or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Debt unpaid or accelerated exceeds $20,000,000 and such failure continues for 10 days after notice; (7) the Company, Finance Corp. or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; -40- (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, Finance Corp. or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company, Finance Corp. or any Significant Subsidiary or for any substantial part of their respective property; or (C) order the winding up or liquidation of the Company or any Significant Subsidiary; or (9) any judgment or decree for the payment of money in excess of $20,000,000 (to the extent not covered by insurance) shall be rendered against either of the Issuers, and there is a period of 60 days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed and such judgment or decree is not satisfied, discharged, waived or the execution stayed within 10 days after the notice specified below. The term "Bankruptcy Law" means Title 11, United States Code, or any ------------------ similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4), (5), (6) or (9) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Securities notify the Issuers of the Default and the Issuers do not cure such Default within the time specified after receipt of such Notice. Such Notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Default or Event of Default, its status and what action the Issuers are taking or propose to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an ------------ Event of Default specified in Section 6.01(7) or (8)) occurs and is continuing, the Trustee by notice to the Issuers, or the Holders of at least 25% in principal amount of the Securities by notice to the Issuers and the Trustee, may declare the principal of and the accrued interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) occurs and is continuing, the principal of and interest on all the -41- Securities shall ipso facto become and be immediately due and payable without ---- ----- any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and its -------------- continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right of 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. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in ----------------------- principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences (including in connection with a tender offer or exchange offer for Securities) except (1) a Default in the payment of the principal of or interest on a Security or (2) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in ------------------- principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee (including in connection with a tender offer or exchange offer for Securities). However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability, provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it -42- in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue ------------------- any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority of principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding ------------------------------------ any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in -------------------------- payment of interest or principal specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount of principal and interest remaining unpaid (together with interest on such unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. 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 and the Securityholders allowed in any judicial proceedings relative to the Company or Finance Corp., or -43- their respective creditors or property, and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or ---------- securities pursuant to this Article 6, it shall pay out such money or securities in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Issuers shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. 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 in its discretion may 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 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company -------------------------------- nor Finance Corp. (to the extent they may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and Finance Corp. -44- (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee ------- SECTION 7.01. Duties of Trustee. (a) If an Event of Default has ----------------- occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (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, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (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; and (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 6.05. -45- (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur 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 to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any ----------------- document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through 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 it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. -46- SECTION 7.03. Individual Rights of Trustee. The Trustee in its ---------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying 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 Securities, it shall not be accountable for the Issuers' use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or Finance Corp. in the Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is ------------------ continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. On or before July 15, ----------------------------- 1996 and or on before July 15 in every year thereafter, the Trustee shall mail to each Securityholder a brief report dated as of May 16 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to the -------------------------- Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses disbursement and advances of the Trustee's agents, counsel, accountants and experts. The Issuers shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees and expenses) incurred by it in connection with the administration of -47- this trust and the performance of its duties hereunder. The Trustee shall notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder. The Issuers shall defend such claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Issuers shall pay the reasonable fees and expenses of such counsel. The Issuers need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. To secure the Issuers' payment obligations in this Section, the Issuers and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Securities. The Issuers' payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs fees and expenses (including reasonable attorneys' fees and expenses) after the occurrence of a Default specified in Section 6.01(7) or (8), such fees and expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any ---------------------- time by so notifying the Issuers. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuers shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise 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 Trustee in such event being referred to herein as the retiring Trustee), the Issuers shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon 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 a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the -48- successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the Holders of a majority in principal amount of the Securities 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 Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuers' obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee --------------------------- consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all ----------------------------- times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA (S) 310(b), including the optional provision permitted by the second sentence of TIA (S) 310(b)(9); provided, however, that there shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuers are outstanding if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. -49- SECTION 7.11. Preferential Collection of Claims Against Issuers. The ------------------------------------------------- Trustee shall comply with TIA S 311(a), excluding any creditor relationship listed in TIA S 311(b). A Trustee who has resigned or been removed shall be subject to TIA S 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture: Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) ------------------------------------------------ When (i) the Issuers deliver to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable and the Issuers irrevocably deposit with the Trustee funds sufficient to pay at maturity all outstanding Securities, including interest thereon (other than Securities replaced pursuant to Section 2.07), and if in either case the Issuers pay all other sums payable hereunder by the Issuers, then this Indenture shall, subject to Sections 8.01(c) and 8.06, cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Issuers accompanied by an Officers' Certificate of the Company and an Opinion of Counsel and at the cost and expense of the Issuers. (b) Subject to Section 8.01(c) and 8.06, the Issuers at any time may terminate (i) all their obligations under the Securities and this Indenture ("legal defeasance option") or (ii) their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 5.01 and 5.02 and the operation of Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6), 6.01(7) (only with respect to Significant Subsidiaries), 6.01(8) (only with respect to Significant Subsidiaries) and 6.01(9) ("covenant defeasance option"). The Issuers may exercise their legal defeasance option notwithstanding their prior exercise of their covenant defeasance option. If the Issuers exercise their legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Issuers exercise their covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.01(3), 6.01(4), 6.01(5), 6.01(6), 6.01(7) (only with respect to Significant Subsidiaries), 6.01(8) (only with respect to Significant Subsidiaries) or 6.01(9). Upon satisfaction of the conditions set forth herein and upon request of the Issuers, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuers terminate. -50- (c) Notwithstanding clauses (a) and (b) above, the Issuers' obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Issuers' obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Issuers may exercise ------------------------ their legal defeasance option or their covenant defeasance option only if: (1) the Issuers irrevocably deposit in trust with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the outstanding Securities to maturity or redemption, as the case may be; (2) the Issuers deliver to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts (but, in the case of the legal defeasance option only, not more than such amounts) as will be sufficient to pay principal and interest when due on all the outstanding Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default (with respect to the Issuers) specified in Section 6.01(7) or (8) occurs which is continuing at the end of the period; (4) no Default has occurred and is continuing on the date of such deposit and after giving effect thereto; (5) the deposit does not constitute a default under any other agreement binding on either of the Issuers; and (6) the Company delivers an Opinion of Counsel to the effect that Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or a change in applicable Federal income tax law); and (7) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. -51- Before or after a deposit, the Issuers may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in -------------------------- trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.04. Repayment to the Company. The Trustee and the Paying ------------------------ Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, 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 two years, and, thereafter, Securityholders entitled to the money must look to the Issuers for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Issuers shall ------------------------------------ pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable ------------- to apply any money or U.S. Government Obligations in accordance with this Article 8 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 Issuers' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Issuers have made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. -52- ARTICLE IX Amendments ---------- SECTION 9.01. Without Consent of Holders. The Company, Finance Corp. -------------------------- and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended, or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Internal Revenue Code of 1986, as amended; (4) to add guarantees with respect to the Securities; (5) to add to the covenants of the Issuers for the benefit of the Holders or to surrender any right or power herein conferred upon the Issuers; (6) to comply with any requirements of the SEC in connection with qualifying this Indenture under the TIA; or (7) to make any change that does not adversely affect the rights of any Securityholder. After an amendment under this Section becomes effective, the Issuers shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. Subject to the next sentence, ----------------------- the Company, Finance Corp. and the Trustee may amend this Indenture or the Securities in any respect without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities (including consents obtained in connection with a tender offer or exchange offer for Securities). However, without the consent of each Securityholder affected, no amendment shall: (1) reduce the amount of Securities whose Holders must consent to an amendment; -53- (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the fixed maturity of any Security; (4) reduce the premium payable upon the redemption of any Security or change the time at which any Security may or shall be redeemed; (5) make any Security payable in money other than that stated in the Security; or (6) make any change in Section 6.04 or 6.07 or this Section. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Issuers shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment ----------------------------------- to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A --------------------------------------------- consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. The Issuers may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those persons who were Securityholders at such record date (or their duly designated proxies), and only those persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such persons continue to be Holders -54- after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment ------------------------------------- changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Issuers or the Trustee so determine, the Issuers in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any -------------------------- amendment authorized pursuant to this Article 9 if the amendment does note adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that all conditions precedent, if any, have been satisfied. ARTICLE X Miscellaneous ------------- SECTION 10.01. Trust Indenture Act 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. SECTION 10.02. Notices. Any notice or communication shall be in ------- writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company or Finance Corp.: BCP Management, Inc. 180 East Broad Street Columbus, Ohio 43215 Attention: Secretary if to the Trustee: The Chase Manhattan Bank (National Association) 4 Chase MetroTech Center - 3rd Floor Brooklyn, New York 11245 Attention: Institutional Trust Group -55- The Company, Finance Corp. or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Security holder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above it is duly given, whether or not the addressee receives it. SECTION 10.03. Communication by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA S 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, Finance Corp., the Trustee, the Registrar and anyone else shall have the protection of TIA S 312(c). SECTION 10.04. Certificate and Opinion as to Conditions Precedent. --------------------------------------------------- Upon any request or application by the Issuers to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the Opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05. Statement Required in Certificate or Opinion. Each --------------------------------------------- certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture 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 necessary to enable him to express an informed opinion as to -56- whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such covenant or condition has been complied with. SECTION 10.06. When Securities Disregarded. In determining whether ---------------------------- the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Issuers or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 10.07 Rules by Trustee, Paying Agent and Registrar. The --------------------------------------------- Trustee may make reasonable rules for action by or meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 10.08. Legal Holidays. A "Legal Holiday" is a Saturday, a --------------- Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 10.09. Governing Law. This Indenture and the Securities shall -------------- be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 10.10. No Recourse Against Others. (a) No director, officer, --------------------------- employee, partner or stockholder, as such, of the Company or of Finance Corp. (or of such partner or stockholder) shall have any liability for any obligations of the Company or of Finance Corp., as the case may be, under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be a part of the consideration for the issue of the Securities. (b) without limiting the generality of the foregoing, if the Company is a limited partnership, the obligations of the -57- Company hereunder and under the Securities will be non-recourse to the general partner (the "General Partner") of the Company (and its affiliates (other than the Company)), and principal of and interest on the Securities will be payable only out of the cash flow and assets of the Company. The Trustee hereby agrees, and each holder of a Security will be deemed to have agreed, that, notwithstanding any statutory and/or common law liability of a general partner for the debts and obligations of a partnership, neither the General Partner nor its assets (nor any of its affiliates (other than the Company) nor their respective assets) shall be liable for any of the obligations of the Company hereunder or under the Securities, it being expressly agreed and acknowledged that all such obligations of the Company shall be payable and satisfied only from the cash flow and assets of the Company. SECTION 10.11. Successors. All agreements of the Company and Finance ---------- Corp. in this Indenture and the Securities shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.12. Multiple Originals. The parties may sign any number of ------------------ copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.13. Table of Contents; Headings. The table of contents, ---------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions thereof. -58- IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. BORDEN CHEMICALS AND PLASTICS OPERATING PARTNERSHIP by: BCP MANAGEMENT, INC., its General Partner, Attest: by: /S/ JOSEPH M. SAGGESE --------------------------- Name: Joseph M. Saggese Title: President /S/ LAWRENCE L. DIEKER - ------------------------------ Name: Lawrence L. Dieker Title: Secretary BCP FINANCE CORPORATION Attest: by: /S/ JOSEPH M. SAGGESE --------------------------- Name: Joseph M. Saggese Title: President /S/ LAWRENCE L. DIEKER - ------------------------------ Name: Lawrence L. Dieker Title: Secretary THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Trustee Attest: by: /S/ THOMAS J. PROVENZANO --------------------------- Name: Thomas J. Provenzano Title: Second Vice President /S/ SHIEK WILTSHIRE - ------------------------------ Name: Shiek Wiltshire Title: Assistant Secretary -59 EXHIBIT A [FORM OF SECURITY] BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP BCP FINANCE CORPORATION No. $ 9 1/2% Note Due 2005 BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership, and BCP FINANCE CORPORATION, a Delaware corporation, as joint and several obligors, promise to pay to , or registered assigns, the principal sum of Dollars on May 1, 2005. Interest Payment Dates: May 1 and November 1 Record Dates: April 15 and October 15 Additional provisions of this Security are set forth on the other side of this Security. Dated: BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP MANAGEMENT, INC. as General Partner By: ____________________________ President ____________________________ Secretary BCP FINANCE CORPORATION By: ____________________________ President ____________________________ Secretary -60- TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE CHASE MANHATTAN BANK (National Association), as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ______________________________ Authorized Signatory -61- [FORM ON REVERSE SIDE OF SECURITY] 9 1/2% Note Due 2005 1. Interest -------- BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership (such partnership, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), and BCP FINANCE CORPORATION, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called "Finance Corp."; the Company and Finance Corp. are collectively referred to herein as the "Issuers"), jointly and severally promise to pay interest on the principal amount of this Security at the rate per annum shown above. The Issuers will pay interest semiannually on May 1 and November 1 of each year (beginning November 1, 1995). Interest on Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid or duly provided for, from May 1, 1995. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuers shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and they shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Issuers will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities at the close of business on the April 15 or October 15 next preceding the interest payment date even if Securities are cancelled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Issuers will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Issuers may pay principal and interest by check payable in such money and may mail an interest check to a Holder's registered address. 3. Paying Agent and Registrar -------------------------- Initially, The Chase Manhattan Bank (National Association), a corporation organized under the laws of the United States of America ("Trustee"), will act as Paying Agent and Registrar. The Issuers may appoint and change and Paying Agent, Registrar or co-registrar without notice. The Company or -62- any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of May 1, 1995 ("Indenture"), among the Company, Finance Corp. and the Trustee. The terms of the Securities 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.C. ------ SS 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. Capitalized terms used herein and not defined herein have the meaning ascribed thereto in the Indenture. The Issuers will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. The Securities are general unsecured obligations of the Issuers limited to $200,000,000 aggregate principal amount (subject to Section 2.07 of the Indenture). The Indenture imposes certain limitations on (i) the payment of dividends on, and redemption of, capital stock of the Company and its subsidiaries and the redemption of certain subordinated obligations of the Company, (ii) the issuance of additional debt by the Company, (iii) limitations on restrictions on distributions from subsidiaries of the Company, (iv) sales of assets and subsidiary stock, (v) the issuance of debt and preferred stock by the Company's subsidiaries, (vi) sale and leaseback transactions and (vii) transactions with affiliates. The Indenture also provides that if the Company does not consummate the acquisition of the Addis Assets by June 15, 1995, the Issuers will be required to offer to purchase up to $35.0 million in principal amount of the Securities at 100% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. 5. Optional Redemption ------------------- The Securities may not be redeemed prior to May 1, 2000. On and after that date, the Issuers may redeem all the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount) plus accrued interest to the redemption date: -63- If redeemed during the 12 month period beginning May 1,
Redemption Year Price ---- ---------- 2000 ........................................... 104.00% 2001 ........................................... 102.50% 2002 ........................................... 101.25% 2003 and thereafter ............................. 100.00%
6. Notice of Redemption -------------------- Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his, her or its registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of accrued and unpaid interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied on or after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Change of Control ----------------- Upon a Change of Control, each Holder shall have the right (subject to any right of the Issuers to redeem all or any part of the Securities pursuant to Article III of the Indenture) to require that the Issuers repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, in accordance with Section 4.11 of the Indenture. 8. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. -64- 9. Persons Deemed Owners --------------------- The registered holder of this Security may be treated as the owner of it for all purposes. 10. Unclaimed Money --------------- If the money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another person. After any such payment, Holders entitled to the money must look only to the Issuers and not to the Trustee for payment. 11. Defeasance ---------- Subject to certain conditions, the Issuers at any time may terminate some or all of their obligations under the Securities and the Indenture if the Issuers deposit with the Trustee money or U.S. Government Obligations for the payment of principal, premium and interest on the Securities to the date fixed for redemption or maturity, as the case may be. 12. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities (including consents obtained in connection with a tender offer or exchange offer for Securities) and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities (including consents obtained in connection with a tender offer or exchange offer for Securities). Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, Finance Corp. and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to comply with the Act or to add additional covenants or surrender the Issuers' rights, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Securityholder. 13. Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 hereof, upon declaration or otherwise; (iii) failure by the Issuers to comply -65- with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) failure to pay other debt after final maturity or after acceleration thereof, if the total amount of such debt exceeds $20,000,000; (v) certain events of bankruptcy or insolvency; and (vi) certain judgments or decrees for the payment of money in excess of $20,000,000. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 14. Trustee Dealings with the Issuers --------------------------------- Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have if it were not Trustee. 15. No Recourse Against Others -------------------------- A director, officer, employee, partner or stockholder, as such, of the Company, Finance Corp. or the Trustee shall not have any liability for any obligations of the Company or Finance Corp., as the case may be, under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Without limiting the generality of the foregoing, if the Company is a limited partnership, the obligations of the Company hereunder and under the Indenture will be non-recourse to the general partner (the "General Partner") of the Company (and its affiliates (other than the Company)), and principal of and -66- interest on this Security will be payable only out of the cash flow and assets of the Company. The Trustee hereby agrees, and each holder of a Security will be deemed to have agreed, that, notwithstanding any statutory and/or common law liability of a general partner for the debts and obligations of a partnership, neither the General Partner nor its assets (nor any of its affiliates (other than the Company) nor their respective assets) shall be liable for any of the obligations of the Company hereunder or under the Indenture, it being expressly agreed and acknowledged that all such obligations of the Company shall be payable and satisfied only from the cash flow and assets of the Company. 16. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 17. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 18. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Securities and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 19. Notices ------- Any notice or communication shall be in writing and delivered in person or mailed by first-class addressed as follows: if to the Company or Finance Corp.: BCP Management, Inc. 180 East Broad Street Columbus, Ohio 43215 Attention: Secretary -67- if to the Trustee: The Chase Manhattan Bank (National Association) 4 Chase MetroTech Center - 3rd Floor Brooklyn, New York 11245 Attention: Institutional Trust Group The Company, Finance Corp. or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. -68- ________________________________________________________________________________ ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: _________________________ Your Signature: ____________________________ ________________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. -69- OPTION OF HOLDER TO ELECT PURCHASE To elect to have this Security purchased by the Issuers pursuant to Section 4.06, 4.11 or 4.12 of the Indenture, check the box below: {__} Section 4.06 {__} Section 4.11 {__} Section 4.12 To elect to have only part of this Security purchased by the Issuers pursuant to Section 4.06, Section 4.11 or Section 4.12 of the Indenture, state the amount you elect to have purchased (in integral multiples of $1,000): $__________________ Date: __________________ Your Signature: ___________________________________ (Sign exactly as your name appears on this Security) Tax Identification No.: ___________________________ Signature Guarantee. -70- EX-10.4 3 REVOLVING CREDIT AGREEMENT DATED MAY 2, 1995 ================================================================================ CLOSING DOCUMENTS ================================================================================ CREDIT AGREEMENT $100,000,000 DATED AS OF MAY 2, 1995 AMONG BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, AS THE COMPANY, THE BANKS DEFINED HEREIN AND CREDIT SUISSE, AS AGENT, AND INDIVIDUALLY, AS A BANK ================================================================================ Andrews & Kurth L.L.P. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP $100,000,000 LOAN FROM CREDIT SUISSE AND THE BANKS NAMED IN THE CREDIT AGREEMENT DATED MAY 2, 1995 INDEX TO CLOSING DOCUMENTS DOCUMENT TAB - -------- --- Credit Agreement dated May 2, 1995 and executed by Borden Chemicals and 1 Plastics Operating Limited Partnership, a limited partnership organized and existing under the New York Limited Partnership Act (the "Company"), whose sole general partner is BCP Management Inc., a Delaware corporation ("BCPM"), the banks and other financial institutions listed on the signature pages under the caption ("Banks" and Credit Suisse, ("Credit Suisse"), individually as a Bank and as agent for the other Banks (in such capacity together with any other Person who becomes the Agent, the "Agent") Revolving Credit Notes in the amount of each Bank's commitment 2 Officer's Certificate of the Company certifying: 3 . and attaching Certificate of Incorporation, Bylaws and Resolutions of the General Partner and the Partnership Agreement of the Company . other items in Section 5.01(d) of the Credit Agreement --------------- Opinion of Sidley & Austin, counsel to the Company 4 Opinion of General Counsel of the Company 5 Certificates of Good Standing and Existence for the Company and its 6 General Partner . Delaware . Louisiana . Illinois Wachovia Bank and Trust Company, N.A. Termination Agreement 7 ================================================================================ CREDIT AGREEMENT $100,000,000 DATED AS OF MAY 2, 1995 AMONG BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, AS THE COMPANY, THE BANKS DEFINED HEREIN AND CREDIT SUISSE, AS AGENT, AND INDIVIDUALLY, AS A BANK ================================================================================ TABLE OF CONTENTS CREDIT AGREEMENT ARTICLE I DEFINITIONS AND ACCOUNTING TERMS ................... 1 Section 1.01 Definitions ........................................ 1 Section 1.02 Types of Loans and Borrowings ...................... 21 Section 1.03 Accounting Terms and Determinations ................ 21 Section 1.04 Computation of Time Periods ........................ 21 ARTICLE II LOANS .............................................. 22 Section 2.01(a) Commitment ......................................... 22 Section 2.02(b) Swing Loan Commitment .............................. 22 Section 2.02 Minimum Amount of Each Borrowing ................... 22 Section 2.03 Notice of Borrowing ................................ 23 Section 2.04 Disbursement of Funds .............................. 23 Section 2.05 Notes .............................................. 24 Section 2.06 Conversions and Continuances ....................... 24 Section 2.07 Pro Rata Borrowings ................................ 25 Section 2.08 Interest ........................................... 25 Section 2.09 Interest Periods ................................... 26 Section 2.10 Interest Rate Not Ascertainable .................... 27 Section 2.11 Reserve Requirements; Change in Circumstances ...... 27 Section 2.12 Change in Legality ................................. 29 Section 2.13 Indemnity .......................................... 30 Section 2.14 Special Provisions for Swing Loans ................. 31 ARTICLE III LETTERS OF CREDIT .................................. 32 Section 3.01 Letters of Credit .................................. 32 Section 3.02 Letter of Credit Requests .......................... 33 Section 3.03 Letter of Credit Participants ...................... 34 Section 3.04 Agreement to Repay Letter of Credit Drawings ....... 35 Section 3.05 Increased Costs .................................... 37 Section 3.06 Conflict between Applications and Agreements ....... 37 ARTICLE IV FEES; COMMITMENTS; PAYMENTS ........................ 38 Section 4.01 Fees ............................................... 38 Section 4.02 Voluntary Reduction of Commitment .................. 39 Section 4.03 Mandatory Reduction of Commitment .................. 39 Section 4.04 Voluntary Prepayments .............................. 40 Section 4.05 Mandatory Repayments ............................... 40 Section 4.06 Method and Place of Payment ........................ 41 Section 4.07 Net Payments ....................................... 41 Section 4.08 Tax Forms .......................................... 42 Section 4.09 Maturity Date Extension Option ..................... 42 -i- ARTICLE V CONDITIONS PRECEDENT ............................... 43 Section 5.01 Conditions Precedent to the Initial Borrowing of Loans ............................................ 43 Section 5.02 Conditions Precedent to All Credit Events .......... 44 Section 5.03 Conditions Precedent to Conversions ................ 44 Section 5.04 Delivery of Documents .............................. 45 ARTICLE VI REPRESENTATIONS AND WARRANTIES ..................... 45 Section 6.01 Organization and Qualification ..................... 45 Section 6.02 Authorization and Validity ......................... 45 Section 6.03 Governmental Consents .............................. 46 Section 6.04 Conflicting or Adverse Agreements or Restrictions .. 46 Section 6.05 Title to Assets .................................... 46 Section 6.06 Litigation ......................................... 46 Section 6.07 Financial Statements, Projections and Information Memorandum ...................................... 46 Section 6.08 Default ............................................ 47 Section 6.09 Investment Company Act ............................. 47 Section 6.10 Public Utility Holding Company Act ................. 47 Section 6.11 ERISA .............................................. 47 Section 6.12 Tax Returns and Payments ........................... 47 Section 6.13 Environmental Matters .............................. 48 Section 6.14 Purpose of Loans ................................... 48 Section 6.15 Franchises and Other Rights ........................ 49 Section 6.16 Subsidiaries ....................................... 49 Section 6.17 Solvency ........................................... 49 Section 6.18 Material Contracts ................................. 49 ARTICLE VII AFFIRMATIVE COVENANTS .............................. 49 Section 7.01 Information Covenants .............................. 49 Section 7.02 Books, Records and Inspections ..................... 51 Section 7.03 Insurance and Maintenance of Properties ............ 51 Section 7.04 Payment of Taxes ................................... 51 Section 7.05 Corporate Existence ................................ 52 Section 7.06 Compliance with Statutes ........................... 52 Section 7.07 ERISA .............................................. 52 ARTICLE VIII NEGATIVE COVENANTS ................................. 53 Section 8.01 Change in Business ................................. 53 Section 8.02 Consolidation, Merger or Sale of Assets ............ 53 Section 8.03 Liens .............................................. 53 Section 8.04 Limitation on Debt ................................. 54 Section 8.05 Investments ........................................ 55 Section 8.06 Restricted Payments ................................ 55 Section 8.07 Change in Accounting; Fiscal Year .................. 57 Section 8.08 Consolidated EBITDA Coverage Ratio ................. 57 -ii- Section 8.09 Total Debt to Consolidated Net Tangible Assets Ratio ............................................ 57 Section 8.10 Transactions with Affiliates ....................... 57 Section 8.11 Limitation on Sales of Assets and Subsidiary Stock . 58 Section 8.12 Limitation on Debt and Preferred Stock of Subsidiaries ..................................... 59 Section 8.13 Limitation on Sale and Leaseback Transactions ...... 60 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES ..................... 60 Section 9.01 Events of Default and Remedies ..................... 60 Section 9.02 Other Remedies ..................................... 62 Section 9.03 Obligations Non Recourse as to General Partner ..... 63 ARTICLE X THE AGENT .......................................... 63 Section 10.01 Authorization and Action ........................... 63 Section 10.02 Agent's Reliance ................................... 63 Section 10.03 Agent and Affiliates; Credit Suisse (in its capacity as a Bank) and Affiliates ........................ 64 Section 10.04 Bank Credit Decision ............................... 65 Section 10.05 Agent's Indemnity .................................. 65 Section 10.06 Successor Agent .................................... 66 Section 10.07 Notice of Default .................................. 66 ARTICLE XI MISCELLANEOUS ...................................... 66 Section 11.01 Amendments ......................................... 66 Section 11.02 Notices ............................................ 67 Section 11.03 No Waiver; Remedies ................................ 68 Section 11.04 Costs, Expenses and Taxes .......................... 68 Section 11.05 Indemnity .......................................... 69 Section 11.06 Right of Setoff .................................... 69 Section 11.07 Governing Law ...................................... 69 Section 11.08 Interest ........................................... 70 Section 11.09 Binding Effect ..................................... 71 Section 11.10 Successors and Assigns; Participants ............... 71 Section 11.11 Confidentiality .................................... 74 Section 11.12 Pro Rata Treatment ................................. 74 Section 11.13 Independence of Covenants .......................... 75 Section 11.14 Separability ....................................... 75 Section 11.15 Execution in Counterparts .......................... 75 Section 11.16 Interpretation ..................................... 75 Section 11.17 Submission to Jurisdiction ......................... 76 Section 11.18 Final Agreement of the Parties ..................... 77 Section 11.19 Waiver of Jury Trial ............................... 77 -iii- Exhibits: - -------- Exhibit 1.01-A Administrative Questionnaire Exhibit 2.03 Form of Notice Borrowing Exhibit 2.05 Form of Revolving Credit Note Exhibit 2.14 Swing Loan Participation Certificate Exhibit 3.02 Form of Letter of Credit Request Exhibit 5.01(e) Form of Opinion Exhibit 11.10 Form of Assignment and Acceptance Schedules: - --------- Schedule 6.13 Exceptions to Environmental Matters Schedule 8.05 Investments -iv- CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of May 2, 1995 (this "Agreement") is --------- among Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (with its successors and permitted assigns, the "Company"), ------- whose sole general partner is BCP Management, Inc., a Delaware corporation, the banks and other financial institutions listed on the signature pages hereof under the caption "Banks" (together with each other Person who becomes a Bank ----- pursuant to Section 11.10, collectively, the "Banks") and Credit Suisse, ------------- ----- ("Credit Suisse"), individually as a Bank and as agent for the other Banks (in ------------- such capacity together with any other Person who becomes the Agent pursuant to Section 10.06, the "Agent"). - ------------- ----- RECITALS The Company has requested that the Banks make available to the Company a revolving line of credit in the aggregate principal amount of $100,000,000 for the purpose of refinancing certain existing debt and for working capital, capital expenditures and general corporate purposes. The Company and the Banks have requested that Credit Suisse act as the Agent for the Banks. The Banks and Credit Suisse are amenable to such requests upon the terms and conditions set forth herein. Accordingly, the Company, the Agent and the Banks now enter into this Agreement. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Definitions. As used in this Agreement, the following ----------- terms shall have the following meanings: "Accounts Receivable" means (a) any accounts receivable (whether or not earned by performance), chattel paper, instruments, documents, general intangibles, trade acceptances, and other rights to receive installment, rental or other payments for, or relating to amounts due or to become due on account of, goods or equipment sold or leased or to be sold or leased or services rendered or to be rendered or funds advanced or loaned or to be advanced or loaned and other similar rights to payment of any kind, (b) any proceeds of any of the foregoing and (c) any interest in any property or asset of any kind (whether of the obligor with respect to such accounts receivable or any other Person) securing the payment of any item listed in clause (a) above. "Administrative Questionnaire" means an Administrative Questionnaire substantially in the form of Exhibit 1.01A, which each Bank has completed and ------------- provided to the Agent and the Company. "Affiliate" of any Person, means (i) any Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or (ii) any Person who is a director or officer (A) of such Person, (B) of any Subsidiary of such Person or (C) of any Person described in clause (i) above. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" has the meaning specified in the introduction to this Agreement. "Agent's Fee" has the meaning specified in Section 4.01(d). --------------- "Agent's Letter" means that certain letter dated April 5, 1995 from Credit Suisse to the Company and acknowledged by the Company setting forth (among other things) the terms of the Agent's Fee. "Agreement" has the meaning specified in the introduction to this Credit Agreement. "Applicable Lending Office" means, with respect to each Bank, such Bank's Domestic Lending Office in the case of a Base Rate Loan and such Bank's Eurodollar Lending Office in the case of a Eurodollar Loan. "Application" means an application in the form used by the Issuing Bank from time to time requesting the Issuing Bank to open a Letter of Credit. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) of Capital Stock of a Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company or any of its Subsidiaries, including any disposition by means of a merger, consolidation or similar transaction, other than (a) a disposition by the Company or a Subsidiary to the Company or a Wholly Owned Subsidiary, (b) a disposition of property or assets at fair market value in the ordinary course of business, (c) a disposition of obsolete assets in the ordinary course of business, (d) a disposition that constitutes a Restricted Payment or a sale and leaseback transaction and (e) any sale, transfer or other disposition by the Company or any Subsidiary of Accounts Receivable or of any Subsidiary substantially all the assets of which are Accounts Receivable, which sale, transfer or other disposition constitutes a "sale" under generally accepted accounting principles (as in effect at the time thereof). "Assignment and Acceptance" has the meaning specified in Section ------- 11.10(c). - -------- "Attributable Debt" in respect of a sale and leaseback arrangement means, as at the time of determination, the present value (discounted at the Base Rate, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such arrangement (including any period for which such lease had been extended). "Available Cash" has the meaning given to such term in the Amended and -2- Restated Agreement of Limited Partnership of the Company, dated as of November 30, 1987, as amended to the date of this Agreement. "Average Life" means, as of the date of determination, with respect to any Debt, the quotient obtained by dividing (a) the sum of the products of (i) the numbers of years from the date of determination to the dates of each successive scheduled principal payment or redemption or similar payment with respect to such Debt multiplied by (ii) the amount of such payment, by (b) the sum of all such payments. "Bank" has the meaning provided in the introduction to this Agreement. "Bankruptcy Code" has the meaning specified in Section 9.01(e). --------------- "Base Rate" means, a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (a) the rate of interest announced publicly by the Agent, from time to time, as the Agent's base lending rate for commercial loans in dollars; and (b) 1/2 of 1% per annum above the Federal Funds Rate. The base lending rate is not the lowest rate of interest charged by the Agent in connection with extensions of credit. "Base Rate Borrowing" means a Borrowing comprised of Base Rate Loans. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate in accordance with the provisions of Article II. ---------- "BCPM" means BCP Management, Inc., a Delaware corporation, and its successors. "Board" means the Board of Governors of the Federal Reserve System of the United States (or any successor). "Board of Directors" means the Board of Directors of the Company (or, if the Company is a limited partnership or a general partnership, the Board of Directors of any of its general partners or partners, respectively, authorized to act on behalf of such limited partnership or general partnership, as the case may be, in connection with this Agreement) or any committee thereof duly authorized to act on behalf of such Board. "Borden" means Borden, Inc., a New Jersey corporation, and its successors (other than as a result of any transaction described in clause (a) of the definition of "Change of Control", as if Borden, Inc. were deemed for such purposes to be the Company). "Borrowing" means a borrowing pursuant to a Notice of Borrowing comprised of a single Type of Loan from all the Banks (or resulting from a conversion or conversions on the same date having in the case of Eurodollar Rate Loans the same Interest Period (except as otherwise provided in this Agreement)) made by all of the Banks concurrently to the Company. -3- "Borrowing Date" means, with respect to each Borrowing, the Business Day upon which the proceeds of such Borrowing are to be made available to the Company. "Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York, New York; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the Eurodollar interbank market. "Capital Lease" means, as to any Person, any lease in respect of which the rental obligations of such Person constitute Capital Lease Obligations. "Capital Lease Obligations" of a Person means any obligation which is required to be classified and accounted for as a capital lease on a balance sheet of such Person prepared in accordance with GAAP; the amount of such obligation shall be the capitalized amount thereof, determined in accordance with GAAP; and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) capital stock, including any preferred stock, and with respect to a partnership, any interest therein (whether general or limited) that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership; provided that Capital Stock shall not include any debt security that is convertible into or exchangeable for Capital Stock. A "Change of Control" occurs when (a) any Person or "group" for purposes of Section 13(d) of the Exchange Act (a "Group"), other than Permitted Holders, shall beneficially own, directly or indirectly, more than 50% of the total voting power of all classes of Voting Stock of the General Partner, Holding Company or the Company or (b)(i) the Company shall sell, lease, convey or otherwise dispose of all or substantially all of the Company's assets to any Person or Group or (ii) the Company shall consolidate with or merge into another Person or another Person shall consolidate with or merge into the Company, in case of either of the foregoing, in a transaction in which the outstanding Voting Stock of the Company is reclassified or changed into or exchanged for cash, securities or other property, other than, in the case of either of clauses (i) or (ii), to, with or into, as applicable, one or more Permitted Holders or a Person, more than 50% of the total voting power of all classes of Voting Stock of which, after giving effect to such transaction, is beneficially owned, directly or indirectly, by one or more Permitted Holders or (iii) the Company, Holding Company or the General Partner shall adopt a plan of liquidation or dissolution (unless all or substantially all the Company's assets are distributed pursuant to such plan to one or more Permitted Holders). -4- "Code" means Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank under the heading "Commitment" on the signature page for such Bank, or, in the case of any Person who becomes a Bank after the Execution Date, on the signature page of the Assignment and Acceptance executed by such Person, in each case, as the same may be reduced from time to time or terminated pursuant to Section 4.02, Section 4.03 or Article IX and with respect ------------ ------------ ---------- to the Commitment for the Swing Loan Bank shall include the Swing Loan Commitment. "Commitment Fee" has the meaning specified in Section 4.01(b). --------------- "Company" has the meaning specified in the introduction to this Agreement. "Consolidated EBITDA Coverage Ratio", as of any date of determination, means the ratio of (a) the aggregate amount of EBITDA for the period of the four most recent consecutive fiscal quarters to (b) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (i) if the Company or any Subsidiary has issued any Debt since the beginning of such period that remains outstanding as of such date of determination, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Debt as if such Debt had been issued on the first day of such period and the discharge of any other Debt repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Debt as if such discharge had occurred on the first day of such period, (ii) if, since the beginning of such period, the Company or any Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that were the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period, and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Debt or Preferred Stock of the Company or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Subsidiary or from which the Company or such continuing Subsidiary has been released by reason of the assumption thereof by the transferee of such Asset Disposition, in connection with such Asset Dispositions for such period (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Debt or Preferred Stock of such Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Debt or Preferred Stock after such sale), (iii) if since the beginning of such period the Company or any Subsidiary (by merger or otherwise) shall have made an Investment in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition of assets, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the issuance of any Debt) as if such Investment or acquisition occurred on the first day of such period and (iv) if since the beginning of such period -5- any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment that would have required an adjustment pursuant to clause (ii) or (iii) above if made by the Company or a Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition or Investment occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto, and the amount of Consolidated Interest Expense associated with any Debt or Preferred Stock issued in connection therewith, shall be determined on a pro forma basis in good faith by a responsible financial or accounting Officer of the Company. If any Debt bears a floating rate of interest and is being given pro forma effect, the interest of such Debt shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Protection Agreement applicable to such Debt if such Interest Rate Protection Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, (a) the total interest expense of the Company and its consolidated Subsidiaries, including (i) interest expense attributable to Capital Lease Obligations, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest payments, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs under Interest Rate Protection Agreements (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with investments in discontinued operations and (ix) interest actually paid by the Company or any of its consolidated Subsidiaries under any guarantee of Debt or other obligation of any other Person minus (b) the total interest income of the Company and its consolidated Subsidiaries. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (a) any net income of any Person if such Person is not a Subsidiary, except that (i) the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Subsidiary, to the limitations contained in clause (c) below) and (ii) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (b) any net income of any Person acquired by the Company or a Subsidiary in a pooling of interests' transaction for any period prior to the date of such acquisition; -6- (c) any net income of any Subsidiary that is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that (i) the Company's equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Subsidiary during such period to the Company or another Subsidiary as a dividend or other distribution (subject in the case of a dividend or other distribution to another Subsidiary, to the limitation contained in this clause) and (ii) the Company's equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income; (d) any gain (or loss) realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; and (e) the cumulative effect of a change in accounting principles. "Consolidated Net Tangible Assets" means the total assets of the Company and its Subsidiaries appearing on a consolidated balance sheet of the Company and its Subsidiaries (prepared in accordance with GAAP) as of the most recent fiscal quarter, after (a) adding thereto all Attributable Debt of the Company and its Subsidiaries in respect of any sale and leaseback arrangement not capitalized on such balance sheet, (b) eliminating all intercompany transactions and all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries and (b) deducting therefrom (without duplication of deductions): (i) all liabilities of the Company and its Subsidiaries other than Debt; (ii) the net book amount of all assets, after deducting any reserves applicable thereto, which would be treated as intangible under GAAP, including such items as goodwill, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing, unamortized debt discount and expense and organization expenses; (iii) any write-up in the book value of any asset on the books of the Company or any Subsidiary resulting from a revaluation thereof subsequent to the date of this Agreement (other than the write-up of the book value of an asset made in accordance with purchase accounting under GAAP in connection with the purchase of such asset); (iv) all deferred charges (other than prepaid expenses); and -7- (v) all reserves, including, without limitation, reserves for deferred income taxes, liabilities (fixed or contingent), depreciation, obsolescence, depletion, insurance and inventory valuation, which appear or under GAAP are required to appear on such balance sheet. "Consolidated Net Worth" of any Person, means the total of the amounts shown on the balance sheet of such Person and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of such Person, and (a) if such Person is a partnership, the consolidated equity of the partners less (x) any amounts attributable to Redeemable Stock and (y) any amounts attributable to Exchangeable Stock and (b) if such Person is not a partnership, (i) the par or stated value of all outstanding Capital Stock of such Person plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit, (B) any amounts attributable to Redeemable Stock and (C) any amounts attributable to Exchangeable Stock. "Conversion Date" means that date upon which the Borrower shall be treated as a corporation for federal income tax purposes pursuant to Section 7704 of the Internal Revenue Code of 1986, as amended and Section 10211(c) of P.L. 100-203, the Omnibus Budget Reconciliation Bill of 1987, as amended by Section 2004(f)(2), of P.L. 100-647, the Technical and Miscellaneous Revenue Act of 1988, as amended or supplemented from time to time. "Credit Event" means the making of any Loan or the issuance or the extension of any Letter of Credit. "Credit Suisse" has the meaning specified in the introduction to this Agreement. "CS First Boston" means CS First Boston Corporation in its capacity as the arranger of this Agreement pursuant to a written agreement dated April 5, 1995 with the Company. "Debt" of any Person means, without duplication, (a) the principal of and premium, if any, in respect of (i) indebtedness of such Person for money borrowed and (ii) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (b) all Capital Lease Obligations and all Attributable Debt of such Person; (c) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); -8- (d) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (a) through (c) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (e) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Redeemable Stock (but excluding any accrued dividends); (f) all obligations of the type referred to in clauses (a) through (e) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any agreement which has the economic effect of a guarantee; and (g) all obligations of the type referred to in clauses (a) through (f) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. "Default" means the occurrence of any event which with the giving of notice or the passage of time or both would become an Event of Default. "Default Rate" has the meaning specified in Section 2.08(c). --------------- "Designated Payment Date" means the last Business Day of each calendar quarter during the term hereof. "Disqualified Capital Stock" means any Capital Stock that is Redeemable Stock or Exchangeable Stock. "Domestic Lending Office" means, with respect to any Bank, the office of such Bank specified as its "Domestic Lending Office" on such Bank's signature ----------------------- page to this Agreement or, as to any Person who becomes a Bank after the date hereof, on the signature page of the Assignment and Acceptance executed by such Person, in the Administrative Questionnaire delivered by such Person or such other office of such Bank as such Bank may hereinafter designate from time to time its "Domestic Lending Office" by notice to the Company and the Agent. "Drawing" has the meaning specified in Section 3.04(b). --------------- "EBITDA" for any period, means the Consolidated Net Income for such period, plus the following to the extent deducted in calculating such Consolidated Net Income: (a) income tax expense, (b) Consolidated Interest Expense, (c) depreciation -9- expense, (d) amortization expense and (e) all other non-cash items reducing Consolidated Net Income, less all non-cash items increasing Consolidated Net Income. "Effective Date" means the date on which all conditions to borrowing set forth in Article V are first met or waived in accordance with Section 11.01 --------- ------------- hereof. "Eligible Assignee" means (a) any Bank, (b) a commercial bank or any similar financial institution having combined capital and surplus in excess of $500,000,000 and (c) any other bank or similar financial institution approved by the Agent and the Company, which approval shall not be unreasonably withheld. "Environmental Laws" means (a) federal, state or local laws pertaining to conservation or protection of the environment in effect at the time in question, including the Clean Air Act, the Comprehensive Environmental Response Compensation and Liability Act, ("CERCLA"), the Federal Water Pollution Control ------ Act, the Occupational Safety and Health Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund Amendment and Reauthorization Act of 1986, the Hazardous Materials Transportation Act, and comparable state and local laws, and other environmental conservation and protection laws, (b) final rules or regulations of any governmental regulatory agency (or interim or temporary rules or regulations in respect of which the issuing agency has appropriately indicated their present applicability pending the finalization process) adopted pursuant to authority granted pursuant to any law listed in (a) above, and (c) any judicial, arbitral or administrative order, judgment, permit or approval, pursuant to any law listed in (a) or rule or regulation listed in (b), to the extent that such order, judgment, permit or approval is binding upon the Company or its property or assets. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is either a member of the same "controlled group" or under "common control," within the meaning of Sections 414(b) and 414(c) of the Code and the regulations thereunder, with the Company. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board as in effect from time to time. "Eurodollar Lending Office" means, with respect to each Bank, the branches or affiliates of such Bank which such Bank has designated as its "Eurodollar Lending Office" on such Bank's signature page to this Agreement or, as to any Person who becomes a Bank after the date hereof, on the signature page of the Assignment and Acceptance executed by such Person, in the Administrative Questionnaire delivered by such Person or such other office of such Bank as such Bank may hereafter designate from time to time as its "Eurodollar Lending Office" by notice to the Company and the Agent. -10- "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Loan comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in London interbank market at 11:00 a.m. (London Time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Reserve Percentage for such Interest Period. The Eurodollar Rate for any Interest Period for each Eurodollar Rate Loan comprising part of the same Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two Business Days before the first day of such Interest Period. "Eurodollar Rate Borrowing" means a Borrowing comprised of a Eurodollar Rate Loans. "Eurodollar Rate Loan" means any Loan bearing interest at a rate determined by reference to the Eurodollar Rate in accordance with the provisions of Article II. ---------- "Events of Default" has the meaning specified in Section 9.01. ------------ "Exchange Act" means the Securities and Exchange Act of 1934, as amended. "Exchangeable Stock" means any Capital Stock that is exchangeable or convertible into another security (other than Capital Stock of the Company that is neither Exchangeable Stock nor Redeemable Stock). "Execution Date" means the earliest date upon which all of the following shall have occurred: counterparts of this Agreement shall have been executed by the Company, the Agent and each Bank listed on the signature pages hereof and the Agent shall have received such counterparts via telecopy or otherwise. "Extension Request" has the meaning specified in Section 4.09. ------------ "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business DAy, the average of the quotations for such day on such transaction received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fees" means all amounts payable pursuant to Section 4.01. ------------ "Financials" has the meaning specified in Section 6.07. ------------ -11- "Financial Statement Delivery Date" means the date on which the quarterly or annual financial statements of the Company are delivered pursuant to Section 7.01(a) or Section 7.01(b), as the case may be. --------------- --------------- "Form 1001" has the meaning specified in Section 4.08. ------------ "Form 4224" has the meaning specified in Section 4.08. ------------ "GAAP" means generally accepted accounting principles as in effect from time to time as set forth in the opinions, statements and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the Financial Accounting Standards Board and such other Persons who shall be approved by a significant segment of the accounting profession and concurred in by the independent certified public accountants certifying any audited financial statements of the Company. "General Partner" shall mean BCP Management, Inc., a Delaware corporation, and its successors. "Hazardous Materials" means (a) hazardous waste as defined in the Resource Conservation and Recovery Act of 1976, or in any applicable federal, state or local law or regulation, (b) hazardous substances, as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable federal, state or local law or regulation or (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable federal, state or local law or regulation, as each such Act, statute or regulation, may be amended from time to time. "Highest Lawful Rate" means, as to any Bank, the maximum nonusurious rate of interest that, under applicable law, may be contracted for, taken, reserved, charged or received by such Bank on the Loans or under the Loan Documents at any time or from time to time. If the maximum rate of interest which, under applicable law, the Banks are permitted to charge the Company on the Loans shall change after the date hereof, to the extent permitted by applicable law, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, as of the effective time of such change without notice to the Company or any other Person. "Holding Company" means Borden Chemicals and Plastics Limited Partnership, a Delaware limited partnership and its successors. "Indenture" means that certain Indenture dated as of May 1, 1995 among the Company, BCP Finance Corporation, a Delaware corporation, and The Chase Manhattan Bank (National Association), a corporation organized under the laws of the United States of America providing for, among other things, issuance of the Securities by the Company and BCP Finance Corporation, and any agreement under -12- which the Company incurs Debt to Refinance any portion of its Debt under the Indenture, as each of same may be amended or supplemented from time to time. "Independent Committee" means a standing committee of the Board of Directors composed entirely of Independent Directors; provided that if there is no such standing committee, then "Independent Committee" means all the Independent Directors. "Information Memorandum" means that certain information memorandum regarding the Loans dated April 1995 compiled by CS First Boston Corporation from information (other than the information contained in the Industry Overview Section thereof) provided by the Company, which Information Memorandum has been previously distributed to the Banks. "Interest Period" has the meaning specified in Section 2.09. ------------ "Interest Rate Protection Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Subsidiary against fluctuations in interest rates. "Investment" in any Person means, as applied to any Person, any direct or indirect purchase or other acquisition by such Person of stock or other securities of any other Person, or any direct or indirect loan, or advance to, any acquisition of Capital Stock, obligation or other security of, or capital contribution or other investment in, such Person by such Person to any other Person, and any other item which would be classified as an "investment" on a balance sheet of such Person, including any direct or indirect contribution by such Person of property or assets to a joint venture, partnership or other business entity in which such Person retains an interest. "Issuing Bank" means, Credit Suisse and its successors and permitted assigns. "Letter of Credit" has the meaning provided in Section 3.01. ------------ "Letter of Credit Fee" has the meaning specified in Section 4.01(c). --------------- "Letter of Credit Limit" means $30,000,000. "Letter of Credit Outstandings" means, at any time, the sum of (a) the aggregate Stated Amount of all outstanding Letters of Credit and (b) the amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" has the meaning specified in Section 3.02. ------------ "Lien" means, when used with respect to any Person, any mortgage, lien, charge, pledge, security interest or encumbrance of any kind (whether voluntary or involuntary and whether imposed or created by operation of law or otherwise) upon, -13- or pledge of, any of its property or assets, whether now owned or hereafter acquired, or any lease intended as security, any Capital Lease in the nature of the foregoing, any conditional sale agreement or other title retention agreement, in each case, for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation to a creditor. "Loan" and "Loans" shall mean an extension of credit by (i) the Banks to the Company under Article II in the form of Base Rate Loans and Eurodollar Rate Loans and (ii) the Swing Loan Bank in the form of a Swing Loan. "Loan Documents" means this Agreement, the Notes, the Letter of Credit Requests and the Applications. "Majority Banks" means, at any time, Banks holding at least 51% of the Total Commitment or, if the Commitments shall have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans. "Margin" means, with respect to any Loan, the rate of interest per annum determined as set forth below as a function of the Type of such Loan: Eurodollar Base Rate Loan Rate Loan --------- --------- 1.00% 0% "Material Adverse Effect" means, relative to any circumstance, condition, occurrence or series of occurrences of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding) affecting the business, condition (financial or otherwise), operations, performance or properties of the Company and its Subsidiaries taken as a whole which after taking into account actual insurance coverage and effective indemnification with respect to such occurrence, materially impairs the ability of the Company to make payment hereunder or under the Notes. "Maturity Date" means with respect to (a) Base Rate Loans and Eurodollar Loans, December 31, 1997, as same may be extended pursuant to the Maturity Date Extension Option, or the earlier date of the acceleration of the maturity of the Obligations pursuant to Section 9.01 and (b) Swing Loans, the ------------- earlier to occur of (i) the seventh (7th) day after such Swing Loan is made and (ii) the Maturity Date for Base Rate Loans and Eurodollar Loans as discussed in (a) above. "Maturity Date Extension Option" shall have the meaning specified in Section 4.09. - ------------ "Maximum Permissible Rate" has the meaning specified in Section 11.08. ------------- "Moody's" means Moody's Investors Service, Inc., and its successors. -14- "Multiemployer Plan" means any plan which is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA). "Net Available Cash" from an Asset Disposition or sale of Accounts Receivable, means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and excluding any other consideration received in the form of assumption by the acquiring Person of Debt or other obligations relating to such properties or assets or received in any other non-cash form) therefrom, in each case net of all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition or sale of Accounts Receivable, and in each case net of all payments made on any Debt which is secured by any assets subject to such Asset Disposition or sale of Accounts Receivable, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition or sale of Accounts Receivable, and net of amounts thereof allocable to minority interest holders in Subsidiaries. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note" and "Notes" have the meanings specified in Section 2.05(a). --------------- "Notice of Borrowing" has the meaning provided in Section 2.03. ------------ "Notice of Conversion" has the meaning provided in Section 2.06. ------------ "Notice of Default" has the meaning specified in Section 9.01. ------------ "Obligations" means all the obligations of the Company now or hereafter existing under the Loan Documents, whether for principal, Unpaid Drawings, interest, Fees, expenses, indemnification or otherwise. "Officer" or "Responsible Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Principal Accounting Officer or the Secretary of the Company (or, if the Company is a limited partnership or a general partnership, the Chairman of the Board of any of its general partners or partners, respectively, authorized to act on behalf of such limited partnership or general partnership, as the case may be, in connection with this Agreement). "Operating Rights" has the meaning specified in Section 6.15. ------------ -15- "Pari Passu Debt" means any Debt of the Company (other than the Obligations), whether or not secured, that is pari passu in right of payment to the Obligations. "Payment Office" means the office of the Agent located at 12 East 49th Street, 39th Floor, New York, New York 10017, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA. "Percentage Participation" means, for each Bank at any time, that percentage obtained when dividing the amount of such Bank's Commitment by the Total Commitment at such time or, if the Commitments shall have been terminated, that percentage obtained by dividing the outstanding principal amount of such Bank's Loans by the aggregate outstanding principal amount of the Loans at such time. "Permitted Holders" means, as of the date of determination, any and all of (a) Borden and its Subsidiaries, (b) Kohlberg Kravis Roberts & Co., its successors and its Affiliates and (c) (i) any officer or other member of management employed by Borden, BCPM, the Company or any Subsidiary for the 12-month period prior to the date of determination; (ii) any Persons described in clause (i) who have retired (including as the result of disability) after the initial date of this Agreement from the employment of Borden, BCPM, the Company or any Subsidiary in the ordinary course of business; (iii) family members or relatives of the Persons described in clause (i) and (ii); (iv) any trusts created for the benefit of the Persons described in clause (i), (ii), (iii) or (v); (v) in the event of the incompetence or death of any of the Persons described in clauses (i), (ii) and (iii), such Person's estate, executor, administrator, committee or other personal representative, or beneficiaries, in each case who at any particular date shall beneficially own or have the right to acquire, directly or indirectly, Capital Stock and (vi) any Person, the management of which is controlled by one or more Persons described in clause (i) or (ii); provided, however, that in connection with the transaction that otherwise would constitute a Change of Control were the Persons described in this clause (c) not Permitted Holders, any debt incurred as a result thereof shall not be recourse to any of the assets of the Company or any Subsidiary. The management of a Person shall be deemed to be controlled by the chief executive officer (or equivalent executive) of such Person. "Permitted Investments" shall mean (a) investments in direct obligations of the United States of America or any agency or instrumentality thereof maturing within one year of the date of acquisition thereof, (b) investments in dollar denominated certificates of deposit of, eurodollar certificates of deposit of, banker's acceptances of or time deposits (including, without limitation, eurodollar time deposits) maturing within one year of the date of acquisition thereof with (i) any Bank or (ii) any commercial Bank having capital, surplus and undivided profits aggregating in excess of $500,000,000 or the debt of which is rated P-1 (or higher) by Moody's or A-1 (or higher) by S&P or which has a bank rating of B/C (or higher) by Thomson Bank Watch and (c) investments in commercial paper given the highest -16- rating by two established national credit rating agencies and maturing not more than nine months from the date of acquisition thereof. "Permitted Liens" means the following, to the extent that the Debt secured thereby does not exceed 10% of the Company's Consolidated Net Tangible Assets: (a) Liens that exist on the date hereof, (b) Liens on property or assets (or any income or profits therefrom) existing at the time of acquisition of such property or assets, (c) Liens on property or assets (or any income or profits therefrom) of a Person existing at the time such Person is merged into or consolidated with or acquired by the Company or its Subsidiaries, (d) Liens in favor of any governmental authority to secure any payment obligation under any statute, (e) Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business, (f) Liens incurred for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the property or assets subject to such Liens; provided, however, that such Lien shall not extend to or cover any other property or assets other than such property or assets and any improvements thereon and shall attach to such property, assets, or improvements within 180 days of the acquisition or construction thereof, (g) Liens incurred to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety or appeal bonds, bids, leases, performance or return-of-money bonds, purchase, construction or sale contracts or other obligations of a like nature incurred in the ordinary course of business, (h) Liens on Capital Stock of a Subsidiary and Liens on intercompany notes issued by such Subsidiary to the Company, in either case to secure Debt incurred by such Subsidiary in connection with the Company's acquisition of such Subsidiary or the business of such Subsidiary, (i) Liens securing any Debt owed to the Company or any Subsidiary, (j) Liens to secure any extension, renewal, refunding or refinancing (or successive extensions, renewals, refundings or refinancings), in whole or in part, of any Debt secured by Liens referred to in the foregoing clauses (a) through (i) so long as such Liens do not extend to any other property or assets and the aggregate principal amount of the Debt so secured is not increased, and (k) Liens securing Debt of a Person, the aggregate principal amount of which, together with the aggregate principal amount of all other Debt of such Person secured by Liens (excluding Debt secured by Liens permitted in the foregoing clauses (a) through (j) and the aggregate amount of Attributable Debt deemed to be outstanding in respect of all sale and leaseback transactions permitted by clause (a) of Section 8.13, does not exceed 5% of Consolidated Net ------------ Tangible Assets. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a foreign or domestic state or political subdivision thereof or any agency of such state or subdivision. "Plan" means any employee pension benefit plan (as defined in Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the Code, other than a Multiemployer Plan, with respect to which the Company or an ERISA Affiliate contributes or has an obligation or liability to contribute, including any such plan that may have been terminated. -17- "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 as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Capital Stock of any other class of such Person. "Prospectus" means the prospectus with respect to the Securities dated April 21, 1995. "Redeemable Stock" means, at any time, any Capital Stock that by its terms or otherwise is required to be redeemed prior to the first anniversary of the then applicable Maturity Date of the Base Rate Loans and the Eurodollar Rate Loans or is redeemable at the option of the holder thereof at any time prior to the first anniversary of such then applicable Maturity Date. "Reference Banks" means Credit Suisse and The Chase Manhattan Bank, N.A. "Refinance" means, in respect of any Debt or Preferred Stock, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue Debt or Preferred Stock in exchange or replacement for, such Debt or Preferred Stock. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Agreement" means any credit agreement, indenture or other agreement pursuant to which the Company or any Subsidiary Refinances, in whole or in part, Debt of the Company or any Subsidiary issued under Section 8.04; ------------ provided, however, that the principal amount of the Refinancing Debt issued pursuant to such Refinancing Agreement may not exceed the principal amount of the Debt so Refinanced. "Register" has the meaning specified in Section 11.10(e). ---------------- "Regulation A" means Regulation A of the Board (respecting loans to depository institutions), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation D" means Regulation D of the Board (respecting reserve requirements), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation U" means Regulation U of the Board (respecting margin credit extended by banks), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation X" means Regulation X of the Board (respecting borrowers who obtain margin credit), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. -18- "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles). "Reportable Event" means an event described in Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Requirements of Environmental Laws" means, as to any Person, the requirements of any applicable Environmental Law relating to or affecting such Person or the condition or operation of such Person's business or its properties, both real and Personal. "Reserve Percentage" for any Interest Period for all Eurodollar Rate Loans comprising part of the same Borrowing means the reserve percentage if and to the extent actually applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board (or any successor) for determining the reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for each Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Loans is determined) having a term equal to such Interest Period. "Restricted Payment" has the meaning set forth in Section 8.06. ------------ "S & P" means Standard & Poor's Corporation, and its successors. "Securities" means the debt instruments issued pursuant to the Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X as promulgated by the Securities and Exchange Commission. "Stated Amount" means, with respect to each Letter of Credit, at any time, the maximum amount then available to be drawn thereunder (without regard to whether any condition to drawing thereon could be met). "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision. "Subordinated Obligation" means any Debt of the Company (whether outstanding on the date hereof or hereafter incurred) that is subordinate or junior in right of payment of the Notes. "Subsidiary" means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of the outstanding -19- Capital Stock (or other interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, general partners, managers, managing members, managing partners or trustees thereof or, if such Persons are not elected, to vote on any matter that is submitted to the vote of all Persons holding ownership interests in such entity) is at the time owned or controlled, directly or indirectly, by (a) the Company, (b) the Company and one or more Subsidiaries or (c) one or more Subsidiaries. "Swing Loan" means an extension of credit by the Swing Loan Bank under Article II in the form of a Swing Loan. "Swing Loan Bank" means Credit Suisse, its successors and permitted assigns. "Swing Loan Commitment" means the commitment of the Swing Loan Bank to make loans from time to time pursuant to Section 2.01(b) in an aggregate amount --------------- not to exceed on any date the amount of $10,000,000 (in minimum increments of $1,000,000 with additional increments of $500,000), as the same shall be reduced as a result of a reduction in the Swing Loan Commitment pursuant to Section 4.02, Section 4.03 and Article IX; provided that the Swing Loan - ------------ ------------ ---------- Commitment is a part of the combined Total Commitments, rather than a separate, independent commitment. "Swing Loan Participation Certificate" means a participation certificate substantially in the form of Exhibit 2.14. ------------ "Threshold Debt" has the meaning set forth in Section 9.01(d). --------------- "Total Commitment" means all Commitments of all of the Banks, which on the Effective Date is $100,000,000 and may be reduced from time to time pursuant to Section 4.02, Section 4.03 or Article IX and by the election of any Bank not ------------ -------------------------- to participate in the Maturity Date Extension Option. "Total Debt" means, as of any date of determination, the total Debt of the Company and its consolidated Subsidiaries. "Total Unutilized Commitment" means the aggregate Unutilized Commitment for all of the Banks. "Type" has the meaning set forth in Section 1.02. ------------ "Unfunded Current Liability" means, with respect to any Plan, the amount, if any, by which the present value of the accrued benefits under the Plan as of the close of its most recent Plan year exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code and based upon the actuarial assumption in the Plan. --------- "Unpaid Drawing" has the meaning specified in Section 3.04(a). --------------- -20- "Unutilized Commitment" for any Bank, at any time, means the remainder of (a) such Bank's Commitment at such time less (b) the sum of (i) the outstanding Loans (excluding Swing Loans) made by such Bank and (ii) the product of (A) the Letter of Credit Outstandings at such time multiplied by (B) such Bank's Percentage Participation. "Up Front Fee" has the meaning specified in Section 4.01(a). --------------- "Voting Stock" of any Person, means, with respect to a corporation, all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors or, with respect to a partnership (whether general or limited), any general partner interest in such partnership. "Wachovia Credit Facility" means the credit facility under that certain Revolving Line of Credit Agreement, dated November 2, 1987, by and between the Company and Wachovia Bank and Trust Company, N.A., providing up to $20,000,000 of credit borrowings, including any related notes, instruments and agreements executed in connection therewith, in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Wholly Owned Subsidiary" of any Person, means a Subsidiary of such Person all the outstanding Capital Stock or other ownership interests or, in the case of a limited partnership, all the partners' Capital Stock (other than up to a 2% general partner interests), of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. Types of Loans and Borrowings. Loans and Borrowings ----------------------------- hereunder are distinguished by "Type". The Type of a Loan refers to the determination whether such Loan is a Eurodollar Rate Loan or a Base Rate Loan. The Type of a Borrowing refers to the determination whether such Borrowing is a Eurodollar Rate Borrowing or a Base Rate Borrowing. SECTION 1.03. Accounting Terms and Determinations. Unless otherwise ----------------------------------- specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article VIII to eliminate the effect of the change in GAAP on the operation of such covenant (or if the Agent notifies the Company that the Majority Banks wish to amend Article VIII for such purposes), then the Company's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant changes in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Majority Banks. SECTION 1.04. Computation of Time Periods. In this Agreement in the --------------------------- computation of periods of time from a specified date to a later specified date, the word -21- "from" means "from and including" and the words "to" and "until" each means "to but excluding". ARTICLE II LOANS SECTION 2.01(a). Commitment. Subject to and upon the terms and ---------- conditions herein set forth, each Bank severally agrees at any time and from time to time on and after the Effective Date and prior to the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans, to make and maintain a Loan or Loans to the Company, which Loans (a) shall, at the option of the Company, be made and maintained pursuant to one or more Borrowings comprised of Base Rate Loans or Eurodollar Rate Loans; provided that, except as otherwise specifically provided herein, all Loans comprising all or a portion of the same Borrowing shall at all times be of the same Type, (b) shall be repaid and may be reborrowed in accordance with the provisions hereof and (c) (including Swing Loans) shall, in the aggregate, not exceed the total principal amount at any time outstanding that amount which, when added to the product of such Bank's Percentage Participation of the Letter of Credit Outstandings at such time, equals the Commitment of such Bank. Notwithstanding the foregoing, the sum of the aggregate outstanding principal amount of the Loans of all Banks plus (i) the Letter of Credit Outstandings and (ii) the outstanding principal amount of the Debt of the Company permitted under Section 8.04(b)(i)(A), shall at no time --------------------- exceed the Total Commitment. SECTION 2.01(b). Swing Loan Commitment. Subject to the terms and --------------------- conditions of this Agreement, the Swing Loan Bank agrees to make one or more Loans to the Company (each such loan, a "Swing Loan") from time to time on any ---------- Business Day during the period from the Effective Date to the Maturity Date, in an aggregate amount not to exceed the Swing Loan Commitment; provided, however, that, after giving effect to any Borrowing of Swing Loans, the aggregate outstanding amount of all Loans of the Banks plus (i)_the Letter of Credit Outstanding and (ii) the outstanding principal amount of the Debt of the -------- Company permitted under Section 8.04(b)(i)(A), shall not at any time exceed the --------------------- Total Commitment; and provided further, that the aggregate outstanding principal amount of any Bank's Loans (excluding Swing Loans) when added to the product of such Bank's Percentage Participation of (i) Swing Loans and (ii) Letter of Credit Outstandings, shall not at any time exceed such Bank's Commitment. Within the limits of the Swing Loan Commitment, and subject to the other terms and conditions hereof, the Company may borrow Swing Loans under this subsection ---------- 2.01(b), prepay Swing Loans under Section 4.04 and reborrow Swing Loans under - ------ ------------ subsection 2.01(b). - ------------------ SECTION 2.02. Minimum Amount of Each Borrowing. The aggregate -------------------------------- principal amount of each Borrowing, shall not be less than the lesser of (a) $5,000,000 and, if greater, shall be an integral multiple of $1,000,000 and (b) the Total Unutilized Commitment. More than one Borrowing may occur on the same day but at no time shall there be outstanding more than ten Borrowings of Eurodollar Rate Loans. -22- SECTION 2.03. Notice of Borrowing. (a) Whenever the Company desires to ------------------- make a Borrowing hereunder, the Company shall give written notice (a " Notice of --------- Borrowing") (or telephonic notice promptly confirmed in writing) to the Agent - --------- (i) in the case of a Borrowing to be comprised of Base Rate Loans, not later than 11:00 a.m. (New York time) one Business Day prior to the Borrowing Date for such Borrowing and (ii) in the case of a Borrowing comprised of Eurodollar Rate Loans, not later than 11:00 a.m. (New York time) three Business Days prior to the Borrowing Date for such Borrowing. Each Notice of Borrowing shall be irrevocable and shall be in the form of Exhibit 2.03 specifying (A) the ------------ aggregate principal amount of the Loans to be made pursuant to such Borrowing, (B) the Borrowing Date (which shall be a Business Day), (C) whether such Loans are to be initially maintained as Base Rate Loans or Eurodollar Rate Loans and (D) if the proposed Borrowing is to be comprised of Eurodollar Rate Loans, the initial Interest Period to be applicable thereto. The Company may submit one or more Notices of Borrowing on any Business Day. (b) The Agent shall promptly give the Banks written notice or telephonic notice (promptly confirmed in writing) of each proposed Borrowing under Section 2.03(a) above, of each Bank's proportionate share thereof and of -------------- the other matters covered by each Notice of Borrowing. (c) Swing Loans. Each Borrowing of Swing Loans shall be made upon the ------------ irrevocable written notice by the Company delivered to the Agent in the form of a Notice of Borrowing, which notice must be received by the Agent at or prior to 11:00 a.m. (New York time) on the requested Borrowing Date, specifying: (i) the amount of the Borrowing, which shall be in an aggregate minimum amount of $1,000,000 with additional increments of $500,000; and (ii) the Borrowing Date, which shall be a Business Day. All Swing Loans shall be Base Rate Loans. SECTION 2.04. Disbursement of Funds. (a) No later than 1:00 p.m. (New --------------------- York time) on the Borrowing Date each Bank will, except with respect to borrowing of Swing Loans, make available its pro rata portion of the amount of such Borrowing in U.S. dollars and in immediately available funds at the Payment Office. The Agent will credit in immediately available funds the amounts so received to the general deposit account of the Company with the Agent or such other single account as directed in writing by the Company. The Swing Loan Bank will make available to the Company at its account at the Swing Loan Bank or such other single account as directed in writing by the Company, no later than 2:30 p.m. (New York time) on the requested Borrowing Date, in immediately available funds, the proceeds of the Swing Loans being made on such date. (b) Unless the Agent shall have been notified by any Bank prior to the Borrowing Date that such Bank does not intend to make available to the Agent such Bank's portion of the Borrowing to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Borrowing and the Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank and the Agent has made available same to the Company, the Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount -23- forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Company, and the Company shall pay such corresponding amount to the Agent within two Business Days after demand therefor. The Agent shall also be entitled to recover interest on such corresponding amount from the date such corresponding amount was made available by the Agent to the Company to the date such corresponding amount is recovered by the Agent, (i) from such Bank at a rate per annum equal to the lesser of (A) the Highest Lawful Rate or (B) the Federal Funds Rate or (ii) from the Company at a rate per annum equal to the lesser of (A) the Highest Lawful Rate or (B) the applicable Margin plus the relevant Eurodollar Rate or Base Rate, as applicable. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Company may have against any Bank as a result of any default by such Bank hereunder. SECTION 2.05. Notes. (a) The Company's obligation to pay the principal of, and interest on, all the Loans made by each Bank shall be evidenced by a promissory note duly executed and delivered by the Company substantially in the form of Exhibit 2.05 hereto with blanks appropriately completed in conformity ------------ herewith (each a "Note" and collectively, the "Notes"), which Note shall (i) be ---- ----- payable to the order of such Bank and be dated the Effective Date, (ii) be in a stated principal amount equal to the Commitment of such Bank, (iii) be payable prior to maturity as provided in Article IV and mature, with respect to the ---------- Loans evidenced thereby, on the Maturity Date, (iv) bear interest as provided in the appropriate clause of Section 2.08 in respect of the Base Rate Loans and ------------ Eurodollar Rate Loans, as the case may be, evidenced thereby and (v) be entitled to the benefits of this Agreement, and, to the extent applicable, the other Loan Documents. (b) Each Bank will note on its internal records, to the extent applicable, the date, amount, Type and Interest Period for each Loan made by such Bank to the Company hereunder, and the amount of each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation shall not affect the Company's obligation in respect of such Loans. SECTION 2.06. Conversions and Continuances. The Company shall have the ---------------------------- option to convert on any Business Day all or a portion of the outstanding principal amount of one Type of its Loans made pursuant to one or more Borrowings into a Borrowing or Borrowings of the other Type of Loans provided, that (a) except as otherwise provided in Section 2.11, no partial conversion of ------------ Eurodollar Rate Loans shall reduce the outstanding principal amount of Eurodollar Rate Loans made pursuant to any single Borrowing to less than $5,000,000 (b) Base Rate Loans may only be converted into Eurodollar Rate Loans, and Eurodollar Rate Loans may only be continued as further Eurodollar Rate Loans, if and only if, in either case no Default or Event of Default is in existence on the date of the conversion or continuance and (c) no Swing Loans may be converted to Eurodollar Rate Loans. Each such conversion or continuance shall be effect by the Company giving the Agent notice (each a "Notice of --------- Conversion") prior to 10:00 a.m. (New York time) (i) at least three Business - ---------- Days prior to the date of such conversion or continuance in the case of a conversion into or continuance as Eurodollar Rate Loans and (ii) on the -24- Business Day of such conversion or continuance in the case of a conversion into or continuance as Base Rate Loans, specifying each Type of Borrowing (or portions thereof) to be so converted and, if to be converted into or continuance as Eurodollar Rate Loans, the Interest Period to be initially applicable thereto. The Agent shall promptly give the Banks written or telephonic notice (promptly confirmed in writing) of any such proposed conversion affecting any of its Loans. SECTION 2.07. Pro Rata Borrowings. Other than as set forth in Section ------------------- ------- 2.14 with respect to Swing Loans, all Borrowings under this Agreement shall be - ---- incurred from the Banks pro rata on the basis of their respective Percentage Participations. It is understood that no Bank shall be responsible for any default by any other Bank in its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. SECTION 2.08 Interest. (a) Subject to Section 11.08, the Company -------- ------------- agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date of the respective Borrowing to maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be equal to the lesser of (i) the Highest Lawful Rate and (ii) the applicable Margin plus the Base Rate in effect from time to time. Interest on Base Rate Loans shall be computed on the basis of the actual number of days elapsed over a year of 360 days. (b) Subject to Section 11.08, the Company agrees to pay interest in ------------- respect of the unpaid principal amount of each Eurodollar Rate Loan from the date of the respective Borrowing to maturity (whether by acceleration or otherwise) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) which shall be equal to the lesser of (i) the Highest Lawful Rate and (ii) the applicable Margin plus the relevant Eurodollar Rate for such Interest Period. (c) Subject to Section 11.08, overdue principal and, to the extent ------------- permitted by law, overdue interest in respect of each Loan and all other overdue amounts owing hereunder shall bear interest for each day that such amounts are overdue at a rate per annum equal to the lesser of (i) the Highest Lawful Rate and (ii) the Base Rate per annum in effect from time to time plus 2% (such lesser rate of interest being the "Default Rate"); provided, that no Loan shall ------------ bear interest after maturity (whether by acceleration or otherwise) at a rate per annum less than the lesser of (i) the rate of interest applicable thereto at maturity and (ii) the Hightest Lawful Rate. (d) Interest on each Loan shall accrue from and including the date of such Loan to but excluding the date of any repayment thereof and shall be payable (i) in respect of Eurodollar Rate Loans (A) on the last day of the Interest Period applicable thereto and in the case of any Interest Period in excess of three months, at three months intervals and on the last day of such Interest Period and (B) on the date of any voluntary prepayment, or mandatory prepayment or any conversion with respect to such Eurodollar Rate Loan, (ii) in respect of each Base Rate Loan (A) on each Designated Payment Date and (B) on the date of any voluntary or mandatory prepayment or any conversion with respect to such Base Rate Loan and (iii) in respect -25- of each Loan, at maturity (whether by acceleration or otherwise) and, after maturity, on demand. (e) The Agent, upon determining the Eurodollar Rate for any Interest Period, shall notify the Company and the Banks thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. In addition, prior to the due date for the payment of interest on any Loans set forth in Section 2.08(d) the Agent shall notify the Company by --------------- telecopy of the amount of interest due by the Company on all outstanding Loans on the applicable due date. SECTION 2.09 Interest Periods. (a) At the time the Company gives any ---------------- Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion or continuance into, a Eurodollar Rate Borrowing, the Company shall have the right to elect, by giving the Agent on the dates and at the times specified in Section 2.03 or Section 2.06, as the case may be, notice of the ------------ ------------ interest period (each an "Interest Period") applicable to such Eurodollar Rate --------------- Borrowing, which Interest Period shall be either a one, two, three or six month period, or such longer period as the Agent in its reasonable discretion may determine is available at the relevant time; provided, that: (i) all Loans comprising a Eurodollar Rate Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Rate Borrowing shall commence on the date of such Eurodollar Rate Borrowing (including the date of any conversion thereto pursuant to Section 2.06) and ------------ each Interest Period occurring thereafter in respect of such Eurodollar Rate Borrowing shall commence on the day on which the next preceding Interest Period expires; (iii) if any Interest Period relating to a Borrower of Eurodollar Rate Loans begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period in respect of a Borrowing of Eurodollar Rate Loans would otherwise expire on a day which is not a Business Day, but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) no Interest Period shall extend beyond the Maturity Date; and (vi) at no time shall there be more than ten Interest Periods in effect under this Agreement. (b) If upon the expiration of any Interest Period applicable to a Eurodollar Rate Borrowing, the Company has failed to elect a new Interest Period to -26- be applicable to such Borrowing as provided above, the Company shall be deemed to have elected to convert such Borrowing into a Base Rate Borrowing effective as of the expiration date of such current Interest Period. SECTION 2.10 Interest Rate Not Ascertainable. In the event that the ------------------------------- Agent shall have reasonably determined (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) that on any date for determining the Eurodollar Rate for any Interest Period, by reason of any changes arising after the date of this Agreement affecting the Eurodollar interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate, then, and in any such event, the Agent shall forthwith give notice to the Company and to the Banks of such determination. Until the Agent notifies the Company that the circumstances giving rise to the suspension described herein no longer exist, the obligations of the Bank to make Eurodollar Rate Loans shall be suspended. SECTION 2.11 Reserve Requirements; Change in Circumstances. (a) --------------------------------------------- Notwithstanding any other provision herein, but subject to Section 11.08, if ------------- after the Execution Date the application or effectiveness of any applicable law or regulation or any change in application or effectiveness of any applicable law or regulation or any change in applicable law or regulation or in the interpretation or administration thereof, or compliance by any Bank with any applicable guideline or request made after the Execution Date from any central bank or governmental authority (whether or not having the force of law) (i) shall change the basis of taxation of payments to any Bank of the principal of or interest on any Eurodollar Rate Loan made by such Bank or any other fees or amount payable hereunder (other than (x) taxes imposed on the overall net income of such Bank or its Applicable Lending Office or franchise taxes imposed upon it by the jurisdiction in which such Bank or its Applicable Lending Office has an office or by any political subdivision or taxing authority therein (or any tax which is enacted or adopted by such jurisdiction, political subdivision or taxing authority as a direct substitute for any such taxes) or (y) any tax, assessment, or other governmental charge that would not have been imposed but for the failure of any Bank to comply with any certification, information, documentation, or other reporting requirement), (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, such Bank or (iii) shall impose on such Bank, or the Eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Rate Loan made by such Bank, and the result of any of the foregoing shall be to increase the cost to such Bank of maintaining its Commitment or of making or maintaining any Eurodollar Rate Loan or to reduce the amount of any sum received or receivable by such Bank hereunder (whether of principal, interest or otherwise) in respect thereof by an amount deemed in good faith by such Bank to be material, then the Company shall pay to the Agent for the account of such Bank such additional amount or amounts as will compensate such Bank for such increase or reduction to such Bank upon demand by such Bank. Nothwithstanding the foregoing, in no event shall the compensation payable under this paragraph (to the extent, if any, constituting interest under applicable laws), together with all amounts constituting interest under applicable laws and payable in connection with this Agreement, the Notes and the other Loan Documents, exceed the Highest Lawful Rate. -27- (b) If any Bank shall have determined in good faith that any law, rule, regulation or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof or compliance by any Bank (or any lending office of such Bank) 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 the capital of such Bank as a consequence of, or with reference to, such Bank's obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance by an amount deemed by such Bank to be material, then, from time to time, the Company shall pay to the Agent for the account of such Bank such additional amount or amounts as will reasonably compensate such Bank for such reduction by such Bank. Notwithstanding the foregoing, in no event shall the compensation payable under this paragraph (to the extent, if any, constituting interest under applicable laws) together with all amounts constituting interest under applicable laws and payable in connection with this Agreement, the Notes or the other Loan Documents, exceed the Highest Lawful Rate. (c) Each Bank will notify the Company through the Agent of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to this Section, as promptly as practicable, and in any event within 60 days after it becomes aware thereof provided that in the event such notification is given after 60 days after such Bank becomes aware thereof, such Bank shall be entitled to recover only those amounts otherwise recoverable hereunder which accrue after the date of such notice. A certificate of a Bank setting forth in reasonable detail (i) such amount or amounts as shall be necessary to compensate such Bank as specified in paragraph (a) or (b) above, as the case may be and (ii) the calculation of such amount or amounts under clause (a)(i), shall be delivered to the Company (with a copy to the Agent) and shall be conclusive absent manifest error. The Company shall pay to the Agent for the account of such Bank the amount shown as due on any such certificate as will reasonably compensate such Bank for such matters within 30 days after its receipt of the same. Upon the request of the Company, each Bank agrees that it will use reasonable efforts to designate a different Applicable Lending Office for the Loans due to it affected by the matters described in subsection (a) and (b) above, if such designation will avoid or reduce the liability of the Company to such Bank under this Section so long as such designation is not materially disadvantageous to such Bank as determined by such Bank in its reasonable discretion. (d) Except as expressly provided in subsection (c) above, failure on the part of any Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any Interest Period shall not constitute a waiver of such Bank's rights to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to such Interest Period or any other Interest Period. (e) In the event any Bank shall seek compensation pursuant to this Section or shall fail to fund any of its Loans in accordance with this Agreement, the -28- Company may give notice to such Bank (with copies to the Agent) that it wishes to seek one or more Eligible Assignees to assume the Commitment of such Bank and to purchase its outstanding Loans, other Obligations and Notes. Each Bank requesting compensation pursuant to this Section agrees to sell its Commitment, Loans, other Obligations, Notes and interest in this Agreement and the other Loan Documents pursuant to subsection (c) above to any such Eligible Assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans, such other Obligations and Notes plus all other fees, amounts and compensation due such Bank hereunder calculated, in each case, to the date such Commitment, Loans, other Obligations, Notes and interest are purchased, whereupon such Bank shall have no further Commitment or other obligation to the Company hereunder or under any Note. SECTION 2.12. Change in Legality. (a) Notwithstanding anything to ------------------ the contrary herein contained, if any change in any law or regulation or in the interpretation thereof by any governmental authority charged with the administration or interpretation thereof shall in the reasonable determination of a Bank or its legal counsel make it unlawful for any Bank or its Eurodollar Lending Office to make or maintain any Eurodollar Rate Loan or to give effect to its obligations as contemplated hereby, then, by prompt written notice to the Company and to the Agent, such Bank may: (i) declare that Eurodollar Rate Loans will not thereafter be made by such Bank hereunder, whereupon the Company shall be prohibited from requesting Eurodollar Rate Loans from such Bank hereunder unless such declaration is subsequently withdrawn; and (ii) require that all outstanding Eurodollar Rate Loans made by it be converted to Base Rate Loans, in which event (A) all such Eurodollar Rate Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below and (B) all payments and prepayments of principal which would otherwise have been applied to repay the converted Eurodollar Rate Loans shall instead be applied to repay the Base Rate Loans resulting from the conversion of such Eurodollar Rate Loans. Each Bank agrees that it will use reasonable efforts to designate a different Applicable Lending Office for the Eurodollar Loans due to it affected by this Section, if such designation will avoid the illegality described in this Section so long as such designation will not be materially disadvantageous to such Bank as determined by such Bank in its reasonable discretion. (b) For purposes of this Section, a notice to the Company (with a copy to the Agent) by any Bank pursuant to paragraph (a) above shall be effective on the date of receipt thereof by the Company. (c) In the event any Bank shall give a notice to the Company pursuant to this Section or Section 3.05, the Company may give notice to such Bank (with copies to the Agent) that it wishes to seek one or more Eligible Assignees to assume the Commitment of such Bank and to purchase its outstanding Loans, Obligations -29- and Notes. Each Bank giving a notice to the Company pursuant to this Section agrees to sell its Commitment, Loans, Obligations, Notes and interest in this Agreement and the other Loan Documents to any such Eligible Assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans, Obligations and Notes plus all other fees, amounts and compensation due such Bank hereunder calculated, in each case, to the date such Commitment, Loans, Obligations, Notes and interest are purchased, whereupon such Bank shall have no further Commitment or other obligation to the Company hereunder or under any Note. SECTION 2.13. INDEMNITY. THE COMPANY SHALL INDEMNIFY EACH BANK --------- AGAINST ANY LOSS OR REASONABLE EXPENSE WHICH SUCH BANK MAY SUSTAIN OR INCUR AS A CONSEQUENCE OF (A) ANY FAILURE BY THE COMPANY TO FULFILL ON THE DATE OF ANY BORROWING HEREUNDER THE APPLICABLE CONDITIONS SET FORTH IN ARTICLE V, (B) IF, --------- FOR ANY REASON (OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH BANK), A BORROWING OF OR A CONVERSION FROM OR INTO EURODOLLAR RATE LOANS DOES NOT OCCUR ON THE DATE SPECIFIED THEREFOR IN A NOTICE OF BORROWING OR NOTICE OF CONVERSION, (C) ANY PAYMENT, PREPAYMENT OR CONVERSION OF A EURODOLLAR RATE LOAN REQUIRED BY ANY PROVISION OF THIS AGREEMENT (OTHER THAN SECTION 2.12) OR OTHERWISE MADE ON A DATE OTHER THAN THE LAST DAY OF THE APPLICABLE INTEREST PERIOD, (D) ANY DEFAULT IN THE PAYMENT OR PREPAYMENT OF THE PRINCIPAL AMOUNT OF ANY LOAN OR ANY PART THEREOF OR INTEREST ACCRUED THEREON, AS AND WHEN DUE AND PAYABLE (AT THE DUE DATE THEREOF OR INTEREST ACCRUED THEREON, AS AND WHEN DUE AND PAYABLE (AT THE DUE DATE THEREOF, BY NOTICE OF PREPAYMENT OR OTHERWISE) OR (E) THE OCCURRENCE OF ANY EVENT OF DEFAULT, INCLUDING, IN THE CASE OF ANY OF THE EVENTS SET FORTH IN CLAUSES (A) THROUGH (D) OF THIS SECTION, ANY LOSS OR REASONABLE EXPENSE SUSTAINED OR INCURRED OR TO BE SUSTAINED OR INCURRED IN LIQUIDATING OR EMPLOYING DEPOSITS FROM THIRD PARTIES ACQUIRED TO EFFECT OR MAINTAIN SUCH LOAN OR ANY PART THEREOF AS A EURODOLLAR RATE LOAN. FOR PURPOSES OF THIS SECTION, "LOSS OR REASONABLE EXPENSE" SHALL MEAN AN AMOUNT EQUAL TO THE EXCESS, IF ANY, AS REASONABLY DETERMINED BY EACH BANK OF (I) ITS ACTUAL COST OF OBTAINING THE FUNDS FOR THE LOAN BEING PAID, PREPAID OR CONVERTED OR NOT BORROWED (BASED ON THE THEN APPLICABLE EURODOLLAR RATE) FOR THE PERIOD FROM THE DATE OF SUCH PAYMENT, PREPAYMENT OR CONVERSION OR FAILURE TO BORROW TO THE LAST DAY OF THE INTEREST PERIOD FOR SUCH LOAN (OR, IN THE CASE OF A FAILURE TO BORROW, THE INTEREST PERIOD FOR THE LOAN WHICH WOULD HAVE COMMENCED ON THE DATE OF SUCH FAILURE TO BORROW) OVER (II) THE AMOUNT OF INTEREST (AS REASONABLY DETERMINED BY SUCH BANK) THAT WOULD BE REALIZED BY SUCH BANK IN REEMPLOYING THE FUNDS SO PAID, PREPAID OR CONVERTED OR NOT BORROWED FOR SUCH PERIOD OR INTEREST PERIOD, AS THE CASE MAY BE. EACH BANK WILL NOTIFY THE COMPANY THROUGH THE AGENT OF ANY LOSS OR EXPENSE WHICH WILL ENTITLE SUCH BANK TO COMPENSATION PURSUANT TO THIS SECTION, AS PROMPTLY AS POSSIBLE AND IN ANY EVENT WITHIN 60 DAYS AFTER IT BECOMES AWARE THEREOF PROVIDED THAT IN THE EVENT SUCH NOTIFICATION IS GIVEN AFTER 60 DAYS AFTER SUCH BANK BECOMES AWARE THEREOF, SUCH BANK SHALL BE ENTITLED TO RECOVER ONLY THOSE AMOUNTS OTHERWISE RECOVERABLE HEREUNDER WHICH ACCRUE AFTER THE DATE OF SUCH NOTICE. A CERTIFICATE OF EACH BANK SETTING FORTH ANY AMOUNT OR AMOUNTS WHICH SUCH BANK IS ENTITLED TO RECEIVE PURSUANT TO THIS SECTION SHALL BE DELIVERED TO THE COMPANY (WITH A COPY TO THE AGENT) AND SHALL BE CONCLUSIVE, IF MADE IN GOOD FAITH, ABSENT MANIFEST ERROR. THE -30- COMPANY SHALL PAY TO THE AGENT FOR THE ACCOUNT OF EACH BANK THE AMOUNT SHOWN AS DUE ON ANY CERTIFICATE WITHIN 30 DAYS AFTER ITS RECEIPT OF THE SAME. NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THE COMPENSATION PAYABLE UNDER THIS SECTION (TO THE EXTENT, IF ANY, CONSTITUTING INTEREST UNDER APPLICABLE LAWS) TOGETHER WITH ALL AMOUNTS CONSTITUTING INTEREST UNDER APPLICABLE LAWS AND PAYABLE IN CONNECTION WITH THIS AGREEMENT OR THE NOTES, EXCEED THE HIGHEST LAWFUL RATE. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER OBLIGATIONS OF THE COMPANY HEREUNDER, THE OBLIGATIONS OF THE COMPANY UNDER THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT, THE PAYMENT OF THE OBLIGATIONS AND THE ASSIGNMENT OF ANY OF THE NOTES. SECTION 2.14. Special Provisions for Swing Loans. ------------------------------------ (a) Banks to Make Revolving Loans. ------------------------------ (i) The Swing Loan Bank, at any time in its discretion, upon written request to the Banks through the Agent (with a copy to the applicable Company) on or before 11.00 a.m. (New York time) on the requested Borrowing Date (which shall be a Business Day), may require each Bank (including the Swing Loan Bank) to make a Base Rate Loan in an amount equal to such Bank's Percentage Participation of the outstanding Swing Loans. Promptly upon receipt of any such request, the Agent shall give notice thereof to the Banks. The Agent shall apply the proceeds of such Loans to prepay the Swing Loans of the Swing Loan Bank; provided, however, that the Agent shall be obligated to make the proceeds of such Loans available only to the extent received by it from the Banks. All Loans made pursuant to this Section 2.14(a) shall be Base Rate Loans. --------------- (ii) In the event the Agent advances proceeds from any Loan to the Swing Loan Bank and one or more of the Banks (other than the Swing Loan Bank) fail to fund all or any portion of such Loan immediately upon receipt of notice from the Agent, then the Agent shall promptly notify the Company, and the Company shall pay such corresponding amount to the Agent within two Business Days after demand therefor. The Agent shall also be entitled to recover from either such Bank or the Company interest on such corresponding amount from the date such corresponding amount was made available by the Agent to the Company to the date such corresponding amount is recovered by the Agent, (i) from such Bank at a rate per annum equal to the lesser of (A) the Highest Lawful Rate or (B) the Federal Funds Rate or (ii) from the Company at a rate per annum equal to the lesser of (A) the Highest Lawful Rate or (B) the applicable Margin plus the Base Rate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Company may have against any Bank as a result of any default by such Bank hereunder. (b) Participations in Swing Loans. ----------------------------- (i) If, at any time prior to the making of Loans pursuant to Section 2.14(a)(i) hereof, any Event of Default shall have occurred, each Bank, - ------------------ on the date such Loan was to have been made or, if no request for Loans had been made pursuant to Section 2.14(a)(i) hereof, promptly upon request by the ------------------ Swing Loan Bank delivered -31- to the Agent, shall purchase an undivided participation interest in all outstanding Swing Loans in an amount equal to its Percentage Participation times the outstanding amount of such Swing Loans. Each Bank (other than the Swing Loan Bank) will transfer immediately to the Swing Loan Bank, in immediately available funds, the amount of its participation and, upon receipt thereof, the Swing Loan Bank will deliver to such other Bank a Swing Loan Participation Certificate, dated the date of receipt of such funds and in the amount of such Bank's participation. (ii) Whenever, at any time after the Swing Loan Bank has received from any other Bank such other Bank's participating interest in a Swing Loan, the Swing Loan Bank receives any payment on account thereof, the Swing Loan Bank will distribute to such other Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that any payment received by the Swing Loan Bank is required to be returned, such other Bank will return to the Swing Loan Bank any portion thereof previously distributed to it. (c) Acknowledged Privity. The Company expressly agrees that, in -------------------- respect of each Bank's funded participation interest in any Swing Loan, such Bank shall be deemed to be in privity of contract with the Company and have the same rights and remedies against the Company under the Loan Documents as if such funded participation interest in such Swing Loan were a Loan. (d) Unconditional Obligation. Each Bank's obligation to make the ------------------------ Loans or to purchase participation interests in the Swing Loans as provided in this Section 2.14 shall be absolute and unconditional and shall not be affected ------------ by any circumstance, including without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Swing Loan Bank, the Company or any other Person for any reason whatsoever, (ii) the existence of any Default or Event of Default at any time (iii) the occurrence of any event or existence of any condition that might have a Material Adverse Effect, or (iv) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. ARTICLE III LETTERS OF CREDIT SECTION 3.01. Letters of Credit. (a) Subject to and upon the terms ----------------- and conditions herein set forth, the Issuing Bank agrees that it will, at any time and from time to time on or after the Effective Date and prior to the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans, following its receipt of a Letter of Credit Request, issue for the account of the Company and in support of the obligations of the Company, one or more irrevocable letters of credit (all such letters of credit collectively, the "Letters of Credit" and individually, a "Letter of Credit"); provided that the ----------------- ---------------- Issuing Bank shall not issue any Letter of Credit if at the time of such issuance: -32- (i) the Stated Amount of such Letter of Credit shall be greater than an amount which when added to (x) the Letter of Credit Outstandings at such time (y) the aggregate principal amount of all Loans then outstanding and (z) the outstanding principal amount of the Debt of the Company allowed under Section 8.04(b)(i)(A), would exceed the Total --------------------- Commitment; or (ii) the Stated Amount of such Letter of Credit shall be greater than an amount which when added to the Letter of Credit Outstandings at such time, would exceed the Letter of Credit Limit; or (iii) the expiry date or, in the case of any Letter of Credit containing an expiry date that is extendible at the option of the Issuing Bank, the initial expiry date of such Letter of Credit is a date that is later than the earlier to occur of (i) a date which is one year after the date of issuance or (ii) the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans. (b) the Issuing Bank shall neither renew nor permit the renewal of any Letter of Credit if any of the conditions precedent to such renewal set forth in Section 5.02 are not satisfied or, after giving effect to such renewal, ------------ the expiry date of such Letter of Credit would be a date that is later than the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans. SECTION 3.02. Letter of Credit Requests. (a) Whenever the Company ------------------------- desires that a Letter of Credit be issued for its account or that the existing expiry date shall be extended, it shall give the Issuing Bank (with copies to be sent to the Agent and each other Bank) (i) in the case of a Letter of Credit to be issued, at least five Business Days' prior written request therefor and (ii) in the case of the extension of the existing expiry date of any Letter of Credit, at least five Business Days' prior written request to the date on which the Issuing Bank must notify the beneficiary thereof that the Issuing Bank does not intend to extend such existing expiry date. Each such request shall be executed by the Company and shall be in the form of Exhibit 3.02 attached hereto ------------ (each a "Letter of Credit Request") and, in the case of the issuance of each ------------------------ Letter of Credit, shall be accompanied by an Application therefor, completed to the satisfaction of the Issuing Bank, and such other certificates documents and other papers and information as the Issuing Bank or any Bank (through the Agent) may reasonably request. Each Letter of Credit shall be denominated in U.S. dollars, shall expire no later than the date specified in Section 3.01, shall ------------ not be in an amount greater than is permitted under clauses (ii) or (iii) of Section 3.01(a) and shall be in such form as may be reasonably approved from - --------------- time to time by the Issuing Bank and the Company. (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Company that such Letter of Credit may be issued in accordance with, and will not violate the requirements of this Agreement. Unless the Issuing Bank has received notice from any Bank before it issues the respective Letter of Credit or extends the existing expiry date of a Letter of Credit that one or more of the conditions specified in Article V are --------- not then satisfied, or that the issuance of such Letter of Credit would violate this Agreement, then the Issuing Bank may issue the requested Letter of Credit for the account of the Company in -33- accordance with the Issuing Bank's usual and customary practices. Upon its issuance of any Letter of Credit or the extension of the existing expiry date of any Letter of Credit, as the case may be, the Issuing Bank shall promptly notify the Company, the Agent and each Bank of such issuance or extension. SECTION 3.03. Letter of Credit Participations. (a) All Letters of ------------------------------- Credit issued subsequent hereto shall be deemed to have been sold and transferred by the Issuing Bank to each Bank, and each Bank shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Bank's Percentage Participation in each such Letter of Credit (including extensions of the expiry date thereof), each substitute letter of credit, each drawing made thereunder and the obligations of the Company under this Agreement and the other Loan Documents with respect thereto. (b) In determining whether to pay under any Letter of Credit, the Issuing Bank shall have no obligation relative to the Banks other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit and applicable law. (c) In the event that the Issuing Bank makes any payment under any Letter of Credit and the Company shall not have reimbursed such amount in full to such Issuing Bank pursuant to Section 3.04(a), such Issuing Bank shall --------------- promptly notify the Agent, which shall promptly notify each Bank of such failure, and each Bank shall promptly and unconditionally pay to the Agent for the account of such Issuing Bank the amount of such Bank's Percentage Participation of such unreimbursed payment in U. S. dollars and in same day funds. If the Agent so notifies, prior to 10:00 a.m. (New York time) on any Business Day, any Bank required to fund a payment under a Letter of Credit, such Bank shall make available to the Agent for the account of such Issuing Bank such Bank's Percentage Participation of the amount of such payment on such Business Day in same day funds. If and to the extent such Bank shall not have so made its Percentage Participation of the amount of such payment available to the Agent for the account of such Issuing Bank, such Bank agrees to pay to the Agent for the account of such Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Issuing Bank at the lesser of (i) the Federal Funds Rate and (ii) the Highest Lawful Rate. The failure of any Bank to make available to the Agent for the account of such Issuing Bank, its Percentage Participation of any payment under any Letter of Credit shall not relieve any other Bank of its obligation hereunder to make available to the Agent for the account of such Issuing Bank its Percentage Participation of any payment under any Letter of Credit on the date required, as specified above, but no Bank shall be responsible for the failure of any other Bank to make available to the Agent for the account of such Issuing Bank such other Bank's Percentage Participation of any such payment. (d) Whenever an Issuing Bank receives a payment of a reimbursement obligation as to which the Agent has received for the account of such Issuing Bank -34- any payments from the Banks pursuant to clause (b) above, such Issuing Bank shall pay promptly to the Agent and the Agent shall promptly pay to each Bank which has paid its Percentage Participation thereof, in U.S. dollars and in same day funds, an amount equal to such Bank's Percentage Participation thereof together with any interest on such reimbursement obligation allocable to such Bank's Percentage Participation paid by the Company to such Issuing Bank pursuant to Section 3.04(a) and received by the Agent. --------------- (e) The obligations of the Banks to make payments (other than payments resulting solely from the gross negligence or wilfull misconduct of the Issuing Bank) to the Agent for the account of the Issuing Bank with respect to Letters of Credit shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Loan Documents; (ii) the existence of any claim, setoff, defense or other right which the Company may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit, the Agent, any Issuing Bank, any Bank, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Company and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or (v) the occurrence of any Default or Event of Default. SECTION 3.04. Agreement to Repay Letter of Credit Drawings. (a) Upon -------------------------------------------- the receipt by the Issuing Bank of any Drawing from a beneficiary under a Letter of Credit, the Issuing Bank promptly will provide the Agent, the Banks and the Company with telecopy notice thereof. The Company hereby agrees to reimburse such Issuing Bank by making payment to the Agent in immediately available funds at the Payment office, for any payment made by the Issuing Bank under any Letter of Credit issued by it (each such amount so paid until reimbursed, an "Unpaid ------ Drawing"). Such reimbursement payment shall be due and payable (x) not later - ------- than 2:00 p.m. (New York time) on the date the Issuing Bank notifies the Company of such Drawing, if such notice is received at or before 11:00 a.m. (New York time) on such date, or (y) not later than 11:00 a.m. (New York time) on the first Business Day succeeding the date such notice is received, if such notice is received after 11:00 a.m. (New York time). The Company shall pay interest on the amount so paid by the Issuing Bank, to the extent not reimbursed on the date of such payment, from and -35- including the date paid to but excluding the date reimbursement is made as provided above, at a rate per annum equal to the Default Rate, such interest to be payable on demand. (b) The Company's obligations under this Section to reimburse the Issuing Bank with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Company may have or have had against any Bank (including such Issuing Bank in its capacity as the issuer of a Letter of Credit or any Bank as a participant therein), including any defense based upon the failure of any drawing under a Letter of Credit (each a "Drawing") to conform to the terms of the Letter of ------- Credit or any non-application or misapplication by the beneficiary of the proceeds of such Drawing, unless such matter arises out of the gross negligence or willful misconduct of the Issuing Bank in paying such Drawing. (c) The Company also agrees with the Issuing Bank and the Banks that the Issuing Bank shall not be responsible for, and the Company's reimbursement obligations under subsection (a) above shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between the Company and the beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Company against any beneficiary of such Letter of Credit or any such transferee other than the gross negligence or willful misconduct of the Issuing Bank in paying such Drawing. (d) THE ISSUING BANK SHALL NOT BE LIABLE FOR ANY ERROR, OMISSION, INTERRUPTION OR DELAY IN TRANSMISSION, DISPATCH OR DELIVERY OF ANY MESSAGE OR ADVICE, HOWEVER TRANSMITTED, IN CONNECTION WITH ANY LETTER OF CREDIT, BUT SHALL BE LIABLE FOR ERRORS OR OMISSIONS CAUSED BY SUCH ISSUING BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE COMPANY AGREES TO INDEMNIFY THE ISSUING BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS AND HOLD SUCH PARTIES HARMLESS FROM ANY AND ALL LOSSES, LIABILITIES, CLAIMS OR DAMAGES (INCLUDING REASONABLE ATTORNEYS FEES) ARISING OUT OF OR RESULTING FROM ANY ACTION TAKEN OR OMITTED BY SUCH PERSON UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR ANY RELATED DRAFT OR DOCUMENT WHICH ACTION TAKEN OR OMITTED WAS CAUSED BY SUCH PERSON'S SOLE OR CONTRIBUTORY NEGLIGENCE. THE COMPANY AGREES THAT ANY ACTION TAKEN OR OMITTED BY AN ISSUING BANK UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR THE RELATED DRAFTS OR DOCUMENTS, IF DONE IN ACCORDANCE WITH THE STANDARDS OF CARE SPECIFIED IN THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (AND ANY SUBSEQUENT REVISIONS THEREOF APPROVED BY A CONGRESS OF THE INTERNATIONAL CHAMBER OF COMMERCE AND ADHERED TO BY THE ISSUING BANKS) AND, TO THE EXTENT NOT INCONSISTENT THEREWITH, THE UNIFORM COMMERCIAL CODE OF THE STATE OF NEW YORK, SHALL NOT RESULT IN ANY LIABILITY OF AN ISSUING BANK TO THE COMPANY. -36- SECTION 3.05. Increased Costs. (a) Notwithstanding any other --------------- provision herein, but subject to Section 11.08, if any Bank shall have ------------- determined in good faith that any law, rule, regulation or guideline or the application or effectiveness of any applicable law or regulation or any change in applicable law or regulation or any change after the Execution Date in the interpretation or administration thereof, or compliance by any Bank (or any lending office of such Bank) with any applicable guideline or request from any central bank or governmental authority (whether or not having the force of law) either (i) shall impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued, or participated in, by any Bank or (ii) shall impose on any Bank any other conditions affecting this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Bank of issuing, maintaining or participating in any Letter of Credit, or reduce the amount received or receivable by any Bank hereunder with respect to Letters of Credit, by an amount deemed by such Bank to be material, then, from time to time, the Company shall pay to the Agent for the account of such Bank such additional amount or amounts as will reasonably compensate such Bank for such increased cost or reduction by such Bank. Notwithstanding the foregoing, in no event shall the compensation payable under this paragraph (to the extent, if any, constituting interest under applicable laws) together with all amounts constituting interest under applicable laws and payable in connection with this Agreement, the Notes or the other Loan Documents, exceed the Highest Lawful Rate. (b) Each Bank will notify the Company through the Agent of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to subsection (a) above, as promptly as practicable, and in any event within 30 days after it becomes aware thereof provided that in the event such notification is given after 60 days after such Bank becomes aware thereof, such Bank shall be entitled to recover only those amounts otherwise recoverable hereunder which accrue after the date of such notice. A certificate of a Bank setting forth in reasonable detail such amount or amounts as shall be necessary to compensate such Bank as specified in subsection (a) above may be delivered to the Company (with a copy to the Agent) and shall be conclusive absent manifest error. The Company shall pay to the Agent for the account of such Bank the amount shown as due on any such certificate within 30 days after its receipt of the same. SECTION 3.06. Conflict between Applications and Agreement. To the ------------------------------------------- extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Agreement, the provisions of this Agreement shall control. -37- ARTICLE IV FEES; COMMITMENTS; PAYMENTS SECTION 4.01 Fees. (a) The Company agrees to pay to the Agent on the ---- Execution Date for pro rata distribution to the Banks (based upon their respective Percentage Participations in the amount of the Total Commitment) a fee equal to 0.25% of the Total Commitment (the "Up Front Fee"). ------------ (b) The Company agrees to pay to the Agent for distribution to each Bank a Commitment fee (the "Commitment Fee") for the period from the Execution -------------- Date to the date upon which the Total Commitment shall have been terminated, computed at a rate equal to 0.375% per annum on the daily average Unutilized Commitment of such Bank. Accrued Commitment Fees shall be calculated to the day immediately preceding each Designated Payment Date and to the date immediately preceding such date upon which the Total Commitment is terminated and shall be due and payable in arrears on each Designated Payment Date commencing June 30, 1995 and on the date upon which the Total Commitment is terminated. The Commitment Fee (i) shall be paid in immediately available funds and (ii) shall be calculated on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be. (c) The Company agrees to pay to the Agent for pro rata distribution to the Banks (based upon their respective Percentage Participations) a fee in respect of each Letter of Credit issued for the account of the Company (the "Letter of Credit Fee"), for the period from the date of issuance of such Letter -------------------- of Credit to the expiry date of such Letter of Credit, computed at the rate of 1% per annum on the daily average Stated Amount of each Letter of Credit. The Company agrees to pay to the Issuing Bank, for its own account, a fee in respect of each Letter of Credit issued for the account of the Company, for the period from the date of issuance of such Letter of Credit to the expiry date of such Letter of Credit, computed at the rate of 0.1% per annum on the daily average Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees and fees due to the Issuing Bank pursuant to this Section shall be due and payable in arrears on each Designated Payment Date commencing June 30, 1995, and on the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans or, if earlier, on the date upon which the Total Commitment is terminated. The Letter of Credit Fees (i) will be in lieu of all commissions and fees for the Letters of Credit other than customary administrative, issuance, amendment, payment and negotiation charges, (ii) shall be paid in immediately available funds and (iii) shall be calculated on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be. (d) The Company agrees to pay to the Agent for its sole account an Agent's fee (the "Agent's Fee") as previously agreed to in writing by the ----------- Company and the Agent. The Agent's Fee shall be due and payable on the Execution Date and on each one year anniversary of the Execution Date during the term hereof as consideration for the performance of the Agent's duties hereunder. -38- (e) The Company agrees to pay to CS First Boston Corporation for its sole account an arranger fee (the "Arranger Fee") as previously agreed to in ------------ writing by the Company and CS First Boston Corporation. The Arranger Fee shall be due and payable on the Execution Date. (f) In no event shall the Fees payable under this Section (to the extent, if any, constituting interest under applicable laws) together with all amounts constituting interest under applicable laws and payable in connection with this Agreement, the Notes and the other Loan Documents exceed the Highest Lawful Rate. SECTION 4.02. Voluntary Reduction of Commitment. Upon at least two --------------------------------- Business Days' prior telephonic notice confirmed in writing to the Agent (which notice the Agent shall promptly transmit to each of the Banks), the Company shall have the right, without premium or penalty, to irrevocably terminate the Unutilized Commitment in part or in whole; provided, that (a) any such reduction shall apply proportionately to the Commitment of each of the Banks and (b) any partial reduction of the Total Commitment shall be in the amount of $10,000,000 or, if greater, an integral multiple of $1,000,000. If and to the extent that the Company specifies in such notice that it desires to terminate all or any part of the Swing Loan Commitment, then (i) the Swing Loan Commitment shall be reduced by the amount so requested, (ii) the reduction shall be applied proportionately to the Commitment of each Bank and (iii) that portion of the Swing Loan Bank's Commitment not constituting a part of the Swing Loan Commitment shall be increased by the aggregate amount of the reductions applied to reduce proportionately the Commitments of each of the Banks. All reductions of the Unutilized Commitment made pursuant to this Section 4.02 shall be applied ------------ proportionately to each of the mandatory reductions of the Total Commitment required under Section 4.03 (a) and Section 4.03(b). ---------------- --------------- SECTION 4.03. Mandatory Reduction of Commitment. (a) The Total --------------------------------- Commitment, if not sooner terminated, shall terminate on the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans. (b) The Total Commitment, if not sooner reduced or terminated, shall be reduced by the Company to not more than (i) $75,000,000 on January 1, 1996 and (ii) $50,000,000 on January 1, 1997. (c) The Total Commitment, if not sooner terminated, shall be reduced by the total amount of all prepayments of the Loans required to be made in accordance with Section 8.11 as a result of Asset Dispositions and Section 8.03 ------------ ------------ as a result of sales of Accounts Receivable. All reductions of the Unutilized Commitment made pursuant to this Section 4.03 (c) shall be applied proportionately to each of the mandatory reductions of the Total Commitment required under Section 4.03 (a) and Section 4.03(b). ---------------- --------------- (d) The Total Commitment, if not sooner terminated, shall be terminated or reduced as required by Section 4.05(c). --------------- -39- (e) The reductions in the Total Commitment required by Section 4.03(b) --------------- and Section 4.03(c) shall with respect to the portion thereof applied to reduce --------------- the Commitment of Credit Suisse, be applied proportionately to the Swing Loan Commitment and the balance of the Credit Suisse Commitment. SECTION 4.04. Voluntary Prepayments. The Company may (x) by giving --------------------- telephonic notice (promptly confirmed in writing) by Noon (New York time) on Business Day of such prepayment, in the case of Base Rate Borrowings, and (y) upon at least three Business Days' notice, in the case of Eurodollar Rate Borrowings, in each case to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Company shall, prepay the outstanding aggregate principal amount of the Loans constituting part of the same Borrowing in whole or in part, together with accrued, unpaid interest to the date of such prepayment on the aggregate principal amount prepaid, provided that (a) no Eurodollar Rate Loan may be prepaid prior to the last day of its Interest Period unless, simultaneously therewith, the Company pays to the Agent for the benefit of the Banks, all sums due and payable under Section 2.13 hereof; (b) each partial prepayment shall be ------------ in an initial aggregate principal amount of $1,000,000 and, if greater, an integral multiple of $500,000; and (c) each prepayment pursuant to this Section shall be applied pro rata among the designated outstanding Loans of each of the Banks, first, to the payment of accrued and unpaid interest, then, to the outstanding principal of such Loans in the inverse order of maturity thereof. SECTION 4.05. Mandatory Repayments. (a) On the Maturity Date the -------------------- Company shall pay the aggregate principal amount of the Loans outstanding on such date, together with all accrued, unpaid interest due thereon. (b) Subject to Section 2.13, the Company shall repay the outstanding ------------ principal amount of the Loans on any day on which the aggregate outstanding principal amount of the Loans, when added to (i) Letter of Credit Outstandings and (ii) the outstanding principal amount of the Debt of the Company allowed under Section 8.04(b)(i)(A) exceeds the Total Commitment, in the amount of such --------------------- excess. If, after giving effect to the prepayment of all outstanding Loans, the Letter of Credit Outstandings exceed the difference between (i) Total Commitment and (ii) the outstanding principal amount of the Debt of the Company allowed under Section 8.04(b)(i)(A), the Company shall pay an amount of cash equal to such excess Letter of Credit Outstandings to the Agent, such cash hereby pledged and to be held as security for all obligations of the Company hereunder and under the other Loan Documents. (c) Upon the occurrence of a Change of Control, the Company shall pay the aggregate principal amount of the Loans outstanding, together with all accrued, unpaid interest due thereon and the Total Commitment shall terminate unless such payment and termination is waived by the Majority Banks (i) in a case where the Company is a voluntary party to the relevant transaction, prior to the effectiveness of such Change of Control or (ii) in a case where the Company is not a voluntary party to the relevant transaction, prior to the fifth day following the occurrence of such Change of Control, in each case pursuant to Section 11.01. Such payment shall be made (i) immediately upon the occurrence of - ------------- a Change of Control in a case where the -40- Company is a voluntary party to the relevant transaction and (ii) within five days after any Change of Control in a case where the Company is not a voluntary party to the relevant transaction. In the event that the Company requests such a waiver the Banks will respond to such request (i) in a case where the Company is a voluntary party to the relevant transaction within ten Business Days or (ii) in a case where the Company is not a voluntary party to the relevant transaction, prior to the fifth day following the occurrence of such Change of Control; provided, that the failure of the Banks to so respond shall constitute the Majority Bank's rejection of such waiver request. (d) Each repayment pursuant to this Section shall be applied pro rata among the designated outstanding Loans of each of the Banks, first, to the payment of accrued and unpaid interest, then, in the case of all Loans, to the outstanding principal of such Loans. SECTION 4.06. Method and Place of Payment. Except as otherwise --------------------------- specifically provided herein, all payments under this Agreement shall be made to the Agent for the account of the Bank or Banks entitled thereto not later than Noon (New York time) on the date when due and shall be made in lawful money of the United States in immediately available funds at the Payment Office. If the Agent fails to send to any Bank its portion of any payment timely received by the Agent by the close of business on the day such payment was received, the Agent shall pay such Bank interest on its portion of such payment at the lesser of (i) the Federal Funds Rate and (ii) the Highest Lawful Rate for the period from the day such payment was timely received by the Agent to the date such Bank's portion of such payment is sent to such Bank. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. SECTION 4.07. Net Payments. Except with respect to withholdings of ------------ United States taxes, as provided in Section 4.08, all payments (whether of ------------ principal, interest, Fees, reimbursements or otherwise) by the Company under this Agreement shall be made without set-off or counterclaim and shall be made free and clear of and without deduction for any present or future tax, levy, impost or any other charge, if any, of any nature whatsoever, other than income taxes, or franchise or similar taxes, now or hereafter imposed by any taxing authority. Except with respect to withholdings of United States taxes as provided in Section 4.08, if the making of such payments by the Company is ------------ prohibited by law unless such a tax, levy, impost or other charge is deducted or withheld therefrom, the Company shall pay to the Agent, on the date of each such payment, such additional amounts (without duplication of any amounts required to be paid by the Company pursuant to Section 2.11 or Section 3.05) as may be ------------ ------------ necessary in order that the net amounts received by the Banks after such deduction or withholding shall equal the amounts which would have been received if such deduction or withholding were not required. The Company shall confirm that all applicable taxes, if any, imposed on this Agreement or transactions hereunder shall have been properly and legally paid by it to the appropriate taxing authorities by sending official tax receipts or notarized copies of such receipts to the Agent within 30 days after payment of any applicable tax. -41- Notwithstanding the foregoing, in no event shall the compensation payable under this Section 4.07 (to the extent, if any, constituting interest under ------------ applicable laws) together with all amounts constituting interest under applicable laws and payable in connection with this Agreement, the Notes and the other Loan Documents exceed the Highest Lawful Rate. SECTION 4.08. Tax Forms. With respect to each Bank that is organized --------- under the laws of a jurisdiction outside the United States, on the date of the initial Borrowing hereunder, and from time to time thereafter if requested by the Company or the Agent, each such Bank shall provide the Agent and the company two duly completed copies of the United States Internal Revenue Service Form 1001 (or such other documentation or information as may, under applicable United States federal income tax statutes or regulations, be required in order to claim an exemption or reduction from United States income tax withholding by reason of an applicable treaty with the United States, such documentation or other information being hereafter referred to as "Form 1001") or 4224 (or such other --------- documentation or information as may, under applicable United States federal income tax statutes or regulations, be required in order to claim an exemption form United States income tax withholding for income that is effectively connected with the conduct of a trade or business within the United States, such documentation or other information being hereafter referred to as "Form 4224"), --------- as the case may be, indicating in each case that such Bank is either entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes or, as the case may be, is subject to such limited deduction or withholding as it is capable of recovering in full from a source other than the Company. Each Bank which delivers to the Company and the Agent a Form 1001 or 4224 pursuant to the next preceding sentence further undertakes to deliver to the Company and the Agent two further copies of the said Form 1001 or 4224, or successor applicable form or certificate, as the case may be, as and when the previous form filed by it hereunder shall expire or shall become incomplete or inaccurate in any respect, unless in any of such cases an event has occurred prior to the date on which any such delivery would otherwise be required which renders such form inapplicable. SECTION 4.09. Maturity Date Extension Option. In the event the ------------------------------ Company desires to extend the Maturity Date with respect to Base Rate Loans and Eurodollar Rate Loans for a period of one year form December 31, 1997 until December 31, 1998 it shall give the Agent written notice to such effect (an "Extension Request") no earlier than October 31, 1997 and no later than November ----------------- 30, 1997. An Extension Request shall be irrevocable and must be accompanied by the Company's (a) pro forma balance sheet as of the Conversion Date and (b) the financial information and certificate described in Section 7.01(a) and Section --------------- ------- 7.01(d) , respectively, applicable to the most recently ended quarterly - ------- accounting period of the Company. The Agent shall promptly give the Banks written notice or telephonic notice (promptly confirmed in writing) of the Company's Extension Request. Each Bank shall have the option, in its sole and absolute discretion, to extend its Commitment in accordance with the Extension Request. Any Bank electing to grant the Extension Request shall notify the Company (with a copy to the Agent and the other Banks) on or before thirty (30) days after the date of receipt of the Extension Request, which notification shall constitute an extension of such Bank's Commitment -42- until December 31, 1998. The failure of any Bank to so notify the Company of its acceptance of the Company's Extension Request shall constitute a rejection of such Extension Request. ARTICLE V CONDITIONS PRECEDENT SECTION 5.01. Conditions Precedent to the Initial Borrowing of Loans. ------------------------------------------------------ The obligation of each Bank to make its initial Loan or issue a Letter of Credit for the account of the Company is subject to the following conditions: The Agent shall received the following, each in form and substance satisfactory to the Agent: (a) this Agreement executed by each party hereto; (b) a Note executed by the Company and payable to the order of each Bank; (c) a Notice of Borrowing with respect to the Loans, if any, to be borrowed on the initial Borrowing Date meeting the requirements of Section 2.03; ------------ (d) a certificate of an Officer and of the secretary or an assistant secretary of the Company certifying, inter alia, (i) true and complete copies of the certificate of incorporation of the General Partner, as amended and in effect, the bylaws of the General Partner, as amended and in effect, the Amended and Restated Agreement of Limited Partnership of the Company and the resolutions adopted by the Board of Directors (A) authorizing the executing, delivery and performance by the Company of this Agreement and the other Loan Documents and the Borrowings to be made and the Letters of Credit to be issued hereunder, (B) approving the forms of the Loan Documents which will be delivered at or prior to the initial Borrowing Documents and any related documents, including, any agreement contemplated by this Agreement, (ii) the incumbency and specimen signatures of the Officers of the General Partner executing any documents on behalf of the Company (iii) (A) that the representations and warranties made by the Company in any Loan Document and which will be delivered at or prior to the date of the initial Borrowing Date are true and correct in all material respects, (B) the absence of any proceedings for the dissolution or liquidation of the Company and (C) the absence of the occurrence of any Material Adverse Effect or the occurrence and continuance of any Default or Event of Default; (iv) that the closing under the Asset Transfer Agreement dated as of August 12, 1994 between Occidental Chemical Corporation and the Company, as amended, shall have occurred substantially as described in the Prospectus; (v) that the closing under the Underwriting Agreement dated April 21, 1995 between the Company, BCPM, BLP Finance Corporation and CS First Boston Corporation shall have occurred and the Securities shall have been issued as described in the Prospectus; and (vi) that the Wachovia Credit Agreement has been terminated; -43- (e) a favorable, signed opinions addressed to the Agent and the Banks from the general counsel of the General Partner and counsel to the Company and from Sidley & Austin, counsel to the Company, in substantially the form attached hereto as Exhibit 5.01(e); --------------- (f) the payment to the Agent and the Banks, as applicable, of all fees then due under Section 4.01 hereof and all other reasonable fees and ------------ expenses (including the reasonable fees and disbursements pursuant to Section ------- 11.04) to be paid on or prior to the Effective Date; and - ----- (g) certificates of appropriate public officials as to the existence and good standing of the Company and the General Partner issued in the state of incorporation or formation and each state wherein the Company is or should be qualified to do business as a foreign entity. SECTION 5.02. Conditions Precedent to All Credit Events. The ----------------------------------------- obligation of the Banks to make any Loan or to issue or extend any Letter of Credit is subject to the further conditions precedent that on the date of such Credit Event (other than any conversion of existing Loans into Base Rate Loans): (a) The Effective Date shall have occurred. (b) The representations and warranties set forth in Article VI, ----------- excluding those contained in Section 6.07(a), 6.07(c) and 6.07(d), shall be - ----------------------------------------------------------------- true and correct in all material respects as of, and as if such representations and warranties were made on, the date of the proposed Loan or Letter of Credit, as the case may be (unless such representation and warranty expressly relates to an earlier date), and the Company shall be deemed to have certified to the Agent and the Banks that such representations and warranties are true and correct in all material respects by submitting a Notice of Borrowing or a Letter of Credit Request, as the case may be. (c) The Company shall have complied with the provisions of Section ------- 2.03 or Section 3.02, as applicable. - ---- ------------ (d) No Default or Event of Default shall have occurred and be continuing or would result from such Credit Event. (e) No Material Adverse Effect shall have occurred since the delivery of the Financials. The acceptance of the benefits of each such Credit Event shall constitute a representation and warranty by the Company, to each of the Banks that all of the conditions specified in this Section above exist as of that time. SECTION 5.03. Conditions Precedent to Conversions. The obligation ----------------------------------- of the Banks to convert any existing Borrowing into a Borrowing consisting of Eurodollar Rate Loans is subject to the condition precedent that on the date of such conversion no Default or Event of Default shall have occurred and be continuing or would result from the making of such conversion. The acceptance of the benefits of -44- each such conversion shall constitute a representation and warranty by the Company to each of the Banks that no Default or Event of Default shall have occurred and be continuing or would result from the making of such conversion. SECTION 5.04. Delivery of Documents. All of the Notes, --------------------- certificates, legal opinions and other documents and papers referred to in this Article V, unless otherwise specified, shall be delivered to the Agent for the - --------- account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be reasonably satisfactory in form and substance to the Banks. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Banks to enter into this Agreement and to make the Loans provided for herein and issue Letters of Credit, the Company makes, on or as of the Effective Date and the occurrence of each Credit Event (except to the extent such representations or warranties relate to an earlier date or are no longer true and correct in all material respects solely as a result of transactions permitted by the Loan Documents), the following representations and warranties to the Agent and the Banks: SECTION 6.01. Organization and Qualification. Each of the Company ------------------------------ and the General Partner (a) is a corporation or partnership duly organized, validly existing and in good standing under the laws of the state of its incorporation or organization, (b) has the corporate or partnership power to own its property and to carry on its business as now conducted and (c) is duly qualified as a foreign corporation or foreign partnership to do business and is in good standing in every jurisdiction in which the failure to be so qualified would, have a Material Adverse Effect. SECTION 6.02. Authorization and Validity. The Company has the power -------------------------- and authority to execute, deliver and perform its obligations hereunder and under the other Loan Documents, and all such action has been duly authorized by all necessary corporate proceedings on the part of the General Partner. The General Partner has the corporate power and authority to execute and deliver as the General Partner the Loan Documents, and all of such action has been duly authorized by all necessary corporate proceedings on its part. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and legally binding agreement enforceable in accordance with its terms and the Notes and the other Loan Documents, when duly executed and delivered by the Company, will constitute valid and legally binding obligations of the Company enforceable in accordance with the respective terms thereof and of this Agreement, except, in each case, as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors' rights generally, and by general principles of equity (regardless of whether such enforceability is a proceeding in equity or at law). -45- SECTION 6.03. Governmental Consents. No authorization, consent, --------------------- approval, license or exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which has not been obtained is necessary for the valid execution, delivery or performance by the Company of any Loan Document. SECTION 6.04. Conflicting or Adverse Agreements or Restrictions. ------------------------------------------------- Neither the execution nor delivery of the Loan Documents nor compliance with the terms and provisions hereof or thereof will be contrary to the provisions of, or constitute a default under (a) the charter, bylaws or partnership agreement of the Company or any of its Subsidiaries or (b) any applicable law (including Regulation U) or any applicable regulation, order, writ, injunction or decree of any court or governmental instrumentality or (c) any material agreement to which the Company or any of its Subsidiaries is a party or by which it is bound or to which it is subject. SECTION 6.05. Title to Assets. Each of the Company and its --------------- Subsidiaries has good and indefeasible title to all of its material assets, subject to no Liens, except those permitted hereunder. All of such assets, have been and are being maintained by the appropriate Person in good working condition in accordance with industry standards, subject to force majeure and ordinary wear and tear excepted. SECTION 6.06. Litigation. Except as described in the Prospectus or ---------- as set forth on schedule 6.13, no proceedings against or affecting the Company ------------- or any Subsidiary are pending or, to the knowledge of the Company, threatened before any court or governmental agency or department which involve a reasonable material risk of having a Material Adverse Effect. SECTION 6.07. Financial Statements, Projections and Information ------------------------------------------------- Memorandum. (a) The Company has furnished to each Bank its audited consolidated - ---------- balance sheet, income statement and statement of cash flow for itself and its consolidated Subsidiaries as of December 31, 1994 (the "Financials"). The ---------- Financials have been prepared in conformity with GAAP consistently applied (except as otherwise disclosed in such financial statements) throughout the periods involved and present fairly, in all material respects, the consolidated financial condition of the Company and its consolidated Subsidiaries as of December 31, 1994 and the results of their operations for the period then ended. (b) No Material Adverse Effect has occurred since the date of the Financials. (c) The projections with respect to the Company's income and cash distributions, balance sheet and statement of cash flows contained in the Information Memorandum, copies of which have been furnished to each Bank prior to the date hereof, were prepared in good faith on the basis of the assumptions stated in the Information Memorandum, which assumptions were believed by the Company to be reasonable in all material respects at the time made, it being recognized by the Banks and the Agent that (w) such projections relate to future events and are not to be viewed as facts or assurances, (x) actual results during the period or periods covered by any such projections ar subject to many economic and competitive -46- uncertainties and contingencies that are beyond the control of the Company, (y) there can be no assurances that such projections and the related financial model will be realized and (z) actual results may vary materially from the projected results. (d) Taken as a whole, as of the date hereof, the representations and warranties of the Company and the assertions of fact by the Company contained in this Agreement, the Information Memorandum and the Prospectus and any other certificate or document provided by the Company to the Banks and the Agent after the date of the Prospectus do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made in such documents not misleading. SECTION 6.08. Default. (a) Neither the Company nor any Subsidiary is ------- in default under the provisions of any instrument evidencing any Debt or of any agreement relating thereto, or in default in any respect under any order, writ, injunction or decree of any court, or in default in any respect under or in violation of any order, injunction or decree of any governmental instrumentality, which defaults or violations would reasonably be expected to have a Material Adverse Effect. (b) Other than the Indenture, neither the Company nor any Subsidiary is a party to any material agreement evidencing any Debt of such Person with an outstanding principal amount in excess of $2,500,000 on the Execution Date. SECTION 6.09. Investment Company Act. Neither the Company nor any ---------------------- Subsidiary is, or is directly or indirectly controlled by or acting on behalf of any Person which is, and "investment company," as such term is defined in the Investment Company Act of 1940. SECTION 6.10. Public Utility Holding Company Act. Neither the ---------------------------------- Company nor any Subsidiary is a non-exempt "holding company" or subject to regulation as such, or, to the knowledge of the Company's officers, an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935. SECTION 6.11. ERISA. No material accumulated funding deficiency (as ----- defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, exists or is expected to be incurred with respect to any Plan(s). No liability to PBGC (other than required premium payments) has been or is expected by the Company to be incurred with respect to any Plan(s) by the Company or any ERISA Affiliate which would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plans which would reasonably be expected to have a Material Adverse Effect. SECTION 6.12. Tax Returns and Payments. Each of the Company and its ------------------------ Subsidiaries has filed all federal income tax returns, state tax returns and other material tax returns, statements and reports (or obtained extensions with respect thereto) which, are required to be filed and have paid or deposited or made adequate provision in accordance with GAAP for the payment of all taxes (including estimated -47- other Loan Document to violate Regulation U, Regulation X, or any other regulation of the Board. SECTION 6.15. Franchises and Other Rights. The Company and each of --------------------------- its Subsidiaries have all franchises, permits, licenses and other authority (collectively, the "Operating Rights") as are necessary to enable them to carry ---------------- on their respective businesses as now being conducted, except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. SECTION 6.16. Subsidiaries. BCF Finance Corporation is the only ------------ Subsidiary of the Company as of the Execution Date. SECTION 6.17. Solvency. As of the Effective Date, the Company -------- warrants and represents that with respect to itself and each of its Subsidiaries: (i) the present fair salable value of its respective assets is not less than its probable liability on its Debts, and the sum of its Debts is not greater than all of its property, at a fair valuation; (ii) it is able to pay its respective Debts as they mature and has not incurred any debts beyond its ability to pay such Debts as they mature (taking into account the timing and amounts of cash to be received by it from any source and the amounts to be payable on or in respect of its Debts); and (iii) it has sufficient capital with which to conduct its respective businesses (whether currently being conducted or proposed to be conducted). SECTION 6.18. Material Contracts. As of the Execution Date, the ------------------ Purchase Agreements and Processing Agreements between Borden and the Company referred to in the Prospectus (a) have been duly executed and delivered by, and constitute the legal, valid and binding obligation of, each party thereto, enforceable against such party in accordance with its terms, (b) are in full force and effect and (c) have not been amended or modified in any material respect. ARTICLE VII AFFIRMATIVE COVENANTS The Company covenants and agrees for itself, that on and after the date hereof and for so long as this Agreement is in effect and until the Commitments and each Letter of Credit have terminated, and the Obligations (other than indemnities not yet due) are paid in full: SECTION 7.01. Information Covenants. The Company will furnish or --------------------- cause to be furnished the following information to each Bank and the Agent: (a) As soon as available, and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the -49- Company, the consolidated balance sheet of the Company and its consolidated Subsidiaries as of the end of such quarterly period and the related consolidated statements of income and retained earnings for such quarterly period and statement of cash flows for the elapsed portion of the fiscal year ended with the last day of such quarterly period, setting forth, in each case, comparative consolidated figures for the related periods in the prior fiscal year, all of which shall be certified by the chief financial officer or chief executive officer of the Company as fairly presenting in all material repects the financial position of the Company and its consolidated Subsidiaries as of the end of such period and the results of their operation for the period then ended in accordance with GAAP, subject to changes resulting from normal year-end audit adjustments and the inclusion of abbreviated footnotes. (b) As soon as available, and in any event within 90 days after the close of each fiscal year of the Company, the consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earinings and statement of cash flows for such fiscal year, setting forth, in each case, comparative figures for the preceding fiscal year and certified by Price Waterhouse LLP or other independent certified public accountants of recognized national standing. (c) Promptly after any Responsible Officer of the Company or any of its Subsidiaries obtains knowledge thereof, notice of (i) any event or condition which constitutes a Default or an Event of Default, (ii) any condition or event which, in the opinion of management of the Company, would reasonably be expected to have a Material Adverse Effect, or (iii) any condition or event with respect to which the Company has determined to issue a Current Report on Form 8-K a notice of such event or condition will be delivered to each Bank specifying the nature and period of existence thereof and specifying the notice given or action taken by such Person and the nature of any such claimed default, event or condition and, in the case of an Event of Default or Default, what action has been taken, is being taken or is proposed to be taken with respect thereto. (d) At the time of the delivery of the financial statements provided for in Sections 7.01(a) and (b), a certficate of the chief financial officer, ---------------- --- treasurer or the controller of the Company to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof and the action that is being taken or that is proposed to be taken with respect thereto, which certificate shall set forth (i) the name of any Subsidiary formed or acquired after the delivery of the last certificate required hereunder and (ii) the calculations required (if any, in the case of Section 8.11 and Section 8.12) to establish whether the ------------ ------------ Company was in compliance with the provisions of Section 8.08, Section 8.09, --------------------------- Section 8.11 and Section 8.12 as at the end of such fiscal period or year, as - ---------------- ------------ the case may be. -50- (e) Upon request by the Agent, such environmental reports, studies and audits regarding the Company or its Subsidiaries as are in existence. (f) Promptly upon transmission therof, copies of any filings and registrations with, and reports to, the SEC other than reports delivered pursuant to Section 16 of the Securities and Exchange Act of 1934, which will be delivered only upon request by the Agent. (g) From time to time and with reasonable promptness, such other information or documents as the Agent or any Bank through the Agent may reasonably request, including, without limitation, notice of any Persons which have become Subsidiaries. SECTION 7.02. Books, Records and Inspections. The Company will ------------------------------ maintain, and will permit, or cause to be permitted at such Bank's or Banks' expense, any Person designated by any Bank or the Banks in writing upon one Business Day's notice and without materially disrupting the operations of the Company or any of its Subsidiaries to visit and inspect any of the properties of the Company and its Subsidiaries, to examine the books and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of any such Persons with the officers, employees and agents of the Company and its Subsidiaries and with their independent public accountants, all at such reasonable times and as often as the Agent or such Bank may reasonably request. SECTION 7.03. Insurance and Maintenance of Properties. (a) Each of --------------------------------------- the Company and its Subsidiaries will keep adequately insured by financially sound and reputable insurers all of its property of a character, and in amounts and against such risks, usually insured by similar Persons engaged in the same or similar businesses, including, without limitation, insurance against fire, casualty and any other hazards normally insured against. Each of the Company and its Subsidiaries will at all times maintain insurance against its liability for injury to Persons or property, which insurance shall be by financially sound and reputable insurers and in such amounts and form as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. (b) Subject to force majeure an ordinary wear and tear, each of the Company and its Subsidiaries will cause all of its material properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals and replacements thereof, such that all of same will be maintained according to standards as are customary with entities of similar size to the Company in the same or similar lines of business. SECTION 7.04. Payment of Taxes. Each of the Company and its ---------------- Subsidiaries will pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties -51- belonging to it, prior to the date on which penalties attach therto, except for such amounts that are being contested in good faith and by appropriate proceedings and against which the Company or such Subsidiary maintains appropriate reserves in accordance with GAAP. SECTION 7.05. Corporate Existence. Subject to Section 8.02, the ------------------- ------------ Company will do all things necessary to preserve and keep in full force and effect the corporate or partnership existence of the Company, and, except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect, to preserve the existence of the Company's Subsidiaries, and to keep in full force and effect the rights and franchises of the Company and its Subsidiaries; provided that the Company may permit the occurrence of the Conversion Date. SECTION 7.06. Compliance with Statutes. Each of the Company and its ------------------------ Subsidiaries will comply with all applicable material statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect. SECTION 7.07. ERISA. As soon as possible and, in any event, within ten ----- days after any Responsible Officer of the Company or any of its Subsidiaries knows or has reason to know any of the following items is true and is reasonably expected to have a Material Adverse Effect, such Person will deliver or cause to be delivered to each of the Banks a certificate of the Responsible Officer of the Company setting forth details as to such occurrence and such action, if any, which such Person or its ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by such Person or ERISA Affiliate with respect thereto: that a Reportable Event has occurred or that an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard; that a Multiemployer Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that any required contribution to a Plan or Multiemployer Plan has not been or may not be timely made; that proceedings may be or have been instituted under Section 4069(a) of ERISA to impose liability on the Company or an ERISA Affiliate or under Section 4042 of ERISA to terminate a Plan or appoint a trustee to administer a Plan; that the Company or any ERISA Affiliate has incurred or may incur any liability (including any contingent or secondary liability) on account of the termiantion of or withdrawal from a Plan or a Multiemployer Plan; and that the Company or any ERISA Affiliate may be required to provide security to a Plan under Section 401(a)(29) of the Code; or any other condition(s) exist(s) or may occur with respect to one or more Plans and/or Multiemployer Plans. -52- ARTICLE VIII NEGATIVE COVENANTS The Company covenants and agrees, that on and after the date hereof and for so long as this Agreement is in effect and until the Commitments and each Letter of Credit have terminated, and the Obligations (other than indemnities not yet due) are paid in full: SECTION 8.01. Change in Business. The Company will not, and will not ------------------ permit any of its Subsidiaries to, engage in any business not related, ancillary or complimentary to the business conducted by the Company and/or any of its Affiliates on the Execution Date. SECTION 8.02. Consolidation, Merger or Sale of Assets. The Company --------------------------------------- shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all its assets to, another Person unless such transaction does not constitute a Change of Control and (a) the resulting, surviving or transferee Person or lessee (if other than the Company) shall be a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia and such entity shall assume by the execution of such notes, credit agreement and other documentation as is satisfactory to the Agent and the Banks all of the Obligations, (b) immediately after giving effect to such transaction, no Default shall have happened and be continuing (including, without limitation, any breach of Section 8.09), and on a ------------ pro forma basis giving effect to such transaction there has not been a breach of Section 8.08,(c) immediately after giving effect to such transaction, the - ------------ resulting, surviving or transferee Person has a Consolidated Net Worth which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction and (d) the Company shall have delivered to the Agent an Officer's Certificate and an opinion of counsel, each stating that such consolidation, merger, sale, conveyance, transfer or lease and such additional loan documentation evidencing same comply with this Agreement. SECTION 8.03. Liens. The Company shall not, and shall not permit any ----- Subsidiary to directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien securing Debt of any kind (other than Permitted Liens) upon any of their respective property or assets, now owned or hereafter acquired, or any income or profits therefrom, unless the Company makes or causes to be made effective provision whereby payment of the Obligations will be secured by such Lien in form satisfactory to the Agent and the Majority Banks equally and ratably for the benefit of the Banks with (or prior to) such Debt for so long as such Debt shall be secured; provided, however, (a) subject to Section 8.02(i), in the event of any sale, transfer or ------------ other disposition by the Company or any Subsidiary of Accounts Receivable or of any Subsidiary substantially all the assets of which are Accounts Receivable, which sale, transfer or other disposition constitutes a "sale" under GAAP (as in effect at the time thereof), neither such sale, transfer or other disposition nor any recourse provided by the Company or any Subsidiary in connection therewith shall, in any event, constitute Debt or a Lien and (ii) all Net Available Cash from any such sale shall be applied as a mandatory repayment of the Loans and the Total -53- Commitment shall be reduced by the amount of such repayment and (b) that neither the satisfaction and discharge of any Debt pursuant to any indenture or other instrument governing such Debt, nor the defeasance of any Debt pursuant to any indenture or other instrument governing such Debt, shall be deemed the creation, incurrence, assumption or existence of any Lien securing Debt. SECTION 8.04 Limitation on Debt. (a) The Company shall not, and shall ------------------ not permit any of its Subsidiaries to, directly or indirectly, issue or permit to exist any Debt. (b) Notwithstanding the foregoing, the Company and its Subsidiaries may issue or permit to exist the following Debt provided that after giving effect to same there shall not be in existence a Default or Event of Default: (i) (A) commercial paper of the Company having a maturity of 12 months or less in an aggregate principal amount not to exceed $50,000,000 outstanding at any time provided that the amount available at any time under the Total Commitment shall be decreased on on a dollar-for-dollar basis by an amount equal to the aggregate outstanding principal amount of any such commercial paper Debt at such time and (B) Debt issued pursuant to the Indenture or any Refinancing Agreement; (ii) Debt issued to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Debt (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of such Debt by the issuer thereof; (iii) The Obligations, and Debt issued in exchange for, or the proceeds of which are used to Refinance either (x) the Obligations or (y) any Debt so issued or the proceeds of which are so used,; provided that (i) the principal amount of the Debt so issued shall not exceed the principal amount of the Debt so Refinanced and (ii) the Debt so issued (i) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt so Refinanced and (ii) shall have an Average Life no less than the remaining Average Life of the Debt so Refinanced; (iv) Debt (other than Debt described in clause (i), (ii) or (iii) above) outstanding on the Effective Date or Debt issued in exchange for, or the proceeds of which are used to Refinance, any Debt permitted by this clause (iv); provided that the principal amount of the Debt so Refinanced and the Debt so issued (A) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt so Refinanced and (B) shall have an Average Life no less than the remaining Average Life of the Debt so Refinanced; and (v) Debt in an aggregate principal amount which, together with all -54- other Debt of the Company then outstanding (other than Debt permitted by clauses (i) through (iv) above) does not exceed $30,000,000. SECTION 8.05. Investments. The Company will not and will not permit ----------- any Subsidiary to, directly or indirectly, make or own any Investment in any Person, except: (a) The Company and its Subsidiaries may make and own Permitted Investments; (b) The Company and its Subsidiaries may continue to own Investments owned by them on the date hereof as set forth on Schedule 8.05; ------------- (c) The Company and its Subsidiaries may make and own Investments (i) arising out of loans and advances in the ordinary course of business; provided, however, the aggregate outstanding amount of all such loans and advances shall not exceed $1,000,000 at any time outstanding, (ii) arising out of advances made in the ordinary course of business to contract or perform services for the Company or any of its Subsidiaries, (iii) constituting accounts receivable arising in the ordinary course of business and payable within 60 days, (iv) arising out of deposits with any bank, (v) acquired by reason of the exercise of customary creditors' rights upon default or pursuant to the bankruptcy, insolvency or reorganization of a debtor, or (vi) de minimis Investments each year in connection with the operations of their businesses; (d) The Company and its Subsidiaries may endorse negotiable instruments for collection in the ordinary course of business; and (e) Subject to the limitations of Section 8.04, and provided that ------------ there is not then in existence a Default or an Event of Default, the Company may acquire (i) new Subsidiaries or substantially all of the assets of any entity (A) engaged generally in the same or related industries as the Company and its Subsidiaries, and (B) not engaged in the same or related industry as the Company and its Subsidiaries, provided, that the acquisition of assets or Capital Stock of the entities described in this Clause (B) shall have a total consideration, not in excess of 10% of the Company's Consolidated Net Tangible Assets and (ii) an interest in any entity which shall not constitute a Subsidiary (including, without limitation, the Company) after acquisition of such interest, provided that, the acquisition of assets of Capital Stock of such entities shall have a total consideration, not in excess of 5% of the Company's Consolidated Net Tangible Assets. SECTION 8.06. Restricted Payments. (a) The Company shall not, and ------------------- shall not permit any of its Subsidiaries, directly or indirectly, to: (i) declare or pay any dividend or make any distribution on or in respect of its Capital Stock, including any payment in connection with any merger or consolidation involving the Company (except dividends or distributions payable solely in its Capital Stock (other than Disqualified Capital Stock) or payable to the Company or a Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or indirect parent of the Company, (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, -55- scheduled repayment or scheduled sinking fund payment, any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment in any Affiliate of the Company other than a Subsidiary or a Person which will become a Subsidiary as a result of any such Investment (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment"), unless, at the time of such Restricted Payment: (A) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (B) the Consolidated EBITDA Coverage Ratio exceeds 3.5 to 1; (C) Total Debt does not exceed 60% of Consolidated Net Tangible Assets on a pro forma basis as of the end of the most recently completed fiscal quarter ending at least 45 days prior to the date on which such Restricted Payment is made; and (D) such Restricted Payment (the amount of any such payment, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution in an Officer's Certificate from the Company delivered to the Agent), together with the aggregate of all other Restricted Payments (other than any Restricted Payments permitted by the provisions of clauses (i),(ii) or (iii) of Section 8.06(b)) made by the Company its Subsidiaries in the --------------- fiscal quarter during which such Restricted Payment is made shall not exceed an amount equal to Available Cash of the Company for the immediately preceding fiscal quarter. (b) The provisions of this Section shall not prohibit: (i) Any purchase, redemption, repurchase, defeasance, other acquisition or retirement (a "purchase or redemption") of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of, Capital Stock of the Company (other than Disqualified Capital Stock); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale (to the extent so used) shall be excluded in the calculation of the amount of Available Cash in clause Section ------- 8.06(a)(D); ---------- (ii) Any purchase or redemption of Subordinated Obligations of the Company made by exchange of, or out of the proceeds of the substantially concurrent sale (other than to a Subsidiary) of, Debt of the Company; provided, however, that such Debt shall be subordinated to the Notes to at least the same extent as the Subordinated Obligations so exchanged, purchased or redeemed, shall have a Stated Maturity later than the earlier of the Stated Maturity of the -56- Notes and the Stated Maturity of such Subordinated Obligations and shall have an Average Life greater than the lesser of the Average Life of the Loans and the Average Life of such Subordinated Obligations; provided, further, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale (to the extent so used) shall be excluded in the calculation of the amount of Available Cash in Section 8.06(a)(D); ------------------ (iii) Any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted under Section 8.11; provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Available Cash from such sale (to the extent so used) shall be excluded from the definition of Available Cash in Section 8.06(a)(D);or ------------------ (iv) Dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this provision; provided, however, that at the time of payment of such dividend, no further Default shall have occurred and be continuing (or would result therefrom); provided further, however, that such dividend shall be included (when paid, but not when declared) in the calculation of the amount of Restricted Payments. (c) Not later than five Business Days after the declaration of any Restricted Payment, but no later than three Business Days before making any Restricted Payment the Company shall deliver to the Agent an Officers' Certificate of the Company stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section ------- 8.06 were computed, which calculations may be based upon the Company's latest - ---- available financial statements. SECTION 8.07. Change in Accounting; Fiscal Year. The Company will --------------------------------- not and will not permit any Subsidiary to, change its method of accounting except for immaterial changes in methods, changes permitted by GAAP in which the Company's auditors concur and changes required by GAAP. The Company shall advise the Agent in writing promptly upon making any such change to the extent same is not disclosed in the financial statements required under Section 7.01 hereof. ------------ SECTION 8.08. Consolidated EBITDA Coverage Ratio. The Company will ------------------- -------------- not permit the Consolidated EBITDA Coverage Ratio to be less than 3.5:1.0. SECTION 8.09. Total Debt to Consolidated Net Tangible Assets Ratio. ---------------------------------------------------- The Company will not permit the ratio of Total Debt to Consolidated Net Tangible Assets to be greater than 60%. SECTION 8.10. Transactions with Affiliates. The Company shall not, ---------------------------- and shall not permit any Subsidiary to, conduct any business or enter into any transaction or series of similar transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company other than (a) a Wholly Owned Subsidiary or (b) an employee stock -57- ownership plan, unless the terms of such business, transaction or series of transactions are fair and reasonable to the Company. All such business, transactions or series of transactions that are approved by the Board of Directors (including by a majority of the Independent Committee of the Board of Directors) shall be deemed fair and reasonable to the Company. This Section, however, will not prohibit any management compensation arrangements consistent with industry practice, and all such business, transactions or series of transactions that have been completed or with respect to which agreements have been entered into prior to the date of this Agreement shall be deemed fair and reasonable to the Company. SECTION 8.11. Limitation on Sales of Assets and Subsidiary Stock. The -------------------------------------------------- Company shall not, and shall not permit any of its Subsidiaries to, make any Asset Disposition unless (a) the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value, as determined in good faith by the Board of Directors, or the board of directors of the relevant Subsidiary (including as to the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition and at least 80% of the consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents or consists of assets in which the Company or such Subsidiary, as the case may be, would have been able to invest pursuant to the election set forth in clause (b)(ii) below, and (b) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be) (i) first, to the extent the Company elects (or is required by the terms of any Pari Passu Debt), to prepay, repay or purchase Pari Passu Debt or Debt of a Wholly Owned Subsidiary or such Subsidiary elects (or is required by the terms of any Pari Passu Debt), to prepay, repay or purchase Pari Passu Debt or Debt of a Wholly Owned Subsidiary or such Subsidiary elects or is required by the terms of any Pari Passu Debt) to prepay, repay or purchase Debt or Pari Passu Debt (in each case other than Debt owed to the Company or an Affiliate of the Company) within 60 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash and in the case of any prepayment under this clause (b)(i) the Total Commitment shall be reduced and the Pari Passu Debt shall be prepaid on the same date in an amount equal to that proportion that each such Debt bears to the total of the outstanding principal amount of the Pari Passu Debt plus the Total Commitment; (ii) second, to the extent of the balance of such Net Available Cash after any application in accordance with clause (i), at the election of the Company or such Subsidiary, as the case may be, to acquire assets to replace its assets that were the subject of such Asset Disposition or to acquire assets (or to make improvements to existing assets) that (as determined by the Board of Directors or the board of directors of such Subsidiary, as the case may be) will be used in the business of the Company and its Subsidiaries existing on the date of original issuance of the Notes or in business reasonably related thereto, in each case by the later of (x) the date that is 180 days from the date of such Asset Disposition or (y) the date of the receipt of such Net Available Cash (iii) third, to the extent of any balance of such Net Available Cash after application and in accordance with clauses (i) and (ii), to make an offer pursuant to and subject to the conditions contained in this Agreement and the Indenture, to the holders of the Securities and the Notes (and to holders of other Pari Passu Debt designated by the Company) to purchase the Securities and the Notes (and such other Pari Passu Debt) at a purchase price of 100% of the principal amount thereof (without premium) plus accrued and unpaid interest (or in respect of such other Pari Passu Debt such lesser price, if any, as may be provided for by the terms of such other Pari -58- Passu Debt) and in the case of this clause (b)(iii) the Total Commitment shall be reduced and the Securities (or other Pari Passu Debt) shall be prepaid on the same day in an amount equal to the proportion that each such Debt bears to the total of the outstanding principal balance of the Securities (or outstanding principal balance of the other Pari Passu Debt) plus the Total Commitment, and (iv) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (i), (ii) and (iii), to any application not prohibited by the Agreement; provided, however, that in connection with any prepayment, repayment or purchase of Debt pursuant to clause (i) or (iii) above, the Company or such Subsidiary shall retire such Debt and shall cause the related loan commitment (if any, including, without limitation, the Total Commitment) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Nothwithstanding the foregoing provisions of this paragraph, the Company and its Subsidiaries shall not be required to apply any Net Available Cash (other than Net Available Cash from an Asset Disposition consisting of a sale and leaseback transaction that the Company has elected to treat as an Asset Disposition pursuant to clause (b) of Section 8.13) in accordance with this ------------ paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this paragraph exceeds $10,000,000. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments. SECTION 8.12. Limitation on Debt and Preferred Stock of Subsidiaries. ------------------------------------------------------ The Company shall not permit any Subsidiary to issue or permit to exist, directly or indirectly, any Debt or Preferred Stock except: (a) Debt or Preferred Stock issued to and held by the Company or a Wholly Owned Subsidiary; provided, however, that (i) any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or (ii) any subsequent transfer of such Debt or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of such Debt or Preferred Stock by the issuer thereof; (b) Debt or Preferred Stock of a Subsidiary issued and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Debt or Preferred Stock issued as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); (c) Any other Debt or Preferred Stock (other than any described in clause (a) or (b)) issued and outstanding on the Execution Date; and (d) Debt or Preferred Stock issued in exchange for, or the proceeds of which are used to Refinance, Debt or Preferred Stock referred to in the foregoing clause (b) or (c); provided, however, the principal amount or liquidation value of such Debt or Preferred Stock so issued shall not exceed the principal amount or the -59- liquidation value of the Debt or Preferred Stock so Refinanced and (ii) the Debt or Preferred Stock so issued (A) shall have a Stated Maturity no earlier than the Stated Maturity of the Debt or Preferred Stock being exchanged or Refinanced and (B) shall have an Average Life no less than the remaining Average Life of the Debt or Preferred Stock being Refinanced. SECTION 8.13. Limitation on Sale and Leaseback Transactions. The --------------------------------------------- Company shall not, and shall not permit any Subsidiary to, enter into any arrangement with any Person providing for the leasing by the Company or any Subsidiary of any real or tangible personal property (except for leases for a term of not more than one year (including renewal rights) or between the Company and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Company or Subsidiary to such Person in contemplation of such leasing, unless (a) the Company or such Subsidiary would be entitled to create a Lien on such property securing Debt in an amount equal to the Attributable Debt with respect to such arrangement without equally and ratably securing the Notes and the Obligations pursuant to Section 8.03 or (b) the ------------ Company or such Subsidiary shall have received consideration from such arrangement at least equal to the fair market value of the property subject thereto (which shall be determined in good faith by the Board of Directors and evidenced by a resolution of the Board of Directors) and elects to treat the assets subject to such arrangement as an Asset Disposition subject to Section ------- 8.11. - ---- ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.01. Events of Default and Remedies. If any of the following ------------------------------ events ("Events of Default") shall occur and be continuing: ----------------- (a) (x) any installment of principal on any Note shall not be paid on the date on which such payment is due or (y) any interest on any Note or Unpaid Drawing, any Fee or any other amount due under any Loan Document shall not be paid on the date on which such payment is due and any such failure referred to in this clause (y) shall continue for five or more Business Days; or (b) any representation or warranty made or, for purposes of Article -------- VI, deemed made by the Company or in any of the Loan Documents or other - -- document, certificate or financial statement delivered in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made or reaffirmed, as the case may be; or (c) the Company (i) shall fail to perform or observe any duty or covenant contained in Article VIII of this Agreement, other than those in ------------ Section 8.07, or (ii) shall fail to perform or observe any duty or covenant - ------------ contained in Article VII or in Section 8.07 or any other material duty or ------------ covenant contained elsewhere in this Agreement and said failure shall continue for a period of thirty (30) days after written notice thereof has been given to the Company by the Agent or by the Agent upon request of any Bank; or -60- (d) the Company or any Subsidiary fails to make (whether as primary obligor or as guarantor or other surety) any principal payment of or interest or premium, if any, on any Debt (other than the Notes) with an aggregate principal amount in excess of $20,000,000 outstanding ("Threshold Debt") beyond any period -------------- of grace provided with respect thereto, or there shall occur any other event which causes, or permits the holder or holders to cause, such obligations to become due prior to any stated maturity, provided that any such event shall constitute an Event of Default hereunder only upon the expiration of any applicable grace period in the instrument governing such Threshold Debt; or (e) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Significant Subsidiary, or of a substantial part of the property or assets of the Company or any such Subsidiary, under Title 11 of the United States Code, as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"), or any other federal or state --------------- bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any such Subsidiary or (iii) the winding-up or liquidation of the Company or any such Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (f) the Company or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code or any other federal or state bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (e) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any such Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; or (g) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, or a waiver of the minimum funding standard or extension of any amortization period is sought or granted under Section 412 of the Code with respect to a Plan; any proceeding shall have occurred or is reasonably likely to occur by the PBGC under Section 4069(a) of ERISA to impose liability on the Company or an ERISA Affiliate; any Plan shall have an Unfunded Current Liability; any required contribution to a Plan or Multiemployer Plan shall not have been timely made; or the Company or any ERISA Affiliate has incurred or is reasonably likely to incur a liability to or on account of a Plan or Multiemployer Plan under Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall result (individually or collectively) from any such -61- event or events a liability which would reasonably be expected to have a Material Adverse Effect; or (h) any judgement or decree for the payment of money in excess of $20,000,000 (to the extent not covered by insurance) shall be rendered against the Company or any Subsidiary, and there is a period of 60 days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed and such judgment or decree is not satisfied, discharged, waived or the execution stayed within 10 days after the notice specified below; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent may, and upon the written request of the Majority Banks shall, by written notice to the Company (a "Notice of Default") ----------------- take any or all of the following actions, without prejudice to the rights of the Agent, any Bank or other holder of any of the Obligations to enforce its claims against the Company (provided that, if an Event of Default specified in Section ------- 9.01(e) or Section 9.01(f) shall occur, the results which would occur upon the - ------- --------------- giving of a Notice of Default as specified in clauses (i), (ii) and (iii) below, shall occur automatically without the giving of any Notice of Default): (i) declare the Total Commitment terminated, whereupon the Commitments of the Banks shall forthwith terminate immediately and any Commitment Fee shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued and unpaid interest in respect of all Loans, and all Obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, notice of demand or of dishonor and non-payment, protest, notice of protest, notice of intent to accelerate,declaration or notice of acceleration or any other notice of any kind, all of which are hereby waived by the Company; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms (whether by the giving of written notice to the beneficiary or otherwise); and (iv) direct the Company to pay, and the Company agrees that upon receipt of such notice (or upon the occurrence of an Event of Default specified in Section 9.01(e) or Section --------------- ------- 9.01(f)), it will pay to the Agent, to the extent permitted by law, such - ------- additional amount of cash as is equal to the aggregate Stated Amount of all Letters of Credit then outstanding hereby pledged and to be held in an interest bearing account with the Agent as security for the Obligations. SECTION 9.02. Other Remedies. Upon the occurrence and during the -------------- continuance of any Event of Default, the Agent, acting at the request of the Majority Banks, may proceed to protect and enforce its and the Banks' rights, either by suit in equity or by action at law or both; or may proceed to enforce the payment of all amounts owing to the Agent and the Banks under the Loan Documents and any accrued and unpaid interest thereon in the manner set forth herein or therein; it being intended that no remedy conferred herein or in any of the other Loan Documents is to be exclusive of any other remedy, and each and every remedy contained herein or in any other Loan Document shall be cumulative and shall be in addition to every other remedy given hereunder and under the other Loan Documents now or hereafter existing at law or in equity or by statute or otherwise. -62- SECTION 9.03. Obligation Non Recourse as to General Partner. --------------------------------------------- Notwithstanding anything contained in this Agreement or any of the other Loan Documents to the contrary, the Agent and the Banks acknowledge and agree that payment of the Obligations shall not be enforced against the General Partner or any of its assets except to the extent of its general partnership interest in the Company, nor shall the General Partner have any liability whatsoever hereunder other than to the extent of the general partnership interest in the Company in connection with this Agreement and the transactions contemplated hereby. The foregoing provision is not intended to release or discharge any of the Obligations. Notwithstanding the foregoing provisions to the contrary the General Partner and its successors and assigns shall be and remain fully liable to the Agent and the Banks, and this Section 9.03 shall not be construed so as to limit ------------ remedies for intentional or wilfull misconduct of the General Partner. ARTICLE X THE AGENT SECTION 10.01. Authorization and Action. Each Bank hereby ------------------------ irrevocably appoints and authorizes the Agent to act on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are specifically delegated to or required of the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its agents and employees. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement or any other Loan Documents a fiduciary relationship in respect of any Bank; and nothing in this Agreement or any other Loan Document, expressed or implied, is intended to, or shall be so construed as to, impose upon the Agent any obligations in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. As to any matters not expressly provided for by this Agreement, the Notes or the other Loan Documents (including enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain form acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Banks and all holders of Notes and the Obligations; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. SECTION 10.02. Agent's Reliance. (a) neither the agent nor any of ---------------- its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, the Notes or any of the other Loan Documents (i) with the consent or at the request of the Majority Banks or (ii) in the absence of its or their own gross negligence or willful misconduct (it being the express intention of the parties hereto that the Agent and its directors, officers, agents and employees shall have no liability for actions and omissions under this Section resulting from their sole ordinary or contributory ordinary negligence). -63- (b) WITHOUT LIMITATION OF THE GENERALITY OF THE FOREGOING, THE AGENT: (I) MAY TREAT THE PAYEE OF EACH NOTE AND THE OBLIGATIONS AS THE HOLDER THEREOF UNTIL THE AGENT RECEIVES WRITTEN NOTICE OF THE ASSIGNMENT OR TRANSFER THEREOF SIGNED BY SUCH PAYEE AND IN FORM SATISFACTORY TO THE AGENT; (II) MAY CONSULT WITH LEGAL COUNSEL (INCLUDING COUNSEL FOR THE COMPANY), INDEPENDENT PUBLIC ACCOUNTANTS AND OTHER EXPERTS SELECTED BY IT AND SHALL NOT BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN IN GOOD FAITH BY IT IN ACCORDANCE WITH THE ADVICE OF SUCH COUNSEL, ACCOUNTANTS OR EXPERTS; (III) MAKES NO WARRANTY OR REPRESENTATION TO ANY BANK AND SHALL NOT BE RESPONSIBLE TO ANY BANK FOR ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENT; (IV) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SHALL NOT HAVE ANY DUTY TO ASCERTAIN OR TO INQUIRE AS TO THE PERFORMANCE OR OBSERVANCE OF ANY OF THE TERMS, CONVENANTS OR CONDITIONS OF THIS AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENT OR TO INSPECT THE PROPERTY (INCLUDING THE BOOKS AND RECORDS) OF THE COMPANY; (V) SHALL NOT BE RESPONSIBLE TO ANY BANK FOR THE DUE EXECUTION, LEGALITY, VALIDITY, ENFORCEABILITY, COLLECTIBILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR THERETO; (VI) SHALL NOT BE RESPONSIBLE TO ANY BANK FOR THE PERFECTION OR PRIORITY OF ANY LIEN SECURING THE OBLIGATIONS; AND (VII) SHALL INCUR NO LIABILITY UNDER OR IN RESPECT OF THIS AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENT BY ACTING UPON ANY NOTICE, CONSENT, CERTIFICATE OR OTHER INSTRUMENT OR WRITING (WHICH MAY BE BY TELEGRAM, TELECOPIER, CABLE OR TELEX) REASONABLY BELIEVED BY IT TO BE GENUINE AND SIGNED OR SENT BY THE PROPER PARTY OR PARTIES. SECTION 10.03. Agent and Affiliates; Credit Suisse (in its capacity ---------------------------------------------------- as a Bank) and Affiliates. Without limiting the right of any other Bank to - ------------------------- engage in any business transactions with the Company or any of its Affiliates, with respect to their Commitments, the Loans made by them and the Notes issued to them, Credit Suisse and each other Bank who may become the Agent shall have the same rights and powers under this Agreement and its Notes as any other Bank and may exercise the same as though it was not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Credit Suisse and any such other Bank, in their individual capacities. Credit Suisse, each other Person who becomes the Agent and their respective Affiliates may be engaged in, or may hereafter engage in, one or more loan, letter of credit, the "Other ----- Financings") with the Company, any Subsidiary of the Company or any of their - ---------- respective Affiliates, or may act as trustee on behalf of, or depositary for, or otherwise engage in other business transactions with the Company, any Subsidiary of the Company or any of their respective Affiliates (all Other Financings and other such business transactions being collectively, the "Other Activities") ---------------- with no responsibility to account therefor to the Banks. Without limiting the rights and remedies of the Banks specifically set forth herein, no other Bank by virtue of being a Bank hereunder shall have any interest in (a) any Other Activities, (b) any present or future guaranty by or for the account of the Company not contemplated or included herein, (c) any present or future offset exercised by the Agent in respect of any such Other Activities, (d) any present or future property -64- taken as security for any such Other Activities or (e) any property now or hereafter in the possession or control of the Agent which may be or become security for the Obligations of the Company, any Subsidiary of the Company or any of their respective Affiliates hereunder and under the Notes by reason of the general description of indebtedness secured, or of property contained in any other agreements, documents or instruments related to such Other Activities; provided, however, that if any payment in respect of such guaranties or such property or the proceeds thereof shall be applied to reduction of the Obligations then each Bank shall be entitled to share in such application according to its pro rata portion of such Obligations. SECTION 10.04. Bank Credit Decision. Each Bank acknowledges and -------------------- agrees that it has, independently and without reliance upon the Agent or any other Bank and based on the financial statements referred to in Section 6.07 and ------------ such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges and agrees that it will, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. SECTION 10.05. AGENT'S INDEMNITY. (A) THE AGENT SHALL NOT BE ----------------- REQUIRED TO TAKE ANY ACTION HEREUNDER OR TO PROSECUTE OR DEFEND ANY SUIT IN RESPECT OF THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT UNLESS INDEMNIFIED TO THE AGENT'S REASONABLE SATISFACTION BY THE BANKS AGAINST LOSS, COST, LIABILITY AND EXPENSE. IF ANY INDEMNITY FURNISHED TO THE AGENT SHALL BECOME IMPAIRED, IT MAY CALL FOR ADDITIONAL INDEMNITY AND CEASE TO DO THE ACTS INDEMNIFIED AGAINST UNTIL SUCH ADDITIONAL INDEMNITY IS GIVEN. IN ADDITION, THE BANKS AGREE TO INDEMNIFY THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE COMPANY), RATABLY ACCORDING TO THE RESPECTIVE AGGREGATE PRINCIPAL AMOUNTS OF THE NOTES THEN HELD BY EACH OF THEM (OR IF NO NOTES ARE AT THE TIME OUTSTANDING, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS, OR IF NO COMMITMENTS ARE OUTSTANDING, THE RESPECTIVE AMOUNTS OF THE COMMITMENTS IMMEDIATELY PRIOR TO THE TIME THE COMMITMENTS CEASED TO BE OUTSTANDING), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGEMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT UNDER THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS (INCLUDING ANY ACTION TAKEN OR OMITTED UNDER ARTICLE II, ARTICLE III, ---------- ----------- OR ARTICLE IV OF THIS AGREEMENT). WITHOUT LIMITATION OF THE FOREGOING, EACH ---------- BANK AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE COUNSEL FEES) INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, ADMINISTRATION, OR ENFORCEMENT OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY THE COMPANY. THE PROVISIONS OF THIS SECTION SHALL SURVIVE -65- the termination of this Agreement, the payment of the Obligations and/or the assignment of any of the Notes. (b) Not withstanding the foregoing, no Bank shall be liable under this Section to the Agent for any portion of such liabilities, obligations, losses damages, penalties, actions, judgments, suits, costs, expenses or disbursements due to the Agent resulting from the Agent's gross negligence or willful misconduct. SECTION 10.06. Successor Agent. The Agent may resign at any time by --------------- giving five days prior written notice thereof to the Banks and the Company and may be removed as Agent under this Agreement, the Notes and the other Loan Documents at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent, subject to the approval of the Company. If no successor Agent shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within 30 calendar days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring Agent may, subject to the approval of the Company, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any state thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder and under the Notes and the other Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement, the Notes and the other Loan Documents. After any retiring Agent's resignation or removal as Agent hereunder and under the Notes and the other Loan Documents, the provisions of this Article X shall inure to its benefits as to any actions --------- taken or omitted to be taken by it while it was Agent under this Agreement, the Notes and the other Loan Documents. SECTION 10.07. Notice of Default. The Agent shall not be deemed to ----------------- have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent shall have received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." If the Agent receives such notice, the Agent shall give notice thereof to the Banks; provided, however, if such notice is received from a Bank, the Agent also shall give notice thereof to the Company. The Agent shall be entitled to take action or refrain from taking action with respect to such Default or Event of Default as provided in Section 10.01 and Section 10.02. ------------- ------------- ARTICLE XI MISCELLANEOUS SECTION 11.01. Amendments. No amendment or waiver of any provision ---------- of this Agreement, any Note or any other Loan Document, nor consent to any departure by the Company herefrom or therefrom, shall in any event be effective unless the same shall be in writing and signed by the Company, as to amendments, -66- and by the Majority Banks in all cases, and then, in any case, such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by 100% of the Banks, do any of the following: (a) change the definition of "Majority Banks," "Total Commitment" or "Percentage Participation,", (b) reduce or increase the amount or alter the terms of the Commitment of any Bank, other than as set forth in Section 4.03(d) --------------- or subject any Bank to any additional obligations, (c) reduce the principal of, or rate or amount of interest applicable to, any Loan or the reimbursement obligations of the Company under the Letters of Credit other than as provided in this Agreement, or the Up Front Fee, the Commitment Fee or any Letter of Credit Fees, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or the reimbursement obligations of the Company under any Letter of Credit, (e) change this Section or (f) change the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action hereunder; and provided that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Banks required above to take such action, affect the rights or duties of the Agent under this Agreement, any Note or any other Loan Document. SECTION 11.02. Notices. The Agent, any Bank or the holder of any of ------- the Obligations, giving consent or notice or making any request of the Company provided for hereunder, shall notify each Bank and the Agent thereof. In the event that the holder of any Note or any of the Obligations (including any Bank) shall transfer such Note or Obligations, it shall promptly so advise the Agent which shall be entitled to assume conclusively that no transfer of any Note or any of the Obligations has been made by any holder (including any Bank) unless and until the Agent receives written notice to the contrary. Except with respect to telephone notifications specifically permitted pursuant to ARTICLE II ---------- and ARTICLE III, all notices, consents, requests, approvals, demands and other ----------- communications provided for herein shall be in writing (including telecopy communications) and mailed, telecopied, sent by overnight courier or delivered: (a) If to the Company or any of its Subsidiaries, to them at: BCP Management, Inc. 180 East Broad Street Columbus, Ohio 43215 Attention: Secretary (b) If to the Agent, to it at: 12 East 49th Street 39th Floor New York, New York 10017 Attention: Syndications/Agency (c) If to any Bank, as specified on the signature page for such Bank hereto or, in the case of any Person who becomes a Bank after the date hereof, as specified on the Assignment and Acceptance executed by such Person or in the Administrative Questionnaire delivered by such Person or, in the case of any party -67- hereto, such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties. All communications shall, when mailed, telecopied or delivered, be effective (x) 72 hours after mailing by certified mail, return receipt requested to any party at its address specified above, on the signature page hereof or on the signature page of such Assignment and Acceptance (or other address designated by such party in a communication to the other parties hereto), (y) when telecopied to any party to the telecopy number set forth above, on the signature page hereof or on the signature page of such Assignment and Acceptance (or other telecopy number designated by such party in a communication to the other parties hereto) and such telecopy is confirmed, or (z) when delivered personally to any party at its address specified above, on the signature page hereof or on the signature page of such Assignment and Acceptance (or other address designated by such party in a Communication to the other parties hereto); provided, that communications to the Agent pursuant to Article II, Article III or Article XI ---------- ----------- ---------- shall not be effective until received by the Agent. SECTION 11.03. No Waiver; Remedies. No failure on the part of any ------------------- Bank or the Agent to exercise and no delay in exercising, any right hereunder, under any Note or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, or any abandonment or discontinuance of any steps to enforce such right, preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 11.04. Costs, Expenses and Taxes. The Company agrees to pay ------------------------- on demand: (a) all reasonable out-of-pocket costs and expenses of the Agent in connection with the preparation, execution and delivery of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for the Agent, including Andrews & Kurth L.L.P., with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement, the Notes and the other Loan Documents, and any modification, extension, amendment, supplement or waiver of any of the terms of this Agreement or any other Loan Document, (b) all reasonable out-of-pocket costs and expenses of the Agent in connection with the syndication of the credit evidenced by this Agreement and the other Loan Documents, (c) all reasonable costs and expenses of each of the Agent, the Banks and any other holder of an interest in the Notes, and the Obligations of the Company hereunder and under the Loan Documents, including reasonable legal fees (including the allocated cost of in-house counsel) and expenses, in connection with a default or the enforcement of this Agreement, the Notes and the other Loan Documents. In addition, the Company shall pay any and all stamp and similar taxes payable or determined to be payable in connection with the execution and delivery of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder. Without prejudice to the survival of any other obligations of the Company hereunder and under the Notes, the obligations of the Company under this -68- Section shall survive the termination of this Agreement and the payment of the Obligations or the assignment of the Notes. SECTION 11.05. Indemnity. (a) The Company agrees to indemnify the --------- Agent, the Banks, the Issuing Bank and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages (including reasonable legal fees and expenses) to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any investigation, litigation or other proceeding (including any threatened investigation or proceeding) including, without limitation, any of same resulting from or arising out of any actual or proposed use by the Company of the proceeds of any extension of credit by any Bank hereunder or any of the other Loan Documents, and the Company shall reimburse the Agent, each Bank and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including legal fees) reasonably incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages, fees or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. (B) Without limiting any provision of this Agreement, it is the express intention of the parties hereto that each Person to be indemnified hereunder or thereunder shall be indemnified and held harmless against any and all losses, liabilities, claims or damages covered by subsection (a) above and arising out of or resulting from the ordinary sole or contributory negligence of such Person. Without prejudice to the survival of any other obligations of the Company hereunder and under the other Loan Documents, the obligations of the Company under this Section shall survive the termination of this Agreement and the other Loan Documents and the payment of the Obligations or the assignment of the Notes. SECTION 11.06. Right of Setoff. If any Event of Default shall have --------------- occurred and be continuing, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank, or any branch, subsidiary or Affiliate of such Bank, to or for the credit or the account of the Company against any and all the Obligations, irrespective of whether or not such Bank or the Agent shall have made any demand under this Agreement, such Note or the Obligations and although the Obligations may be unmatured. Each Bank agrees promptly to notify the Company after any such setoff and application made by such Bank, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Bank under this Section are in addition to other rights and remedies (including other rights of setoff) which such Bank may have. SECTION 11.07 Governing Law. This Agreement, all Notes, the other ------------- Loan Documents and all other documents executed in connection herewith and therewith, shall be deemed to be contracts and agreements executed by the Company, -69- the Agent and the Banks under the law of the State of New York and for all purposes shall be construed in accordance with, and governed by, the law of said state. Without limitation of the foregoing, nothing in this Agreement, or in the Notes or in any other Loan Document shall be deemed to constitute a waiver of any rights which any Bank may have under applicable federal legislation relating to the amount of interest which such Bank may contract for, take, receive or charge in respect of any Loans or other Obligations to such Bank hereunder and under the other Loan Documents, including any right to take, receive, reserve and charge interest at the rate allowed by the law of the state where such Bank is located. SECTION 11.08. Interest. Each provision in this Agreement and each -------- other Loan Document is expressly limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be paid, to the Agent or any Bank, or charged, contracted for, reserved, taken or received by the Agent or any Bank, for the use, forbearance or detention of the money to be loaned under this Agreement or any Loan Document or otherwise (including any sums paid as required by any covenant or obligation contained herein or in any other Loan Document which is for the use, forbearance or detention of such money), exceed that amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate, and all amounts owed under this Agreement and each other Loan Document shall be held to be subject to reduction to the effect that such amounts so paid or agreed to be paid, charged, contracted for, reserved, taken or received which are for the use, forbearance or detention of money under this Agreement or such Loan Document shall in no event exceed that amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate. Anything in any Note or any other Loan Document to the contrary notwithstanding, the Company shall not be required to pay unearned interest on any Note and under the Loan Documents at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest which would otherwise be payable under such Note, such Obligations and such Loan Documents would exceed the Highest Lawful Rate, or if the holder of such Note shall receive any unearned interest or shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable by the Company under such Note and the Loan Documents to a rate in excess of the Highest Lawful Rate, then (a) the amount of interest which would otherwise be payable shall be reduced to the amount allowed under applicable law and (b) any unearned interest paid or any interest paid in excess of the Highest Lawful Rate shall in the first instance be credited on the principal of the Obligations (or if all such Obligations shall have been paid in full, refunded to the Company). It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, reserved, taken, charged or received by any Bank under the Notes and under this Agreement and the other Loan Documents held by it are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate applicable to such Bank (such Highest Lawful Rate being such Bank's "Maximum Permissible Rate"), and shall be made, to the extent permitted ------------------------ by usury laws applicable to such Bank (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the full stated term of the Loans evidenced by said Notes and the other Obligations all interest at any time contracted for, charged or received by such Bank in connection therewith. If at any time and from time to time (y) the amount of interest payable to any Bank on any date shall be computed at such Bank's Maximum Permissible Rate -70- pursuant to this Section and (z) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Bank would be less than the amount of interest payable to such Bank computed at such Bank's Maximum Permissible Rate, then the amount of interest payable to such Bank in respect of such subsequent interest computation period shall continue to be computed at such Bank's Maximum Permissible Rate until the total amount of interest payable to such Bank shall equal the total amount of interest which would have been payable to such Bank if the total amount of interest had been computed without giving effect to this Section. SECTION 11.09. Binding Effect. This Agreement shall become effective -------------- when it shall have been executed by the Company and the Agent and when the Agent shall have been notified by each Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Company, the Agent and each Bank and their respective successors and permitted assigns. SECTION 11.10. Successors and Assigns; Participations. (a) All -------------------------------------- covenants, promises and agreements by or on behalf of the Company, the Agent or the Banks that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. Other than as set forth in Section 8.02, the Company may not assign or transfer any of its rights ------------ or obligations hereunder without the written consent of all the Banks. (b) Each Bank may, without the consent of the Company, sell participations to one or more banks in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment, the Loans and the Notes and participations in Letters of Credit held by it); provided, however, that (i) the selling Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the cost protection provisions contained in Article II, Article III ---------- ----------- and Section 11.04; provided, however, the costs to which a participant shall be ------------- entitled to obtain pursuant to Articles II and III shall be determined by ----------- --- reference to such participant's selling Bank and shall be recoverable solely from such selling Bank (without increasing the Company's obligation to reimburse such Bank thereunder) and (iv) the Company, the Agent and the other Banks shall continue to deal solely and directly with the selling Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents; provided, however, the selling Bank may grant a participant rights with respect to amendments, modifications or waivers only with respect to the amount of principal or the rate of interest payable on, or the dates fixed for any payment of principal of or fees with respect to interest on, the Loans. No participant shall be a third party beneficiary of this Agreement and shall not be entitled to enforce any rights provided to its selling Bank against the Company under this Agreement. (c) A Bank may assign to any other Bank or Banks or to any Affiliate of a Bank and, with the prior written consent of the Agent and the Company (which consent shall not be unreasonably withheld), a Bank may assign to one or more other Eligible Assignees all or a portion of (but if a portion of, not less than $5,000,000 of) -71- its interests, rights, and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the same portion of the Loans at the time owing to it and the Note held by it, including its participation in the Letters of Credit); provided, however, that (i) each such assignment shall be in a minimum principal amount of not less than $5,000,000 (unless such assignment shall be to another Bank) and shall be of a constant, and not a varying, percentage of all the assigning Bank's Commitment, rights and obligations under this Agreement and (ii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance substantially in the form of Exhibit 11.10 hereto (an "Assignment and Acceptance"), any Note subject ------------- ------------------------- to such assignment and, in the case of the Eligible Assignee, an Administrative Questionnaire. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof unless otherwise agreed to by the assigning Bank, the Eligible Assignee thereunder and the Agent (x) the Eligible Assignee thereunder shall be a party hereto and to the other Loan Documents and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and under the other Loan Documents and (y) the assignor Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Bank's rights and obligations under this Agreement and the other Loan Documents such Bank shall cease to be a party hereto). (d) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the Eligible Assignee confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim known to such Bank assignor, such Bank assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (ii) such Bank assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance of observance of its respective obligations under this Agreement or any other instrument or document furnished pursuant hereto or thereto; (iii) such Eligible Assignee confirms that it has received a copy of this Agreement together with copies of the most recent financial statements delivered pursuant to Section 6.07 or Section 7.01 and such ------------ ------------ other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Eligible Assignee will, independently and without reliance upon the Agent, such Bank assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (v) such Eligible Assignee appoints and authorizes the Agent to take such action on behalf of such Eligible Assignee and to the exercise such powers under this Agreement -72- and the other Loan Documents as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; (vi) such Eligible Assignee agrees that it will perform in accordance with its terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Bank and (vii) such Eligible Assignee confirms that it is an Eligible Assignee confirms that it is an Eligible Assignee as defined herein. (e) The Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans and other Obligations owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of -------- manifest error, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement and the other Loan Documents. The Register shall be available for inspection by the Company, any Bank or the Agent at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an Eligible Assignee together with the Note subject to such assignment, a service fee of $3,500 payable by the assigning Bank to the Agent and upon giving any required written consent to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is substantially in form of Exhibit 11.10 hereto, (i) accept such Assignment and Acceptance, (ii) ------------- record the information contained therein in the Register and (iii) give prompt notice thereof to the Banks and the Company. Within five Business Days after receipt of such notice, the Company shall execute and deliver to the Agent in exchange for the surrendered Note, a new Note to the order of such Eligible Assignee in an amount respectively equal to their portion of the Commitment of the assigning Bank assumed by it pursuant to such Assignment and Acceptance and, if the assigning Bank has retained any of its Commitment hereunder, a new Note to the order of the assigning Bank in an equal amount to the Commitment (which must be in an amount not less than $5,000,000) retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit 2.05, as applicable, hereto. Any cancelled Note shall be returned to ------------ the Company. (g) Notwithstanding any other provision herein, any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Bank by or on behalf of the Company, however to the provisions of Section 11.11. ------------- (h) Anything in this Section to the contrary notwithstanding, any Bank may at any time, without the consent of the Company or the Agent, assign and pledge all or any portion of its Commitment and the Loans owing to it any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A -73- and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. (i) All transfers of any interest in any Note hereunder shall be in compliance with all federal and state securities laws, if applicable. Notwithstanding the foregoing sentence, however, the parties to this Agreement do not intend that any transfer under this Section be construed as a "purchase" or "sale" of a "security" within the meaning of any applicable federal or state securities laws. SECTION 11.11. Confidentiality. Each Bank agrees to exercise its --------------- best efforts to keep any information delivered or made available by the Company to it (including any information obtained pursuant to Section 7.01) ------------ which is clearly indicated to be confidential information, confidential from anyone other than Persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans or the Letters of Credit; provided that nothing herein shall prevent any Bank from disclosing such information (a) to any of such Bank's Affiliates or any other Bank, (b) pursuant to subpoena or upon the order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over such Bank, (d) which has been publicly disclosed, (e) to the extent reasonably required in connection with any litigation to which either Agent, any Bank, the Company or their respective Affiliates may be a party, (f) upon the occurrence and continuation of an Event of Default, to the extent reasonably required in connection with the exercise of any remedy hereunder, (g) to such Bank's legal counsel and independent auditors to the extent such Persons are involved in evaluating, approving, structuring or administering the Loans, and to the extent of such activity, and (h) to any actual or proposed participant or assignee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section. Each Bank will promptly notify the Company of any information that it is required or requested to deliver pursuant to clause (b), (c) or (e) of this Section, prior to any disclosure, if reasonably practicable, provided further that the Company may, at its sole expense, move to quash or remove any subpoena or otherwise contest any demand for such documents arising in items (b), (c) and/or (e) of this Section. SECTION 11.12. Pro Rata Treatment. (a) Except as otherwise ------------------ specifically permitted hereunder, each payment or prepayment of principal, if permitted under this Agreement, and each payment of interest with respect to a Borrowing shall be made pro rata among the Banks in accordance with the respective principal amounts of the Loans extended by each Bank with respect to such Borrowing. (b) Each Bank agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Company (pursuant to Section 11.06 or otherwise), including a secured claim under Section 506 of the - ------------- Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim, received by such Bank under any applicable bankruptcy, insolvency or other similar law or otherwise, obtain payment (voluntary or involuntary) in respect of the Notes, Loans, Unpaid Drawings and other Obligations held by it (other than pursuant to Section 2.11, Section 2.13 and Section 3.05) as a result ------------ ------------ ------------ of which the unpaid principal portion -74- of the Notes and the Obligations held by it shall be proportionately less than the unpaid principal portion of the Notes and Obligations held by any other Bank, it shall be deemed to have simultaneously purchased from such other Bank a participation in the Notes and Obligations held by such other Bank, so that the aggregate unpaid principal amount of the Notes, Obligations and participations in Notes held by each Bank shall be in the same proportion to the aggregate unpaid principal amount of the Notes and Obligations then outstanding as the principal amount of the Notes and other Obligations held by it prior to such exercise of banker's lien, setoff or counterclaim was to the principal amount of all Notes and other Obligations outstanding prior to such exercise of banker's lien, setoff or counterclaim; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustments restored without interest. The Company expressly consents to the foregoing arrangements and agrees that any Person holding such a participation in the Notes and the Obligations deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Company to such Person as fully as if such Person had made a Loan directly to the Company in the amount of such participation. SECTION 11.13. Independence of Covenants. All covenants contained in ------------------------- this Agreement and in the other Loan Documents shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that such action or condition would be permitted by an exception to, or otherwise be within the limitations of, another covenant, shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. SECTION 11.14. Separability. Should any clause, sentence, paragraph ------------ or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder will have the same force and effectiveness as if such part or parts had never been included herein. SECTION 11.15. Execution in Counterparts. This Agreement may be ------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute on and the same agreement. SECTION 11.16. Interpretation. (a) In this Agreement, unless a clear -------------- contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any gender includes each other gender; -75- (iii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (iv) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually, provided that nothing in this clause (iv) is intended to authorize any assignment not otherwise permitted by this Agreement; (v) except as expressly provided to the contrary herein, reference to any agreement, document or instrument (including this Agreement) means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, and reference to any Note or other note includes any note issued pursuant hereto in extension or renewal thereof and in substitution or replacement therefor; (vi) unless the context indicates otherwise, reference to any Article, Section, Schedule or Exhibit means such Article or Section hereof or such Schedule or Exhibit hereto; (vii) the words "including" (and with correlative meaning "include") means including, without limiting the generality of any description preceding such term; and (viii) reference to any law, rule or regulation means such as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. (b) The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. (c) No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision. SECTION 11.17. SUBMISSION TO JURISDICTION. (a) ANY LEGAL ACTION OR -------------------------- PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID ------------- COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY -76- OR THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS ------------- AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. (b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 11.18. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT ------------------------------ (INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. SECTION 11.19. WAIVER OF JURY TRAIL. EACH OF THE COMPANY, THE AGENT -------------------- AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRAIL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE LOANS OR THE ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. THE COMPANY: BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By BCP Management, Inc. By: /s/ David A. Kelly -------------------------------- Name: David A. Kelly Title: Director, Treasurer and Principal Financial Officer AGENT: CREDIT SUISSE, as Agent for the Banks By:_______________________________ Name: Heather Riekenberg Title: Associate By:_______________________________ Name: Ira Lubinsky Title: Associate ISSUING BANK: CREDIT SUISSE, as Issuing Bank By:_______________________________ Name: J. Hamilton Crawford Title: Associate By:_______________________________ Name: Michael Mast Title: Member of Senior Management IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. THE COMPANY: BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By BCP Management, Inc. By: ____________________________________ Name: Title: AGENT: CREDIT SUISSE, as Agent for the Banks By: /s/Heather Riekenberg ------------------------------------ Name: Heather Riekenberg Title: Associate By: /s/Ira Lubinsky ------------------------------------ Name: Ira Lubinsky Title: Associate ISSUING BANK: CREDIT SUISSE, as Issuing Bank By: /s/J. Hamilton Crawford ------------------------------------ Name: J. Hamilton Crawford Title: Associate By: /s/Michael Mast ------------------------------------ Name: Michael Mast Title: Member of Senior Management Bank ---- CREDIT SUISSE Commitment: - ---------- $16,000,000 By: /s/J. Hamilton Crawford ------------------------------------ Name: J. Hamilton Crawford Title: Associate Address: 12 E. 49th Street New York, New York 10017 By: /s/Michael Mast ------------------------------------ Name: Michael Mast Title: Member of Senior Management Address: 12 E. 49th Street New York, New York 10017 Telecopy No.: (212) 238-5439 Domestic Lending Office ----------------------- Credit Suisse 12 E. 49th Street New York, New York 10017 Eurodollar Lending Office ------------------------- Credit Suisse 12 E. 49th Street New York, New York 10017 Bank ---- THE CHASE MANHATTAN BANK, N.A. Commitment: - ---------- $14,000,000 By: /s/Ruth I. Dreessen ------------------------------------ Name: Ruth I. Dreessen Title: Vice President Address: 1 Chase Manhattan Plaza - 4th Floor New York, New York 10081 Telecopy No.: (212) 552-1246 Domestic Lending Office ----------------------- The Chase Manhattan Bank, N.A. 1 Chase Manhattan Plaza New York, New York 10081 Eurodollar Lending Office ------------------------- The Chase Manhattan Bank, N.A. 1 Chase Manhattan Plaza New York, New York 10081 Bank ---- THE HUNTINGTON NATIONAL BANK Commitment: - ---------- $14,000,000 By: /s/ Robert H. Friend ---------------------------- Name: Robert H. Friend Title: Vice President Address: Huntington National Bank The Huntington Center - HCO810 Columbus, Ohio 43287 Telecopy No: (614) 480-3066 Domestic Lending Office ----------------------- Hunting National Bank The Huntington Center - HC0810 Columbus, Ohio 43287 Eurodollar Lending Office ------------------------- Huntington National Bank The Huntington Center - HC0810 Columbus, Ohio 43287 Bank ---- WACHOVIA BANK OF GEORGIA, N.A. Commitment: - ---------- $14,000,000 By: [SIGNATURE ILLEGIBLE] --------------------- Name: [SIGNATURE ILLEGIBLE] Title: Sen. Vice President Corporate Services Address: 191 Peachtree St. N.E. Atlanta, Georgia 30303 Telecopy No.: (404) 332-6898 Domestic Lending Office ----------------------- Wachovia Bank of Georgia, N.A. 191 Peachtree St. N.E. Atlanta, Georgia 30303 Eurodollar Lending Office ------------------------- Wachovia Bank of Georgia, N.A. 191 Peachtree St. N.E. Atlanta, Georgia 30303 Bank ---- NATIONSBANK, N.A. (CAROLINAS) Commitment: - ---------- $14,000,000 By: /s/ Scott Jackson ------------------------------- Name: Scott Jackson Title: Vice President Address: 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Telecopy No.: (212) 751-6909 Domestic Lending Office ----------------------- NationsBank, N.A. 101 North Tryon Street, 15th Floor Charlotte, North Carolina 28255 Eurodollar Lending Office ------------------------- NationsBank, N.A. 101 North Tryon Street, 15th Floor Charlotte, North Carolina 28255 Bank ---- BANK ONE, COLUMBUS, NA Commitment: - ---------- $14,000,000 By: /s/ James B. Waddell ------------------------------ Name: James B. Waddell Title: Vice President Address: 100 East Broad Street Columbus, Ohio 43271-0209 Telecopy No.: (614) 248-5518 Domestic Lending Office ----------------------- Bank One, Columbus, NA 100 East Broad Street Columbus, Ohio 43271-0209 Eurodollar Lending Office ------------------------- Bank One, Columbus, NA 100 East Broad Street Columbus, Ohio 43271-0209 Bank ---- CREDITLYONNAIS Commitment: - ---------- $14,000,000 Domestic Lending Office ----------------------- Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, New York 10019 Telecopy No.: (212) 459-3179 By: /s/ Mark Campellone ------------------------------------ Name: Mark Campellone Title: Eurodollar Lending Office ------------------------- Credit Lyonnais Cayman Island Branch 1301 Avenue of the Americas New York, New York 10019 By: /s/ Mark Campellone ------------------------------------ Name: Mark Campellone Title: EXHIBIT 1.01A CREDIT SUISSE Administrative Details Form For: Borden Chemicals and Plastic LP
==================================================================================== ==================================================================================== Lending Institutions: ______________________________________________________ Address: ______________________________________________________ ______________________________________________________ Telephone: ___________________ Telex No:____________________ Telefax: ___________________ Answerback:____________________ CONTACTS - Credit Incomes: ______________________________________________________ Address: ___________________ Telephone:___________________ ___________________ Telefax:___________________ CONTACTS - Admin/Operations: ______________________________________________________ Address: ___________________ Telephone:___________________ ___________________ Telefax:___________________ Domestic Lending Eurodollar Lending PAYMENT INSTRUCTIONS: Fees & Interest Bank Name: ___________________ ___________________ Bank Address: ___________________ ___________________ ___________________ ___________________ ABA#/Acct.#: ___________________ ___________________ Name on Acct.: ___________________ ___________________ Further credit to: ___________________ ___________________ Acct. Name/No.: ___________________ ___________________ PAYMENT INSTRUCTIONS: Principal Bank Name: ___________________ ___________________ Bank Address: ___________________ ___________________ ___________________ ___________________ ABA#/Acct.#: ___________________ ___________________ Name on Acct.: ___________________ ___________________ Further credit to: ___________________ ___________________ Acct. Name/No.: ___________________ ___________________
PLEASE NOTE: CREDIT SUISSE ADMINISTRATIVE DETAILS For payments of principal, fees, or interest to Credit Suisse, please credit our account at the Federal Reserve Bank of New York. ABA# 0260-0917-9, for further credit to Credit Suisse Account No. 904996-02, Attn: Loans Dept., Reference: Borden Chemicals and Plastic LP PLEASE MAKE ALL PAYMENTS NO LATER THAN - ---------------------------------------- 11:00 A.M. NY TIME. Primary Acct Administrator CREDIT SUISSE NEW YORK Julia Kingsbury 12 E. 49th Street Tel: 212-238-5063 New York, NY 10017 Fax: 212-238-5073 EXHIBIT 2.03 FORM OF NOTICE OF BORROWING Credit Suisse, as Agent for the Banks that are parties to the Credit Agreement referred to below 12 East 49th Street, 44th Floor New York, New York 10017 Attention:____________ [Date] Dear Sirs: Reference is made to the Credit Agreement dated as of _______________, 1995 (the "Credit Agreement"), among Borden Chemicals and Plastics Operating ---------------- Limited Partnership (the "Company"), the banks party thereto and Credit Suisse, ------- as agent for such banks. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Company, hereby requests a Borrowing under the Credit Agreement and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.03 of the Credit ------------------ Agreement: (a) Aggregate Principal Amount of Proposed Borrowing/1/ $_______________ - (b) Borrowing Date of Proposed Borrowing/2/ ________________ - (c) Type of Loans to comprise the Proposed Borrowing/3/ ________________ - (d) Interest Period and last day thereof/4/ ________________ - ___________ /1/ Except with respect to any Proposed Borrowing of the entire Unutilized - Commitment, not less than $5,000,000 and, if greater, in integral multiples of $1,000,000. /2/ Must be a Business Day. - /3/ Base Rate Loans or Eurodollar Rate Loans. - /4/ Applicable only to a proposed Borrowing to be comprised of Eurodollar Rate - Loans, which shall have a duration of one, two, three or six months, or such longer period as the Agent in its reasonable discretion may determine is available at the relevant time, and which shall end not later than the Maturity Date; subject, however, to the limitations contained in Section 2.09 of the Credit Agreement. By each of the delivery of this Notice of Borrowing and the acceptance of any or all of the Loans made by the Banks in response to this Notice of Borrowing, the Company shall be deemed to have represented and warranted that the conditions to lending specified in Article V of the Credit Agreement have been satisfied with respect to the Proposed Borrowing. Very truly yours, BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By:_______________________ Name: Title: -2- EXHIBIT 2.05 FORM OF REVOLVING CREDIT NOTE $________________ Dated: _____________, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc., HEREBY PROMISES TO PAY to the order of (the "Bank") on or before the Maturity Date (as hereinafter defined) ---- the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of _____________, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit ------ Agreement," the terms defined therein and not otherwise defined herein being - --------- used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By:_______________________ Name:_____________________ Title:____________________ -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ================================================================================================= _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________
-3- EXHIBIT 2.14 FORM OF SWING LOAN PARTICIPATION CERTIFICATE ______________, 199_ (Name of Bank) - ---------------- ________________ ________________ Dear Ladies and Gentlemen: Pursuant to subsection 2.14(b)(i) of that certain Credit Agreement dated as of _______, 1995 (as the same may be amended, modified or restated from time to time, the "Credit Agreement"), among Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership, (as defined in the Credit Agreement), the several financial institutions from time to time party thereto (the "Banks"), Credit Suisse, letter of credit issuing bank, Credit Suisse, as Agent (the "Agent") for the Banks therein named, the undersigned hereby acknowledges receipt from you on the date hereof of ___________________ DOLLARS ($___________) as payment for a participating interest in the following Swing Loan(s): Date(s) of Swing Loan(s): _________________, 199_ Principal Amount of Swing Loan(s): $_____________ Capitalized terms used herein without definition have the meaning assigned to them in the Credit Agreement. Very truly yours, CREDIT SUISSE, as Swing Loan Bank By:__________________________ Name: Title: EXHIBIT 3.02 FORM OF LETTER OF CREDIT REQUEST ______________, 19_ Credit Suisse 12 East 49th Street, 44th Floor New York, New York 10017 Attention:__________ Gentlemen: Reference is made to the Credit Agreement dated as of _______________, 1995 (the "Credit Agreement"), among Borden Chemicals and Plastics Operating ---------------- Limited Partnerships (the "Company"), the banks thereto and Credit Suisse, as ------- agent for such banks. Capitalized terms which are used but not defined herein shall have the respective meanings assigned to such terms in the Credit Agreement. The Company hereby requests the issuance of a Letter of Credit under the Credit Agreement, and in that connection sets forth below the information relating to such Letter of Credit ("Proposed Letter of Credit") as required by ------------------------- Section 3.02 of the Credit Agreement. The Proposed Letter of Credit must be issued: (a) on or before _________, 19__/1/ (b) for the benefit of ______________ (c) in the amount of $_______________ (d) having an expiry date of _______, 19__/2/ (e) subject to the conditions set forth in the Application attached hereto 0R The Company hereby refers to Letter of Credit Number __________ (the "Expiring Letter of Credit") which has an existing expiry date of ___________. ------------------------- The Company hereby requests that [the expiry date of the Expiring Letter of Credit be extended to _________/2/] The Company hereby certifies that after giving effect to the [issuance of the Proposed Letter of Credit] or [the extension of the Expiring Letter of Credit] (a) the aggregate Letter of Credit Outstanding will not exceed the Letter of Credit _______________________________ /1/ Which must be not less than two Business Days after notice is given to the Issuing Bank. /2/ Which shall not be later than the earlier of (i) a date which is one year after the date of issuance or (ii) the Maturity Date. Limit and (b) the sum of the aggregate outstanding Loans plus the Letter of Credit Outstanding will not exceed the Total Commitment. The Company hereby further certifies that on the date hereof all applicable conditions to the [issuance of the Proposed Letter of Credit] [extension of the Expiring Letter of Credit] set forth in Article V of the Credit Agreement have been satisfied and that the [Proposed Letter of Credit][the Expiring Letter of Credit as extended] complies with the terms of the Credit Agreement, and upon the [issuance of the Proposed Letter of Credit] [extension of the Expiring Letter of Credit], the Company will be deemed to have recertified the foregoing on such issuance date or extension date, as the case may be. Sincerely, BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By:_______________________ Name: Title: S&A DRAFT 4/28/95 MAY __, 1995 To Credit Suisse, as Agent, and each of the Banks Under the Credit Agreement referred to below c/o Credit Suisse, as Agent 12 East 49th Street 39th Floor New York, New York 10017 Re: Borden Chemicals and Plastics Operating Limited Partnership ----------------------------- Ladies and Gentlemen: I am Vice President, General Counsel and Secretary of BCP Management, Inc. (the "General Partner") and have acted as counsel to Borden Chemicals and Plastics Operating Limited Partnership (the "Company"), and to the General Partner, the Company's sole general partner, in connection with the preparation, execution and delivery of that certain Credit Agreement dated as of May __, 1995 (the "Credit Agreement") among the Company, the institutions from time to time party thereto as Banks (collectively, the "Banks"), and Credit Suisse, as agent for the Banks (in such capacity, the "Agent"). This opinion is being delivered pursuant to Section 5.01(e) of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings as so defined. In connection with the opinions expressed herein, I have reviewed the following documents: (i) The Credit Agreement executed by each of the parties thereto; (ii) The Notes; and (iii) (x) The Certificate of Incorporation and By-Laws of the General Partner, (y) the Certificate of Limited Partnership and Amended and Restated Agreement of Limited Partnership of the Company, and (z) certificates of governmental officials as to (1) the due organization, valid existence and good standing of each of the Company and the General Partner under the laws of the State of Delaware, (2) the due qualification or registration of the Company as a foreign limited partnership in the State of Illinois and the State of Louisiana, and (3) the due qualification as a foreign corporation and good standing of the General Partner in the State of Illinois and the State of Louisiana. The Credit Agreement and the Notes are hereinafter referred to as the "Loan Documents". In addition, I have examined originals or copies, certified or otherwise identified to my satisfaction, of such corporate records, agreements, documents or instruments and other instruments, as applicable, and of certificates or comparable documents or instruments of public officials and other instruments and documents and have made such inquiries of such officers and representatives and such examination of law as I have deemed relevant and necessary to form and basis for the opinions hereinafter set forth. In my examination of the Loan Documents I have assumed the authenticity of all such documents submitted to us as originals, the conformity to authentic originals of all such documents submitted to me as copies and the genuineness of all signatures (other than the signatures of the representatives of the General Partner). As to all questions of fact material to the opinions specified herein that have not been independently established, I have relied upon the representations and warranties of the Company contained in the Credit Agreement. In rendering the opinions expressed below, I have assumed, without any independent investigation or verification of any kind, that each party to the Loan Documents (other than the Company and the General Partner) has been duly organized and is validly existing and in good standing under its jurisdiction of incorporation and has full power and authority to execute and deliver the Loan Documents and perform the obligations set forth therein, and that the execution, delivery, and performance of the Loan Documents by such other parties have been duly authorized by all requisite corporate and other action on the part of such 2 other parties and such documents have been duly executed and delivered by such other parties. Based upon the foregoing assumptions and examination of documents and upon such investigation as I have deemed necessary, and subject to the qualifications set forth in subparagraphs (a) through (f) below, I am of the opinion that: 1. The Company (i) is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) has the partnership power to own its property and carry on its business as now conducted. The General Partner (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) has the corporate power to own its property and carry on its business as now conducted. 2. The Company is duly qualified or authorized as a foreign limited partnership in the State of Illinois and the State of Louisiana. 3. The General Partner is duly qualified as a foreign corporation to do business and is in good standing in the State of Illinois and the State of Louisiana. 4. The execution, delivery and performance by the Company of each Loan Document are within the Company's partnership powers and have been duly authorized by all necessary corporate action on the part of the General Partner. The execution and delivery by the General Partner, as general partner of the Company, of each Loan Document are within the General Partner's corporate powers and have been duly authorized by all necessary corporate action on the part of the General Partner. My opinions are expressly qualified as follows: (a) My opinions expressed above are limited to the General Corporation Law of the State of Delaware, the Delaware Revised Uniform Limited Partnership Act, and the federal law of the United States, and I do not express any opinion herein concerning any other law. (b) I express no opinion as to the effect of the compliance or noncompliance of the Agent, any of the Banks or the Issuing Bank with any state or federal laws or regulations applicable to any such party because of such party's legal or regulatory status, the nature of such party's business or the authority of any party to conduct business in any jurisdiction. 3 (c) I express no opinion at to the effect (if any) of the law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. (d) Insofar as the opinions expressed in paragraphs 2 and 3 related to matters governed by the law of the State of Illinois or the State of Louisiana, I have not made an independent examination of such law, but have relied exclusively upon the certificates referred to clauses (iii)(z)(2) and (iii)(z)(3) above. (e) I express no opinion with respect to any federal or state securities laws. (f) My opinions speak as of the date hereof and I assume no obligation to supplement the foregoing opinions if any applicable laws change after the date hereof or if I become aware of any facts which might change such opinions after the date hereof. This opinion is furnished to you by me as counsel to the Company and the General Partner and is solely for your benefit and may not be quoted by you without my prior written consent. Sidley & Austin may rely upon this opinion in rendering their opinion to you of even date herewith, but this opinion may not be furnished to, relied on or quoted by any other Person without my prior written consent. Very truly yours, Lawrence L. Dieker 4 S&A DRAFT 4/28/95 May __, 1995 To Credit Suisse, as Agent, and each of the Banks Under the Credit Agreement referred to below c/o Credit Suisse, as Agent 12 East 49th Street 39th Floor New York, New York 10017 Re: Borden Chemicals and Plastics Operating Limited Partnership ----------------------------- Ladies and Gentlemen: We have acted as special New York counsel to Borden Chemicals and Plastics Operating Limited Partnership (the "Company"), and to BCP Management, Inc. (the "General Partner"), the Company's sole general partner, in connection with the preparation, execution and delivery of that certain Credit Agreement dated as of May __, 1995 (the "Credit Agreement") among the Company, the institutions from time to time party thereto as Banks (collectively, the "Banks"), and Credit Suisse, as agent for the Banks (in such capacity, the "Agent"). This opinion is being delivered pursuant to Section 5.01(e) of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings as so defined. In connection with the opinions expressed herein, we have reviewed the following documents: (i) The Credit Agreement executed by each of the parties thereto; (ii) The Notes; and (iii) The opinion of Lawrence L. Dieker, Vice President, General Counsel and Secretary of the General Partner. The Credit Agreement and the Notes are hereinafter referred to as the "Loan Documents". In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents or instruments and other instruments, as applicable, and of certificates or comparable documents or instruments of public officials and other instruments and documents and have made such inquiries of such officers and representatives and such examination of law as we have deemed relevant and necessary to form the basis for the opinions hereinafter set forth. In our examination of the Loan Documents we have assumed the authenticity of all such documents submitted to us as originals, the conformity to authentic originals of all such documents submitted to us as copies and the genuineness of all signatures (other than the signatures of the representatives of the General Partner). As to all questions of fact material to the opinions specified herein that have not been independently established, we have relied upon the representations and warranties of the Company contained in the Credit Agreement. In rendering the opinions expressed below, we have assumed, without any independent investigation or verification of any kind, that each party to the Loan Documents (other than the Company and the General Partner) has been duly organized and is validly existing and in good standing under its jurisdiction of incorporation and has full power and authority to execute and deliver the Loan Documents and perform the obligations set forth therein, and that the execution, delivery, and performance of the Loan Documents by such other parties have been duly authorized by all requisite corporate and other action on the part of such other parties and such documents have been duly executed and delivered by such other parties. To the extent that our opinion expressed below involve conclusions as to the matters set forth in the opinion referred to above of Lawrence L. Dieker, we have relied upon and assumed without independent investigation the correctness of such opinion, and our opinion is subject to the assumptions, qualifications and limitations set forth in such opinion. Based upon the foregoing assumptions and examination of documents and upon such investigation as we have deemed necessary, and subject to the qualifications set forth in subparagraphs (a) through (f) below, we are of the opinion that each Loan Document has been executed and delivered by the Company and constitutes the legal, valid, and binding obligation of the 2 Company, enforceable against the Company in accordance with its terms. Our opinions are expressly qualified as follows: (a) Our opinions are subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and other laws affecting the enforcement of creditors' rights generally and to the effect of general equitable principles (whether considered in a proceeding in equity or at law). In applying such principles, a court, among other things, might not allow a creditor to accelerate maturity of a debt upon the occurrence of a default deemed immaterial or for non-credit reasons or might decline to order a debtor to perform covenants. Such principles applied by a court might include a requirement that a creditor act with reasonableness and in good faith. Furthermore, a court may refuse to enforce a covenant or any provision providing for indemnification if and to the extent that it deems such covenant or indemnification provision to be violative of applicable public policy. (b) Our opinions expressed above are limited to the law of the State of New York and the federal law of the United States, and we do not express any opinion herein concerning any other law. (c) We express no opinion as to the effect of the compliance or noncompliance of the Agent, any of the Banks or the Issuing Bank with any state or federal laws or regulations applicable to any such party because of such party's legal or regulatory status, the nature of such party's business or the authority of any party to conduct business in any jurisdiction. (d) We express no opinion at to the effect (if any) of the law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. (e) We express no opinion with respect to any federal or state securities laws. (f) Our opinions speak as of the date hereof and we assume no obligation to supplement the foregoing opinions if any applicable laws change after the date hereof or if we become aware of any facts which might change such opinions after the date hereof. 3 This opinion is furnished to you by us as counsel to the Company and the General Partner and is solely for your benefit and may not be quoted by you without our prior written consent. This opinion may not be furnished to, relied on or quoted by any other Person without our prior written consent. Very truly yours, 4 Schedule 6.13 ------------- 1. The Company acquired a facility in Geismar, Louisiana ("Geismar facility") and a facility in Illiopolis, Illinois (Illiopolis facility") from Borden, Inc. ("Borden") in 1987 ("1987 Transaction"). In connection with the 1987 Transaction, Borden, the Company and Borden Chemicals and Plastics Limited Partnership ("Holding Company") entered into an Environmental Indemnity Agreement. Under the Environmental Indemnity Agreement, subject to certain conditions, Borden has agreed to indemnify the Company and the Holding Company in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987 ("Transfer Date"). The Company is responsible for environmental liabilities arising from facts or circumstances that existed and requirements in effect on or after the Transfer Date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect bother prior to and after the Transfer Date, Borden and the Company will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the asset in question (to the extent relevant). No claims can be made under the Environmental Indemnity Agreement after November 30, 2002, and no claim can, with certain exceptions, be made with respect to the first $0.5 million of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3.5 million in the aggregate. Excluded amounts under the Environmental Indemnity Agreement have aggregated approximately $2.2 million through December 31, 1994. In 1985 the Louisiana Department of Environmental Quality ("LDEQ") and Borden entered into a Settlement Agreement that called for the implementation of a long term groundwater and soil remediation program at the Geismar facility. Borden and the Company have implemented the Settlement Agreement, and have worked in cooperation with the LDEQ to remediate the groundwater and soil contamination. The Company believes that it already has sufficiently identified the extent of the groundwater plume. Nevertheless, the Company may drill and test some additional groundwater wells for the purpose of addressing issues raised by the LDEQ concerning whether the extent of the groundwater contamination has been identified. Borden has paid substantially all the costs to date of the Settlement Agreement. It is unknown how long the remediation program will continue or whether the LDEQ will require the Company to incur costs to take further remedial measures in response to data generated by the potential additional groundwater wells. If the LDEQ requires the Company to take further remedial measures, the Company anticipates that a portion of such costs would be covered by the Environmental Indemnity Agreement. The extent to which any such costs for further remedial measures required by LDEQ will be covered by the Environmental Indemnity Agreement will depend, in large part, on whether such remedial measures respond to facts or circumstances that existed and requirements in effect prior to the Transfer Date. 2. On October 27, 1994, the Department of Justice ("DOJ"), at the request of the United States Environmental Protection Agency ("USEPA"), filed and enforcement proceeding against the Company, the Holding Company and BCP Management, Inc. ("BCPM") in federal district court in Louisiana ("Geismar enforcement proceeding"). The complaint seeks civil penalties for alleged violations of the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and the Clean Air Act at the Geismar facility, as well as corrective action at that facility. The federal government's primary allegations for which it seeks penalties include claims that: (i) the Company's export to South Africa of a partially depleted mercuric chloride catalyst for recycling violated RCRA; (ii) the Company should have applied for a RCRA permit for operation of its valorization of chlorinated residuals ("VCR") unit and related tanks before August 1991; and (iii) the Company should have applied for a RCRA permit for the north trench sump at the Geismar facility because such sump allegedly contains hazardous waste. The government's allegation include other claims that are related to these and other alleged RCRA violations, as well as claims of alleged violations of immediate release reporting requirements under CERCLA and requirements governing particulate matter emissions under the Clear Air Act. In May 1994, the Company filed a Complaint for Declaratory Judgment in federal district court in Louisiana seeking a determination that: (i) the partially depleted mercuric chloride catalyst was not a hazardous waste when it was exported for recycling; (ii) the materials entering the VCR unit and related tanks are not hazardous waste; and (iii) the north trench sump does not require a RCRA permit. If the Company is unsuccessful in prosecuting its Declaratory Judgment Action, or in defending itself against the Geismar enforcement proceeding, it could be subject to three types of costs: (i) penalties; (ii) corrective action; and (iii) costs needed to obtain a RCRA permit. Although the maximum statutory penalties that would apply in a successful enforcement action by the DOJ would be in excess of $150 million, the Company believes that, assuming the Company is unsuccessful and based on information currently available to it and an analysis of relevant case law and administrative decisions, the more likely amount of any liability for civic penalties would not exceed several million dollars. If the company is unsuccessful in either the Declaratory Judgment Action or the Geismar enforcement proceeding, it may also be subject to corrective action. The federal government also can require corrective action for a facility subject to RCRA permit requirements. Corrective action could require the Company to conduct investigatory and remedial activities at the Geismar facility concurrently with the groundwater monitoring and remedial program that the Company is currently conducting under the Settlement Agreement with LDEQ. The DOJ has advised the Company that it intends to seek facility-wide corrective action to address potential contamination at the Geismar complex. 2 The EPA has indicated that it intends to evaluate the adequacy of the existing groundwater remediation project performed under the Settlement Agreement with LDEQ, and to determine the potential for other areas of contamination on or near the Geismar facility. The cost of any corrective action could be material, depending on the scope of such corrective action. If the Company is unsuccessful in either proceeding concerning its challenge to the applicability of the RCRA permit requirements to the VCR unit related tanks, or the north trench sump, it will have to incur additional permitting costs. The Company estimates that its costs to complete the permitting process for the VCR unit and related tanks would be approximately $1.0 million. The Company believes that the costs for amending its pending RCRA permit application to include the north trench sump would not be material. If the United States is successful in requiring the Company to perform corrective action at the Geismar facility, the Company anticipates that at least a portion of such corrective action costs would be covered by the Environmental Indemnity Agreement. The extent to which any penalties or permit costs that the Company may incur as a result of the Geismar enforcement action will be subject to the Environmental Indemnity Agreement will depend, in large part, on whether such penalties or costs are attributable to facts or circumstances that existed and requirements in effect prior to November 30, 1987. 3. In February 1993, an EPA Administrative Law Judge held that the Illiopolis facility had violated CERCLA and the Emergency Planning and Community Right-to-Know Act ("EPCRA") by failing to report certain valve releases, which occurred between February 1987 and July 1989, that the Company believes are exempt from CERCLA and EPCRA reporting. The Company's petition for reconsideration was denied, a penalty hearing will be scheduled, and further appeals are possible. The proposed penalty in EPA's administrative complaint initiating this proceeding in 1991 was $1.0 million. 4. During the early 1990s, the Company shipped partially depleted mercuric chloride catalyst to the facility of Thor Chemicals S.A. (PTY) Limited ("Thor") in Cato Ridge, South Africa for recovery of mercury. In 1993 the LDEQ determined that the partially depleted catalyst was not a hazardous waste, although LDEQ reversed this position in 1994. The Company disagrees with this reversal. The Company believes that Thor's operations have included the production of mercuric chloride catalyst and the recovery of mercury from partially depleted catalyst. Recovery of mercury at Thor's facility was discontinued in March 1994 when the Department of Health in South Africa refused to renew a temporary license that had been granted to Thor. At such time, there were approximately 2,600 drums of partially depleted catalyst at the facility which had been shipped by the Company to Thor. 3 In February 1995, Thor and three of its management personnel were tried by South Africa for the common law crime of culpable homicide and a number of alleged violations of the Machinery Occupational Safety Act of 1983 ("MOSA"), because of the deaths of two Thor employees. The prosecution alleged that the deaths were the result of mercury poisoning. In exchange for a plea by Thor that it had violated provisions of MOSA, the prosecution dropped the homicide charges against Thor and all the charges against Thor's management personnel. The court has sentenced Thor to a fine of R13,500.00, which is equivalent to approximately $3,800. The Company is aware that relatives of two deceased Thor employees, and a Thor employee allegedly suffering from mercury poisoning, have filed suit in the United Kingdom against Thor's parent company for negligence. On March 24, 1995, the President of South Africa appointed a Commission of Inquiry and published the following terms of reference for the Commission: (i) to investigate the history and background of the acquisition of mercury catalyst stockpiled by Thor as well as additional mercury-containing sludge on the premises and to report on the further utilization or disposal thereof; (ii) to recommend the best practical environmental option to address the problem of mercury-containing catalyst and/or waste currently on Thor's premises; and (iii) to report the results of the Commission's inquiry to the President of the Republic of South Africa. In addition, the Minister of Water Affairs and Forestry has instructed his department's regional office to investigate alleged water pollution at and near the Thor facility. The Government of South Africa has not made any allegations or asserted any claims against the Company. The contract between the Company and Thor provides that title to, risk of loss, and all other incidents of ownership of the partially depleted catalyst would pass from the Company to Thor when the catalyst reached South Africa. The Company does not believe that it is liable for disposing of the approximately 2,600 drums of partially depleted catalyst remaining at the Thor facility. Nonetheless, in the event that the Company should be required to dispose of the approximately 2,600 drums at the facility shipped by the Company, the Company estimates that such cost would not be in excess of $4 million. With regard to the environmental condition of the Thor facility, the Company has not been notified by the Government of South Africa that the Company would be liable for any contamination or other conditions at the facility, although it is impossible to determine what, if any, allegations any party may make in connection with the Thor facility in the future. 5. In connection with its environmental due diligence investigation of the facility in Addis, Louisiana that the Company plans to acquire ("Acquisition") from Occidental Chemical Corporation ("Oxychem"), some contamination has been identified at that facility. Oxychem has agreed to indemnify the Company for environmental liabilities arising from 4 the manufacture, generation, treatment, storage, handling, processing, disposal, discharge, loss, leak, escape or spillage of any product, waste or substance generated or handled by Oxychem prior to the closing of the Acquisition, any condition resulting therefrom relating to acts, omissions or operations of Oxychem prior to such date, and any duty, obligation or responsibility imposed on Oxychem prior to such date under environmental laws in effect prior to such date to address such condition. However, except with regard to claims arising from Oxychem's disposal of waste at sites other than the Addis Facility, Oxychem has no indemnification obligation if the claim for indemnification is the result of a change in applicable law after the closing of the Acquisition. Oxychem's obligation to indemnify the Company for environmental liabilities is subject to certain limits. 5 Schedule 8.05 ------------- EXHIBIT 11.10 FORM OF ASSIGNMENT AND ACCEPTANCE DATED______,19__ Reference is made to the Credit Agreement dated as of_____________, 1995 (the "Credit Agreement"), among Borden Chemicals and Plastics Operating ---------------- Limited Partnership (the "Company"), the banks party thereto and Credit Suisse, as agent for such banks. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. ____________________ (the "Assignor") and __________________ (the -------- "Assignee") agree as follows: -------- 1. (a) The Assignor hereby sells and assigns to the Assignee (without recourse to the Assignor), and the Assignee hereby purchases and assumes from the Assignor, a __% interest (the "Percentage Interest") in and to ------------------- all the Assignor's rights and obligations under the Credit Agreement as of the Assignment Date (as defined below), including, without limitation, (i) the Percentage Interest in the Commitment of the Assignor on the Assignment Date, (ii) the Percentage Interest in all reimbursement obligations (net of participations therein purchased by other Banks pursuant to the Credit Agreement) in respect of the Letters of Credit either issued by the Assignor or in which the Assignor has purchased participations pursuant to the Credit Agreement, (iii) the Percentage Interest in the Loans owing to the Assignor outstanding on the Assignment Date, (iv) the Percentage Interest in all unpaid interest with respect to such Loans and all Commitment Fees and Letter of Credit Fees due to Assignor in its capacity as a bank accrued to the Assignment Date and (v) the Percentage Interest in the Note held by the Assignor. (b) In furtherance of the foregoing (i) to the extent the Assignor is the issuer of the Letters of Credit, the Assignee hereby purchases a participation, in the proportion of the Percentage Interest, in all reimbursement obligations (net of participations therein purchased by other Banks pursuant to the Credit Agreement) in respect of the Letters of Credit upon the terms and conditions set forth in the Credit Agreement, with the same effect as if the Assignee had been a Bank, and had purchased such participation, on the date each Letter of Credit was issued and (ii) to the extent the Assignor is not the issuer of the Letters of Credit and has purchased participations in reimbursement obligations in respect of the Letters of Credit issued by the Issuing Bank, the Assignee hereby purchases a portion of such participations (net of portions thereof purchased by other Banks pursuant to the Credit Agreement), in the proportion of the Percentage Interest, upon the terms and conditions set forth in the Credit Agreement, with the same effect as if the Assignee had been a Bank, and had directly purchased participations equal to such portions, on the date Letter of Credit was issued. 2. The Assignor (a) shall deliver to the Agent a schedule in the form of Schedule 1 hereto with all blanks appropriately completed (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim known to the Assignor; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by any Loan Party of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (d) attaches the Note issued to Assignor and requests that the Agent exchange such Note for a new Note executed by the Company and payable to the Assignee in a principal amount equal to $___________ [and a New Note executed by the Company and payable to the Assignor in a principal amount equal to $____________]. 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is an Eligible Assignee; (v) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; (vii) agrees that it will comply with Section 11.11 of the Credit Agreement with respect to information complying with that provision furnished to it by the Company or the Assignor with respect to any Loan Party; (viii) confirms that it has delivered a completed Administrative Questionnaire to the Agent[; and (ix) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty]./1/ 4. The effective date for this Assignment and Acceptance shall be ______________(the "Assignment Date")./2/ Following the execution of this --------------- Assignment ______________________ 1/ If the Assignee is organized under the laws of a jurisdiction outside the United States. 2/ See Section 11.11(c) of the Credit Agreement. Such date shall be at least five Business Days after the execution of this Assignment and Acceptance and delivery thereof to the Agent unless otherwise agreed to by the Assignor, the Assignee and the Agent. -2- and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent pursuant to Section 11.10 of the Credit Agreement. 5. Upon such acceptance and recording, form amd after the Assignment Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Notwithstanding anything to the contrary contained in the Credit Agreement, the Company shall not be required to reimburse the Agent, the Assignor or the Assignee for any costs and expenses (including attorney's fees) incurred by such Person in connection with this Assignment and Acceptance. 7. Upon such acceptance and recording, from and after the Assignment Date, the Agent shall make all payments in respect of the interest assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments for periods prior to the Assignment Date by the Agent or with respect to the making of this assignment directly between themselves. -3- 8. This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the State of New York. [NAME OF ASSIGNOR], By:________________________________ Name: Title: [NAME OF ASSIGNEE], By:________________________________ Name: Title: Consented and Agreed to as of the date first above written. CREDIT SUISSE, as Agent By:________________________________ Name: Title: /3/ ________________________________ 3/ Consent of the Company is required if the Assignee is not a Bank or an Affiliate of a Bank. -4- SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE (i) Percentage Interest assigned: ____________% (ii) Assignee's Commitment (without giving effect $____________ to assignments that have not yet become effective): (iii) Aggregate outstanding principal amount of Loans $____________ assigned (unreduced by any assignments thereof which have not yet become effective): (iv) Amount of reimbursement obligations (net of $____________ participations therein purchased by other Banks pursuant to the Credit Agreement) in respect of the Letters of Credit issued by the Assignor:/1/ (v) Amount of participations in reimbursement $____________ obligations in respect of the Letters of Credit issued by a Bank other than Assignor purchased by the Assignor (net of portions thereof purchased by other Banks pursuant to the Credit Agreement):/2/ [NAME OF ASSIGNOR], as Assignor By:________________________________ Name: Title: Dated:_____________________________ [NAME OF ASSIGNEE], as Assignee By:________________________________ Name: Title: Lending Office: Accepted this ____ day of _______________________, 1995 CREDIT SUISSE, as Agent By:________________________________ Name: Title: ________________________ /1/ If the Assignor is Credit Suisse, clause (iv) should be included and clause (v) omitted. /2/ If the Assignor is not Credit Suisse, clause (v) should be included and clause (iv) omitted. REVOLVING CREDIT NOTE $14,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc., HEREBY PROMISES TO PAY to the order of Bank One, Columbus, NA (the "Bank") on or before the Maturity Date (as ---- hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ---------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day finds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly -------------------------------------- Name: David A. Kelly ------------------------------------ Title: Director Treasurer and Principal ----------------------------------- Financial Officer -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_____________________________________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ============================================================================================================================= _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $14,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc., HEREBY PROMISES TO PAY to the order of The Huntington National Bank (the "Bank") on or before the Maturity ---- Date (as hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ---------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly -------------------------------------- Name: David A. Kelly ------------------------------------ Title: Director, Treasurer and Principal ----------------------------------- Financial Officer -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_____________________________________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ============================================================================================================================= _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $16,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc. , HEREBY PROMISES TO PAY to the order of Credit Suisse, (the "Bank") on or before the Maturity Date (as ---- hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ----------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. The Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly --------------------------- Name: DAVID A. KELLY ------------------------- Title: Director, Treasurer and ------------------------ Principal Financial ------------------- Officer ------- -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
- ----------------------------------------------------------------------------------------------------------------------------- End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ============================================================================================================================= _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $14,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc. , HEREBY PROMISES TO PAY to the order of NationsBank, N.A. (the "Bank") on or before the Maturity Date (as ---- hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ---------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly --------------------------- Name: DAVID A. KELLY ------------------------- Title: Director, Treasurer and ------------------------ Principal Financial ------------------- Officer ------- -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
- ------------------------------------------------------------------------------------------------------------------------------ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ============================================================================================================================= _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $14,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc., HEREBY PROMISES TO PAY to the order of Credit Lyonnais (the "Bank") on or before the Maturity Date (as ---- hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ---------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly ---------------------------- Name: DAVID A. KELLY -------------------------- Title: Director, Treasurer and ------------------------- Principal Financial ----------------------- Officer ------- -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
________________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid to Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ======================================================================================================== ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________ ________________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $14,000,000 Dated:May 2,1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc. , HEREBY PROMISES TO PAY to the order of The Chase Manhattan Bank, (the "Bank") on or before the Maturity ---- Date (as hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined)shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and able at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the terms ---------------- defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other banks . Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017 or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, Inc. By: /s/ David A. Kelly -------------------------- Name: David A. Kelly ------------------------ Title: Director, Treasurer and ----------------------- Principal Financial Officer --------------------------- -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_______________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ======================================================================================================= _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________
-3- REVOLVING CREDIT NOTE $14,000,000 Dated: May 2, 1995 FOR VALUE RECEIVED, the undersigned, Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company") ------- whose sole general partner is BCP Management Inc., HEREBY PROMISES TO PAY to the order of Wachovia Bank of Georgia, N.A. (the "Bank") on or before the Maturity ---- Date (as hereinafter defined) the lesser of (i) the amount of the Bank's Commitment and (ii) the aggregate amount of the Loans made by the Bank to the Company and outstanding on the Maturity Date. The principal amount of each Loan made by the Bank to the Company pursuant to the Credit Agreement (as hereinafter defined) shall be due and payable on the dates and in the amounts as are specified in the Credit Agreement. The Company promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and payable at such dates and times, as are specified in the Credit Agreement dated as of May 2, 1995 (as the same may from time to time be amended, modified or supplemented, the "Credit Agreement," the ---------------- terms defined therein and not otherwise defined herein being used herein as therein defined), among the Company, the Bank and certain other banks that are parties thereto, Credit Suisse, as Agent for the Bank and such other bank. Both principal and interest are payable in same day funds in lawful money of the United States of America to Credit Suisse, as Agent, at 12 East 49th Street, New York, New York 10017, or at such other place as the Agent shall designate in writing to the Company. The amount of each Loan made by the Bank to the Company and the borrowing date, the rate of interest applicable thereto and all payments made on account of principal and interest hereof, may be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided, however, that the failure of the Bank to make such notation or any error therein shall not in any manner affect the obligation of the Company to repay such Loan in accordance with the terms of this Promissory Note and the Credit Agreement. This Promissory Note may be held by the Bank for the account of its Domestic Lending Office or its Eurodollar Lending Office and may be transferred from one to the other from time to time as the Bank may determine. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Loans by the Bank to the Company from time to time, the indebtedness of the Company resulting from each such Loan being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified, and to the effect that no provision of the Credit Agreement or this Promissory Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default or intent to accelerate, protest and notice of protest and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security herefor, in whole or in part, with or without notice, before or after maturity. This Promissory Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP Management, In. By: /s/ David A. Kelly ------------------------------- Name: David A. Kelly ----------------------------- Title: Director, Treasurer and ----------------------- Principal Financial ------------------- Officer ------- -2- LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_______________________________________________________________________________________________________ End of Borrowing Interest Rate of Amount of Amount of Date or Amount Period Interest Principal Interest Unpaid Conversion and Type of Applicable Applicable Paid or Paid or Principal Notation Date Loan to Loan to Loan Prepaid Prepaid Balance Made By ======================================================================================================= _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________ _______________________________________________________________________________________________________
-3- BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP OFFICER'S CERTIFICATE I, Lawrence L. Dieker, Vice President, General Counsel and Secretary of BCP Management, Inc., a Delaware corporation and the sole general partner (the "General Partner") of Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Company"), in connection with the execution and delivery of the Credit Agreement (the "Credit Agreement", the terms defined therein being used herein as therein defined) dated as of May 2, 1995 among the Company, the banks and other financial institutions listed on the signature pages under the caption "Banks" and Credit Suisse, ("Credit Suisse"), individually as a Bank and as agent for the other Banks (in such capacity together with any other Person who becomes the Agent, the "Agent"), which Credit Agreement provides for loans for the benefit of the Company not to exceed $100,000,000 in aggregate unpaid principal amount DO HEREBY CERTIFY AS FOLLOWS on behalf of the General Partner: 1. Attached hereto as Exhibit A is true and complete copy of the certificate of incorporation, as amended and in effect, of the General Partner. 2. Attached hereto as Exhibit B is a true and complete copy of the bylaws, as amended and in effect, of the General Partner. 3. Attached hereto as Exhibit C is a true and correct copy of the Amended and Restated Agreement of Limited Partnership of the Company. 4. Attached hereto as Exhibit D is a true and correct copy of resolutions duly adopted by the Board of Directors of the General Partner. Such resolutions have not been amended, modified or revoked and are in full force and effect on the date hereof. 5. The persons named below are duly elected officers of the Company, now hold the offices set forth opposite their respective names and the signature opposite the name and title of each of them is his or her true and correct signature: Name Office Signature ---- ------ --------- David A. Kelly Director, Treasurer /s/ David A. Kelly - -------------------- ------------------------ and Principal Financial Officer Lawrence L. Dieker Vice President, General /s/ Lawrence A Dieker - -------------------- Counsel and Secretary ------------------------ 6. The representations and warranties made by the Company in any loan Document are true and correct in all material respects and no dissolution or liquidation proceedings with respect to the Company have been commenced. 7. There exists on the date hereof no Event of Default. 8. The closing under the Asset Transfer Agreement dated as of August 12, 1994 between Occidental Chemical Corporation and the Company, as amended, has occurred substantially as described in the Prospectus. 9. The closing under the Underwriting Agreement dated April 21, 1995 between the Company, BCPM, BLP Finance Corporation and CS First Boston Corporation has occurred and the Securities have been issued as described in the Prospectus. 10. The Wachovia Credit Agreement has been terminated. IN WITNESS WHEREOF, I have signed this certificate as of the 2nd day --- of May , 1995. ------ /s/ Lawrence L. Dieker --------------------- Secretary -2- EXHIBIT A State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "BCP MANAGEMENT, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY OF AUGUST, A.D. 1987, AT 10 O'CLOCK A.M. [SEAL] /s/ Edward J. Freel ------------------------------------ Edward J. Freel, Secretary of State AUTHENTICATION: 7474495 2134202 8100 DATE: 04-17-95 950083756 CERTIFICATE OF INCORPORATION OF BCP MANAGEMENT, INC. FIRST: The name of the Corporation is BCP Management, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 10,000 shares of common stock with a par value of one dollar ($1.00) per share. FIFTH: The name and mailing address of the incorporator of the Corporation are as follows: Name Address ---- ------- Steven Sutherland One First National Plaza Suite 4200 Chicago, Illinois 60603 SIXTH: The name and mailing address of the person who is to serve as director until the first annual meeting of stockholders or until his successor is elected and qualified is as follows: Name Address ---- ------- Lawrence O. Doza c/o Borden, Inc. 277 Park Avenue New York, New York 10172 SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, subject to any specific limitation on such power provided by any By-Laws adopted by the stockholders. EIGHTH: Elections of directors need not be by written ballot unless the By-Laws of the Corporation so provide. NINTH: The Corporation is to have perpetual existence. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this reservation. ELEVENTH: A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Any repeal or modification of this Section A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. B. (1) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and -2- amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (2) of this Section B - -------- ------- with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section B shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State -------- ------- of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of & proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section B or otherwise. (2) If a claim under paragraph (1) of this Section B is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of -3- Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section B shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise. (4) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another Corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. (5) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Section B with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, makes this Certificate, hereby declaring and certifying that the facts herein stated are true, and accordingly has hereunto set his hand this 5th day of August, 1987. --- /s/ Steven Sutherland ----------------------------- Steven Sutherland -4- BYLAWS ------ OF -- BCP MANAGEMENT, INC. -------------------- ARTICLE I --------- Stockholders' Meetings ---------------------- Section 1. Annual Meeting. The annual meeting of stockholders for -------------- the election of directors and the transaction of such other business as may properly come before it shall be held on the first Monday of April of each year, or such other date, and at such time and place, within or without the State of Delaware, as shall be determined by resolution of the Board of Directors. If the day fixed for the annual meeting is a legal holiday, such meeting shall be held on the next succeeding business day. Section 2. Special Meeting. Special meetings of stockholders may be --------------- called by the Board of Directors or the Chairman of the Board of Directors and shall be called by the Chairman of the Board of Directors or the Secretary at the request in writing, stating the purpose or purposes thereof, of holders of at least a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote. Special meetings of stockholders may be held at such places, within or without the State of Delaware, as may be specified in the call of any meeting. Section 3. Notice of Meetings and Adjourned Meetings. Written notice ----------------------------------------- of every meeting of stockholders stating the place, date, time and purposes thereof, shall, except when otherwise required by the laws of Delaware, be mailed at least ten but not more than sixty days prior to the meeting to each stockholder of record entitled to vote thereat. Any meeting at which a quorum of stockholders is present, in person or by proxy, may adjourn from time to time without notice other than announcement at such meeting until its business is completed. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 4. Quorum. The holders of a majority of the shares of ------ capital stock issued and outstanding and entitled to vote, present in person or by proxy, shall, except as otherwise provided by law, constitute a quorum for the transaction of business at all meetings of stockholders. If at any meeting a quorum is not present, the chairman of the meeting or the holders of the majority of the shares of stock present or represented may adjourn the meeting from time to time until a quorum is present. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. The stockholders present or represented at a duly called or held meeting at which a quorum is present may continue to transact business until final adjournment notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 5. Voting. Except as provided in the Certificate of ------ Incorporation of the Corporation, each holder of capital stock entitled to vote at a stockholders' meeting shall, as to all matters in respect of which such capital stock has voting rights, be entitled to one vote in person or by written proxy for each share of capital stock owned of record by him, but no proxy shall be voted or acted upon after three years from its date unless the proxy provides for a longer period. No vote upon any matter need be by ballot unless demanded by the holders of at least ten per cent of the shares represented and entitled to vote at the meeting. All elections shall be decided by a plurality of the votes cast and all other questions or matters shall be decided by a majority of the votes cast, unless otherwise required by the laws of Delaware, the Certificate of Incorporation or these bylaws. Section 6. Consent of Stockholders in Lieu of Meeting. Any action ------------------------------------------ required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. -2- ARTICLE II ---------- Directors --------- Section 1. Number, Election and Term of Office of Directors. The ------------------------------------------------ number of directors shall be fixed from time to time resolution of the Board of Directors. Each director shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders. Section 2. Resignation or Removal. Any director may resign by giving ---------------------- written notice to the Board of Directors or the Chairman of the Board of Directors, any such resignation shall take effect at the time of receipt of notice thereof or at any later time specified therein, and, unless expressly required, acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by the Certificate of Incorporation, any director may be removed, with or without cause, by the affirmative vote or consent of the holders of a majority of the shares of capital stock issued and outstanding and entitled to vote. Section 3. Vacancies. Except as otherwise required by the --------- Certificate of Incorporation, any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by the stockholders. A director elected to fill a vacancy shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Except as otherwise required by the Certificate of Incorporation, when one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this Section for the filling of other vacancies. Section 4. Place of Meetings. Meetings of the Board of Directors may ----------------- be held at such places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as may be specified in the call of any meetings. Section 5. Regular Meetings. A regular annual meeting of the Board ---------------- of Directors shall be held without call or notice immediately after and at the same general place as the annual meeting of stockholders, or at such other time or place as determined by the stockholders at such meeting, for -3- the purpose of organizing the Board of Directors, electing officers and transacting any other business that may properly come before the meeting. Additional regular meetings of the Board of Directors may be held without call or notice at such place and at such time as shall be fixed by resolution of the Board of Directors. Section 6. Special Meetings. Special meetings of the Board of ---------------- Directors may be called by the Chairman of the Board of Directors or at least a majority of the directors then in office. Notice of special meetings either shall be mailed by the Secretary to each director at least three days before the meeting or shall be given personally or telegraphed or telecopied to each director by the Secretary at least twenty-four hours before this meeting. Such notice shall set forth the date, time and place of such meeting but need not, unless otherwise required by law, state the purpose of the meeting. Section 7. Quorum and Voting. A majority of the entire Board of ----------------- Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless otherwise provided by the laws of Delaware, the Certificate of Incorporation or these bylaws. A majority of the directors present at any meeting at which a quorum is present may adjourn the meeting to any other date, time or place without further notice other than announcement at the meeting. If at any meeting a quorum is not present, a majority of the directors present may adjourn the meeting to any other date, time or place without notice other than announcement at the meeting until a quorum is present. Section 8. Compensation. The directors shall be paid their ------------ reasonable expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 9. Telephonic Meetings. Members of the Board of Directors ------------------- may participate in a meeting of the Board of Directors, by means of conference telephone or other similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. Section 10. Independent Committee. So long as the Corporation is a --------------------- general partner of Borden Chemicals and -4- Plastics Limited Partnership ("the Partnership"), the Board of Directors shall from time to time by resolution designate an Independent Committee to consist of three members of the Board of Directors, each of which shall not be an officer of the Corporation or of any corporate stockholder of the Corporation which owns a majority of the capital stock of the Corporation. The Independent Committee shall examine and resolve any matter required to be submitted to such Committee by the Agreement of Limited Partnership of the Partnership and any matter submitted to such Committee by a vote of the majority of the entire Board of Directors. The Board of Directors shall have the power at any time to change the membership of such Committee and to fill vacancies in such Committee, subject to the requirements in the first sentence of this Section 10. The Independent Committee may make rules for the conduct of its business and may appoint such committees and assistants as it shall from time to time deem necessary. ARTICLE III ----------- Officers -------- Section 1. Number, Qualification, Election and Term of Office. The -------------------------------------------------- officers of the Corporation shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and such other officers, including one or more Vice-Presidents (who may be designated by different classes) and one or more Assistant Secretaries and Assistant Treasurers, as the Board of Directors may from time to time deem advisable. Each officer of the Corporation shall be elected by the Board of Directors and shall hold office until his successor shall have been elected and qualified, or until his earlier resignation or removal. Section 2. Removal and Vacancies. All officers shall serve at the --------------------- pleasure of the Board of Directors. Any officer may be removed by the Board of Directors at any time with or without cause. A vacancy in any office shall be filled by the Board of Directors. Section 3. The Chairman of the Board. The Chairman of the Board of ------------------------- Directors shall be the chief executive officer of the Corporation and shall preside at all meetings of stockholders and at all meetings of the Board of Directors. He shall have general and active supervision over the property business and affairs of the Corporation. The Chairman of the Board may sign, execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations, and shall have such further duties as are incident to the office of the Chairman of the Board of -5- Directors or prescribed by law or as shall from time to time be designated by the Board of Directors. Section 4. The President. The President shall, subject to the ------------- direction and control of the Chairman of the Board of Directors, be the chief operating officer of the Corporation and have such duties and powers as shall from time to time be designated by the Board of Directors or by the Chairman of the Board of Directors. Section 5. The Vice-Presidents. In the absence of the President or ------------------- in the event of his inability or refusal to act, the Vice-President, if any (or, if there be more than one, the Vice-Presidents in the order designated by the Chairman of the Board of Directors, subject to revision by the Board of Directors, and, absent such designation or revision, in the order of their first election to that office), shall perform the duties and discharge the responsibilities of the President. They shall have such other duties and powers as shall from time to time be designated by the Board of Directors or by the Chairman of the Board of Directors. Section 6. The Secretary and Assistant Secretaries. The Secretary, --------------------------------------- or in the event of his absence or inability or refusal to act, the Assistant Secretary, if any (or, if there be more than one, the Assistant Secretaries in the order designated by the Chairman of the Board of Directors, subject to revision by the Board of Directors, and, absence such designation or revision, in order of their first election to that office), shall be the keeper of the corporate seal and records (except those kept by the Treasurer), and shall give notice of, attend and record minutes of meetings of stockholders and directors. The Secretary or any Assistant Secretary shall have authority to affix the corporate seal to any instrument requiring it, and when so affixed, the corporate seal may be attested by the signature of the Secretary or any Assistant Secretary. The Secretary and any Assistant Secretaries shall have such other duties as may be prescribed by the Board of Directors or by the Chairman of the Board of Directors. Section 7. The Treasurer and Assistant Treasurers. The Treasurer, -------------------------------------- or, in the event of his absence or inability or refusal to act, the Assistant Treasurer, if any (or, if there be more than one, the Assistant Treasurers in the order designated by the Chairman of the Board of Directors, subject to revision by the Board of Directors, and, absent such designation or revision, in the order of their first election to that office), shall be responsible for (i) the custody and safekeeping of all of the funds of the Corporation, (ii) the receipt and deposit of all moneys paid to the Corporation, (iii) where necessary or appropriate, the endorsement for -6- collection on behalf of the Corporation of all checks, drafts, notes, and other obligations payable to the Corporation, (iv) the disbursement of funds of the Corporation under such rules as the Board of Directors may from time to time adopt, (v) keeping full and accurate records of all receipts and disbursements, and (vi) the performance of such further duties as are incident, to the office of Treasurer or as may from time to time be prescribed by the Board of Directors or by the Chairman of the Board of Directors. Section 8. Other Officers. Any other officers elected pursuant to -------------- Section 1 of this Article III shall have such duties as are prescribed by the Board of Directors. ARTICLE IV ---------- Stock Certificates and Transfer Books ------------------------------------- Section 1. Certificate. Every stockholder shall be entitled to have ----------- a certificate, in such form as the Board of Directors shall from time to time approve, signed by or in the name of the Corporation by the Chairman of the Board of Directors, the President or any Vice-President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, certifying the number of shares owned by him. Section 2. Facsimile Signatures. Where a certificate is -------------------- countersigned (a) by a transfer agent other than the Corporation or its employee, or (b) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Record Ownership. A record of the name and address of the ---------------- holder of each certificate, the number of shares represented thereby, and the date of issue, thereof, shall be made on the Corporation's books. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person whether or not it shall have express or other notice thereof, except as required by the laws of the State of Delaware. Section 4. Lost Certificates. Any person claiming a stock ----------------- certificate in lieu of one Lost, stolen, mutilated or destroyed shall give the Corporation an affidavit as to his ownership of the certificate and of the facts as to its loss, theft, mutilation or destruction. He shall also, if required by the Board of Directors, give the Corporation a bond, in such form and amount as may be approved by the Board of Directors, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or theft of the certificate or the issuance of a new certificate. Section 5. Transfer Agent or Registrar. The Corporation may maintain --------------------------- one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of stock of the Corporation shall be transferable. The Corporation may also maintain one or more registry offices, each in charge of a registrar designated by the Board of Directors, wherein such shares of stock shall be registered. Section 6. Transfer of Stock. Transfer of shares shall, except as ----------------- provided in Section 4 of this Article IV, be made on the books of the Corporation only by direction of the person named in the certificate or his attorney, lawfully constituted in writing, and only upon the surrender for cancellation of the certificate therefor, duly endorsed or accompanied by a written assignment of the shares evidenced thereby. Section 7. Fixing Date for Determination of Stockholders of Record. ------------------------------------------------------- (a) In order that the Corporation may determine the stockholders entitled to notice of or to Vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. (b) If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. -8- (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (3) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new -------- ------- record date for the adjourned meeting. ARTICLE V --------- General Provisions ------------------ Section 1. Offices. The registered office of the Corporation in ------- Delaware shall be in the City of Wilmington, County of New Castle. The Corporation may have such other offices as the Board of Directors may from time to time determine. The books of the Corporation may be kept outside the State of Delaware. Section 2. Seal. The corporation's seal shall have inscribed thereon ---- the name of the Corporation, the year of its organization and the words "corporate seal - Delaware." Section 3. Fiscal Year. The fiscal year of the Corporation shall be ----------- fixed by resolution of the Board of Directors. Section 4. Inspection of Books. Subject to laws of the State of ------------------- Delaware, the directors shall determine from time to time whether, and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. Section 5. Reliance on Records. Each director and officer shall in ------------------- the performance of his duties be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officials, -9- or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors, or in relying in good faith upon other records of the Corporation. Section 6. Waiver of Notice. Whenever any notice is required to be ---------------- given, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Section 7. Indemnification. (a) Each person who was or is made a --------------- party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (b) of this Section 7 - ----------------- with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 7 shall be a contrast right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State ----------------- of Delaware requires, the payment of such expenses incurred by a director of offi- -10- cer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 7 or otherwise. (b) If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section 7 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation -11- would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. (e) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Section 7 with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. Section 8. Amendments to Bylaws. These bylaws may be amended, altered -------------------- or repealed by the stockholders or by the Board of Directors. -12- EXHIBIT C AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP TABLE OF CONTENTS
Page ---- ARTICLE I ORGANIZATIONAL MATTERS.................................... 1 1.1 Formation and Continuation................................ 1 1.2 Name...................................................... 1 1.3 Registered Office; Principal Office....................... 2 1.4 Power of Attorney......................................... 2 1.5 Term...................................................... 4 ARTICLE II DEFINITIONS............................................... 4 ARTICLE III PURPOSE................................................... 11 3.1 Purpose and Business...................................... 11 3.2 Powers.................................................... 12 ARTICLE IV CAPITAL CONTRIBUTIONS..................................... 13 4.1 Initial Contributions..................................... 13 4.2 Return of Initial Contributions........................... 13 4.3 Contributions by General Partner, Organizational Limited Partner and Investor Partnership........................ 14 4.4 No Preemptive Rights...................................... 14 4.5 Capital Accounts.......................................... 15 4.6 Interest.................................................. 18 4.7 No Withdrawal............................................. 18 4.8 Loans from Partners....................................... 18 ARTICLE V ALLOCATIONS AND DISTRIBUTIONS............................. 18 5.1 Allocations for Tax Purposes.............................. 18 5.2 Allocations for Capital Account Purposes.................. 20 5.3 Requirement of Distributions.............................. 21 ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS...................... 22 6.1 Management................................................ 22 6.2 Certificate of Limited Partnership........................ 23 6.3 Restrictions on General Partner's Authority............... 24 6.4 Reimbursement of the General Partner...................... 25 6.5 Outside Activities........................................ 26
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Page ---- 6.6 Loans to and from the General Partner; Contracts with Affiliates.............................................. 27 6.7 Indemnification........................................... 28 6.8 Liability of Indemnitees.................................. 29 6.9 Resolution of Conflicts of Interest....................... 30 6.10 Other Matters Concerning the General Partner.............. 31 6.11 Title to Partnership Assets............................... 32 6.12 Limitations Regarding Certain Actions..................... 32 6.13 Reliance by Third Parties................................. 32 ARTICLE VII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER............. 33 7.1 Limitation of Liability................................... 33 7.2 Management of Business.................................... 33 7.3 Return of Capital......................................... 33 7.4 Rights of the Limited Partner Relating to the Partnership. 33 ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS.................... 34 8.1 Records and Accounting.................................... 34 8.2 Fiscal Year............................................... 35 8.3 Reports................................................... 35 ARTICLE IX TAX MATTERS............................................... 35 9.1 Preparation of Tax Returns................................ 35 9.2 Tax Elections............................................. 35 9.3 Tax Controversies......................................... 36 9.4 Organizational Expenses................................... 36 9.5 Withholding............................................... 36 ARTICLE X TRANSFER OF INTERESTS..................................... 36 10.1 Transfer.................................................. 36 10.2 Transfer of General Partner's Partnership Interest........ 37 10.3 Transfer of Interest of Limited Partner................... 37 ARTICLE XI ADMISSION OF PARTNERS..................................... 37 11.1 Admission of Substituted Limited Partner.................. 37
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Page ---- 11.2 Admission of Successor General Partner................... 37 11.3 Amendment of Agreement and Certificate of Limited Partnership............................................ 37 ARTICLE XII WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER............. 38 12.1 Withdrawal or Removal of General Partner................. 38 12.2 Interest of Departing Partner and Successor.............. 38 12.3 Reimbursement of Departing Partner....................... 38 ARTICLE XIII DISSOLUTION AND LIQUIDATION.............................. 38 13.1 Dissolution.............................................. 38 13.2 Continuation of the Business of the Partnership after Dissolution............................................ 40 13.3 Liquidation.............................................. 41 13.4 Distributions in Kind.................................... 42 13.5 Cancellation of Certificate of Limited Partnership....... 42 13.6 Reasonable Time for Winding Up........................... 42 13.7 Return of Capital........................................ 43 13.8 No Capital Account Restoration........................... 43 13.9 Waiver of Partition...................................... 43 ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT....................... 43 14.1 Amendment to Be Adopted Solely by General Partner........ 43 14.2 Amendment Procedures..................................... 44 14.3 Prohibited Amendments.................................... 44 ARTICLE XV GENERAL PROVISIONS....................................... 45 15.1 Addresses and Notices.................................... 45 15.2 Titles and Captions...................................... 45 15.3 Pronouns and Plurals..................................... 45 15.4 Further Action........................................... 45 15.5 Binding Effect........................................... 45 15.6 Integration.............................................. 45 15.7 Creditors................................................ 45 15.8 Waiver................................................... 45 15.9 Counterparts............................................. 46
-iii- 15.10 Applicable Law........................................... 46 15.11 Invalidity of Provisions................................. 46 -iv- AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP dated as of November 30, 1987 is entered into by and among BCP Management, Inc., a Delaware corporation as the General Partner, Borden, Inc., a New Jersey corporation as the Organizational Limited Partner, and Borden Chemicals and Plastics Limited Partnership, a Delaware limited partnership (the "Limited Partner" or "Investor Partnership"), together with any other Persons who become Partners, as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I ORGANIZATIONAL MATTERS 1.1 Formation and Continuation. The General Partner and the -------------------------- Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership in its entirety. Subject to the provisions of this Agreement, the General Partner and the Organizational Limited Partner hereby continue the Partnership as a limited partnership pursuant to the provisions of the Delaware Act. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes. 1.2 Name. The name of the Partnership shall be "Borden Chemicals ---- and Plastics Operating Limited Partnership." The Partnership's business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partner of such change. Notwithstanding the foregoing, unless otherwise permitted by the Organizational Limited Partner, in the event that neither BCP Management, Inc. nor a Subsidiary of Borden is the general partner of the Partnership, the Partnership shall change its name to a name not including "Borden" and shall cease using the name "Borden" or other names or symbols associated therewith. 1.3 Registered Office; Principal Office. The address of the ----------------------------------- registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be Highway 73, Geismar, Louisiana 70734, or such other place as the General Partner may from time to time designate by notice to the Limited Partner. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. 1.4 Power of Attorney. (a) The Limited Partner hereby constitutes ----------------- and appoints each of the General Partner and the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including without limitation this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems reasonable and appropriate or necessary to form, qualify, or continue the existence or qualification of, the Partnership as a limited partnership (or a partnership in which limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all instruments that the General Partner or the Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (C) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the -2- terms of this Agreement, including a certificate of cancellation; and (D) all instruments relating to the admission, withdrawal or substitution of any Partner pursuant to Articles X, XI or XII or the Capital Contribution of any Partner; (ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when -------- the consent or approval of the Limited Partner is required by any other provision of this Agreement, the General Partner or the Liquidator may exercise the power of attorney made in this subsection (ii) only after the necessary consent or approval of the Limited Partner. Nothing herein contained shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIV or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of the Limited Partner, the transfer of all or any portion of the Limited Partner's Partnership Interest and shall extend to the Limited Partner's heirs, successors, assigns and personal representatives. The Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator, acting in good faith pursuant to such power of attorney; and the Limited Partner hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator, taken in good faith under such power of attorney. The Limited Partner shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner's or the Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. -3- 1.5 Term. The Partnership commenced upon the filing of the ---- Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the close of Partnership business on December 31, 2082, or until the earlier termination of the Partnership in accordance with the provisions of Article XIII. ARTICLE II DEFINITIONS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Acquired Facilities" shall mean the interest in the manufacturing and ------------------- production facilities located at Geismar, Louisiana and Illiopolis, Illinois which were transferred to the Partnership by Borden, the General Partner and the Investor Partnership, as such facilities may be maintained or improved from time to time, subject to the provisions of Article VI hereof. "Adjusted Property" means any property the Carrying Value of which has ----------------- been adjusted pursuant to Section 4.5(d)(i) or (d)(ii). "Affiliate" means any Person that directly or indirectly controls, is --------- controlled by, or is under common control with, the Person in question; provided, that neither the Partnership nor the Investor Partnership shall be - -------- deemed an Affiliate of Borden or the General Partner. As used in the definition of "Affiliate" the term "control" means the procession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Agreed Value" of any Contributed Property means the fair market value ------------ of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, that the Agreed Value of any property deemed contributed -------- to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.5(c) hereof. Subject to Section 4.5(c), the General Partner shall, in its discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties transferred to the Partnership in a single or integrated transaction among each -4- separate property on a basis proportional to their fair market values. "Agreement" means this Amended and Restated Agreement of Limited --------- Partnership, as it may be amended, supplemented or restated from time to time. "Available Cash," with respect to any quarter within any calendar -------------- year, means (i) the sum of (a) the cash receipts of the Partnership during such quarter from all sources and (b) any reduction in reserves established in prior quarters, less (ii) the sum of (aa) all cash disbursements of the Partnership during such quarter, including, without limitation, disbursements for operating expenses, taxes, debt service (including payments of principal, premium and interest) and capital items (but excluding all cash distributions to Partners), (bb) any reserves established in such quarter in such amounts as the General Partner shall deem to be necessary in the reasonable discretion of the General Partner or appropriate in its reasonable discretion to provide for the proper conduct of the business of the Partnership (including reserves for future capital expenditures), and (cc) any other reserves in such amounts as are necessary in the reasonable discretion of the General Partner because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party (including, without limitation, the Note Agreement) or by which it is bound or its assets are subject. Notwithstanding the foregoing, "Available Cash" shall not include any cash receipts or reductions in reserves or take into account any disbursements made or reserves established after commencement of the dissolution and liquidation of the Partnership. "Book-Tax Disparities" means the differences between a Partner's -------------------- Capital Account balance as maintained pursuant to Section 4.5, and such balance had such Capital Account been maintained strictly in accordance with tax accounting principles (such disparities reflecting the differences between the Carrying Value of either Contributed Properties or Adjusted Properties, as adjusted from time to time, and the adjusted basis thereof for federal income tax purposes). "Borden" means Borden, Inc., a New Jersey corporation. ------ "Borden Delaware" means Borden Delaware Holdings, Inc., a Delaware --------------- Corporation. "Business Day" means Monday through Friday of each week, except that a ------------ legal holiday recognized as such by the -5- government of the United States or the states of Delaware, Louisiana, Illinois or New York shall not be regarded as a Business Day. "calendar quarter" or "quarter" means any calendar quarter or, at the ---------------- ------- election of the General Partner, (i) any period commencing on January 1 and comprised of not less than 12 nor more than 13 weeks, as determined by the General Partner (ii) any period commencing on the day next following any period referred to in clause (i) and comprised of approximately 13 weeks, as determined by the General Partner (iii) any period commencing on the day next following any period referred to in clause (ii) and comprised of approximately 13 weeks, as determined by the General Partner and (iv) any period commencing on the day next following any period referred to in clause (iii) and ending on the next following December 31. "Capital Account" means the capital account maintained for a Partner --------------- pursuant to Section 4.5. "Capital Contribution" means any cash, cash equivalents or the Net -------------------- Agreed Value of Contributed Property which a Partner contributes to the Partnership pursuant to Section 4.1, 4.2, 4.3 or 12.2(c). "Carrying Value" means (a) with respect to a Contributed Property, the -------------- Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Partners' Capital Accounts, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 4.5(d)(i) and 4.5(d)(ii), and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "Certificate" means a certificate issued by the Partnership evidencing ----------- ownership of one or more Partnership Interests. "Certificate of Limited Partnership" means the Certificate of Limited ---------------------------------- Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2, as such Certificate may be amended and/or restated from time to time. "Chemical Products" shall mean (i) methanol, ammonia, formaldehyde, ----------------- urea, acetylene, acetylene-based vinyl chloride monomer, ethylene-based vinyl chloride monomer, -6- urea-formaldehyde concentrate, acetic acid, general purpose and specialty purpose polyvinyl chloride resins and industrial gases produced in connection with the production of the foregoing, (ii) any other basic chemical products approved from time to time by Special Approval of the General Partner, and (iii) any chemical or other by-products of the products set forth in or referred to in clause (i) or clause (ii) above. "Code" means the Internal Revenue Code of 1986, as amended and in ---- effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Commencement Date" means November 30, 1987. ----------------- "Common Unit" has the meaning set forth in the Investor Partnership ----------- Agreement. "Contributed Property" means each property or other consideration, in -------------------- such form as may be permitted by the Delaware Act, but excluding cash and cash equivalents, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.5(d)(i), such property shall no longer constitute a Contributed Property for purposes of Section 5.1, but shall be deemed an Adjusted Property for such purposes. "Contributing Partner" means each Partner contributing (or deemed to -------------------- have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property. "Conveyance Agreement" means the Conveyance and Transfer Agreement -------------------- dated as of the Commencement Date among Borden, Borden Delaware, the General Partner, the Partnership and the Investor Partnership. "Delaware Act" means the Delaware Revised Uniform Limited Partnership ------------ Act, 6 Del. C. (S) 17-101, et seq., as it may be amended from time to time, and --- - ------- any successor to such statute. "Departing Partner" means a former General Partner, as of the ----------------- effective date of any withdrawal or removal of such former General Partner pursuant to Section 12.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and any successor to such statute. -7- "General Partner" means BCP Management, Inc., a Delaware corporation, --------------- or any of its successors in its capacity as general partner of the Partnership. "Indemnitiee" means the General Partner, any Departing Partner, any ----------- Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was an officer, director, employee, partner, agent or trustee of the General Partner or any Departing Partner or any such Affiliate, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any such Affiliate as a director, officer, employee, agent or trustee of another Person. "Independent Committee" means a comittee of the Board of Directors of --------------------- the General Partner composed of all directors who are neither officers, employees, or directors of Borden or any of its Affiliates, other than the General Partner, nor officers or employees of the General Partner. "Intercompany Agreement" means the Intercompany Agreement dated as of ---------------------- the Commencement Date among Borden, the Partnership, the Investor Partnership and the General Partner. "Investor Partnership" means Borden Chemicals and Plastics Limited -------------------- Partnership, a Delaware limited partnership. "Investor Partnership Agreement" means the Amended and Restated ------------------------------ Agreement of Limited Patnership of the Investor Partnership, dated as of the Commencement Date, as it may be amended, supplemented or restated from time to time. "License Agreements" means, collectively, the Use of Name and ------------------ Trademark License Agreement and the Patent and Know-How Agreement, in each case among Borden, the Partnership and the Investor Partnership and dated as of the Commencement Date. "Limited Partner" means any Person who is a limited partner of the --------------- Partnership other than the Organizational Limited Partner (i.e., the Investor ---- Partnership and each Substituted Limited Partner) and shown as a Limited Partner on the books and records of the Partnership. "Liquidator" means the General Partner or the Person (other than the ---------- General Partner) approved pursuant to Section 13.3 who performs the functions described therein. "Minimum Gain" has the meaning as set forth in Section 5.2(d). ------------ -8- "NASDAQ" means the National Association of Securities Dealers ------ Automated Quotation System. "Net Agreed Value" means (a) in the case of any Contributed Property, ---------------- the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code. "Note Agreement" means the Note Agreement dated November 20, 1987 -------------- regarding the issuance by the Partnership of the Notes. "Notes" means the $150,000,000 aggregate principal amount 10.70% and ----- 11.10% Senior Notes of the Partnership. "Operative Agreements" means, collectively, (a) the Purchase -------------------- Agreements, (b) the Distribution Support Agreement (as defined in the Investor Partnership Agreement), (c) the License Agreements, (d) the Intercompany Agreement, (e) the Environmental Indemnity Agreement dated as of the Commencement Date among Borden, the Investor Partnership and the Partnership and (f) the Lease Agreement dated as of the Commencement Date, between Borden and the Partnership. "Opinion of Counsel" means a written opinion of counsel (who may be ------------------ regular counsel to the Partnership or the General Partner) acceptable to the General Partner. "Organizational Limited Partner" means Borden in its capacity as the ------------------------------ organizational limited partner pursuant to this Agreement. "Outstanding" means the Partnership Interests of the Limited Partner ----------- issued by the Partnership and shown on the Partnership's books and records to be outstanding. "Partner" means a General Partner or a Limited Partner. ------- "Partnership" means the limited partnership formed and continued ----------- pursuant to this Agreement and any successor thereto. "Partnership Interest" means the interest of a Partner in the -------------------- Partnership. -9- "Partnership Year" means the fiscal year of the Partnership, which ---------------- shall be the calendar year. "Percentage Interest" means (a) as to the General Partner, 1.0101%, ------------------- and (b) as to the Limited Partner, 98.9899% "Person" means an individual or a corporation, partnership, trust, ------ unincorporated organization, association or other entity. "Preference Unit" has the meaning set forth in the Investor --------------- Partnership Agreement. "Purchase Agreements" means collectively, the PVC Purchase Agreement, ------------------ the Ammonia Purchase Agreement, the Urea Purchase Agreement, the Methanol Purchase Agreement, the Formaldehyde Processing Agreement and the Urea- Formaldehyde Processing Agreement, in each case between Borden and the Partnership and dated as of the Commencement Date. "Recapture Income" means any gain recognized by the Partnership ------------------ (computed without regard to any adjustment required by Sections 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Recaptured Credits" means any credits previously taken against ------------------ federal income tax liability which are required under the Code to be recaptured upon the disposition of any property by the Partnership prior to the end of such property's useful life used in determining the amount of the credit relating thereto. "Registration Statement" means the Registration Statement on Form S-1 ---------------------- (Registration No. 33-17057), as it has been or as it may be amended or supplemented from time to time, filed by the Investor Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Depositary Preference Units (as defined in the Investor Partnership Agreement) of the Investor Partnership in the Initial Offering (as so defined). "Residual Gain" or "Residual Loss" shall mean any net gain or net ------------- ------------- loss. As the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such net gain or net loss, is not allocated pursuant to Section 5.1(f) or 5.1(g) to eliminate Book-Tax Disparities. -10- "Securities Act" means the Securities Act of 1933, as amended, and any -------------- successor to such statute. "Service Agreement" means the Service Agreement between Borden and the ----------------- Partnership and dated as of the Commencement Date. "Special Approval" means approval by a majority of the members of the ---------------- Board of Directors of the General Partner that includes approval by a majority of the members of the Independent Committee. "Subsidiary" means, with respect to any Person, any corporation or ---------- other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Substituted Limited Partner" means a Person who is admitted as a --------------------------- Limited Partner to the Partnership pursuant to Section 11.1 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. "Unitholder" means any limited partner in the Investor Partnership or ---------- any assignee of a Unit. "Unit" has the meaning set forth in the Investor Partnership ---- Agreement. "Unrealized Gain" attributable to a Partnership property means, as of --------------- any date, the excess, if any, of the fair market value of such property (as determined under Section 4.5(d)) as of such date over the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.5(d) as of such date). "Unrealized Loss" attributable to a Partnership property means, as of --------------- any date, the excess, if any , of the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.5(d) as of such date) over the fair market value of such property (as determined under Section 4.5(d) as of such date). ARTICLE III PURPOSE 3.1 Purpose and Business. The purpose and nature of the business to -------------------- be conducted by the Partnership shall be (i) to engage in the manufacture and production of the Chemical Products at the Acquired Facilities and sell or otherwise distribute such Chemical Products and, in -11- connection therewith, to operate, maintain and improve the Acquired Facilities, (ii) to conduct any other business that may be lawfully conducted by a limited partnership organized pursuant to the Delaware Act, and (iii) to do anything necessary or incidental to the foregoing; provided, that without Special -------- Approval of the General Partner, the Partnership shall not (a) expand the annual capacity of the Acquired Facilities for the production of formaldehyde to any capacity in excess of an aggregate of 385,000,000 pounds per year, (b) expand the definition of Chemical Products, as permitted by the definition thereof, or (c) engage in any other business as contemplated by clause (ii) above. The General Partner has no duty to the Partnership or the Limited Partner to propose or approve, and in its sole discretion may decline to propose or approve, any of the matters referred to in clause (a), (b) or (c) of the proviso to the foregoing sentence. 3.2 Powers. The Partnership shall be empowered to do any and all ------ acts and things necessary, appropriate, proper, advisable, incidental to , or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, including, without limitation, the following: (a) To borrow money and issue evidences of indebtedness, and to secure the same by mortgages, deeds of trust, security interests, pledges, or other liens on all or any part of the assets and properties of the Partnership; (b) To secure and maintain insurance against liability or other loss with respect to the activities and assets of the Partnership (including, without limitation, insurance against liabilities under Section 6.7); (c) To employ or retain such Persons as may be necessary or appropriate for the conduct of the Partnership's business, including permanent, temporary, or part-time employees and independent attorneys, accountants, consultants, and contractors; (d) To acquire, own, hold a leasehold interest in, maintain, use, lease, sublease, manage, operate, sell, exchange, transfer, or otherwise deal in assets and property as may be necessary or convenient for the purposes and business of the Partnership; (e) To incur expenses and to enter into, guarantee, perform, and carry out contracts or commitments of any kind, to assume obligations, and -12- to execute, deliver, acknowledge, and file documents in furtherance of the purposes and business of the Partnership; (f) To pay, collect, compromise, arbitrate, litigate, or otherwise adjust, contest, or settle any and all claims or demands of or against the Partnership; (g) To invest in interest-bearing and non-interest bearing accounts and short term investments, including, without limitation, obligations of federal, state, and local governments and their agencies, mutual funds (including money market funds), commercial paper, time deposits, letters of credit, and certificates of deposit of commercial banks, savings banks, or savings and loan associations; and (h) To engage in any kind of activity and to enter into and perform obligations of any kind necessary to or in connection with, or incidental to, the accomplishment of the purposes and business of the Partnership, so long as such activities and obligations may be lawfully engaged in or performed by a limited partnership under the Delaware Act. ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Initial Contributions. In order to form the Partnership under --------------------- the Delaware Act, the General Partner has made an initial contribution to the capital of the Partnership of $10 and has accepted a contribution to the capital of the Partnership in the amount of $990 from the Organizational Limited Partner for an interest in the Partnership, and the Organizational Limited Partner has been admitted to the Partnership as a limited partner of the Partnership. 4.2 Return of Initial Contributions. As of the Commencement Date and ------------------------------- after giving effect to the transactions contemplated by Section 4.3 hereof and the admission to the Partnership of the Investor Partnership as the Limited Partner in accordance with this Agreement, the interest in the Partnership of the Organizational Limited Partner shall be terminated, the $10 contributed by the General Partner and the $990 contributed by the Organizational Limited Partner as an initial contribution shall be refunded, and the Organizational Limited Partner shall withdraw as a limited partner. Ninety-nine percent of any interest or other profit -13- which may have resulted from the investment or other use of such initial contribution shall be allocated and distributed to the Organizational Limited Partner and the balance thereof shall be allocated and distributed to the General Partner. 4.3 Contributions by General Partner, Organizational Limited Partner ---------------------------------------------------------------- and Investor Partnership. Pursuant to the Conveyance Agreement, on the - ------------------------ Commencement Date, (i) the General Partner shall contribute, transfer, convey, assign and deliver or cause to be contributed, transferred, conveyed, assigned and delivered, to the Partnership the property and other consideration described in the Conveyance Agreement as being so contributed, transferred, conveyed, assigned and delivered, as and to the extent provided in the Conveyance Agreement, in exchange for a Partnership Interest as a general partner in the Partnership representing a 1.0101% Percentage Interest and the payment and distribution of 1.0101% of the net proceeds from the issuance and sale of the Notes; (ii) the Investor Partnership shall contribute, transfer, convey, assign and deliver, or cause to be contributed, transferred, conveyed, assigned and delivered, to the Partnership the property and other consideration described in the Conveyance Agreement as being so contributed, transferred, conveyed, assigned and delivered, as and to the extent provided in the Conveyance Agreement, in exchange for a Partnership Interest as a limited partner in the Partnership representing a .9899% Percentage Interest and the payment and distribution of .9899% of the net proceeds from the issuance and sale of the Notes; and (iii) the Organizational Limited Partner shall contribute, sell, transfer, convey, assign and deliver or cause to be contributed, sold, transferred, conveyed, assigned and delivered, to the Partnership the property and other consideration described in the Conveyance Agreement as being so contributed, as and to the extent provided in the Conveyance Agreement, in exchange for a Partnership Interest as a limited partner in the Partnership representing a 98.0000% Percentage Interest and the payment and distribution of 98.0000% of the net proceeds from the issuance and sale of the Notes. As provided for in the Conveyance Agreement, the Organizational Limited Partner shall, immediately after the contribution, sale, transfer, conveyance, assignment and delivery referred to in clause (iii) above, contribute, sell, transfer, convey, assign and deliver all of the Partnership Interest (representing a 98.0000% Percentage Interest as a limited partner) received in exchange therefor to the Investor Partnership in exchange for 28,125,000 Preference Units and 8,625,000 Common Units representing a 99% partnership interest in the Investor Partnership, and the Investor Partnership shall be admitted to the Partnership as a Limited Partner. The Limited Partner, with the consent of the General Partner, may, but shall not be obligated to, make additional Capital Contributions to the Partnership. Upon -14- any such Capital Contribution by the Limited Partner, the General Partner shall be obligated to make an additional Capital Contribution to the Partnership such that the General Partner shall at all times have at least a 1% interest in each item of Partnership gain, loss, deduction and credit. 4.4 No Preemptive Rights. No Person shall have any preemptive, -------------------- preferential or other similar right with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Partnership Interests, whether unissued, held in treasury or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any unissued Partnership Interests held in treasury; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any of the foregoing securities; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership. 4.5 Capital Accounts. (a) The Partnership shall maintain for each ---------------- Partner a separate Capital Account in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 4.5(b) and allocated to such Partner pursuant to Article V and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss allocated to such Partner pursuant to Article V. (b) For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including any method of depreciation, cost recovery or amortization used for that purpose), provided, that: -------- (i) Solely for purposes of this Section 4.5, the partnership shall be treated as owning directly its proportionate share (as determined by the General Partner) of all property owned by any partnership which the Partnership controls. (ii) Except as otherwise provided in Treasury Regulation Section 1.704-:(b)(2)(iv)(m), the -15- computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section ------------------------------------------------------------------- 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includible in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (iv) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 4.5(d)(i) to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived under the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, that if the asset has a -------- zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method which the General Partner may adopt. (v) If the Partnership's adjusted basis in a depreciable or cost recovery property is reduced for federal income tax purposes pursuant to Section 48(q)(l) or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes hereof, be deemed to be an additional depreciation or cost recovery deduction in the year such property is placed in service and shall be allocated among the Partners pursuant to -16- Section 5.2. Any restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the same manner to the Partners to whom such deemed deduction was allocated. (c) A transferee of a Partnership Interest shall succeed to that portion of the Capital Account of the transferor relating to such Partnership Interest transferred; provided, that if the transfer causes a termination of the -------- Partnership under Section 708(b)(1)(3) of the Code, the Partnership's properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.5(d)(ii) and such Carrying Values shall then constitute the Agreed Values of such properties. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.5. (d)(i) Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 5.2. In determining Unrealized Gain or Unrealized Loss for purposes of this Section 4.5(d)(i), the aggregate fair market value of all Partnership properties as of any date shall be deemed to be equal to the sum of (a) all Partnership liabilities, plus (b) 101.02% of the product resulting from multiplying (x) the total number of Percentage Interests of Limited Partners immediately before the issuance of such additional Partnership Interests by (y) the price at which the additional Partnership Interests are purchased from the Partnership as of such date, provided, that in -------- the event any Partnership Interests then Outstanding or such additional Partnership interests to be issued are of a different class or type from any other Partnership Interests of Limited Partners such aggregate fair market value shall be determined by the General Partner in its reasonable discretion. The General Partner shall allocate such aggregate value among the assets of the Partnership (in whatever manner it deems reasonable) to arrive at a fair market value for individual properties. -17- (ii) In accordance with Treasury Regulation Section 1.704- 1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than cash or cash equivalents), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall, immediately prior to any such distribution be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.2. In determining Unrealized Gain or Unrealized Loss for purposes of this Section 4.5(d)(ii), the fair market value of such Partnership property shall be determined by the General Partner using such method of valuation as it deems reasonable; provided, that in the -------- case of a liquidation distribution pursuant to Section 13.4, such fair market value shall be determined in the manner provided in Section 13.4. 4.6 Interest. No interest shall be paid by the Partnership on -------- Capital Contributions or on balances in Partners' Capital Accounts. 4.7 No Withdrawal. No Partner shall be entitled to withdraw any part ------------- of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as provided in Sections 4.2 and 4.3 and Articles V, XII and XIII. 4.8 Loans from Partners. Loans by a Partner to the Partnership shall ------------------- not be considered Capital Contributions. If either Partner shall advance funds to the Partnership in excess of the amounts required hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt of the Partnership to such Partner and shall be payable or collectible only out of the Partnership assets in accordance with the terms and conditions upon which such advances are made. ARTICLE V ALLOCATIONS AND DISTRIBUTIONS 5.1 Allocations for Tax Purposes. (a) Except as otherwise provided ---------------------------- in this Section 5.1, for federal income tax purposes, each item of income, gain, loss, deduction and -18- credit shall be allocated between the Partners in the same manner as its correlative item of "book" income, gain, loss, deduction or credit has been allocated pursuant to Section 5.2. (b) Any Recapture Income or Recaptured Credits resulting from the sale or other taxable disposition of any Partnership asset shall be allocated, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 5.1 (other than Section 5.1(a)), among the Partners or their successors in interest in the same proportions that the deductions or credits directly or indirectly giving rise to such Recapture Income or Recaptured Credits were allocated. (c) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof and any basis allocation made by the Partnership shall be determined without regard to any election under Section 754 of the Code made by the Partnership; provided, that such allocations, once made, -------- shall be adjusted as necessary or appropriate to take into account, those adjustments permitted or required by Section 734 and 743 of the Code. (d) Each item of Partnership income, gain, loss, and deduction attributable to a transferred Partnership Interest shall, for federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners based on the number of days such Partnership Interest was owned during the Partnership Year to which such items are attributable. The General Partner may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (e) For the proper administration of the Partnership and for the preservation of uniformity of the Units, the General Partner shall have sole discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(c) of the Code, or (y) otherwise to preserve or achieve uniformity of Units. The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 5.1(e) only if such conventions, allocations, or amendments would not have a material adverse effect on the -19- Partners or the Partnership and if such allocations are consistent with the principles of Section 704 of the Code. (f)(i) In the case of any Contributed Property, for federal income tax purposes, items of income, gain, loss, depreciation and cost recovery deductions attributable thereto shall be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account any variation between the Agreed Value of such property and its adjusted basis at the time of contribution in attempting to eliminate Book-Tax Disparities. (ii) Except as otherwise provided in Section 5.1(h), any item of Residual Gain or Residual Loss attributable to any Contributed Property shall be allocated among the Partners in accordance with Section 5.2. (g)(i) In the case of any Adjusted Property, for federal income tax purposes, items of income, gain, loss, depreciation and cost recovery deductions attributable thereto shall (x) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account any Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.5(d)(i) in attempting to elimination Book-Tax Disparities, and (y) second, if such property was originally Contributed Property, be allocated among the Partners in a manner consistent with Section 5.1(f)(i). (2) Except as otherwise provided in Section 5.1(h), items of Residual Gain or Residual Loss attributable to any Adjusted Property shall be allocated among the Partners in accordance with Section 5.2. (h) Subject to Sections 5.1(f)(i) and (g)(i), any item of income, gain, loss or deduction otherwise allocable to the Limited Partners which constitutes the tax corollary of an item of "book" income, gain, loss or deduction that has been allocated to the General Partner pursuant to Section 5.2(b), shall be allocated to the General Partner in the same manner and to the same extent as provided in this Section 5.2(b). 5.2 Allocations for Capital Account Purposes. (a) For purposes of ---------------------------------------- maintaining the Capital Accounts of the Partners and in determining the rights of the Partners between themselves, except as otherwise provided in this Section 5.2, each item of income, gain, loss, deduction or credit (computed in accordance with Section 4.5(b)) shall be allocated to the Partners in accordance with their respective Percentage Interests. -20- (b) If the allocation of any item of loss or deduction to the Limited Partner would cause the Capital Account of the Limited Partner to have a deficit balance in excess of the Limited Partner's share of any then existing Minimum Gain, such item of loss or deduction to the extent of such excess shall instead be allocated to the General Partner and the General Partner shall as soon thereafter as practicable be allocated a like amount of income or gain otherwise allocable to the Limited Partner. (c) If any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b) (2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall, subject to Section 5.2(d), be specially allocated to such Partner in an amount and manner sufficient to eliminate any deficit in its Capital Account created by such adjustments, allocations or distributions as quickly as possible. This Section 5.2(c) is intended to constitute a "qualified income offset" within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(3). (d) If there is a net decrease in Partnership Minimum Gain during a Partnership Year, all Partners with a deficit Capital Account balance at the end of such year, computed as described in Treasury Regulation Section 1.704-1(b)(4)(iv)(e), shall be allocated, before any other allocation of Partnership items for such Partnership Year is made under Section 704(b) of the Code, items of income and gain for such year (and, if necessary, subsequent years) in the amount and in the proportions sufficient to eliminate such deficits as quickly as possible. For purposes of this Section 5.2(d), "Minimum Gain" shall be determined in accordance with Treasury Regulation Section 1.704-1(b)(4)(iv). This Section 5.2(d) is intended to constitute a "minimum gain chargeback" within the meaning of Treasury Regulation Section 1.704-1(b)(4)(iv)(e). (e) Notwithstanding any other provision of this Section 5.2, in the event that the Internal Revenue Service is successful in asserting an adjustment to the taxable income of the General Partner and, as a result of any such adjustment, the Partnership is entitled to a deduction for federal income tax purposes with respect to any portion of such adjustment, such deduction shall be allocated to the General Partner. 5.3 Requirement of Distributions. Within 45 days following the end of ---------------------------- each calendar quarter (or following the period from the Commencement Date to December 31, 1987) an amount equal to 100% of Available Cash with respect to such quarter (or period) shall be distributed by the Partnership to the Partners in accordance with their Percentage -21- Interests. The foregoing shall not (i) modify in any respect the provisions of Section 4.2 regarding the distribution of any interest or other profit on the initial contributions referred to therein or the provisions of Section 4.3 regarding the payment and distribution of the net proceeds from the issuance and sale of the Notes, or (ii) require any distribution of cash if and to the extent such distribution would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Partnership is a party (including, without limitation, the Note Agreement) or by which it is bound or its assets are subject. ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS 6.1 Management. (a) The General Partner shall conduct, direct and ---------- exercise full control over all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and the Limited Partner shall have no right of control or management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 6.3, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation, (i) the making of any expenditures, the borrowing of money, the guaranteeing of indebtedness and other liabilities, the issuance of evidences of indebtedness, and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership; (ii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or other combination of the Partnership with or into another entity (all of the foregoing subject to any prior approval which may be required by Section 6.3); (iii) the use of the assets of the Partnership (including without limitation, cash on hand) for any purpose and on any terms it sees fit, including, without limitation, the financing of the conduct of the operations of the Partnership, the lending of funds to other Persons and the repayment of obligations of the Partnership; (iv) the negotiation, execution and performance of contracts, conveyances and other instruments that it considers useful or necessary to the conduct of Partnership operations or the -22- implementation of its powers under this Agreement, on such terms and conditions deemed desirable in its sole discretion including, without limitation, in the case of any mortgage against property of the Partnership in Louisiana, a confession of judgment, waiver of appraisal and other usual Louisiana security clauses; (v) the distribution of Partnership cash; (vi) the selection and dismissal of employees (including, without limitation, employees having titles such as "president," "vice-president," "secretary" and "treasurer") and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (vii) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (viii) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable; (ix) the control of any matters affecting the rights and obligations of the Partnership, including the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; and (x) the lending or borrowing of money (including but not limited to the issuance of the Notes), the assumption or guarantee of or other contracting for indebtedness and other liabilities, the issuance of evidences of indebtedness and the securing of same by mortgage, deed of trust or other lien or encumbrance, the bringing and defending of actions at law or in equity and the indemnification of any Person against liabilities and contingencies to the extent permitted by law. (b) Each of the Partners (and each other Person who may acquire a Partnership Interest) hereby approves the execution, delivery and performance by -------------------------------------- the parties thereto of the Purchase Agreements, the Intercompany Agreement, the - ---------------------- Conveyance Agreement, the License Agreements, the Service Agreement, the Note Agreement and the payment and distribution to the Investor Partnership, General Partner and the Organizational Limited Partner of the net proceeds of the issuance and sale of the Notes by the Partnership, as provided herein, and the ------- other agreements described in the Registration Statement and agrees that the - -------------------------------------------------------- General Partner is authorized to execute, deliver and perform the - ----------------------------------------------------------------- above-mentioned agreements and transactions and such other agreements described - ------------------------------------------------------------------------------- in the Registration Statement on behalf of the Partnership without any further - ------------------------------------------------------------------------------ act, approval or vote of the Partners (or such other Persons), notwithstanding - ------------------------------------- any other provision of this Agreement, the Delaware Act or any applicable law, rule or regulation. None of the execution, delivery or performance by the General Partner, the Partnership, the Investor Partnership or any Affiliate of the foregoing of any agreement authorized or permitted under this Agreement shall constitute a breach by the General Partner of -23- any duty that the General Partner may owe the Partnership or the Limited Partner under this Agreement or of any duty stated or implied by law or equity. 6.2 Certificate of Limited Partnership. The General Partner has filed ---------------------------------- the Certificate of Limited Partnership with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be determined by the General Partner in its sole discretion to be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that the General Partner in its sole discretion determines such action to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware or any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 7.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership or any amendment thereto to the Limited Partner. 6.3 Restrictions on General Partner's Authority. (a) The General ------------------------------------------- Partner may not, without the written approval of the specific act by the Limited Partner or by other written instrument executed and delivered by the Limited Partner subsequent to the date of this Agreement, do any of the following: (i) any act in contravention of this Agreement; (ii) any act that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement; (iii) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose; (iv) admit a person as a Partner, except as otherwise provided in this Agreement; (v) amend this Agreement in any manner, except as otherwise provided in this Agreement; or -24- (vi) transfer its interest as General Partner of the Partnership, except as otherwise provided in Section 10.2. (b) Except as provided in Article XIII, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger or other combination with any other Person) without the approval of the Limited Partner; provided, that this provision shall not -------- preclude or limit the mortgage, pledge, hypothecation or grant of a security interest in all or substantially all of the Partnership's assets and shall not apply to any forced sale of any or all of the Partnership's assets pursuant to the foreclosure of, or other realization upon, any such encumbrance. 6.4 Reimbursement of the General-Partner. (a) Except as provided in ------------------------------------ this Section 6.4 and elsewhere in this Agreement or the Investor Partnership Agreement, the General Partner shall not be compensated for its services as general partner of the Partnership. (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including amounts paid to any Person to perform services to or for the Partnership) and (ii) for the General Partner's and that portion of its Affiliates' legal, accounting, investor communications, utilities, telephone, secretarial, travel, entertainment, bookkeeping, reporting, data processing, office rent and other office expenses (including overhead charges), salaries, fees and other compensation and benefit expenses of employees, officers and directors, other administrative or overhead expenses and all other expenses necessary or appropriate to the conduct of the Partnership's business and allocable to the Partnership or otherwise incurred by the General Partner in operating the Partnership's business (including, without limitation, expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Such reimbursements shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 6.7. (c) The General Partner in its sole discretion and without the approval of the Limited Partner may propose and adopt on behalf of the Partnership employee benefit plans (including, without limitation, plans involving the issuance of Units), for the benefit of employees of the General -25- Partner, the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership; provided, -------- that no such plan may provide for the issuance of Partnership Interests in the Partnership. 6.5 Outside Activities. (a) After the Commencement Date, the General ------------------ Partner shall not, for so long as it is the general partner of the Partnership, enter into or conduct any business nor incur any debts or liabilities except in connection with or incidental to (i) its performance of the activities required or authorized by this Agreement or the Investor Partnership Agreement or described in or contemplated by the Registration Statement and (ii) the acquisition, ownership or disposition of its partnership interests in the Partnership and the Investor Partnership. (b) Except as provided in the Intercompany Agreement, or described in the Registration Statement or provided in subsection (a) above, no Indemnitee shall be expressly or implicitly restricted or proscribed pursuant to this Agreement, the Investor Partnership Agreement or by the partnership relationship established hereby or thereby from engaging in other activities for profit, whether in the businesses engaged in by the Partnership or the Investor Partnership or anticipated to be engaged in by the Partnership or anticipated to be engaged in by the Partnership, the Investor Partnership or otherwise, including without limitation, those businesses described in or contemplated by the Registration Statement. Without limitation of and subject to the foregoing (but subject to the limitations set forth in the Registration Statement and the Intercompany Agreement), each Indemnitee shall have the right to engage in the chemicals or plastics business and any other business of every type and description and to engage in and possess an interest in other business ventures of any and every type and description, independently or with others, including business interests and activities in direct competition with the Partnership or the Investor Partnership and none of the same shall breach any duty to the Partnership or any Partner. Neither the Partnership, the Investor Partnership nor any other Person shall have any rights by virtue of this Agreement, the Investor Partnership Agreement or the partnership relationship established hereby or thereby in any business ventures of any Indemnitee, and, except as set forth in the Registration Statement, such Indemnitees shall have no obligation to offer any interest in any such business ventures to the Partnership, the Investor Partnership or any Partner or any such other Person. (c) Without limitation of subsections (a) and (b), and notwithstanding anything to the contrary in this Agreement, the competitive activities of certain Indemnitees and the restrictions on the Partnership's activities -26- contained in the Intercompany Agreement or described in the Registration Statement under the caption "Conflicts of Interest and Fiduciary Responsibility" are hereby approved by the Limited Partner. 6.6 Loans to and from the General Partner; Contracts with ------------------------------------- -------------- Affiliates. (a) The General Partner, the Limited Partner or any Affiliate of - ---------- either may lend to the Partnership funds needed or desired by the Partnership for such periods of time as the General Partner may determine; provided, that -------- the General Partner, the Limited Partner or any such Affiliate may not charge the Partnership interest at a rate greater than the rate that would be charged the Partnership (without reference to the General Partner's financial abilities or guaranties) by unrelated lenders on comparable loans. The Partnership shall reimburse the General Partner, the Limited Partner or any Affiliate of either, as the case may be, for any costs (other than any additional interest costs) incurred by it in connection with the borrowing of funds obtained by the General Partner, the Limited Partner or such Affiliate and loaned to the Partnership. The Partnership may not lend funds to the General Partner or any Affiliate of the General Partner. (b) The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services for the Partnership. Any service rendered to the Partnership by the General Partner or any such Affiliate shall be on terms that are fair and reasonable to the Partnership; provided, that the -------- requirements of this Section 6.6(b) shall be deemed satisfied as to any transaction approved by Special Approval. The provisions of Section 6.4 shall apply to the rendering of services described in this Section 6.6(b). (c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with applicable law as the General Partner deems appropriate. (d) Neither the General Partner nor any Affiliate thereof shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, that the requirements of this -------- Section 6.6(d) shall be deemed to be satisfied as to (i) the transactions effected pursuant to Section 4.2 and Section 4.3 hereof, the Conveyance Agreement and any other transactions described in the Registration Statement or (ii) any transaction approved by Special Approval. -27- (e) Without limitation of subsections (a) through (d) above, and notwithstanding anything to the contrary in this Agreement, the existence of conflicts of interest described in the Registration Statement under the caption "Conflicts of Interest and Fiduciary Responsibility" are hereby approved by the Limited Partner. 6.7 Indemnification. (a) To the fullest extent permitted by law, each --------------- Indemnitee shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as (x) the General Partner, a Departing Partner or an Affiliate thereof, (y) an officer, director, employee, partner, agent or trustee of the General Partner, any Departing Partner or an Affiliate thereof of (z) a Person serving at the request of the Partnership in another entity in a similar capacity, if the Indemnitee acted in good faith and in a manner which such Indemnitee acted in good faith and in a manner which such Indemnitee in good faith believed to be in, or not opposed to, the best interests of the Partnership, and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. The termination of any such action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create ---- ---------- a presumption that the Indemnitee acted in a manner contrary to that specified above. Any indemnification pursuant to this Section 6.7 shall be made only out of the assets of the Partnership. (b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 6.7. (c) The indemnification provided by this Section 6.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, either as to actions in the Indemnitee's capacity as (i) the General Partner, a Departing Partner or an Affiliate thereof, (ii) as an officer, director, employee, partner, agent or trustee of the General Partner, any Departing Partner or an -28- Affiliate thereof or (iii) a Person serving at the request of the Partnership in a similar capacity with respect to another entity, and shall continue as to an Indemnitee who has ceased to serve in any such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee. (d) The Partnership may purchase and maintain insurance, on behalf of the General Partner and such other Persons as the General Partner shall determine, against any liability that may be asserted against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. (e) For purposes of this Section 6.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed "fines" within the meaning of Section 6.7(a); and action taken or omitted by it with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partner to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) The provisions of this Section 6.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other persons. 6.8 Liability of Indemnitees. (a) No Indemnitee shall be liable to ------------------------ the Partnership, the Limited Partner or any Persons who have acquired interests in the Partnership (whether as a Limited Partner or otherwise) or Units, for -29- losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) The General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. 6.9 Resolution of Conflicts of Interest. (a) Unless otherwise ----------------------------------- expressly provided in this Agreement or the Investor Partnership Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership or the Limited Partner, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by the Limited Partner and shall not constitute a breach of this Agreement, of the Investor Partnership Agreement, or any other agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement, is deemed to be fair and reasonable to the Partnership. The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of a resolution of such conflict or course of action. Any conflict of interest and any resolution of such conflict of interest shall be deemed fair and reasonable to the Partnership upon Special Approval of such conflict of interest or resolution. The General Partner may also adopt a resolution or course of action that has not received Special Approval. Any such resolution or course of action in respect of any conflict of interest shall not constitute a breach of this Agreement, of the Investor Partnership Agreement, of any other agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if such resolution or course of action is fair and reasonable to the Partnership. The General Partner shall be authorized in connection with its resolution of any such conflict of interest to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; and (ii) such additional factors as the General Partner deems relevant, reasonable or appropriate under the circumstances. However, nothing contained in this Agreement shall require the General Partner to consider the interests of any Person other than the Partnership. (b) Whenever this Agreement or any other agreement contemplated hereby provides that the General Partner or any of its Affiliates is permitted or required to make a decision -30- (i) in its "discretion" or under a grant of similar authority or latitude, the General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Limited Partner, the Partnership, or any Unitholder, or (ii) in its "good faith" or under another express standard, the General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement, any other agreement contemplated hereby or applicable law. In addition, any actions taken by the General Partner consistent with the standard of "reasonable discretion" set forth in the definition of Available Cash will be deemed not to breach any duty of the General Partner to the Partnership or the Limited Partner. During the Support Period (as defined in the Investor Partnership Agreement) the General Partner shall have no duty to sell or otherwise dispose of any asset of the Partnership, other than in the ordinary course of business. No borrowing by the Partnership or the approval thereof by the General Partner shall be deemed to constitute a breach of duty of the General Partner to the Partnership, or the Limited Partner by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to avoid (i) subordination of Common Units by reason of the provisions of Section 5.4 or 5.5 of the Investor Partnership Agreement or (ii) the obligation of Borden or any of its Affiliates to purchase APUs (as defined in the Investor Partnership Agreement) in accordance with the Distribution Support Agreement (as so defined), or to permit the redemption of APUs. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required hereunder to be "fair and reasonable" to any Person, the fairness and reasonableness of such transaction, arrangement or resolution shall be considered on the whole in the context of all similar or related transactions, and in the context of all transactions, relationships and arrangements between or among the relevant Persons or their respective Affiliates. 6.10 Other Matters Concerning the General Partner. (a) The General -------------------------------------------- Partner may rely and shall be protected in acting or refraining from action upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, and other consultants and advisers selected by it, and any act taken or omitted to be taken in -31- reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters which the General Partner believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. 6.11 Title to Partnership Assets. Title to Partnership assets, --------------------------- whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner or assignee, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement. All Partnership assets shall be recorded as the property of the Partnership on its books and records, irrespective of the name in which legal title to such Partnership assets is held. 6.12 Limitations Regarding Certain Actions. In addition to any other ------------------------------------- provision of this Agreement requiring Special Approval, the General Partner will not cause or permit the Partnership to take any of the following actions without Special Approval: (a) the making of any material capital expenditure (individually or, with respect to related capital expenditures, as a group), (b) the material curtailment of the operations of the Partnership, (c) the material expansion of the capacity of any of the plants constituting part of the Acquired Facilities, or (d) the amendment of or entry into by the Partnership of any agreement between the Partnership and Borden (except that the Partnership may, -------------------- without Special Approval, enter into the agreements specifically referred to in - ------------------------------------------------------------------------------- Section 6.1(b)). - ----------- 6.13 Reliance by Third Parties. Notwithstanding anything to the ------------------------- contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the -32- Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. The Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership, the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. ARTICLE VII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER 7.1 Limitation of Liability. The Limited Partner and the ----------------------- Organizational Limited Partner shall have no liability under this Agreement except as provided in this Agreement or the Delaware Act. 7.2 Management of Business. The Limited Partner (in its capacity as ---------------------- such) shall not take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. 7.3 Return of Capital. The Limited Partner shall not be entitled to ----------------- the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. 7.4 Rights of the Limited Partner Relating to the Partnership. (a) --------------------------------------------------------- In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 7.4(b), the Limited Partner shall have the right, for -33- a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon reasonable demand and at such Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local income tax returns for each year; (iii) to have furnished to it, upon notification to the General Partner, a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to it, upon notification to the General Partner, a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed; (v) to obtain true and full information regarding the amount of cash and a description and statement of the Agreed Value of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future and the date on which each become a Partner; and (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) Notwithstanding any other provision of this Section 7.4, the General Partner may keep confidential from the Limited Partner for such period of time as the General Partner deems reasonable, any information that the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business or which the Partnership is required by law or by agreements with third parties to keep confidential. -34- ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS 8.1 Records and Accounting. The General Partner shall keep or cause ---------------------- to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business including, without limitation, all books and records necessary to provide to the Limited Partner any information, lists and copies of documents required to be provided pursuant to Section 7.4(a). The books of the Partnership shall be maintained on an accrual basis in accordance with generally accepted accounting principles. 8.2 Fiscal Year. The fiscal year of the Partnership shall be the ----------- calendar year. 8.3 Reports. (a) As soon as practicable, but in no event later ------- than 90 days after the close of each Partnership Year, the General Partner shall cause to be mailed to the Limited Partner as of a date selected by the General Partner in its sole discretion, an annual report containing financial statements of the Partnership for such Partnership Year, presented in accordance with generally accepted accounting principles, including a balance sheet and statements of operations, Partners' equity and changes in financial position, such statements to be audited by a firm of independent public accountants selected by the General Partner. (b) As soon as practicable, but in no event later than 60 days after the close of each calendar quarter except the last calendar quarter of each year, the General Partner shall cause to be mailed to the Limited Partner, as of a date selected by the General Partner in its sole discretion, a report containing unaudited financial statements of the Partnership. ARTICLE IX TAX MATTERS 9.1 Preparation of Tax Returns. The General Partner shall arrange -------------------------- for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish to the Limited Partner, within 75 days of the close of each taxable year, the tax information reasonably required for federal and state income tax reporting purposes. The classification, realization and recognition of income, gain, losses and deductions and other -35- items shall be on the accrual method of accounting for federal income tax purposes. The taxable year of the Partnership shall be the calendar year. 9.2 Tax Elections. Except as otherwise provided herein, the General ------------- Partner shall, in its sole discretion, determine whether to make any available election pursuant to the Code, provided, that the General Partner shall make the -------- election under Section 754 of the Code in accordance with applicable regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner's determination that such revocation is in the best interests of the Limited Partner. 9.3 Tax Controversies. Subject to the provisions hereof, the General ----------------- Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 9.4 Organizational Expenses. The Partnership shall elect to deduct ----------------------- expenses, if any, incurred by it in organizing the Partnership ratably over a 60-month period as provided in Section 709 of the Code. 9.5 Withholding. Notwithstanding any other provision of this ----------- Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Section 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to the Limited Partner. The amount so withheld shall be treated as a distribution of cash in the amount of such withholding to such Partner. -36- ARTICLE X TRANSFER OF INTERESTS 10.1 Transfer. (a) The term "transfer," when used in this Article X -------- with respect to a Partnership Interest, shall be deemed to refer to a transaction by which a Partner assigns its Partnership Interest to another Person and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article X shall be null and void. 10.2 Transfer of General Partner's Partnership Interest. The General -------------------------------------------------- Partner may not transfer all or any part of its Partnership Interest as the General Partner; provided, that if the General Partner transfers its partnership -------- interest as general partner in the Investor Partnership to any Person (in accordance with the provisions of the Investor Partnership Agreement), the General Partner shall also transfer its Partnership Interest as the General Partner to such Person. The Limited Partner hereby approves of any such transfer. 10.3 Transfer of Interest of Limited Partner. The Limited Partner may --------------------------------------- not transfer all or any part of its Partnership Interests except that a successor of the Limited Partner may become a Substituted Limited Partner as provided in Article XI. ARTICLE XI ADMISSION OF PARTNERS 11.1 Admission of Substituted Limited Partner. Any successor to the ---------------------------------------- Partnership Interest of the Limited Partner shall be admitted to the Partnership as a Limited Partner upon (a) furnishing to the General Partner (1) acceptance in form satisfactory to the General Partner of all the terms and conditions of this Agreement and (ii) such other documents or instruments as may be required in order to effect its admission as a Limited Partner, and (b) obtaining the consent of the General Partner, which consent may be withheld or granted in the sole discretion of the General Partner. The transferee shall be admitted to the Partnership as a Limited Partner immediately prior to the transfer. -37- 11.2 Admission of Successor General Partner. A successor General -------------------------------------- Partner approved pursuant to Section 12.1 or the transferee of or successor to the Partnership Interest of the General Partner pursuant to Section 10.2 admitted to the Partnership as the General Partner, effective immediately prior to the transfer of the Partnership Interest of the General Partner pursuant to Section 10.2 or the withdrawal or removal of the General Partner pursuant to Section 12.1 and such successor General Partner shall continue the business of the Partnership without dissolution. 11.3 Amendment of Agreement and Certificate of Limited Partnership. ------------------------------------------------------------- To cause the admission to the Partnership of any successor General Partner, the General Partner shall take all steps necessary and appropriate to prepare as soon as practical an amendment of this Agreement and, if required by law, shall prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose exercise the power of attorney granted pursuant to Section 1.4. ARTICLE XII WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER 12.1 Withdrawal or Removal of General Partner. The General partner ---------------------------------------- shall automatically withdraw from the Partnership or be removed as General Partner if, and only if, it withdraws from, or is removed as the general partner of, the Investor Partnership. Such withdrawal or removal shall become effective at the same time as is its withdrawal or removal as general partner of the Investor Partnership shall become effective. The Partners agree that the approval of a successor general partner of the Investor Partnership shall constitute approval by each Partner of such successor as the successor General Partner of the Partnership. If no successor General Partner is approved, the Partnership shall be dissolved pursuant to Section 13.1. 12.2 Interest of Departing Partner and Successor. The Partnership ------------------------------------------- Interest of a Departing Partner departing as a result of withdrawal or removal pursuant to Section 13.1 of the Investor Partnership Agreement shall be purchased by the successor to the Departing Partner. Such purchase shall be a condition to the admission of the successor to the Partnership as General Partner. The purchase price for such Partnership Interest shall be paid in cash and shall be equal to the fair market value of the Departing Partner's Partnership Interest, determined as of the effective date of its departure in the manner specified in the Investor Partnership Agreement. -38- 12.3 Reimbursement of Departing Partner. The Partnership shall ---------------------------------- reimburse a Departing Partner for all employee related liabilities, including, without limitation, reasonable severance liabilities incurred in connection with the termination of employees employed by such Departing Partner for the benefit of the Partnership. ARTICLE XIII DISSOLUTION AND LIQUIDATION 13.1 Dissolution. The Partnership shall not be dissolved by the ----------- admission of a Substituted Limited Partner or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon: (a) the expiration of its term as provided in Section 1.5; (b) the withdrawal or removal of the General Partner, or any other event that results in its ceasing to be the General Partner (other than by reason of a transfer of the General Partner's Partnership Interest in accordance with Section 10.2 or withdrawal or removal following approval by the Limited Partner of a successor pursuant to Section 12.1); (c) an election to dissolve the Partnership by the General Partner that is approved by the Limited Partner; (d) the bankruptcy or the dissolution of the General Partner; (e) the sale of all or substantially all of the assets and properties of the Partnership; or (f) the dissolution of the Investor Partnership; provided, that the Partnership shall not be dissolved upon an event described in - -------- Section 13.1(b) if, within 90 days after such event, all Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of the date of such event, of a successor General Partner or General Partners. For purposes of this Section 13.1, bankruptcy of the General Partner shall be deemed to have occurred when (a) it commences a voluntary proceeding seeking liquidation, -39- reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (v) it is adjudged a bankrupt or insolvent, or has entered against it a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect, (w) it executes and delivers a general assignment for the benefit of its creditors, (x) it files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of the nature described in clause (u) above, (y) it seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for it or for all or any substantial part of its properties, or (z)(1) any proceeding of the nature described in clause (u) above has not been dismissed within 120 days after the commencement thereof, (2) the appointment without its consent or acquiescence of a trustee, receiver or liquidator appointed pursuant to clause (y) above has not been vacated or stayed within 90 days of such appointment, or (3) such appointment is not vacated within 90 days after the expiration of any such stay. 13.2 Continuation of the Business of the Partnership after ----------------------------------------------------- Dissolution. Upon (i) dissolution of the Partnership in accordance with Section - ----------- 13.1(b) and a failure of all Partners to agree to continue the business of the Partnership and appoint a successor General Partner as provided in Section 13.1 then within an additional 90 days, or (ii) dissolution of the Partnership in accordance with Section 13.1(d) then within 180 days, the Limited Partner may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as a general partner a Person approved by the Limited Partner. In addition, upon dissolution of the Partnership in accordance with Section 13.1(f), if the Investor Partnership is reconstituted pursuant to Section 14.2 of the Investor Partnership Agreement, the reconstituted entity may, within 180 days after such event of dissolution, as the Limited Partner, elect to reconstitute the Partnership in accordance with the foregoing sentence. Upon any such election by the Limited Partner, all Partners shall be bound thereby and shall be deemed to have approved thereof. Unless such an election is made within the applicable time period set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made after dissolution, then: (a) the reconstituted Partnership shall continue until the end of the term set forth in Section 1.5 unless earlier dissolved in accordance with this Article XIII; -40- (b) if the successor general partner is not the former General Partner, then the interest of the former General Partner shall be purchased by the successor general partner in the manner described in Section 12.2 and (c) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the General Partner pursuant to Section 1.4. 13.3 Liquidation. Upon dissolution of the Partnership, unless the ----------- Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 13.2, the General Partner, or in the event the General Partner has been dissolved or removed, become bankrupt as defined in Section 13.1 or withdrawn from the Partnership, a liquidator or liquidating committee approved by the Limited Partner, shall be the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by the Limited Partner. The Liquidator shall agree not to resign at any time without 15 days' prior written notice and (if other than the General Partner) may be removed at any time, with or without cause, by notice of removal approved by the Limited Partner. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the Limited Partner. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XIII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 6.3(b)) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding up and liquidation of the Partnership as provided for herein. The Liquidator shall liquidate the assets of the Partnership, and apply and distribute the proceeds of such liquidation in -11- the following order of priority, unless otherwise required by mandatory provisions of applicable law: (a) the payment to creditors of the Partnership, including Partners who are creditors, in the order of priority provided by law; and the creation of a reserve of cash or other assets of the Partnership for contingent liabilities in an amount, if any, determined by the Liquidator to be appropriate for such purposes; (b) to the Partners in accordance with the positive balances in their respective Capital Accounts after taking into account adjustments to such Capital Accounts pursuant to Section 5.2 until such balances are reduced to zero; provided, that the General Partner shall contribute to the -------- Partnership cash in an amount sufficient to restore to zero any negative balance in its Capital Account by the end of the taxable year of liquidation or 90 days after the date of liquidation, whichever is later; and (c) finally, to the Partners in accordance with their respective Percentage Interests. 13.4 Distributions in Kind. Notwithstanding the provisions of -------------------- Section 13.3 which require the liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including those to Partners) and/or distribute to the Partners, in lieu of cash, as tenants in common or as owners in indivision and in accordance with the provisions of Section 13.3, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgement of the Liquidator, such distributions in kind are in the best interest of the Limited Partner, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. 13.5 Cancellation of Certificate of Limited Partnership. Upon the -------------------------------------------------- completion of the distribution of -42- partnership cash and property as provided in Sections 13.3 and 13.4, the Partnership shall be terminated, and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken. 13.6 Reasonable Time for Winding Up. A reasonable time shall be ------------------------------ allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets pursuant to the Section 13.3 in order to minimize any losses otherwise attendant upon such winding up and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. 13.7 Return of Capital. The General Partner shall not be personally ----------------- liable for the return of the Capital Contributions of the Limited Partner, or any portion thereof, it being expressly understood that any such return shall be made solely from the Partnership assets. 13.8 No Capital Account Restoration. Except as provided in Section ------------------------------ 13.3(b), no Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. 13.9 Waiver of Partition. Each Partner hereby agrees that there ------------------- shall not be a partition of the Partnership property distributed in kind for a period of 15 years following such distribution. ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT 14.1 Amendment to Be Adopted Solely by General Partner. The Limited ------------------------------------------------- Partner agrees that the General Partner (pursuant to its power of attorney from the Limited Partner), without the approval of the Limited Partner, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership or the location of the principal place of business of the Partnership; (b) the admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; -43- (c) a change that in the sole discretion of the General Partner is reasonable and necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be taxable as a corporation or an association taxable as a corporation for federal income tax purposes; (d) a change (i) that in the sole discretion of the General Partner does not adversely affect the Limited Partner in any material respect, (ii) that is necessary or desirable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute, or that is necessary or desirable to facilitate the trading of the Depositary Units (as defined in the Investor Partnership Agreement) or comply with any rule, regulation, guideline or requirement of any securities exchange on which Depositary Units (as so defined) are or will be listed for trading, compliance with any of which the General Partner deems to be in the best interests of the Partnership and the Limited Partner or (iii) that is required to effect the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement; (e) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or its directors or officers from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; (f) any amendment expressly permitted in this agreement to be made by the General Partner acting alone; (g) any amendment to this Agreement that is necessary to conform this Agreement to any amend- -44- ments made in the Investor Partnership Agreement; or (h) any other amendments similar to the foregoing. 14.2 Amendment Procedures. Except as provided in Section 14.1, all -------------------- amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed by the General Partner or by the Limited Partner. Subject to Section 14.1, any proposed amendment shall be effective only upon the approval of the General Partner and the Limited Partner. 14.3 Prohibited Amendments. Notwithstanding any other provision of --------------------- this Agreement, no amendment to this Agreement shall be made if such amendment would have a material adverse effect on the business, financial condition, results of operations, properties or assets of the Partnership or on the ability of the Partnership to perform its obligations under this Agreement, the Operative Agreements or the Notes. ARTICLE XV GENERAL PROVISIONS 15.1 Addresses and Notices. Any notice, demand, request or report --------------------- required or permitted to be given or made to the Partnership, the General Partner or the Limited Partner under this Agreement shall be in writing and shall be deemed given if received by it at the principal office of the Partnership designated pursuant to Section 1.3. 15.2 Titles and Captions. All article or section titles or captions ------------------- in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. 15.3 Pronouns and Plurals. Whenever the context may require, any -------------------- pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. 15.4 Further Action. The parties shall execute and deliver all -------------- documents, provided all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. -45- 15.5 Binding Effect. This Agreement shall be binding upon and inure -------------- to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 15.6 Integration. This Agreement constitutes the entire agreement ----------- among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreement and understandings pertaining thereto. 15.7 Creditors. None of the provisions of this Agreement shall be --------- for the benefit of, or shall be enforceable by, any creditor of the Partnership. 15.8 Waiver. No failure by any party to insist upon the strict ------ performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 15.9 Counterparts. This Agreement may be executed in counterparts, ------------ all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. 15.10 Applicable Law. This Agreement shall be construed in -------------- accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 15.11 Invalidity of Provisions. If any provision of this Agreement ------------------------ is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. -46- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates and at the places set forth below and in the presence of the witnesses whose signatures appear opposite the signatures of the parties hereto. Date: November 30, 1987 GENERAL PARTNER Place: New York, New York BCP MANAGEMENT, INC. ------------------ Witnesses: By: /s/ David A. Kelly --------------------------- /s/ SIGNATURE ILLEGIBLE Name: David A. Kelly - --------------------------- Title: Treasurer /s/ SIGNATURE ILLEGIBLE - --------------------------- Date: November 30, 1987 ORGAINZATIONAL LIMITED PARTNER: Place: New York, New York BORDEN, INC. ------------------ By: /s/ SIGNATURE ILLEGIBLE Witensses: --------------------------- Name: Lawrence O. Doza /s/ Carolyn O'Leary Title: Sr. Vice President & - --------------------------- Chief Financial Officer /s/ SIGNATURE ILLEGIBLE - --------------------------- Date: November 30, 1987 LIMITED PARTNER: Place: New York, New York BORDEN CHEMICALS AND PLASTICS ------------------ LIMITED PARTNERSHIP, Witnesses: /s/ Carolyn O'Leary By: BCP Management, Inc. - --------------------------- (General Partner) /s/ SIGNATURE ILLEGIBLE - --------------------------- By: /s/ SIGNATURE ILLEGIBLE --------------------------- Name: David A. Kelly Title: Treasurer -47- STATE OF New York COUNTY OF New York On this 30th day of November, 1987, before me, the undersigned Notary Public for the State and County aforesaid, and in the presence of the undersigned competent witnesses, personally came and appeared David A. Kelly who declared and acknowledged unto me, that he is the Treasurer of BCP Management, Inc., a Delaware corporation, that as such duly authorized officer, by and with the authority of the Board of Directors of said corporation, he signed the foregoing instrument as the free act and deed of said corporation, for and on behalf of said corporation and for the objects and purposes therein set forth. THUS DONE AND PASSED at New York, New York, on the date first above written in the presence of me, Notary, and the following competent witnesses, who have signed in the presence of the appearer and me, Notary. WITNESSES: BCP MANAGEMENT, INC. /s/ Carolyn O'Leary By: [SIGNATURE ILLEGIBLE] - ------------------------ ------------------------ [SIGNATURE ILLEGIBLE] - ------------------------ Margaret M. Keane ----------------- NOTARY PUBLIC County of New York, State of New York My commission expires: May 12, 1988 STATE OF New York COUNTY OF New York On this 30th day of November, 1987, before me, the undersigned Notary Public for the State and County aforesaid, and in the presence of the undersigned and competent witnesses, personally came and appeared Lawrence U. Doza ,who declared and acknowledged unto me, that he is the Senior VP and Chief Financial Officer of Borden, Inc., a New Jersey corporation, that as such duly authorized officer, by and with the authority of the Board of Directors of said corporation, he signed the foregoing instrument as the free act and deed of said corporation, for and on behalf of said corporation and for the objects and purposes therein set forth. THUS DONE AND PASSES at New York, New York, on the date first above written in the presence of me, Notary, and the following competent witnesses, who have signed in the presence of the appearer and me, Notary. WITNESSES: BORDEN, INC. /s/ Carolyn O'Leary By: [SIGNATURE ILLEGIBLE] - ------------------------ ------------------------ [SIGNATURE ILLEGIBLE] - ------------------------ Margaret M. Keane ----------------- NOTARY PUBLIC County of New York, State of New York. My commission expires: May 12, 1988 STATE OF New York COUNTY OF New York On this 30th day of November, 1987, before me, the undersigned Notary Public for the State and County aforesaid, and in the presence of the undersigned competent witnesses, personally came and appeared David A. Kelly, who declared and acknowledged unto me, that he is the Treasurer of BCP Management, Inc., a Delaware corporation and the general partner of Borden Chemicals and Plastics Limited Partnership, a Delaware limited partnership, that as such duly authorized officer, by and with the authority of the Board of Directors of said corporation, he signed the foregoing instrument as the free act and deed of said corporation as the general partner of said limited partnership, for and on behalf of said limited partnership and for the objects and purposes therein set forth. THUS DONE AND PASSED at New York, New York, on the date first above written in the presence of me, Notary, and the following competent witnesses, who have signed in the presence of the appearer and me, Notary. WITNESSES: BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP By: BCP Management, Inc. (General Partner) /s/ Carolyn O'Leary By: [SIGNATURE ILLEGIBLE] - ------------------------ ------------------------ [SIGNATURE ILLEGIBLE] - ------------------------ Margaret M. Keane ----------------- NOTARY PUBLIC County of New York, State of New York My commission expires: May 12, 1988 Exhibit D BCP MANAGEMENT, INC. MINUTES OF SPECIAL MEETING OF BOARD OF DIRECTORS MARCH 29, 1995 A special meeting of the Board of Directors was held by telephone conference call on March 29, 1995, beginning at 10:00 a.m., pursuant to notice duly given. Mr. Saggese, the Chairman of the Board, called the meeting to order. The following directors participated: J. M. Saggese D. M. Galbreath E. H. Jennings D. A. Kelly G. W. Koch J. V. Stapleton R. B. Wiles Mr. M. M. Mahmood, of Sidley & Austin, also participated at Mr. Saggese's invitation. The minutes of the meeting of the Board held on January 24, 1995, were approved. Mr. Saggese then advised the Board that he was recommending that the Operating Partnership should not proceed with the previously approved public offering of Units, but instead should (i) proceed with the previously approved public offering of $200 million of Notes for purposes of prepayng the existing $150 million of Notes and the paying of related premiums, financing a portion of the purchase price for the Addis PVC plant acquisition from Occidental Chemical Corporation, and other purposes, and (ii) implement a revolving credit facility for up to $100 million to finance the balance of the purchase price for the Addis PVC plant, and for other purposes. Mr. Saggese then explained that his recommendation was primarily based on the current trading price of the Units and prevailing interest rates, which made the Unit offering less attractive and the Notes offering and credit facility more attractive and the Notes offering and credit facility more attractive. He also noted that his recommendation will eliminate the dilution of earnings that would have resulted from the Unit offering. Thereupon, upon motion duly made and seconded, and after a full discussion, the following resolution was unanimously passed: WHEREAS, this Board of Directors of BCP Management, Inc. (the "Corporation") had previously approved, for and on behalf of the Corporation, on its own behalf and, in its capacity as general partner of Borden Chemicals and Plastics Limited Partnership ("BCP") and Borden Chemicals and Plastics Operating Limited Partnership ("BCOP"), for and on behalf of BCP and BCOP: (i) the acquisition ("Acquisition") by BCOP of the Addis PVC resins facility from Occidental Chemical Corporation; (ii) the registration and public offering ("Units Offering") by BCP of up to 5,000,000 Units for purposes of financing all or a portion of the purchase price for the Acquisition and other purposes; and (iii) the registration and public offering ("Notes Offering") by BCOP of up to $225 million of Notes for purposes of prepaying the existing $150 million of Notes ("Old Notes") of BCOP and paying of related premiums, financing a portion of the purchase price for the Acquisition and other purposes; and -2- WHEREAS, based on the trading price of the Units, prevailing interest rates and other factors, it is desirable and in the best interests of BCP and BCOP that in order to (i) finance the purchase price for the Acquisition and the prepayment of the Old Notes and payment of the related premiums and expenses and (ii) obtain a larger working line of credit for BCOP relative to BCOP's existing $20 million working capital facility (the "Existing Facility"), BCOP should effect the Notes Offering for up to $225 million of Notes and implement a revolving credit facility for up to $100 million; NOW, THEREFORE, BE IT RESOLVED, that the Notes Offering by BCOP of up to $225 million of Notes previously authorized and approved by this Board of Directors be and hereby is further approved, confirmed and ratified by the Corporation on its own behalf and, in its capacity as general partner of BCP and BCOP, for and on behalf of BCP and BCOP; and FURTHER RESOLVED, that, without limiting the scope of any previous authorization provided by this Board of Directors with respect to the Notes Offering, the President, the Chief Financial Officer and the Treasurer of the Corporation, or any of them, be and hereby are authorized to determine and establish for and on behalf of the Corporation on its own behalf and in its capacity as general partner of BCP and BCOP, for and on behalf of BCP and BCOP, (a) the aggregate principal amount of the Notes, which shall not exceed $225 million, (b) the maturity date or dates of the Notes, (c) the offering price by the underwriters of the Notes to the public, (d) the purchase price to be paid to BCOP by the underwriters, (e) the interest to be borne by the Notes, (f) the terms and provisions of any redemption provisions, (g) the other terms and restrictive covenants relating to the Notes and (h) any terms or conditions required or appropriate to be complied with by BCP, BCOP or the Corporation; and FURTHER RESOLVED, that the implementation by BCOP of a new revolving credit facility ("Revolving Credit Facility") of up to $100 million and the incurrence by BCOP of up to $100,000,000 of additional indebtedness by BCOP under the Revolving Credit Facility for purposes of financing a portion of the purchase price of the Acquisition and related expenses and for capital expenditures, working capital and other partnership purposes, be and hereby is authorized and approved by -3- the Corporation, in its capacity as general partner of BCOP, for and on behalf of BCOP, and that the President, the Chief Financial Officer and the Treasurer of the Corporation, or any of them, be and hereby are authorized to determine and establish, for and on behalf of the Corporation in its capacity as general partner of BCOP, for and on behalf of BCOP, the amount (not to exceed $100 million outstanding principal amount) and terms (including in respect of maturity date, principal amortization, interest rates and restrictions on BCOP) of such additional indebtedness to be incurred by BCOP and to enter into such agreements (including, without limitation, an agreement for retention of CS First Boston Corporation as arranger, an agreement for retention of Credit Suisse as administrative agent and a Revolving Credit Agreement) as they may determine to be necessary or appropriate in order to implement the foregoing, such determination to be conclusively evidenced by the establishment in writing of such amounts and terms and the execution and delivery of such agreements; and FURTHER RESOLVED, that, unless subsequently authorized by the Board of Directors of the Corporation, BCP shall not proceed with the Units Offering and the President or any Vice President of the Corporation be and hereby is authorized (but not required), for and on behalf of the Corporation, in its capacity as general partner of BCP, for and on behalf of BCP, to apply at any time to the Securities and Exchange Commission for withdrawal of the registration statement with respect to the Units Offering; and FURTHER RESOLVED, that in the event that BCOP obtains the Revolving Credit Facility, the President or any Vice President of the Corporation be and hereby is authorized (but not required to), for and on behalf of the Corporation, in its capacity as general partner of BCOP, for and on behalf of BCOP, to terminate the Existing Facility; and FURTHER RESOLVED, that the BCOP shall (i) apply the net proceeds from the Notes Offering to prepayment of the Old Notes and payment of related premiums and expenses and payment of a portion of the purchase price of the Acquisition and related expenses and (ii) use cash on hand, borrowings of up to $75 million under the Revolving Credit Facility or a combination thereof to pay the remaining portion of the purchase price for the Acquisition and to pay for transaction costs relating -4- to the Acquisition, the Notes Offering, the Units Offering and the Revolving Credit Facility and that the President, Vice President or Treasurer of the Corporation, or any of them, be and hereby are authorized, for and on behalf of the Corporation in its capacity as general partner of BCOP, for and on behalf of BCOP, to determine and establish the amount of cash on hand, borrowings under the Revolving Credit Facility or a combination thereof to be used for such purposes; and FURTHER RESOLVED, that in the event that the closing of the Notes Offering and the Acquisition occurs prior to the implementation by BCOP of the Revolving Credit Facility, and net proceeds from the Notes Offering remaining after prepayment of the Old Notes and payment of related premiums and expenses be applied towards the purchase price of the Acquisition and any remaining purchase price and transaction costs be financed by means of cash on hand, borrowings under the Existing Facility or a combination thereof and the President, Vice President or Treasurer of the Corporation, or any of them, be and hereby are authorized, for and on behalf of the Corporation in its capacity as general partner of BCOP, for and on behalf of BCOP, to (i) determine and establish the amount of cash on hand, borrowings under the Existing Facility or a combination thereof, used for such purposes and (ii) borrow such amounts under the Revolving Credit Facility, when established, that they deem appropriate to replenish all or any portion of the cash on hand or repay borrowings under the Existing Facility; FURTHER RESOLVED, that the officers of the Corporation, for and on behalf of the Corporation, on its own behalf and, in its capacity as general partner of BCP or BCOP, on behalf of BCP or BCOP, be and hereby is authorized to take such additional actions, including, without limitation, the execution and delivery of such agreements, documents and other instruments, the obtaining of such consents or waivers, the retention of such legal counsel, financial advisors, accountants and other specialists and the incurrence and payment of all such expenses, fees and taxes (including fees for legal counsel, accountants and financial advisors, underwriting fees, filing fees, printing and distribution costs), as they in their discretion shall determine to be advisable, appropriate or necessary in order to carry out the purposes and intent of the foregoing resolutions (such determination to be conclusively evidenced by the taking of such -5- actions) and that all actions by the officers of the Corporation so taken or heretofore taken in connection with any of the actions authorized in any of the foregoing resolutions and the transactions contemplated by the foregoing resolutions, are hereby authorized, approved and ratified. There being no further business, Mr. Saggess adjourned the meeting. Lawrence L. Dieker Secretary [SIDLEY & AUSTIN LETTERHEAD] May 2, 1995 To Credit Suisse, as Agent, and each of the Banks Under the Credit Agreement referred to below c/o Credit Suisse, as Agent 12 East 49th Street 39th Floor New York, New York 10017 Re: Borden Chemicals and Plastics Operating Limited Partnership ----------------------------- Ladies and Gentlemen: We have acted as special New York Counsel to Borden Chemicals and Plastics Operating Limited Partnership (the "Company"), and to BCP Management, Inc. (the "General Partner"), the Company's sole general partner, in connection with the preparation, execution and delivery of that certain Credit Agreement dated as of May 2, 1995 (the "Credit Agreement") among the Company, the institutions from time to time party thereto as Banks (collectively, the "Banks"), and Credit Suisse, as agent for the Banks (in such capacity, the "Agent"). This opinion is being delivered pursuant to Section 5.01(e) of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings as so defined. In connection with the opinion expressed herein, we have reviewed the following documents: (i) The Credit Agreement executed by each of the parties thereto; (ii) The Notes; and (iii) The opinion of Lawrence L. Dieker, Vice President, General Counsel and Secretary of the General Partner. The Credit Agreement and the Notes are hereinafter referred to as the "Loan Documents". In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents or instruments and other instruments, as applicable, and of certificates or comparable documents or instruments of public officials and other instruments and documents and have made such inquiries of such officers and representatives and such examination of law as we have deemed relevant and necessary to form the basis for the opinion hereinafter set forth. In our examination of the Loan Documents we have assumed the authenticity of all such documents submitted to us as originals, the conformity to authentic originals of all such documents submitted to us as copies and the genuineness of all signatures (other than the signatures of the representatives of the General Partner). As to all questions of fact material to the opinions specified herein that have not been independently established, we have relied upon the representations and warranties of the Company contained in the Credit Agreement. In rendering the opinion expressed below, we have assumed, without any independent investigation or verification of any kind, that each party to the Loan Documents (other than the Company) has been duly organized and is validly existing and in good standing under its jurisdiction of incorporation and has full power and authority to execute and deliver the Loan Documents and perform the obligations set forth therein, and that the execution, delivery, and performance of the Loan Documents by such other parties have been duly authorized by all requisite corporate and other action on the part of such other parties and such documents have been duly executed and delivered by such other parties. To the extent that our opinion expressed below involves conclusions as to the matters set forth in the opinion referred to above of Lawrence L. Dieker, we have relied upon and assumed without independent investigation the correctness of such opinion, and our opinion is subject to the assumptions, qualifications and limitations set forth in such opinion. Based upon the foregoing assumptions and examination of documents and upon such investigation as we have deemed necessary, and subject to the qualifications set forth 'in subparagraphs (a) through (f) below, we are of the opinion that each Loan Document has been executed and delivered by the Company and constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms. 2 Our opinion is expressly qualified as follows: (a) Our opinion is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and other laws affecting the enforcement of creditors' rights generally and to the effect of general equitable principles (whether considered in a proceeding in equity or at law). In applying such principles, a court, among other things, might not allow a creditor to accelerate maturity of a debt upon the occurrence of a default deemed immaterial or for non-credit reasons or might decline to order a debtor to perform covenants. Such principles applied by a court might include a requirement that a creditor act with reasonableness and in good faith. Furthermore, a court may refuse to enforce a covenant or any provision providing for indemnification if and to the extent that it deems such covenant or indemnification provision to be violative of applicable public policy. (b) Our opinion expressed above is limited to the law of the State of New York and the federal law of the United States, and we do not express any opinion herein concerning any other law. (c) We express no opinion as to the effect of the compliance or noncompliance of the Agent, any of the Banks or the Issuing Bank with any state or federal laws or regulations applicable to any such party because of such party's legal or regulatory status, the nature of such party's business or the authority of any party to conduct business in any jurisdiction. (d) We express no opinion as to the effect (if any) of the law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. (e) We express no opinion with respect to any federal or state securities laws. (f) Our opinion speaks as of the date hereof and we assume no obligation to supplement the foregoing opinion if any applicable laws change after the date hereof or if we become aware of any facts which might change such opinion after the date hereof. This opinion is furnished to you by us as counsel to the Company and the General Partner and is solely for your benefit and may not be quoted by you without our prior written 3 consent. This opinion may not be furnished to, relied on or quoted by any other Person without our prior written consent. Very truly yours, /s/ Sidley & Austin 4 [LETTERHEAD OF BORDEN CHEMICAL AND PLASTICS] May 2, 1995 LAWRENCE L. DIEKER VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY BCP MANAGEMENT, INC. To Credit Suisse, as Agent, and each of the Banks Under the Credit Agreement referred to below c/o Credit Suisse, as Agent 12 East 49th Street 39th Floor New York, New York 10017 Re: Borden Chemicals and Plastics Operating Limited Partnership ----------------------------- Ladies and Gentlemen: I am Vice President, General Counsel and Secretary of BCP Management, Inc. (the "General Partner") and have acted as counsel to Borden Chemicals and Plastics Operating Limited Partnership (the "Company"), and to the General Partner, the Company's sole general partner, in connection with the preparation, execution and delivery of that certain Credit Agreement dated as of May 2, 1995 (the "Credit Agreement") among the Company, the institutions from time to time party thereto as Banks (collectively, the "Banks"), and Credit Suisse, as agent for the Banks (in such capacity, the "Agent"). This opinion is being delivered pursuant to Section 5.01(e) of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings as so defined. In connection with the opinions expressed herein, I have reviewed the following documents: (i) The Credit Agreement executed by each of the parties thereto; (ii) The Notes; and (iii) (x) The Certificate of Incorporation and By-Laws of the General Partner, (y) the Certificate of Limited Partnership and Amended and Restated Agreement of Limited Partnership of the Company, and (z) certificates of governmental officials as to (1) the due organization, valid existence and good standing of each of the Company and the General Partner under the laws of the State of Delaware, (2) the due qualification or registration of the Company as a foreign limited partnership in the State of Illinois and the State of Louisiana, and (3) the due qualification as a foreign corporation and good standing of the General Partner in the State of Illinois and the State of Louisiana. The Credit Agreement and the Notes are hereinafter referred to as the "Loan Documents". In addition, I have examined originals or copies, certified or otherwise identified to my satisfaction, of such corporate records, agreements, documents or instruments and other instruments, as applicable, and of certificates or comparable documents or instruments of public officials and other instruments and documents and have made such inquiries of such officers and representatives and such examination of law as I have deemed relevant and necessary to form the basis for the opinions hereinafter set forth. In my examination of the Loan Documents I have assumed the authenticity of all such documents submitted to us as originals, the conformity to authentic originals of all such documents submitted to me as copies and the genuineness of all signatures (other than the signatures of the representatives of the General Partner). As to all questions of fact material to the opinions specified herein that have not been independently established, I have relied upon the representations and warranties of the Company contained in the Credit Agreement. In rendering the opinions expressed below, I have assumed, without any independent investigation or verification of any kind, that each party to the Loan Documents (other than the Company) has been duly organized and is validly existing and in good standing under its jurisdiction of incorporation and has full power and authority to execute and deliver the Loan Documents and perform the obligations set forth therein, and that the execution, delivery, and performance of the Loan Documents by such other parties have been duly authorized by all requisite corporate and other action on the part of such other parties and such documents have been duly executed and delivered by such other parties. Based upon the foregoing assumptions and examination of documents and upon such investigation as I have deemed necessary, 2 and subject to the qualifications set forth in subparagraphs (a) through (f) below, I am of the opinion that: 1. The Company (i) is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) has the partnership power to own its property and carry on its business as now conducted. The General Partner (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) has the corporate power to own its property and carry on its business as now conducted. 2. The Company is duly qualified or authorized as a foreign limited partnership in the State of Illinois and the State of Louisiana. 3. The General Partner is duly qualified as a foreign corporation to do business and is in good standing in the State of Illinois and the State of Louisiana. 4. The execution, delivery and performance by the Company of each Loan Document are within the Company's partnership powers and have been duly authorized by all necessary corporate action on the part of the General Partner. The execution and delivery by the General Partner, as general partner of the Company, of each Loan Document are within the General Partner's corporate powers and have been duly authorized by all necessary corporate action on the part of the General Partner. My opinions are expressly qualified as follows: (a) My opinions expressed above are limited to the General Corporation Law of the State of Delaware, the Delaware Revised Uniform Limited Partnership Act, and the federal law of the United States, and I do not express any opinion herein concerning any other law. (b) I express no opinion as to the effect of the compliance or noncompliance of the Agent, any of the Banks or the Issuing Bank with any state or federal laws or regulations applicable to any such party because of such party's legal or regulatory status, the nature of such party's business or the authority of any party to conduct business in any jurisdiction. (c) I express no opinion as to the effect (if any) of the law of any jurisdiction (except the State of New York) 3 in which any Bank is located which limits the rate of interest that such Bank may charge or collect. (d) Insofar as the opinions expressed in paragraphs 2 and 3 related to matters governed by the law of the State of Illinois or the State of Louisiana, I have not made an independent examination of such law, but have relied exclusively upon the certificates referred to clauses (iii)(z)(2) and (iii)(z)(3) above. (e) I express no opinion with respect to any federal or state securities laws. (f) My opinions speak as of the date hereof and I assume no obligation to supplement the foregoing opinions if any applicable laws change after the date hereof or if I become aware of any facts which might change such opinions after the date hereof. This opinion is furnished to you by me as counsel to the Company and the General Partner and is solely for your benefit and may not be quoted by you without my prior written consent. Sidley & Austin may rely upon this opinion in rendering their opinion to you of even date herewith, but this opinion may not be furnished to, relied on or quoted by any other Person without my prior written consent. Very truly yours, /s/Lawrence L. Dieker Lawrence L. Dieker 4 STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP" IS DULY FORMED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE NOT HAVING BEEN CANCELLED OR REVOKED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF LIMITED PARTNERSHIP, FILED THE THIRTY-FIRST DAY OF AUGUST, A.D. 1987, AT 10 O'CLOCK A.M. RESTATED CERTIFICATE, FILED THE TWENTY-FIRST DAY OF OCTOBER, A.D. 1987, AT 11:30 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, REPRESENTED BY "THE CORPORATION TRUST COMPANY" WITHOUT APPOINTMENT, FILED THE EIGHTH DAY OF AUGUST, A.D. 1988, AT 9 O'CLOCK A.M. RESTATED CERTIFICATE, FILED THE FIFTEENTH DAY OF DECEMBER, A.D. 1988, AT 12:45 O'CLOCK P.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED PARTNERSHIP. /s/Edward J. Freel ---------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 2136420 8310 7476253 DATE: 950085709 04-19-95 STATE OF DELAWARE PAGE 2 OFFICE OF THE SECRETARY OF STATE -------------------------------- AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE BEEN PAID TO DATE. /s/Edward J. Freel ---------------------------------------- [SEAL APPEARS HERE] Edward J. Freel, Secretary of State AUTHENTICATION: 2136420 8310 7476253 DATE: 04-19-95 950085709 STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED PARTNERSHIP OF "BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP", FILED IN THIS OFFICE ON THE THIRTY-FIRST DAY OF AUGUST, A.D. 1987, AT 10 O'CLOCK A.M. /s/Edward J. Freel ---------------------------------------- [SEAL APPEARS HERE] Edward J. Freel, Secretary of State AUTHENTICATION: 2136420 8100 7476366 DATE: 950085732 04-19-95 CERTIFICATE OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP THIS Certificate of Limited Partnership of Borden Chemicals and Plastics Operating Limited Partnership, (the "Partnership"), dated as of August 28, 1987, has been duly executed and is being filed by the undersigned to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.C (S) 17-101, et seq.). The undersigned states: ----- -- ---- 1. Name. The name of the limited partnership formed hereby is Borden ---- Chemicals and Plastics Operating Limited Partnership. 2. Registered Office. The address of the registered office of the ----------------- Partnership in the state of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 3. Registered Agent. The name and address of the registered agent ---------------- for service of process on the Partnership in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Hew Castle County, Delaware 19801. 4. General Partner. The name and the business address of the sole --------------- general partner of the Partnership is: BCP Management, Inc., 277 Park Avenue, New York, New York 10172. IN WITNESS WHEREOF, the undersigned general partner has duly executed this Certificate of Limited Partnership as of the day and year first aforesaid. BCP MANAGEMENT, INC. a Delaware corporation By: [SIGNATURE ILLEGIBLE] ------------------------------- Title: TREASURER ----------------------- STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF "BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF OCTOBER, A.D. 1987, AT 11:30 O'CLOCK A.M. /s/Edward J. Freel ---------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 2136420 8100 7476365 DATE: 950085732 04-19-95 AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP This Amended and Restated Certificate of Limited Partnership of Borden Chemicals and Plastics Operating Limited Partnership (the "Partnership"), dated as of October 16, 1987, has been duly executed and is being filed by the undersigned in accordance with the provisions of 6 Del. C. (S) 17-210, to amend ------- and restate the original Certificate of Limited Partnership of the Partnership, which was filed on August 31, 1987, with the Secretary of State of the State of Delaware, (the "Certificate"), to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del. C. (S) 17-101, et seq.). ------- -- ---- The Certificate is hereby amended and restated in its entirety to read as follows: 1. Name. The name of the limited partnership formed and continued ---- hereby is Borden Chemicals and Plastics Operating Limited Partnership. 2. Registered Office. The address of the registered office of the ----------------- Partnership in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 3. Registered Agent. The name and address of the registered agent ---------------- for service of process on the Partnership in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 4. General Partner. The name and the business address of the sole --------------- general partner of the Partnership is: BCP Management, Inc., Highway 73, Geismar, Louisiana 70734. IN WITNESS WHEREOF, the undersigned general partner has duly executed this Amended and Restated Certificate of Limited Partnership as of the day and year first aforesaid. BCP MANAGEMENT, INC. a Delaware corporation By: [SIGNATURE ILLEGIBLE] ------------------------------- Title: VICE PRESIDENT ----------------------- -2- STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP", FILED IN THIS OFFICE ON THE EIGHTH DAY OF AUGUST, A.D. 1988, AT 9 O'CLOCK A.M. /s/Edward J. Freel [SEAL] ---------------------------------------- Edward J. Freel, Secretary of State 2136420 8100 AUTHENTICATION: 7476364 950085732 DATE: 04-19-95 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP It is hereby certified that: First: The name of the limited partnership, hereinafter called the "(Partnership") is Borden Chemicals and Plastics Operating Limited Partnership. Second: Pursuant to the provisions of Section 17-202; Title 6, Delaware Code, the Amendment to the Certificate of Limited Partnership effected by this Certificate of Amendment is: Change the registered agent from The Corporation Trust Company to The Prentice-Hall Corporation System, Inc., and change the registered office of the Partnership in Delaware to 229 South State Street, City of Dover 19901, County of Kent. The Undersigned, a general partner of the Partnership, executes this Certificate of Amendment on May 31, 1988. ------ [SIGNATURE ILLEGIBLE] ----------------------------------- BCP Management, Inc. General Partner STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF "BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP", FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF DECEMBER, A.D. 1988, AT 12:45 O'CLOCK P.M. /s/Edward J. Freel [SEAL] ---------------------------------------- Edward J. Freel, Secretary of State 2136420 8100 AUTHENTICATION: 7476363 950085732 DATE: 04-19-95 AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP OF BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP THIS Amended and Restated Certificate of Limited Partnership of Borden Chemicals and Plastics Operating Limited Partnership (the "Partnership"), dated as of August 8, 1988, has been duly executed and is being filed by the undersigned in accordance with the provisions of 6 Del.C. (S) 17-210, to amend ------ and restate the original Certificate of Limited Partnership of the Partnership, which was filed on August 31, 1987, with the Secretary of State of the State of Delaware, as heretofore amended (the "Certificate"), to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.C. ------ (S) 17-101, et seq.). -- --- The Certificate is hereby amended and restated in its entirety to read as follows: 1. Name. The name of the limited partnership formed and continued ---- hereby is Borden Chemicals and Plastics Operating Limited Partnership. 2. Registered Office. The address of the registered office of the ----------------- Partnership in the State of Delaware is c/o The Prentice-Hall Corporation Systems, Inc., 229 South State Street, Dover, Kent County, Delaware 19901. 3. Registered Agent. The name and address of the registered agent ---------------- for service of process on the Partnership in -1- the State of Delaware is The Prentice-Hall Corporation Systems, Inc., 229 South State Street, Dover, Kent County, Delaware 19901. 4. General Partner. The name and the business address of the sole --------------- general partner of the Partnership is BCP Management, Inc., a Delaware corporation, Highway 73, Geismar, Louisiana 70734. IN WITNESS WHEREOF, the undersigned general partner has duly executed this Amended and Restated Certificate of Limited Partnership as of the day and year first aforesaid. GENERAL PARTNER: BCP Management, Inc. By: [SIGNATURE ILLEGIBLE] -------------------------------- TITLE: Secretary ----------------------------- -2- PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "BCP MANAGEMENT, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF INCORPORATION, FILED THE SIXTH DAY OF AUGUST, A.D. 1987, AT 10 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, FILED THE SECOND DAY OF NOVEMBER, A.D. 1987, AT 10 O'CLOCK A.M. CERTIFICATE OF CHANGE OF REGISTERED AGENT, REPRESENTED BY "THE CORPORATION TRUST COMPANY" WITHOUT APPOINTMENT, FILED THE TWENTY-FIRST DAY OF JUNE, A.D. 1988, AT 9 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE. AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES /s/Edward J. Freel ----------------------------------- [SEAL] Edward J. Freel, Secretary of State 2134202 8310 AUTHENTICATION: 7474810 950084545 DATE: 04-18-95 STATE OF DELAWARE PAGE 2 OFFICE OF THE SECRETARY OF STATE -------------------------------- HAVE BEEN PAID TO DATE. /s/Edward J. Freel [SEAL] ----------------------------------- Edward J. Freel, Secretary of State 2134202 8310 AUTHENTICATION: 7474810 950084545 DATE: 04-18-95 STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "BCP MANAGEMENT, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY OF AUGUST, A.D. 1987, AT 10 O'CLOCK A.M. /s/Edward J. Freel [SEAL] ----------------------------------- Edward J. Freel, Secretary of State 2134202 8100 AUTHENTICATION: 7474495 950083756 DATE: 04-17-95 CERTIFICATE OF INCORPORATION OF BCP MANAGEMENT, INC. FIRST: The name of the Corporation is BCP Management, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 10,000 shares of common stock with a par value of one dollar ($1.00) per share. FIFTH: The name and mailing address of the incorporator of the Corporation are as follows:
Name Address ---- ------- Steven Sutherland One First National Plaza Suite 4200 Chicago, Illinois 60603
SIXTH: The name and mailing address of the person who is to serve as director until the first annual meeting of stockholders or until his successor is elected and qualified is as follows:
Name Address ---- ------- Lawrence O. Doza c/o Borden, Inc. 277 Park Avenue New York, New York 10172
SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, subject to any specific limitation on such power provided by any By-Laws adopted by the stockholders. EIGHTH: Elections of directors need not be by written ballot unless the By-Laws of the Corporation so provide. NINTH: The Corporation is to have perpetual existence. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this reservation. ELEVENTH: A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Any repeal or modification of this Section A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. B. (1) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and -2- amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (2) of this Section B - -------- ------- with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section B shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State -------- ------- of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section B or otherwise. (2) If a claim under paragraph (1) of this Section B is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the Claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of -3- Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section B shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise. (4) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation, or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. (5) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Section B with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, makes this Certificate, herby declaring and certifying that the facts herein stated are true, and accordingly has hereunto set his hand this 5th day of August, 1987. - --- /s/ Steven Sutherland ----------------------------- Steven Sutherland -4- State of Delaware PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "BCP MANAGEMENT, INC.", FILED IN THIS OFFICE ON THE SECOND DAY OF NOVEMBER, A.D. 1987, AT 10 0' CLOCK A.M. [SEAL APPEARS HERE] /s/ Edward J. Freel ---------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 2134202 8100 7474496 DATE: 950083756 04-17-95 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF BCP MANAGEMENT, INC. BCP Management, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware ("the Corporation"), DOES HEREBY CERTIFY: FIRST: That the directors of the Corporation, by written consent dated October 2, 1987, filed with the minutes of the Corporation, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of the Corporation and directing that such amendment be submitted to the sole stockholder of the Corporation for its approval in accordance with Section 242 of the General Corporation Law of the State of Delaware; RESOLVED, that the Board of Directors of the Corporation declares it advisable that the Certificate of Incorporation of the Corporation be amended by changing Article THIRD thereof so that, as amended, said Article shall be and read in its entirety as follows: THIRD: The purposes of the Corporation are to (i) act as the general partner of Borden Chemicals and Plastics Limited Partnership, a Delaware Limited Partnership, and Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership, and any successors to such limited partnerships, (ii) conduct, direct and exercise full control over all activities of such limited partnerships and successors and (iii) do anything necessary or incidental to the foregoing. RESOLVED FURTHER, that such proposed amendment be submitted to the sole stockholder of the Corporation for its approval. SECOND: That in lieu of a meeting and vote of the sole stockholder, the sole stockholder has given its written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said BCP Management, Inc. has caused this certificate to be signed by A.S. D'Amato, its Chairman of the Board, President and Chief Executive Officer, -2- and attested by Lawrence L. Dieker, its Secretary, this 6th day of October, --- 1987. BCP Management, Inc. By: /s/ A.S. D'Amato ------------------------- A. S. D'Amato Chairman of the Board, President and Chief Executive Officer ATTEST: By: /s/ Lawrence L. Dieker ------------------------- Lawrence L. Dieker Secretary -3- State of Delaware PAGE 1 OFFICE OF THE SECRETARY OF STATE ________________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CHANGE OF REGISTERED AGENT OF "BCP MANAGEMENT, INC.", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF JUNE, A.D. 1988, AT 9 O'CLOCK A.M. /s/ Edward J. Freel [SEAL APPEARS HERE] ---------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 2134202 8100 7474497 DATE: 950083756 04-17-95 CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE AND OF REGISTERED AGENT It is hereby certified that: 1. The name of the corporation (hereinafter called the "corporation") is - BCP Management, Inc. 2. The registered office of the corporation within the State of Delaware is hereby changed to 229 South State Street, City of Dover 19901, County of Kent. 3. The registered agent of the corporation within the State of Delaware is hereby changed to The Prentice-Hall Corporation System, Inc., the business office of which is identical with the registered office of the corporation as hereby changed. 4. The corporation has authorized the changes hereinbefore set forth by resolution of its Board of Directors. Signed on June 1, 1988. [SIGNATURE ILLEGIBLE] ------------------------------------- President Attest: /s/ [SIGNATURE ILLEGIBLE] - ------------------------------ Secretary UNITED STATES OF AMERICA STATE OF LOUISIANA FOX MCKEITHEN SECRETARY OF STATE AS SECRETARY OF STATE, OF THE STATE OF LOUISIANA, I DO HEREBY CERTIFY THAT BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP A partnership whose principal place of business is Wilmington, Delaware, Filed partnership documents and registered to do business in this State on November 19, 1987. IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND AND CAUSED THE SEAL OF MY OFFICE TO BE AFFIXED AT THE CITY OF BATON ROUGE ON, April 25, 1995 [SEAL APPEARS HERE] /s/ Fox McKeithen DWI SECRETARY OF STATE UNITED STATES OF AMERICA STATE OF LOUISIANA FOX MCKEITHEN SECRETARY OF STATE AS SECRETARY OF STATE, OF THE STATE OF LOUISIANA, I DO HEREBY CERTIFY THAT BCP MANAGEMENT, INC. A Delaware corporation domiciled at Wilmington, Filed charter and qualified to do business in this State on November 19, 1987, I further certify that the records of this Office indicate the corporation has paid all fees due the Secretary of State, and so far as the Office of the Secretary of State is concerned is in good standing and is authorized to do business in this State. I further certify that this Certificate is not intended to reflect the financial condition of this corporation since this information is not available from the records of this Office. Qualification Documents: November 19, 1987 R. S. 12:308 June 23, 1988 R. S. 12:308 October 8, 1991 IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND AND CAUSED THE SEAL OF MY OFFICE TO BE AFFIXED AT THE CITY OF BATON ROUGE ON, April 25, 1995 [SEAL APPEARS HERE] /s/ Fox McKeithen DWI SECRETARY OF STATE File Number S000458 ----------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: I, George H, Ryan, Secretary of State of the State of Illinois, do hereby certify that BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, HAVING COMPLIED WITH THE PROVISIONS OF THE REVISED UNIFORM LIMITED PARTNERSHIP ACT OF THE ILLINOIS STATE STATUTES ON 11/09/1987 IS AUTHORIZED AND EXISTS IN ILLINOIS AS A LIMITED PARTNERSHIP.***************************************** [SEAL APPEARS HERE] IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois this 25th --------------------- day of APRIL A.D., 1995. ---------------- --- /s/ George H. Ryan --------------------------------------------------- Secretary of State File Number 5486-225-3 --------------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: I, George H. Ryan, Secretary of State of the State of Illinois, do hereby certify that BCP MANAGEMENT, INC., INCORPORATED IN THE STATE OF DELAWARE AND LICENSED TO TRANSACT BUSINESS IN THIS STATE ON NOVEMBER 9, 1987, APPEARS TO HAVE COMPLIED WITH ALL THE PROVISIONS OF THE BUSINESS CORPORATION ACT OF THIS STATE RELATING TO THE FILING OF ANNUAL REPORTS AND PAYMENT OF FRANCHISE TAXES, AND IS AT THIS TIME A FOREIGN CORPORATION IN GOOD STANDING AND AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF ILLINOIS********** [SEAL APPEARS HERE] IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois this 25TH ------------------------- day of APRIL A.D., 1995. ----------------- -- /s/ George H. Ryan --------------------------------------------------- SECRETARY OF STATE EXPEDITED SECRETARY OF STATE APR 25 1995 EXP. FEES 10.00 ------- COPY.CERT. 5.00 ------ May 1, 1995 - Wachovia Bank and Trust Company, N.A. P.O. Box 3099 301 North Main Street Winston-Salem, North Carolina 27102 Attention: National Noteteller First Wachovia Corporation 2 Peachtree Street, N.W. Atlanta, Georgia 30383 Attention: Robert Marcus, MC370 Re: $20,000,000 Revolving Line of Credit Agreement (the "Old Agreement") ------------------------------------------ Ladies and Gentlemen: Effective simultaneously with the closing of the $100,000,000 Credit Agreement dated as of May __, 1995 among Borden Chemicals and Plastics Operating Limited Partnership (the "Borrower"), the banks and other financial institutions listed on the signature pages thereof under the caption "Banks", and Credit Suisse, individually as a Bank and as agent for the other Banks, the Borrower hereby terminates and Old Agreement. By your signature set forth below, you acknowledge and agree to such termination and waive the thirty (30) days' written notice requirement set forth in the Old Agreement. This letter may be executed in counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Very Truly Yours, BORDEN CHEMICALS AND PLASTICS OPERATING LIMITED PARTNERSHIP By: BCP MANAGEMENT, INC., as General Partner By:___________________________ Name: Title: Acknowledged and Agreed to: WACHOVIA BANK AND TRUST COMPANY, N.A. By: /s/ J. Peter Payton ----------------------------- Name: J. Peter Payton Title: SUP/GE Dec 31, 1995 quick coverage calc - -------------------------------- 568.5 (Assets) ( 9.0) finance cost deferred (144.7) Liab + 40.0 debt (1,655) ( 5.677) - --------- 268.000 -----END PRIVACY-ENHANCED MESSAGE-----