EXHIBIT 10.8
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of the _____ day of
September, 2001 (the "Effective Date"), by and between BPI LIQUIDATION CORP.
("BPI") and CHEMTRUSION, INC. ("Chemtrusion"), a Delaware corporation.
WHEREAS, on September __, 2001, the Board of Directors of Chemtrusion
approved and declared a dividend to BPI (as defined below) effective as of the
date hereof, of the Distributed Amount (as defined below); and
WHEREAS, the parties hereto wish to acknowledge their understanding
regarding the Distributed Amount and agree to and clarify the procedures to be
utilized to effectuate payment of the Distributed Amount.
NOW, THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements set forth below, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Payment of the Management Fee.
(a) As of September __, 2001, Chemtrusion distributed to BPI the right to
receive the Distributed Amount (as defined below). BPI shall hold all right,
title and interest in the Distributed Amount from and after the date hereof. For
purposes of this Agreement, the Distributed Amount shall mean for each calendar
year prior to January 1, 2007, such amount of the "Management Fee," as defined
in the "Definitive Agreement" (as hereinafter defined) as equals the following
amount:
(i) for the calendar year 2001, 50% of the Management Fee up to $150,000
plus the Supplemental Amount; and
(ii) for each subsequent calendar year through and including December 31,
2006 only, 50% of the Management Fee up to an amount equal to: the
sum of (a) $400,000.00, plus (b) the Supplemental Amount (as defined
below), if any (the sum of $150,000 plus the Supplemental Amount for
the year 2001 and the sum of $400,000 plus the Supplemental Amount
for each year thereafter is referred to as the "Maximum Annual
Amount").
The term "Definitive Agreement" shall refer to that certain agreement for
Compounding Services, dated as of January 26, 1996, between Mytex Polymers and
Chemtrusion, as such agreement has been or may hereafter be amended. The term
"Supplemental Amount" means for any calendar year or portion thereof the sum of
the "Monthly Supplemental Amounts" for such calendar year or portion thereof;
the term "Monthly Supplemental Amount" shall mean for a particular month, the
product of (x) $33,333.33, times (y) the percentage amount, if any, by which the
annual Fixed Fee (as defined in the Definitive Agreement) in effect on the first
(1st) day of such month exceeds $1,035,000.00. Chemtrusion shall timely
calculate and provide to BPI the Monthly Supplemental Amount in effect on the
first day of each calendar month prior to December 31, 2006, and shall also
promptly, but in no event more than two (2) business days
after the invoice is delivered to Mytex, provide copies of all monthly invoices
for the Management Fee delivered to Mytex. In addition, Chemtrusion shall
promptly provide notice to InterSystems, Inc., a Delaware corporation
("InterSystems") of the construction completion date for each new facility or
line installed at the Plant (as defined in the Definitive Agreement) pursuant to
Article XII of the Definitive Agreement prior to December 31, 2006. Payments to
BPI of the Distributed Amount shall be made within four (4) business days
following receipt of a payment of the monthly Management Fee and receipt by
Southwest Bank of Texas, N.A. ("Southwest Bank") of a Disbursement Request, as
contemplated by 1(c) below (the "Payment Date"), all in accordance with the
procedures set forth in Paragraphs 1(b) and 1(c). For purposes of determining
the amount to which BPI is entitled to be paid, the Supplemental Amount shall be
calculated for the months in the applicable calendar year through the date of
payment. To the extent less than the Maximum Annual Amount has been paid to BPI
with respect to any particular calendar year together with the sum of any
deficiency with respect to Maximum Annual Amount payments that has been carried
over from prior years, such amount shall be added to the Distributed Amount for
the next succeeding year. In the event BPI is not paid the entire monthly amount
to which it is entitled hereunder, as applicable, interest at a rate equal to
the lesser of (i) fifteen percent (15%) per annum or (ii) the highest lawful
rate shall accrue on the unpaid portion of such amount from the Due Date (as
hereinafter defined) until paid and BPI shall be permitted to pursue its
available remedies. For purposes of this Section 1(a), "Due Date" shall mean (i)
the Payment Date or (ii) four business days after a Misdirection Event and a
"Misdirection Event" shall mean (a) Chemtrusion, for any reason, causes Mytex to
make the payments referred to in Section 1(b) to any location other than
directly to the Trust Account at Southwest Bank without the written consent of
BPI or its successors or assigns and such payment is received by Chemtrusion or
its Affiliates and not promptly remitted to such Trust Account; or (b) for any
reason Mytex fails to make a payment constituting part of the Distributed Amount
to such Trust Account, and such payment is received by Chemtrusion or its
Affiliates and not promptly remitted to such Trust Account.
(b) In order to effectuate such payments, all payments of the Management
Fee shall be paid to a Trust Account maintained at the Southwest Bank and
distributed in accordance with Paragraph 1(c) and the Escrow Agreement to be
executed among BPI, Chemtrusion and Southwest Bank. Chemtrusion shall as soon as
practicable after the date hereof, but in no event later than October 1, 2001
notify Mytex to make such payments to such account, pursuant to a Payment Notice
in the form annexed hereto as Exhibit A, which instructions shall not be
modified without BPI's prior written consent. Chemtrusion and BPI agree that
fees directly attributable to the Trust Account will be paid 50% by Chemtrusion
and 50% by BPI. The parties agree that such fees will be deducted from the
amounts distributable to the applicable party in connection with calculating the
Disbursement Calculation (as hereinafter defined).
(c) Pursuant to the terms of the Escrow Agreement, Chemtrusion and BPI
shall provide monthly joint written instructions to Southwest Bank in the form
of a Disbursement Request setting forth the amount of the Distributed Amount and
the amount to be disbursed to Chemtrusion ("Disbursement Calculation").
Chemtrusion shall calculate the Distributed Amount and complete a Disbursement
Request contemporaneously with calculating and preparing the monthly invoice of
the Management Fee pursuant to Paragraph 1(a). Chemtrusion will deliver a
completed and executed Disbursement Request to BPI at the same time it delivers
a copy of such invoice. In the event BPI agrees with the Disbursement
Calculation, BPI shall execute and
2
deliver to Southwest Bank (with a copy to Chemtrusion) such Disbursement Request
in the form received from Chemtrusion. In the event BPI identifies any errors
with or otherwise disputes the Disbursement Calculation, BPI shall promptly, but
in no event more than 5 business days after receipt of the proposed Disbursement
Request, notify Chemtrusion of its disagreement specifically setting forth the
reason for such dispute and setting forth BPI's Disbursement Calculation
("Notice"). Chemtrusion and BPI will use commercially reasonable good faith
efforts to resolve any dispute and agree on the Disbursement Calculation,
including to the extent practicable, causing Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx
to meet and negotiate any disputes. In the event BPI unreasonably withholds or
fails to deliver the Disbursement Request to Southwest Bank within five (5)
business days of receipt from Chemtrusion (the "Delivery Date"), BPI shall pay a
"Delay Fee" (as hereinafter defined). The Delay Fee shall be equal to an amount
determined by accruing "interest" on the amount to be disbursed to Chemtrusion
at a rate of 15% per annum from the Delivery Date. In the event the parties do
not agree on the Disbursement Calculation, such dispute shall be settled by
arbitration before a single arbitrator to be selected by mutual agreement of the
parties or if the parties cannot agree in twenty days after Notice, by the
American Arbitration Association ("AAA") as arbitrator. The arbitration hearing
shall be commenced within thirty (30) days following the date of delivery of
Notice to Chemtrusion. The arbitration shall be conducted in Houston, Texas, in
accordance with the commercial arbitration rules for expedited dispute
resolution promulgated by AAA notwithstanding any threshold or value limitations
contained therein, and each party shall retain the right to cross-examine the
opposing party's witnesses, either through legal counsel, expert witnesses or
both. The decision of the arbitrator shall be final, binding and conclusive on
all parties (without any right of appeal therefrom) and shall not be subject to
judicial review. As part of his decision, the arbitrator may allocate the cost
of arbitration, including fee of attorneys and experts, as he or she deems fair
and equitable in light of all relevant circumstances. The arbitrator shall
deliver an order to Southwest Bank setting forth his decision and directing
Southwest Bank to deliver the funds in the Escrow Account to the parties as
directed by such arbitrator. Judgment on the award rendered by the arbitrator
may be entered in any court of competent jurisdiction. The amount actually
disbursed by Southwest Bank shall be equal to the amounts set forth in the
Disbursement Calculation or as ordered by the arbitrator, plus the respective
parties' pro rata portion of any interest accrued and paid on such amount based
on their respective portion of the disbursed amounts.
(d) BPI shall have the right to audit the books and records of Chemtrusion
insofar as such books and records relate to the calculation and payment of the
Distributed Amount herein; provided, however, any audit shall be performed at
BPI's sole cost (unless as a result of such audit it is determined by BPI and
agreed by Chemtrusion that BPI was not paid at least 95% of the amount to which
it is entitled, in which case the costs, expenses and fees related to such audit
shall be borne by Chemtrusion and Chemtrusion shall promptly reimburse BPI for
any amounts it has expended with respect thereto) and conducted at Chemtrusion's
principal office during normal business hours not more than two (2) years after
the due date of the payment in question. In the event any such audit or
investigation by BPI determines or reflects that BPI has not been paid the
entire sum of the Distributed Amount to which it is entitled, Chemtrusion shall
be responsible for the payment of the portion of the Distributed Amount not so
paid, together with interest at the rate stated in paragraph 1(a) above from the
date such payment was due.
3
(e) Chemtrusion agrees to provide to BPI a copy of any notice of Default
or termination given by it or Mytex, whether such notice is provided pursuant to
Section 9.2 or Section 15.6 of the Definitive Agreement.
(f) Chemtrusion agrees that during the period from the Effective Date
until December 31, 2006, (i) neither the structure nor substance of the
Management Fee, including, without limitation, the Fixed Fee (as defined in the
Definitive Agreement) or any component thereof or the payment terms with respect
thereto shall be amended or adjusted in a manner that is adverse to BPI, without
the prior written consent of BPI, (ii) unless otherwise agreed to by BPI,
Chemtrusion's management or incentive fees relating to each new facility or line
installed at the Plant (as such term is defined in the Definitive Agreement)
prior to December 31, 2006 shall be based upon the structure and substance of
the Supplier Management Fee (including the Fixed Fee and each component thereof)
currently set forth in the Definitive Agreement, and (iii) any new facility or
line used for the compounding of products for Mytex or any of its affiliates for
the primary benefit of Mytex or its Subsidiaries that is constructed or
installed within a twenty mile radius of 0000 Xxxx Xxxx, Xxxxxxxxxxxxxx, Xxxxxxx
and in which Chemtrusion or any of its affiliates have any interest shall be
deemed to be part of the Plant. For purposes of this Agreement, "Subsidiary"
shall mean any entity of which Mytex owns 40% or more of its outstanding voting
securities or, in the case where it does not have voting securities, 40% or more
of its outstanding equity interests.
2. Grant of Security Interest. Notwithstanding anything to the contrary
contained herein, for the purposes of providing additional protection of BPI's
ownership interest in the Distributed Amount, and without in any way abrogating
or implying a diminution of BPI's absolute ownership interest in the Distributed
Amount, Chemtrusion hereby grants to BPI a security interest under the
applicable uniform commercial code in the Distributed Amount and any interest
actually accrued and received thereon in the Account referenced in Section 1(b)
above, if, and to the extent, any amount constituting the Distributed Amount is
contained therein. This Memorandum of Understanding is intended to constitute a
security agreement under the applicable uniform commercial code. Chemtrusion
agrees to enter into the Subordination and Account Control Agreement and to
execute any financing statement as may be necessary, in the reasonable opinion
of BPI to establish and perfect the security interest granted above. The
security interest granted pursuant to this Section 2 shall automatically
terminate upon all Distributed Amounts being received by BPI or BPI having no
further rights to receive any amount under this Memorandum of Understanding, and
as soon as practicable after such date, BPI and its successors and assigns
agrees to undertake such additional action and execute such other documents as
may be necessary, in the reasonable opinion of Chemtrusion, to release or
terminate the security interest granted above.
3. Complete Agreement. This Memorandum, together with the Exhibits hereto,
is the complete and exclusive agreement between the parties with respect to the
subject matter hereof, and supercedes any related prior agreements, whether oral
or written.
4. Choice of Law. This Memorandum shall be construed and enforced under
the laws of the State of Texas, except for any rule of such laws which would
make the law of any other jurisdiction applicable.
4
5. Expenses. In the event BPI is not timely paid all or any portion of the
Distributed Amount to which it is entitled, or any breach of this Agreement by
Chemtrusion hereunder, BPI shall be entitled to be paid its costs and expenses
(including, without limitation, reasonable attorneys' fees) of enforcing
Chemtrusion's obligations hereunder and obtaining payment of the Distributed
Amount.
6. Assignment; Binding Effect. This Agreement shall be binding on, and
inure to the benefit of, the parties hereto and each of their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding to be effective as of the Effective Date.
CHEMTRUSION, INC.
By:
-----------------------------------
Xxxxx X. Xxxxx, President
BPI LIQUIDATION CORP.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
The undersigned hereby consents to, acknowledges and accepts the understanding
set forth above effective as of this ______ day of September, 2001.
INTERSYSTEMS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
5
EXHIBIT A
PAYMENT NOTICE
Mytex Polymers
[Insert Address]
Ladies and Gentlemen:
Until further written notice, Mytex Polymers is directed to pay the
Management Fee due Chemtrusion, Inc. pursuant to that certain Definitive
Agreement for Compounding Services dated as of January 26, 1996 (as heretofore
or hereafter amended from time to time, the "Definitive Agreement"), between
Chemtrusion, Inc. and Mytex Polymers by wire transfer in immediately available
funds, to the following account maintained in Chemtrusion, Inc.'s name and
federal identification number at Southwest Bank, N.A.:
Sincerely,
