**Exhibit 99.2**

**ZEOLYST INTERNATIONAL**

FINANCIALSTATEMENTS

As of December 31, 2006 and 2005

and for the years ended December 31, 2006, 2005, and 2004

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**Report of Independent Registered Public Accounting Firm**

To the Management Committee of Zeolyst International and PQ Corporationand CRI Zeolites:

In our opinion, the accompanyingbalance sheets and the related statements of operations and accumulatedearnings (deficit), of changes in partners’ capital and of cash flows presentfairly, in all material respects, the financial position of ZeolystInternational at December 31, 2006 and 2005 and the results of its operationsand its cash flows for each of the three years in the period ended December 31,2006 in conformity with accounting principles generally accepted in the UnitedStates of America.  These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.  We conducted our audits ofthese statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation.  We believe thatour audits provide a reasonable basis for our opinion.

As discussed in Note 13 to thefinancial statements, the Company has significant related party transactions.

/s/ PricewaterhouseCoopers LLP

Philadelphia,Pennsylvania

March 30, 2007

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ZEOLYSTINTERNATIONAL

BALANCE SHEETS

(in thousands)

 
| ** **                                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **2006**              | ** ** | **2005**              | ** ** |
|                                         |       |                  |       |                  |       |
| ASSETS                                       |       |                  |       |                  |       |
| Cash                                         |       | $                     | 3,698      |                  | $          | 7,062 |   |
| Trade  receivables, net                      |       | 26,469                |       | 11,289                |       |
| Receivables from  affiliates                 |       | 931                   |       | 5,261                 |       |
| Inventories                                  |       | 46,149                |       | 15,654                |       |
| Other current  assets                        |       | 2,505                 |       | 5,414                 |       |
| Total current assets                         |       | 79,752                |       | 44,680                |       |
| Property, plant  and equipment, net          |       | 14,371                |       | 15,613                |       |
| Other long-term  assets                      |       | 346                   |       | 780                   |       |
| Total assets                                 |       | $                     | 94,469     |                  | $          | 61,073 |   |
|                                         |       |                  |       |                  |       |
| LIABILITIES AND  PARTNERS’ EQUITY       |       |                  |       |                  |       |
| Short-term debt                              |       | $                     | 10,000     |                  | $          | — |   |
| Trade accounts  payable                      |       | 5,822                 |       | 2,408                 |       |
| Accounts payable  to affiliates              |       | 9,386                 |       | 5,890                 |       |
| Other current  liabilities                   |       | 9,248                 |       | 5,095                 |       |
| Total current liabilities                    |       | 34,456                |       | 13,393                |       |
| Other long-term  liabilities                 |       | 2,107                 |       | 2,126                 |       |
| Total liabilities                            |       | 36,563                |       | 15,519                |       |
| Commitments and  contingencies               |       |                  |       |                  |       |
| PARTNERS’  CAPITAL                      |       |                  |       |                  |       |
| Contributed  capital                         |       | 54,930                |       | 54,930                |       |
| Accumulated  earnings (deficit)              |       | 2,976                 |       | (9,376                | )          |
| Net partners’ capital                   |       | 57,906                |       | 45,554                |       |
| Total liabilities and partners’ capital |       | $                     | 94,469     |                  | $          | 61,073 |   |

 

See accompanying notes to consolidated financialstatements.

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ZEOLYSTINTERNATIONAL

STATEMENTS OF OPERATIONS AND ACCUMULATED EARNINGS(DEFICIT)

(in thousands)

 
| ** **                                     | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                     | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                           |       |                                       |       |   |   |   |   |
| Net sales                                      |       | $                                          | 120,855    |   | $ | 94,007 |   | $ | 92,438 |   |
| Cost of goods  sold                            |       | 57,126                                     |       | 58,344 |   | 55,663 |   |
| Gross profit                                   |       | 63,729                                     |       | 35,663 |   | 36,775 |   |
| Selling, general  and administrative expenses  |       | 18,972                                     |       | 17,986 |   | 18,358 |   |
| Operating income                               |       | 44,757                                     |       | 17,677 |   | 18,417 |   |
| Interest  expense, net                         |       | 42                                         |       | 58 |   | 93 |   |
| Other expense,  net                            |       | 363                                        |       | 571 |   | 238 |   |
| Net income                                     |       | 44,352                                     |       | 17,048 |   | 18,086 |   |
| Accumulated  deficit at beginning of year      |       | (9,376                                     | )          | (13,424 | ) | (17,510 | ) |
| Dividends paid                                 |       | (32,000                                    | )          | (13,000 | ) | (14,000 | ) |
| Accumulated  earnings (deficit) at end of year |       | $                                          | 2,976      |   | $ | (9,376 | ) | $ | (13,424 | ) |

 

See accompanying notes to consolidated financialstatements.

 

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ZEOLYST INTERNATIONAL

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

(in thousands)
| **PQ Corporation:**                           | ** ** | **Contributed  capital** | ** ** | **Accumulated  earnings (deficit)** | ** ** | **Net partners’   capital** | ** ** |
|----------------------------------------------------|------------|--------------------------|------------|------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                         | ** ** | ** **               | ** ** | ** **                               | ** ** | ** **                                 | ** ** |
| Balance, December 31,  2003                        |       | $                        | 27,465     |                                     | $          | (8,755                                     | )          | $ | 18,710 |   |
| Dividends paid                                     |       | —                   |       | (7,000                                   | )          | (7,000                                     | )          |
| Net income                                         |       | —                   |       | 9,043                                    |       | 9,043                                      |       |
| Balance, December 31,  2004                        |       | $                        | 27,465     |                                     | $          | (6,712                                     | )          | $ | 20,753 |   |
| Dividends paid                                     |       | —                   |       | (6,500                                   | )          | (6,500                                     | )          |
| Net income                                         |       | —                   |       | 8,524                                    |       | 8,524                                      |       |
| Balance, December 31,  2005                        |       | $                        | 27,465     |                                     | $          | (4,688                                     | )          | 22,777 |   |
| Dividends paid                                     |       | —                   |       | (16,000                                  | )          | (16,000                                    | )          |
| Net income                                         |       | —                   |       | 22,176                                   |       | 22,176                                     |       |
| Balance, December 31,  2006                        |       | $                        | 27,465     |                                     | $          | 1,488                                      |       | $ | 28,953 |   |
|                                               |       |                     |       |                                     |       |                                       |       |
| **CRI Zeolites, Inc.:**                            |       |                     |       |                                     |       |                                       |       |
|                                               |       |                     |       |                                     |       |                                       |       |
| Balance, December 31,  2003                        |       | $                        | 27,465     |                                     | $          | (8,755                                     | )          | $ | 18,710 |   |
| Dividends paid                                     |       | —                   |       | (7,000                                   | )          | (7,000                                     | )          |
| Net income                                         |       | —                   |       | 9,043                                    |       | 9,043                                      |       |
| Balance, December 31,  2004                        |       | $                        | 27,465     |                                     | $          | (6,712                                     | )          | $ | 20,753 |   |
| Dividends paid                                     |       | —                   |       | (6,500                                   | )          | (6,500                                     | )          |
| Net income                                         |       | —                   |       | 8,524                                    |       | 8,524                                      |       |
| Balance, December 31,  2005                        |       | $                        | 27,465     |                                     | $          | (4,688                                     | )          | $ | 22,777 |   |
| Dividends paid                                     |       | —                   |       | (16,000                                  | )          | (16,000                                    | )          |
| Net income                                         |       | —                   |       | 22,176                                   |       | 22,176                                     |       |
| Balance, December 31,  2006                        |       | $                        | 27,465     |                                     | $          | 1,488                                      |       | $ | 28,953 |   |
|                                               |
| Total partners’ capital  at December 31, 2004 |       | $                        | 54,930     |                                     | $          | (13,424                                    | )          | $ | 41,506 |   |
| Total partners’ capital  at December 31, 2005 |       | $                        | 54,930     |                                     | $          | (9,376                                     | )          | $ | 45,554 |   |
| Total partners’ capital  at December 31, 2006 |       | $                        | 54,930     |                                     | $          | 2,976                                      |       | $ | 57,906 |   |

 

See accompanying notes to consolidated financialstatements.

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 ZEOLYSTINTERNATIONAL 

 STATEMENTS OFCASH FLOWS 

 (in thousands) 

 
| ** **                                                                         | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Cash flows from  operating activities:                                             |       |                                       |       |   |   |   |   |
| Net income                                                                         |       | $                                          | 44,352     |   | $ | 17,048 |   | $ | 18,086 |   |
| Adjustments to reconcile net income to net cash provided  by operating activities: |       |                                       |       |   |   |   |   |
| Depreciation                                                                       |       | 3,402                                      |       | 4,010 |   | 4,417 |   |
| Loss on capital asset                                                              |       | 278                                        |       | — |   | — |   |
| Changes in allowance for bad debts                                                 |       | (143                                       | )          | (75 | ) | 101 |   |
| Working capital changes that provided (used) cash:                                 |       |                                       |       |   |   |   |   |
| Receivables                                                                        |       | (10,707                                    | )          | 8,165 |   | (8,185 | ) |
| Inventories                                                                        |       | (30,495                                    | )          | (3,220 | ) | 4,131 |   |
| Other current assets                                                               |       | 2,909                                      |       | (5,133 | ) | 3,044 |   |
| Accounts payable                                                                   |       | 6,910                                      |       | 1,580 |   | (6,260 | ) |
| Other current liabilities                                                          |       | 4,153                                      |       | 709 |   | 2,919 |   |
| Other long-term liabilities                                                        |       | (19                                        | )          | 661 |   | 305 |   |
| Other long-term assets                                                             |       | 434                                        |       | 345 |   | 399 |   |
| Net cash provided by operating activities                                          |       | $                                          | 21,074     |   | $ | 24,090 |   | $ | 18,957 |   |
| Cash flows from  investing activities:                                             |       |                                       |       |   |   |   |   |
| Purchases of property, plant and equipment                                         |       | (2,438                                     | )          | (2,246 | ) | (689 | ) |
| Net cash used for investing activities                                             |       | (2,438                                     | )          | (2,246 | ) | (689 | ) |
| Cash flows from  financing activities:                                             |       |                                       |       |   |   |   |   |
| Proceeds from short-term debt                                                      |       | 10,000                                     |       | — |   | 5,000 |   |
| Payments on short-term debt                                                        |       | —                                     |       | (5,000 | ) | (7,500 | ) |
| Payments of cash dividends                                                         |       | (32,000                                    | )          | (13,000 | ) | (14,000 | ) |
| Net cash used for financing activities                                             |       | (22,000                                    | )          | (18,000 | ) | (16,500 | ) |
| Net change in  cash                                                                |       | (3,364                                     | )          | 3,844 |   | 1,768 |   |
| Cash at  beginning of period                                                       |       | 7,062                                      |       | 3,218 |   | 1,450 |   |
| Cash at end of period                                                              |       | $                                          | 3,698      |   | $ | 7,062 |   | $ | 3,218 |   |

 

See accompanying notes to consolidated financialstatements.

 

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**zeolyst international**

**notes to financial statements**

**(in thousands)**

**1.  Organization:**

Zeolyst International (the Partnership) was formed in1988 pursuant to a Joint Venture Agreement (the Agreement) between PQCorporation (PQ) and CRI Zeolites, a Shell Oil Co. affiliate (collectively, thePartners).  The percentage interests asof December 31, 2006 and 2005 are as follows:

PQCorporation     50%

CRIZeolites          50%

ThePartnership was formed pursuant to the Kansas Uniform Partnership Act.  The Agreement specifies that the partnersshare equally in capital contributions. The Agreement states that the profitsand losses of the Partnership will be allocated in accordance with the partners’interests in the Partnership.  The intentof the Partnership is to develop zeolites and zeolite-containing catalysts.

ThePartnership has significant transactions with its partners and relatedaffiliates.  Refer to the Related Partiesfootnote for further disclosure.

**2.  PartnershipBusiness:**

The Partnership manufactures zeolites and zeolyticcatalysts that are used by refiners to capture impurities in the processing ofpetroleum and other chemicals. The filtration ability of zeolites placed into acustomer’s chemical process generally extends two to three years.  As a result, a significant portion of thePartnership’s customer base tends to change on an annual basis.  A significant percentage of the basematerials purchased for the Partnership’s manufacturing process is acquiredfrom related parties.  In addition, asignificant portion of the Partnership’s sales is transacted through CriterionCatalyst Company (Criterion).  ThePartnership compensates Criterion with a 2% sales commission on specific salestransactions.

**3.  Summary ofSignificant Accounting Policies:**

These financial statements have been prepared inaccordance with generally accepted accounting principles.  Thesefinancial statements are accounted for on a historical cost basis and do notreflect the results of any purchase accounting adjustments recorded in thePartner’s consolidated financial statements.

*Trade Accounts Receivables and Allowance for Doubtful Accounts:*  Tradeaccounts receivables are recorded at the invoiced amount and do not bearinterest.  The Partnership maintainsallowances for doubtful accounts for estimated losses resulting from theinability of its customers to make required payments.  Allowances for doubtful accounts are based onhistorical experience and known factors regarding specific customers.  If the financial condition of the Partnership’scustomers were to deteriorate, resulting in an impairment of their ability tomake payments, additional allowances would be required. Account balances arecharged off against the allowance when it is probable the receivable will notbe recovered.

*Inventories:*  Inventories are stated at the lower ofcost or market, valued on the first-in, first-out (FIFO) method.

*Other Current Assets:* Other current assets includes areceivable of $4,100 related to the purchase of platinum for a customer as ofDecember 31, 2005.  There were noplatinum purchases for any customers as of December 31, 2006.

*Property, Plant and Equipment:*  Property,plant and equipment are carried at cost and include expenditures for newfacilities and major renewals and betterments. Interest is capitalized oncapital projects that are expected to exceed $500. Maintenance, repairs andminor renewals are charged to expense as incurred.  When assets are sold or otherwise disposedof, the related cost and accumulated depreciation are removed from theaccounts, and any resulting gain or loss is included in the results ofoperations.

Depreciation is generally provided on the straight-linemethod based on estimated useful lives of the assets, ranging up to33 years for buildings and improvements, 10 years for machinery andequipment, and 5 years for computer software and 3 years for computerhardware.

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*Other Long-Term Liabilities:*  Specificperformance reserves based on customer contracts are set up in the otherlong-term liabilities account.  Estimatesare calculated based on the performance of the catalyst over a specified runlength.

*Revenue Recognition:*  The Partnership generally recognizesrevenue when both title and risk of loss of the product have been transferredto the customer, the seller’s price to the buyer is fixed or determinable,collectibility is reasonably assured, and persuasive evidence of an arrangementexists.  Customers take title and assumeall the risks of ownership upon shipment (if terms are “FOB shipping point”) orupon delivery (if terms are “FOB destination”). Any deviation from the standard terms and arrangements are reviewed forthe proper accounting treatment, and revenue recognition is revisedaccordingly.

Priorto shipment, product specifications are verified with the customer throughproduct samples.  Specific performancereserves based on customer contracts are recorded in the other long-termliabilities account. The Partnership can quantify the performance reserves thatallows for full recognition of the revenue.

We defer revenuerecognition on certain of our product lines until all essential elements of thesales order has been shipped and both title and risk of loss has passed to thecustomer.  Hydrocracking and specialty catalystorders are typically filled by a number of individual shipments, and thoseshipments may span the end of a fiscal quarter or year.  If a portion of the order has not shipped andit is essential to the functionality of the customer’s end use, all revenueassociated with that order will be deferred until the order is completed.  A shipment is considered essential if eachindividual shipment has no value to the customer on a stand-alone basis and ifthe remaining shipment is not considered inconsequential and perfunctory.

*Shippingand Handling Costs.*  Inaccordance with the Emerging Issues Task Force (“EITF”) No. 00-10 “Accountingfor Shipping and Handling Revenues and Costs,” costs related to shipping andhandling of products shipped to customers is classified as cost of goods sold.

*Research and Development.*  Researchand development costs of $6,339, $5,084, and $5,446 for the year ended December31,**2006, 2005, and 2004,respectively, were expensed as incurred and reported in selling, general andadministrative expenses in the accompanying statement of operations.

*Use of Estimates:*  Thepreparation of the Partnership’s financial statements in conformity withgenerally accepted accounting principles requires management to make estimatesthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

*Foreign Exchange Transactions:*  The functional currencyof the Partnership is the U.S. Dollar. The Partnership enters into transactions that are denominated in othercurrencies.  Gains and losses on foreigncurrency transactions are included in other expense, net on the statement ofoperations.  Foreign exchange loss was$523, $803 and $266 for 2006, 2005 and 2004, respectively.

**4.  RecentlyIssued Accounting Standards:**

In September 2006, the SEC staff issued Staff AccountingBulletin (“SAB”) No. 108, “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements.”  SAB No. 108 was issuedto provide interpretive guidance on how the effects of the carryover orreversal of prior year misstatements should be considered in quantifying acurrent year misstatement. We adopted the provisions of SAB No. 108effective December 31, 2006. The adoption of SAB No. 108 did not havean impact on the financial statements.

In November 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”)No. 151, “Inventory Costs —an amendment of ARB No. 43, Chapter 4.”  SFAS No. 151 is the result of efforts toconverge U.S. accounting standards for inventories with InternationalAccounting Standards. SFAS No. 151 requires abnormal amounts of idlefacility expense, freight, handling costs and spoilage to be recognized ascurrent-period charges. It also requires that allocation of fixed productionoverheads to the costs of conversion be based on the normal capacity of theproduction facilities. SFAS No. 151 is effective for inventory costsincurred during fiscal years beginning after June 15, 2005. Therefore,SFAS No. 151 is effective for the Partnership for the year ended December 31,2006.  The adoption of SFAS No. 151 didnot have a material impact on the financial statements.

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In September 2006, the FASB issued SFASNo. 157, “Fair Value Measurements.” SFAS No. 157 addresses how companies should measure fair valuewhen they are required to use a fair value measure for recognition anddisclosure purposes under generally accepted accounting principles.SFAS No. 157 will require the fair value of an asset or liability tobe based on a market based measure which will reflect the credit risk of thecompany. SFAS No. 157 will also require expanded disclosurerequirements which will include the methods and assumptions used to measurefair value and the effect of fair value measures on earnings.SFAS No. 157 will be applied prospectively and will be effective forfiscal years beginning after November 15, 2007 and to interim periods within those fiscal years. TheCompany is currently evaluating the new statement and does not believe that itwill have a significant impact on the determination or reporting of ourfinancial results.

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities, Including an amendment of FASB Statement No. 115.”SFAS No. 159 provides companies with an option to report selected financialassets and liabilities at fair value. The statement requires the fair value ofthe assets and liabilities that the company has chosen to fair value be shownon the face of the balance sheet. The standard also requires companies toprovide additional information to enable users of the financial statements tounderstand the company’s reasons for electing the fair value option and howchanges in the fair values affect earnings for the period. SFAS No. 159 alsoestablishes presentation and disclosure requirements designed to facilitatecomparisons between companies that choose different measurement attributes forsimilar types of assets and liabilities. This statement is effective for fiscalyears beginning on or before November 15, 2007. The Partnership is currentlyevaluating the potential impact this statement may have on the financialstatements.

In September 2006, the FASB issued FASB Staff Position (“FSP”)No.  AUG AIR-1, “Accounting for Planned Major Maintenance Activities.” The FSP prohibits companies from accruing the cost of planned major maintenancein advance of the activities actually occurring.  This FSP is effectivefor fiscal years beginning after December 15, 2006.  The adoption of FSPNo. AUG AIR-1 is not expected to have a significant impact on the financial statements.

**5.  AccountsReceivable and Allowance for Doubtful Accounts:**

The components of accounts receivable are presented asfollows:
| ** **                       | ** ** | **December 31,** | ** ** | **December 31** | ** ** |
|----------------------------------|------------|-----------------------|------------|----------------------|------------|
| ** **                       | ** ** | **2006**              | ** ** | **2005**             | ** ** |
|                             |       |                  |       |                 |       |
| Trade accounts  receivable       |       | $                     | 26,745     |                 | $          | 11,708 |   |
| Allowance for  doubtful accounts |       | (276                  | )          | (419                 | )          |
|                             |       | $                     | 26,469     |                 | $          | 11,289 |   |

 

**6.  Inventories:**

Inventories were classified and valued as follows:
| ** **                             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                             | ** ** | **2006**              | ** ** | **2005**              | ** ** |
|                                   |       |                  |       |                  |       |
| Finished  products and work in process |       | $                     | 43,527     |                  | $          | 14,931 |   |
| Raw materials  and containers          |       | 2,622                 |       | 723                   |       |
|                                   |       | $                     | 46,149     |                  | $          | 15,654 |   |

 

**7.  Property,Plant and Equipment:**

A summary of property, plant and equipment, at cost, andrelated accumulated depreciation is as follows:

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| ** **                      | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **2006**              | ** ** | **2005**              | ** ** |
|                            |       |                  |       |                  |       |
| Land and  buildings             |       | $                     | 6,140      |                  | $          | 6,079 |   |
| Machinery and  equipment        |       | 48,107                |       | 45,619                |       |
| Construction in  progress       |       | 1,389                 |       | 2,182                 |       |
|                            |       | 55,636                |       | 53,880                |       |
| Less:  accumulated depreciation |       | (41,265               | )          | (38,267               | )          |
|                            |       | $                     | 14,371     |                  | $          | 15,613 |   |

 

Depreciation expense was $3,402, $4,010, and $4,417 for theyears ended December 31, 2006, 2005, and 2004, respectively.

**8.  Other CurrentLiabilities:**

Asummary of other current liabilities is as follows:
| ** **           | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **           | ** ** | **2006**              | ** ** | **2005**              | ** ** |
|                 |       |                  |       |                  |       |
| Accrued expenses     |       | $                     | 8,157      |                  | $          | 4,667 |   |
| Accrued  commissions |       | 1,091                 |       | 428                   |       |
| Total                |       | $                     | 9,248      |                  | $          | 5,095 |   |

 

**9.  Debt:**

EffectiveDecember 13, 2000, the Partnership refinanced previously outstanding debt witha new revolving credit agreement.

Thecredit amendment was amended in March 2004. The amended credit agreementreduced the credit facility to $15,000 for a 3-year term expiring on March 31,2007. The Partnership pays an all-in-rate of LIBOR plus 87.5 basis points.   The interest rate on the term loan is LIBORas adjusted per the agreement plus an interest margin ranging from 0.65% to1.325% per annum based on the Partnership’s debt to EBITDA ratio. An annualagency fee is paid to the bank for this agreement.  Availability under this agreement was $5,000and $15,000 as of December 31, 2006 and 2005, respectively.

The revolving credit agreement contains certainrestrictions and covenants that require the Partnership, to maintain a minimumpartners’ equity, as defined, of $37,421, a fixed charge coverage ratio, asdefined, at or above 1.00, and debt to equity ratio, as defined, at a maximumof 2.75, on a quarterly basis. Compliance with the fixed charge coverage ratio is guaranteed through acash deficiency agreement whereby each partner is required to make equal cashcontributions or advances in the form of subordinated debt to the Partnershipin order to maintain a ratio of not less than 1.00 on a quarterly basis.  The Partnership was in compliance with allcovenants during 2006 and 2005.

Cash payments for interest were approximately $42, $71,and $91 in 2006, 2005, and 2004, respectively.

**10.  Partners’Contributions:**

In accordance with the Agreement, in the event that cashflow from operations is insufficient to meet the Partnership’s requirements,following a majority vote by the Management Committee of the Partnership torequest capital from the partners, the partners will provide additional capitalto enable the Partnership to meet its obligations. No such contributionswere made during 

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the years ended December 31, 2006, 2005, or 2004 asthe Partnership had the ability to finance operations through cash flow fromoperations.

**11.  IncomeTaxes:**

As a partnership, Zeolyst International is not liablefor the payment of taxes on income in the U.S. Net income and losses are allocated to the respective partners on anannual basis, and it is the partners’ responsibility to pay income taxes, ifany, thereon according to their respective tax positions.

**12.  Commitmentsand Contingent Liabilities:**

In1998, the Partnership entered into a ten year tolling agreement (the TollingAgreement) with CRI Belgium, a related party, for the manufacture of specialtyextruded products.  Over the term of theTolling Agreement, the Partnership is obligated to pay direct and indirectmanufacturing charges and certain plant overhead charges incurred in theoperation of the specialty extrusion facility. In addition, the Partnership is obligated to pay 50% of the actualcapital costs incurred to construct the facility or $3,600 plus interest at arate of 8%, whichever is less, during the initial five years of the TollingAgreement.  The actual capital costsrelated to the Tolling Agreement are being treated as rental expense and arebeing recognized on a straight-line basis over the life of the TollingAgreement.  Payments made for capitalcosts in excess of expense recognized are recorded as other current assets andother assets on the Partnership’s balance sheet.

EffectiveJanuary 2004, the 1998 Tolling Agreement was replaced by a new ten-year tollingagreement with CRI Belgium. Over the term of the Tolling Agreement, thePartnership is obligated to pay direct and indirect manufacturing charges andcertain plant overhead charges incurred in the operation of the specialtyextrusion facility.  In addition, thePartnership is obligated to pay for minor capital investments of less than Euro200. For any capital investment greater than Euro 200, the Partnership has theoption to pay for the betterment up front or pay incremental tolling charges.For the years ended December 31, 2006, 2005, and 2004, the Partnership expensed$428, $399, and $399, respectively, related to this Tolling Agreement.  Amounts included in other current assets andother assets are $656 and $1,084 at December 31, 2006 and 2005,respectively.  Both parties were incompliance with the agreement in 2006 and 2005.

During2002, the Partnership and related entities entered into an agreement underwhich discounts are to be provided to a customer dependent upon the amount offuture sales.  The maximum amount ofdiscounts to be provided under this agreement is $9,012 of which $5,000 ($2,300by the Partnership) was recognized through December 31, 2006.  Included in accrued expense in other currentliabilities is $2,214 related to this agreement.  This agreement expires in 2009.

**13.  RelatedParty Transactions:**

*Policies and Procedures*

The Partnership maintains certain policies and proceduresfor the review, approval, and ratification of related party transactions toensure that all transactions with selected parties are fair, reasonable and inour best interest.  All significantrelationships and transactions are separately identified by management if theymeet the definition of a related party or a related party transaction.  Related party transactions includetransactions that occurred during the year, or are currently proposed, in whichthe Partnership was or will be a participant and which any related person hador will have a direct or indirect material interest.  Due to the nature of the Partnership,material related party transactions are identified on a transaction-basedapproach.  The types of transactionsidentified and reviewed include, but are not limited to, sales of products,purchases of inventory, tolling costs, sales and marketing costs, research anddevelopment, and management-related fees. All related party transactions are reviewed, approved and documented bythe appropriate level of the Partnership’s management in accordance with thesepolicies and procedures.

*PQ Corporation*

Under the terms of the Agreement, the Partnership leasescertain land used in its Kansas City production facilities from PQ.  This lease, which has been recorded as anoperating lease, provides for rental payments of $197 each year.  The rent expense 

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is included in the cost of goods sold line item in theaccompanying income statement.  The termsof this lease are evergreen as long as the Partnership agreement is in place.The Partnership purchases certain of its raw materials from PQ and is chargedfor various manufacturing costs incurred at the PQ Kansas City productionfacility. The amount of these costs charged to the Partnership during 2006,2005, and 2004 were $5,503, $5,187, and $5,084, respectively.  These costs are a component of productioncosts and are included in the cost of goods sold line item in the accompanyingincome statement when the inventory is sold. Certain administrative, marketing, engineering, management-related, andresearch and development services are provided to the Partnership by PQ. During2006, 2005, and 2004, the Partnership was charged $5,909, $6,474, and $6,435,respectively, for these services.  Theseamounts are included in the selling, general and administrative line item inthe accompanying income statement.

At December 31, 2006, the accounts payable to affiliatesconsisted of $1,161 due to PQ.  AtDecember 31, 2005, the accounts receivable from affiliates consisted of $878due from PQ.

*CRI and Shell Affiliates*

Shell Affiliates include CRI Zeolites, Criterion, ShellDevelopment Company, Shell Research and Technology Center - Amsterdam, CRICenter Marketing Asia Pacific, Shell International Oil Products, and CRITechnology Services.  As described in footnote 2, a significant portionof the Partnership’s sales are transacted through Criterion.  During 2006, 2005, and 2004, the Partnershiprecognized sales transacted through Criterion of $84,107, $60,527, and $61,805,respectively.  The Partnership purchasescertain of its raw materials and is charged for tolling, customer distributionand packaging costs incurred by Criterion. The amount of these costs charged tothe Partnership during 2006, 2005, and 2004 were $23,081, $16,245, and $13,903,respectively.  These costs are acomponent of production costs and are included in the cost of goods sold lineitem in the accompanying income statement when the inventory is sold.  Certainengineering, management-related, broker-related, and research and developmentservices are provided to the Partnership by CRI and Shell Affiliates.  During2006, 2005, and 2004, the Partnership was charged $10,727, $10,188, and$10,538, respectively, for these services. These amounts are included in the selling, general and administrativeline item in the accompanying income statement.

At December 31, 2006 and 2005, the accounts payable toaffiliates balance consisted of $8,225 and $5,890, respectively, due to CRI andShell affiliates.  Included in tradeaccounts receivable at December 31, 2006 and 2005 was $18,152 and $5,671,respectively, of receivables related to sales transacted through Criterion, asdescribed above.

*Zeolyst C.V.*

Zeolyst C.V. is a limited partnership formed in 1993pursuant to a joint venture agreement between PQ Zeolites B.V. and CRI Zeolitesfor the purpose of the production of Zeolite powders.  The Partnership entered into a salesagreement with Zeolyst C.V. to purchase Zeolite powders manufactured by ZeolystC.V.  Under the terms of the salesagreement, products manufactured by Zeolyst C.V. are supplied solely to thePartnership.  The Partnership haspurchased $15,721, $10,164, and $8,641 through the sales agreement in 2006,2005, and 2004, respectively.  Thesecosts are a component of production costs and are included in the cost of goodssold line item in the accompanying income statement when the inventory is sold.

At December 31, 2006 and 2005, the accounts receivablefrom affiliates balance consisted of $931and $4,383, respectively, due fromZeolyst C.V.

**14.  SubsequentEvent:**

InMarch 2007, the Partnership’s $15,000 revolving credit agreement was amended toextend the termination date to May 15, 2007.

 

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