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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1997
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OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The transition period from to
---------------- ----------------
Commission file number 1-7677
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LSB INDUSTRIES, INC.
----------------------------------------------------
Exact name of Registrant as specified in its charter
DELAWARE 73-1015226
- ------------------------------ ---------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
16 South Pennsylvania, Oklahoma City, Oklahoma 73107
-------------------------------------------------------
Address of principal executive offices (Zip Code)
(405) 235-4546
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Registrant's telephone number, including area code
None
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Former name, former address and former fiscal year, if
changed since last report.
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
------ ------
The number of shares outstanding of the Registrant's voting Common
Stock, as of August 12, 1997 is 12,861,081 shares excluding 2,152,395
shares held as treasury stock.
PART I
FINANCIAL INFORMATION
Company or group of companies for which report is filed: LSB
Industries, Inc. and all of its wholly-owned subsidiaries.
The accompanying condensed consolidated balance sheet of LSB
Industries, Inc., at June 30, 1997, the condensed consolidated
statements of operations for the six month and three month
periods ended June 30, 1997 and 1996 and the consolidated
statements of cash flows for the six month periods ended June 30,
1997 and 1996 are unaudited and reflect all adjustments,
consisting primarily of adjustments of a normal recurring nature,
which are, in the opinion of management, necessary for a fair
presentation of the interim periods. The results of operations
for the six months and three months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full
year. The condensed consolidated balance sheet at December 31,
1996, was derived from audited financial statements as of that
date.
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Information at June 30, 1997 is unaudited)
(Dollars in thousands)
June 30, December 31,
ASSETS 1997 1996
_______________________________________ ___________ __________
Current assets:
Cash and cash equivalents $ 769 $ 1,620
Trade accounts receivable, net of allowance 56,578 50,791
Inventories:
Finished goods 37,720 36,304
Work in process 6,490 12,084
Raw materials 19,232 19,594
___________ __________
Total inventory 63,442 67,982
Supplies and prepaid items 7,978 7,217
___________ __________
Total current assets 128,767 127,610
Property, plant and equipment, net 119,547 103,143
Investments and other assets:
Loans receivable, secured by real estate 743 15,010
Other assets, net of allowance 17,163 15,521
___________ __________
$ 266,220 $ 261,284
(Continued on following page)
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
(Information at June 30, 1997 is unaudited)
(Dollars in thousands)
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
____________________________________ ___________ __________
Current liabilities:
Drafts payable $ 519 $ 536
Accounts payable 35,715 41,796
Accrued liabilities 12,385 12,780
Current portion of long-term debt (Note 1) 14,904 13,007
___________ __________
Total current liabilities 63,523 68,119
Long-term debt (Note 1) 135,135 119,277
Contingencies (Note 5)
Redeemable, noncumulative convertible
preferred stock, $100 par value; 1,539 shares
issued and outstanding 146 146
Stockholders' equity (Note 4):
Series B 12% cumulative, convertible
preferred stock, $100 par value;
20,000 shares issued and outstanding 2,000 2,000
Series 2 $3.25 convertible, exchangeable
Class C preferred stock, $50 stated
value; 920,000 shares issued 46,000 46,000
Common stock, $.10 par value; 75,000,000
shares authorized, 15,013,476 shares
issued (14,888,476 in 1996) 1,501 1,489
Capital in excess of par value 38,227 37,843
Accumulated deficit (8,687) (2,706)
___________ __________
79,041 84,626
Less treasury stock, at cost:
Series 2 Preferred, 5,000 shares 200 200
Common stock, 2,079,395 shares
(1,913,120 in 1996) 11,425 10,684
___________ __________
Total stockholders' equity 67,416 73,742
___________ __________
$ 266,220 $ 261,284
=========== ==========
(See accompanying notes)
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30, 1997 and 1996
(Dollars in thousands, except per share amounts)
1997 1996
__________ __________
Revenues:
Net sales $ 162,502 $ 159,375
Other income 3,801 2,991
__________ __________
166,303 162,366
Costs and expenses:
Cost of sales 132,199 127,335
Selling, general and administrative 31,554 27,087
Interest 6,396 5,964
__________ __________
170,149 160,386
__________ __________
Income (loss) before provision for
income taxes (3,846) 1,980
Provision for income taxes 125 139
----------- ----------
Net income (loss) $ (3,971) $ 1,841
=========== ==========
Net income (loss) applicable to
common stock (Note 3) $ (5,594) $ 218
=========== ==========
Average common shares outstanding (Note 3):
Primary 13,066,250 13,129,970
Fully diluted 13,068,250 13,465,303
Earnings (loss) per common share (Note 3):
Primary $ (.43) $ .02
========== ==========
Fully diluted $ (.43) $ .02
========== ==========
(See accompanying notes)
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, 1997 and 1996
(Dollars in thousands, except per share amounts)
1997 1996
__________ __________
Revenues:
Net sales $ 89,268 $ 89,880
Other income 2,171 1,580
__________ __________
91,439 91,460
Costs and expenses:
Cost of sales 69,887 72,647
Selling, general and administrative 16,682 13,369
Interest 3,340 2,995
__________ __________
89,909 89,011
__________ __________
Income before provision for
income taxes 1,530 2,449
Provision for income taxes 63 77
---------- ----------
Net income $ 1,467 $ 2,372
========== ==========
Net income applicable to
common stock (Note 3) $ 648 $ 1,568
========== ==========
Average common shares outstanding (Note 3):
Primary 13,157,676 13,348,553
Fully diluted 13,161,676 14,019,219
Earnings per common share (Note 3):
Primary $ .05 $ .12
========== ==========
Fully diluted $ .05 $ .12
========== ==========
(See accompanying notes)
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, 1997 and 1996
(Dollars in thousands)
1997 1996
___________ __________
Cash flows from operations:
Net income (loss) $ (3,971) $ 1,841
Adjustments to reconcile net income (loss)
to cash flows provided (used) by operations:
Depreciation, depletion and amortization:
Property, plant and equipment 5,141 4,522
Other 567 617
Provision for possible losses
on receivables and other assets 1,066 677
Loss (gain) on sale of assets 9 (767)
Recapture of prior period provisions for loss
on loans receivable secured by real estate (1,383) -
Cash provided (used) by changes in assets
and liabilities:
Trade accounts receivable ( 5,834) (17,959)
Inventories 4,540 1,169
Supplies and prepaid items ( 716) (1,880)
Accounts payable (6,081) 23,372
Accrued liabilities (853) 598
___________ _________
Net cash provided (used) by operations (7,515) 12,190
Cash flows from investing activities:
Capital expenditures (5,701) (7,381)
Principal payments on notes receivable 203 75
Proceeds from sales of equipment and
real estate properties 360 236
Proceeds from sale of investment securities - 1,444
Increase in other assets (2,994) (985)
---------- ---------
Net cash used in investing activities (8,132) (6,611)
Cash flows from financing activities:
Payments on long-term and other debt (23,041) (3,365)
Long-term and other borrowings 53,864 5,647
Net change in revolving debt (13,655) (3,465)
Net change in drafts payable (17) (424)
Dividends paid (Note 4):
Preferred stocks (1,621) (1,623)
Common Stock (389) (389)
Purchases of treasury stock (Note 4) (535) (12)
Net proceeds from issuance of common stock 190 -
_________ __________
Net cash provided (used) by financing activities 14,796 (3,631)
_________ __________
Net increase (decrease) in cash (851) 1,948
Cash and cash equivalents at beginning of period 1,620 1,420
--------- ----------
Cash and cash equivalents at end of period $ 769 $ 3,368
========= ==========
(See accompanying notes)
Note 1: The Company's working capital line of credit has a
scheduled termination date of April 1, 1998, and as of June 30,
1997, the Company was not in compliance with its financial
covenants relating to Tangible Net Worth and Debt-to-Worth. The
Company's working capital lender has waived such defaults as of
June 30, 1997. As of the date of this report, the lender has
verbally committed to an extension of the termination date so
that the termination date will be scheduled to occur more than
twelve months from June 30, 1997, and resetting the Company's
Tangible Net Worth and Debt-to-Worth financial covenants so that
such are consistent with the Company's current projections for
the next twelve months. Accordingly, the Company has classified
the $43.4 million due under the working capital line of credit at
June 30, 1997 as long-term debt due after one year in the
accompanying condensed consolidated financial statements. As of
the date of this report, there are no assurances that the lender
will extend the scheduled termination date and reset the Tangible
Net Worth and Debt-to-Worth financial covenants and, if such
financial covenants are reset, that the Company will be able to
comply with such reset covenants.
Note 2: At June 30, 1997, the Company had net operating loss
("NOL") carryforwards for tax purposes of approximately $45
million (approximately $10 million alternative minimum tax NOLs).
Such amounts of regular tax NOL expire beginning in 1999. The
Company also has investment tax credit carryforwards of
approximately $356,000 which begin expiring in 1997.
The Company s provision for income taxes for the six months ended
June 30, 1997 of $125,000 is for current state income taxes and
federal alternative minimum tax.
Note 3: Primary earnings per common share are based upon the
weighted average number of common shares and dilutive common
equivalent shares outstanding during each period, after giving
appropriate effect to preferred stock dividends.
Fully diluted earnings per share are based on the weighted
average number of common shares and dilutive common equivalent
shares outstanding and the assumed conversion of dilutive
convertible securities outstanding after appropriate adjustment
for interest and related income tax effects on convertible notes
payable.
Net income applicable to common stock is computed by adjusting
net income by the amount of preferred stock dividends, including
undeclared or unpaid dividends, if cumulative.
In February 1997, the Financial Accounting Standards Board issued
statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. Based on the
Company's review of its earnings per share calculation, the
impact of Statement No. 128 on both primary and fully diluted
earnings per share for the periods presented herein are not
expected to be material.
Note 4: The table below provides detail of activity in the Stockholders'
equity accounts for the six months ended June 30, 1997:
SEVENTH AMENDMENT Exhibit 4.1
TO
LOAN AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the
"Amendment") is dated as of April 11, 1997, and entered into by
and between BANKAMERICA BUSINESS CREDIT, INC. ( Lender ) and LSB
INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain
Loan and Security Agreement dated December 12, 1994, as amended
by (i) that certain First Amendment to Loan and Security
Agreement dated as of August 17, 1995, (ii) that certain Second
Amendment to Loan and Security Agreement dated as of December 1,
1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, (iv) that certain Fourth
Amendment to Loan and Security Agreement dated as of July 1,
1996, (v) that certain Fifth Amendment to Loan and Security
Agreement dated as of November 18, 1996, and (vi) that certain
Sixth Amendment to Loan and Security Agreement dated as of
February 13, 1997 (as so amended, the "Agreement");
WHEREAS, Lender and Borrower desire to amend the Agreement
as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions
and agreements set forth in the Agreement and this Amendment, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have
the same meanings as in the Agreement, as amended hereby.
Section 1.02. Amendment to Definition of Availability
Reductions. The definition of "Availability Reductions" is
hereby amended by adding a new subsection (vi) which reads as
follows:
"(vi) reserves in Lender s sole discretion with respect
to Swap Transactions, with the amount thereof to be at all times
based on a weekly mark-to-market calculation given to Lender by
Bank s Capital Markets Credit Group."
All other subsections of the definition remain unchanged.
Section 1.03 Amendment to Definition of Obligations. The
second sentence of the definition of "Obligations" beginning in
its original version as ""Obligations" includes" and ending
"Letter of Credit Agreement." is amended in its entirety to read
as follows:
""Obligations" includes, without limitation, (a) all debts,
liabilities, and obligations now or hereafter owing from Borrower
to Lender under or in connection with the Letters of Credit and
(b) all debts, liabilities and obligations now or hereafter owing
from the Borrower to the Lender arising from or related to Swap
Transactions."
There is no change in the first sentence of the definition of
"Obligations".
Section 1.04 New Definition. The following new definition
is hereby added to the Agreement:
"Swap Transactions" means interest rate swaps entered into
by the Bank s Capital Markets Credit Group for the account of or
otherwise for the benefit of the Borrower.
ARTICLE II
Amendments
Section 2.01. Amendment to Article 2. Article 2 of the
Agreement is hereby amended by adding a new Section 2.5 which
reads as follows:
"2.5. Swap Transactions. The Borrower may request and the
Lender may, in its sole and absolute discretion, arrange for the
Borrower to obtain Swap Transactions from the Bank s Capital
Markets Credit Group, provided, however, that Lender's exposure
to the LSB Borrowing Group may in no event exceed a maximum
amount of $1,850,000. The Borrower agrees to indemnify and hold
the Lender harmless from all losses, liabilities, costs, expenses
and claims incurred by the Lender arising from or related to such
Swap Transactions. The Borrower acknowledges and agrees that the
obtaining of Swap Transactions from the Bank s Capital Markets
Credit Group (a) is in the sole and absolute discretion of the
Bank s Capital Markets Credit Group, (b) is subject to all rules
and regulations of the Bank s Capital Markets Credit Group, and
(c) is due to the Bank s Capital Markets Credit Group relying on
the indemnity of the Lender to the Bank s Capital Markets Credit
Group with respect to all risks of loss associated with the Swap
Transactions."
Section 2.02. Amendment to Section 12. The first sentence
of Section 12 which in its original version reads in its entirety
as follows "The initial term of this Agreement shall be three (3)
years from the Closing Date (the "Termination Date")" is hereby
amended to read in its entirety as follows:
"The initial term of this Agreement shall be from the
Closing Date until April 1, 1998 (the "Termination Date")."
All other provisions of Section 12 remain unchanged.
ARTICLE III
Ratifications, Representations and Warranties
Section 3.01.Ratifications. The terms and provisions set forth
in this Amendment shall modify and supersede all inconsistent
terms and provisions set forth in the Agreement and, except as
expressly modified and superseded by this Amendment, the terms
and provisions of the Agreement, including, without limitation,
all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender
and Borrower agree that the Agreement as amended hereby shall
continue to be legal, valid, binding and enforceable in
accordance with its terms.
Section 3.02.Representations and Warranties. Borrower hereby
represents and warrants to Lender that the execution, delivery
and performance of this Amendment and all other loan, amendment
or security documents to which Borrower is or is to be a party
hereunder (hereinafter referred to collectively as the "Loan
Documents") executed and/or delivered in connection herewith,
have been authorized by all requisite corporate action on the
part of Borrower and will not violate the Articles of
Incorporation or Bylaws of Borrower.
ARTICLE IV
Conditions Precedent
Section 4.01.Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent
(unless specifically waived in writing by the Lender):
(a)Lender shall have received all of the following, each dated
(unless otherwise indicated) as of the date of this Amendment, in
form and substance satisfactory to Lender in its sole discretion:
(i)Company Certificate. A certificate executed by the Secretary
or Assistant Secretary of Borrower certifying (A) that Borrower's
Board of Directors has met and adopted, approved, consented to
and ratified the resolutions attached thereto which authorize the
execution, delivery and performance by Borrower of the Amendment
and the Loan Documents, (B) the names of the officers of Borrower
authorized to sign this Amendment and each of the Loan Documents
to which Borrower is to be a party hereunder, (C) the specimen
signatures of such officers, and (D) that neither the Articles of
Incorporation nor Bylaws of Borrower have been amended since the
date of the Agreement;
(ii)No Material Adverse Change. There shall have occurred no
material adverse change in the business, operations, financial
condition, profits or prospects of Borrower, or in the
Collateral, and the Lender shall have received a certificate of
Borrower's chief executive officer to such effect;
(iii) Other Documents. Borrower shall have
executed and delivered such other documents and
instruments as well as required record searches as
Lender may require.
(b) All corporate proceedings taken in connection with
the transactions contemplated by this Amendment and all
documents, instruments and other legal matters incident
thereto shall be satisfactory to Lender and its legal
counsel, Jenkens & Gilchrist, a Professional Corporation.
ARTICLE V
Miscellaneous
Section 5.01. Survival of Representations and Warranties.
All representations and warranties made in the Agreement or any
other document or documents relating thereto, including, without
limitation, any Loan Document furnished in connection with this
Amendment, shall survive the execution and delivery of this
Amendment and the other Loan Documents, and no investigation by
Lender or any closing shall affect the representations and
warranties or the right of Lender to rely thereon.
Section 5.02. Reference to Agreement. The Agreement, each
of the Loan Documents, and any and all other agreements,
documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the
Agreement as amended hereby, are hereby amended so that any
reference therein to the Agreement shall mean a reference to the
Agreement as amended hereby.
Section 5.03. Severability. Any provision of this
Amendment held by a court of competent jurisdiction to be invalid
or unenforceable shall not impair or invalidate the remainder of
this Amendment and the effect thereof shall be confined to the
provision so held to be invalid or unenforceable.
Section 5.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER
LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE
BEEN MADE AND TO BE PERFORMABLE IN THE STATE OF OKLAHOMA AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF OKLAHOMA.
Section 5.05. Successors and Assigns. This Amendment is
binding upon and shall inure to the benefit of Lender and
Borrower and their respective successors and assigns; provided,
however, that Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent
of Lender. Lender may assign any or all of its rights or
obligations hereunder without the prior consent of Borrower.
Section 5.06. Counterparts. This Amendment may be executed
in one or more counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together
shall constitute one and the same instrument.
Section 5.07. Effect of Waiver. No consent or waiver,
express or implied, by Lender to or of any breach of or deviation
from any covenant or condition of the Agreement or duty shall be
deemed a consent or waiver to or of any other breach of or
deviation from the same or any other covenant, condition or duty.
No failure on the part of Lender to exercise and no delay in
exercising, and no course of dealing with respect to, any right,
power, or privilege under this Amendment, the Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power, or privilege
under this Amendment, the Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. The rights and remedies
provided for in the Agreement and the other Loan Documents are
cumulative and not exclusive of any rights and remedies provided
by law.
Section 5.08. Headings. The headings, captions and
arrangements used in this Amendment are for convenience only and
shall not affect the interpretation of this Amendment.
Section 5.09. Releases. As a material inducement to Lender
to enter into this Amendment, Borrower hereby represents and
warrants that there are no claims or offsets against, or defenses
or counterclaims to, the terms and provisions of and the other
obligations created or evidenced by the Agreement or the other
Loan Documents. Borrower hereby releases, acquits, and forever
discharges Lender, and its successors, assigns, and predecessors
in interest, their parents, subsidiaries and affiliated
organizations, and the officers, employees, attorneys, and agents
of each of the foregoing (all of whom are herein jointly and
severally referred to as the "Released Parties") from any and all
liability, damages, losses, obligations, costs, expenses, suits,
claims, demands, causes of action for damages or any other
relief, whether or not now known or suspected, of any kind,
nature, or character, at law or in equity, which Borrower now has
or may have ever had against any of the Released Parties,
including, but not limited to, those relating to (a) usury or
penalties or damages therefor, (b) allegations that a partnership
existed between Borrower and the Released Parties, (c)
allegations of unconscionable acts, deceptive trade practices,
lack of good faith or fair dealing, lack of commercial
reasonableness or special relationships, such as fiduciary, trust
or confidential relationships, (d) allegations of dominion,
control, alter ego, instrumentality, fraud, misrepresentation,
duress, coercion, undue influence, interference or negligence,
(e) allegations of tortious interference with present or
prospective business relationships or of antitrust, or (f)
slander, libel or damage to reputation, (hereinafter being
collectively referred to as the "Claims"), all of which Claims
are hereby waived.
Section 5.10. Expenses of Lender. Borrower agrees to pay
on demand (i) all costs and expenses reasonably incurred by
Lender in connection with the preparation, negotiation and
execution of this Amendment and the other Loan Documents executed
pursuant hereto and any and all subsequent amendments,
modifications, and supplements hereto or thereto, including,
without limitation, the costs and fees of Lender's legal counsel
and the allocated cost of staff counsel and (ii) all costs and
expenses reasonably incurred by Lender in connection with the
enforcement or preservation of any rights under the Agreement,
this Amendment and/or other Loan Documents, including, without
limitation, the costs and fees of Lender's legal counsel and the
allocated cost of staff counsel.
Section 5.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL
AGREEMENTS BETWEEN LENDER AND BORROWER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND BORROWER.
IN WITNESS WHEREOF, the parties have executed this Amendment
on the date first above written.
"BORROWER"
LSB INDUSTRIES, INC.
By: _________________________
Name: Tony M. Shelby
Title: Vice President
"LENDER"
BANKAMERICA BUSINESS CREDIT, INC.
By: _________________________
Name: Michael J. Jasaitis
Title: Vice President
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution
of, and consents to, the terms and conditions of that certain
Seventh Amendment to Loan and Security Agreement dated as of
April 11, 1997, between LSB Industries, Inc., and BankAmerica
Business Credit, Inc. ("Creditor") and reaffirms its obligations
under that certain Cross-Collateralization and Cross-Guaranty
Agreement (the Cross-Collateralization Agreement ) dated as of
December 12, 1994, made by the undersigned in favor of the
Creditor, and acknowledges and agrees that the Cross-
Collateralization Agreement remains in full force and effect and
the Cross-Collateralization Agreement is hereby ratified and
confirmed.
Dated as of April 11, 1997.
CLIMATE MASTER, INC.
L&S BEARING CO.
SUMMIT MACHINE TOOL
MANUFACTURING CORP.
INTERNATIONAL ENVIRONMENTAL
CORPORATION
By: _______________________________
Tony M. Shelby, Vice President
acting on behalf of each of
the above
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution
of, and consents to, the terms and conditions of that certain
Seventh Amendment to Loan and Security Agreement dated as of
April 11, 1997, between LSB Industries, Inc., and BankAmerica
Business Credit, Inc. ("Creditor") and reaffirms its obligations
under (i) that certain Continuing Guaranty with Security
Agreement (the "Guaranty") dated as of December 12, 1994, and
(ii) that certain Cross-Collateralization and Cross-Guaranty
Agreement (the Cross-Collateralization Agreement ) dated as of
December 12, 1994, each made by the undersigned in favor of the
Creditor, and acknowledges and agrees that the Guaranty and the
Cross-Collateralization Agreement remain in full force and effect
and the Guaranty and the Cross-Collateralization Agreement are
hereby ratified and confirmed.
Dated as of April 11, 1997.
UNIVERSAL TECH CORPORATION
LSB CHEMICAL CORP.
L&S AUTOMOTIVE PRODUCTS CO.
(f/k/a LSB Bearing Corp.)
INTERNATIONAL BEARINGS, INC.
LSB EXTRUSION CO.
ROTEX CORPORATION
TRIBONETICS CORPORATION
SUMMIT MACHINE TOOL SYSTEMS, INC.
HERCULES ENERGY MFG. CORPORATION
MOREY MACHINERY MANUFACTURING
CORPORATION
CHP CORPORATION
KOAX CORP.
APR CORPORATION
By: _________________________________
Tony M. Shelby, Vice President
acting on behalf of each of
the above
Exhibit 4.2
EIGHTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
AND WAIVER OF DEFAULTS
THIS EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND
WAIVER OF DEFAULTS (the "Amendment") is dated as of May 19, 1997,
and entered into by and between BANKAMERICA BUSINESS CREDIT, INC.
( Lender ) and LSB INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain
Loan and Security Agreement dated December 12, 1994, as amended
by (i) that certain First Amendment to Loan and Security
Agreement dated as of August 17, 1995, (ii) that certain Second
Amendment to Loan and Security Agreement dated as of December 1,
1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, (iv) that certain Fourth
Amendment to Loan and Security Agreement dated as of July 1,
1996, (v) that certain Fifth Amendment to Loan and Security
Agreement dated as of November 18, 1996, (vi) that certain Sixth
Amendment to Loan and Security Agreement dated as of February 13,
1997, and (vii) that certain Seventh Amendment to Loan and
Security Agreement dated as of April 11, 1997 (as so amended, the
"Agreement");
WHEREAS, two Events of Default have occurred under the Agreement;
WHEREAS, the Borrower desires that the Lender waive the Events of Default
and amend the Agreement in certain respects; and
WHEREAS, the Lender is willing to waive the Events of Default and amend the
Agreement subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions
and agreements set forth in the Agreement and this Amendment, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have
the same meanings as in the Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.01. Amendment to Section 9.16. Section 9.16 of the Agreement is
hereby amended to read in its entirety as follows:
9.16 Adjusted Tangible Net Worth. Adjusted Tangible Net Worth
will not be less than the following amounts at the end of each of the
Fiscal Quarters during the following Fiscal Years:
ANHYDROUS AMMONIA SALES AGREEMENT Exhibit 10.1
****INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN
OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE
COMPANY FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE
COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY
WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR
PURPOSES OF SUCH REQUEST.
THIS AGREEMENT is entered into as of the 28th day of May,
1997, to be effective January 1, 1997, between KOCH NITROGEN
COMPANY, a Nebraska corporation, with principal offices at 4111
East 37th Street North, Wichita, Kansas 67220 (herein called
"Koch") and EL DORADO CHEMICAL COMPANY, an Oklahoma corporation,
with principal offices at 16 S. Pennsylvania, Oklahoma City,
Oklahoma 73107 (herein called"Buyer");
WITNESSETH:
WHEREAS, as specified in this Agreement, Buyer and Koch
desire to enter into an anhydrous ammonia sales agreement under
which Koch agrees to supply to Buyer and Buyer agrees to take and
pay for, or to pay for if not taken, a Required Yearly Quantity
of anhydrous ammonia; and
WHEREAS, as specified in this Agreement, Buyer will take
delivery of such Required Yearly Quantity in approximately equal
monthly quantities throughout the term of this Agreement; and
WHEREAS, as specified in this Agreement, Koch shall charge
Buyer a price for each Ton to be taken or paid for hereunder
based upon the pricing formula set out in this Agreement; and
WHEREAS, as specified in this Agreement, Buyer shall be
responsible for all taxes related to such quantities of anhydrous
ammonia and for all transportation charges beyond the Delivery
Point hereunder; and
WHEREAS, the parties desire to state their agreements in
writing:
NOW THEREFORE, in consideration of the mutual promises
herein contained, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
I. DEFINITIONS
Whenever used in this Agreement, the following terms shall
have the following respective meanings:
A. "Agreement" shall mean this Anhydrous Ammonia Sales
Agreement between Koch and Buyer.
B. "Ammonia Pipeline Transportation Charge" shall mean
Koch's actual Product pipeline transportation cost from
Koch's Sterlington, Louisiana ammonia production
facility to the pipeline Delivery Point.
C. "Contract Price" shall mean the price stated in Article
VI, Section A.
D. "Contract Year" shall mean: (i) each of the three (3)
twelve (12) Month periods during the term hereof, the
first of which shall begin on the Effective Date and
shall end on December 31, 1997 and the following two
(2) twelve ( 12) month periods until December 31, 1999
and (ii) the four (4) month period from January 1, 2000
to April 30, 2000.
E. "Conversion Factor" shall mean ****
F. "Deficiency Volumes" shall mean the definition stated
in Article III, Section B.
G. "Delivery Point" shall mean (i) for pipeline
deliveries, the discharge side of the Product meter
owned by Koch Pipeline Company, L.P. at Buyer's El
Dorado, Arkansas chemical production facility, or (ii)
for rail or trucking deliveries, the point at Buyer's
facility where the truck or rail cars come to rest, or
(iii) another delivery point along Koch Pipeline
Company, L.P.'s ammonia pipeline, provided Buyer gives
Koch at least forty-five (45) days written notice prior
to the date it wishes to begin delivery at such
alternate delivery point.
H. "Effective Date" shall mean January 1, 1997.
I. "Fixed Charge" shall mean ****
J. "Gas Price" shall mean (MMBTU Price + Transportation
Charge) multiplied by the Conversion Factor.
K. "Koch Facility" shall mean Koch's anhydrous ammonia
production facility at Sterlington, Louisiana.
L. "Maximum Take Quantity" shall mean the definition
stated in Article VII, Section A.
M. "Minimum Take Quantity" shall mean the definition
stated in Article VII, Section A.
N. "MMBTU Price" shall mean the "Henry Hub" Index price in
MMBTU's reported under the table entitled "Market
Center Spot-Gas Prices" in the first issue of Inside
FERC's Gas Market Report for the Month of delivery. If
Inside FERC's Gas Market Report and/or the "Henry Hub"
Index price are no longer published, the parties shall
meet within 30 days of the date such publication ceases
to determine a new publication and/or index.
O. "Month" shall mean a calendar month.
P. "Monthly Quantity" for any given Month during the term
of this Agreement shall mean 10,000 Tons/Month.
Q. "Product" shall mean commercial anhydrous ammonia
having the following specifications:
Ammonia (NH3) Content: 99.5% by weight minimum
Oil: 5 ppm maximum by weight
Water: 0.2% by weight minimum; 0.5%
by weight maximum
Inerts: 0.5 cc per gram maximum
R. "PPI" shall mean the Producer Price Index for Chemicals
and Allied Products published by the United States
Department of Labor.
S. "Required Yearly Quantity" shall mean one hundred
twenty thousand (120,000) Tons per Contract Year,
except for the four (4) Month period from January 1,
2000 to April 30, 2000 where it shall be defined as
forty thousand (40,000) Tons per Contract Year.
T. "Taxes" shall mean the definition set forth in Article
VIII, Section A.
U. "Ton" shall mean a short ton of two thousand (2,000)
pounds avoirdupois.
V. "Transportation Charge" shall mean Koch's actual
natural gas transportation charge, including fuel, from
Henry Hub to Koch's Sterlington, Louisiana ammonia
facility, which as of the Effective Date of this
Agreement is ****, subject to adjustments under
Article Vl, Section B, below.
W. "Weighted Average Monthly Gas Price" shall mean (i) the
sum of the (Gas Price x Tons of Product actually taken
by Buyer) for each Month of the subject Contract Year
divided by (ii) the total Tons of Product actually
taken by Buyer during the subject Contract Year,
provided if Buyer fails to take any Product during a
Contract Year, the total amount taken during each Month
shall be deemed to be the Monthly Quantity and the
total amount take during the Contract Year shall be
deemed to be the Required Yearly Quantity.
X. "Yearly Contract Price" shall mean the price per Ton of
Product equal to the sum of (i) the Weighted Average
Monthly Gas Price, plus (ii) the Fixed Charge, for the
applicable Contract Year.
II. TERM
This Agreement shall continue and remain in full force and
effect for a term of forty (40) Months commencing on the
Effective Date and ending April 30, 2000.
III. QUANTITY TO BE SOLD AND PURCHASED
A. Purchase Obligation. Subject to Article III, Section B,
Article VII, Section A and Article IX below, during
each Contract Year, Koch agrees to sell and deliver to
Buyer and Buyer agrees to take and pay for, or pay Koch
the Contract Price if not taken, the Required Yearly
Quantity of Product. If during any Month of a
particular Contract Year, Koch fails to deliver the
volume of Product requested by Buyer for such Month, up
to the Maximum Take Quantity, and such failure to
deliver is not otherwise excused by another provision
of this Agreement, Buyer's Required Yearly Quantity for
the Contract Year shall be reduced by the quantity of
Product Koch failed to deliver during such Contract
Year. In addition, if for two (2) consecutive Months
during the term of this Agreement, Koch fails to
deliver a minimum of eighty percent (80%) of the
Product volumes requested by Buyer for the particular
Months (up to the Maximum Take Quantity), for any
reason other than a Force Majeure event or for an event
where Koch's performance is excused hereunder, then
Buyer shall have the right to terminate this Agreement
by providing Koch written notice within ten (10) days
of the end of the second Month where Koch failed to
provide at least eighty percent (80%) of Buyer's
requested Product volumes.
B. Make-up Rights. Subject to Article VII, Section B
below, if during any Contract Year Buyer fails to take
the Required Yearly Quantity (the difference between
the Required Yearly Quantity and the quantity actually
taken shall be referred to hereafter as the "Deficiency
Volumes"), Buyer shall have the right to take delivery
of the Deficiency Volumes during the twenty-four (24)
months following the Contract Year it failed to take
such Deficiency Volumes, including after the term of
this Agreement expires. Buyer's take of any Deficiency
Volumes shall be in addition to its take obligations of
the Required Yearly Quantity for the subject Contract
Year. If Buyer elects to take delivery of Deficiency
Volumes during the twenty-four (24) Months following
the Contract Year it failed to take the Deficiency
Volumes, in addition to the Yearly Contract Price paid
in the Contract Year it failed to take the Deficiency
Volumes, Buyer shall pay Koch the product of the (i)
difference between the Contract Price for the Month
Buyer actually takes delivery of Deficiency Volumes and
the Yearly Contract Price paid by Buyer in the Contract
Year it failed to take the Deficiency Volumes
multiplied by (ii) the Tons of Deficiency Volumes
actually taken in the subject Month of the following
Contract Year. If Buyer elects to take Deficiency
Volumes after this Agreement's term expires, Buyer
shall pay Koch, in addition to the Yearly Contract
Price paid in the Contract Year it failed to take the
Deficiency Volumes, the product of (i) the difference
between the Contract Price for the Month it actually
takes delivery of any Deficiency Volumes calculated as
if the term of this Agreement had been extended to such
Month and the Yearly Contract Price paid by Buyer in
the Contract Year it failed to take the Deficiency
Volumes multiplied by (ii) the Tons of Deficiency
Volumes actually taken during the subject Month after
this Agreement's term expires. If Buyer elects not to
take Deficiency Volumes as set forth in this Section B,
it waives any rights to take the Deficiency Volumes at
a later date.
C. No Duty to Mitigate. It is understood and agreed by
Buyer that its obligation to pay for Product it elects
not to take during any Contract Year is not in the
nature of damages. Rather, such a payment constitutes
an alternative measure of performance elected by Buyer.
This alternative measure is designed to compensate Koch
for the risk of producing, procuring and supplying the
Product, while it is expressly understood that Buyer
has accepted the market risk associated with such a
contract. Therefore, if Buyer fails to take or to pay
for the Required Yearly Quantity not taken in any
Contract Year, Koch shall have no duty or obligation to
resell or otherwise mitigate its potential losses
arising from Buyer's failure to perform its contractual
obligations.
D. Measurement. The quantity of Product delivered
hereunder to Buyer by pipeline shall be governed by the
weights and measures taken by meters owned by Koch
Pipeline Company, L.P. at the Delivery Point pursuant
to Koch Pipeline Company, L.P.'s tariff in effect on
the date of delivery. For trucking or rail deliveries,
the quantity of Product delivered to Buyer shall be
governed by the weights and measures taken as the
trucks or rail cars are loaded at the Koch Facility.
The foregoing measurements of said quantities shall be
final and conclusive, unless proven to be in error.
E. Refund. If Buyer and Koch execute this Agreement by
June 1, 1997, within five (5) business days of Koch
receiving payment from Buyer for Product purchased in
May 1997, Koch shall refund to Buyer the difference
between (i) the total price paid by Buyer for Product
purchased from Koch from the Effective Date until the
date the Contract Price becomes effective hereunder and
(ii) the total Tons of Product purchased by Buyer from
Koch from the Effective Date until the date the
Contract Price becomes effective hereunder multiplied
by the lower of (x) the Contract Price and (y) the
"Green Markets-Gulf Coast Low Average", less three
percent (3%). The "Green Markets Gulf Coast Low
Average" shall mean the average of the weekly lows of
the ranges of "Green Markets" Price Scan, Northern
American Domestic Spot Quotes, U.S. Gulf New Orleans,
FOB Barge for the Month of delivery.
IV. QUALITY
All Product delivered hereunder shall conform to the
specifications set forth in Section Q of Article I. All claims
by Buyer that any Product delivered hereunder does not conform to
the specifications set forth in said Section Q, shall be made in
writing and sent within thirty (30) days of Koch's delivery of
such Product to the Delivery Point. Failure to give written
notice of such claim within the specified time shall constitute a
waiver and bar of and to such claim, and Buyer shall be precluded
from relying on defects which are not stated in such notice as a
basis for rejection or assertion of a breach.
V. WARRANTIES
A. Koch makes no warranty of any kind, express or implied,
except that Product sold hereunder shall conform to the
specifications set forth in Section Q of Article I and
that Koch will convey good title thereto, free from any
lien or security interest. Koch ASSUMES NO OTHER
LIABILITY WITH RESPECT TO PRODUCT AND MAKES NO OTHER
WARRANTY WHETHER OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE, EXPRESSED OR IMPLIED,
WITH RESPECT THERETO.
B. Neither party shall be liable, under any circumstances,
for any special, indirect, incidental, consequential
(including but not limited to, loss of profits or any
similar damages) or punitive or exemplary damages
arising out of this Agreement, except for third party
personal injuries and property damage which are deemed
by applicable law to be consequential damages. In no
event shall the amount of any claim by Buyer, whether
for failure to meet the specifications, for non-
delivery, or for any other reason, be greater than the
actual replacement costs of the Product for the
particular shipment. In this regard, Buyer's sole and
exclusive remedy for any breach of this Agreement by
Koch shall be, at Koch's option, replacement of any
nonconforming product at the Delivery Point or payment
not to exceed the replacement price of the Product.
Buyer shall use reasonable efforts to obtain reasonably
priced replacement Product.
Vl. PRICE AND PAYMENT
A. Contract Price. For each Ton of Required Yearly
Quantity to be sold to Buyer hereunder, Koch shall
charge, and Buyer shall pay to Koch the following
Contract Price:
****
B. Transportation Charge Adjustment. The Transportation
Charge component of the Gas Price shall be increased or
decreased whenever Koch incurs a cost change to reflect
Koch's actual natural gas transportation costs
(including fuel) from Henry Hub to Koch's Facility.
C. Fixed Charge Adjustment. The Fixed Charge shall be
adjusted annually beginning January 1, 1998, and shall
be adjusted on January I of each calendar year
thereafter, by the difference in the PPI as it existed
on January 1, 1997, and each Contract Year thereafter.
To calculate each annual adjustment, the difference in
the PPI for the preceding Contract Year (expressed as a
percentage) and the PPI for the subject Contract Year
(expressed as a percentage) shall be multiplied by the
then effective Fixed Charge. For example, stated for
illustrative purposes only, to adjust the Fixed Charge
effective January 1, 1998, the difference in the PPI
for the year 1997 and the PPI for 1996 will be
calculated, and then multiplied by the Fixed Charge in
effect on January 1, 1997. If the PPI ceases to be
published, or the government changes the underlying
basis of how the index is calculated, the parties shall
meet within thirty (30) days of the date publication
ceases or the date the index is changed to determine a
replacement index.
D. Ammonia Pipeline Transportation Charge Adjustment. The
Ammonia Pipeline Transportation Charge shall be
increased or decreased whenever Koch incurs a cost
change to reflect Koch's actual Product transportation
costs from Koch's Facility to the Delivery Point.
E. Rail or Truck Transportation Costs. Notwithstanding any
other provision of this Agreement, if ammonia pipeline
transportation service is interrupted or curtailed,
preventing Koch from making all or a portion of the
required deliveries of Product hereunder, Koch shall
use reasonable efforts to arrange rail or trucking
transportation service from Koch's Facility to Buyer's
Facility. Buyer shall be responsible for and reimburse
Koch for all rail and/or trucking transportation costs
incurred by Koch for deliveries of Product hereunder,
including without limitation, demurrage charges.
However, if Buyer is forced to pay a trucking and/or
rail transportation rate that is higher than the
Pipeline Transportation Charge and the increased
transportation rate makes it uneconomical for Buyer to
operate Buyer's Facility, forcing Buyer to shut down
such facility, then Buyer shall have the right to
suspend its performance hereunder by providing Koch
with thirty (30) days written notice. However, Buyer
shall not be allowed to suspend its performance
hereunder if Koch, within its sole discretion, elects
to pay the difference between the Ammonia Pipeline
Transportation Charge and the trucking and/or rail
transportation charges to the Delivery Point. If it
remains uneconomical for Buyer to operate Buyer's
Facility for sixty (60) consecutive days from the date
Buyer gives Company notice solely because of the
interruption or curtailment of pipeline Product
deliveries hereunder and Koch elects not to pay the
transportation differential, then Buyer shall have the
right to terminate this Agreement by providing Koch
with written notice within five (5) days of the end of
the sixty (60) day period.
F. Payment Terms. ****
G. Deficiency Payment. If during a Contract Year Buyer
fails to take the Required Yearly Quantity, Koch shall
invoice Buyer within thirty (30) days of the end of the
Contract Year for an amount equal to the Deficiency
Volumes multiplied by the Yearly Contract Price for
such Contract Year. Buyer shall pay Koch the foregoing
amount within two (2) days of the invoice date by Koch
debiting Buyer's bank account using EFT.
H. Letter of Credit. As assurance to Koch for Buyer's
performance hereunder, Buyer agrees at least one
business day prior to the execution of this Agreement
to deliver to Koch an irrevocable standby letter of
credit in the amount of $3.5 million dollars
($3,500,000) (the "LC") issued by a bank or other
financial institution acceptable to the Credit
Department of Koch Industries, Inc. Such LC shall be in
the form of Addendum A attached hereto and made a part
hereof. Buyer shall annually renew or cause the renewal
of the LC at least thirty (30) days prior to the LC's
expiration date. The LC shall remain effective until 30
days after the term of this Agreement expires. If the
bank or financial institution issuing the LC shall at
any time cease to be acceptable to the Credit
Department of Koch Industries, Inc., as determined in
its sole discretion, then within fifteen (15) calendar
days after written notice from Koch, Buyer agrees it
shall deliver to Koch a substitute irrevocable standby
LC issued by a bank or other financial institution
satisfactory to Koch, without terminating the original
or then outstanding LC until such substitute LC has
been delivered to Koch. If Buyer fails or refuses to
cause the renewal of an existing LC or the delivery of
a substitute LC within the required time period, such
failure or refusal shall constitute a material breach
of this Agreement entitling Koch to collect damages and
to draw on the original or then outstanding letter of
credit for such damages, in addition to any other
remedies Koch may be entitled to under this Agreement
or at law or in equity. Koch shall give Buyer five (5)
days notice prior to drawing on the LC.
I. Additional Credit. Koch may from time to time demand
different terms of payment, or additional assurance of
payment, or other credit terms whenever Koch within its
good faith discretion deems itself insecure because the
prospect for payment or performance reasonably appears
impaired. In any such event, and upon written notice
specifying the event warranting the change in terms of
payment, additional assurance of payment, or credit,
Koch may suspend further deliveries pending agreement
to the revised terms, including, but not limited to,
pending agreement of Buyer to the posting of an
appropriate bond, an additional letter of credit or
other security acceptable to Koch to further secure
Buyer's obligations hereunder. If Buyer fails or
refuses to give adequate assurance of performance or
payment upon demand therefor, Koch may treat such
failure or refusal as a repudiation and breach of this
Agreement, thereby entitling Koch to exercise all
remedies provided for under this Agreement and any
other remedy it may have at law or in equity.
Vll. DELIVERY
A. Required Yearly Quantity. Subject to variations as may
be necessitated due to a Force Majeure event as set out
in Article IX, Koch shall deliver the Required Yearly
Quantity, and Buyer shall take delivery of the Required
Yearly Quantity in approximately equal quantities of
10,000 Tons per Month. However, in no event (except as
provided in the preceding sentence) shall Buyer take
delivery of less than eight thousand (8,000) Tons per
Month (the "Minimum Take Quantity"), nor shall Seller
be obligated to deliver more than twelve thousand
(12,000) Tons per Month (the "Maximum Take Quantity").
Buyer shall notify Koch no later than the I st calendar
day of the Month immediately prior to the Month of
delivery of the number of Product Tons it wishes to
receive for such Month of delivery. Buyer shall
promptly notify Koch in writing of any known or
anticipated changes that will not permit Buyer to
receive the Monthly Quantity.
B. Deficiency Volumes. If Buyer elects to take delivery of
Deficiency Volumes in a subsequent Contract Year or
after the term of this Agreement expires as set forth
in Article III, Section B above, it shall give Koch
forty-five (45) days written notice prior to the first
day of the requested Month of delivery. Unless
otherwise agreed to by Koch, Buyer shall take delivery
of such Deficiency Volumes in approximately equal
quantities during each Month of the subsequent Contract
Year or the twelve (12) month period after the term of
this Agreement expires, unless otherwise agreed to by
Koch in writing. However, in no event shall Koch be
required to deliver more than twelve thousand ( 12,000)
Tons of Deficiency Volumes in any given Month.
C. Title and Risk of Loss. Koch shall deliver the Product
hereunder to Buyer at the Delivery Point, and upon the
passing of said title to Buyer, Buyer shall be deemed
to have exclusive ownership and control of said Product
and shall be responsible for any injuries or damages
caused thereby.
VIII. TAXES
A. All present and future taxes, including, but not
limited to, the Superfund Tax, (referred to herein as
"Taxes") relating to the Product delivered hereunder,
including all new taxes or increases in existing taxes
including excise taxes (but excluding Koch's net
income, excess profits, or corporate franchise taxes)
imposed by any governmental authority upon the
manufacture, use, sale, or delivery of the Product,
shall be for Buyer's account, unless Buyer delivers to
Koch current exemption certificates evidencing Buyer's
exemption from paying such Taxes.
B. Buyer agrees to indemnify and hold harmless Koch and
its successors and assigns from and against any and all
excise taxes (but not including net income, excess
profits, or corporate franchise taxes), inclusive of
any penalty and interest, assessed at a future date
against Koch by any governmental authority upon the
manufacture, use, sale, or delivery of the Required
Yearly Quantity and/or Additional Volumes, whether
taken or not.
IX. FORCE MAJEURE
A. Neither Koch, nor Buyer, shall be liable for any
failure or delay in performance under this Agreement,
except for the obligation to make money payments due
hereunder for Product already purchased, due to a Force
Majeure event. "Force Majeure," as used herein shall
mean any event which may be due in whole or in part to
any contingency, delay, failure, cause or other
occurrence of any nature beyond a party's reasonable
control, whether it is presently occurring or occurs in
the future, which (i) prevents Koch from producing,
selling, purchasing or transporting the Product or (ii)
which prevents Product from being used at Buyer's
chemical facility in El Dorado, Arkansas (referred to
hereinafter as Buyer's Facility).
B. The term "Force Majeure" shall not include (i) an event
caused by a party's sole or contributory negligence;
(ii) Koch's ability to sell or Buyer's ability to
purchase Product at a price more advantageous than the
Contract Price; (iii) Buyer's loss of markets for
products produced at Buyer's Facility; (iv) shutdown of
Seller's Facility or Buyer's Facility for reasons other
than a Force Majeure event and (v) routine or scheduled
maintenance at Seller's Facility or Buyer's Facility.
C. If a Force Majeure event occurs, the declaring party
may exercise its right under this Article by giving
timely notice thereof to the other party setting forth
with reasonable particularity the nature of the Force
Majeure event. The declaring party shall use reasonable
efforts to remedy the situation as quickly as possible
and shall only be excused from performance hereunder
during the duration of the Force Majeure event. The
declaring party shall give the other party prompt
notice of when the Force Majeure event ends. If Koch's
deliveries of Product to Buyer are impeded due to a
Force Majeure event, Koch shall have the right to
apportion deliveries among its present and future
customers (including regular customers not then under
contract) and Koch's own requirements on such basis as
may appear to Koch to be appropriate and equitable.
Koch shall not be obligated to take any action which
would result in increasing its performance costs under
this Agreement beyond the costs which it would have
incurred in the absence of such occurrence, delay or
cause. In this regard, should Koch be required to
operate the Koch Facility in a manner that results in
Koch violating an operational flow order or similar gas
pipeline order in order to meet its obligations under
this Agreement, and the violation triggers a penalty or
other charge to be incurred by Koch, Koch shall have
the right to invoice Buyer for such charge on a per Ton
basis as follows: ([the dollar amount per MMBTU of such
a charge x Conversion Factor] x the number of Tons of
Product produced using natural gas to which such charge
applies). Buyer agrees to pay such charge in addition
to the Contract Price per Ton and all other charges to
be paid by Buyer to Koch for Product under this
Agreement until such penalty or charge is curtailed as
against Koch, provided, that in any such event, Buyer
will have the option of declining to take Product that
is subject to such penalty or charge. The Required
Yearly Quantity for the subject Contract Year shall be
reduced by the Tons of Product Buyer declines to take
under the preceding sentence.
D. If a Force Majeure event occurs, Koch shall have the
option, but not the obligation, to reduce the number of
Tons of Product that it is required to deliver and
Buyer is required to take or pay for hereunder;
provided, that such reduction shall not affect the
obligation of Koch to deliver, nor the obligation of
Buyer (except as provided for herein) to take or pay
for, the remaining Tons to be taken or paid for
hereunder. If Koch elects to reduce the number of Tons
Buyer is obligated to take or pay for in a particular
Contract Year due to a Force Majeure event, or if the
Force Majeure event continues into a subsequent
Contract Year, Buyer's Required Yearly Quantity shall
be reduced by number of Tons canceled by Koch due to
the Force Majeure event. Koch's exercise of its option
to cancel such affected Tons must be made by notice in
writing by Koch to Buyer no later than thirty (30) days
after the Force Majeure event no longer exists. If Koch
does not exercise such option, the quantity of Product
which was not delivered and received during the
occurrence shall be delivered by Koch and received by
Buyer after the Force Majeure event no longer exists
during the term of this Agreement or within a
reasonable period immediately following the expiration
of this Agreement depending upon when Koch has Product
available. If Koch delivers the Product after the Force
Majeure event no longer exists during the term hereof,
the Contract Price per Ton for such Product shall be as
set forth in Article VI, Section A calculated for the
Month Koch actually delivers the Product. If, however,
Koch delivers the Product after the end of this
Agreement's term, the price for such Product shall be
the price per Ton according to the formula contained in
Article Vl, Section A and the definitions contained in
Article I that would have been charged during the Month
the Product is actually delivered if the term of this
Agreement had continued in effect. If a Force Majeure
event exists for a period of sixty (60) days or longer,
or the declaring party gives notice that such event
will last more than sixty (60) days, the non-declaring
party shall have the option to terminate this Agreement
by written notice to the other. Upon such termination,
all obligations of the parties hereunder shall
terminate without liability to the other party, except
for obligations which accrued prior to the effective
date of the termination.
E. If, at any time during this Agreement's term, any
regulatory or governmental body adopts, issues, or
publishes any action, rule, or order which directly or
indirectly materially and adversely affects the rights
or obligations of Koch under this Agreement or (each of
the events described in hereafter referred to as
"Adverse Action"), Koch shall notify Buyer in writing
of the Adverse Action and the parties shall enter into
negotiations to modify this Agreement. If negotiations
regarding the Adverse Action do not result in Koch and
Buyer agreeing on the terms of a modification to this
Agreement within sixty (60) days of Koch's notice to
Buyer, Koch shall have the right, but not the
obligation, to suspend its performance hereunder until
such time, if any, as the parties reach agreement on
such a modification to this Agreement. In the event
such Adverse Action continues for a period of one
hundred twenty (120) days after Koch notifies Buyer of
the same and the parties have not resolved the handling
of the Adverse Action, either party may, but is not
required to, terminate this Agreement upon thirty (30)
days written notice to the other party within one
hundred eighty (180) days of when Koch first notified
buyer of the Adverse Action. Upon termination, all
obligations by either party shall cease, except
obligations to remit money due and payable. In the
event of Adverse Action, upon written request, Koch
shall provide Buyer with data or information reasonably
necessary for Buyer to determine that such Adverse
Action exists, subject to the confidentiality
obligations of Article XV of this Agreement.
X. REMEDIES FOR PAYMENT BREACH
A. If Buyer is late in making any payment due to Koch
under Article VI hereof, or otherwise, Koch may at its
sole discretion by notice to Buyer elect one or more of
the following courses of action:
1. Cease to make any further deliveries hereunder
until Buyer has made the late payment and has
taken steps to assure Koch that there shall be no
such delinquencies in the future;
2. Refuse to make any further deliveries hereunder
except upon cash payments before delivery;
3. Stop delivery of goods in the possession of a
carrier or other bailee as provided by law;
4. Resell any Product concerned without further
notice to Buyer and without affecting or abating
Buyer's other obligations under this Agreement;
5. Set off any obligations Koch may have to Buyer
against the payments due Koch hereunder; or
6. Draw upon any letter of credit and/or other
security provided by Buyer hereunder, provided any
draw by Koch shall not exceed the amounts due and
payable.
If Buyer has not remedied late payments to the
reasonable satisfaction of Koch within ten (10) days of
such notice, Koch may at its option by notice to Buyer
terminate this Agreement (without discharging any claim
for breach), provided Koch shall not be allowed to
terminate this Agreement if the amount of Buyer's
liability to Koch does not exceed the outstanding LC
amount and Buyer makes-up the amount drawn by Koch
under the LC within five (5) days of the date Koch
draws on the LC; however, Koch shall have the right to
suspend performance until Buyer replenishes the LC. The
election by Koch of any of the courses of action hereto
shall in no way limit any other remedies available to
Koch under this Agreement or otherwise at law or in
equity.
B. If either party:
1. Voluntarily petitions under or otherwise seeks the
benefit of any bankruptcy, reorganization,
arrangement or insolvency law; or
2. Makes a general assignment for the benefit of
creditors; or
3. Is adjudicated bankrupt or becomes insolvent; or
4. Allows a receiver or trustee of the business to be
appointed; or
5. Fails to perform any part of this Agreement (other
than provided for in Section A. of this Article)
and upon written notice of such failure by the
other party fails to remedy the same within thirty
(30) days of such notice, or in the event such
failure cannot reasonably be cured within thirty
(30) days, does not initiate and pursue reasonable
corrective action within said period of time,
then, in any of said events, this Agreement may be
terminated forthwith by written notice at the
option of the other party with such other party
retaining all its other rights and remedies at law
or in equity.
XI. RIGHTS NOT WAIVED
The waiver by either party hereto of any breach of this
Agreement by the other party hereto shall not be deemed to be a
waiver of any successive or other breach of this Agreement. Each
and every right, power and remedy may be excused from time to
time and so often and in such order as may be deemed expedient by
the party, and the exercise of any such right, power or remedy
shall not be deemed a waiver of the right to exercise at the same
time or thereafter, any other right, power or remedy.
XII. NOTICES
Any notices, requests or other communications required or
permitted by any provision of this Agreement shall be in writing
and shall be deemed delivered if delivered by hand, facsimile or
mailed by U.S. Postal Service, postage prepaid, by registered or
certified mail, and if to Koch, addressed to:
Koch Nitrogen Company Secretary
4111 East 37th Street North Koch Nitrogen Company
P.O. Box 2256 c/o Legal Department
Wichita, KS 67201 4111 East 37th Street North
Attention: President P.O. Box 2256
Wichita, KS 67201
or, if to Buyer, addressed to:
El Dorado Chemical Company El Dorado Chemical Company
16 S. Pennsylvania 16 S. Pennsylvania
Oklahoma City, OK 73107 Oklahoma City, OK 73107
Attention: President Attention: General Counsel
Any party may change the address to which notices are to be given
by mailing written notice thereof to the other party as provided
above.
XIII. ASSIGNMENT
Neither party shall assign or delegate, or permit by
assignment or delegation, by operation of law or otherwise any of
its rights and obligations under this Agreement to any third
party without first obtaining the prior written consent of the
other party, which shall not be unreasonably withheld.
Notwithstanding the foregoing, either party shall be allowed to
assign this Agreement to an Affiliate upon providing written
notice to the other party, provided no such transfer shall
operate to relieve the transferor party of its obligations
hereunder. For purposes of this Agreement, "Affiliate" shall mean
any corporation or other business enterprise which directly or
indirectly controls, is controlled by, or is under common control
with a party hereunder; and for the purpose of this definition
"control" shall mean the ability to directly or indirectly vote
fifty percent (50%) or more of the shares or other securities at
the time entitled to vote for the election of directors. Any
assignment or delegation, or attempted assignment or delegation,
in violation of this Article XIII shall be null and void, shall
be considered a material breach of this Agreement and shall
permit the other party in addition to any other rights which it
may hereunder or at law or in equity to terminate this Agreement
and exercise any remedies available to the non-breaching party
hereunder or at law or in equity.
XIV. ENTIRE AGREEMENT; AMENDMENT
This Agreement constitutes the final and complete Agreement
between the parties relative to the transactions contemplated
hereby and supersedes any and all prior or contemporaneous
agreements, understandings, correspondence or other agreements
relating to the subject matter hereof. This Agreement may be
amended only by a written document signed by duly authorized
representatives or employees of each of the parties hereto. Any
printed terms or conditions contained in any printed forms used
in placing or acknowledging orders hereunder, or otherwise used
in any way in connection with the sale and purchase provided for
in this Agreement, shall not have the effect of modifying or
amending this Agreement in any respect unless specifically
identified and accepted in writing by a duly authorized
representative of both parties.
XV. CONFIDENTIALITY
If an Adverse Action, as defined in Section E of Article IX,
results in Koch's suspension of its performance hereunder, Koch
may, as provided for in said Section, provide Buyer with certain
information ("Adverse Action Information"). Koch and Buyer may
also, in connection with their respective performance of this
Agreement, communicate information, give notices and exchange
documents ("Contract Related Information"). Buyer shall maintain
in confidence the Adverse Action Information and the Contract
Related Information, and Koch shall maintain in confidence the
Contract Related Information, and such information shall be
disclosed to no one other than (i) the receiving party's
officers, directors, agents and other personnel who need to know
the same in connection with this Agreement, and such of officers,
directors, agents and other personnel shall be advised of and
bound by the confidential nature of such information or (ii) when
disclosure is required by law or pursuant to a court or
administrative order. For disclosures required under sub-item
(ii), the disclosing party shall immediately notify the other
party of the required disclosure so that the other party may seek
an appropriate protective order or other remedy and use
reasonable efforts to limit the scope of the disclosure so
required. If a protective order or other remedy is not obtained,
the disclosing party shall only furnish such portion or portions
of the Confidential Information as it is legally required to
furnish. Koch and Buyer shall take all proper precautions to
prevent such information from being acquired by any unauthorized
person, firm, company or other entity. In this regard, Koch and
Buyer acknowledge specifically, but without limitation, that both
injunctive relief and monetary damages, alone or in combination,
are appropriate remedies for any breach of this Article XV by
Koch or Buyer or any person, firm, company or other entity
obtaining such information through the recipient thereof. The
confidentiality obligations hereunder shall continue for a period
of seven (7) years after the termination of this Agreement. Koch
shall have no obligation to provide, and Buyer shall have no
right to obtain, information regarding Koch's Product supply
costs.
XVI. ARTICLE HEADINGS
Article headings are for the convenience of the parties and
are not considered parts of the Agreement, it being stipulated
that any headings in conflict with the substantive provisions of
the Agreement shall have no force and effect.
XVII. GOVERNING LAW
This Agreement shall be governed exclusively by the laws of
the State of Kansas both with respect to interpretation and
performance without giving effect to any provision which would
direct application of the laws of another jurisdiction. Koch and
Buyer agree that venue and jurisdiction of any action or cause of
action arising hereunder shall be exclusively in the United
States District Court for the District of Kansas.
XVIII. SEVERABILITY
The provisions of this Agreement are severable and, if any
provisions are determined to be void or unenforceable in whole or
in part, the remaining provisions shall remain unaffected and
shall be binding and enforceable in accordance with the terms
hereof.
XIX. AUTHORITY
A. Buyer warrants and represents that it is a corporation
duly organized and validly existing and in good
standing under the laws of the State of Oklahoma and
has all requisite power and authority to lawfully carry
on its business as now being conducted and
specifically, that it has all requisite power and
authority to make, execute, deliver and perform this
Agreement.
B. Koch warrants and represents that it is a corporation
duly organized and validly existing and in good
standing under the laws of the State of Nebraska and
has all requisite power and authority to lawfully carry
on its business as now being conducted and
specifically, that it has all requisite power and
authority to make, execute, deliver and perform this
Agreement.
XX. LEGAL COMPLIANCE
Each party shall be subject to all applicable laws, rules,
regulations and ordinances issued by any national, state, or
local regulatory or governing body and may act in accordance
therewith until such time as the same may be held invalid by
final judgment in a court of competent jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement
to be effective on the Effective Date by their respective
officers thereunto duly authorized.
("Koch") KOCH NITROGEN COMPANY
By: __________________________
Title: _______________________
Attest:
Secretary/Assistant Secretary
("Buyer") EL DORADO CHEMICAL COMPANY
By: __________________________
Title: _______________________
Attest:
Secretary/Assistant Secretary
STATE OF KANSAS )
COUNTY OF SEDGWICK )
BEFORE ME, the undersigned, a Notary Public in and for said
County and State, on this ___ day of _____________, 1997,
personally came and appeared _______________________, who in the
presence of me, said authority, declared and acknowledged that he
is the identical person who executed the foregoing instrument in
writing; that his signature thereto is his own true and genuine
signature; and that he executed said instrument in his capacity
as President of Koch Nitrogen Company, a Nebraska corporation, of
his own free will and accord and as the free act and deed of said
Koch Nitrogen Company for the purposes and considerations therein
set forth and expressed.
Notary Public
My Commission Expires: ______________________________
STATE OF OKLAHOMA )
COUNTY OF CLEVELAND )
BEFORE ME, the undersigned, a Notary Public in and for said
County and State, on this ___ day of _________, 1997, personally
came and appeared _______________, who in the presence of me,
said authority, declared and acknowledged that he is the
identical person who executed the foregoing instrument in
writing; that his signature thereto is his own true and genuine
signature; and that he executed said instrument in his capacity
as __________________ of El Dorado Chemical Company, an Oklahoma
corporation, of his own free will and accord and as the free act
and deed of said El Dorado Chemical Company, for the purposes and
considerations therein set forth and expressed.
Notary Public
My Commission Expires: ___________________________
ADDENDUM A
(Bank Letterhead) Date:
Letter of Credit No.:______________
Expire Date:
KOCH NITROGEN COMPANY
4111 E. 37TH STREET NORTH
WICHITA, KS 67220
ATTN: CREDIT DEPARTMENT
KEVIN SHELTON / CALVIN BAHR
GENTLEMEN:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR FOR
THE ACCOUNT OF EL DORADO CHEMICAL COMPANY. AVAILABLE BY YOUR DRAFTS
DRAWN AT SIGHT ON BANK NAME, CITY, STATE, FOR ANY SUM OR SUMS NOT EXCEEDING
A TOTAL OF ABOUT U.S. 3,500,000 (THREE MILLION FIVE HUNDRED THOUSAND AND
00/100 U.S. DOLLARS).
ACCOMPANIED BY STATEMENT SIGNED BY A PURPORTED OFFICER OF KOCH NITROGEN COMPANY
STATING THAT:
"EL DORADO CHEMICAL COMPANY ("EDC") HAS BEEN PROVIDED WITH AT LEAST TEN (10)
DAYS NOTICE OF A BREACH UNDER THE ANHYDROUS AMMONIA SALES AGREEMENT
DATED _________ ("AGREEMENT), AND, THEREFORE KOCH NITROGEN COMPANY IS DUE THE
AMOUNT OF $________ AND MAKES THIS DRAWING FOR SUCH AMOUNT UNDER LETTER OF
CREDIT NUMBER _________. BREACH OF THE AGREEMENT BY EDC RELATES TO EDC
FAILING TO RENEW THE UC AS PER THE AGREEMENT, EDC FAILING TO PAY AMOUNTS DUE
OR OWING UNDER THE AGREEMENT, EDC ASSIGNING THE AGREEMENT TO AN UNAFFILIATED
THIRD PARTY WITHOUT KOCH NITROGEN'S CONSENT, OR EDC FAILING TO PROVIDE A
SUBSTITUTE UC IN FORM AND SUBSTANCE ACCEPTABLE TO KOCH AND ON A BANK ACCEPTABLE
TO KOCH SHOULD THE BANK ISSUING THE ORIGINAL LC BECOME UNACCEPTABLE TO KOCH."
EXCEPT AS OTHERWISE STATED HEREIN, THIS CREDIT IS SUBJECT TO THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL
CHAMBER OF COMMERCE, PUBLICATION NO. 500.
ALSO EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, ANY CHARGES OR COMMISSION IN
RESPECT TO THE NEGOTIATION OF DRAFTS UNDER THIS CREDIT ARE FOR OPENER'S ACCOUNT.
THE AMOUNT OF EACH DRAFT NEGOTIATED, WITH THE DATE OF NEGOTIATION, MUST BE
ENDORSED HEREON BY THE NEGOTIATING BANK, AND ANY DRAFT PRESENTED TO US SHALL
CONSTITUTE A WARRANTY OF THE NEGOTIATING BANK THAT SUCH ENDORSEMENT WAS
EFFECTED.
ALL DRAFTS DRAWN UNDER THIS CREDIT SHOULD BEAR THE CLAUSE "DRAWN UNDER BANK NAME
LETTER OF CREDIT NO.___________ DATED _____________. CITY, STATE'
PARTIAL DRAWINGS ARE ACCEPTABLE AND DRAWING MAY BE MADE FOR SALES PRIOR TO AND
DURING THE TERM OF THIS CREDIT.
ANY AND/OR ALL DOCUMENTS REQUIRED BY THIS LETTER OF CREDIT MAY BE PRESENTED
REGARDLESS OF THEIR DATE OF ORIGINATION.
IN EXCEPTION TO ARTICLE 43, PUBLICATION NO. 500, STALE DOCUMENTS ARE
ACCEPTABLE, AND ALL DOCUMENTS REQUIRED BY THIS LETTER MAY BE SUBMITTED UNTIL
EXPIRY.
WE HEREBY AGREE WITH YOU AND WITH NEGOTIATING BANKS AND BANKERS THAT ALL DRAFTS
DRAWN BY VIRTUE OF THIS CREDIT, AND IN ACCORDANCE WITH ITS TERMS, SHALL MEET
WITH DUE HONOR UPON PRESENTATION AND DELIVERY OF DOCUMENTS AS SPECIFIED TO
BANK NAME, CITY, STATE, IF NEGOTIATED, OR IF PRESENTED AT THIS OFFICE TOGETHER
WITH LETTER OF CREDIT ON OR BEFORE (EXPIRE DATE).
YOURS VERY TRULY,
AUTHORIZED BANK REPRESENTATIVE SIGNATURE
Exhibit 10.2
BAYTOWN NITRIC ACID
PROJECT AND SUPPLY AGREEMENT
By and Among
EL DORADO NITROGEN COMPANY,
EL DORADO CHEMICAL COMPANY
and
BAYER CORPORATION
****INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN
OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE
COMPANY FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND
EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION FOR PURPOSES OF SUCH REQUEST.
BAYTOWN NITRIC ACID
PROJECT AND SUPPLY AGREEMENT
TABLE OF CONTENTS
PAGE
SECTION 1: DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Additional Capital Investment. . . . . . . . . . . . . . . . . 3
1.2 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Ammonia. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Ammonia Specifications . . . . . . . . . . . . . . . . . . . . 4
1.5 Back-up and Start-up Supply Plan . . . . . . . . . . . . . . . 4
1.6 Baseline Fixed Costs . . . . . . . . . . . . . . . . . . . . . 4
1.7 Baseline Period. . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Battery Limits . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Bayer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Bayer Agreement. . . . . . . . . . . . . . . . . . . . . . . . 5
1.11 Bayer Baytown Plant. . . . . . . . . . . . . . . . . . . . . . 5
1.12 Bayer Default Termination Fee. . . . . . . . . . . . . . . . . 5
1.12(A) Bayer Support Agreement. . . . . . . . . . . . . . . . . . . . 5
1.13 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.14 Capital Costs Monthly Charge . . . . . . . . . . . . . . . . . 6
1.14(A) Capital Costs Monthly Credit . . . . . . . . . . . . . . . . . 6
1.15 Change of Control Event. . . . . . . . . . . . . . . . . . . . 6
1.16 Commencement Date. . . . . . . . . . . . . . . . . . . . . . . 9
1.17 Compliance Program . . . . . . . . . . . . . . . . . . . . . . 9
1.18 Delivered Unit Cost. . . . . . . . . . . . . . . . . . . . . . 9
1.19 Delivery Systems . . . . . . . . . . . . . . . . . . . . . . . 10
1.20 Demonstrated Capacity. . . . . . . . . . . . . . . . . . . . . 10
1.21 Depreciation Cycle . . . . . . . . . . . . . . . . . . . . . . 10
1.22 EDNC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.23 EDNC Baytown Plant . . . . . . . . . . . . . . . . . . . . . . 10
1.24 EDNC Baytown Plant Net Book Value. . . . . . . . . . . . . . . 10
1.25 EDNC Default Termination Fee . . . . . . . . . . . . . . . . . 11
1.26 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 11
1.27 Egress Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.28 Environmental, Health and Safety Laws. . . . . . . . . . . . . 11
1.29 Event of Default . . . . . . . . . . . . . . . . . . . . . . . 12
1.30 Excluded Fixed Costs . . . . . . . . . . . . . . . . . . . . . 12
1.31 Expiration Termination Fee . . . . . . . . . . . . . . . . . . 12
1.32 First Operating Period . . . . . . . . . . . . . . . . . . . . 13
1.33 Fixed Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.34 Fixed Costs Monthly Charge . . . . . . . . . . . . . . . . . . 14
1.35 Fixed Price Purchase Option. . . . . . . . . . . . . . . . . . 15
1.36 Fixed Price Purchase Option Amount . . . . . . . . . . . . . . 15
1.37 Force Majeure Event. . . . . . . . . . . . . . . . . . . . . . 15
1.38 Fully Operational. . . . . . . . . . . . . . . . . . . . . . . 15
1.39 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.40 Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.41 Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.42 Initial Capital Investment . . . . . . . . . . . . . . . . . . 16
1.43 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.44 Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.45 Leased Premises. . . . . . . . . . . . . . . . . . . . . . . . 17
1.46 Leasehold Improvements . . . . . . . . . . . . . . . . . . . . 18
1.47 Leveraged Lease. . . . . . . . . . . . . . . . . . . . . . . . 18
1.47A Monthly Net Capital Amount . . . . . . . . . . . . . . . . . . 18
1.48 Moving Average Actual Cost . . . . . . . . . . . . . . . . . . 18
1.49 Net Distributed Cost . . . . . . . . . . . . . . . . . . . . . 18
1.50 Net Sales Price. . . . . . . . . . . . . . . . . . . . . . . . 18
1.51 Nitric Acid Specifications . . . . . . . . . . . . . . . . . . 19
1.52 Operating Period . . . . . . . . . . . . . . . . . . . . . . . 19
1.53 Operative Agreements . . . . . . . . . . . . . . . . . . . . . 19
1.55 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.56 Production Shortfall . . . . . . . . . . . . . . . . . . . . . 20
1.57 Profit Component . . . . . . . . . . . . . . . . . . . . . . . 20
1.58 Project Agreements . . . . . . . . . . . . . . . . . . . . . . 21
1.59 Rebate Reconciliation Statement. . . . . . . . . . . . . . . . 21
1.60 Renewal Term . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.61 Right of First Refusal . . . . . . . . . . . . . . . . . . . . 21
1.62 Safety Improvement Program . . . . . . . . . . . . . . . . . . 21
1.63 Services Agreement . . . . . . . . . . . . . . . . . . . . . . 21
1.64 Spill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.65 Start-up Expenses. . . . . . . . . . . . . . . . . . . . . . . 21
1.66 Start-up Nitric Acid . . . . . . . . . . . . . . . . . . . . . 23
1.67 Stipulated Loss Value. . . . . . . . . . . . . . . . . . . . . 23
1.68 Substitute Blended Nitric Acid . . . . . . . . . . . . . . . . 23
1.69 Surplus Nitric Acid. . . . . . . . . . . . . . . . . . . . . . 23
1.70 Technology Agreement . . . . . . . . . . . . . . . . . . . . . 23
1.71 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.72 Termination Date . . . . . . . . . . . . . . . . . . . . . . . 24
1.73 Total Capital Invested . . . . . . . . . . . . . . . . . . . . 24
1.74 Total Estimate . . . . . . . . . . . . . . . . . . . . . . . . 24
1.75 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.76 Variable Costs Adjustments . . . . . . . . . . . . . . . . . . 24
1.77 Variable Costs Component . . . . . . . . . . . . . . . . . . . 24
1.78 Waste. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2: NITRIC ACID. . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1 Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.2(A) Nitric Acid Specifications . . . . . . . . . . . . . . . . . . 25
2.2(B) Start-up Nitric Acid and Substitute Blended Nitric
Acid: Specifications. . . . . . . . . . . . . . . . . . . . . 26
2.3 Place of Delivery. . . . . . . . . . . . . . . . . . . . . . . 27
2.4 Most Favored Customer. . . . . . . . . . . . . . . . . . . . . 27
2.5 Sales Optimization . . . . . . . . . . . . . . . . . . . . . . 28
2.6 Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3: PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
**** APPROXIMATELY TWENTY-ONE (21) PAGES HAVE BEEN OMITTED FROM
THIS SECTION PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
SUCH PAGES HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SUCH REQUEST.
3.10 Additional Capital Investments . . . . . . . . . . . . . . . . 48
(A) Additional Capital Investments. . . . . . . . . . . . . . 48
(B) Changes to Profit Component . . . . . . . . . . . . . . . 49
(C) Requirements for Additional Capital Investment. . . . . . 49
(D) Direct Additional Capital Investment by Bayer . . . . . . 50
3.11 Miscellaneous (Invoices, Forecasts and Planned
Outages) Provisions. . . . . . . . . . . . . . . . . . . . . . 50
(A) Forecasts by Bayer. . . . . . . . . . . . . . . . . . . . 50
(B) Forecasts by EDNC . . . . . . . . . . . . . . . . . . . . 50
(C) Effect of Forecasts . . . . . . . . . . . . . . . . . . . 51
(D) Monthly Purchase Orders/Monthly Sales Forecasts . . . . . 51
(E) Planned Outages . . . . . . . . . . . . . . . . . . . . . 52
(F) Contract Maintenance Expenditures . . . . . . . . . . . . 52
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4: BAYER REBATE AND EGRESS FEE. . . . . . . . . . . . . . . . . 53
4.1 Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.2 Egress Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5: TITLE AND RISK OF LOSS . . . . . . . . . . . . . . . . . . . 54
5.1 Ammonia. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2 Nitric Acid Produced by EDNC at the EDNC Baytown
Plant for Bayer. . . . . . . . . . . . . . . . . . . . . . . . 54
5.3 Nitric Acid From El Dorado and Third Party
Suppliers Under the Start-up Supply Plan . . . . . . . . . . . 54
5.4 Nitric Acid From El Dorado and Third Party
Suppliers Under the Back-up Supply Plan. . . . . . . . . . . . 54
5.5 Surplus Nitric Acid. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6: NITRIC ACID WARRANTY AND TECHNOLOGY. . . . . . . . . . . . . 55
6.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.2 Technology Approval. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7: LEASE OF REAL PROPERTY FOR AND CONSTRUCTION OF EDNC
BAYTOWN PLANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.1 Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.3 Ownership, Operation and Maintenance . . . . . . . . . . . . . 58
SECTION 8: REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . 58
8.1 Representations, Warranties and Covenants of EDNC. . . . . . . 58
(A) Corporate Standing. . . . . . . . . . . . . . . . . . . . 58
(B) Binding Effect of Project Agreements. . . . . . . . . . . 58
(C) Consents. . . . . . . . . . . . . . . . . . . . . . . . . 59
(D) Conflicts . . . . . . . . . . . . . . . . . . . . . . . . 59
(E) Health and Safety Covenants . . . . . . . . . . . . . . . 59
(F) Notices Under the Operative Agreements. . . . . . . . . . 60
(G) Compliance with Laws & Permits. . . . . . . . . . . . . . 60
(H) EDNC Baytown Plant Capacity . . . . . . . . . . . . . . . 61
(I) Hazards Analyses. . . . . . . . . . . . . . . . . . . . . 61
(J) Common Carriers . . . . . . . . . . . . . . . . . . . . . 62
(K) Termination for Uneconomic or Surplus Condition . . . . . 62
(L) Operative Agreements. . . . . . . . . . . . . . . . . . . 62
(M) Assignment and Sublease of EDNC Baytown Plant . . . . . . 62
(N) Bankruptcy Remote . . . . . . . . . . . . . . . . . . . . 62
(O) Quality Standards . . . . . . . . . . . . . . . . . . . . 63
8.2 Representations, Warranties and Covenants of
El Dorado. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(A) Corporate Standing. . . . . . . . . . . . . . . . . . . . 64
(B) Binding Effect of Project Agreements. . . . . . . . . . . 64
(C) Consents. . . . . . . . . . . . . . . . . . . . . . . . . 64
(D) Conflicts . . . . . . . . . . . . . . . . . . . . . . . . 65
(E) Back-up and Start-up Supply . . . . . . . . . . . . . . . 65
(F) Health and Safety . . . . . . . . . . . . . . . . . . . . 65
8.3 Representations, Warranties and Covenants of Bayer . . . . . . 65
(A) Corporate Standing. . . . . . . . . . . . . . . . . . . . 65
(B) Binding Effect of Project Agreements. . . . . . . . . . . 66
(C) Consents. . . . . . . . . . . . . . . . . . . . . . . . . 66
(D) Conflicts . . . . . . . . . . . . . . . . . . . . . . . . 66
(E) Quality Standards . . . . . . . . . . . . . . . . . . . . 67
SECTION 9: AMMONIA. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.1 Supply by Bayer. . . . . . . . . . . . . . . . . . . . . . . . 67
9.2 Supply by EDNC . . . . . . . . . . . . . . . . . . . . . . . . 68
9.3 Measurement of Ammonia Supplied. . . . . . . . . . . . . . . . 68
(A) Metering. . . . . . . . . . . . . . . . . . . . . . . . . 68
(B) Calibration . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10: UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11: WASTE . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12: INTERRUPTION OF AMMONIA, UTILITIES OR NITRIC ACID . . . . . 70
12.1 Interruption of EDNC Feedstock . . . . . . . . . . . . . . . . 70
12.2 Interruption of Nitric Acid. . . . . . . . . . . . . . . . . . 71
SECTION 13: PIPELINE AND DELIVERY SYSTEM CONSTRUCTION AND
MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
13.1 Delivery Systems . . . . . . . . . . . . . . . . . . . . . . . 71
13.2 Plant Systems. . . . . . . . . . . . . . . . . . . . . . . . . 71
13.3 Connection Points. . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 14: PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 15: INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.1 EDNC's Insurance . . . . . . . . . . . . . . . . . . . . . . . 72
(A) Builders Risk (Course of Construction) Insurance. . . . . 72
(B) Insurance Against Loss or Damage. . . . . . . . . . . . . 73
(C) Insurance Against Public Liability. . . . . . . . . . . . 73
(D) Workers' Compensation and Other Insurance . . . . . . . . 74
15.2 Bayer's Insurance. . . . . . . . . . . . . . . . . . . . . . . 74
(A) Builders Risk (Course of Construction) Insurance. . . . . 74
(B) Insurance Against Loss or Damage. . . . . . . . . . . . . 75
(C) Insurance Against Public Liability. . . . . . . . . . . . 75
(D) Workers' Compensation and Other Insurance . . . . . . . . 76
15.3 Waiver of Subrogation Rights . . . . . . . . . . . . . . . . . 76
15.4 Miscellaneous Insurance Provisions . . . . . . . . . . . . . . 77
15.5 Form of Policies . . . . . . . . . . . . . . . . . . . . . . . 77
15.6 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . 78
15.7 Blanket Coverage . . . . . . . . . . . . . . . . . . . . . . . 78
15.8 Failure of EDNC to Insure. . . . . . . . . . . . . . . . . . . 78
SECTION 16: DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . 79
16.1 EDNC Events of Default . . . . . . . . . . . . . . . . . . . . 79
16.2 EDNC Cure Periods. . . . . . . . . . . . . . . . . . . . . . . 80
16.3 Bayer Events of Default. . . . . . . . . . . . . . . . . . . . 82
16.4 Bayer Cure Periods . . . . . . . . . . . . . . . . . . . . . . 83
16.5 Bayer Remedies for EDNC Events of Default. . . . . . . . . . . 83
16.6 EDNC Remedies for Bayer Events of Default. . . . . . . . . . . 86
SECTION 17: TERMINATION/FIXED PRICE PURCHASE OPTION . . . . . . . . . . 88
17.1 Bayer's Optional Termination Rights. . . . . . . . . . . . . . 88
17.2 EDNC's Optional Termination Rights . . . . . . . . . . . . . . 89
17.3 Automatic Termination. . . . . . . . . . . . . . . . . . . . . 89
17.4 Effects of Termination . . . . . . . . . . . . . . . . . . . . 90
17.5 Fixed Price Purchase Option. . . . . . . . . . . . . . . . . . 93
SECTION 18: INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 95
18.1 EDNC Indemnification . . . . . . . . . . . . . . . . . . . . . 95
18.2 Bayer Indemnification. . . . . . . . . . . . . . . . . . . . . 97
18.3 Notice of Proceedings. . . . . . . . . . . . . . . . . . . . . 98
18.4 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 19: INJUNCTIVE RELIEF . . . . . . . . . . . . . . . . . . . . . 99
SECTION 20: TERM AND RENEWALS . . . . . . . . . . . . . . . . . . . . .100
20.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . .100
20.2 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . .100
SECTION 21: RIGHT OF FIRST REFUSAL. . . . . . . . . . . . . . . . . . .100
21.1(A) Change of Control Event. . . . . . . . . . . . . . . . . . . .100
21.1(B) Third Party Offer. . . . . . . . . . . . . . . . . . . . . . .101
21.2 Injunctive Relief and Specific Performance . . . . . . . . . .101
SECTION 22: DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . .102
22.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . .102
22.2 Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . .102
22.3 Commencement of Legal Actions. . . . . . . . . . . . . . . . .103
22.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .103
22.5 Submission to Jurisdiction . . . . . . . . . . . . . . . . . .103
22.6 Consent to Service of Process. . . . . . . . . . . . . . . . .104
SECTION 23: ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . .104
SECTION 24: MODIFICATION. . . . . . . . . . . . . . . . . . . . . . . .104
SECTION 25: PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .105
SECTION 26: DEMURRAGE . . . . . . . . . . . . . . . . . . . . . . . . .105
SECTION 27: COOPERATION . . . . . . . . . . . . . . . . . . . . . . . .105
SECTION 28: NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . .106
SECTION 29: BINDING AGREEMENT . . . . . . . . . . . . . . . . . . . . .106
SECTION 30: WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . .107
SECTION 31: CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . .107
SECTION 32: COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . .108
SECTION 33: ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . .108
SECTION 34: AUDIT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . .108
SECTION 35: GUARANTY. . . . . . . . . . . . . . . . . . . . . . . . . .109
SECTION 36: FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . .110
SECTION 37: CONTROLLING AGREEMENT . . . . . . . . . . . . . . . . . . .110
BAYTOWN NITRIC ACID PROJECT AND SUPPLY AGREEMENT
****INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED
FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES
OF SUCH REQUEST.
THIS BAYTOWN NITRIC ACID PROJECT AND SUPPLY AGREEMENT
(this "Agreement") is made and entered into this ____ day of
June, 1997 (the "Effective Date"), by and among EL DORADO
NITROGEN COMPANY, an Oklahoma corporation ("EDNC"), EL DORADO
CHEMICAL COMPANY, an Oklahoma corporation ("El Dorado") and BAYER
CORPORATION, an Indiana corporation ("Bayer").
W I T N E S S E T H:
WHEREAS, Bayer owns and operates a chemical
manufacturing facility located in Baytown, Chambers County, Texas
(the "Bayer Baytown Plant");
WHEREAS, Bayer engages in a manufacturing process at
the Bayer Baytown Plant that requires nitric acid meeting certain
agreed-upon specifications described in Section 2 hereof ("Nitric
Acid");
WHEREAS, Bayer desires to obtain Nitric Acid for use in
connection with the Bayer Baytown Plant;
WHEREAS, EDNC agrees, in accordance with the terms and
conditions of this Agreement, the Services Agreement (as such
term is hereinafter defined) and the Ground Lease (as such term
is hereinafter defined), to construct, lease and operate a
manufacturing facility capable of producing Nitric Acid (the
"EDNC Baytown Plant") on real property located at the Bayer
Baytown Plant;
WHEREAS, Bayer agrees to supply to EDNC ammonia that is
required for the production of Nitric Acid and that is requested
by EDNC in connection with the operation of the EDNC Baytown
Plant ****;
WHEREAS, Bayer agrees, in accordance with the terms and
conditions of this Agreement and the Services Agreement, to
supply to EDNC certain utilities and services that are required
for the production of Nitric Acid at the EDNC Baytown Plant and
to share certain facilities and services with EDNC;
WHEREAS, EDNC agrees to supply Nitric Acid to Bayer,
subject to and in accordance with the terms and conditions of
this Agreement;
WHEREAS, beginning on the Commencement Date, as
hereinafter defined, Bayer desires to purchase from EDNC all of
Bayer's requirements for Nitric Acid for use at the Bayer Baytown
Plant; and
WHEREAS, beginning on the Commencement Date, EDNC will
use reasonable efforts to market and distribute to third parties
Nitric Acid manufactured at the EDNC Baytown Plant that is not
required by Bayer.
NOW, THEREFORE, in consideration of the premises, and
other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged, and intending
to be legally bound, the parties hereby agree as follows:
SECTION 1: DEFINITIONS
Unless otherwise defined herein, the following terms
have the respective meanings assigned to them for purposes of
this Agreement:
1.1 Additional Capital Investment - Shall mean all
capital investments (other than Initial Capital Investments) made
by or on behalf of EDNC or the Owner Trustee (as hereafter
defined) at the EDNC Baytown Plant, all as determined in
accordance with GAAP, including without limitation capitalized
maintenance expenditures but excluding expenditures incurred in
connection with:
(A) unless approved by Bayer, additional
improvements for the purpose of enabling the storage or transport
of Nitric Acid to third parties from the EDNC Baytown Plant
(e.g., capital expended for the construction of a rail spur,
barge loading facilities or additional truck loading facilities
not contemplated by EDNC's Initial Capital Investment proposal);
(B) remediation, abatement, containment, clean-
up, disposal or response costs associated with Spills (as such
term is defined in the Services Agreement) at, on or under the
Leased Premises to the extent such costs are the responsibility
of EDNC pursuant to this Agreement; and
(C) any other item for which EDNC has expended
any funds pursuant to its indemnification obligations to Bayer
under this Agreement.
1.2 Affiliate - Shall mean any person, partnership,
corporation, or other entity that controls, is controlled by or
is under common control with a specified person, partnership,
corporation or other entity. For purposes of this definition,
"control" shall mean the power, whether direct or indirect, and
whether by exercise of voting power or contract or otherwise, to
direct the management policies and decisions of another entity.
1.3 Ammonia - All ammonia necessary for the
manufacture of Nitric Acid by EDNC at the EDNC Baytown Plant at
the operating rates necessary to meet Bayer's requirements of
Nitric Acid and EDNC's sales requirements of Surplus Nitric Acid,
which ammonia shall be supplied to EDNC by Bayer for its use and
as required by EDNC at the EDNC Baytown Plant pursuant to the
terms of this Agreement.
1.4 Ammonia Specifications - Shall mean the
specifications for Ammonia set forth on Schedule 9 to this
Agreement.
1.5 Back-up and Start-up Supply Plan - That certain
Back-up and Start-up Supply Plan set forth in the attached
Exhibit D.
1.6 Baseline Fixed Costs - Shall mean the aggregate
of all Fixed Costs paid by EDNC during the Baseline Period, which
amount shall include any real estate or property tax abatement in
EDNC's favor.
1.7 Baseline Period - Shall mean the second Operating
Period.
1.8 Battery Limits - The boundary lines of the Leased
Premises.
1.9 Bayer - Shall have the meaning set forth in the
preamble.
1.10 Bayer Agreement - Shall mean the agreement to be
entered into among Bayer, Security Pacific Leasing Corporation
(or such other party designated as "Owner Participant"
thereunder), Bayerische Landesbank, New York Branch, El Dorado,
EDNC, Wilmington Trust Company (or such other party designated as
"Indenture Trustee" thereunder), Boatmen's Trust Company of Texas
(or such other party designated as "Lessor" and "Owner Trustee"
thereunder), substantially in the form of the attached Exhibit F.
1.11 Bayer Baytown Plant - Shall have the meaning set
forth in the recitals.
1.12 Bayer Default Termination Fee - Shall mean ****
1.12(A) Bayer Support Agreement - Shall mean the
agreement to be entered into among Bayer, Security Pacific
Leasing Corporation (or such other party designated as "Owner
Participant" thereunder), Bayerische Landesbank, New York Branch,
EDNC, El Dorado, Wilmington Trust Company (or such other party
designated as "Indenture Trustee" thereunder), Boatmen's Trust
Company of Texas (or such other party designated as "Lessor" and
"Owner Trustee" thereunder) and Bank of America National Trust
and Savings Association, substantially in the form of the
attached Exhibit G.
1.13 Business Day - Any day other than a (i) Saturday,
(ii) Sunday or (iii) holiday on which national banks in New York
City, New York are not open for business.
1.14 Capital Costs Monthly Charge - Shall mean:
****
1.14(A) Capital Costs Monthly Credit - Shall mean ****
1.15 Change of Control Event - Shall mean any of the
following events:
(A) EDNC, El Dorado or LSB Industries, Inc. (a
Delaware corporation and the parent company of El Dorado,
hereinafter "LSB") is merged or consolidated into or with another
corporation or other legal person not affiliated with EDNC,
El Dorado or LSB and, as a result, (i) EDNC, El Dorado or LSB,
whichever is applicable, is not the surviving entity and
(ii) shareholders of the acquiring party have directly or
indirectly acquired more than a majority of the combined voting
power of the then-outstanding voting securities of such
corporation or person immediately after such transaction;
(B) EDNC, El Dorado or LSB sells or otherwise
transfers all or substantially all of its assets (other than
pursuant to a sale-leaseback transaction) to any other
corporation or other legal person not affiliated with EDNC,
El Dorado or LSB, or LSB sells or otherwise transfers a majority
of all of the voting equity securities of EDNC or El Dorado to
any other corporation or other legal person not affiliated with
LSB and, as a result of such sale or transfer, less than a
majority of the combined voting power of the then-outstanding
voting securities of such corporation or person immediately after
such sale or transfer is held in the aggregate by the holders of
Voting Stock (as defined below) of EDNC, El Dorado or LSB,
whichever is applicable, immediately prior to such sale or
transfer;
(C) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each
as promulgated pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), disclosing that any person (as
the term "person" is used in Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of
securities representing ten percent (10%) or more of the combined
voting power of the then-outstanding securities entitled to vote
generally in the election of directors of EDNC, El Dorado or LSB
(the "Voting Stock"), and such person has publicly disclosed or
otherwise manifested an intention to cause the occurrence of an
event described in subparagraphs (A), (B), (D) or (E) of this
Section 1.15 in respect of EDNC, El Dorado or LSB, and such
person is ultimately successful in affecting the occurrence of an
event described in subparagraphs (A), (B), (D) or (E) of this
Section 1.15;
(D) EDNC, El Dorado or LSB files a report or
proxy statement with the Securities and Exchange Commission,
pursuant to the Exchange Act, disclosing in response to Form 8-K
or Schedule 14A (or any successor schedule, form or report or
item therein) that a change of control of EDNC, El Dorado or LSB
has occurred or will occur in the future pursuant to any then-
existing contract or transaction (provided, however, that the
pledge of the capital stock of LSB, EDNC or El Dorado to a third
party lender in connection with a bona fide financing transaction
will not, absent a default under such financing transaction, be
considered in determining whether a Change of Control Event has
occurred under this Section 1.15(D)); or
(E) If during any period of two (2) consecutive
years, individuals who at the beginning of any such period
constitute the directors of EDNC, El Dorado or LSB cease for any
reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the relevant
company's stockholders, of each director of the relevant company
first elected during such period was approved by a vote of at
least a majority of the directors of the relevant company then
still in office.
1.16 Commencement Date - The date on which the EDNC
Baytown Plant is Fully Operational.
1.17 Compliance Program - Shall have the meaning set
forth in Section 8.1(G) hereof.
1.18 Delivered Unit Cost - Shall mean:
****
1.19 Delivery Systems - All pipelines, powerlines and
other fixtures and improvements to the Bayer Baytown Plant
(including, without limitation, pipe racks and other related
fixtures) that comprise the systems that are necessary to
transport to or from the Battery Limits: (i) Ammonia to be sold
to the EDNC Baytown Plant; (ii) Utilities to be supplied to the
EDNC Baytown Plant, including water treatment sewers and
pipelines; (iii) Nitric Acid produced at the EDNC Baytown Plant;
and (iv) Excess Steam (as defined in the Services Agreement) and
condensate produced at the EDNC Baytown Plant.
1.20 Demonstrated Capacity - Shall mean the highest
level of production of nitric acid at the EDNC Baytown Plant
during any Operating Period, adjusted for normal outages for
catalyst changes and turnarounds.
1.21 Depreciation Cycle - Shall mean depreciation on a
straight-line basis over a ten (10) year useful life from the
deemed date of any investment or financing, with no assumed
salvage value.
1.22 EDNC - Shall have the meaning set forth in the
preamble.
1.23 EDNC Baytown Plant - Shall have the meaning set
forth in the recitals.
1.24 EDNC Baytown Plant Net Book Value - The pro forma
book value of the EDNC Baytown Plant as of the date of
cancellation, expiration or termination of the Term, determined
as follows: the sum of the Initial Capital Investment plus any
Additional Capital Investment, minus the aggregate amount of all
Capital Costs Monthly Charges paid to the relevant date,
utilizing the Depreciation Cycle.
1.25 EDNC Default Termination Fee - Shall mean ****
1.26 Effective Date - Shall have the meaning set forth
in the preamble.
1.27 Egress Fee - The throughput charge of thirty-two
cents ($.32) per ton of Surplus Nitric Acid (one hundred percent
assay basis) shipped from the Leased Premises pursuant to Section
4.2 hereof.
1.28 Environmental, Health and Safety Laws - All
applicable federal, state and local laws relating to pollution or
protection of human health or the environment including, without
limitation, all laws, statutes, ordinances, rules, regulations,
orders, codes and notices relating to releases or threatened
releases of pollutants, contaminants, toxic or hazardous
substances or wastes into the environment, including, without
limitation, the following statutes, as amended from time to time:
(a) Resource Conservation and Recovery Act ("RCRA");
(ii) Comprehensive Environmental Response, Compensation and
Liability Act of 1980; (iii) Superfund Amendments and
Reauthorization Act of 1986; (iv) Clean Air Act, 42 U.S.C. Section 7401
et seq.; (v) The Clean Water Act, 33 U.S.C. Section 1251 et seq.;
(vi) Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and
(vii) Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.
1.29 Event of Default - Shall have the meaning set
forth in Section 16 hereof.
1.30 Excluded Fixed Costs - Shall mean any tax other
than those based upon revenue or income, insurance premiums,
Bayer's net distributed unit costs or allocation rates for
services and utilities, contract maintenance or EDNC hourly or
salaried wage rates and/or benefits.
1.31 Expiration Termination Fee - Shall mean ****
1.32 First Operating Period - Shall mean the period
from the Commencement Date through December 31 of the year in
which the Commencement Date occurs; provided, however, that in
the event such period is less than four (4) months in duration,
the First Operating Period shall be the period from the
Commencement Date through December 31 of the succeeding calendar
year.
1.33 Fixed Costs - Shall collectively mean ****
1.34 Fixed Costs Monthly Charge - Shall mean ****
1.35 Fixed Price Purchase Option - Shall have the
meaning set forth in the Leveraged Lease (as hereinafter
defined).
1.36 Fixed Price Purchase Option Amount - Shall be ****
1.37 Force Majeure Event - Any circumstances
materially interfering with the performance of this Agreement or
any of the other Project Agreements that is reasonably beyond the
control of the party hereto that is affected by such
circumstances, such as but not limited to fire; storm; flood; act
of God; war; explosion; sabotage; strike or other labor trouble;
shortage of labor, utilities, fuel or energy; embargo; car
shortage; accident; any new occurrence of a material
environmental hazard or catastrophe; expropriation of plant,
product, raw materials, utilities, fuel or energy in whole or in
part by federal or state authority; inability to secure machinery
or other equipment for the manufacture of the product; acts of
the federal, state or local government or any agency thereof,
including, without limitation, any material change in
Environmental, Health and Safety Laws.
1.38 Fully Operational - When the EDNC Baytown Plant
has first operated for (i) up to two hundred forty (240) hours
(such duration to be fixed at EDNC's option, but in no event
shall such duration be less than seventy-two (72) consecutive
hours) at full capacity producing Nitric Acid meeting the Nitric
Acid Specifications at a rate not less than 1265 short tons (1150
metric tons) per day during each day of operation and (ii) at
least seventy-two (72) hours at the turndown rate producing
Nitric Acid meeting the Nitric Acid Specifications.
1.39 GAAP - Shall mean generally accepted United
States accounting principles consistently applied.
1.40 Ground Lease - That certain Ground Lease, dated
as of the Effective Date and in the form of the attached
Exhibit A.
1.41 Guarantor - Shall mean El Dorado Chemical
Company.
1.42 Initial Capital Investment - Shall mean ****
1.43 Initial Term - Shall mean the initial term of
this Agreement commencing on the Effective Date and ending on the
tenth (10th) year following the Commencement Date; provided,
however, that if the Commencement Date has not occurred prior to
December 31, 2008, then the termination shall occur on
December 31, 2008, unless (a) sooner terminated as provided
hereunder, (b) extended in accordance with Section 20 of this
Agreement or (c) extended for a period equal to the duration of a
Force Majeure Event as agreed by the parties.
1.44 Laws - Shall have the meaning set forth in
Section 8.1(G) hereof.
1.45 Leased Premises - Shall have the meaning
specified in the Ground Lease.
1.46 Leasehold Improvements - Shall have the meaning
specified in the Ground Lease.
1.47 Leveraged Lease - Shall mean the Lease Agreement
to be entered into between EDNC and the Owner Trustee (as
hereafter defined).
1.47A Monthly Net Capital Amount - Shall mean ****
1.48 Moving Average Actual Cost - Shall mean ****
1.49 Net Distributed Cost - Shall mean ****
1.50 Net Sales Price - Shall mean ****
1.51 Nitric Acid Specifications - Shall mean the
specifications for Nitric Acid set forth in Section 2.2 hereof.
1.52 Operating Period - Shall mean the First Operating
Period and any subsequent calendar year beginning on the first
(1st) day of January immediately after the conclusion of the
First Operating Period and ending on the last day of each
December until the end of the Term; provided, however, that the
final Operating Period shall terminate on the date of termination
or expiration of this Agreement.
1.53 Operative Agreements - Shall mean the following
financing documents:
(A) Participation Agreement;
(B) Leveraged Lease (as defined in Section 1.47
hereof);
(C) Tax Indemnity Agreement;
(D) Trust Indenture and Security Agreement;
(E) Ground Lease Sublease;
(F) Construction Loan and Security Agreement;
(G) Bayer Agreement (as defined in Section 1.10
hereof);
(H) Lessor's Consent to Ground Lease Sublease
and Non-Disturbance Agreement;
(I) Bayer Support Agreement (as defined in
Section 1.12(A) hereof); and
(J) Security Agreement and Collateral Assignment
of Facility Documents,
by and among the parties thereto, and including any other
documents pertaining to such financing of the EDNC Baytown Plant,
which documents Bayer shall have the right to approve in its sole
discretion pursuant to Section 8.1(L) hereof.
1.54 Owner Trustee - Shall mean the equipment lessor
under the Leveraged Lease.
1.55 Permits - All necessary federal, state and local
governmental permits, approvals, licenses, authorizations and
consents required in connection with the design, construction and
operation of the EDNC Baytown Plant, including, without
limitation, all construction and environmental permits.
1.56 Production Shortfall - Shall mean ****
1.57 Profit Component - Shall mean ****
1.58 Project Agreements - Shall collectively mean this
Agreement, the Ground Lease, the Services Agreement, the
Technology Agreement and the Supplemental Agreement.
1.59 Rebate Reconciliation Statement - Shall have the
meaning ****
1.60 Renewal Term - Any renewal term of this Agreement
subsequent to the Initial Term, each of which shall be five (5)
years in duration unless sooner terminated as provided hereunder.
1.61 Right of First Refusal - Shall have the meaning
set forth in Section 21 hereof.
1.62 Safety Improvement Program - Shall have the
meaning set forth in Section 8.1(E)(2)(b) hereof.
1.63 Services Agreement - That certain Services
Agreement, dated as of the Effective Date and in the form of the
attached Exhibit B.
1.64 Spill - Shall have the meaning set forth in the
Services Agreement.
1.65 Start-up Expenses - Shall mean ****
1.66 Start-up Nitric Acid - Shall have the meaning set
forth in Section 2.2 hereof.
1.67 Stipulated Loss Value - Shall have the meaning
set forth in the Bayer Agreement.
1.68 Substitute Blended Nitric Acid - Shall have the
meaning set forth in Section 2.2 hereof.
1.69 Surplus Nitric Acid - Shall mean any Nitric Acid
produced by EDNC at the EDNC Baytown Plant that is sold to any
party other than Bayer and its Affiliates.
1.70 Technology Agreement - That certain Technology
Agreement, by and between Bayer, EDNC, ICF Kaiser Engineers, Inc.
and La Grande Paroisse S.A., in the form of the attached
Exhibit E.
1.71 Term - The Initial Term and all Renewal Terms of
this Agreement, as determined in accordance with Section 20
hereof.
1.72 Termination Date - The date of termination of the
Project Agreements pursuant to Section 17 or Section 21 hereof.
1.73 Total Capital Invested - Shall mean, at any given
time: (a) the Initial Capital Investment plus (b) the aggregate
amount of any Additional Capital Investments in the EDNC Baytown
Plant.
1.74 Total Estimate - Shall have the meaning specified
in Section 3.11(C) hereof.
1.75 Utilities - Shall have the meaning specified in
the Services Agreement.
1.76 Variable Costs Adjustments - ****
1.77 Variable Costs Component - Shall mean ****
1.78 Waste - Shall have the meaning specified in the
Services Agreement.
SECTION 2: NITRIC ACID
2.1 Supply - From the Commencement Date until the
Termination Date, Bayer and EDNC agree that Bayer shall acquire,
and EDNC shall supply, Bayer's monthly requirements of Nitric
Acid meeting the requirements set forth in Section 2.2(A) hereof,
to the extent of Bayer's needs for facilities located at the
Bayer Baytown Plant, from the EDNC Baytown Plant, up to the
maximum monthly production of the EDNC Baytown Plant. Bayer may
obtain any Nitric Acid requirements at the Bayer Baytown Plant in
excess of the available production of the EDNC Baytown Plant from
El Dorado or from any other source whatsoever. During any start-
up period and in the event of any planned or unplanned outage,
Bayer, EDNC and El Dorado agree that the Back-up and Start-up
Supply Plan, attached hereto as Exhibit D, shall become
operative. EDNC will use reasonable efforts to have the EDNC
Baytown Plant on-line by September 1, 1998. Bayer will use
reasonable efforts to have the Delivery Systems, excluding
ammonia and steam, on-line by February 1, 1998.
2.2(A) Nitric Acid Specifications - EDNC covenants
that it will construct the EDNC Baytown Plant to provide Nitric
Acid of:
(i) an assay of at least sixty-five percent
(65%);
(ii) an iron content of not more than one and
three-tenths parts per million (1.3 ppm) on a thirty (30) day
rolling average, and in no event to exceed ten parts per million
(10 ppm);
(iii) total oxides of nitrogen, as N2O3, of not
more than one hundred parts per million (100 ppm);
(iv) color of less than one hundred (100) APHA
units;
(v) a chloride content of not more than ten
parts per million (10 ppm); and
(vi) a sulfate content of not more than ten
parts per million (10 ppm);
During the first hour and a half following start-up of
the EDNC Baytown Plant, EDNC may provide Nitric Acid meeting the
minimum criteria set forth in Section 2.2(B) hereof ("Start-up
Nitric Acid"). During any planned or unplanned outage, EDNC
shall be permitted to provide nitric acid meeting the minimum
criteria set forth in Section 2.2(B) hereof ("Substitute Blended
Nitric Acid") pursuant to the Back-up and Start-up Supply Plan
set forth in Exhibit D hereto.
2.2(B) Start-up Nitric Acid and Substitute Blended
Nitric Acid: Specifications - EDNC covenants that Start-up
Nitric Acid and Substitute Blended Nitric Acid shall meet the
following minimum specifications:
(i) an assay of at least sixty-four percent
(64%);
(ii) an iron content of not more than ten parts
per million (10 ppm);
(iii) total oxides of Nitrogen, as N2O3, content
of not more than one hundred fifty parts per million (150 ppm);
(iv) a color of not more than one hundred fifty
(150) APHA units;
(v) a chloride content of not more than ten
parts per million (10 ppm); and
(vi) a sulfate content of not more than one
hundred fifty parts per million (150 ppm).
Notwithstanding the above, Bayer may, in its sole
discretion, waive the specifications set forth in Sections 2.2(A)
and 2.2(B) hereof. EDNC's lab test results or lab test results
performed by Bayer on behalf of EDNC shall constitute conclusive
findings that the nitric acid provided hereunder meets or fails
to meet the specifications set forth in this Section 2.2.
2.3 Place of Delivery - Unless otherwise provided
herein, Bayer shall accept physical delivery of Nitric Acid that
is purchased hereunder at EDNC's product output flange at the
Battery Limits.
2.4 Most Favored Customer -
****
2.5 Sales Optimization - EDNC hereby covenants that it
will exercise diligent efforts to maximize sales to third parties
of Nitric Acid produced at the EDNC Baytown Plant to the extent
such Nitric Acid is not purchased by Bayer.
2.6 Swaps - All in-kind transfers ("swap"
arrangements) entered into by EDNC shall provide for the return
of inventory to, or replacement of inventory by, the EDNC Baytown
Plant.
SECTION 3: PRICE
**** APPROXIMATELY TWENTY-ONE (21) PAGES HAVE BEEN OMITTED FROM
THIS SECTION PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
SUCH PAGES HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SUCH REQUEST.
3.11 Miscellaneous (Invoices, Forecasts and Planned
Outages) Provisions -
(A) Forecasts by Bayer - Prior to the
Commencement Date and not less than ninety (90) days before the
end of each Operating Period, Bayer shall provide to EDNC an
eighteen (18) month written forecast as to the anticipated
quantity of Nitric Acid to be purchased by Bayer during each
month of the following Operating Period and as to the schedule on
which Nitric Acid is to be purchased. Such forecasts shall
include anticipated daily average and minimum and maximum daily
use rates of Nitric Acid by Bayer.
(B) Forecasts by EDNC - Prior to the Commencement
Date and not less than ninety (90) days before the end of each
Operating Period, EDNC shall provide to Bayer (a) an eighteen
(18) month written sales forecast as to the quantity of Nitric
Acid produced at the EDNC Baytown Plant to be sold to third
parties by EDNC during the subsequent eighteen (18) month period
and the schedule on which Nitric Acid is to be sold and (b) an
estimate of Additional Capital Investment(s) to be undertaken by
EDNC during the subsequent calendar year.
(C) Effect of Forecasts - The parties shall add
five percent (5%) to the daily, monthly and total estimates
provided by Bayer under Section 3.11(A), the sum of each of which
shall be hereinafter referred to as the "Total Estimates." EDNC
may enter into long-term commitments to sell to third parties at
any time nitric acid produced at the EDNC Baytown Plant on a
daily, monthly or annual basis in excess of the Total Estimates,
and Bayer shall have no claim to nitric acid produced at the EDNC
Baytown Plant in excess of the Total Estimate. Except as
provided in the foregoing sentence, all forecasts and estimates
provided under this Section 3.11 shall be for information and
planning purposes only and shall not be construed as firm orders
or firm commitments on either party's part.
(D) Monthly Purchase Orders/Monthly Sales
Forecasts - Not less than five (5) days prior to the end of each
month, Bayer shall place monthly purchase orders for Nitric Acid
to be acquired in the next succeeding month. Such purchase
orders shall be subject to reasonable revision, modification or
cancellation, and to unplanned outages at the Bayer Baytown Plant
or the EDNC Baytown Plant. Not less than five (5) days prior to
the end of each month, EDNC shall provide Bayer with a monthly
sales forecast for nitric acid to be sold to third parties in a
given month. Such EDNC forecasts shall be subject to reasonable
revisions, modification or cancellation and to unplanned outages
at the Bayer Baytown Plant, the EDNC Baytown Plant or plants of
third party customers (including El Dorado's Arkansas plant).
(E) Planned Outages - EDNC shall provide to Bayer
at least sixty (60) days' notice of any planned outage of the
EDNC Baytown Plant, and shall schedule any such outage only with
the prior written consent of Bayer (which shall not be
unreasonably withheld). Bayer shall provide to EDNC at least
sixty (60) days' notice of any planned outage of any relevant
production unit located at Baytown and shall schedule any such
outage only with the prior written consent of EDNC (which shall
not be unreasonably withheld). The parties will work together to
coordinate outages to prevent any adverse impact that may be
caused by a planned outage of the EDNC Baytown Plant or any other
relevant production unit in Baytown.
(F) Contract Maintenance Expenditures - EDNC will
consult with Bayer on all major contract maintenance activities
to manage contract maintenance costs as referenced in
Schedule 1.33 hereof.
3.12 Taxes - All new taxes, excises and other
governmental charges, including, without limitation, all charges
for waste, sewer, solid waste disposal and similar services, and
all increases in existing taxes, excises and charges, except
taxes on or measured by revenues or income or similar taxes
imposed after the Effective Date of this Agreement, or after the
date any price is determined or modified, on or as a result of
the production, sale or transportation of the goods sold
hereunder that EDNC may be required to pay, may be added to the
Baseline Fixed Costs (but shall not adjust the Fixed Costs
Monthly Charge).
SECTION 4: BAYER REBATE AND EGRESS FEE
4.1 Rebate -
(A)****
(B) Within forty-five (45) days after the end of
each Operating Period, EDNC shall determine the actual rebate for
such Operating Period in accordance with Section 4.1(A) above and
shall deliver to Bayer a statement containing the amount of such
actual rebate, together with the calculation of the amount of the
reconciliation payment due from EDNC to Bayer for such Operating
Period (a "Rebate Reconciliation Statement").
(C) For purposes of this Section 4, at the end of
each Operating Period EDNC shall provide Bayer a sales report
reflecting the total quantity and sales of Surplus Nitric Acid
sold from the Leased Premises during that Operating Period.
4.2 Egress Fees - ****
SECTION 5: TITLE AND RISK OF LOSS
5.1 Ammonia - EDNC shall have title to and risk of
loss of Ammonia when such Ammonia enters the input flange to the
EDNC Baytown Plant.
5.2 Nitric Acid Produced by EDNC at the EDNC Baytown
Plant for Bayer - When Bayer receives the Nitric Acid at the
Nitric Acid output flange, title to and risk of loss of the
Nitric Acid shall pass to Bayer.
5.3 Nitric Acid From El Dorado and Third Party
Suppliers Under the Start-up Supply Plan - When Nitric Acid is
shipped from El Dorado or a third party to Bayer at the Bayer
Baytown Plant pursuant to the Start-up Supply Plan, title to and
risk of loss of the Nitric Acid shall pass to Bayer at the
battery limits of the El Dorado plant or the third party plant,
F.O.B. such producing plant.
5.4 Nitric Acid From El Dorado and Third Party
Suppliers Under the Back-up Supply Plan - When Nitric Acid is
shipped from El Dorado or a third party to Bayer at the Bayer
Baytown Plant pursuant to the Back-up Supply Plan, title to and
risk of loss of the Nitric Acid shall pass to Bayer at the
battery limits of the El Dorado plant or the third party plant,
F.O.B. such producing plant.
5.5 Surplus Nitric Acid - When Surplus Nitric Acid is
shipped from the EDNC Baytown Plant to a third party customer,
EDNC's standard terms and conditions of sale shall be F.O.B. EDNC
Baytown Plant and shall provide that title to and risk of loss of
the Nitric Acid pass to the third party customer at the Battery
Limits of the EDNC Baytown Plant.
SECTION 6: NITRIC ACID WARRANTY AND TECHNOLOGY
6.1 Title - EDNC warrants that the Nitric Acid
delivered by it shall conform to the Nitric Acid Specifications
and shall be free of all liens and encumbrances. Upon delivery
to Bayer, Bayer shall obtain good and marketable title to the
Nitric Acid. EDNC shall be released from this warranty if and to
the extent that the failure to meet the Nitric Acid
Specifications was attributable to Bayer's failure to meet the
specifications for, or quantities of, Ammonia or Utilities set
forth in the Services Agreement. The parties hereby agree to
take reasonable efforts to mitigate the application of this
Section by promptly notifying the other party of any detected
deficiency in the Ammonia and Utilities provided.
6.2 Technology Approval - EDNC shall select the
technology and engineering services necessary for the design,
construction and operation of the EDNC Baytown Plant with the
approval of Bayer, which approval shall not be unreasonably
withheld. The technology agreement shall be in form and
substance satisfactory to Bayer and shall provide that Bayer
shall have the right to continue to use the technology necessary
to operate the EDNC Baytown Plant from and after the Termination
Date.
SECTION 7: LEASE OF REAL PROPERTY FOR AND CONSTRUCTION OF EDNC
BAYTOWN PLANT
7.1 Ground Lease - Contemporaneously herewith, Bayer
and EDNC have entered into the Ground Lease pursuant to which
Bayer agrees to lease and EDNC agrees to rent the Leased Premises
for the Term. The Ground Lease shall be recorded by Bayer in the
land records of the office of the County Clerk of Chambers
County, Texas. EDNC shall hold and possess the Leased Premises
for the Term in accordance with the terms and conditions of the
Ground Lease (subject to the terms of any Operative Agreements
entered into by EDNC and approved by Bayer in accordance with
Section 8.1(L) hereof).
7.2 Construction -
(A) Subject to the issuance of all required
Permits, EDNC shall diligently proceed with the design and
construction of the EDNC Baytown Plant on the Leased Premises.
The EDNC Baytown Plant shall be designed and constructed (i) to
meet the criteria set forth on the attached Exhibit C and (ii) in
accordance with detailed plans and specifications that will be
made available to Bayer upon Bayer's reasonable request.
(B) Bayer shall consult with EDNC regarding the
construction schedule of the EDNC Baytown Plant, and Bayer shall
not direct activities of EDNC's contractors performing
construction services with respect to the EDNC Baytown Plant
except in emergency circumstances or situations requiring
immediate attention (e.g., obstruction of roadways, safety or
environmental issues).
(C) In order to avoid delays in the construction
of the EDNC Baytown Plant, Bayer shall use reasonable efforts to
respond to a request for a time-critical change order within two
(2) working days, but in no event shall Bayer's response time
exceed three (3) working days.
(D) In designing and constructing the EDNC
Baytown Plant, the parties have assumed that the combination of
Bayer's Nitric Acid demand and third party Nitric Acid demand
("Combined Demand") will equal or exceed the technology
provider's guaranteed turndown rate, which is currently estimated
to be ****. If the Combined Demand does not equal or exceed such
guaranteed turndown rate, the parties will exercise reasonable
efforts to mitigate the negative consequences of such weak
Combined Demand. If the Combined Demand in any Operating Period
is insufficient to achieve the guaranteed turndown rate, Bayer
and EDNC agree to negotiate in good faith appropriate temporary
adjustments to the Fixed Costs component, the Variable Costs
component, the Nitric Acid Specifications and any other aspects
of the Project Agreements that are negatively affected.
7.3 Ownership, Operation and Maintenance - EDNC shall
construct, operate and maintain all Leasehold Improvements on the
Leased Premises in connection with the EDNC Baytown Plant,
subject to the terms and conditions of the Ground Lease. Owner
Trustee will own the Leasehold Improvements and will lease the
same to EDNC pursuant to the Operative Agreements.
SECTION 8: REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations, Warranties and Covenants of
EDNC - EDNC hereby represents and warrants to Bayer as follows:
(A) Corporate Standing - EDNC is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma, and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business requires such qualification. EDNC
has the full corporate power and authority to enter into and
perform this Agreement and all Project Agreements and to
consummate the transactions therein. The execution, delivery and
performance of the Project Agreements are authorized by all
necessary corporate action of EDNC.
(B) Binding Effect of Project Agreements - The
Project Agreements constitute legal, valid and binding
obligations of EDNC, enforceable against EDNC in accordance with
their terms. The execution, delivery and performance of the
Project Agreements do not violate or conflict with any provision
of the Articles of Incorporation or Bylaws of EDNC.
(C) Consents - Except for the Permits, no
consent, approval or authorization from, notice to, or filing or
registration with, any governmental authority or agency, or from,
to or with any other person or entity under any contract, license
or agreement to which EDNC is a party, is necessary or required
to be obtained or made by EDNC in connection with the execution,
delivery or performance of the Project Agreements by EDNC or the
consummation by EDNC of the transactions contemplated by the
Project Agreements.
(D) Conflicts - There is no:
(1) litigation or governmental proceeding
pending or, so far as is known to any officer of EDNC,
threatened;
(2) asserted claim or basis for any claim of
default, breach of liability under or violation of any law, rule
or regulation applicable to EDNC; nor
(3) any agreement or order to which EDNC is
a party or by which EDNC is bound, which in any such case, would
prohibit or materially delay the ability of EDNC to execute,
deliver and perform the Project Agreements in accordance with
their terms.
(E) Health and Safety Covenants -
(1) EDNC hereby agrees (a) to have "practice
in place" for all Chemical Manufacturers' Association Responsible
Care Codes within one (1) year of the Commencement Date and
(b) to enter the review/implementation phase of the Responsible
Care Codes within three (3) years of the Commencement Date.
(2)(a) EDNC hereby agrees to exercise
reasonable efforts to design and operate the EDNC Baytown Plant
with the objective of achieving an Occupational Health and Safety
Administration total Recordable Occupational Injury or Illness
rate (as defined in 29 C.F.R. Section 1904.12 (1996); hereinafter
"Recordable Incidence Rate") goal consistent with Bayer's
Recordable Incidence Rate goal for the Bayer Baytown Plant.
(b) In the event that injuries at the EDNC
Baytown Plant indicate to Bayer in its reasonable discretion that
there exists (i) a pattern of improper safety practice by EDNC at
the EDNC Baytown Plant, (ii) a failure of EDNC to maintain a safe
working environment at the EDNC Baytown Plant or (iii) a failure
to follow EDNC's safety plan (as previously approved by Bayer) at
the EDNC Baytown Plant, then (x) EDNC shall meet with
representatives of Bayer to develop a safety improvement program
("Safety Improvement Program") for the EDNC Baytown Plant to
bring its operations into compliance or to cure the shortcomings
Bayer has identified to EDNC and (y) EDNC shall take all
reasonable steps to implement such Safety Improvement Program.
(F) Notices Under the Operative Agreements - EDNC
hereby agrees to notify promptly, and agrees to require Owner
Trustee to notify promptly, Bayer of any EDNC default under the
Operative Agreements.
(G) Compliance with Laws & Permits - (1) EDNC
will construct and operate the EDNC Baytown Plant in full
compliance with all applicable federal, state and local laws,
statutes, ordinances, rules, regulations, orders, codes,
judgments, decrees and other governmental requirements applicable
to EDNC and/or the EDNC Baytown Plant (including, without
limitation, Environmental, Health and Safety Laws) (collectively,
"Laws") and in compliance with the terms of all applicable
operating, environmental, occupancy and other permits and similar
requirements. EDNC will promptly notify Bayer of the occurrence
of any violation of any such Law and/or the occurrence of any
Spill (as defined in the Services Agreement) at the EDNC Baytown
Plant.
(2) In the event that any occurrences at the
EDNC Baytown Plant indicate to Bayer in its reasonable discretion
that there exists a pattern of conduct resulting in frequent or
material violations of Laws, EDNC shall meet with representatives
of Bayer promptly and upon request of Bayer to develop a remedial
program ("Compliance Program") for the EDNC Baytown Plant to
bring its operations into compliance with Laws or to cure the
shortcomings identified to EDNC by Bayer, and EDNC shall take all
reasonable steps to implement such Compliance Program.
(H) EDNC Baytown Plant Capacity - EDNC shall
design and construct the EDNC Baytown Plant to have a production
capacity of 443,000 short tons of Nitric Acid per year.
(I) Hazards Analyses - EDNC shall perform a
process safety hazards analysis of the proposed Nitric Acid
manufacturing process. In addition, EDNC shall perform a safety
hazards analysis of the transportation and handling of Nitric
Acid (including Nitric Acid provided under the Back-up and Start-
up Supply Plan). Representatives of Bayer shall participate in
such safety hazards analyses.
(J) Common Carriers - EDNC shall select common
carriers for the transportation of Nitric Acid from a list of
common carriers that has been pre-approved by Bayer.
(K) Termination for Uneconomic or Surplus
Condition - EDNC will not terminate the Leveraged Lease for
uneconomic or surplus condition pursuant to the Leveraged Lease
without first obtaining the prior written consent of Bayer, which
consent Bayer may grant or withhold in its sole discretion.
(L) Operative Agreements - EDNC hereby agrees to
obtain Bayer's prior written consent (which consent Bayer may
grant or withhold in its sole discretion) before executing any of
the Operative Agreements. EDNC further agrees not to amend any
of the Operative Agreements in a manner that could materially
adversely effect Bayer without the prior written consent of
Bayer, which consent may not be unreasonably withheld.
(M) Assignment and Sublease of EDNC Baytown Plant
- - EDNC agrees not to assign or sublease (or to allow the Owner
Trustee to assign or sublease) the EDNC Baytown Plant or any
portion thereof to a third party without first obtaining the
express written consent of Bayer, which consent Bayer may grant
or withhold in its sole discretion.
(N) Bankruptcy Remote - EDNC will execute a
Supplemental Agreement substantially in the form of the attached
Exhibit H. EDNC covenants that the corporate purpose of EDNC, as
set forth in its articles/certificate of incorporation, is (a) to
engage in all activities reasonably related to (i) the production
of Nitric Acid at the EDNC Baytown Plant, (ii) the provision of
Nitric Acid to Bayer pursuant to the Project Agreements and (iii)
the sale of nitric acid produced at the EDNC Baytown Plant to
third parties and (b) to engage in all activities reasonably
related to obtaining financing for the construction, maintenance
and operation of the EDNC Baytown Plant.
(O) Quality Standards - EDNC will cooperate with
Bayer to achieve such quality standards and certifications (for
example, ISO 9000 standards) as either party may reasonably
request.
(P) Fixed Price Purchase Option - EDNC shall
promptly notify Bayer not less than sixty (60) days prior to the
date upon which EDNC may exercise the Fixed Price Purchase Option
(as such date is determined under the Operative Agreements) of
EDNC's intention to exercise or to decline to exercise such Fixed
Price Purchase Option. EDNC agrees not to exercise the Fixed
Price Purchase Option without first obtaining the written consent
of Bayer, which consent Bayer may grant or withhold in its sole
and absolute discretion. Bayer may, in the event that EDNC
notifies Bayer of its intention not to exercise the Fixed Price
Purchase Option, direct EDNC to exercise the Fixed Price Purchase
Option. In such event, EDNC shall act in accordance with Bayer's
instructions. If Bayer either (i) consents to the exercise of
the Fixed Price Purchase Option by EDNC or (ii) requires the
exercise thereof by EDNC, then Bayer shall pay the Fixed Price
Purchase Option Amount. The rights of Bayer and EDNC in such
circumstances shall be governed by the provisions of Section 17.5
hereof.
8.2 Representations, Warranties and Covenants of
El Dorado - El Dorado hereby represents and warrants to Bayer as
follows:
(A) Corporate Standing - El Dorado is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Oklahoma, and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business requires such qualification.
El Dorado has the full corporate power and authority to enter
into and perform this Agreement and all Project Agreements and to
consummate the transactions therein. The execution, delivery and
performance of the Project Agreements are authorized by all
necessary corporate action of El Dorado.
(B) Binding Effect of Project Agreements - The
Project Agreements constitute legal, valid and binding
obligations of El Dorado, enforceable against El Dorado in
accordance with their terms. The execution, delivery and
performance of the Project Agreements do not violate or conflict
with any provision of the Articles of Incorporation or Bylaws of
El Dorado.
(C) Consents - Except for the Permits, no
consent, approval or authorization from, notice to, or filing or
registration with any governmental authority or agency, or from,
to or with any other person or entity under any contract, license
or agreement to which El Dorado is a party is necessary or
required to be obtained or made by El Dorado in connection with
the execution, delivery or performance of the Project Agreements
by El Dorado or the consummation by El Dorado of the transactions
contemplated by the Project Agreements.
(D) Conflicts - There is no:
(1) litigation or governmental proceeding
pending or, so far as is known to any officer of El Dorado,
threatened;
(2) asserted claim or basis for any claim of
default, breach of liability under or violation of any law, rule
or regulation applicable to El Dorado; nor
(3) any agreement or order to which
El Dorado is a party or by which El Dorado is bound, which, in
any such case, would prohibit or materially delay the ability of
El Dorado to execute, deliver and perform the Project Agreements
in accordance with their terms.
(E) Back-up and Start-up Supply - El Dorado will
supply back-up and Start-up Nitric Acid to Bayer in accordance
with the Back-up and Start-up Supply Plan set forth in Exhibit D
hereof.
(F) Health and Safety - El Dorado represents and
warrants that El Dorado is a member of the Chemical
Manufacturers' Association.
8.3 Representations, Warranties and Covenants of
Bayer - Bayer hereby represents and warrants to EDNC as follows:
(A) Corporate Standing - Bayer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Indiana. Bayer is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business requires such qualification.
Bayer has the full corporate power and authority to enter into
and perform this Agreement and all Project Agreements to which
Bayer is a party and to consummate the transactions therein. The
execution, delivery and performance of the Project Agreements are
authorized by all necessary corporate action of Bayer.
(B) Binding Effect of Project Agreements - The
Project Agreements constitute legal, valid and binding
obligations of Bayer, enforceable against Bayer in accordance
with their terms. The execution, delivery and performance of the
Project Agreements do not violate or conflict with any provision
of the Articles of Incorporation or Bylaws of Bayer.
(C) Consents - Except for the Permits, no
consent, approval or authorization from, or notice to, or filing
or registration with any governmental authority or agency, or
from, to or with any other person or entity under any contract,
license or agreement to which Bayer is a party is necessary or
required to be obtained or made by Bayer in connection with the
execution, delivery or performance of the Project Agreements by
Bayer or the consummation by Bayer of the transactions
contemplated by the Project Agreements.
(D) Conflicts - There is no:
(1) litigation or governmental proceeding
pending or, so far as is known to any officer of Bayer,
threatened;
(2) asserted claim or basis for any claim of
default, breach of liability under or violation of any law, rule
or regulation applicable to Bayer; nor
(3) any agreement or order to which Bayer is
a party or by which Bayer is bound; which, in any such case,
would prohibit or materially delay the ability of Bayer to
execute, deliver and perform the Project Agreements in accordance
with their terms.
(E) Quality Standards - Bayer will cooperate with
EDNC to achieve such quality standards and certifications (for
example, ISO 9000 standards) as either party may reasonably
request.
SECTION 9: AMMONIA
9.1 Supply by Bayer - Bayer shall supply to EDNC at
the Battery Limits of the EDNC Baytown Plant the Ammonia for
EDNC's use in manufacturing Nitric Acid; provided, however, that
Bayer shall not be obligated to supply EDNC with more than One
Hundred Fifteen percent (115%) of the monthly nameplate
requirements of the EDNC Baytown Plant. **** Bayer warrants
that the Ammonia supplied hereunder shall meet the applicable
Ammonia Specifications set forth on the attached Schedule 9.
Bayer covenants that such Ammonia shall be free of all liens and
encumbrances. The Ammonia shall be delivered by or on behalf of
Bayer to EDNC at the Battery Limits of the EDNC Baytown Plant via
the Delivery System or other agreed-upon mechanism. Bayer shall
invoice EDNC monthly for Ammonia provided by Bayer.
9.2 Supply by EDNC - Subject to the terms of any
ammonia procurement contracts between Bayer and its ammonia
supplier(s) and subject to the satisfactory resolution of any
logistical issues between Bayer and EDNC regarding the
segregation and maintenance of ammonia inventory, the parties
hereby agree that upon EDNC's request the parties will negotiate
in good faith the possibility of the sourcing of ammonia for
third party sales by EDNC on its own behalf (provided, however,
that this clause shall not be interpreted to require Bayer to pay
any premium, increased cost or penalty for Ammonia under its
procurement contracts as a result of such direct sourcing by
EDNC).
9.3 Measurement of Ammonia Supplied
(A) Metering - EDNC shall install, operate and
maintain, at its expense, metering equipment to measure EDNC's
consumption of the Ammonia supplied by pipeline. EDNC's readings
will be the basis upon which any charges will be assessed against
EDNC for the consumption of Ammonia.
(B) Calibration - EDNC shall calibrate all meters
in accordance with manufacturer's recommendations. If dual in-
line meters are installed, EDNC shall also calibrate the meters
relative to each other. EDNC shall designate one meter as the
primary meter from which all readings shall be taken. The second
meter's readings shall be used during failure, testing or
recalibration of the first meter and to periodically verify the
reading of the first meter. EDNC shall give Bayer three (3) days
notice of, and the right to observe, the calibration of any
meters installed by EDNC. EDNC shall recalibrate each meter as
recommended by the manufacturer. If during any such periodic
recalibration the meter is found to be inaccurate by more than
one-half of one percent (0.50%) of indicated value, or the second
of the dual meters differs by more than one half of one percent
with the first meter, then EDNC shall repair or recalibrate such
meter to the lesser of: (i) manufacturer's tolerances; or
(ii) plus or minus one-half of one percent (0.50%) of indicated
value. If a meter is inaccurate by more than one-half of one
percent (0.50%) of indicated value, the party that has benefitted
from the inaccuracy shall refund to the other party one hundred
percent (100%) of the discrepancy, back to the date of the last
calibration or, if identifiable, back to the date of the failure
that triggered the inaccuracy. If feasible, EDNC shall affix its
seal to each meter after each calibration. EDNC agrees to
exercise reasonable efforts to conduct all meter readings,
inspections, recalibrations and repairs in a manner that will not
unreasonably interfere with Bayer's operations at the Bayer
Baytown Plant. EDNC shall also permit Bayer, at Bayer's expense,
to inspect the meters at any time, provided such inspection does
not unreasonably interfere with EDNC's operations at the EDNC
Baytown Plant.
SECTION 10: UTILITIES
In accordance with and subject to the terms, conditions
and limitations of the Services Agreement, Bayer shall supply to
EDNC at the Battery Limits of the EDNC Baytown Plant the
Utilities.
SECTION 11: WASTE
In accordance with and subject to the terms, conditions
and limitations of the Services Agreement, Bayer shall accept at
the Battery Limits of the EDNC Baytown Plant and shall be
responsible for the proper treatment and disposal, in accordance
with all applicable Environmental, Health and Safety Laws, of
certain Waste produced in connection with the operation of the
EDNC Baytown Plant.
SECTION 12: INTERRUPTION OF AMMONIA, UTILITIES OR NITRIC ACID
12.1 Interruption of EDNC Feedstock - If Bayer is
unable to or fails to deliver Ammonia or Utilities to the EDNC
Baytown Plant as required by the Project Agreements, then EDNC
may procure such Ammonia or Utilities elsewhere through any
commercially reasonable source. Notwithstanding the foregoing,
EDNC may supply such Ammonia and Utilities through the
infrastructure of the Bayer Baytown Plant only with the prior
approval of Bayer, which may not be unreasonably withheld. Any
procurement by EDNC of Ammonia or Utilities from parties other
than Bayer shall be at EDNC's risk, and shall have no effect on
the warranty made to Bayer by EDNC pursuant to Section 6 hereof.
If Bayer is unable to or fails to deliver Ammonia or Utilities as
required by the Project Agreements, EDNC's remedy for such
failure is set forth in Section 16 hereof.
12.2 Interruption of Nitric Acid - If EDNC is unable to
or fails to provide Bayer's monthly Nitric Acid requirements for
the Bayer Baytown Plant and EDNC is unable to provide back-up
supply to Bayer, then Bayer may procure such Nitric Acid
elsewhere through any commercially reasonable source. EDNC shall
permit Bayer to use EDNC's four (4) spot truck loading and
un-loading rack if Bayer requires use of the same for the receipt
of nitric acid from third party suppliers.
SECTION 13: PIPELINE AND DELIVERY SYSTEM CONSTRUCTION AND
MAINTENANCE
13.1 Delivery Systems - Bayer shall design, engineer
and construct the Delivery Systems. However, Bayer shall be
under no obligation to design, engineer or construct any
improvement within the Battery Limits of the Leasehold Premises,
including without limitation any improvement that relates to the
transportation of Ammonia, Utilities, Waste or other material to
or from the EDNC Baytown Plant to tie-in points with the Delivery
Systems at the Battery Limits.
13.2 Plant Systems - EDNC shall design, engineer and
construct the improvements necessary to transport Ammonia,
Utilities, Waste or other material provided or handled by the
Delivery Systems to or from tie-in points at the Battery Limits
to the EDNC Baytown Plant.
13.3 Connection Points - Bayer and EDNC shall agree
upon the connections at the Battery Limits between the Delivery
Systems and EDNC's connections thereto. Bayer shall be
responsible for operating and maintaining and shall own the
Delivery Systems outside of the Battery Limits of the EDNC
Baytown Plant. EDNC shall be responsible for operating and
maintaining and shall own or lease from the Owner Trustee (on
terms that have been approved by Bayer) all of the improvements
inside the Battery Limits of the EDNC Baytown Plant.
SECTION 14: PERMITS
EDNC shall be responsible for the preparation, filing
and cost of obtaining all Permits related to the construction,
lease/ownership and operation of the EDNC Baytown Plant. Bayer
shall have ten (10) Business Days from its receipt of draft
permit applications to review and approve, or to disapprove, all
Permit applications prepared by EDNC. Bayer shall provide EDNC
reasonable assistance necessary to obtain the Permits. The
parties' respective obligations hereunder are conditioned upon
the issuance of all required Permits.
SECTION 15: INSURANCE
15.1 EDNC's Insurance - EDNC shall maintain, or cause
to be maintained, the following insurance:
(A) Builders Risk (Course of Construction)
Insurance - EDNC shall maintain from the commencement of and
until the completion of the construction of the EDNC Baytown
Plant, builders risk insurance on an all-risk basis, including
perils of earthquake, windstorm and flood, on the work and all
property to be incorporated into the EDNC Baytown Plant. Such
coverage shall be in an amount not less than the full replacement
value of the completed EDNC Baytown Plant.
(B) Insurance Against Loss or Damage - After
completion of the construction and installation of the EDNC
Baytown Plant, EDNC shall maintain or cause to be maintained in
effect at all times during the Term of this Agreement and the
other Project Agreements property insurance for the EDNC Baytown
Plant. EDNC shall keep all of the equipment, machinery,
apparatus and buildings comprising the EDNC Baytown Plant insured
for full replacement value on an all-risk basis, including,
without limitation, perils of earthquake, windstorm and flood,
against loss or damage from fire or other casualty, with
vandalism, malicious mischief, replacement costs and cost of
demolition endorsements and with comprehensive boiler and
machinery coverage.
(C) Insurance Against Public Liability - EDNC
shall procure and maintain in effect at all times from the
Effective Date until the expiration or termination of this
Agreement automobile liability, comprehensive general and excess
liability insurance policies applying to bodily injury (including
death) and third party property damage arising from the
activities of EDNC under the Project Agreements. Such coverage
shall have a minimum combined single limit of liability of at
least Five Million Dollars ($5,000,000) and a general aggregate
limit of Five Million Dollars ($5,000,000). All such policies
shall be written to apply to all bodily injury, property damage,
personal injury and other losses occurring during the policy
term. Such coverage shall also contain endorsements:
(A) deleting any employee exclusion on personal injury coverage;
(B) including employees as additional insureds; (C) deleting any
liquor liability exclusion; (D) providing for coverage of
employer's automobile non-ownership liability; (E) providing for
fire legal liability coverage; (F) providing for explosion,
collapse and underground liability coverage; and (G) providing
for contractual liability.
(D) Workers' Compensation and Other Insurance -
EDNC shall also carry workers' compensation insurance and such
other forms of insurance that EDNC is required by law to provide,
covering loss resulting from injury, sickness, disability or
death of the employees of EDNC arising out of and in the course
of their employment to the extent required by law, together with
employer's liability coverage with a limit of One Million Dollars
($1,000,000).
15.2 Bayer's Insurance - Bayer shall maintain, or cause
to be maintained, the following insurance:
(A) Builders Risk (Course of Construction)
Insurance - Bayer shall maintain from the commencement of and
until the completion of the construction of the Delivery Systems
for which it is responsible, builders risk insurance on an all-
risk basis, including perils of earthquake, windstorm and flood,
on the work and all property to be incorporated into the Delivery
Systems located at the Bayer Baytown Plant. Such coverage shall
be in an amount not less than the full replacement value of the
completed Delivery Systems.
(B) Insurance Against Loss or Damage - Bayer
shall maintain or cause to be maintained in effect at all times
during the Term property insurance for the Bayer Baytown Plant
and keep it, and all of the equipment, machinery, apparatus and
buildings comprising the Bayer Baytown Plant insured for full
replacement value on an all-risk basis, including, without
limitation, perils of earthquake, windstorm and flood, against
loss or damage from fire or other casualty, with vandalism,
malicious mischief, replacement costs and cost of demolition
endorsements and with comprehensive boiler and machinery
coverage.
(C) Insurance Against Public Liability - Bayer
shall procure and maintain in effect at all times from the
Effective Date until the expiration or termination of this
Agreement, automobile liability, comprehensive general and excess
liability insurance policies applying to bodily injury (including
death) and third party property damage arising from the
activities of Bayer under the Project Agreements. Such coverage
shall have a minimum combined single limit of liability of at
least Five Million Dollars ($5,000,000) and a general aggregate
limit of Five Million Dollars ($5,000,000). All such policies
shall be written to apply to all bodily injury, property damage,
personal injury and other covered losses occurring during the
policy term. Such coverage shall also contain endorsements:
(A) deleting any employee exclusion on personal injury coverage;
(B) including employees as additional insureds; (C) deleting any
liquor liability exclusion; (D) providing for coverage of
employer's automobile non-ownership liability; (E) providing for
fire legal liability coverage; (F) providing for explosion,
collapse and underground liability coverage; and (G) providing
for contractual liability.
(D) Workers' Compensation and Other Insurance -
Bayer shall also carry workers' compensation insurance and such
other forms of insurance that Bayer is required by law to provide
covering loss resulting from injury, sickness, disability or
death of the employees of Bayer arising out of and in the course
of their employment to the extent required by law, together with
employer's liability coverage with a limit of One Million Dollars
($1,000,000).
15.3 Waiver of Subrogation Rights - Anything in this
Agreement to the contrary notwithstanding, EDNC and Bayer each
waive all rights of recovery, claim, action or cause of action
against the other, its agents, officers, directors, shareholders
or employees for any loss or damage that may occur to the EDNC
Baytown Plant or the Bayer Baytown Plant, or any personal
property of either party hereto, by reason of any cause or origin
that is insured against under insurance coverages hereunder,
excluding the sole negligence of the other party hereto, its
agents, officers or employees. The insurance policies required
hereunder shall be endorsed if necessary to waive the insured's
rights of subrogation against EDNC or Bayer as applicable.
15.4 Miscellaneous Insurance Provisions - Each party
shall provide the other party with thirty (30) days notice of
cancellation or material change in terms of any of the coverage
described in this Section 15 required to be maintained by the
party. If at any time during the Term the amount or type of
insurance coverage that each party is required to carry under
this Section 15 is, in the reasonable judgment of the other
party, materially deficient under Sections 15.1, 15.2 or 15.3
hereof, the party not in default of this Section 15 may, at its
option: (A) notify the defaulting party that it has thirty (30)
days in which to cure such deficiency or the defaulting party
shall be in default hereunder, or (B) pay any premiums or take
any other steps necessary to cure the deficiency, in which case
the defaulting party shall be liable to the non-defaulting party
for all premiums and other costs associated with such cure.
15.5 Form of Policies - All insurance policies required
to be carried under this Agreement shall be obtained from
insurance companies of good national or international reputation.
Any deductible amounts exceeding Five Hundred Thousand Dollars
($500,000) under any insurance policies required hereunder shall
be subject to the other party's prior written approval. In any
event, deductible amounts shall not exceed ten percent (10%) of
the limit of liability in dollars for each required insurance.
However, the above conditions of approval and limitations of
amounts of deductible shall not apply when the conditions of
self-insurance set forth in Section 15.6 below are satisfied.
Each party shall deliver to the other party, within ten (10) days
following the Effective Date, and annually thereafter,
certificates evidencing continued maintenance of the insurance
required under this Section 15.
15.6 Self-Insurance - Any insurance required to be
maintained by either party under this Agreement (other than
workers' compensation insurance) may be maintained under a plan
of self-insurance. However, either party shall be entitled to
use such self-insurance only (A) during periods when such party's
net worth exceeds Two Hundred Fifty Million Dollars
($250,000,000), and (B) if such party maintains adequate reserves
or liquid assets for payment of claims of liability against the
other party, including the replacement value of the EDNC Baytown
Plant in the case of EDNC and the Bayer Baytown Plant in the case
of Bayer.
15.7 Blanket Coverage - Any policy required to be
maintained by either party under this Agreement may be maintained
under a "blanket policy" that insures other parties or locations.
However, the amount of insurance and the type of coverage
required to be provided hereunder may not be thereby diminished,
changed or adversely affected.
15.8 Failure of EDNC to Insure - If EDNC fails to
procure or maintain the insurance that EDNC is required to
maintain pursuant to Section 15.1 hereof, Bayer may procure, on
behalf of EDNC, the minimum amount of insurance coverage required
under Section 15.1 hereof, and EDNC shall promptly reimburse
Bayer for the same.
SECTION 16: DEFAULT AND REMEDIES
16.1 EDNC Events of Default - An "EDNC Event of
Default" shall occur upon the occurrence of any one or more of
the following events, unless the event is caused by Bayer or any
of its agents or contractors:
(A) If EDNC is unable to provide, for any reason
substantially related to EDNC's negligence or any material breach
of EDNC's obligations hereunder, a minimum of the lesser of
(i) Bayer's monthly Nitric Acid requirements for the Bayer
Baytown Plant or (ii) **** per month of Nitric Acid, in each case
under any combination of this Agreement and the Back-up and
Start-up Supply Plan, provided, however, that EDNC shall have no
obligation to purchase substitute ammonia or utilities;
(B) If EDNC fails to meet, for thirty (30) days
during any one hundred eighty (180) day period or forty-five (45)
days during any three hundred sixty-five (365) day period, its
obligations to provide to Bayer Nitric Acid meeting the Nitric
Acid Specifications in Section 2.2 hereof, provided such failure
to provide Nitric Acid meeting the Nitric Acid Specifications has
a material adverse effect on the DNT/SAC or MNB/Aniline plants;
(C) If EDNC fails to pay to Bayer any amount due
Bayer pursuant to Sections 3.7 ("Fixed Costs Reimbursements"),
3.8 ("Capital Costs Reimbursements by EDNC"), 3.9 ("Profit
Component Reimbursements by EDNC"), 4 ("Rebate and Egress Fee")
or 15.8 ("Failure of EDNC to Insure") hereof, or any amount due
pursuant to the Services Agreement, the Ground Lease or the
Technology Agreement when and as due, and such payments are not
being contested in good faith by appropriate proceedings;
(D) If EDNC breaches any of its covenants set
forth in Section 8.1(E) hereof ("Health and Safety Covenants");
(E) If EDNC defaults in its obligations under the
Operative Agreements and such default is not cured or waived
within any applicable cure period set forth therein;
(F) If EDNC breaches its covenants set forth in
Section 8.1(G) ("Compliance with Laws & Permits") hereof; or
(G) If EDNC materially defaults in the due
performance or observance of any other term, covenant or
agreement on its part to be performed or observed pursuant to any
of the provisions of this Agreement or any of the other Project
Agreements.
16.2 EDNC Cure Periods - In the event any EDNC Event of
Default occurs, EDNC shall have the following cure periods
following notice by Bayer to EDNC:
(A) Sixty (60) days in the case of a default
under Section 16.1(A) hereof;
(B) Zero (0) days, in the case of a default under
Section 16.1(B) hereof;
(C) Five (5) Business Days, in the case of a
default under Section 16.1(C) hereof;
(D) Ten (10) days, in the case of a default under
Section 16.1(D) hereof (provided, however, that in the event of a
default under Section 16.1(D) that is caused by a breach by EDNC
of its covenant under Section 8.1(E)(2), EDNC shall have a
reasonable period of time, which in no event shall exceed one
hundred eighty (180) days, to implement the Safety Improvement
Program described in Section 8.1(E)(2)(b) hereof);
(E) Zero (0) days in the case of a default under
Section 16.1(E) hereof;
(F) In the case of a default under Section
16.1(F) hereof, a reasonable period of time which in no event
shall exceed one hundred eighty (180) days, to implement the
Compliance Program described in Section 8.1(G)(2) hereof and to
obtain results which indicate to Bayer in its reasonable
discretion that EDNC has substantially addressed and corrected
the issues identified pursuant to Section 8.1(G)(2) hereof; and
(G) Forty-five (45) days, in all other cases,
unless such EDNC Event of Default cannot reasonably be cured in
forty-five (45) days and EDNC has, during such forty-five (45)
day period, undertaken reasonably effective curative measures, in
which case the cure period for such EDNC Event of Default shall
be the number of days reasonably required to effectuate such
cure.
If any EDNC Event of Default is remedied within the
aforementioned cure periods, such EDNC Event of Default shall not
constitute a continuing EDNC Event of Default and this Agreement
shall continue in full force and effect as if said EDNC Event of
Default had not occurred. The waiver of any EDNC Event of
Default under this Agreement shall not constitute a waiver of any
subsequent EDNC Event of Default.
16.3 Bayer Events of Default - A "Bayer Event of
Default" shall occur upon the occurrence of any one or more of
the following events, unless the event is caused by EDNC or any
of its agents or contractors:
(A) If Bayer is unable to provide, for any reason
substantially related to Bayer's negligence or any material
breach of Bayer's obligations hereunder, a minimum of the lesser
of the Ammonia necessary to produce (i) Bayer's monthly Nitric
Acid requirements for the Bayer Baytown Plant or (ii) **** per
month of Nitric Acid (less any amounts supplied to Bayer under
the Back-up and Start-up Supply Plan);
(B) If Bayer fails to meet, for thirty (30) days
during any one hundred eighty (180) day period or forty-five (45)
days during any three hundred sixty-five (365) day period, its
obligations to supply to EDNC certain Ammonia, Utilities or
Services (as defined in the Services Agreement) to be supplied by
Bayer and such failure to provide Ammonia, Utilities or Services
has a material adverse effect on the EDNC Baytown Plant;
(C) If Bayer fails to pay to EDNC any amount due
EDNC pursuant to Section 3 hereof when and as due; or
(D) If Bayer materially defaults in the due
performance or observance of any other term, covenant or
agreement on its part to be performed or observed pursuant to any
of the provisions of this Agreement or any of the other Project
Agreements.
16.4 Bayer Cure Periods - In the event of any Bayer
Event of Default occurs, Bayer shall have the following cure
periods following notice by EDNC to Bayer:
(A) Sixty (60) days, in the case of a default
under Section 16.3(A); or
(B) Zero (0) days, in the case of a default under
Section 16.3(B) hereof;
(C) Five (5) Business Days, in the case of a
default under Section 16.3(C) hereof; and
(D) Forty-five (45) days, in all other cases,
unless such Bayer Event of Default cannot reasonably be cured in
forty-five (45) days and, during such forty-five (45) day period,
Bayer has undertaken reasonably effective curative measures, in
which case the cure period for such Bayer Event of Default shall
be the number of days reasonably required to effectuate such
cure.
If any Bayer Event of Default is remedied within the
aforementioned cure periods, such Bayer Event of Default shall
not constitute a continuing Bayer Event of Default and this
Agreement shall continue in full force and effect as if said
Bayer Event of Default had not occurred. The waiver of any Bayer
Event of Default under this Agreement shall not constitute a
waiver of any subsequent Bayer Event of Default.
16.5 Bayer Remedies for EDNC Events of Default - The
parties agree that upon the occurrence of an EDNC Event of
Default (and subject to the continuation of such Event of Default
beyond any applicable cure periods), Bayer shall have the
following rights and remedies (in addition to the indemnification
rights provided for in Section 18.1 hereof):
(A) If an EDNC Event of Default occurs pursuant
to Section 16.1(A) hereof, Bayer shall have the termination
rights specified in Section 17.1 hereof and EDNC shall pay to
Bayer the difference between the reasonable cost of any purchase
of substitute nitric acid (including cost of transportation,
storage, handling and any other direct costs associated with
procuring substitute nitric acid) and the Variable Costs
Component in respect of all Nitric Acid ordered by Bayer and not
delivered by EDNC during the existence of and continuation of the
EDNC Event of Default;
(B) If an EDNC Event of Default occurs pursuant
to Section 16.1(B) hereof, Bayer shall have the termination
rights specified in Section 17.1 hereof and EDNC shall pay to
Bayer its actual damages incurred in connection with the
provision of nitric acid failing to meet the Nitric Acid
Specifications during the existence and continuation of the EDNC
Event of Default;
(C) If an EDNC Event of Default occurs pursuant
to Section 16.1(C) hereof, Bayer shall have the termination
rights specified in Section 17.1 hereof; provided, however, that
if EDNC contests the amounts due Bayer, EDNC and Bayer shall
first resolve such payment dispute in accordance with Section 22
hereof;
(D) If an EDNC Event of Default occurs pursuant
to Section 16.1(D) hereof, Bayer shall have the termination
rights specified in Section 17.1 hereof and EDNC shall pay to
Bayer its damages incurred; and
(E) In all other EDNC Events of Default, Bayer
shall have the termination rights specified in Section 17.1
hereof and EDNC shall pay to Bayer its damages incurred and Bayer
shall have any and all other rights and remedies available,
whether at law or at equity.
In addition to any and all other remedies available to
Bayer as specified above, Bayer shall have the right to offset
its damages incurred pursuant to any Event of Default against any
payments due EDNC under the Project Agreements or otherwise,
subject to the following limitations:
(1) Bayer may offset damages incurred pursuant to an
EDNC Event of Default under Section 16.1(A) or Section 16.1(B)
hereof against any payments due EDNC except that amount equal to
EDNC's periodic payments under the Leveraged Lease.
(2) Bayer may offset damages incurred pursuant to an
EDNC Event of Default under Section 16.1(C) hereof against any
payments due EDNC except that amount equal to EDNC's periodic
lease payments under the Leveraged Lease, provided Bayer and EDNC
have first employed the dispute resolution procedures set forth
in Section 22 hereof; and
(3) Bayer may offset any damages incurred pursuant to
an EDNC Event of Default under Section 16.1(D), Section 16.1(F)
or Section 16.1(G) hereof against any payments due EDNC except
(i) that amount equal to EDNC's periodic lease payments under the
Leveraged Lease, (ii) the Fixed Costs Monthly Charge and (iii)
the Variable Costs Component.
Upon the occurrence of an EDNC Event of Default, Bayer
may, at its election, deliver Leveraged Lease payments directly
to the Owner Trustee.
16.6 EDNC Remedies for Bayer Events of Default - The
parties agree that upon the occurrence of a Bayer Event of
Default (and subject to the continuation of such Event of Default
beyond any applicable cure periods), EDNC shall have the
following rights and remedies (in addition to the indemnification
rights provided for in Section 18.2 hereof):
(A) If a Bayer Event of Default occurs due to
Bayer's failure to provide sufficient quantities of Ammonia
pursuant to Section 16.3(A) hereof or Bayer's failure to provide
sufficient quantities of Utilities or Services pursuant to
Section 16.3(B) hereof, EDNC shall have the termination rights
specified in Section 17.2 hereof and Bayer shall pay to EDNC the
difference between the cost of any reasonable purchase of
ammonia, utilities or services, as the case may be (including
cost of transportation, storage, handling and any other direct
costs associated with procuring substitute ammonia, utilities or
services) and the price of Ammonia, Utilities or Services, as the
case may be, under the Project Agreements in respect of all
Ammonia, Utilities and/or Services ordered by EDNC from Bayer
during the existence and continuation of the Bayer Event of
Default;
(B) If a Bayer Event of Default occurs due to
Bayer's failure to provide Ammonia, Utilities or Services that
meet specifications pursuant to Section 16.3(B) hereof, EDNC
shall have the termination rights specified in Section 17.2
hereof and Bayer shall pay to EDNC its actual damages incurred in
connection with the provision of Ammonia, Services or Utilities
failing to meet the specifications for Ammonia, Services and
Utilities during the existence and the continuation of the Bayer
Event of Default;
(C) If a Bayer Event of Default occurs pursuant
to Section 16.3(C) hereof, EDNC shall have the termination rights
specified in Section 17.2 hereof; provided, however, that if
Bayer contests the amounts due EDNC, Bayer and EDNC shall first
resolve such payment dispute in accordance with Section 22
hereof. Following such resolution in EDNC's favor, EDNC shall
have the termination rights specified in Section 17.2 hereof and
Bayer shall pay to EDNC its damages incurred; and
(D) In all other Bayer Events of Default, EDNC
shall have the termination rights specified in Section 17.2
hereof and Bayer shall pay to EDNC its damages, and EDNC shall
have any and all other rights and remedies available, whether at
law or at equity.
In addition to any and all other remedies available to
EDNC as specified above, EDNC shall have the right to offset its
damages incurred pursuant to an Event of Default against any
payments due Bayer under the Project Agreements or otherwise.
SECTION 17: TERMINATION/FIXED PRICE PURCHASE OPTION
17.1 Bayer's Optional Termination Rights - Bayer shall
have an option to terminate this Agreement by written notice to
EDNC upon an occurrence of any one of the following events:
(A) Failure by EDNC to complete construction and
commence the operations of the EDNC Baytown Plant prior to ****
(provided such failure is not substantially related to a material
breach by Bayer of its obligations under the Project Agreements);
provided, however, that if such failure is by reason of a Force
Majeure Event, then Bayer shall not have the option to terminate
this Agreement if EDNC provides, within sixty (60) days of the
occurrence of such Force Majeure Event, a reasonable plan to
remedy such Force Majeure Event and such plan is reasonably
acceptable to Bayer;
(B) An EDNC Event of Default that is not cured
within any applicable cure period (provided, however, that Bayer
shall have complied with any continuing obligations under the
Bayer Agreement);
(C) Failure by EDNC to obtain construction
financing, evidenced by definitive signed agreements approved by
Bayer (the approval of which Bayer may withhold in its sole
discretion), by July 15, 1997; or
(D) Failure by EDNC to obtain permanent
financing, evidenced by definitive signed agreements approved by
Bayer (the approval of which Bayer may withhold in its sole
discretion), by ****
17.2 EDNC's Optional Termination Rights - EDNC shall
have an option to terminate this Agreement by written notice to
Bayer upon an occurrence of any one of the following events:
(A) Failure by Bayer to complete construction of
the Delivery Systems prior to **** (provided such failure is not
substantially related to a material breach by EDNC of its
obligations under the Project Agreements); provided, however,
that if such failure is by reason of a Force Majeure Event, then
EDNC shall not have the option to terminate this Agreement if
Bayer provides, within sixty (60) days of the occurrence of such
Force Majeure Event, a reasonable plan to remedy such Force
Majeure Event and such plan is reasonably acceptable to EDNC; or
(B) A Bayer Event of Default that is not cured
within any applicable cure period.
17.3 Automatic Termination - This Agreement shall be
automatically terminated:
(A) at the expiration of the Term, if the Term of
this Agreement is not extended beyond either the Initial Term or
any current Renewal Term;
(B) in the event that either Bayer, on the one
hand, or EDNC or El Dorado on the other hand (collectively, "EDNC
Parties") (i) makes an assignment for the benefit of creditors,
becomes insolvent or admits in writing its inability to pay its
debts as they become due, files a voluntary petition in
bankruptcy or a petition seeking reorganization, liquidation,
dissolution or similar relief under any law or regulation; (ii)
either Bayer or one of the EDNC Parties applies for, consents to
or acquiesces in the appointment of a trustee, receiver or
liquidator for itself or any of its property; or (iii) an
involuntary bankruptcy or involuntary insolvency proceeding is
commenced by either Bayer or either of the EDNC Parties and such
involuntary bankruptcy or involuntary insolvency proceeding is
not dismissed within ninety (90) days of its commencement.
17.4 Effects of Termination
(A) In the event that (i) the Term of this
Agreement is not extended beyond either the Initial Term or any
current Renewal Term, (ii) is terminated as a result of an EDNC
Event of Default, (iii) is terminated as a result of a Bayer
Event of Default or (iv) is automatically terminated pursuant to
Section 17.3 hereof, Bayer shall pay to EDNC the appropriate
termination fee (as hereinafter provided); the Project Agreements
shall terminate (except as otherwise provided in Section 17.4(B)
hereof); and all right and interest of EDNC to and under the
Ground Lease and the Leasehold Improvements shall automatically
terminate without further action by Bayer, EDNC or any other
party. In the case of a termination due to (a) the expiration of
the Initial Term or any Renewal Term, any automatic termination
under Section 17.3 hereof, Bayer shall pay to EDNC the Expiration
Termination Fee; (b) an EDNC Event of Default, Bayer shall pay to
EDNC the EDNC Default Termination Fee; and (c) a Bayer Event of
Default, Bayer shall pay to EDNC the Bayer Termination Fee. The
Bayer Agreement shall govern Bayer's rights and obligations in
respect of the Owner Trustee in the case of such a termination.
Any election by Bayer pursuant to the Bayer Agreement shall not
release EDNC or El Dorado from liability for any deficiencies
EDNC owes pursuant to any of the Project Agreements. EDNC's
interest in and title to the Leasehold Improvements shall be
transferred to Bayer upon payment to EDNC (or to the Owner
Trustee on behalf of EDNC) of the Expiration Termination Fee, the
EDNC Default Termination Fee or the Bayer Termination Fee,
whichever is applicable. If the Bayer Default Termination Fee,
the EDNC Default Termination Fee or the Expiration Termination
Fee is a negative number, then EDNC shall pay to Bayer the
deficiency.
(B) The termination contemplated by this
Section 17 shall be conditioned upon and subject to the receipt
of any necessary regulatory approvals, including without
limitation the expiration of the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (if
applicable), and any necessary approvals under the Exon-Florio
Act, as amended (if applicable). The termination shall be
effective (A) within thirty (30) days following the expiration of
the Term of this Agreement, (B) within ninety (90) days following
the date of termination in the event the Project Agreements are
terminated pursuant to Section 17.1, 17.2 or 17.3 hereof or
(C) within ninety (90) days following the exercise of the Right
of First Refusal described in Section 21 hereof; provided,
however, that in no event shall the transaction be consummated
until the expiration of the waiting period, if any, imposed by
the Hart-Scott-Rodino Antitrust Improvements Act, as amended (if
applicable), and the receipt by the parties of all other
necessary regulatory approvals. At the termination, EDNC shall
take all action necessary (in the sole discretion of Bayer and
its counsel) to transfer its interest in the Leasehold
Improvements and other assets comprising the EDNC Baytown Plant
and to surrender the Leased Premises free and clear of any and
all liens, encumbrances and liabilities (direct, contingent and
otherwise) other than the Permitted Exceptions (as such term is
defined in the Ground Lease), the Leveraged Lease liabilities
assumed by Bayer (if any) and such other liens, encumbrances and
liabilities imposed by or through Bayer. The rights set forth in
Section 16, the obligations set forth in this Section 17, and the
indemnification obligations contained in Section 18 and elsewhere
in the Project Agreements shall survive any termination or
expiration of the Project Agreements, and the payment of the
Expiration Termination Fee, the Bayer Default Termination Fee or
the EDNC Default Termination Fee shall be subject to offset by
Bayer for damages otherwise recoverable by Bayer hereunder.
(C) In the event that the termination of the
Project Agreements and the payment of the Expiration Termination
Fee, the Bayer Default Termination Fee or the EDNC Default
Termination Fee (as applicable) shall be prohibited or materially
delayed by the operation of the Hart-Scott-Rodino Antitrust
Improvements Act, as amended, the Exon-Florio Act, as amended, or
any other applicable federal, state or local law, EDNC and Bayer
agree to negotiate in good faith appropriate agreements that will
permit EDNC to continue to operate the EDNC Baytown Plant for the
continued production of Nitric Acid for Bayer. Such agreements
shall include a continuation of term of the Ground Lease and
mutually acceptable terms pertaining to the provision of the
Ammonia, Utilities and Services necessary for the continuing
operation by EDNC of the EDNC Baytown Plant.
(D) Upon termination of this Agreement pursuant
to this Section 17 or exercise of the Right of First Refusal
pursuant to Section 21 hereof, the nondefaulting party or parties
shall be entitled to recover from the defaulting party or
parties, in addition to all other sums due and payable by the
defaulting party or parties hereunder, all expenses incurred in
enforcing this Agreement, including without limitation, all
reasonable attorneys' fees and out-of-pocket litigation expenses.
Termination of this Agreement for any cause whatsoever shall not
interfere with, affect or prevent the collection by the
nondefaulting party or parties of any and all sums of money
accrued hereunder or otherwise due to the nondefaulting party or
parties prior to the date such termination becomes effective.
Termination of this Agreement for any reason shall not relieve
the defaulting party or parties of any of its or their
unfulfilled obligations under this Agreement, including, without
limitation, its or their indemnification obligations hereunder.
17.5 Fixed Price Purchase Option
(A) Not less than twelve (12) months nor more
than eighteen (18) months prior to the scheduled end of the Lease
Term (as such term is defined in the Operative Agreements), Bayer
may, in its sole and absolute discretion: (i) direct EDNC to
exercise the Fixed Price Purchase Option (provided, however, that
if Bayer elects such option, Bayer shall pay Boatmen's Trust
Company of Texas (or any successor Lessor appointed pursuant to
the Operative Agreements) the Fixed Price Purchase Option Amount,
thereby terminating the Leveraged Lease); (ii) direct EDNC to
exercise the Fixed Price Purchase Option, thereby terminating the
Leveraged Lease, and terminate the Project Agreements (provided,
however, that if Bayer elects such option, Bayer shall pay
Boatmen's Trust Company of Texas (or any successor Lessor
appointed pursuant to the Operative Agreements) the Fixed Price
Purchase Option Amount, thereby terminating the Leveraged Lease,
and shall pay EDNC the Expiration Termination Fee, thereby
terminating the Project Agreements); or (iii) refuse its consent
to the exercise by EDNC of the Fixed Price Purchase Option, in
which case the Fixed Price Purchase Option shall not be payable,
and Bayer may permit the Project Agreements to expire pursuant to
Section 17.3 (provided, however, that if Bayer elects such
option, Bayer shall pay to EDNC the EDNC Expiration Termination
Fee and shall enter into new Project Agreements with Boatmen's
Trust Company of Texas (or any successor Lessor appointed
pursuant to the Operative Agreements) or its designee pursuant to
Section 8 of the Lessor's Consent to Ground Sublease and Non-
Disturbance Agreement.) In the event that Bayer directs EDNC to
exercise the Fixed Price Purchase Option, then EDNC shall have
the option, and is hereby granted the option, to (i) exercise the
Fixed Price Purchase Option in its own name (or any assignee
approved by Bayer), or (ii) assign the Fixed Price Purchase
Option to Bayer (or its designee) prior to any exercise of the
Fixed Price Purchase Option and Bayer hereby consents to such
assignment. If the Fixed Price Purchase Option is assigned to
Bayer hereunder, the parties hereto agree that title to the EDNC
Baytown Plant will automatically revert to Bayer.
SECTION 18: INDEMNIFICATION
18.1 EDNC Indemnification
(A) EDNC shall indemnify and save Bayer and its
Affiliates harmless from and against any and all claims, actions,
obligations, suits, damages (whether direct, actual, special,
consequential or otherwise, but excluding lost profits), fines,
penalties, losses, costs, liabilities and expenses, including,
without limitation, reasonable attorneys' fees, out-of-pocket
litigation expenses and other costs incurred in connection with
(i) any negligence or misconduct on the part of EDNC or its
officers, employees, agents, invitees or contractors, (ii) any
bodily injury, loss of life, personal injury or death to persons
or damage to property occurring in or on the EDNC Baytown Plant
or the Construction Laydown Area (as such term is defined in the
Ground Lease) not attributable, in whole or in part, to the
negligence or intentional misconduct of the party seeking to be
indemnified, (iii) any breach by EDNC of any Environmental,
Health and Safety Law, any Spill or the remediation, abatement,
containment, clean-up, disposal or response costs associated with
environmental conditions at the Bayer Baytown Plant or the EDNC
Baytown Plant caused by EDNC, (iv) any failure by EDNC to observe
or comply with any applicable laws or government rules or
regulations, (v) any tax or other indemnity payments due Owner
Trustee, Owner Participant or any other party under the Operative
Agreements incurred as a result of any act, omission or
misrepresentation occurring on or prior to the date of the
exercise of any option by Bayer under the Bayer Agreement, or
(vi) a breach of any other EDNC covenant or agreement hereunder
or under any of the Project Agreements, provided, however, that
until the occurrence of an EDNC Event of Default: (a) Bayer's
remedy for EDNC's failure to supply Nitric Acid is expressly
limited to the difference between all costs associated with the
procurement of substitute Nitric Acid and the Variable Costs
Component and (b) Bayer's remedy for off-specification nitric
acid is expressly limited to actual damages.
(B) If EDNC's indemnification obligations under
Section 18.1(A) hereof arise or result from EDNC's sole
negligence, EDNC shall (subject to any limitations set forth in
Section 18.1(A) hereof) remain entirely responsible for the
results and consequences of its sole negligence, and if EDNC's
indemnification obligations under Section 18.1(A) hereof arise or
result from joint or concurrent negligence of more than one
party, EDNC shall be responsible (subject to any limitations set
forth in Section 18.1(A) hereof) for only that portion of the
claim, loss, damage, cost or expense caused by the negligence of
EDNC, EDNC's agents or employees, subcontractors retained by EDNC
or agents or employees of such subcontractors. In all other
cases, all remedies under Section 16 hereof and at law and equity
are available to Bayer.
18.2 Bayer Indemnification
(A) Bayer shall indemnify and save EDNC and its
Affiliates harmless from and against any and all claims, actions,
obligations, suits, damages (whether direct, actual, special,
consequential or otherwise, but excluding lost profits), fines,
penalties, losses, costs, liabilities and expenses, including,
without limitation, reasonable attorneys' fees, out-of-pocket
litigation expenses and other costs incurred in connection with
(i) any negligence or misconduct on the part of Bayer or its
officers, employees, agents, invitees or contractors, (ii) any
bodily injury, loss of life, personal injury or death to persons
or damage to property occurring in or on the Bayer Baytown Plant
(other than the EDNC Baytown Plant or the Construction Laydown
Area (as such term is defined in the Ground Lease)) not
attributable, in whole or in part, to the negligence or
intentional misconduct of the party seeking to be indemnified,
(iii) any breach by Bayer of any Environmental, Health and Safety
Law or any Spill or the remediation, abatement, containment,
clean-up, disposal or response costs associated with
environmental conditions at the Bayer Baytown Plant or the EDNC
Baytown Plant caused by Bayer, (iv) any failure by Bayer to
observe or comply with any applicable laws or government rules or
regulations or (v) a breach of any other Bayer covenant or
agreement hereunder or any of the Project Agreements, provided,
however, that until the occurrence of a Bayer Event of Default,
EDNC's remedy for Bayer's failure to provide Ammonia, Utilities
or Services is expressly limited to the difference between all
costs associated with the purchase of substitute ammonia,
utilities or services, as the case may be, and the price of
Ammonia, Utilities or Services, as the case may be, under the
Project Agreements.
(B) If Bayer's indemnification obligations under
Section 18.2(A) hereof arise or result from Bayer's sole
negligence, Bayer shall (subject to any limitations set forth in
Section 18.2(A) hereof) remain entirely responsible for the
results and consequences of its sole negligence, and if Bayer's
indemnification obligations under Section 18.2(A) hereof arise or
result from joint or concurrent negligence of more than one
party, Bayer shall be responsible (subject to any limitations set
forth in Section 18.2(A) hereof) for that portion of the claim,
loss, damage, cost or expense caused by the negligence of Bayer,
Bayer's agents or employees, subcontractors retained by Bayer or
agents or employees of such subcontractors. In all other cases,
all remedies under Section 16 hereof and at law and equity are
available to EDNC.
18.3 Notice of Proceedings - The indemnitee shall give
the indemnitor notice of any suit, proceeding or action (whether
pending or threatened) commenced by any party which could give
rise to damages under this Section 18. Such notice shall be
given within thirty (30) days of indemnitee's discovery or
receipt of such matter (but the failure to notify within such
time period shall not rescind the indemnitor's duty to indemnify
but shall only reduce the amount of the indemnification amount to
the extent that the indemnifying party is damaged by such delay).
The indemnitor shall then have the option, at its own cost and
expense, to participate in or assume control of such proceedings
by retaining counsel reasonably acceptable to the indemnitee. If
the indemnitor does not make its election within thirty (30) days
of its receipt of the indemnitee's notice, the indemnitee may
proceed with the defense of the matter and indemnitor shall be
bound by the result.
18.4 Insurance - Notwithstanding anything contained in
this Section 18 to the contrary, it is the intention of the
parties to avail themselves, to the maximum extent possible, of
the proceeds of the insurance policies required to be maintained
pursuant to this Agreement and to the extent the damages or
expenses referenced by this Section 18 are paid by such insurance
policies (including deductibles), this indemnity shall be
inapplicable.
SECTION 19: INJUNCTIVE RELIEF
The parties acknowledge that irreparable damage may
occur in the event that any of the material provisions of this
Agreement are not performed in accordance with their specific
terms or are otherwise breached and such performance does not
occur or such breach is not cured within the period set forth
above. Each of the parties therefore agrees that the other
parties shall be entitled to an injunction or injunctions to
prevent nonperformance or breach of material provisions of this
Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 20: TERM AND RENEWALS
20.1 Initial Term - The Initial Term of this
Agreement shall commence on the Effective Date.
20.2 Renewals - The Term of this Agreement shall be
automatically renewed for six (6) successive Renewal Terms of
five (5) years each unless either Bayer or EDNC has given the
other party written notice of its intention not to renew the Term
of this Agreement not less than twelve (12) nor more than
eighteen (18) months before the expiration of the Initial Term or
the current Renewal Term, as the case may be. If Bayer gives
such notice, then not more than ninety (90) days nor less than
sixty (60) days before the end of the Term Bayer shall pay to
EDNC the Expiration Termination Fee and shall terminate the
Project Agreements pursuant to Section 17 hereof.
SECTION 21: RIGHT OF FIRST REFUSAL
21.1(A) Change of Control Event - Upon the occurrence
of a Change of Control Event, EDNC shall notify Bayer of Bayer's
option and right to pay the EDNC Default Termination Fee and to
terminate the Project Agreements pursuant to Section 17 hereof.
Bayer shall have a reasonable amount of time, not to exceed sixty
(60) days, from its receipt of notice of a Change of Control
Event to exercise an option to pay to EDNC the EDNC Default
Termination Fee and to terminate the Ground Lease and the other
Project Agreements in accordance with Section 17 hereof.
21.1(B) Third Party Offer - If EDNC desires to sell
and receives a bona fide third-party offer to purchase any voting
equity securities of EDNC or any portion of the assets of the
EDNC Baytown Plant (other than purchases of product in the
ordinary course of business) that EDNC would like to accept, EDNC
shall notify Bayer of Bayer's option and right to pay either the
Expiration Termination Fee or the amount of the third party
offer, whichever is lower, and to terminate the Project
Agreements pursuant to Section 17 hereof (the "Right of First
Refusal"). Bayer shall have a reasonable amount of time, not to
exceed sixty (60) days, from its receipt of the notice of a bona-
fide third party offer to exercise an option to pay to EDNC the
Expiration Termination Fee or the amount of the third party offer
and to terminate the Ground Lease and the other Project
Agreements in accordance with Section 17 hereof.
21.2 Injunctive Relief and Specific Performance - The
parties acknowledge that irreparable damage may occur in the
event that any of the material provisions of this Section 21 are
not performed in accordance with their specific terms or are
otherwise breached and such performance does not occur or such
breach is not cured within the period set forth above. Each of
the parties therefore agrees that the other party will be
entitled to an injunction or injunctions to prevent
nonperformance or breach of material provisions of this
Section 21 and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 22: DISPUTE RESOLUTION
22.1 General - Unless otherwise provided herein or in
the Project Agreements, any dispute arising hereunder or under
the Project Agreements shall be resolved in the manner specified
in this Section 22.
22.2 Mediation - The parties agree to exercise
reasonable efforts to resolve any dispute promptly and within a
reasonable period of time. If any such dispute cannot be
resolved within fifteen (15) Business Days, either party shall
have the right to notify the other party that it wishes to
convene a personal meeting between the senior management of
Bayer's Polymers Division and the senior management of EDNC.
Such meeting shall take place within fifteen (15) Business Days
of the delivery of such notice. The representatives of the
parties shall then meet and attempt in good faith to resolve the
subject dispute. If such attempt is unsuccessful, either party
may proceed to litigate the matter at issue. Any such
negotiation or series of negotiations shall be maintained as
confidential by the parties and the parties covenant that they
shall not disclose (other than to their respective Affiliates)
either the existence of such proceedings or the content thereof
to any other party without the express written consent of the
opposite party. Any participation in or initiation of such
discussions shall not be deemed to be an admission of liability
and no statement made or provided in or related to such
negotiations shall be construed as a statement against interest
or otherwise disclosed or used in any proceeding involving the
parties.
22.3 Commencement of Legal Actions - In the absence of
irreparable harm or material damages, the parties agree that no
party shall be entitled to commence any legal action to resolve
any dispute hereunder prior to the completion of the procedures
specified in Section 22.2 hereof. If a party declines or fails
to participate in the meeting contemplated by Section 22.2
hereof, the other party shall be entitled to request any court of
competent jurisdiction to grant a stay of litigation while the
parties attempt to settle the litigation through this negotiation
method. The party declining to participate agrees not to oppose
such a stay.
22.4 Governing Law - The construction and
interpretation of this Agreement shall be governed by the
internal laws of the State of Texas, without regard to conflicts-
of-laws provisions.
22.5 Submission to Jurisdiction - The parties hereto
hereby irrevocably submit to the jurisdiction of the United
States District Court for the Southern District of Texas over any
dispute arising out of or relating to this Agreement or any of
the transactions contemplated hereby. Each party hereby
irrevocably agrees that all claims in respect of such dispute or
proceeding shall be heard and determined in such court. The
parties hereby irrevocably waive, to the fullest extent permitted
by applicable law, any objection that they may now or hereafter
have to the venue of any such dispute brought in such court, any
defense of inconvenient forum and any right to trial by jury of
any dispute under the Project Agreements.
22.6 Consent to Service of Process - Each of the
parties hereto hereby consents to process being served by either
party to this Agreement in any suit, action or proceeding by
mailing of a copy thereof in accordance with the provisions of
Section 28 hereof.
SECTION 23: ENTIRE AGREEMENT
This Agreement, the Project Agreements and the Bayer
Agreement, together with all the schedules attached hereto and
thereto, contain the entire understanding of the parties and
supersede any prior understanding and agreements among them
respecting the subject matter hereof and thereof. There are no
agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject
matter of this Agreement and the other Project Agreements that
are not set forth or expressly referred to herein or therein.
SECTION 24: MODIFICATION
This Agreement shall not be modified or amended, except
by written instrument executed by the duly authorized officers of
the parties hereto.
SECTION 25: PAYMENTS
All amounts payable hereunder shall be paid in lawful
money of the United States on a net fifteen (15) day basis, with
interest to accrue thereafter at a rate equal to the prime rate
charged by Citibank, N.A. The acceptance by either party of bank
drafts, checks or other media of payment will be subject to
immediate collection of the full face amount thereof and the
payment shall not be deemed to have been paid until actually
received in cash by the respective party, except that no interest
shall be charged after receipt of any bank drafts, checks or
other media of payment that is collected in cash in the ordinary
course of business and without unusual delay.
SECTION 26: DEMURRAGE
Bayer or EDNC shall unload and release all
transportation equipment promptly to minimize demurrage or other
out-of-pocket expense resulting from delivery. The amount of any
demurrage or out-of-pocket expense resulting to either party from
the other party's delay in unloading or releasing transportation
equipment will be paid by the responsible party.
SECTION 27: COOPERATION
The parties hereto shall cooperate and take all such
reasonable and necessary actions required to achieve the stated
purposes of the Project Agreements during the Term hereof.
SECTION 28: NOTICES
Any notice, communication or statement required or
permitted to be given hereunder shall be in writing and deemed to
be sufficiently given when delivered in person, or on the second
Business Day following the date of transmission by U.S. certified
or registered mail, return receipt requested, or on the Business
Day following the date of transmission by overnight courier to
the address of the respective party below:
Bayer Corporation
100 Bayer Road
Pittsburgh, Pennsylvania 15205-9741
Attn: Controller, Polymers Division
Attn: Assistant General Counsel,
Polymers Division
El Dorado Nitrogen Company
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
El Dorado Chemical Company
655 Craig Road, Suite 322
St. Louis, Missouri 63141
Attn: Vice President, Industrial Chemicals
and: LSB Industries, Inc.
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: General Counsel
Either party may, by notice given as aforesaid, change its
address or its party that receives notices for all subsequent
notices.
SECTION 29: BINDING AGREEMENT
This Agreement shall be binding upon and shall inure to
the benefit of the respective successors and assigns of the
parties hereto, as the case may be, and may not be terminated,
modified, changed or amended, except by a written instrument
signed by the party to be charged.
SECTION 30: WAIVER
No waiver by Bayer or EDNC of any default or breach of
any covenant, condition or stipulation herein shall be treated as
a waiver of any subsequent default, or breach of the same or any
other covenant, condition or stipulation hereof.
SECTION 31: CONSTRUCTION
The singular form of any word used herein shall include
the plural, and vice versa. The use herein of a word of any
gender shall include each of the masculine, feminine and neuter
genders. The headings or titles of the several sections and
paragraphs of this Agreement are for convenience only. They
shall not affect the meaning, construction or effect of the
provisions hereof and do not constitute a part of this Agreement.
Nothing contained in or done pursuant to this Agreement
or any of the other Project Agreements shall be deemed or
construed by the parties hereto, or by any third party, to create
the relationship of principal and agent, partnership, joint
venture or any association whatsoever between Bayer and EDNC. It
is expressly understood and agreed that no provisions contained
in this Agreement, nor any act or acts of the parties hereto,
shall be deemed to create any agency, partnership or joint
venture relationship between Bayer and EDNC.
SECTION 32: COUNTERPARTS
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which taken together constitute one instrument.
SECTION 33: ASSIGNMENT
EDNC may not assign its respective rights and
obligations under the Project Agreements to any other party
without first obtaining the express written consent of Bayer,
which consent may be granted or withheld by Bayer in its sole
discretion; provided, however, that EDNC shall be permitted to
sublease the Leased Premises and to encumber the Ground Lease
Sublease (as defined in the Ground Lease) in accordance with
Section 15.3 of the Ground Lease, and to collaterally assign its
rights under the Project Agreements to the Construction Loan
Agent, the Owner Trustee and/or the Indenture Trustee under the
Operative Agreements.
SECTION 34: AUDIT RIGHTS
Each calculation, adjustment, payment or estimate made
pursuant to the Project Agreements shall be supported by
appropriate work papers and background data and shall be made in
conformity with GAAP. Each party shall have the right, at its
own expense, to employ a firm of independent certified public
accountants to conduct an audit of any adjustment or calculation
made pursuant to the Project Agreements. Such auditors shall
execute agreements of confidentiality reasonably acceptable to
both parties, approval of the form of which shall not be
unreasonably withheld.
SECTION 35: GUARANTY
The Guarantor hereby unconditionally guarantees the
full and faithful performance by EDNC of all of the terms,
provisions, representations, warranties and obligations of EDNC
pursuant to the Project Agreements, including without limitation
the indemnification and remedial provisions of the Project
Agreements. The Guarantor further agrees that Bayer may, without
notice to or further assent of the Guarantor, and without in any
way releasing or impairing the obligations of the Guarantor
hereunder (i) waive compliance with, or any default under, the
Project Agreements; (ii) modify or amend any provisions of the
Project Agreements with the written consent of EDNC only;
(iii) grant extensions or renewals of any of the obligations of
EDNC; and (iv) in all respects deal with EDNC as if this guaranty
were not in effect. The obligations of the Guarantor under this
guaranty shall remain in force notwithstanding any event that
would, in the absence of this clause, result in the release or
discharge by operation of law of the Guarantor from the
performance of its obligations hereunder. The liability of the
Guarantor under this guaranty to Bayer shall be a guaranty of
performance and of payment, not merely a guaranty of collection,
and the liability of the Guarantor under this guaranty shall not
be contingent upon the exercise by Bayer of any right it may have
in respect of the Guarantor. This guaranty obligation is not
intended to and shall not release or extinguish any obligations
of EDNC to Bayer. The provisions of this Section 35 are not
intended to create and shall not create or impose any obligations
on the Guarantor in favor of any third party, the provisions of
this Section 35 being only for the benefit of Bayer.
SECTION 36: FORCE MAJEURE
Upon the occurrence of a Force Majeure Event, the
obligations of the parties shall be suspended pending removal,
termination or cure of the Force Majeure Event. This Section 36
shall apply to all provisions, terms and conditions of this
Agreement, notwithstanding anything seemingly to the contrary
herein.
SECTION 37: CONTROLLING AGREEMENT
To the extent any of the Project Agreements contain
conflicting provisions, the terms of this Agreement shall
control.
IN WITNESS WHEREOF, the undersigned have executed this
Baytown Nitric Acid Project and Supply Agreement effective as of
the date first above written.
BAYER CORPORATION
By:________________________
Name:______________________
Title:_____________________
EL DORADO NITROGEN COMPANY
By: ______________________
Name:_____________________
Title:____________________
El Dorado Chemical Company executes this Baytown Nitric
Acid Project and Supply Agreement solely for purposes of the
representations, warranties and covenants set forth in
Section 8.2 hereof, the provisions of Section 17.4 hereof, the
guaranty set forth in Section 35 hereof and the Back-up and
Start-up Supply Plan attached hereto as Exhibit D.
EL DORADO CHEMICAL COMPANY
By:_____________________
Name:___________________
Title:__________________
EXHIBIT A
GROUND LEASE
Filed as a separate exhibit.
EXHIBIT B
SERVICES AGREEMENT
Filed as a separate exhibit.
EXHIBIT C
DESIGN CRITERIA
1.1 Plant Capacity
One dual pressure nitric unit. The EDNC Baytown Plant will be
built in Baytown, Texas at the existing Bayer Baytown Plant. The
EDNC Baytown Plant will have the annual capacity to produce
443,000 short tons per year (403,000 metric tons per year or 1265
short tons/day), one hundred percent (100%) basis, with the
nitric acid at sixty-five percent (65%) by weight concentration.
Bayer Baytown Plant demand will be impacted by scheduled EDNC
Baytown Plant unit shutdowns. Either the toluene diisocynate
train or the methyl diphenyl diisocynate train can be down for up
to six weeks each for maintenance. The EDNC Baytown Plant will
operate with a minimum on-stream time of ninety-two percent
(92%).
1.2 Nitric Acid Specification at Battery Limits
1. Assay At least 65%
2. Iron content Not more than 1.3 ppm on a
thirty (30) day rolling
average, and in no
event to exceed 10 ppm
3. Total oxides of nitrogen as N2O3 Not more than 100 ppm
4. Color Less than 100 APHA units
5. Chloride content Not more than 10 ppm
6. Sulfate content Not more than 10 ppm
7. Temperature 45-50 degrees C, maximum
8. Pressure 75 P.S.I.G.
1.3 Absorber Feed Water
Bayer will supply demineralized Water for absorber feed water
only, not for boiler water makeup.
1.4 Environmental
NOx Abatement
The EDNC Baytown Plant is located in an ozone nonattainment zone.
EDNC is to provide any continuous on-line analyzers for final
tailgas stream monitoring as required the Texas Natural Resources
Conservation Commission.
All EDNC Baytown Plant start-up and shutdown NOx plumes are to be
colorless unless otherwise approved by Bayer. The parties agree
to work together to minimize, if feasible, the occurrence of
visible stack emissions caused by a compressor trip.
Effluent Disposal
EDNC shall collect waste water in a sump and shall neutralize the
waste water as required in Schedule 6 of the Services Agreement.
EDNC will pump the neutralized water to the existing Bayer
Baytown Plant overhead waste water line.
Storm Water - The Bayer Baytown Plant has limits on quality of
storm water runoff. EDNC shall include necessary paving and
curbs to contain spills and acid from maintenance activities and
routine discharges. EDNC shall collect spills and acid from
maintenance activities and routine discharges along with the
first inch of rainfall into the waste water sump. EDNC shall
neutralize the same as required by Schedule 6 of the Services
Agreement. EDNC will also send this water to the overhead waste
water line. Rain water that is not collected in this sump will
overflow to grade to the plant storm water system.
Sanitary sewer - Underground gravity tie-in point will be
provided for disposal.
Boiler Blowdown - EDNC shall dispose of boiler blowdown via
process trench to waste water sump for pumping overhead or to
EDNC cooling tower for part of the cooling tower makeup.
Ammonia Stripper Blowdown - EDNC shall dispose of ammonia
stripper blowdown (without oil) via process trench to waste water
sump for pumping overhead.
Cooling Tower Blowdown - EDNC shall pipe blowdown from the EDNC
Baytown Plant to a separate header that collects all cooling
tower blowdown.
1.5 Utilities
The Bayer Baytown Plant has normal steam distribution levels of
630 and 135 P.S.I.G.. The EDNC Baytown Plant shall export steam
at 700 P.S.I.G. minimum and import from the 630 P.S.I.G. Bayer
header for start-up (instantaneous rate of 110,000 lbs/hr).
Bayer will supply utilities to the Battery Limits of the EDNC
Baytown Plant as stated in Section 3 of the Services Agreement.
Utility Characteristics
EDNC shall design the EDNC Bayer Baytown Plant on the basis of
the following utility characteristics:
Pressure (P.S.I.G.) Temperature (degrees Celsius)
------------------- -----------------------------
Normal Design Normal Design
M.P. Steam 135 175 181 210
H.P. Steam 650 750 258 282
M.P. Condensate 135 175 181 210
H.P. Condensate 650 750 258 282
Boiler Feed Water 250 300 115 145
Plant Water 80 150 Ambient 60
Nitrogen (1) 110 150 Ambient 60
Plant Air 75 150 Ambient 60
Instrument Air (1)(2)75 150 Ambient 60
(1) Nitrogen can be used to back up instrument air in an
emergency.
(2) Dew Point -40 degrees F.
Electricity:
- -----------
over 200 Hp 2300v 3 phase 60 Hz
0.2 - 200 Hp 460v 3 phase 60 Hz
below 0.2 Hp 100v 1 phase 60 Hz
Electricity will be metered by HL&P to EDNC from the Bayer
electrical distribution system. Bayer will charge EDNC an
allocation for the use of Bayer's electrical system
infrastructure. EDNC may operate motors over 200 Hp at other
voltages with Bayer approval. Bayer electrical distribution will
be at 13,800 volts.
Natural Gas:
- -----------
Natural gas will be supplied to the Battery Limits at 50 P.S.I.G.
and ambient temperatures. The gross heating value is 1032
BTU/SCF (934 net).
1.6 Instrumentation and Electrical
Any interface with Bayer to share information needs to be
defined. Bayer needs to know the waste water flow, pH,
environmental flows, utilities flows and product flows.
EDNC shall install emergency communications systems in accordance
with Bayer specifications.
1.7 Location and Site Data
Plant Location: Baytown, Texas, on portion of Block 12C
Typical Climatological Data used by Bayer for design:
Height above sea level
23 feet
Minimum Winter temperature
17 F
Maximum summer temperature
102 F
Design air temperature for air
cooled exchangers
105 F
Direction of Prevailing Winds
S/SE
Design max. wind strength
125 mph for the absorber
column; others per 1995 Code
Design max. rainfall intensity
2.5 inches/hour
1.8 Product Storage
Bayer requires storage tanks to have secondary containment for
product storage. Tanks are to be sized to provide three days
storage at plant capacity. EDNC shall include product pumps and
necessary piping to users. EDNC shall also provide acid piping
to battery limits with a separate metering station for nitration
and MNB.
1.9 Civil Engineering Information
Refer to Fugro-McClelland (Southwest), Inc. report of August 29,
1996. The piling on all absorbers should be no lower than
thirty-two feet (32') below mean sea level assuming a grade of at
least 23' above mean sea level. IF EDNC requires any additional
soil investigation, EDNC shall arrange for the performance of
such investigations and shall bear the cost of the same. Bayer
requests one copy of any soil investigation done by EDNC.
EXHIBIT D
BACK-UP AND START-UP SUPPLY PLAN
****INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED
FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES
OF SUCH REQUEST.
SUPPLY FOR PLANNED OUTAGES:
ASSUMPTIONS: . Beginning storage at minimum level of 95%
capacity, 3605 tons (100% basis)
Storage capacity of 3 days production, 3795
tons (100% basis)
. Third party Nitric Acid at approximately 61%
assay; El Dorado Arkansas Nitric Acid at 65%
assay
. Storage must be re-built to 50% level from
excess production capacity or from outside
sources
. During outage, Bayer maintains usage rate at
100% of capacity
. Supply of nitric acid from outside sources
will be reduced accordingly to coincide with
Bayer usage rates below 1265 tons per day
Example 1:
APPROXIMATE DIVISION
BETWEEN SOURCES
Estimated Ending
Total El Dorado Third Party Use From Storage
Day No. Trucks Trucks/Tons Trucks/Tons Storage Level
- -------- --------- ----------- ----------- -------- -------
1 15 15 234 0 0 1031 2574
2 15 15 234 0 0 1031 1543
3 30 20 320** 10 156 789 754
* 4 20 20 312 0 0 0 1129
5 20 20 312 0 0 0 1504
6 20 20 312 0 0 0 1879
---- --- ---
120 1724 0 156
Tons Tons
* Back in full production at 105% of nameplate capacity. Rates
reduced to nameplate capacity after Day 6.
** One truck will supply Nitric Acid at 98% assay, and the
balance of the trucks will supply Nitric Acid of 65% assay.
Note 1: The supply plan for planned outage is subject to
availability of drivers and transportation equipment
suitable for Nitric Acid services, which EDNC currently
believes will be available. Nitric Acid that cannot be
delivered due to unavailability of transportation
equipment shall not be included as Production
Shortfall.
Note 2: EDNC will use reasonable efforts to supply Nitric Acid
hereunder at the lowest cost to Bayer, subject to the
availability of Nitric Acid at the El Dorado, Arkansas
plant at the time of the planned outage.
Note 3: EDNC shall invoice Bayer for all costs incurred in the
delivery of Nitric Acid hereunder. The price for
Nitric Acid shipped from the El Dorado, Arkansas plant
shall be the then-current price for Nitric Acid to
Bayer under the Project and Supply Agreement, plus the
applicable transportation charges. The price for
Nitric Acid shipped from third parties shall be the
price billed to EDNC or El Dorado, whichever is
applicable, plus the applicable transportation charges.
When possible, Nitric Acid shall be supplied on a swap
basis, whether from El Dorado or a third party.
Note 4: EDNC will return storage to the fifty percent (50%)
minimum level by running the Nitric Acid Plant at one
hundred five percent (105%) of nameplate capacity.
Nitric Acid would be supplied from El Dorado or third
party sources as needed to supplement the incremental
production above Bayer's usage rate; provided, however,
that EDNC must be able to return the storage to the
fifty percent (50%) level within a reasonable period
after the re-start of the EDNC Baytown Plant.
Note 5: EDNC will use reasonable efforts to supply ninety-eight
percent (98%) concentrated nitric acid to blend with
third party acid to bring the average assay to sixty-
four percent (64%). EDNC will invoice Bayer at
El Dorado's then-current average price for ninety-eight
percent (98%) concentrated nitric acid sales from
Arkansas plus transportation charges.
Note 6: Bayer reserves the right to supply the ninety-eight
percent (98%) concentrated nitric acid from its own
facilities rather than from El Dorado's Arkansas plant.
Note 7: The data in Example 1 above are illustrative only and
in no way bind EDNC or El Dorado to the schedule of
shipments shown.
SUPPLY FOR UNPLANNED OUTAGES:
ASSUMPTIONS: . Beginning storage at minimum level of 50%
capacity, 1898 tons (100% basis)
. Storage capacity of 3 days production, 3795
tons (100% basis)
. Third party Nitric Acid at approximately 61%
assay; El Dorado Nitric Acid at 65% assay
. Storage must be re-built to 50% level from
excess production capacity or from outside
sources
. El Dorado will not hold capacity idle to
cover unplanned outages
. During outage, Bayer cuts rate to 52.5% of
capacity, 665 tons per day
. Supply of acid from outside sources will be
reduced accordingly to coincide with Bayer
usage rates below 1265 tons per day
Example 2:
APPROXIMATE DIVISION
BETWEEN SOURCES
Estimated Ending
Total El Dorado Third Party Use From Storage
Day No. Trucks Trucks/Tons Trucks/Tons Storage Level
- ------- ---------- ----------- ----------- -------- -------
1 6 6 94 0 0 571 1327
2 6 6 94 0 0 571 756
3 25 15 242** 10 156 267 489
4 30 20 320** 10 156 189 300
5 30 20 320** 10 156 189 111
* 6 20 20 312 0 0 0 486
7 20 20 312 0 0 0 861
8 20 20 312 0 0 0 1236
9 20 20 312 0 0 0 1611
10 14 14 218 0 0 0 1892
-- --- ---
214 2894 468
Tons Tons
* Back in full production at 105% of nameplate capacity. Rates
reduced to nameplate capacity after Day 10.
** One truck will supply Nitric Acid at 98% assay.
Note 1: The parties will meet to determine ways to mitigate the
effects of any unplanned outage on Bayer or EDNC,
whether or not such unplanned outage is due to EDNC's
negligence. If an unplanned outage is due to the
negligence of EDNC, Bayer shall have the
indemnification rights set forth in Section 18.1
hereof.
Note 2: The supply plan for unplanned outage is subject to
availability of drivers and transportation equipment
suitable for Nitric Acid services, which EDNC currently
believes will be available. Nitric Acid that cannot be
delivered due to unavailability of transportation
equipment shall not be included as Production
Shortfall.
Note 3: EDNC shall invoice Bayer for all costs incurred in the
delivery of Nitric Acid hereunder. The price for
Nitric Acid shipped from El Dorado, Arkansas shall be
the then-current price for Nitric Acid to Bayer under
the Project and Supply Agreement, plus the applicable
transportation charges. The price for Nitric Acid
shipped from third parties shall be the price billed to
EDNC or El Dorado, whichever is applicable, plus the
applicable transportation charges. When possible,
Nitric Acid shall be supplied a swap basis, whether
from El Dorado or third parties.
Note 4: EDNC will return storage to the fifty percent (50%)
minimum level by running the Nitric Acid Plant at one
hundred five percent (105%) of the nameplate capacity.
Nitric Acid would be supplied from El Dorado or from
other sources as needed to supplement the incremental
production above Bayer's usage rate beyond day five,
provided, however, that EDNC must be able to return the
storage to the fifty percent (50%) level within a
reasonable period after the re-start of the Plant.
Note 5: EDNC will use reasonable efforts to supply ninety-eight
percent (98%) concentrated nitric acid to blend with
third party acid to bring the average assay to sixty-
four percent (64%). EDNC will invoice Bayer at
El Dorado's then-current average price for ninety-eight
percent (98%) concentrated nitric acid sales from
El Dorado, Arkansas plus transportation charges.
Note 6: Bayer reserves the right to supply the ninety-eight
percent (98%) concentrated nitric acid from its own
facilities rather than from El Dorado, Arkansas.
Note 7: The data in Example 2 herein are illustrative only and
in no way bind EDNC or El Dorado to the schedule of
shipments shown.
START-UP SUPPLY PLAN
CONDITIONS: (a) Supply plan for 65% Nitric Acid requirements
up to 260 tons per day (100% acid basis).
(b) Storage systems available beginning March 1,
1998. EDNC may elect to build inventory
prior to the start of the 4/1/98 - 8/31/98
requirement.
(c) Storage capacity of 3 days production, 3795
tons (100% basis).
(d) Third party Nitric Acid at approximately 61%
assay. El Dorado Nitric Acid at 65% assay.
One full truck of 98% concentrated Nitric
Acid per ten trucks of 61% Nitric Acid.
(e) Purchases will be steady and continuous to
allow trucks and drive teams to be dedicated
to the shipments.
NOTES:
Note 1: Subject to condition (e) above, the supply plan
ensures the availability of drivers and
transportation equipment suitable for Nitric Acid
service.
Note 2: EDNC will use reasonable efforts to supply Nitric
Acid hereunder at the lowest cost to Bayer.
Note 3: EDNC shall invoice Bayer for all costs incurred in
the delivery of Nitric Acid hereunder. The price
for Nitric Acid shipped from El Dorado's plant in
El Dorado, Arkansas shall be: ****
The price for Nitric Acid shipped from third
parties shall be the price billed to EDNC plus the
applicable transportation charges. To the extent
possible, Nitric Acid will be supplied to the
Bayer Baytown Plant on a swap basis from El Dorado
or third parties.
Note 4: When a load is not shipped, Bayer may be charged a
"non-user" charge, estimated to be **** per unit,
to cover out-of-pocket expenses for the
tractor/trailer/driver unit standing-by idle.
These charges would apply seven (7) days per week
for the sixteen (16) units in service.
Note 5: EDNC will supply 98% concentrated nitric acid to
blend with third party acid to bring the average
assay to 65%. EDNC will invoice Bayer for the
nitric acid against the existing swap agreement
between Bayer and EDNC, plus transportation
charges.
If the exchange balance exceeds 1,500 tons in
favor of EDNC, EDNC has the option to supply
additional tons of 98% concentrated nitric acid at
EDNC's then-current average price for sales from
Arkansas.
Note 6: Bayer reserves the right to supply the 98%
concentrated nitric acid from its own facilities
rather than from El Dorado's Arkansas plant.
Note 7: This start-up supply plan is intended to be a five
month supply plan.
Note 8: Within fifteen (15) days of the end of each
calendar month under this start-up supply plan,
EDNC will invoice Bayer for its actual handling
and unloading costs for Nitric Acid.
EXHIBIT E
Note: This draft agreement
must be reviewed by Bayer team, EDNC,
ICF Kaiser and La Grande Paroisse S.A.
TECHNOLOGY SUBLICENSE AND NON-DISCLOSURE AGREEMENT
THIS AGREEMENT made and effective this __ day of
__________, 1997 by and between ICF KAISER ENGINEERS, INC. whose
address is Gateway View Plaza, 1600 West Carson Street,
Pittsburgh, Pennsylvania 15219-1031 ("ICF KAISER"), LA GRANDE
PAROISSE S.A., Immeuble Iris 12, Place de L'Iris, 92062, Paris La
Defense 2) ("G-P"), EL DORADO NITROGEN COMPANY, P.O. Box 419082,
St. Louis, Missouri 63141-1782 ("EDNC") and BAYER CORPORATION,
100 Bayer Road, Pittsburgh, Pennsylvania 15205-9741 ("Bayer").
WHEREAS, EDNC has contracted with ICF Kaiser pursuant
to an agreement dated __________ __, 1997 (hereinafter referred
to as the "CONTRACT"), to design, procure and construct a nitric
acid plant having a capacity of 1265 short tons per day (100%
acid basis) of nitric acid to be installed at the Baytown, Texas
site (hereinafter referred to as the "UNIT"); and
WHEREAS, the UNIT shall be designed and constructed
utilizing a process developed by G-P for producing nitric acid by
oxidation of a mixture of air and anhydrous ammonia over a
platinum/rhodium catalyst and by oxidation and absorption under
pressure of the produced nitrous gas, together with a catalytic
reduction of the tall gas by ammonia (hereinafter referred to as
the "Process"); and
WHEREAS, ICF Kaiser will utilize certain patented or
unpatented inventions and improvements, modifications, trade
secrets and technical information relating to the Process
(hereinafter referred to as "TECHNICAL INFORMATION") and provided
to ICF Kaiser by G-P; and
WHEREAS, in connection with the CONTRACT, G-P has
granted to ICF Kaiser a license to practice and use said
TECHNICAL INFORMATION for engineering and constructing the UNIT
using the Process, and operation and maintaining said UNIT, and
selling the product thereby obtained;
NOW THEREFORE, in consideration of the mutual covenants
set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. A. ICF Kaiser and G-P hereby grant to EDNC, its assignees,
designees or affiliates, an irrevocable, royalty-free
sub-license under G-P's TECHNICAL INFORMATION to
practice and use said TECHNICAL INFORMATION for
operating and maintaining the UNIT using the Process,
and for selling the product thereby obtained, excluding
the use of said TECHNICAL INFORMATION for extension of
said UNIT or any similar unit in the United States of
America and abroad, or for the design or construction
of any new similar unit wherever located, except as is
normally accepted industry practice for the periodic
upgrade, modernization or debottlenecking for increased
or modified production of the UNIT. Said exception
shall be limited to increase of production capacity of
the UNIT to a maximum of 20% beyond the higher of the
guaranteed operating capacity or the actual operating
capacity as determined during the performance test as
defined in the CONTRACT. G-P's TECHNICAL INFORMATION
for further increase of production capacity of the UNIT
shall not be used without the prior written consent of
G-P, which consent shall not be unreasonably withheld.
B. Upon any acquisition of the UNIT by Bayer in accordance
with the terms of the Project and Supply Agreement by
and among EDNC, El Dorado Chemical Company and Bayer,
ICF Kaiser and G-P hereby grant to Bayer, its
assignees, designees or affiliates, an irrevocable,
royalty-free sub-license under G-P's TECHNICAL
INFORMATION to practice and use said TECHNICAL
INFORMATION for operating and maintaining the UNIT
using the Process and for selling the product thereby
obtained. The parties agree that internal transfers of
employees of EDNC, El Dorado Chemical Company and Bayer
from the UNIT to other units not licensed to use the
TECHNICAL INFORMATION shall not be deemed a violation
of this license, provided that such employees agree in
writing to be individually bound by the confidentiality
provisions contained herein.
2. A. In consideration of G-P's and ICF Kaiser's use and
disclosure of said TECHNICAL INFORMATION, EDNC agrees
to receive and maintain in confidence and not to use
(except as otherwise permitted by paragraph 1, above)
or disclose to any third party or parties the said
TECHNICAL INFORMATION, or any part thereof, disclosed
to EDNC by ICF Kaiser or G-P, without the prior written
consent of both ICF Kaiser and G-P, for a period of ten
(10) years from the date of this Agreement or from the
date the UNIT completely ceases operation, whichever
date occurs later. The term "third party" shall mean
any person, legal or natural, other than EDNC or Bayer,
parents, subsidiaries and affiliated companies of EDNC
or Bayer.
B. In consideration of G-P's and ICF Kaiser's use and
disclosure of said TECHNICAL INFORMATION, Bayer agrees
to receive and maintain in confidence and not to use
(except as otherwise permitted by paragraph 1, above)
or disclose to any third party or parties the said
TECHNICAL INFORMATION, or any part thereof, disclosed
to Bayer by ICF Kaiser or G-P, without the prior
written consent of both ICF Kaiser and G-P, for a
period of ten (10) years from the date of this
Agreement or from the date the UNIT completely ceases
operation, whichever date occurs later. The term
"third party" shall mean any person, legal or natural,
other than EDNC or Bayer, parents, subsidiaries and
affiliated companies of EDNC or Bayer.
3. A. EDNC will disclose said TECHNICAL INFORMATION only to
those of EDNC's or Bayer's employees, contractors or
agents who require it in connection with their duties
related to the aforesaid use, and will bind these
employees, contractors and agents to the
confidentiality obligations described in this
Agreement. Not included in the foregoing
confidentiality obligations and restricted use
obligations is:
i. Information that at the time of disclosure is in
the public domain, or which later becomes part of
the public domain by publication or otherwise
through no act of EDNC or Bayer;
ii. Information that can be demonstrated to be in
EDNC's or Bayer's possession prior to ICF
Kaiser's or G-P's disclosure;
iii. Information that is furnished to EDNC or Bayer by
a third party, as a matter of right without
restriction on disclosure, and which was not
received directly or indirectly from ICF Kaiser
or G-P; or
iv. Information that is by reasonable proof
independently developed by EDNC.
B. Bayer will disclose said TECHNICAL INFORMATION only to
those of Bayer's or EDNC's employees, contractors or
agents who require it in connection with their duties
related to the aforesaid use, and will bind these
employees, contractors and agents to the
confidentiality obligations described in this
Agreement. Not included in the foregoing
confidentiality obligations and restricted use
obligations is:
i. Information that at the time of disclosure is in
the public domain, or which later becomes part of
the public domain by publication or otherwise
through no act of Bayer or EDNC;
ii. Information that can be demonstrated to be in
Bayer's or EDNC's possession prior to ICF
Kaiser's or G-P's disclosure;
iii. Information that is furnished to Bayer or EDNC by
a third party, as a matter of right without
restriction on disclosure, and which was not
received directly or indirectly from ICF Kaiser
or G-P; or
iv. Information that is by reasonable proof
independently developed by Bayer.
4. For the purpose of this Agreement, any combination of
TECHNICAL INFORMATION shall not be deemed to be within the
foregoing exceptions because individual terms of TECHNICAL
INFORMATION are in the public domain or in EDNC's or Bayer's
possession unless the combination itself is in the public
domain or in EDNC's or Bayer's possession. This Agreement
shall be construed and governed under the same laws and
venue as the CONTRACT.
In WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their respective
representative, each such representative having been first duly
authorized so to act, as of the date first above written.
ICF KAISER ENGINEERS, INC.
By:________________________________
(signature)
Name:______________________________
(print name)
Title:_____________________________
Date:______________________________
LA GRANDE PAROISSE S.A.
By:________________________________
(signature)
Name:______________________________
(print name)
Title:_____________________________
Date:______________________________
EL DORADO NITROGEN COMPANY
By:________________________________
(signature)
Name:______________________________
(print name)
Title:_____________________________
Date: _____________________________
BAYER CORPORATION
By:________________________________
(signature)
Name:______________________________
(print name)
Title:_____________________________
Date:______________________________
EXHIBIT F
BAYER AGREEMENT
****THIS ENTIRE EXHIBIT HAS BEEN OMITTED FROM THIS PUBLIC FILING
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT BY THE
SECURITIES AND EXCHANGE COMMISSION AND HAS BEEN FILED SEPARATELY
WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR
PURPOSES OF SUCH REQUEST.
EXHIBIT G
BAYER SUPPORT AGREEMENT
****THIS ENTIRE EXHIBIT HAS BEEN OMITTED FROM THIS PUBLIC FILING
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT BY THE
SECURITIES AND EXCHANGE COMMISSION AND HAS BEEN FILED SEPARATELY
WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR
PURPOSES OF SUCH REQUEST.
EXHIBIT H
SUPPLEMENTAL AGREEMENT
Filed as a separate exhibit.
SCHEDULE 1.14A
CAPITAL COSTS MONTHLY CREDIT
See attached copy.
SCHEDULE 1.33
FIXED COST ESTIMATE: EDNC BAYTOWN NITRIC ACID PLANT
LA GRANDE PAROISSE PROCESS ANNUAL PRODUCTION = 443,000 TONS
65% ACID - COST ON 100% BASIS
****THE REMAINDER OF THIS SCHEDULE HAS BEEN OMITTED FROM THIS PUBLIC FILING
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE
COMMISSION AND HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES
AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
SCHEDULE 1.42(A)
INITIAL CAPITAL INVESTMENT
****THIS ENTIRE SCHEDULE HAS BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION
AND HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION FOR PURPOSES OF SUCH REQUEST.
SCHEDULE 1.42(B)
INITIAL CAPITAL INVESTMENT
****THIS ENTIRE SCHEDULE HAS BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION
AND HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION FOR PURPOSES OF SUCH REQUEST.
SCHEDULE 1.77
VARIABLE COST ESTIMATE: EDNC BAYTOWN NITRIC ACID PLANT
LA GRANDE PAROISSE PROCESS
65% ACID - COST ON 100% BASIS
ANNUAL PRODUCTION IN 100% TONS = 1265 TONS/DAY * 350 DAYS/YEAR = 443,000
****THE REMAINDER OF THIS SCHEDULE HAS BEEN OMITTED FROM THIS PUBLIC FILING
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT BY THE SECURITIES
AND EXCHANGE COMMISSION AND HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
SCHEDULE 9
AMMONIA
Purchased Anhydrous Ammonia Specification
Ammonia, Anhydrous - Commercial Grade
Properties:
Appearance Clear, colorless Liquid
Oil, PPM 5.0 ppm
Water, weight % 0.5% maximum
Iron (Fe), PPM 1 maximum
Nonvolatile 0.5% maximum
Delivery Pressure 200 P.S.I.G.
Delivery Temperature, expected Ambient
Exhibit 10.3
SERVICES AGREEMENT
****INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS
BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE
COMPANY FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE
COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY
WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR
PURPOSES OF SUCH REQUEST.
THIS SERVICES AGREEMENT (the "Agreement") is made
effective as of June __, 1997 (the "Effective Date") between
BAYER CORPORATION, an Indiana corporation ("Bayer") and EL DORADO
NITROGEN COMPANY, an Oklahoma corporation ("EDNC").
W I T N E S S E T H:
WHEREAS, Bayer owns and operates a chemical
manufacturing facility located in Baytown, Chambers County, Texas
(the "Bayer Baytown Plant") where, among other manufacturing
processes, it engages in a manufacturing process that consumes
Nitric Acid; and
WHEREAS, pursuant to a certain Baytown Nitric Acid
Project and Supply Agreement (the "Project and Supply Agreement")
between Bayer, EDNC and El Dorado (as hereafter defined), dated
as of the Effective Date, and pursuant to a Ground Lease between
Bayer and EDNC (the "Ground Lease"), also dated as of the
Effective Date, Bayer has leased to EDNC a portion of the Bayer
Baytown Plant so that EDNC may design, construct, maintain and
operate Leasehold Improvements (as defined below) for the
manufacture and supply of Nitric Acid to Bayer;
WHEREAS, in connection with its occupancy of the Leased
Premises (as hereafter defined), EDNC desires to use or share the
use of certain facilities and services situated on or to be
constructed at the Bayer Baytown Plant;
WHEREAS, in connection with the operation of the EDNC
Baytown Plant (as defined below), Bayer agrees to supply to EDNC
certain utilities and waste treatment services that are required
for, or incidental to, the production of Nitric Acid;
NOW THEREFORE, in consideration of the premises and the
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of all of which is
hereby acknowledged, and intending to be legally bound, the
parties hereby agree as follows:
SECTION 1: DEFINITIONS
Capitalized terms not otherwise defined herein shall
have the meanings specified in the Project and Supply Agreement.
Unless otherwise defined herein, the following terms shall have
the meanings assigned to them below for purposes of this
Agreement:
1.1 Battery Limits - The boundary lines of the Leased
Premises (as hereafter defined).
1.2 Boiler Blowdown - Shall mean water discharged from
the EDNC Baytown Plant to maintain optimum boiler operations at
the EDNC Baytown Plant.
1.3 Condensate - Shall have the meaning set forth in
Section 5 hereof.
1.4 Easements - Shall have the meaning set forth in
the Ground Lease.
1.5 EDNC Baytown Plant - That certain manufacturing
facility to be constructed, leased and operated on the Leased
Premises (as hereafter defined) by EDNC for the purpose of
producing Nitric Acid in accordance with the terms of the Project
and Supply Agreement.
1.6 El Dorado - Shall mean El Dorado Chemical Company,
an Oklahoma corporation.
1.7 Environmental, Health and Safety Laws - All
applicable federal, state and local laws relating to pollution or
protection of human health or the environment including, without
limitation, all laws, statutes, ordinances, rules, regulations,
orders, codes and notices relating to releases or threatened
releases of pollutants, contaminants, toxic or hazardous
substances or wastes into the environment, including, without
limitation, the following statutes, as amended from time to time:
(i) Resource Conservation and Recovery Act ("RCRA");
(ii) Comprehensive Environmental Response, Compensation and
Liability Act of 1980; (iii) Superfund Amendments and
Reauthorization Act of 1986; (iv) Clean Air Act, 42 U.S.C. Section 7401
et seq.; (v) The Clean Water Act, 33 U.S.C. Section 1251 et seq.;
(vi) Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and
(vii) Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.
1.8 Excess Steam - All excess steam that meets the
requirements of Section 5 hereof and results from EDNC's
production of Nitric Acid at the EDNC Baytown Plant and is not
required for the operation of the EDNC Baytown Plant.
1.9 Fugitive Emissions - Shall mean any gaseous or
particulate contaminant entering the atmosphere without first
passing through a vent designed to direct or control its flow.
1.10 Fully Operational - When the EDNC Baytown Plant
has first operated for (i) up to two hundred forty (240) hours
(such duration to be fixed at EDNC's option, but in no event
shall such duration be less than seventy-two (72) consecutive
hours) at full capacity producing Nitric Acid meeting the Nitric
Acid Specifications at a rate of not less than 1265 short tons
(1150 metric tons) per day during each day of operation and
(ii) at least seventy-two (72) hours at the turndown rate
producing Nitric Acid meeting the Nitric Acid Specifications.
1.11 Leased Premises - Shall have the meaning specified
in the Ground Lease.
1.12 Leasehold Improvements - Shall have the meaning
specified in the Ground Lease.
1.13 Maximum Use - Shall have the meaning set forth in
Section 4 hereof.
1.14 Net Distributed Cost - Shall have the meaning set
forth in the Project and Supply Agreement.
1.15 Services - Shall mean all services provided by
Bayer to EDNC hereunder.
1.16 Spills - Shall mean any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, pumping or dispersing of gaseous, solid or
liquid substances into the environment, excluding discharges
allowed or permitted under Environmental, Health and Safety Laws.
1.17 Termination Date - Shall have the meaning set
forth in the Project and Supply Agreement.
1.18 Utilities - The utilities to be provided to EDNC
by Bayer pursuant to Sections 3.1(A)-(E) of this Agreement.
1.19 Washdown Water - Shall mean waste water
periodically generated from essential maintenance activities
within the EDNC Baytown Plant's Battery Limits and meeting the
specifications in Schedule 6.
1.20 Waste - The water-borne liquid, gaseous or solid
substances resulting from the Nitric Acid manufacturing process
conducted by EDNC at the EDNC Baytown Plant and falling within at
least one of the following categories:
(A) Sanitary Sewage - Non-Waste effluent
generated in kitchens, change rooms and bathrooms by EDNC at the
EDNC Baytown Plant as a result of activities necessary to
preserve and maintain human health and hygiene.
(B) Cooling Tower Blowdown - Shall mean waste
water discharged from the EDNC Baytown Plant meeting the
specifications in Schedule 6.
(C) Routine Process Waste - Shall have the
meaning set forth in Section 6.3.
(D) Stormwater - Shall mean the following three
types of precipitation falling within the Battery Limits and
meeting the specifications in Schedule 6:
(1) Initial Stormwater - Shall mean the
first inch of precipitation falling on the padded areas within a
twenty-four (24) hour period;
(2) Additional Stormwater - Shall mean any
precipitation falling on the padded areas in excess of the
Initial Stormwater; and
(3) Uncollected Stormwater - Shall mean any
precipitation falling on unpadded areas within the Battery
Limits.
(E) Other Wastes - Shall mean any waste other
than the wastes defined in Section 1.18(A) through (D) hereof
generated by EDNC at the EDNC Baytown Plant (including, without
limitation, oily sludge generated in the blowdown process, waste
lubricating oils, construction debris and production/maintenance
generated wastes.)
1.21 Waste Treatment Facilities - The portion of the
Bayer Baytown Plant that accepts the Waste for necessary
treatment and all pipelines, equipment, fixtures and improvements
appurtenant thereto.
1.22 Waste Treatment Services - The services for the
treatment and disposal of Waste to be provided to EDNC by Bayer
pursuant to the requirements of Section 6 of this Agreement.
SECTION 2: TERM AND ACCESS
2.1 Term
This Services Agreement shall commence on the Effective
Date and shall terminate upon the Termination Date.
2.2 Parking and Access
EDNC officers, directors, employees, agents,
contractors and invitees may park in the parking lots located on
the Bayer Baytown Plant, and such parties shall use access routes
designated by Bayer to reach the Leased Premises, in each case,
as more particularly described in the Ground Lease. EDNC
officers, directors, employees, agents, contractors and invitees
shall observe all conditions imposed by Bayer for parking at the
Bayer Baytown Plant. EDNC officers, directors, employees,
agents, contractors and invitees shall have access to the EDNC
Baytown Plant at all times during the term of this Agreement (as
set forth in Section 2.1 hereof); provided, however, that EDNC
officers, directors, employees, agents, contractors and invitees
must observe Bayer Baytown Plant security procedures at all
times. Bayer may restrict the access of EDNC officers,
directors, employees, agents, contractors and invitees in the
event of an emergency.
2.3 Truck and Pipeline Access
(A) EDNC shall design, construct and maintain a
four (4) spot truck loading and unloading rack. EDNC shall be
responsible for all costs associated with the truck loading rack.
(B) Bayer grants EDNC the right to use Bayer's
pipelines for the transportation of Nitric Acid and Ammonia to
the consuming units. EDNC shall use Bayer's designated pipelines
in a manner that will not unreasonably interfere with Bayer's
operations at the Bayer Baytown Plant.
SECTION 3: UTILITIES AND AMMONIA
3.1 Provision of Utilities
Bayer shall supply certain utilities in specified
quantities (each, a "Utility" and collectively, the "Utilities")
based on certain assumptions set forth in Schedule 3.1, to the
Leased Premises for EDNC's use in the manufacture of Nitric Acid
and operation, construction and maintenance of the Leased
Premises, such supply to be in the amounts and manner provided in
this Section 3. EDNC warrants that the quantities provided in
Schedules 3.1(A)-(G) are a good faith estimate of the quantities
of Utilities it will consume at an annual production rate of
443,000 short tons of nitric acid per year. It is expressly
understood that Bayer shall not be obligated to supply any
Utilities other than those specifically listed in this Agreement
and that Bayer shall not be obligated to supply such Utilities in
excess of the quantities provided for in Schedules 3.1(A)-(G).
Bayer's obligations hereunder shall at all times remain subject
to any competing priorities Bayer may have at the Bayer Baytown
Plant for such Utilities. Bayer shall provide all such Utilities
to EDNC at the Battery Limits in accordance with the
specifications and the prices (if applicable) set forth on
Schedules 3.1(A)-(G) hereto and at Bayer's Net Distributed Cost.
(A) Water - The Bayer Baytown Plant is served by
public utility-supplied and plant-supplied water that is piped
through and from the Bayer Baytown Plant. Bayer agrees to supply
to the Leased Premises at the Battery Limits: (i) boiler feed
water (makeup); (ii) fire water; (iii) potable water; (iv) plant
(non-potable) water; and (v) demineralized water in the amounts
and at the specifications set forth in Schedule 3.1(A), subject
to the availability of such water from the utility supplying
same. Bayer shall supply all water at Bayer's Net Distributed
Cost.
(B) Nitrogen - Bayer agrees to supply to the
Leased Premises at the Battery Limits, at Bayer's Net Distributed
Cost, nitrogen gas through pipelines located at or on the Bayer
Baytown Plant in the amounts and in the specifications set forth
in Schedule 3.1(B).
(C) Air - Bayer agrees to supply to the Leased
Premises at the Battery Limits, at Bayer's Net Distributed Cost:
(i) plant air and (ii) instrument air through pipelines located
at or on the Bayer Baytown Plant in the amounts and in the
specifications set forth in Schedule 3.1(C).
(D) Steam - Bayer agrees to supply to the Leased
Premises at the Battery Limits, at Bayer's Net Distributed Cost,
six hundred thirty pounds per square inch gauged steam ("630
P.S.I.G. Steam") during start-up and one hundred fifty pounds per
square inch gauged steam during normal operations through
pipelines located at or on the Bayer Baytown Plant in the amounts
and in the specifications set forth in Schedule 3.1(D).
(E) Natural Gas - Bayer agrees to supply to the
Leased Premises at the Battery Limits, at Bayer's Net Distributed
Cost, natural gas through pipelines located at or on the Bayer
Baytown Plant in the amounts and at the specifications set forth
in Schedule 3.1(E).
(F) Chlorine - Bayer agrees to supply to the
Leased Premises at the Battery Limits at Bayer's Net Distributed
Cost, chlorine through pipelines located at or on the Bayer
Baytown Plant in the amounts and in the specifications set forth
in Schedule 3.1(F).
(G) Caustic - Bayer agrees to supply to the
Leased Premises at the Battery Limits at Bayer's Net Distributed
Cost, caustic through pipelines located at or on the Bayer
Baytown Plant in the amounts and in the specifications set forth
in Schedule 3.1(G).
(H) Electricity - Bayer agrees to cause Houston
Light & Power to supply electricity to EDNC. Bayer will bill
EDNC the actual cost per kilowatt hour of electricity plus a
reasonable pro rata portion of the capital invested for
electrical capacity infrastructure development.
3.2 Utility Quality
(A) Bayer makes no warranty with regard to the
quality or quantity of the Utilities made available to EDNC under
this Agreement.
(B) EDNC shall be released from the warranty
contained in Section 6 of the Project and Supply Agreement as to
nitric acid produced at the EDNC Baytown Plant if and to the
extent EDNC can establish that the failure to meet the Nitric
Acid Specifications was attributable to Bayer's failure to meet
the relevant specifications for, or quantities of, Ammonia or
Utilities provided to EDNC. EDNC shall exercise reasonable
efforts to mitigate the application of this section by promptly
notifying Bayer of any detected deficiency in the Utilities
provided.
3.3 Utility Cross Connections
All Utilities cross connections will be designed,
engineered and installed in accordance with Bayer's Utilities
Cross Connections Engineering Standards, copies of which are
attached as Schedule 3.3. EDNC agrees to maintain and operate
these systems as originally designed to prevent possible cross
contamination between EDNC's processes and a given Utility or
possible cross contamination between two Utility streams.
3.4 Utility Meters
(A) EDNC shall install, operate and maintain, at
its expense, demand metering equipment to measure EDNC's demand
and consumption of the Utilities. EDNC's readings will be the
basis upon which any charges will be assessed against EDNC for
the consumption of Utilities, unless any reading is proven to be
in error in accordance with Section 3.4(B).
(B) EDNC shall calibrate all meters in accordance
with manufacturer's recommendations. EDNC shall give Bayer three
(3) days notice of, and the right to observe, the calibration of
any meters installed by EDNC. EDNC shall recalibrate each meter
as recommended by the manufacturer. If during any such periodic
recalibration any meter is found to be inaccurate by more than
one-half of one percent (0.50%), then EDNC shall repair or
recalibrate such meter to the lesser of (i) manufacturer's
tolerances or (ii) plus or minus one-half of one percent (0.50%).
If a meter is inaccurate by more than one-half of one percent
(0.50%), the party that has benefitted from the inaccuracy shall
refund to the other party one hundred percent (100%) of the
discrepancy, back to the date of the last calibration or, if
identifiable, back to the date of the failure that triggered the
inaccuracy. If feasible, EDNC shall affix its seal to each meter
after each calibration. EDNC agrees to exercise reasonable
efforts to conduct all meter readings, inspections,
recalibrations and repairs in such a manner that it will not
unreasonably interfere with Bayer's operations at the Bayer
Baytown Plant. EDNC shall also permit Bayer, at Bayer's expense,
to inspect the meters at any time, provided such inspection does
not unreasonably interfere with EDNC's operations at the EDNC
Baytown Plant.
(C) If any inspection by Bayer reveals an
inaccurate meter (as determined under the preceding paragraph),
then the parties shall negotiate an appropriate adjustment to be
made to the cost of the affected Utility.
3.5 Resale of Utilities
EDNC covenants that it will not sell, transfer or
distribute to any other party (including Affiliates of EDNC)
those Utilities provided to EDNC by Bayer pursuant to this
Agreement.
3.6 Construction Utilities
Bayer shall supply certain utilities to the Leased
Premises for EDNC's use in the construction of the EDNC Baytown
Plant. Bayer shall invoice EDNC monthly for such construction
utilities at Bayer's Net Distributed Cost.
3.7 Electrical Distribution Lines and Equipment
Bayer will install necessary electrical distribution
lines and equipment to provide electricity to the Battery Limits
of the EDNC Baytown Plant, for which Bayer will charge EDNC a
monthly fee as set forth in 3.1(H) hereof.
SECTION 4: PRO-RATA SHARE OF INFRASTRUCTURE CAPITAL INVESTMENT
Upon start-up, EDNC is expected to use up to the
monthly quantities of Utilities as outlined in Schedules 3.1(A)-
(G) ("Maximum Use"). If for any reason EDNC increases its use of
any Utility above the Maximum Use and such increase in use would
cause a reduction in the amount of the particular Utility
otherwise available for Bayer's use, and the remedy of the
limitation requires a capital investment, Bayer may include a
reasonable portion of the capital investment in Bayer's Net
Distributed Cost for the Utility.
SECTION 5: EXCESS STEAM
(A) To the extent that EDNC has or generates Excess
Steam or condensate that meets the requirements of Schedule
3.1(D) hereof ("Condensate"), and subject to the provisions of
this Section 5, EDNC shall deliver the Excess Steam and
Condensate to Bayer ****. The Excess Steam shall be saturated,
have a minimum pressure of seven hundred (700) P.S.I.G. at the
inlet control/letdown valve at the Battery Limits and shall have
a minimum of five hundred eight degrees (508) superheat. Bayer
shall accept all excess steam that does not meet the
specifications set forth in this Section 5 and condensate that
does not meet the requirements set forth in Schedule 3.1(D)
hereof; provided, however, that Bayer shall have the right to
surcharge EDNC for any damages caused by the off-specification
steam or condensate. EDNC shall install and maintain meters at
such boundary points mutually agreed upon by the parties to
measure the quantity of Excess Steam supplied.
(B) Boiler water treatment chemicals used by EDNC
shall be approved by Bayer for compatibility with Bayer equipment
and piping and acceptability for treatment in the Waste Treatment
Facilities. In particular, hydrazine hydrate shall be used for
oxygen scavenging.
SECTION 6: USE OF SANITARY SEWERS AND DISPOSAL OF WASTE
Wastes from the EDNC Baytown Plant may be described by
the following categories:
1. Sanitary Sewage;
2. Cooling Tower Blowdown;
3. Routine Process Wastes;
4. Stormwater; and
5. Other Wastes.
EDNC shall provide at its sole cost and expense Nitric Acid
process sewers, collection sump(s) and pH neutralization for
Routine Process Wastes and Stormwater.
Bayer reserves the right to test the Waste streams and,
in the event Bayer notifies EDNC that the Waste streams do not
comply with Schedule 6, EDNC shall promptly take all appropriate
action to bring the Waste streams into compliance with
Schedule 6. In addition, Bayer may assess EDNC a surcharge to
cover the actual costs of all special handling and extra
treatment incurred by Bayer for waste that fails to meet
established specifications. In no case shall Bayer be required
to accept Waste that will cause Bayer to exceed limits imposed by
permits. With Bayer's prior approval, which shall not
unreasonably be withheld, EDNC may construct and locate
additional lines for transportation of its Waste, provided that
all such Waste, other than Sanitary Sewage, is processed and
directed above ground. Bayer shall invoice EDNC for such use of
the Waste Treatment Facilities on a Net Distributed Cost basis.
6.1 Use of Sanitary Sewers
EDNC may, at no cost to EDNC, discharge Sanitary Sewage
into the existing sanitary sewer system located on or near the
Leased Premises. EDNC shall not allow any third party or any
other site source to cause any substance, including without
limitation Waste, to be discharged into the sanitary sewer system
on the Leased Premises or the Bayer Baytown Plant. EDNC shall
make no discharges that violate any applicable: (i) governmental
laws, ordinances, orders, permits, rules or regulations
(including, without limitation, Environmental, Health and Safety
Laws); (ii) insurance or underwriting rules or regulations
disclosed to or known by EDNC on or prior to the Effective Date;
or (iii) revised insurance or underwriting rules or regulations
reasonably imposed by Bayer's loss prevention consultants and
insurance carriers following the Effective Date. EDNC shall
grant Bayer access to all records and files that relate in any
manner to any discharge by EDNC into the sanitary sewer system
during the term of this Agreement. Bayer reserves the right to
analyze, at its sole cost and expense, Sanitary Sewage at the
tie-in points.
6.2 Cooling Tower Blowdown
EDNC may discharge into Bayer's Cooling Tower Blowdown
header, via existing lines or lines to be constructed, Cooling
Tower Blowdown that meets the quality and quantity specifications
set forth in Schedule 6. To ensure that the Cooling Tower
Blowdown is acceptable for treatment in the Waste Treatment
Facilities, any chemicals EDNC uses in its cooling tower must be
approved by Bayer.
6.3 Routine Process Waste
(1) In connection with the production of
Nitric Acid by EDNC at the EDNC Baytown Plant, EDNC anticipates
producing Routine Process Waste of the general types listed
below, with the characteristics set forth in the attached
Schedule 6:
(a) Washdown Water;
(b) Lab Samples;
(c) Process Purges;
(d) Leaks;
(e) Boiler Blowdown; and
(f) Ammonia Vaporizer Blowdown.
(2) Subject to any contrary provisions of
this Section 6, EDNC may discharge into the overhead waste water
piping to the Waste Treatment Facilities, via existing lines or
those to be constructed, Routine Process Waste from the Leased
Premises that meets the quality and quantity specifications set
forth in Schedule 6. With Bayer's prior approval, which shall
not unreasonably be withheld, EDNC may construct and locate
additional lines for transportation of its Routine Process Waste,
provided that all such Routine Process Waste is processed and
directed above ground.
6.4 Initial Stormwater and Additional Stormwater
EDNC shall install, operate and maintain facilities to
capture all Initial Stormwater and Additional Stormwater that
falls on padded areas. EDNC shall construct such facilities so
that the Initial Stormwater is segregated from the Additional
Stormwater. EDNC shall discharge (pump) the Initial Stormwater
along with the Routine Process Wastes, via existing pipelines or
those to be constructed, into the Waste Treatment Facilities.
EDNC shall sample the Additional Stormwater and analyze the pH
and general appearance of the Additional Stormwater to ensure
that it does not exceed the permissible contamination levels for
Additional Stormwater described in Schedule 6. If the Additional
Stormwater does not exceed the permissible contamination levels
set forth in Schedule 6, then EDNC shall discharge the Additional
Stormwater, via existing pipelines or those to be constructed,
into the Bayer Baytown Plant's stormwater system. If the
Additional Stormwater exceeds the permissible contamination
levels set forth in Schedule 6, then EDNC shall hold the
Additional Stormwater until it can be discharged, via existing
pipelines or those to be constructed, into the Waste Treatment
Facilities, provided that Bayer has analyzed the Additional
Stormwater and determined that based on level of contamination
and volume, the Waste Treatment Facilities can accept such
Additional Stormwater.
6.5 Uncollected Stormwater
Uncollected Stormwater will be directed, via pipelines,
existing or to be built, or by ground elevation, to Bayer's
underground stormwater piping. EDNC will not allow contamination
of Uncollected Stormwater.
6.6 EDNC's Disposal of Other Wastes
EDNC shall be solely responsible for the proper
segregation, storage and disposal of any other waste (including,
without limitation, oily sludge from the ammonia separation
system, waste lubricating oils, construction debris and
production/maintenance generated wastes) generated by EDNC at the
EDNC Baytown Plant, the storage, conveyance, treatment and
disposal of which shall be performed in accordance with all
applicable Environmental, Health and Safety Laws and all Bayer
guidelines and procedures. EDNC shall use waste management
services mutually agreed upon by the parties for the segregation
and disposal of such other wastes. Bayer will not reimburse EDNC
for any costs associated with the storage, conveyance, treatment
and disposal process of other waste except as otherwise provided
in the Project Agreements.
6.7 General
(A) Bayer shall maintain the Waste Treatment
Facilities in good condition and repair and in such a manner as
to allow the Waste to be treated and discharged in compliance
with all applicable laws, including, without limitation,
Environmental, Health and Safety Laws. EDNC shall maintain any
pipelines, sumps, sump pumps or other facilities located on the
Leased Premises in compliance with all applicable laws, including
without limitation, Environmental, Health and Safety Laws.
(B) Upon reasonable notice, EDNC and Bayer shall
each grant to the other access to all properties, records and
files relating to the deliveries and discharge of Waste. Bayer
and EDNC shall submit written reports to each other containing
such matters and information as are reasonably requested by the
other party.
(C) EDNC shall be responsible for ensuring that
the EDNC Baytown Plant maintains compliance with all leak
detection and repair programs related to Fugitive Emissions as
mandated by all applicable Environmental, Health and Safety Laws.
(D) EDNC shall be responsible, at its expense,
for all costs associated with the proper containment, clean-up,
treatment and disposal of all Spills and materials contaminated
by such Spills arising from EDNC's operation of the EDNC Baytown
Plant. EDNC shall employ the Spill remediation services and
disposal outlets mutually agreed upon by the parties.
(E) EDNC shall discharge all Sanitary Sewage or
Waste into the existing sanitary sewer system or Waste Treatment
Facilities in such a manner as to ensure that such discharges do
not unreasonably interfere with Bayer's operations at the Bayer
Baytown Plant. EDNC shall promptly correct any nonconforming
discharges.
(F) EDNC shall install, operate and maintain, at
its expense, metering equipment to measure EDNC's discharge of
Routine Process Waste and Cooling Tower Blowdown into the Waste
Treatment System.
SECTION 7: PIPELINE AND PIPERACK CONSTRUCTION AND MAINTENANCE
7.1 Pipeline Construction
At least thirty (30) days prior to the date on which
the EDNC Baytown Plant becomes Fully Operational, EDNC shall
complete the construction of those pipelines that are necessary
to transport: (i) Excess Steam and pipeline-borne Waste from the
EDNC Baytown Plant to the appropriate Battery Limits tie-in
points designated by mutual agreement of the parties, and
(ii) all specified Utilities from the appropriate tie-in points
at the Battery Limits designated by mutual agreement of the
parties. Bayer shall design, engineer and construct the Delivery
Systems in accordance with the provisions of Section 13.1 of the
Project and Supply Agreement.
7.2 Pipeline Backflushing
If it is necessary to backflush the pipelines, EDNC
shall make an estimate of Nitric Acid or other material remaining
in the pipelines and the appropriate credit will be applied to
the relevant Bayer or EDNC account.
SECTION 8: FIRE PROTECTION, SAFETY AND SECURITY
8.1 Fire Protection
(A) The fire protection system for the Bayer
Baytown Plant and the Leased Premises shall be located partly at
or on the Bayer Baytown Plant and partly on the Leased Premises.
With the prior written approval of Bayer, which will not be
unreasonably withheld, EDNC may make such additions to the fire
protection system on the Leased Premises as EDNC requires for the
protection of the Leased Premises and Leasehold Improvements.
Bayer, at its cost and expense, shall maintain in good condition
and repair and shall make available for the benefit of the Leased
Premises in case of an emergency the portion of the fire
protection system located at or on the Bayer Baytown Plant.
EDNC, at its cost and expense, shall maintain in good condition
and repair and shall make available for the benefit of the Bayer
Baytown Plant in case of an emergency the portion of the fire
protection system located on the Leased Premises. Each party
shall be responsible for notifying the designated authority of
emergencies occurring on its property. EDNC shall only use water
from the fire protection system for emergency purposes and shall
immediately report any such use to the designated authority at
the Bayer Baytown Plant.
(B) (1) EDNC shall incorporate in the design of
the EDNC Baytown Plant the specific recommendations for fire
protection on the Leased Premises that are recommended by Bayer's
loss prevention consultants as described generally in
Schedule 8.1 or mandated by insurance requirements.
(2) During the course of construction and
operation of the EDNC Baytown Plant at or on the Leased Premises,
further recommendations may be made by Bayer for changes in fire
protection or personnel safety practices. These further
recommendations must be submitted to EDNC in writing, and EDNC
shall consult with EDNC's insurance carrier regarding such
recommendations. EDNC shall implement any reasonable Bayer
recommendations.
(3) Bayer agrees to furnish the fire-
fighting services for the Leased Premises that Bayer has
available for the protection of its own property and personnel.
EDNC agrees to cooperate with Bayer in furnishing such services,
including participating in any fire drill procedures on the
Leased Premises, as reasonably requested by Bayer. Subject to
the prior execution of confidentiality agreements in form and
substance satisfactory to EDNC and its counsel, EDNC agrees to
grant Bayer, and any insurer or agent of Bayer, access to the
Leased Premises and Leasehold Improvements as required by Bayer's
insurance carriers for inspection purposes. Subject to the prior
execution of confidentiality agreements in form and substance
satisfactory to Bayer and its counsel, Bayer agrees to grant EDNC
and its insurance carriers access to the Bayer Baytown Plant and
the improvements located thereon as required by EDNC's insurance
carriers for inspections related to fire protection or other
safety measures.
8.2 Safety
(A) EDNC will construct and operate the EDNC
Baytown Plant according to sound engineering practice and all
applicable laws and regulations. In the interest of promoting a
safe manufacturing environment, EDNC and Bayer agree to meet
every other month to discuss and review safety items of mutual
interest.
(B) EDNC and Bayer will coordinate the
installation at the EDNC Baytown Plant of a public address system
that will be integrated with the Bayer Baytown Plant public
address system so as to permit centralized emergency notification
and other central announcements to personnel at the EDNC Baytown
Plant. Bayer shall provide connections for the public address
system at the Battery Limits.
(C) Bayer will provide EDNC with a list of VHF
radio frequencies for routine use at the EDNC Bayer Baytown Plant
and for emergency communication with the Bayer disaster response
office. EDNC shall utilize radio equipment capable of
transmitting and receiving information on the assigned
frequencies.
(D) Bayer will provide EDNC with phosgene
monitoring badges for use by EDNC personnel at the EDNC Baytown
Plant. EDNC shall require the use of such badges by all
personnel at the EDNC Baytown Plant, and shall cause such badges
to be handled and examined in accordance with Bayer safety rules
applicable to the use and examination of such badges. Bayer
shall provide EDNC with such safety rules prior to the date the
EDNC Baytown Plant becomes Fully Operational.
8.3 Security
EDNC shall be responsible for providing security for
the Leased Premises and the Construction Laydown Area (as such
term is defined in the Ground Lease). Bayer shall have no
responsibility for the internal security of the Leased Premises
or the construction laydown area. On or about March 1, 1998,
Bayer will provide perimeter security only at the Bayer Baytown
Plant perimeter.
SECTION 9: CUSTODIAL, MAINTENANCE AND LABORATORY SERVICES
EDNC is responsible for providing its own custodial,
maintenance and laboratory services for the EDNC Baytown Plant.
However, EDNC and Bayer may reach agreement regarding joint use
of any or all of the same services used by Bayer at the Bayer
Baytown Plant. EDNC may utilize Bayer's weigh scales.
SECTION 10: ESTIMATED COSTS
If any fee or charge to be paid by one party to the
other hereunder is based on the other party's distributed costs,
and if such costs vary from time to time in a way that is not
readily ascertainable by reference to suppliers' invoices and the
like, then the parties shall endeavor in good faith to agree upon
billings based on estimates of such costs. If estimates are used
for billing purposes, then at the end of each quarter in which
estimates were used, actual costs shall be compared to estimated
costs and any underpayments will be paid or overpayments will be
refunded.
SECTION 11: AUDIT RIGHTS
Each calculation, adjustment or estimate made pursuant
to this Agreement shall be supported by appropriate workpapers
and background data and shall be made in conformity with GAAP.
Each party shall have the right, at its own expense, to employ a
firm of independent certified public accountants to conduct an
audit of any calculation, adjustment or estimate made pursuant to
this Agreement. Such auditors shall execute agreements of
confidentiality acceptable to both parties, approval of which
shall not be unreasonably withheld.
SECTION 12: INTERRUPTION OF SERVICE
Neither party shall be liable to the other to provide
Utilities or Waste Treatment Services pursuant to the terms of
this Agreement if the failure to provide such Utilities or Waste
Treatment Services was due to any cause or causes beyond the
reasonable control of the party required to provide the Utilities
or Waste Treatment Services. As a practice of good maintenance,
events, whether involuntary or voluntary, may require temporary
fluctuations or interruptions in Utilities or Waste Treatment
Services. Both parties agree to exert reasonable efforts to
minimize the frequency and duration of such interferences.
SECTION 13: INDEMNIFICATION
The indemnification rights and obligations of the
parties under this Agreement shall be determined in accordance
with Section 18 of the Project and Supply Agreement.
SECTION 14: EXERCISE OF RIGHTS UNDER THIS AGREEMENT
Bayer and EDNC covenant and agree that each party shall
fulfill its obligations under this Agreement to maintain, repair
or replace the equipment that each is obligated to maintain,
repair or replace at standards equivalent to or surpassing those
prevailing in the industry. Except as otherwise provided hereby,
neither party has the right to enter the property of the other
party to make any repairs or replacements or to perform
maintenance or any other function unless immediate action is
required because of an emergency. Bayer and EDNC each agree to
give the other party advance written notice and await approval
before entering upon the other's property to perform any
maintenance on or repair or replacement of any equipment or
facilities located on the property of the other party.
SECTION 15: REMEDIES AND FORCE MAJEURE
15.1 Remedies
If either party fails to comply with any term or
condition or to fulfill any obligation imposed under this
Agreement, then the other party may exercise any one of the
remedies afforded such party under the Project and Supply
Agreement.
15.2 Force Majeure
Both EDNC and Bayer will be excused from the
obligations of this Agreement to the extent that performance is
delayed or prevented as a result of a Force Majeure Event.
SECTION 16: MISCELLANEOUS
16.1 Payment for Services
All amounts payable hereunder shall be paid in lawful
money of the United States on a net fifteen (15) day basis, with
interest to accrue thereafter at a rate equal to the prime rate
charged by Citibank, N.A. The acceptance by either party of bank
drafts, checks or other media of payment will be subject to
immediate collection of the full face amount thereof and the
payment shall not be deemed to have been paid until actually
received in cash by the respective party, except that no interest
shall be charged after receipt of any bank drafts, checks, or
other media of payment that is collected in cash in the ordinary
course of business and without unusual delay.
16.2 Material Default
Either party may recover for each delivery of goods,
materials, utilities or raw materials hereunder as a separate
transaction, without reference to any other delivery. If either
party is in material default (after expiration of any cure
period) with respect to any of the terms or conditions of this
Agreement, the other party may, at its option, defer further
deliveries of goods, materials, utilities or raw materials
hereunder until such default is remedied, all without prejudice
to any other legal or equitable remedy. If either party is in
material default (after expiration of any cure period) with
respect to any terms or conditions of this Agreement, the other
party may, at its option, notify the defaulting party that it
will suspend orders until it receives adequate assurance of due
performance, all without prejudice to any other legal or
equitable remedy. However, this Section 16.2 does not apply to
situations in which either party's non-performance or delay is
excused by applicable law or provisions of the Project
Agreements. In addition to the remedies set forth above or
otherwise available at law or in equity, a party not in default
hereunder shall have the rights and remedies set forth in the
Project and Supply Agreement.
16.3 Dispute Resolution
If any dispute arises concerning or related to this
Agreement, the parties shall resolve such dispute in accordance
with the dispute resolution provisions set forth in the Project
and Supply Agreement.
16.4 Assignment
EDNC may not assign its respective rights and
obligations under this Agreement or any of the Project Agreements
to any other party without first obtaining the express written
consent of Bayer, which consent may be granted or withheld by
Bayer in its sole discretion; provided, however, that EDNC shall
be permitted to sublease the Leased Premises and encumber the
Ground Lease Sublease (as defined in the Ground Lease) in
accordance with Section 15.3 of the Ground Lease and to
collaterally assign its rights under the other Project Agreements
to the Owner Trustee, the Construction Loan Agent and/or the
Indenture Trustee pursuant to the Operative Agreements.
16.5 Notices
Any notice, communication or statement required or
permitted to be given hereunder shall be in writing and deemed to
be sufficiently given when delivered in person or by overnight
mail to the address of the respective party below:
Bayer Corporation
100 Bayer Road
Pittsburgh, Pennsylvania 15205-9741
Attn: Controller, Polymers Division
Attn: Assistant General Counsel, Polymers Division
El Dorado Nitrogen Company
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
and to:
El Dorado Chemical Company
655 Craig Road
Suite 322
St. Louis, Missouri 63141
Attn: Vice President, Industrial Chemicals
LSB Industries, Inc.
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73017
Attn: General Counsel
Either party may, by notice given as aforesaid, change its
address or the party that receives notice for all subsequent
notices.
16.6 Modification
This Agreement shall not be modified or amended, except
by written instrument executed by the duly authorized officers of
the parties hereto.
16.7 Applicable Law; Submission to Jurisdiction;
Consent to Service
The validity, interpretation and performance of this
Agreement shall be governed by the internal laws of the State of
Texas, without reference to conflicts of laws provisions. The
parties hereto irrevocably submit to the jurisdiction of the
United States District Court for the Southern District of Texas
and consent to service of process in accordance with the
provisions of Section 22 of the Project and Supply Agreement.
16.8 Invalidity of Particular Provisions
If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, then the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby. Each
term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
16.9 Captions
The headings or titles used herein are for convenience
only. They do not constitute a part of this Agreement and shall
not affect the meaning, construction or effect of the provisions
hereof.
16.10 Relationship of Parties
Nothing contained in or done pursuant to this Agreement
or any of the other Project Agreements shall be deemed or
construed by the parties hereto, or by any third party, to create
the relationship of principal and agent, partnership, joint
venture or any association whatsoever between Bayer and EDNC. It
is expressly understood and agreed that no provisions contained
in this Agreement, nor any act or acts of the parties hereto,
shall be deemed to create any agency, partnership or joint
venture relationship between EDNC and Bayer.
16.11 Counterparts
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which taken together constitute one instrument.
16.12 Entire Agreement
This Agreement and the other Project Agreements,
together with all the schedules attached hereto and thereto,
contain the entire understanding of the parties and supersede any
prior understanding and agreements among them respecting the
subject matter hereof and thereof. There are no agreements,
arrangements or understandings, oral or written, between and
among the parties hereto relating to the subject matter of this
Agreement and the other Project Agreements that are not set forth
or expressly referred to herein or therein.
16.13 Waiver
No waiver by Bayer or EDNC of any default or breach of
any covenant, condition or stipulation herein shall be treated as
a waiver of any subsequent default, breach of the same or any
other covenant, condition or stipulation hereof.
16.14 Controlling Agreement
In the event of any conflict between the provisions
hereof and the provisions of the Project and Supply Agreement,
the provisions of the Project and Supply Agreement shall control.
16.15 Binding Effect
This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective
permitted successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed and delivered by their duly authorized
officers and their corporate seals to be hereunto affixed the day
and year first above written.
EL DORADO NITROGEN COMPANY BAYER CORPORATION
By:_________________________ By: __________________________
Name:_______________________ Name:_________________________
Title:______________________ Title:________________________
SCHEDULE LIST
3.1 Utility Specifications
3.1(A) Water Specifications
3.1(B) Nitrogen Specifications
3.1(C) Air Specifications
3.1(D) Steam Specifications
3.1(E) Natural Gas Specifications
3.1(F) Chlorine Specifications
3.1(G) Caustic Specifications
3.3 Utilities Cross Connections Engineering Standards
6 Waste CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AS
IT IS THE SUBJECT OF A REQUEST BY THE COMPANY FOR CONFIDENTIAL
TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
FREEDOM OF INFORMATION ACT. THE OMITTED INFORMATION HAS BEEN FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION FOR PURPOSES OF SUCH REQUEST.
8.1 Fire Prevention Design Requirements
SCHEDULE 3.1
UTILITY SPECIFICATIONS
The information set forth on Schedules 3.1(A)-(G) is based on the
following assumptions:
1. Monthly quantities are based on one hundred twenty five
percent (125%) of projected utility consumption rates
necessary to produce 37,950 short tons of nitric acid (100%
basis) in a thirty-day month at the EDNC Baytown Plant.
2. Annual production of nitric acid at the EDNC Baytown Plant is
estimated to be 443,000 short tons.
3. Utility specifications represent the quality of such
utilities at the Battery Limits.
4. Typical monthly limits reflect anticipated maximum usages
during peak consumption periods.
SCHEDULE 3.1(A)
WATER SPECIFICATIONS
(i) Boiler Feed Water (makeup)
Pressure 250 P.S.I.G. minimum
Temperature 250F (15F)
Hardness 0.2 ppm maximum
Oxygen 7 ppb maximum
pH 8.3 minimum - 10 maximum
Iron 0.1 ppm maximum
Copper 0.05 ppm maximum
Typical monthly volume of boiler feed water is estimated
to be 58.3 million pounds. With an average rate of
approximately 78,400 lbs/hr, the boiler feed water
consumption shall not exceed a maximum rate of 98,000
lbs/hr.
Boiler feed water specifications may be subject to change
based on final selection and design of the boiler. If a
higher quality of boiler feed water is required, but
cannot be met by Bayer, the installation of any additional
water treatment facilities by EDNC, if needed, will be
treated as a change order.
(ii) Fire Water
The Bayer Baytown Plant fire water grid consists of a
series of sixteen inch (16") and twelve inch (12")
underground water mains. The fire water grid will be
extended north/south with sixteen inch (16") mains and
east/west with twelve inch (12") mains as the new
construction projects proceed.
The grid is supplied by two fire pump stations:
East Fire Water Pump Station
Located in Block 15A, the East Fire Pump Station has
three 2500 gpm at 125 psi vertical turbine fire water
pumps. These three pumps take suction from two reservoirs
of at least 7.5 million gallons each. The reservoirs are
automatically refilled by an overflow/refill pipe to the
river. The reservoirs are interconnected by a seventy-two
inch (72") concrete pipe. Individual thirty-six inch
(36") concrete pipes supply each of the three pumps from
the seventy-two inch (72") pipe. There are isolation/
diversion valves in the suction arrangement.
One of the three fire water pumps is electric motor
driven. The other two pumps are diesel engine driven
(designated as north diesel and south diesel). All three
pumps/drivers are UL-listed. A large, electric 350 gpm
"jockey" pump maintains a normal pressure of 140 psi.
"Start" pressure for the East Fire Pump Station pumps:
1. Electric 100 psi
2. North Diesel 80 psi
3. South Diesel 60 psi
The pumps discharge to a valved manifold, then to common
piping distribution headers via two parallel sixteen inch
(16") mains. Valving provides flexibility to accommodate
and discharge combination.
West Fire Pump Station
Located at the extreme west end of the plant
property, near the barge dock, the West Fire Pump Station
has two 2500 gpm at 125 psi vertical turbine fire water
pumps taking suction from a 2 million gallon reservoir.
The reservoir is refilled by manual back fill through the
fire water grid. A common wet well provides suction for
both of the West Fire Pump Station pumps.
Both pumps are diesel engine driven. The pumps,
drivers and control equipment are all UL-listed. A 60 gpm
electric jockey pump is provided. This pump is a back-up
to the 350 gpm jockey pump in the East Pump Station.
"Start" pressures for the West Fire Pump Station pumps:
1. North Diesel 75 psi
2. South Diesel 55 psi
Pump discharge is to a common header, complete with
valving, that supplies a single sixteen inch (16")
underground main connecting to the plant grid at the
corner of D Street and 4th Avenue.
The pump discharge manifold in the pump house is
arranged to accommodate a second discharge line. Bayer
will install a second sixteen inch (16") discharge line
tying into the plant grid at the northwest corner of Block
12C.
Bayer will supply fire water to the Battery Limits of
the EDNC Baytown Plant at a sufficient pressure and flow
rate to met EDNC design and insurance requirements.
(iii) Potable Water
Typical monthly volume is estimated to be approximately
25,000 gallons. Potable water consumption shall not
exceed a maximum rate of 30,000 gallons. Potable water
shall meet the minimum municipal guidelines.
(iv) Plant (Non-Potable) Water
Typical monthly volume is estimated to be 29.5 million
gallons at an average rate of approximately 660 gpm. The
plant water consumption shall not exceed a maximum rate of
870 gpm.
Chlorides 80 ppm maximum
Supply temperature ambient
Chlorine 0.1 ppm maximum
Pressure 50 P.S.I.G. minimum
(v) Demineralized Water
Pressure 60 P.S.I.G.
Conductivity 2.0 pMhos maximum
Temperature 90 F maximum
Chlorides 0.5 ppm maximum
Chlorine 0.1 ppm maximum
Typical monthly volume at capacity is estimated to be 2.23
million gallons at an average rate of 50 gpm.
Demineralized water consumption shall not exceed a maximum
rate of 63 gpm.
SCHEDULE 3.1(B)
NITROGEN SPECIFICATIONS
When EDNC is not using the Back-up or Start-up Supply
Plan, typical monthly volume for continuous usage is
estimated to be 0 SCF.
Nitrogen may be used to unload nitric acid trailers when
EDNC is using the Back-up and Start-up Supply Plan. Peak
flow for the unloading of nitric acid trailers shall not
exceed 75 SCFM. During use of the Start-up Supply Plan,
monthly requirements of nitrogen are estimated not to
exceed 130,000 SCF.
SCHEDULE 3.1(C)
AIR SPECIFICATIONS
(i) Plant Air
Typical volume during truck unloading is estimated to be
300 SCFM. Typical monthly volume is estimated to be 3.38
million SCF at an average rate of approximately 75 SCFM.
Plant air consumption shall not exceed a maximum rate of
400 SCFM.
(ii) Instrument Air
Typical monthly volume is estimated to be 7.23 million SCF
at an average rate of approximately 165 SCFM. A maximum
monthly volume is estimated to be 9.2 million SCF. The
instrument air consumption shall not exceed a maximum rate
of 206 SCFM. Instrument air shall meet the pressures of
plant air, above, and have a maximum dew point of -40 Farenheit.
Pressure:
Minimum 60 P.S.I.G.
Design 75 P.S.I.G.
Maximum 150 P.S.I.G.
SCHEDULE 3.1(D)
STEAM SPECIFICATIONS
Except for each start-up of the EDNC Baytown Plant, during normal
operation EDNC will not consume steam from Bayer. EDNC shall
export approximately 40,000 to 70,000 lbs/hr to Bayer.
All steam treatment must be compatible with the Bayer steam
treatment system.
The following is a brief description of Bayer Baytown Utilities
Department Water Treatment and Control Limits:
Boiler Feedwater
pH - 8.3 minimum - 10 maximum
Conductivity - Record only (to check boiler cycles)
Total Hardness - 0.2 ppm maximum
Silica - Record only
Boiler Water
Hydrazine hydrate is used as an oxygen scavenger. Control range
is 150-500 ppb (in condensate return).
Chelate (BTC - 105) is used as a scale control agent. Control
agent is 5-8 ppm (as CaCO3, in the Boiler water).
Silica - Control range is 50 ppm maximum (in Boiler water).
Conductivity - Control range is 2700-3000 Mhos (in Boiler
water).
"O" Alkalinity - Control range is 150-550 ppm (in Boiler water).
Steam and Condensate System
The steam pH is controlled by adding Ammonia. Control range is
8.4-8.8 (in condensate return).
The steam and condensate piping corrosion is controlled by
adding Amercor 8750. The feed rate is determined by corrosion
reports.
Drew Industrial (division of Ashland Chemicals Inc.) is the
water treating consultant for the Bayer Baytown Plant.
Condensate
Typical production levels will result in steam export with Boiler
Feed Water makeup. No condensate import is anticipated. Upon
start-up, the EDNC Baytown Plant will import 630 P.S.I.G. steam
at a peak flow of 125,000 lbs/hour. Most of the resultant
condensate will then be exported. Peak condensate export is
approximately 125,000 lbs/hour. EDNC must verify that the
condensate is not contaminated, as verified by EDNC with a
conductivity meter. Control limits are 50 Mhos with condensate
to be dumped at 100 Mhos. If the condensate is contaminated,
EDNC shall dump the condensate to process waste water.
SCHEDULE 3.1(E)
NATURAL GAS SPECIFICATIONS
Sulphur content 1 grain of hydrogen sulphide
maximum or 20 grains of total
sulfur maximum per 100 cubic feet
Water vapor content 7 pounds maximum per 1 million
cubic feet maximum
No natural gas is consumed in the nitric acid manufacturing
process. The gas may be used in the lab or in the offices and
buildings for heat and air conditioning. Natural gas consumption
is estimated to average less than 1 SCFM.
SCHEDULE 3.1(F)
CHLORINE SPECIFICATIONS
Chlorine is used for water treatment at the cooling tower. Based
on the anticipated blowdown rate, chlorine consumption will
average 85 pounds per day, with a peak consumption of 170 pounds
per day. The chlorine will be standard commercial grade with a
minimum of 99.5% chlorine by weight.
SCHEDULE 3.1(G)
CAUSTIC SPECIFICATIONS
Caustic (NaOH) will be used primarily for neutralization.
Caustic consumption will average 140 pounds per day on a 100%
basis with peak consumption of 1500 pounds per day. Initially
Bayer will supply to EDNC a 50% caustic solution, ET grade. When
another Bayer unit becomes operational (such unit is estimated to
become operational in early 1999), Bayer will generally supply to
EDNC 32% membrane grade caustic solution; provided, however, that
Bayer may supply to EDNC 50% caustic solution as an alternative.
SCHEDULE 3.3
UTILITIES CROSS
CONNECTIONS ENGINEERING STANDARDS
See attached copy.
SCHEDULE 6
WASTE
BASIS:
1. For pH control of Routine Process Waste, Initial
Stormwater and Additional Stormwater, EDNC will neutralize
with caustic soda.
2. EDNC will collect the Initial Stormwater and pump out the
Initial Stormwater over a six (6) hour period to the waste
water header. Additional Stormwater is to be routed to
the Bayer Baytown Plant's stormwater system after
verifying water quality.
3. EDNC will discharge Cooling Tower Blowdown into the Bayer
Baytown Plant's cooling tower blowdown header.
4. The overhead waste water header backpressure is up to 50
P.S.I.G. during rains.
5. Normal flow rates below are based on EDNC Baytown Plant
production of 443,000 short tons of nitric acid (100%
basis) a year.
6. EDNC will continuously monitor pH and flow to waste water
header as well as pH of Additional Stormwater to Bayer's
storm sewer.
7. EDNC must keep Uncollected Stormwater free of
contaminants.
Peak Normal
Waste Stream Quality Flow Flow
- ------------ ------------------- ---- ------
Flow to Cooling Tower
Blowdown header
pH range 7.5 - 8.0 **** ****
Anticipated metal
levels:
Cr 0.013 lb/day
Cu 0.045 lb/day
Ni 0.014 lb/day
Pb 0.007 lb/day
Zn 0.767 lb/day
Flow to Waste Water header
Routine Process Waste,
gpm
Washdown Water
Lab Samples warranted pH range of 5.0 to **** ****
Process Purges 8.0 temperature 104 F max
Leaks
Boiler Blowdown
Ammonia Vaporizer
Water 210 lb/hr max
Free ammonia 2.0 lb/hr max **** ****
Oil 0.15 lb/hr max*
- --------------------------------
1
Metal levels of this water shall be no more than twice the anticipated metal
levels.
Peak Normal
Waste Stream Quality Flow Flow
- ------------------------ ---------------- ---- ------
Initial Stormwater, gpm warranted pH range of
5.0 to 8.0 **** ****
Additional Stormwater warranted pH range of -- --
5.0 to 8.0 appearance -
uncontaminated
Total Flow to Waste Water
header, gpm **** ****
* to be reverified by IFC Kaiser.
___________________________________________
2
Additional Stormwater that is not pumped to the overhead waste water line must
be monitored and warranted to above pH range as well as uncontaminated with
other foreign substances, including but not limited to oils, as determined
by visual inspection.
EDNC will not allow the streams specified above to contain any species other
than those set forth above.
EDNC is expected to follow the Bayer Baytown Plant procedures for monitoring,
communicating and controlling action levels for pH and species noted in the
specifications, including n9otifying Bayer if the waste water is likely to
deviate from the above parameters. Bayer will routinely monitor cooling Tower
Blowdown and total flow of overhead waste water header.
SCHEDULE 8.1
FIRE PREVENTION DESIGN REQUIREMENTS
1. General
(a) Monitor nozzle coverage should be provided around the
perimeter of the unit, such that any process area can
be reached by at least two monitor nozzles.
(b) Drainage and curbing should be provided to direct fire
water to the process water sump for collection.
(c) Structural fireproofing is not anticipated. Bayer does
not typically endorse fireproofing unless high
explosion potentials exist.
(d) The cooling tower should have sprinkler protection
following current NFPA guidelines.
(e) The compressor lube oil system should have sprinkler
protection. Storage of these oils needs to be reviewed
for fire protection comments. Bayer recommends that
oil and other flammables in the storage area have
sprinkler protection.
(f) Bayer would not normally recommend sprinkler protection
for the hydrogen bottles used for burner ignition
provided the bottles are located in an open area and
remain disconnected except when in use.
(g) The ammonia surge tank should be reachable from at
least two monitors.
2. Control Room
At minimum, the building should provide a two-hour fire
resistance (typically concrete block with brick facing,
minimal wired glass windows and fire-rated doors). Due to
proximity to neighboring units and depending on the
insurance company's position, some level of blast resistance
may be required.
Once building construction is agreed upon, the following
fire protection should be provided:
(a) At minimum, smoke detection throughout, with alarms
locally and audible in a constantly attended location.
(b) Fire protective cable coating and firestopping for
significant electrical cable accumulations. Automatic
suppression -- sprinkler or gas suppression system --
is an option if cable loading is significant.
(c) If support areas (offices, labs, etc.) contain a
combustible occupancy, automatic sprinkler or other
appropriate protection should be provided.
3. Equipment Venting
(a) Emergency relief calculations are to be done per OSHA
1910.106 and NFPA 30 guidelines with consideration
given to DIERS Protocol where applicable.
4. Tank Farm
(a) Monitors to provide water spray protection for the
storage tanks.
(b) The truck loading/unloading area should be covered by
at least two monitor nozzles.
Exhibit 10.4
GROUND LEASE
THIS GROUND LEASE (the "Ground Lease"), entered into
and effective June__ , 1997 (the "Effective Date"), is by and
between BAYER CORPORATION, an Indiana corporation, ("Bayer") and
EL DORADO NITROGEN COMPANY, an Oklahoma corporation ("EDNC").
W I T N E S S E T H:
WHEREAS, Bayer owns and operates a chemical
manufacturing facility located in Baytown, Chambers County, Texas
(the "Bayer Baytown Plant") where, among other manufacturing
processes, it engages in a manufacturing process that consumes
nitric acid meeting certain agreed-upon specifications ("Nitric
Acid");
WHEREAS, Bayer owns the real property on which the
Bayer Baytown Plant is located ("Bayer Real Property");
WHEREAS, Bayer, EDNC and El Dorado (as hereafter
defined) have entered into that certain Baytown Nitric Acid
Project and Supply Agreement (the "Project and Supply
Agreement"), dated as of the Effective Date, whereby the parties
have agreed that EDNC will construct and operate a chemical
manufacturing facility (the "EDNC Baytown Plant") for the
manufacture of Nitric Acid at the Bayer Baytown Plant;
WHEREAS, Bayer and EDNC have also entered into that
certain Services Agreement (the "Services Agreement"), dated as
of the Effective Date, whereby Bayer has agreed to supply certain
Utilities and Services (each as hereafter defined) to EDNC for
the manufacture of Nitric Acid; and
WHEREAS, Bayer wishes to lease to EDNC a portion of the
Bayer Real Property identified as the Leased Premises in
Section 1.19 herein, upon which EDNC will construct and operate
the EDNC Baytown Plant;
NOW, THEREFORE, in consideration of the premises, and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be
legally bound, the parties hereby agree as follows:
SECTION 1: DEFINITIONS
Capitalized terms not otherwise defined herein have the
respective meanings assigned to them in the Project and Supply
Agreement or the Services Agreement. The following terms have
the respective meanings assigned to them for purposes of this
Ground Lease:
1.1 Benefitted Property - Shall have the meaning set
forth in Section 5.14 hereof.
1.2 Chemical Delivery Date - Shall have the meaning
set forth in Section 5.1 hereof.
1.3 Construction Access Easements - Shall have the
meaning set forth in Section 5.1 hereof.
1.4 Construction Easement Term - Shall have the
meaning set forth in Section 5.1 hereof.
1.5 Construction Laydown Area - Shall have the meaning
set forth in Section 5.2 hereof.
1.6 Construction Parking Easements - Shall have the
meaning set forth in Section 5.3 hereof.
1.7 Construction Staging Easements - Shall have the
meaning set forth in Section 5.2 hereof.
1.8 Cross-Block Roads - Shall have the meaning set
forth in Section 5.14 hereof.
1.9 Current Environmental Assessment - Shall mean the
Geotechnical Study and Environmental Baseline Assessment to be
prepared by Geraghty & Miller, Inc. and relating to the Leased
Premises, as more fully described in Section 4.4 hereof.
1.10 Easements - All easements granted to EDNC by Bayer
in (or pursuant to) Section 5 of this Ground Lease for the
purposes described therein.
1.11 EDNC Personnel - Shall mean all officers,
directors, employees, agents and invitees of EDNC.
1.12 El Dorado - Shall mean El Dorado Chemical Company,
an Oklahoma corporation.
1.13 Environmental, Health and Safety Laws - All
applicable federal, state and local laws relating to pollution or
protection of human health or the environment including, without
limitation, all laws, statutes, ordinances, rules, regulations,
orders, codes and notices relating to releases or threatened
releases of pollutants, contaminants, toxic or hazardous
substances or wastes into the environment including, without
limitation, the following statutes, as amended from time to time:
(a) Resource Conservation and Recovery Act ("RCRA");
(b) Comprehensive Environmental Response, Compensation and
Liability Act of 1980; (c) Superfund Amendments and
Reauthorization Act of 1986; (d) Clean Air Act, 42 U.S.C. Section 7401
et seq.; (e) The Clean Water Act, 33 U.S.C. Section 1251 et seq.;
(f) Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and
(g) Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.
1.14 Existing Environmental Assessment - Shall mean the
Geotechnical Study and Environmental Baseline Assessment, report
number LA1387.001, dated December 9, 1996, prepared by Geraghty &
Miller, Inc. and relating to the Leased Premises (as hereafter
defined).
1.15 Ground Lease Sublease - Shall mean the Ground
Lease Sublease that constitutes one of the Operative Agreements
(as hereafter defined).
1.16 Industrial District Payments - Those taxes levied
on the Bayer Baytown Plant by the City of Baytown, Texas,
pursuant to the Industrial District Agreement dated April 13,
1992 and executed by and between Bayer and the City of Baytown,
Texas, in the form attached hereto as Exhibit E, as it may be
hereinafter amended from time to time.
1.17 Initial Term - The initial term of this Ground
Lease, commencing on the Effective Date and ending on December 31
of the tenth (10th) calendar year following the Commencement
Date; provided, however, that if the Commencement Date has not
occurred prior to December 31, 2008, then the initial term shall
end on December 31, 2008, unless (a) sooner terminated as
provided for hereunder, (b) extended in accordance with Section 2
of this Ground Lease or (c) extended for a period equal to the
duration of a Force Majeure Event (as such term is defined in the
Project and Supply Agreement) as agreed by the parties.
1.18 Landlord's Lien - Shall mean any lien and/or
security interest now or hereafter created under Texas statutory
or common law in favor of a landlord of real property located in
Texas with respect to any personal property located in or upon
the Leased Premises as security for the rent payable to such
landlord.
1.19 Leased Premises - That certain tract of land in
Bayer Block 12C of approximately 2.755 acres, specifically
described by metes and bounds on the attached Exhibit A, situated
within the Bayer Baytown Plant in Baytown, Chambers County,
Texas.
1.20 Leasehold Improvements - Any and all improvements
constructed by EDNC (whether as construction agent or otherwise)
or on its behalf on the Leased Premises, including without
limitation, buildings, fixtures, tanks, pipes, piperacks,
powerlines, roadways, cables, conduits and other structures
located on the Leased Premises and comprising the EDNC Baytown
Plant.
1.21 New Route Date - Shall have the meaning set forth
in Section 5.1 hereof.
1.22 Operative Agreements - Shall mean the following
financing documents:
(A) Participation Agreement;
(B) Leveraged Lease (as defined in Section 1.45
of the Project and Supply Agreement);
(C) Tax Indemnity Agreement;
(D) Trust Indenture and Security Agreement;
(E) Ground Lease Sublease;
(F) Construction Loan and Security Agreement;
(G) Bayer Agreement (as defined in Section 1.10
of the Project and Supply Agreement); and
(H) Lessor's Consent to Ground Lease Sublease and
Non-Disturbance Agreement;
by and among the parties thereto, and including any other
documents pertaining to such financing of the EDNC Baytown Plant,
which documents Bayer shall have the right to approve in its sole
discretion pursuant to Section 8.1(L) of the Project and Supply
Agreement.
1.23 Perimeter Fence - Shall have the meaning set forth
in Section 5.1 hereof.
1.24 Permits - All necessary federal, state and local
governmental permits, approvals, licenses, authorizations and
consents required in connection with the design, construction and
operation of the EDNC Baytown Plant, including, without
limitation, all construction and environmental permits.
1.25 Permitted Exceptions - Those matters set forth on
the attached Exhibit B.
1.26 Post-Construction Access Easements - Shall have
the meaning set forth in Section 5.5 hereof.
1.27 Post-Construction Easement Term - Shall have the
meaning set forth in Section 5.5 hereof.
1.28 Post-Construction Parking Easements - Shall have
the meaning set forth in Section 5.6 hereof.
1.29 Post-New Route Date Access Easements - Shall have
the meaning set forth in Section 5.4 hereof.
1.30 Renewal Term - Any renewal term of this Ground
Lease subsequent to the Initial Term, each of which shall be five
(5) years in duration.
1.31 Rent - Shall have the meaning set forth in
Section 3.2 hereof.
1.32 Reserved Easements - Shall have the meaning set
forth in Section 5.14 hereof.
1.33 Spills - Shall have the meaning set forth in the
Services Agreement.
1.34 Tap Facilities - Shall have the meaning set forth
in Section 5.7 hereof.
1.35 Term - The Initial Term and any and all Renewal
Terms of this Ground Lease.
1.36 Termination Date - Shall mean the date of
termination of the Project and Supply Agreement as that date is
determined pursuant to Section 17 or Section 21 of the Project
and Supply Agreement.
1.37 Termination Fee - Shall mean the Expiration
Termination Fee, the EDNC Default Termination Fee or the Bayer
Default Termination Fee (each as defined in the Project and
Supply Agreement), whichever is applicable.
1.38 Utilities - Shall have the meaning set forth in
the Services Agreement.
1.39 Waste - Shall have the meaning set forth in the
Services Agreement.
SECTION 2: TERM
This Ground Lease shall commence on the Effective Date
and end at the conclusion of the Initial Term, unless sooner
terminated pursuant to any provision hereof or extended as
provided for herein. The Term of this Ground Lease shall be
automatically renewed for up to six (6) successive Renewal Terms
unless either party to this Ground Lease has given the other
party notice of its intention not to renew this Ground Lease for
the relevant Renewal Term not less than twelve (12) nor more than
eighteen (18) months before the expiration of the Initial Term or
any Renewal Term, as the case may be. Bayer shall have the right
pursuant to Section 17 of the Project and Supply Agreement to
terminate this Ground Lease if EDNC fails to complete
construction and commence operations of the EDNC Baytown Plant
prior to February 1, 1999.
SECTION 3: LEASE AND USE OF LEASED PREMISES
3.1 Lease of Leased Premises
Bayer hereby leases to EDNC and EDNC does hereby rent
and accept from Bayer the Leased Premises, provided, however,
that Bayer further reserves for itself all of the oil, gas and
other minerals in and under and that may be produced from the
Leased Premises. EDNC hereby agrees to design and construct the
EDNC Baytown Plant to meet the criteria set forth on Exhibit C of
the Project and Supply Agreement.
3.2 Rent
(A) EDNC agrees to pay Bayer as rental (the "Rent")
for the use and occupancy of the Leased Premises the amount of
One Hundred Dollars ($100.00) in advance for the Initial Term and
One Hundred Dollars ($100.00) for each Renewal Term. Bayer
acknowledges receipt of such payment for the Initial Term and
further acknowledges that such rental shall be deemed adequate
consideration for all rights granted herein to EDNC.
(B) Except as may be otherwise expressly set
forth herein or in the Project Agreements, it is the intention of
the parties that the Rent payable hereunder shall be absolutely
net to Bayer, so that this Ground Lease shall yield to Bayer the
net Rent during the Initial Term and each Renewal Term, and that
all costs, expenses and obligations relating to the operation and
maintenance of the Leased Premises and Leasehold Improvements
shall be paid by EDNC.
3.3 Use
(A) EDNC shall occupy and use the Leased Premises
only for the production of Nitric Acid and all activities
incidental thereto or associated therewith, including, without
limitation, all storage, transport and research and development
activities related to EDNC's production of Nitric Acid on the
Leased Premises.
(B) Except as provided below, EDNC shall not
drill or excavate on the Leased Premises without the prior
written consent of Bayer, which consent shall not be unreasonably
withheld. Bayer agrees that EDNC may drill or excavate, in
accordance with Exhibit C of the Project and Supply Agreement,
but in no event lower than thirty-two feet (32') below mean sea
level (assuming a ruling grade of not less than twenty-three feet
(23') above mean sea level), for:
(1) Soil testing related to foundation design or
otherwise to determine the suitability of the Leased
Premises for the EDNC Baytown Plant and any future Leasehold
Improvements to be constructed with Bayer's approval under
Section 4.1(D) hereof and otherwise made in conformity with
the requirements of Section 4 hereof;
(2) The construction of the EDNC Baytown Plant
and any future Leasehold Improvements to be constructed with
Bayer's approval under Section 4.1(D) hereof and otherwise
made in conformity with the requirements of Section 4
hereof;
(3) Safety or pollution control measures
necessary in connection with the operation of the EDNC
Baytown Plant;
(4) Determination of the extent of any
contamination arising from any Spills; or
(5) Any additional environmental studies EDNC
reasonably determines to be necessary in connection with the
design and construction of the EDNC Baytown Plant,
including, without limitation, monitor wells that may be
requested by EDNC or required by any governmental entity.
SECTION 4: LEASEHOLD IMPROVEMENTS
4.1 Construction and Ownership of Leasehold
Improvements
(A) EDNC shall have the right and obligation to
construct and install on the Leased Premises all Leasehold
Improvements that EDNC determines are required or desirable for
its operation of the EDNC Baytown Plant; provided, however, that
EDNC agrees (i) it shall, on or before the Commencement Date,
construct and install such Leasehold Improvements in accordance
with the site design specifications agreed upon by the parties
hereto and as described more particularly on the attached
Exhibit C, and (ii) it shall design and construct such Leasehold
Improvements in accordance with all applicable laws, codes and
regulations. Bayer agrees that it will provide to EDNC revisions
to provisions of the General Baytown Site Design Data on the
attached Exhibit C relating to engineering standards, safety and
industrial hygiene as updated or amended throughout the Term.
(B) During the Term, EDNC shall own and operate
the Leasehold Improvements, provided, however, that during the
term of the Ground Lease Sublease, the Sublessee thereunder shall
own the Leasehold Improvements. At the expiration or termination
of this Ground Lease, the Leasehold Improvements shall
automatically become the property of Bayer without further action
by Bayer, EDNC or any other party; provided, however, that in the
event that the Termination Fee is payable by Bayer, Bayer shall
pay such fee.
(C) EDNC shall prepare, file and pay all costs
associated with obtaining all Permits that are required in order
for EDNC to design, construct, repair, restore or operate the
Leasehold Improvements on the Leased Premises, notwithstanding
the fact that a Permit may be required to be issued in the name
of Bayer and regardless of whether any such Permit relates to
activity occurring on or outside of the Leased Premises. If
requested by EDNC, Bayer shall provide to EDNC, in a timely
manner, any necessary information or assistance to enable EDNC to
obtain any Permits that are required in connection with design,
construction, repair, restoration or operation of the Leasehold
Improvements.
(D) Following the Commencement Date, EDNC shall
not make any material modifications to the Leasehold Improvements
without the prior written consent of Bayer, which consent shall
not be unreasonably withheld.
4.2 Maintenance and Repair
During the Term, EDNC shall keep and maintain the
Leased Premises and the Leasehold Improvements in a good state of
repair, reasonable wear and tear excepted.
4.3 Removal
(A) At the expiration or termination of this
Ground Lease and subject to the payment by Bayer of the
Termination Fee, all Leasehold Improvements shall be surrendered
by EDNC to Bayer in accordance with the provisions of this
Section 4.3.
(B) Upon the expiration or termination of this
Ground Lease and subject to the payment by Bayer of any
applicable Termination Fee, EDNC shall surrender to Bayer the
Leased Premises, together with all Leasehold Improvements, in a
condition of good quality, order and repair (reasonable wear and
tear excepted), provided, however, that EDNC shall not be
required to surrender to Bayer any portion of the Leased Premises
that has been permanently taken as a result of eminent domain
power or proceedings pursuant to Section 11.2 hereof.
4.4 Current Environmental Assessment
Not more than thirty (30) days prior to the scheduled
date of the groundbreaking for construction, Bayer shall cause
Geraghty & Miller, Inc. to take all samples necessary to prepare
the Current Environmental Assessment, and shall cause Geraghty &
Miller, Inc. to prepare the Current Environmental Assessment and
deliver copies thereof to Bayer and EDNC. In addition, at the
termination of this Ground Lease, Bayer shall promptly cause a
qualified environmental engineering firm to conduct an exit
assessment and provide copies thereof to EDNC and Bayer.
SECTION 5: EASEMENTS
5.1 Construction Access Easements
Bayer hereby grants to EDNC the non-exclusive,
temporary easements of ingress and egress over the Bayer Baytown
Plant, at the locations and for the types of traffic, more
particularly described on Exhibit D attached hereto, for the
purposes of transporting vehicles, equipment and personnel during
the initial design and subsequent construction of the Leasehold
Improvements on the Leased Premises. These easements, designated
"Construction Access Easements" on Exhibit D, shall have a term
(the "Construction Easement Term") which commences on the
Effective Date and ends on the New Route Date. The term "New
Route Date" means the date upon which deliveries of process
chemicals (such as nitric acid or benzene) to the EDNC Baytown
Plant (or to the aniline plant which will be immediately adjacent
thereto) begin in connection with the production of
mononitrobenzene (the "Chemical Delivery Date"), or such earlier
date which is reasonably deemed to be appropriate by Bayer if the
fence which Bayer will construct around the EDNC Baytown Plant
(the "Perimeter Fence") is completed prior to the Chemical
Delivery Date.
5.2 Construction Staging Easements
Bayer hereby grants to EDNC, for the Construction
Easement Term, the exclusive, temporary easement on the Bayer
Baytown Plant, at the location more particularly described on
Exhibit D, for use as a staging and storage area (the
"Construction Laydown Area") during the construction of the
Leasehold Improvements on the Leased Premises. This easement is
designated the "Construction Staging Easement" on Exhibit D.
EDNC shall fence, at its own expense, all staging and storage
areas during any period in which the use of such areas is
required.
5.3 Construction Parking Easements
Bayer hereby grants to EDNC, for the Construction
Easement Term, the non-exclusive, temporary easement on the Bayer
Baytown Plant, at the locations more particularly described on
Exhibit D, for use as parking areas during the construction of
the Leasehold Improvements on the Leased Premises. These
easements are designated the "Construction Parking Easements" on
Exhibit D.
5.4 Post-New Route Date Access Easements
Bayer hereby grants to EDNC the non-exclusive,
temporary easements of ingress and egress over the Bayer Baytown
Plant, at the locations and for the types of traffic, more
particularly described on Exhibit D attached hereto, for the
purposes of transporting vehicles, equipment and personnel during
the initial design and subsequent construction of the Leasehold
Improvements on the Leased Premises. These easements, designated
"Post-New Route Date Access Easements" on Exhibit D, shall have a
term which commences on the New Route Date and ends on the
Commencement Date.
5.5 Post-Construction Access Easements
Bayer hereby grants to EDNC, for a term (the "Post-
Construction Easement Term") which begins on the Commencement
Date and ends on the date this Ground Lease expires or is
terminated, non-exclusive, temporary easements of ingress and
egress over the Bayer Baytown Plant, at the locations, and for
the types of traffic, more particularly described on Exhibit D
and designated "Post-Construction Access Easements" thereon, for
the purpose of providing EDNC reasonable access to the Leased
Premises.
5.6 Post-Construction Parking Easements
Bayer hereby grants to EDNC, for the Post-Construction
Easement Term, non-exclusive, temporary easements of ingress and
egress over the Bayer Baytown Plant, at the locations more
particularly described on Exhibit D and designated "Post-
Construction Parking Easements" thereon, for use as parking
areas.
5.7 Tap Easements
Bayer hereby grants to EDNC, for a term which commences
on the Effective Date and ends on the date this Ground Lease
expires or is terminated, non-exclusive, temporary easements to
tap into (in each case, at such points as shall be designated by
Bayer) and use the following systems:
A. Bayer's sanitary and storm sewer systems as
shown on Annex D-6 attached hereto;
B. Bayer's electrical ground-loop system, as
shown on Annex D-3 attached hereto;
C. Bayer's fire water system, as shown on Annex
D-4 attached hereto; and
D. Bayer's pipe bridge system, as shown on
Annex D-5 attached hereto to the extent
necessary to supply ammonia, chlorine,
caustic and the following utilities to the
EDNC Baytown Plant:
water;
nitrogen;
air;
steam;
electricity;
communication equipment; and
natural gas;
provided, however, that (1) the commencement of the term of such
easements to tap into and use such systems shall be delayed, in
the case of any system which is not available for use as of the
Effective Date, until such time as it becomes available for use
and (2) EDNC shall (and is hereby granted the easements necessary
to) maintain, repair and replace all such pipes, wires, valves
and related equipment and facilities installed by EDNC (the "Tap
Facilities") to accomplish and operate such Tap Facilities from
the point where such Tap Facilities enter Bayer's system back to
the point where such Tap Facilities leave the EDNC Baytown Plant.
5.8 Additional Easements Related to Leasehold Repairs
and Improvements
Bayer shall grant any other non-exclusive easements
over property Bayer then owns, including, but not limited to,
(A) construction and staging easements reasonably requested by
EDNC and reasonably necessary for making repairs to the Leasehold
Improvements or designing and constructing additional Leasehold
Improvements and (B) such other easements which, in the
reasonable judgment of EDNC, are or may be necessary in order for
EDNC to (1) perform its obligations under this Ground Lease and
the Services Agreement and/or (2) operate the EDNC Baytown Plant.
Bayer shall have the sole right to designate the locations and
terms of any further easements granted under this Section 5.8;
provided, however, that Bayer shall act reasonably and in good
faith consult with EDNC prior to designating the locations of any
such additional easements.
5.9 Bayer's Right to Use and Grant Other Easements
Bayer retains, reserves and shall continue to use and
to grant to other parties the right to use all non-exclusive
Easements and/or the areas affected thereby for any and all
purposes, provided, however, that Bayer shall not materially
interfere with EDNC's use of the Easements or grant to other
parties the right to do so.
5.10 Granting of Alternative Easements
In the event the Easements or any part thereof
interfere substantially with the use and occupation of the Bayer
Baytown Plant or the operation of any of the improvements located
at such Plant, or in the event it becomes necessary or desirable
for Bayer or its successors or assigns to use the property that
is subject to the Easements or any portion thereof for the
construction, erection, transportation or installation of
additional machinery, equipment, buildings or other facilities,
then EDNC, upon receipt of written notice from Bayer, agrees to
abandon, release and discharge the Easements conveyed herein,
provided, however, that prior to or upon any such abandonment,
release and discharge Bayer (1) promptly conveys to EDNC
alternative easements that will provide EDNC with substantially
equivalent rights under the same terms and conditions set forth
herein and (2) promptly reimburses EDNC (either by means of
direct reimbursement or by means of the Additional Capital
Investment mechanism of Section 3.9 of the Project and Supply
Agreement) for all reasonable costs incurred in relocating to and
improving such alternative easements.
5.11 General
Except as expressly stated herein, the Easements
granted by Bayer under or pursuant to this Section 5 are non-
exclusive and are expressly subject to all other easements,
leases, rights and encumbrances, whether or not recorded, at or
on the Bayer Real Property and are granted without any warranty
of title, express or implied, by Bayer, provided, however, that
Bayer warrants to EDNC the right to use the Easements (other than
those granted under Section 5.8 hereof) consistent with their
terms. Unless terminated sooner pursuant to this Section 5,
EDNC's rights in such Easements shall terminate upon the earlier
of the expiration of the Term or the Termination Date. EDNC
shall exercise reasonable efforts to use such Easements in such a
manner so as to minimize disruption to the operations of Bayer,
its tenants and their respective successors and assigns at the
Bayer Baytown Plant.
5.12 Rules and Regulations
Use of all Easements granted by Bayer under or pursuant
to this Section 5 shall be governed by reasonable rules and
regulations promulgated by Bayer from time to time, which rules
and regulations shall be uniformly applied and consistently
enforced.
5.13 Temporary Interruptions
If in the reasonable judgment of Bayer, it becomes
necessary or advisable to relocate any parking or access
easements on a temporary basis (i.e., for not more than six (6)
months), Bayer may do so by giving EDNC at least thirty (30) days
prior written notice thereof, provided, however, that Bayer shall
in good faith consult with EDNC prior to designating such
temporary relocations. If in the reasonable judgment of Bayer,
it becomes necessary or advisable to relocate any access
easements because of any emergency, Bayer may do so immediately
without giving any formal notice to EDNC.
5.14 Reserved Easements
Notwithstanding anything in this Ground Lease or any of
the other Project Agreements, Bayer hereby reserves, for the
benefit of all real property (other than the Leased Premises)
which Bayer presently owns in Baytown, Texas, including without
limitation, the Bayer Baytown Plant, and each portion thereof
(collectively the "Benefitted Property"), the following non-
exclusive, perpetual easements (collectively, the "Reserved
Easements"): (A) to use, maintain, repair and replace those roads
which are shown as the "Cross-Block Roads" on Annex D-6, attached
hereto and (B) to locate, construct, use, operate, maintain,
repair and replace and gain access to and from the following
matters on, over, under and through the Leased Premises:
(1) The electrical ground loop system, as shown
on Annex D-3 attached hereto, including all conduit, wires and
other equipment and facilities necessary therefor or related
thereto;
(2) The fire water system, as shown on Annex D-4
attached hereto, including all valves, pipes and other equipment
and facilities necessary therefor or related thereto;
(3) The pipe bridges and supports therefor, as
shown on Annex D-5 attached hereto, together with an easement to
interface and tie into the pipes of EDNC to the extent necessary
to operate the systems for which such pipes were designed;
(4) The electric power cable which connects the
transformer to the electric substation, as shown on Annex D-5
attached hereto; and
(5) All other systems, wires, conduits, pipes,
valves, supports and other equipment and facilities necessary
therefor or related thereto which, in the reasonable judgment of
Bayer, are or may be necessary in order for Bayer to (i) perform
its obligations under this Ground Lease, the Services Agreement
or any of the other Project Agreements and/or (ii) utilize any
utility or system which, at any time hereafter, serves not only
the Leased Premises, but also any other area of the Bayer Baytown
Plant as well.
5.15 Bayer's Right to Reserve Other Easements
Bayer retains and reserves the right, from time to
time, to reserve additional easements for the benefit of the
Bayer Baytown Plant on, over, under and through the Leased
Premises.
5.16 No Material Interference
Bayer agrees that, in the exercise of its rights under
Sections 5.10 through and including 5.15 hereof, it shall not act
in a manner which would materially interfere with the operations
of EDNC and its permitted successors and assigns at the Leased
Premises.
5.17 Recordation of New or Alternative Easements
Any new or alternative easement that is created
pursuant to the provisions of Section 5.8, 5.10 or 5.15 hereof
shall expressly terminate any easement that it replaces, shall be
in recordable form and shall be recorded by Bayer with the County
Clerk of Chambers County, Texas.
SECTION 6: COVENANTS
6.1 Quiet Enjoyment
Subject to Permitted Exceptions and to the performance
by EDNC of its obligations under this Ground Lease, EDNC shall
peaceably and quietly hold and enjoy the Leased Premises for the
Term, without hindrance from Bayer, or persons or entities
claiming by, through or under Bayer.
6.2 Estoppel Certificates
Upon not less than fifteen (15) days prior written
request by a party hereto, the other party shall execute,
acknowledge and deliver to the requesting party a statement in
writing certifying that this Ground Lease is unmodified and in
full force and effect and that the responding party has no
defenses, offsets or counterclaims against its obligations to
perform its covenants under this Ground Lease (or, if there have
been any modifications, that this Ground Lease is in full force
and effect as modified and stating the modifications and, if
there are any defenses, offsets or counterclaims, setting them
forth in reasonable detail). Any such statement delivered
pursuant to this Section 6.2 may be relied upon by any
prospective purchaser or mortgagee of Bayer's fee interest in the
Leased Premises or any prospective assignee of such mortgage.
6.3 Compliance with Environmental, Health and Safety
Laws
Bayer covenants and warrants that:
(1) other than may be indicated in the Existing
Environmental Assessment, it has not filed and has not been
required to file any notice under any Environmental, Health and
Safety Law indicating past or present treatment, storage or
disposal of any Waste or reporting a Spill or release of any
Waste into the environment on or from the Leased Premises;
(2) other than may be indicated in the Existing
Environmental Assessment, there is no soil contamination in, on
or under the Leased Premises and no Waste has been generated,
treated, stored or disposed of or placed in violation of any
Environmental, Health and Safety Law on any part of the Leased
Premises;
(3) there are no underground tanks located on or
under the Leased Premises;
(4) other than may be indicated in the Existing
Environmental Assessment, there is no contaminated groundwater on
or under the Leased Premises; and
(5) in addition to the other indemnifications
contained herein or in the other Project Agreements, Bayer agrees
to indemnify and hold harmless EDNC from and against any and all
losses, damages, claims, costs, liabilities and expenses
(including reasonable attorney's fees) arising from the soil or
ground water contamination identified in the Existing
Environmental Assessment or that may be identified in the Current
Environmental Assessment. Without prior written consent of EDNC,
which consent shall not be unreasonably withheld, Bayer shall not
voluntarily undertake any remediation plans or other corrective
action on the Leased Premises that would unreasonably interfere
with the operations of EDNC on the Leased Premises as
contemplated by the Project Agreements.
6.4 Waiver of Landlord's Lien
During the term of the Leveraged Lease, Bayer hereby
waives any Landlord's Lien that Bayer has or hereafter acquires
to the lien and security interests that will be granted by EDNC
or the Sublessee with respect to the Leasehold Improvements in
order to secure EDNC's or the Sublessee's obligations under the
Trust Indenture and Security Agreement and the Construction Loan
and Security Agreement.
SECTION 7: LIENS
7.1 No Liens
Except for those liens which are expressly permitted by
the Ground Lease Sublease, EDNC shall not suffer or permit to
exist any liens (including consensual liens and mechanics' and
materialmen's liens) to be filed against Bayer's fee interest or
EDNC's leasehold interest in the Leased Premises nor against any
Leasehold Improvements on the Leased Premises.
7.2 Removal of Liens
If any liens arising from work performed for, or
material provided to, EDNC or any of its contractors or agents,
or action or inaction of EDNC or any of its contractors or
agents, shall be recorded against the leasehold interest in the
Leased Premises or any Leasehold Improvements thereon, then EDNC
shall cause the same to be removed promptly or, in the
alternative, if EDNC in good faith desires to contest the same,
it may do so, but in such case EDNC shall indemnify and hold
Bayer harmless from all liability for damages occasioned thereby
and shall, in the event of a judgment or foreclosure on said
lien, cause the same to be discharged and removed prior to the
execution of such judgment.
SECTION 8: TAXES
8.1 Industrial District Payments and Ad Valorem Taxes
and Assessments
(1) During the Term, EDNC shall be responsible
for and pay all Industrial District Payments and ad valorem taxes
and assessments, both general and special, levied on the Leased
Premises or the Leasehold Improvements in accordance with this
Section 8.1.
(2) EDNC will either (i) with the assistance of
Bayer, execute an agreement with the City of Baytown, Texas (the
"City") regarding additional payments to the City as a result of
the construction of the Leasehold Improvements or (ii) timely pay
to Bayer, upon Bayer's notification to EDNC, any Industrial
District Payment, ad valorem tax or assessment levied on the
Leased Premises or the Leasehold Improvements.
(3) If EDNC and the City execute an agreement
pursuant to Section 8.1(2) hereunder, such execution shall not
relieve EDNC of liability for any taxes levied on the Leased
Premises as a consequence of the Leasehold Improvements between
the Effective Date and the execution of such agreement.
(4) If EDNC in good faith either:
(A) disputes the amount of such Industrial
District Payment or ad valorem tax or assessment attributable to
the value of the Leased Premises and the Leasehold Improvements;
or
(B) desires to contest any Industrial
District Payment or ad valorem tax or assessment on the Leased
Premises and the Leasehold Improvements, then EDNC shall pay to
Bayer in accordance with Section 8.1(1) any amount EDNC does not
dispute and shall cause any liability arising from such failure
to pay to be discharged and removed before the enforcement of any
lien related to such liability.
8.2 Other Taxes
In addition to the above taxes, EDNC shall also pay all
federal, state or local sales, excise or use taxes levied against
the activities on the Leased Premises, or against the Leasehold
Improvements. EDNC shall also submit a list of the personal
property leased by EDNC and maintained on the Leased Premises to
the appropriate official of Chambers County and shall pay all
taxes applicable thereto. At the request of Bayer, EDNC shall
provide Bayer with evidence of such payments.
8.3 Information
EDNC agrees to allow any appropriate taxing authority
reasonable access to the Leased Premises and the Leasehold
Improvements upon reasonable notice to EDNC and subject to
compliance with Bayer and EDNC health, safety and welfare
policies. EDNC also agrees to furnish such documentary
information as reasonably required by such authority.
SECTION 9: INDEMNIFICATION
The parties shall have the indemnification rights set
forth in Section 18 of the Project and Supply Agreement.
SECTION 10: TERMINATION
This Ground Lease:
(1) may be terminated in accordance with the
provisions of Sections 2, 11 or 13 hereof;
(2) shall be terminated upon the termination of
the Project and Supply Agreement in accordance with
Sections 17 and 21 of the Project and Supply Agreement.
SECTION 11: CASUALTY AND CONDEMNATION
11.1 Casualty
(1) In the event of damage or destruction to the
Leased Premises or the Leasehold Improvements, EDNC agrees to
restore the Leasehold Improvements to a condition consistent with
the design and production capacity designated in the Project and
Supply Agreement for the initial construction. In the event the
Delivery Systems or other assets of Bayer reasonably related to
the Nitric Acid operations at the Bayer Baytown Plant have also
been damaged to an extent that renders such assets unsuitable for
their intended use, EDNC shall have no obligation to restore the
EDNC Baytown Plant until such Bayer assets are restored by Bayer
or EDNC receives adequate assurances from Bayer that such Bayer
assets shall be restored in a timely manner.
(2) Upon such damage or destruction to the
Leasehold Improvements described in Section 11.1(1) above and
during any period of restoration, the obligations of the parties
shall abate under the Project Agreements pending restoration.
11.2 Condemnation
(1) Interests of Parties
If the Leased Premises or any part thereof shall
be taken for public or quasi-public purposes by condemnation as a
result of any action or proceeding in eminent domain, or shall be
transferred in lieu of condemnation to any authority entitled to
exercise the power of eminent domain, then the interests of Bayer
and EDNC in the award of consideration for such transfer and the
effect of the taking or transfer on this Ground Lease shall be as
provided by this Section 11.2.
(2) Total Taking
In the event the entire Leased Premises is taken
or so transferred, this Ground Lease and all of the right, title
and interest thereunder shall terminate on the date title to such
land so taken or transferred vests in the condemning authority.
The proceeds of such condemnation shall first be distributed to
EDNC (or, during the term of the Operative Agreements, the owner
of the Leasehold Improvements) in an amount equal to (i) the
Stipulated Loss Value (as such term is defined in the Operative
Agreements), if the Operative Agreements are then in effect, or
(ii) the EDNC Default Termination Fee, if the Operative
Agreements are no longer in effect. All excess, if any, shall be
distributed to Bayer.
(3) Partial Taking - Termination
In the event of the taking or transfer of only a
part of the Leased Premises leaving the remainder of the Leased
Premises in such location, or in such form, shape or reduced size
as to be not effectively and practicably usable in the reasonable
opinion of EDNC for the operation of the EDNC Baytown Plant, this
Ground Lease and all right, title, and interest thereunder shall
terminate on the date title to the land or the portion thereof so
taken or transferred vests in the condemning authority; provided,
however, that the proceeds from such partial taking shall first
be distributed to EDNC (or, during the term of the Operative
Agreements, the owner of the Leasehold Improvements) up to an
amount equal to (i) the Stipulated Loss Value (as such term is
defined in the Operative Agreements), if the Operative Agreements
are then in effect, or (ii) the EDNC Default Termination Fee, if
the Operative Agreements are no longer in effect. All excess, if
any, shall be distributed to Bayer.
(4) Partial Taking - Continuation
In the event of such taking or transfer of only a
part of the Leased Premises leaving the remainder of the Leased
Premises in such location and in such form, shape, or size as to
be used effectively and practicably in the opinion of EDNC for
the operation of the EDNC Baytown Plant, this Ground Lease shall
terminate as to the portion of the Leased Premises so taken or
transferred as of the date title to such portion vests in the
condemning authority, but shall continue in full force and effect
as to the portion of the Leased Premises not so taken or
transferred. The proceeds of such partial taking shall first be
distributed to EDNC (or, during the term of the Operative
Agreements, the owner of the Leasehold Improvements) in an amount
sufficient to compensate EDNC for the then-existing market value
of the Leasehold Improvements taken and any relocation expenses
for Leasehold Improvements not taken. All excess, if any, shall
be distributed to Bayer.
(5) Voluntary Conveyance
A voluntary conveyance by Bayer to a public
utility, agency or authority under threat of a taking under the
power of eminent domain in lieu of formal proceedings shall be
deemed a taking within the meaning of this Section 11.2.
SECTION 12: REMEDIES
12.1 Remedies
If either party fails to comply with any term or
condition or fulfill any obligation imposed under this Ground
Lease, then the other party may exercise any one of the remedies
afforded such party under Section 16 of the Project and Supply
Agreement.
12.2 Attorneys' Fees
If a suit or action is instituted in connection with
any dispute arising out of this Ground Lease, then the prevailing
party is entitled to recover reasonable costs and expenses,
including reasonable attorneys' fees and other costs incurred in
connection with enforcing this Ground Lease.
SECTION 13: TERMINATION RIGHTS
In addition to those termination rights which are
expressly set forth in this Ground Lease, the obligations, rights
and interests of the parties under this Ground Lease and the
Project Agreements are subject to (i) termination, at the option
of either party, or automatic termination, upon the occurrence of
certain Events of Default and other events as more specifically
described in Section 17 of the Project and Supply Agreement; or
(ii) certain rights of Bayer to pay a specified sum to EDNC and
to terminate this Ground Lease if EDNC receives an offer to sell
any securities of EDNC or any material portion of the EDNC
Baytown Plant to a third party, upon the occurrence of a Change
of Control Event, as more specifically described in Section 21 of
the Project and Supply Agreement. The above-described provisions
of the Project and Supply Agreement are incorporated herein by
reference as if fully set forth herein.
SECTION 14: UTILITIES AND SERVICES
Utilities and Services will be provided to the Leased
Premises in accordance with the terms and conditions of the
Services Agreement. The Services Agreement, a copy of which is
attached hereto as Exhibit F, is incorporated herein and made a
part hereof. In the event of any inconsistency between the
Services Agreement and this Ground Lease, the provisions of this
Ground Lease shall control.
SECTION 15: MISCELLANEOUS
15.1 Notices
Any notice, communication or statement required or
permitted to be given hereunder shall be in writing and deemed to
have been sufficiently given when delivered in person, or on the
second Business Day following the date of transmission by U.S.
certified or registered mail, return receipt requested, or on the
Business Day following the date of transmission by overnight
courier, to the address of the respective party below:
Bayer Corporation
100 Bayer Road
Pittsburgh, PA 15205-9741
Attn: Controller, Polymers Division
Attn: Assistant General Counsel,
Polymers Division
El Dorado Nitrogen Company
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
and to:
El Dorado Chemical Company
655 Craig Road, Suite 322
St. Louis, Missouri 63141
Attn: Vice President, Industrial Chemicals
LSB Industries, Inc.
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: General Counsel
Either party may, by notice given as aforesaid, change its
address or the party that receives its notice for all subsequent
notices.
15.2 Applicable Law; Submission to Jurisdiction;
Consent to Service of Process
The place of performance of this Ground Lease is the
State of Texas and the internal laws of said State, without
reference to its conflicts of laws provisions, shall govern the
rights of the parties hereto. The parties hereby irrevocably
submit to the jurisdiction of the United States District Court
for the Southern District of Texas and consent to service of
process as more fully set forth in Section 22 of the Project and
Supply Agreement.
15.3 Assignment
EDNC shall not assign or encumber its respective rights
and obligations under this Ground Lease and shall not sublease
the Leased Premises, in whole or in part, to any other party
without first obtaining the express written consent of Bayer,
which consent may be granted or withheld by Bayer in its sole
discretion, provided, however, that EDNC shall be permitted
(i) to sublease the Leased Premises and to encumber the Ground
Lease Sublease but, in each case, only to the extent contemplated
by the Operative Agreements, and (ii) to collaterally assign its
rights under this Ground Lease to the Owner Trustee, the
Construction Loan Agent and/or the Indenture Trustee under the
Operative Agreements. The Ground Lease Sublease must provide
that, except as expressly provided in this Ground Lease, it is
subject and subordinate to the terms of this Ground Lease.
15.4 Invalidity of Particular Provision
If any term or provision of this Ground Lease or the
application thereof to any person or circumstance shall be
invalid or unenforceable to any extent, the remainder of this
Ground Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Ground Lease shall be valid and be
enforced to the fullest extent permitted by law.
15.5 Construction
The singular form of any word used herein shall include
the plural, and vice versa. The headings or titles used herein
are for convenience only. They do not constitute a part of this
Ground Lease and shall not affect the meaning, construction or
effect of the provisions hereof and do not constitute a part of
this Ground Lease. In the event of any conflict between the
provisions hereof and the provisions of the Project and Supply
Agreement, the provisions of the Project and Supply Agreement
shall apply.
15.6 Relationship of Parties
Nothing contained in or done pursuant to this Ground
Lease or any of the Project Agreements shall be deemed or
construed by the parties hereto, or by any third party, to create
the relationship of principal and agent, partnership, joint
venture or any association whatsoever between Bayer and EDNC. It
is expressly understood and agreed that no provisions contained
in this Ground Lease, nor any acts of the parties hereto, shall
be deemed to create any relationship between Bayer and EDNC other
than the relationship of landlord and tenant.
15.7 Entire Agreement
This Ground Lease and the Project Agreements, together
with all of the exhibits and schedules attached hereto and
thereto, contain the entire understanding of the parties and
supersede any prior understanding and agreements between them
respecting the subject matter hereof and thereof. There are no
agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject
matter of this Ground Lease and the other Project Agreements that
are not set forth or expressly referred to herein.
15.8 Modification
This Ground Lease shall not be modified or amended,
except by written instrument executed by the duly authorized
officers of the parties hereto.
15.9 Recordation of Ground Lease and Termination
Notices
The parties agree that Bayer shall cause this Ground
Lease to be recorded in the office of the County Clerk of
Chambers County, Texas. The parties also agree to execute, and
Bayer shall record with such office, any documents which either
party reasonably requests from the other in order to reflect in
the public records the expiration or termination of this Ground
Lease and the expiration or termination of any of the Easements.
15.10 Dispute Resolution
If any dispute arises concerning or related to this
Ground Lease, the parties shall resolve such dispute in
accordance with the dispute resolution provisions set forth in
Section 22 of the Project and Supply Agreement.
15.11 Counterparts
This Ground Lease may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which taken together constitute one instrument.
15.12 Waiver
No waiver by Bayer or EDNC of any default or breach of
any covenant, condition or stipulation herein shall be treated as
a waiver of any subsequent default or breach of the same or any
other covenant, condition or stipulation hereof.
15.13 Amendment of Operative Agreements
EDNC shall comply with each of its obligations under
each of the Operative Agreements and shall not amend any of the
Operative Agreements if such amendment materially adversely
affects Bayer without first obtaining the prior written consent
of Bayer, which consent Bayer may not unreasonably withhold.
15.14 No Merger
The rights and estate created by this Ground Lease
shall not, under any circumstances, be deemed to have merged into
any other estate or interest now owned or hereafter acquired by
Bayer (or any successor or assign of Bayer) unless Bayer shall
have consented to such merger in writing.
15.15 Binding Effect
This Ground Lease shall be binding upon, and inure to
the benefit of, EDNC and Bayer and their respective permitted
successors and assigns. Notwithstanding the foregoing, the
rights of Bayer under this Ground Lease shall, to the extent that
they relate to (or inure to the benefit of) any of the Benefitted
Property (except the EDNC Baytown Plant), shall not be deemed to
have been assigned to any successor or assignee of Bayer unless,
and only to the extent that, Bayer (or its designated "Successor
or Assignee") designates such successor or assign as "Bayer's
Successor or Assignee" in a document that is executed by Bayer
(or any such Bayer's Successor or Assignee) and recorded in the
office of the Clerk of Chambers County, Texas.
IN WITNESS WHEREOF, the parties hereto have executed
this Ground Lease effective as of the date first above written.
EL DORADO NITROGEN COMPANY BAYER CORPORATION
By: ______________________ By:__________________________
Name:_____________________ Name:________________________
Title:____________________ Title: ______________________
STATE of
COUNTY of
This instrument was acknowledged before me on
_____________ __, 1997, by ____________________________, the
______________________ of El Dorado Nitrogen Company, an Oklahoma
corporation, on behalf of said corporation.
[SEAL OF NOTARY] ____________________________
Notary Public in and for the
State of __________________
My Commission Expires:
_______________________________ _____________________________
Printed Name of Notary
STATE of___________________
COUNTY of__________________
This instrument was acknowledged before me on
_____________ __, 1997, by ____________________, the
_________________________________ of Bayer Corporation, an
Indiana corporation, on behalf of said corporation.
[SEAL OF NOTARY] ______________________________
Notary Public in and for the
State of______________________
My Commission Expires:
_______________________________ _______________________________
Printed Name of Notary
EXHIBIT LIST
A Metes and Bounds Description of the Leased Premises
B Permitted Exceptions
C Design Criteria
D Easements
E Industrial District Agreement
F Services Agreement
EXHIBIT A
METES AND BOUNDS DESCRIPTION OF THE LEASED PREMISES
See attached copy.
EXHIBIT B
PERMITTED EXCEPTIONS
The lien of real estate taxes and assessments, both
general and special, those matters which are set forth in items 2
through and including 13 of Schedule B to the title commitment
issued by Chicago Title Insurance Company (No. 44-901-80-201789-
B) on August 26, 1996, effective May 24, 1996, and all matters
shown on the survey prepared by Busch, Hutchison & Associates,
Inc. (Job No. 96-1074), dated June 11, 1996 as revised through
August 1, 1996.
EXHIBIT C
GENERAL BAYTOWN SITE DESIGN DATA
Plants on the Bayer Baytown site are to be designed and
constructed according to the then-current guidelines as outlined
by Bayer design requirements in the areas of:
1. Battery Limits/Interface
. Piping -- preventing backflow and cross-contamination
of chemicals/utilities, for example.
. Instrument/electrical
. Civil, structural, architectural
. Communications - phones, PA, alarms, radios, hot lines,
data links
. Painting - color coding/identification (see attached
Table of Color Codes)
. Noise level of 80 dBA weighted over 8 hours
. As a minimum, the following national codes and
standards - NEC, NFPA, NEMA, ACI, ASCE, AISC, ASME,
ANSI, API
2. Then-Current Long Range Site Development Plan - location of:
. Railroads
. Roads
. Piperacks
. Firewater piping
. Sanitary sewers
. Power cabling
Improvements will be handled consistent with the then-
current Long Range Site Development Plan.
3. Overall Site Architectural Aesthetics
. Buildings, structures, and grounds similar or equal in
appearance to surrounding/adjacent Bayer plant.
DESIGN/PROCESS SAFETY
Plants on the Bayer Baytown site are to be operated in accordance
with principles of OSHA 1910.119 (Process Safety Management),
Risk Management Program, and Responsible Care.
Certain Bayer procedures are recommended to be incorporated into
the internal operating procedures of companies located on the
Bayer sites and certain are required (those marked with an
asterisk). At the orientation, Bayer will provide its current
procedures (all of which are subject to modification upon
reasonable prior notice) including, but not limited to, the
following:
. Control building air intake analyzers
. Breathing air systems
. Firewater/sprinkler systems
. Phosgene badges and breathing air
. Evacuation
. Alarms
. X-rays of welding
. Respiratory protection
. Security
. Emergency
ENVIRONMENTAL
. Concrete pads and sumps shall be designed to prevent impact
on ground water and Bayer environmental control systems
related to process, storm, or wash waters.
. Tank car or truck loading/unloading -- all operations to be
contained; splash loading of chemicals will not be
permitted.
. Visible emissions, high noise levels, or objectionable odors
that detract from overall community impression of Bayer and
site companies will not be permitted.
LONG-TERM APPEARANCE
. Plants on the Bayer Baytown site are to be maintained
similar in appearance to surrounding/adjacent Bayer plant.
TABLE OF COLOR CODES
UTILITY PIPING COLOR FEDERAL NUMBER
Plant Air Med. Gray 16314
Breathing White 17925
Inst. Air Med. Gray 16314
Nitrogen Lt. Blue 35250
Oxygen White 17925
Steam HP Black 17038
Steam LP Black 17038
Steam Utl. Black 17038
Hydrogen Yellow 13655
Tower Water Med. Gray 16314
Chill Water Med. Gray 16314
Plant Water Med. Gray 16314
Potable Water Med. Gray 16314
Hot Water Med. Gray 16314
Fire Water Red 11350
Brine Med. Gray 16314
Ammonia Dr. Blue 15065
Nat. Gas Yellow 13655
Fuel Oil Yellow 13655
PROCESS PIPING COLOR FEDERAL NUMBER
Phosgene L. Orange 12473
Phosgene Gas Orange 12473
Chlorine Orange 12473
Nitric Acid Dr. Blue 15065
Sulfuric Dr. Blue 15065
HCL Dr. Blue 15065
CO2 Yellow 13655
Freon Yellow 13655
Safety Shower/ Day Glo 38901
Eyewash Green 14491
Solvents Yellow 13655
Aniline Dr. Blue 15065
Tanks/Vessels Med. Green 14491
Hand Rails Black 17038
All hand rails/ladder cages, coupling guards, paint Yellow/Black.
Note: All colors are "Bayer Approved" to match existing color
scheme.
EXHIBIT D
I. Construction Access Easements.
(1) Access to and from the Construction Laydown
Area for those EDNC Personnel (except EDNC non-managerial
employees) and those construction managers (which, including
their administrative personnel, are herein referred to as the
"Construction Managers") who are driving Company Cars (as
hereinafter defined) shall be accomplished solely by way of the
route which includes Highway FM 565, West Bay Road and 12th
Avenue, which roads, together with all other roads referred to
herein, are shown on Annexes D-1 (the "Construction Easements
Drawing") and D-2 (the "Post-Construction Easements Drawing").
The term "Company Car" means a car, van, or truck that is owned
or rented by EDNC or any of its construction contractors and has
been authorized for entry by Bayer's security director for
purposes of this Ground Lease;
(2) Access to and from the Construction Parking
Lots (as hereinafter defined) for all construction personnel
(other than those Construction Managers who are driving Company
Cars) shall be accomplished solely by way of the route which
includes Highway FM 1405, 9th Avenue, "A" Street and 10th Avenue;
(3) Access to and from the Construction Parking
Lots (as hereinafter defined) to and from the Construction
Laydown Area (as hereinafter defined) by all construction
personnel (other than those Construction Managers who are driving
Company Cars) shall be accomplished solely by means of a bus or
van (in either case, to be provided by EDNC, at its sole expense
(the "Shuttle Bus"), provided that EDNC may permit its contractor
to provide such Shuttle Bus) using the route which includes "C"
Street and 11th or 12th Avenue;
(4) Access to and from Parking Lot A (as
hereinafter defined) for all non-managerial EDNC employees and
all other EDNC Personnel who are not driving Company Cars shall
be accomplished solely by means of the Applicable Route. The
term "Applicable Route" means the route which Bayer designates
from time to time by giving notice to EDNC, which route shall
either include (a) West Bay Road, 10th Avenue and "BI" Street, or
(b) if "C" Street is constructed, FM 565, "C" Street, 10th Avenue
and "BI" Street. Until Bayer notifies EDNC to the contrary, the
Applicable Route shall be the one which includes West Bay Road,
10th Avenue and "BI" Street;
(5) Access to and from Parking Lot A and the
Construction Laydown Area by EDNC non-managerial employees and
all other EDNC Personnel who are not driving Company Cars shall
be accomplished solely by means of a bus or van (in either case,
to be provided by EDNC at its sole expense), using the route
which includes "C" Street and 11th or 12th Avenue; and
(6) Access to and from the Construction Laydown
Area for any construction deliveries shall be as follows: any
construction deliveries which involve materials or equipment that
arrive by way of the Cedar Bayou shall be unloaded at the point
designated as the "Beach Area" on the Construction Easements
Drawing, and then delivered to the Construction Laydown Area
solely by means of the route which includes West Bay Road and
12th Avenue; all other deliveries to and from the Construction
Laydown Area shall be accomplished solely by means of the route
which includes Highway FM 565, West Bay Road and 12th Avenue;
provided, however, that when the absorber column is delivered,
the parties will cooperate with each other in order to determine
an alternate route for such column, if necessary.
II. Construction Staging Easements. The Construction
Laydown Area shall be that portion of Block 11 C which is
designated as the "Construction Laydown Area" on the Construction
Easements Drawing. This easement includes the right to locate
one (1) or more construction trailers in the southwest corner of
the Construction Laydown Area.
III. Construction Parking Easements.
(1) Those EDNC Personnel (except EDNC
non-managerial employees) and those Construction Managers who are
driving Company Cars shall park in the Construction Laydown Area;
(2) All construction personnel (other than those
Construction Managers who are driving Company Cars) and all
maintenance support personnel shall park in the areas (the
"Construction Parking Lots") shown as Block 9 B1 and Block 9 B,
as shown on the Construction Easements Drawing;
(3) All EDNC non-managerial employees and all
other EDNC Personnel who are not driving Company Cars shall park
in Parking Lot A;
(4) EDNC shall park the Shuttle Bus in the
Construction Laydown Area; and
(5) For purposes of subparagraph (2) hereof, such
construction personnel may use up to a maximum of one hundred
sixty-five (165) non-designated parking spaces in Block 9 B1 and
Block 9 B. For purposes of subparagraph (3) hereof, such EDNC
Personnel may use up to a maximum of twenty (20) non-designated
parking spaces in Parking Lot A.
IV. Post-New Route Date Access Easements.
(1) Access to and from the Construction Laydown
Area for those EDNC Personnel (except EDNC non-managerial
employees) and those Construction Managers who are driving
Company Cars shall be accomplished solely by way of the route
which includes Highway FM 565, West Bay Road, 10th Avenue,
"BI" Street, the ("Construction and Visitor's Gate") as shown on
the Post-Construction Easement Drawing) and 13th Avenue;
(2) Access to and from the Construction Parking
Lots for all construction personnel (other than the Construction
Managers who are driving Company Cars) shall be accomplished
solely by way of the route which includes Highway FM 1405, 9th
Avenue, "A" Street and 10th Avenue;
(3) Access to and from the Construction Parking
Lots to and from the Construction Laydown Area by construction
personnel (other than Construction Managers who are driving
Company Cars) shall be accomplished solely by means of a bus or
van (in either case, to be provided by EDNC, at its sole expense)
using the route which includes "BI" Street, the Construction and
Visitor's Gate and 13th Avenue;
(4) Access to and from Parking Lot A (as
hereinafter defined) for all non-managerial EDNC employees and
all other EDNC Personnel who are not driving Company Cars shall
be accomplished solely by means of the Applicable Route;
(5) Access to and from Parking Lot A and the
Leased Premises by all non-managerial EDNC employees and all
other EDNC Personnel who are not driving Company Cars shall be
accomplished solely by means of walking, using the route which
includes "BI" Street, the Construction and Visitor's Gate and
13th Avenue. All EDNC Personnel parking in Parking Lot A shall
log in and out with their Bayer-issued identification badges at
the Bayer employee gate;
(6) Access to and from the Construction Laydown
Area for any construction deliveries shall be as follows: any
construction deliveries which involve materials and equipment
that arrive by way of the Cedar Bayou shall be unloaded at the
point designated as the "Beach Area" on the Construction
Easements Drawing and then delivered to the Construction Laydown
Area solely by means of the route which includes West Bay Road
and 12th Avenue. All other deliveries to and from the
Construction Laydown Area shall be accomplished solely by means
of the route which includes West Bay Road, 10th Avenue, "BI"
Street, the Construction and Visitor's Gate, 13th Avenue and
those Block 12 access Roads which are shown on Annex D-6 attached
hereto;
(7) If any deliveries are being made to the
Construction Laydown Area from the Beach Area at a time when the
Perimeter Fence has been constructed, EDNC shall have the right,
at its expense, to dismantle such fence and secure the area (in
accordance with Bayer's security procedures, as reasonably
established by Bayer's director of security) for such time and to
such extent as may reasonably be necessary in order to complete
such deliveries; provided, however that (a) EDNC shall, at its
expense, promptly restore such fence to its previous condition,
and (b) the time during which such circumstances may exist shall
never exceed forty-eight (48) hours on any particular occasion;
(8) Access to and from the Leased Premises for
transporting all products, raw materials and wastes and making
other deliveries (other than those which relate to any
construction activities) to and from the Leased Premises shall be
accomplished solely by way of the route which, in the case of
inbound traffic, includes Highway FM 1405, Mobay Road, West Bay
Road, Bayer's delivery gate at 17th Avenue, "D" Street, 13th
Avenue, Block 12 Access Roads, and 12th Avenue, and, in the case
of outbound traffic, includes Block 12 Access Roads, 13th Avenue,
"D" Street, 17th Avenue, Bayer's delivery gate, West Bay Road,
Mobay Road and Highway FM 1405. All deliveries made pursuant to
this subsection (8) shall include checking in and out at Bayer's
truck delivery gate (the "Delivery Gate") and, if appropriate,
weighing in and out at Bayer's truck scale (the "Truck Scale"),
in each case, as shown on the Post-Construction Easements
Drawing;
(9) Access to and from Parking Lot B (as
hereinafter defined) by all maintenance support personnel shall
be accomplished solely by way of the Applicable Route which
includes Highway FM 565, West Bay Road, 10th Avenue and "BI"
Street; and
(10) Access to and from Parking Lot B and the
Leased Premises by all maintenance personnel who are entitled to
park in such parking lot shall be accomplished solely by walking,
using the same routes and procedures which are described in
subsection V(3) of this Exhibit D, provided, however, that any
maintenance personnel who are driving vehicles which are needed
to support the maintenance activity that is to be performed at
the Leased Premises, may proceed directly to the Leased Premises
(after logging in) solely by means of the route which includes
West Bay Road, 10th Avenue, "BI" Street, the Construction and
Visitor's Gate and 13th Avenue.
V. Post-Construction Access Easements.
(1) Access to and from the Leased Premises for
those EDNC Personnel (except EDNC non-managerial employees) who
are driving Company Cars shall be accomplished solely by means of
the route which includes Highway FM 565, West Bay Road, 10th
Avenue, the Construction and Visitor's Gate, "BI" Street and 13th
Avenue;
(2) Access to and from Parking Lot A for all EDNC
non-managerial employees and all other EDNC Personnel who are not
driving Company Cars shall be accomplished solely by way of the
route which includes Highway FM 1405, Highway FM 565, West Bay
Road, 10th Avenue and "BI" Street;
(3) Access to and from Parking Lot A and the
Leased Premises by all EDNC Personnel who are entitled to park in
such parking lot shall be accomplished solely by means of
walking, using the route which includes "BI" Street, the
"Construction and Visitor's Gate" and 13th Avenue. All EDNC
Personnel parking in Parking Lot A shall log in and out with
their Bayer-issued identification badges at the Bayer employee
gate;
(4) Access to and from Parking Lot B (as
hereinafter defined) by all construction personnel (including all
Construction Managers) and all maintenance support personnel
shall be accomplished solely by way of the route which includes
Highway FM 565, West Bay Road, 10th Avenue and "BI" Street;
(5) Access to and from Parking Lot B and the
Leased Premises by all construction personnel and maintenance
support personnel who are entitled to park in such parking lot
shall be accomplished solely by walking, using the same routes
and procedures which are described in subsection V(3) of this
Exhibit D, provided, however, that any construction personnel and
maintenance support personnel who are driving vehicles which are
needed to support the construction or maintenance activity that
is to be performed at the Leased Premises, may proceed directly
to the Leased Premises (after logging in) solely by means of the
route which includes West Bay Road, 10th Avenue, "BI" Street, the
Construction and Visitor's Gate and 13th Avenue;
(6) Access to and from the Leased Premises for
transporting all products, raw materials and wastes and for
making other deliveries (other than those which relate to any
construction activities) to and from the Leased Premises shall be
accomplished solely by way of the same routes and procedures
described in subsection IV(8) of this Exhibit D;
(7) Access to and from the Leased Premises for
making any deliveries to and from the Leased Premises relating to
construction activities shall be accomplished solely by way of
the route which includes Highway FM 1405, Highway FM 565, West
Bay Road, 10th Avenue and "BI" Street; and
(8) Access to and from any other areas of the
Bayer Baytown Plant by EDNC Personnel shall be accomplished over
routes which are reasonable under the circumstances, but only to
the extent that such access is reasonably necessary for the
conduct of their business thereon.
VI. Post-Construction Parking Easements.
(1) Those EDNC Personnel (except EDNC
non-managerial employees) who are driving Company Cars and those
construction personnel and maintenance support personnel who are
permitted to drive their vehicles to the Leased Premises pursuant
to subsection V(5) of this Exhibit D shall park on the Leased
Premises;
(2) All EDNC non-managerial employees and all
other EDNC Personnel who are not driving Company Cars shall park
in the area ("Parking Lot A") comprised of Block 11 B1 and 12 B1,
as shown on the Post-Construction Easements Drawing;
(3) All construction personnel (including the
Construction Managers) who are not driving Company Cars and all
maintenance support personnel shall park in the area ("Parking
Lot B") shown as Block 11 B on the Post-Construction Easements
Drawing; and
(4) For purposes of paragraph (2) hereof, such
EDNC Personnel may use up to a maximum of twenty (20)
non-designated parking spaces in Block 11 B1 and 12 B1. For
purposes of paragraph (3) hereof, such construction personnel and
maintenance support personnel may use up to a maximum of fifty
(50) non-designated parking spaces in Block 11 B.
VII. Disabled Persons. Notwithstanding anything in
this Ground Lease to the contrary, all EDNC Personnel and
construction personnel who are disabled to any extent shall enjoy
the benefits of the easements provided hereby subject, however,
to such reasonable limitations as Bayer's safety manager or
safety director may approve, which approval must be requested in
advance by EDNC.
EXHIBIT E
INDUSTRIAL DISTRICT AGREEMENT
See attached copy.
EXHIBIT F
SERVICES AGREEMENT
See attached copy.
Exhibit 10.5
PARTICIPATION AGREEMENT
Dated as of June 27, 1997
among
EL DORADO NITROGEN COMPANY,
as Lessee and Construction Agent,
BOATMEN'S TRUST COMPANY OF TEXAS,
not in its individual capacity,
except as expressly provided herein, but solely
as Owner Trustee,
SECURITY PACIFIC LEASING CORPORATION,
as Owner Participant,
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein, but solely
as Indenture Trustee,
BAYERISCHE LANDESBANK, NEW YORK BRANCH,
as a Construction Lender and as Note Purchaser,
SECURITY PACIFIC LEASING CORPORATION,
as a Construction Lender,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Construction Loan Agent
NITRIC ACID PRODUCTION FACILITY
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS; INTERPRETATION OF THIS AGREEMENT . . . . . . . .2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Directly or Indirectly. . . . . . . . . . . . . . . . . . . .3
SECTION 2 PURCHASE OF UNITS; CONSTRUCTION AGENT; CONSTRUCTION
ADVANCES; FUNDINGS; PARTICIPATION IN THE EQUIPMENT
COST; TRANSACTION COSTS . . . . . . . . . . . . . . . . . . .3
2.1 Construction Agent; Sale and Purchase . . . . . . . . . . . .3
2.2 Construction Advances . . . . . . . . . . . . . . . . . . . .5
2.3 Purchase Dates; Advance Dates; Procedure for Funding. . . . .6
2.4 Investments by the Owner Participant. . . . . . . . . . . . .7
2.5 Issue and Sale of Note. . . . . . . . . . . . . . . . . . . .8
2.6 Lease Term Commencement Date; Procedure for Participation . 10
2.7 Owner Participant's Instructions. . . . . . . . . . . . . . 12
2.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Calculation of Adjustments to Basic Rent, Stipulated Loss Value,
Termination Value and Note Amortization; Confirmation
and Verification............................................15
2.10 Postponement of Closing; Termination of Transaction; and
Expiration of Commitment. . . . . . . . . . . . . . . . . . 18
2.11 Sufficiency of Note and Cash Payment. . . . . . . . . . . . 19
SECTION 3 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 19
3.1 Representations and Warranties of the Owner Trustee . . . . 19
3.2 Representations and Warranties of the Lessee. . . . . . . . 21
3.3 Representations and Warranties of the Indenture Bank and
the Indenture Trustee . . . . . . . . . . . . . . . . . . . 29
3.4 Representations and Warranties of the Owner Participant . . 30
3.5 Representations, Warranties and Covenants Regarding
Beneficial Interest and Notes . . . . . . . . . . . . . . . 32
SECTION 4 CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . 35
4.1 Conditions Precedent to the Making of First Construction
Advance.....................................................35
4.2 Conditions Precedent to Each Advance Date . . . . . . . . . 37
4.3 Conditions Precedent to Investment by the Participants. . . 39
4.4 Additional Conditions Precedent to Investment by the Owner
Participant. . . . . . . . . . . . . . . . . . . . . . . . .44
4.5 Additional Conditions Precedent to Purchase by the Note
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.6 Conditions Precedent to the Obligation of the Lessee. . . . 47
4.7 Opinion Acknowledgment. . . . . . . . . . . . . . . . . . . 49
4.8 Further Condition To Participants' Commitment . . . . . . . 49
SECTION 5 FINANCIAL AND OTHER REPORTS OF THE LESSEE . . . . . . . . . 49
SECTION 6 CERTAIN COVENANTS OF THE PARTICIPANTS, THE OWNER
TRUSTEE, THE INDENTURE TRUSTEE AND THE LESSEE . . . . . . . 50
6.1 Restrictions on Transfer of Beneficial Interest . . . . . . 50
6.2 Liens Attributable to the Owner Participant . . . . . . . . 52
6.3 Lessor's Liens Attributable to the Owner Trustee. . . . . . 52
6.4 Liens Created by the Indenture Trustee. . . . . . . . . . . 53
6.5 Certain Covenants of the Owner Trustee, the Owner
Participant and Boatmen's . . . . . . . . . . . . . . . . . 53
6.6 Lessee's Merger Covenant. . . . . . . . . . . . . . . . . . 54
6.7 Lessee Not to Own Notes or Beneficial Interest. . . . . . . 55
6.8 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 55
6.9 Boatmen's Covenant to Notify of Relocation or Name Change . 55
6.10 Lessee's Covenant to Notify of Relocation or Name Change. . 55
6.11 Corporate Existence . . . . . . . . . . . . . . . . . . . . 56
6.12 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 56
6.13 Restriction on Transfer of Notes. . . . . . . . . . . . . . 56
6.14 Amendments to Indenture . . . . . . . . . . . . . . . . . . 57
6.15 Environmental Matters . . . . . . . . . . . . . . . . . . . 57
SECTION 7 LESSEE'S INDEMNITIES. . . . . . . . . . . . . . . . . . . . 58
7.1 General Tax Indemnity . . . . . . . . . . . . . . . . . . . 58
7.2 General Indemnification and Waiver of Certain Claims. . . . 69
SECTION 8 LESSEE'S RIGHTS UNDER THE LEASE . . . . . . . . . . . . . . 74
SECTION 9 SPECIAL RIGHTS OF NOTE PURCHASER. . . . . . . . . . . . . . 74
SECTION 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 75
10.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.3 No Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 76
10.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . 76
10.5 Business Day. . . . . . . . . . . . . . . . . . . . . . . . 76
10.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 76
10.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . 76
10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 76
10.9 Headings and Table of Contents. . . . . . . . . . . . . . . 77
10.10 Reproduction of Documents . . . . . . . . . . . . . . . . . 77
10.11 Limitations of Liability. . . . . . . . . . . . . . . . . . 77
10.12 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 78
10.13 Disclosure of Information . . . . . . . . . . . . . . . . . 78
10.14 FORUM SELECTION AND CONSENT TO JURISDICTION . . . . . . . . 79
10.15 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . 79
10.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 79
Attachments:
Exhibit A Form of Amended and Restated Trust Agreement
Exhibit B Form of Indenture
Exhibit C Form of Construction Loan Agreement
Exhibit D-1 Form of Bayer Support Agreement THIS EXHIBIT HAS BEEN
OMITTED AS IT IS THE SUBJECT OF A REQUEST BY THE
COMPANY FOR CONFIDENTIAL TREATMENT BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE
FREEDOM OF INFORMATION ACT. THE OMITTED
INFORMATION HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION FOR PURPOSES OF SUCH REQUEST.
Exhibit D-2 Form of Bayer LetterTHIS EXHIBIT HAS BEEN OMITTED AS IT IS
THE SUBJECT OF A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE FREEDOM OF
INFORMATION ACT. THE OMITTED INFORMATION HAS
BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES
OF SUCH REQUEST.
Exhibit D-3 Form of Bayer Environmental Letter
Exhibit E Form of Lease
Exhibit F-1 Form of Ground Lease
Exhibit F-2 Form of Ground Lease Sublease
Exhibit G-1A Form of Opinion of Lessee's In-House Counsel - Effective Date
Exhibit G-1B Form of Opinion of Lessee's Special Counsel - Effective Date
Exhibit G-2A Form of Opinion of Lessee's In-House Counsel -
Lease Term Commencement Date
Exhibit G-2B Form of Opinion of Lessee's Special Counsel -
Lease Term Commencement Date
Exhibit H-1 Form of Opinion of Owner Trustee's Special Counsel -
Effective Date
Exhibit H-2 Form of Opinion of Owner Trustee's Special Counsel -
Lease Term Commencement Date
Exhibit I-1A Form of Opinion of Owner Participant's In-House Counsel -
Effective Date
Exhibit I-1B Form of Opinion of Owner Participant s Special Counsel -
Effective Date
Exhibit I-1C Form of Opinion of Owner Participant s Special Texas Counsel -
Effective Date
Exhibit I-2A Form of Opinion of Owner Participant's In-House Counsel -
Lease Term Commencement Date
Exhibit I-2B Form of Opinion of Owner Participant's Special Counsel -
Lease Term Commencement Date
Exhibit I-2C Form of Opinion of Owner Participant s Special Texas Counsel -
Lease Term Commencement Date
Exhibit J-1 Form of Opinion of Indenture Trustee's Special Counsel -
Effective Date
Exhibit J-2 Form of Opinion of Indenture Trustee s Special Counsel -
Lease Term Commencement Date
Exhibit K-1A Form of Opinion of Bayer's In-House Counsel - Effective Date
Exhibit K-1B Form of Opinion of Bayer s Special Counsel - Effective Date
Exhibit K-2A Form of Opinion of Bayer's In-House Counsel -
Lease Term Commencement Date
Exhibit K-2B Form of Opinion of Bayer s Special Counsel -
Lease Term Commencement Date
Exhibit L Form of Private Placement Certificate
Exhibit M [Intentionally Omitted]
Exhibit N Form of Assignment and Assumption Agreement
Exhibit O Form of Bill of Sale
Exhibit P Form of Purchase Notice
Exhibit Q Form of Advance Date Notice
Exhibit R Form of Amended and Restated Construction Agency Agreement
Exhibit S-1 Form of Project and Supply Agreement CERTAIN INFORMATION WITHIN
THIS EXHIBIT HAS BEEN OMITTED AS IT IS THE SUBJECT OF A REQUEST
BY THE COMPANY FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE FREEDOM OF INFORMATION ACT. THE
OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY
OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH
REQUEST.
Exhibit S-2 Form of Services Agreement CERTAIN INFORMATION WITHIN THIS EXHIBIT
HAS BEEN OMITTED AS IT IS THE SUBJECT OF A REQUEST BY THE COMPANY
FOR CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE FREEDOM OF INFORMATION ACT. THE OMITTED
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
Exhibit S-3 Form of Ground Lease Related Document
Exhibit T-1 Form of Leasehold Deed of Trust (Construction)
Exhibit T-2 Form of Leasehold Deed of Trust (Indenture)
Exhibit U Form of Eligible OP Assignee Guaranty
Exhibit V Form of Security Agreement
SCHEDULE 1 Parties' Addresses and Payment Instructions
SCHEDULE 2 Rental Factors
SCHEDULE 3 Stipulated Loss Value/Termination Value
SCHEDULE 4 [Intentionally Omitted]
SCHEDULE 5 Amortization Schedule
SCHEDULE 6 Fixed Price Purchase Option Amount THIS SCHEDULE HAS BEEN OMITTED
AS IT IS THE SUBJECT OF A REQUEST BY THE COMPANY FOR CONFIDENTIAL
TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
FREEDOM OF INFORMATION ACT. THE OMITTED INFORMATION HAS BEEN
FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND
EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
SCHEDULE 7 Leased Property
SCHEDULE 8 Pricing Assumptions
SCHEDULE 9 Construction Commitment Amounts
SCHEDULE 10 Note Purchaser s Percentage and Commitment
SCHEDULE 11 Lessee Disclosures
Appendix A Definitions
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of June 27, 1997 (as
amended, supplemented or otherwise modified from time to time,
this Agreement or this "Participation Agreement"), is among:
(i) EL DORADO NITROGEN COMPANY, an Oklahoma corporation (together
with its successors and permitted assigns, the Lessee ; and
sometimes also referred to herein as the Construction Agent , as
applicable) (ii) BOATMEN'S TRUST COMPANY OF TEXAS, a Texas state
chartered trust company ("Boatmen's"), not in its individual
capacity, except as expressly provided herein, but solely as
trustee under the Trust Agreement (in such capacity, together
with its successors and permitted assigns, the Owner Trustee or
"Lessor"); (iii) SECURITY PACIFIC LEASING CORPORATION, a Delaware
corporation (together with its successors and assigns, the "Owner
Participant"); (iv) WILMINGTON TRUST COMPANY, a Delaware banking
corporation (in its individual capacity, "Indenture Bank"), not
in its individual capacity, except as expressly provided herein,
but solely as trustee under the Indenture (in such capacity,
together with its successors and assigns, the "Indenture
Trustee"); (v) BAYERISCHE LANDESBANK, NEW YORK BRANCH
("Bayerische"), as a construction lender and as note purchaser;
(vi) SECURITY PACIFIC LEASING CORPORATION, a Delaware corporation
("Security Pacific") , as a construction lender (Bayerische and
Security Pacific, together with their respective successors and
permitted assigns, in their respective capacities as construction
lenders, the Construction Lenders , and Bayerische, in its
capacity as note purchaser, the "Note Purchaser"); and (vii)
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, as agent for the Construction
Lenders (in such capacity, together with its successors and
assigns, the "Construction Loan Agent").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of
this Agreement, the Owner Participant is entering into an Amended
and Restated Trust Agreement (EDNC Trust 1997) (the form of which
is attached as Exhibit A) with Boatmen's, pursuant to which
Boatmen's, acting as the Owner Trustee, agrees, among other
things, to hold the Trust Estate for the benefit of the Owner
Participant thereunder on the terms specified in the Trust
Agreement, subject, however, to the Lien created under the
Indenture and under the Construction Loan Agreement and, subject
to the terms and conditions hereof, to purchase on one or more
Purchase Dates the Units; and
WHEREAS, concurrently with the execution and delivery of
this Agreement, the Owner Trustee is entering into an Amended and
Restated Construction Agency Agreement (the Construction Agency
Agreement ) with the Construction Agent, the form of which
Amended and Restated Construction Agency Agreement is attached as
Exhibit R; and
WHEREAS, concurrently with the execution and delivery of
this Agreement, the Owner Trustee is entering into the
Construction Loan Agreement (the form of which is attached as
Exhibit C) with the Construction Lenders and the Construction
Loan Agent pursuant to which the Owner Trustee may borrow
Construction Advances to finance the Equipment Cost for the
Units, pay Transaction Costs, make progress payments in
connection with the Units, and pay interest on outstanding
Construction Advances; and
WHEREAS, concurrently with the execution and delivery of
this Agreement, the Lessee is leasing from Bayer Corporation, an
Indiana corporation ("Bayer"), the Premises pursuant to a Ground
Lease substantially in the form of Exhibit F-1 and, in connection
therewith, the Lessee is subleasing the Premises to the Owner
Trustee pursuant to a Ground Lease Sublease substantially in the
form of Exhibit F-2, and the Owner Trustee is further subleasing
to the Lessee the Premises pursuant to a Lease substantially in
the form of Exhibit E; and
WHEREAS, the Lessee agrees to lease from the Owner Trustee,
and the Owner Trustee agrees to lease to the Lessee, on the Lease
Term Commencement Date, all of the Units pursuant to the Lease;
and
WHEREAS, concurrently with the execution and delivery of
this Agreement, the Lessee and the Owner Participant will enter
into a Tax Indemnity Agreement relating to the Units; and
WHEREAS, on or prior to the Lease Term Commencement Date,
the Owner Trustee will enter into the Indenture (the form of
which is attached as Exhibit B) with the Indenture Trustee
pursuant to which the Owner Trustee will agree, among other
things, to issue on the Lease Term Commencement Date the Note to
the Note Purchaser as evidence of the loans made by the Note
Purchaser in the financing of the Equipment Cost for the Units;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration,
receipt of which is acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS; INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. For all purposes of this Agreement,
except as otherwise defined herein or unless the context
otherwise requires:
(a) capitalized terms used herein (including the
foregoing recitals) shall have the meanings assigned to them
in Appendix A hereto;
(b) 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; and
(c) all references in this Agreement to Articles,
Section, Exhibits and Schedules refer to Articles, Sections,
Exhibits and Schedules of this Agreement unless otherwise
indicated.
1.2 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by
such Person.
SECTION 2 PURCHASE OF UNITS; CONSTRUCTION AGENT; CONSTRUCTION
ADVANCES; FUNDINGS; PARTICIPATION IN THE EQUIPMENT
COST; TRANSACTION COSTS
2.1 Construction Agent; Sale and Purchase.
(a) Pursuant to the Construction Agency Agreement, the
Owner Trustee is appointing the Construction Agent as its
construction agent with respect to the Units, and the
Construction Agent accepts such appointment pursuant to the
Construction Agency Agreement and hereto. In its capacity as
such, the Construction Agent shall select, order, install (or
arrange for the installment of) and test the Units to be leased
by the Lessee, and shall take all necessary action to provide
that the Units will be In Service and subject to the Lease on or
prior to the Construction Termination Date. If all of the Units
are not subject to the Lease for any reason (including, without
limitation, the failure of the Lessee to execute and deliver a
Lease Supplement with respect thereto, or if the conditions
precedent to the investment by the Participants pursuant to
Sections 4.3, 4.4, 4.5 and 4.8 have not been met) on or before
such Construction Termination Date, then the Construction Agent
shall pay, as damages, to the Owner Trustee on the day following
the Construction Termination Date, an amount equal to the sum of
(i) the outstanding principal amount of all Construction
Advances, plus (ii) the accrued and unpaid (and not previously
capitalized) interest on such Construction Advances as of the day
following the Construction Termination Date, plus (iii) the
accrued and unpaid Commitment Fee as of the day following the
Construction Termination Date, plus (iv) all other amounts due to
the Owner Trustee, the Owner Participant, the Construction
Lenders, the Indenture Trustee or any Indemnified Person pursuant
to this Agreement or any other Operative Agreement. Upon receipt
of such payment, the Owner Trustee shall transfer all of the
Units to the Lessee (or as the Lessee may direct) and terminate
the Lease, without any representation or warranty, except as to
the absence of Lessor Liens.
(b) Subject to the terms and conditions hereof and on the
basis of the representations and warranties set forth herein, the
Owner Trustee agrees, on each Purchase Date, to purchase from the
vendor or manufacturer, or to make, or reimburse the Construction
Agent for, progress payments to the vendor or manufacturer of,
the Units described in the Purchase Notice given pursuant to
Section 2.3(a) with respect to such Purchase Date, and in
connection therewith, the Owner Trustee agrees to pay to the
vendor or manufacturer, or, in the case of a reimbursement, the
Construction Agent, the Purchase Cost or a progress payment for
each such Unit, or portion thereof, as specified in the Purchase
Notice relating to such Unit; provided, however, that the Owner
Trustee shall not be obligated to purchase on any Purchase Date
any Unit that is destroyed, damaged, defective, in unsuitable
condition or otherwise unacceptable to the Lessee for lease
pursuant to the Lease; and provided further, however, that the
principal amount of all advances made under the Interim Financing
Documents, and all accrued and unpaid interest and fees
thereunder, outstanding as of the Effective Date shall be rolled
over and deemed to have been advanced to the Owner Trustee as
Construction Advances (made pro rata by the Construction Lenders
in proportion to the respective Construction Commitment Amounts
of such Construction Lenders) on the Effective Date, such
Effective Date to be deemed to be a Purchase Date for all
purposes hereunder.
(c) During the period from the first Purchase Date to the
Lease Term Commencement Date (the "Construction Term"), the
Construction Agent shall (i) at its expense, carry and maintain
insurance with respect to such Units as set forth in Section 12
of the Lease and (ii) keep such Unit at the site identified in
the Purchase Notice. In the event that an Event of Loss shall
occur during the Construction Term, the Construction Agent shall,
on or before the earlier of the date that is 180 days after the
date of such Event of Loss and the Construction Termination Date,
either (i) replace such Unit with a replacement Unit meeting the
standards of Section 11.2(i) of the Lease or (ii) pay to the
Owner Trustee an amount equal to the outstanding Construction
Advances, together with all accrued and unpaid (and not
previously capitalized) interest thereon and all other amounts
due with respect thereto (including but not limited to the
accrued and unpaid Commitment Fee); provided that the
Construction Agent shall, not later than 60 days after the date
of such Event of Loss, notify the Owner Trustee and the
Construction Loan Agent of the action which it proposes to take
with respect to such Event of Loss. The Construction Agent
agrees that the Owner Trustee and the Construction Lenders shall
have all of the rights of inspection with respect to the Units
during the Construction Term therefor as set forth in Section 13
of the Lease.
(d) It is the intent of the Construction Agent, the Owner
Trustee and the Owner Participant that during the Construction
Term, each Unit purchased on a Purchase Date from a vendor or
manufacturer shall be owned by the Owner Trustee. If any court
shall determine that any Unit is owned by the Construction Agent
during the Construction Term, the Construction Agent shall be
deemed to have granted and assigned, and hereby grants and
assigns, to the Owner Trustee during the Construction Term a
continuing, first priority security interest in and to such Unit
and the proceeds thereof, whether now owned or hereafter
acquired, and wherever located, as security for the Construction
Agent's obligations with respect to such Unit under the Operative
Agreements, including, without limitation, the Construction
Agent's obligations pursuant to Section 2.1(a). The Construction
Agent hereby acknowledges that the Owner Trustee has pledged
during the Construction Term all of its right, title and interest
in the Units to the Construction Loan Agent, for the benefit of
the Construction Lenders, pursuant to the Construction Loan
Agreement. The Construction Agent hereby agrees to take all such
action, at its expense, as the Owner Trustee, the Owner
Participant or the Construction Loan Agent may reasonably
request, including, without limitation, the execution, delivery
and filing of financing statements, in order to perfect the Owner
Trustee's or the Construction Loan Agent's interest in the Units
during the Construction Term or to otherwise carry out the intent
of this Agreement.
2.2 Construction Advances.
(a) In order to finance the cost (including progress
payments) of the Units related to a Purchase Date, to pay
Transaction Costs described in Section 2.8(a)(i) through and
including (xiii) incurred prior to the Closing and to make
required interest payments, Section 2.1 of the Trust Agreement
authorizes the Owner Trustee, subject to the terms and conditions
hereof, to borrow funds from the Construction Lenders pursuant to
the Construction Loan Agreement and hereto (each such borrowing,
a "Construction Advance"). In no event shall the aggregate
principal amount of all Construction Advances outstanding exceed
the Construction Commitment Amount. The Construction Advances
are to be made under, and secured by, the Construction Loan
Agreement. The Construction Advances shall be LIBOR Advances;
interest shall be payable on the Construction Advances at the
rates and times set forth in the Construction Loan Agreement.
The Construction Advances shall be repaid in full on the earlier
to occur of the Lease Term Commencement Date and the day
immediately following the Construction Termination Date.
(b) Subject to the terms and conditions hereof (including,
without limitation, the second proviso to Section 2.1(b)) and on
the basis of the representations and warranties set forth herein,
on each Purchase Date, on each date that Transaction Costs are
payable and on each date that interest on a Construction Advance
is due (each of the foregoing, an "Advance Date"), in each case
that occurs on or prior to the Construction Termination Date, the
Construction Lenders will make a Construction Advance to the
Owner Trustee in an amount equal to (v) the Purchase Cost, or a
portion thereof, of the Units to be purchased by the Owner
Trustee on such Purchase Date, (w) progress payments upon any
Unit then due and owing, (x) the Transaction Costs described in
Section 2.8(a)(i) through and including (xiii) then due and
owing, (y) the accrued interest on the Construction Advances due
on such date, or (z) the sum of any combination of the foregoing
clauses (v), (w), (x) or (y); provided, however, that the
commitment of the Construction Lenders to make Construction
Advances shall not exceed the excess of the Construction
Commitment Amount over the aggregate principal amount of all
Construction Advances then outstanding.
(c) If on any Advance Date the conditions to the
obligations of the Construction Lenders specified in Sections 4.1
and 4.2 have not been fulfilled or waived in writing by the
Construction Lenders, the Construction Lenders may thereupon
elect to be relieved of all further obligations under this
Agreement with respect to the transactions contemplated to occur
on such Advance Date. Nothing in this paragraph shall operate to
relieve the Owner Trustee, the Owner Participant, the
Construction Agent or the Lessee from any of their respective
obligations hereunder or to waive the Construction Loan Agent's
or the Construction Lenders' rights against the Owner Trustee,
the Owner Participant or the Lessee.
2.3 Purchase Dates; Advance Dates; Procedure for Funding.
(a) Notice of Purchase Date. The purchase of Units
pursuant to Section 2.3 (b), the making of progress payments and
the making of the related Construction Advance shall take place
on any Business Day occurring on or before the Construction
Termination Date (each a "Purchase Date"), provided that (i)
there shall be no more than two Purchase Dates in any calendar
month, (ii) the aggregate Purchase Cost of the Units to be
purchased on each Purchase Date and progress payments to be made
on each Purchase Date shall not be less than $100,000 and (iii)
the Construction Agent shall have delivered written notice of
such Purchase Date (each such notice, a "Purchase Notice") to the
Owner Trustee, the Owner Participant and the Construction Loan
Agent at least two Business Days prior to such proposed Purchase
Date. Each Purchase Notice shall be in the form attached hereto
as Exhibit P, appropriately completed. Prior to 12:00 noon, New
York City time, on such Purchase Date, subject to the fulfillment
of the applicable conditions precedent set forth herein, each
Construction Lender shall make its Construction Percentage of the
amount of the Construction Advance required to be paid on such
Purchase Date available to the Owner Trustee, by transferring or
delivering such amount, in funds immediately available on such
Purchase Date, to the Owner Trustee, either directly to, or for
deposit in, the Owner Trustee's account number 55-05-300-4673100
at Boatmen's First National Bank of Amarillo (ABA No. 111-300-
945), account name: Credit Trust Account, with a reference to
EDNC Trust-1997. The making available by the Construction
Lenders of the Construction Advance to be paid on such Purchase
Date shall be deemed a waiver by the Construction Lenders of the
timely delivery of the Purchase Notice (if not theretofore
delivered on a timely basis).
(b) Purchase. With respect to each Purchase Date, upon
receipt by the Owner Trustee on such Purchase Date of the
Construction Advance required to be paid on such Purchase Date,
the Owner Trustee shall, subject to the conditions set forth in
Sections 4.1 and 4.2 having been fulfilled to the satisfaction of
the Owner Participant and the Construction Loan Agent or waived
by the Owner Participant and the Construction Loan Agent, pay to
the applicable sellers of the Units or make progress payments in
respect of Units (or reimburse the Construction Agent for
payments made to the applicable sellers) from the proceeds of
Construction Advances, in immediately available funds, an amount
equal to the Purchase Cost, or a portion thereof, for the Units
to be settled for on such Purchase Date or with respect to which
progress payments are being made, as set forth in the related
Purchase Notice.
(c) Advance Date Notice. Two Business Days prior to each
Advance Date, the Construction Agent shall deliver to the Owner
Trustee, the Owner Participant and the Construction Loan Agent a
notice substantially in the form of Exhibit Q (each, an "Advance
Date Notice"), appropriately completed.
(d) Construction Advances. Prior to 12:00 noon, New York
City time, on such Purchase Date, subject to the fulfillment of
the applicable conditions precedent set forth herein, each
Construction Lender shall make its Construction Percentage of the
amount of the Construction Advance required to be paid on such
Purchase Date available to the Owner Trustee, by transferring or
delivering such amount, in funds immediately available on such
Purchase Date, to the Owner Trustee, either directly to, or for
deposit in, the Owner Trustee's account number 55-05-300-4673100
at Boatmen's First National Bank of Amarillo (ABA No. 111-300-
945), account name: Credit Trust Account, with a reference to
EDNC Trust-1997. The making available by the Construction
Lenders of the Construction Advance to be paid on such Purchase
Date shall be deemed a waiver by the Construction Lenders of the
timely delivery of the Purchase Notice (if not theretofore
delivered on a timely basis).
(e) Interest Periods. On each Advance Date, the Lessee
shall specify the Interest Period applicable to the related
Construction Advance as set forth in the Advance Date Notice
related thereto. On the last day of each Interest Period for a
LIBOR Advance, the Lessee shall continue such Construction
Advance, in whole, as a LIBOR Advance for a subsequent Interest
Period with a duration as set forth in the applicable Advance
Date Notice. Any such Construction Advances pursuant to Section
2.3(d) shall be subject to the following:
(i) each LIBOR Advance shall be in a principal amount
equal to at least $100,000;
(ii) there shall not be more than three (3) different
Interest Periods outstanding at any one time; and
(iii) no Interest Period shall extend beyond the
Scheduled Lease Commencement Date.
Each Purchase Notice and Advance Date Notice shall be
irrevocable. If no notice is given with respect to the
continuation of a LIBOR Advance on or prior to the second
Business Day before the last day of the Interest Period with
respect thereto, such Construction Advance shall have an Interest
Period of one month.
2.4 Investments by the Owner Participant.
(a) Subject to the terms and conditions hereof and on the
basis of the representations and warranties set forth herein, on
the Lease Term Commencement Date, the Owner Participant agrees to
participate in the payment of the Total Equipment Cost for all of
the Units, taken together as a whole, by making an equity
investment in the beneficial ownership of such Units in the
amount (the Owner Participant's "Commitment") equal to the Owner
Participant's Percentage of the Total Equipment Cost for all of
the Units. The Owner Participant's Commitment shall be paid to
the Owner Trustee to be held and applied by the Owner Trustee
toward the repayment of the Construction Advances then
outstanding made by Security Pacific and as provided in Section
2.6. In no event shall the aggregate amount of (x) the Owner
Participant's Percentage of the Total Equipment Cost and (y) the
Transaction Costs (which the Owner Participant shall pay pursuant
to Section 2.8(a)) exceed $15,000,000.
(b) If on the Lease Term Commencement Date the conditions
to the obligations of the Owner Participant specified in Sections
4.3, 4.4 and 4.8 have not been fulfilled or waived by it, the
Owner Participant may thereupon elect to be relieved of all
further obligations under this Agreement with respect to the
transactions contemplated to occur on the Lease Term Commencement
Date. In case any Note Purchaser shall default in its obligation
to make the amount of its commitment available pursuant to
Section 2.5 on the Lease Term Commencement Date, the Owner
Participant shall use its reasonable efforts to promptly find a
replacement Note Purchaser (but shall not be required to find,
nor to fund itself as, a replacement Note Purchaser). Nothing in
this paragraph shall operate to relieve the Lessee, the Owner
Trustee, the Indenture Trustee or the Note Purchaser from any of
their respective obligations hereunder or to waive any of the
Owner Participant's rights against the Lessee, the Owner Trustee,
the Indenture Trustee or the Note Purchaser.
2.5 Issue and Sale of Note.
(a) In order to finance a portion of the Total Equipment
Cost of all of the Units, Section 2.1 of the Trust Agreement
authorizes the Owner Trustee, subject to the terms and conditions
hereof, to issue and sell secured notes of one series. In no
event shall the aggregate principal amount of the Note exceed the
lesser of (i) 85% of the Total Equipment Cost and (ii)
$65,000,000. The Note is to be issued under, and secured by, the
Indenture. The Note is to be dated the date of original issue,
to bear interest prior to maturity at the rate designated in such
Note, payable monthly on each Rent Payment Date for the related
Lease Supplement thereafter until and including maturity, and to
be otherwise in the form of Note attached to the Indenture as
Exhibit A. The term Note or Notes , as used herein and in the
other Operative Agreements, shall mean and include the Note
issued under the Indenture and any Notes issued in exchange
therefor or replacement thereof pursuant to the Indenture.
(b) Subject to the terms and conditions hereof and on the
basis of the representations and warranties set forth herein, on
the Lease Term Commencement Date, the Note Purchaser will
participate in the payment of the Total Equipment Cost for all of
the Units by purchasing the Note at a price in United States
dollars equal to 100% of the principal amount thereof and in an
aggregate principal amount equal to the product of (i) the Total
Equipment Cost for all of the Units and (ii) the percentage set
forth therefor in the Owner Participant's Certificate described
in Section 2.6(a); provided that the commitment of the Note
Purchaser to purchase its Note pursuant to this Section 2.5(b)
shall not exceed the amount set forth on Schedule 10 hereto; and
provided, further, that the aggregate principal amount of the
Note to be issued on the Lease Term Commencement Date to the Note
Purchaser shall be equal to the product of (x) the percentage set
forth for such Note Purchaser on Schedule 10 hereto and (y) the
aggregate principal amount of the Note to be issued on the Lease
Term Commencement Date. Notwithstanding the foregoing, the Note
Purchaser shall be deemed to have purchased its Note and to have
repaid the Construction Advances (except any portion thereof
attributable to Transaction Costs, but excluding (i) accrued and
unpaid interest on such Transaction Costs and (ii) previously
capitalized interest on such Transaction Costs (such portion
attributable to Transaction Costs, after giving effect to the
exclusions in the immediately preceding clauses (i) and (ii),
being Excluded Transaction Costs )) then outstanding made by
such Note Purchaser in its capacity as a Construction Lender,
together with all accrued but unpaid interest on such
Construction Advances, on the Lease Term Commencement Date
without any further action required by such Note Purchaser;
provided, however, that if the amount set forth in clause (A) of
the fourth sentence of Section 2.6(a) (the Clause (A) Amount )
is other than the outstanding principal amount of, and accrued
and unpaid (and not previously capitalized) interest payable to
Security Pacific upon, Construction Advances of Security Pacific,
other than that portion of Excluded Transaction Costs which are a
part thereof (the "Security Pacific Amount"), then (x) if such
Clause A Amount is greater than the Security Pacific Amount, the
Owner Trustee, following receipt of the Clause A Amount from the
Owner Participant upon the consummation of the Closing, shall
apply the sum which shall be equal to the difference between the
Clause A Amount and the Security Pacific Amount to the
outstanding principal amount of, and accrued and unpaid (and not
previously capitalized) interest payable to the Construction
Lenders other than Security Pacific upon, Construction Advances
of Construction Lenders other than Security Pacific, other than
that portion of Excluded Transaction Costs which are a part
thereof, and (y) if the Clause A Amount is less than the Security
Pacific Amount, the participation of the Note Purchaser
determined pursuant to the provisions of this Section 2.5(b),
except for this sentence, shall be paid to Security Pacific as a
Construction Lender upon the consummation of the Closing, so that
in the case of each of the foregoing clauses (x) and (y) Security
Pacific and each other Construction Lender shall be paid its
outstanding principal amount of, and accrued and unpaid (and not
previously capitalized) interest upon, its Construction Advances,
other than that portion of Excluded Transaction Costs which are a
part thereof, in full. The Note delivered to the Note Purchaser
will be typewritten and will be in the form of a single Note
registered in the name of such Note Purchaser. Contemporaneously
therewith, Excluded Transaction Costs will be paid by the Owner
Participant to the Owner Trustee pursuant to Section 2.8(a) and
will be applied by the Owner Trustee to the Construction Advances
so that upon the payment thereof and consummation of the Closing
the aggregate outstanding principal amount of, and accrued and
unpaid (and not previously capitalized), interest payable to the
Construction Lenders upon, the Construction Advances shall be
paid in full.
(c) If on the Lease Term Commencement Date the conditions
to the obligations of the Note Purchaser specified in Sections
4.3, 4.5 and 4.8 have not been fulfilled or waived by the Note
Purchaser, the Note Purchaser may thereupon elect to be relieved
of all further obligations under this Agreement with respect to
the transactions contemplated to occur on the Lease Term
Commencement Date. In such an event, the Owner Trustee shall
immediately pay to the Construction Lenders an amount equal to
the sum of (i) the outstanding principal amount of all
Construction Advances, plus (ii) the accrued and unpaid interest
on such Construction Advances as of the Construction Termination
Date, plus (iii) the accrued and unpaid Commitment Fee, plus (iv)
all other amounts due to the Construction Lenders pursuant to
this Agreement or any other Operative Agreement. In case the
Owner Participant shall default in its obligation to make the
amount of its Commitment available pursuant to Section 2.4, or to
make the amount of the Excluded Transaction Costs available
pursuant to Section 2.8(a), the Note Purchaser shall have no
obligation to make any amounts available under any Operative
Agreement. Nothing in this paragraph shall operate to relieve
the Owner Trustee, the Owner Participant, the Lessee or the
Indenture Trustee from any of their respective obligations
hereunder or to waive any Note Purchaser's rights against the
Owner Trustee, the Owner Participant, the Lessee or the Indenture
Trustee.
2.6 Lease Term Commencement Date; Procedure for
Participation
(a) Notice of Closing. The refinancing and lease of all of
the Units, taken together as a whole, and purchase by the Note
Purchaser of the Note shall take place, and all documentation
relating thereto shall be delivered, at the offices of Mayer,
Brown & Platt, 1675 Broadway, New York, New York 10019-5820
commencing at 10:00 a.m., New York City time, on the Lease Term
Commencement Date designated by not less than five Business Days'
(or such lesser notice agreed upon by the Lessee, the Owner
Participant and the Note Purchaser) prior written notice by the
Lessee to the Owner Participant, the Owner Trustee, the Indenture
Trustee and the Note Purchaser (such notice being referred to as
a "Notice of Lease Commencement"); provided, however that (i)
there shall not be more than one Lease Term Commencement Date,
(ii) the Lessee shall use its reasonable efforts to effect the
Lease Term Commencement Date on the first day of a calendar month
and (iii) the Lease Term Commencement Date shall occur on or
before June 30, 1999. The aforesaid closing is referred to as
the Closing. The Notice of Lease Commencement shall be by
facsimile transmission promptly confirmed by telephone and shall
specify in reasonable detail (i) the number, type and description
of all of the Units, (ii) the Total Equipment Cost of such Units,
(iii) the Equipment Cost of each Unit, (iv) the proposed Lease
Term Commencement Date and (v) the location of such Units (if
other than at the Premises). Not less than two Business Days
prior to the Lease Term Commencement Date, the Owner Participant
shall deliver to the Lessee, the Owner Trustee, the Indenture
Trustee and the Note Purchaser a certificate (the Owner
Participant's Certificate ) setting forth (A) the amount of the
Owner Participant's Commitment (to be paid on the Lease Term
Commencement Date), (B) the Owner Participant's Percentage of the
Total Equipment Cost (to be funded on the Lease Term Commencement
Date), (C) the aggregate principal amount of the Note to be sold
on such Lease Term Commencement Date and purchased by the Note
Purchaser, and (D) the percentage of the Total Equipment Cost for
all of the Units to be funded by the Note Purchaser on the Lease
Term Commencement Date through the purchase of the Note, and
having attached thereto revised Schedules 2, 3, 4 and 5 to this
Participation Agreement (as the same relate to the Lease Term
Commencement Date) reflecting any adjustments to Basic Rent,
Stipulated Loss Value, Termination Value and debt amortization
pursuant to Section 2.9(a)(i). Nothing in this Section 2.6(a)
shall limit or affect the Owner Participant's right to make post-
closing adjustments pursuant to Section 2.9(a). Prior to 12:00
noon, New York City time, on the Lease Term Commencement Date,
the Owner Participant shall make the amount of the Owner
Participant's Commitment, and, subject to the second sentence of
Section 2.5(b), the Note Purchaser shall make the principal
amount of the Note to be purchased on the Lease Term Commencement
Date, available to the Owner Trustee, by transferring or
delivering such amounts, in funds immediately available on the
Lease Term Commencement Date, to the Owner Trustee, either
directly to, or for deposit in, the Owner Trustee's account
number 55-05-300-4673100 at Boatmen's First National Bank of
Amarillo (ABA No. 111-300-945), account name: Credit Trust
Account, with a reference to EDNC Trust-1997. The making
available by the Owner Participant of its Commitment on the Lease
Term Commencement Date (which may include the tendering by the
Owner Participant of its interest in the Construction Note) shall
be deemed a waiver by the Owner Participant and the Owner
Trustee, and the making available by the Note Purchaser of the
funds to be paid by such Note Purchaser on the Lease Term
Commencement Date (which may include the tendering by the Note
Purchaser of its interest in the Construction Note) shall be
deemed a waiver by such Note Purchaser and the Indenture Trustee,
of the timely delivery of the Notice of Lease Commencement (if
not theretofore delivered on a timely basis).
(b) Closing. With respect to the Lease Term Commencement
Date, upon receipt (or deemed receipt) by the Owner Trustee on
the Lease Term Commencement Date of the Owner Participant's
Commitment (required to be paid on the Lease Term Commencement
Date), the proceeds (or deemed proceeds) of the Note to be sold
on the Lease Term Commencement Date, and the Excluded Transaction
Costs, the Owner Trustee shall, subject to the conditions set
forth in Sections 4.3, 4.4 and 4.8 having been fulfilled to the
satisfaction of the Owner Participant or waived by the Owner
Participant and subject to the conditions set forth in Sections
4.3, 4.5 and 4.8 having been fulfilled to the satisfaction of the
Note Purchaser or waived by the Note Purchaser, pay (and to the
extent of deemed proceeds be deemed to have paid) to the
Construction Loan Agent, for the benefit of the Construction
Lenders, from the funds then held by it, in immediately available
funds, an amount equal to the outstanding Construction Advances,
plus all accrued and unpaid (and not previously capitalized)
interest thereon.
(c) Failure to Close. If on the Lease Term Commencement
Date the Owner Participant fails to make any payment required of
it under this Section 2.6, a Note Purchaser fails to purchase its
Note or the Owner Participant, a Note Purchaser or the
Construction Agent otherwise is in breach of any of its material
obligations under any Operative Agreement, then any party hereto
(other than the party so failing to make the payment (other than
by reason of a failure of the closing conditions contained herein
to be satisfied) or otherwise in breach) may cancel its
obligations under this Agreement with respect to the Closing and
the transactions contemplated hereby with respect to the Closing
by notice to the other parties; provided that this Section 2.6(c)
shall neither limit the obligations, if any, of the Construction
Agent under Section 2.8(c), and such obligations shall survive
any exercise of rights by the Construction Agent, nor affect any
rights any non-breaching party hereto may have against either the
Owner Participant or a Note Purchaser for any failure described
in this Section 2.6(c); and provided further, with respect to any
funds actually deposited by a Participant with the Owner Trustee
as payment under Sections 2.4 and 2.5 and this Section 2.6,
interest shall be paid in the same manner, and to the same
extent, as provided for in Section 2.10(b) mutatis mutandis if
such Participant is not the party in breach.
(d) Transfer of Rights. For and in consideration of the
payment of the Construction Advances and other amounts payable
hereunder, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the
Construction Agent shall convey, assign, bargain, grant, transfer
and sell to the Owner Trustee, and its successors and assigns, if
not theretofore conveyed, assigned, bargained, granted,
transferred and sold to the Owner Trustee, all of the
Construction Agent's right, title and interest, if any, in each
Unit on and as of the Lease Term Commencement Date, free and
clear of all Liens, other than Permitted Liens. The Construction
Agent covenants and agrees that it will defend the Owner
Trustee's title to each Unit against the claims and demands of
all persons whomsoever.
2.7 Owner Participant's Instructions.
(a) Authorization and Direction on the Lease Term
Commencement Date. The Owner Participant agrees that its making
available to the Owner Trustee the amount of its Commitment for
the Units and an amount equal to the Excluded Transaction Costs
in accordance with the terms of this Section 2 shall constitute,
without further act, authorization or direction by the Owner
Participant to the Owner Trustee, subject, on the Lease Term
Commencement Date, to the conditions set forth in Sections 4.3,
4.4 and 4.8 having been fulfilled to the satisfaction of the
Owner Participant or waived by the Owner Participant, to take the
actions specified in Section 2.1 of the Trust Agreement with
respect to all of the Units, taken together as a whole, on the
Lease Term Commencement Date. The Owner Participant further
agrees that the authorization by the Owner Participant to the
Owner Trustee to release to the Construction Loan Agent, for the
benefit of the Construction Lenders, the Owner Participant's
Commitment and Excluded Transaction Costs shall constitute,
without further act, notice and confirmation that all conditions
to such closing set forth in Sections 4.3, 4.4 and 4.8 were
either met to the satisfaction of the Owner Participant or, if
not so met, were waived as a condition precedent to such closing
by it.
(b) Authorization and Direction Regarding Replacement
Units. The Owner Participant agrees, in the case of any
Replacement Unit substituted pursuant to Section 11.4 of the
Lease, that the Owner Trustee is authorized and directed to take
the actions specified in such Section 11.4 of the Lease with
respect to such Replacement Unit upon due compliance by the
Lessee with the terms and conditions set forth in such Section of
the Lease with respect to such Replacement Unit.
2.8 Expenses.
(a) Transaction Costs. If the Owner Participant shall have
made its equity investment provided for in Section 2.4 and the
transactions contemplated by this Agreement are consummated, the
Owner Participant will pay from time to time (including, with
respect to Excluded Transaction Costs (which, for the avoidance
of doubt, shall include the accrued and unpaid Commitment Fee),
on the Lease Term Commencement Date) the following (the
Transaction Costs ), if evidenced by an invoice or invoices
(which the Lessee shall have the right to review and approve, but
which approval shall not be unreasonably withheld), such payment
to be made (with respect to Transaction Costs other than Excluded
Transaction Costs) within 30 days of the delivery of such invoice
or invoices:
(i) (A) the cost of reproducing and printing the
Operative Agreements, and (B) all costs and fees in
connection with the filing and recording of each document
required to be filed or recorded pursuant to the provisions
hereof or of any other Operative Agreement;
(ii) (A) the fees and expenses of Mayer, Brown &
Platt, special counsel for the Owner Participant and (B) the
allocated internal costs of internal counsel to the Owner
Participant and BA Leasing & Capital Corporation, for their
services rendered in connection with the negotiation,
preparation, execution and delivery of the Operative
Agreements and other documentation prepared in connection
with the contemplated transactions;
(iii) (A) the fees and expenses of White & Case,
special counsel for the Note Purchaser and Bayerische, in
its capacity as a Construction Lender, and (B) the fees and
expenses of two Texas counsel for the Construction Loan
Agent, the Construction Lenders and the Note Purchaser, for
their services rendered in connection with the negotiation,
execution and delivery of the Operative Agreements and other
documentation prepared in connection with the contemplated
transactions;
(iv) the fees and expenses of Baker & Botts, L.L.P.,
special counsel for the Owner Trustee, for their services
rendered in connection with the negotiation, execution and
delivery of the Operative Agreements and other documentation
prepared in connection with the contemplated transactions;
(v) the fees and expenses of Richards, Layton &
Finger, special counsel for the Indenture Trustee, for their
services rendered in connection with the negotiation,
execution and delivery of the Operative Agreements and other
documentation prepared in connection with the contemplated
transactions;
(vi) with respect to the Lease Term Commencement
Date, the initial fees and expenses of each of the Owner
Trustee and the Indenture Trustee;
(vii) the fees and expenses of Accuval Associates,
Incorporated, for their services rendered in connection with
delivering the Appraisals required by Sections 4.4(a) and
4.5(f);
(viii) the fees and expenses of any environmental
consultants retained by the Owner Participant with respect
to the Units or the Premises or matters related thereto;
(ix) the fees and expenses of an independent
engineering consulting firm retained by the Owner
Participant in connection with the written Engineering
Report to be provided to the Owner Participant pursuant to
Section 4.4(e);
(x) the expenses of Bank of America in connection
with arranging the debt in the transactions contemplated by
the Operative Agreements; and the reasonable out-of-pocket
expenses of the Owner Participant, the Construction Loan
Agent, the Construction Lenders and Bank of America;
(xi) the Commitment Fee;
(xii) the debt placement fees of Bank of America; and
(xiii) any and all fees and costs associated with the
arrangement of the Swap Agreement.
The foregoing agreement to pay Transaction Costs is in addition
to the Owner Participant's Commitment, but subject to the last
sentence of Section 2.4(a). Notwithstanding the foregoing, the
Owner Participant shall not be obligated to pay any Transaction
Cost if the invoice therefor is not delivered within 120 days
after the Lease Term Commencement Date.
(b) Other Expenses After the consummation of the
transactions contemplated by this Agreement on the Lease Term
Commencement Date, the Lessee agrees to pay when due: (i) the
fees and expenses of the Owner Trustee, the Indenture Trustee,
the Note Purchaser, the Construction Loan Agent, the Construction
Lenders and the Owner Participant (including reasonable legal
fees and expenses) incurred in connection with any supplements,
amendments, modifications or alterations of any of the Operative
Agreements, and all recording and filing fees, stamp taxes and
other recording or filing taxes incurred in connection therewith;
(ii) the ongoing fees and expenses (including reasonable legal
fees and expenses) of the Owner Trustee under the Operative
Agreements (including, without limitation, Section 6.2 of the
Trust Agreement); (iii) the ongoing fees and expenses of the
Indenture Trustee under the Operative Agreements (including,
without limitation, Section 9.5 of the Indenture); (iv) all
recording and filing fees, stamp taxes and other recording or
filing taxes in connection with any continuation statements or
other documents filed to maintain and protect the rights of the
parties under the Operative Agreements; (v) all other fees and
expenses (including reasonable legal fees and expenses) incurred
by the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Note Purchaser in connection with endeavoring
to administer or enforce the Operative Agreements; and (vi) all
Transaction Costs not required to be paid by the Owner
Participant.
(c) Failure to Consummate Transaction.
Except as set forth in the following sentence, if the
transactions contemplated hereby on the Effective Date, any
Purchase Date or the Lease Term Commencement Date are not
consummated for any reason, the Construction Agent shall pay all
Transaction Costs. Notwithstanding anything contained herein to
the contrary, if the transactions contemplated hereby are not
consummated as a result of (i) the Owner Participant's failure to
make its equity investment as required by Section 2.4(a) after
the conditions specified in Sections 4.3, 4.4 and 4.8 have been
satisfied or waived by it in writing, the Owner Participant shall
pay (or reimburse the Owner Trustee to the extent such
Transaction Costs were paid as part of any Construction Advances)
its own fees and expenses and the fees and expenses of its
special counsel, Mayer, Brown & Platt; or (ii) the Note
Purchaser's failure to purchase the Note as required by Section
2.5 after the conditions specified in Sections 4.3, 4.5 and 4.8
have been satisfied or waived by it in writing, no debt placement
fee with respect to the Note Purchaser shall be payable, and the
Note Purchaser shall pay its own fees and expenses and the fees
and expenses of its special counsel.
(d) Invoices. All invoices in respect of Transaction Costs
shall be directed to the Owner Participant and the Lessee at
their respective addresses set forth in Section 10.2.
2.9 Calculation of Adjustments to Basic Rent, Stipulated
Loss Value, Termination Value and Note Amortization;
Confirmation and Verification.
(a) Calculation of Adjustments.
(i) In the event that, with respect to the Units:
(A) there is any variation from the Pricing Assumptions set
forth on Schedule 8 (other than the application of Section
168(d)(3) of the Code), (B) a Change in Tax Law occurs, or
(C) a Proposed Change in Tax Law is finalized or enacted, as
applicable; then, subject to Section 2.9(c), in each such
case, the Owner Participant shall recalculate (and adjust
upward or downward, as appropriate) the payments or amounts,
as the case may be, of Basic Rent, Stipulated Loss Values
and Termination Values and, solely upon written direction
from the Lessee, and subject to the satisfaction of the
conditions contained in Section 2.9(d) and in accordance
with the procedures set forth in Section 2.14 of the
Indenture, the amortization of the Notes, in each case for
or with respect to such Units (x) first to preserve the Net
Economic Return that the Owner Participant would have
realized had the events described in the foregoing clauses
(A) through (C) not occurred, and (y) then to minimize to
the greatest extent possible, consistent with the
requirements set forth in this Section 2.9(a)(i), the
present value (discounted quarterly at an interest rate per
annum equal to the applicable Debt Rate) of the payments of
Basic Rent for such Units, taken together as a whole. In
the case of the events described in clause (A) of the
immediately preceding sentence actually known to the Lessor
at least five (5) Business Days prior to the Lease Term
Commencement Date, Lessor shall prepare adjustments (upward
or downward) no later than three (3) Business Days prior to
the Lease Term Commencement Date. In the case of the events
described in clauses (A) or (B) of the immediately preceding
sentence, such adjustments shall be made on or prior to, and
shall be effective as of the Lease Term Commencement Date;
in the case of the events described in clause (C) of such
sentence, such adjustments shall be effective as of the next
Rent Payment Date which is at least 30 days after the event
giving rise to such adjustment. In performing any such
recalculation and in determining the preservation of the
Owner Participant's Net Economic Return, the Owner
Participant shall utilize the same methods and assumptions
as are set forth in the definition of Net Economic Return
(other than those assumptions which changed as a result of
any of the events described in clauses (A) through (C) of
the first sentence of this paragraph (i) necessitating such
recalculation). Such adjustments shall comply with: (1)
Section 467 of the Code (including regulations, rulings and
decisions if any, issued under, or with respect to, Section
467 of the Code prior to such adjustment and applicable
thereto) such that no such adjustment shall cause the Lease
to be a disqualified leaseback within the meaning of such
Code section, (2) Revenue Procedures 75-21 and 75-28
Sections 4.02(5), 4.07(1) and 4.08(1) (except as applicable
to uneven payments of rent), and (3) to the extent possible,
while still preserving the Owner Participant's Net Economic
Return and meeting the other requirements of this Section
2.9(a), the requirements of FASB Statement No. 13 in order
that the Lease will qualify as an operating lease
thereunder. Each adjustment shall be reflected in an
appropriate adjustment of the appropriate portions of
Schedules 2, 3, 4 and/or 5 and/or 7 to this Agreement (and
the related adjustments to the assumptions contained in
clauses (A) through (C) above).
(ii) The adjustments to the Schedules referred to in
paragraph (i) above shall be made, subject always to
Sections 2.9(b) and 2.9(c), by the Owner Participant without
the consent of the other parties hereto.
(b) Confirmation and Verification. Upon completion of any
recalculation with respect to the Units described above in
Section 2.9(a), a duly authorized officer of the Owner
Participant shall provide a certificate to the Lessee, the
Indenture Trustee and each holder of a Note either (x) stating
that for such Units the payments of Basic Rent, Stipulated Loss
Values, Termination Values and amortization of the Notes with
respect to the Lease Term as are then set forth in the
appropriate portions of Schedules 2, 3, 4 and 5 of this Agreement
do not require change, or (y) setting forth such adjustments to
such payments of Basic Rent, Stipulated Loss Values, Termination
Values or amortization of the Notes with respect to the Lease
Term as have been calculated by the Owner Participant in
accordance with Section 2.9(a) above. Such certificate shall
describe in reasonable detail the basis for any such adjustments.
If the Lessee shall so request within 30 days of receiving the
certificate described in the first sentence of this Section
2.9(b), the recalculation of any such adjustments described in
this Section 2.9 shall be verified by a nationally recognized
firm of certified public accountants (other than the firm which
then prepares the Lessee's audited statements unless the Owner
Participant otherwise consents, which consent may be withheld in
the Owner Participant's sole and absolute discretion) selected by
the Lessee and reasonably acceptable to the Owner Participant,
and any such recalculation of such adjustment as so verified
shall be binding on the Lessee and the Owner Participant. Such
accountants shall be requested to make their determination within
30 days of its appointment by the Lessee. The Owner Participant
shall provide to a representative of such accountants, on a
confidential basis (and such accountants shall be obligated to
execute a confidentiality agreement in form and substance
reasonably acceptable to the Owner Participant), the original
assumptions used by the Owner Participant and the methods used by
the Owner Participant in the original calculation of, and any
recalculation of, Basic Rent, Stipulated Loss Values, Termination
Values and amortization of the Notes and such other information
as is necessary to determine whether the computation is accurate
and in conformity with the provisions of this Agreement. In no
event shall the Owner Participant be required to provide any tax
return in connection with any verification. All materials
provided by the Owner Participant shall remain the property of
the Owner Participant and shall be returned to the Owner
Participant contemporaneously with the completion of the
verification process. The costs of such verification shall be
borne by the Lessee, except that if such accounting firm s
verification shall result in a decrease in the net present value
of Basic Rent, as compared to the net present value of Basic Rent
proposed by the Owner Participant, each discounted at the
applicable Debt Rate, by more than 15 basis points, then the
Owner Participant shall pay the costs of such verification.
(c) Sufficiency of Rent, etc.; Compliance of Adjustments.
Anything contained in this Section 2.9 to the contrary
notwithstanding, any adjustment made to the payments of Basic
Rent, Stipulated Loss Values or Termination Values with respect
to the Lease Term, pursuant to the foregoing, shall comply with
the following requirements: (i) each installment of Basic Rent,
on the Lease Term Commencement Date and as adjusted pursuant to
this Section 2.9, under any circumstances and in any event, will
be in a scheduled amount at least sufficient for the Owner
Trustee to pay in full as of the due date of such installment any
scheduled payment of principal of and interest on the Notes
required to be paid on such due date of such installment of Basic
Rent, and (ii) Stipulated Loss Values and Termination Values, on
the Lease Term Commencement Date and as adjusted pursuant to this
Section 2.9, under any circumstances and in any event (assuming
there has been performance in full of the Lease), will be in a
scheduled amount at least sufficient to pay in full as of the
date of scheduled payment thereof, together with any installment
of Basic Rent, payable in arrears, scheduled to be payable as of
the date of scheduled payment thereof, the aggregate unpaid
principal of and all unpaid interest on the Notes accrued to the
date on which Stipulated Loss Value or Termination Value, as the
case may be, is to be paid in accordance with the terms of the
Lease.
(d) Adjustment Due to Change in Transaction Costs or Change
in Tax Rate. If the Transaction Costs are other than 4.0% of
Total Equipment Cost, the principal amortization schedule for the
Notes may be modified by the Owner Participant, in accordance
with the procedure set forth in Section 2.14 of the Indenture;
provided, however, that (A) no such modification shall (1) change
the unpaid principal amount of any Outstanding Note or (2) extend
the Maturity Date of any Note, (B) after taking such modification
into account, the average life to maturity of such Notes shall
not be different by more than 180 days from the average life to
maturity of the Notes set out in Schedule 5 at the date hereof
and (C) any such adjustment resulting from a change in the
assumed Transaction Costs shall occur no later than six months
from the Lease Term Commencement Date. In addition, Basic Rent,
Stipulated Loss Values and Termination Values with respect to the
Units may be adjusted due to such Change in Tax Rate so long as
Owner Participant holds Lessee harmless, on a net after-tax
basis, from any out-of-pocket expenses attributable to such
adjustment and any adverse tax effect of such adjustment, or
Owner Participant s payment of such expenses and such adjustment
(i) shall comply with Section 2.9(c), (ii) shall not (x) increase
the present value (discounted monthly at an interest rate per
annum equal to the applicable Debt Rate) of the payments of Basic
Rent and (y) as of any date, increase the sum of the present
value (discounted monthly at an interest rate per annum equal to
the applicable Debt Rate) of the payments of Basic Rent through
such date plus the present value (discounted monthly at an
interest rate per equal to the applicable Debt Rate) of the
Stipulated Loss Value or Termination Value as of such date, and
(iii) if the Lease qualified as an operating lease under FASB
Statement No. 13 prior to such adjustment, shall be made in such
a way so as to continue to comply with the requirements of FASB
Statement No. 13.
2.10 Postponement of Closing; Termination of Transaction;
and Expiration of Commitment.
(a) Postponement. The scheduled Closing may be postponed
from time to time for any reason (but to no later than the
Scheduled Lease Commencement Date subject to Section 2.6(a)) if
the Lessee gives the Participants and the Trustees facsimile
notice (promptly confirmed by telephone) of the postponement and
notice of the date to which such Closing has been postponed, the
notice of postponement to be received by each party no later than
11:00 a.m., New York City time, on the Scheduled Lease
Commencement Date, and the term Scheduled Lease Commencement
Date as used in this Agreement thereupon shall mean such
postponed Scheduled Lease Commencement Date .
(b) Interest on Participant Funds. In the event of any
postponement of the Scheduled Original Lease Commencement Date
pursuant to Section 2.10(a) or if the Lease Term Commencement
Date fails to occur: (i) the Lessee will reimburse each
Participant for the loss of the use of its funds (other than
funds which are Construction Advances plus accrued and unpaid
(and not previously capitalized) interest thereon) occasioned by
such postponement by paying to such Participant on demand
interest at a rate per annum equal to the Debt Rate, for the
period from and including the Scheduled Original Lease
Commencement Date, if such Participant has made its funds
available, to but excluding the earlier of the date upon which
such funds are returned (unless such funds are returned after
1:00 p.m. (New York City time) in which case such date of return
shall be included) or the Lease Term Commencement Date; provided
that the Lessee shall in any event pay to each Participant at
least one day's interest on the amount of such funds, unless such
Participant shall have received, prior to 1:00 p.m. (New York
City time) on the Business Day preceding the Scheduled Original
Lease Commencement Date, a notice of postponement of the
Scheduled Original Lease Commencement Date pursuant to Section
2.10(a); and (ii) the Owner Trustee will return not later than
1:00 p.m. (New York City time), on the first Business Day
following the Scheduled Original Lease Commencement Date, any
such funds which it shall have received from such Participant and
originally expected to have been used in the Closing on the
Scheduled Original Lease Commencement Date. Any Excluded
Transaction Costs which the Owner Participant has made available
shall be treated as a part of the funds subject to this Section
2.10(b).
(c) Expiration of Commitment. Notwithstanding the
provisions of Section 2.10(a) or any other provision hereof,
neither the Owner Participant nor any Note Purchaser shall be
under any obligation to make its funds available beyond 1:00
p.m., New York City time, on June 30, 1999.
(d) Several Commitments. The obligations hereunder of the
Participants shall be several and not joint and no Participant
shall be liable or responsible for the acts or defaults of any
other Participant.
2.11 Sufficiency of Note and Cash Payment. Notwithstanding
anything to the contrary contained in this Agreement, the
aggregate of (i) the principal amount of the Note which
Bayerische shall receive on the Lease Term Commencement Date and
(ii) any cash payment which Bayerische shall receive from the
Owner Trustee on the Lease Term Commencement Date (such aggregate
of (i) and (ii), the Aggregate Lease Term Commencement Date
Payment ) shall be not less than the aggregate of (x) the portion
of the accrued and unpaid Commitment Fee payable to Bayerische in
its capacity as a Construction Lender, and (y) the aggregate
outstanding principal amount of, and accrued and unpaid (and not
previously capitalized) interest payable upon, the Construction
Advances made by Bayerische in its capacity as a Construction
Lender. The Construction Loan Agent s calculation with respect to
whether the Aggregate Lease Term Commencement Date Payment is
sufficient in terms of the foregoing sentence shall control
absent demonstrable error.
SECTION 3 REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Owner Trustee.
Boatmen's, both in its individual capacity and as Owner Trustee
(except that (x) the representations and warranties in Sections
3.1(a), 3.1(b), 3.1(d)(i), 3.1(d)(ii), 3.1(e)(i), 3.1(e)(ii),
3.1(f), 3.1(h)(i) and 3.1(j)(i) are made by Boatmen's solely in
its individual capacity and (y) the representations and
warranties in Sections 3.1(c), 3.1(d)(iii), 3.1(e)(iii),
3.1(h)(ii) and 3.1(j)(ii) are made by the Owner Trustee solely in
its capacity as such), represents and warrants to the other
parties hereto, notwithstanding the provisions of Section 10.12
or any similar provision in any other Operative Agreement, that:
(a) Organization and Power. Boatmen's (i) is a
national banking association, duly organized, validly
existing and in good standing under the laws of the United
States of America, (ii) has full corporate power, authority
and legal right to carry on its business as now conducted
and to enter into and perform its obligations hereunder and
under the Trust Agreement, and (iii) (assuming due
authorization, execution and delivery of the Trust Agreement
by the Owner Participant) has full power and authority, as
Owner Trustee, and, to the extent expressly provided herein
or therein, in its individual capacity, to enter into and
perform its obligations under each of the Owner Trustee
Agreements.
(b) Authorization, Execution and Validity. (i)
Boatmen's has duly authorized, executed and delivered the
Trust Agreement; (ii) assuming the due authorization,
execution and delivery of the Trust Agreement by the Owner
Participant, the Owner Trustee, in its trust capacity, and,
to the extent expressly provided herein or therein, in its
individual capacity, has duly authorized, executed and
delivered each of the other Owner Trustee Agreements; and
(iii) the Trust Agreement and this Agreement constitute
legal, valid and binding obligations of Boatmen's,
enforceable against it in its individual capacity (but, with
respect to this Participation Agreement, only to the extent
of representations, warranties, covenants and agreements
expressly made by Boatmen's in its individual capacity) in
accordance with their respective terms, except as enforce-
ability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the
enforcement of creditors', mortgagees' or lessors' rights in
general and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(c) Further Validity Warranty. Assuming the due
authorization, execution and delivery of the Trust Agreement
by the Owner Participant, each of the Owner Trustee
Agreements (other than the Trust Agreement) constitutes, or
when entered into will constitute, a legal, valid and
binding obligation of the Owner Trustee enforceable against
the Owner Trustee in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the
enforcement of creditors', mortgagees' or lessors' rights in
general and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(d) No Conflict. (i) The execution, delivery and
performance by Boatmen's, in its individual capacity and as
Owner Trustee, of each Owner Trustee Agreement and
compliance by Boatmen's, in its individual capacity and as
Owner Trustee, with all of the provisions hereof and thereof
do not and will not contravene any law or regulation of the
United States of America or the State of Texas governing the
banking or trust powers of Boatmen's, in its individual
capacity and as Owner Trustee; (ii) the execution, delivery
and performance by Boatmen's of each Owner Trustee Agreement
and compliance by Boatmen's with all of the provisions
hereof and thereof do not and will not contravene any order
of any court or Governmental Authority applicable to or
binding on Boatmen's or contravene the provisions of, or
constitute a default by Boatmen's under, or result in the
creation of any Lien upon the Trust Estate under Boatmen's
charter documents or by-laws or any indenture, mortgage,
contract or other agreement or instrument to which Boatmen's
is a party or by which Boatmen's or any of its property is
bound or affected; and (iii) the execution, delivery and
performance by the Owner Trustee of each Owner Trustee
Agreement and compliance by the Owner Trustee with all the
provisions hereof and thereof do not and will not contravene
any order of any Governmental Authority or contravene the
provisions of, or constitute a default by the Owner Trustee
under, or result in the creation of any Lien upon the Trust
Estate under any indenture, mortgage, contract or other
agreement or instrument to which the Owner Trustee is a
party or by which the Owner Trustee or any of its property
is bound or affected.
(e) Litigation. (i) There are no proceedings
pending or, to the knowledge of Boatmen's, threatened
against Boatmen's, in its individual capacity or as Owner
Trustee, before any Governmental Authority which
individually or in the aggregate would impair the ability of
Boatmen's, in its individual capacity or as Owner Trustee,
to perform its obligations under the Owner Trustee
Agreements or which question the validity of any Owner
Trustee Agreement or any action taken or to be taken
pursuant thereto; (ii) Boatmen's is not in default with
respect to any order of any Governmental Authority, the
default under which would materially adversely affect the
ability of Boatmen's, in its individual capacity or as Owner
Trustee, to perform its obligations under the Owner Trustee
Agreements; and (iii) the Owner Trustee is not in default
with respect to any order of any Governmental Authority, the
default under which would materially adversely affect the
ability of the Owner Trustee to perform its obligations
under the Owner Trustee Agreements.
(f) Consents. No consent, approval or authorization
of, or filing, registration or qualification with, or giving
of notice or taking of any other action with respect to, any
state or local Governmental Authority or any United States
federal Governmental Authority regulating the banking or
trust powers of Boatmen's, in its individual capacity or as
Owner Trustee, is required in connection with the execution,
delivery and performance by Boatmen's, in its individual
capacity and as Owner Trustee, of any of the transactions
contemplated hereby or of the Trust Agreement or of any of
the transactions contemplated by any of the other Owner
Trustee Agreements, other than any such consent, approval,
authorization, filing, registration, qualification, notice
or action as has been duly obtained, given or taken and is
in full force and effect.
(g) Title. On each Purchase Date (other than a
Purchase Date on which only progress payments are being
made), the Owner Trustee shall receive from each seller of a
Unit such title to such Unit as was conveyed to it by such
seller.
(h) Default. (i) Boatmen's is not in default under
any of the Owner Trustee Agreements; and (ii) the Owner
Trustee is not in default under any of the Owner Trustee
Agreements.
(i) Chief Executive Office. Both the principal
place of business and the chief executive office (as such
term is used in the Uniform Commercial Code) of the Owner
Trustee are located at 701 South Taylor Street, Amarillo,
Texas 79101, Attention: Corporate Trust Department. The
place where its records concerning the Units and all its
interest in, to and under all documents relating to the
Trust Estate is located at Boatmen's Trust Company of Texas,
701 South Taylor Street, Amarillo, Texas 79101, Attention:
Corporate Trust Department.
(j) No Liens. (i) The Owner Trustee's right, title
and interest in and to the Units and the Lease are free of
any Lessor's Liens attributable to Boatmen's, in its
individual capacity; and (ii) the Owner Trustee has not
conveyed an interest in the Trust Estate to any Person, or
subjected the Trust Estate to any Lien except pursuant to
the Lease, the Indenture and the Construction Loan Agreement
(which conveyance under the Construction Loan Agreement with
respect to a Unit subject to the Indenture will be
terminated as of the Lease Term Commencement Date).
3.2 Representations and Warranties of the Lessee. The
Lessee represents and warrants to the other parties hereto that:
(a) Due Organization. The Lessee is a corporation
duly organized, validly existing and in good standing under
the laws of the State of its incorporation, and has the
corporate power and authority to conduct its business as now
conducted, to own or hold under lease its properties and to
execute, deliver and perform its obligations under the
Operative Agreements to which it is or is to become a party.
The Lessee is duly qualified to do business and is in good
standing in: (i) each jurisdiction in which Units to be
leased by the Lessee are located; and (ii) each other
jurisdiction in which its business is conducted, except
where failure so to qualify or to be in good standing could
not reasonably be expected to have a Material Adverse
Effect.
(b) Due Authorization; No Conflict. Each of the
Operative Agreements to which the Lessee is or is to become
a party has been duly authorized by all necessary corporate
action on the part of the Lessee and has been or on each
Purchase Date or Lease Term Commencement Date, as the case
may be, will have been, duly executed and delivered by the
Lessee, and the execution, delivery and performance thereof
and compliance by the Lessee with all of the provisions
hereof and thereof do not, and on each Purchase Date and the
Lease Term Commencement Date will not (i) require any
approval of the shareholders of the Lessee or any approval
or consent of any trustee or holder of any indebtedness or
obligation of the Lessee, other than such consents and
approvals as have been, or, on or prior to such Purchase
Date and the Lease Term Commencement Date, as the case may
be, will have been, obtained (and are in full force and
effect), (ii) contravene any law or regulation, or any order
of any Governmental Authority binding on the Lessee or any
of its properties, the Units or the Operative Agreements,
(iii) breach or contravene the Lessee's certificate of
incorporation or by-laws; or (iv) contravene or result in
any breach of or creation of any Lien (other than pursuant
to the Operative Agreements) upon any property of the Lessee
under any indenture, mortgage, loan agreement, lease or
other agreement or instrument to which the Lessee is a party
or by which the Lessee or any of its properties is bound.
The Lessee is in compliance with all applicable laws,
including Environmental Laws and Governmental Actions, the
failure to comply with which could reasonably be expected to
have a Material Adverse Effect.
(c) Governmental Action. All Governmental Action,
required in connection with the execution, delivery and
performance by the Lessee of the Operative Agreements to
which it is or is to become a party, has been or will have
been on each Advance Date and the Lease Term Commencement
Date obtained, given or made (and are or will be in full
force and effect), but for those Governmental Actions, all
of which are either (x) not required on the date hereof or
on the related Advance Date or the Lease Term Commencement
Date, as the case may be, and cannot be obtained prior to
such date(s), as the case may be, or (y) for which the
failure to obtain, give or make could not reasonably be
expected to have a Material Adverse Effect.
(d) Enforceability. Each of the Operative
Agreements to which the Lessee is or is to become a party
constitutes, or, when executed and delivered by the Lessee,
will constitute, the legal, valid and binding obligation of
the Lessee, enforceable against the Lessee in accordance
with the terms thereof, except as enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of
creditors', mortgagees' or lessors' rights in general and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
(e) Litigation. Except as disclosed on Schedule 11
hereto, there is no action, suit or proceeding pending or,
to the Lessee's knowledge, threatened and, to the Lessee's
knowledge, there are no facts, circumstances, conditions or
occurrences that would reasonably be expected to form the
basis of a Claim against the Lessee or any Unit before or by
any Governmental Authority that (i) questions the validity
or enforceability of the Operative Agreements to which the
Lessee is or is to become a party or (ii) if adversely
determined, could (whether individually or when aggregated
with other actions, suits or proceedings) be reasonably
expected to have a Material Adverse Effect. The Lessee is
not in default with respect to any order of any Governmental
Authority except as disclosed on Schedule 11, which default
could reasonably be expected to have a Material Adverse
Effect.
(f) No Defaults; Etc. No Lease Default or Lease
Event of Default has occurred or is continuing. The Lessee
is not a party to any agreement or instrument or subject to
any charter or other corporate restriction affecting its
business, properties, financial condition, prospects or
results of operations that could have a Material Adverse
Effect. The Lessee is not in default in, nor has any non-
permanent waiver been granted to the Lessee with respect to
the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any
agreement to which it is a party, which default could be
reasonably expected to have a Material Adverse Effect or
(ii) any other agreement or instrument evidencing or
governing an outstanding principal amount of indebtedness
equal to or in excess of Ten Million Dollars ($10,000,000).
(g) Financial Advisors; Broker's Fee. The Lessee
has not retained any broker, finder, agent (excluding Bank
of America in its capacity as debt placement agent) or
financial advisor in connection with the transactions
contemplated hereby. Neither the Lessee nor any Person
authorized or employed by the Lessee as agent or otherwise
has taken any action the effect of which would be to cause
the Owner Participant, the Trust Estate, the Owner Trustee,
the Note Purchaser, the Construction Lenders, the
Construction Loan Agent or the Indenture Trustee to be
liable for any brokers', finders', agents' or advisors' fees
or commissions or costs of any nature or kind claimed by or
on behalf of brokers, finders, agents or advisors in respect
of the transactions contemplated by the Operative
Agreements, except for the fees of Bank of America as debt
placement agent.
(h) Status of the Lessee. The Lessee is not an
investment company or an affiliated person of an
investment company within the meaning of the Investment
Company Act of 1940, as amended. The Lessee is not subject
to regulation as a Holding Company, 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, as amended.
(i) Title to the Units; Security Interest. On each
Purchase Date (other than a Purchase Date on which only
progress payments are being made), (A) good, marketable and
insurable title to the Units to be settled for on such
Purchase Date will be validly and effectively conveyed to,
and vested in, the Owner Trustee, free and clear of all
Liens, except the Lien of the Construction Loan Agreement
and other Permitted Liens and (B) no filings or recordings
are necessary to validly and effectively convey to the Owner
Trustee good, marketable and insurable title to interest in
such Units, in all cases free and clear of all Liens, except
the Lien of the Construction Loan Agreement and other
Permitted Liens, or to grant to the Construction Loan Agent,
for the benefit of the Construction Lenders, and to perfect,
the Lien provided for in the Construction Loan Agreement,
except for the filings and recordings required by Section
4.2(c). On or prior to each Purchase Date, the Lessee shall
have delivered to special counsel to the Construction Loan
Agent for filing in the appropriate filing offices all
filings and recordings required by Section 4.2(c).
Notwithstanding the foregoing terms of this Section 3.2(i),
or any other term of this Agreement to the contrary, the
parties hereto acknowledge and agree that title to the Units
may pass to the Owner Trustee only on the Lease Term
Commencement Date or on a limited number of dates prior
thereto, the timing of such transfer or transfers of title
to be subject to the terms of (x) the Turnkey Engineering,
Procurement and Construction Agreement, dated as of July 1,
1997, to be entered into between the Construction Agent and
ICF Kaiser Engineers, Inc. (the "Turnkey Construction
Contract"), and (y) prior to the execution and delivery of
the Turnkey Construction Contract, that certain letter of
intent, dated as of February 14, 1997, between the
Construction Agent and ICF Kaiser Engineers, Inc. (the
"Construction Letter of Intent"). On the Lease Term
Commencement Date, (a) good, marketable and insurable title
to all Units will be vested in the Owner Trustee, free and
clear of all Liens, except the Lien of the Lease and the
Indenture and other Permitted Liens, (B) no filings or
recordings are necessary to validly and effectively vest in
the Owner Trustee good, marketable and insurable title to
such Units, in all cases free and clear of all Liens except
the Lien of the Lease and the Indenture and other Permitted
Liens, and (C) upon the filing and recording of all filings
and recordings required by Sections 4.3(c) and 4.5(b), the
Indenture will create a valid and perfected first priority
Lien and security interest in the Indenture Estate,
effective as against creditors of, and purchasers from, the
Owner Trustee and the Lessee, subject only to Permitted
Liens and to the accuracy of the representations and
warranties in Sections 3.1(j) and 3.4(f). On or prior to
the Lease Term Commencement Date, the Lessee has caused to
be filed in the appropriate filing offices all filings and
recordings required by Sections 4.3(c) and 4.5(b).
(j) Applicable Law. The use of the Units (whether
taken individually, as a whole, or otherwise) in a manner
consistent with the Operative Agreements does not violate
any applicable law, including Environmental Laws, or
Governmental Action, the violation of which could reasonably
be expected to have a Material Adverse Effect.
(k) Event of Loss; Eminent Domain. No Event of Loss
has occurred; no event or condition has occurred which
would, with the passage of time or the giving of notice, or
both, constitute an Event of Loss; and no damage, loss,
condemnation, confiscation, theft or seizure has occurred
with respect to any Unit which would result in the potential
for any other party to the Operative Agreements to fail to
consummate the transactions contemplated hereby. There is
no action pending or, to the knowledge of the Lessee,
threatened by any Governmental Authority or other Person to
initiate a taking or use of the Units (whether taken
individually, as a whole, or otherwise) or any part or
portion thereof through condemnation, seizure, requisition
of title, power of eminent domain or otherwise.
(l) Certificates, Permits. The Lessee has obtained
and is in compliance with all Governmental Actions and all
certificates, licenses, and permits, required from all
Governmental Authorities or from private parties, for the
normal use and operation of the Units (whether taken
individually, as a whole, or otherwise) that the failure to
obtain or comply with could reasonably be expected to have a
Material Adverse Effect and all such certificates, licenses,
permits and the like will be final, in full force and effect
and all applicable appeal periods shall have expired on the
Lease Term Commencement Date.
(m) Chief Executive Office. The principal place of
business and chief executive office (as such term is used in
Article 9 of the Uniform Commercial Code) of the Lessee and
the office where it keeps its records concerning its
accounts relating to the transactions contemplated hereby is
accurately set forth opposite the Lessee's name on
Schedule 1.
(n) Use of Proceeds. None of the transactions
contemplated by the Operative Agreements (including, without
limitation, the use of the proceeds indirectly received by
the Lessee from the Construction Advances or sale of the
Note) will result in a violation of Section 7 of the
Securities Exchange Act or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II.
(o) Taxes. All Federal and state income tax returns
and all other material Federal and state tax returns, or
allowable extensions thereof, required to be filed by the
Lessee or any of its Subsidiaries have, in fact, been filed,
and all taxes which are shown to be due and payable in such
returns or extensions have been paid. Except as described
on Schedule 11 hereto, no controversy in respect of
additional income or other material taxes due is pending or,
to the knowledge of the Lessee threatened, other than any
such controversy which, if prosecuted, would result solely
in a Permitted Lien.
(p) Disclosure. The information disclosed in
writing by or on behalf of the Lessee to the Owner
Participant, the Note Purchaser or the Construction Lenders
(including, without limitation, in any memorandum prepared
in connection with the placement of the Note and financial
statements) in connection with the negotiation of the
Operative Agreements and the transactions contemplated
hereby and thereby, when taken as a whole with all other
written disclosures to such parties by the Lessee, do not
contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to
the Lessee that has not been disclosed to the Owner
Participant and the Note Purchaser in writing that could
reasonably be expected to have a Material Adverse Effect.
(q) Subjection to Government Regulation. Except as
disclosed on Schedule 11 hereto, none of the Owner
Participant, any Construction Lender, the Construction Loan
Agent, the Indenture Trustee or any Note Purchaser will
become (i) solely by reason of entering into the Operative
Agreements or the consummation of the transactions
contemplated thereby, subject to ongoing regulation of its
operations by any Governmental Authority; or (ii) upon the
exercise of remedies under the Indenture or the Lease or
upon the expiration thereof, other than with respect to
environmental permits needed for the operation of the Units
(taken together as a whole) and which Lessee has obtained
and which remain in full force and effect, subject to
ongoing regulation of its operations by any Governmental
Authority.
(r) Unsatisfied Judgments. There are no material
outstanding unsatisfied judgments, tax liens or bankruptcy
proceedings against the Lessee.
(s) Foreign Person. The Lessee is not a foreign
person as defined in Section 1445 of the Code.
(t) ERISA.
(i) Prohibited Transactions. Neither the
execution of the Operative Agreements nor the
consummation of any transaction contemplated thereby,
including the making by the Owner Participant of its
investment or the holding by it of the Beneficial
Interest, the making or holding by the Construction
Lenders of the Construction Advances or the purchase or
holding by the Note Purchaser of the Note, will
constitute a "prohibited transaction" (as defined in
section 406 of ERISA or section 4975 of the Code). It
is understood that, in making the representation set
out in this Section 3.2(t)(i), the Lessee is relying,
to the extent applicable, upon the representation of
the Owner Participant set forth at Section 3.4(i), upon
the representation of the Construction Lenders set
forth at Section 3.5(f) and upon the representation of
the Note Purchaser set forth at Section 3.5(e).
(ii) Pension Plans.
(A) Compliance with ERISA. The Lessee and
the ERISA Affiliates are in compliance with
ERISA and the Code, except for such failures to
comply that, in the aggregate for all such
failures, could not reasonably be expected to
have a Material Adverse Effect. To the best of
the Lessee's knowledge, there have been no
"reportable events" (as defined in section 4043
of ERISA) with respect to any Pension Plan that
could result in the termination of such Pension
Plan and give rise to a liability of the Lessee
or any ERISA Affiliate in respect thereof that
could reasonably be expected to have a Material
Adverse Effect.
(B) Funding Status. No "accumulated funding
deficiency" (as defined in section 302 of ERISA
and section 412 of the Code) exists with respect
to Pension Plans of the Lessee, and no ERISA
Affiliate has an accumulated funding deficiency.
Neither the Lessee nor any ERISA Affiliate has
failed to make any contribution or payment to
any Pension Plan which has resulted, or could
reasonably be expected to result, in the
imposition of a Lien under section 302(f) of
ERISA or section 412(n) of the Code.
(C) PBGC. No liability to the Pension
Benefit Guaranty Corporation (the "PBGC") has
been or is expected to be incurred by the Lessee
or any ERISA Affiliate with respect to any
Pension Plan that, individually or in the
aggregate, could reasonably be expected to have
a Material Adverse Effect. No circumstance
exists that constitutes or reasonably could be
expected to constitute grounds under section
4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee
to administer, any Pension Plan or trust created
thereunder, nor has the PBGC instituted any such
proceeding.
(D) Multiemployer Plans. Neither the Lessee
nor any ERISA Affiliate has incurred or
presently expects to incur any withdrawal
liability under Title IV of ERISA with respect
to any Multiemployer Plan that could reasonably
be expected to have a Material Adverse Effect.
(u) Sales Tax. On each Purchase Date (other than
one on which only progress payments are being made) and on
the Lease Term Commencement Date, all sales or use taxes
relating to the sale to the Owner Trustee of the Units to be
settled for on such Purchase Date or on the Lease Term
Commencement Date (if any), as the case may be, which are
then due will have been paid in full or adequate provision
for the payment of which will have been made.
(v) Description of Units. The description of the
Units with respect to a Purchase Date set forth in the
Purchase Notice delivered in connection with such Purchase
Date is, or will be, a true and correct description of the
Units being sold on such date in all material respects.
(w) Condition of Units. No event or condition
currently exists that (i) presently adversely affects the
operation or maintenance of any of the Units (whether taken
together as a functional whole or individually) or (ii)
causes the Lessee to believe that the functional ability of
the Units (whether taken together as a functional whole or
individually) is less than the functional ability for which
the Units were designed.
(x) Lease of Real Property. Except as set forth on
Schedule 7, the Lessee holds a valid leasehold interest
under the Ground Lease to each parcel of real property upon
which any Unit leased or to be leased by the Lessee will be
located; and no Unit leased or to be leased by the Lessee
will be or become subject to any Liens, rights of distraint,
charges, encumbrances or Claims created by or through Lessee
as a result of such Unit being located upon such owned or
leased real property, except for Permitted Liens.
(y) Intellectual Property. All third party
licenses, patents, trademarks, tradenames and similar
rights, if any, necessary for the operation of the Units
(whether taken together as a functional whole or
individually) by the Lessee or a third party are in full
force and effect and have been, or on the Lease Term
Commencement will be, duly assigned or licensed to the Owner
Trustee; it being understood that such licenses, patents,
trademarks, tradenames and similar rights do not include
licenses, patents, trademarks, tradenames and similar rights
related to the products produced by the Lessee with the
Units.
(z) Environmental Matters.
(i) Lessee is in compliance, in all material
respects, with all Environmental Laws and the
requirements of any permits issued under such Laws.
(ii) Lessee has not generated, used, treated,
recycled, stored, released or disposed of, or permitted
the generation, use, treatment, recycling, storage,
release or disposal of Hazardous Substances at, on or
under all or a portion of the Premises or transported
or permitted the transportation of Hazardous Substances
to or from the Premises, the Units and Easements,
except as necessary for the construction and operation
of Lessee's business and in compliance in all material
respects with all applicable Environmental Laws.
(iii) There are no pending or, to the best
knowledge of Lessee, threatened Environmental Claims
against Lessee or the Premises, the Units and
Easements.
The parties acknowledge that the Easements are used in
connection with many operations (in addition to the
operations of Lessee) and that the representations and
covenants made in this Agreement with respect to Easements
apply only to activities involving the Premises or the
Units.
3.3 Representations and Warranties of the Indenture Bank
and the Indenture Trustee. Indenture Bank, in its individual
capacity and in its capacity as Indenture Trustee as set forth
below, represents and warrants to the other parties hereto that:
(a) Organization and Power. Indenture Bank is a
banking corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and
has full corporate power, authority and legal right to carry
on its business as now conducted and to enter into and
perform its obligations hereunder and under each of the
other Indenture Trustee Agreements.
(b) Authorization, Execution and Validity.
Indenture Bank has duly authorized, executed and delivered
each of the Indenture Trustee Agreements other than those to
be executed and delivered on the Lease Term Commitment Date,
and, as of the Lease Term Commitment Date, the Indenture
Trustee Agreements to be delivered on the Lease Term
Commencement Date also will have been duly authorized,
executed and delivered (and in the case of the Note, duly
authenticated) by it. Assuming that each of the Indenture
Trustee Agreements constitutes, or when entered into will
constitute, a legal, valid and binding obligation of all
other parties thereto, enforceable against such parties in
accordance with their respective terms, this Agreement
constitutes, and each of the other Indenture Trustee
Agreements when entered into by the Indenture Bank will
constitute, the legal, valid and binding obligation of
Indenture Bank, enforceable against it in its individual
capacity (to the extent expressly provided therein) in
accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the
enforcement of creditors', mortgagees' or lessors' rights in
general and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(c) Further Validity Warranty. Assuming that each
of the Indenture Trustee Agreements constitutes, or when
entered into will constitute, a legal, valid and binding
obligation of all other parties thereto, enforceable against
such parties in accordance with their respective terms, each
of the Indenture Trustee Agreements constitutes, or when
entered into by the Indenture Trustee will constitute, a
legal, valid and binding obligation of Indenture Trustee
enforceable against it in accordance with its respective
terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors', mortgagees' or
lessors' rights in general and by general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) No Conflict. The execution, delivery and
performance by Indenture Bank and Indenture Trustee of each
Indenture Trustee Agreement and compliance by Indenture Bank
and Indenture Trustee with all of the provisions thereof
binding upon it do not and will not contravene any order of
any Governmental Authority or any law or regulation of the
United States of America or the State of Delaware, in each
case governing the banking or trust powers of Indenture
Bank, or contravene the provisions of, or constitute a
default by Indenture Bank under, or result in the creation
of any Lien (except for Permitted Liens upon the Units) upon
the Indenture Estate under its corporate charter or by-laws
or any indenture, mortgage, contract or other agreement or
instrument to which Indenture Bank is a party or by which
Indenture Bank or any of its property is bound or affected.
(e) Litigation. There are no proceedings pending
or, to the knowledge of Indenture Bank, threatened against
Indenture Bank, in its individual capacity or as Indenture
Trustee, before any Governmental Authority governing the
banking or trust powers of the Indenture Bank or the
Indenture Trustee which individually or in the aggregate
would impair the ability of the Indenture Bank or the
Indenture Trustee to perform its respective obligations
under this Agreement or any other Indenture Trustee
Agreement or which question the validity of this Agreement
or any other Indenture Trustee Agreement or any action taken
or to be taken pursuant hereto or thereto. Indenture Bank
is not in default with respect to any order of any
Governmental Authority governing the banking or trust powers
of the Indenture Bank, the default under which would affect
adversely the ability of the Indenture Bank or the Indenture
Trustee to perform its obligations under this Agreement or
any other Indenture Trustee Agreement.
(f) Consents. No consent, approval or authorization
of, or filing, registration or qualification with, or giving
of notice or taking of any other action with respect to, any
state or local Governmental Authority or any United States
federal Governmental Authority regulating the banking or
trust powers of Indenture Bank is required in connection
with the execution, delivery and performance by Indenture
Bank, in its individual capacity or as Indenture Trustee, of
any of the transactions contemplated hereby or of any of the
transactions contemplated by any of the other Indenture
Trustee Agreements, other than any such consent, approval,
authorization, filing, registration, qualification, notice
or action as has been duly obtained, given or taken and is
in full force and effect.
(g) Default. The Indenture Trustee is not in
default under any of the Indenture Trustee Agreements.
3.4 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to
the other parties hereto that:
(a) Organization and Power. The Owner Participant
is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has
the power, authority and legal right to carry on its
business as now conducted, and has the power, authority and
legal right to execute, deliver and perform its obligations
under the Owner Participant Agreements.
(b) Authorization, Execution and Validity. The
Owner Participant Agreements have been duly authorized by
all necessary action, executed and delivered (or, in the
case of each other Owner Participant Agreement executed and
delivered in relation to a Purchase Date or the Lease Term
Commencement Date, on such Purchase Date or the Lease Term
Comment Date, as the case may be, will have been duly
executed and delivered) by the Owner Participant; and
(assuming the due authorization, execution and delivery by
each other party thereto) constitute (or, in the case of
each other Owner Participant Agreement executed and
delivered in relation to a Purchase Date or the Lease Term
Commencement Date, on such Purchase Date or the Lease Term
Commencement Date, as the case may be, will constitute)
legal, valid and binding obligations of the Owner
Participant, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors', mortgagees' or
lessors' rights in general and by general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) No Conflict. The execution, delivery and
performance by the Owner Participant of each Owner
Participant Agreement and compliance by the Owner
Participant with all of the provisions thereof do not and
will not contravene any law or regulation, or any order of
any Governmental Authority applicable to or binding on the
Owner Participant (it being understood that the Owner
Participant makes no representation or warranty relating to
the nature of the Units or the Premises or the laws,
regulations or orders pertaining thereto or pertaining to
the use thereof), or contravene the provisions of, or
constitute a default by the Owner Participant under, or
result in the creation of any Lien (except for Permitted
Liens upon the Units) upon the Units under its certificate
of incorporation or any indenture, mortgage, contract or
other agreement or instrument to which the Owner Participant
is a party or by which the Owner Participant or any of its
property is bound or affected. The representation and
warranty contained in this Section 3.4(c) does not
constitute any representation or warranty as to ERISA or
regulations thereunder.
(d) Litigation. There is no action, suit or
proceeding pending or, to the knowledge of the Owner
Participant, threatened against the Owner Participant before
or by any Governmental Authority that (i) questions the
validity or enforceability of any Owner Participant
Agreement or (ii) if adversely determined (whether
individually or when aggregated with other actions, suits or
proceedings) would materially and adversely affect its
ability to perform its obligations under the Owner
Participant Agreements. The Owner Participant is not in
default with respect to any order of any Governmental
Authority, the default under which would materially affect
adversely the ability of the Owner Participant to perform
its obligations under the Owner Participant Agreements.
(e) Governmental Actions. No Governmental Action on
the part of the Owner Participant is required in connection
with the execution, delivery and performance by the Owner
Participant of the Owner Participant Agreements (it being
understood that the Owner Participant makes no
representation or warranty relating to the nature of the
Units or the Premises or the laws, regulations or orders
pertaining thereto).
(f) No Liens. The Trust Estate is free of any
Lessor's Liens attributable to the Owner Participant.
(g) Default. The Owner Participant is not in
default under any of the Owner Participant Agreements. No
Indenture Default or Indenture Event of Default with respect
to the Owner Participant has occurred and is continuing.
(h) Investment Company. The Owner Participant is
not an investment company or an affiliated person of an
investment company within the meaning of the Investment
Company Act of 1940, as amended.
(i) ERISA. The Owner Participant is not an
employee benefit plan within the meaning of Section 3(3)
of ERISA which is subject to Title I of ERISA, or a plan
within the meaning of Section 4975 of the Code or an entity
that is deemed to hold plan assets within the meaning of
29 C.F.R. Section 2510.3-101 of any such employee benefit plan or
plan (collectively, an "ERISA Plan"), and no part of the
funds to be advanced by the Owner Participant pursuant to
Section 2.4 will constitute assets of an ERISA Plan.
(j) Broker's Fees. Neither the Owner Participant
nor any Person authorized or employed by the Owner
Participant as agent or otherwise has taken any action the
effect of which would be to cause the Trust Estate, the
Owner Trustee, the Lessee, the Note Purchaser, the
Construction Lenders, the Construction Loan Agent or the
Indenture Trustee to be liable for any brokers', finders',
agents' or advisors' fees or commissions or costs of any
nature or kind claimed by or on behalf of brokers, finders,
agents or advisors in respect of the transactions
contemplated by the Operative Agreements.
3.5 Representations, Warranties and Covenants Regarding
Beneficial Interest and Notes.
(a) Offers by the Owner Trustee. Boatmen's
represents and warrants to the other parties hereto that, as
of the date hereof, as of each Advance Date and as of the
Lease Term Commencement Date, neither the Owner Trustee
(whether acting in its individual capacity or as Owner
Trustee) nor any Person authorized or employed by the Owner
Trustee as agent or otherwise in connection with the
placement of any interest in the Construction Notes, the
Note, the Beneficial Interest, the Trust Estate, the
Indenture Trust Estate, the Lease, the Bayer Letter or the
Bayer Support Agreement or any similar interest has directly
or indirectly offered any interest in any of the
Construction Notes, the Note, the Beneficial Interest, the
Trust Estate, the Indenture Trust Estate, the Lease, the
Bayer Letter or the Bayer Support Agreement, or any similar
interest for sale to, or directly or indirectly solicited
any offers to buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any Person.
(b) Offers by the Lessee. The Lessee represents and
warrants to the other parties hereto that, as of the date
hereof, as of each Advance Date and as of the Lease Term
Commencement Date, it has not, nor has any Person authorized
or employed by it as agent or otherwise in connection with
the placement of the Construction Notes, the Note, the
Beneficial Interest, the Trust Estate, the Indenture Estate,
the Lease, the Bayer Letter or the Bayer Support Agreement,
directly or indirectly offered any interest in the Units
(whether individually or taken together as a whole), the
Construction Notes, the Note, the Beneficial Interest, the
Trust Estate, the Indenture Estate, the Lease, the Bayer
Letter or the Bayer Support Agreement, or any similar
securities of the Lessee or the Owner Trustee, for sale to,
or directly or indirectly solicited any offers to buy any
thereof from, or otherwise approached or negotiated with
respect thereto with, any Person in violation of the
Securities Act or any state securities laws, and neither it
nor any Person authorized or employed by it as agent or
otherwise in connection with the placement of the
Construction Notes or the Note, the Beneficial Interest, the
Trust Estate, the Indenture Estate, the Lease, the Bayer
Letter or the Bayer Support Agreement has taken any action
which would subject any interest in the Construction Notes,
the Units, the Note, the Beneficial Interest, the Trust
Estate, the Indenture Estate, the Lease, the Bayer Letter or
the Bayer Support Agreement to the registration requirements
of Section 5 of the Securities Act or any state securities
laws.
(c) Securities Covenant. Each of the Owner Trustee
and the Lessee covenants and agrees as to itself that
neither it nor anyone acting on the behalf of it will:
(i) offer the Beneficial Interest, the Trust
Estate or any part thereof or any similar security for
issue or sale to, or solicit any offer to acquire any
thereof from, or otherwise approach or negotiate with,
anyone so as to violate the provisions of Section 5 of
the Securities Act, or any state securities laws, or
(ii) offer the Construction Notes, the Notes
or any part thereof or any similar security for issue
or sale to, or solicit any offer to acquire any thereof
from, or otherwise approach or negotiate with, anyone
so as to violate the provisions of Section 5 of the
Securities Act or any state securities laws.
(d) Purchase for Investment. Each Participant
represents and warrants to each other Participant, the
Lessee, and the Trustees that, as of the Lease Term
Commencement Date, such Participant is purchasing the
Interest (as hereinafter defined) to be acquired by it for
its account with no present intention of distributing such
Interest or any part thereof in any manner which would
violate the Securities Act or state securities laws, but
without prejudice, however, to the right of such Participant
at all times to sell or otherwise dispose of all or any part
of such Interest in compliance with the Securities Act and
any state securities laws and, in the case of the Owner
Participant, Section 6.1 hereof or, in the case of the Note
Purchaser, Section 6.13 hereof. The Beneficial Interest and
the Notes are sometimes referred to in the Operative
Agreements collectively as the Interests and individually
as an "Interest".
(e) ERISA Representation, Warranty and Covenant of
Note Purchaser. The Note Purchaser represents, warrants and
covenants that either (i) no part of the funds used by it to
acquire and hold any Note constitutes assets of an ERISA
Plan; or (ii) the source of funds used to acquire and hold
any Note is an "insurance company general account" within
the meaning of Department of Labor Prohibited Transaction
Exemption ( PTE ) 95-60 (issued July 12, 1995), and there is
no employee benefit plan (treating as a single plan all
plans maintained by the same employer or employee
organization) with respect to which the aggregate amount of
the general account reserves and liabilities for all
contracts held by or on behalf of such plan exceed 10% of
the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as
set forth in such Note Purchaser's most recent annual
statement in the form required by the National Association
of Insurance Commissioners as filed with such Note
Purchaser's state of domicile. Any transferee of a Note
shall by its acceptance of such Note be deemed to make one
of the above representations and covenants to Lessee, Owner
Participant, Owner Trustee and Indenture Trustee regarding
the source of funds used to purchase and hold such Note.
(f) ERISA Representation, Warranty and Covenant of
each Construction Lender. Each Construction Lender
represents, warrants and covenants to each of the other
parties that (i) it is not an ERISA Plan, and (ii) no part
of the funds used by it to fund and hold any Construction
Advance constitutes assets of an ERISA Plan.
(g) Reaffirmation on the Lease Term Commencement
Date. The purchase of the Note by the Note Purchaser on the
Lease Term Commencement Date shall constitute a
reaffirmation by such Note Purchaser of its representations
and warranties set forth in this Section 3.5 as of the Lease
Term Commencement Date.
(h) Tax Status of Bayerische. Bayerische is
acquiring its interest in the Note and any Construction
Advance through its New York branch and all principal,
interest and Premium, if any, generated by the Note and any
Construction Advance is expected to be effectively
connected (within the meaning of Section 1441(c) of the
Code and the regulations thereunder) with the conduct of
Bayerische's trade or business in the United States. The
Internal Revenue Service Forms 4224 delivered by Bayerische
to the Owner Participant, the Indenture Trustee, the Lessor
and the Lessee on the date hereof are true and correct and
Bayerische has obtained all approvals needed to execute and
deliver such Forms.
SECTION 4 CLOSING CONDITIONS
4.1 Conditions Precedent to the Making of First
Construction Advance. The obligation of the Owner Trustee to
proceed with the transactions contemplated for it by the
Operative Agreements on the date of the first Construction
Advance, and the obligation of the Construction Lenders to make a
Construction Advance on such date, shall be subject to the
fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably
satisfactory to the addressee or beneficiary thereof), or the
waiver in writing by, the Owner Participant, the Owner Trustee,
the Construction Agent or the Construction Lenders, as
appropriate, of the following conditions hereunder on such date:
(a) Execution of Certain Operative Agreements. This
Agreement, the Trust Agreement, the Construction Notes, the
Construction Agency Agreement, the Facility Documents, the
Support Documents, the Ground Lease Sublease, the Lease, the
Tax Indemnity Agreement, the Security Agreement, the
Construction Loan Agreement, the Leasehold Deed of Trust
(Construction), the Leasehold Deed of Trust (Indenture) and
the Construction Agency Agreement Assignment shall have been
duly executed and delivered by the parties thereto (except
that the execution and delivery of this Agreement and the
other documents referred to above by a party hereto or
thereto shall not be a condition precedent to such party's
obligations hereunder), shall each be in full force and
effect and executed counterparts of each shall have been
delivered to the Owner Participant, the Owner Trustee and
the Construction Lenders or their respective counsel on or
before such first date (except that (A) there shall only be
one executed counterpart of each Construction Note payable
to a Construction Lender, and each Construction Note shall
be delivered to the payee thereof and (B) the Tax Indemnity
Agreement shall only be delivered to the Owner Participant).
(b) Opinions of Counsel. The Owner Trustee, the
Construction Lenders and the Owner Participant shall have
received the favorable written opinion of each of:
(i) David M. Shear, General Counsel of the
Lessee, substantially in the form of Exhibit G-1A;
(ii) Sidley & Austin, special counsel to the
Lessee, substantially in the form of Exhibit G-1B;
(iii) Baker & Botts, L.L.P., special counsel
to the Owner Trustee, substantially in the form of
Exhibit H-1;
(iv) Joseph B. Schubert, Senior Counsel of
the Owner Participant, substantially in the form of
Exhibit I-1A;
(v) Mayer, Brown & Platt, special counsel to
the Owner Participant, substantially in the form of
Exhibit I-1B;
(vi) Fulbright & Jaworski LLP, special Texas
counsel to the Owner Participant, substantially in the
form of Exhibit I-1C;
(vii) Richards, Layton & Finger, special
counsel to the Indenture Trustee, substantially in the
form of Exhibit J-1;
(viii) Paul Berry, Assistant General Counsel of
Bayer, substantially in the form of Exhibit K-1A;
(ix) Jones, Day, Reavis & Pogue, special
counsel to Bayer, substantially in the form of Exhibit
K-1B; and
(x) special local counsel as to real
property and other matters, in form and substance
reasonably satisfactory to the Construction Loan Agent
and the Owner Participant;
provided that receipt by a party hereto of a favorable
written opinion from counsel to such party shall not be a
condition precedent to such party's obligations hereunder.
(c) Corporate Documents. The Owner Trustee, the
Construction Lenders and the Owner Participant shall have
received such documents and evidence with respect to the
Lessee, the Owner Trustee, Bayer and the Owner Participant
as the recipient may reasonably request in order to
establish the consummation of the transactions contemplated
by this Agreement and the other Operative Agreements,
including corporate charters and by-laws, certificates of
incumbency and evidence of the taking of all corporate and
other proceedings in connection herewith and therewith and
compliance with the conditions herein or therein set forth;
provided that receipt by a party hereto of such documents
and evidence with respect to such party shall not be a
condition precedent to such party's obligations hereunder.
(d) Recordation and Filing of Lease, Etc. (i) the
Ground Lease, the Ground Lease Sublease and the Lease
(including any Lease Supplement) (and/or a financing
statement or similar notice thereof if and to the extent
permitted or required by applicable law) shall have been
recorded or filed for record in such public offices as may
be deemed necessary or appropriate by special counsel for
such Participant in order to (A) protect the rights of the
Owner Trustee in the Units and in the balance of the Trust
Estate and (B) perfect the right, title and interest of the
Construction Loan Agent under the Construction Loan
Agreement, and (ii) the Lessee shall provide evidence
satisfactory to the Participants and their respective
counsel that no Liens or other claims exist in respect of
any portion of the Trust Estate in favor of any Person
(other than Permitted Liens). By such recording or filing
of a memorandum of the Ground Lease, the Ground Lease
Sublease or the Lease (including any Lease Supplement)
(and/or a financing statement or similar notice thereof),
neither the Owner Trustee, the Owner Participant nor the
Lessee are acknowledging or implying that the Ground Lease,
the Ground Lease Sublease or Lease (including any Lease
Supplement) constitutes a security agreement or creates a
security interest within the meaning of the Uniform
Commercial Code.
(e) Consents. All approvals and consents of any
trustees or holders of any indebtedness or obligations of
the Lessee which are required in connection with the
transactions contemplated by this Agreement shall have been
duly obtained and shall be in full force and effect.
(f) Governmental Actions. All actions, if any,
required to have been taken on or prior to such first date
in connection with the transactions contemplated by this
Agreement shall have been taken by any Governmental
Authority and all orders, permits, waivers, exemptions,
authorizations and approvals of such entities required to be
in effect on such first date in connection with the
transactions contemplated by this Agreement shall have been
issued, and all such orders, permits, waivers, exemptions,
authorizations and approvals shall be in full force and
effect.
(g) Satisfactory Proceedings. All proceedings taken
in connection with the transactions contemplated by this
Agreement, and all documents necessary to the consummation
thereof or which are addressed to the Owner Participant, the
Owner Trustee, the Construction Agent or the Construction
Lenders, shall be satisfactory in form and substance to such
Person and its respective counsel, and each such Person
shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in
connection with the consummation of such transactions; and
all legal matters in connection with the transactions
contemplated hereby shall be satisfactory to each such
Person and its respective counsel.
(h) Construction Documents. The Construction Letter
of Intent shall be in full force and effect and executed
counterparts thereof shall have been delivered to the Owner
Participant, the Owner Trustee and the Construction Lenders,
or their respective counsel, on or before such date.
4.2 Conditions Precedent to Each Advance Date. The
obligation of the Owner Trustee to proceed with the transactions
contemplated for it on each Advance Date and of the Construction
Lenders to make any Construction Advance on such date (including
the first such date) shall be subject to the fulfillment to the
satisfaction of, or the waiver in writing by, the Owner
Participant, the Owner Trustee and the Construction Lenders, as
appropriate, of the following conditions hereunder on such date:
(a) No Default. No event shall have occurred and be
continuing that constitutes a Construction Agreement Default
or a Construction Agreement Event of Default.
(b) Representations and Warranties. The
representations and warranties of each of the Lessee, the
Owner Trustee and the Owner Participant shall be true and
correct in all material respects on such Advance Date with
the same effect as though made on and as of such date,
except to the extent that such representations and
warranties relate solely to an earlier date (in which case
such representations and warranties were true and correct in
all material respects on and as of such earlier date); and
the Lessee shall have performed and complied with all
agreements and conditions herein contained or contained in
any other Operative Agreement which are required to be
performed or complied with by the Lessee on or before such
date; and the acceptance of the proceeds of the Construction
Advance on such date shall constitute a representation and
warranty of the Lessee to the foregoing effect.
(c) Bill of Sale; UCC Filings. The Owner Trustee
shall have received a bill of sale in substantially the form
attached hereto as Exhibit O from the sellers of the Units,
if any, to be settled for on such date, dated such date
(which bill of sale, if not available from the vendor or
manufacturer of the Units being settled for on such date,
may be prepared by the Construction Agent) transferring to
the Owner Trustee all right, title and interest to such
Units, including, without limitation, legal and beneficial
title to such Units, free and clear of all Liens; and a
Uniform Commercial Code financing statement (or similar
notice thereof if and to the extent permitted or required by
applicable law) shall have been recorded or filed for record
in such public offices as may be deemed necessary or
appropriate by special counsel for the Owner Participant and
the Construction Lenders (or, if not filed, shall have been
delivered to special counsel for the Construction Lenders
for filing in the appropriate filing offices), in order to
(A) perfect the rights, titles and interests of the Owner
Trustee and (B) perfect the right, title and interest of the
Construction Loan Agent under the Construction Loan
Agreement.
(d) No Threatened Proceedings. No action or
proceeding shall have been instituted, nor shall
Governmental Action be threatened before any Governmental
Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental
Authority at the time of such Advance Date to set aside,
restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(e) Notice. The Owner Trustee, the Construction
Loan Agent and the Owner Participant shall have received the
Purchase Notice or the Advance Date Notice, as the case may
be, required pursuant to Section 2.3.
(f) No Illegality. No change shall have occurred
after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by regulatory authorities that would
make it illegal for the Owner Participant, the Owner
Trustee, the Construction Agent or any Construction Lender
to enter into any transaction contemplated by the Operative
Agreements.
(g) Tax Law Change. No adverse change or proposed
change of tax law (including any Change in Tax Law or Change
in Tax Rate) shall have occurred that would not result under
the Operative Agreements in a fully compensating rental
adjustment.
4.3 Conditions Precedent to Investment by the Participants.
The obligation of each Participant to make the investment
specified with respect to such Participant in Sections 2.4, 2.5
and 2.6 (which investment may be made in whole or in part by the
tendering of the Construction Note), and for the Indenture
Trustee and the Owner Trustee to proceed with the transactions
contemplated for it by the Operative Agreements, on the Lease
Term Commencement Date shall be subject to the fulfillment to the
satisfaction of (including, with respect to writings, such
writings being in form and substance reasonably satisfactory to
the addressee or beneficiary thereof), or the waiver in writing
by, such Participant, the Owner Trustee or the Indenture Trustee,
as appropriate, of the following conditions hereunder on the
Lease Term Commencement Date:
(a) Execution of Certain Operative Agreements. This
Agreement, the Trust Agreement, the Facility Documents, the
Support Documents, the Ground Lease Sublease, the Lease, the
Lease Supplements in respect of all of the Units, the
Security Agreement, the Leasehold Deed of Trust
(Construction), the Leasehold Deed of Trust (Indenture), the
Indenture, the Construction Agency Agreement Assignment and
the Note (which, in addition to the provisions of this
Section 4.3, shall comply with the provisions of Section
2.11) shall have been duly executed and delivered by the
parties thereto (except that the execution and delivery of
this Agreement and the other documents referred to above by
a party hereto or thereto shall not be a condition precedent
to such party's obligations hereunder), shall each be in
full force and effect and executed counterparts of each
shall have been delivered to each Participant, the Owner
Trustee and the Indenture Trustee or their respective
counsel on or before the Lease Term Commencement Date
(except that there shall only be one executed counterpart of
each Note, and each such Note shall be delivered to the
payee thereof).
(b) No Default. No event shall have occurred and be
continuing that constitutes a Lease Default, a Lease Event
of Default, an Indenture Default or an Indenture Event of
Default.
(c) Recordation and Filing of Lease, Etc. (i) the
Ground Lease, the Ground Lease Sublease, the Lease, the
Lease Supplement (and/or a financing statement or similar
notice thereof if and to the extent permitted or required by
applicable law) shall have been recorded or filed for record
in such public offices as may be deemed necessary or
appropriate by special counsel for such Participant in order
to (A) protect the rights of the Owner Trustee in the Units
and in the balance of the Trust Estate and (B) perfect the
right, title and interest of the Indenture Trustee under the
Indenture, and (ii) the Lessee shall provide evidence
satisfactory to the Participants and their respective
counsel that no Liens or other claims exist in respect of
any Unit or any other portion of the Trust Estate or on the
Indenture Estate, in each case, in favor of any Person
(other than Permitted Liens) or exist as a result of any
right, claim or interest in favor of any Person owning or
holding any interest in the Premises or that appropriate
waivers and/or terminations of such Liens or other claims
have been obtained and recorded or filed for record in all
necessary public offices; provided, however, that, in the
case of Permitted Liens described in clause (iv) of the
definition of Permitted Liens, on the Lease Term
Commencement Date there shall be no Liens in favor of ICF
Kaiser Engineers, Inc. or any of its subcontractors which
shall not have been waived or duly paid or otherwise
provided for. By such recording or filing of a memorandum
of the Ground Lease, the Ground Lease Sublease, the Lease or
Lease Supplement (and/or a financing statement or similar
notice thereof), neither the Owner Trustee, the Owner
Participant nor the Lessee are acknowledging or implying
that the Ground Lease, Ground Lease Sublease or Lease
constitutes a "security agreement" or creates a "security
interest" within the meaning of the Uniform Commercial Code.
(d) Closing Certificate of the Lessee. The Owner
Trustee, the Indenture Trustee and each Participant shall
have received an Officer's Certificate of the Lessee dated
such date, to the effect that the representations and
warranties of the Lessee contained in Sections 3.2 and
3.5(b) are true and correct in all material respects on the
Lease Term Commencement Date with the same effect as though
made on and as of said date, except to the extent that the
representations and warranties relate solely to an earlier
date (in which case such representations and warranties were
true and correct in all material respects on and as of such
earlier date), and that the Lessee has performed and
complied with all agreements and conditions contained in any
Operative Agreement which are required to be performed or
complied with by the Lessee on or before said date.
(e) Closing Certificate of the Owner Trustee. The
Indenture Trustee and each Participant shall have received
an Officer's Certificate of the Owner Trustee, in its
individual capacity and as Owner Trustee, dated such date,
to the effect that the representations and warranties of the
Owner Trustee, in its individual capacity and as Owner
Trustee, contained in Sections 3.1 and 3.5(a) are true and
correct in all material respects on the Lease Term
Commencement Date with the same effect as though made on and
as of said date, except to the extent that such
representations and warranties relate solely to an earlier
date (in which case such representations and warranties were
true and correct in all material respects on and as of such
earlier date), and that the Owner Trustee, in its individual
capacity and as Owner Trustee, has performed and complied
with all agreements and conditions contained in any
Operative Agreement which are required to be performed or
complied with by the Owner Trustee, in its individual
capacity and as Owner Trustee, on or before said date. The
delivery of the foregoing certificate shall not be a
condition precedent to the Owner Trustee's obligations
hereunder.
(f) Closing Certificate of the Owner Participant.
The Owner Trustee, the Indenture Trustee and the Note
Purchaser shall have received an Officer's Certificate of
the Owner Participant dated such date, to the effect that
the representations and warranties of the Owner Participant
contained in Sections 3.4 and 3.5(d) are true and correct in
all material respects on the Lease Term Commencement Date
with the same effect as though made on and as of said date,
except to the extent that such representations and
warranties relate solely to an earlier date (in which case
such representations and warranties were true and correct in
all material respects on and as of such earlier date), and
that the Owner Participant has performed and complied with
all agreements and conditions contained in any Operative
Agreement which are required to be performed or complied
with by the Owner Participant on or before said date. The
delivery of the foregoing certificate shall not be a
condition precedent to the Owner Participant's obligations
hereunder.
(g) Closing Certificate of the Indenture Trustee.
The Owner Trustee and each Participant shall have received
an Officer's Certificate of the Indenture Bank, in its
individual capacity and as Indenture Trustee, dated such
date, to the effect that the representations and warranties
of the Indenture Bank, in its individual capacity and as
Indenture Trustee, contained in Section 3.3 are true and
correct in all material respects on the Lease Term
Commencement Date with the same effect as though made on and
as of said date, except to the extent that such representa-
tions and warranties relate solely to an earlier date (in
which case such representations and warranties were true and
correct in all material respects on and as of such earlier
date), and that the Indenture Bank, in its individual
capacity and as Indenture Trustee, has performed and
complied with all agreements and conditions contained in any
Operative Agreement which are required to be performed or
complied with by the Indenture Bank, in its individual
capacity and as Indenture Trustee on or before said date.
The delivery of the foregoing certificate shall not be a
condition precedent to the Indenture Trustee's obligations
hereunder.
(h) Opinions of Counsel. The Owner Trustee, the
Indenture Trustee and each Participant shall have received
the favorable written opinion of each of:
(i) David M. Shear, General Counsel of the
Lessee, substantially in the form of Exhibit G-2A;
(ii) Sidley & Austin, special counsel to the
Lessee, substantially in the form of Exhibit G-2B;
(iii) Baker & Botts, L.L.P., special counsel
to the Owner Trustee, substantially in the form of
Exhibit H-2;
(iv) Joseph B. Schubert, Senior Counsel of
the Owner Participant, substantially in the form of
Exhibit I-2A;
(v) Mayer, Brown & Platt, special counsel to
the Owner Participant, substantially in the form of
Exhibit I-2B;
(vi) Fulbright & Jaworski LLP, special Texas
counsel to the Owner Participant, substantially in the
form of Exhibit I-2C;
(vii) Richards, Layton & Finger, special
counsel to the Indentured Trustee, substantially in the
form of Exhibit J-2;
(viii) Paul Berry, Assistant General Counsel of
Bayer, substantially in the form of Exhibit K-2A;
(ix) Jones, Day, Reavis & Pogue, special
counsel to Bayer, substantially in the form of Exhibit
K-2B; and
(x) special local counsel as to real
property and other matters, in form and substance
reasonably satisfactory to the Participants;
provided that receipt by a party hereto of a favorable
written opinion from counsel to such party shall not be a
condition precedent to such party's obligations hereunder.
(i) Title. After giving effect to the transactions
contemplated hereby on the Lease Term Commencement Date, the
Owner Trustee shall have legal title to and the ownership of
each and every Unit, free and clear of all Liens, except for
Permitted Liens.
(j) Insurance. (i) the insurance coverages required
pursuant to Section 12 of the Lease (including the self-
insurance provisions thereof) shall be in full force and
effect and (ii) the Owner Trustee, the Indenture Trustee and
each Participant shall have received the report of the
Lessee's independent insurance broker required pursuant to
Section 12 of the Lease together with certificates of
insurance evidencing the insurance then carried and
maintained on the Units.
(k) Corporate Documents. The Owner Trustee, the
Indenture Trustee and each Participant shall have received
such documents and evidence with respect to the Lessee,
Bayer, the Owner Trustee, the Indenture Trustee and the
Owner Participant as the recipient may reasonably request in
order to establish the consummation of the transactions
contemplated by this Agreement and the other Operative
Agreements, including corporate charters and by-laws, good
standing certificates, certificates of incumbency and
evidence of the taking of all corporate and other
proceedings in connection herewith and therewith and
compliance with the conditions herein and therein set forth;
provided that receipt by a party hereto of such documents
and evidence with respect to such party shall not be a
condition precedent to such party's obligations hereunder.
(l) No Threatened Proceedings. No action or
proceeding shall have been instituted, nor shall
Governmental Action be threatened before any Governmental
Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental
Authority at the time of the Lease Term Commencement Date to
set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions
contemplated hereby.
(m) Lease Term Commencement Notice. The Owner
Trustee, the Indenture Trustee and each Participant shall
have received the Notice of Lease Commencement required
pursuant to Section 2.6(a).
(n) No Illegality. No change shall have occurred
after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by regulatory authorities that would
make it illegal for any Participant or any Trustee to enter
into any transaction contemplated by the Operative
Agreements.
(o) Related Transactions. The Note Purchaser shall
have purchased its Note in the amount specified in, and
otherwise in accordance with, Sections 2.5 and 2.6, the
Owner Participant shall have advanced funds in the amount
specified in, and otherwise in accordance with Sections 2.4,
2.6, and, with respect to Excluded Transaction Costs,
2.8(a); and the Owner Trustee shall have received the
proceeds thereof; provided that the purchase or advance by a
Participant shall not be a condition precedent to such
Participant's obligations hereunder.
(p) Consents. All approvals and consents of any
trustees or holders of any indebtedness or obligations of
the Lessee which are required in connection with the
transactions contemplated by this Agreement shall have been
duly obtained and shall be in full force and effect.
(q) Governmental Actions. All actions, if any,
required to have been taken on or prior to the Lease Term
Commencement Date in connection with the transactions
contemplated by this Agreement on the Lease Term
Commencement Date shall have been taken by any Governmental
Authority and all orders, permits, waivers, exemptions,
authorizations and approvals of such entities required to be
in effect on the Lease Term Commencement Date in connection
with the transactions contemplated by this Agreement on the
Lease Term Commencement Date shall have been issued, and all
such orders, permits, waivers, exemptions, authorizations
and approvals shall be in full force and effect.
(r) Equipment Cost Certificate. The Owner Trustee,
the Indenture Trustee and each Participant shall have
received an Officer's Certificate of the Lessee certifying
that the Equipment Cost of each Unit is the amount shown on
the appropriate Lease Supplement.
(s) Private Placement Certificate. Each
Participant, the Owner Trustee and the Indenture Trustee
shall have received a certificate (the Private Placement
Certificate ), substantially in the form of Exhibit L
hereto, from Bank of America, dated the Lease Term
Commencement Date, with respect to offerees of the
Beneficial Interest and the Note.
(t) Satisfactory Proceedings. All proceedings taken
in connection with the transactions contemplated by this
Agreement and the other Operative Agreements, and all
documents necessary to the consummation thereof or which are
addressed to the Participants or the Trustees shall be
satisfactory in form and substance to the Participants and
the Trustees and their respective counsel, and each such
Person shall have received a copy (executed or certified as
may be appropriate) of all legal documents or proceedings
taken in connection with the consummation of such
transactions; and all legal matters in connection with the
transactions contemplated hereby and thereby shall be
satisfactory to each such Person and its respective counsel.
(u) Environmental Report. On or before the Lease
Term Commencement Date, the Owner Participant and the Note
Purchaser shall have received a written environmental
assessment of the soil conditions at the Premises from an
independent environmental consultant selected by the Lessee
and approved by the Owner Participant, in form and substance
satisfactory to the Owner Participant and the Note
Purchaser, which assessment is expected to be provided on or
about August 31, 1997.
(v) Completion. Completion shall have occurred.
(w) Lien Waivers. On the Lease Term Commencement
Date, the Owner Participant and the Note Purchaser shall
have received copies of each subcontractor s lien waiver
(required pursuant to the Turnkey Construction Contract)
delivered to the Construction Agent on or prior to the Lease
Term Commencement Date.
4.4 Additional Conditions Precedent to Investment by the
Owner Participant. The obligation of the Owner Participant to
make its investment specified in Section 2.4 and to pay Excluded
Transaction Costs on the Lease Term Commencement Date shall be
subject to the fulfillment to the satisfaction of (including,
with respect to writings, such writings being in form and
substance reasonably satisfactory to the Owner Participant), or
the waiver in writing by, the Owner Participant of the following
additional conditions:
(a) Appraisal. On or before the Lease Term
Commencement Date, the Owner Participant shall have received
an opinion (the "Appraisal") of Accuval concluding that:
(i) the fair market value in place and in use of each Unit
on the Lease Term Commencement Date is equal to the
Equipment Cost of such Unit; (ii) the anticipated remaining
economic useful life of the Units does not exceed 125% of
the base Lease Term (excluding any period prior to the Lease
Term Commencement Date) and does not exceed the term of the
Ground Lease or the Ground Lease Sublease; (iii) without
taking into account inflation or deflation from and after
the Lease Term Commencement Date, it is reasonable to expect
that at the end of the Lease Term, (A) each Unit will have a
fair market value of at least 20% of Equipment Cost therefor
and (B) all of the Units will have a fair market value of at
least 20% of Total Equipment Cost; (iv) the estimated fair
market value of the Units at the end of the base Lease Term,
taking into account a prudent and supportable rate of
inflation or deflation, is no greater than the Fixed Price
Purchase Option Amount for the Units; (v) the use of the
Units at the end of the base Lease Term by Lessor or by a
Person, other than Lessee or any person related to Lessee
within the meaning of Section 318 of the Code (a Lessee
Related Person ), who could lease or purchase the Units from
Lessor, will be commercially feasible to Lessor or such
other Person; (vi) (A) not less than 95% of the Units
constitute tangible personal property for U.S. federal
income tax purposes and as described in Asset Class 28.0
Manufacture of Chemicals and Allied Products under U.S.
Rev. Proc. 87-56 or otherwise constitute 5-year recovery
property, and (B) not more than 5% of the Units constitute
nonresidential real property; (vii) assuming the
enforceability thereof, the Operative Agreements grant
Lessor all rights necessary to operate the Units in
commercial operation at design capacity and do not restrict
the Lessor's right to sell the output thereof to parties
other than a Lessee Related Person for the remaining
economic life of the Units at their installed location; and
(viii) on the Lease Term Commencement Date, the Units will
be in service and ready and available to perform their
assigned function at design capacity and none of the Units
requires any improvement or modification to perform its
specifically assigned function.
(b) Opinion with Respect to Certain Tax Aspects. On
the Lease Term Commencement Date, the Owner Participant
shall have received the opinion of Mayer, Brown & Platt, its
special tax counsel, addressed, and in form and substance
satisfactory, to the Owner Participant containing such
counsel's favorable opinion with respect to such federal tax
matters as the Owner Participant may request.
(c) Tax Indemnity Agreement. On or before the first
Advance Date, the Tax Indemnity Agreement shall have been
duly executed and delivered by the Lessee and, assuming due
authorization, execution and delivery by the Owner
Participant, the Tax Indemnity Agreement shall be in full
force and effect.
(d) Tax Law Change. On or before the Lease Term
Commencement Date, no Change in Tax Law shall have occurred
or shall have been proposed which in the Owner Participant's
reasonable judgment would adversely affect the Owner
Participant's investment in the Units or the Lease and for
which an adjustment is not permitted pursuant to Section
2.9(a).
(e) Engineering Report. On or before the Lease Term
Commencement Date, the Owner Participant shall have received
a written Engineering Report (the "Engineering Report")
regarding all of the Units as installed on the Premises from
an independent engineering consulting firm selected by the
Owner Participant and the Construction Agent, which
Engineering Report shall be in form and substance
satisfactory to the Owner Participant.
4.5 Additional Conditions Precedent to Purchase by the Note
Purchaser. The obligation of the Note Purchaser to purchase and
pay for its Note to be delivered pursuant hereto on the Lease
Term Commencement Date shall be subject to the fulfillment to the
satisfaction of (including, with respect to writings, such
writings being in form and substance reasonably satisfactory to
such Note Purchaser), or the waiver in writing by, such Note
Purchaser of the following additional conditions:
(a) Note. The Note Purchaser shall have received
its Note.
(b) Recording of Indenture. On or before the Lease
Term Commencement Date, the Indenture (and/or a financing
statement or similar notice thereof, if and to the extent
permitted or required by applicable law) shall have been
recorded or filed in such public offices as may be deemed
necessary or appropriate by special counsel to the Note
Purchaser in order to perfect the first priority Lien and
security interest provided by the Indenture as against
creditors of and purchasers from the Owner Trustee and the
Lessee.
(c) Legal Investment. The Note to be issued on the
Lease Term Commencement Date shall on the Lease Term
Commencement Date qualify as a legal investment for the Note
Purchaser under any laws regulating investments to which it
may be subject (without recourse to provisions in any such
law permitting limited investments without restriction as to
the character of the particular investment), and such Note
Purchaser shall have received such evidence as it may
reasonably request to establish compliance with this
condition.
(d) Opinion of Counsel. On the Lease Term
Commencement Date, the Note Purchaser shall have received
the favorable written opinion, dated the Lease Term
Commencement Date, of (i) White & Case, its special counsel,
and (ii) Fulbright & Jaworski LLP, its special Texas
counsel, in each case with respect to such matters as the
Note Purchaser shall reasonably request.
(e) Revised Schedules. The Owner Participant shall
have delivered to the Note Purchaser revised Schedules 2, 3,
4, 5 and 6 hereto pursuant to Section 2.6(a) and the Note
Purchaser shall be satisfied that such Schedules comply with
Sections 2.9(c) and (d).
(f) Appraisal. On or before the Lease Term
Commencement Date, the Note Purchaser shall have received a
letter from Accuval describing: (i) the fair market value
of all of the Units taken together as a whole as of the
Lease Term Commencement Date, (ii) the economic useful life
of all of the Units and (iii) the estimated fair market
value of all of the Units, as of the expiration of the Lease
Term, taking into account inflation and deflation.
(g) Completion. Completion shall have occurred.
(h) Swap Agreement. Without cost to it, the Note
Purchaser shall have the benefit of an interest rate swap
agreement with counterparties reasonably acceptable to the
Note Purchaser containing the following terms: (i) the term
of the swap agreement shall be ten years; (ii) the notional
principal amount of the swap agreement shall be
approximately $60,000,000; and (iii) the monthly payments to
be made available to the Note Purchaser under the swap
agreement shall be calculated by reference to a floating
rate equal to the sum of the LIBO Rate, plus 29 basis points
(such swap agreement, the "Swap Agreement"). Bank of
America agrees to arrange for such Swap Agreement on such
terms on or before the Lease Term Commencement Date.
4.6 Conditions Precedent to the Obligation of the Lessee.
The obligation of the Lessee with respect to the consummation of
the transactions to occur on and after the Lease Term
Commencement Date shall be subject to the fulfillment to the
satisfaction of (including, with respect to writings, such
writings being in form and substance reasonably satisfactory to
the Lessee), or the waiver in writing by, the Lessee of the
following conditions; provided, however, that the following shall
not limit the obligations of Bayer under the Bayer Letter or the
Bayer Support Agreement:
(a) Operative Agreements. On or before the Lease
Term Commencement Date, the Operative Agreements shall have
been duly authorized, executed and delivered by the parties
thereto (other than the Lessee), shall each be in full force
and effect and executed counterparts of each (except for the
Note) shall have been delivered to the Lessee or its special
counsel on or before the Lease Term Commencement Date.
(b) Representations and Warranties True. On the
Lease Term Commencement Date, the representations and
warranties of the Owner Trustee, the Owner Participant, the
Indenture Trustee and the Note Purchaser contained in
Section 3 hereof shall be true and correct in all material
respects as of the Lease Term Commencement Date as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier
date (in which case such representations and warranties were
true and correct in all material respects on and as of such
earlier date), and the Lessee shall have received an
Officer's Certificate dated such date from each of the Owner
Trustee as described in Section 4.3(e), the Owner
Participant as described in Section 4.3(f) and the Indenture
Trustee as described in Section 4.3(g), addressed to the
Lessee and certifying as to the foregoing matters insofar as
they relate to the Owner Trustee, the Owner Participant and
the Indenture Trustee, as the case may be.
(c) Opinions of Counsel. On the Lease Term
Commencement Date, the Lessee shall have received the
opinions of counsel referred to in Section 4.3(h) (other
than those set forth in clauses (i), (vi), (vii) and (viii)
therein), addressed to the Lessee.
(d) Corporate Documents. On the Lease Term
Commencement Date, the Lessee shall have received such
documents and evidence with respect to the Owner Trustee,
the Indenture Trustee and the Owner Participant as the
Lessee may reasonably request in order to establish the
consummation of the transactions contemplated by this
Agreement and the other Operative Agreements, including
corporate charters and by-laws, certificates of incumbency
and evidence of the taking of all corporate and other
proceedings in connection herewith and therewith and
compliance with the conditions herein and therein set forth.
(e) No Threatened Proceedings. No action or
proceeding shall have been instituted, nor shall any
Governmental Action be threatened before any Governmental
Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental
Authority at the time of the Lease Term Commencement Date to
set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or the transactions
contemplated hereby; provided that any such action or
proceeding instituted or threatened by the Lessee or any of
its Affiliates shall not be a condition precedent to the
Lessee's obligations hereunder.
(f) Owner Participant's Investment; Issuance of
Note. (i) The Owner Participant shall have made available
on the Lease Term Commencement Date the portion of its
Commitment and Excluded Transaction Costs in the amounts
specified in, and otherwise in accordance with, Sections
2.4, 2.6 and 2.8(a), and (ii) the Note Purchaser shall have
purchased its Note in the amount specified in, and otherwise
in accordance with, Sections 2.5 and 2.6.
(g) Revised Schedules. The Owner Participant shall
have delivered to the Lessee, the Owner Trustee and the
Indenture Trustee revised Schedules 2, 3, 4, 5 and 6 hereto
pursuant to Section 2.6(a).
(h) Private Placement Certificate. The Lessee shall
have received an executed counterpart of the Private
Placement Certificate.
(i) No Change in Law or Material Rent Adjustment.
No change of law shall have occurred that, in the opinion of
Lessee, renders the transactions contemplated herein
illegal; and no rent adjustment shall be proposed which, in
the opinion of Lessee, renders the transactions uneconomic
to Lessee, provided that if all adjustments to Base Rent
result in an increase of the present value of Base Rent
(other than adjustments relating to the interest rate upon
the Debt) by less than 200 basis points, such adjustments
shall not be deemed to be uneconomic.
(j) Completion. Completion shall have occurred,
provided, however, that any failure of completion to occur
which is a result of the actions or inactions of the Lessee
shall not be deemed a failure of Completion for purposes of
this Section 4.6.
4.7 Opinion Acknowledgment. Each of the parties hereto,
with respect to such party, expressly consents to the rendering
by its counsel of the opinion referred to in Sections 4.1(b),
4.3(h), 4.5(d) and 4.6(c) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the
instructions of such party, each of whom has consulted with and
has been advised by its counsel as to the consequences of such
request, instructions and consent.
4.8 Further Condition To Participants' Commitment. The
obligation of each Construction Lender to make any Construction
Advance, and the obligation of each Participant to make its
investment specified in Section 2 on the Lease Term Commencement
Date, shall be further subject to the condition that no material
adverse change shall have occurred in (x) the condition,
financial or otherwise, of the Lessee or Bayer from its condition
as of December 31, 1996, and (y) Bayer's ability to perform its
obligations under the Support Documents.
SECTION 5 FINANCIAL AND OTHER REPORTS OF THE LESSEE
(a) Financial Statements. The Lessee covenants and
agrees that it will furnish directly to the Owner
Participant, the Owner Trustee, each Construction Lender,
the Construction Loan Agent, each holder of a Note and the
Indenture Trustee the following:
(i) Interim Financials. As soon as
available and in any event within 60 days after the end
of each quarterly period, except the last, of each
fiscal year of LSB, an unaudited consolidated balance
sheet of LSB and its Subsidiaries (including the
Lessee) as at the end of such period, together with the
related unaudited consolidated statements of income and
expense of LSB and its Subsidiaries (including the
Lessee) for the period beginning on the first day of
such fiscal year and ending on the last day of such
quarterly period, all in reasonable detail and
prepared in accordance with GAAP, and certified as
true, correct and complete, subject to changes
resulting from year-end adjustments, by a Senior
Financial Officer; and
(ii) Audited Report. As soon as available
and in any event within 120 days after the last day of
each fiscal year of LSB, audited consolidated balance
sheet, statement of income and expense, retained
earnings, and statements of cash flows and
stockholders' equity for LSB and its Subsidiaries
(including the Lessee) for such fiscal year, and the
accompanying notes thereto, setting forth in each case
in comparative form the figures for the previous fiscal
year, all in reasonable detail and prepared in
accordance with GAAP; such financial statements shall
be certified by a firm of independent certified public
accountants of recognized international standing
selected by LSB, without qualification relating to
scope of audit.
(b) Reports to the Securities and Exchange
Commission. As soon as available, the Lessee shall furnish
to the Owner Participant, the Owner Trustee, each
Construction Lender, the Note Purchaser and the Indenture
Trustee one copy of each publicly filed proxy statement,
financial statement or report (including, without
limitation, each Annual Report on Form 10-K (or any
successor form), each Quarterly Report on Form 10-Q (or any
successor form) and each Report on Form 8-K), or proxy
statement filed under the Securities Exchange Act of 1934,
as amended, sent by LSB or the Lessee, as the case may be,
or any Subsidiary of either to stockholders generally, in
respect thereof filed by LSB or the Lessee or any such
Subsidiary with, the National Association of Securities
Dealers, any securities exchange or the Securities and
Exchange Commission or any successor agency.
(c) Compliance Certificate. Within the time periods
prescribed in Sections 5(a)(i) and 5(a)(ii), the Lessee
shall send to the Owner Participant, the Owner Trustee, each
Construction Lender, the Note Purchaser and the Indenture
Trustee a certificate, signed by a Responsible Officer of
the Lessee, to the effect that the signer is familiar with
the relevant terms of the Operative Agreements and has
reviewed, or caused to be made under signer's supervision a
review of, the activities of the Lessee and that, to the
best of his or her knowledge, no Lease Default or Lease
Event of Default exists, or if a Lease Default or Lease
Event of Default exists or did exist, specifying such Lease
Default or Lease Event of Default and the nature, period of
existence and status thereof and what action the Lessee has
taken or proposes to take with respect thereto.
(d) Defaults. The Lessee shall promptly notify the
Owner Participant, the Owner Trustee, each Construction
Lender, the Note Purchaser and the Indenture Trustee in
writing of the occurrence of any Lease Default or Lease
Event of Default, and what action the Lessee has taken or
proposes to take with respect thereto.
(e) Other Information. The Lessee shall send to the
Owner Participant, the Owner Trustee, each Construction
Lender, the Construction Loan Agent, the Note Purchaser and
the Indenture Trustee from time to time, such additional
information as the Owner Participant, the Owner Trustee, any
Construction Lender, the Construction Loan Agent, any holder
of a Note or the Indenture Trustee may reasonably request.
SECTION 6 CERTAIN COVENANTS OF THE PARTICIPANTS, THE OWNER
TRUSTEE, THE INDENTURE TRUSTEE AND THE LESSEE
6.1 Restrictions on Transfer of Beneficial Interest. The
Owner Participant covenants and agrees with and for the benefit
of the other parties to this Agreement that without the consent
of the Lessee and a Majority In Interest, the Owner Participant
will not sell, convey, assign or otherwise transfer all or a
portion of its Beneficial Interest or its right and interest in
and to this Agreement, the Tax Indemnity Agreement, the Trust
Agreement and the other Operative Agreements prior to the
expiration or earlier termination of the Lease Term (except by
merger or consolidation) unless:
(a) Transferee Qualifications. The Person to whom
such transfer is to be made (a "Transferee") is an Eligible
OP Assignee.
(b) Notice. The Owner Trustee, Indenture Trustee
and the Lessee shall have received 15 days' prior written
notice of such transfer specifying the name and address of
any proposed Transferee and such additional information as
shall be necessary to determine whether the proposed
transfer satisfies the requirements of this Section 6.1.
(c) Transfer Agreement and Opinion of Counsel. Such
Transferee enters into an agreement substantially in the
form of Exhibit N hereto and provides the Indenture Trustee,
the Note Purchaser, the Owner Trustee and the Lessee with an
opinion of counsel (whose fees and expenses shall not be the
obligation of the Lessee) covering the matter referred to in
clause (d) below and stating that such agreement has been
duly authorized, executed and delivered by such Transferee
and constitutes the legal, valid and binding contract of
such Transferee, enforceable against such Transferee in
accordance with its terms (subject to customary
qualifications).
(d) No Violation of Law. Such transfer complies in
all respects with and does not violate any applicable law.
(e) Expenses. All fees, expenses and charges of the
parties hereto (including, without limitation, reasonable
legal fees and expenses of special counsel) incurred in
connection with each transfer of such Beneficial Interest is
paid by an Owner Participant, as specified in the agreement
entered into pursuant to Section 6.1(c).
(f) ERISA. Such Transferee makes the representation
set forth in Section 3.4(i) to the parties hereto.
(g) Default. As a result of such transfer, no
Indenture Default attributable to the Owner Participant or
the Owner Trustee shall have occurred and be continuing.
(h) Non-Competitor. Such Transferee is not a
Competitor, unless the Lessee and Bayer shall have otherwise
consented in writing.
(i) Number of Owner Participants. After giving
effect to such transfer, there are no more than three (3)
Owner Participants.
In connection with any such transfer, the Lessee shall represent
to the Transferee that no Lease Default, Lease Event of Default
or, except as disclosed pursuant to the Lease, Event of Loss then
exists. Upon any such transfer (x) except as the context
otherwise requires, such Transferee shall be deemed an Owner
Participant for all purposes, and shall enjoy the rights and
privileges and perform the obligations of the transferor Owner
Participant to the extent of the interest transferred hereunder
and under each other Operative Agreement to which the transferor
Owner Participant is a party, and, except as the context
otherwise requires, each reference in this Agreement and each
other Operative Agreement to the Owner Participant shall
thereafter be deemed to include such Transferee for all purposes
to the extent of the interest transferred, and (y) the transferor
shall be released from all obligations hereunder and under each
other Operative Agreement to which such transferor is a party or
by which such transferor is bound to the extent such obligations
are expressly assumed by a Transferee. In no event shall any
such transfer or assignment waive or release the transferor from
any liability on account of any breach existing immediately prior
to such transfer of any of its representations, warranties,
covenants or obligations set forth in the Operative Agreements or
for any fraudulent or wilful misconduct. Any transfer,
conveyance or assignment of the Owner Participant's Beneficial
Interest hereunder in violation of this Section 6.1 shall be void
and of no effect, unless such transfer, conveyance or assignment,
on its face, at the time of occurrence appears to comply with the
requirements of this Section 6.1; and the effectiveness of a
transfer, conveyance or assignment which appears on its face to
comply with the requirements of this Section 6.1, however, shall
not impair any other right or remedy which any party may have as
a result of such transfer, conveyance or assignment actually
violating this Section 6.1. In the event that there is more than
one Owner Participant, any consent, waiver or amendment with
respect to the Operative Agreements may be given by those Owner
Participants that hold more than 50% of the aggregate amount
invested by the Owner Participants, except that without the
consent of each Owner Participant affected thereby, no consent,
amendment or waiver may (i) reduce any amount payable as Basic
Rent or Supplemental Rent, or change the date on which any such
amount is payable, (ii) create or allow any Liens on the Units
other than Permitted Liens, (iii) affect any Excepted Property or
(iv) reduce the percentage required to approve consents, waivers
and amendments set forth in this sentence.
6.2 Liens Attributable to the Owner Participant. The Owner
Participant covenants and agrees with and for the benefit of the
other parties to this Agreement that the Owner Participant will
not directly or indirectly create, incur, assume or suffer to
exist: (a) any Lessor's Liens created by it (whether or not
through its act or failure to act), or (b) any Lessor's Liens
arising as a result of taxes described in clause (iii) of the
definition of Lessor's Liens which are imposed against the Owner
Trustee (not in its individual capacity but solely as Owner
Trustee); and the Owner Participant agrees that it will, at its
own cost and expense, take such action as may be necessary to
duly discharge and satisfy in full any such Lessor's Lien (by
bonding or otherwise); provided that the Owner Participant may
contest any such Lessor's Lien in good faith by appropriate
proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Trust
Estate or any interest therein and do not interfere with the use,
operation or possession of the Units by the Lessee under the
Lease or the rights, titles and interests of the Construction
Loan Agent under the Construction Loan Agreement or the Indenture
Trustee under the Indenture. The Owner Participant agrees to
hold harmless the other parties to this Agreement from and
against any loss, cost or expense (including reasonable legal
fees and disbursements) as the result of the existence of any
such Lessor's Lien or the failure of the Owner Participant to
discharge and satisfy any such Lessor's Lien.
6.3 Lessor's Liens Attributable to the Owner Trustee.
Boatmen's covenants and agrees with and for the benefit of the
other parties to this Agreement that Boatmen's will not directly
or indirectly create, incur, assume or suffer to exist any
Lessor's Liens attributable to it (whether or not through its act
or failure to act), and Boatmen's agrees that it will, at its own
cost and expense, take such action as may be necessary to duly
discharge and satisfy in full any such Lessor's Lien (by bonding
or otherwise). Boatmen's agrees to hold harmless the other
parties to this Agreement from and against any loss, cost or
expense (including reasonable legal fees and disbursements) as
the result of the existence of any such Lessor's Lien or the
failure of Boatmen's to discharge and satisfy any such Lessor's
Lien.
6.4 Liens Created by the Indenture Trustee. The Indenture
Trustee, in its individual capacity, covenants and agrees with
and for the benefit of the other parties to this Agreement that:
(a) it shall not cause or permit to exist any Lien on the Units
or all or any other portion of the Trust Estate or the Indenture
Estate arising as a result of (i) claims against the Indenture
Trustee, in its individual capacity, not related to its interest
in the Units or any other portion of the Trust Estate, or the
administration of the Indenture Estate pursuant to the Indenture,
(ii) acts, or failures to act, of the Indenture Trustee, in its
individual capacity, not contemplated, or failure of the
Indenture Trustee to take any action it is expressly required to
perform, by the Operative Agreements, (iii) claims against the
Indenture Trustee in its individual capacity relating to taxes or
expenses that are not indemnified against by the Lessee pursuant
to Section 7 attributable to the Indenture Trustee, in its
individual capacity, or (iv) claims against the Indenture Trustee
arising out of the transfer by the Indenture Trustee (without the
consent of the Lessee and the Owner Trustee and not pursuant to
the direction of the holders of Notes pursuant to the terms of
the Indenture) of all or any portion of its interest in the
Units, the Indenture Estate or the Operative Agreements, other
than a transfer expressly contemplated by the Operative
Agreements; and (b) the Indenture Trustee will, at its own cost
and expense (and without any right of reimbursement from any
other party hereto), promptly take such action as may be
necessary to duly discharge and satisfy in full any such Lien (by
bonding or otherwise). The Indenture Trustee agrees to hold
harmless the other parties to this Agreement from and against any
loss, cost or expense (including reasonable legal fees and
disbursements) as the result of the existence of any such Lien or
the failure of the Indenture Trustee to discharge and satisfy any
such Lien.
6.5 Certain Covenants of the Owner Trustee, the Owner
Participant and Boatmen's. The Owner Participant and Boatmen's
hereby covenant and agree, severally and not jointly, with and
for the benefit of the Lessee, the Indenture Trustee, the
Construction Loan Agent, the Construction Lenders and the Note
Purchaser: (a) not to amend, supplement or otherwise modify any
provision of the Trust Agreement in such a manner as to adversely
affect the rights of the Lessee, the Indenture Trustee, the
Construction Loan Agent, the Construction Lenders or the Note
Purchaser, without the prior written consent of the affected
party and (b) not to terminate or revoke the Trust Agreement, or
the trust created by the Trust Agreement, and such trust shall
not be subject to revocation or termination by the Owner
Participant, prior to the latest of (i) payment in full and
discharge of the Construction Advances and all other indebtedness
secured by the Construction Loan Agreement, (ii) payment in full
and discharge of the Notes and all other indebtedness secured by
the Indenture and the final discharge thereof pursuant to Section
10.1 thereof and (iii) the expiration or early termination of the
Lease and (c) so long as the Lien of the Indenture has not been
discharged in accordance with the terms thereof, not to declare a
Lease Event of Default under the Lease except as expressly
permitted by the terms of the Indenture.
6.6 Lessee's Merger Covenant. (a) The Lessee shall not
consolidate with or merge into any other Person, or permit any
other Person to merge or consolidate with or into it, or convey,
transfer or lease substantially all of its assets as an entirety
to any Person without the consent of the Owner Participant, the
Required Construction Lenders and the Construction Loan Agent
(for so long as any Construction Advance is outstanding) and a
Majority In Interest unless (i) the Person formed by such
consolidation or surviving such merger (if other than the Lessee)
or the Person which acquires by conveyance, transfer or lease
substantially all of the assets of the Lessee as an entirety (A)
is a domestic corporation organized and existing under the laws
of the United States of America or a political subdivision
thereof, and (B) shall execute and deliver to the Owner Trustee,
the Owner Participant, the Indenture Trustee, the Construction
Lenders, the Construction Loan Agent and the Note Purchaser an
agreement, in form and substance satisfactory to the Owner
Trustee, the Owner Participant, the Indenture Trustee, the
Required Construction Lenders and the Construction Loan Agent
(for so long as any Construction Advance is outstanding) and a
Majority In Interest, containing the express assumption by such
successor Person of the due and punctual performance and
observance of each covenant and condition of this Agreement and
each of the other Operative Agreements to be performed or
observed by the Lessee, (ii) immediately prior to and immediately
after giving effect to such transaction, no Lease Default or
Lease Event of Default shall have occurred, whether as a result
of such consolidation or merger or such conveyance, transfer or
lease or otherwise, (iii) immediately after giving effect to such
transaction, such successor Person shall be in compliance with
all of the terms and conditions of the Operative Agreements and
(iv) such successor Person shall deliver to the Owner Trustee,
Owner Participant, the Indenture Trustee, the Construction
Lenders and the Construction Loan Agent (for so long as any
Construction Advance is outstanding) and the Note Purchaser (x)
an opinion of counsel, which counsel shall be reasonably
satisfactory to the Owner Trustee, the Owner Participant, the
Indenture Trustee, the Required Construction Lenders and the
Construction Loan Agent (for so long as any Construction Advance
is outstanding) and a Majority In Interest and (y) an Officer's
Certificate of a Responsible Officer of the Lessee to the effect
that such merger, consolidation, conveyance, transfer or lease
and such agreement described in clause (i)(B) above comply with
this Section 6.6, that such agreement is a legal, valid and
binding obligation of, and is enforceable against, such successor
Person, and that all conditions precedent relating to such
transaction provided in this Section 6.6 have been complied with.
Upon such consolidation or merger, or any conveyance, transfer or
lease of substantially all of the assets of the Lessee as an
entirety in accordance with this Section 6.6, the successor
Person formed by such consolidation or into which the Lessee is
merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every
right and power of, the Lessee, as the case may be, under this
Agreement and the other Operative Agreements with the same effect
as if such successor Person had been named as the Lessee herein
and therein. No such consolidation, merger, conveyance, transfer
or lease of all or substantially all of the assets of the Lessee
as an entirety shall have the effect of releasing the Lessee or
any successor Person from its liability under the Operative
Agreements. Nothing contained in this Section 6.6 shall permit
any lease, sublease, assignment or other arrangement for the use,
operation or possession of the Units except in compliance with
the applicable provisions of the Lease.
6.7 Lessee Not to Own Notes or Beneficial Interest.
(a) Neither the Lessee nor any of its Affiliates nor any
ERISA Plan sponsored by the Lessee or any of its Affiliates, will
at any time own any of the Notes.
(b) Neither the Lessee nor any of its Affiliates will at
any time own any of the Beneficial Interest unless the Owner
Trustee, the Owner Participant, the Indenture Trustee, the
Construction Loan Agent (for so long as any Construction Advance
is outstanding), the Required Construction Lenders (for so long
as any Construction Advance is outstanding) and a Majority In
Interest consent thereto; provided that neither the Lessee nor
any of its Affiliates shall acquire any of the Beneficial
Interest if such acquisition would result in a prohibited
transaction (as defined in Section 406 of ERISA or section 4975
of the Code).
6.8 Broker's Fees.
(a) Lessee. The Lessee covenants and agrees that it will
hold the Owner Participant, the Owner Trustee, the Indenture
Trustee, the Construction Lenders, the Construction Loan Agent
and each holder of a Note harmless from and against any claim,
demand or liability for any broker's, finder's or placement fees
or commission alleged to have been incurred as a result of any
action by the Lessee in connection with the transactions
contemplated by the Operative Agreements, except for any such fee
or commission included in Transaction Costs.
(b) The Owner Participant. The Owner Participant covenants
and agrees that it will hold the Lessee, the Owner Trustee, the
Indenture Trustee, the Construction Lenders, the Construction
Loan Agent and each holder of a Note harmless from and against
any claim, demand or liability for any broker's, finder's or
placement fees or commission alleged to have been incurred as a
result of any action by the Owner Participant in connection with
the transactions contemplated by the Operative Agreements.
6.9 Boatmen's Covenant to Notify of Relocation or Name
Change. Boatmen's covenants and agrees to give the Owner
Participant, the Indenture Trustee, the Construction Loan Agent
and the Lessee prompt written notice of any relocation of its
chief executive office, principal place of business or the place
where its records concerning the Units and all its interest in,
to and under all documents relating to the Trust Estate is
located or of any change in its corporate name.
6.10 Lessee's Covenant to Notify of Relocation or Name
Change. The Lessee covenants and agrees to give the Owner
Trustee, the Owner Participant, the Construction Loan Agent and
the Indenture Trustee prompt written notice (which notice shall
be given at least 15 days prior to the effectiveness of any
relocation) of any relocation of its chief executive office,
principal place of business or the place where its records
concerning the Units is located or of any change in its corporate
name.
6.11 Corporate Existence. Except as otherwise provided in
Section 6.6, the Lessee covenants and agrees at all times to
maintain its corporate existence and all of its rights,
privileges and franchises necessary in the normal conduct of its
business, except for any corporate right, privilege or franchise
(x) that it determines, in its reasonable, good faith business
judgment, is no longer necessary or desirable in the conduct of
its business, and (y) the loss of which could not have a Material
Adverse Effect.
6.12 Compliance with Laws. The Lessee covenants and agrees
to comply with all laws, rules, regulations (including ERISA),
orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, except where the failure so to comply could
not reasonably be expected to have a Material Adverse Effect.
The Lessee shall promptly file any reports, or furnish to the
Owner Trustee and the Owner Participant such information as may
be required to enable the Owner Trustee and the Owner Participant
timely to file any reports, required to be filed by the Owner
Trustee as the Lessor and the Owner Participant under the Lease
with any Governmental Authority.
6.13 Restriction on Transfer of Notes. The Note Purchaser
agrees, and each holder of a Note upon acceptance or purchase of
such Note shall be deemed to have agreed, that it will not
transfer or grant a participation in a Note unless:
(a) in the case of a transfer, the transferee is an
Eligible Lender Assignee and such transfer complies with
Section 2.4 of the Indenture;
(b) in the case of a transfer or participation, the
transferee or Note Purchaser is not a Competitor, unless the
Lessee shall have otherwise consented;
(c) in the case of a transfer, immediately after
such transfer, the transferee shall hold a Note or Notes in
an aggregate principal amount equal to the lesser of (i)
$5,000,000 and (ii) the aggregate outstanding principal
amount of all of the transferors' Notes immediately prior to
such transfer;
(d) in the case of a transfer, such transfer does
not, at the time of transfer, and after giving effect to the
transfer, increase the Lessee's costs or obligations (other
than non-material administrative costs and obligations),
unless the Lessee shall have otherwise consented; and
(e) in the case of a transfer to an Eligible Lender
Assignee which is organized under the laws of any
jurisdiction other than the United States or any state
thereof, the transferor Note Purchaser or Note holder shall
have furnished to each of the Owner Participant, the
Indenture Trustee, the Lessor and the Lessee (A) two
completed and executed copies of Internal Revenue Service
Form 4224 or, if the transferee is organized under the laws
of France, Germany, The Netherlands or the United Kingdom,
Internal Revenue Service Form 1001 (wherein such Eligible
Lender Assignee claims entitlement to complete exemption
from United States federal withholding tax), (B) either a
duly completed and executed Internal Revenue Service Form W-
8 or W-9 (to establish an exemption from United States
backup withholding tax), and (C) any other governmental
forms which are necessary or required under applicable tax
law, treaty or otherwise by law to reduce or eliminate any
withholding tax.
6.14 Amendments to Indenture. So long as no Lease Default
or Lease Event of Default shall have occurred and be continuing,
the Owner Participant, the Indenture Trustee and Boatmen's, each
severally and not jointly, agree that they will not amend the
Indenture in such a manner as to adversely affect the rights of
the Lessee without the prior written consent of the Lessee.
6.15 Environmental Matters. Lessee covenants to the Owner
Participant, the Owner Trustee, the Indenture Trustee and the
holders of the Notes:
(a) During the Lease Term, Lessee shall comply in
all material respects with all Environmental Laws and the
requirements of any permits issued under such Environmental
Laws and shall keep or cause to be kept the Premises, the
Units and Easements free and clear of any Liens imposed
pursuant to such Environmental Laws.
(b) During the Lease Term, Lessee shall not
generate, use, treat, recycle, store, release or dispose of,
or permit the generation, use, treatment, recycling,
storage, release or disposal of Hazardous Substances at, on
or under all or a portion of the Premises, the Units or
Easements, or transport or permit the transportation of
Hazardous Substances to or from the Premises, the Units or
Easements, except as reasonably necessary for the
construction and operation of Lessee's business and in
compliance with all applicable Environmental Laws.
(c) During the Lease Term, Lessee shall conduct and
complete any investigation and undertake any Cleanup,
removal, remedial or other action required by a Governmental
Authority or Environmental Laws to remove and remediate all
Hazardous Substances released during the Lease Term, at, on,
in, under or emanating from the Premises, the Units and
Easements, including such investigation, Cleanup, removal,
remedial or other action on properties adjacent to the
Premises to the extent permitted by the Facility Documents
or Environmental Laws.
(d) During the Lease Term, Lessee shall provide
written notice to the Owner Participant, Owner Trustee,
Indenture Trustee and the holders of the Notes of (i) any
fact, circumstance, condition, occurrence at, on, or arising
from the Premises, the Units and Easements that results or
would be reasonably likely to result in a material
noncompliance with any Environmental Laws or any release of
Hazardous Substances during the Lease Term on or from the
Premises that has resulted or would be reasonably likely to
result in personal injury or material property damage, such
notice to be given promptly after the condition is
discovered or release or occurrence takes place; (ii) any
fact, circumstance, condition or occurrence at the Premises
and the Units that would cause, or would be reasonably
likely to cause, the Premises, the Units and Easements to be
subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law; and (iii) any
pending or threatened Environmental Claim against Lessee or
any other person or entity arising in connection with their
occupying or conducting operations on or at the Premises,
the Units and Easements, such notice to be given promptly
after such Environmental Claim is commenced or threatened.
To the extent possible, all such notices shall describe in
reasonable detail the nature of the Environmental Claim,
investigation, condition, incident or occurrence and the
Lessee's response thereto. In addition, the Lessee shall
provide the Owner Participant, the Owner Trustee, the
Indenture Trustee and the holders of the Notes with copies
of all written communications with any Governmental
Authorities relating to any material non-compliance with
Environmental Laws or any material Environmental Claim
simultaneously with the giving or promptly upon receiving
any such written communications. The Lessee shall also
provide such detailed reports of any Environmental Claim as
may be reasonably requested by the Owner Participant, the
Owner Trustee, the Indenture Trustee and the holders of the
Notes.
SECTION 7 LESSEE'S INDEMNITIES
7.1 General Tax Indemnity.
(a) Tax Indemnitee Defined. For purposes of this
Section 7.1, Tax Indemnitee means the Owner Participant
and its Affiliates, the Owner Trustee, both in its
individual capacity and as trustee, each Construction Lender
and its Affiliates, the Indenture Trustee, both in its
individual capacity and as trustee, the Construction Loan
Agent, the Note Purchaser and each holder of a Note and each
of their respective successors, assigns, servants, agents,
officers, directors and employees and the Trust Estate and
the Indenture Estate.
(b) Taxes Indemnified. The Lessee agrees to pay
promptly when due, and will indemnify and hold harmless each
Tax Indemnitee on an After-Tax Basis against, all taxes,
fees, withholdings, and governmental charges attributable to
the transactions contemplated herein including all license,
recording, documentary, registration and other fees and all
taxes (including, without limitation, income, adjusted gross
income, gross receipts, franchise, net worth, capital,
sales, rental, use, value added, property (tangible and
intangible), ad valorem, excise and stamp taxes), fees,
levies, imposts, recording duties, charges, assessments or
withholdings of any nature whatsoever, together with any
assessments, penalties, fines, addition to tax or interest
thereon (individually, a "Tax" and collectively called
"Taxes"), however imposed (whether imposed upon any Tax
Indemnitee, the Lessee, or all or any part of the Units or
any payment made in connection with the transactions
contemplated hereunder), by any federal, state or local
government or taxing authority in the United States of
America, or by any government or taxing authority of a
foreign country, of any political subdivision or taxing
authority thereof or by a territory or possession of the
United States of America or an international taxing
authority, upon or with respect to, based upon or measured
by:
(i) the Units or any part thereof;
(ii) the location, replacement, conditioning,
refinancing, control, purchase, repossession,
improvement, maintenance, redelivery, manufacture,
acquisition, purchase, financing, mortgaging,
ownership, acceptance, rejection, delivery, non-
delivery, leasing, subleasing, transportation,
insuring, inspection, registration, assembly,
abandonment, preparation, installation, possession,
use, operation, return, presence, storage, repair,
transfer of title, modification, rebuilding, import,
export, alteration, addition, replacement, assignment,
overhaul, transfer or registration, imposition of any
Lien, sale or other disposition of the Units or any
part thereof or interest therein;
(iii) the rentals, receipts or earnings arising
from the Operative Agreements or from the purchase,
financing, ownership, delivery, leasing, possession,
use, operation, return, storage, transfer of title,
sale or other disposition of the Units or any part
thereof;
(iv) any or all of the Operative Agreements;
(v) the Units, or the income or other proceeds
received with respect to the Units, held by the Owner
Trustee under the Trust Agreement or after a Lease
Event of Default, by the Construction Loan Agent under
the Construction Loan Agreement or by the Indenture
Trustee under the Indenture, as the case may be;
(vi) otherwise with respect to or by reason of
the transactions described in or contemplated by the
Operative Agreements;
(vii) the payment of the principal or interest
or other amounts payable with respect to the
Construction Advances or the Notes;
(viii) the Notes, the Construction Advances or
the issuance, acquisition, transfer, or refinancing
thereof or the Beneficial Interest or the creation
thereof under the Trust Agreement; or
(ix) any assumptions by the Lessee of the
Notes.
(c) Taxes Excluded. The indemnity provided for in
paragraph (b) above shall not apply to any of the following:
(i) in the case of any Tax Indemnitee other
than a Lender Indemnitee, (A) Taxes imposed by the
United States federal government, the State of Texas
(or any Governmental Authority within the State of
Texas) or the Tax Indemnitee s Home Jurisdiction (as
hereinafter defined) imposed on or measured by the net
or gross income or excess profits, capital gains,
receipts, minimum tax from tax preferences, accumulated
earnings, personal holding company income, alternative
minimum taxable income, capital, franchise, excess
profits, net worth or conduct of business of, or
succession and estate taxes of, such Tax Indemnitee
(other than any Taxes which are, or are in the nature
of, sales (unless included in Equipment Cost), use,
value added (other than value added Taxes in the nature
of net or gross income Taxes rather than sales or use
Taxes), rental, license, ad valorem or property
Taxes)(collectively "Income Taxes") and (B) Income
Taxes imposed by any taxing authority other than the
United States federal government, or the State of Texas
(or any Governmental Authority within the State of
Texas) or the Tax Indemnitee s Home Jurisdiction;
provided, that Income Taxes imposed by a jurisdiction
described in clause (B) of this Section 7.1(c)(i) shall
be subject to indemnification if (w) the Units or any
part thereof are operated, registered, located, present
or used within such jurisdiction, (x) a Lessee Person
is present or conducts activities within such
jurisdiction, (y) a Lessee Person makes, or is deemed
to make, payments from or through such jurisdiction, or
(z) any security interest, filing or collateral
contemplated by the Operative Agreements is present,
perfected, exists or occurs within such jurisdiction
and, in any case described in clauses (w) through (z),
such event or occurrence causes the transactions
contemplated by the Operative Agreements to be subject
to Income Tax in such jurisdiction (and if so subject
to such Income Taxes, the portion of the Tax
Indemnitee s Income Taxes payable to such jurisdiction
which shall be subject to indemnification pursuant to
this Section 7.1 shall be determined as if the sole
connection of the Tax Indemnitee with such jurisdiction
had been the transactions contemplated by the Operative
Agreements). Notwithstanding the foregoing, the
provisions of this Section 7.1(c)(i) and each other
exclusion contained in Section 7.1(c) relating to
income Taxes shall not be interpreted to exclude any
amount necessary to make any payment under the
Operative Agreements, otherwise required to be made on
an After-Tax Basis, to be made on an After-Tax Basis.
For purposes of this Section 7.1(c)(i), the term Tax
Indemnitee s Home Jurisdiction shall mean the State of
California (or any Governmental Authority within the
State of California), provided, that if Security
Pacific Leasing Corporation (or any Affiliate) or any
transferee or subsequent transferee of Security Pacific
Leasing Corporation (or an Affiliate) transfers some or
all of its interest in the Units, the Lease, the Trust
Estate, or any other interest or obligations arising
under the Operative Agreements to another Owner
Participant pursuant to the terms of this Agreement,
the term "Tax Indemnitee's Home Jurisdiction" shall
mean the state in which such transferee (or the
applicable subsequent transferee) is treated as
maintaining its principal place of business or
headquarters (and any Governmental Authority within
such state);
(ii) in the case of a Lender Indemnitee, (A)
Taxes imposed by the United States federal governmental
or the Lender Indemnitee s Home Jurisdiction (as
hereinafter defined) on or measured by the net or gross
income or excess profits, capital gains, receipts,
minimum tax from tax preferences, accumulated earnings,
personal holding company income, alternative minimum
taxable income, capital, franchise, excess profits, net
worth or conduct of business of, or succession and
estate taxes of, such Lender Indemnitee, other than any
such Taxes which are, or are in the nature of, sales,
use, value added, rental, license, ad valorem or
property Taxes, (collectively, "Income Taxes") and (B)
Income Taxes imposed by any taxing authority other than
the United States federal government or the Lender
Indemnitee s Home Jurisdiction; provided that Income
Taxes imposed by a jurisdiction described in clause (B)
of this Section 7.1(c) (ii) shall be subject to
indemnification if (w) the Units or any part thereof,
are operated, registered, located, present, or used
within such jurisdiction, (x) a Lessee Person, or any
other Tax Indemnitee, is present or conducts activities
within such jurisdiction, (y) a Lessee Person, or the
Owner Trustee or Owner Participant, makes, or is deemed
to make, payments from or through such jurisdiction, or
(z) any security interest, filing or collateral
contemplated by the Operative Agreements is present,
perfected, exists or occurs within such jurisdiction,
and in any case described in clauses (w) through (z),
such event or occurrence causes the transactions
contemplated by the Operative Agreements to be subject
to Income Tax in such jurisdiction (determined without
taking into account any other contacts that the Lender
Indemnitee may have with such jurisdiction) and if so
subject to such Income Taxes, the portion of the Lender
Indemnitee s Income Taxes payable to such jurisdiction
which shall be subject to indemnification pursuant to
this Section 7.1 shall be determined as if the sole
connection of the Lender Indemnitee with such
jurisdiction had been the transactions contemplated by
the Operative Agreements. Notwithstanding the
foregoing, the provisions of this clause (ii) relating
to Income Taxes shall not exclude from the indemnity
described in this Section 7.1 any Taxes for which the
Lessee would be required to indemnify a Lender
Indemnitee so that any payment under the Operative
Agreements, otherwise required to be made on an After-
Tax Basis, is made on an After-Tax Basis. (For
purposes of this Section 7.1(c)(ii), the term Lender
Indemnitee s Home Jurisdiction shall mean the State of
New York, New York City or Germany (or any governmental
authority within the State of New York, New York City
or Germany), provided that if the Lender Indemnitee
transfers all or a portion of its interest in the Note
or the Construction Advances in accordance with the
terms of this Agreement, the term Lender Indemnitee s
Home Jurisdiction shall be modified to reflect the
location within the United States in which the Note or
Construction Advance is maintained as an asset and the
jurisdiction under the laws of which the transferee
Lender Indemnitee has been formed.)
(iii) in the case of a Tax Indemnitee other than
a Lender Indemnitee, Taxes arising out of or measured
by acts, omissions, events or periods of time (or any
combination of the foregoing) which occur after (and
are not attributable to acts, omissions or events
occurring contemporaneously with or prior to) (1) the
payment in full of all amounts payable by the Lessee
pursuant to and in accordance with the Operative
Agreements and (2) the earlier of (x) the expiration of
the Lease Term and return of the Units in accordance
with the return provisions of the Lease and (y) the
termination of the Lease in accordance with the
applicable provisions of the Lease and return or
disposition of the Units in accordance with the Lease,
except that, notwithstanding anything to the contrary,
Taxes incurred in connection with the exercise of any
remedies following the occurrence and continuance of a
Lease Event of Default shall not be included in this
Section 7.1(c)(iii);
(iv) in the case of a Lender Indemnitee, Taxes
imposed on such Lender Indemnitee with respect to any
period commencing after the date of the payment in full
of the Construction Advances and the Notes and all
amounts due to the Construction Lender, the Note
Purchaser and each holder of a Note pursuant to the
Operative Agreements, except that Taxes related to
events occurring or matters arising prior to or
simultaneously with such date shall not be excluded
from the indemnity provided for in this Section 7.1 by
reason of this Section 7.1(c)(iv);
(v) in the case of a Tax Indemnitee other than a
Lender Indemnitee, Taxes imposed that would not have
been imposed but for any act or omission of such Tax
Indemnitee not contemplated by the Operative
Agreements, including, without limitation, the willful
misconduct or gross negligence of such Tax Indemnitee
(other than any act, omission, gross negligence or
willful misconduct not actually committed by but
instead imputed to such Indemnitee by reason of such
Tax Indemnitee's participation in the transactions
contemplated by the Operative Agreements and entering
into the Operative Agreements);
(vi) in the case of a Lender Indemnitee, Taxes
imposed on such Lender Indemnitee that would not have
been imposed but for the gross negligence or willful
misconduct of such Lender Indemnitee (other than any
gross negligence or willful misconduct not actually
committed by such Lender Indemnitee, but imputed to
such Lender Indemnitee by reason of (y) the acts or
omissions of a Lessee Person or any other Tax
Indemnitee, or (z) such Lender Indemnitee s
participation in the transactions contemplated by the
Operative Agreements and entering into the Operative
Agreements);
(vii) in the case of a Tax Indemnitee other than
a Lender Indemnitee, Taxes imposed on any Tax
Indemnitee or any successor, assign or Affiliate
thereof which became payable by reason of (A) any
voluntary transfer, assignment, sale or other
disposition ("Transfer") by such Tax Indemnitee
subsequent to the applicable Purchase Date, of any
interest in some or all of the Units, the Lease, its
interest in the Trust Estate, or any other interest or
obligations arising under the Operative Agreements,
other than (y) Taxes that result from Transfers which
occur as a result of the exercise of remedies after a
Lease Event of Default has occurred and is continuing
or (z) Taxes (other than Taxes on net income, Taxes of
a similar nature or Taxes imposed in lieu of the
foregoing) that result from any Transfer pursuant to
the terms of the Lease at the request or option of the
Lessee (including the Lessee's exercise of the option
granted pursuant to Section 22 of the Lease); or (B)
any involuntary Transfer by such Tax Indemnitee of any
interest in the Units, the Lease, or any interests or
obligations arising under the Operative Agreements
resulting from any bankruptcy or other proceeding for
relief of debtors in which such Tax Indemnitee is the
debtor or any foreclosure by a creditor of such Tax
Indemnitee other than any such Transfer following the
occurrence and continuance of a Lease Event of Default;
(viii) in the case of a Lender Indemnitee, Taxes
imposed on such Lender Indemnitee which become payable
by reason of any voluntary or involuntary transfer or
disposition by such Lender Indemnitee of its interest
in the Construction Loan Advances or the Notes other
than (y) Taxes imposed under Section 4975 of the Code
that would not have been imposed if the representation
made by the Owner Participant in Section 3.4(i) had
been true and correct at the time made, and (z) any
such Taxes that result from transfers or dispositions
which occur after a Lease Event of Default has occurred
and is continuing; provided, however, the provisions of
this clause (viii) shall not exclude from the indemnity
described in this Section 7.1 any Taxes for which the
Lessee would be required to indemnify a Lender
Indemnitee so that any payment under the Operative
Agreements, otherwise required to be made on an After-
Tax Basis, is made on an After-Tax Basis;
(ix) Taxes imposed on or with respect to or
payable by the Owner Trustee or the Indenture Trustee
based on, measured by or imposed with respect to any
fees paid to or accruable by the Owner Trustee or the
Indenture Trustee, as the case may be, in its capacity
as Owner Trustee or the Indenture Trustee, as the case
may be;
(x) in the case of a Tax Indemnitee other than a
Lender Indemnitee, Taxes which have been included in
Lessor's Cost to the extent actually paid on or before
the Lease Commencement Date;
(xi) Taxes imposed upon the Owner Participant
for which the Lessee is obligated to indemnify the
Owner Participant pursuant to the Tax Indemnity
Agreement;
(xii) Taxes imposed against a transferee (or
subsequent transferee) of an original Tax Indemnitee to
the extent of the excess of such Taxes over the amount
of such Taxes which would have been imposed against the
original Tax Indemnitee had there not been a transfer
by such original Tax Indemnitee of its interest in the
Units, the Lease, its interest in the Trust Estate, the
Notes, the Construction Advances or any other interest
or obligation arising under the Operative Agreements;
provided, however, that this subparagraph (xii) shall
not apply (A) to any transfer following the occurrence
and continuance of a Lease Event of Default (or, in the
case of a transferee or subsequent transferee of a
Lender Indemnitee, a Transfer which occurs while a
payment then due under the Indenture has not been
paid), (B) in determining amounts necessary to make
payments on an After-Tax Basis or (C) Taxes imposed
under Section 4975 of the Code that would not have been
imposed if the representation made by the Owner
Participant in Section 3.4(i) had been true and correct
at the time made;
(xiii) in the case of a Tax Indemnitee other
than a Lender Indemnitee, Taxes resulting from any
Transfer by a Tax Indemnitee of all or any portion of
its interest in the Lease or any Unit to the extent of
the excess of such Taxes over the amount of such Taxes
that would have been imposed had there been no such
disposition; and
(xiv) any interest, penalties or additions to
tax of a Tax Indemnitee attributable to a failure by
such Tax Indemnitee to file when due any report or
return required by any taxing authority or to a failure
by the Lessor to pay or remit any Tax when due in
either case unless caused by the Lessee's failure to
prepare returns, provide information or otherwise meet
its obligations under the Operative Agreements.
(d) Withholding Taxes. Notwithstanding any of the
exclusions set forth in paragraph (c) to the contrary, in
the case of any withholding Taxes imposed or other
deductions on the Lessee's payment of Rent or on the payment
by or on behalf of the Lessor of principal, interest or
Premium, if any, on the Note or on any amounts paid pursuant
to the Indenture or the Construction Loan Agreement, the
Lessee shall make such additional payments as will be
sufficient such that after the payment of such withholdings
and deductions there will be available sufficient amounts to
pay all Rent amounts otherwise payable hereunder or under
the Lease, and all principal, interest and Premium, if any,
on the Note or on any amounts paid pursuant to the Indenture
or the Construction Loan Agreement, subject to the Lessee's
right to recover from the Owner Participant any of such
amounts withheld from Lessee s payment of Rent as a result
of the Owner Participant or any Affiliate thereof, being
other than a U.S. Person, for which the Owner Participant
agrees to pay the Lessee promptly upon demand.
(e) Payments to the Lessee.
(i) If any Tax Indemnitee actually shall
realize a net Tax benefit with respect to a Tax not
indemnifiable hereunder as a result of any Taxes paid
or indemnified against by the Lessee under this Section
7.1 (whether by way of deduction, credit, allocation or
apportionment or otherwise), which benefit was not
previously taken into account in determining the amount
of the Lessee's payment to such Tax Indemnitee, such
Tax Indemnitee shall pay to the Lessee an amount, on an
After-Tax Basis, equal to the amount of such net Tax
benefit attributable to the payment being made to the
Lessee hereunder; provided, however, that if, and so
long as, a Lease Event of Default shall have occurred
and be continuing, and, in the case of a Lender
Indemnitee, any payment then due to such Lender
Indemnitee under the Operative Agreements has not been
paid, the Tax Indemnitee may hold such amount for the
benefit of the Lessee and shall pay such amount to the
Lessee promptly following the date on which the Lease
Event of Default is no longer continuing and, in the
case of a Lender Indemnitee, such payment to such
Lender Indemnitee has been made; provided further,
however, that no Tax Indemnitee shall be required to
pay to the Lessee any Tax benefit to the extent such
benefit (determined without regard to the reverse
gross-up amount) exceeds the indemnity received by such
Tax Indemnitee (determined without regard to the gross-
up amount), with such excess to be carried over and
applied against any future obligation of the Lessee to
indemnify such Tax Indemnitee under the Operative
Agreements. In the case of a Lender Indemnitee, such
Lender Indemnitee may determine in its sole discretion
whether to claim a Tax credit as distinguished from a
Tax deduction for any Tax and such treatment shall be
applied for purposes of determining the amount of such
Tax benefit. If such Tax benefit is thereafter lost,
the additional Tax payable shall be treated as a Tax
indemnifiable hereunder without regard to the
exclusions set forth in Section 7.1(c) except if, and
to the extent, such loss results solely from such Tax
Indemnitee's gross negligence or willful misconduct.
(ii) Upon receipt by a Tax Indemnitee of a
refund or credit of all or part of any Taxes paid or
indemnified against by the Lessee, which refund or
credit was not previously taken into account in
determining the amount of the Lessee's payment to Tax
Indemnitee, such Tax Indemnitee shall pay to the
Lessee, on an After-Tax Basis, an amount equal to the
amount of such refund plus any interest received by or
credited to such Tax Indemnitee with respect to such
refund; provided that if, and so long as, a Lease Event
of default shall have occurred and be continuing, and,
in the case of a Lender Indemnitee, any payment to such
Lender Indemnitee under the Operative Agreements then
due has not been paid, the Tax Indemnitee may hold such
amount for the benefit of the Lessee and shall pay such
amount to the Lessee promptly following the date on
which the Lease Event of Default is no longer
continuing and, in the case of a Lender Indemnitee,
such payment has been made. If it is later determined
that the Tax Indemnitee was not entitled to such refund
or credit, the portion of such refund that is repaid,
recaptured or disallowed will be treated as a Tax
indemnifiable hereunder without regard to the
exclusions set forth in Section 7.1(c) except if, and
to the extent, such loss, recapture or disallowance
results solely from such Tax Indemnitee s gross
negligence or willful misconduct.
(iii) The Tax Indemnitee will, at the Lessee's
expense, pursue refunds and Tax benefits that would
result in any such payments to the Lessee, but only if
(x) the Tax Indemnitee has been notified in writing by
the Lessee that such refunds or Tax benefits are
available, and (y) in the case of a Lender Indemnitee,
the pursuit of such refund or Tax benefit shall not, in
the sole discretion of such Lender Indemnitee,
exercised in good faith, result in any adverse
consequence to such Lender Indemnitee.
(f) Procedures. Any amount payable to a Tax
Indemnitee pursuant to paragraph (b) shall be paid within 30
days after receipt of a written demand therefor from such
Tax Indemnitee accompanied by a written statement describing
in reasonable detail the basis for such indemnity and the
computation of the amount so payable, provided that such
amount need not be paid prior to the later of (i) the date
on which such Taxes are due or (ii) in the case of amounts
which are being contested pursuant to paragraph (g) hereof
and which are not required to be paid under applicable law,
the time such contest (including all appeals permitted
hereunder) is finally resolved, provided, further, that with
respect to Taxes of a recurring nature, the Tax Indemnitee
shall only be required to provide one such written notice.
Any amount payable to the Lessee pursuant to paragraph (e)
shall be paid within 30 days of the day on which a return is
filed reflecting such Tax benefit or, in the case of a
refund, promptly after the Tax Indemnitee actually receives
a refund giving rise to a payment under paragraph (e), and
shall be accompanied by a written statement by the Tax
Indemnitee setting forth in reasonable detail the basis for
computing the amount of such payment. Within 30 days
following the Lessee's receipt of any computation from the
Tax Indemnitee, the Lessee may request that a nationally
recognized accounting firm selected by the Tax Indemnitee,
and reasonably acceptable to the Lessee, determine whether
such computations (but not any matters of interpretation of
law or the Operative Agreements) are correct. Such
accounting firm shall be requested to make the determination
contemplated by this paragraph (f) within 30 days of its
selection. In the event such accounting firm shall
determine that such computations are incorrect, then such
firm shall determine what it believes to be the correct
computations. The Tax Indemnitee shall cooperate with such
accounting firm and supply it with all information necessary
to permit it to accomplish such determination. The
computations of such accounting firm shall be final, binding
and conclusive upon the parties and the Lessee shall not
have any right to inspect the books, records or tax returns
of the Tax Indemnitee to verify such computation or for any
other purpose. All fees and expenses of the accounting firm
payable under this Section 7.1(f) shall be borne by the
Lessee, except that if such accounting firm's computation
shall result in a decrease in the amount due from the Lessee
or an increase in the amount owing to the Lessee by more
than the greater of 5% of the Tax Indemnitee's computation
or $10,000, then the Tax Indemnitee shall bear the cost of
such accounting firm.
(g) Contest. If any claim shall be made against any
Tax Indemnitee or if any proceeding shall be commenced
against any Tax Indemnitee (including a written notice of
such proceeding) for any Tax as to which the Lessee may have
an indemnity obligation, or if any Tax Indemnitee shall
determine that any Tax as to which the Lessee may have an
indemnity obligation may be payable, such Tax Indemnitee
shall promptly notify the Lessee in writing and shall not
take any action with respect to such claim, proceeding or
Tax without the consent of the Lessee for 30 days after
receipt of such notice by the Lessee unless the failure to
take action could result in the imposition of penalties or
fines or material danger of sale, forfeiture or loss of, or
the creation of any Lien on, the Units or any portion
thereof or interest therein; provided, however, that any
failure to provide such notice shall not relieve the Lessee
of any obligation to indemnify any Tax Indemnitee hereunder
except to the extent such failure materially impairs the
defense of such claim and such failure did not result from
the Lessee's failure to provide information, file reports or
otherwise fulfill the requirements of the Operative
Agreements; provided, further, however, that if such Tax
Indemnitee shall be required by law or regulation to take
action with respect to any such claim, proceeding or Tax
prior to the end of such 30 day period such Tax Indemnitee
shall, in such notice to the Lessee, so inform the Lessee
and such Tax Indemnitee shall not take any action with
respect to such claim, proceeding or Tax without the consent
of the Lessee before the date on which such Tax Indemnitee
shall be required to take action. If, within 30 days after
its receipt of such notice (or the shorter period referred
to in the preceding sentence), the Lessee shall request in
writing that such Tax Indemnitee contest the imposition of
such Tax, the Tax Indemnitee shall, at the expense of the
Lessee, in good faith contest (including by pursuit of
appeals other than appeals to the United States Supreme
Court), and shall not settle without the Lessee's written
consent (such consent not to be unreasonably withheld, in
good faith, based solely on the merits of the claim at
issue), or if such contest does not involve a claim for
Income Taxes or Taxes imposed by way of withholding, the Tax
Indemnitee shall allow the Lessee to contest the validity,
applicability or amount of such Tax in the Lessee's own
name, or if required by law, in the Tax Indemnitee's name,
by, in the sole discretion of the Person conducting such
contest:
(i) resisting payment thereof;
(ii) not paying the same except under protest,
if protest shall be necessary and proper; or
(iii) if payment shall be made, using
reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings;
provided, however, that in no event shall such Tax
Indemnitee be required to contest (or permit the Lessee to
contest) the imposition of any Tax for which the Lessee may
be obligated unless: (t) no Lease Default or Lease Event of
Default shall have occurred and be continuing, (u) in the
case of Income Taxes or withholding Taxes indemnifiable
hereunder, (1) the amount of the claim and all future
related claims exceeds $100,000 and (2) the Lessee shall
have delivered to the Tax Indemnitee an opinion of tax
counsel chosen by the Lessee and reasonably acceptable to
the Tax Indemnitee to the effect that there is a Reasonable
Basis to contest such claim and, in the case of an appeal of
an adverse judicial decision, a reasonable basis to appeal
such decision, (v) in the case of any contest conducted by
the Lessee, the Lessee shall have acknowledged in writing
its liability hereunder if the contest is unsuccessful, (w)
the Lessee shall have agreed to pay such Tax Indemnitee all
costs and expenses that such Tax Indemnitee shall incur in
connection with the contest of such claim (including all
reasonable legal and accounting fees and disbursements), (x)
the action to be taken will not result in any material
danger of sale, forfeiture or loss of, or the creation of
any Lien on, the Units or any portion thereof or interest
therein, (y) if such contest shall involve payment of the
claim, the Lessee shall advance the amount thereof, plus
interest, penalties and additions to Tax with respect
thereto, to such Tax Indemnitee on an interest-free basis
and on an after-tax basis, and (z) the subject matter of
the claim shall not be of a continuing nature which has been
previously decided by a court of competent jurisdiction
pursuant to the contest provisions of this Section 7.1(g)
unless there shall have been a change in facts or law after
the date with respect to which such previous contest shall
have been decided, and the Tax Indemnitee shall have
received, at Lessee s expense, an opinion of independent tax
counsel chosen by the Lessee and reasonably acceptable to
the Tax Indemnitee that as a result of such change in facts
or law it is more likely than not that such contest will
prevail. For purposes of the preceding sentence, a
Reasonable Basis for a position shall exist if tax counsel
may properly advise reporting such position on a tax return
in accordance with ABA Formal Opinion 85-352 issued by the
Standing Committee on Ethics and Professional Responsibility
of the American Bar Association. The Tax Indemnitee shall
consult in good faith with the Lessee regarding the conduct
of any contest controlled by such Tax Indemnitee and the
Lessee shall consult in good faith with the Tax Indemnitee
regarding the conduct of any contest controlled by the
Lessee. Notwithstanding the above, a Tax Indemnitee may
settle and will not be required to contest the imposition of
any Taxes if such Tax Indemnitee shall waive its right to
indemnity with respect to such Taxes and any future and
logically related Taxes unless, with respect to such future
Taxes, the facts or law with respect thereto change in a
manner which would render a new contest of such Taxes
reasonable.
(h) Reports. In the event any reports with respect
to Taxes are required to be made, the Lessee will either
prepare and file such reports (and in the case of reports
which are required to be filed on the basis of individual
Units, such reports shall be prepared and filed in such
manner as to show as required the interests of each Tax
Indemnitee in such Unit) or, (x) if it shall not be
permitted to file the same, it will notify each Tax
Indemnitee of such reporting requirements, prepare such
reports in such manner as shall be reasonably satisfactory
to each Tax Indemnitee and deliver the same to each Tax
Indemnitee within a reasonable period prior to the date the
same is to be filed or (y) if it shall not possess the
information required to so prepare and file (and such
information is of the type which the Tax Indemnitee could
reasonably be expected to possess and which is of the type
which the Lessee and its Affiliates would not reasonably be
expected to possess) it shall request such information from
the Tax Indemnitee, which Tax Indemnitee will cooperate with
the Lessee in good faith to provide such information, if
within the possession of such Tax Indemnitee, or if not
within its possession, to obtain (at the Lessee's expense)
such information; it being understood that the ultimate
responsibility for obtaining such information not in the
possession of the Tax Indemnitee shall be that of the
Lessee.
7.2 General Indemnification and Waiver of Certain Claims.
(a) Claims Defined. For the purposes of this
Section 7.2, Claims shall mean any and all costs, expenses
(including reasonable attorneys' and consultants' fees and
disbursements), liabilities, obligations, losses, damages,
penalties, proceedings, actions or suits or claims of
whatsoever kind or nature (whether or not on the basis of
negligence, strict or absolute liability or liability in
tort) which may be imposed on, incurred by, suffered by, or
asserted against an Indemnified Person or any Unit or any
other portion of the Trust Estate and, except as otherwise
expressly provided in this Section 7.2, shall include, but
not be limited to, all reasonable out-of-pocket costs,
disbursements and expenses paid or incurred by an
Indemnified Person in connection therewith or thereto.
(b) Indemnified Person Defined. For the purposes of
this Section 7.2, "Indemnified Person" means the Owner
Participant, the Owner Trustee (both in its individual
capacity and as Owner Trustee), the Trust Estate, the
Indenture Trustee (both in its individual capacity and as
Indenture Trustee), the Indenture Estate, the Construction
Lenders, the Construction Loan Agent, the holders of Notes
(and if such holder is the nominee of another Person, such
other Person) and the respective shareholders, directors,
officers, employees, Affiliates, successors and permitted
assigns, agents and servants of the Owner Participant, the
Owner Trustee (both in its individual capacity and as Owner
Trustee), the Indenture Trustee (both in its individual
capacity and as Indenture Trustee), the Construction Loan
Agent, the Construction Lenders, and the holders of Notes.
(c) Claims Indemnified. Subject to the exclusions
stated in paragraph (d) below, the Lessee agrees to
indemnify, protect, defend and hold harmless each
Indemnified Person on an After-Tax Basis against Claims
relating to, resulting from or arising out of the Units, any
of the property constituting a part of the Trust Estate, the
Operative Agreements or the transactions contemplated
thereby (whether or not such Indemnified Person shall be
indemnified as to such Claim by any other Person),
including, without limitation:
(i) this Agreement or any other Operative
Agreement or any of the transactions contemplated
hereby and thereby, or the location, replacement,
condition, ownership, acquisition, lease, operation,
possession, repossession, redelivery, modification,
improvement, abandonment, use, non-use, maintenance,
assembly, installation, presence, rebuilding, import,
export, addition, assignment, transfer of title,
preparation, sublease, rental, substitution, control,
repair, storage, alteration, transfer, sale or other
application or disposition (including the imposition of
a Lien other than a Lessor's Lien), return, overhaul,
transportation, insuring, inspection, testing or
registration of any Unit (including, without
limitation, injury, death or property damage of
passengers, shippers or others), and strict liability
in tort;
(ii) the actual or alleged presence, release
or threatened release of Hazardous Substances on, in,
under or from the Premises, Easements or Units during
the Lease Term, whether discovered during or after the
Lease Term; any Environmental Claim based on Lessee s
operations on or at the Premises, Easements or Units,
but excluding any matters based solely on the gross
negligence or willful misconduct of the Owner
Participant, the Owner Trustee, the Indenture Trustee
and the holders of the Notes; and any violation by
Lessee of any Environmental Law;
(iii) the construction, manufacture, financing,
mortgaging, refinancing, design, purchase, acceptance,
rejection, delivery, non-delivery or condition of any
Unit (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for
patent, trademark or copyright infringement);
(iv) any act or omission (whether negligent or
otherwise) or any breach of or failure to perform or
observe, or any other noncompliance with, any covenant,
condition or agreement to be performed by, or other
obligation of, the Lessee or Bayer under any of the
Operative Agreements, or the falsity of any
representation or warranty of the Lessee or Bayer in
any of the Operative Agreements or in any document or
certificate delivered in connection therewith, other
than representations and warranties in the Tax
Indemnity Agreement;
(v) without limiting Section 10.3, the offer,
issue, sale or delivery of any Notes or the
Construction Advances or the Construction Notes or any
interest in the Trust Estate and any refinancing of the
Notes or the Construction Advances or the Construction
Notes, other than violations of applicable securities
laws attributable to such Indemnified Person's own
actions or omissions (and not imputed to such
Indemnified Person solely by reason of its entering
into the Operative Agreements, its participation in the
transactions contemplated by the Operative Agreements
and its interest in the Units or the acts or omissions
of the Lessee or Bayer);
(vi) the imposition of any Lien on any Unit
other than Lessor's Liens;
(vii) endeavoring to enforce the Operative
Agreements or exercising remedies thereunder;
(viii) violations of ERISA, including, without
limitation, by reason of this Agreement or any other
Operative Agreement or any transactions contemplated
hereby or thereby constituting a prohibited transaction
within the meaning of Section 406 of ERISA;
(ix) any violation of any law, rule, regulation
or order by the Lessee or its directors, officers,
employees, agents or servants; and
(x) any costs incurred directly or indirectly by
the Construction Lenders in connection with the
purchase by Bayerische of a participation in Security
Pacific s Construction Advances as contemplated by
Section 2.5 of the Construction Loan Agreement which
result from any breakage of an Interest Period for
outstanding Construction Advances or the establishment
of any short-period match-funding by Bayerische related
to the purchase of such participation.
(d) Claims Excluded. The following are excluded
from the agreement to indemnify under this Section 7.2:
(i) Claims with respect to any Unit to the
extent attributable to acts or events occurring in
connection with and after (and not attributable to
events having occurred or conditions existing prior to)
(A) in the case of the consummation by the Lessee of a
purchase option with respect to all of the Units under
Section 22 of the Lease, or the payment of Termination
Value by the Lessee in respect of Proposed Terminated
Units under Section 10.2 of the Lease, or the
occurrence of an Event of Loss with respect to all of
the Units for which Stipulated Loss Value is paid under
Section 11 of the Lease, the payment of all amounts due
from the Lessee in connection with any such event, and
(B) in all other cases, with respect to such Unit, the
last to occur of (x) the earlier to occur of the
termination of the Lease or the expiration of the Lease
Term thereof, (y) the return of such Unit to the Owner
Trustee in accordance with the terms of the Lease (it
being understood that, so long as any Unit is in
storage as provided in Section 6.3 of the Lease, the
date of return thereof for the purpose of this Clause
(i)(B)(y) shall be the end of the last day of such
storage period), and (z) the payment in full of the
principal of, Premium, if any, and interest on the
Notes and all other amounts due and payable to or for
the account of the Indenture Trustee and the Note
holders under the Indenture and the other Operative
Agreements;
(ii) Claims which are Taxes (other than amounts
necessary to indemnify Claims on an After-Tax Basis),
or any cost or expense of contesting any such Taxes
whether or not the Lessee is required to indemnify
therefor under Section 7.1 hereof or the Tax Indemnity
Agreement, the Lessee's entire obligation with respect
to Claims which are Taxes under Section 4975 of the
Code and to Taxes and losses of tax benefits being
fully set out in such Section 7.1 or the Tax Indemnity
Agreement;
(iii) with respect to any particular
Indemnified Person and only as to such Indemnified
Person, Claims to the extent attributable to the gross
negligence or wilful misconduct (other than any gross
negligence or wilful misconduct imputed as a matter of
law to such Indemnified Person solely by reason of its
participation in the transactions and entering into the
Operative Agreements, its interest in the Units or the
acts or omissions of the Lessee or Bayer) of, or the
falsity or inaccuracy of any representation or warranty
of, or any breach of any covenant of, such Indemnified
Person; and
(iv) Claims attributable to (A) any voluntary
transfer, assignment or other disposition ( Transfer )
by such Indemnified Person subsequent to the applicable
Purchase Date, of any interest in some or all of the
Units, any of the property constituting the Trust
Estate, the Lease, its interest in the Trust Estate,
the Notes, the Construction Advances or any other
interests or obligations arising under the Operative
Agreements other than (x) Transfers which occur as a
result of the exercise of remedies after a Lease Event
of Default has occurred and is continuing, (y) any
Transfer pursuant to the terms of the Lease at the
request or option of the Lessee (including the Lessee's
exercise of the option granted pursuant to Section 22
of the Lease), or (z) any Claim under ERISA that would
not have been made if the representation made by the
Owner Participant in Section 3.4(i) had been true and
correct when made or (B) any involuntary Transfer by
such Indemnified Person of any interest in the Units,
any of the property constituting the Trust Estate, the
Lease, the Notes, the Construction Advances or any
interests or obligations arising under the Operative
Agreements resulting from any bankruptcy or other
proceeding for relief of debtors in which such
Indemnified Person is the debtor or any foreclosure by
a creditor of the Indemnified Person other than (y) any
such Transfer following the occurrence and continuance
of a Lease Event of Default, or (z) any Claim under
ERISA that would not have been made if the
representation made by the Owner Participant in Section
3.4(i) had been true and correct when made.
(e) Insured Claims. In the case of any Claim
indemnified by the Lessee hereunder which is covered by a
policy of insurance maintained by the Lessee pursuant to
Section 12 of the Lease or otherwise, each Indemnified
Person agrees, at Lessee's cost and expense, to provide
reasonable cooperation to the insurers in the exercise of
their rights to investigate, defend or compromise such Claim
as may be required to retain the benefits of such insurance
with respect to such Claim.
(f) Claims Procedure. An Indemnified Person shall,
after obtaining actual knowledge thereof, promptly notify
the Lessee of any Claim as to which indemnification is
sought (unless the Lessee theretofore has notified such
Indemnified Person of such Claim); provided, however, that
the failure to give such notice shall not release the Lessee
from any of its obligations under this Section 7, except to
the extent that failure to give notice of any action, suit
or proceeding against such Indemnified Person shall
materially and substantially prejudice the Lessee's ability
to defend such Claim and such failure arises out of or is
caused by the misconduct or negligence of such Indemnified
Person, provided that, for purposes of this sentence,
whenever (but only prior to the Lease Term Commencement
Date) Bayerische, in its capacity as a Construction Lender,
is an Indemnified Person, such Indemnified Person shall be
deemed to have actual knowledge of a Claim only to the
extent that both such Indemnified Person and the
Construction Loan Agent have actual knowledge of such claim.
Subject to the provisions of the following paragraph, the
Lessee shall at its sole cost and expense be entitled to
control, and shall assume full responsibility for, the
defense of such Claim; provided that the Lessee shall keep
the Indemnified Person which is the subject of such
proceeding fully apprised of the status of such proceeding
and shall provide such Indemnified Person with all
information with respect to such proceeding as such
Indemnified Person shall reasonably request.
Notwithstanding any of the foregoing to the contrary,
no Lessee shall be entitled to control and assume
responsibility for the defense of such Claim if (1) a Lease
Event of Default shall have occurred and be continuing and
the Indemnified Person notifies the Lessee that it is no
longer permitted to control the defense of such Claim, (2)
there exists an imminent risk of sale, forfeiture or loss of
any Unit or any other portion of the Trust Estate or such
proceeding will involve any material danger of the sale,
forfeiture or loss of, or the creation of any Lien (other
than any Permitted Lien) on, any Unit or any other portion
of the Trust Estate, (3) the amounts involved, in the
reasonable opinion of such Indemnified Person, are likely to
have a materially adverse effect on the business, taken as a
whole, of such Indemnified Person (other than the ownership,
leasing and financing of the Units), (4) in the reasonable
opinion of such Indemnified Person, there exists an actual
or potential material conflict of interest such that it is
advisable for such Indemnified Person to retain control of
such proceeding, (5) the Lessee has not acknowledged its
liability to the Indemnified Person with respect to such
Claim (except to the extent that thereafter any judicial
determination or settlement establishes that the act,
omission or event giving rise to such Claim was not
indemnifiable under this Section 7.2) or (6) in the
reasonable opinion of such Indemnified Person such Claim
involves the risk of criminal sanctions or liability to such
Indemnified Person. In the circumstances described in
clauses (1) through (6), the Indemnified Person shall be
entitled to control and assume responsibility for the
defense of such claim or liability at the cost and expense
of the Lessee. Unless a Lease Event of Default has occurred
and is continuing, the Indemnified Person shall not settle
or compromise any Claim without the prior consent of the
Lessee, which consent shall not be unreasonably withheld.
In addition, any Indemnified Person, at its own cost and
expense, may participate in any proceeding controlled by the
Lessee pursuant to this Section 7.2(f). The Lessee may in
any event participate in all such proceedings at its own
cost and expense. Nothing contained in this Section 7.2(f)
shall be deemed to require an Indemnified Person to contest
any Claim or to assume responsibility for or control of any
judicial proceeding with respect thereto.
(g) Subrogation. If a Claim indemnified under this
Section 7.2 is paid in full by the Lessee and/or an insurer
under a policy of insurance maintained by the Lessee, or if
payment of the Claim has otherwise been provided for in full
in a manner reasonably satisfactory to the Indemnified
Person, the Lessee and/or such insurer, as the case may be,
shall be subrogated to the extent of such payment (or
provision) to the rights and remedies of the Indemnified
Person (other than under insurance policies maintained by
such Indemnified Person) on whose behalf such Claim was paid
(or provided for) with respect to the act or event giving
rise to such Claim. So long as no Lease Default or Lease
Event of Default shall have occurred and be continuing,
should an Indemnified Person receive any refund, in whole or
in part, with respect to any Claim paid by the Lessee
hereunder, it shall promptly pay over the amount refunded
(but not in excess of the amount the Lessee or any of its
insurers has paid in respect of such Claim paid or payable
by such Indemnified Person on account of such refund) to the
Lessee.
(h) Waiver of Certain Claims. The Lessee hereby
waives and releases any Claim now or hereafter existing
against any Indemnified Person arising out of death or
personal injury to personnel of the Lessee or any of its
Affiliates or Bayer (including directors, officers,
employees, agents and servants), loss or damage to property
of the Lessee or its Affiliates or Bayer, or the loss of use
of any property of Lessee or its Affiliates or Bayer, which
may result from or arise out of the condition, use or
operation of the Units during the Lease Term, including,
without limitation, any latent or patent defect whether or
not discoverable.
(i) No Guaranty. The general indemnification
provisions of this Section 7.2 do not constitute a guaranty
by the Lessee that the principal of, interest on or any
other amounts payable with respect to the Notes will be
paid.
SECTION 8 LESSEE'S RIGHTS UNDER THE LEASE
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease, and
expressly, severally and as to its own actions only, agrees that
unless a Lease Event of Default has occurred and is continuing,
it shall not take, or cause to be taken, any action contrary to
the Lessee's rights under the Lease, including, without
limitation, the right to possession, use and operation by the
Lessee (or any permitted sublessee) of the Units.
SECTION 9 SPECIAL RIGHTS OF NOTE PURCHASER
Notwithstanding any provision to the contrary in this
Agreement, the Indenture or the Notes relating to the manner and
place of payment, all amounts payable to the Note Purchaser with
respect to any Notes held by the Note Purchaser or a nominee for
the Note Purchaser shall be paid by the Indenture Trustee to the
Note Purchaser (without any presentment thereof and without any
notation of the payment being made thereon) by check, duly
mailed, by first-class mail, postage prepaid, or delivered to
such Note Purchaser at the address for payments for such Note
Purchaser or, if a wire transfer to a bank account is designated
opposite such Note Purchaser's name on Schedule 1 or in a written
notice from such Note Purchaser to the Owner Trustee and the
Indenture Trustee, by wire transfer of immediately available
funds to the bank so designated for credit to the account and
marked for attention as so designated, provided that such bank
has facilities for the receipt of a wire transfer, or in any
other manner or to any other address in the United States as may
be designated by such Note Purchaser in a written notice from
such Note Purchaser to the Owner Trustee and the Indenture
Trustee. In the case of any wire transfer, the Indenture Trustee
will transfer funds from the office of the Indenture Trustee not
later than 2:00 p.m., Wilmington, Delaware time the date any
payment or prepayment of principal, Premium, if any, or interest
on the Notes is due, provided that funds therefor have been
received by the Indenture Trustee in cash or in solvent credits
acceptable to it by 12:00 noon, Wilmington, Delaware time, or if
not so received, the Indenture Trustee shall transfer such funds
promptly upon its receipt of such cash or solvent credits, but no
later than 12:00 noon Wilmington, Delaware time the next Business
Day. In the event the Indenture Trustee shall fail to make any
such payment as provided in the immediately foregoing sentence
after its receipt of funds by the time specified above, the
Indenture Trustee agrees to compensate the Note holders for loss
of use of funds. The Note Purchaser agrees that, if the Note
Purchaser shall sell or transfer any Notes, the Note Purchaser
will notify the Indenture Trustee of the name and address of the
transferee and such Note Purchaser will, prior to the delivery of
such Notes, make a notation on such Notes of the date to which
interest has been paid thereon and of the amount of any payments
or prepayments made on account of the principal thereof.
SECTION 10 MISCELLANEOUS
10.1 Survival. All warranties, representations,
indemnities and covenants made by any party hereto, whether
herein or in any certificate or other instrument delivered by any
such party or on behalf of any such party under this Agreement,
shall be considered to have been relied upon by each other party
hereto and shall survive the execution and delivery hereof, the
consummation of the transactions contemplated hereby at the
Closing or on each Purchase Date, each Advance Date and the Lease
Term Commencement Date, regardless of any investigation made by
any such party or on behalf of any such party. All indemnities
made by any party hereto, whether herein or in any certificate or
other instrument delivered by any such party or on behalf of any
such party under this Agreement, shall survive the termination of
this Agreement or any other Operative Agreement.
10.2 Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices
provided for herein shall be in writing, and any such notice
shall become effective when received. Any written notice shall
be by (a) personal delivery thereof, including, without
limitation, by overnight mail and courier service, (b) United
States mail, certified, postage prepaid, return receipt requested
or (c) facsimile transmission, confirmed by the method set forth
in clause (a) or (b) above, in each case addressed to addressee
at its respective address set forth on Schedule 1 or at such
other address as such Person may from time to time designate by
written notice to the other Persons party hereto.
10.3 No Guaranty. Nothing contained herein (including,
without limitation, Section 7.2 hereof) or in the Lease, the
Indenture, the Trust Agreement, the Bayer Letter, the Bayer
Support Agreement or the Tax Indemnity Agreement or in any
certificate or other statement delivered by the Lessee or Bayer
in connection with the transactions contemplated hereby or
thereby shall be deemed to be (a) a guaranty by the Lessee or
Bayer to the Owner Trustee, the Owner Participant, the Indenture
Trustee or any holder of Notes that the Units will have any
residual value or useful life, or (b) a guaranty by the Lessee or
Bayer of payment of the principal of, Premium, if any, or
interest on the Notes. Nevertheless, this Participation
Agreement and each other document named in the foregoing sentence
shall be enforceable in accordance with its terms.
10.4 Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors
and assigns and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective
successors and assigns as permitted by and in accordance with the
terms hereof, including each successive holder of the Beneficial
Interest permitted under Section 6.1 hereof and each successive
holder of a Note permitted under Section 6.13 hereof. Except as
expressly provided herein or in the other Operative Agreements,
no party hereto may assign their interests herein without the
consent of the other parties hereto.
10.5 Business Day. If the date on which any payment is to
be made pursuant to this Agreement or any other Operative
Agreement is not a Business Day, the payment otherwise payable on
such date shall be payable on the next succeeding Business Day,
with the same force and effect as if made on the date when such
payment is due.
10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
10.7 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under the laws
of any jurisdiction, such provision, as to such jurisdiction,
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement as to such
jurisdiction or any other jurisdiction.
10.8 Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
10.9 Headings and Table of Contents. The headings of the
Sections of this Agreement and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions
hereof.
10.10 Reproduction of Documents. This Agreement, all
documents constituting exhibits hereto, and all documents
relating hereto received by a party hereto, including, without
limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received in connection with
the purchase of the Notes, (c) documents received by the Owner
Participant in connection with the Owner Trustee's purchase of
the Units, and (d) financial statements, certificates, and other
information previously or hereafter furnished to the Owner
Participant, the Owner Trustee, the Construction Loan Agent and
the Indenture Trustee, may be reproduced by the party receiving
the same by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process. Each party
hereto agrees and stipulates that, to the extent permitted by
law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not
such reproduction was made by such party in the regular course of
business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such
reproduction shall likewise be admissible in evidence.
10.11 Limitations of Liability.
(a) Liabilities of the Indenture Trustee, the Owner
Trustee, the Construction Lenders, the Construction Loan Agent
and the Participants. Neither the Indenture Trustee, the Owner
Trustee, any Construction Lender, the Construction Loan Agent nor
any Participant shall have any obligation or duty to the Lessee
or to others with respect to the transactions contemplated
hereby, except those obligations or duties expressly set forth
with respect to it in this Agreement and the other Operative
Agreements; and neither the Indenture Trustee, the Owner Trustee,
any Construction Lender, the Construction Loan Agent nor any
Participant shall be liable for performance by any other party
hereto of such other party's obligations or duties hereunder.
Without limiting the generality of the foregoing, under no
circumstances whatsoever shall the Indenture Trustee, any
Construction Lender, the Construction Loan Agent or any
Participant be liable to the Lessee for any action or inaction on
the part of the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is
caused by misconduct or negligence of the Owner Trustee unless
such action or inaction is at the direction of the Indenture
Trustee, such Construction Lender, the Construction Loan Agent or
such Participant, as the case may be.
(b) No Recourse to the Owner Trustee. It is expressly
understood and agreed by and among the Owner Trustee, the Lessee,
each Participant, each Construction Lender, the Construction Loan
Agent and the Indenture Trustee, and their respective successors
and permitted assigns, that, subject to the proviso contained in
this Section 10.11(b), all representations, warranties, covenants
and undertakings of the Owner Trustee hereunder shall be binding
upon the Owner Trustee only in its capacity as Owner Trustee
under the Trust Agreement, and (except as otherwise expressly
provided herein) the Owner Trustee shall not be liable in its
individual capacity for any breach thereof, except in the case of
handling funds for failure to act with the same care Boatmen's
uses in handling its own funds, and in all other cases for its
gross negligence or wilful misconduct; provided, however, that
nothing in this Section 10.11(b) shall be construed to limit in
scope or substance those representations, warranties, covenants
and undertakings of the Owner Trustee made expressly in its
individual capacity set forth herein or in any other Operative
Agreement. The term "Owner Trustee" as used in this Agreement
shall include any successor trustee under the Trust Agreement, or
the Owner Participant if the trust created thereby is terminated
or revoked.
(c) No Recourse to the Indenture Trustee. It is
expressly understood and agreed by and among the Owner Trustee,
the Lessee, each Participant, the Indenture Trustee and each
holder of a Note, and their respective successors and permitted
assigns, that, subject to the proviso contained in this Section
10.11(c), all representations, warranties, covenants and
undertakings of the Indenture Trustee hereunder shall be binding
upon the Indenture Trustee only in its capacity as Indenture
Trustee under the Indenture, and (except as otherwise expressly
provided herein) the Indenture Trustee shall not be liable in its
individual capacity for any breach thereof, except in the case of
handling funds for failure to act with the same care the
Indenture Bank uses in handling its own funds and in all other
cases for its gross negligence or wilful misconduct; provided,
however, that nothing in this Section 10.11(c) shall be construed
to limit in scope or substance those representations, warranties,
covenants and undertakings of the Indenture Trustee made
expressly in its individual capacity set forth herein or in any
other Operative Agreement. The term Indenture Trustee as used
in this Agreement shall include any successor trustee under the
Indenture.
10.12 Amendments and Waivers. Subject to Section 2.9
hereof, no term, covenant, agreement or condition of this
Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or
instruments in writing executed by each party against which
enforcement of the termination, amendment or waiver is sought.
10.13 Disclosure of Information. (a) The Lessee authorizes
each holder of a Note to disclose to any Note Purchaser or
potential Note Purchaser, or to any assignee or potential
assignee of a Note, any and all financial and other information
in such holder's possession concerning the Lessee or LSB that has
been delivered to such holder of a Note by or on behalf of the
Lessee or LSB pursuant to this Agreement or any other Operative
Agreement or that has been delivered to such holder of a Note by
or on behalf of the Lessee or LSB in connection with such
holder's investigation of the Lessee and LSB prior to purchasing
a Note.
(b) Subject to the provisions of Section 10.16, the
Lessee authorizes the Owner Participant to disclose to any
Transferee or potential Transferee of the Beneficial Interest any
and all financial and other information in the Owner
Participant's possession concerning the Lessee or LSB that has
been delivered to the Owner Participant by or on behalf of the
Lessee or LSB pursuant to this Agreement or any other Operative
Agreement or that has been delivered to the Owner Participant by
or on behalf of the Lessee or LSB in connection with the Owner
Participant's investigation of the Lessee and LSB prior to
purchasing the Beneficial Interest.
10.14 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON OR ON ANY OTHER OPERATIVE AGREEMENT, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER OPERATIVE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, EXCEPT FOR
LITIGATION BROUGHT IN THE COURTS OF OTHER JURISDICTIONS TO
ENFORCE JUDGMENTS RENDERED BY SUCH COURTS OF THE STATE OF NEW
YORK OR FEDERAL COURTS LOCATED IN NEW YORK. EACH PARTY HERETO
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF THE
APPELLATE COURTS THEREFROM FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREIN FOR WHICH APPEALS OR THE TIME FOR
APPEAL HAVE EXPIRED IN CONNECTION WITH SUCH LITIGATION. EACH
PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OR VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER OPERATIVE AGREEMENTS.
10.15 WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY MATTER ARISING
HEREUNDER OR UNDER ANY OTHER OPERATIVE AGREEMENT.
10.16 Confidentiality. The parties hereto (other than
Lessee) agree to take normal and reasonable precautions in
accordance with their normal procedures and exercise due care to
maintain the confidentiality of all information relating to the
Lessee, Bayer and their respective Affiliates, which has been
identified as confidential by the Lessee or Bayer, and neither
such parties nor any of their Affiliates shall use any such
information for any purpose or in any manner other than pursuant
to the terms contemplated by the Operative Agreements; except to
the extent such information (a) was or becomes generally
available to the public other than as a result of a disclosure by
such parties, or (b) was or becomes available on a non-
confidential basis from a source other than the Lessee or Bayer;
provided, that such source is not bound by a confidentiality
agreement with either the Lessee or Bayer known to such parties;
and provided, further, that any such party may disclose such
information (i) at the request or pursuant to any requirement of
any Governmental Authority to which such party is subject or in
connection with an examination of such party by any such
Governmental Authority including, without limitation, the
National Association of Insurance Commissioners and any other
industry regulators, (ii) pursuant to subpoena or other court
process, (iii) when required to do so in accordance with the
provisions of any applicable law, (iv) to each such party's
independent auditors and other professional advisors, and (v) to
any Person and in any proceeding necessary in any such party's
judgment to protect such party's interests in connection with any
claim or dispute involving such party. Notwithstanding the
foregoing, the Lessee authorizes such parties to disclose to any
participant or assignee or purchaser of the Construction Notes,
the Notes, the Trust Estate, the Indenture Estate, the Beneficial
Interest or the Units (each, a "Transferee"), to any prospective
Transferee and to any Affiliate, such financial and other
information in such parties' possession concerning the Lessee,
Bayer or their respective Affiliates which has been delivered to
such parties pursuant to this Lease or the Participation
Agreement; provided, that unless otherwise agreed by the Lessee
or Bayer, as applicable, the Transferee agrees in writing with
such parties to keep such information confidential to the same
extent required of such parties hereunder.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered in New York, New York, all
as of the date first above written.
Lessee: EL DORADO NITROGEN COMPANY
By:__________________________________
Name:_____________________________
Title:____________________________
Owner Trustee: BOATMEN'S TRUST COMPANY OF TEXAS,
not in its individual capacity, except as
expressly provided herein, but solely as
Owner Trustee
By:__________________________________
Name:_____________________________
Title:____________________________
Owner Participant: SECURITY PACIFIC LEASING CORPORATION
By:__________________________________
Name:_____________________________
Title:____________________________
Indenture Trustee: WILMINGTON TRUST COMPANY,
not in its individual capacity, except as
expressly provided herein, but solely as
Indenture Trustee
By:___________________________________
Name:____________________________
Title:___________________________
Construction Loan
Agent: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:___________________________________
Name:______________________________
Title:_____________________________
Construction Lender: SECURITY PACIFIC LEASING CORPORATION
By:___________________________________
Name:______________________________
Title:_____________________________
Construction Lender
and Note Purchaser: BAYERISCHE LANDESBANK, NEW YORK BRANCH
By:___________________________________
Name:______________________________
Title:_____________________________
By:___________________________________
Name:______________________________
Title:_____________________________
EXHIBIT A
Participation Agreement
FORM OF AMENDED AND RESTATED TRUST AGREEMENT
EXHIBIT B
Participation Agreement
FORM OF INDENTURE
EXHIBIT C
Participation Agreement
FORM OF CONSTRUCTION LOAN AGREEMENT
EXHIBIT D-1
Participation Agreement
FORM OF BAYER SUPPORT AGREEMENT
EXHIBIT D-2
Participation Agreement
FORM OF BAYER LETTER
EXHIBIT E
Participation Agreement
FORM OF LEASE
EXHIBIT F-1
Participation Agreement
FORM OF GROUND LEASE
EXHIBIT F-2
Participation Agreement
FORM OF GROUND LEASE SUBLEASE
EXHIBIT G-1
Participation Agreement
FORM OF OPINION OF LESSEE'S COUNSEL - EFFECTIVE DATE
EXHIBIT G-2
Participation Agreement
FORM OF OPINION OF LESSEE'S COUNSEL - LEASE
TERM COMMENCEMENT DATE
EXHIBIT H-1
Participation Agreement
FORM OF OPINION OF OWNER TRUSTEE'S SPECIAL COUNSEL -
EFFECTIVE DATE
EXHIBIT H-2
Participation Agreement
FORM OF OPINION OF OWNER TRUSTEE'S SPECIAL COUNSEL -
LEASE TERM COMMENCEMENT DATE
EXHIBIT I-1A
Participation Agreement
FORM OF OPINION OF OWNER PARTICIPANT'S SPECIAL COUNSEL -
EFFECTIVE DATE
EXHIBIT I-2A
Participation Agreement
FORM OF OPINION OF OWNER PARTICIPANT'S SPECIAL COUNSEL -
EFFECTIVE DATE
EXHIBIT I-2B
Participation Agreement
FORM OF OPINION OF OWNER PARTICIPANT S SPECIAL
COUNSEL-LEASE TERM COMMENCEMENT DATE
EXHIBIT J
Participation Agreement
FORM OF OPINION OF INDENTURE TRUSTEE'S SPECIAL COUNSEL
EXHIBIT K-1A
Participation Agreement
FORM OF OPINION OF BAYER'S COUNSEL -
EFFECTIVE DATE
EXHIBIT K-1B
Participation Agreement
FORM OF OPINION OF PAUL BERRY
EXHIBIT K-2A
Participation Agreement
FORM OF OPINION OF BAYER'S COUNSEL -
LEASE TERM COMMENCEMENT DATE
EXHIBIT K-2B
Participation Agreement
FORM OF OPINION OF PAUL BERRY -
LEASE TERM COMMENCEMENT DATE
EXHIBIT L
Participation Agreement
FORM OF PRIVATE PLACEMENT CERTIFICATE
EXHIBIT M
Participation Agreement
[INTENTIONALLY OMITTED]
EXHIBIT N
Participation Agreement
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT O
Participation Agreement
FORM OF BILL OF SALE
EXHIBIT P
Participation Agreement
FORM OF PURCHASE NOTICE
EXHIBIT Q
Participation Agreement
FORM OF ADVANCE DATE NOTICE
EXHIBIT R
Participation Agreement
FORM OF AMENDED AND RESTATED
CONSTRUCTION AGENCY AGREEMENT
EXHIBIT S
Participation Agreement
FORM OF FACILITY DOCUMENTS
EXHIBIT T
Participation Agreement
FORM OF SUPPORT DOCUMENTS
EXHIBIT U
Participation Agreement
FORM OF ELIGIBLE OP ASSIGNEE GUARANTY
SCHEDULE 1
Participation Agreement
PARTIES' ADDRESSES AND PAYMENT INSTRUCTIONS
Party Address Payment Instructions
SCHEDULE 2
Participation Agreement
RENTAL FACTORS
Basic Rent Percentage
Rent Payment Date In Arrears/In Advance
SCHEDULE 3
Participation Agreement
STIPULATED LOSS VALUE/TERMINATION VALUE
Stipulated Loss
Value as Percent Termination
Determination Date of Total Eqipment Cost Value
- ------------------- ---------------------- -----------
SCHEDULE 4
Participation Agreement
[INTENTIONALLY OMITTED]
SCHEDULE 5
Participation Agreement
AMORTIZATION SCHEDULE
SCHEDULE 6
Participation Agreement
FIXED PRICE PURCHASE OPTION AMOUNT
Fixed Price Purchase
Lease Term Expiration Date Option Amount
- -------------------------- ---------------------
SCHEDULE 7
Participation Agreement
LEASED PROPERTY
SCHEDULE 8
Participation Agreement
PRICING ASSUMPTIONS
SCHEDULE 9
Participation Agreement
CONSTRUCTION COMMITMENT AMOUNTS
SCHEDULE 10
Participation Agreement
NOTE PURCHASER'S PERCENTAGE AND COMMITMENT
SCHEDULE 11
Participation Agreement
LESSEE DISCLOSURES
APPENDIX A
Participation Agreement
DEFINITIONS
Exhibit 10.6
LEASE AGREEMENT
(EDNC Trust 1997)
Dated as of June 27, 1997
Between
BOATMEN'S TRUST COMPANY OF TEXAS,
not in its individual capacity, except
as expressly provided herein, but
solely as Owner Trustee,
as Lessor
and
EL DORADO NITROGEN COMPANY,
as Lessee
Nitric Acid Production Facility
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE LESSOR IN AND TO
THIS LEASE, THE UNITS COVERED HEREBY AND THE RENT DUE AND TO BECOME
DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF, WILMINGTON TRUST COMPANY,
NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS INDENTURE TRUSTEE UNDER
A TRUST INDENTURE AND SECURITY AGREEMENT (EDNC TRUST 1997), DATED AS
OF JUNE 27, 1997, BETWEEN SUCH INDENTURE TRUSTEE, AS SECURED PARTY, AND
THE LESSOR, AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST
MAY BE OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH
IN SECTION 20 OF THIS LEASE. THIS LEASE HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS, BUT ONLY THE COUNTERPART TO BE DEEMED THE ORIGINAL
COUNTERPART FOR CHATTEL PAPER PURPOSES CONTAINS THE RECEIPT
THEREFOR EXECUTED BY WILMINGTON TRUST COMPANY, AS INDENTURE
TRUSTEE, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 25.2 FOR
INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE
HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS LEASE. . . . . . . . . . .1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Directly or Indirectly.. . . . . . . . . . . . . . . . . . . . .1
SECTION 2. LEASE AND DELIVERY . . . . . . . . . . . . . . . . . . . . . .2
SECTION 3. TERM AND RENT. . . . . . . . . . . . . . . . . . . . . . . . .2
3.1 Lease Term.. . . . . . . . . . . . . . . . . . . . . . . . . . .2
3.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3.3 Sufficiency of Basic Rent. . . . . . . . . . . . . . . . . . . .3
3.4 Supplemental Rent. . . . . . . . . . . . . . . . . . . . . . . .3
3.5 Certain Adjustments. . . . . . . . . . . . . . . . . . . . . . .3
3.6 Manner of Payments . . . . . . . . . . . . . . . . . . . . . . .3
3.7 Net Lease, Etc . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 4. OWNERSHIP AND MARKING OF UNITS; PERSONAL PROPERTY. . . . . . .5
4.1 Retention of Title . . . . . . . . . . . . . . . . . . . . . . .5
4.2 Duty to Mark Units . . . . . . . . . . . . . . . . . . . . . . .5
4.3 Prohibition Against Certain Designations . . . . . . . . . . . .5
4.4 Personal Property. . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 5. DISCLAIMER OF WARRANTIES . . . . . . . . . . . . . . . . . . .6
SECTION 6. RETURN OF UNITS; CONDITION; STORAGE. . . . . . . . . . . . . .8
6.1 Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
6.2 Condition of Units . . . . . . . . . . . . . . . . . . . . . . .8
6.3 Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 7. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 8. MAINTENANCE; OPERATION; POSSESSION; COMPLIANCE WITH
LAWS; SUBLEASE; REPLACEMENT OF PARTS; SUBSTITUTION9
8.1 Maintenance and Operation. . . . . . . . . . . . . . . . . . . .9
8.2 Possession and Use . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.4 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . 11
SECTION 9. MODIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Required Modifications . . . . . . . . . . . . . . . . . . . . 12
9.2 Optional Modifications . . . . . . . . . . . . . . . . . . . . 12
SECTION 10. VOLUNTARY TERMINATION . . . . . . . . . . . . . . . . . . . 13
10.1 Uneconomic or Surplus Condition Termination. . . . . . . . . . 13
10.2 Sale of Units. . . . . . . . . . . . . . . . . . . . . . . . . 13
10.3 Retention of Units by the Lessor . . . . . . . . . . . . . . . 14
10.4 Termination of Lease . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11. LOSS, DESTRUCTION, REQUISITION, ETC.. . . . . . . . . . . . 15
11.1 Event of Loss. . . . . . . . . . . . . . . . . . . . . . . . . 15
11.2 Replacement or Payment upon Event of Loss. . . . . . . . . . . 15
11.3 Rent Termination . . . . . . . . . . . . . . . . . . . . . . . 16
11.4 Disposition of Units; Replacement of Units . . . . . . . . . . 16
11.5 Applications of Event of Loss Proceeds . . . . . . . . . . . . 17
11.6 Eminent Domain; Damage Not Constituting an Event of Loss . . . 18
11.7 Lease Event of Default . . . . . . . . . . . . . . . . . . . . 18
SECTION 12. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Property Damage, Public Liability and Other Insurance. . . . . 20
12.2 Policy Provisions. . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Proceeds of Insurance. . . . . . . . . . . . . . . . . . . . . 22
12.4 Notice, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.5 Reports and Certificates . . . . . . . . . . . . . . . . . . . 23
12.6 Additional Insurance . . . . . . . . . . . . . . . . . . . . . 23
SECTION 13. INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 14. LEASE EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . 24
SECTION 15. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.2 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . 28
15.3 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15.4 Notice of Lease Default. . . . . . . . . . . . . . . . . . . . 29
15.5 Specific Performance; the Lessor Appointed the Lessee's Agent. 29
SECTION 16. FURTHER ASSURANCES; REPORTS; OPINION. . . . . . . . . . . . 29
16.1 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . 29
16.2 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
16.3 Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 17. THE LESSOR'S RIGHT TO PERFORM.. . . . . . . . . . . . . . . 30
SECTION 18. ASSIGNMENT BY THE LESSOR. . . . . . . . . . . . . . . . . . 30
SECTION 19. ASSIGNMENT BY THE LESSEE. . . . . . . . . . . . . . . . . . 31
SECTION 20. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 21. CONCERNING THE INDENTURE TRUSTEE. . . . . . . . . . . . . . 32
21.1 Rights and Immunities of Indenture Trustee . . . . . . . . . . 32
21.2 Amendments; Exercise of Remedies . . . . . . . . . . . . . . . 33
SECTION 22. END OF LEASE TERM PURCHASE OPTION. . . . . . . . . . . . . 33
SECTION 23. LIMITATION OF THE LESSOR'S LIABILITY. . . . . . . . . . . . 34
SECTION 24. INVESTMENT OF SECURITY FUNDS. . . . . . . . . . . . . . . . 34
SECTION 25. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 34
25.1 Governing Law; Severability. . . . . . . . . . . . . . . . . . 34
25.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . 35
25.3 Headings and Table of Contents; Section References.. . . . . . 35
25.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 35
25.5 True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 35
25.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 36
25.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
25.8 Business Days. . . . . . . . . . . . . . . . . . . . . . . . . 36
25.9 Incorporation by Reference.. . . . . . . . . . . . . . . . . . 36
25.10 Lessee's Right of Use and Enjoyment . . . . . . . . . . . 36
25.11 License to Enter Land . . . . . . . . . . . . . . . . . . 36
25.12 FORUM SELECTION AND CONSENT TO JURISDICTION . . . . . . . 36
SECTION 26. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . 37
SECTION 27. BAYER RIGHTS UPON DEFAULT OR LOSS . . . . . . . . . . . . . 37
Attachments:
Exhibit A Form of Lease Supplement
Exhibit B Description of Premises
Appendix A Definitions
LEASE AGREEMENT
(EDNC Trust 1997)
THIS LEASE AGREEMENT (EDNC Trust 1997), dated as of June 27,
1997 (as amended, supplemented or otherwise modified from time to
time, this "Lease"), is between BOATMEN'S TRUST COMPANY OF TEXAS,
a Texas state chartered trust company, not in its individual
capacity except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (the "Lessor"), and EL DORADO
NITROGEN COMPANY, an Oklahoma corporation (the "Lessee").
W I T N E S S E T H:
WHEREAS, the Lessor and the Lessee each desire to enter into
this Lease on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the Lessor and the
Lessee agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS LEASE.
1.1 Definitions. For all purposes of this Lease, except as
otherwise defined herein or unless the context otherwise
requires:
(a) capitalized terms used herein (including the
foregoing recitals) shall have the meanings assigned to them
in Appendix A hereto;
(b) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Lease as a whole
and not to any particular Article, Section or other
subdivision; and
(c) all references in this Lease to Articles,
Sections, Exhibits and Schedules refer to Articles,
Sections, Exhibits and Schedules of this Lease unless
otherwise indicated.
1.2 Directly or Indirectly. Where any provision in this
Lease refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by
such Person.
SECTION 2. LEASE AND DELIVERY.
The Lessor hereby agrees (subject to satisfaction or waiver
of the conditions set forth in Sections 4.1 and 4.2 of the
Participation Agreement) on the date of execution and delivery
hereof to sublease (and does hereby sublease) the Premises (as
described in Exhibit B hereto) to the Lessee and the Lessee
agrees to sublease (and does hereby sublease) the Premises from
the Lessor. The Lessor hereby further agrees (subject to the
satisfaction or waiver of the conditions set forth in Sections
4.3, 4.4, 4.5 and 4.8 of the Participation Agreement) on the
Lease Term Commencement Date to subject to this Lease the Units,
described in Schedule 1 to the Lease Supplement dated the Lease
Term Commencement Date and covering such Units, by executing and
delivering on the Lease Term Commencement Date such Lease
Supplement. The Lessee hereby agrees (subject to satisfaction or
waiver of the conditions set forth in Section 4.6 of the
Participation Agreement) on the Lease Term Commencement Date to
lease from the Lessor on the terms and conditions set forth
herein the Units, as conclusively evidenced by the execution and
delivery by the Lessee and the Lessor of a Lease Supplement
covering such Units. The Lease Supplement executed and delivered
on the Lease Term Commencement Date shall describe the Units
subjected to this Lease on the Lease Term Commencement Date,
shall set forth the Total Equipment Cost thereof, shall confirm
that each Unit has been assembled and installed at the Premises,
and shall state and represent that such Units are free and clear
of all Liens, except the Lien of this Lease and the Indenture and
Permitted Liens of the type described in clauses (iii) and (iv)
of the definition thereof, and subject to the express rights of
Bayer under the Facility Documents. The Lessee hereby agrees
that execution and delivery of a Lease Supplement by the Lessee
shall, without further act, irrevocably constitute acceptance by
the Lessee of the Units identified in such Lease Supplement for
all purposes of this Lease. All risk of loss of the Premises
shall pass to the Lessee upon the execution and delivery hereof
and all risk of loss of a Unit shall pass to the Lessee upon the
acceptance of each such Unit.
SECTION 3. TERM AND RENT.
3.1 Lease Term. The Lease Term of this Lease (the "Lease
Term") shall commence, with respect to the Premises, on the
execution and delivery hereof, and, with respect to the Units, on
the Lease Term Commencement Date. Subject to earlier termination
pursuant to Sections 10, 11 and 15, the Lease Term shall expire
at 11:59 p.m. (New York City time) on the Lease Term Expiration
Date.
3.2 Basic Rent. The Lessee hereby agrees to pay the Lessor
Basic Rent for the Units throughout the Lease Term in consecutive
monthly installments payable on each Rent Payment Date in
arrears. Each such monthly payment of Basic Rent shall be in an
amount equal to the product of the Total Equipment Cost
multiplied by the Basic Rent percentage set forth opposite such
Rent Payment Date on Schedule 2 to the Participation Agreement
(as such Schedule 2 shall be adjusted in accordance with
Section 2.9 of the Participation Agreement). In addition, if the
Lease Term Commencement Date is other than the first day of a
calendar month, an additional amount equal to the product of (i)
the daily average of the Basic Rent payable during the Lease
Term, times (ii) the number of days from, and including, the
Lease Term Commencement Date to, but excluding, the first day of
the next calendar month, shall be paid by the Lessee to the
Lessor on the first day of such next calendar month.
3.3 Sufficiency of Basic Rent. Notwithstanding anything to
the contrary contained in this Lease or any other Operative
Agreement, (i) each installment of Basic Rent (both before and
after any adjustment in accordance with Section 2.9 of the
Participation Agreement) shall be in an amount at least
sufficient to pay in full the principal and interest on the Notes
due on the due date of such installment of Basic Rent; and (ii)
assuming prior performance of the Lease, all Stipulated Loss
Values and Termination Values shall be an amount at least
sufficient to pay in full as of the date of payment thereof,
together with any installment of Basic Rent payable in arrears,
as of the scheduled date of payment thereof, the aggregate unpaid
principal of and all unpaid interest on the Notes accrued to the
date on which Stipulated Loss Value or Termination Value, as the
case may be, is scheduled to be paid in accordance with the terms
hereof. The foregoing shall not constitute a guaranty of the
payment of the Notes.
3.4 Supplemental Rent. The Lessee also agrees to pay to
the Lessor, or to whomsoever shall be entitled thereto, any and
all Supplemental Rent, promptly as the same shall become due and
owing, or where no due date is specified, promptly after demand
by the Person entitled thereto, and in any event within ten
Business Days after such demand, and in the event of any failure
on the part of the Lessee to pay any Supplemental Rent, the
Lessor shall have all rights, powers and remedies provided for
herein or by law or equity or otherwise as in the case of
nonpayment of Basic Rent. The Lessee will also pay, as
Supplemental Rent, (i) on demand, to the extent permitted by
applicable law, an amount equal to interest at the applicable
Late Rate on any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and
on any payment of Supplemental Rent payable to any Indemnified
Person not paid when due or demanded, as the case may be, for the
period from such due date or demand, as the case may be, until
the same shall be paid, and (ii) in the case of any prepayment or
repayment of the Notes or in the case of any change in the
amortization schedule, in each case pursuant to the Indenture, on
the date such Notes are prepaid or repaid or on the date the
amortization schedule is to be adjusted, an amount equal to the
Premium, if any, payable in connection therewith. All
Supplemental Rent to be paid pursuant to this Section 3.4 shall
be payable in the type of funds and in the manner set forth in
Section 3.6 and, except in the case of payments designated as
interest or payments of Stipulated Loss Value, Termination Value,
Fixed Price Purchase Option Amount or Premium, Supplemental Rent
shall be payable on an After-Tax Basis.
3.5 Certain Adjustments. The Lessee and the Lessor agree
that Basic Rents, Stipulated Loss Values and Termination Values
shall be adjusted to the extent provided in Section 2.9 of the
Participation Agreement.
3.6 Manner of Payments. All Rent (other than Supplemental
Rent payable to Persons other than the Lessor, which shall be
payable to such other Persons in accordance with written
instructions furnished to the Lessee by such Persons, unless
otherwise provided in any of the Operative Agreements or required
by law) shall be paid by the Lessee to the Lessor by transferring
or delivering such amounts to the Lessor's account number 55-05-
300-4673100 at Boatmen's First National Bank of Amarillo, ABA No.
111-300-945, account name: Credit Trust Account, with a reference
to EDNC Trust-1997. All Rent shall be paid by the Lessee in
funds consisting of lawful currency of the United States of
America, which shall be immediately available to the recipient
not later than 1:00 p.m. (New York City time) on the date of such
payment; provided that unless and until the Lessee shall have
received written notice from the Indenture Trustee that the Lien
of the Indenture has been discharged pursuant to the terms
thereof, the Lessor hereby directs, and the Lessee agrees, that
all Rent (excluding Excepted Property) payable to the Lessor and
assigned to the Indenture Trustee shall be paid directly to the
Indenture Trustee at the times and in funds of the type specified
in this Section 3.6 at the office of the Indenture Trustee, or at
such other location in the United States of America as the
Indenture Trustee may otherwise direct.
3.7 Net Lease, Etc. This Lease is a net lease and the
Lessee's obligation to pay all Rent payable hereunder shall be
absolute, unconditional and irrevocable and shall not be affected
by any circumstance of any character whatsoever, including,
without limitation, (i) any set-off, abatement, counterclaim,
suspension, recoupment, reduction, rescission, defense or other
right that the Lessee may have against the Lessor, the Owner
Participant, Bayer, the Indenture Trustee or any holder of a
Note, any vendor or manufacturer of any Unit, or any other Person
for any reason whatsoever, (ii) any defect in or failure of
title, merchantability, condition, design, compliance with
specifications, operation or fitness for use of all or any part
of any Unit or the Premises, (iii) any damage to, or removal,
abandonment, requisition, taking, condemnation, loss, theft or
destruction of all or any part of any Unit or the Premises or any
interference, interruption, restriction, curtailment or cessation
in the use or possession of any Unit or the Premises by the
Lessee or any other Person for any reason whatsoever or of
whatever duration, (iv) to the maximum extent permitted by law,
any insolvency, bankruptcy, reorganization or similar proceeding
by or against the Lessee, the Lessor, the Owner Participant,
Bayer, the Indenture Trustee, any holder of a Note or any other
Person, (v) any Liens, security interest or rights of the Lessor,
the Owner Trustee, Bayer, the Indenture Trustee, any holder of a
Note or any other Person with respect to the Units, (vi) the
invalidity, illegality or unenforceability of this Lease, any
other Operative Agreement, or any other agreement, document or
instrument referred to herein or therein or any other infirmity
herein or therein or any lack of right, power or authority or
authorization of the Lessee, the Lessor, the Owner Participant,
Bayer, the Indenture Trustee, any holder of a Note or any other
Person to enter into this Lease or any other Operative Agreement
or to perform the obligations hereunder or thereunder or
consummate the transactions contemplated hereby or thereby or any
doctrine of force majeure, impossibility, frustration or failure
of consideration, (vii) the breach or failure of any warranty or
representation made in this Lease or any other Operative
Agreement by any Lessee, the Lessor, Bayer, the Owner
Participant, the Indenture Trustee, any holder of a Note or any
other Person, or (viii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, any
present or future law notwithstanding, it being the intention of
the parties hereto that all Rent being payable by the Lessee
shall continue to be payable in all events in the manner and at
the times provided herein. To the maximum extent permitted by
law, the Lessee hereby waives any and all rights which it may now
have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, cancel, quit or surrender
this Lease, except in accordance with the express terms hereof.
If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise, except as
specifically provided herein, the Lessee nonetheless agrees to
the maximum extent permitted by law, to pay to the Lessor and/or
to any other Person entitled thereto, amounts equal to each
installment of Basic Rent and all Supplemental Rent due and owing
at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been
terminated in whole or in part. The obligations of the Lessee in
the immediately preceding sentence shall survive the expiration
or termination of this Lease other than in accordance with its
terms. Each payment of Rent made by the Lessee hereunder shall
be final and the Lessee shall not seek or have any right to
recover all or any part of such payment from the Lessor or any
Person for any reason whatsoever. All covenants, agreements and
undertakings of the Lessee under this Lease and under any other
Operative Agreement shall be performed, complied with and
satisfied at the Lessee s sole cost, expense and risk unless
otherwise expressly stated herein or therein. Nothing contained
herein shall be construed to waive any claim which the Lessee
might have under any of the Operative Agreements or otherwise, or
to limit the right of the Lessee to independently make any claim
it might have against the Lessor or any other Person or to
independently pursue such claim in such manner as the Lessee
shall deem appropriate.
SECTION 4. OWNERSHIP AND MARKING OF UNITS; PERSONAL PROPERTY.
4.1 Retention of Title. The Lessor shall and hereby does
retain, subject to the rights and interests of the Indenture
Trustee under the Indenture so long as the Indenture shall remain
in effect, full legal title to and ownership of the Units
notwithstanding the delivery to and possession and use of the
Units by the Lessee hereunder or any sublessee under any sublease
permitted hereby.
4.2 Duty to Mark Units. The Lessee will promptly, on or
prior to the date a Unit becomes subject to this Lease, cause
such Unit (and Replacement Unit or Substitute Unit) to be
plainly, distinctly, permanently and conspicuously marked by a
plate or stencil printed in contrasting colors upon such Unit,
with the following legend:
"LEASED FROM BOATMEN'S TRUST COMPANY OF TEXAS,
AS OWNER TRUSTEE, AND SUBJECT TO A SECURITY
INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY"
with appropriate changes thereof and additions thereto as from
time to time may be required by law in order to protect the
Lessor's right, title and interest in and to such Unit, its
rights under this Lease and the rights of the Indenture Trustee;
provided, however, that the Lessee will not, under any
circumstances, be required to place more than five plates,
stencils or legends (in the aggregate) on the Units or otherwise
at the Premises. The Lessee will replace promptly any such
plates, stencils or legends which may be removed, defaced,
obliterated or destroyed.
4.3 Prohibition Against Certain Designations. Except as
above provided, the Lessee will not allow the name of any Person
to be placed on any Unit or at the Premises as a designation that
might reasonably be interpreted as a claim of ownership.
4.4 Personal Property. It is intended by the Lessor and
the Lessee that each Unit is and shall be and remain personal
property notwithstanding the manner in which such Unit may be
attached or affixed to realty, and that, upon termination of the
Lease Term, the Lessor shall have the right, to remove such Unit
from the premises whereon the same is located, whether or not
affixed or attached to the realty or any building, at the sole
cost and expense of the Lessee. The Lessor shall not be liable
for, and the Lessee hereby indemnifies each Indemnified Person
(which indemnification shall survive the termination of this
Lease), and agrees to hold each Indemnified Person harmless from
and against, any claim, loss or liability resulting from, any
damage caused to the realty or any building by the removal of
such Unit, other than those arising from the gross negligence or
willful misconduct of such Indemnified Person.
SECTION 5. DISCLAIMER OF WARRANTIES.
Without waiving any claim the Lessee may have against any
seller, supplier or manufacturer, THE LESSEE ACKNOWLEDGES AND
AGREES THAT, (i) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE, AND THAT
THE LESSEE HAS EXAMINED AND APPROVED ALL SUPPLY AND PURCHASE
CONTRACTS RELATING TO ANY UNIT, (ii) THE LESSEE IS SATISFIED THAT
EACH UNIT AND THE PREMISES ARE SUITABLE FOR THEIR PURPOSES,
(iii) NEITHER THE LESSOR NOR THE OWNER PARTICIPANT IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) EACH UNIT
AND THE PREMISES ARE LEASED HEREUNDER SUBJECT TO ALL APPLICABLE
LAWS AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER
ADOPTED AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN
THE SAME FIRST BECAME SUBJECT TO THIS LEASE, WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR (IN ITS
INDIVIDUAL CAPACITY OR OTHERWISE) OR THE OWNER PARTICIPANT, AND
(v) THE LESSOR LEASES AND THE LESSEE TAKES EACH UNIT AND THE
PREMISES "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN WHATEVER
CONDITION THEY MAY BE, AND THE LESSEE ACKNOWLEDGES THAT NEITHER
THE LESSOR, AS THE LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR THE
OWNER PARTICIPANT MAKES, NOR SHALL BE DEEMED TO HAVE MADE, AND
EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES
OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY, OR TITLE, OF ANY UNIT OR THE PREMISES, THE
QUALITY OF THE MATERIAL THEREIN OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT,
COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE
OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH
RESPECT THERETO, IT BEING AGREED THAT ALL SUCH RISKS, AS AMONG
THE LESSOR, THE OWNER PARTICIPANT AND THE LESSEE, ARE TO BE BORNE
BY THE LESSEE, except that the Lessor hereby represents and
warrants that (i) the Lessor shall have received whatever title
to the Units that was conveyed to it by the seller thereof,
(ii) the Lessor shall have received whatever interest in the
Premises that was conveyed to it pursuant to the Ground Lease
Sublease and (iii) the Units and the Premises are free and clear
of Lessor's Liens attributable to it. It is also agreed that, as
between the Indemnified Persons and the Lessee, all risks
incident to the matters discussed in the preceding sentence are
to be borne by the Lessee. The provisions of this Section 5 have
been negotiated, and except to the extent otherwise expressly
stated in the Operative Agreements, the foregoing provisions are
intended to be a complete exclusion and negation of any
representations or warranties by any Participant, the Lessor or
the Indenture Trustee, expressed or implied, with respect to the
Units, the Premises or any part of any thereof, that may arise
pursuant to any applicable law now or hereafter in effect, or
otherwise. The Lessee hereby sells, assigns, conveys and
transfers to the Lessor all of the Lessee's right, title and
interest in and to all warranty and indemnity provisions
contained in or to be provided pursuant to the purchase
agreements that relate to the Units and all claims thereunder in
respect of the Units arising as a result of any default by the
applicable manufacturer under a purchase agreement; provided
that, except as otherwise expressly stated in the Operative
Agreements, it is expressly agreed that the Lessor shall have no
obligation or liability under any such purchase agreement by
reason of, or arising out of, the foregoing assignment or be
obligated to perform any of the obligations of the Lessee under
any such purchase agreement. The Lessor hereby appoints and
constitutes the Lessee its agent and attorney-in-fact during the
Lease Term to assert and enforce, from time to time, in the name
and for the account of the Lessor and the Lessee, as their
interests may appear, but in all cases at the sole cost and
expense of the Lessee, whatever claims and rights the Lessor may
have as owner of the Units against the manufacturer, vendor or
subcontractor of any such Unit or any prior owner thereof;
provided, however, that if at any time a Lease Event of Default
shall have occurred and be continuing, at the Lessor's option,
such power of attorney shall terminate, and the Lessor may assert
and enforce, at the Lessee's sole cost and expense, such claims
and rights. None of the Owner Participant, the Indenture
Trustee, any holder of a Note, the Construction Loan Agent, any
Construction Lender or the Lessor shall have any responsibility
or liability to the Lessee or any other Person with respect to
any of the following: (w) any liability, loss or damage caused
or alleged to be caused directly or indirectly by any Unit or the
Premises or by any inadequacy thereof or deficiency or defect
therein or by any other circumstances in connection therewith,
other than, as to any such Person, that arising directly from the
gross negligence or willful misconduct of such Person during any
visit by such Person to the Premises; (x) the use, operation or
performance of any Unit or the Premises or any risks relating
thereto; (y) any interruption of service, loss of business or
anticipated profits or consequential damages; or (z) the
delivery, operation, servicing, maintenance, repair, improvement
or replacement of any Unit or the Premises. The Lessee's
delivery of a Lease Supplement shall be conclusive evidence as
between the Lessee and the Lessor that all Units described
therein are in good order and condition, appear to conform to
specifications applicable thereto and all governmental standards
and requirements reasonably interpreted as being applicable
thereto and are in all respects satisfactory to the Lessee, and
the Lessee will not assert any claim of any nature whatsoever
against the Lessor or the Owner Participant based on any of the
foregoing matters.
SECTION 6. RETURN OF UNITS; CONDITION; STORAGE.
6.1 Return. At the end of the Lease Term, unless the
Lessee has exercised the Fixed Price Purchase Option under
Section 22, the Lessee shall surrender each Unit which is subject
to the Lease at such time to Lessor at the Premises in accordance
with the terms of this Section 6, and the Lessee shall promptly
vacate the Premises.
6.2 Condition of Units. Each Unit when surrendered to the
Lessor pursuant to Section 6.1 shall be in the condition required
by Section 8.1 (as then currently tooled) and free and clear of
all Liens, other than Lessor's Liens, with all Severable
Modifications that are not Required Modifications to which title
was retained by the Lessee pursuant to Section 9.2 having been
removed from such Unit and with any damage caused by such removal
having been repaired. All logs, documents, instruments,
specifications, manuals, drawings, records, books, service
bulletins and other materials relating to such Unit and the use,
damage, repair and maintenance of such Unit shall be surrendered
to the Lessor or its designee upon the surrender of such Unit.
In addition, all licenses, patents and similar rights necessary
for the operation of each Unit by a third party shall be assigned
or conveyed to the Lessor or its designee upon surrender of such
Unit.
6.3 Storage. If requested by the Lessor, the Lessee will
provide for free storage of each Unit (i) so long as no Lease
Event of Default has occurred and is continuing, for a period not
exceeding 60 days or (ii) subject to the rights of Bayer under
the Facility Documents, if a Lease Event of Default has occurred
and is continuing, for a period not exceeding one year, in each
case on the Premises, during which time the Lessee will, at its
sole cost and expense, maintain and insure such Unit in
accordance with the provisions of this Lease. During such period
of storage, the Lessor or any Person designated by it and any
prospective purchaser or user, shall have the right to inspect,
at its sole cost, expense and risk (except that if a Lease
Default or a Lease Event of Default shall have occurred and be
continuing, any such inspection shall be at the cost, expense and
risk of the Lessee) any Unit that is surrendered pursuant to
Section 6.1. If the Lessee has not exercised the Fixed Price
Purchase Option, the Lessee will cause the Units to be kept in a
state where such Units can be demonstrated to a prospective
purchaser or user during the last 180 days of the Lease Term.
The Lessor agrees to indemnify, protect and keep harmless, on an
After-Tax Basis, the Lessee, its employees, agents, successors
and assigns from and against any and all liabilities,
obligations, losses, damages, injuries, claims, actions, costs
and expenses (including reasonable attorney's fees) for personal
injuries or property damage arising directly out of the gross
negligence or willful misconduct of the Lessor, or the acts or
omissions of any Person designated by it or any prospective
purchaser or user in connection with the inspection of the Units
pursuant to this Section 6.3, whether or not such acts or
omissions of such Person, prospective purchaser or user
constitute gross negligence or willful misconduct. The Lessee
will provide to the Lessor or any Person designated by it such
cooperation and assistance as the Lessor or such Person shall
reasonably request in connection with the remarketing of the
Units.
SECTION 7. LIENS.
The Lessee will not directly or indirectly create, incur,
assume, permit or suffer to exist any Lien on or with respect to
any Units or the Premises or the Lessee's leasehold interest
therein under this Lease, except Permitted Liens, Lessor's Liens
and Liens described in Section 6.4 of the Participation Agreement
and the Lessee shall promptly, at its own expense, take such
action or cause such action to be taken as may be necessary to
duly discharge (by bonding or otherwise) any such Lien not
excepted above if the same shall arise at any time. Without
limiting the foregoing and except for the Lien of this Lease and
the Indenture and Permitted Liens of the type described in
clauses (iii) and (iv) of the definition thereof, and subject to
the express rights of Bayer under the Facility Documents, the
Lessee covenants and agrees that it will keep each Unit and the
Premises free and clear of any Liens, rights of distraint,
charges, encumbrances or claims of the owner or owners of any
interest in the real estate on which any Unit may from time to
time be located and any purchaser of, or present or future
creditor obtaining a Lien on, such real estate, and will obtain
and deliver, promptly after delivery or change in location of any
Unit, such waivers of any of the foregoing in recordable form
reasonably satisfactory to the Lessor as are necessary to so
maintain each Unit free and clear as aforesaid.
SECTION 8. MAINTENANCE; OPERATION; POSSESSION; COMPLIANCE
WITH
LAWS; SUBLEASE; REPLACEMENT OF PARTS; SUBSTITUTION.
8.1 Maintenance and Operation. The Lessee, at its own cost
and expense, shall maintain, service, repair, protect and keep,
or shall cause to be maintained, serviced, repaired, protected
and kept, each Unit and the Premises, and shall operate and use
each Unit and the Premises, (i) in good operating order,
condition and repair, and in at least as good operating order,
condition and repair as on the date of the delivery by the
manufacturer of such Unit, ordinary wear and tear excepted, and
in a manner comparable to and no less favorable than maintenance
practices used by the Lessee in respect of equipment owned or
leased by the Lessee similar in type to such Unit, (ii) in
accordance with all manufacturer's standards and warranties and
in accordance with standards and procedures necessary to preserve
coverages under all insurance policies required to be maintained
pursuant to Section 12, if applicable, (iii) in material
compliance with all applicable laws, rules and regulations or as
required by any Governmental Authority, and (iv) in accordance
with sound engineering practice and standards which will enable
the Lessee to operate the Units at or above the contracted
capacity levels or otherwise fully perform its obligations under
the Operative Agreements. The Lessee shall at all times, at its
own expense, comply with such operating or repair standards and
periodic maintenance inspections as are required to enforce
warranty claims against manufacturers or subcontractors in
respect of each Unit or which are otherwise established by such
manufacturers or subcontractors as normal operating procedures.
The Lessee shall use each Unit and the Premises only in the
manner for which they were designed and intended; provided that
the Lessee may retool such Unit so long as the operation and
maintenance thereof otherwise complies with this Section 8. In
no event shall the Lessee adversely discriminate as to the use or
maintenance of any Unit (including the periodicity of maintenance
or record keeping in respect of such Unit) as compared to other
equipment of a similar nature which the Lessee owns or leases.
The Lessee will maintain all blueprints, operating manuals,
maintenance manuals, parts lists, service bulletins and other
technical documents and information necessary for the assembly
and operation of each Unit and all records, logs and other
materials for each Unit required by any Governmental Authority,
all as if the Lessee were the owner of such Unit, regardless of
whether any such requirements, by their terms, are nominally
imposed on the Lessee, the Lessor or the Owner Participant. The
Lessee, at its sole cost and expense, shall promptly repair,
restore, rebuild or replace any Units which from time to time
become damaged, destroyed, seized or confiscated so that at all
times the condition of such Unit shall be in compliance with this
Section 8.1, except to the extent such damage, destruction,
seizure or confiscation constitutes an Event of Loss, in which
case the provisions of Section 11 shall apply.
8.2 Possession and Use. Subject to Section 8.3, the Lessee
agrees that each Unit will be used solely in the conduct of its
business and will at all times remain in the possession and
control of the Lessee on the Premises. The Lessee warrants that
each Unit will at all times be used and operated under and in
material compliance with all contracts or agreements applicable
to use or operation of such Unit to which the Lessee is a party
or by which the Lessee is bound and under and in material
compliance with the laws of the jurisdiction in which the
Premises is situated, and in material compliance with all lawful
acts, rules, regulations and orders of any Governmental Authority
having power to regulate or supervise the use of the Units.
8.3 Sublease. The Lessee, but only with the prior written
consent of the Lessor (and, unless the Lien of the Indenture
shall have been discharged in accordance with the terms thereof,
the Indenture Trustee) (which consent shall not be unreasonably
withheld) and upon receipt by the Lessor of an Officer s
Certificate of Bayer addressed to the Lessor pursuant to which
Bayer expressly consents to the proposed sublease and the
sublessor, shall be entitled to sublease all or a portion of the
Units to a business entity (each a "Permitted Sublease") so long
as: (i) on the effective date of any such sublease, no Lease
Default or Lease Event of Default has occurred and is continuing
and such sublessee is not subject to any bankruptcy, insolvency
or similar proceedings; (ii) any sublease, and the rights and
interest of any sublessee thereunder, shall be in all events
subject and subordinate to this Lease and the rights and
interests of the Lessor and its respective successors and assigns
hereunder, and the Lessee shall remain primarily and directly
liable for the performance of its obligations hereunder;
(iii) any sublease shall not be for a term which extends beyond
the Lease Term; (iv) such sublease will prohibit further
subleasing by the sublessee; (v) all filings of any such sublease
necessary to protect the rights of the Lessor (including, without
limitation, filings necessary to comply with Section 7) and the
Lien of the Indenture shall have been made in a timely fashion;
(vi) without limiting the foregoing clause (ii), any such
sublease shall include appropriate provision (whether by
requiring such obligations to be performed by the sublessee, the
Lessee or both) for the operation, maintenance and insurance in
accordance with the terms hereof of the Units subleased thereby;
(vii) any sublease of any Unit shall require that each Unit
subject to such sublease shall at all times be located on the
Premises; and (viii) the Lessor (and, unless the Lien of the
Indenture shall have been discharged in accordance with the terms
thereof, the Indenture Trustee) shall be satisfied that the Bayer
Letter and, prior to the expiration thereof pursuant to its
terms, the Bayer Support Agreement, as the case may be, remain
fully in effect after giving effect to any such sublease. No
sublease shall permit the sublessee thereunder to take any action
inconsistent with the terms of this Lease or any other Operative
Agreement. The Lessee shall provide to the Lessor and the
Indenture Trustee not less than 30 days prior written notice of
such sublease, such notice to identify the sublessee and to
specify the term of the sublease and confirm that the location at
which any Unit or Units are to be used under the sublease is at
the Premises. In addition, if the term of any sublease exceeds
one year, the Lessee shall promptly, and in any event within 45
days of the execution and delivery of such sublease, deliver a
true, correct and complete copy of such sublease to the Lessor
and the Indenture Trustee. Throughout the term of any such
sublease, all of the terms and provisions of this Lease shall
continue to be applicable thereto and no such sublease shall
relieve the Lessee of any of its liabilities or obligations
hereunder, which shall be and remain those of a principal and not
a surety.
8.4 Replacement of Parts. The Lessee, at its sole cost and
expense, will promptly replace, or cause to be replaced at no
cost to the Lessor, the Owner Participant, the Indenture Trustee
or any holder of a Note, all tooling, appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment of whatever nature (herein collectively called "Parts")
which are or may from time to time be incorporated or installed
in or attached to any Unit and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use by damage or
obsolescence. All replacement Parts shall be free and clear of
all Liens and rights of others on the date they become subject to
this Lease (other than the Liens of the Lease and the Indenture
and Permitted Liens of the type described in clauses (iii) and
(iv) of the definition thereof) and shall be in as good operating
condition as, and shall have a fair market value, utility,
remaining economic useful life and estimated residual value at
least equal to, the Parts replaced, assuming such replaced Parts
were in at least the condition and repair required to be
maintained by the terms of this Lease.
All Parts at any time removed from such Unit shall remain
subject to the rights of the Lessor, no matter where located,
until such time as such Parts shall be replaced by Parts which
have been incorporated or installed in or attached to such Unit
and which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to any Unit as above
provided, without further act:
(i) Such replacement Part shall become subject to this
Lease and, unless the Lien of the Indenture shall have been
discharged, the Lien of the Indenture, and such replacement
Part shall be deemed part of such Unit, for all purposes
hereof to the same extent as the Parts originally
incorporated or installed in such Unit;
(ii) Title to such replacement Part shall thereupon
vest in the Lessor; and
(iii) Title to the removed Part shall thereupon
vest in the Lessee or in such Person as shall be designated
by the Lessee, free and clear of all rights of the Lessor,
the Owner Participant and the Indenture Trustee.
SECTION 9. MODIFICATIONS.
9.1 Required Modifications. The Lessee, at its own
expense, shall make such alterations, modifications and additions
to the Units as may be required from time to time to meet the
requirements of applicable law, insurance, or any Governmental
Authority, or to maintain manufacturer's warranties, or to enable
the Lessee to operate the Units at the contracted capacity levels
or otherwise fully perform its obligations under the Facility
Documents and the other Operative Agreements to which it is a
party (a "Required Modification"). Title to any Required
Modification (regardless of whether such Required Modification is
a Severable Modification or a Non-Severable Modification) shall
immediately vest in the Lessor.
9.2 Optional Modifications. The Lessee at any time may
modify, alter, improve, replace or substitute any Unit (an
"Optional Modification"; and each of an Optional Modification and
a Required Modification is a "Modification"); provided that no
Optional Modification shall (i) diminish the fair market value,
utility, condition, remaining economic useful life, or estimated
residual value of such Unit below the fair market value, utility,
condition, remaining economic useful life, or estimated residual
value thereof immediately prior to such Modification, assuming
such Unit was then in the condition required to be maintained by
the terms of this Lease, (ii) cause any Unit to become "limited
use property" within the meaning of Revenue Procedure 76-30,
(iii) otherwise result, in the opinion of Owner Participant's tax
counsel, in adverse tax consequences to the Owner Participant or
the Lessor which are not subject to indemnification under the Tax
Indemnity Agreement, or (iv) alter the essential function of such
Unit from that for which it was designed and intended. Title to
any Non-Severable Modification which is an Optional Modification
shall be immediately vested in the Lessor. Title to any
Severable Modification which is not a Required Modification
shall, as between the Lessor and the Lessee, remain with the
Lessee (subject to the rights, if any, of Bayer to such Severable
Modification arising under the terms of the Facility Documents).
During the Lease Term or at the return of such Unit, and so long
as no Lease Default or Lease Event of Default shall have occurred
and be continuing, the Lessee may remove and replace any
Severable Modification which is not a Required Modification;
provided, however, that the Lessee may remove in the ordinary
course of the operation of the Units precious metal catalysts,
commonly referred to as gauze changeouts (each, a "Gauze
Changeout"), provided that each Gauze Changeout which is removed
is simultaneously replaced with an operationally equivalent Gauze
Changeout of equal or greater utility. Upon the return of a
Unit, if the Lessee, at its cost, shall cause any Severable
Modifications which are not Required Modifications to be made to
such Unit, and such Severable Modifications theretofore made have
not been removed, the Lessor shall have the right to purchase
such Severable Modifications (other than Severable Modification
consisting of proprietary equipment of the Lessee) at their then
fair market value. If the Lessor does not elect to purchase such
Severable Modifications or such Severable Modification consists
of proprietary equipment of the Lessee and has not been removed,
it shall have the right to cause, at the Lessee's cost and
expense, such Severable Modifications to be removed upon return
of the Unit.
SECTION 10. VOLUNTARY TERMINATION.
10.1 Uneconomic or Surplus Condition Termination. So long
as no Lease Default or Lease Event of Default shall have occurred
and be continuing, the Lessee shall have the right, at its option
at any time (subject to the terms and conditions of this Section
10.1), during the Lease Term on any Rent Payment Date occurring
after the fifth anniversary of the Lease Term Commencement Date
to terminate the Lease Term with respect to all (and not less
than all) of the Units then subject to the Lease if the Lessee
determines in good faith (as evidenced by a certificate executed
by a Responsible Officer of the Lessee certifying that the Board
of Directors of EDNC has made a good faith determination that the
Units are uneconomic or surplus) that such Units (the "Proposed
Terminated Units") have become uneconomic or surplus to the
Lessee's needs. The Lessee shall deliver at least 180 days'
revocable prior notice to the Lessor and the Indenture Trustee,
specifying a proposed date of termination for the Proposed
Terminated Units (the "Termination Date"), which date shall be a
Rent Payment Date, and which notice (as an express condition
precedent to the exercise by the Lessee of its rights under this
Section 10.1) must be accompanied by an Officer s Certificate of
Bayer addressed to the Lessor and the Indenture Trustee pursuant
to which Bayer expressly consents to the termination of the Lease
Term by the Lessee pursuant to this Section 10.1. Any such
termination will be effective on the Termination Date after all
amounts payable under Section 10.2 or 10.3, as applicable, and
all other obligations thereunder, have been paid and performed in
full. So long as the Lessor shall not have given the Lessee a
notice of election to retain the Proposed Terminated Units in
accordance with Section 10.3, the Lessee may withdraw the
termination notice at any time prior to the thirtieth (30th)
Business Day preceding the Termination Date, whereupon this Lease
shall continue in full force and effect; provided that the Lessee
may not exercise its right to withdraw such a termination notice
more than once. Unless theretofore withdrawn, the termination
notice shall become irrevocable upon the thirtieth (30th)
Business Day preceding the Termination Date. The Lessee agrees
that, without limiting Section 2.8(b) of the Participation
Agreement, it will reimburse the Lessor, the Indenture Trustee,
the Owner Participant and each holder of a Note for all out-of-
pocket costs and expenses (including, without limitation,
reasonable legal fees and expenses) incurred by the Lessor, the
Owner Participant, the Indenture Trustee and each holder of a
Note in connection with the proposed termination of any Unit,
whether or not consummated, including, without limitation, costs,
if any, associated with an early termination of the Swap
Agreement.
10.2 Sale of Units. (a) With respect to the Proposed
Terminated Units, during the period from the date of such notice
given pursuant to Section 10.1 to the Termination Date, the
Lessee, as agent for the Lessor and at the Lessee's sole cost and
expense, shall use its reasonable efforts to obtain bids from
Persons other than the Lessee or Affiliates thereof for the cash
purchase of the Proposed Terminated Units on the Termination
Date, and it shall promptly, and in any event at least ten
Business Days prior to the proposed date of sale, certify to the
Lessor in writing the amount and terms of each such bid and the
name and address of the party submitting such bid. The Lessor
and the Owner Participant shall have the right, at its own
expense, to obtain bids for the purchase of the Proposed
Terminated Units, either directly or through agents other than
the Lessee, from the Owner Participant or other Persons, but
shall be under no duty to solicit bids, inquire into the efforts
of the Lessee to obtain bids or otherwise take any action in
connection with arranging such sale. Unless the Lessor shall
have elected to retain the Proposed Terminated Units in
accordance with Section 10.3, subject to Section 10.2(b), on the
Termination Date: (i) the Lessee shall, subject to receipt
(x) by the Indenture Trustee or, if the Lien of the Indenture has
been discharged, the Lessor of all amounts owing to the Lessor
pursuant to the next sentence, and (y) by any other Persons
entitled thereto of all unpaid Supplemental Rent accrued on or
before the Termination Date, deliver the Proposed Terminated
Units to the bidder (which shall not be the Lessee or any
Affiliate thereof), if any, which shall have submitted the
highest cash bid prior to such date for such Proposed Terminated
Units (or to such other bidder as the Lessee and the Lessor shall
agree); and (ii) the Lessor shall, without recourse or warranty
(except as to the absence of any Lessor's Lien attributable to
the Lessor) simultaneously therewith (including with the receipt
of the amounts described in clause (i) above by the Persons
entitled to receive such amounts) sell such Proposed Terminated
Units "as-is, where-is" to such bidder. The cash selling price
realized at such sale shall be paid to and retained by the
Indenture Trustee or, if the Lien of the Indenture has been
discharged, the Lessor (after reimbursement to the Lessee of all
of its costs and expenses in connection with such sale) and, in
addition, on the Termination Date, the Lessee shall pay to (A)
the Indenture Trustee or, if the Lien of the Indenture has been
discharged, the Lessor (x) all unpaid Basic Rent due and payable
prior to, and in arrears on, the Termination Date, and (y) the
excess, if any, of (1) the Termination Value for all of the Units
computed as of the Termination Date, over (2) the net cash sales
proceeds (after the deduction of all costs and expenses of the
Lessee, the Lessor, the Indenture Trustee, each holder of a Note
and the Owner Participant in connection with such sale of the
Proposed Terminated Units), (B) the Persons entitled thereto, any
other unpaid Supplemental Rent accrued on or before the
Termination Date and (C) without limiting clause (B), an amount
equal to the Premium, if any, on the Notes payable on the
Termination Date. Neither the Lessee nor any Affiliate thereof
shall purchase, lease or otherwise acquire the Proposed
Terminated Units or any portion thereof from the purchasing
bidder or any Affiliate thereof for a period of three years from
the Termination Date relating to the Proposed Terminated Units,
such prohibition, notwithstanding any provision to the contrary
in Section 10.4 or otherwise, to survive the termination of this
Lease with respect to such Proposed Terminated Unit.
(b) If (x) the Lessor has not elected to retain the
Proposed Terminated Units in accordance with Section 10.3, (y)
the Lessee has not withdrawn its termination notice pursuant to
Section 10.1 and (z) on the Termination Date, no bidder described
in Section 10.2(a) shall exist, this Lease shall continue with
respect to such Proposed Terminated Units.
10.3 Retention of Units by the Lessor. Notwithstanding the
provisions of Sections 10.1 and 10.2, the Lessor may, with
respect to all Proposed Terminated Units, irrevocably elect by
written notice to the Lessee, no later than 60 days after receipt
of the Lessee's notice of termination, not to sell such Proposed
Terminated Units on the Termination Date, whereupon the Lessee
shall (i) deliver the Proposed Terminated Units to the Lessor in
the same manner and condition as if delivery were made to the
Lessor pursuant to Section 6, treating the Termination Date as
the last day of the Lease Term with respect to such Proposed
Terminated Units, (ii) pay to the Lessor, the Owner Participant,
the Indenture Trustee and each holder of a Note, all Basic Rent
and all Supplemental Rent due and owing on or before the
Termination Date and unpaid excluding any Termination Value and
(iii) pay to the Lessor an amount equal to the Premium, if any,
on the Notes paid pursuant to the next sentence of this Section
10.3. On such Termination Date, the Lessor shall pay, or cause
to be paid, to the Indenture Trustee in funds of the type
specified in Section 3.6 an amount equal to the outstanding
principal amount of the Notes issued in respect of such Proposed
Terminated Units, all accrued interest to the date of prepayment
of such Notes on such Termination Date and the Premium, if any,
on such Notes.
10.4 Termination of Lease. In the event of either (x) any
such sale and receipt by the Lessor and the Indenture Trustee of
all of the amounts provided in Section 10.2 or (y) retention of
the Proposed Terminated Units by the Lessor pursuant to
Section 10.3 and compliance by the Lessor with the provisions of
Section 10.3, and upon compliance by the Lessee with the
provisions of this Section 10, the obligation of the Lessee to
pay Basic Rent hereunder for such Proposed Terminated Units shall
cease with respect to any period after the Termination Date and
the Lease Term shall end.
SECTION 11. LOSS, DESTRUCTION, REQUISITION, ETC.
11.1 Event of Loss. The term "Event of Loss" shall mean
that (i) all Units shall suffer damage or destruction resulting
in an insurance settlement on the basis of an actual,
constructive or compromised total loss; (ii) all Units shall
suffer destruction or damage beyond repair; (iii) all Units
shall suffer damage which, in the Lessee's good faith judgment
(with the written concurrence of Bayer), makes repair uneconomic
or renders all Units unfit for commercial use; (iv) all Units
shall suffer theft, loss or disappearance for a period in excess
of 90 days or, if less, the remaining portion of the Lease Term
then in effect; (v) all Units shall have title thereto taken or
appropriated by any Governmental Authority under the power of
eminent domain or otherwise; or (vi) all Units shall be taken or
requisitioned for use by any Governmental Authority under the
power of eminent domain or otherwise, and such taking or
requisition for use pursuant to this clause (vi) is for an
indefinite period or a period that exceeds 180 days or, if less,
the remaining portion of the Lease Term then in effect.
11.2 Replacement or Payment upon Event of Loss. Upon the
occurrence of an Event of Loss, the Lessee shall, promptly after
a Responsible Officer of the Lessee shall have actual knowledge
of such occurrence (and in any event within 10 days after the
occurrence of such Event of Loss), give the Lessor and the
Indenture Trustee written notice of such Event of Loss and,
within 60 days after such notice, give the Lessor and the
Indenture Trustee further notice of its election to perform one
of the following options (it being agreed that if the Lessee
shall not have given notice of such election within 60 days after
giving notice of such occurrence, the Lessee shall be deemed to
have elected to perform the option set forth in the following
paragraph (ii)); provided that the Lessee shall not have the
right to select the option set forth in paragraph (i) (A) if a
Lease Default or Lease Event of Default shall have occurred and
be continuing or (B) after the seventh anniversary of the Lease
Term Commencement Date; and, provided, further, that the
selection of the option set forth in paragraph (i) shall be
subject to the provisions of the Tax Indemnity Agreement:
(i) as promptly as practicable (but no sooner than
ten days after giving of its notice of election to perform
the option set forth in this paragraph (i)), and in any
event on or before the 540th day following the date on which
the Event of Loss occurred, the Lessee shall comply with
Section 11.4(b) and shall convey or cause to be conveyed to
the Lessor Replacement Units to be leased to the Lessee
hereunder, such Replacement Units to be free and clear of
all Liens (other than the Liens of the Lease and the
Indenture and Permitted Liens of the type described in
clauses (iii) and (iv) of the definition thereof) and to
have a Fair Market Value, utility, condition, remaining
economic useful life and estimated residual value at least
equal to the Units so replaced (assuming such Units have not
suffered an Event of Loss and were in the condition required
to be maintained by the terms of this Lease); provided that,
if the Lessee shall not perform its obligation to effect
such replacement under this paragraph (i) during the period
of time provided herein, then the Lessee shall comply with
the following paragraph (ii) except that the related
Settlement Date may occur within 570 days following the
Event of Loss; or
(ii) on the next succeeding Determination Date
(the "Settlement Date") occurring at least 90 days after the
date on which the Event of Loss occurred, the Lessee shall
pay or cause to be paid to the Indenture Trustee or, if the
Lien of the Indenture has been discharged, the Lessor (or in
the case of Supplemental Rent, to the Persons entitled
thereto) in funds of the type specified in Section 3.6, the
sum of (x) an amount equal to the Stipulated Loss Value,
determined as of such Settlement Date, (y) to the extent not
theretofore paid, Basic Rent due and payable prior to, and
in arrears on, such Settlement Date, and (z) all other
accrued and unpaid Supplemental Rent. Notwithstanding the
foregoing, if the Event of Loss occurs prior to the Lease
Term Commencement Date, any amounts payable to the Indenture
Trustee pursuant to this Section 11.2(ii) shall be paid to
the Construction Loan Agent.
11.3 Rent Termination. Upon the payment of all sums
required to be paid pursuant to Section 11.2(ii) hereof, the
Lease and the obligation to pay Basic Rent due and accruing
subsequent to the date of payment of Stipulated Loss Value shall
terminate, without prejudice to the continuation of those
obligations which, by the express terms of the Operative
Agreements, survive termination of the Lease Term.
11.4 Disposition of Units; Replacement of Units.
(a) Upon satisfaction of all conditions in Section
11.2(ii), the Lessor will transfer to the Lessee "as-is, where-
is" all right, title and interest of the Lessor in and to all
Units having suffered the Event of Loss, without recourse or
warranty, except for the absence of Lessor's Liens attributable
to the Lessor.
(b) At the time of or prior to any replacement of the
Units, the Lessee, at its own expense, will (A) furnish the
Lessor with a full warranty (as to title) Bill of Sale (together
with an assignment of the manufacturer's warranties, if any such
warranties exist) with respect to the Replacement Units,
(B) cause a Lease Supplement substantially in the form of
Exhibit A hereto with appropriate modifications, subjecting such
Replacement Units to this Lease, and duly executed by the Lessee,
to be delivered to the Lessor for execution, (C) furnish the
Lessor and the Indenture Trustee with an opinion of the Lessee's
counsel, to the effect that (x) each of the Bill of Sale and
Lease Supplement referred to in clauses (A) and (B) above
constitutes a legal, valid, binding and enforceable obligation of
the Lessee (subject to customary qualifications as to bankruptcy
and equitable principles), (y) legal title and ownership of such
Replacement Units have been conveyed to the Lessor, free and
clear of all Liens (other than the Liens of the Lease and the
Indenture and Permitted Liens of the type described in clauses
(iii) and (iv) of the definition thereof), and (z) all filings,
recordings and other action necessary or appropriate to perfect
and protect the Lessor's and the Indenture Trustee's respective
interests in the Replacement Units have been accomplished, (D)
furnish the Lessor and the Indenture Trustee with an Officer's
Certificate of the Lessee certifying that as of said date, and
upon consummation of the replacement, no Lease Default or Lease
Event of Default exists, and the Replacement Units have a Fair
Market Value (as supported by an independent appraisal
satisfactory in form and substance to the Owner Participant from
an appraiser of recognized standing and knowledgeable in
equipment of the type being appraised and selected by the Lessee
and satisfactory to the Owner Participant), utility, condition,
remaining economic useful life and estimated value at least equal
to the Units replaced (assuming such Units have not suffered an
Event of Loss and were in the condition required to be maintained
by the terms of this Lease), (E) furnish to the Lessor and the
Indenture Trustee evidence of compliance with the provisions of
Section 12 with respect to the Replacement Units, and (F) furnish
such other documents and evidence as the Owner Participant, the
Lessor, Indenture Trustee, a Majority In Interest, or their
respective counsel, may reasonably request in order to establish
the consummation of the transactions contemplated by this
Section 11.4. For all purposes hereof, upon passage of title
thereto to the Lessor the Replacement Units shall be deemed part
of the property leased hereunder and each Replacement Unit shall
be deemed a "Unit" as defined herein. Upon such passage of
title, and upon payment in full of any indemnity due and payable
as a result of such replacement pursuant to Section 7 of the
Participation Agreement, the Lessor will transfer to the Lessee
"as-is, where-is" all the Lessor's right, title and interest in
and to the replaced Units, without recourse or warranty (except
as to the absence of Lessor's Liens attributable to the Lessor).
No Event of Loss under the circumstances contemplated by the
terms of Section 11.2(i) shall result in any reduction of Basic
Rent. The Lessee shall pay all reasonable costs and expenses
(including, without limitation, reasonable attorney s fees) of
the Lessor, the Owner Participant, the Indenture Trustee and the
holders of the Notes incurred in connection with such
replacement.
11.5 Applications of Event of Loss Proceeds. The Indenture
Trustee (or, after the Lien of the Indenture has been discharged,
the Lessor) shall be entitled to receive, and, subject to the
provisions of Section 12.2, the Lessee hereby irrevocably assigns
to the Indenture Trustee (and, after the Lien of the Indenture
has been discharged, the Lessor), all right, title and interest
of the Lessee in and to any proceeds of any claims for damage,
insurance or award received on account of an Event of Loss;
provided that the insurance proceeds and claims for damage, in
each case with respect to insurance carried by the Lessee, shall
be applied pursuant to and in the manner set forth in Section
12.3; and provided further that, with respect to an Event of Loss
described in clause (v) or (vi) of Section 11.1 hereof, so long
as no Lease Default or Lease Event of Default shall have occurred
and be continuing (i) the Lessee shall be entitled to a credit
for the amount of such proceeds or any award (other than
insurance) so received and retained by the Lessor against the
Lessee's obligation to pay Stipulated Loss Value and (ii)
following the payment of Stipulated Loss Value and all other
amounts payable under Section 11.2(ii), any such proceeds or
award shall be payable to the Lessor and the Lessee as their
interests may appear. Notwithstanding the foregoing, if the
Event of Loss occurs prior to the Lease Term Commencement Date,
any amounts payable to the Indenture Trustee pursuant to this
Section 11.5 shall be paid to the Construction Loan Agent.
11.6 Eminent Domain; Damage Not Constituting an Event of
Loss. In the event that during the Lease Term the use of any
Unit is requisitioned or taken by any Governmental Authority
under the power of eminent domain or otherwise for a period which
does not constitute an Event of Loss, this Lease and the Lessee's
obligation to pay all installments of Basic Rent, the
Supplemental Rent and any other amount payable hereunder shall
continue for the duration of such requisitioning or taking. The
Lessee shall be entitled to receive and retain for its own
account all sums payable for any such period by such Governmental
Authority as compensation for requisition or taking of
possession; provided, however, that nothing herein contained
shall affect the obligations of the Lessee contained in Section 6
hereof with respect to the condition in which the Unit is to be
returned to the Lessor. A requisition or taking of use for an
indefinite period of time shall not be deemed to exceed the
remaining Lease Term with respect to any Unit unless and until
the period of such requisition or taking does, in fact, exceed
the remaining Lease Term. In such case, the Event of Loss shall
be deemed to have occurred on the 41st day preceding the last day
of the Lease Term, unless the Lessee has exercised its Fixed
Price Purchase Option pursuant to Section 22 hereof, and, all
payments received by the Lessor or the Lessee from any
Governmental Authority for the use of such Unit after the Lease
Term shall be applied in the manner set forth in the final
proviso to Section 11.5. If any damage or destruction, theft,
loss or disappearance shall occur, the occurrence of which does
not constitute an Event of Loss, the Lessee shall promptly, and
in any event within ten days after the occurrence of such event
give the Lessor and the Indenture Trustee notice thereof. The
Lessee shall make or cause to be made such repairs as are
necessary to ensure that the Units and the Premises are
maintained in the condition and state of repair required under
Section 8; provided that such repairs shall be commenced promptly
and shall be completed promptly, before the earlier of (i) 60
days after the occurrence of the event, except that in the event
such repairs cannot be reasonably commenced and completed during
such 60-day period, such longer period as is reasonably necessary
to commence and complete such repairs, provided that in no event
shall such period exceed, in the aggregate, 180 days, and (ii)
the last day of the Lease Term. If such repairs have not been
completed within the time period referred to in the foregoing
proviso, then an Event of Loss shall be deemed to have occurred
at the 41st day preceding the last day of the Lease Term, unless
the Lessee has exercised the Fixed Price Purchase Option pursuant
to Section 22 hereof. No such event shall result in any
reduction of Basic Rent.
11.7 Lease Event of Default. Any amount referred to in
Section 11.5, or any amount payable in connection with events
described in the first sentence of Section 11.6, or any amount
which is insurance proceeds received in connection with any
damage or destruction, theft, loss or disappearance which does
not constitute an Event of Loss, which is payable to the Lessee
shall not be paid to the Lessee, or if it has been previously
paid directly to the Lessee, shall not be retained by the Lessee,
if at the time of such payment a Lease Default or Lease Event of
Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor (or, so long as the Lien of the
Indenture has not been discharged, the Indenture Trustee) as
security for the obligations of the Lessee under this Lease, and
at such time as there shall not be continuing any such Lease
Default or Lease Event of Default, such amount (unless
theretofore otherwise applied to the obligations of the Lessee
hereunder) shall be paid over to the Lessee.
11.8 Substitution of Units. So long as no Lease Default or
Lease Event of Default has occurred and is continuing, the Lessee
shall have the right, from time to time during the Lease Term, to
replace any Unit or a portion of any Unit that has become
uneconomic, obsolete or surplus to the Lessee s operating
requirements, as determined by the Lessee in its reasonable
business judgment (the Replaced Unit ), with equipment of
substantially like kind and of equal or greater Fair Market
Value, utility, condition, remaining economic useful life and
estimated residual value (the Substitute Unit ) (assuming that
such Replaced Unit has not suffered an Event of Loss and was then
in the condition and state of repair required to be maintained
under the terms of this Lease), so long as: (a) the Lessee gives
at least 90 days prior written notice to the Lessor, the Owner
Participant and the Indenture Trustee, which notice shall specify
and describe the Replaced Unit, the Substitute Unit and the date
of such substitution, and which notice shall also contain a
certification signed by a Responsible Officer of the Lessee on
behalf of the Lessee that the Replaced Unit has become
uneconomic, obsolete or surplus to the Lessee s operating
requirements, as determined by the Lessee in its reasonable
business judgment, other than as a result of damage or
destruction, (b) the Lessee complies with Section 11.4(b) (with
the Substitute Unit being treated as a Replacement Unit for the
purposes thereof) in connection with such substitution, and (c)
the Lessee indemnifies the Owner Participant, on an After Tax-
Basis, for any adverse tax consequences to the Lessor or Owner
Participant associated with such substitution. The Lessee s
right to substitute any Unit pursuant to this Section 11.8 shall
also be subject to the condition that the Replaced Unit be
promptly disposed of by the Lessee to a Person, other than the
Lessee, any Affiliate of the Lessee, Bayer or any Affiliate of
Bayer, and that none of the Lessee, any Affiliate of the Lessee,
Bayer or any Affiliate of Bayer may purchase, lease or otherwise
acquire the Replaced Unit for a period of not less than three
years from the substitution date thereof, such prohibition,
notwithstanding any provision herein or in any other Operative
Agreement to the contrary, to survive the termination of this
Lease with respect to such Replaced Unit. Upon satisfaction of
all of the conditions set forth in this Section 11.8, (i) the
Replaced Unit shall no longer be deemed part of the property
leased hereunder, (ii) the Substitute Unit shall be deemed part
of the property leased hereunder and shall be deemed a Unit
defined herein, and (iii) the Lessor shall convey the Replaced
Unit as is where is , without recourse or warranty (except as
to the ability and authority of the Lessor to transfer and convey
such Replaced Unit free and clear of Lessor s Liens) to the
transferee.
SECTION 12. INSURANCE.
12.1 Property Damage, Public Liability and Other Insurance.
(a) The Lessee will, at all times prior to the return of a Unit
to the Lessor or the exercise of the Fixed Price Purchase Option
pursuant to Section 22, and during any storage period for such
Unit hereunder, at its own expense, cause to be carried and
maintained with insurance companies reasonably acceptable to the
Owner Participant and, so long as the Indenture is in effect, the
Indenture Trustee (i) all risk property insurance in respect of
such Unit (including coverage for loss by fire, lightning,
windstorm, hail, explosion, riot, civil strife or commotion,
vandalism and malicious mischief, damage from aircraft, vehicles
and smoke, and with an extended coverage endorsement covering all
such other risks (including flood, hurricane and earthquake)
commonly used in the state where the Premises are located, and
against such other risks as are customarily insured against by
prudent Persons engaged in the same business as the Lessee) in an
amount not less than the Stipulated Loss Value of such Unit,
subject to a deductible provision not exceeding in the aggregate
for all Units suffering a loss, $1,000,000 per occurrence;
provided that such deductible provisions shall not be higher than
deductible provisions applicable to insurance coverage maintained
by the Lessee for property similar to such Unit; (ii) public
liability insurance, against loss or damage for personal injury,
death or property damage occurring as a result of the ownership,
use, maintenance or operation of the Units (whether in, on or
about the Premises, including adjoining areas), and in any event
assuring against such loss or damage from such risks and in such
amounts as is maintained by the Lessee in respect of similar
equipment owned or leased by it; provided, however, that such
general public liability insurance shall at least be in an amount
not less than that maintained by prudent companies operating
similar equipment (but in any event, not less than $1,000,000 per
occurrence), subject to a deductible provision not exceeding
$250,000 per occurrence; and provided further that such
deductible provisions shall not be higher than deductible
provisions applicable to insurance coverage maintained by the
Lessee in connection with property similar to the Units; and
(iii) such other insurance, including comprehensive motor
vehicle, workers compensation and business interruption
insurance, in each case as is generally carried by companies
operating similar equipment and in such amounts and against such
risks as are then customary for properties similar in use. Such
liability insurance may be carried under blanket policies
maintained by the Lessee so long as such policies otherwise
comply with the provisions of this Section 12. All such
insurance shall cover the interest of the Lessor (in its
individual capacity and as Owner Trustee), the Owner Participant,
the Indenture Trustee, the holders of Notes and the Lessee in the
Units or, as the case may be, shall protect the Lessor (in its
individual capacity and as Owner Trustee), the Owner Participant,
the Indenture Trustee, the holders of the Notes and the Lessee in
respect of risks arising out of the condition, maintenance, use,
ownership or operation of the Units. It is agreed that any
casualty insurance which the Lessee obtains in respect of the
Units in excess of any amount payable to the Lessor (in its
individual capacity and as Owner Trustee), the Owner Participant,
and/or the Indenture Trustee hereunder shall be obtained as
insurance of the Lessee's rights and interests under this Lease,
and shall be payable to the Lessee. All policies of insurance
required to be maintained pursuant to this Section 12 shall be
sufficient in amount, such that the Lessee will under no
circumstances be deemed to be a co-insurer with respect to any
such policy.
(b) The insurance companies providing the coverages
described in this Section 12 shall have a general policyholder
rating of A and a financial rating of at least XII by A.M.
Best s Insurance Guide (or a similar rating from another
insurance rating agency with a similar national reputation if
such insurance company is not rated in A.M. Best s Insurance
Guide), or be otherwise expressly acceptable to the Owner
Participant and a Majority In Interest.
12.2 Policy Provisions. All policies carried by the Lessee
which cover loss or damage to a Unit shall (i) name the Lessee as
insured and the Indenture Trustee (until the Lien of the
Indenture has been discharged in accordance with the terms
thereof), the Owner Participant, each holder of a Note and the
Lessor) as loss payees, (ii) provide that any payment thereunder
for any loss or damage shall (except as provided below) be made
to the Indenture Trustee under a standard mortgagee loss payable
clause or, if the Lien of the Indenture has been discharged in
accordance with the terms of the Indenture, to the Lessor, (iii)
provide that such insurance as to the interest of the Lessor (in
its individual capacity and as Owner Trustee), the Owner
Participant, each holder of a Note and the Indenture Trustee
therein shall not be invalidated as against such insured by any
act or neglect of the Lessee or of any other Person (other than,
with respect to such Person, the acts of such Person) or by any
breach or violation by the Lessee or by any other Person (other
than, with respect to such Person, breaches or violations by such
Person) of any warranties, declarations or conditions contained
in such policies or by any change in the title or ownership of
the Units or any interest therein or with respect thereto. Upon
the occurrence of any event giving rise to a payment to be made
under any policy of insurance required by the terms of the first
sentence of this Section 12, the Lessor (and, until the Lien of
the Indenture shall have been discharged in accordance with the
terms thereof, the Indenture Trustee) shall instruct the relevant
insurer in writing as to the Person(s) entitled to receive such
amounts pursuant to the terms of this Section 12. All liability
policies carried by the Lessee shall (A) name the Lessor (in its
individual capacity and as Owner Trustee), the Owner Participant,
each holder of a Note, the Indenture Trustee and the Lessee as
insureds and (B) insure the interests of the Lessor, the Owner
Participant, each holder of a Note and the Indenture Trustee
regardless of any action or inaction of the Lessee or of any
other Person (other than, with respect to such Person, the acts
of such Person) or any breach or violation by the Lessee or by
any other Person (other than, with respect to such Person,
breaches or violations by such Person) of any warranties,
declarations or conditions contained in such policies. So long
as no Lease Default or Lease Event of Default has occurred and is
continuing, the loss, if any, under any policy carried by the
Lessee covering the Units shall be adjusted with the insurance
companies by the Lessee (otherwise by the Lessor); provided,
however, that the Lessor may, at its option, participate in the
adjustment of any loss that exceeds $5,000,000. If a loss
relating to damage to a Unit or Units does not exceed $5,000,000,
then, so long as no Lease Default or Lease Event of Default has
occurred and is continuing, said loss shall be paid under such
policy directly to the Lessee and the Lessor shall receive notice
of such payment. All policies described in this Section 12 shall
provide: (i) that coverage thereunder shall not be canceled,
reduced or otherwise materially changed without at least 30 days'
prior written notice from the insurer to the Lessor, the Owner
Participant and the Indenture Trustee, (ii) that none of the loss
payees or additional insureds shall have any obligation or
liability for premiums, commissions, if any, additional premiums
or assessments in connection with such insurance, (iii) that the
insurers shall waive any rights of subrogation, setoff,
counterclaim or other deduction, whether by attachment or
otherwise, against Lessor (in its individual capacity and as
Owner Trustee), the Owner Participant, each holder of a Note and
the Indenture Trustee as the loss payees or additional insureds,
(iv) that such insurance shall be primary, without right of
contribution from any other insurance which is carried by any
loss payee or additional insured with respect to its interest in
the Units and shall expressly provide that all provisions except
the limits of liability shall operate in the same manner as if
there were a separate policy insuring each loss payee or insured,
and (v) the interests of the Lessor (in its individual capacity
and as Owner Trustee), the Owner Participant, each holder of a
Note and the Indenture Trustee shall not be invalidated by any
act or negligence or failure to act of, or breach or violation of
any warranties, declarations or conditions by, the Lessee or any
Person having an interest in the Premises or any of the Units.
12.3 Proceeds of Insurance. The Lessee shall promptly pay
to the Indenture Trustee (or, if the Lien of the Indenture has
been discharged in accordance with the terms thereof, to the
Lessor) any proceeds of insurance the Lessee receives (other than
pursuant to the next to last sentence of Section 12.2 hereof)
covering loss or damage to the Units which are payable under the
provisions of this Section 12. The proceeds of any insurance
carried by the Lessee which are received by the Indenture Trustee
or the Lessor on account of or for any loss or damage in respect
of any Unit shall be applied as follows:
(i) If such Unit is to be repaired or replaced, the
insurance proceeds shall be released to the Lessee or as it
may direct from time to time as restoration, replacement,
rebuilding, alterations and additions ("Restoration")
progresses to pay (or reimburse the Lessee for) the cost of
Restoration, but only upon receipt by the Lessor and the
Indenture Trustee of (A) an Officer's Certificate of the
Lessee in form and substance reasonably acceptable to the
Lessor and the Indenture Trustee showing in reasonable
detail the nature of the Restoration, the purpose for which
the expenditures were made, the actual cash expenditures
made for such purpose and the remaining proceeds held by the
Indenture Trustee or the Lessor after such release are not
less than 100% of the reasonably estimated remaining cost of
completing the Restoration, and stating that there is no
Lease Default or Lease Event of Default, and (B) if
necessary, a supplement to this Lease and the Indenture
sufficient to lease such Restoration and to grant a security
interest therein to the Indenture Trustee (and the Lessor
agrees to cooperate with the Lessee to effectuate the
requirements of this clause (B)); or
(ii) If this Lease is terminated in accordance
with the provisions of Section 11.2(ii) hereof and all
amounts payable by the Lessee under Section 11.2(ii) have
been paid, all insurance proceeds shall be released to the
Lessee;
provided that any amount referred to herein which is payable to
the Lessee shall not be paid to the Lessee if at the time of such
payment a Lease Default or Lease Event of Default shall have
occurred and be continuing, and in such event all such amounts
shall be paid to and held by the Indenture Trustee (or, after the
Lien of the Indenture has been discharged in accordance with the
terms thereof, the Lessor) as security for the obligations of the
Lessee to make payments under and perform this Lease. At such
time as there shall not be continuing any Lease Default or Lease
Event of Default, all such amounts at the time held by the
Indenture Trustee or the Lessor (unless theretofore otherwise
applied to the obligations of the Lessee hereunder) shall be paid
to the Lessee. Notwithstanding the foregoing, any amounts
payable to the Indenture Trustee pursuant to this Section 12.3 as
a result of a loss or casualty occurring prior to the Lease Term
Commencement Date shall be paid to the Construction Loan Agent.
12.4 Notice, Etc. The Lessee will advise the Lessor and
the Indenture Trustee in writing promptly of any default in the
payment of any premium and of any other act or omission on the
part of the Lessee which might invalidate or render
unenforceable, in whole or in part, any insurance on any Unit.
The Lessee will advise the Lessor and the Indenture Trustee in
writing of the expiration or termination of any insurance carried
and maintained on any Unit pursuant to this Section 12 at least
thirty (30) days prior to the expiration or termination date
unless such insurance has been replaced. In the event that the
Lessee shall fail to maintain or renew insurance as herein
provided, the Lessor or the Owner Participant may at its sole
option provide such insurance and, in such event, the Lessee
shall thereupon reimburse the Lessor or the Owner Participant, as
appropriate, as Supplemental Rent, for the cost thereof;
provided, however, that no exercise by the Lessor or the Owner
Participant of said option shall affect the provision of this
Lease, including the provisions that failure by the Lessee to
maintain the prescribed insurance shall constitute a Lease Event
of Default.
12.5 Reports and Certificates. On the Lease Term
Commencement Date, and annually upon renewal of the insurance
policies carried by the Lessee pursuant to this Section 12, and
upon any material modification of the insurance policies required
by this Section 12, the Lessee will furnish to the Lessor, the
Owner Participant and the Indenture Trustee (a) all applicable
certificates of insurance and a report, including, without
limitation, a copy of the certificate of insurance signed by the
Lessee's broker, describing in reasonable detail the insurance
then maintained pursuant to this Section 12 and stating that no
premiums are then delinquent, (b) a certificate signed by a
Responsible Officer of the Lessee stating that such insurance is
in accordance with this Section 12 and (c) any other document
evidencing compliance by the Lessee with this Section 12 as may
be reasonably requested by the Lessor, the Owner Participant and
the Indenture Trustee.
12.6 Additional Insurance. At any time the Lessor (either
directly or in the name of the Owner Participant) or the Owner
Participant may at its own expense carry insurance with respect
to its interest in the Units and the Premises; provided that such
insurance does not interfere with the Lessee's ability to insure
the Units as required by this Section 12, or the Lessee's ability
to insure the Units for replacement cost, or the ability of the
Lessee to collect a claim under any such insurance policy. Any
insurance payments received from policies maintained by the
Lessor or the Owner Participant pursuant to the previous sentence
shall be retained by the Lessor or the Owner Participant, as the
case may be, without reducing or otherwise affecting the Lessee's
obligations hereunder.
SECTION 13. INSPECTION.
During the Lease Term, each of the Lessor, the Owner
Participant, the Indenture Trustee and each holder of a Note
(provided that the holders of the Notes shall in good faith
endeavor to coordinate the dates of inspection) shall have the
right, but not the obligation, at its sole cost, expense and risk
(except that if a Lease Default or Lease Event of Default shall
have occurred and be continuing such inspection shall be at the
cost, expense and risk of the Lessee) by its authorized
representatives to inspect the Units and the Premises and all
logs, records, books and other materials relating to the use,
damage, repair and maintenance of the Units, to make copies and
take extracts therefrom, and to discuss the affairs, finances and
accounts with respect to the Units and the Premises with the
Lessee's officers, in each case during the Lessee's normal
business hours, subject to the Lessee's and Bayer s standard
security and safety rules and procedures and, unless a Lease
Event of Default shall have occurred and be continuing, upon five
days' prior notice to the Lessee (such notice being waived by
Lessee during the continuance of a Lease Event of Default).
Without limiting the foregoing, the Lessee shall promptly furnish
to the Lessor, the Owner Participant and the Indenture Trustee
such information with respect to the Units and the Premises, this
Lease and the other Operative Agreements as the Lessor, the Owner
Participant or the Indenture Trustee may from time to time
reasonably request.
SECTION 14. LEASE EVENTS OF DEFAULT.
The following events shall constitute "Lease Events of
Default" hereunder (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order
of any court or any order, rule or regulation of any
administrative or governmental body) and each such Lease Event of
Default shall be deemed to exist and continue so long as, but
only as long as, it shall not have been remedied:
(a) the Lessee shall fail to make (x) any payment of
Basic Rent, within five Business Days after the same shall
have become due or (y) any payment under Section 10.2, 10.3,
11.2 or 22 when due; or
(b) the Lessee shall fail to make any other payment
under the Operative Agreements (provided that any failure to
pay any amount owed by the Lessee under the Tax Indemnity
Agreement or any failure of the Lessee to pay to the Lessor
(in its individual or trust capacity) or the Owner
Participant when due any amounts constituting Excepted
Property shall not constitute a Lease Event of Default prior
to the discharge of the Lien of the Indenture in accordance
with the terms thereof unless written notice is given by the
Owner Participant to the Lessee that such failure shall
constitute a Lease Event of Default), including, without
limitation, any payment of Supplemental Rent, other than
Supplemental Rent payable under Section 10.2, 10.3, 11.2 or
22 (which failure is covered by paragraph (a) above), after
the same shall have become due and such failure shall
continue unremedied for a period of 30 days after receipt by
the Lessee of written notice of such failure from the
Lessor, the Owner Participant or the Indenture Trustee; or
(c) the Lessee shall fail to maintain the insurance
coverages required of it by Section 12; or
(d) any representation or warranty made by the Lessee
in this Lease or in any other Operative Agreement or in any
other document or certificate furnished by the Lessee (or a
Responsible Officer of the Lessee) pursuant to the terms of
the Operative Agreements (other than representations set
forth in the Tax Indemnity Agreement) that was untrue or
incorrect in any material respect as of the date of making
thereof and such untruth or incorrectness shall continue to
be material and the facts or circumstances causing such
untruth or incorrectness are not modified to conform to such
representation or warranty after a period of 30 days
following receipt by the Lessee of written notice thereof
from the Lessor, the Owner Participant or the Indenture
Trustee; or
(e) the Lessee, LSB or Bayer shall (i) commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
(ii) consent to any such relief or to the appointment of or
taking possession by any such official in any voluntary case
or other proceeding commenced against it, or (iii) generally
fail to pay, or admit in writing its inability to pay, its
debts as they come due, or (iv) make a general assignment
for the benefit of creditors, or (v) take any corporate
action to authorize or in furtherance of any of the
foregoing; or
(f) an involuntary case or other proceeding shall be
commenced against the Lessee, LSB or Bayer seeking
liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90
days; or
(g) the Lessee shall fail to observe or perform any of
its covenants or agreements (other than those described in
the foregoing clauses of this Section 14) to be observed or
performed by it under any Operative Agreement (other than
the Tax Indemnity Agreement) and such failure shall continue
unremedied for 30 days after notice from the Lessor, the
Owner Participant or the Indenture Trustee to the Lessee
specifying the failure and demanding the same to be
remedied; provided that, if such failure is capable of being
remedied and such remedy does not involve the payment of
money alone, no such failure shall constitute a Lease Event
of Default hereunder so long as the Lessee is diligently
proceeding to remedy such failure, but in no event shall
such failure continue unremedied for a period in excess of
the lesser of 180 days from the notice referred to above and
the remaining number of days in the Lease Term; or
(h) any of the Facility Documents shall be, or Bayer
or the Lessee shall assert that any of the Facility
Documents are, unenforceable, in whole or in part, for any
reason, or Bayer or the Lessee repudiates, seeks to
disaffirm or terminates its obligations under any of the
Facility Documents; or
(i) the Bayer Letter or the Bayer Support Agreement
shall be, or Bayer shall assert that either the Bayer Letter
or the Bayer Support Agreement is, unenforceable, in whole
or in part, for any reason, or Bayer repudiates, or seeks to
disaffirm, its obligations under either the Bayer Letter or
the Bayer Support Agreement, except pursuant to the express
terms of the Bayer Letter or the Bayer Support Agreement, as
applicable; or
(j) The Turnkey Construction Agreement shall not have
been duly executed and delivered by the parties thereto on
or before August 31, 1997 on terms materially consistent
with the Construction Letter of Intent.
SECTION 15. REMEDIES.
15.1 Remedies. Upon the occurrence of any Lease Event of
Default and at any time thereafter so long as the same shall be
continuing, the Lessor may, at its option, declare this Lease to
be in default by a written notice to the Lessee (a copy of which
notice Lessor shall provide to Bayer at or about the same time at
which the Lessor provides such notice to the Lessee) (but this
Lease shall be deemed to be in default in the event of the
occurrence of a Lease Event of Default under Section 14(e) or
14(f) without such declaration); and at any time thereafter, the
Lessor may do one or more of the following as the Lessor in its
sole discretion shall elect, to the extent permitted by, and
subject to compliance with any mandatory requirement of,
applicable law then in effect:
(a) proceed by appropriate court action or actions,
either at law or in equity, to enforce performance by the
Lessee of the applicable covenants of this Lease or the
other Operative Agreements or to recover damages for the
breach thereof, including, without limitation, as described
in Section 15.5;
(b) by notice in writing to the Lessee, the Lessor may
(x) rescind or terminate the Lease; and/or (y) demand of the
Lessee, and the Lessee shall, upon written demand of the
Lessor and at the Lessee's expense, forthwith return all of
the Units to the Lessor or its order in the manner and
condition required by, and otherwise in accordance with all
of the provisions of, this Lease; or the Lessor with or
without notice or judicial process, and without the
necessity for first instituting any proceedings, or by
summary proceedings or otherwise, may by its agents enter
upon the premises (including the Premises) of the Lessee
where any of the Units may be located, or are believed to be
located, and take immediate possession of and remove all or
any of the Units and thenceforth hold, possess and enjoy the
same free from any right of the Lessee, or its successor or
assigns, to use such Units for any purpose whatever, all
without liability of the Lessor or its agents for or by
reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such action
or otherwise;
(c) with or without taking possession thereof, sell or
otherwise dispose of any Unit at public or private sale,
with or without advertisement or notice to the Lessee, as
the Lessor may determine, free and clear of any rights of
the Lessee and without any duty to account to the Lessee
with respect to such sale or for the proceeds thereof
(except to the extent required by paragraph (e) or (f) below
if the Lessor elects to exercise its rights under either of
said paragraphs), and the Lessor may hold the Lessee liable
for any installment of Basic Rent due on or before the date
of such sale or disposition (and, if payable in arrears, the
pro rata portion of the installment of Basic Rent due on the
next succeeding Rent Payment Date in respect of any period
commencing on the immediately preceding Rent Payment Date to
the date of such sale or disposition, in which event the
Lessee's obligation to pay Basic Rent with respect to such
Unit hereunder due for any periods subsequent to the date of
such sale shall terminate (except to the extent that Basic
Rent is to be included in computations under paragraph (e)
or (f) below if the Lessor elects to exercise its rights
under either of said paragraphs));
(d) hold, use, operate or lease to others or keep idle
any Unit as the Lessor in its sole discretion may determine,
free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or
inaction or for any proceeds with respect thereto, except
that the Lessee's obligation to pay Basic Rent with respect
to such Unit due for any periods subsequent to the date upon
which the Lessee shall have been deprived of possession and
use of such Unit pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by the Lessor
from leasing such Unit to any Person other than the Lessee;
(e) whether or not the Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights
under paragraph (a), (b), (c) or (d) above with respect to
any Unit, the Lessor, by written notice to the Lessee
specifying a payment date (for purposes of this paragraph
(e), the "Default Payment Date") which shall be a
Determination Date not earlier than ten days after the date
of such notice, may demand that the Lessee pay to the
Lessor, and the Lessee shall pay to the Lessor, on account
of any Unit selected by the Lessor on the Default Payment
Date, as liquidated damages and not as a penalty (in lieu of
the Basic Rent for such Unit due after the Default Payment
Date), the sum of: (x) any unpaid Basic Rent on account of
such Unit due prior to, and payable in arrears on, the
Default Payment Date; plus (y)(A) an amount equal to the
excess, if any, of (1) the Stipulated Loss Value for such
Unit determined as of the Default Payment Date over (2) the
Fair Market Value of such Unit (and if such Unit has been
sold, the net sales proceeds (after deduction of all of the
Lessor's and the Owner Participant's costs and expenses of
such sale, including, without limitation, sales or transfer
taxes, costs of storage, overhaul, maintenance, preparation
and transportation of such Unit and brokers' and attorneys'
fees) shall be deemed to be equal to Fair Market Value) or
(B) if so specified in the notice, an amount equal to the
excess, if any, of (1) the present value as of the
Determination Date of all remaining installments (including
any installment of Basic Rent due on the Determination Date)
of Basic Rent for such Unit until the end of the Lease Term,
discounted back to the Determination Date at a rate per
annum equal to 7.0%, over (2) the Fair Market Rental Value
for such Unit, discounted back at a rate per annum equal to
11.5%; plus interest on such sum of (x) plus (y) at the Late
Rate from the Default Payment Date to the date of actual
payment; and upon payment in full of such amount, together
with payment of all other amounts of Supplemental Rent then
due, the Lease Term for such Unit, if not theretofore ended,
shall end;
(f) unless the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1(e) with respect to a Unit, the Lessor, by
written notice to the Lessee specifying a payment date which
shall be a Determination Date occurring not earlier than ten
days after the date of such notice (for purposes of this
paragraph (f), the "Default Payment Date"), may require that
the Lessee pay to the Lessor, and the Lessee shall pay to
the Lessor, on account of such Unit on the Default Payment
Date as liquidated damages and not as a penalty (in lieu of
scheduled Basic Rent due after the Default Payment Date),
the sum of: (x) any unpaid Basic Rent on account of such
Unit due prior to, and payable in arrears on, the Default
Payment Date; plus (y) the Stipulated Loss Value for such
Unit, computed as of the Default Payment Date; plus interest
on such sum of (x) and (y) at the Late Rate from the Default
Payment Date to the date of actual payment; and upon payment
in full of such amount, together with all other amounts of
Supplemental Rent then due, the Lessor shall transfer "as
is", "where is", without recourse or warranty (except as to
the absence of Lessor's Liens attributable to the Lessor)
all right, title, and interest of the Lessor to such Unit to
the Lessee or as it may direct, and the Lease Term for such
Unit, if not theretofore ended, shall end; and/or
(g) The Lessor may exercise any other right or remedy
that may be available to it at law, in equity or by statute,
including all rights or remedies available under Article 2A
of the Uniform Commercial Code.
In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before,
during and after the exercise of any of the foregoing remedies
(together with interest thereon at the Late Rate from the due
date thereof until paid), for all amounts payable by the Lessee
under the Participation Agreement and the other Operative
Agreements before and after any termination thereof, and for
reasonable legal fees and other costs and expenses incurred by
reason of the occurrence of any Lease Event of Default or the
exercise of the Lessor's remedies with respect thereto,
including, without limitation, all costs and expenses incurred in
connection with the return of such Unit in accordance with the
terms of this Lease or in placing such Unit in the condition
required by this Lease or in connection with any use, operation,
maintenance, storage or leasing carried out as part of such
exercise of remedies.
15.2 Cumulative Remedies. Except as otherwise provided in
this Section 15, each right, power and remedy in this Lease
provided in favor of the Lessor shall not be deemed exclusive,
but shall be cumulative and shall be in addition to all other
rights, powers and remedies in its favor existing at law, in
equity or by statute; and the exercise or beginning of exercise
by the Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by the Lessor of any
or all other remedies. Subject to Section 3.7, the Lessee hereby
waives any and all existing or future claims of any right to
assert any offset or counterclaim against the Rent payments due
hereunder, and agrees to make the Rent payments regardless of any
offset or counterclaim or claim which may be asserted by the
Lessee on its behalf in connection with the lease of the Units.
15.3 No Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lessor upon any breach or
default by the Lessee under this Lease shall impair any such
right, power or remedy of the Lessor, nor shall any such delay or
omission be construed as a waiver of any breach or default, or of
any similar breach or default, thereafter occurring; nor shall
any express or implied waiver of a single breach or default be
deemed a waiver of any subsequent breach or default.
15.4 Notice of Lease Default. The Lessee agrees to furnish
to the Lessor, the Owner Participant, the Indenture Trustee,
Bayer and each holder of a Note, promptly upon any Responsible
Officer becoming aware of any condition which constituted or
constitutes a Lease Default or Lease Event of Default, an
Officer's Certificate of the Lessee specifying such condition or
event and the nature, period of existence and status thereof and
what action the Lessee has taken or proposes to take with respect
thereto.
15.5 Specific Performance; the Lessor Appointed the
Lessee's Agent. The delivery of possession of the Units as
provided in Section 6.1 and/or Section 15.1 is of the essence of
this Lease and shall not be impaired, and upon application to any
court of competent jurisdiction in the premises, the Lessor shall
be entitled to a decree against the Lessee requiring specific
performance of the covenants of the Lessee so to deliver
possession of the Units. Without in any way limiting the
obligation of the Lessee under the provisions of Section 6.1 or
Section 15.1, the Lessee hereby irrevocably appoints the Lessor
as the agent and attorney of the Lessee, with full power and
authority, at any time while the Lessee is obligated to deliver
possession of any Units to the Lessor pursuant to this Section
15, to demand and take possession of such Unit in the name and on
behalf of the Lessee from whosoever shall be at the time in
possession of such Unit.
SECTION 16. FURTHER ASSURANCES; REPORTS; OPINION.
16.1 Further Assurances. The Lessee will, at its own
expense, do, execute, acknowledge and deliver all and every such
further acts, deeds, conveyances, transfers and assurances as the
Lessor, the Owner Participant or the Indenture Trustee may
reasonably request in order to protect the right, title and
interest of the Lessor hereunder or the perfection or protection
of the Lien and first priority security interest granted by the
Indenture including, without limitation, ordering such searches
for Uniform Commercial Code financing statements (for both
personal property and fixtures) and preparing such "fixture
filings" and real estate recordings as the Lessor or the
Indenture Trustee may reasonably request. Without limiting the
foregoing, the Lessee, at its own expense, will take, or cause to
be taken, such action with respect to the recording, filing, re-
recording and re-filing of the Indenture, the Lease and any
financing statements and continuation statements or other
instruments as are necessary, or requested by the Lessor, the
Owner Participant or the Indenture Trustee, to maintain the
perfection of the Lien and first security interest created by the
Indenture and the protection of the Lessor's right and title to
and interest in the Units and the Premises and the Trust Estate
as against the Lessee and any third parties, or will furnish to
the Lessor and the Indenture Trustee timely notice of the
necessity of such action, together with such instruments, in
execution and recordable form, and such information as may be
required to enable the Lessor or the Indenture Trustee, as the
case may be, to take such action in a timely manner and at the
Lessee's expense.
16.2 Reports. The Lessee will, at its own expense,
promptly file any reports, or furnish to the Lessor and the Owner
Participant such information as may be required to enable the
Lessor and the Owner Participant, at the Lessee s cost and
expense, timely to file any reports, required to be filed by the
Lessor or the Owner Participant with any Governmental Authority.
16.3 Opinion. The Lessee will, at its own expense, furnish
to the Lessor, the Owner Participant, the Indenture Trustee and
each holder of a Note, on or prior to the fifth anniversary of
the Lease Term Commencement Date, an opinion, reasonably
satisfactory to the Owner Participant and the Indenture Trustee
of Lessee's counsel(i) stating either (x) that in the opinion of
such counsel all action has been taken with respect to the
recording, filing, re-recording, and re-filing of the Indenture,
the Lease and any supplements to any of them, and any financing
statements, continuation statements or other instruments, and all
other action has been taken, as is necessary to establish and
maintain the protection of the Lessor's interests and the
perfection of the Liens and security interests created by the
Operative Agreements, and reciting the details of such action, or
(y) that in the opinion of such counsel, no such action is
necessary to establish and maintain protection of the Lessor's
interest and the perfection of such security interests; and (ii)
specifying all action which needs to be taken in order to
establish and maintain the protection of the Lessor's interest
and the perfection of such security interests.
SECTION 17. THE LESSOR'S RIGHT TO PERFORM.
If the Lessee fails to make any payment required to be made
by it hereunder or fails to perform or comply with any of its
other agreements contained herein, the Lessor may itself, after
notice to and demand upon the Lessee (unless a Lease Event of
Default has occurred pursuant to Section 14(e), in which case no
such notice or demand shall be required), make such payment or
perform or comply with such agreement, but shall not be obligated
hereunder to do so, and the amount of such payment and of the
reasonable expenses of the Lessor incurred in connection with
such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at
the Late Rate from the date of such payment or incurrence of
expenditure until the Lessor has been fully reimbursed therefor,
to the extent permitted by applicable law, shall be deemed to be
Supplemental Rent, payable by the Lessee to the Lessor on demand.
SECTION 18. ASSIGNMENT BY THE LESSOR.
The Lessee and the Lessor hereby confirm that the Lessor
will execute and deliver on or prior to the Lease Term
Commencement Date to the Indenture Trustee the Indenture, which
assigns as collateral security and grants a security interest in
favor of the Indenture Trustee in and to the Units and the
Premises, this Lease and certain of the Rent payable hereunder
(excluding Excepted Property), to which assignment pursuant to
the Indenture the Lessee hereby consents. The Lessor agrees that
it shall not otherwise assign or convey its right, title and
interest in and to this Lease, the Units or any Unit and the
Premises, except as expressly permitted by and subject to the
provisions of the Participation Agreement, the Trust Agreement
and the Indenture.
SECTION 19. ASSIGNMENT BY THE LESSEE.
The Lessee will not, without the prior written consent of
the Lessor, assign any of its rights hereunder; nor will the
Lessee sublease any of the Units without the prior written
consent of the Lessor, except in accordance with Section 8.3,
provided that, in each case, the Lessor and the Owner Participant
shall be satisfied that the Bayer Letter and, prior to the
expiration thereof pursuant to its terms, the Bayer Support
Agreement, as the case may be, remains fully in effect after
giving effect to any such assignment or sublease.
Notwithstanding the foregoing, the rights and obligations of the
Lessee in respect of the Fixed Price Purchase Option may be
assigned in whole or in part to Bayer or any entity designated by
Bayer without the consent of the Lessor, provided that the Lessor
and the Owner Participant shall be satisfied that the Bayer
Letter and, prior to the expiration thereof pursuant to its
terms, the Bayer Support Agreement, as the case may be, remains
fully in effect.
SECTION 20. NOTICES.
Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein
shall be in writing, and any such notice shall become effective
when delivered. Any written notice shall be by (a) personal
delivery thereof, including, without limitation, by overnight
mail and courier service, (b) United States mail, certified,
postage prepaid, return receipt requested or (c) facsimile
transmission, confirmed by the method set forth in clause (a) or
(b) above, in each case addressed to the addressee at its
respective address set forth below or at such other address as
such Person may from time to time designate by written notice to
the other Persons listed below:
If to the Lessor:
Boatmen's Trust Company of Texas
701 South Taylor Street
Amarillo, Texas 79101
Attention: Ms. Nancy Ward, Corporate Trust Department
Facsimile No: (806) 378-6621
Confirmation No.: (806) 378-1932
If to the Owner Participant:
To the address specified in Section 10.2 of the
Participation Agreement
If to the Indenture Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Facsimile No.: (302) 651-1000
Confirmation No.: (302) 651-8882
If to a holder of a Note:
To the address specified in Section 10.2 of the
Participation Agreement
If to the Lessee:
El Dorado Nitrogen Company
16 South Pennsylvania
P.O. Box 754
Oklahoma City, Oklahoma 73107
Attention: General Counsel
Facsimile No.: (405) 236-1209
Confirmation No.: (405) 235-4546
If to Bayer:
Bayer Corporation
100 Bayer Road
Pittsburgh, Pennsylvania 15205-9741
Attention: Controller - Polymers Division
Facsimile No.: (412) 777-7755
Confirmation No.: (412) 777-4802
SECTION 21. CONCERNING THE INDENTURE TRUSTEE.
21.1 Rights and Immunities of Indenture Trustee. The
Indenture Trustee shall not be obligated to perform any duty,
covenant or condition required to be performed by the Lessor
under any of the terms hereof, but, on the contrary, the Lessee
by its execution hereof acknowledges and agrees that,
notwithstanding any grant or assignment in the Indenture, each
and all such duties, covenants or conditions required to be
performed by the Lessor shall survive any such granting or
assignment and shall be and remain the sole liability of the
Lessor and of every Person succeeding (by merger, consolidation,
purchase of assets of otherwise) to all or substantially all of
the business assets or goodwill of the Lessor. Without limiting
the foregoing, the Lessee further acknowledges and agrees that
the rights of the Indenture Trustee in and to the Units and the
Premises or the Rent shall not be subject to any abatement
whatsoever, and shall not be subject to any defense, setoff,
counterclaim or recoupment or reduction of any kind for any
reason whatsoever, whether by reason of failure or defect in the
Lessor's title to, or any interruption from whatsoever cause in
the use, operation or possession of, the Units or the Premises or
any part thereof, the taking of any affirmative act by the Lessor
or any party, other than the Indenture Trustee itself through its
gross negligence or willful misconduct, which would interfere
with the Lessee's use and enjoyment of the Units or the Premises,
or (except as provided elsewhere in this Lease) any damage to or
loss or destruction of the Units or the Premises or any part
thereof or by reason of any other indebtedness or liability,
howsoever and whenever arising, of the Lessor to the Lessee or to
any other Person or by reason of any cause whatsoever, it being
the intent hereof that the Lessee shall be unconditionally and
absolutely obligated to pay the Indenture Trustee all of the Rent
assigned under and pursuant to the Indenture.
21.2 Amendments; Exercise of Remedies. Unless and until
the Lessee shall have received written notice from the Indenture
Trustee that the Lien of the Indenture has been discharged in
accordance with the terms thereof (i) no amendment or
modification of, or waiver by or consent of the Lessor in respect
of, any of the provisions of this Lease shall be effective unless
the Indenture Trustee shall have joined in such amendment,
modification, waiver or consent or shall have given its prior
written consent thereto; provided, however, that amendments,
modifications, waivers and consents with respect to matters which
constitute Excepted Property may be made without such consent,
and (ii) except as otherwise expressly provided in the Indenture,
the Indenture Trustee shall have the right to exercise all
rights, privileges and remedies (either in its own name or in the
name of the Lessor for the use of and benefit of the Indenture
Trustee) which by the terms of this Lease or by applicable law
are permitted or provided to be exercised by the Lessor.
SECTION 22. END OF LEASE TERM PURCHASE OPTION.
Provided that no Lease Default or Lease Event of Default
shall have occurred and be continuing at the scheduled expiration
of the Lease Term and the Lessee shall have duly given the notice
required by the next succeeding sentence of this Section 22, the
Lessee shall have the right (the Fixed Price Purchase Option )
to purchase all (but not less than all) of the Units then leased
hereunder at the scheduled expiration of the Lease Term at a
price equal to the Fixed Price Purchase Option Amount for such
Units. The Lessee shall give the Lessor irrevocable written
notice not less than 12 months (and not more than 18 months)
prior to the scheduled end of the Lease Term of its election to
exercise the Fixed Price Purchase Option provided for in this
Section 22. Payment of the Fixed Price Purchase Option Amount,
together with all other amounts due and owing by the Lessee under
the Operative Agreements, shall be made at the place of payment
specified in Section 3.6 hereof in immediately available funds
and the Lessor shall transfer to the Lessee all of its right,
title and interest in and to the Units on an "as-is, where-is"
basis upon payment of the Fixed Price Purchase Option Amount and
all such other amounts due and owing. The Lessor shall not be
required to make any representation or warranty as to the
condition of the Units or as to any other matters, except for the
absence of Lessor's Liens attributable to the Lessor, and may
specifically disclaim any such representations or warranties.
SECTION 23. LIMITATION OF THE LESSOR'S LIABILITY.
It is expressly agreed and understood that all representa-
tions, warranties and undertakings of the Lessor hereunder
(except as expressly provided herein) shall be binding upon the
Lessor only in its capacity as Owner Trustee under the Trust
Agreement and in no case shall Boatmen s be personally liable for
or on account of, any statements, representations, warranties,
covenants or obligations stated to be those of the Lessor
hereunder, except that the Lessor (or any successor Owner
Trustee) shall be personally liable (i) in the case of handling
funds, for its failure to act with the same care as Boatmen s
uses in handling its own funds and, in all other cases, for its
gross negligence or wilful misconduct and (ii) for its breach of
its covenants, representations and warranties contained in the
Operative Agreements to the extent covenanted or made in its
individual capacity.
SECTION 24. INVESTMENT OF SECURITY FUNDS.
Any moneys received by the Lessor or the Indenture Trustee
which are required to be paid to the Lessee pursuant to
Section 11.5, 11.6, or 12.3, as the case may be, until paid to
the Lessee as provided in Section 11.5, 11.6, or 12.3, or as
otherwise applied as provided herein or in the Trust Agreement
and Indenture, shall be invested in Permitted Investments by the
Lessor (unless the Lien of the Indenture shall not have been
discharged, in which case, by the Indenture Trustee as provided
in Section 9.3 of the Indenture) from time to time as directed in
writing by the Lessee, if such investments are reasonably
available for purchase. There shall be promptly remitted to the
Lessee, so long as no Lease Default or Lease Event of Default
shall have occurred and be continuing and unless applied as
provided herein or in the Trust Agreement and Indenture, any gain
(including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if
any, incurred in connection with such investment). The Lessee
will promptly pay to the Lessor or the Indenture Trustee, as the
case may be, on demand, the amount of any net loss realized as
the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection
with such investment), such amount to be held and disposed of in
accordance with the terms hereof and of the Trust Agreement and
the Indenture.
SECTION 25. MISCELLANEOUS.
25.1 Governing Law; Severability. THIS LEASE, AND ANY
EXTENSIONS, AMENDMENTS, MODIFICATIONS, RENEWALS OR SUPPLEMENTS
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS AND DECISIONS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
EXCEPT AS TO MATTERS RELATING TO REAL PROPERTY AND THE EXERCISE
OF REMEDIES WITH RESPECT THERETO, WHICH WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Whenever possible, each provision of this Lease shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Lease shall be
prohibited by or invalid under the laws of any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Lease as to such jurisdiction or in any other jurisdiction.
25.2 Execution in Counterparts. This Lease may be executed
in any number of counterparts, each executed counterpart
constituting an original and all such counterparts constituting
but one and the same agreement; provided, however, that to the
extent that this Lease constitutes chattel paper (as such term is
defined in the Uniform Commercial Code) no security interest in
this Lease may be created through the transfer or possession of
any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the
signature page hereof, which counterpart shall constitute the
only "original" hereof for purposes of the Uniform Commercial
Code.
25.3 Headings and Table of Contents; Section References.
The headings of the sections of this Lease and the Table of
Contents are inserted for purposes of convenience only and shall
not be construed to affect the meaning or construction of any of
the provisions hereof. All references herein to numbered
sections, unless otherwise indicated, are to sections of this
Lease.
25.4 Successors and Assigns. This Lease shall be binding
upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective
successors and permitted assigns. Except as expressly provided
herein, no party hereto may assign its interests herein without
the consent of the other parties hereto and the Indenture
Trustee.
25.5 True Lease. It is the intent of the parties to this
Lease that it will be a true lease and not a "conditional sale"
and will be a "finance lease" under Article 2A of the Uniform
Commercial Code, and that the Lessor shall at all times be
considered to be the owner of each Unit which is the subject of
this Lease for the purposes of all Federal, state, city and local
income taxes or for franchise taxes measured by income, and that
this Lease conveys to the Lessee no right, title or interest in
any Unit or the Premises except as lessee. Nothing contained in
this Section 25.5 shall be construed to limit the Lessee's use or
operation of any Unit or the Premises in accordance with the
terms hereof or to constitute a representation, warranty or
covenant by the Lessor as to tax consequences.
25.6 Amendments and Waivers. No term, covenant, agreement
or condition of this Lease may be terminated, amended or
compliance therewith waived (either generally or in a particular
instance, retroactively or prospectively) except by an instrument
or instruments in writing executed by each party hereto and, to
the extent required by Section 21.2, by the Indenture Trustee,
and except as may be permitted by the terms of the Indenture.
25.7 Survival. All warranties, representations,
indemnities and covenants made by either party hereto, herein or
in any certificate or other instrument delivered by such party or
on the behalf of any such party under this Lease, shall be
considered to have been relied upon by the other party hereto and
shall survive the consummation of the transactions contemplated
hereby regardless of any investigation made by either such party
or on behalf of either such party.
25.8 Business Days. If the date on which any payment is to
be made pursuant to this Lease is not a Business Day, the payment
otherwise payable on such date shall be payable on the next
succeeding Business Day.
25.9 Incorporation by Reference. The obligations set forth
in Sections 7.1 and 7.2 of the Participation Agreement are hereby
incorporated by reference.
25.10 Lessee's Right of Use and Enjoyment. The Lessor shall
not take, or cause to be taken, any action contrary to the
Lessee's rights under this Lease, including, without limitation,
the right to possession and use by the Lessee unless and until a
Lease Event of Default has occurred and is continuing or the term
of the Lease has expired (and the Lessee has not exercised its
option to purchase the Units) or has been terminated (and the
Lessee has not exercised its option to purchase the Units) in
accordance with the terms hereof.
25.11 License to Enter Land. Subject to the proviso hereto,
the Lessee hereby grants to the Lessor and the Indenture Trustee
(or such Persons as the Lessor or the Indenture Trustee may
designate) an irrevocable license to enter upon the land where
any Unit is located; provided, however, that neither the Lessor
nor the Indenture Trustee shall be entitled to exercise such
license unless a Lease Event of Default has occurred and is
continuing and this Lease or the Lessee's rights of possession
hereunder have been terminated or the Lease Term has expired and
the Lessee has failed or refused for any reason to surrender any
Unit in the manner provided in Section 6 hereof.
25.12 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, EXCEPT FOR
LITIGATION BROUGHT IN THE COURTS OF OTHER JURISDICTIONS TO
ENFORCE JUDGMENTS RENDERED BY SUCH COURTS OF THE STATE OF NEW
YORK OR FEDERAL COURTS LOCATED IN NEW YORK. EACH PARTY HERETO
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF THE
APPELLATE COURTS THEREFROM FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREIN FOR WHICH APPEALS OR THE TIME FOR
APPEAL HAVE EXPIRED IN CONNECTION WITH SUCH LITIGATION. EACH
PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO
THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
SECTION 26. WAIVER OF JURY TRIAL
THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY MATTER ARISING HEREUNDER.
SECTION 27. BAYER RIGHTS UPON DEFAULT OR LOSS.
Upon the occurrence of (x) a Lease Event of Default (other
than a Lease Event of Default arising under Section 14(e) or
14(f) with respect to Bayer or under Section 14(h) or Section
14(i)) and receipt by Bayer of (1) a written determination by
the Indenture Trustee that the Indenture Trustee intends to
exercise the remedies available to it under Section 15 (other
than any remedy intended to cause performance and continuance of
this Lease) in respect of such Lease Event of Default or (2) a
written notice from the Owner Participant as contemplated by the
Bayer Letter in respect of such Lease Event of Default, or (y) an
Event of Loss and the receipt by Bayer of a written notice from
the Indenture Trustee or the Owner Participant as contemplated by
the Bayer Letter in respect of such Event of Loss, the parties
hereto acknowledge that Bayer shall have all of the rights,
duties and obligations set forth in the Bayer Letter and, to the
extent relevant, shall be entitled to exercise the rights it
obtains hereunder.
* * * * * * * * *
IN WITNESS WHEREOF, the Lessor and the Lessee have caused
this Lease to be duly executed and delivered in New York, New
York on the day and year first above written.
LESSOR:
BOATMEN'S TRUST COMPANY OF TEXAS, not
in its individual capacity except
as otherwise expressly provided
herein but solely as Owner Trustee
By:_______________________________
Name: ____________________________
Title: ___________________________
LESSEE:
EL DORADO NITROGEN COMPANY
By:_____________________________
Name: James L. Wewers
---------------------------
Title: President
--------------------------
Receipt of the original
counterpart of the foregoing
Lease is hereby acknowledged
this ____ day of __________, 199_.
WILMINGTON TRUST COMPANY,
as Indenture Trustee
By:_____________________________
Name:___________________________
Title:__________________________
EXHIBIT A
Lease Agreement
FORM OF
LEASE SUPPLEMENT (EDNC Trust 1997) NO.
Dated ___________________, 199_
between
BOATMEN'S TRUST COMPANY OF TEXAS,
not in its individual
capacity except as expressly provided
herein but solely as Owner Trustee,
as Lessor
and
EL DORADO NITROGEN COMPANY,
as Lessee
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE LESSOR IN
AND TO THIS LEASE SUPPLEMENT, THE UNITS COVERED HEREBY AND THE
RENT DUE AND TO BECOME DUE UNDER THE LEASE HAVE BEEN ASSIGNED AS
COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF, WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY,
BUT SOLELY AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE AND
SECURITY AGREEMENT (EDNC TRUST 1997), DATED AS OF JUNE 27, 1997,
BETWEEN SUCH INDENTURE TRUSTEE, AS SECURED PARTY, AND THE LESSOR,
AS DEBTOR. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE
OBTAINED FROM THE INDENTURE TRUSTEE AT ITS ADDRESS SET FORTH IN
SECTION 20 OF THE LEASE. THIS LEASE SUPPLEMENT HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS, BUT ONLY THE COUNTERPART TO BE DEEMED THE
ORIGINAL COUNTERPART FOR CHATTEL PAPER PURPOSES CONTAINS THE
RECEIPT THEREFOR EXECUTED BY WILMINGTON TRUST COMPANY, AS
INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 25.2
OF THE LEASE FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL
HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
LEASE SUPPLEMENT (EDNC Trust 1997) NO. __
LEASE SUPPLEMENT (EDNC Trust 1997) NO. dated , 199_ (this
"Lease Supplement") is between BOATMEN'S TRUST COMPANY OF TEXAS, a Texas state
chartered trust company, not in its individual capacity but solely as Owner
Trustee (the "Lessor") under the Trust Agreement, and EL DORADO NITROGEN
COMPANY, an Oklahoma corporation (the "Lessee");
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement (EDNC Trust 1997) dated as of June 27, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Lease";
unless otherwise defined herein, capitalized terms used herein shall have the
meanings specified in Appendix A to the Lease); and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on the Lease Term Commencement Date substantially in the form hereof
for the purpose of confirming the acceptance and lease of the Units under the
Lease in accordance with the terms thereof;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Lessor and the Lessee hereby agree as follows:
1. Inspection and Approval. The Lessee hereby acknowledges and confirms
that it has inspected and approved the Units set forth on Schedule 1 hereto
and, as between the Lessor and the Lessee, such Units comply in all material
respects with the specifications for such Units and are in good working order.
2. Delivery and Acceptance. The Lessor hereby confirms delivery and lease
to the Lessee, and the Lessee hereby confirms acceptance and lease from the
Lessor, under the Lease as hereby supplemented, of the Units listed on
Schedule 1 hereto.
3. Representations and Warranties. The Lessee hereby represents and
warrants that:
(a) No event which would constitute an Event of Loss under the Lease has
occurred with respect to the Units set forth on Schedule 1 hereto as
of the date hereof;
(b) The Total Equipment Cost for the Units listed on Schedule 1 hereto is
$[__________];
(c) Each Unit listed on Schedule 1 hereto has been assembled and installed
at the Premises;
(d) The Units listed on Schedule 1 hereto are free and clear of all Liens,
except the Liens of the Lease and the Indenture and Permitted Liens
described in clauses (iii) and (iv) of the definition thereof;
(e) The Units and the current operation thereof do not violate any law or
regulation, or any order of any Governmental Authority applicable to, or
binding on, the Units, including, without limitation, any such law,
regulation or order relating to matters of occupational safety and
health or the environment, other than violations that would
not, individually or in the aggregate, have a Material Adverse Effect; and
(f) As of the Lease Term Commencement Date (i) the Units, taken as a
whole, and each major component thereof, are substantially complete
such that they are ready and available to perform the function for which
they were designed; (ii) all material approvals of any Governmental
Authority necessary for the commercial operation of such Unit have been
received and are in full force and effect; (iii) the Units have been
maintained, serviced and repaired (A) in a manner consistent with sound
engineering practice and standards which will enable the Lessee to operate
the Units at or above the contracted capacity levels or otherwise fully
perform its obligation under the Operative Agreements and (B) in
compliance in all material respects with (1) applicable laws, rules,
regulations and orders of any Governmental Authority and (2)
all requirements of manufacturers of the Units for maintaining in full
force and effect any warranties of such manufacturers with
respect to the Units; (iv) there is no present event or condition that is
directed, addressed or relates specifically to the Units and
that would materially and adversely affect the capability of the Units
to operate as intended by the Lessee or materially impair their fair market
value, utility, condition or remaining economic useful life; and (v) all
licenses, patents, trademark, tradenames and similar rights that are
necessary for the operation of the Units by a third party are
in full force and effect and have been, or on the Lease Term
Commencement Date will be, duly assigned to the Lessor; it being
understood that such licenses, patents, trademarks, tradenames and similar
rights do not include licenses, patents, trademarks, tradenames and
similar rights related to the products produced by the Lessee with the
Units.
4. Basic Rent, Stipulated Loss Values and Termination Values. The Basic
Rent payable under Section 3.2 of the Lease, Stipulated Loss Values, Termination
Values and the Fixed Price Purchase Option Amount applicable in respect of the
Units are set forth, respectively, on the appropriate portions of Schedules
2, 3, 4 and 6 to the Participation Agreement.
5. Confirmation. The Lessee hereby confirms its agreement, in accordance
with the Lease as supplemented by this Lease Supplement, to pay Rent to the
Lessor for each Unit leased hereunder as provided for in the Lease.
6. Incorporation into Lease. This Lease Supplement shall be construed in
connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease, as supplemented by this Lease Supplement,
shall be and remain in full force and effect.
7. References. Any and all notices, requests, certificates and other
instruments executed and delivered concurrently with or after the execution
and delivery of this Lease Supplement may refer to the "Lease Agreement,
dated as of June 27, 1997", or may identify the Lease in any other respect
without making specific reference to this Lease Supplement,
but nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
8. Counterparts. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together constituting one and the same instrument.
9. Governing Law. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS
RELATING TO REAL PROPERTY AND THE EXERCISE OF REMEDIES WITH
RESPECT THERETO, WHICH WILL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
LESSOR:
BOATMEN'S TRUST COMPANY OF TEXAS, not
in its individual capacity, but solely as Owner
Trustee
By:_____________________________________
Name:___________________________________
Title:__________________________________
LESSEE:
EL DORADO NITROGEN COMPANY
By:_____________________________________
Name: __________________________________
Title:__________________________________
Receipt of the original
counterpart of the foregoing
Lease Supplement is hereby
acknowledged this
____ day of _________, 199_.
WILMINGTON TRUST COMPANY,
as Indenture Trustee
By:___________________________
Name:_________________________
Title:________________________
SCHEDULE 1
Units
Serial No. Description Equipment Cost
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
- ------------------ -------------------- ---------------------
EXHIBIT B
DESCRIPTION OF PREMISES
[TO BE PROVIDED]
Exhibit 10.7
SECURITY AGREEMENT AND COLLATERAL
ASSIGNMENT OF FACILITY DOCUMENTS
FOR VALUE RECEIVED, and to secure the performance by EL
DORADO NITROGEN COMPANY, an Oklahoma corporation ("Assignor"), of
all of its obligations under that certain Participation Agreement
dated as of June 27, 1997 (as the same may be amended, modified
or restated from time to time, and together with all
substitutions therefor and replacements thereof, the "Agreement")
among Assignor, BOATMEN'S TRUST COMPANY OF TEXAS, a Texas state
chartered trust company, not in its individual capacity, but
solely as Owner Trustee ("Secured Party"), and the other parties
thereto, and under the other Operative Agreements, Assignor does
hereby collaterally assign and grant a security interest in and
Lien upon, to Secured Party and its successors and assigns, all
of Assignor s right, title and interest in and to the Facility
Documents, now or hereafter existing, and all proceeds thereof
(referred to collectively herein as the Collateral ); provided,
however, that Secured Party shall have no obligation or liability
of any kind under or with respect to the Facility Documents,
either before or after its exercise of any rights hereby granted
to it, and Assignor agrees to save and hold Secured Party
harmless from, and to indemnify it against, any and all such
obligations and liabilities, contingent or otherwise.
All capitalized but undefined terms used herein shall have
the same respective meanings as in the Agreement.
This Security Agreement and Collateral Assignment of
Facility Documents shall inure to the benefit of Secured Party
and its successors and assigns, and shall be binding upon
Assignor and its successors and assigns, and shall continue in
full force and effect until all obligations, liabilities and
indebtedness of any kind now or hereafter due Secured Party from
any of the other Operative Agreements, or which are otherwise
secured hereby, whether now existing or hereafter arising or
incurred (collectively, the "Liabilities"), have been fully paid,
performed and satisfied, at which time this Security Agreement
and Collateral Assignment of Facility Documents will terminate.
Secured Party will not exercise any of its rights hereunder until
a default by Assignor occurs under the Agreement or the other
Operative Agreements (after giving effect to any applicable
notice requirements or cure periods) (a "Default").
For purposes of operating the units and occupying the
Premises either before or after a Default shall have occurred,
Secured Party may, at its option, further assign its right, title
and interest in the Collateral to the Construction Loan Agent
and/or the Indenture Trustee without the consent of Assignor or
any other Person.
This Security Agreement and Collateral Assignment of
Construction Documents is a present security interest and
collateral assignment. During the continuance of any Default,
Secured Party may, without affecting any other right or remedy
available to it, exercise its rights under this Security
Agreement and Collateral Assignment of Facility Documents as
provided herein in any manner permitted by law. If any notice to
Assignor is required by law, such notice shall be deemed
commercially reasonable if given at least 10 days prior to the
date of intended action.
Assignor represents and warrants that it has more than one
place of business and that its chief executive office, as such
terms are used in Section 9-103(3) of the Uniform Commercial
Code, is located at 16 South Pennsylvania, Oklahoma City,
Oklahoma 73107.
Assignor represents and warrants that upon the filing of an
appropriate Uniform Commercial Code financing statement with the
Secretary of State of Oklahoma, the Secretary of State of Texas
and in the Real Property Records of Chambers County, Texas,
Secured Party will have an enforceable, perfected first priority
security interest of record in the Collateral (except for (a)
insurance proceeds to the extent excluded from Section 9-306 of
the Uniform Commercial Code and (b) permits as to which (i)
perfection of a security interest therein is not governed by the
Uniform Commercial Code or (ii) the assignment thereof, or the
granting of a security interest therein, violates applicable law
or the terms thereof) as against all Persons, including Assignor
and its creditors.
Assignor, at its own cost and expense, will cause all
financing statements (including precautionary financing
statements), fixture filings and other documents, to be recorded
or filed at such places and times in such manner, and will take
all such other actions or cause such actions top be taken, as may
be reasonably requested by Secured Party in order to establish,
preserve, protect and perfect the first and prior Lien of Secured
Party to the Collateral.
This Security Agreement and Collateral Assignment of
Facility Documents may be effectively waived, modified, amended
or terminated only by a written instrument executed by Secured
Party. Any waiver by Secured Party shall be effective only with
respect to the specific instance described therein. Delay or
course of conduct shall not constitute a waiver of any right or
remedy of Secured Party.
THIS SECURITY AGREEMENT AND COLLATERAL ASSIGNMENT OF
FACILITY DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
[Signature Page Follows]
IN WITNESS WHEREOF, Assignor has caused this Security
Agreement and Collateral Assignment of Facility Documents to be
executed by its duly authorized officer as of this 27th day of
June, 1997.
EL DORADO NITROGEN COMPANY,
as Assignor
By:________________________________
Name: James L. Wewers
Title: President
BAYER CORPORATION, an Indiana corporation, joins in the
execution hereof for the purpose of acknowledging and consenting
to the terms and provisions of this Security Agreement and
Collateral Assignment of Facility Documents, and agrees to look
solely to Assignor and that it shall have no recourse to Secured
Party with respect to any claims arising under the Facility
Documents, except to the extent that Secured Party has assumed in
writing any obligations under, or has foreclosed upon, the
Facility Documents.
Dated: June ____, 1997
BAYER CORPORATION
By: _______________________________
Name: H. Lee Noble
Title: Executive Vice President
Exhibit 10.8
Security Agreement and
Collateral Assignment of Construction Documents
FOR VALUE RECEIVED, and to secure the performance by EL
DORADO NITROGEN COMPANY, an Oklahoma corporation (HEREINAFTER
REFERRED TO AS "Assignor"), of all of its obligations under that
certain Construction Agency Agreement dated as of June 27, 1997
(as the same may be amended, modified or restated from time to
time, and together with all substitutions therefor and
replacements thereof, the "Agreement") between Assignor and
Boatmen's Trust Company of Texas, not in its individual capacity,
except as otherwise expressly provided herein, but solely as
Owner Trustee (the "Secured Party"), and the other Operative
Agreements, Assignor does hereby collaterally assign and grant a
security interest in and Lien upon, to the Secured Party and its
successors and assigns, all of Assignor's right, title and
interest in and to the following, now or hereafter existing,
(referred to collectively herein as the "Construction Agency
Collateral"):
(i) all engineering, procurement and construction
contracts, purchase orders and other agreements relating to
the designing, engineering, selecting, ordering, installing,
testing and placing into service of the Units, as each such
agreement may heretofore or hereafter be entered into,
supplemented, modified or amended from time to time
(collectively, the "Construction Contracts");
(ii) all plans, specifications and drawings of any
and every kind heretofore or hereafter prepared for use in
connection with the designing, engineering, selecting,
ordering, installing, testing and/or placing into service of
the Units, and any supplements, amendments or modifications
thereto (collectively, the "Plans");
(iii) to the extent assignable and to the extent
permitted under applicable law, all building and other
permits, licenses and government approvals which are
necessary or useful to the commencement and completion of
the designing, engineering, selecting, ordering, installing,
testing and/or placing into service of the Units, or which
otherwise relate thereto, heretofore or hereafter obtained
or applied for by or on behalf of Assignor, and any deposits
made in connection therewith (collectively, the "Permits");
(iv) to the extent assignable, all insurance
policies, guarantees and bonds in favor of Assignor required
pursuant to the Construction Contracts or otherwise, as each
of the same be heretofore or hereafter supplemented,
modified, or amended form time to time and the right to
receive payments and proceeds under such insurance policies,
guarantees and bonds (collectively, the "Insurance
Policies"); and
(v) all proceeds of any of the foregoing;
provided, however, that Secured Party shall have no obligation or
liability of any kind under or with respect to the Construction
Contracts, the Permits, the Plans or the Insurance Policies,
either before or after its exercise of any rights hereby granted
to it, and Assignor agrees to save and hold Secured Party
harmless from, and to indemnify it against, any and all such
obligations and liabilities, contingent or otherwise.
All capitalized but undefined terms used herein shall have
the same respective meanings as in the Construction Agency
Agreement.
This Security Agreement and Collateral Assignment of
Construction Documents shall inure to the benefit of Secured
Party and its successors and assigns, and shall be binding upon
Assignor and its successors and assigns, and shall be binding
upon Assignor and its successors and assigns, and shall continue
in full force and effect until all obligations, liabilities and
indebtedness of any kind now or hereafter due Secured party from
Assignor under or with respect to the Construction Agency
Agreement or any of the other Operative Agreements, or which are
otherwise secured hereby, whether now existing or hereafter
arising or incurred (collectively, the "Liabilities"), have been
fully paid, performed and satisfied, at which time this Security
Agreement and Collateral Assignment of Construction Documents
will terminate. Secured Party will not exercise any of its
rights hereunder until a Construction Agency Event of Default
occurs.
For purposes of completing the designing, engineering,
selecting, ordering, installing, testing and/or placing into
service of the Units after a Construction Agency Event of Default
shall have occurred, Secured Party may, at its option, further
assign its right, title and interest in the Construction Agency
Collateral without the consent of Assignor, any contractor or any
other Person.
This Security Agreement and Collateral Assignment of
Construction Documents is a present security interest and
collateral assignment; provided, however, that Secured Party
shall not have the right to undertake completion of the
designing, engineering, selecting, ordering, installing (or
arranging for the installation of), testing and/or placing into
service of the Units or directly to enforce the provisions of any
Construction Contract until a Construction Agency Event of
Default exists. During the continuance of any such Construction
Agency Event of Default, Secured party may, without affecting any
other right or remedy available to it, exercise its rights under
this Security Agreement and Collateral Assignment of Construction
Documents as provided herein in any manner permitted by law. If
any notice to Assignor is required by law, such notice shall be
deemed commercially reasonable if given at least 10 days prior to
the date of intended action.
Assignor represents and warrants that it has more than one
place of business and that its chief executive office, as such
terms are used in Section 9-103(3) of the Uniform Commercial
Code, is located at 16 South Pennsylvania, Oklahoma City,
Oklahoma 73107.
Assignor represents and warrants that upon the filing of an
appropriate Uniform Commercial Code financing statement with the
Secretary of State of Oklahoma, the Secretary of State of Texas
and in the Real Property Records of Chambers County, Texas,
Secured Party will have an enforceable, perfected first priority
security interest of record in the Construction Agency Collateral
(except for (a) insurance proceeds to the extent excluded from
Section 9-306 of the Uniform Commercial Code and (b) permits as
to which (i) perfection of a security interest therein is not
governed by the Uniform Commercial Code or (ii) the assignment
thereof, or the granting of a security interest therein, violates
applicable law) as against all Persons, including Assignor and
its creditors.
Assignor, at its own cost and expense, will cause all
financing statements (including precautionary financing
statements), fixture filings and other documents, to be recorded
or filed at such places and times in such manner, and will take
all such other actions or cause such actions top be taken, as may
be reasonably requested by Secured Party in order to establish,
preserve, protect and perfect the first and prior Lien of Secured
Party to the Construction Agency Collateral.
This Security Agreement and Collateral Assignment of
Construction Documents may be effectively waived, modified,
amended or terminated only by a written instrument executed by
Secured Party. Any waiver by Secured Party shall be effective
only with respect to the specific instance described therein.
Delay or course of conduct shall not constitute a waiver of any
right or remedy of Secured Party.
THIS SECURITY AGREEMENT AND COLLATERAL ASSIGNMENT OF
FACILITY DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, Assignor has caused this Security
Agreement and Collateral Assignment of Construction Documents to
be executed by its duly authorized officer as of this 27th day of
June, 1997.
EL DORADO NITROGEN COMPANY,
as Assignor
By:________________________________
Name: James L. Wewers
Title: President
LSB INDUSTRIES, INC. Exhibit 11.1
Page 1 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
1997 quarter ended
------------------------
March 31 June 30
Shares for primary earnings per share:
Weighted average shares:
Common shares outstanding from
beginning of period 12,975,356 12,931,856
Common shares issued on conversion
of redeemable preferred stock;
calculated on weighted average
basis - -
Common shares issued upon exercise
of employee or director stock
options; calculated on weighted
average basis 13,440 35,198
Purchases of treasury stock;
calculated on weighted average
basis (13,972) (60,367)
---------- ----------
12,974,824 12,906,687
Common Stock equivalents:
Shares issuable upon exercise of
options and warrants (including
the weighted average for shares
subject to options and warrants
granted during the period) - 790,942
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on average market price for
the period) - (539,953)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - -
---------- ----------
- 250,989
---------- ----------
12,974,824 13,157,676
========== ==========
Earnings for primary earnings per share:
Net earnings (loss) $(5,437,954) $ 1,466,628
Dividends on cumulative preferred stocks (60,000) (75,390)
Dividends on convertible, exchangeable
Class C preferred Stock (6.5% annually) (743,438) (743,438)
---------- ----------
Earnings (loss) applicable to common stock $(6,241,392) $ 647,800
========== ==========
Earnings (loss) per share $(.48) $ .05
==== ====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 2 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
Six months
ended
June 30, 1997
-------------
Net earnings (loss) applicable to common Stock $(5,593,592)
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,066,250
==========
Earnings (loss) per share $(.43)
====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 3 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
1996 quarter ended
-------------------------
March 31 June 30
Shares for primary earnings per share:
Weighted average shares:
Common shares outstanding from
beginning of period 12,911,447 12,909,487
Common shares issued on conversion
of redeemable preferred stock;
calculated on weighted average
basis 270 -
Common shares issued upon exercise
of employee or director stock
options; calculated on weighted
average basis - -
Purchases of treasury stock;
calculated on weighted average
basis (330) (978)
---------- ----------
12,911,387 12,908,509
Common Stock equivalents:
Shares issuable upon exercise of
options and warrants (including
the weighted average for shares
subject to options and warrants
granted during the period) - 737,640
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on average market price for
the period) - (359,676)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - 62,080
---------- ----------
- 440,044
---------- ----------
12,911,387 13,348,553
========== ==========
Earnings for primary earnings per share:
Net earnings (loss) $ (531,218) $ 2,371,797
Dividends on cumulative preferred stocks (75,520) (60,000)
Dividends on convertible, exchangeable
Class C preferred Stock (6.5% annually) (743,438) (743,438)
---------- ----------
Earnings (loss) applicable to common stock $(1,350,176) $ 1,568,359
========== ==========
Earnings (loss) per share $(.10) $ .12
==== ====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 4 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
Six months
ended
June 30, 1996
-------------
Net earnings applicable to common Stock $ 218,183
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,129,970
==========
Earnings per share $ .02
====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 5 of 6
FULLY DILUTED EARNINGS PER SHARE COMPUTATION
1997 quarter ended
_________________________________
March 31 June 30
Shares for fully diluted earnings
per share:
Weighted average shares outstanding
for primary earnings per share 12,974,824 12,906,687
Shares issuable upon exercise of
options and warrants - 790,942
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on ending market price for
the quarter if greater than the
average) - (539,953)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - -
Common shares issuable upon conversion
of convertible note payable - 4,000
Common shares issuable upon conversion
of convertible preferred stock,
if dilutive, from date of issue:
Series B - -
Series 2 - -
---------- ----------
12,974,824 13,161,676
========== ==========
Earnings for fully diluted
earnings per share:
Net earnings (loss) $(5,437,954) $ 1,466,628
Dividends on cumulative convertible
preferred stocks:
Series B (60,000) (75,390)
Series 2 Class C (743,438) (743,438)
---------- ----------
Earnings (loss) applicable to
common stock $(6,241,392) $ 647,800
========== ==========
Earnings (loss) per share (.48) $.05
=== ===
Six months
ended
June 30, 1997
-------------
Net earnings (loss) applicable to common stock $(5,593,592)
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,068,250
==========
Earnings (loss) per share $(.43)
====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 6 of 6
FULLY DILUTED EARNINGS PER SHARE COMPUTATION
1996 quarter ended
March 31 June 30
Shares for fully diluted earnings per
share:
Weighted average shares outstanding
for primary earnings per share 12,911,387 12,908,509
Shares issuable upon exercise of
options and warrants - 737,640
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on ending market price
for the quarter if greater than
the average) - (359,676)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above on
actual conversion - 62,080
Common shares issuable upon conversion
of convertible note payable - 4,000
Common shares issuable upon conversion
of convertible preferred stock, if
dilutive, from date of issue:
Series B - 666,666
Series 2 - -
---------- ----------
12,911,387 14,019,219
========== ==========
Earnings for fully diluted earnings
per share:
Net earnings (loss) $ (531,218) $2,371,797
Dividends on cumulative preferred
stocks:
Series B (75,520) -
Series 2 Class C (743,438) (743,438)
---------- ----------
Earnings (loss) applicable to common stock $(1,350,176) $1,628,359
========== =========
Earning (loss) per share $(.10) $.12
==== ===
Six months
ended
June 30, 1996
-------------
Net earnings applicable to common stock $ 278,183
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,465,303
==========
Earnings per share $ .02
=====
410q-10k\tq697x11.wp