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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: December 31, 1994
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File Number: 1-7677
LSB INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 73-1015226
- --------------------------- -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
- ---------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(405) 235-4546
--------------
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- -------------------------------- ----------------------
Common Stock, Par Value $.10 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
(Facing Sheet Continued)
Securities Registered Pursuant to Section 12(g) of the Act:
$3.25 Convertible Exchangeable Class C Preferred Stock, Series 2.
Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for the shorter period that the Registrant has had
to file the reports), and (2) has been subject to the filing requirements for
the past 90 days. YES X NO _____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
As of March 31, 1995, the aggregate market value of the 9,423,861 shares
of voting stock of the Registrant held by non-affiliates of the Company
equaled approximately $57,721,149 based on the closing sales price for the
Company's common stock as reported for that date. That amount does not
include (1) the 1,588 shares of Convertible Non-Cumulative Preferred Stock
(the "Non-Cumulative Preferred Stock") held by non-affiliates of the Company,
(2) the 20,000 shares of Series B 12% Convertible, Cumulative Preferred Stock
(the "Series B Preferred Stock"), and (3) the 915,000 shares of $3.25
Convertible Exchangeable Class C Preferred Stock, Series 2, excluding 5,000
shares held in treasury (the "Series 2 Preferred Stock"). An active trading
market does not exist for the shares of Non-Cumulative Preferred Stock or the
Series B Preferred Stock . The shares of Series 2 Preferred Stock do not have
voting rights except under limited circumstances.
As of March 31, 1995, the Registrant had 13,044,922 shares of common
stock outstanding (excluding 1,575,594 shares of common stock held as
treasury stock).
FORM 10-K OF LSB INDUSTRIES, INC.
TABLE OF CONTENTS
PART I
Page
Item 1. Business
General 1
Segment Information and Foreign
and Domestic Operations and Export Sales 1
Chemical Business 1
Environmental Control Business 3
Automotive Products Business 5
Industrial Products Business 6
Employees 8
Research and Development 8
Environmental Compliance 8
Item 2. Properties
Chemical Business 9
Environmental Control Business 11
Automotive Products Business 11
Industrial Products Business 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 4A. Executive Officers of the Company 13
PART II
Item 5. Market for Company's Common Equity
and Related Stockholder Matters
Market Information 14
Stockholders 15
Dividends 15
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview 19
Results of Operations 19
Liquidity and Capital Resources 22
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 28
PART III
Item 10. Directors and Executive Officers of the Company 28
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and Management37
Item 13. Certain Relationships and Related Transactions 41
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 43
PART I
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Item 1. BUSINESS
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General
- -------
LSB Industries, Inc. (the "Company") was formed in 1968 as an Oklahoma
corporation, and in 1977 became a Delaware corporation. The Company is a
diversified holding company which is engaged, through its subsidiaries, in (i)
the manufacture and sale of chemical products for the explosives, agricultural
and industrial acids markets (the "Chemical Business"), (ii) the manufacture
and sale of a broad range of air handling and heat pump products for use in
commercial and residential air conditioning systems (the "Environmental
Control Business"), and (iii) the manufacture or purchase and sale of certain
automotive and industrial products, including automotive bearings and other
automotive replacement parts (the "Automotive Products Business") and the
manufacture, purchase and sale of machine tools (the "Industrial Products
Business"). In May, 1994, the Company sold its Financial Services Business,
which was comprised of Equity Bank for Savings F.A. ("Equity Bank") and
subsidiaries of Equity Bank. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 3 of Notes to
Consolidated Financial Statements included elsewhere in this Form 10-K for a
brief discussion as to the terms of sale by the Company of its Financial
Services Business.
Segment Information and Foreign and Domestic Operations and Export Sales
- ------------------------------------------------------------------------
Schedules of the amounts of sales, operating profit and loss, and
identifiable assets attributable to each of the Company's lines of business
and of the amount of export sales of the Company in the aggregate and by major
geographic area for each of the Company's last three fiscal years appear in
Note 15 of the Notes to Consolidated Financial Statements included elsewhere
in this report.
A discussion of any risks attendant as a result of a foreign operation
or the importing of products from foreign countries appears below in the
discussion of each of the Company's business segments.
Chemical Business
- -----------------
General:
-------
The Chemical Business manufactures and sells the following types of
chemical products to the mining, agricultural and other industries: sulfuric
acid, concentrated nitric acid, prilled ammonium nitrate fertilizer and
ammonium nitrate-based blasting products. In addition, the Chemical Business
markets emulsions that it purchases from others for resale to the mining
industry.
In addition to its existing facilities, the Company is in the process of
constructing a plant in Wilmington, N.C. to allow the Company to produce a
mixed acid product for sale. The Company expects this plant to become
operational during the third quarter of 1995.
For 1994, approximately 30% of the sales of the Chemical Business
consisted of sales of fertilizer and related chemical products for
agricultural purposes, which represented approximately 16% of the Company's
1994 consolidated sales, and 49% consisted of sales of ammonium nitrate and
other chemical-based blasting products for the mining industry, which
represented approximately 26% of the Company's 1994 consolidated sales. The
Chemical Business accounted for approximately 54% and 49% of the Company's
1994 and 1993 consolidated sales, respectively.
Seasonality:
-----------
The Company believes that the only seasonal products of the Chemical
Business are fertilizer and related chemical products sold to the agricultural
industry. The selling seasons for those products generally occur during the
spring and fall planting seasons, i.e., from February through May and from
September through November, which causes the Company to build up inventory
prior thereto. In addition, sales to the agricultural markets depend upon
weather conditions and other circumstances beyond the control of the Company.
Raw Materials:
-------------
Ammonia represents an essential component in the production of most of
the products of the Chemical Business, and the price of those products
generally fluctuates with the price of ammonia. The Company has a contract
with a supplier of ammonia pursuant to which the supplier has agreed to supply
the ammonia requirements of the Chemical Business on terms the Company
considers favorable.
Substantial world-wide per ton price increases for ammonia were incurred
during 1994 by most, if not all, users of ammonia that are not also
manufacturers of ammonia. During 1994, the Company's Chemical Business was
not able to recover a substantial portion of these cost increases by way of
price increases on its products due to market conditions. As a result, such
inability to increase prices for the Chemical Business' products had a
substantial negative impact on the Company's 1994 earnings. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
a discussion of such negative impact. Beginning in the latter part of 1994
and through the first few months of 1995, the Company's Chemical Business has
been able to increase its sales prices to cover a substantial portion of the
price increases relating to the cost of ammonia that were incurred during
1994. However, the Company is not able to predict, at this time, what the
effect of continuing ammonia price increases during 1995, if any, will have on
the Company and the Company's earnings.
The Company believes that it could obtain ammonia from other sources in
the event of a termination of the above referenced contract, but such may not
be obtainable on as favorable terms as presently available to the Chemical
Business under its present agreement.
Marketing and Distribution:
--------------------------
The Chemical Business sells and markets its products to wholesalers and
directly through its own sales force using thirty-three distribution centers.
See "Properties". The Chemical Business sells low density prilled ammonium
nitrate-based explosives primarily to the surface coal mining industry through
nine company-owned distribution centers most of which are located in close
proximity to the customers' surface mines in the coal producing states of
Kentucky, Indiana, Missouri and Illinois, and through four company-owned
distribution centers in Australia located in the proximity of the mines. In
addition, sales of explosives are made on a wholesale basis to independent
wholesalers and other explosives companies.
The Chemical Business sells high density prilled ammonium nitrate for
use in agricultural markets in geographical areas within a freight-logical
distance from its El Dorado, Arkansas, manufacturing plant, primarily Texas,
Oklahoma, Arkansas and Louisiana. The products are sold through 20
distribution centers, with 15 centers located in Northern and Eastern Texas,
two centers located in Missouri and three centers located in Tennessee. The
Chemical Business also sells its agricultural products directly to wholesale
customers.
The Chemical Business sells its industrial acids, consisting primarily
of high grade concentrated nitric acid and sulfuric acid, primarily to the
food, paper, chemical and electronics industries. Concentrated nitric acid is
a special grade of nitric acid used in the manufacture of pharmaceutical,
explosives, and other chemical products.
Patents:
-------
The Company believes that the Chemical Business does not depend upon any
patent or license; however, the Chemical Business does own certain patents
that it considers important in connection with the manufacture of certain
blasting agents and high explosives. These patents expire through 1997.
Regulatory Matters:
------------------
Each of the Chemical Business' blasting product distribution centers are
licensed by the Bureau of Alcohol, Tobacco and Firearms in order to
manufacture and distribute blasting products. The Chemical Business also must
comply with substantial governmental regulations dealing with environmental
matters. See "PROPERTIES - Chemical Business" for a discussion as to an
environmental issue regarding the Company's El Dorado, Arkansas, manufacturing
facility.
Competition:
-----------
The Chemical Business competes with other chemical companies, in its
markets, many of whom have greater financial resources than the Company. The
Company believes that the Chemical Business is competitive as to price,
service, warranty and product performance. The Company believes that the
Chemical Business' contract with its supplier of ammonia, which the Company
believes allows the Chemical Business to purchase ammonia at a favorable price
compared to the world market price of ammonia, allows the Chemical Business
the ability to favorably compete with its competitors as to price. The
Company believes that the Chemical Business is a leader in the Texas ammonium
nitrate market and one of the leading producers of concentrated nitric acid in
the United States for third party sales.
Environmental Control Business
- ------------------------------
General:
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The Company's Environmental Control Business manufactures and sells a
broad range of fan coil, air handling, air conditioning, heating, heat pump
and dehumidification products targeted to both new building construction and
renovation, as well as industrial application. The fan coil products consist
of in-room terminal air distribution equipment utilizing air forced over a fin
tube heat exchanger which, when connected to centralized equipment
manufactured by other companies, creates a centralized air conditioning and
heating system that permits individual room temperature control. The heat
pump products manufactured by the Environmental Control Business consist of
heat-recovery, water-to-air heat pumps that include a self-contained
refrigeration circuit and blower, which allow the unit to heat or cool the
space it serves when supplied with recirculating water at mild temperatures.
The Environmental Control Business accounted for approximately 29% and 30% of
the Company's 1994 and 1993 consolidated sales, respectively, with fan coil
products accounting for approximately 16% and heat pump products accounting
for approximately 13%, respectively, of the Company's 1994 consolidated sales.
Production and Backlog:
----------------------
Most of the Environmental Control Business' production of the above-
described products occurs on a specific order basis. The Company manufactures
the units in many sizes, as required by the purchaser, to fit the space and
capacity requirements of hotels, motels, schools, hospitals, apartment
buildings, office buildings and other commercial or residential structures.
As of December 31, 1994, the backlog of confirmed orders for the Environmental
Control Business was approximately $24.2 million, as compared to approximately
$17 million as of December 31, 1993. A customer generally has the right to
cancel an order prior to the order being released to production. Past
experience indicates that customers generally do not cancel orders after the
Company receives them. As of December 31, 1994, the Company had released
approximately $21.4 million of backlog orders in the Environmental Control
Business to production, all of which are expected to be filled by December 31,
1995.
Distribution:
------------
The Environmental Control Business sells its products to mechanical
contractors, original equipment manufacturers and distributors. The Company's
sales to mechanical contractors primarily occur through independent
manufacturer's representatives, who also represent complimentary product lines
not manufactured by the Company. Original equipment manufacturers generally
consist of other air conditioning and heating equipment manufacturers who
resell under their own brand name the products purchased from the
Environmental Control Business as a separate item in competition with the
Company or as part of a package with other air conditioning-heating equipment
products to form a total air conditioning system which they then sell to
mechanical contractors or end-users for commercial application. Sales to
original equipment manufacturers accounted for approximately 36% of the sales
of the Environmental Control Business in 1994 and approximately 10% of the
Company's 1994 consolidated sales.
Construction Industry:
---------------------
Historically, the Environmental Control Business has depended primarily
on the commercial construction industry, including new construction and the
remodeling and renovation of older buildings, however, this Business' recent
growth has been in the residential area.
Raw Materials:
-------------
Numerous domestic and foreign sources exist for the materials used by
the Environmental Control Business, which materials include aluminum, copper,
steel, electric motors and compressors. The Company does not expect to have
any difficulties in obtaining any necessary materials for the Environmental
Control Business.
Competition:
-----------
The Environmental Control Business competes with approximately eight
companies, several of whom are also customers of the Company. Some of the
competitors have greater financial resources than the Company. The Company
believes that the Environmental Control Business manufactures a broader line
of fan coil and water source heat pump products than any other manufacturer in
the United States, and, that it is competitive as to price, service, warranty
and product performance.
Automotive Products Business
- ----------------------------
General:
-------
The Automotive Products Business is primarily engaged in the manufacture
and sale of a line of anti-friction bearings, which includes straight-thrust
and radial-thrust ball bearings, angular contact ball bearings, and certain
other automotive replacement parts. These products are used in automobiles,
trucks, trailers, tractors, farm and industrial machinery, and other
equipment. The Automotive Products Business accounted for approximately 13%
and 12% of the Company's 1994 and 1993 sales, respectively. In 1994, the
Automotive Products Business manufactured approximately 47% of the products it
sold and approximately 49% in 1993, and purchased the balance of its products
from other sources, including foreign sources.
Distribution and Market:
-----------------------
The automotive, truck and agricultural equipment replacement markets
serve as the principal markets for the Automotive Products Business. This
business sells its products domestically and for export, principally through
independent manufacturers' representatives who also sell other automotive
products. Those manufacturers' representatives sell to retailers (including
major chain stores), wholesalers, distributors and jobbers. The Automotive
Products Business also sells its products directly to original equipment
manufacturers and certain major chain stores.
Inventory:
---------
The Company generally produces or purchases the products sold by the
Automotive Products Business in quantities based on a general sales forecast,
rather than on specific orders from customers. The Company fills most orders
for the automotive replacement market from inventory. The Company generally
produces or purchases bearings for original equipment manufacturers after
receiving an order from the manufacturer.
Raw Materials:
-------------
The principal materials that the Automotive Products Business needs to
produce its products consist of high alloy steel tubing, steel bars, flat
strip coil steel and bearing components produced to specifications. The
Company acquires those materials from a variety of domestic and foreign
suppliers at competitive prices. The Company does not anticipate having any
difficulty in obtaining those materials in the near future.
Competition:
-----------
The Automotive Products Business engages in a highly competitive
business. Competitors include other domestic and foreign bearing
manufacturers, which sell in the original equipment and replacement markets.
Many of those manufacturers have greater financial resources than the Company.
Industrial Products Business
- ----------------------------
General:
-------
The Industrial Products Business manufactures, purchases and markets a
proprietary line of machine tools. The current line of machine tools
distributed by the Industrial Products Business includes milling, drilling,
turning, fabricating and grinding machines. The Industrial Products Business
purchases most of the machine tools marketed by it from foreign companies,
which manufacture the machine tools to the Company's specifications. This
Business manufactures CNC bed mills and electrical control panels for machine
tools.
Distribution and Market:
-----------------------
The Industrial Products Business distributes its machine tools in the
United States, Mexico, Canada and certain other foreign markets and
distributes its industrial supplies principally in Oklahoma. The Industrial
Products Business sells and distributes its products through its own sales
personnel, who call directly on end users. The Industrial Products Business
also sells its machine tools through independent machine tool dealers
throughout the United States and Canada, who purchase the machine tools for
resale to end users. The principal markets for machine tools, other than
independent machine tool dealers, consist of manufacturing and metal working
companies, maintenance facilities, utilities and schools.
Customer:
--------
The Industrial Products Business does not depend on any single customer,
or a few customers, the loss of any one or more of which would have a material
adverse effect on the Industrial Products Business. A significant increase in
the revenues of the Industrial Products Business occurred during 1992 and 1993
as a result of an agreement with a foreign company ("Buyer"), dated July 6,
1992, to supply the Buyer with equipment, technology and technical services to
manufacture certain types of automotive bearing products. The Company has
shipped to the Buyer all machinery and equipment and the tooling and designs
required under the agreement. The agreement provides for a total contract
amount of approximately $56.0 million, with $12.0 million of the contract
amount to be retained by the Buyer as the Company's subsidiary's equity
participation in the Buyer. The Company's subsidiary exchanged its rights to
the equity interest in the Buyer with a foreign nonaffiliated company
("Purchaser of the Interest") for $12 million in notes. The Company has been
advised that the Buyer has agreed to repurchase from the Purchaser of the
Interest up to $6 million of such equity interest over a six-year period, with
payment to the Purchaser of the Interest to be either in cash or bearing
products. The notes issued to the subsidiary for its rights to the equity
interest in the Buyer will only be payable when, as and if the Purchaser of
the Interest collects from the Buyer for such equity interest, and the method
of payment to the subsidiary will be either cash or bearing products, in the
same manner as received by the Purchaser of the Interest from the Buyer. Due
to the Company's inability to determine what payments, if any, it will receive
on such notes, the Company will continue to carry such notes at a nominal
amount.The balance of approximately $44.0 million has been or will be paid to
the Company's subsidiary as follows: (i) approximately $13.9 million was paid
through December 31, 1994, and (ii) the balance of approximately $30.1 million
payable in equal quarterly installments over a ten (10) year period, plus
interest. Under the agreement, the Company's subsidiary will use its best
efforts to purchase approximately $14.5 million of bearing products from the
Buyer each year over a period of ten (10) years; provided, however, that the
Company's subsidiary is not required to purchase more product from the Buyer
in any one (1) year than the amount of tapered bearings the Company's
subsidiary is able to sell in its market. However, the Company's subsidiary
has negotiated a preliminary oral agreement in principle which, if completed,
would change the method of payment of the balance due and the subsidiary's
obligation to buy products from the Buyer as discussed below. The Company
will recognize revenues and profits on the sale of equipment and technology
over the term of the agreement as they are realized. The revenue and profits
realized during the delivery and installation period have been recognized on a
percentage of completion basis. During the years ended December 31, 1994 and
1993, the Company recorded sales of approximately $1.8 million and $7.5
million, respectively, in connection with the agreement. The percentage of
completion is determined by relating the productive costs incurred to date to
the total productive costs estimated to complete the performance under the
contract for delivery and installation. The Company presently meets all of
its obligations under the contract which generally coincides with the payout
term.
In March 1995, the subsidiary negotiated a preliminary oral agreement in
principle with a syndication of foreign lenders whereby the lenders will
acquire, without recourse to the Company, as such subsidiary, approximately
$24.0 million of the unpaid contract amount billable by the Company. Under
the oral agreement, the Company expects to receive approximately $4.0 million
at closing, net of fees, and a commitment from the Buyer to provide
approximately $16.0 million of bearing products. Upon completion of the oral
agreement with the foreign lenders, the Company and the Buyer will amend their
agreement to exchange the then remaining unpaid contract amount from the Buyer
(approximately $5.0 million) for an amendment to the Buyer's commitment to
provide additional bearing products approximating $5.0 million, thereby making
the Buyer's commitment to provide bearing products to the Company
approximately $21.0 million. The Company is to receive such bearing products
when and if the Buyer repays the debt discussed above which the foreign
lenders will acquire. The commitment of the Buyer to provide the Company
$21.0 million in bearing products, at no additional cost, is to be further
increased to include interest at 7 1/2% per annum until such commitment has
been fulfilled by the delivery of bearing products to the Company, which
delivery is not expected to begin prior to the year 2000. In connection with
this agreement, the Company would also amend its purchase commitment from a
best efforts arrangement to a firm commitment to purchase approximately $6.0
million of bearing products over each of the next five years, at predetermined
prices, not in excess of market prices, subject to the Buyer's ability to
deliver product to the Company and the product meeting quality standards. The
agreement in principle is subject to, among other things, finalization of
definitive agreements. There is no assurnace that the agreement in principle
will be finalized. See "MANAGEMENT'S DISCUSSION AND ANALYSIS" and Note 6 of
Notes to Consolidated Financial Statements for further discussion of this
agreement.
Foreign Risk:
------------
By purchasing a majority of the machine tools from foreign
manufacturers, the Industrial Products Business must bear certain import
duties and international economic risks, such as currency fluctuations and
exchange controls, and other risks from political upheavals and changes in
United States or other countries' trade policies. Most of the current
contracts for the purchase of foreign-made machine tools provide for payment
in United States dollars. Circumstances beyond the control of the Company
could eliminate or seriously curtail the supply of machine tools from any one
or all of the foreign countries involved.
Competition:
-----------
The Industrial Products Business competes with manufacturers and other
distributors of machine tools many of whom have greater financial resources
than the Company. The Company's machine tool business generally is
competitive as to price, warranty and service, and maintains personnel to
install and service machine tools.
Employees
- ---------
As of December 31, 1994, the Company employed 1,446 persons. As of that
date, (a) the Environmental Control Business employed 550 persons, (none of
which is represented by a union),(b) the Automotive Products Business employed
255 persons, with 91 represented by unions under an agreement that expired in
August, 1990, and, (c) the Chemical Business employed 447 persons, with 113
represented by unions under agreements expiring in August, 1995.
The union contract within the Automotive Product Business expired on
August 1, 1990, and the employees within that business have continued to work
without a contract. The employees did not strike in 1990 when their contract
expired, and, as of the date of this report, there are no indications that the
employees are considering striking. There are no pending negotiations in
connection with the expired union contract. The Company does not believe such
employees will strike within the foreseeable future, but there are no
assurances to that effect.
Research and Development
- ------------------------
The Company incurred approximately $606,000 in 1994, $788,000 in 1993,
and $684,000 in 1992 on research and development relating to the development
of new products or the improvement of existing products. All expenditures for
research and development related to the development of new products and
improvements are sponsored by the Company.
Environmental Compliance
- ------------------------
The Company does not anticipate, based on facts presently known to the
Company, that it will be required during 1995 to incur any material capital
expenditures for environmental control facilities relating to its industrial
businesses. However, a subsidiary of the Company in its Automotive Products
Business has been notified that it is a potentially responsible party as a
result of having been a generator of waste disposed of at the Mosley site (as
defined in the first paragraph of Item 3 of this report). In addition, a
subsidiary of the Company in its Chemical Business has been notified that its
chemical manufacturing facility located in El Dorado, Arkansas, has been
placed into the Environmental Protection Agency's data based tracking system
and that there has occurred certain releases of contaminates at it's El
Dorado, Arkansas facility, and, as a result of such releases, the Chemical
Business will be required to perform certain activities to remediate the
contamination at the facility. See Item 2 "PROPERTIES - Chemical Business"
and Item 3 "LEGAL PROCEEDINGS" for a discussion of the environmental issues at
the El Dorado, Arkansas facility. While the Company is, at this time, unable
to determine the ultimate cost of remediation as a result of contamination of
the site in El Dorado, Arkansas, the Company has included a provision for
environmental costs of $450,000 in its results of operations for 1994. While
there are no assurances, based on the information presently available to the
Company, the Company does not believe that the Mosley Site, as discussed in
Item 3 "LEGAL PROCEEDINGS", or the El Dorado, Arkansas facility being placed
in the Environmental Protection Agency's data based tracking system or any
response to contamination at such El Dorado, Arkansas facility due to any
release of contamination of such facility or the assessment of any penalty as
a result thereof, should have a material adverse effect on the Company.
Item 2. PROPERTIES
- -------------------
Chemical Business
- -----------------
The Chemical Business primarily conducts manufacturing operations (i) on
150 acres of a 1400 acre tract of land located in El Dorado, Arkansas (the
"Site") and (ii) on 10 acres of land in a facility of approximately 60,000
square feet located in Hallowell, Kansas ("Kansas facility").
As of December 31, 1994, the manufacturing facility at the Site was
being utilized to the extent of approximately 88%, based on the continuous
operation of those facilities. As of December 31, 1994, manufacturing
operations at the Kansas facility were being utilized to the extent of
approximately 80% based on two 8 hour shifts per day and a 5 day week.
In addition, the Chemical Business distributes its products through 33
agricultural and blasting distribution centers. The Chemical Business
currently operates 20 agricultural distribution centers, with 15 of the
centers located in Texas ( 12 of which the Company owns and 3 of which it
leases); 2 centers located in Missouri (1 of which the Company owns and 1 of
which it leases); and 3 centers located in Tennessee (all of which the Company
owns). The Chemical Business currently operates 9 domestic explosives
distribution centers located in Bonne Terre, Missouri (owned); Central City,
Owensboro, Combs, and Pilgrim, Kentucky (leased); Midland, Indiana (leased);
Rawlins, Wyoming (leased); Carlsbad, New Mexico (leased); and Pryor, Oklahoma
(leased). The Chemical Business also has explosives distribution centers in
Australia located at: Peaks Down; Kalgoorlie; Karratha; and, Hunter Valley
(all leased).
The Chemical Business also operates its business from buildings located
on an approximate four acre site on the perimeter of the JayHawk Industrial
site in southeastern Kansas, and a research and testing facility comprising of
a one square mile tract of land including buildings and equipment thereon also
located in southeastern Kansas which it owns.
All facilities owned by the Chemical Business are subject to mortgages.
During November, 1993, the Company's Chemical Business acquired assets
for an additional concentrated nitric acid plant and related assets ("Plant
and Assets") for approximately $1.9 million. During 1994 and early 1995 the
Chemical Business spent approximately $15.1 million to install such Plant and
Assets at its manufacturing plant facility located in El Dorado, Arkansas.
The plant is scheduled to be operational in May, 1995. As a result of such
expansion and the present utilization of the Chemical Business' manufacturing
facilities, the Company believes that it's present manufacturing facilities
are suitable for it's current operations.
Since the 1940's, the Site has been a manufacturing facility for
ammonium nitrate compounds, and until 1969, was a manufacturing facility for
ammonia. In 1955, the Site was acquired by Monsanto Company ("Monsanto"), and
in June, 1983, Monsanto sold the Site to El Dorado Chemical Company ("EDC").
EDC was acquired by the Company in 1984. Under the agreement with Monsanto,
Monsanto agreed to indemnify EDC for any claim which is suffered, incurred or
arises due solely out of Monsanto's disposal of chemicals or chemical
byproducts prior to acquisition of the Site by EDC from Monsanto or the use by
Monsanto of any substance prior to the date EDC acquired the Site from
Monsanto which is subsequently determined to be deleterious or dangerous to
the public's health, safety or welfare. Under the agreement with Monsanto,
the indemnification is not assignable to a party to which EDC transfers the
Site without the prior written consent of Monsanto, except to any company of
which 100% of the voting stock is owned or controlled, directly or indirectly,
by EDC. Although EDC has operated the Site since its acquisition from
Monsanto in 1983, in 1988, EDC transferred ownership of the Site to the
Company, which in turn transferred title to another subsidiary. All of the
outstanding stock of EDC is directly and wholly owned by the Company.
Although no consent was obtained from Monsanto to assign the Monsanto
indemnification when EDC transferred ownership of the Site to its affiliated
company, if such a consent was required under the agreement with Monsanto, the
Company believes that the Monsanto indemnification remains applicable to EDC.
In 1993, the Company's Chemical Business was advised that the Site had
been placed in the Environmental Protection Agency's ("EPA") data-based
tracking system (the "System"). The System maintains an inventory of sites in
the United States where it is known or suspected that a release of hazardous
waste has occurred. Notwithstanding inclusion in the System, EPA's
regulations recognize that such does not represent a determination of
liability or a finding that any response action will be necessary. Over
12,000 sites in the United States are presently listed in the System. If a
site is placed in the System, EPA regulations require that the government or
its agent perform a preliminary assessment of the site. If the preliminary
assessment determines that there has been a release, or that there is
suspected to have occurred a release at the site of certain types of
contamination, the EPA will perform a site investigation. Pursuant to such
regulations, the State of Arkansas, on behalf of the EPA, performed such
preliminary assessment. The preliminary assessment report prepared by the
State of Arkansas, dated September 30, 1992, stated in part, that a release of
certain types of contaminants is suspected to have occurred at the Site. It
is anticipated that the EPA will, at some future date, perform a site
inspection at the Site. Such inspections usually involve the gathering of
additional data including environmental sampling of the Site. After
conducting the site inspection, the regulations provide that the EPA may
determine that: (i) the Site does not warrant further involvement in the
evaluation process, or (ii) that further study of the Site is warranted to
determine what appropriate action is to be taken in response to a release, if
any, of contaminants at the Site or whether such release, if any, justifies
the Site being placed on the National Priorities List. Being placed in the
System will generally be the first step in the EPA's determination as to
whether a site will be placed on the National Priorities List. After the EPA
completes its site inspection and evaluates other information, the EPA will
then assess the Site using the Hazard Ranking System to ascertain whether the
Site poses a sufficient risk to human health or the environment to be proposed
for the National Priorities List. There are approximately 1,200 sites in the
United States presently listed on the National Priorities List. The Company
has been advised that there have occurred certain releases of contaminants at
the Site. However, the Company does not believe that such releases should
warrant the Site being placed on the National Priorities List, but there are
no assurances to that effect. See Item 1 "BUSINESS - Environmental
Compliance" and Item 3 "LEGAL PROCEEDINGS".
Environmental Control Business
- ------------------------------
The Environmental Control Business conducts its fan coil manufacturing
operations in various facilities, including two adjacent facilities located in
Oklahoma City, Oklahoma, consisting of approximately 240,000 square feet owned
by the Company. As of December 31, 1994, the Environmental Control Business
was using the productive capacity of the above-referenced facilities to the
extent of approximately 93%, based on one, eight-hour shift per day and a
five-day week.
The Environmental Control Business manufactures most of its heat pump
products in a leased 230,000 square foot facility in Oklahoma City, Oklahoma.
The lease carries a five year term beginning March 1, 1988, with options to
renew for five additional five year periods, and currently provides for the
payment of rent in the amount of $52,389 per month. The Company also has an
option to acquire the facility at any time in return for the assumption of the
then outstanding balance of the lessor's mortgage. As of December 31, 1994,
the productive capacity of this manufacturing operation was being utilized to
the extent of approximately 71%, based on one, eight-hour shift per day and a
five-day week.
The Environmental Control Business owns a 60,000 square foot facility in
Juarez, Mexico, which it leases to a third party tenant. The Environmental
Control Business also leases sales offices in Los Angeles and Chicago.
All of the properties utilized by the Environmental Control Business are
considered by Company management to be suitable and adequate to meet the
current needs of that business.
Automotive Products Business
- ----------------------------
The Automotive Products Business conducts its operations in plant
facilities principally located in Oklahoma City, Oklahoma which are considered
by Company management to be suitable and adequate to meet its needs. One of
the manufacturing facilities occupies a building owned by the Company, subject
to mortgages, totaling approximately 178,000 square feet. The Automotive
Products Business also uses additional manufacturing facilities located in
Oklahoma City, Oklahoma, owned and leased by the Company totalling
approximately 102,000 square feet. During 1994, the Automotive Products
Business under-utilized the productive capacity of its facilities.
In December 1993, International Bearings, Inc. ("IBI") of Memphis,
Tennessee, was acquired as a wholly owned subsidiary of the Company operating
as a separate entity within the Automotive Products Division. IBI is a
warehouse unit operating from a Company owned warehouse of approximately
45,000 square feet in an industrial park section of Memphis, TN.
Industrial Products Business
- ----------------------------
The Company owns several buildings, some of which are subject to
mortgages, totaling approximately 691,000 square feet located in Oklahoma
City, Oklahoma, Tulsa, Oklahoma, and Middletown, New York, which the
Industrial Products Business uses for showrooms, offices, warehouse and
manufacturing facilities. The Company also owns real property located near or
adjacent to the above-referenced buildings, which the Industrial Products
Business uses for parking and storage.
The Industrial Products Business also leases a facility from an entity
owned by the immediate family of the Company's President, which facility
occupies approximately seven acres in Oklahoma City, Oklahoma, with buildings
having approximately 44,000 square feet. The Industrial Products Business
also leases an office in Europe to coordinate its European activities.
All of the properties utilized by the Industrial Products Business are
considered by Company management to be suitable and adequate to meet the needs
of the Industrial Products Business.
Item 3. LEGAL PROCEEDINGS
- --------------------------
In December 1987, the United States Environmental Protection Agency
("EPA") notified L&S Bearing Company ("L&S") of potential responsibility for
releases of hazardous substances at the Mosley Road Landfill in Oklahoma ("the
Mosley Site"). The recipients of such notification were: a) generators of
industrial waste allegedly sent to the Mosley Site (including L&S), and b) the
current owner/operator of the Mosley Site, Waste Management of Oklahoma
("WMO") (collectively, "PRPs"). Between February 20, and August 24, 1976, the
Mosley Site was authorized to accept industrial hazardous waste. During this
time, a number of industrial waste shipments allegedly were transported from
L&S to the Mosley Site. In February 1990, EPA added the Mosley Site to the
National Priorities List. WMO and the U.S. Air Force conducted the remedial
investigation ("RI") and feasibility study ("FS"). It is too early to
evaluate the probability of a favorable or unfavorable outcome of the matter
for L&S. However, it is the PRP Group's position that WMO as the Mosley Site
owner and operator should be responsible for at least half of total liability
at the Mosley Site, and that 75% to 80% of the remaining liability, if
allocated on a volumetric basis, should be assignable to the U.S. Air Force.
The Company is unable at this time to estimate the amount of liability, if
any, since the estimated costs of clean-up of the Mosley Site are continuing
to change and the percentage of the total waste which were alleged to have
been contributed to the Mosley Site by L&S has not yet been determined. If an
action is brought against the Company in this matter, the Company intends to
vigorously defend itself and assert the above position. Although there are no
assurances to this effect, the Company is exploring whether it has insurance
coverage for this claim. Insurance coverage, however, is not considered since
it is not known whether insurance coverage will be provided in connection with
this matter. The Company does not believe that the ultimate outcome of this
matter will have a material adverse effect on the Company's financial position
or results of operations.
In April, 1989, a subsidiary of the Company, International Environmental
Corporation ("IEC"), was named as a third party defendant in a lawsuit brought
by Economy Mechanical Industries of Illinois, Inc. ("Economy"), in an action
pending in the Circuit Court of Cook County, Illinois, in connection with a
project in Chicago, Illinois. Economy had purchased fan coil units for the
project from IEC and the units were built in accordance with Economy's
specifications. This litigation initially resulted from disputes between the
owner of the project and the general contractor, and in connection therewith,
the owner withheld payment from the general contractor. The general
contractor and a number of subcontractors (including Economy) filed mechanics
liens against the property. The general contractor filed this action to
foreclose on its lien and the owner has asserted numerous claims against the
general contractor and certain subcontractors (including Economy) in the total
amount of $20,610,599. One of the counterclaims made by the owner relates to
the fan coil system manufactured by IEC. As a result Economy brought a third
party action against IEC alleging that if the fan coil system is defective,
such was the responsibility of IEC and in breach of IEC's implied and express
warranties. IEC has denied that the fan coils are defective and contends that
any failures, if any, were caused by improper installation or other causes
beyond IEC's control. IEC has filed fourth party complaints against certain
of its suppliers. A settlement in principle has recently been reached subject
to documentation. This settlement in principle would require two of IEC's
insurance carriers to fund IEC's portion of the settlement in the sum of
$868,000 and reimburse IEC approximately $330,000 for previously paid attorney
fees and expenses. One of these policies has a $250,000 loss limitation on
IEC's retro-premium calculations under the policy. The retro-premiums under
this policy will total less than the $330,000 reimbursement payment IEC is
expecting to receive under the other policy. This settlement in principle is
subject to documentation and will require payments to the building owners by
other parties to the suit; therefore, no assurances can currently be made
concerning the final resolution of this litigation. Notwithstanding the
settlement in principle, the Company does not believe this matter will have a
material adverse effect on the financial condition or results of operations of
the Company.
In addition to the Chemical Business' El Dorado, Arkansas facility being
placed in the System (see Item 2 "PROPERTIES" for a discussion thereof),
recent investigations have identified possible contamination associated with
the on-site solid waste landfill at such facility in El Dorado, Arkansas. The
contamination includes possible landfilling of sludges containing chromium and
lead, and possible groundwater contamination. An investigation of the
chromium sludge generation and landfilling was completed, as well as
confirmation of the groundwater sampling data. Preliminary results indicated
the presence of hazardous quantities of lead and chromium in the landfill,
which were reported to EPA through the National Response Center and to the
Arkansas Department of Pollution Control and Ecology ("ADPC&E"). A
preliminary remedial plan was also submitted by the Chemical Business to
ADPC&E. ADPC&E conducted a multi-media inspection of the facility, including
the landfill, and collected groundwater samples. An inspection report
identified a few deficiencies in recordkeeping which have been corrected, and
allegations of improper management of the chromium sludge and another waste
stream which had been managed in the wastewater treatment system. On March
29, 1995, ADPC&E forwarded to the Chemical Business a proposed Consent
Administrative Order ("CAO") to resolve all compliance issues identified in
the multi-media inspection. The significant items in the CAO are that the CAO
provides for closure of the landfill as a solid waste unit, performance of
ground water monitoring for the entire site, and payment of a civil penalty of
$25,000. While the Company is at this time unable to determine the ultimate
cost of compliance with the CAO, the Company has determined the subsidiary's
cost to be at least $450,000; therefore, the Company has included a provision
for environmental costs of $450,000 in the results of operations. Based on
information presently available, the Company does not believe, as of the date
of this report, that compliance with the CAO, should have a material adverse
effect on the Company, the Company's subsidiary or the Company's financial
condition; however, there are no assurances to that effect.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
Item 4A. EXECUTIVE OFFICERS OF THE COMPANY
- -------------------------------------------
Identification of Executive Officers. The following table identifies
the executive officers of the Company.
Position and Served as
Offices With an Officer
Name Age the Company From
- ---- ---- ------------- -----------
Jack E. Golsen 66 Board Chairman December, 1968
and President
Barry H. Golsen 44 Board Vice Chairman August, 1981
and President of the
Environmental
Control Business
David R. Goss 54 Senior Vice March, 1969
President of
Operations and
Director
Tony M. Shelby 53 Senior Vice March, 1969
President - Chief
Financial Officer,
and Director
Jim D. Jones 53 Vice President - April, 1977
Treasurer and
Corporate Controller
David M. Shear 35 Vice President and March, 1990
General Counsel
- --------------------------------------------------------------
The Company's officers serve one-year terms, renewable on an annual
basis by the Board of Directors. All of the individuals listed above have
served in substantially the same capacity with the Company and/or its
subsidiaries for the last five years.
Family Relationships. The only family relationship that exists among
the executive officers of the Company is that Jack E. Golsen is the father of
Barry H. Golsen.
PART II
---------
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ --------------------------------------------------------------
MATTERS
-------
Market Information
- ------------------
The Company's Common Stock trades on the New York Stock Exchange, Inc.
("NYSE"). Prior to August, 1994, the Company's Common Stock traded on the
American Stock Exchange, Inc. ("AMEX"). The following table shows, for the
periods indicated, the high and low closing sales prices for the Company's
Common Stock.
Fiscal Year Ended
December 31,
----------------------------
1994 1993
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
First 10 8 1/4 11 1/8 6 3/4
Second 9 1/4 7 12 9
Third 7 3/4 5 1/4 12 3/8 10
Fourth 7 3/4 5 3/8 11 3/8 8 1/8
Stockholders
- ------------
As of March 31, 1995, the Company had 1463 record holders of its Common
Stock.
Dividends
- ---------
Holders of the Company's Common Stock are entitled to receive dividends
only when, as and if declared by the Board of Directors. No dividends may be
paid on the Company's Common Stock until all required dividends are paid on
the outstanding shares of the Company's preferred stock, or declared and
amounts set apart for the current period, and, if cumulative, prior periods.
The Company has issued and outstanding as of December 31, 1994, 915,000 shares
of $3.25 Convertible Exchangeable Class C Preferred Stock, Series 2 ("Series 2
Preferred"), 1,597 shares of a series of Convertible Non Cumulative Preferred
Stock ("Non Cumulative Preferred Stock") and 20,000 shares of Series B 12%
Convertible, Cumulative Preferred Stock ("Series B Preferred"). Each share of
preferred stock is entitled to receive an annual dividend, if, as and when
declared by the Board of Directors, payable as follows: (i) Series 2 Preferred
at the rate of $3.25 a share payable quarterly in arrears on June 15,
September 15, December 15, and March 15, which dividend is cumulative, (ii)
Non Cumulative Preferred Stock at the rate of $10 a share payable April 1, and
(iii) Series B Preferred at the rate of $12.00 a share payable January 1,
which dividend is cumulative. The Company did not pay cash dividends on its
Common Stock for many years. During the first part of 1993, the Company's
Board of Directors approved the adoption of a policy as to the payment of cash
dividends on its outstanding Common Stock pursuant to which an annual cash
dividend of $.06 per share will be declared by the Board of Directors and paid
on the Company's outstanding shares of Common Stock payable at $.03 per share
semiannually, subject to change or termination by the Board of Directors at
any time. The Company paid a cash dividend of $.03 a share on its outstanding
Common Stock on July 1, 1994, and January 1, 1995; however, there are no
assurances that this policy will not be terminated or changed by the Board of
Directors. See Notes 9,10 and 11 of Notes to Consolidated Financial
Statements.
Under the terms of a loan agreement between the Company and its lender,
the Company may, so long as no event of default has occurred and is continuing
under the loan agreement, make currently scheduled dividends and pay dividends
on its outstanding preferred stock and pay annual dividends on its Common
Stock equal to $.06 per share.
Under the terms of a term loan agreement between El Dorado Chemical
Company ("EDC"), EDC's wholly owned subsidiary, Slurry Explosive Corporation
("SEC") and certain lenders, EDC cannot transfer funds to the Company in the
form of cash dividends or other advances, except (i) for the amount of taxes
that EDC would be required to pay if it was not consolidated with the Company
and (ii) an amount equal to twenty-five percent (25%) of EDC's cumulative
adjusted net income (as reduced by cumulative net losses), as defined, any
time EDC has a Total Capitalization Ratio, as defined, greater than .65:1 and
after EDC has a Total Capitalization Ratio of .65:1 or less, 50% of EDC's
cumulative adjusted net income (as reduced by cumulative net losses). See
Note 7 of Notes to Consolidated Financial Statements and "Management's
Discussion and Analysis".
The Company is a holding company and, accordingly, its ability to pay
dividends on its preferred stock and its common stock is dependent in large
part on its ability to obtain funds from its subsidiaries. The ability of EDC
and SEC to pay dividends to the Company, to fund the payment of dividends by
the Company or for other purposes, is restricted by certain agreements to
which they are parties.
On February 17, 1989, the Company's Board of Directors declared a
dividend to its stockholders of record on February 27, 1989, of one preferred
stock purchase right on each of the Company's outstanding shares of common
stock. The rights expire on February 27, 1999. The Company issued the
rights, among other reasons, in order to assure that all of the Company's
stockholders receive fair and equal treatment in the event of any proposed
takeover of the Company and to guard against partial tender abusive tactics to
gain control of the Company. The rights will become exercisable only if a
person or group acquires beneficial ownership of 30% or more of the Company's
common stock or announces a tender or exchange offer the consummation of which
would result in the ownership by a person or group of 30% or more of the
common stock, except any acquisition by Jack E. Golsen, Chairman of the Board
and President of the Company, and certain other related persons or entities.
Each right (other than the rights, owned by the acquiring person or
members of a group that causes the rights to become exercisable, which became
void) will entitle the stockholder to buy one one-hundredth of a share of a
new series of participating preferred stock at an exercise price of $14.00 per
share. Each one one-hundredth of a share of the new preferred stock
purchasable upon the exercise of a right has economic terms designed to
approximate the value of one share of the Company's common stock. If another
person or group acquires the Company in a merger or other business combination
transaction, each right will entitle its holder (other than rights owned by
that person or group, which become void) to purchase at the right's then
current exercise price, a number of the acquiring company's common shares
which at the time of such transaction would have a market value two times the
exercise price of the right. In addition, if a person or group (with certain
exceptions) acquires 30% or more of the Company's outstanding common stock,
each right will entitle its holder, (other than the rights owned by the
acquiring person or members of the group that results in the rights becoming
exercisable, which become void), to purchase at the right's then current
exercise price, a number of shares of the Company's common stock having a
market value of twice the right's exercise price in lieu of the new preferred
stock.
Following the acquisition by a person or group of beneficial ownership
of 30% or more of the Company's outstanding common stock (with certain
exceptions) and prior to an acquisition of 50% or more of the Company's common
stock by the person or group, the Board of Directors may exchange the rights
(other than rights owned by the acquiring person or members of the group that
results in the rights becoming exercisable, which become void), in whole or in
part, for shares of the Company's common stock. That exchange would occur at
an exchange ratio of one share of common stock, or one one-hundredth of a
share of the new series of participating preferred stock, per right.
Prior to the acquisition by a person or group of beneficial ownership of
30% or more of the Company's common stock (with certain exceptions) the
Company may redeem the rights for one cent per right at the option of the
Company's Board of Directors. The Company's Board of Directors also has the
authority to reduce the 30% thresholds to not less than 10%.
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is executed as of the 2nd
day of August, 1994, by Dr. Hauri AG, a corporation formed under the laws of
Switzerland (the "Pledgor"), in favor of LSB Chemical Corp., an Oklahoma
corporation (the "Pledgee").
WHEREAS, Compagnie Financiere du Tararois, an SARL formed under the laws
of the Republic of France (the "Borrower"), of which all of the issued and
outstanding capital stock is owned by Pledgor, has executed and delivered to
Pledgee that certain Secured Promissory Note (the "Note") of even date
herewith in the aggregate principal amount of seven million five hundred
thousand French Francs (FRF 7,500,000);
WHEREAS, Pledgor, as the sole shareholder of Borrower, will materially
benefit from the loan to Borrower represented by the Note; and
WHEREAS, Pledgor and Pledgee desire to have Pledgor grant to Pledgee a
security interest in the Collateral (as hereinafter defined) as security for
Borrower's performance of the terms and conditions of the Note, together with
Pledgor's performance of certain obligations set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
Section 1. Grant of Security Interest.
(a) Upon the terms hereof, for value received, Pledgor hereby delivers,
and grants to, Pledgee, a security interest in five thousand (5,000)
shares of common stock, FRF 100 par value per share, of Borrower which
represents all of the issued and outstanding capital stock of Borrower.
Pledgor shall, simultaneously with the execution of this Agreement,
deliver in pledge to Pledgee the stock certificates, registered in the
name of Pledgor, representing all of the Pledged Shares, together with
appropriate stock powers duly endorsed in blank.
(b) The term "Pledged Shares" as used herein shall also mean and
include, without limitation, any cash or stock dividend and/or
distribution or exchange of stock in connection with any reorganization,
recapitalization, reclassification, or increase or reduction of capital,
to which Pledgor shall become entitled for any reason whatsoever as an
addition to, in substitution for, or in exchange for any of the
aforesaid Shares.
(c) If Pledgor shall at any time become entitled to receive, or shall
receive, any stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection
with any reclassification, increase or reduction of capital) or option,
whether as an addition to, in substitution of, or in exchange for, any
of the Pledged Shares, or otherwise, Pledgor agrees to accept the same
as Pledgee's agent and to deliver promptly the same in pledge to
Pledgee, in the exact form received, with appropriate stock powers
relating thereto duly endorsed in blank, and such other documents as
Pledgee shall request in order to perfect Pledgee's security interest
therein.
(d) At any time and from time to time after an Event of Default (as
hereinafter defined), Pledgee may cause all or any part of the
Collateral (as hereinafter defined) to be transferred to or registered
in its name or in the name of its nominee.
(e) All properties in which Pledgee is herein granted a security
interest are hereinafter collectively referred to as the "Collateral."
Section 2. Obligations. This Agreement is made, and the security
interests created hereby are granted to Pledgee, to secure the following
Obligations (so called herein):
(a) Payment of the indebtedness evidenced by, and performance and
discharge of each and every covenant, condition, and agreement contained
in the Note, and any and all modifications, extensions, or renewals
thereof, whether hereafter evidenced by the Note or otherwise;
(b) The due and punctual payment of any costs and expenses incurred in
connection with the realization of the Collateral for which this
Agreement provides; and
(c) Performance and discharge of each and every obligation, covenant,
and agreement of Pledgor herein contained.
Section 3. Substituted Collateral. In the event that Pledgor, with the
prior written consent of Pledgee (such consent being hereby required),
substitutes other collateral acceptable to Pledgee in place and stead of all
or any of the Collateral pursuant to the terms and provisions hereof, upon the
delivery of such substituted collateral in pledge to Pledgee pursuant to a
security agreement or other instrument reasonably acceptable to Pledgee,
Pledgee will reassign and deliver to Pledgor the Collateral for which
substitution is being effected.
Section 4. Additional Collateral. Pledgor hereby agrees and acknowledges
that Borrower, of which Pledgor is the sole shareholder, has entered into an
agreement to acquire a majority of the outstanding capital stock of Beutot
S.A. ("Beutot"). As additional security for the Obligations hereunder, Pledgor
hereby covenants and agrees that following the consummation of Borrower's
acquisition of a controlling interest in Beutot, Pledgor shall cause the
Borrower to have Beutot execute and deliver to Borrower a security agreement
substantially in the form attached hereto as Exhibit "A" hereto, granting to
Borrower, among other things, a security interest in the Collateral (as
therein defined) as security for any loans or other extensions of credit made
by the Borrower to Beutot.
Section 5. Representations and Warranties of Pledgor.
(a) Pledgor represents and warrants to Pledgee and agrees that it owns
and at all times will own, except with respect to one (1) disclosed
potential sale of Pledged Shares, the Collateral from time to time
pledged hereunder, free and clear of any mortgage, pledge, lien, charge
or undisclosed encumbrance, except for the lien created hereby or any
other lien created against the Collateral in favor of Pledgee, and that
this Agreement constitutes and at all times will constitute a first,
prior and valid security interest in the Collateral pledged hereunder,
enforceable in accordance with its terms. Pledgor, at its expense, will
warrant and defend the title to the Collateral against the claims of all
third parties, except for claims, if any, known to Pledgee at the date
hereof but not disclosed to Pledgor at or prior to the date hereof, and
will execute and deliver all such further instruments, and take all such
further action as from time to time may be requested by Pledgee,
reasonably necessary in order to better assure and confirm the rights of
Pledgee to all or any part of the Collateral, to maintain the lien or
security interest created by this Agreement thereon as a valid and
perfected security interest, to facilitate the carrying out of this
Agreement, and to secure the rights and remedies of Pledgee.
(b) Pledgor further warrants and represents that it has full power and
lawful authority to sell, transfer and assign the Collateral to Pledgee
and to grant Pledgee a first, prior and valid security interest therein
as herein provided, and the execution and delivery and the performance
hereof are not in contravention of any indenture, agreement or
undertaking to which Pledgor is a party or by which Pledgor is bound.
Section 6. Voting and Other Rights.
(a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing, Pledgor may exercise all voting and other
rights in respect of the Collateral, providing that Pledgor shall not
exercise any of such rights in a manner which would be inconsistent with
the terms of this Agreement, or any other agreement, document or
instrument executed and delivered pursuant hereto, or which would
otherwise have the effect of impairing the value of the Collateral.
(b) Upon the occurrence of an Event of Default, all voting rights of
Pledgor shall cease and Pledgee shall, without notice, have the sole and
exclusive right to exercise all voting and other rights with respect to
the Collateral as if it were the absolute owner thereof. In order to
facilitate Pledgee's exercise of such voting and other rights, Pledgor
shall, if necessary, upon the written request of Pledgee, from time to
time execute and deliver to Pledgee appropriate proxies.
(c) So long as no Event of Default shall have occurred and be
continuing, all cash dividends and other cash distributions attributable
to the Pledged Shares shall belong to Pledgor.
Section 7. Events of Default. The happening of any one of the following
events (hereinafter called "Events of Default") shall constitute a default
hereunder:
(a) failure to meet or perform any of the Obligations;
(b) the breach of any representation or warranty made in this Agreement,
the Note, or that certain Stock Purchase Option. dated of even date
herewith (the "Option"), by and between Pledgor and Pledgee; or in any
certificate or instrument or agreement furnished by Borrower or Pledgor
pursuant to this Agreement or the Note.
(c) failure to duly observe or perform any covenant, condition or
agreement of Borrower or Pledgor, as applicable, pursuant to the terms
of this Agreement, the Note or the Option, as applicable; or
(d) the filing of a petition of bankruptcy or for receivership, whether
voluntary or involuntary, an assignment for the benefit of creditors,
the consenting to or suffering of an appointment of a receiver or
trustee for any substantial part of the assets that is not vacated
within 30 days, or the consenting to or suffering of an attachment or
execution upon any substantial part of the assets of Borrower or
Pledgor, that is not released or satisfied within 30 days on behalf of
Borrower or Pledgor, as applicable.
Section 8. Remedies. If an Event of Default shall have occurred, all
Obligations shall become immediately due and payable, and Pledgee shall be
entitled to all rights and remedies available to it under the law of the State
of Oklahoma or otherwise available to him. If any notification of intended
disposition of any of the Collateral is required by law, such notification, if
mailed, shall be deemed reasonably and properly given if mailed at least five
(5) business days before such disposition (unless a longer notice period is
required by law), postage prepaid, addressed to Pledgor, at the address shown
below. Any proceeds of any disposition of Collateral shall be applied by
Pledgee first to the payment of costs and expenses incurred in connection with
the Collateral, including reasonable attorneys' fees and legal expenses, then
toward the payment of the Obligations, and any balance of such proceeds shall
be paid by Pledgee to Pledgor. All rights and remedies of Pledgee expressed
hereunder are in addition to all other rights and remedies possessed by him,
including those under any other agreement or instrument relating to any of the
Obligations or security therefor. No action of Pledgee permitted hereunder
shall impair or affect the rights of Pledgee in and to the Collateral.
Section 9. No Waiver.
(a) No delay or failure to exercise, on the part of Pledgee, any right,
power, or privilege hereunder or under any other agreement (or under any
other instrument contemplated hereby or thereby) shall constitute a
waiver thereof, nor shall any single or partial exercise of any other
right, power, or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The remedies herein provided are cumulative and are not
exclusive of each other or any other remedies provided by law or
otherwise available to Pledgee.
(b) Nothing in this Agreement shall be deemed a waiver or prohibition of
Pledgee's right of counterclaim, offset or lien, or a waiver or release
of any collateral security, guaranty, or (except to the extent expressly
provided herein) other right or power now or hereafter held or
enforceable by or available to Pledgee.
Section 10. Attorney-in-Fact. Pledgor hereby constitutes and appoints
Pledgee, the attorney-in-fact of Pledgor for the purposes of carrying out the
provisions of this Agreement and taking any action and executing any
instrument which Pledgee may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest.
Section 11. Termination. This Agreement shall terminate upon the payment
and performance in full of all the Obligations and delivery of the Collateral
by Pledgee as hereinabove provided.
Section 12. Notices. All notices, written directions and other
communications hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, return receipt requested, postage and
fees prepaid, first class mail:
To Pledgee:
LSB Chemical Corp.
16 S. Pennsylvania
Oklahoma City, OK
U.S.A. 73107
Attention: Mr. Barry Golsen
To Pledgor:
Dr. Hauri AG
Hebelweg 1
5001 Aarau/Switzerland
Attention: Managing Director or President
Any party hereto may change the address designated for mailing by written
notice to the other party. Notices shall be deemed to be given when delivered
in person, or if placed in the mail as aforesaid, then five (5) days
thereafter.
Section 13. Miscellaneous.
(a) Neither this Agreement nor any provision hereof may be amended,
modified, waived, discharged or terminated orally nor may any of the
Collateral be released other than as provided in this Agreement, except
by an instrument in writing duly signed by or on behalf of all of the
parties hereto.
(b) The Section headings used herein are for convenience of reference
only and shall not define or limit the provisions of this Agreement.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Oklahoma, exclusive of its laws with respect to
conflict of laws. Wherever possible each such 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 such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement. Pledgor agrees that
any suit, action or proceeding with respect to this Agreement or the
pledge of the Collateral, any amendments or replacements hereof or
thereof may be brought in the state courts of, or the federal courts in,
the State of Oklahoma, and Pledgor hereby irrevocably consents and
submits to the jurisdiction of such courts for the purpose of any such
suit, action or proceeding.
(d) This Agreement may not be assigned by Pledgor without the prior
written consent of Pledgee. Subject to the preceding sentence, this
Agreement and the terms, covenants and conditions hereof, shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LSB CHEMICAL CORP.
By: /s/ Barry H. Golsen
________________________
Its: VP
________________________
DR. HAURI AG
By:
________________________
Its:
________________________
beutot\pledge
STOCK PURCHASE OPTION
This Stock Purchase Option Agreement (the "Agreement"), dated as of June
15, 1994, by and between Dr. Hauri AG, a corporation formed under the laws of
Switzerland (the "Grantor"), and LSB Chemical Corp., an Oklahoma corporation
(the "Grantee"), sets forth the terms pursuant to which the Grantor grants to
the Grantee an option to purchase (the "Option"), within the option period set
forth herein, up to 100% of the issued and outstanding common stock, FF 100
par value per share (the "Covered Shares"), of Compagnie Financiere du
Tararois, an SARL formed under the laws of the Republic of France (the
"Company"). In consideration of the payment by the Grantee to the Grantor of
US$10 and of the premises and the mutual and dependent promises hereinafter
set forth. the parties hereto agree as follows:
1. Option to Purchase Covered Shares. Subject to the terms and conditions
of this Agreement, the Grantor hereby grants to the Grantee the Option to
purchase the Covered Shares. Such Option shall be exercisable by the Grantee,
in whole or in part, at any time during the period beginning upon the earlier
of (i) June 15, 1995, or (ii) the occurrence of a Triggering Event (as herein
defined), and ending on June 15, 1999 (the "Exercise Period"). The term
Triggering Event as used herein shall mean any one or more of the following:
(a) The occurrence of a default as defined in Section 7 of that
certain Pledge Agreement, dated of even date herewith, pursuant to which
the Grantor has granted to the Grantee a pledge of, and security
interest in, the Covered Shares as security for the payment of the
obligations therein set forth; and
(b) The transfer of ownership of twenty-five (25%) percent or
more of the outstanding voting equity of the Grantor without the prior
consent of the Grantee; the loss by the Grantor of its legal status as a
corporation; or the loss by Grantor of its legal right or corporate
power to perform its obligations under this Option.
2. Purchase Price. The aggregate purchase price for the Covered
Shares shall be equal to FRF 750,000 (the "Purchase Price"), unless otherwise
agreed to by the parties.
3. Payment of Purchase Price. The entire Purchase Price shall be
payable at the Closing (as herein defined) by certified or bank cashier's
check, made payable to the Grantor, forgiveness of indebtedness, or in such
other manner as shall be mutually agreed upon by the parties hereto.
4. Notice of Exercise; Closing. The Grantee may exercise the Option
at any time during the Exercise Period by providing notice to of its intention
to do so to the Grantor. The Closing (so called herein) of the sale and
purchase of the Covered Shares shall occur at the time and place and in the
manner specified by Grantee. At Closing, the Grantor shall deliver to the
Grantee, or its authorized representative, a certificate representing the
Covered Shares, which shall be registered in the name of the Grantee, or its
nominee, against payment therefor by the Grantee in the amount of the Purchase
Price.
5. Representations and Warranties of the Grantor. The Grantor hereby
represents and warrants to the Grantee that:
(a) The Company is a corporation duly incorporated, validly existing
and is in good standing under the laws of the Republic of France.
(b) The capital stock of the Company consists of five thousand (5,000)
shares of common stock, FRF 100 par value per share, of which the
Covered Shares represent one hundred percent (100%) of the issued and
outstanding shares. The Covered Shares have been duly authorized and are
validly issued, fully paid and non-assessable; and the Grantor is the
lawful owner of record and beneficially of the Covered Shares, free and
clear of all security interests, liens, undisclosed encumbrances, claims
and equities of every kind other than the liens and security interests
created hereunder.
(c) This Agreement has been duly authorized by all necessary corporate
action of the Grantor, has been duly executed and delivered by the
Grantor, and is a legal, valid and binding obligation of the Grantor
enforceable in accordance with its terms. Delivery of the Covered Shares
at the Closing in accordance with this Agreement will vest good title to
the Covered Shares in the Grantee, free and clear of all security
interests, liens, encumbrances, claims and equities of every kind.
(d) The Company has not been actively engaged in any business activity
prior to the date of this Agreement and has no liabilities of any kind,
whether contingent or otherwise.
6. Conditions of Closing. Upon the exercise of the option, the
obligation of the Grantee to purchase and pay for the Covered Shares shall be
subject, at the option of the Grantee, to the following conditions:
(a) The representations and warranties of the Grantor set forth in
Section 5 shall have been true when made and shall be true at the
Closing as if made again on such date, except that the representations
made in subparagraph (d) of Section 5 shall be modified but only to the
extent necessary to give effect to the acquisition by the Company of a
majority of the capital stock of Beutot SA ("Beutot") contemplated by
that certain Stock Purchase Agreement (so called herein), dated
________________, pursuant to which the Company shall acquire the
capital stock of Beutot;
(b) Neither the Company nor any of its subsidiaries shall have entered
into any undisclosed material transaction, contract or agreement, of a
type requiring the approval of its or their shareholders or boards or
directors, as applicable, except (i) the acquisition of Beutot pursuant
to the Stock Purchase Agreement and (ii) transactions entered in the
ordinary course of business; and
(c) The Company shall not have amended its Certificate of
Incorporation or Bylaws, or other documents performing similar function
under the laws of France, except for the amendment to the Company's
Certificate of Incorporation or similar document required by Section 8
hereof.
7. Covenants of the Company. The Grantor hereby covenants and agrees
with the Grantee as follows:
(a) The Grantor, as the sole shareholder of the Company, shall cause
the Company to include in its Certificate of Incorporation (or similar
establishment document) a provision to restrict the Company's corporate
powers in such a fashion as to prohibit the Company from engaging in any
line of business other than the acquisition of Beutot and the HVAC
business generally.
(b) Except as set forth in subparagraph (a) of this Section 7, the
Grantor shall cause the Company not to undertake, and, as the sole
shareholder of the Company, the Grantor shall not approve, (i) any
amendment to the Certificate of Incorporation or Bylaws or similar
establishment documents of the Company; (ii) any agreement or
understanding to acquire, or be acquired by, any other entity or
business enterprise, whether by merger, consolidation, purchase or sale
of assets, or purchase or sale of stock, other than the acquisition of
Beutot pursuant to the Stock Purchase Agreement; (iii) the issuance of
any authorized but unissued shares of the capital stock of the Company
or any series thereof; (iv) the incurrence of any material indebtedness
or liability; or (v) any other undisclosed action that might have a
material adverse affect on financial condition, results of operations,
or the nature of the business currently engaged in by the Company (and
upon its acquisition, Beutot).
8. Communications. All communications provided for herein shall be
deemed sufficiently given if in writing and either personally delivered, or
sent by certified or registered mail, postage prepaid, addressed to the party
at the address set forth below, or at such other address as the party may
subsequently designate:
(a) LSB Chemical Corp.
16 S. Pennsylvania
Oklahoma City, OR 73107
Attention: Barry Golsen
(b) Dr. Hauri AG
Hebelweg 1
5001 Aarau/Switzerland
Attention: Managing Director or President
9. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements of the Grantor and the
Grantee contained in this Agreement shall survive the delivery of the Covered
Shares to the Grantee and shall continue to have full force and effect
thereafter.
10. No Assignment; Successors. Neither party may assign this Agreement
without the written consent of the other except that the Grantee may, without
such consent, assign all of its rights and obligations hereunder to any other
company that controls, is controlled by or is under common control with the
Grantee.
11. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions hereof shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
12. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one agreement.
16. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Oklahoma, exclusive of its laws
with respect to conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives as of the date first
above written.
GRANTEE:
LSB CHEMICAL CORP.
By: /s/ Barry H. Golsen VP
_____________________________
Printed Name
Its:_____________________________
GRANTOR:
Dr. HAURI AG
By: _____________________________
Its:_____________________________
BEUTOT\STK.OPT
IHS:\K-M\LSB\10K\EXH-SPA.WP5
Exhibit 4.12
LOAN AND SECURITY AGREEMENT
by and between
BANKAMERICA BUSINESS CREDIT, INC.
as Lender
and
LSB INDUSTRIES, INC.
as Borrower
Dated: December 12, 1994
TABLE OF CONTENTS
SECTION
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . .-i-
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 As used herein:. . . . . . . . . . . . . . . . . . . . . . . 1
Account . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Account Debtor. . . . . . . . . . . . . . . . . . . . . . . 1
Account Loans . . . . . . . . . . . . . . . . . . . . . . . 1
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjusted Tangible Assets. . . . . . . . . . . . . . . . . . 2
Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 2
Aggregate LSB Gross Availability. . . . . . . . . . . . . . 2
Availability. . . . . . . . . . . . . . . . . . . . . . . . 2
Availability Reductions . . . . . . . . . . . . . . . . . . 3
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrower Subsidiaries . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Expenditures. . . . . . . . . . . . . . . . . . . . 3
Capital Lease . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . 3
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Distribution. . . . . . . . . . . . . . . . . . . . . . . . 4
Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 4
Eligible Inventory. . . . . . . . . . . . . . . . . . . . . 7
Environmental Compliance Reserve. . . . . . . . . . . . . . 7
Environmental Laws. . . . . . . . . . . . . . . . . . . . . 8
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 8
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Eurocurrency Liabilities. . . . . . . . . . . . . . . . . . 8
Eurodollar Business Day . . . . . . . . . . . . . . . . . . 8
Eurodollar Base Rate. . . . . . . . . . . . . . . . . . . . 8
Eurodollar Interest Payment Date. . . . . . . . . . . . . . 9
Eurodollar Interest Rate Determination Date . . . . . . . . 9
Eurodollar Rate . . . . . . . . . . . . . . . . . . . . . . 9
Eurodollar Rate Loan. . . . . . . . . . . . . . . . . . . . 9
Eurodollar Rate Reserve Percentage. . . . . . . . . . . . . 9
Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Event of Default. . . . . . . . . . . . . . . . . . . . . . 9
Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Statements. . . . . . . . . . . . . . . . . . . . 9
Fiscal Quarter. . . . . . . . . . . . . . . . . . . . . . . 9
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 9
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gross Availability Reductions . . . . . . . . . . . . . . . 10
Gross LSB Accounts Availability . . . . . . . . . . . . . . 10
Guarantor Subsidiaries. . . . . . . . . . . . . . . . . . . 10
Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Industrial Division Guarantor Subsidiaries. . . . . . . . . 10
Intercompany Accounts . . . . . . . . . . . . . . . . . . . 10
Interest Period . . . . . . . . . . . . . . . . . . . . . . 10
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 10
Inventory Loans . . . . . . . . . . . . . . . . . . . . . . 11
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Latest Forecasts. . . . . . . . . . . . . . . . . . . . . . 11
Letter of Credit. . . . . . . . . . . . . . . . . . . . . . 11
Letter of Credit Agreement. . . . . . . . . . . . . . . . . 11
Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . 11
Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . 11
LSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
LSB Borrowing Group . . . . . . . . . . . . . . . . . . . . 11
LSB Consolidated Group. . . . . . . . . . . . . . . . . . . 11
LSB Eligible Accounts . . . . . . . . . . . . . . . . . . . 12
LSB-Related Loan Agreements . . . . . . . . . . . . . . . . 12
Maximum Inventory Advance Amount. . . . . . . . . . . . . . 12
Maximum Revolving Credit Line . . . . . . . . . . . . . . . 12
Minimum Borrowing Commitment. . . . . . . . . . . . . . . . 12
Multi-employer Plan . . . . . . . . . . . . . . . . . . . . 12
Obligations . . . . . . . . . . . . . . . . . . . . . . . . 12
Participating Lender. . . . . . . . . . . . . . . . . . . . 12
Patent and Trademark Assignments. . . . . . . . . . . . . . 12
Payment Account . . . . . . . . . . . . . . . . . . . . . . 13
PBGC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plan. . . . . . . . . . . . . . . . . . . . . . . . 13
Permitted Debt. . . . . . . . . . . . . . . . . . . . . . . 13
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . 13
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Property. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Proprietary Rights. . . . . . . . . . . . . . . . . . . . . 14
Public Authority. . . . . . . . . . . . . . . . . . . . . . 15
Real Property . . . . . . . . . . . . . . . . . . . . . . . 15
Receivables . . . . . . . . . . . . . . . . . . . . . . . . 15
Reference Rate. . . . . . . . . . . . . . . . . . . . . . . 15
Reference Rate Loan . . . . . . . . . . . . . . . . . . . . 16
Reference Rate Margin . . . . . . . . . . . . . . . . . . . 16
Related Company . . . . . . . . . . . . . . . . . . . . . . 16
Reportable Event. . . . . . . . . . . . . . . . . . . . . . 16
Restricted Investment . . . . . . . . . . . . . . . . . . . 16
Reversions. . . . . . . . . . . . . . . . . . . . . . . . . 16
Revolver Facility . . . . . . . . . . . . . . . . . . . . . 16
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 16
Security Interest . . . . . . . . . . . . . . . . . . . . . 16
Subordinated Debt . . . . . . . . . . . . . . . . . . . . . 17
Subsidiary" or "Subsidiaries. . . . . . . . . . . . . . . . 17
Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . 17
Termination Event . . . . . . . . . . . . . . . . . . . . . 17
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 17
1.3 Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . 17
1.4 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2. LOANS AND LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 18
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Availability Determination . . . . . . . . . . . . . . . . . 18
2.3 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . 18
3. INTEREST AND OTHER CHARGES . . . . . . . . . . . . . . . . . . . . 19
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Eurodollar Borrowings: Conversion or Continuation. . . . . . 20
3.3 Special Provisions Governing Eurodollar Rate Loans . . . . . 21
3.4 Maximum Interest Rate. . . . . . . . . . . . . . . . . . . . 24
3.5 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . 26
3.7 Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . 26
4. PAYMENTS AND PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 26
4.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Place and Form of Payments: Extension of Time. . . . . . . . 27
4.3 Apportionment, Application and Reversal of Payments. . . . . 27
4.4 INDEMNITY FOR RETURNED PAYMENTS. . . . . . . . . . . . . . . 27
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. . . . . . . . . . 28
6. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Grant of Security Interest . . . . . . . . . . . . . . . . . 28
6.2 Perfection and Protection of Security Interest . . . . . . . 29
6.3 Location of Collateral . . . . . . . . . . . . . . . . . . . 29
6.4 Title to, Liens on, and Sale and Use of Collateral . . . . . 30
6.5 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 Access and Examination . . . . . . . . . . . . . . . . . . . 30
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 Collateral Reporting . . . . . . . . . . . . . . . . . . . . 31
6.9 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.10 Collection of Accounts . . . . . . . . . . . . . . . . . . . 33
6.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.12 Documents and Instruments. . . . . . . . . . . . . . . . . . 34
6.13 Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . 34
6.14 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . 34
6.15 Lender's Rights, Duties, and Liabilities . . . . . . . . . . 35
6.16 Release of Collateral and Borrower . . . . . . . . . . . . . 35
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES. . . . . . . . . 36
7.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . 36
7.2 Financial Information. . . . . . . . . . . . . . . . . . . . 36
7.3 Notices to Lender. . . . . . . . . . . . . . . . . . . . . . 38
8. GENERAL WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . 39
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents . . . . . . . . . . . . . . 39
8.2 Validity and Priority of Security Interest . . . . . . . . . 39
8.3 Organization and Qualification . . . . . . . . . . . . . . . 40
8.4 Corporate Name; Prior Transactions . . . . . . . . . . . . . 40
8.5 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . . 40
8.6 Financial Statements and Projections . . . . . . . . . . . . 40
8.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 41
8.8 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.9 Title to Property. . . . . . . . . . . . . . . . . . . . . . 41
8.10 Real Property; Leases. . . . . . . . . . . . . . . . . . . . 41
8.11 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . 41
8.12 Trade Names and Terms of Sale. . . . . . . . . . . . . . . . 41
8.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.14 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . 42
8.15 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 42
8.16 No Violation of Law. . . . . . . . . . . . . . . . . . . . . 43
8.17 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.18 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.20 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 44
8.21 Private Offerings. . . . . . . . . . . . . . . . . . . . . . 44
8.22 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . 44
8.23 No Material Adverse Change . . . . . . . . . . . . . . . . . 44
8.24 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . . . 45
9.1 Taxes and Other Obligations. . . . . . . . . . . . . . . . . 45
9.2 Corporate Existence and Good Standing. . . . . . . . . . . . 45
9.3 Maintenance of Property and Insurance. . . . . . . . . . . . 45
9.4 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 45
9.5 Mergers, Consolidations, Acquisitions, or Sales. . . . . . . 46
9.6 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.7 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.8 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.9 Transactions with Affiliates . . . . . . . . . . . . . . . . 46
9.10 Plans and Compensation . . . . . . . . . . . . . . . . . . . 47
9.11 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 47
9.14 Distributions and Restricted Investments . . . . . . . . . . 47
9.15 Capital Expenditures . . . . . . . . . . . . . . . . . . . . 48
9.16 Adjusted Tangible Net Worth. . . . . . . . . . . . . . . . . 48
9.17 Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.18 Further Assurances . . . . . . . . . . . . . . . . . . . . . 49
10. CLOSING; CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 49
10.1 Representations and Warranties; Covenants; Events. . . . . . 49
10.2 Delivery of Documents. . . . . . . . . . . . . . . . . . . . 49
10.3 Aggregate LSB Gross Availability . . . . . . . . . . . . . . 49
10.4 Termination of Liens . . . . . . . . . . . . . . . . . . . . 49
10.5 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 50
10.6 Required Approvals . . . . . . . . . . . . . . . . . . . . . 50
10.7 No Material Adverse Change . . . . . . . . . . . . . . . . . 50
10.8 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 50
10.9 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 50
10.10 September 30, 1994 Quarterly Financial Statements. . . 50
10.11 Repurchase of Accounts from Prime. . . . . . . . . . . 50
10.12 Conditions Precedent to Each Loan. . . . . . . . . . . 50
11. DEFAULT; REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 51
11.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . 51
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 54
13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.1 Cumulative Remedies; No Prior Recourse to Collateral . . . . 55
13.2 No Implied Waivers . . . . . . . . . . . . . . . . . . . . . 55
13.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . 55
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 56
13.5 Consent to Jurisdiction and Venue; Service of Process;
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . 56
13.6 Survival of Representations and Warranties . . . . . . . . . 57
13.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 57
13.8 Other Security and Guaranties. . . . . . . . . . . . . . . . 58
13.9 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . 58
13.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . 59
13.11 Waiver of Notices. . . . . . . . . . . . . . . . . . . 60
13.12 Binding Effect; Assignment; Disclosure . . . . . . . . 60
13.13 Modification . . . . . . . . . . . . . . . . . . . . . 60
13.14 Counterparts . . . . . . . . . . . . . . . . . . . . . 60
13.15 Captions . . . . . . . . . . . . . . . . . . . . . . . 60
13.16 Right of Set-Off . . . . . . . . . . . . . . . . . . . 60
13.17 Participating Lender's Security Interests. . . . . . . 61
13.18 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 61
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated December 12, 1994, and is
entered into by and between BANKAMERICA BUSINESS CREDIT, INC., a Delaware
corporation, with offices at Two North Lake Avenue, Suite 400, Pasadena,
California 91101 (the "Lender"), and LSB INDUSTRIES, INC., a Delaware
corporation, with offices at 16 South Pennsylvania, Oklahoma City, Oklahoma
73107 (the "Borrower" or "LSB").
W I T N E S S E T H
WHEREAS, the Borrower has requested the Lender to make available to the
Borrower a revolving line of credit for loans and letters of credit in an
amount not to exceed the Maximum Credit Facility as defined herein, which
extensions of credit the Borrower will use (i) in part to repay certain of
Borrower's obligations, and (ii) for Borrower's working capital needs and
general business purposes; and
WHEREAS, of even date herewith, Lender has entered into five (5) related
loan transactions with certain other Subsidiaries of LSB (which, along with
Borrower, are referred to as the "Borrower Subsidiaries"); and
WHEREAS, Lender has agreed to make loans and letters of credit available
to Borrower based on certain assets of the Borrower and thirteen (13) of
Borrower's other Subsidiaries (the "Guarantor Subsidiaries"), which is secured
by guaranties of the Guarantor Subsidiaries, and Borrower has represented to
Lender that Borrower will, in turn, make such loans and letters of credit
available to the Guarantor Subsidiaries; and
WHEREAS, the aggregate amount of all loans to be made by Lender to the
Borrower Subsidiaries will not exceed Sixty-Five Million and No/100 Dollars
($65,000,000);
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. DEFINITIONS.
1.1 As used herein:
"Account" means the Borrower's or any Guarantor Subsidiary's right
to payment for a sale or lease and delivery of goods or rendition of
services.
"Account Debtor" means each Person obligated to the Borrower or
any Guarantor Subsidiary on an Account.
"Account Loans" means Loans based on Eligible Accounts.
"Acquisition" means the investment in or purchase of a
corporation, association, business, entity, partnership or limited
liability company by any of the LSB Borrowing Group by means of the
purchase of stock, assets, memberships, partnership interests or
otherwise.
"Adjusted Tangible Assets" means all of the assets of the LSB
Consolidated Group, on a consolidated basis, except: (a) goodwill; (b)
unamortized debt discount and expense; (c) assets constituting
Intercompany Accounts; and (d) fixed assets to the extent of any
write-up in the book value thereof resulting from a revaluation
effective after the Closing Date.
"Adjusted Tangible Net Worth" means, at any date: (a) the book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with
GAAP) at which the Adjusted Tangible Assets would be shown on a
consolidated balance sheet of the LSB Consolidated Group at such date
prepared in accordance with GAAP less (b) the amount at which the LSB
Consolidated Group's liabilities would be shown on such balance sheet
prepared in accordance with GAAP.
"Affiliate" means: a Person who, directly or indirectly,
controls, is controlled by or is under common control with LSB. The
term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
the Person in question.
"Aggregate LSB Gross Availability" means the sum of the amounts
calculated as "Availability" under all of the LSB-Related Loan
Agreements without taking into account the Gross Availability
Reductions.
"Availability" means at any time the lesser of:
A. The Maximum Revolving Credit Line; or
B. The sum of:
(1) eighty-five percent (85%) of the value of Eligible
Accounts other than Eligible Accounts of the
Industrial Division Guarantor Subsidiaries, plus
eighty percent (80%) of the Eligible Accounts of the
Industrial Division Guarantor Subsidiaries ("Accounts
Availability"), plus
(2) the lesser of (a) the Maximum Inventory Advance Amount
or (b) sixty percent (60%) of the value of Eligible
Inventory; less
(3) the Availability Reductions; or
C. Six Million Dollars ($6,000,000) less the Availability
Reductions.
"Availability Reductions" means the following amounts which reduce
Availability:
(i) the unpaid balance of outstanding Revolving Loans at
such time;
(ii) one hundred percent (100%) of the aggregate undrawn
face amount of all outstanding Letters of Credit at such time and
the aggregate outstanding amount of all acceptances at such time
which the Lender has, or has caused to be, issued or obtained for
Borrower's account;
(iii) reserves for accrued interest on the Revolving Loans
which is past due;
(iv) the Environmental Compliance Reserve (Note: There is
no Environmental Compliance Reserve as of the Closing Date); and
(v) all other reasonable reserves which the Lender in its
reasonable discretion deems necessary or desirable to maintain
with respect to Borrower's account, including, without limitation,
any amounts which the Lender could reasonably be obligated to pay
within a six-month period for the account of Borrower.
"Bank" means Bank of America National Trust and Savings
Association in San Francisco, California.
"Borrower Subsidiaries" means LSB, L&S Bearing Co., El Dorado
Chemical Company, Slurry Explosive Corporation, Climate Master, Inc.,
International Environmental Corporation and Summit Machine Tool
Manufacturing Corp.
"Business Day" means any day that is not a Saturday, Sunday, or
day on which banks in Los Angeles, California are required or permitted
to close.
"Capital Expenditures" means all costs incurred, whether payable
in the Fiscal Year incurred or thereafter, (including financing costs
required to be capitalized under GAAP) for purchases made during a
Fiscal Year for any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than
one year, including, without limitation, those costs arising in
connection with the direct or indirect acquisition of such assets by way
of increased product or service charges or offset items or in connection
with Capital Leases.
"Capital Lease" means any lease of Property that, in accordance
with GAAP, should be reflected as a liability on a Person's balance
sheet.
"Closing Date" means the date of this Agreement, being the date
first above written.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 6.1.
"Debt" means all liabilities, obligations and indebtedness of the
Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, as would be shown on the balance sheet of the
Borrower prepared in accordance with GAAP.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of Property in
respect of capital stock of such corporation, other than distributions
in capital stock; and (b) the redemption or other acquisition of any
capital stock of such corporation
"Dollars" and "$" means lawful money of the United States of
America.
"Eligible Accounts" means all Accounts of Borrower and each
Guarantor Subsidiary which are not ineligible. Accounts shall be
ineligible as the basis for Revolving Loans based on the following
criteria. Eligible Accounts shall not include any Account:
(i) where such Account is "Past Due". For the purposes of
this provision, "Past Due" means: (a) where the Account has terms
of payment of less than ninety-one (91) days from the invoice
date, the payment thereof is more than 90 days past due; and (b)
where the Account has terms of payment of ninety-one to three
hundred sixty (91 to 360) days from the Invoice Date, the payment
thereof is more than 30 days past due; notwithstanding the
foregoing all advances to Borrower and the other Borrower
Subsidiaries with respect to "eligible accounts" under the LSB-
Related Loan Agreements that have terms of payment of more than
one hundred eighty (180) days (the "180-Day Accounts") shall not
exceed in the aggregate at any time the lesser of (i) $1,500,000
or (ii) five percent (5%) of the Gross LSB Accounts Availability
(without taking into account the 180-Day Accounts);
(ii) where, with respect to such Account, any of the
representations, warranties, covenants and agreements contained in
Sections 6.9 and 8.2 of this Agreement are not or have ceased to
be complete and correct or have been breached;
(iii) where such Account represents a progress billing or as
to which the Borrower or a Guarantor Subsidiary has extended the
time for payment after issuance of the invoice relating to such
Account. For the purpose hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a
contract or agreement pursuant to which the Account Debtor's
obligation to pay such invoice is expressly conditioned upon the
completion by Borrower or the applicable Guarantor Subsidiary of
any further performance under the contract or agreement, provided,
however, that performance required under a warranty claim or
provision shall not make such Account a "progress billing";
(iv) where Borrower or a Guarantor Subsidiary has become
aware that any one or more of the following events has occurred
with respect to an Account Debtor on such Account: death or
judicial declaration of incompetency of an Account Debtor who is
an individual; the filing by or against the Account Debtor of a
request or petition for liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of
the United States, any state or territory thereof, or any foreign
jurisdiction, now or hereafter in effect; the making of any
general assignment by the Account Debtor for the benefit of
creditors; the appointment of a receiver or trustee for the
Account Debtor or for any of the assets of the Account Debtor; the
institution by or against the Account Debtor of any other type of
insolvency proceeding (under the bankruptcy laws of the United
States or otherwise) or of any formal or informal proceeding for
the dissolution or liquidation of, or winding up of affairs of,
the Account Debtor; the sale, assignment, or transfer of all or
any material part of the assets of the Account Debtor; or the
cessation of the business of the Account Debtor as a going
concern;
(v) where an Account is not a valid, legally enforceable
obligation of the Account Debtor thereunder or is subject to
offset, counterclaim or other defenses on the part of such Account
Debtor denying liability thereunder in whole or in part (provided,
however, that claims under or relating to any warranty issues or
claims by an Account Debtor as a result of the Borrower or a
Guarantor Subsidiary purchasing products or supplies or having
received services from such Account Debtor shall not render an
Account ineligible);
(vi) where the Borrower or a Guarantor Subsidiary does not
have good and marketable title to such Account, free and clear of
all Liens, other than Liens arising under this Agreement and the
documents delivered in connection herewith;
(vii) which is owed by an Account Debtor which: (i) does not
maintain its chief executive office in the United States or
territory thereof or Canada; or (ii) is not organized under the
laws of the United States or any state or territory thereof or
Canada; or (iii) is the government of any foreign country or any
state, province, municipality or other political subdivision
thereof (all of the foregoing being referred to as "Foreign
Accounts"); except that, to the extent that such Foreign Accounts
are secured or payable by letters of credit or bank guarantees
reasonably acceptable to Lender, such Foreign Accounts shall be
considered Eligible Accounts. Notwithstanding the foregoing,
Lender has agreed that Foreign Accounts, if they otherwise meet
all eligibility requirements, will be Eligible Accounts even
though such Foreign Accounts are not secured or payable by letters
of credit or bank guaranties reasonably acceptable to Lender up to
an amount not to exceed at any one time more than five percent
(5%) of the Gross LSB Accounts Availability (without taking into
account such Foreign Accounts);
(viii) which is owed by an Account Debtor which is an
Affiliate;
(ix) which is owed by the government of the United States
of America, or any department, agency, or other instrumentality
thereof, unless the Federal Assignment of Claims Act of 1940, as
amended, or any other steps necessary to perfect the Lender's
Security Interest therein, have been complied with to the Lender's
reasonable satisfaction with respect to such Account;
(x) which is owed by any state or municipality, or any
department, agency, or other instrumentality thereof, and as to
which the Lender's Security Interest therein is not or cannot be
perfected;
(xi) which arises out of a sale to an Account Debtor on a
bill and hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis;
(xii) which is evidenced by a promissory note or other
instrument (unless such note or instrument is part of chattel
paper in which Lender has a first priority perfected Security
Interest) or by chattel paper (unless Lender has a first priority
perfected Security Interest therein);
(xiii) where the goods giving rise to such Account have
not been shipped and delivered to and accepted by the Account
Debtor (provided, however, that where the Account Debtor has
agreed in writing to accept billings for such goods, with a copy
of such writing being provided to Lender, then such Account shall
be an Eligible Account if it otherwise qualifies) or the services
giving rise to such Account have not been performed by the
Borrower or a Guarantor Subsidiary and accepted by the Account
Debtor; or
(xiv) if Lender believes in its reasonable credit judgment
that the prospect of collection of such Account is impaired; or
(xv) which Account is owing from an Account Debtor in which
fifty percent (50%) or more of the Accounts owing from whom are
Past Due as set forth in subsection (i) of this definition of
Eligible Accounts; or
(xvi) as to which either the perfection, enforceability, or
validity of the Security Interest in such Account, or the Lender's
right or ability to obtain direct payment to the Lender of the
Proceeds of such Account, is governed by any federal, state, or
local statutory requirements other than those of the UCC; or
(xvii) with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, West Virginia or
any other state requiring the filing of a Business Activity Report
or similar document in order to bring suit or otherwise enforce
its remedies against such Account Debtor in the courts or through
any judicial process of such state, unless Borrower or the
Guarantor Subsidiary that owns such Account has qualified to do
business in New Jersey, Minnesota, West Virginia or such other
states, or has filed a Notice of Business Activities Report with
the applicable Division of Taxation, the Department of Revenue, or
with such other state offices, as appropriate, for the then
current year.
"Eligible Inventory" means Inventory valued at the lower of cost
or market on a "first in-first out" ("FIFO") basis that constitutes raw
materials (including raw materials stored or held by the Borrower or any
Guarantor Subsidiary in the work-in-progress area and fifty percent
(50%) of Inventory classified as components) and first quality finished
goods and that (a) is not obsolete or unmerchantable, and (b) upon which
the Lender has a first priority perfected Security Interest, and (c) the
Lender otherwise deems eligible as the basis for Revolving Loans based
on such other credit and collateral considerations as the Lender may
from time to time establish in its reasonable discretion. Without
intending to limit the Lender's discretion to establish other reasonable
criteria of eligibility, no work-in-progress (except as otherwise
provided above), service or spare parts, packaging, used parts, shipping
materials, supplies, containers, defective Inventory, Inventory
consisting of machines being rebuilt, Inventory acquired in trade in
connection with the sale of other Inventory, slow-moving Inventory,
Inventory in transit (except for Inventory in transit owned by Borrower
or any Guarantor Subsidiary, covered by insurance, and in which Lender
has a Security Interest), fifty percent (50%) of Inventory classified as
components, or Inventory delivered to Borrower on consignment shall
constitute Eligible Inventory. Except for Inventory in transit in which
Lender has a perfected Security Interest, Eligible Inventory shall not
include Inventory stored at locations other than those locations either
owned by the Borrower or a Guarantor Subsidiary or locations for which a
landlord's waiver acceptable to Lender or a consignment agreement (with
appropriate UCC filings) has been signed by the owner of such location
and delivered to Lender. In addition, the amount of all finished goods
reserves (excluding reserves for "last-in-first-out" valuation) shown on
the books of Borrower or any of the Guarantor Subsidiaries shall be
deducted from the value of the Eligible Inventory as used in computing
Availability, except to the extent that any such reserve has already
been taken into account in connection with any of the above criteria.
"Environmental Compliance Reserve" means all reserves which the
Lender from time to time establishes for amounts that are liabilities
required to be paid by the Borrower or any Guarantor Subsidiary within
180 days in order to correct any violation by the Borrower or such
Guarantor Subsidiary or the operations or Property of Borrower or any
Guarantor Subsidiary with respect to Environmental Laws.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, and consent decrees relating to
hazardous substances, and environmental matters applicable to the
business and facilities of Borrower or any Guarantor Subsidiary (whether
or not owned by it). Such laws and regulations include but are not
limited to the Resource Conservation and Recovery Act, 42 U.S.C. section
6901 et seq., as amended; the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. section 9601 et seq., as
amended: the Toxic Substances Control Act, 15 U.S.C. section 2601 et
seq., as amended; the Clean Water Act, 33 U.S.C. section 466 et seq., as
amended; the Clean Air Act, 42 U.S.C. section 7401 et seq., as amended;
state and federal superlien and environmental cleanup programs; and U.S.
Department of Transportation regulations.
"Equipment" means, with respect to the Borrower and each Guarantor
Subsidiary, all of the now owned and hereafter acquired machinery,
equipment, furniture, furnishings, fixtures, and other tangible personal
property (except Inventory), including, without limitation, data
processing hardware and software, motor vehicles, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property
which are leased and all of the rights and interests with respect
thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes
for any of the foregoing, and all manuals, drawings, instructions,
warranties and rights with respect thereto wherever any of the foregoing
is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Business Day" means any Business Day in which
commercial banks are open for international business (including dealings
in dollar deposits) in London, England and Los Angeles, California.
"Eurodollar Base Rate" means, for any Interest Period, an interest
rate determined by the Lender to be the rate per annum at which deposits
in Dollars are offered to Bank in the London interbank market at 11:00
a.m. (London time) two (2) Business Days before the first day of such
Interest Period for delivery on the first day of such Interest Period in
an amount substantially equal to the Eurodollar Rate Loans requested for
such Interest Period and for a period equal to such Interest Period.
"Eurodollar Interest Payment Date" means the first day of each
month during any Interest Period and the last day of such Interest
Period.
"Eurodollar Interest Rate Determination Date" means each date of
calculating the Eurodollar Rate for purposes of determining the interest
rate with respect to an Interest Period. The Eurodollar Interest Rate
Determination Date for any Eurodollar Rate Loan shall be the second
Business Day prior to the first day of the related Interest Period for
such Eurodollar Rate Loan.
"Eurodollar Rate" means, for any Interest Period, a per annum
interest rate equal to the quotient of (a) the Eurodollar Base Rate for
such Interest Period, divided by (b) one hundred percent (100%) minus
the Eurodollar Rate Reserve Percentage for such Interest Period.
"Eurodollar Rate Loan" means a Revolving Loan during any period in
which it bears interest at the rate provided in Section 3.1(a)(ii), as
such amount may be adjusted pursuant to Section 3.1(b).
"Eurodollar Rate Reserve Percentage" for any Interest Period means
the reserve percentage applicable during such Interest Period (or if
more than one such percentage shall be so applicable, the daily average
of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for Bank with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Event" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Event of Default" has the meaning given to such term in Section
11.1.
"Facility Fee" has the meaning given to such term in Section 3.5.
"Financial Statements" means, according to the context in which it
is used, the financial statements attached hereto as Exhibit G-1, and
the Latest Forecasts attached hereto as Exhibit G-2, and any other
financial statements required to be given by the Borrower to the Lender
under this Agreement.
"Fiscal Quarter" means any three-month period ending March 31,
June 30, September 30 or December 31.
"Fiscal Year" means LSB's fiscal year for financial accounting
purposes. The current Fiscal Year of LSB will end on December 31, 1994.
"GAAP" means at any particular time generally accepted accounting
principles as in effect at such time.
"Gross Availability Reductions" means the sum of all "Availability
Reductions" under the LSB-Related Loan Agreements.
"Gross LSB Accounts Availability" means the sum of the amounts
calculated as "Accounts Availability" under all of the LSB-Related Loan
Agreements less any Reserves established with respect to any of the LSB
Eligible Accounts in accordance with the LSB-Related Loan Agreements.
"Guarantor Subsidiaries" means Universal Tech Corporation, LSB
Chemical Corp., L&S Automotive Products, Co. (f/k/a LSB Bearing Corp.),
International Bearing, Inc., LSB Extrusion Co., Rotex Corporation,
Tribonetics Corporation, Summit Machine Tool Systems, Inc., Hercules
Energy Manufacturing Corporation, Morey Machinery Manufacturing
Corporation, CHP Corporation, Koax Corp., and APR Corporation.
Individually the Guarantor Subsidiaries shall be referred to as
"Guarantor Subsidiary").
"Guaranty" by any Person means all obligations of such Person
which in any manner directly or indirectly guarantee the payment or
performance of any indebtedness or other obligation of any other Person
(the "guaranteed obligations"), or assure or in effect assure the holder
of the guaranteed obligations against the loss in respect thereof,
including, without limitation, any such obligations incurred through an
agreement, (a) to purchase the guaranteed obligations or any Property
constituting security therefor or (b) to advance or supply funds for the
purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition.
"Industrial Division Guarantor Subsidiaries" means Summit Machine
Tool Systems, Inc., Hercules Energy Manufacturing Corporation, and Morey
Machinery Manufacturing Corporation.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the
Borrower to, or which otherwise arise from any transaction by the
Borrower with, any Affiliate.
"Interest Period" means, with respect to each Eurodollar Rate Loan
the 90-day interest period applicable to such Eurodollar Rate Loan as
determined pursuant to Section 3.3(b).
"Inventory" means all of the Borrower's and each Guarantor
Subsidiary's now owned and hereafter acquired inventory, wherever
located, to be held for sale or lease, all raw materials,
work-in-process, finished goods, returned and repossessed goods, and
materials and supplies of any kind, nature or description which are or
might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such inventory, and all documents
of title or other documents representing them.
"Inventory Loans" means Loans based on Eligible Inventory.
"IRS" means the Internal Revenue Service or any successor agency.
"Latest Forecasts" means, (a) on the Closing Date and thereafter
until the Lender receives new forecasts pursuant to Section 8.6, the
forecasts of the Borrower's monthly financial condition, results of
operations, and cash flows through the year ending December 31, 1996,
attached hereto as Exhibit G-2; and (b) thereafter, the forecasts most
recently received by the Lender pursuant to Section 7.2.
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Agreement" has the meaning specified in Section
2.3.
"Letter of Credit Fee" means the commissions charged under the
Letter of Credit Agreement on the Outstanding Amount of each Letter of
Credit.
"Lien" means: any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute, or contract,
and including without limitation, a security interest, charge, claim, or
lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, or
conditional sale, or a lease, consignment or bailment for security
purposes.
"Loans" means, collectively, all loans and advances by the Lender
to or on behalf of the Borrower provided for in Article 2.
"Loan Documents" means this Agreement, the Letter of Credit
Agreement, the Patent and Trademark Assignments, the Subsidiary
Guaranties, the Collateral Assignment of Notes and Liens, and all other
agreements, instruments, and documents heretofore, now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, the Security Interest, or any other aspect
of the transactions contemplated by this Agreement, as the same may
hereafter be amended, modified, restated and/or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation, the
Borrower under this Agreement.
"LSB Borrowing Group" means the Borrower Subsidiaries and the
Guarantor Subsidiaries.
"LSB Consolidated Group" means LSB and all of its Subsidiaries,
including, but not limited to, the LSB Borrowing Group.
"LSB Eligible Accounts" means the then existing "Eligible
Accounts" of all of the Borrower Subsidiaries and the Guarantor
Subsidiaries under the LSB-Related Loan Agreements.
"LSB-Related Loan Agreements" means all of the following loan
agreements: (i) this Agreement; (ii) the Loan and Security Agreement
dated of even date herewith between Lender and L & S Bearing Co.; (iii)
the Loan and Security Agreement dated of even date herewith between
Lender, El Dorado Chemical Company and Slurry Explosive Corporation;
(iv) the Loan and Security Agreement dated of even date herewith between
Lender and Climate Master, Inc.; (v) the Loan and Security Agreement
dated of even date herewith between Lender and International
Environmental Corporation; and (vi) the Loan and Security Agreement
dated of even date herewith between Lender and Summit Machine Tool
Manufacturing Corp.
"Maximum Inventory Advance Amount" means, $32,500,000 less all
then outstanding loans, advances, and outstanding Letters of Credit
based on the Eligible Inventory of the LSB Borrowing Group under the
LSB-Related Loan Agreements.
"Maximum Revolving Credit Line" means Sixty-Five Million Dollars
($65,000,000) less the Gross Availability Reductions.
"Minimum Borrowing Commitment" means Five Million Dollars
($5,000,000).
"Multi-employer Plan" means a Plan which is described in Section
3(37) of ERISA.
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties and Debts owing by the
Borrower to the Lender, arising under this Agreement or any other Loan
Document, whether or not evidenced by any note, or other instrument or
document, whether arising from an extension of credit, opening of a
letter of credit, acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect, absolute or contingent, due or to
become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to the
Borrower hereunder or under another Loan Document. "Obligations"
includes, without limitation, all debts, liabilities, and obligations
now or hereafter owing from Borrower to Lender under or in connection
with the Letters of Credit and the Letter of Credit Agreement.
"Participating Lender" means any Person who shall have been
granted the right by the Lender to participate in the Loans and who
shall have entered into a participation agreement in form and substance
satisfactory to the Lender.
"Patent and Trademark Assignments" means the Patent Security
Agreement and the Trademark and Trade Names Security Agreement dated as
of the date hereof, executed and delivered by the Borrower to the Lender
to evidence and perfect the Lender's Security Interest in the Borrower's
present and future patents, trademarks, trade names and related licenses
and rights.
"Payment Account" means each blocked bank account, established
pursuant to Section 6.10, to which Proceeds of Accounts and other
Collateral are deposited or credited, and which is maintained in the
name of the Borrower on terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Pension Plan" means any employee benefit plan, including a
Multiemployer Plan, which is subject to Title IV of ERISA, where either
(a) the Plan is maintained by the Borrower or any Related Company; or
(b) Borrower or any Related Company contributes or is required to
contribute to it; or (c) Borrower or any Related Company has incurred or
may incur liability, including contingent liability, under Title IV of
ERISA, either to it, or to the PBGC with respect to it.
"Permitted Debt" means: (i) the Obligations; (ii) Debt set forth
in the most recent Financial Statements delivered to the Lender, or the
notes thereto; (iii) Debt incurred since the date of such Financial
Statements to finance Capital Expenditures permitted hereby; (iv) Debt
issued or assumed by Borrower in connection with an Acquisition
permitted under Section 9.14 hereof; (v) Debt resulting from a judgment
having been rendered against the Borrower that is being appealed by the
Borrower in good faith and in a timely manner, for which an adequate
reserve has been recorded on Borrower's books, and which is not fully
covered by insurance; (vi) Subordinated Debt; (vii) Debt resulting from
the refinancing of any other Permitted Debt as long as (a) such Debt
does not exceed the amount of the refinanced Debt, and (b) such Debt
does not result in payment acceleration of the refinanced Debt; (viii)
Debt resulting from trade payables and other obligations arising in the
ordinary course of business, (ix) other Debt not otherwise permitted by
this definition in an amount not to exceed $5,000,000 at any one time,
and (x) Debt of the Borrower to a member of the LSB Borrowing Group or
to an Affiliate in accordance with Section 9.9 hereof. Notwithstanding
the foregoing, Permitted Debt described in subsection (ix) of this
definition, when combined with Permitted Debt allowed under subsection
(ix) of the definition of Permitted Debt under all of the other LSB-
Related Loan Agreements, shall not exceed $5,000,000 at any one time.
"Permitted Liens" means: (a) Liens for taxes not yet payable or
Liens for taxes being contested in good faith and by proper proceedings
diligently pursued, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor on the applicable Financial Statements, and further provided
that, with respect to the Collateral, a stay of enforcement of any such
Lien is in effect; (b) Liens in favor of the Lender; (c) reservations,
exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions or
encumbrances affecting the Real Property; (d) Liens or deposits under
workmen's compensation, unemployment insurance, social security and
other similar laws, (e) Liens relating to obligations with respect to
surety, appeal bonds, performance bonds, bids, tenders and other
obligations of a like nature, (f) Liens existing as of the Closing Date
and granted after the date hereof in connection with the Equipment, Real
Property or other fixed assets, provided that such Liens attach only to
such Property and the proceeds thereof, and so long as the indebtedness
secured thereby does not exceed 100% of the fair market value of such
Property at the time of acquisition; (g) Liens on goods consigned to the
Borrower or a Guarantor Subsidiary or not owned by Borrower or a
Guarantor Subsidiary so long as such Lien attaches only to such goods
and so long as Lender has been given notice of such Lien, (h) mechanic,
materialmen and other like Liens arising in the ordinary course of
business securing obligations which are not overdue or are being
contested in good faith by appropriate proceedings and adequately
reserved against, (i) statutory Liens in favor of landlords, (j) Liens
against any life insurance policy or the cash surrender value thereof
which relate to borrowings incurred to finance the premiums made under
such policy; (k) Liens not to exceed $1,000,000 at any one time in
amounts secured, which are junior in priority to the Security Interest
and which arise or are placed inadvertently against the assets of
Borrower or any Guarantor Subsidiary and are removed within ten (10)
days from receipt of notice by the Borrower or such Guarantor Subsidiary
of such Lien; and (l) Liens reflected on Exhibit A hereto.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, Public Authority, or any other entity.
"Plan" means, individually and collectively, all Pension Plans,
all additional employee benefit plans as defined in Section 3(3) of
ERISA, and all other plans, programs, agreements, arrangements, and
methods of contribution or compensation providing any material
remuneration or benefits, other than the cash payment of wages or
salary, to any current or former employee(s) of the Borrower.
"Proceeds" means all products and proceeds of any Collateral, and
all proceeds of such proceeds and products, including, without
limitation, all cash and credit balances, all payments under any
indemnity, warranty, or guaranty payable with respect to any Collateral,
all proceeds of fire or other insurance, and all money and other
Property obtained as a result of any claims against third parties or any
legal action or proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of the Borrower's and each
Guarantor Subsidiary's now owned and hereafter arising or acquired:
licenses, franchises, permits, patents, patent rights, copyrights, works
which are the subject matter of copyrights, trademarks, trade names,
trade styles, patent and trademark applications and licenses and rights
thereunder, including without limitation those patents, trademarks and
copyrights set forth on Exhibit B hereto, and all other rights under any
of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and
all rights to sue for past, present, and future infringement of any of
the foregoing; inventions, trade secrets, formulae, processes,
compounds, drawings, designs, blueprints, surveys, reports, manuals, and
operating standards, goodwill, customer and other lists in whatever form
maintained, and trade secret rights, copyright rights, right in works of
authorship, and contract rights relating to computer software programs,
in whatever form created or maintained.
"Public Authority" means the government of any country or
sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or any department, agency, public
corporation or other instrumentality of any of the foregoing.
"Real Property" means all of Borrower's and Guarantor
Subsidiaries' rights, title, and interest in real property now owned or
hereafter acquired by Borrower or the Guarantor Subsidiaries, including,
without limitation, the real property more particularly described in
Exhibit H attached hereto, including all rights and easements in
connection therewith and all buildings and improvements now or hereafter
constructed thereon.
"Receivables" means all of the Borrower's and each Guarantor
Subsidiary's now owned or hereafter arising or acquired: Accounts
(whether or not earned by performance), including Accounts owed to the
Borrower by any of its Subsidiaries or Affiliates (but excluding
Accounts arising solely from the sale of Equipment, Real Property or
other fixed assets), together with all interest, late charges,
penalties, collection fees, and other sums which shall be due and
payable in connection with any Account; proceeds of any letters of
credit naming the Borrower or any Guarantor Subsidiary as beneficiary
except such letters of credit as are issued solely in connection with
the purchase or sale of Equipment, Real Property or other fixed assets;
contract rights, chattel paper, instruments, documents, general
intangibles (including, without limitation, choses in action, causes of
action, tax refunds, tax refund claims, Reversions and other amounts
payable to the Borrower or to a Guarantor Subsidiary from or with
respect to any Plan, rights and claims against shippers and carriers,
rights to indemnification and business interruption insurance), and all
forms of obligations owing to Borrower (including, without limitation,
obligations owing to the Borrower by its Subsidiaries and Affiliates);
guarantees and other security for any of the foregoing; and rights of
stoppage in transit, replevin, and reclamation; and other rights or
remedies of an unpaid vendor, lienor, or secured party.
"Reference Rate" means the per annum rate of interest publicly
announced from time to time by the Bank at its San Francisco, California
main office as its reference rate. It is a rate set by Bank based upon
various factors including Bank's costs and desired return, general
economic conditions, and other factors, and is used as a reference point
for pricing some loans; however, Bank may price loans at, above or below
the Reference Rate. Any change in the Reference Rate shall take effect
on the day specified in the public announcement of such change.
"Reference Rate Loan" means a Revolving Loan during any period in
which it bears interest at the rate provided in Section 3.1(a)(i).
"Reference Rate Margin" has the meaning specified in Section
3.1(a)(i).
"Related Company" means any member of any controlled group of
corporations including, or under common control with, Borrower (as
defined in Section 414(b) or (c) of the Code or Section 4001(a)(14) of
ERISA).
"Reportable Event" means, with respect to a Pension Plan, a
reportable event described in Section 4043 of ERISA or the regulations
thereunder, a withdrawal from a Plan described in Section 4063 of ERISA,
or a cessation of operations described in Section 4062(e) of ERISA.
"Restricted Investment" means any acquisition of Property by the
Borrower in exchange for cash or other Property, whether in the form of
an acquisition of stock, indebtedness or other obligation, or by loan,
advance, capital contribution, or otherwise, except the following: (a)
Property to be used in the business of Borrower or any of the Guarantor
Subsidiaries; (b) assets arising from the sale or lease of goods or
rendition of services in the ordinary course of business of the Borrower
or any of the Guarantor Subsidiaries; (c) direct obligations of the
United States of America, or any agency thereof, or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof;
(d) certificates of deposit maturing within one year from the date of
acquisition, bankers acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least $100,000,000;
and (e) commercial paper given the highest rating by a national credit
rating agency and maturing not more than 270 days from the date of
creation thereof.
"Reversions" means any funds which may become due to the Borrower
in connection with the termination of any Plan.
"Revolver Facility" means the credit facility hereunder consisting
of the provision for Revolving Loans and Letters of Credit.
"Revolving Loans" has the meaning specified in Section 2.1.
"Security Interest" means collectively the Liens granted by
Borrower and the Guarantor Subsidiaries to the Lender in the Collateral
pursuant to this Agreement or the other Loan Documents.
"Subordinated Debt" shall mean Debt that is unsecured and is
subordinated to the payment of the Obligations.
"Subsidiary" or "Subsidiaries" means any present or future
corporation or corporations of which LSB owns, directly or indirectly,
more than 50% of the voting stock.
"Subsidiary Guaranties" means the continuous guaranties of the
Obligations made by the Guarantor Subsidiaries in favor of the Lender
and delivered to the Lender pursuant to Section 10.2.
"Termination Event" means: (a) a Reportable Event (other than a
Reportable Event described in Section 4043 of ERISA which is not subject
to the provision for 30-day notice to the PBGC under applicable
regulations); or (b) the withdrawal of the Borrower or any Related
Company from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA with
respect to such Pension Plan; or (c) the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as
a termination under Section 4041 of ERISA; or (d) the institution of
proceedings by the PBGC to terminate or have a trustee appointed to
administer a Pension Plan; or (e) any other event or condition which
might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan, or
(f) the partial or complete withdrawal of Borrower or any Related
Company from a Multi-employer Plan, or (g) the withdrawal of Borrower
from any state workers' compensation system.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of Oklahoma or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the
issue of perfection of security interests.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
1.4 Exhibits. All references in this Agreement to Exhibits are,
unless otherwise specified, references to exhibits attached hereto, and all
such exhibits are hereby deemed incorporated herein by this reference.
2. LOANS AND LETTERS OF CREDIT.
2.1 Revolving Loans. The Lender shall, subject to the terms and
conditions set forth in this Agreement, and upon the Borrower's request from
time to time, make revolving loans (the "Revolving Loans") to the Borrower up
to the limits of the Availability. The Lender, in its discretion, may elect
to exceed the limits of the Availability on one or more occasions, but if it
does so, the Lender shall not be deemed thereby to have changed the limits of
the Availability or to be obligated to exceed the limits of the Availability
on any other occasion. If the unpaid balance of the Revolving Loans exceeds
the Availability (with Availability for this purpose determined as if the
amount of the Revolving Loans were zero), then the Lender may refuse to make
or otherwise restrict Revolving Loans on such terms as the Lender determines
until such excess has been eliminated. The Borrower may request Revolving
Loans either orally or in writing, provided, however, that each such request
with respect to Reference Rate Loans shall be made no later than 1:00 p.m.
(Los Angeles, California time). Each oral request for a Revolving Loan shall
be conclusively presumed to be made by a person authorized by the Borrower to
do so and the crediting of a Revolving Loan to the Borrower's deposit account,
or transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of the Borrower to repay such Revolving Loan. The
Lender will charge all Revolving Loans and other Obligations to a loan account
of the Borrower maintained with the Lender. All fees, commissions, costs,
expenses, and other charges due from the Borrower pursuant to the Loan Docu-
ments, and all payments made and out-of-pocket expenses incurred by Lender and
authorized to be charged to the Borrower pursuant to the Loan Documents, will
be charged as Revolving Loans to the Borrower's loan account as of the date
due from the Borrower or the date paid or incurred by the Lender, as the case
may be.
2.2 Availability Determination. Availability will be determined
by the Lender in accordance with the terms of this Agreement, each day on the
basis of such relevant information as the Lender deems appropriate to
consider, including the collateral summary reports and such other information
regarding the Accounts and the Inventory as the Lender shall obtain from the
Borrower.
2.3 Letters of Credit. The Lender will, subject to the terms
and conditions of this Agreement and the Letter of Credit Agreement as
hereafter defined, and upon the Borrower's request from time to time, cause
merchandise letters of credit (the "Merchandise L/C's") or standby letters of
credit (the "Standby L/C's") to be issued for the Borrower's account (the
Merchandise L/C's and the Standby L/C's being referred to collectively as the
"Letters of Credit"). The Lender will not cause to be opened any Letter of
Credit if: (a) the maximum face amount of the requested Letter of Credit,
plus the aggregate undrawn face amount of all outstanding Letters of Credit
under this Agreement and the other LSB-Related Loan Agreements, would exceed
Eleven Million and No/100 Dollars ($11,000,000); or (b) the maximum face
amount of the requested Letter of Credit, and all commissions, fees, and
charges due from Borrower to Lender in connection with the opening thereof,
would cause the Availability to be exceeded at such time. In addition, with
respect to any Merchandise L/C, the requested term of such Letter of Credit
may not exceed 180 days, and no Merchandise L/C may by its terms be scheduled
to be outstanding on the Termination Date. Standby L/C's may have terms that
extend beyond the Termination Date but upon termination of this Agreement, all
Letters of Credit must be either terminated with the consent of the
beneficiary thereof, replaced with a letter of credit provided by a financial
institution acceptable to Lender, collateralized by cash or cash equivalent,
or otherwise satisfied in a manner acceptable to Lender. The Letters of
Credit shall be governed by a Letter of Credit Financing Agreement -
Supplement to Loan and Security Agreement between the Lender and the Borrower
("Letter of Credit Agreement"), in the form attached hereto as Exhibit "O" and
made a part hereof, in addition to the terms and conditions hereof. All
payments made and expenses incurred by the Lender pursuant to or in connection
with the Letters of Credit and the Letter of Credit Agreement will be charged
to the Borrower's loan account as Revolving Loans.
3. INTEREST AND OTHER CHARGES
3.1 Interest.
(a) Interest Rates. All amounts charged as Revolving Loans
shall bear interest on the unpaid principal amount thereof from the date made
until paid in full in cash at the Applicable Interest Rate as described in
Sections 3.1(a)(i) and (ii) but not to exceed the maximum rate permitted by
applicable law. Subject to the provisions of Section 3.2, any of the
Revolving Loans may be converted into, or continued as, Reference Rate Loans
or Eurodollar Rate Loans in the manner provided in Section 3.2. If at any
time Revolving Loans are outstanding with respect to which notice has not been
delivered to Lender in accordance with the terms of this Agreement specifying
the basis for determining the interest rate applicable thereto, then those
Revolving Loans shall be Reference Rate Loans and shall bear interest at a
rate determined by reference to the Reference Rate until notice to the
contrary has been given to the Lender and such notice has become effective.
Except as otherwise provided herein, the amounts charged as Revolving Loans
shall bear interest at the following rates (the "Applicable Interest Rate"):
(i) For all amounts charged as Revolving Loans other than
Eurodollar Rate Loans, including all Revolving Loans which are Reference
Rate Loans, then at a fluctuating per annum rate equal to one-half
percent (1/2%) per annum (the "Reference Rate Margin") plus the
Reference Rate; and
(ii) If the Revolving Loans are Eurodollar Rate Loans, then
at a per annum rate equal to: two and seven-eighths percent (2.875%) per
annum (the "Eurodollar Margin") plus the Eurodollar Rate determined for
the applicable Interest Period.
Each change in the Reference Rate shall be reflected in the interest
rate described in (i) above as of the effective date of such change.
All interest charges shall be computed on the basis of a year of three
hundred sixty (360) days and actual days elapsed. Except as otherwise
provided herein, (1) interest accrued on each Eurodollar Rate Loan shall
be payable in arrears on each Eurodollar Interest Payment Date
applicable to such Eurodollar Rate Loan and upon payment thereof in
full, and (2) interest accrued on the Reference Rate Loans will be
payable in arrears on the first day of each month hereafter.
(b) Default Rate. If any Event of Default occurs, then, while
any such Event of Default is continuing, all Loans shall bear interest at an
increased rate of interest equal to the Applicable Interest Rate thereto plus
two percent (2.0%) per annum, and the Letter of Credit Fee shall be increased
to three percent (3%) per annum.
3.2 Eurodollar Borrowings: Conversion or Continuation.
(a) Subject to the provisions of Section 3.3, the Borrower shall
have the option: (i) to request the Lender to make a Revolving Loan as a
Eurodollar Rate Loan; (ii) to convert all or any part of the outstanding
Revolving Loans from Reference Rate Loans to Eurodollar Rate Loans, (iii) to
convert all or any part of the outstanding Revolving Loans from Eurodollar
Rate Loans to Reference Rate Loans on the expiration of the Interest Period
applicable thereto; (iv) upon the expiration of any Interest Period applicable
to any outstanding Eurodollar Rate Loan, to continue all or any portion of
such Eurodollar Rate Loan as a Eurodollar Rate Loan; provided, however, that
no outstanding Loans may be converted into or continued as, Eurodollar Rate
Loans when any Event or Event of Default has occurred and is continuing.
(b) Whenever the Borrower elects to borrow, convert into or
continue Eurodollar Rate Loans under this Section 3.2, the Borrower shall
notify the Lender in writing or telephonically no later than 11:00 a.m. (Los
Angeles, California time) two (2) Business Days in advance of the requested
borrowing/conversion/continuation date. The Borrower shall specify (1) the
borrowing/conversion/continuation date (which shall be a Business Day), (2)
the amount and type of the Revolving Loans to be borrowed/converted/continued,
and (3) the nature of the requested borrowing/ conversion/continuation. In
the event that the Borrower should fail to timely notify the Lender to
continue to convert any existing Eurodollar Rate Loan, such Loan shall, on the
last day of the Interest Period with respect to such Revolving Loan, convert
to a Reference Rate Loan.
(c) The officer of the Borrower authorized by the Borrower to
request Revolving Loans on behalf of the Borrower shall also be authorized to
request a conversion/continuation on behalf of the Borrower. The Lender shall
be entitled to rely on such officer's authority until the Lender is notified
to the contrary in writing. The Lender shall have no duty to verify the
authenticity of the signature appearing on any written notification or request
and, with respect to an oral notification or request, the Lender shall have no
duty to verify the identity of any individual representing himself as one of
the officers authorized to make such notification or request on behalf of the
Borrower. The Lender shall incur no liability to the Borrower in acting upon
any telephonic notice or request referred to in this Section 3.2, which the
Lender believes in good faith to have been given by an officer authorized to
do so on behalf of the Borrower, or for otherwise acting in good faith under
this Section 3.2 and, upon lending/conversion/continuation by the Lender in
accordance with this Agreement pursuant to any such telephonic notice, the
Borrower shall have effected the borrowing/conversion/continuation of the
applicable Loans hereunder.
(d) Any written or telephonic notice of conversion to, or
borrowing or continuation of, Revolving Loans made pursuant to this Section
3.2 shall be irrevocable and the Borrower shall be bound to borrow, convert or
continue in accordance therewith.
3.3 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provisions to the contrary contained in this
Agreement, the following provisions shall govern with respect to Eurodollar
Rate Loans as to the matters covered:
(a) Amount of Eurodollar Rate Loans. Each election of,
continuation of, or conversion to a Eurodollar Rate Loan, shall be in a
minimum amount of Five Million Dollars ($5,000,000) and in integral multiples
of One Million Dollars ($1,000,000) in excess of that amount.
(b) Determination of Interest Period. The Interest Period for
each Eurodollar Rate Loan shall be for a three (3) month period. The
determination of Interest Periods shall be subject to the following
provisions:
(i) In the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if
the next succeeding Business Day occurs in the following calendar month,
then such Interest Period shall expire on the immediately preceding
Business Day.
(iii) The Borrower may not select an Interest Period
for any Eurodollar Rate Loan, which Interest Period expires later than
the Stated Termination Date.
(iv) There shall be not more than two (2) Interest Periods
in effect at any one time, and no more than two (2) Interest Periods may
begin during any calendar month.
(v) If an Interest Period starts on a date for which no
numerical correspondent exists in the month in which such Interest
Period ends, such Interest Period will end on the last Business Day of
such month.
(c) Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (Los Angeles, California time) on the Eurodollar Interest
Rate Determination Date, the Lender shall determine (which determination
shall, absent manifest error, be presumptively correct) the Interest Rate for
the Eurodollar Rate Loans for which an Interest Rate is then being determined
and shall promptly give notice thereof (in writing or by telephone confirmed
in writing) to the Borrower.
(d) Substituted Rate of Borrowing. In the event that on any
Eurodollar Interest Rate Determination Date the Lender shall have determined
(which determination shall, absent manifest error, be presumptively correct
and binding upon all parties) that:
(i) by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market or affecting
the position of Bank or Lender in such market, adequate and fair means
do not exist for ascertaining the applicable interest rates by reference
to which the Eurodollar Rate then being determined is to be fixed; or
(ii) by reason of (1) any change after the date of this
Agreement in any applicable law or governmental rule, regulation or
order (or any interpretation thereof and including the introduction of
any new law or governmental rule, regulation or order) or (2) any other
circumstances affecting Bank or Lender or the interbank Eurodollar
market or the position of Bank or Lender in such market (such as, for
example, but not limited to, official reserve requirements required by
Regulation D of the Board of Governors of the Federal Reserve System to
the extent not given effect in the Eurodollar Rate), the Eurodollar Rate
shall not represent the effective pricing to Lender for Dollar deposits
of comparable amounts for the relevant period;
then, and in any such event, the right of the Borrower to request application
of the Eurodollar Rate to some or all of the Loans shall be suspended until
the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and such Loans shall be Reference Rate Loans.
(e) Illegality. In the event that on any date Lender shall have
reasonably determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties) that the making of,
conversion into, or the continuation of, Lender's Eurodollar Rate Loans has
become unlawful as the result of compliance by Lender or Bank in good faith
with any law, governmental rule, regulation or order (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful), then, and in any such event, Lender shall promptly give notice (by
telephone confirmed in writing) to the Borrower of such determination. In
such case and except as provided in Section 3.3(f), the obligation of Lender
to make or maintain any Eurodollar Rate Loans during any such period shall be
terminated at the earlier of the termination of the Interest Period then in
effect or when required by law, and the Borrower shall, no later than the
earlier of the termination of the Interest Period in effect at the time any
such determination pursuant to this Section 3.3(e) is made, or when required
by law, repay the Eurodollar Rate Loans, together with all interest accrued
thereon.
(f) Options of the Borrower. In lieu of prepaying the
Eurodollar Rate Loans as required by Section 3.3(e), the Borrower may exercise
either of the following options:
(i) Upon written notice to the Lender, the Borrower may
release Lender from its obligations to make or maintain Loans as
Eurodollar Rate Loans and in such event, the Borrower shall, at the end
of the then current Interest Period (or at such earlier time as
prepayment is otherwise required), convert all of the Eurodollar Rate
Loans into Reference Rate Loans in the manner contemplated by Section
3.2, but without satisfying the advance notice requirements therein; or
(ii) The Borrower may, by giving notice (by telephone
confirmed immediately by telecopy) to Lender require Lender to continue
to maintain its outstanding Reference Rate Loans as Reference Rate
Loans, but without satisfying the advance notice requirements set forth
in such Section 3.2.
(g) Compensation. In addition to such amounts as are required
to be paid by the Borrower pursuant to the other Sections of this Article 3,
the Borrower agrees to compensate the Lender for all expenses and liabilities,
including, without limitation, any loss or expense incurred by Lender by
reason of the liquidation or reemployment of deposits or other funds acquired
by Lender to fund or maintain the Lender's Eurodollar Rate Loans to the
Borrower, which Lender sustains (i) if due to the fault of the Borrower a
funding of any Eurodollar Rate Loans does not occur on a date specified
therefor by Borrower in a telephonic or written request for borrowing or
conversion/continuation, or a successive Interest Period does not commence
after notice therefor is given pursuant to Section 3.2, (ii) if any voluntary
or mandatory prepayment of any Eurodollar Rate Loans occurs for any reason on
a date which is not the last scheduled day of an Interest Period, or (iii) as
a consequence of any other failure by the Borrower to repay Eurodollar Rate
Loans when required by the terms of this Agreement.
(h) Quotation of Eurodollar Rate. Anything herein to the
contrary notwithstanding, if on any Eurodollar Interest Rate Determination
Date no Eurodollar Rate is available by reason of the failure of Bank to be
offered quotations in accordance with the definition of "Eurodollar Base
Rate," the Lender shall give the Borrower prompt notice thereof and (i) any
Eurodollar Rate Loan requested to be made at the Eurodollar Rate to be
determined on any Eurodollar Interest Rate Determination Date shall be made as
a Reference Rate Revolving Loan, and (ii) any notice given by the Borrower to
convert any Loans into or to continue any Loans as Eurodollar Rate Loans at
the Eurodollar Rate to be determined on any such Eurodollar Interest Rate
Determination Date shall be ineffective.
(i) Eurodollar Rate Taxes. The Borrower agrees that it will
pay, prior to the date on which penalties attach thereto, all present and
future income, stamp and other taxes, levies, or costs and charges whatsoever
imposed, assessed, levied or collected on or from the Lender on or in respect
of the Borrower's Loans from the Lender solely as a result of the interest
rate being determined by reference to the Eurodollar Rate and/or the
provisions of this Agreement relating to the Eurodollar Rate and/or the
recording, registration, notarization or other formalization of any of the
foregoing and/or any payments of principal, interest or other amounts made on
or in respect of the Loans from the Lender when the interest rate is
determined by reference to the Eurodollar Rate (all such taxes, levies, cost
and charges being herein collectively called "Eurodollar Rate Taxes");
provided, however, that Eurodollar Rate Taxes shall not include taxes imposed
on or measured by the overall net income of the Lender by the United States of
America or any political subdivision or taxing authority thereof or therein,
or taxes on or measured by the overall net income by any foreign branch or
subsidiary of the Lender by any foreign country or subdivision thereof in
which that branch or subsidiary is doing business. Promptly after the date on
which payment of any such Eurodollar Rate Tax is due pursuant to applicable
law, the Borrower will, at the request of the Lender, furnish to the Lender
evidence, in form and substance satisfactory to the Lender, that the Borrower
has met its obligation under this Section 3.3(i), an addition, the Borrower
will indemnify the Lender against, and reimburse Lender on demand for, any
Eurodollar Rate Taxes for which the Lender is or may be liable by reason of
the making or maintenance of any Eurodollar Rate Loans hereunder, as
determined by the Lender in its discretion exercised in good faith and
pursuant to standards of commercial reasonableness. The Lender shall provide
Borrower with appropriate receipts for any payments or reimbursements made by
Borrower pursuant to this Section 3.3(i).
(j) Booking of Eurodollar Rate Loans. The Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices or the office of any of its Affiliates.
(k) Increased Costs. If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Reserve Percentage) in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in the cost to
the Lender of agreeing to make or making, funding or maintaining Eurodollar
Rate Loans, then the Borrower agrees that it shall, from time to time, upon
demand by the Lender in writing to the Borrower, within sixty (60) days from
the date of such increased cost, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost relating to the
outstanding Eurodollar Rate Loans made to the Borrower. A certificate as to
the amount of such increased cost and the method of determination thereof,
submitted to the Borrower by the Lender, shall be rebuttably presumptive
evidence of the correctness of such amount. Notwithstanding the above, the
Lender shall promptly advise Borrower of any increased costs covered by this
paragraph (k) of which Lender is aware that have been made or which are
proposed to be made which may require the Borrower to be required to pay the
increased cost under this paragraph (k) prior to or at the time that Borrower
requests additional Eurodollar Rate Loans.
3.4 Maximum Interest Rate.
(a) Notwithstanding the foregoing provisions of Sections 3.1
through 3.3 regarding the rates of interest applicable to the Loans, if at any
time the amount of such interest computed on the basis of the Applicable
Interest Rate would exceed the amount of such interest computed upon the basis
of the maximum rate of interest permitted by applicable state or federal law
in effect from time to time hereafter, after taking into account, to the
extent required by applicable law, any and all fees, payments, charges and
calculations provided for in this Agreement or in any other agreement between
Borrower and Lender (the "Maximum Legal Rate"), the interest payable under
this Agreement shall be computed upon the basis of the Maximum Legal Rate, but
any subsequent reduction in the Reference Rate or the Eurodollar Rate shall
not reduce such interest thereafter payable hereunder below the amount
computed on the basis of the Maximum Legal Rate until the aggregate amount of
such interest accrued and payable under this Agreement equals the total amount
of interest which would have accrued if such interest had been at all times
computed solely on the basis of the Applicable Interest Rate.
(b) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between the Borrower and the Lender or default of the Borrower, or the
exercise by the Lender of the right to accelerate the payment of the maturity
of principal and interest, or to exercise any option whatsoever contained in
this Agreement or any other agreement between the Borrower and the Lender, or
the arising of any contingency whatsoever, shall entitle the Lender to
collect, in any event, interest exceeding the Maximum Legal Rate and in no
event shall the Borrower be obligated to pay interest exceeding such Maximum
Legal Rate and all agreements, conditions or stipulations, if any, which may
in any event or contingency whatsoever operate to bind, obligate or compel the
Borrower to pay a rate of interest exceeding the Maximum Legal Rate, shall be
without binding force or effect, at law or in equity, to the extent only of
the excess of interest over such Maximum Legal Rate. In the event any
interest is charged in excess of the Maximum Legal Rate ("Excess"), the
Borrower acknowledges and stipulates that any such charge shall be the result
of an accidental and bona fide error, and such Excess shall be, first, applied
to reduce the principal then unpaid hereunder; second, applied to reduce the
Obligations; and third, returned to the Borrower, it being the intention of
the parties hereto not to enter at any time into a usurious or otherwise
illegal relationship. The Borrower recognizes that, with fluctuations in the
Applicable Interest Rate and the Maximum Legal Rate, such an unintentional
result could inadvertently occur. By the execution of this Agreement, the
Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by the Borrower of such Excess, and (ii) the
Borrower shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon the charging or receiving of
any interest in excess of the maximum authorized by applicable law. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all interest at any time contracted for,
charged or received by the Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the entire
term of this Agreement.
(c) The provisions of Section 3.4 shall be deemed to be
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of the Lender with respect to the Borrower (or any other
obligor in respect of Obligations), whether or not any provision of Section
3.4 is referred to therein. All such documents and communications and all
figures set forth therein shall, for the sole purpose of computing the extent
of the liabilities and obligations of the Borrower (or other obligor) asserted
by the Lender thereunder, be automatically recomputed by any Borrower or
obligor, and by any court considering the same, to give effect to the
adjustments or credits required by Section 3.4.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
or any other Loan Documents than is presently allowed by applicable state or
federal law, then the limitation of interest under Section 3.4 shall be
increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to the Lender
by reason thereof shall be payable upon demand.
3.5 Facility Fee. The Borrower will pay the Lender a facility
fee in the amount of $28,850 on the Closing Date. The Lender and the Borrower
agree that the Facility Fee shall be financed by the Lender as a Reference
Rate Revolving Loan.
3.6 Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting Lender or any of Lender's affiliated
companies there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, minimum capital, capital ratio, or similar
requirement against or with respect to or measured by reference to loans made
or to be made to Borrower hereunder, or to Letters of Credit issued on behalf
of Borrower pursuant to the Letter of Credit Agreement, and the result shall
be to increase the cost to Lender or to any of Lender's affiliated companies
of making or maintaining any Revolving Loan or Letter of Credit hereunder, or
reduce any amount receivable in respect of any such Revolving Loan and which
increase in cost, or reduction in amount receivable, shall be the result of
Lender's or Lender's affiliated company's reasonable allocation among all
affected customers of the aggregate of such increases or reductions resulting
from such event, then, within ten (10) days after receipt by Borrower of a
certificate from Lender containing the information described in this Section
3.6 which shall be delivered to Borrower, Borrower agrees from time to time to
pay Lender such additional amounts as shall be sufficient to compensate Lender
or any of Lender's affiliated companies for such increased costs or reductions
in amounts which Lender determines in Lender's reasonable discretion are
material. Notwithstanding the foregoing, all such amounts shall be subject to
the provisions of Section 3.4. The certificate requesting compensation under
this Section 3.6 shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the
amount of such additional cost or reduction in the amount receivable and the
way in which such amount has been calculated.
3.7 Unused Line Fee. For every month during the term of this
Agreement, the Borrower shall pay the Lender a fee (the "Unused Line Fee") in
an amount equal to one-half percent (.50%) per annum, multiplied by the amount
by which (a) the Minimum Borrowing Commitment then in effect exceeds (b) the
average closing daily unpaid balance of all Loans and all issued but undrawn
Letters of Credit during such month, with the unpaid balance calculated for
this purpose by applying payments immediately upon receipt. Such a fee, if
any, shall be calculated on the basis of a year of three hundred sixty (360)
days and actual days elapsed, and shall be payable to the Lender on the first
day of each month prior to the termination of this Agreement commencing
January 1, 1995 and on the termination of this Agreement, with respect to the
prior month or portion thereof.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, upon the termination of this Agreement. In addition, the Borrower
shall pay to the Lender, on demand, the amount by which the unpaid principal
balance of the Revolving Loans at any time exceeds the Availability at such
time (with Availability for this purpose determined as if the amount of the
Revolving Loans were zero).
4.2 Place and Form of Payments: Extension of Time. All payments
of principal, interest, and other sums due to the Lender shall be made at the
Lender's address set forth in Section 13.10. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately
available funds. If any payment of principal, interest, or other sum to be
made hereunder becomes due and payable on a day other than a Business Day, the
due date of such payment shall be extended to the next succeeding Business Day
and interest thereon shall be payable at the applicable interest rate during
such extension.
4.3 Apportionment, Application and Reversal of Payments. Except
as otherwise expressly provided hereunder, the Lender shall determine in its
discretion the order and manner in which proceeds and other payments that the
Lender receives are applied to the Revolving Loans, interest thereon, and the
other Obligations, and the Borrower hereby irrevocably waives the right to
direct the application of any payment or proceeds; provided, however, unless
so directed by the Borrower, the Lender shall not apply any such payments
which it receives to any Eurodollar Rate Loan, except: (a) on the expiration
date of the Interest Period applicable to any such Eurodollar Rate Loan; or
(b) in the event, and only to the extent, that there are not outstanding
Reference Rate Loans. Following an Event of Default that is continuing, the
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of the
Obligations subject to the terms of this Section 4.3 and the Borrower's right
to direct prepayments of Eurodollar Rate Loans.
4.4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY
PAYMENT OF, OR PROCEEDS APPLIED TO THE PAYMENT OF, ALL OR ANY PART OF THE
OBLIGATIONS, THE LENDER IS FOR ANY REASON REQUIRED TO SURRENDER SUCH PAYMENT
OR PROCEEDS TO ANY PERSON, BECAUSE SUCH PAYMENT OR PROCEEDS IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE
OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND
CONTINUE AND THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT OR
PROCEEDS HAD NOT BEEN RECEIVED BY THE LENDER AND THE BORROWER SHALL BE LIABLE
TO PAY TO THE LENDER, AND HEREBY DOES INDEMNIFY THE LENDER AND HOLD THE LENDER
HARMLESS FOR THE AMOUNT OF SUCH PAYMENT OR PROCEEDS SURRENDERED. The
provisions of this Section 4.4 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Lender in reliance upon
such payment or Proceeds, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment or Proceeds having become
final and irrevocable. The provisions of this Section 4.4 shall survive the
termination of this Agreement.
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. The Borrower
agrees that the Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom irrespective of
whether any Obligation is also evidenced by a promissory note or other
instrument, and shall constitute presumptive proof thereof until such time as
Borrower has reviewed the monthly statement as hereinafter provided. The
Lender will provide to the Borrower a monthly statement of Loans, payments,
and other transactions pursuant to this Agreement. Such statement shall be
deemed correct, accurate, and binding on the Borrower and as an account stated
and shall constitute prima facie proof thereof (except for reversals and
reapplications of payments made as provided in Section 4.3 and corrections of
errors discovered by the Lender), unless the Borrower notifies the Lender in
writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Borrower, only the items to which exception is expressly made will be
considered to be disputed by the Borrower.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, the Borrower and each
Guarantor Subsidiary hereby grants to the Lender a continuing security
interest in, lien on, and assignment of: (i) all Receivables, Inventory,
Proprietary Rights, and Proceeds, wherever located and whether now existing or
hereafter arising or acquired; (ii) all moneys, securities and other property
and the Proceeds thereof, now or hereafter held or received by, or in transit
to, the Lender from or for the Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, including, without limitation,
all of the Borrower's deposit accounts, credits and balances with the Lender
and all claims of the Borrower against the Lender at any time existing; (iii)
all of Borrower's deposit accounts containing Collateral with any financial
institutions with which Borrower maintains deposits; and (iv) all books,
records and other Property relating to or referring to any of the foregoing,
including, without limitation, all books, records, ledger cards, data
processing records, computer software and other property and general
intangibles at any time evidencing or relating to the Receivables, Inventory,
Proprietary Rights, Proceeds, and other property referred to above (all of the
foregoing, together with all other property in which Lender may at any time be
granted a Lien, being herein collectively referred to as the "Collateral").
The Lender shall have all of the rights of a secured party with respect to the
Collateral under the UCC and other applicable laws.
(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, (i) exchange, waive,
or release any of the Collateral, (ii) after the occurrence of an Event of
Default that is continuing, apply Collateral and direct the order or manner of
sale thereof as the Lender may determine, and (iii) after the occurrence of an
Event of Default that is continuing, settle, compromise, collect, or otherwise
liquidate any Collateral in any manner, all without affecting the Obligations
or the Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. The
Borrower and each Guarantor Subsidiary shall, at its expense, perform all
steps requested by the Lender at any time to perfect, maintain, protect, and
enforce the Security Interest in the Collateral including, without limitation:
(a) executing and recording of the Patent and Trademark Assignments and
executing and filing financing or continuation statements, and amendments
thereof, relating to the Collateral in form and substance satisfactory to the
Lender; (b) delivering to the Lender, upon Lender's request therefor, the
originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Lender determines it should have physical possession
in order to perfect and protect the Security Interest therein, duly endorsed
or assigned to the Lender without restriction; (c) delivering to the Lender
warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued; (d) after an Event of
Default that is continuing, causing notations to be placed on the Borrower's
and each Guarantor Subsidiary's books of account to disclose the Security
Interest; (e) delivering to the Lender, upon Lender's request therefor, all
letters of credit on which the Borrower or any Guarantor Subsidiary is a named
beneficiary; (f) after an Event of Default that is continuing transferring
Inventory to warehouses designated by the Lender; and (g) taking such other
steps as are deemed necessary by the Lender to maintain the Security Interest.
The Lender may file, without the Borrower's signature or that of any Guarantor
Subsidiary, one or more financing statements disclosing the Security Interest.
The Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the agents or processors of
Borrower or any Guarantor Subsidiary, then the Borrower shall notify the
Lender thereof and shall notify such Person of the Security Interest in such
Collateral and, upon the Lender's request following an Event of Default that
is continuing, instruct such Person to hold all such Collateral for the
Lender's account subject to the Lender's instructions. If at any time any
Collateral is located on any premises that are not owned by the Borrower or a
Guarantor Subsidiary, then the Borrower shall obtain written waivers, in form
and substance reasonably satisfactory to the Lender, of all present and future
Liens to which the owner or lessor of such premises may be entitled to assert
against the Collateral. From time to time, the Borrower shall, upon Lender's
request, cause to be executed and delivered confirmatory written instruments
pledging to the Lender the Collateral, but the Borrower's failure to do so
shall not affect or limit the Security Interest. So long as this Agreement is
in effect and until all Obligations have been fully satisfied, the Security
Interest shall continue in full force and effect in all Collateral (whether or
not deemed eligible for the purpose of calculating the Availability or as the
basis for any advance, loan, or other financial accommodation). Upon
termination of this Agreement and payment of all Obligations, the Lender shall
release all Security Interests held by the Lender.
6.3 Location of Collateral. The Borrower represents and
warrants to the Lender that: (a) Exhibit D hereto is a correct and complete
List of the Borrower's chief executive office, the location of its books and
records as well as the books and records of the Guarantor Subsidiaries, the
locations of the Collateral, and the locations of all of its other places of
business; and (b) Exhibit H correctly identifies any of such facilities and
locations that are not owned by the Borrower or the Guarantor Subsidiaries and
sets forth the names of the owners and lessors of, and, to the best of the
Borrower's knowledge, the holders of any mortgages on such facilities and
locations. Except for Inventory that is consigned by a Borrower or a
Guarantor Subsidiary to a customer or warehouse, the Borrower agrees that it
will not maintain, nor will it allow any Guarantor Subsidiary to maintain, any
Collateral at any location other than those listed on Exhibit D, and it will
not otherwise change or add to any of such locations, unless it gives the
Lender at least thirty (30) days prior written notice and executes or has
executed, such financing statements and other documents that the Lender
requests in connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral. The
Borrower represents and warrants to the Lender that: (a) all Collateral is and
will continue to be owned by the Borrower or a Guarantor Subsidiary free and
clear of all Liens whatsoever, except for the Security Interest and other
Permitted Liens; (b) the Security Interest will not be subject to any prior
Lien except the Permitted Liens; (c) the Borrower and each Guarantor
Subsidiary will use, store, and maintain the Collateral with all reasonable
care and will use the Collateral for lawful purposes only; and (d) neither the
Borrower nor the Guarantor Subsidiaries will, without the Lender's prior
written approval, sell, or dispose of or permit the sale or disposition of any
Collateral, except for (i) sales of Inventory in the ordinary course of
business, and (ii) as otherwise provided or allowed by this Agreement or any
of the other Loan Documents. The inclusion of Proceeds in the Collateral
shall not be deemed the Lender's consent to any sale or other disposition of
the Collateral except as expressly permitted herein.
6.5 Appraisals. Following the occurrence of an Event of Default
that is continuing, the Borrower shall, at the request of the Lender, provide
the Lender, at the Borrower's expense, with appraisals or updates thereof of
any or all of the Collateral from an appraiser satisfactory to the Lender.
6.6 Access and Examination. The Lender may at all reasonable
times have access to, examine, audit, make extracts from and inspect the
Borrower's records, files, and books of account and those of each Guarantor
Subsidiary, as well as the Collateral and may discuss the Borrower's affairs
with the Borrower's officers and management. The Borrower will deliver to the
Lender any instrument necessary for the Lender to obtain records from any
service bureau maintaining records for the Borrower or any Guarantor
Subsidiary. The Lender may, at any time when an Event of Default exists and
at the Borrower's expense, make copies of all of the Borrower's books and
records, or require the Borrower to deliver such copies to the Lender. After
the occurrence of an Event of Default that is continuing, the Lender may,
without expense to the Lender, use such of the Borrower's personnel, supplies,
and premises as well as those of the Guarantor Subsidiaries as may be
reasonably necessary for maintaining or enforcing the Security Interest.
Lender shall have the right, at any time, in Lender's name or in the name of a
nominee of the Lender, to verify the validity, amount or any other matter
relating to the Accounts, by mail, telephone, or otherwise.
6.7 Insurance. The Borrower shall insure the Collateral and
Equipment against loss or damage by fire with extended coverage, theft,
burglary, pilferage, loss in transit, and such other hazards as the Lender
shall specify, in amounts, under policies and by insurers acceptable to the
Lender. Borrower shall also maintain flood insurance, in the event of a
designation of the area in which any Real Property is located as "flood prone"
or a "flood risk area," as defined by the Flood Disaster Protection Act of
1973, in an amount to be reasonably determined by Lender, and shall comply
with the additional requirements of the National Flood Insurance Program as
set forth therein. The Borrower shall cause the Lender to be named in each
such policy as secured party of the Inventory that constitutes part of the
Collateral and loss payee or additional insured, in a manner acceptable to the
Lender, as to the Collateral. Each policy of insurance shall contain a clause
or endorsement requiring the insurer to give not less than thirty (30) days
prior written notice to the Lender in the event of cancellation of the policy
for any reason whatsoever and a clause or endorsement stating that the
interest of the Lender shall not be impaired or invalidated by any act or
neglect of the Borrower or the owner of any premises where Collateral is
located nor by the use of such premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by
the Borrower when due, and certificates of insurance and, if requested,
photocopies of the policies shall be delivered to the Lender. If the Borrower
fails to procure such insurance or to pay the premiums therefor when due, the
Lender may (but shall not be required to) do so and charge the costs thereof
to the Borrower's loan account. After becoming aware of any loss, damage or
destruction to Collateral, the Borrower shall promptly notify the Lender of
any such loss, damage, or destruction that exceeds $200,000, whether or not
covered by insurance. The Lender is hereby authorized to collect all
insurance proceeds directly following the occurrence of an Event of Default
that is continuing. After deducting from such proceeds the expenses, if any,
incurred by Lender in the collection or handling thereof, if an Event of
Default has occurred and is continuing, the Lender may apply such proceeds to
the reduction of the Obligations, in such order as Lender determines, or at
the Lender's option may permit or require the Borrower to use such money, or
any part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction. If no Event of Default has occurred and is continuing, Lender
hereby authorizes Borrower to collect all such insurance proceeds and to use
such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.
6.8 Collateral Reporting. The Borrower will provide the Lender
with the following documents at the following times in form satisfactory to
the Lender: (a) on a daily basis, a schedule of Accounts created since the
last such schedule, a schedule of remittance advices, credit memos and reports
and a schedule of collections of Accounts since the last such schedule; (b) no
later than fifteen (15) days after the last day of each month, monthly summary
and detailed agings of Accounts aged by due date and by invoice date; (c) no
later than twenty (20) days after the last day each month, monthly
reconciliations of Accounts balances per the aging to the general ledger
accounts receivable balance and to the financial statements provided to Lender
under Section 7.2(c); (d) no later than twenty (20) days after the last day
each month, monthly Inventory reports by category and by location; (e) no
later than twenty (20) days after the last day each month, monthly
reconciliations of the detailed Inventory reports to the general ledger and to
the financial statements provided to Lender under Section 7.2(c); (f) upon
request, copies of invoices, credit memos, shipping and delivery documents,
purchase orders; (g) such other reports as to the Collateral as the Lender
shall request from time to time; and (h) certificates of an officer of the
Borrower certifying as to the foregoing. If any of the Borrower's records or
reports of the Collateral are prepared by an accounting service or other
agent, the Borrower hereby authorizes such service or agent to deliver such
records, reports, and related documents to the Lender.
6.9 Accounts. (a) The Borrower hereby represents and warrants
to the Lender that: (i) each existing Account represents, and each future
Account will represent, a bona fide sale or lease and delivery of goods by the
Borrower or a Guarantor Subsidiary, or rendition of services by the Borrower
or a Guarantor Subsidiary, in the ordinary course of business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Lender, without offset,
deduction, defense, or counterclaim (other than claims relating to warranty
issues); (iii) no payment will be received with respect to any Account, and no
credit, discount, or extension, or agreement therefor will be granted to any
Account, except as reported to or otherwise agreed to by the Lender in
accordance with this Agreement; (iv) each copy of an invoice requested by and
delivered to the Lender by the Borrower will be a genuine copy of the original
invoice sent to the Account Debtor named therein; and (v) all goods described
in each invoice will have been delivered to the Account Debtor and all
services described in each invoice will have been performed, except where the
Account Debtor has previously agreed in writing to accept billings for such
goods.
(b) The Borrower shall not re-date or allow any Guarantor
Subsidiary to re-date any invoice or sale or make sales on extended dating
beyond that customary in the business of the applicable Borrower or a
Guarantor Subsidiary or extend or modify any Account which alters its
eligibility status, or, with respect to ineligible Accounts, which are
inconsistent with prudent business practice and industry standards. If the
Borrower becomes aware of any matter adversely affecting any Account in an
amount in excess of $100,000, including information regarding the Account
Debtor's creditworthiness, the Borrower will promptly so advise the Lender.
(c) The Borrower shall not accept or allow any Guarantor
Subsidiary to accept any note or other instrument (except a check or other
instrument for the immediate payment of money) with respect to any Eligible
Account without the Lender's written consent. If the Lender consents to the
acceptance of any such instrument, it shall be considered as evidence of the
Account and not payment thereof and the Borrower will upon Lender's request,
promptly deliver such instrument to the Lender appropriately endorsed.
Regardless of the form of presentment, demand, notice of dishonor, protest,
and notice of protest with respect thereto, the Borrower or the appropriate
Guarantor Subsidiary will remain liable thereon until such instrument is paid
in full.
(d) The Borrower shall notify the Lender promptly of all
disputes and claims with an Account Debtor relating to an Eligible Account
that exceeds $100,000 and when no Event of Default exists hereunder, may
settle or adjust them at no expense to the Lender, but no discount, credit or
allowance in excess of $100,000 shall be granted to any Account Debtor without
the Lender's consent, except for discounts, credits and allowances made or
given in the ordinary course of the business of the applicable Borrower or
Guarantor Subsidiary. The Borrower shall send the Lender a copy of each
credit memorandum in excess of $100,000 as soon as issued. The Lender may, at
all times when an Event of Default exists hereunder, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms which the
Lender considers advisable and, in all cases, the Lender will credit the
Borrower's loan account with only the net amounts received by the Lender in
payment of any Accounts.
6.10 Collection of Accounts. (a) Until the occurrence of an
Event of Default that is continuing, the Borrower and each Guarantor
Subsidiary shall collect all Accounts, shall receive all payments relating to
Accounts, and shall promptly deposit all such collections into a Payment
Account established for the account of the Borrower and the Guarantor
Subsidiaries at a bank acceptable to the Borrower and the Lender. All
collections relating to Accounts received in any such Payment Account or
directly by the Borrower or any Guarantor Subsidiary or the Lender, and all
funds in any Payment Account or other account to which such collections are
deposited, shall be the sole property of the Lender and subject to the
Lender's sole control. After the occurrence of an Event of Default that is
continuing, the Lender may, at any time, notify obligors that the Accounts
have been assigned to the Lender and of the Security Interest therein, and may
collect them directly and charge the collection costs and expenses to the
Borrower's loan account. After the occurrence of an Event of Default that is
continuing, the Borrower, at Lender's request, shall execute and deliver to
the Lender such documents as the Lender shall require to grant the Lender
access to any post office box in which collections of Accounts are received.
(a) If sales of Inventory are made for cash, the Borrower and
each Guarantor Subsidiary shall immediately deliver to the Lender the
identical checks, cash, or other forms of payment which the Borrower or such
Guarantor Subsidiary receives.
(b) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrower's loan account (conditional upon final collection)
after allowing one (1) Business Day for collection.
(c) In the event the Borrower repays all of the Obligations upon
the termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrower's loan
account one (1) Business Day after the Lender's receipt thereof.
6.11 Inventory. The Borrower and each Guarantor Subsidiary
represents and warrants to the Lender that all of the Inventory is and will be
held for sale or lease, or to be furnished in connection with the rendition of
services, in the ordinary course of business, and is and will be fit for such
purposes. The Borrower and each Guarantor Subsidiary will cause the Inventory
to be kept in good and marketable condition, at its own expense. The Borrower
agrees that all Inventory produced by the Borrower or any Guarantor Subsidiary
in the United States will be produced in accordance with the Federal Fair
Labor Standards Act of 1938. The Borrower will conduct a physical count of
the Inventory at least once per Fiscal Year, except as otherwise agreed to
between the Lender and the Borrower, and will, upon request of the Lender,
supply the Lender with a copy of such count accompanied by a report of the
value of such Inventory (valued at the lower or cost, on a first-in, first-out
basis, or market value). Neither the Borrower nor any Guarantor Subsidiary
will, without the Lender's written consent, allow any Inventory to be sold on
a bill and hold basis (except as provided in subsection (xiii) of the
definition of Eligible Accounts set forth in this Agreement), guaranteed sale,
sale and return, sale on approval, consignment, or other repurchase or return
basis.
6.12 Documents and Instruments. The Borrower and each Guarantor
Subsidiary represents and warrants to the Lender that: (a) all Documents and
Instruments describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine and (b) all goods evidenced by such Documents and Instruments were, at
the time of their sale, owned by the Borrower or such Guarantor Subsidiary
free and clear of all Liens other than Permitted Liens.
6.13 Right to Cure. The Lender may in its sole discretion pay
any amount or do any act required of the Borrower or any Guarantor Subsidiary
hereunder in order to preserve, protect, maintain or enforce the Obligations,
the Collateral or the Security Interest, and which the Borrower or such
Guarantor Subsidiary fails to pay or do, including, without limitation,
payment of any judgment against the Borrower or such Guarantor Subsidiary, any
insurance premium, any warehouse charge, processing charge, any landlord's
claim, and any other Lien upon the Collateral. All payments that the Lender
makes under this Section 6.13 and all out-of-pocket costs and expenses that
the Lender pays or incurs in connection with any action, taken by it hereunder
shall be charged to the Borrower's loan account; provided that Lender will
make a good faith effort to notify the Borrower and provide the Borrower with
a written, itemized invoice covering such charge. Any payment made or other
action taken by the Lender under this Section 6.13 shall be without prejudice
to any right Lender may have to assert an Event of Default hereunder and to
proceed accordingly.
6.14 Power of Attorney. The Borrower and each Guarantor
Subsidiary appoints the Lender and the Lender's designees as the Borrower's or
such Guarantor Subsidiary's attorney, with power: (a) to endorse the
Borrower's or such Guarantor Subsidiary's name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come
into the Lender's possession; (b) to sign the Borrower's or such Guarantor
Subsidiary's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records and on verifications of Accounts to Account Debtors; (c) to notify the
post office authorities, when an Event of Default exists, to change the
address for delivery of the Borrower's or such Guarantor Subsidiary's mail to
an address designated by the Lender and to receive, open and dispose of all
mail addressed to the Borrower or such Guarantor Subsidiary; (d) to send
requests for verification of Accounts to Account Debtors; and (e) to do all
things necessary to carry out this Agreement. The Borrower and each Guarantor
Subsidiary ratifies and approves all acts of such attorney. Neither the
Lender nor the attorney will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
6.15 Lender's Rights, Duties, and Liabilities. The Borrower and
each Guarantor Subsidiary assumes all responsibility and liability arising
from or relating to the use, sale or other disposition of the Collateral.
Neither the Lender nor any of its officers, directors, employees, and agents
shall be liable or responsible in any way for the safekeeping of any of the
Collateral, or for any act or failure to act with respect to the Collateral,
or for any loss or damage thereto, or for any diminution in the value thereof,
or for any act of default by any warehouseman, carrier, forwarding agency or,
other person whomsoever, all of which shall be at the Borrower's sole risk.
The Obligations shall not be affected by any failure of the Lender to take any
steps to perfect the Security Interest or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release the Borrower
from any of the Obligations. After the occurrence of an Event of Default that
has not been cured or otherwise waived by Lender, the Lender may (but shall
not be required to), without notice to or consent from the Borrower or any
Guarantor Subsidiary, sue upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash or
credit, grant other indulgences, extensions, renewals, compositions, or
releases, and take or omit to take other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any
insurance applicable thereto, or any Person liable directly or indirectly in
connection with any of the foregoing, without discharging or otherwise
affecting the liability of the Borrower for the Obligations.
6.16 Release of Collateral and Borrower.
(a) If the Borrower or any Guarantor Subsidiary sells or
otherwise finances an Account that does not qualify as an Eligible Account,
and the proceeds from the sale or financing of such Account is received or is
to be received by the Borrower or such Guarantor Subsidiary, then the Lender's
Security Interest in such Account shall be automatically terminated and the
Lender shall immediately release its Security Interest in and to such Account.
(b) If LSB sells any Borrower Subsidiary or Guarantor Subsidiary
or any Borrower Subsidiary or Guarantor Subsidiary sells all or substantially
all of its assets, then such Borrower Subsidiary shall be allowed to prepay,
without penalty or prepayment premium, all of the outstanding Revolving Loans
applicable to such Borrower Subsidiary or Guarantor Subsidiary, plus the
accrued interest relating to such Revolving Loans, and upon payment of such
Revolving Loans, the Lender shall release and terminate its Security Interest
as to the Collateral of such Borrower Subsidiary or Guarantor Subsidiary and
release such Borrower Subsidiary or Guarantor Subsidiary from any further
liability and responsibility under the Loan Documents.
(c) Upon payment in full of all Obligations, Lender shall
immediately release its Security Interest in and to all of the Collateral.
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
7.1 Books and Records. The Borrower shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with
GAAP. The Borrower shall, by means of appropriate entries, reflect in such
accounts and in all Financial Statements proper liabilities and reserves for
all taxes and proper provision for depreciation and amortization of Property
and bad debts, all in accordance with GAAP. The Borrower shall maintain at
all times books and records pertaining to the Collateral in such detail, form,
and scope as the Lender shall reasonably require, including without limitation
records of: (a) all payments received and all credits and extensions granted
with respect to the Accounts; (b) the return, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral.
7.2 Financial Information. The Borrower shall promptly furnish
to the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is authorized
to obtain such information directly from them. Without limiting the
foregoing, Borrower will furnish to the Lender, in such detail as the Lender
shall request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, audited consolidated and
unaudited consolidating balance sheet, statement of income and expense,
retained earnings, and statement of cash flows and stockholders' equity for
the LSB Consolidated Group for such Fiscal Year, and the accompanying notes
thereto, setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting the
financial position and the results of operations of the LSB Consolidated Group
as at the date thereof and for the Fiscal Year then ended, and prepared in
accordance with GAAP. The audited statements shall be examined in accordance
with generally accepted auditing standards by, and accompanied by a report
thereon unqualified as to scope of, independent certified public accountants
selected by LSB and reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than forty-
five (45) days after the close of each Fiscal Quarter other than the fourth
quarter of a Fiscal Year, unaudited consolidated and consolidating balance
sheets of the LSB Borrowing Group as at the end of such quarter, and
consolidated and consolidating unaudited statements of income and expense and
consolidated statements of cash flows for the LSB Borrowing Group for such
quarter and for the period from the beginning of the Fiscal Year to the end of
such quarter, together with a report of Capital Expenditures for such Fiscal
Quarter, all in reasonable detail, fairly presenting the financial position
and results of operation of the LSB Borrowing Group as at the date thereof and
for such periods, prepared in accordance with GAAP consistent with the audited
Financial Statements required pursuant to Section 7.2(a). Such statements
shall be certified to be correct by the chief financial officer or an
executive officer of LSB, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than thirty
(30) days after the end of each month, unaudited consolidated balance sheets
of the LSB Borrowing Group as at the end of such month, and consolidated and
consolidating unaudited statements of income and expenses for the LSB
Borrowing Group for such month and for the period from the beginning of the
Fiscal Year to the end of such month, all in reasonable detail (although not
as detailed as the reports required under Sections 7.2(a) and 7.2(b), fairly
presenting the financial position and results of operation of the LSB
Borrowing Group as at the date thereof and for such periods, and prepared in
accordance with GAAP consistent with the audited Financial Statements required
pursuant to Section 7.2(a). Such statements shall be certified to be correct
by the chief financial officer, treasurer or chief accounting officer of LSB,
subject to normal year end adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have
reviewed and are familiar with the Loan Documents and that, in examining such
Financial Statements, they did not become aware of any fact or condition which
then constituted an Event of Default, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 7.2(a) and 7.2(b), a
certificate of the chief financial officer, treasurer or chief accounting
officer of the Borrower (i) setting forth in reasonable detail the calcu-
lations required to establish that the LSB Borrowing Group was in compliance
with the covenants set forth in Sections 9.16 and 9.17 hereof as of the end of
the Fiscal Year and most recent Fiscal Quarter covered in such Financial
Statements; and, (ii) stating that, except as explained in reasonable detail
in such certificate, (A) nothing has come to the attention of such officer
that would lead such officer to believe that all of the representations,
warranties and covenants of the Borrower contained in this Agreement and the
other Loan Documents are not correct and complete as of the date of such
certificate and (B) no Event of Default then exists or existed during the
period covered by such Financial Statements. If such certificate discloses
that a representation or warranty is not correct or complete, or that a
covenant has not been complied with, or that an Event of Default existed or
exists, such certificate shall set forth what action the Borrower has taken or
proposes to take with respect thereto.
(f) No sooner than ninety (90) days and no less than thirty (30)
days prior to the beginning of each Fiscal Year, projected consolidated and
consolidating balance sheets, statements of income and expense, and statements
of cash flow for the Borrower and Subsidiaries as at the end of and for each
Fiscal Quarter of such Fiscal Year.
(g) Promptly upon their becoming available, copies of each proxy
statement, financial statement and report which LSB sends to its stockholders
or files with the Securities and Exchange Commission.
(h) Promptly after filing with the PBGC and the IRS a copy of
each annual report or other filing filed with respect to each Plan of the
Borrower or any Related Company.
(i) Such additional, reasonable information as the Lender may
from time to time reasonably request regarding the financial and business
affairs of the Borrower or the Subsidiaries.
7.3 Notices to Lender. The Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Within two Business Days after becoming aware of the
existence of any Event of Default.
(b) Within two Business Days after becoming aware that the
holder of any Debt in excess of $1,000,000 has given notice or taken any
action with respect to a claimed default.
(c) Within five Business Days after a responsible officer of LSB
becomes aware of any change which LSB deems to be a material adverse change in
the Borrower's Property, business, operations, or condition (financial or
otherwise).
(d) Within five Business Days after a responsbile officer of LSB
becomes aware of any pending or threatened action, proceeding, or counterclaim
by any Person, or any pending or threatened investigation by a Public
Authority, which, in the opinion of such officer, would materially and
adversely affect the Collateral, the repayment of the Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property,
business, operations, or condition (financial or otherwise).
(e) Within two Business Days after becoming aware of any pending
or threatened strike, work stoppage, material unfair labor practice claim, or
other material labor dispute affecting the Borrower.
(f) Within five Business Days after a responsible officer of LSB
becomes aware of any violation of any law, statute, regulation, or ordinance
of a Public Authority applicable to Borrower, which, in the opinion of such
officer, would materially and adversely affect the Collateral, the repayment
of the Obligations, the Lender's rights under the Loan Documents, or the
Borrower's Property, business, operations, or condition (financial or
otherwise).
(g) Within five Business Days after a responsible officer of LSB
becomes aware of any violation or any investigation of a violation by the
Borrower of Environmental Laws which, in the opinion of such officer, would
materially and adversely affect the Borrower's Property, Collateral, business,
operation or condition (financial or otherwise).
(h) Within five Business Days after a responsible officer of LSB
becomes aware of any Termination Event, accompanied by any materials required
to be filed with the PBGC with respect thereto; immediately after the
Borrower's receipt of any notice concerning the imposition of any withdrawal
liability under Section 4042 of ERISA with respect to a Plan; immediately upon
the establishment of any Pension Plan not existing at the Closing Date or the
commencement of contributions by the Borrower to any Pension Plan to which the
Borrower was not contributing at the Closing Date; and immediately upon
becoming aware of any other event or condition regarding a Plan or the
Borrower's or a Related Company's compliance with ERISA, which, in the opinion
of such officer, would materially and adversely affect the Borrower's
Property, business, operation or condition (financial or otherwise).
(i) Thirty (30) days prior to the Borrower changing its name.
Each notice given under this Section 7.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrower
has taken or proposes to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
The Borrower continuously warrants and represents to the Lender,
at all times during the term of this Agreement and until all Obligations have
been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing in the exercise of its reasonable discretion:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. The Borrower has the corporate power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents, to incur the Obligations, and to grant the Security Interest. The
Borrower has taken all necessary corporate action to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents. No
consent, approval, or authorization of, or filing with, any Public Authority,
and no consent of, any other Person, is required in connection with the
Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for (a) those already duly obtained, (b) those
required to perfect the Lender's Security Interest, and (c) the compliance
with any of the conditions precedent set forth in Sections 10.4 and 10.11
hereof. This Agreement and the other Loan Documents have been duly executed
and delivered by the Borrower and constitute the legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its
terms without defense, setoff, or counterclaim. The Borrower's execution,
delivery, and performance of this Agreement and the other Loan Documents do
not and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any
Lien upon the Property of the Borrower (except as contemplated by this
Agreement and the other Loan Documents) by reason of the terms of (a) any
material mortgage, lease, agreement, or instrument to which the Borrower is a
party or which is binding upon it, (b) any judgment, law, statute, rule or
governmental regulation applicable to the Borrower, or (c) the Certificate or
Articles of Incorporation or By-Laws of the Borrower.
8.2 Validity and Priority of Security Interest. The provisions
of this Agreement and the other Loan Documents create legal and valid Liens on
all the Collateral in the Lender's favor and when all proper filings,
recordings, and other actions necessary to perfect such Liens have been made
or taken such Liens will constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, except for
Permitted Liens, securing all the Obligations and enforceable against the
Borrower and all third parties after payment of the obligations due Congress
under the Congress Loan Agreement and Household under the Household Working
Capital Agreement and termination of all of the Agreements for Purchase of
Receivables between Borrower and Prime upon payment of the obligations due
Bank IV by Prime under the Prime Loan Agreement.
8.3 Organization and Qualification. Borrower is duly
incorporated and organized and validly existing in good standing under the
laws of the State of Delaware; (ii) is qualified to do business as a foreign
corporation and is in good standing in each state where, because of the nature
of its activities or properties, such qualification is required, except where
the failure to so qualify would not have a material adverse effect on the
Borrower; and (iii) has all requisite corporate power and authority to conduct
its business and to own its Property.
8.4 Corporate Name; Prior Transactions. The Borrower has not,
during the past five years, been known by or used any other corporate or
fictitious name, or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
Property out of the ordinary course of business, except as set forth on
Exhibit E.
8.5 Subsidiaries and Affiliates. Exhibit F is a correct and
complete list of the name and relationship to the Borrower of each and all of
the Borrower's Subsidiaries and other Affiliates, which list may be amended by
Borrower from time to time as LSB adds new or additional Subsidiaries or
Affiliates. Each Subsidiary is (a) duly incorporated and organized and
validly existing in good standing under the laws of its state of incorporation
set forth on Exhibit F and (b) qualified to do business as a foreign
corporation and in good standing in the states set forth opposite its name on
Exhibit F, which are the only states in which such qualification is necessary
in order for it to own or lease its Property and conduct its business, except
where the failure to so qualify would not have a material adverse effect on
the LSB Borrowing Group taken as a whole.
8.6 Financial Statements and Projections.
(a) LSB has delivered to the Lender the audited consolidated
balance sheet and related statements of income, retained earnings, statements
of cash flows, and changes in stockholders' equity for LSB, as of December 31,
1993 and for the Fiscal Year then ended, accompanied by the report thereon of
LSB's independent certified public accountants. LSB has also delivered to the
Lender the unaudited consolidated balance sheets and related statements of
income and cash flows for LSB, as at September 30, 1994 and for the nine
months and three months then ended. Such financial statements are attached
hereto as Exhibit G-1. All such financial statements have been prepared in
accordance with GAAP and present accurately and fairly the Borrower's
financial position as at the dates thereof and its results of operations for
the periods then ended.
(b) The Latest Forecasts, attached hereto as Exhibit G-2,
represent the Borrower's best estimate of the Borrower's future financial
performance for the periods set forth therein. The Latest Forecasts have been
or will be prepared on the basis of certain assumptions, which the Borrower
believes are fair and reasonable in light of current and reasonably
foreseeable business conditions; provided, however, that although such
forecasts represent the Borrower's best estimate, the Borrower makes no
representation that it will achieve such forecasts.
8.7 Capitalization. LSB's authorized capital stock consists of
(i) 75,000,000 shares of Common Stock, par value $.10 per share; (ii) 250,000
shares of Preferred Stock, par value $100 per share; and (iii) 5,000,000
shares of Class C Preferred Stock, no par value.
8.8 Solvency. The Borrower is solvent prior to and after giving
effect to the making of the Revolving Loans, and after taking into account
Intercompany Accounts.
8.9 Title to Property. Except for Permitted Liens, and except
for Property which the Borrower leases, the Borrower has, to its knowledge,
good and marketable title in fee simple to the real property listed in Exhibit
H and good, indefeasible, and merchantable title to all of its other Property
free of all Liens except Permitted Liens.
8.10 Real Property; Leases. Exhibit H hereto is a correct and
complete list of all real property owned by the Borrower, and all leases and
subleases of real property by the Borrower as lessee or sublessee where
Collateral is located. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect and
no material default by any party to any such lease or sublease exists.
8.11 Proprietary Rights. Exhibit B hereto is a correct and
complete list of all of the Proprietary Rights owned by Borrower. None of the
Proprietary Rights is subject to any licensing agreement or similar
arrangement except as set forth on Exhibit B. To the Borrower's knowledge,
none of the Proprietary Rights infringes on or conflicts with any other
Person's Property. The Proprietary Rights described on Exhibit B constitute
all of the Property of such type necessary to the current and anticipated
future conduct of the Borrower's business.
8.12 Trade Names and Terms of Sale. All trade names or styles
under which the Borrower or any Guarantor Subsidiary will sell Inventory or
create Accounts, or to which instruments in payment of Accounts may be made
payable, are listed on Exhibit I hereto. The terms of sale on which such
sales of Inventory will be made are set forth on Exhibit I.
8.13 Litigation. Except as set forth on Exhibit J or as
described in the reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission, there is no pending or, to the Borrower's
knowledge, threatened suit, proceeding, or counterclaim by any Person, or
investigation by any Public Authority, or any basis for any of the foregoing,
which would have a material adverse effect on the LSB Borrowing Group, taken
as a whole, or (ii) involve damages or a claim for damages in excess of
$1,000,000 and not fully covered by insurance.
8.14 Labor Disputes. Except as set forth on Exhibit K or as
described in reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission: (a) there is no collective bargaining
agreement or other labor contract covering employees of the Borrower or any
Guarantor Subsidiary; (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this Agreement; (c)
no union or other labor organization is seeking to organize, or to be
recognized as, a collective bargaining unit of employees of the Borrower or
any Guarantor Subsidiary; and (d) there is no pending or, to the Borrower's
knowledge, threatened strike, work stoppage, material unfair labor practice
claims, or other material labor dispute which would have a material adverse
effect on the LSB Borrowing Group, taken as a whole.
8.15 Environmental Laws. Except as disclosed on Exhibit M
hereto, and as hereafter disclosed by Borrower to Lender in writing, and to
the Borrower's knowledge:
(a) All environmental permits, certificates, licenses,
approvals, registrations and authorizations ("Permits") required under all
Environmental Laws in connection with the business of the Borrower and each
Guarantor Subsidiary have been obtained, unless the failure to obtain such
Permits would not have a material adverse effect on the LSB Borrowing Group,
taken as a whole;
(b) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental entity with respect to any
generation, treatment, storage, recycling, transportation or disposal of any
hazardous or toxic waste (including petroleum products and radioactive
materials) generated or used ("Hazardous Substances") by the Borrower or any
Guarantor Subsidiary, which would have a material adverse effect on the LSB
Borrowing Group, taken as a whole;
(c) Neither Borrower nor any Guarantor Subsidiary has received
any request for information that is likely to lead to a claim, any notice of
claim, demand or other notification that the Borrower or any Guarantor
Subsidiary is or may be potentially responsible with respect to any clean up
of any threatened or actual release of any Hazardous Substance;
(d) There are no underground storage tanks, active or abandoned,
at any property now owned, operated or leased by the Borrower or any Guarantor
Subsidiary.
(e) Neither Borrower nor any Guarantor Subsidiary has knowingly
transported any Hazardous Substances to any location which is listed on the
National Priority List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), which is the
subject of any federal or state enforcement actions which may lead to claims
against Borrower or any Guarantor Subsidiary for clean up costs, remedial
work, damages to natural resources or for personal injury claims, including,
but not limited to, claims under CERCLA which would have a material adverse
effect on the LSB Borrowing Group, taken as a whole.
(f) No written notification of a release of Hazardous Substance
has been filed by or on behalf of the Borrower or any Guarantor Subsidiary or
in relation to any Property now owned, operated or leased by the Borrower or
any Guarantor Subsidiary or previously owned, operated or leased by the
Borrower or any Guarantor Subsidiary at the time such property was so owned,
operated or leased. No such Property is listed or proposed for listing on the
National Priority List promulgated pursuant to CERCLA, or on any similar state
list of sites requiring investigation or clean up.
(g) There are no environmental Liens on any material properties
owned or leased by the Borrower or any Guarantor Subsidiary and no
governmental actions have been taken or are in process or pending which could
subject any of such Properties to such Liens.
(h) The Borrower shall promptly forward a copy to Lender of any
environmental written inspections, investigations or studies prepared by or to
be prepared by the Borrower or any Guarantor Subsidiary relating to Properties
now owned, operated or leased by the Borrower or any Guarantor Subsidiary;
provided, however, that Borrower makes no representation or warranty with
respect to environmental inspections, investigations, studies, audits, tests,
reviews or other analyses conducted by or on behalf of Lender.
8.16 No Violation of Law. Except as disclosed in Exhibit J or in
reports filed by LSB prior to the Closing Date with the Securities and
Exchange Commission, to the Borrower's knowledge, neither the Borrower nor any
Guarantor Subsidiary is in violation of any law, statute, regulation,
ordinance, judgment, order, or decree applicable to it which violation would
have a material adverse effect on the LSB Borrowing Group, taken as a whole.
8.17 No Default. Neither the Borrower nor any Guarantor
Subsidiary is in default with respect to any note, loan agreement, mortgage,
lease, or other agreement to which the Borrower or any Guarantor Subsidiary is
a party or bound, where the amount owed by Borrower or any Guarantor
Subsidiary under such note, loan agreement, mortgage, lease, or other
agreement exceeds $750,000.
8.18 Plans. Each Plan has been maintained at all times in
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code. All Pension Plans are listed on Exhibit L, and those, if
any, which are a Multi-employer Plan are designated as such, and a copy of
each such Pension Plan which has been requested in writing by Lender has been
furnished to Lender. Except as set forth on Exhibit L, no Pension Plan has
incurred any accumulated funding deficiency, as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, which would
have a material adverse effect on the LSB Borrowing Group, taken as a whole.
Except as set forth on Exhibit L, each Pension Plan, which is intended to be a
qualified Pension Plan under Section 401(a) of the Code, as currently in
effect has received a favorable determination letter from the Internal Revenue
Service finding that the current form of the Plan is qualified under Section
401(a) of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code. The Borrower has not incurred any
liability to the PBGC other than the payment of premiums, and there are no
premium payments which have become due, are unpaid, and the non-payment of
which would have a material adverse effect on the LSB Borrowing Group.
Neither LSB nor any of its Subsidiaries, nor any fiduciary of or trustee to
any Plan has breached any of the responsibilities, obligations or duties
imposed on it under the terms of the Plan or by ERISA with respect to any Plan
the breach of which would have a material adverse effect on the LSB Borrowing.
LSB has established reserves on its books to provide for the benefits earned
and other liabilities accrued under each such Plan in amounts sufficient to
substantially provide for such benefits and liabilities which have not been
funded through the trust, if any, established for such Plan.
8.19 Taxes. The Borrower and each Guarantor Subsidiary has filed
all tax returns and other reports which it was required by law to file on or
prior to the date hereof and has paid all taxes, assessments, fees, and other
governmental charges, and penalties and interest, if any, against it or its
Property, income, or franchise, that are due and payable, except such Taxes
which are being contested in good faith and for which appropriate reserves
have been established in connection therewith, or for which an extension as to
the date of filing has been authorized.
8.20 Use of Proceeds. None of the transactions contemplated in
this Agreement (including, without limitation, the use of certain proceeds
from such loans) will violate or result in the violation of Section 7 of the
Securities Exchange Act of 1934, as amended, 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 ("Federal Reserve
Board"), 12 C.F.R., Chapter II. Borrower does not own or intend to carry or
purchase any "margin stock" within the meaning of said Regulation G. None of
the proceeds of the loans will be used, directly or indirectly, to purchase or
carry (or refinance any borrowing, the proceeds of which were used to purchase
or carry) any "security" within the meaning of the Securities Exchange Act of
1934, as amended.
8.21 Private Offerings. Borrower has not, directly or
indirectly, offered the Revolving Loans for sale to, or solicited offers to
buy part thereof from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser other than Lender. Borrower hereby
agrees that neither it nor anyone acting on its behalf has offered or will
offer the Revolving Loan or any part thereof or any similar securities for
issue or sale to or solicit any offer to acquire any of the same from anyone
so as to bring the issuance thereof within the provisions of Section 5 of the
Securities Act of 1933, as amended.
8.22 Broker's Fees. Borrower represents and warrants to Lender
that, with respect to the financing transaction herein contemplated, no Person
is entitled to any brokerage fee or other commission as a result of acts by
the Borrower and Borrower agrees to indemnify and hold Lender harmless against
any and all such claims if such claim is due to the acts of the Borrower.
8.23 No Material Adverse Change. No material adverse change has
occurred in the Property, business, operations, or conditions (financial or
otherwise) of the LSB Borrowing Group, taken as a whole, since the date of the
Financial Statements delivered to the Lender, except as otherwise disclosed in
that Special Report to LSB Shareholders dated September 15, 1994 and in the
reports filed by LSB with the Securities and Exchange Commission, if any.
8.24 Debt. After giving effect to the making of each Revolving
Loan, the Borrower has no Debt except Permitted Debt.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrower and, where
applicable, each Guarantor Subsidiary covenants that, so long as any of the
Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. The Borrower and each
Guarantor Subsidiary, no later than ten days after such payments become due,
shall: (a) file when due (including extensions) all tax returns and other
reports which it is required to file, pay when due all taxes, fees,
assessments and other governmental charges against it or upon its Property,
income, and franchises, make all required withholding and other tax deposits,
and establish adequate reserves for the payment of all such items, and shall
provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (b) pay all Debt owed by it within normal
business terms and consistent with past practices; provided, however, that
neither the Borrower nor any Guarantor Subsidiary need pay any tax, fee,
assessment, governmental charge, or Debt, or perform or discharge any other
obligation, that it is contesting in good faith by appropriate proceedings
diligently pursued.
9.2 Corporate Existence and Good Standing. The Borrower and
each Guarantor Subsidiary shall maintain its corporate existence and its
qualification and good standing in all states necessary to conduct its
business and own its Property, except where the failure to so qualify would
not have a material adverse effect on the Borrower or such Guarantor
Subsidiary, and shall obtain and maintain all licenses, permits, franchises
and governmental authorizations necessary to conduct its business and own its
Property.
9.3 Maintenance of Property and Insurance. The Borrower and
each Guarantor Subsidiary shall: (a) maintain all of its Property necessary
and material in its business in good operating condition and repair, ordinary
wear and tear excepted, provided, however, that Borrower shall have a period
of ten (10) days after learning that repair is necessary within which to
repair any Property which has not been so maintained before an Event of
Default shall be deemed to have occurred; and (b) in addition to the insurance
required by Section 6.7, maintain with financially sound and reputable
insurers such other insurance with respect to its Property and business
against casualties and contingencies of such types (including, without
limitation, business interruption, public liability, product liability, and
larceny, embezzlement or other criminal misappropriation), and in such amounts
as is customary for Persons of established reputation engaged in the same or a
similar business and similarly situated, naming the Lender, at its request, as
additional insured under each such policy as to the Collateral.
9.4 Environmental Laws. Except as disclosed to Lender in
writing prior to the Closing Date in connection with Section 8.15, the
Borrower and each Guarantor Subsidiary will use all reasonable efforts to
conduct its business in substantial compliance with all Environmental Laws
applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. The Borrower shall take prompt and appropriate action to
respond to any noncompliance with Environmental Laws and shall regularly
report to the Lender on such response. Without limiting the generality of the
foregoing, whenever there is potential noncompliance with any Environmental
Laws, the Borrower shall, at the Lender's request and the Borrower's expense:
(a) cause an independent environmental engineer acceptable to the Lender to
conduct such tests of the site where the Borrower's or any Guarantor
Subsidiary's noncompliance or alleged noncompliance with Environmental Laws
has occurred and prepare and deliver to the Lender a report setting forth the
results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof; and (b)
provide to the Lender a Supplemental report of such engineer whenever the
scope of the environmental problems, or the Borrower's response thereto or the
estimated costs thereof, shall materially change.
9.5 Mergers, Consolidations, Acquisitions, or Sales. Neither
the Borrower nor any Guarantor Subsidiary shall enter into any transaction of
merger, reorganization, or consolidation in which Borrower or, in the case of
the Guarantor Subsidiaries, another Guarantor Subsidiary, is not the survivor
or transfer, sell, assign, lease, or otherwise dispose of all or substantially
all of its Property, or wind up, liquidate or dissolve, or agree to do any of
the foregoing, except (i) sales of Inventory in the ordinary course of its
business, or (ii) after thirty (30) days prior written notice to Lender,
mergers or consolidations of the Borrower into any of the Borrower
Subsidiaries or a merger of a Borrower Subsidiary or Guarantor Subsidiary into
the Borrower or the sale of all or substantially all of the assets of the
Borrower to any of the Borrower Subsidiaries or the sale of all or
substantially all of the assets of a Borrower Subsidiary or Guarantor
Subsidiary to the Borrower.
9.6 Guaranties. Borrower shall not make, issue, or become
liable on any secured Guaranty, except Guaranties in favor of the Lender and
endorsements of instruments for deposit.
9.7 Debt. Borrower shall not incur or maintain any Debt other
than Permitted Debt.
9.8 Prepayment. The Borrower shall not voluntarily prepay any
Debt, except the Obligations in accordance with the terms of this Agreement.
9.9 Transactions with Affiliates. Except (a) as set forth
below, (b) as set forth in Section 9.14 hereof, or (c) as otherwise provided
in this Agreement, the Borrower shall not sell, transfer, distribute, or pay
any money or Property to any Affiliate, or lend or advance money or Property
to any Affiliate, or invest in (by capital contribution or otherwise) or
purchase or repurchase any stock or indebtedness, or any Property, of any
Affiliate, or become liable on any secured Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate, except nothing contained
herein shall limit or restrict the Borrower from (i) performing any agreements
entered into with an Affiliate prior to the date hereof, or (ii) engaging in
other transactions with Affiliates in the normal course of business, in
amounts and upon terms disclosed to the Lender, and which are no less
favorable to the Borrower than would be obtainable in a comparable arm's
length transaction with a third party who is not an Affiliate. Subject to
applicable law, Borrower and other members of the LSB Borrowing Group may
borrow any amounts from each other and repay such amounts on terms agreed to
between them without any limitations.
9.10 Plans and Compensation. The Borrower shall not take any
action, or shall fail to take any action, that will cause or be reasonably
expected to cause any representation or warranty contained in Section 8.18
(other than the listing of Pension Plans on Exhibit L), if made on and again
as of any date on or after the date of this Agreement, to not be true and,
without limitation and without excusing such violation, if such a prohibited
action or inaction occurs or fails to occur, Borrower shall notify Lender in
writing of the nature of the resulting consequences or expected consequences,
and a description of the action Borrower or any Subsidiary is taking or
proposing to take with respect thereto and, when known, any action taken by
the Internal Revenue Service of the Department of Labor, or the PBGC, with
respect thereto.
9.11 Reserved.
9.12 Liens. The Borrower shall not create, incur, assume, or
permit to exist any Lien on any Property now owned or hereafter acquired by
the Borrower or any Guarantor Subsidiary, except Permitted Liens.
9.13 New Subsidiaries. The Borrower shall not, directly or
indirectly, organize or acquire any new subsidiary which would have any
interest in the Collateral.
9.14 Distributions and Restricted Investments. Borrower shall
not (a) directly or indirectly declare or make, or incur any liability to
make, any Distribution, or (b) make any Restricted Investments, except: (i)
Borrower may make and receive Distributions and Restricted Investments by the
other members of the LSB Borrowing Group; (ii) so long as no Event of Default
has occurred and is continuing, currently scheduled Dividends by LSB and per-
formance of all of the terms, provisions and conditions by LSB, relating to or
in connection with or arising out of any and all series of LSB's preferred
stock issued and outstanding as of the date hereof and the payments of an
annual cash dividend on its Common Stock in an amount equal to $.06 a share
payable on a semi-annual basis; (iii) Borrower may make Restricted Investments
to any of its Subsidiaries other than the members of the LSB Borrowing Group,
provided, however, that the sum of all such Restricted Investments from
Borrower and all other members of the LSB Borrowing Group shall not exceed
$200,000 in the aggregate per annum; (iv) Borrower may make Restricted
Investments in Affiliates outstanding as of the date hereof; (v) Borrower may
make other Restricted Investments consituting Acquisitions not otherwise
permitted above in this Section as long as such Restricted Investments when
aggregated with all other Restricted Investments for the same Acquisition from
all members of the LSB Borrowing Group do not exceed $2,000,000 in cash
investments and issued and/or assumed interest-bearing debt per Acquisition
and $10,000,000 in cash investments and issued and/or assumed interest-bearing
debt in the aggregate for all such Acquisitions per annum; provided, however,
that interest-bearing debt of the acquired company which Lender in its sole
and absolute discretion agrees to refinance as a working capital facility
shall not be included in the $2,000,000 and the $10,000,000 limitations; and
further provided that nothing in this subsection (v) shall be construed to
imply Lender's willingness in advance to provide any such refinancing; and
(vi) Borrower may purchase up to $2,500,000 in the aggregate of its treasury
stock from the Closing Date through December 31, 1996 in accordance with the
following schedule: (x) up to $500,000 of treasury stock may be purchased
from the Closing Date through March 31, 1995, (y) up to $1,500,000 of treasury
stock may be purchased from the Closing Date through December 31, 1995, and
(z) up to $2,500,000 of treasury stock may be purchased from the Closing Date
through December 31, 1996.
9.15 Capital Expenditures. Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto, the aggregate amount of
all Capital Expenditures by the LSB Borrowing Group during the following
periods would exceed the following amounts: Fiscal Year ending December 31,
1994: $20,000,000; Fiscal Year ending December 31, 1995: $6,000,000, and
each Fiscal Year thereafter; provided, however, that if the aggregate amount
of Capital Expenditures made or incurred by the LSB Borrowing Group during the
Fiscal Year ending December 31, 1994 (the "1994 Actual Capital Expenditures")
is less than $20,000,000, then the $6,000,000 amount available during the
Fiscal Year ending December 31, 1995 shall be increased by the difference
between $20,000,000 and the 1994 Actual Capital Expenditures.
9.16 Adjusted Tangible Net Worth. Adjusted Tangible Net Worth
(without taking into account any purchases of treasury stock) will not be less
than the following amounts at the end of each of the Fiscal Quarters during
the following Fiscal Years:
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Fiscal Year Ending
December 31, 1994 $ 86,000,000
Fiscal Year Ending
December 31, 1995 $ 85,000,0001 $ 88,000,0001 $ 90,000,0001 $ 92,000,0001
Fiscal Year Ending
December 31, 1996 $ 92,000,0001 $ 94,000,0001 $ 96,000,0001 $ 98,000,0001
Each Fiscal Quarter during each Fiscal Year ending thereafter: $ 98,000,0001
9.17 Debt Ratio. The ratio of Debt of the LSB Borrowing Group
(excluding all loans to any Borrower Subsidiary from the Lender) to Adjusted
Tangible Net Worth will not be greater than the ratio of 0.85 to 1.0.
9.18 Further Assurances. The Borrower shall execute and deliver,
or cause to be executed and delivered, to the Lender such documents and
agreements, and shall take or cause to be taken such actions, as the Lender
may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
10. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated
to make any Loans or issue any Letters of Credit at the Closing unless the
following conditions precedent have been satisfied as reasonably determined by
the Lender:
10.1 Representations and Warranties; Covenants; Events. The
Borrower's representations and warranties contained in this Agreement and the
other Loan Documents shall be correct and complete as of the Closing Date; the
Borrower shall have performed and complied with all covenants, agreements, and
conditions contained herein and in the other Loan Documents which are required
to have been performed or complied with on or before the Closing Date; and
there shall exist no Event of Default on the Closing Date.
10.2 Delivery of Documents. The Borrower shall have delivered,
or cause to be delivered, to the Lender the documents listed on Exhibit N
hereto and such other documents, instruments and agreements as the Lender
shall request in connection herewith, duly executed by all parties thereto
other than the Lender, and in form and substance satisfactory to the Lender
and its counsel.
10.3 Aggregate LSB Gross Availability. After taking into account
the Revolving Loans made to and the Letters of Credit issued to or for the
benefit of the Borrower Subsidiaries under the LSB-Related Loan Agreements on
the Closing Date, there shall be remaining Aggregate LSB Gross Availability of
at least ten percent (10%) of the Aggregate LSB Gross Availability calculated
prior to the making of such Revolving Loans and the issuance of such Letters
of Credit.
10.4 Termination of Liens. The Lender shall have received such
duly executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate and
satisfy all Liens on the Property of the Borrower and its Subsidiaries except
Permitted Liens, including, but not limited to, (a) payment of the obligations
due (i) Congress Financial Corporation ("Congress") under the Loan Agreement,
dated March 29, 1994, as amended ("Congress Loan Agreement"), and (ii)
Household Commercial Financial Services, Inc. ("Household") under the Second
Amended and Restated Working Capital Loan Agreement, dated as of January 21,
1992, between Household, El Dorado Chemical and Slurry, as amended ("Household
Working Capital Agreement"), which Congress Loan Agreement and Household
Working Capital Agreement will be paid in full upon the closing of the LSB-
Related Loan Agreements using proceeds from Loans made on the Closing Date,
and (b) termination of all of the Agreements for Purchase of Receivables
between the Borrower and Prime Financial Corporation ("Prime"), which
termination will require payment by Prime of the obligations due Bank IV
Oklahoma, N.A. ("Bank IV") under the Loan Agreement, dated March 30, 1994, as
amended, between Prime and Bank IV ("Prime Loan Agreement") at the closing of
the LSB-Related Loan Agreements using proceeds from Loans made on the Closing
Date.
10.5 Facility Fee. The Borrower shall have paid in full the
Facility Fee.
10.6 Required Approvals. The Lender shall have received
certified copies of all consents or approvals of any Public Authority or other
Person which the Lender reasonably determines is required in connection with
the transactions contemplated by this Agreement.
10.7 No Material Adverse Change. Except as disclosed in that
Special Report to LSB Shareholders dated September 15, 1994, there shall have
occurred no material adverse change in the Borrower's and the Subsidiaries'
business or financial condition or in the Collateral taken as a whole, since
September 30, 1994, and the Lender shall have received a certificate of
Borrower's chief executive officer to such effect.
10.8 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents
contemplated in connection herewith, shall be satisfactory in form and
substance to the Lender and its counsel.
10.9 Legal Opinions. The Lender shall have received from counsel
to the Borrower such legal opinions as the Lender may reasonably require with
respect to the Loan Documents.
10.10 September 30, 1994 Quarterly Financial Statements. The
Lender shall have received LSB's and the Subsidiaries' consolidated September
30, 1994, unaudited quarterly financial statements.
10.11 Repurchase of Accounts from Prime. The Borrower and each
member of the LSB Borrowing Group shall have repurchased from Prime under
terms and conditions acceptable to Lender all of the outstanding Accounts
previously sold by Borrower and the other members of the LSB Borrowing Group
which will be owned by members of the LSB Borrowing Group as of the Closing
Date and will serve as Collateral under the LSB-Related Loan Agreements using
proceeds from the Loan made on the Closing Date. Borrower and the other
members of the LSB Borrowing Group shall own such Accounts free and clear of
all liens, claims and encumbrances, and Prime and each of its secured lenders
shall have released all of its security interests in such Accounts. The
documents evidencing such repurchase shall be in form and substance
satisfactory to Lender and its counsel.
10.12 Conditions Precedent to Each Loan. The obligation of the
Lender to make each Revolving Loan or to provide for the issuance of any
Letter of Credit after the Closing and after the initial Revolving Loans on
the Closing Date are made, shall be subject to the further conditions
precedent that on the date of any such extension of credit, the following
statements shall be true, and the acceptance by the Borrower of any extension
of credit shall be deemed to be a statement to the effect set forth in clauses
(i) and (ii), with the same effect as the delivery to the Lender of a
certificate signed by the chief executive officer and chief financial officer
of the Borrower, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent the Lender has been
notified by the Borrower that any representation or warranty is no
longer correct and the reason therefor and the Lender has explicitly
accepted in writing such disclosure in the exercise of its reasonable
discretion; and
(ii) No Event has occurred and is continuing, or would
result from such extension of credit, which constitutes an Event of
Default.
11. DEFAULT; REMEDIES.
11.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to make payment of principal, interest, fees or
premium on any of the Obligations when due;
(b) any representation or warranty made by the Borrower or any
Guarantor Subsidiary in this Agreement, any of the other Loan Documents, any
Financial Statement, or any certificate furnished by the Borrower at any time
to the Lender shall prove to be untrue in any material respect as of the date
when made or furnished;
(c) default shall occur in the observance or performance of any
of the covenants and agreements contained in this Agreement, or in any of the
other Loan Documents, or if any such agreement or document shall terminate
(other than in accordance with its terms or the terms hereof or with the
written consent of the Lender) or become void or unenforceable without the
written consent of the Lender other than as a direct result of any conduct
solely on the part of the Lender;
(d) any default by Borrower under any material agreement or
instrument (other than an agreement or instrument evidencing the lending of
money), which default would have a material adverse effect on the LSB
Borrowing Group, taken as a whole, and such default continues for thirty (30)
days after such breach first occurs; provided, however, that such grace period
shall not apply, and an Event of Default shall exist, promptly upon such
breach, if such breach may not, in Lender's reasonable determination, be cured
by Borrower during such thirty (30) day grace period;
(e) any default by Borrower in any payment of principal of or
interest on any indebtedness (other than the Obligations) for borrowed money
where the then outstanding amount exceeds $500,000 beyond any period of grace
provided with respect thereto or in the performance of any other agreement,
term or condition contained in any agreement under which any such obligation
is created if (i) the effect of such default is to cause or permit the holder
or holders of such obligation to cause, such obligation to become due prior to
its stated maturity, and (ii) the effect of such default would have a material
adverse effect on the Borrower.
(f) Borrower shall make a general assignment for benefit of
creditors; or any proceeding shall be instituted by Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property or Borrower shall take any corporate
action to authorize any of the actions set forth above in this Subsection
11.1(f).
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against the Borrower seeking reorganization,
arrangement or readjustment of the Borrower's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy
or insolvency act or law, state or federal, now or hereafter existing and
remain undismissed or unvacated for a period of sixty (60) days;
(h) a receiver, assignee, liquidator, trustee or similar officer
for the Borrower or any Subsidiary or for all or substantially all of its
Property shall be appointed involuntarily;
(i) the Borrower shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for
dissolution, winding-up or liquidation, or shall take any corporate action in
furtherance thereof, except if one Borrower merges or consolidates with
another Borrower;
(j) any guaranty of the Obligations shall be terminated, revoked
or declared void or invalid other than by an action undertaken by Lender;
(k) one or more final judgments for the payment of money
aggregating in excess of $1,000,000 (not covered by insurance) shall be
rendered against any members of the LSB Borrowing Group, and LSB or such other
member of the LSB Borrowing Group shall fail to discharge the same within
thirty (30) days from the date of notice of entry thereof or to appeal
therefrom or reach a negotiated settlement in connection therewith;
(l) any loss, theft, damage or destruction of any item or items
of Collateral occurs which: (i) materially and adversely affects the
operation of the Borrower's and the Guarantor Subsidiaries' business taken as
a whole; or (ii) is material in amount and is not adequately covered by
insurance;
(m) any event or condition shall occur, or exist with respect to
a Plan that would, in the Lender's reasonable judgment, subject the Borrower
or any Subsidiary to any tax, penalty or other liabilities under the terms of
the Plan, under ERISA or under the Code which in the aggregate are material in
relation to the business, operations, Property or financial or other condition
of the LSB Borrowing Group taken as a whole;
(n) there occurs after the date hereof an Ownership Change (as
defined below) in LSB. For purposes of this Agreement, an "Ownership Change"
in LSB is deemed to have occurred if any Person (except Jack E. Golsen,
members of his Immediate Family [as defined below] and any entity controlled
by Jack E. Golsen or members of his Immediate Family), together with such
Person's affiliates and associates, is or becomes the beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of LSB. The term "Immediate Family" of any Person means the
spouse, siblings, children, mothers and mothers-in-law, fathers and fathers-
in-law, sons and daughters-in-law, daughters and sons-in-law, nieces, nephews,
brothers and sisters-in-law, sisters and brothers-in-law; and
(o) an event of default exists under any of the other LSB-
Related Loan Agreements.
11.2 Remedies.
(a) If an Event of Default exists, the Lender may, without
notice to or demand on the Borrower, do one or more of the following at any
time or times and in any order: (i) reduce the amount of or refuse to make
Revolving Loans and restrict or refuse to arrange for Letters of Credit; (ii)
terminate this Agreement; (iii) declare any or all Obligations to be
immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Sections 11.1(f), 11.1(g), or 11.1(h), all
Obligations shall automatically become immediately due and payable); and (iv)
pursue its other rights and remedies under the Loan Documents and applicable
law. The foregoing shall not be construed to limit the Lender's discretion to
take the actions described in clause (i) of this subparagraph (a) at any other
time.
(b) If an Event of Default exists: (i) the Lender shall have, in
addition to all other rights, the rights and remedies of a secured party under
the UCC; (ii) the Lender may, at any time, take possession of the Collateral
and keep it on the Borrower's or any Guarantor Subsidiary's premises, at no
cost to the Lender, or remove any part of it to such other place or places as
the Lender may desire, or, the Borrower shall, upon the Lender's demand, at
the Borrower's cost, assemble the Collateral and make it available to the
Lender at a place reasonably convenient to the Lender; and (iii) the Lender
may sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as the Lender deems
advisable, in its sole discretion, and may, if the Lender deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given in the
following manner, the Borrower and each Guarantor Subsidiary agrees that any
notice by the Lender of sale, disposition or other intended action hereunder
or in connection herewith, whether required by the UCC or otherwise, shall
constitute reasonable notice to the Borrower and such Guarantor Subsidiary if
such notice is mailed by registered or certified mail, return receipt
requested, postage prepaid, or is delivered personally against receipt, at
least five (5) days prior to such action to the Borrower's address specified
in or pursuant to Section 13.10. If any Collateral is sold on terms other
than payment in full at the time of sale, no credit shall be given against the
Obligations until the Lender receives payment, and if the buyer defaults in
payment, the Lender may resell the Collateral without further notice to the
Borrower or any Guarantor Subsidiary. In the event the Lender seeks to take
possession of all or any portion of the Collateral by judicial process, the
Borrower and each Guarantor Subsidiary irrevocably waives: (a) the posting of
any bond, surety or security with respect thereto which might otherwise be
required; (b) any demand for possession prior to the commencement of any suit
or action to recover the Collateral; and (c) any requirement that the Lender
retain possession and not dispose of any Collateral until after trial or final
judgment. The Borrower and each Guarantor Subsidiary agrees that the Lender
has no obligation to preserve rights to the Collateral or marshal any
Collateral for the benefit of any Person. Following the occurrence of an
Event of Default that is continuing, the Lender is hereby granted a license or
other right to use, without charge, the Borrower's and each Guarantor
Subsidiary's labels, patents, copyrights, name, trade secrets, trade names,
trademarks, and advertising matter or any similar property, in completing
production of, advertising or selling any Collateral, and the Borrower's and
each Guarantor Subsidiary's rights under all licenses and all franchise
agreements shall inure to the Lender's benefit, as long as such does not
violate in any manner such other loan agreements that may be in place at such
time. The proceeds of sale shall be applied first to all expenses of sale,
including attorneys' fees, and second, in whatever order the Lender elects, to
all Obligations. The Lender will return any excess to the Borrower and the
Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs and is continuing, the
Borrower and each Guarantor Subsidiary hereby waives: (i) all rights to notice
and hearing prior to the exercise by the Lender of the Lender's rights to
repossess the Collateral without judicial process or to replevy, attach or
levy upon the Collateral without notice or hearing, and (ii) all rights of
set-off and counterclaim against Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction,
the Borrower shall pay the Lender, immediately upon termination, an early
termination penalty equal to the early termination fee that would have been
payable under Article 12 if this Agreement had been terminated on that date
pursuant to the Borrower's election.
12. TERM AND TERMINATION. The initial term of this Agreement shall be
three (3) years from the Closing Date (the "Termination Date"). This
Agreement shall automatically be renewed thereafter for successive thirteen
(13) month terms, unless this Agreement is terminated as provided below. The
Lender and the Borrower shall each have the right to terminate this Agreement,
without premium or penalty, at the end of the initial term or at the end of
any renewal term by giving the other written notice not less than sixty (60)
days prior to the end of such term by registered or certified mail. The
Borrower may also terminate this Agreement at any time during its initial term
or any renewal periods if: (a) it gives the Lender sixty (60) days prior
written notice of termination by registered or certified mail; (b) it pays and
performs all Obligations on or prior to the effective date of termination; and
(c) except as otherwise provided herein, it pays the Lender, on or prior to
the effective date of termination, (i) two percent (2%) of the average daily
balance of the Loans and Letters of Credit outstanding under the Revolver
Facility for the preceding one hundred eighty day (180) day period (or from
the Closing Date up to and including the date of termination if less than one
hundred eighty (180) days from the Closing Date) if such termination is made
on or prior to the first anniversary of the Closing Date; and (ii) one percent
(1%) of the average daily balance of the Loans and Letters of Credit
outstanding under the Revolver Facility for the preceding one hundred eighty
(180) day period if such termination is made after the first anniversary but
on or prior to the second anniversary of the Closing Date; provided, however,
that prior to an Event of Default that is continuing, the Borrower may prepay
at any time all outstanding Obligations due hereunder without penalty or
premium as provided in clause (c) above if (i) Lender under any condition or
for any reason changes the advance rates relating to Eligible Accounts or
Eligible Inventory from that set forth in the definition of Availability
contained herein, provided further that nothing contained in this clause shall
be construed as allowing the Lender to make any such change, or (ii) a public
offering by LSB of its securities (equity or debt) is consummated and the
proceeds thereof are used to prepay the Obligations after the date hereof.
The Lender may also terminate this Agreement without notice upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction.
Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations shall become immediately due and payable.
Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in full, the Lender shall retain all its rights and
remedies hereunder (including, without limitation, in all then existing and
after-arising Collateral).
13. MISCELLANEOUS.
13.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against the Borrower to collect the
Obligations without any prior recourse to the Collateral.
13.2 No Implied Waivers. No act, failure or delay by the Lender
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement, or any other
Loan Document, or of breach or default hereunder or thereunder, or of any
right or remedy which the Lender may have, shall operate as a waiver of any
other provision, breach, default, right or remedy or of the same provision,
breach, default, right or remedy on a future occasion. No waiver by the
Lender shall affect its rights to require strict performance of this
Agreement.
13.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be effective only to
such extent, without invalidating the remainder of this Agreement.
13.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE EXCEPT THAT NO DOCTRINE OF CHOICE OF
LAW SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION.
13.5 Consent to Jurisdiction and Venue; Service of Process;
Arbitration.
(a) The Borrower agrees that, in addition to any other courts
that may have jurisdiction under applicable laws, any action or proceeding to
enforce or arising out of this Agreement or any of the other Loan Documents
may be commenced in the appropriate court of the State of Oklahoma for
Oklahoma County, or in the United States District Court for the Western
District of Oklahoma, and each Borrower consents and submits in advance to
such jurisdiction and agrees that venue will be proper in such courts on any
such matter. Borrower hereby waives personal service of process and agrees
that a summons and complaint commencing an action or proceeding in any such
court shall be properly served and shall confer personal jurisdiction if
served by registered or certified mail to the Borrower. Should the Borrower
fail to appear or answer any summons, complaint, process or papers so served
within thirty (30) days after the mailing or other service thereof, it shall
be deemed in default and an order or judgment may be entered against it as
demanded or prayed for in such summons, complaint, process or papers. The
choice of forum set forth in this section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum, or the taking of any
action under this Agreement to enforce the same, in any appropriate
jurisdiction.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE
CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, INCLUDING BUT
NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT
THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY ARBITRATION. The
arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitration shall be conducted within
Oklahoma County, Oklahoma. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(c) No provision of subparagraph (a) shall limit the right of
either party to this Agreement to exercise self-help remedies such as setoff,
foreclosure against or sale of any Collateral, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any proceeding after the occurrence of an Event of
Default. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference.
13.6 Survival of Representations and Warranties. All of the
Borrower's representations and warranties of the Borrower and each Guarantor
Subsidiary contained in this Agreement shall survive the execution, delivery,
and acceptance thereof by the parties, notwithstanding any investigation by
the Lender or its agents, but after the Closing Date it is recognized that
such representations and warranties may be amended from time to time during
the term of this Agreement by written agreement between the Borrower to the
Lender due to changes in circumstances.
13.7 Indemnification. BORROWER HEREBY INDEMNIFIES , DEFENDS AND
HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL
ARISING OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR
PROCEEDINGS (WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER
STATUTES OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES,
ENVIRONMENTAL, OR COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT
EQUITABLE CAUSE, OR ON CONTRACT OR OTHERWISE) COMMENCED OR THREATENED, WHICH
ARISE OUT OF OR ARE IN ANY WAY BASED UPON THE NEGOTIATION, PREPARATION,
EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR PROCEEDING RELATED
TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION TO ACT,
EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING, WITHOUT
LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES
OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH LITIGATION,
INVESTIGATION, CLAIM OR PROCEEDING, EXCEPT THAT THIS INDEMNIFICATION SHALL NOT
APPLY TO ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES, JUDGMENTS, PENALTIES OR
EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE LENDER, AND ITS
DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, OR COUNSEL IF SUCH IS DUE TO AND
ARISES FROM OR IN CONNECTION WITH THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF ANY OF THEM OR THE INTENTIONAL AND WRONGFUL BREACH OF THIS AGREEMENT BY
LENDER. Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against Borrower, or by
Borrower or any other party against Lender, which in Lender's sole discretion
makes it advisable for Lender to seek counsel for protection and preservation
of its liens and security assets, or to defend its own interest, such
reasonable expenses and counsel fees shall be allowed to Lender. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 13.7 may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all indemnified matters incurred by Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement. All of the foregoing costs and expenses shall be part of the
Obligations and secured by the Collateral.
13.8 Other Security and Guaranties. The Lender may, without,
notice or demand and without affecting the Borrower's obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than
the Collateral) for the payment of all or any part of the Obligations and
exchange, enforce or release such collateral or any part thereof; and (b)
accept and hold any endorsement or guaranty of payment of all or any part of
the Obligations and release any such endorser or guarantor, or any Person who
has given any Lien in any other collateral as security for the repayment of
all or any part of the Obligations, or any other Person in any way obligated
to pay all or any part of the Obligations.
13.9 Fees and Expenses. The Borrower shall pay to the Lender on
demand all costs and expenses that the Lender pays or incurs in connection
with the negotiation, preparation, consummation, administration, enforcement,
and termination of this Agreement and the other Loan Documents, including,
without limitation: (a) attorneys' and paralegals' fees and disbursements of
counsel to the Lender; (b) costs and expenses (including attorneys' and
paralegals' fees and disbursements) for any amendment, supplement, waiver,
consent, or subsequent closing in connection with the Loan Documents and the
transactions contemplated thereby; (c) costs and expenses of lien and title
searches and title insurance; (d) fees and other charges for recording and
filing financing statements and continuations, and other actions to perfect,
protect, and continue the Security Interest; (e) sums paid or incurred to pay
any amount or take any action required of the Borrower under the Loan
Documents that the Borrower was obligated to pay or take under the Loan
Documents but failed to pay or take; (f) the expenses of $500 per Lender's
auditor per audit day plus actual costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, travel,
lodging, and meals, for inspections of the Collateral and the Borrower's
operations by the Lender's agents up to three times per year and whenever an
Event of Default exists; (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) all amounts that the Borrower is required
to pay under the Letter of Credit Agreement; (i) costs and expenses of
preserving and protecting the Collateral; and (j) costs and expenses
(including attorneys' and paralegals' fees and disbursements and including,
without limitation, a reasonable estimate of the allocable cost of in-house
counsel and staff) paid or incurred to obtain payment of the Obligations,
enforce the Security Interest, sell or otherwise realize upon the Collateral,
and otherwise enforce the provisions of the Loan Documents, or to defend any
claims made or threatened against the Lender arising out of the transactions
contemplated hereby (including without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and
expenses shall be charged to the Borrower's loan account as Revolving Loans.
13.10 Notices. All notices, demands and requests that either
party is required or elects to give to the other shall be in writing, shall be
delivered personally against receipt, or sent by recognized overnight courier
service, or mailed by registered or certified mail, return receipt requested,
postage prepaid, and shall be addressed to the party to be notified as
follows:
If to the Lender: BankAmerica Business Credit, Inc.
Two North Lake Avenue, Suite 400
Pasadena, California 91101
Attn: Mr. Charles Burtch
Executive Vice President
with a copy to: Bank of America - Business Credit Legal Dept.
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
Assistant General Counsel
and with a copy to: Jenkens & Gilchrist, A Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75201
Attn: Linda D. Sartin, Esq.
If to the Borrower: LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: Mr. Jack E. Golsen
President
with a copy to: LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: Mr. Tony M. Shelby
Senior Vice President
with a copy to: LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: David M. Shear, Esq.
General Counsel
and with a copy to: Hastie and Steinhorn
3000 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102
Attn: Irwin H. Steinhorn, Esq.
or to such other address as each party may designate for itself by like
notice. Any such notice, demand, or request shall be deemed given when
received if personally delivered or sent by overnight courier, or when
deposited in the United States mails, postage paid, if sent by registered or
certified mail.
13.11 Waiver of Notices. Unless otherwise expressly provided
herein, the Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate and
notice of acceleration, as well as any and all other notices to which it might
otherwise be entitled. No notice to or demand on the Borrower which the
Lender may elect to give shall entitle the Borrower to any further notice or
demand in the same, similar or other circumstances.
13.12 Binding Effect; Assignment; Disclosure. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors and assigns of the parties hereto:
provided, however, that no interest herein may be assigned by the Borrower
without the prior written consent of the Lender. The rights and benefits of
the Lender hereunder shall, if the Lender so agrees, inure to any party
acquiring any interest in the Obligations or any part thereof. The Borrower
agrees that the Lender may use the Borrower's name in advertising and
promotional materials and in conjunction therewith disclose the general terms
of this Agreement.
13.13 Modification. THIS AGREEMENT IS INTENDED BY THE BORROWER
AND THE LENDER TO BE THE FINAL, COMPLETE, AND EXCLUSIVE EXPRESSION OF THE
AGREEMENT BETWEEN THEM. THIS AGREEMENT SUPERSEDES ANY AND ALL PRIOR ORAL OR
WRITTEN AGREEMENTS RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE, OR AMENDMENT OF ANY
PROVISION OF THIS AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT
SIGNED BY THE BORROWER AND A DULY AUTHORIZED OFFICER OF THE LENDER.
13.14 Counterparts. This Agreement may be executed in any number
of counterparts, and by the Lender and the Borrower in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
13.15 Captions. The captions contained in this Agreement are for
convenience only, are without substantive meaning and should not be construed
to modify, enlarge, or restrict any provision.
13.16 Right of Set-Off. Whenever an Event of Default exists the
Lender is hereby authorized at any time and from time to time, to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by Lender or any affiliate of the Lender and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations, whether or not then due and payable. Lender agrees promptly to
notify Borrower after any such set-off and application made by Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
13.17 Participating Lender's Security Interests. If a
Participating Lender shall at any time with the Borrower's knowledge
participate with the Lender in the Loans, the Borrower hereby grants to such
Participating Lender, and the Lender and such Participating Lender shall have
and are hereby given, a continuing lien on and security interest in any money,
securities and other property of the Borrower in the custody or possession of
the Participating Lender, including, the right of set-off, to the extent of
the Participating Lender's participation in the Obligations, and such
Participating Lender shall be deemed to have the, same right of set-off, to
the extent of the Participating Lender's participation in the Obligations
under this Agreement, as it would have if it were a direct lender.
13.18 WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT GROWING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT JURY. TRIAL BY A JUDGE SITTING WITHOUT A JURY WILL FURTHER
RESULT IN THE AVOIDANCE OF DELAYS, A STREAMLINING OF THE PROCEEDINGS INVOLVED
AND, AS A RESULT, WILL MINIMIZE THE EXPENSE OF ANY SUCH LAWSUIT FOR THE
BENEFIT OF BORROWER AND LENDER. BORROWER HEREBY WAIVES TRIAL BY JURY, RIGHTS
OF SET-OFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT FOR COMPULSORY
COUNTERCLAIMS) IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED
PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING,
BETWEEN THE BORROWER, AND THE LENDER. BORROWER HEREBY CONFIRMS THAT THE
FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER":
LSB INDUSTRIES, INC.
By:
Jack E. Golsen
President
"LENDER":
BANKAMERICA BUSINESS CREDIT, INC.
By:
Joyce White
Senior Vice President
ACKNOWLEDGED AND AGREED TO:
Each of the following "Guarantor Subsidiaries" hereby grants to the
Lender a Security Interest in and to the Collateral owned by such Guarantor
Subsidiary pursuant to Section 6.1 hereof and has executed this Agreement
solely to acknowledge its agreement to comply with and be bound by all those
particular warranties, representations, covenants and agreements set forth
herein that are expressly applicable to the Guarantor Subsidiaries by the
terms of this Agreement.
UNIVERSAL TECH CORPORATION
By:
Tony M. Shelby
Vice President
LSB CHEMICAL CORP.
By:
Tony M. Shelby
Vice President
L&S AUTOMOTIVE PRODUCTS, CO.
(formerly known as LSB Bearing Corp.)
By:
Tony M. Shelby
Vice President
INTERNATIONAL BEARING, INC.
By:
Tony M. Shelby
Vice President
LSB EXTRUSION CO.
By:
Tony M. Shelby
Vice President
ROTEX CORPORATION
By:
Tony M. Shelby
Vice President
TRIBONETICS CORPORATION
By:
Tony M. Shelby
Vice President
SUMMIT MACHINE TOOL SYSTEMS, INC.
By:
Tony M. Shelby
Vice President
HERCULES ENERGY MANUFACTURING
CORPORATION
By:
Tony M. Shelby
Vice President
MOREY MACHINERY MANUFACTURING
CORPORATION
By:
Tony M. Shelby
Vice President
CHP CORPORATION
By:
Tony M. Shelby
Vice President
KOAX CORP.
By:
Tony M. Shelby
Vice President
APR CORPORATION
By:
Tony M. Shelby
Vice President
EXHIBITS TO LOAN AGREEMENT
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT C - Guarantor Subsidiaries
EXHIBIT D - List of Borrower's Locations
EXHIBIT E - Corporate History
EXHIBIT F - Subsidiaries and Affiliates
EXHIBIT G-1 - Financial Statements
EXHIBIT G-2 - Pro Forma Financial Statements
EXHIBIT H - Real Property Descriptions: Premises
EXHIBIT I - Trade Names, Trade Styles, Terms of Sale
EXHIBIT J - Pending Litigation
EXHIBIT K - Labor Matters
EXHIBIT L - ERISA Matters
EXHIBIT M - Schedule of Environmental Matters
EXHIBIT N - Closing Documents
EXHIBIT O - Letter of Credit Financing Agreement -
Supplement to Loan and Security Agreement
EXHIBIT P - Notice of Borrowing
sec\10k\tk94x412.wpe
Exhibit 4.13
LOAN AND SECURITY AGREEMENT
by and among
BANKAMERICA BUSINESS CREDIT, INC.
as Lender
and
EL DORADO CHEMICAL COMPANY
and
SLURRY EXPLOSIVES CORPORATION
as Borrowers
Dated: December 12, 1994
TABLE OF CONTENTS
SECTION
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . .-i-
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 As used herein:. . . . . . . . . . . . . . . . . . . . . . . 1
Account . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Account Debtor. . . . . . . . . . . . . . . . . . . . . . . 2
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjusted Tangible Assets. . . . . . . . . . . . . . . . . . 2
Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 2
Aggregate LSB Gross Availability. . . . . . . . . . . . . . 2
Applicable Interest Rate. . . . . . . . . . . . . . . . . . 2
Availability. . . . . . . . . . . . . . . . . . . . . . . . 2
Availability Reductions . . . . . . . . . . . . . . . . . . 3
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrower Subsidiaries . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Expenditures. . . . . . . . . . . . . . . . . . . . 3
Capital Lease . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . 4
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 4
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Distribution. . . . . . . . . . . . . . . . . . . . . . . . 4
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 4
Eligible Inventory. . . . . . . . . . . . . . . . . . . . . 7
Environmental Compliance Reserve. . . . . . . . . . . . . . 8
Environmental Laws. . . . . . . . . . . . . . . . . . . . . 8
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 8
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Eurocurrency Liabilities. . . . . . . . . . . . . . . . . . 8
Eurodollar Business Day . . . . . . . . . . . . . . . . . . 8
Eurodollar Base Rate. . . . . . . . . . . . . . . . . . . . 9
Eurodollar Interest Payment Date. . . . . . . . . . . . . . 9
Eurodollar Interest Rate Determination Date . . . . . . . . 9
Eurodollar Rate . . . . . . . . . . . . . . . . . . . . . . 9
Eurodollar Rate Loan. . . . . . . . . . . . . . . . . . . . 9
Eurodollar Rate Reserve Percentage. . . . . . . . . . . . . 9
Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Event of Default. . . . . . . . . . . . . . . . . . . . . . 9
Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . 10
Financial Statements. . . . . . . . . . . . . . . . . . . . 10
Fiscal Quarter. . . . . . . . . . . . . . . . . . . . . . . 10
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 10
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gross Availability Reductions . . . . . . . . . . . . . . . 10
Gross LSB Accounts Availability . . . . . . . . . . . . . . 10
Guarantor Subsidiaries. . . . . . . . . . . . . . . . . . . 10
Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . 10
HCFS Loan Agreement . . . . . . . . . . . . . . . . . . . . 10
Instruments . . . . . . . . . . . . . . . . . . . . . . . . 11
Intercompany Accounts . . . . . . . . . . . . . . . . . . . 11
Interest Period . . . . . . . . . . . . . . . . . . . . . . 11
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 11
Inventory Loans . . . . . . . . . . . . . . . . . . . . . . 11
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Latest Forecasts. . . . . . . . . . . . . . . . . . . . . . 11
Letter of Credit. . . . . . . . . . . . . . . . . . . . . . 11
Letter of Credit Agreement. . . . . . . . . . . . . . . . . 11
Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . 11
Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . 12
LSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
LSB Borrowing Group . . . . . . . . . . . . . . . . . . . . 12
LSB Consolidated Group. . . . . . . . . . . . . . . . . . . 12
LSB Eligible Accounts . . . . . . . . . . . . . . . . . . . 12
LSB-Related Loan Agreements . . . . . . . . . . . . . . . . 12
Maximum Inventory Advance Amount. . . . . . . . . . . . . . 12
Maximum Revolving Credit Line . . . . . . . . . . . . . . . 12
Minimum Borrowing Commitment. . . . . . . . . . . . . . . . 12
Multi-employer Plan . . . . . . . . . . . . . . . . . . . . 12
Obligations . . . . . . . . . . . . . . . . . . . . . . . . 13
Participating Lender. . . . . . . . . . . . . . . . . . . . 13
Patent and Trademark Assignments. . . . . . . . . . . . . . 13
Payment Account . . . . . . . . . . . . . . . . . . . . . . 13
PBGC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plan. . . . . . . . . . . . . . . . . . . . . . . . 13
Permitted Debt. . . . . . . . . . . . . . . . . . . . . . . 13
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . 14
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Property. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Proprietary Rights. . . . . . . . . . . . . . . . . . . . . 15
Public Authority. . . . . . . . . . . . . . . . . . . . . . 15
Real Property . . . . . . . . . . . . . . . . . . . . . . . 15
Receivables . . . . . . . . . . . . . . . . . . . . . . . . 16
Reference Rate. . . . . . . . . . . . . . . . . . . . . . . 16
Reference Rate Loan . . . . . . . . . . . . . . . . . . . . 16
Reference Rate Margin . . . . . . . . . . . . . . . . . . . 16
Related Company . . . . . . . . . . . . . . . . . . . . . . 16
Reportable Event. . . . . . . . . . . . . . . . . . . . . . 16
Restricted Investment . . . . . . . . . . . . . . . . . . . 17
Reversions. . . . . . . . . . . . . . . . . . . . . . . . . 17
Revolver Facility . . . . . . . . . . . . . . . . . . . . . 17
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 17
Security Interest . . . . . . . . . . . . . . . . . . . . . 17
Subordinated Debt . . . . . . . . . . . . . . . . . . . . . 17
Subsidiary" or "Subsidiaries. . . . . . . . . . . . . . . . 17
Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . 17
Termination Event . . . . . . . . . . . . . . . . . . . . . 17
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 18
1.3 Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . 18
1.4 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2. LOANS AND LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 18
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Availability Determination . . . . . . . . . . . . . . . . . 19
2.3 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . 19
3. INTEREST AND OTHER CHARGES . . . . . . . . . . . . . . . . . . . . 20
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Eurodollar Borrowings: Conversion or Continuation. . . . . . 20
3.3 Special Provisions Governing Eurodollar Rate Loans . . . . . 21
3.4 Maximum Interest Rate. . . . . . . . . . . . . . . . . . . . 25
3.5 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 27
3.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . 27
4. PAYMENTS AND PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 28
4.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Place and Form of Payments: Extension of Time. . . . . . . . 28
4.3 Apportionment, Application and Reversal of Payments. . . . . 28
4.4 INDEMNITY FOR RETURNED PAYMENTS. . . . . . . . . . . . . . . 28
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. . . . . . . . . . 29
6. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Grant of Security Interest . . . . . . . . . . . . . . . . . 29
6.2 Perfection and Protection of Security Interest . . . . . . . 30
6.3 Location of Collateral . . . . . . . . . . . . . . . . . . . 31
6.4 Title to, Liens on, and Sale and Use of Collateral . . . . . 31
6.5 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.6 Access and Examination . . . . . . . . . . . . . . . . . . . 31
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.8 Collateral Reporting . . . . . . . . . . . . . . . . . . . . 33
6.9 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.10 Collection of Accounts . . . . . . . . . . . . . . . . . . . 34
6.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.12 Documents and Instruments. . . . . . . . . . . . . . . . . . 35
6.13 Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . 35
6.14 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . 36
6.15 Lender's Rights, Duties, and Liabilities . . . . . . . . . . 36
6.16 Release of Collateral and the Borrowers. . . . . . . . . . . 36
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES. . . . . . . . . 37
7.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . 37
7.2 Financial Information. . . . . . . . . . . . . . . . . . . . 37
7.3 Notices to Lender. . . . . . . . . . . . . . . . . . . . . . 39
8. GENERAL WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . 40
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents . . . . . . . . . . . . . . 41
8.2 Validity and Priority of Security Interest . . . . . . . . . 41
8.3 Organization and Qualification . . . . . . . . . . . . . . . 41
8.4 Corporate Name; Prior Transactions . . . . . . . . . . . . . 42
8.5 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . . 42
8.6 Financial Statements and Projections . . . . . . . . . . . . 42
8.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 42
8.8 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.9 Title to Property. . . . . . . . . . . . . . . . . . . . . . 43
8.10 Real Property; Leases. . . . . . . . . . . . . . . . . . . . 43
8.11 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . 43
8.12 Trade Names and Terms of Sale. . . . . . . . . . . . . . . . 43
8.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.14 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . 43
8.15 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 44
8.16 No Violation of Law. . . . . . . . . . . . . . . . . . . . . 45
8.17 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.18 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.20 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 46
8.21 Private Offerings. . . . . . . . . . . . . . . . . . . . . . 46
8.22 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . 46
8.23 No Material Adverse Change . . . . . . . . . . . . . . . . . 46
8.24 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9. AFFIRMATIVE AND NEGATIVE COVENANTS . . . . . . . . . . . . . . . . 47
9.1 Taxes and Other Obligations. . . . . . . . . . . . . . . . . 47
9.2 Corporate Existence and Good Standing. . . . . . . . . . . . 47
9.3 Maintenance of Property and Insurance. . . . . . . . . . . . 47
9.4 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 47
9.5 Mergers, Consolidations, Acquisitions, or Sales. . . . . . . 48
9.6 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.7 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.8 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9 Transactions with Affiliates . . . . . . . . . . . . . . . . 48
9.10 Plans and Compensation . . . . . . . . . . . . . . . . . . . 49
9.11 Business Conducted . . . . . . . . . . . . . . . . . . . . . 49
9.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.13 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 49
9.14 Distributions and Restricted Investments . . . . . . . . . . 49
9.15 Capital Expenditures . . . . . . . . . . . . . . . . . . . . 50
9.16 Adjusted Tangible Net Worth. . . . . . . . . . . . . . . . . 50
9.17 Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.18 Compliance with . . . . . . . . . . . . . . . . . . . . . . 51
9.19 Further Assurances . . . . . . . . . . . . . . . . . . . . . 51
10. CLOSING; CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 51
10.1 Representations and Warranties; Covenants; Events. . . . . . 51
10.2 Delivery of Documents. . . . . . . . . . . . . . . . . . . . 51
10.3 Aggregate LSB Gross Availability . . . . . . . . . . . . . . 51
10.4 Termination of Liens . . . . . . . . . . . . . . . . . . . . 51
10.5 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 52
10.6 Required Approvals . . . . . . . . . . . . . . . . . . . . . 52
10.7 No Material Adverse Change . . . . . . . . . . . . . . . . . 52
10.8 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 52
10.9 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 52
10.10 September 30, 1994 Quarterly Financial Statements. . . 52
10.11 Repurchase of Accounts from Prime. . . . . . . . . . . 52
10.12 Conditions Precedent to Each Loan. . . . . . . . . . . 53
11. DEFAULT; REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 53
11.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . 53
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 57
13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.1 Cumulative Remedies; No Prior Recourse to Collateral . . . . 58
13.2 No Implied Waivers . . . . . . . . . . . . . . . . . . . . . 58
13.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . 58
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 58
13.5 Consent to Jurisdiction and Venue; Service of Process;
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . 58
13.6 Survival of Representations and Warranties . . . . . . . . . 59
13.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 59
13.8 Other Security and Guaranties. . . . . . . . . . . . . . . . 60
13.9 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . 61
13.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . 61
13.11 Waiver of Notices. . . . . . . . . . . . . . . . . . . 63
13.12 Binding Effect; Assignment; Disclosure . . . . . . . . 63
13.13 Modification . . . . . . . . . . . . . . . . . . . . . 63
13.14 Counterparts . . . . . . . . . . . . . . . . . . . . . 63
13.15 Captions . . . . . . . . . . . . . . . . . . . . . . . 63
13.16 Right of Set-Off . . . . . . . . . . . . . . . . . . . 63
13.17 Participating Lender's Security Interests. . . . . . . 64
13.18 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 64
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") is dated December
12, 1994, and is entered into by and among BANKAMERICA BUSINESS CREDIT INC., a
Delaware corporation, with offices at Two North Lake Avenue, Suite 400,
Pasadena, California 91101 (the "Lender"), and EL DORADO CHEMICAL COMPANY, an
Oklahoma corporation, with offices at 16 Pennsylvania Avenue, Oklahoma City,
Oklahoma 73107 ("EDC"), and SLURRY EXPLOSIVES CORPORATION, an Oklahoma
corporation, with offices at 5700 N. Portland, Oklahoma City, Oklahoma 73112
("Slurry", and together with EDC, referred to individually herein as a
"Borrower" and collectively as the "Borrowers").
W I T N E S S E T H
WHEREAS, the Borrowers have requested the Lender to make available to
the Borrowers a revolving line of credit for loans and letters of credit in an
amount not to exceed the Maximum Credit Facility as defined herein, which
extensions of credit the Borrower will use (i) in part to repay certain of
Borrowers' obligations, and (ii) for Borrowers' working capital needs and
general business purposes; and
WHEREAS, Slurry is a wholly-owned subsidiary of EDC, and Slurry will
receive direct and indirect benefit from the transactions contemplated by this
Agreement; and
WHEREAS, of even date herewith, Lender has entered into five (5) related
loan transactions with LSB Industries, Inc., a Delaware corporation ("LSB"),
the corporation which owns 100% of the stock of LSB Chemical Corp. which, in
turn, owns 100% of the stock of EDC, and with certain other "Borrower
Subsidiaries" as defined herein; and
WHEREAS, the aggregate amount of all loans to be made by Lender to the
Borrower Subsidiaries will not exceed Sixty-Five Million and No/100 Dollars
($65,000,000);
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, each of the Borrowers and the Lender
hereby agree as follows:
1. DEFINITIONS.
1.1 As used herein:
"Account" means either Borrower's right to payment for a sale or
lease and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated to either Borrower on
an Account.
"Acquisition" means the investment in or purchase of a
corporation, association, business, entity, partnership or limited
liability company by either of the Borrowers by means of the purchase of
stock, assets, memberships, partnership interests or otherwise.
"Adjusted Tangible Assets" means all of the assets of the LSB
Consolidated Group, on a consolidated basis, except: (a) goodwill; (b)
unamortized debt discount and expense; (c) assets constituting
Intercompany Accounts; and (d) fixed assets to the extent of any
write-up in the book value thereof resulting from a revaluation
effective after the Closing Date.
"Adjusted Tangible Net Worth" means, at any date: (a) the book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with
GAAP) at which the Adjusted Tangible Assets would be shown on a
consolidated balance sheet of the LSB Consolidated Group at such date
prepared in accordance with GAAP less (b) the amount at which the LSB
Consolidated Group's liabilities would be shown on such balance sheet
prepared in accordance with GAAP.
"Affiliate" means: a Person who, directly or indirectly,
controls, is controlled by or is under common control with LSB. The
term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
the Person in question.
"Aggregate LSB Gross Availability" means the sum of the amounts
calculated as "Availability" under all of the LSB-Related Loan
Agreements without taking into account the Gross Availability
Reductions.
"Applicable Interest Rate" has the meaning given such term in
Section 3.1(a).
"Availability" means at any time the lesser of:
A. The Maximum Revolving Credit Line, or
B. The sum of:
(1) eighty-five percent (85%) of the value of Eligible
Accounts ("Accounts Availability"), plus
(2) the lesser of (a) the Maximum Inventory Advance Amount
or (b) sixty percent (60%) of the value of Eligible
Inventory; less
(3) the Availability Reductions.
"Availability Reductions" means the following amounts which reduce
Availability:
(i) the unpaid balance of outstanding Revolving Loans at
such time;
(ii) one hundred percent (100%) of the aggregate undrawn
face amount of all outstanding Letters of Credit at such time and
the aggregate outstanding amount of all acceptances at such time
which the Lender has, or has caused to be, issued or obtained for
either Borrower's account;
(iii) reserves for accrued interest on the Revolving Loans
which is past due;
(iv) the Environmental Compliance Reserve (Note: There is
no Environmental Compliance Reserve as of the Closing Date); and
(v) all other reasonable reserves which the Lender in its
reasonable discretion deems necessary or desirable to maintain
with respect to either Borrower's account, including, without
limitation, any amounts which the Lender could reasonably be
obligated to pay within a six-month period for the account of
either Borrower.
"Bank" means Bank of America National Trust and Savings
Association in San Francisco, California.
"Borrower Subsidiaries" means LSB, Borrowers, L&S Bearing Co.,
Climate Master, Inc., International Environmental Corporation and Summit
Machine Tool Manufacturing Corp.
"Business Day" means any day that is not a Saturday, Sunday, or
day on which banks in Los Angeles, California are required or permitted
to close.
"Capital Expenditures" means all costs incurred, whether payable
in the Fiscal Year incurred or thereafter, (including financing costs
required to be capitalized under GAAP) for purchases made during a
Fiscal Year for any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than
one year, including, without limitation, those costs arising in
connection with the direct or indirect acquisition of such assets by way
of increased product or service charges or offset items or in connection
with Capital Leases.
"Capital Lease" means any lease of Property that, in accordance
with GAAP, should be reflected as a liability on a Person's balance
sheet.
"Closing Date" means the date of this Agreement, being the date
first above written.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 6.1.
"Debt" means all liabilities, obligations and indebtedness of
either Borrower to any Person, of any kind or nature, now or hereafter
owing, arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, as would be shown on the balance sheet of either such
Borrower prepared in accordance with GAAP.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of Property in
respect of capital stock of such corporation, other than distributions
in capital stock; and (b) the redemption or other acquisition of any
capital stock of such corporation
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods now owned or
hereafter acquired by either Borrower.
"Dollars" and "$" means lawful money of the United States of
America.
"Eligible Accounts" means all Accounts of either Borrower which
are not ineligible. Accounts shall be ineligible as the basis for
Revolving Loans based on the following criteria. Eligible Accounts
shall not include any Account:
(i) where such Account is "Past Due". For the purposes of
this provision, "Past Due" means: (a) where the Account has terms
of payment of less than ninety-one (91) days from the invoice
date, the payment thereof is more than 90 days past due; and (b)
where the Account has terms of payment of ninety-one to three
hundred sixty (91 to 360) days from the Invoice Date, the payment
thereof is more than 30 days past due; notwithstanding the
foregoing all advances to either Borrower and the other Borrower
Subsidiaries with respect to "eligible accounts" under the LSB-
Related Loan Agreements that have terms of payment of more than
one hundred eighty (180) days (the "180-Day Accounts") shall not
exceed in the aggregate at any time the lesser of (i) $1,500,000
or (ii) five percent (5%) of the Gross LSB Accounts Availability
(without taking into account the 180-Day Accounts);
(ii) where, with respect to such Account, any of the
representations, warranties, covenants and agreements contained in
Sections 6.9 and 8.2 of this Agreement are not or have ceased to
be complete and correct or have been breached;
(iii) where such Account represents a progress billing or as
to which either Borrower has extended the time for payment after
issuance of the invoice relating to such Account. For the purpose
hereof, "progress billing" means any invoice for goods sold or
leased or services rendered under a contract or agreement pursuant
to which the Account Debtor's obligation to pay such invoice is
expressly conditioned upon such Borrower's completion of any
further performance under the contract or agreement, provided,
however, that performance required under a warranty claim or
provision shall not make such Account a "progress billing";
(iv) where either Borrower has become aware that any one or
more of the following events has occurred with respect to an
Account Debtor on such Account: death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing
by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, or similar laws of the United States, any
state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the
Account Debtor for the benefit of creditors; the appointment of a
receiver or trustee for the Account Debtor or for any of the
assets of the Account Debtor; the institution by or against the
Account Debtor of any other type of insolvency proceeding (under
the bankruptcy laws of the United States or otherwise) or of any
formal or informal proceeding for the dissolution or liquidation
of, or winding up of affairs of, the Account Debtor; the sale,
assignment, or transfer of all or any material part of the assets
of the Account Debtor; or the cessation of the business of the
Account Debtor as a going concern;
(v) where an Account is not a valid, legally enforceable
obligation of the Account Debtor thereunder or is subject to
offset, counterclaim or other defenses on the part of such Account
Debtor denying liability thereunder in whole or in part (provided,
however, that claims under or relating to any warranty issues or
claims by an Account Debtor as a result of either Borrower
purchasing products or supplies or having received services from
such Account Debtor shall not render an Account ineligible);
(vi) where either Borrower does not have good and
marketable title to such Account, free and clear of all Liens,
other than Liens arising under this Agreement and the documents
delivered in connection herewith;
(vii) which is owed by an Account Debtor which: (i) does not
maintain its chief executive office in the United States or
territory thereof or Canada; or (ii) is not organized under the
laws of the United States or any state or territory thereof or
Canada; or (iii) is the government of any foreign country or any
state, province, municipality or other political subdivision
thereof (all of the foregoing being referred to as "Foreign
Accounts"); except that, to the extent that such Foreign Accounts
are secured or payable by letters of credit or bank guarantees
reasonably acceptable to Lender, such Foreign Accounts shall be
considered Eligible Accounts. Notwithstanding the foregoing,
Lender has agreed that Foreign Accounts, if they otherwise meet
all eligibility requirements, will be Eligible Accounts even
though such Foreign Accounts are not secured or payable by letters
of credit or bank guaranties reasonably acceptable to Lender up to
an amount not to exceed at any one time more than five percent
(5%) of the Gross LSB Accounts Availability (without taking into
account such Foreign Accounts);
(viii) which is owed by an Account Debtor which is an
Affiliate;
(ix) which is owed by the government of the United States
of America, or any department, agency, or other instrumentality
thereof, unless the Federal Assignment of Claims Act of 1940, as
amended, or any other steps necessary to perfect the Lender's
Security Interest therein, have been complied with to the Lender's
reasonable satisfaction with respect to such Account;
(x) which is owed by any state or municipality, or any
department, agency, or other instrumentality thereof, and as to
which the Lender's Security Interest therein is not or cannot be
perfected;
(xi) which arises out of a sale to an Account Debtor on a
bill and hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis;
(xii) which is evidenced by a promissory note or other
instrument (unless such note or instrument is part of chattel
paper in which Lender has a first priority perfected Security
Interest) or by chattel paper (unless Lender has a first priority
perfected Security Interest therein);
(xiii) where the goods giving rise to such Account have
not been shipped and delivered to and accepted by the Account
Debtor (except where the Account Debtor has agreed in writing to
accept billings for such goods, with a copy of such writing being
provided to Lender, then such Account shall be an Eligible Account
if it otherwise qualifies) or the services giving rise to such
Account have not been performed by the applicable Borrower and
accepted by the Account Debtor; or
(xiv) if Lender believes in its reasonable credit judgment
that the prospect of collection of such Account is impaired; or
(xv) which Account is owing from an Account Debtor in which
fifty percent (50%) or more of the Accounts owing from whom are
Past Due as set forth in subsection (i) of this definition of
Eligible Accounts; or
(xvi) as to which either the perfection, enforceability, or
validity of the Security Interest in such Account, or the Lender's
right or ability to obtain direct payment to the Lender of the
Proceeds of such Account, is governed by any federal, state, or
local statutory requirements other than those of the UCC; or
(xvii) with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, West Virginia or
any other state requiring the filing of a Business Activity Report
or similar document in order to bring suit or otherwise enforce
its remedies against such Account Debtor in the courts or through
any judicial process of such state, unless the appropriate
Borrower has qualified to do business in New Jersey, Minnesota,
West Virginia or such other states, or has filed a Notice of
Business Activities Report with the applicable Division of
Taxation, the Department of Revenue, or with such other state
offices, as appropriate, for the then current year.
"Eligible Inventory" means Inventory of either Borrower valued at
the lower of cost or market on a "first in-first out" ("FIFO") basis
that constitutes raw materials (including raw materials stored or held
by a Borrower in the work-in-progress area and fifty percent (50%) of
Inventory classified as components) and first quality finished goods and
that (a) is not obsolete or unmerchantable, and (b) upon which the
Lender has a first priority perfected Security Interest, and (c) the
Lender otherwise deems eligible as the basis for Revolving Loans based
on such other credit and collateral considerations as the Lender may
from time to time establish in its reasonable discretion. Without
intending to limit the Lender's discretion to establish other reasonable
criteria of eligibility, no work-in-progress (except as otherwise
provided above), service or spare parts, packaging, used parts, shipping
materials, supplies, containers, defective Inventory, Inventory
consisting of machines being rebuilt, Inventory acquired in trade in
connection with the sale of other Inventory, slow-moving Inventory,
Inventory in transit (except for Inventory in transit owned by a
Borrower, covered by insurance, and in which Lender has a Security
Interest), fifty percent (50%) of Inventory classified as components,
Olin acid inventory, Inventory consisting of Ireco exchange items or
Inventory delivered to either Borrower on consignment shall constitute
Eligible Inventory. Except for Inventory in transit in which Lender has
a perfected Security Interest, Eligible Inventory shall not include
Inventory stored at locations other than those locations either owned by
either Borrower or locations for which a landlord's waiver acceptable to
Lender or a consignment agreement (with appropriate UCC filings) has
been signed by the owner of such location and delivered to Lender. In
addition, the amount of all finished goods reserves (excluding reserves
for "last-in-first-out" valuation) shown on the books of a Borrower
shall be deducted from the value of the Eligible Inventory as used in
computing Availability, except to the extent that any such reserve has
already been taken into account in connection with any of the above
criteria.
"Environmental Compliance Reserve" means all reserves which the
Lender from time to time establishes for amounts that are liabilities
required to be paid by either Borrower within 180 days in order to
correct any violation by such Borrower or such Borrower's operations or
Property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, and consent decrees relating to
hazardous substances, and environmental matters applicable to the
Borrowers', or either of their, business and facilities (whether or not
owned by it). Such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. section 6901 et
seq., as amended; the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. section 9601 et seq., as amended: the Toxic
Substances Control Act, 15 U.S.C. section 2601 et seq., as amended; the
Clean Water Act, 33 U.S.C. section 466 et seq., as amended; the Clean
Air Act, 42 U.S.C. section 7401 et seq., as amended; state and federal
superlien and environmental cleanup programs; and U.S. Department of
Transportation regulations.
"Equipment" means all of either Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including, without
limitation, data processing hardware and software, motor vehicles,
aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by either such Borrower and all of such
Borrower's rights and interests with respect thereto under such leases
(including, without limitation, options to purchase); together with all
present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be used
in connection therewith, and all substitutes for any of the foregoing,
and all manuals, drawings, instructions, warranties and rights with
respect thereto wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Business Day" means any Business Day in which
commercial banks are open for international business (including dealings
in dollar deposits) in London, England and Los Angeles, California.
"Eurodollar Base Rate" means, for any Interest Period, an interest
rate determined by the Lender to be the rate per annum at which deposits
in Dollars are offered to Bank in the London interbank market at 11:00
a.m. (London time) two (2) Business Days before the first day of such
Interest Period for delivery on the first day of such Interest Period in
an amount substantially equal to the Eurodollar Rate Loans requested for
such Interest Period and for a period equal to such Interest Period.
"Eurodollar Interest Payment Date" means the first day of each
month during any Interest Period and the last day of such Interest
Period.
"Eurodollar Interest Rate Determination Date" means each date of
calculating the Eurodollar Rate for purposes of determining the interest
rate with respect to an Interest Period. The Eurodollar Interest Rate
Determination Date for any Eurodollar Rate Loan shall be the second
Business Day prior to the first day of the related Interest Period for
such Eurodollar Rate Loan.
"Eurodollar Rate" means, for any Interest Period, a per annum
interest rate equal to the quotient of (a) the Eurodollar Base Rate for
such Interest Period, divided by (b) one hundred percent (100%) minus
the Eurodollar Rate Reserve Percentage for such Interest Period.
"Eurodollar Rate Loan" means a Revolving Loan during any period in
which it bears interest at the rate provided in Section 3.1(a)(ii), as
such amount may be adjusted pursuant to Section 3.1(b).
"Eurodollar Rate Reserve Percentage" for any Interest Period means
the reserve percentage applicable during such Interest Period (or if
more than one such percentage shall be so applicable, the daily average
of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for Bank with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Event" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Event of Default" has the meaning given to such term in Section
11.1.
"Facility Fee" has the meaning given to such term in Section 3.5.
"Financial Statements" means, according to the context in which it
is used, the financial statements attached hereto as Exhibit G-1, and
the Latest Forecasts attached hereto as Exhibit G-2, and any other
financial statements required to be given by the Borrowers, or either of
them, or LSB to the Lender under this Agreement.
"Fiscal Quarter" means any three-month period ending March 31,
June 30, September 30 or December 31.
"Fiscal Year" means LSB's fiscal year for financial accounting
purposes. The current Fiscal Year of LSB will end on December 31, 1994.
"GAAP" means at any particular time generally accepted accounting
principles as in effect at such time.
"Gross Availability Reductions" means the sum of all "Availability
Reductions" under the LSB-Related Loan Agreements.
"Gross LSB Accounts Availability" means the sum of the amounts
calculated as "Accounts Availability" under all of the LSB-Related Loan
Agreements less any Reserves established with respect to any of the LSB
Eligible Accounts in accordance with the LSB-Related Loan Agreements.
"Guarantor Subsidiaries" means Universal Tech Corporation, LSB
Chemical Corp., L&S Automotive Products, Co. (f/k/a LSB Bearing Corp.),
International Bearing, Inc., LSB Extrusion Co., Rotex Corporation,
Tribonetics Corporation, Summit Machine Tool Systems, Inc., Hercules
Energy Manufacturing Corporation, Morey Machinery Manufacturing
Corporation, CHP Corporation, Koax Corp., and APR Corporation.
"Guaranty" by any Person means all obligations of such Person
which in any manner directly or indirectly guarantee the payment or
performance of any indebtedness or other obligation of any other Person
(the "guaranteed obligations"), or assure or in effect assure the holder
of the guaranteed obligations against the loss in respect thereof,
including, without limitation, any such obligations incurred through an
agreement, (a) to purchase the guaranteed obligations or any Property
constituting security therefor or (b) to advance or supply funds for the
purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition.
"HCFS Loan Agreement" shall mean the Amended and Restated Secured
Credit Agreement dated as of January 21, 1992 by and among Borrowers,
Household Commercial Financial Services, Inc., Connecticut Mutual Life
Insurance Company and C. M. Life Insurance Company, and any other
lenders from time to time parties to in the HCFS Loan Agreement.
"Instruments" means all "instruments", "chattel paper" or "letters
of credit" (each as defined in the UCC) including, but not limited to,
promissory notes, drafts, bills of exchange and trade acceptances, now
owned or hereafter acquired by either Borrower.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to either Borrower from, which are due from
either Borrower to, or which otherwise arise from any transaction by
either Borrower with, any Affiliate.
"Interest Period" means, with respect to each Eurodollar Rate Loan
the 90-day interest period applicable to such Eurodollar Rate Loan as
determined pursuant to Section 3.3(b).
"Inventory" means all of each Borrower's now owned and hereafter
acquired inventory, wherever located, to be held for sale or lease, all
raw materials, work-in-process, finished goods, returned and repossessed
goods, and materials and supplies of any kind, nature or description
which are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such inventory, and all
documents of title or other documents representing them.
"Inventory Loans" means Loans based on Eligible Inventory.
"IRS" means the Internal Revenue Service or any successor agency.
"Latest Forecasts" means, (a) on the Closing Date and thereafter
until the Lender receives new forecasts pursuant to Section 8.6, the
forecasts which include EDC's and Slurry's monthly financial condition,
results of operations, and cash flows through the year ending December
31, 1996, attached hereto as Exhibit G-2; and (b) thereafter, the
forecasts most recently received by the Lender pursuant to Section 7.2.
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Agreement" has the meaning specified in Section
2.3.
"Letter of Credit Fee" means the commissions charged under the
Letter of Credit Agreement on the Outstanding Amount of each Letter of
Credit.
"Lien" means: any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute, or contract,
and including without limitation, a security interest, charge, claim, or
lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, or
conditional sale, or a lease, consignment or bailment for security
purposes.
"Loans" means, collectively, all loans and advances provided for
in Article 2.
"Loan Documents" means this Agreement, the Letter of Credit
Agreement, the Patent and Trademark Assignments, the Subsidiary
Guaranties, and all other agreements, instruments, and documents
heretofore, now or hereafter evidencing, securing guaranteeing or
otherwise relating to the Obligations, the Collateral, the Security
Interest, or any other aspect of the transactions contemplated by this
Agreement, as the same may hereafter be amended, modified, restated
and/or extended.
"LSB" has the meaning given in the recitals to this Agreement.
"LSB Borrowing Group" means the Borrower Subsidiaries and the
Guarantor Subsidiaries.
"LSB Consolidated Group" means LSB and all of its Subsidiaries,
including, but not limited to, the LSB Borrowing Group.
"LSB Eligible Accounts" means the then existing "Eligible
Accounts" of all of the Borrower Subsidiaries and the Guarantor
Subsidiaries under the LSB-Related Loan Agreements.
"LSB-Related Loan Agreements" means all of the following loan
agreements: (i) this Agreement; (ii) the Loan and Security Agreement
dated of even date herewith between Lender and LSB; (iii) the Loan and
Security Agreement dated of even date herewith between Lender and L & S
Bearing Co.; (iv) the Loan and Security Agreement dated of even date
herewith between Lender and Climate Master, Inc.; (v) the Loan and
Security Agreement dated of even date herewith between Lender and
International Environmental Corporation; and (vi) the Loan and Security
Agreement dated of even date herewith between Lender and Summit Machine
Tool Manufacturing Corp.
"Maximum Inventory Advance Amount" means $32,500,000 less all then
outstanding loans, advances, and outstanding Letters of Credit based on
Eligible Inventory of the LSB Borrowing Group under the LSB-Related Loan
Agreements.
"Maximum Revolving Credit Line" means Sixty Five Million Dollars
($65,000,000) less the Gross Availability Reductions.
"Minimum Borrowing Commitment" means Thirty Million Dollars
($30,000,000).
"Multi-employer Plan" means a Plan which is described in Section
3(37) of ERISA.
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties and Debts owing by the
Borrowers, or either of them, to the Lender, arising under this
Agreement or any other Loan Document, whether or not evidenced by any
note, or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including, without limitation, all interest, charges,
expenses, fees, attorneys' fees, filing fees and any other sums
chargeable to the Borrowers, or either of them, hereunder or under
another Loan Document. "Obligations" includes, without limitation, all
debts, liabilities, and obligations now or hereafter owing from the
Borrowers, or either of them, to Lender under or in connection with the
Letters of Credit and the Letter of Credit Agreement.
"Participating Lender" means any Person who shall have been
granted the right by the Lender to participate in the Loans and who
shall have entered into a participation agreement in form and substance
satisfactory to the Lender.
"Patent and Trademark Assignments" means the Patent Security
Agreement and the Trademark and Trade Names Security Agreement dated as
of the date hereof, executed and delivered by either Borrower, to the
Lender to evidence and perfect the Lender's Security Interest in the
Borrowers' present and future patents, trademarks, trade names and
related licenses and rights.
"Payment Account" means each blocked bank account, established
pursuant to Section 6.10, to which Proceeds of Accounts and other
Collateral are deposited or credited, and which is maintained in the
name of the Borrowers, or either of them, on terms acceptable to the
Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Pension Plan" means any employee benefit plan, including a Multi-
employer Plan, which is subject to Title IV of ERISA, where either (a)
the Plan is maintained by the Borrowers, or either of them, or any
Related Company; or (b) the Borrowers, or either of them, or any Related
Company contributes or is required to contribute to it; or (c) the
Borrowers, or either of them, or any Related Company has incurred or may
incur liability, including contingent liability, under Title IV of
ERISA, either to it, or to the PBGC with respect to it.
"Permitted Debt" means: (i) the Obligations; (ii) Debt set forth
in the most recent Financial Statements delivered to the Lender, or the
notes thereto; (iii) Debt incurred since the date of such Financial
Statements to finance Capital Expenditures permitted hereby; (iv) Debt
issued or assumed by either Borrower in connection with an Acquisition
permitted under Section 9.14 hereof; (v) Debt resulting from a judgment
having been rendered against either Borrower that is being appealed by
such Borrower in good faith and in a timely manner, for which an
adequate reserve has been recorded on such Borrower's books, and which
is not fully covered by insurance; (vi) Subordinated Debt; (vii) Debt
resulting from the refinancing of any other Permitted Debt as long as
(a) such Debt does not exceed the amount of the refinanced Debt, and (b)
such Debt does not result in payment acceleration of the refinanced
Debt; (viii) Debt resulting from trade payables and other obligations
arising in the ordinary course of business; (ix) other Debt not
otherwise permitted by this definition in an amount not to exceed
$5,000,000 at any one time; (x) Debt of either Borrower to a member of
the LSB Borrowing Group or to an Affiliate in accordance with Section
9.9 hereof; and (xi) Debt of either of the Borrowers under the HCFS Loan
Agreement or any other loan documents referred to or entered into in
connection with the HCFS Loan Agreement. Notwithstanding the foregoing,
Permitted Debt described in subsection (ix) of this definition, when
combined with Permitted Debt allowed under subsection (ix) of the
definition of Permitted Debt under all of the other LSB-Related Loan
Agreements, shall not exceed $5,000,000 at any one time.
"Permitted Liens" means: (a) Liens for taxes not yet payable or
Liens for taxes being contested in good faith and by proper proceedings
diligently pursued, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor on the applicable Financial Statements, and further provided
that, with respect to the Collateral, a stay of enforcement of any such
Lien is in effect; (b) Liens in favor of the Lender; (c) reservations,
exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions or
encumbrances affecting the Real Property; (d) Liens or deposits under
workmen's compensation, unemployment insurance, social security and
other similar laws, (e) Liens relating to obligations with respect to
surety, appeal bonds, performance bonds, bids, tenders and other
obligations of a like nature, (f) Liens existing as of the Closing Date
and granted after the date hereof in connection with either Borrower's
Equipment, Real Property or other fixed assets, provided that such Liens
attach only to such Property and the proceeds thereof, and so long as
the indebtedness secured thereby does not exceed 100% of the fair market
value of such Property at the time of acquisition; (g) Liens on goods
consigned to either Borrower or not owned by either Borrower so long as
such Lien attaches only to such goods and so long as Lender has been
given notice of such Lien, (h) mechanic, materialmen and other like
Liens arising in the ordinary course of business securing obligations
which are not overdue or are being contested in good faith by
appropriate proceedings and adequately reserved against, (i) statutory
Liens in favor of landlords, (j) Liens against any life insurance policy
or the cash surrender value thereof which relate to borrowings incurred
to finance the premiums made under such policy; (k) Liens not to exceed
$1,000,000 at any one time in amounts secured, which are junior in
priority to the Security Interest and which arise or are placed
inadvertently against either Borrower's assets and are removed within
ten (10) days from receipt of notice by either such Borrower of such
Lien; and (l) Liens reflected on Exhibit A hereto.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, Public Authority, or any other entity.
"Plan" means, individually and collectively, all Pension Plans,
all additional employee benefit plans as defined in Section 3(3) of
ERISA, and all other plans, programs, agreements, arrangements, and
methods of contribution or compensation providing any material
remuneration or benefits, other than the cash payment of wages or
salary, to any current or former employee(s) of either Borrower.
"Proceeds" means all products and proceeds of any Collateral, and
all proceeds of such proceeds and products, including, without
limitation, all cash and credit balances, all payments under any
indemnity, warranty, or guaranty payable with respect to any Collateral,
all proceeds of fire or other insurance, and all money and other
Property obtained as a result of any claims against third parties or any
legal action or proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of either Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, trade names, trade styles, patent and trademark
applications and licenses and rights thereunder, including without
limitation those patents, trademarks and copyrights set forth on Exhibit
B hereto, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for
past, present, and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings,
designs, blueprints, surveys, reports, manuals, and operating standards,
goodwill, customer and other lists in whatever form maintained, and
trade secret rights, copyright rights, right in works of authorship, and
contract rights relating to computer software programs, in whatever form
created or maintained.
"Public Authority" means the government of any country or
sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or any department, agency, public
corporation or other instrumentality of any of the foregoing.
"Real Property" means all of either Borrower's rights, title, and
interest in real property now owned or hereafter acquired by such
Borrower, including, without limitation, the real property more
particularly described in Exhibit H attached hereto, including all
rights and easements in connection therewith and all buildings and
improvements now or hereafter constructed thereon.
"Receivables" means all of either Borrower's now owned or
hereafter arising or acquired: Accounts (whether or not earned by
performance), including Accounts owed to such Borrower by any of its
Subsidiaries or Affiliates (but excluding Accounts arising solely from
the sale of Equipment, Real Property or other fixed assets), together
with all interest, late charges, penalties, collection fees, and other
sums which shall be due and payable in connection with any Account;
proceeds of any letters of credit naming such Borrower as beneficiary
except such letters of credit as are issued solely in connection with
the purchase or sale of Equipment, Real Property or other fixed assets;
contract rights, chattel paper, instruments, documents, general
intangibles (including, without limitation, causes in action, causes of
action, tax refunds, tax refund claims, Reversions and other amounts
payable to such Borrower or to a Guarantor Subsidiary from or with
respect to any Plan, rights and claims against shippers and carriers,
rights to indemnification and business interruption insurance), and all
forms of obligations owing to such Borrower (including, without
limitation, obligations owing to such Borrower by its Subsidiaries and
Affiliates); guarantees and other security for any of the foregoing; and
rights of stoppage in transit, replevin, and reclamation; and other
rights or remedies of an unpaid vendor, lienor, or secured party.
"Reference Rate" means the per annum rate of interest publicly
announced from time to time by the Bank at its San Francisco, California
main office as its reference rate. It is a rate set by Bank based upon
various factors including Bank's costs and desired return, general
economic conditions, and other factors, and is used as a reference point
for pricing some loans; however, Bank may price loans at, above or below
the Reference Rate. Any change in the Reference Rate shall take effect
on the day specified in the public announcement of such change.
"Reference Rate Loan" means a Revolving Loan during any period in
which it bears interest at the rate provided in Section 3.1(a)(i).
"Reference Rate Margin" has the meaning specified in Section
3.1(a)(i).
"Related Company" means any member of any controlled group of
corporations including, or under common control with, the Borrowers, or
either of them (as defined in Section 414(b) or (c) of the Code or
Section 4001(a)(14) of ERISA).
"Reportable Event" means, with respect to a Pension Plan, a
reportable event described in Section 4043 of ERISA or the regulations
thereunder, a withdrawal from a Plan described in Section 4063 of ERISA,
or a cessation of operations described in Section 4062(e) of ERISA.
"Restricted Investment" means any acquisition of Property by
either Borrower in exchange for cash or other Property, whether in the
form of an acquisition of stock, indebtedness or other obligation, or by
loan, advance, capital contribution, or otherwise, except the following:
(a) Property to be used in the business of such Borrower; (b) assets
arising from the sale or lease of goods or rendition of services in the
ordinary course of business of such Borrower; (c) direct obligations of
the United States of America, or any agency thereof, or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof;
(d) certificates of deposit maturing within one year from the date of
acquisition, bankers acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least $100,000,000;
and (e) commercial paper given the highest rating by a national credit
rating agency and maturing not more than 270 days from the date of
creation thereof.
"Reversions" means any funds which may become due to the
Borrowers, or either of them, in connection with the termination of any
Plan.
"Revolver Facility" means the credit facility hereunder consisting
of the provision for Revolving Loans and Letters of Credit.
"Revolving Loans" has the meaning specified in Section 2.1.
"Security Interest" means collectively the Liens granted to the
Lender in the Collateral pursuant to this Agreement or the other Loan
Documents.
"Subordinated Debt" shall mean Debt that is unsecured and is
subordinated to the payment of the Obligations.
"Subsidiary" or "Subsidiaries" means any present or future
corporation or corporations of which LSB owns, directly or indirectly,
more than 50% of the voting stock.
"Subsidiary Guaranties" means the continuous guaranties of the
Obligations made by the Guarantor Subsidiaries in favor of the Lender
and delivered to the Lender pursuant to Section 10.2.
"Termination Event" means: (a) a Reportable Event (other than a
Reportable Event described in Section 4043 of ERISA which is not subject
to the provision for 30-day notice to the PBGC under applicable
regulations); or (b) the withdrawal of the Borrowers, or either of them,
or any Related Company from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA with respect to such Pension Plan; or (c) the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (d) the
institution of proceedings by the PBGC to terminate or have a trustee
appointed to administer a Pension Plan; or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Pension Plan, or (f) the partial or complete withdrawal of the
Borrowers, or either of them, or any Related Company from a Multi-
employer Plan, or (g) the withdrawal of the Borrowers, or either of
them, from any state workers' compensation system.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of Oklahoma or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the
issue of perfection of security interests.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
1.4 Exhibits. All references in this Agreement to Exhibits are,
unless otherwise specified, references to exhibits attached hereto, and all
such exhibits are hereby deemed incorporated herein by this reference.
2. LOANS AND LETTERS OF CREDIT.
2.1 Revolving Loans. The Lender shall, subject to the terms and
conditions set forth in this Agreement, and upon a Borrower's request from
time to time, make revolving loans (the "Revolving Loans") to EDC and Slurry
up to the limits of the Availability. The Lender, in its discretion, may
elect to exceed the limits of the Availability on one or more occasions, but
if it does so, the Lender shall not be deemed thereby to have changed the
limits of the Availability, or to be obligated to exceed the limits of the
Availability on any other occasion. If the unpaid balance of the Revolving
Loans exceeds the Availability (with the Availability for this purpose
determined as if the amount of the Revolving Loans were zero), then the Lender
may refuse to make or otherwise restrict Revolving Loans on such terms as the
Lender determines until such excess has been eliminated. Either Borrower may
request Revolving Loans either orally or in writing, provided, however, that
each such request with respect to Reference Rate Loans shall be made no later
than 1:00 p.m. (Los Angeles, California time). Each oral request by either
Borrower for a Revolving Loan shall be conclusively presumed to be made by a
person authorized by such Borrower to do so and the crediting of a Revolving
Loan to the Borrowers' deposit account, or transmittal to such Person as
either Borrower shall direct, shall conclusively establish the joint and
several obligation of the Borrowers to repay such Revolving Loan. The Lender
will charge all Revolving Loans and other Obligations to a loan account of the
Borrowers maintained with the Lender. All fees, commissions, costs, expenses,
and other charges due from the Borrowers, or either of them, pursuant to the
Loan Documents, and all payments made and out-of-pocket expenses incurred by
Lender and authorized to be charged to the Borrowers, or either of them,
pursuant to the Loan Documents, will be charged as Revolving Loans to the
Borrowers' loan account as of the date due from the Borrowers or the date paid
or incurred by the Lender, as the case may be.
2.2 Availability Determination. Availability will be determined
by the Lender in accordance with the terms of this Agreement, each day on the
basis of such relevant information as the Lender deems appropriate to
consider, including the collateral summary reports and such other information
regarding the Accounts and the Inventory as the Lender shall obtain from the
Borrowers.
2.3 Letters of Credit. The Lender will, subject to the terms
and conditions of this Agreement and the Letter of Credit Agreement, and upon
either Borrower's request from time to time, cause merchandise letters of
credit (the "Merchandise L/C's") or standby letters of credit (the "Standby
L/C's") to be issued for such Borrower's account (the Merchandise L/C's and
the Standby L/C's being referred to collectively as the "Letters of Credit").
The Lender will not cause to be opened any Letter of Credit if: (a) the
maximum face amount of the requested Letter of Credit, plus the aggregate
undrawn face amount of all outstanding Letters of Credit under this Agreement
and the other LSB-Related Loan Agreements, would exceed Eleven Million and
No/100 Dollars ($11,000,000); or (b) the maximum face amount of the requested
Letter of Credit, and all commissions, fees, and charges due from Borrowers to
Lender in connection with the opening thereof, would cause the Availability to
be exceeded at such time. In addition, with respect to any Merchandise L/C,
the requested term of such Letter of Credit may not exceed 180 days, and no
Merchandise L/C may by its terms be scheduled to be outstanding on the
Termination Date. Standby L/C's may have terms that extend beyond the
Termination Date but upon termination of this Agreement, all Letters of Credit
must be either terminated with the consent of the beneficiary thereof,
replaced with a letter of credit provided by a financial institution
acceptable to Lender, collateralized by cash or cash equivalent, or otherwise
satisfied in a manner acceptable to Lender. The Letters of Credit shall be
governed by a Letter of Credit Financing Agreement - Supplement to Loan and
Security Agreement among the Lender and the Borrowers ("Letter of Credit
Agreement"), in the form attached hereto as Exhibit "O" and made a part
hereof, in addition to the terms and conditions hereof. All payments made and
expenses incurred by the Lender pursuant to or in connection with the Letters
of Credit and the Letter of Credit Agreement will be charged to the Borrowers'
loan account as Revolving Loans.
3. INTEREST AND OTHER CHARGES
3.1 Interest.
(a) Interest Rates. All amounts charged as Revolving Loans
shall bear interest on the unpaid principal amount thereof from the date made
until paid in full in cash at the Applicable Interest Rate as described in
Sections 3.1(a)(i) and (ii) but not to exceed the maximum rate permitted by
applicable law. Subject to the provisions of Section 3.2, any of the
Revolving Loans may be converted into, or continued as, Reference Rate Loans
or Eurodollar Rate Loans in the manner provided in Section 3.2. If at any
time Revolving Loans are outstanding with respect to which notice has not been
delivered to Lender in accordance with the terms of this Agreement specifying
the basis for determining the interest rate applicable thereto, then those
Revolving Loans shall be Reference Rate Loans and shall bear interest at a
rate determined by reference to the Reference Rate until notice to the
contrary has been given to the Lender and such notice has become effective.
Except as otherwise provided herein, the amounts charged as Revolving Loans
shall bear interest at the following rates (the "Applicable Interest Rate"):
(i) For all amounts charged as Revolving Loans other than
Eurodollar Rate Loans, including all Revolving Loans which are Reference
Rate Loans, then at a fluctuating per annum rate equal to one-half
percent (1/2%) per annum (the "Reference Rate Margin") plus the
Reference Rate; and
(ii) If the Revolving Loans are Eurodollar Rate Loans, then
at a per annum rate equal to: two and seven-eighths percent (2.875%) per
annum (the "Eurodollar Margin") plus the Eurodollar Rate determined for
the applicable Interest Period.
Each change in the Reference Rate shall be reflected in the interest
rate described in (i) above as of the effective date of such change.
All interest charges shall be computed on the basis of a year of three
hundred sixty (360) days and actual days elapsed. Except as otherwise
provided herein, (1) interest accrued on each Eurodollar Rate Loan shall
be payable in arrears on each Eurodollar Interest Payment Date
applicable to such Eurodollar Rate Loan and upon payment thereof in
full, and (2) interest accrued on the Reference Rate Loans will be
payable in arrears on the first day of each month hereafter.
(b) Default Rate. If any Event of Default occurs, then, while
any such Event of Default is continuing, all Loans shall bear interest at an
increased rate of interest equal to the Applicable Interest Rate thereto plus
two percent (2.0%) per annum, and the Letter of Credit Fee shall be increased
to three percent (3%) per annum.
3.2 Eurodollar Borrowings: Conversion or Continuation.
(a) Subject to the provisions of Section 3.3, the Borrowers
shall have the option: (i) to request the Lender to make a Revolving Loan as
a Eurodollar Rate Loan; (ii) to convert all or any part of the outstanding
Revolving Loans from Reference Rate Loans to Eurodollar Rate Loans, (iii) to
convert all or any part of the outstanding Revolving Loans from Eurodollar
Rate Loans to Reference Rate Loans on the expiration of the Interest Period
applicable thereto; (iv) upon the expiration of any Interest Period applicable
to any outstanding Eurodollar Rate Loan, to continue all or any portion of
such Eurodollar Rate Loan as a Eurodollar Rate Loan; provided, however, that
no outstanding Loans may be converted into or continued as, Eurodollar Rate
Loans when any Event or Event of Default has occurred and is continuing.
(b) Whenever a Borrower elects to borrow, convert into or
continue Eurodollar Rate Loans under this Section 3.2, such Borrower shall
notify the Lender in writing or telephonically no later than 11:00 a.m. (Los
Angeles, California time) two (2) Business Days in advance of the requested
borrowing/conversion/continuation date. Each Borrower shall specify (1) the
borrowing/conversion/continuation date (which shall be a Business Day), (2)
the amount and type of the Revolving Loans to be borrowed/converted/continued,
and (3) the nature of the requested borrowing/conversion/continuation. In the
event that a Borrower should fail to timely notify the Lender to continue to
convert any existing Eurodollar Rate Loan, such Loan shall, on the last day of
the Interest Period with respect to such Revolving Loan, convert to a
Reference Rate Loan.
(c) The officer of each Borrower authorized by such Borrower to
request Revolving Loans on behalf of such Borrower shall also be authorized to
request a conversion/continuation on behalf of such Borrower. The Lender
shall be entitled to rely on such officer's authority until the Lender is
notified to the contrary in writing. The Lender shall have no duty to verify
the authenticity of the signature appearing on any written notification or
request and, with respect to an oral notification or request, the Lender shall
have no duty to verify the identity of any individual representing himself as
one of the officers authorized to make such notification or request on behalf
of either Borrower. The Lender shall incur no liability to the Borrowers, or
either of them, in acting upon any telephonic notice or request referred to in
this Section 3.2, which the Lender believes in good faith to have been given
by an officer authorized to do so on behalf of the Borrowers, or either of
them, or for otherwise acting in good faith under this Section 3.2 and, upon
lending/conversion/continuation by the Lender in accordance with this
Agreement pursuant to any such telephonic notice, each Borrower shall have
effected the borrowing/conversion/continuation of the applicable Loans
hereunder.
(d) Any written or telephonic notice of conversion to, or
borrowing or continuation of, Revolving Loans made pursuant to this Section
3.2 shall be irrevocable and the Borrowers shall be bound to borrow, convert
or continue in accordance therewith.
3.3 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provisions to the contrary contained in this
Agreement, the following provisions shall govern with respect to Eurodollar
Rate Loans as to the matters covered:
(a) Amount of Eurodollar Rate Loans. Each election of,
continuation of, or conversion to a Eurodollar Rate Loan, shall be in a
minimum amount of Five Million Dollars ($5,000,000) and in integral multiples
of One Million Dollars ($1,000,000) in excess of that amount.
(b) Determination of Interest Period. The Interest Period for
each Eurodollar Rate Loan shall be for a three (3) month period. The
determination of Interest Periods shall be subject to the following
provisions:
(i) In the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if
the next succeeding Business Day occurs in the following calendar month,
then such Interest Period shall expire on the immediately preceding
Business Day.
(iii) Neither Borrower may select an Interest Period
for any Eurodollar Rate Loan, which Interest Period expires later than
the Stated Termination Date.
(iv) There shall be not more than two (2) Interest Periods
in effect at any one time, and no more than two (2) Interest Periods may
begin during any calendar month.
(v) If an Interest Period starts on a date for which no
numerical correspondent exists in the month in which such Interest
Period ends, such Interest Period will end on the last Business Day of
such month.
(c) Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (Los Angeles, California time) on the Eurodollar Interest
Rate Determination Date, the Lender shall determine (which determination
shall, absent manifest error, be presumptively correct) the Interest Rate for
the Eurodollar Rate Loans for which an Interest Rate is then being determined
and shall promptly give notice thereof (in writing or by telephone confirmed
in writing) to appropriate Borrower.
(d) Substituted Rate of Borrowing. In the event that on any
Eurodollar Interest Rate Determination Date the Lender shall have determined
(which determination shall, absent manifest error, be presumptively correct
and binding upon all parties) that:
(i) by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market or affecting
the position of Bank or Lender in such market, adequate and fair means
do not exist for ascertaining the applicable interest rates by reference
to which the Eurodollar Rate then being determined is to be fixed; or
(ii) by reason of (1) any change after the date of this
Agreement in any applicable law or governmental rule, regulation or
order (or any interpretation thereof and including the introduction of
any new law or governmental rule, regulation or order) or (2) any other
circumstances affecting Bank or Lender or the interbank Eurodollar
market or the position of Bank or Lender in such market (such as, for
example, but not limited to, official reserve requirements required by
Regulation D of the Board of Governors of the Federal Reserve System to
the extent not given effect in the Eurodollar Rate), the Eurodollar Rate
shall not represent the effective pricing to Lender for Dollar deposits
of comparable amounts for the relevant period;
then, and in any such event, the right of the Borrowers, or either of them, to
request application of the Eurodollar Rate to some or all of the Loans shall
be suspended until the Lender shall notify the Borrowers that the
circumstances causing such suspension no longer exist, and such Loans shall be
Reference Rate Loans.
(e) Illegality. In the event that on any date Lender shall have
reasonably determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties) that the making of,
conversion into, or the continuation of, Lender's Eurodollar Rate Loans has
become unlawful as the result of compliance by Lender or Bank in good faith
with any law, governmental rule, regulation or order (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful), then, and in any such event, Lender shall promptly give notice (by
telephone confirmed in writing) to the Borrowers of such determination. In
such case and except as provided in Section 3.3(f), the obligation of Lender
to make or maintain any Eurodollar Rate Loans during any such period shall be
terminated at the earlier of the termination of the Interest Period then in
effect or when required by law, and the appropriate Borrower shall, no later
than the earlier of the termination of the Interest Period in effect at the
time any such determination pursuant to this Section 3.3(e) is made, or when
required by law, repay the Eurodollar Rate Loans, together with all interest
accrued thereon.
(f) Options of the Borrowers. In lieu of prepaying the
Eurodollar Rate Loans as required by Section 3.3(e), either Borrower may
exercise either of the following options:
(i) Upon written notice to the Lender, either Borrower may
release Lender from its obligations to make or maintain Loans as
Eurodollar Rate Loans and in such event, such Borrower shall, at the end
of the then current Interest Period (or at such earlier time as
prepayment is otherwise required), convert all of the Eurodollar Rate
Loans into Reference Rate Loans in the manner contemplated by Section
3.2, but without satisfying the advance notice requirements therein; or
(ii) Either Borrower may, by giving notice (by telephone
confirmed immediately by telecopy) to Lender require Lender to continue
to maintain its outstanding Reference Rate Loans as Reference Rate
Loans, but without satisfying the advance notice requirements set forth
in such Section 3.2.
(g) Compensation. In addition to such amounts as are required
to be paid by a Borrower pursuant to the other Sections of this Article 3,
each Borrower, jointly and severally, agrees to compensate the Lender for all
expenses and liabilities, including, without limitation, any loss or expense
incurred by Lender by reason of the liquidation or reemployment of deposits or
other funds acquired by Lender to fund or maintain the Lender's Eurodollar
Rate Loans to the Borrowers, or either of them, which Lender sustains (i) if
due to the fault of the Borrowers, or either of them, a funding of any
Eurodollar Rate Loans does not occur on a date specified therefor by either
Borrower in a telephonic or written request for borrowing or
conversion/continuation, or a successive Interest Period does not commence
after notice therefor is given pursuant to Section 3.2, (ii) if any voluntary
or mandatory prepayment of any Eurodollar Rate Loans occurs for any reason on
a date which is not the last scheduled day of an Interest Period, or (iii) as
a consequence of any other failure by either Borrower to repay Eurodollar Rate
Loans when required by the terms of this Agreement.
(h) Quotation of Eurodollar Rate. Anything herein to the
contrary notwithstanding, if on any Eurodollar Interest Rate Determination
Date no Eurodollar Rate is available by reason of the failure of Bank to be
offered quotations in accordance with the definition of "Eurodollar Base
Rate," the Lender shall give the Borrowers prompt notice thereof and (i) any
Eurodollar Rate Loan requested to be made at the Eurodollar Rate to be
determined on any Eurodollar Interest Rate Determination Date shall be made as
a Reference Rate Revolving Loan, and (ii) any notice given by the Borrowers,
or either of them, to convert any Loans into or to continue any Loans as
Eurodollar Rate Loans at the Eurodollar Rate to be determined on any such
Eurodollar Interest Rate Determination Date shall be ineffective.
(i) Eurodollar Rate Taxes. The Borrowers, jointly and severally
agree to pay, prior to the date on which penalties attach thereto, all present
and future income, stamp and other taxes, levies, or costs and charges
whatsoever imposed, assessed, levied or collected on or from the Lender on or
in respect of the Borrowers' Loans from the Lender solely as a result of the
interest rate being determined by reference to the Eurodollar Rate and/or the
provisions of this Agreement relating to the Eurodollar Rate and/or the
recording, registration, notarization or other formalization of any of the
foregoing and/or any payments of principal, interest or other amounts made on
or in respect of the Loans from the Lender when the interest rate is
determined by reference to the Eurodollar Rate (all such taxes, levies, cost
and charges being herein collectively called "Eurodollar Rate Taxes");
provided, however, that Eurodollar Rate Taxes shall not include taxes imposed
on or measured by the overall net income of the Lender by the United States of
America or any political subdivision or taxing authority thereof or therein,
or taxes on or measured by the overall net income by any foreign branch or
subsidiary of the Lender by any foreign country or subdivision thereof in
which that branch or subsidiary is doing business. Promptly after the date on
which payment of any such Eurodollar Rate Tax is due pursuant to applicable
law, the Borrowers will, at the request of the Lender, furnish to the Lender
evidence, in form and substance satisfactory to the Lender, that the Borrowers
have met their obligation under this Section 3.3(i), an addition, each
Borrower will, jointly and severally, indemnify the Lender against, and
reimburse Lender on demand for, any Eurodollar Rate Taxes for which the Lender
is or may be liable by reason of the making or maintenance of any Eurodollar
Rate Loans hereunder, as determined by the Lender in its discretion exercised
in good faith and pursuant to standards of commercial reasonableness. The
Lender shall provide the Borrowers with appropriate receipts for any payments
or reimbursements made by the Borrowers pursuant to this Section 3.3(i).
(j) Booking of Eurodollar Rate Loans. The Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices or the office of any of its Affiliates.
(k) Increased Costs. If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Reserve Percentage) in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in the cost to
the Lender of agreeing to make or making, funding or maintaining Eurodollar
Rate Loans, then each Borrower agrees that it shall, from time to time, upon
demand by the Lender in writing to the Borrowers, within sixty (60) days from
the date of such increased cost, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost relating to the
outstanding Eurodollar Rate Loans made to the Borrowers, or either of them. A
certificate as to the amount of such increased cost and the method of
determination thereof, submitted to the Borrowers by the Lender, shall be
rebuttably presumptive evidence of the correctness of such amount.
Notwithstanding the above, the Lender shall promptly advise the Borrowers of
any increased costs covered by this paragraph (k) of which Lender is aware
that have been made or which are proposed to be made which may require the
Borrowers to be required to pay the increased cost under this paragraph (k)
prior to or at the time that either Borrower requests additional Eurodollar
Rate Loans.
3.4 Maximum Interest Rate.
(a) Notwithstanding the foregoing provisions of Sections 3.1
through 3.3 regarding the rates of interest applicable to the Loans, if at any
time the amount of such interest computed on the basis of the Applicable
Interest Rate would exceed the amount of such interest computed upon the basis
of the maximum rate of interest permitted by applicable state or federal law
in effect from time to time hereafter, after taking into account, to the
extent required by applicable law, any and all fees, payments, charges and
calculations provided for in this Agreement or in any other agreement among
the Borrowers, or either of them, and Lender (the "Maximum Legal Rate"), the
interest payable under this Agreement shall be computed upon the basis of the
Maximum Legal Rate, but any subsequent reduction in the Reference Rate or the
Eurodollar Rate shall not reduce such interest thereafter payable hereunder
below the amount computed on the basis of the Maximum Legal Rate until the
aggregate amount of such interest accrued and payable under this Agreement
equals the total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of the Applicable Interest
Rate.
(b) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
among the Borrowers, or either of them, and the Lender or default of the
Borrowers, or the exercise by the Lender of the right to accelerate the
payment of the maturity of principal and interest, or to exercise any option
whatsoever contained in this Agreement or any other agreement among the
Borrowers, or either of them, and the Lender, or the arising of any
contingency whatsoever, shall entitle the Lender to collect, in any event,
interest exceeding the Maximum Legal Rate and in no event shall the Borrowers,
or either of them, be obligated to pay interest exceeding such Maximum Legal
Rate and all agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel the
Borrowers, or either of them, to pay a rate of interest exceeding the Maximum
Legal Rate, shall be without binding force or effect, at law or in equity, to
the extent only of the excess of interest over such Maximum Legal Rate. In
the event any interest is charged in excess of the Maximum Legal Rate
("Excess"), each Borrower acknowledges and stipulates that any such charge
shall be the result of an accidental and bona fide error, and such Excess
shall be, first, applied to reduce the principal then unpaid hereunder;
second, applied to reduce the Obligations; and third, returned to the
Borrowers, it being the intention of the parties hereto not to enter at any
time into a usurious or otherwise illegal relationship. Each Borrower
recognizes that, with fluctuations in the Applicable Interest Rate and the
Maximum Legal Rate, such an unintentional result could inadvertently occur.
By the execution of this Agreement, each Borrower covenants that (i) the
credit or return of any Excess shall constitute the acceptance by such
Borrower of such Excess, and (ii) neither Borrower shall seek or pursue any
other remedy, legal or equitable, against Lender, based in whole or in part
upon the charging or receiving of any interest in excess of the maximum
authorized by applicable law. For the purpose of determining whether or not
any Excess has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received by the Lender in
connection with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
(c) The provisions of Section 3.4 shall be deemed to be
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of the Lender with respect to the Borrowers, or either of them
(or any other obligor in respect of Obligations), whether or not any provision
of Section 3.4 is referred to therein. All such documents and communications
and all figures set forth therein shall, for the sole purpose of computing the
extent of the liabilities and obligations of the Borrowers, or either of them
(or other obligor) asserted by the Lender thereunder, be automatically
recomputed by any Borrower or obligor, and by any court considering the same,
to give effect to the adjustments or credits required by Section 3.4.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
or any other Loan Documents than is presently allowed by applicable state or
federal law, then the limitation of interest under Section 3.4 shall be
increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to the Lender
by reason thereof shall be payable upon demand.
3.5 Facility Fee. The Borrowers jointly and severally promise
to pay the Lender a facility fee in the amount of $175,000 on the Closing
Date. The Lender and the each Borrower agree that the Facility Fee shall be
financed by the Lender as a Reference Rate Revolving Loan.
3.6 Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting Lender or any of Lender's affiliated
companies there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, minimum capital, capital ratio, or similar
requirement against or with respect to or measured by reference to loans made
or to be made to the Borrowers, or either of them, hereunder, or to Letters of
Credit issued on behalf of the Borrowers, or either of them, pursuant to the
Letter of Credit Agreement, and the result shall be to increase the cost to
Lender or to any of Lender's affiliated companies of making or maintaining any
Revolving Loan or Letter of Credit hereunder, or reduce any amount receivable
in respect of any such Revolving Loan and which increase in cost, or reduction
in amount receivable, shall be the result of Lender's or Lender's affiliated
company's reasonable allocation among all affected customers of the aggregate
of such increases or reductions resulting from such event, then, within ten
(10) days after receipt by Borrowers of a certificate from Lender containing
the information described in this Section 3.6 which shall be delivered to
Borrowers, each Borrower agrees from time to time to pay Lender such
additional amounts as shall be sufficient to compensate Lender or any of
Lender's affiliated companies for such increased costs or reductions in
amounts which Lender determines in Lender's reasonable discretion are
material. Notwithstanding the foregoing, all such amounts shall be subject to
the provisions of Section 3.4. The certificate requesting compensation under
this Section 3.6 shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the
amount of such additional cost or reduction in the amount receivable and the
way in which such amount has been calculated.
3.7 Unused Line Fee. For every month during the term of this
Agreement, the Borrowers shall pay the Lender a fee (the "Unused Line Fee") in
an amount equal to one-half percent (.50%) per annum, multiplied by the amount
by which (a) the Minimum Borrowing Commitment then in effect exceeds (b) the
average closing daily unpaid balance of all Loans and all issued but undrawn
Letters of Credit during such month, with the unpaid balance calculated for
this purpose by applying payments immediately upon receipt. Such a fee, if
any, shall be calculated on the basis of a year of three hundred sixty (360)
days and actual days elapsed, and shall be payable to the Lender on the first
day of each month prior to the termination of this Agreement commencing
January 1, 1995 and on the termination of this Agreement, with respect to the
prior month or portion thereof.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrowers jointly and severally
promise to repay the outstanding principal balance of the Revolving Loans,
plus all accrued but unpaid interest thereon, upon the termination of this
Agreement. In addition, the Borrowers jointly and severally promise to pay to
the Lender, on demand, the amount by which the unpaid principal balance of the
Revolving Loans at any time exceeds the Availability at such time (with
Availability for this purpose determined as if the amount of the Revolving
Loans were zero).
4.2 Place and Form of Payments: Extension of Time. All payments
of principal, interest, and other sums due to the Lender shall be made at the
Lender's address set forth in Section 13.10. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately
available funds. If any payment of principal, interest, or other sum to be
made hereunder becomes due and payable on a day other than a Business Day, the
due date of such payment shall be extended to the next succeeding Business Day
and interest thereon shall be payable at the applicable interest rate during
such extension.
4.3 Apportionment, Application and Reversal of Payments. Except
as otherwise expressly provided hereunder, the Lender shall determine in its
discretion the order and manner in which proceeds and other payments that the
Lender receives are applied to the Revolving Loans, interest thereon, and the
other Obligations, and each Borrower hereby irrevocably waives the right to
direct the application of any payment or proceeds; provided, however, unless
so directed by the Borrowers, the Lender shall not apply any such payments
which it receives to any Eurodollar Rate Loan, except: (a) on the expiration
date of the Interest Period applicable to any such Eurodollar Rate Loan; or
(b) in the event, and only to the extent, that there are not outstanding
Reference Rate Loans. Following an Event of Default that is continuing, the
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of the
Obligations subject to the terms of this Section 4.3 and each Borrower's right
to direct prepayments of Eurodollar Rate Loans.
4.4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY
PAYMENT OF, OR PROCEEDS APPLIED TO THE PAYMENT OF, ALL OR ANY PART OF THE
OBLIGATIONS, THE LENDER IS FOR ANY REASON REQUIRED TO SURRENDER SUCH PAYMENT
OR PROCEEDS TO ANY PERSON, BECAUSE SUCH PAYMENT OR PROCEEDS IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE
OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND
CONTINUE AND THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT OR
PROCEEDS HAD NOT BEEN RECEIVED BY THE LENDER AND EACH BORROWER SHALL BE
JOINTLY AND SEVERALLY LIABLE TO PAY TO THE LENDER, AND HEREBY DOES INDEMNIFY
THE LENDER AND HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT OR
PROCEEDS SURRENDERED. The provisions of this Section 4.4 shall be and remain
effective notwithstanding any contrary action which may have been taken by the
Lender in reliance upon such payment or Proceeds, and any such contrary action
so taken shall be without prejudice to the Lender's rights under this
Agreement and shall be deemed to have been conditioned upon such payment or
Proceeds having become final and irrevocable. The provisions of this Section
4.4 shall survive the termination of this Agreement.
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. Each Borrower
agrees that the Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom irrespective of
whether any Obligation is also evidenced by a promissory note or other
instrument, and shall constitute presumptive proof thereof until such time as
such Borrower has reviewed the monthly statement as hereinafter provided. The
Lender will provide to the Borrowers a monthly statement of Loans, payments,
and other transactions pursuant to this Agreement. Such statement shall be
deemed correct, accurate, and binding on each Borrower and as an account
stated and shall constitute prima facie proof thereof (except for reversals
and reapplications of payments made as provided in Section 4.3 and corrections
of errors discovered by the Lender), unless such Borrower notifies the Lender
in writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
applicable Borrower, only the items to which exception is expressly made will
be considered to be disputed by such Borrower.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, each Borrower hereby grants
to the Lender a continuing security interest in, lien on, and assignment of:
(i) all Receivables and Inventory, wherever located and whether now existing
or hereafter arising or acquired; (ii) all Documents and Instruments
representing such Receivables; (iii) all guaranties, collateral, liens on, or
security interests in, letters of credit, and other rights, agreements, and
property securing or relating to payment of Receivables; (iv) all books,
records, ledger cards, data processing records, computer software, and other
property at any time evidencing or relating to any of the foregoing; (v) all
monies, securities, and other property now or hereafter held, or received by,
or in transit to, Lender from or for Borrowers, or either of them, and all of
each Borrower's deposit accounts containing proceeds of any of the foregoing,
and all credits, and balances with Lender existing at any time; and (vi) all
Proceeds and products of all of the foregoing in any form, including, without
limitation, amounts payable under any policies of insurance insuring the
foregoing against loss or damage, and all increases and profits received from
all of the foregoing (all of the foregoing, together with all other property
in which Lender may at any time be granted a Lien, being herein collectively
referred to as the "Collateral"). The Lender shall have all of the rights of
a secured party with respect to the Collateral under the UCC and other
applicable laws.
(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, (i) exchange, waive,
or release any of the Collateral, (ii) after the occurrence of an Event of
Default that is continuing, apply Collateral and direct the order or manner of
sale thereof as the Lender may determine, and (iii) after the occurrence of an
Event of Default that is continuing, settle, compromise, collect, or otherwise
liquidate any Collateral in any manner, all without affecting the Obligations
or the Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. Each
Borrower shall, or shall cause the other Borrower to, at its expense, perform
all steps requested by the Lender at any time to perfect, maintain, protect,
and enforce the Security Interest in the Collateral including, without
limitation: (a) executing and recording of the Patent and Trademark
Assignments and executing and filing financing or continuation statements, and
amendments thereof, relating to the Collateral in form and substance
satisfactory to the Lender; (b) delivering to the Lender, upon Lender's
request therefor, the originals of all instruments, documents, and chattel
paper, and all other Collateral of which the Lender determines it should have
physical possession in order to perfect and protect the Security Interest
therein, duly endorsed or assigned to the Lender without restriction; (c)
delivering to the Lender warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are issued;
(d) after an Event of Default that is continuing, placing notations on each
such Borrower's books of account to disclose the Security Interest; (e)
delivering to the Lender, upon Lender's request therefor, all letters of
credit on which such Borrower is a named beneficiary; (f) after an Event of
Default transferring Inventory to warehouses designated by the Lender; and (g)
taking such other steps as are deemed necessary by the Lender to maintain the
Security Interest. The Lender may file, without either Borrower's signature,
one or more financing statements disclosing the Security Interest. Each
Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of either Borrower's agents or
processors, then such Borrower shall notify the Lender thereof and shall
notify such Person of the Security Interest in such Collateral and, upon the
Lender's request following an Event of Default that is continuing, instruct
such Person to hold all such Collateral for the Lender's account subject to
the Lender's instructions. If at any time any Collateral is located on any
premises that are not owned by the Borrowers, then the Borrowers shall obtain
written waivers, in form and substance reasonably satisfactory to the Lender,
of all present and future Liens to which the owner or lessor of such premises
may be entitled to assert against the Collateral. From time to time, the
Borrowers shall, upon Lender's request, execute and deliver confirmatory
written instruments pledging to the Lender the Collateral, but either
Borrower's failure to do so shall not affect or limit the Security Interest.
So long as this Agreement is in effect and until all Obligations have been
fully satisfied, the Security Interest shall continue in full force and effect
in all Collateral (whether or not deemed eligible for the purpose of
calculating the Availability or as the basis for any advance, loan, or other
financial accommodation). Upon termination of this Agreement and payment of
all Obligations, the Lender shall release all Security Interests held by the
Lender.
6.3 Location of Collateral. Each Borrower represents and
warrants to the Lender that: (a) Exhibit D hereto is a correct and complete
List of such Borrower's chief executive office, the location of its books and
records, the locations of the Collateral, and the locations of all of its
other places of business; and (b) Exhibit H correctly identifies any of such
facilities and locations that are not owned by such Borrower and sets forth
the names of the owners and lessors of, and, to the best of such Borrower's
knowledge, the holders of any mortgages on such facilities and locations.
Except for Inventory that is consigned by a Borrower to a customer or
warehouse, each Borrower agrees that it will not maintain any Collateral at
any location other than those listed on Exhibit D, and it will not otherwise
change or add to any of such locations, unless it gives the Lender at least
thirty (30) days prior written notice and executes such financing statements
and other documents that the Lender requests in connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral. Each
Borrower represents and warrants to the Lender that: (a) all Collateral is and
will continue to be owned by such Borrower free and clear of all Liens
whatsoever, except for the Security Interest and other Permitted Liens; (b)
the Security Interest will not be subject to any prior Lien except the Per-
mitted Liens; (c) such Borrower will use, store, and maintain the Collateral
with all reasonable care and will use the Collateral for lawful purposes only;
and (d) such Borrower will not, without the Lender's prior written approval,
sell, or dispose of or permit the sale or disposition of any Collateral,
except for (i) sales of Inventory in the ordinary course of business, and (ii)
as otherwise provided or allowed by this Agreement or any of the other Loan
Documents. The inclusion of Proceeds in the Collateral shall not be deemed
the Lender's consent to any sale or other disposition of the Collateral except
as expressly permitted herein.
6.5 Appraisals. Following the occurrence of an Event of Default
that is continuing, each Borrower shall, at the request of the Lender, provide
the Lender, at each such Borrower's expense, with appraisals or updates
thereof of any or all of the Collateral from an appraiser satisfactory to the
Lender.
6.6 Access and Examination. The Lender may at all reasonable
times have access to, examine, audit, make extracts from and inspect each
Borrower's records, files, and books of account and the Collateral and may
discuss each Borrower's affairs with each such Borrower's officers and
management. Each Borrower will deliver to the Lender any instrument necessary
for the Lender to obtain records from any service bureau maintaining records
for such Borrower. The Lender may, at any time when an Event of Default
exists and at the Borrowers' expense, make copies of all of the Borrowers'
books and records, or require each Borrower to deliver such copies to the
Lender. After the occurrence of an Event of Default that is continuing, the
Lender may, without expense to the Lender, use such of each Borrower's
personnel, supplies, and premises as may be reasonably necessary for
maintaining or enforcing the Security Interest. Lender shall have the right,
at any time, in Lender's name or in the name of a nominee of the Lender, to
verify the validity, amount or any other matter relating to the Accounts, by
mail, telephone, or otherwise.
6.7 Insurance. The Borrowers shall insure the Collateral and
its Equipment against loss or damage by fire with extended coverage, theft,
burglary, pilferage, loss in transit, and such other hazards as the Lender
shall specify, in amounts, under policies and by insurers acceptable to the
Lender. The Borrowers shall also maintain flood insurance, in the event of a
designation of the area in which any Real Property is located as "flood prone"
or a "flood risk area," as defined by the Flood Disaster Protection Act of
1973, in an amount to be reasonably determined by Lender, and shall comply
with the additional requirements of the National Flood Insurance Program as
set forth therein. The Borrowers shall cause the Lender to be named in each
such policy as secured party of the Inventory that constitutes part of the
Collateral and loss payee or additional insured, in a manner acceptable to the
Lender, as to the Collateral. Each policy of insurance shall contain a clause
or endorsement requiring the insurer to give not less than thirty (30) days
prior written notice to the Lender in the event of cancellation of the policy
for any reason whatsoever and a clause or endorsement stating that the
interest of the Lender shall not be impaired or invalidated by any act or
neglect of the Borrowers, or either of them, or the owner of any premises
where Collateral is located nor by the use of such premises for purposes more
hazardous than are permitted by such policy. All premiums for such insurance
shall be paid by the Borrowers when due, and certificates of insurance and, if
requested, photocopies of the policies shall be delivered to the Lender. If
either Borrower fails to procure such insurance or to pay the premiums
therefor when due, the Lender may (but shall not be required to) do so and
charge the costs thereof to the Borrowers' loan account. After becoming aware
of any loss, damage or destruction to Collateral, the Borrowers shall promptly
notify the Lender of any such loss, damage, or destruction that exceeds
$200,000, whether or not covered by insurance. The Lender is hereby
authorized to collect all insurance proceeds directly following the occurrence
of an Event of Default that is continuing. After deducting from such proceeds
the expenses, if any, incurred by Lender in the collection or handling
thereof, if an Event of Default has occurred and is continuing, the Lender may
apply such proceeds to the reduction of the Obligations, in such order as
Lender determines, or at the Lender's option may permit or require the
Borrowers, or either of them, to use such money, or any part thereof, to
replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction. If no Event of
Default has occurred and is continuing, Lender hereby authorizes the Borrowers
to collect all such insurance proceeds and to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a diligent
and expeditious manner with materials and workmanship of substantially the
same quality as existed before the loss, damage or destruction.
6.8 Collateral Reporting. Each Borrower will provide the Lender
with the following documents at the following times in form satisfactory to
the Lender: (a) on a daily basis, a schedule of Accounts created since the
last such schedule, a schedule of remittance advices, credit memos and reports
and a schedule of collections of Accounts since the last such schedule; (b) no
later than fifteen (15) days after the last day of each month, monthly summary
and detailed agings of Accounts aged by due date and by invoice date; (c) no
later than twenty (20) days after the last day of each month, monthly
reconciliations of Accounts balances per the aging to the general ledger
accounts receivable balance and to the financial statements provided to Lender
under Section 7.2(c); (d) no later than twenty (20) days after the last day of
each month, monthly Inventory reports by category and by location; (e) no
later than twenty (20) days after the last day of each month, monthly
reconciliations of the detailed Inventory reports to the general ledger and to
the financial statements provided to Lender under Section 7.2(c); (f) upon
request, copies of invoices, credit memos, shipping and delivery documents,
purchase orders; (g) such other reports as to the Collateral as the Lender
shall request from time to time; and (h) certificates of an officer of each
Borrower certifying as to the foregoing. If any of either Borrower's records
or reports of the Collateral are prepared by an accounting service or other
agent, such Borrower hereby authorizes such service or agent to deliver such
records, reports, and related documents to the Lender.
6.9 Accounts. (a) Each Borrower hereby represents and warrants
to the Lender that: (i) each existing Account represents, and each future
Account will represent, a bona fide sale or lease and delivery of goods by
such Borrower, or rendition of services by such Borrower, in the ordinary
course of such Borrower's business; (ii) each existing Account is, and each
future Account will be, for a liquidated amount payable by the Account Debtor
thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Lender, without offset, deduction, defense, or
counterclaim (other than claims relating to warranty issues); (iii) no payment
will be received with respect to any Account, and no credit, discount, or
extension, or agreement therefor will be granted to any Account, except as
reported to or otherwise agreed to by the Lender in accordance with this
Agreement; (iv) each copy of an invoice requested by and delivered to the
Lender by such Borrower will be a genuine copy of the original invoice sent to
the Account Debtor named therein; and (v) all goods described in each invoice
will have been delivered to the Account Debtor and all services of such
Borrower described in each invoice will have been performed, except where the
Account Debtor has previously agreed in writing to accept billings for such
goods.
(b) Neither Borrower shall re-date any invoice or sale or make
sales on extended dating beyond that customary in such Borrower's business or
extend or modify any Account which alters its eligibility status, or, with
respect to ineligible Accounts, which are inconsistent with prudent business
practice and industry standards. If either Borrower becomes aware of any
matter adversely affecting any Account in an amount in excess of $100,000,
including information regarding the Account Debtor's creditworthiness, such
Borrower will promptly so advise the Lender.
(c) Neither Borrower shall accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Eligible Account without the Lender's written consent. If the
Lender consents to the acceptance of any such instrument, it shall be
considered as evidence of the Account and not payment thereof and either such
Borrower will, upon Lender's request, promptly deliver such instrument to the
Lender appropriately endorsed. Regardless of the form of presentment, demand,
notice of dishonor, protest, and notice of protest with respect thereto,
either such Borrower will remain liable thereon until such instrument is paid
in full.
(d) Each Borrower shall notify the Lender promptly of all
disputes and claims with an Account Debtor relating to an Eligible Account
that exceeds $100,000 and when no Event of Default exists hereunder, may
settle or adjust them at no expense to the Lender, but no discount, credit or
allowance in excess of $100,000 shall be granted to any Account Debtor without
the Lender's consent, except for discounts, credits and allowances made or
given in the ordinary course of such Borrower's business. Each Borrower shall
send the Lender a copy of each credit memorandum in excess of $100,000 as soon
as issued. The Lender may, at all times when an Event of Default exists
hereunder, settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which the Lender considers advisable and, in all
cases, the Lender will credit the Borrowers' loan account with only the net
amounts received by the Lender in payment of any Accounts.
6.10 Collection of Accounts. (a) Until the occurrence of an
Event of Default that is continuing, each Borrower shall collect all Accounts,
shall receive all payments relating to Accounts, and shall promptly deposit
all such collections into a Payment Account established for the account of
such Borrower at a bank acceptable to such Borrower and the Lender. All
collections relating to Accounts received in any such Payment Account or
directly by either Borrower or the Lender, and all funds in any Payment
Account or other account to which such collections are deposited, shall be the
sole property of the Lender and subject to the Lender's sole control. After
the occurrence of an Event of Default that is continuing, the Lender may, at
any time, notify obligors that the Accounts have been assigned to the Lender
and of the Security Interest therein, and may collect them directly and charge
the collection costs and expenses to the Borrowers' loan account. After the
occurrence of an Event of Default that is continuing, each Borrower, at
Lender's request, shall execute and deliver to the Lender such documents as
the Lender shall require to grant the Lender access to any post office box in
which collections of Accounts are received.
(a) If sales of Inventory are made for cash, each Borrower shall
immediately deliver to the Lender the identical checks, cash, or other forms
of payment which such Borrower receives.
(b) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrowers' loan account (conditional upon final collection)
after allowing one (1) Business Day for collection.
(c) In the event the Borrowers repay all of the Obligations upon
the termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrowers' loan
account one (1) Business Day after the Lender's receipt thereof.
6.11 Inventory. Each Borrower represents and warrants to the
Lender that all of the Inventory is and will be held for sale or lease, or to
be furnished in connection with the rendition of services, in the ordinary
course of each such Borrower's business, and is and will be fit for such
purposes. Each Borrower will keep the Inventory in good and marketable
condition, at its own expense. Each Borrower agrees that all Inventory
produced by such Borrower in the United States will be produced in accordance
with the Federal Fair Labor Standards Act of 1938. Each Borrower will conduct
a physical count of the Inventory at least once per Fiscal Year, except as
otherwise agreed to between the Lender and such Borrower, and will, upon
request of the Lender, supply the Lender with a copy of such count accompanied
by a report of the value of such Inventory (valued at the lower or cost, on a
first-in, first-out basis, or market value). Neither Borrower will, without
the Lender's written consent, sell any Inventory on a bill and hold basis
(except as provided in subsection (xiii) of the definition of Eligible
Accounts set forth in this Agreement), guaranteed sale, sale and return, sale
on approval, consignment, or other repurchase or return basis.
6.12 Documents and Instruments. Each Borrower represents and
warrants to the Lender that: (a) all Documents and Instruments describing,
evidencing, or constituting Collateral, and all signatures and endorsements
thereon, are and will be complete, valid, and genuine and (b) all goods
evidenced by such Documents and Instruments were, at the time of their sale,
owned by such Borrower free and clear of all Liens other than Permitted Liens.
6.13 Right to Cure. The Lender may in its sole discretion pay
any amount or do any act required of the Borrowers, or either of them,
hereunder in order to preserve, protect, maintain or enforce the Obligations,
the Collateral or the Security Interest, and which the Borrowers, or either of
them, fail to pay or do, including, without limitation, payment of any
judgment against the Borrowers, or either of them, any insurance premium, any
warehouse charge, processing charge, any landlord's claim, and any other Lien
upon the Collateral. All payments that the Lender makes under this Section
6.13 and all out-of-pocket costs and expenses that the Lender pays or incurs
in connection with any action, taken by it hereunder shall be charged to the
Borrowers, loan account; provided that Lender will make a good faith effort to
notify the Borrowers and provide the Borrowers with a written, itemized
invoice covering such charge. Any payment made or other action taken by the
Lender under this Section 6.13 shall be without prejudice to any right Lender
may have to assert an Event of Default hereunder and to proceed accordingly.
6.14 Power of Attorney. Each Borrower appoints the Lender and
the Lender's designees as such Borrower's attorney, with power: (a) to endorse
such Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Lender's possession; (b) to
sign such Borrower's name on any invoice, bill of lading, or other document of
title relating to any Collateral, on drafts against customers, on assignments
of Accounts, on notices of assignment, financing statements and other public
records and on verifications of Accounts to Account Debtors; (c) to notify the
post office authorities, when an Event of Default exists, to change the
address for delivery of such Borrower's mail to an address designated by the
Lender and to receive, open and dispose of all mail addressed to such
Borrower; (d) to send requests for verification of Accounts to Account
Debtors; and (e) to do all things necessary to carry out this Agreement. Each
Borrower ratifies and approves all acts of such attorney. Neither the Lender
nor the attorney will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
6.15 Lender's Rights, Duties, and Liabilities. The Borrowers
jointly and severally assume all responsibility and liability arising from or
relating to the use, sale or other disposition of the Collateral. Neither the
Lender nor any of its officers, directors, employees, and agents shall be
liable or responsible in any way for the safekeeping of any of the Collateral,
or for any act or failure to act with respect to the Collateral, or for any
loss or damage thereto, or for any diminution in the value thereof, or for any
act of default by any warehouseman, carrier, forwarding agency or, other
person whomsoever, all of which shall be at the Borrowers' sole risk. The
Obligations shall not be affected by any failure of the Lender to take any
steps to perfect the Security Interest or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release the
Borrowers, or either of them, from any of the Obligations. After the
occurrence of an Event of Default that has not been cured or otherwise waived
by Lender, the Lender may (but shall not be required to), without notice to or
consent from the Borrowers, or either of them, sue upon or otherwise collect,
extend the time for payment of, modify or amend the terms of, compromise or
settle for cash or credit, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take other action with respect
to the Collateral, any security therefor, any agreement relating thereto, any
insurance applicable thereto, or any Person liable directly or indirectly in
connection with any of the foregoing, without discharging or otherwise
affecting the liability of the Borrowers, or either of them, for the
Obligations.
6.16 Release of Collateral and the Borrowers.
(a) If either Borrower sells or otherwise finances an Account
that does not qualify as an Eligible Account, and the proceeds from the sale
or financing of such Account is received or is to be received by either such
Borrower, then the Lender's Security Interest in such Account shall be
automatically terminated and the Lender shall immediately release its Security
Interest in and to such Account.
(b) If LSB Chemical Corp. (or successor parent corporation of
EDC) sells EDC, or EDC sells Slurry, or either Borrower sells all or
substantially all of its assets, then such Borrower shall be allowed to
prepay, without penalty or prepayment premium, all of the outstanding
Revolving Loans applicable to such Borrower, plus the accrued interest
relating to such Revolving Loans, and upon payment of such Revolving Loans,
the Lender shall release and terminate its Security Interest as to the
Collateral of such Borrower and release such Borrower from any further
liability and responsibility under the Loan Documents.
(c) Upon payment in full of all Obligations, Lender shall
immediately release its Security Interest in and to all of the Collateral.
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
7.1 Books and Records. Each Borrower shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with
GAAP. Each Borrower shall, by means of appropriate entries, reflect in such
accounts and in all Financial Statements proper liabilities and reserves for
all taxes and proper provision for depreciation and amortization of Property
and bad debts, all in accordance with GAAP. Each Borrower shall maintain at
all times books and records pertaining to the Collateral in such detail, form,
and scope as the Lender shall reasonably require, including without limitation
records of: (a) all payments received and all credits and extensions granted
with respect to the Accounts; (b) the return, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral.
7.2 Financial Information. Each Borrower shall promptly furnish
to the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is authorized
to obtain such information directly from them. Without limiting the
foregoing, the Borrowers, or LSB, will furnish to the Lender, in such detail
as the Lender shall request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, audited consolidated and
unaudited consolidating balance sheet, statement of income and expense,
retained earnings, and statement of cash flows and stockholders' equity for
the LSB Consolidated Group and for Borrowers for such Fiscal Year, and the
accompanying notes thereto, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of the LSB
Consolidated Group as at the date thereof and for the Fiscal Year then ended,
and prepared in accordance with GAAP. The audited statements shall be
examined in accordance with generally accepted auditing standards by, and
accompanied by a report thereon unqualified as to scope of, independent
certified public accountants selected by LSB and reasonably satisfactory to
the Lender.
(b) As soon as available, but in any event not later than forty-
five (45) days after the close of each Fiscal Quarter other than the fourth
quarter of a Fiscal Year, unaudited consolidated and consolidating balance
sheets of the LSB Borrowing Group as at the end of such quarter, and
consolidated and consolidating unaudited statements of income and expense and
consolidated statements of cash flows for the LSB Borrowing Group for such
quarter and for the period from the beginning of the Fiscal Year to the end of
such quarter, together with a report of Capital Expenditures for such Fiscal
Quarter, all in reasonable detail, fairly presenting the financial position
and results of operation of the LSB Borrowing Group as at the date thereof and
for such periods, prepared in accordance with GAAP consistent with the audited
Financial Statements required pursuant to Section 7.2(a). Such statements
shall be certified to be correct by the chief financial officer or an
executive officer of LSB, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than thirty
(30) days after the end of each month, unaudited consolidated balance sheets
of the LSB Borrowing Group as at the end of such month, and consolidated and
consolidating unaudited statements of income and expenses for the LSB
Borrowing Group for such month and for the period from the beginning of the
Fiscal Year to the end of such month, all in reasonable detail (although not
as detailed as the reports required under Sections 7.2(a) and 7.2(b), fairly
presenting the financial position and results of operation of the LSB
Borrowing Group as at the date thereof and for such periods, and prepared in
accordance with GAAP consistent with the audited Financial Statements required
pursuant to Section 7.2(a). Such statements shall be certified to be correct
by the chief financial officer, treasurer or chief accounting officer of LSB,
subject to normal year end adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have
reviewed and are familiar with the Loan Documents and that, in examining such
Financial Statements, they did not become aware of any fact or condition which
then constituted an Event of Default, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 7.2(a) and 7.2(b), a
certificate of the chief financial officer, treasurer or chief accounting
officer of each Borrower and LSB (i) setting forth in reasonable detail the
calculations required to establish that the LSB Borrowing Group and, with
respect to Section 9.17, the Borrowers, were in compliance with the covenants
set forth in Sections 9.16, 9.17 and 9.18 hereof as of the end of the Fiscal
Year and most recent Fiscal Quarter covered in such Financial Statements; and,
(ii) stating that, except as explained in reasonable detail in such
certificate, (A) nothing has come to the attention of such officer that would
lead such officer to believe that all of the representations, warranties and
covenants of the Borrowers contained in this Agreement and the other Loan
Documents are not correct and complete as of the date of such certificate and
(B) no Event of Default then exists or existed during the period covered by
such Financial Statements. If such certificate discloses that a
representation or warranty is not correct or complete, or that a covenant has
not been complied with, or that an Event of Default existed or exists, such
certificate shall set forth what action the Borrowers have taken or proposes
to take with respect thereto.
(f) No sooner than ninety (90) days and no less than thirty (30)
days prior to the beginning of each Fiscal Year, projected consolidated and
consolidating balance sheets, statements of income and expense, and statements
of cash flow for each Borrower and Subsidiaries as at the end of and for each
Fiscal Quarter of such Fiscal Year.
(g) Promptly upon their becoming available, copies of each proxy
statement, financial statement and report which LSB or either Borrower sends
to its stockholders or files with the Securities and Exchange Commission.
(h) Promptly after filing with the PBGC and the IRS a copy of
each annual report or other filing filed with respect to each Plan of either
Borrower or any Related Company.
(i) Such additional, reasonable information as the Lender may
from time to time reasonably request regarding the financial and business
affairs of the Borrowers, or either of them, or the Subsidiaries.
7.3 Notices to Lender. Each Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Within two Business Days after becoming aware of the
existence of any Event of Default.
(b) Within two Business Days after becoming aware that the
holder of any Debt in excess of $1,000,000 has given notice or taken any
action with respect to a claimed default.
(c) Within five Business Days after a responsible officer of LSB
or either Borrower becomes aware of any change which LSB or either such
Borrower deems to be a material adverse change in the Borrowers', or either of
their, Property, business, operations, or condition (financial or otherwise).
(d) Within five Business Days after a responsible officer of LSB
or either Borrower becomes aware of any pending or threatened action,
proceeding, or counterclaim by any Person, or any pending or threatened
investigation by a Public Authority, which, in the opinion of such officer,
would materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or the Borrowers',
or either of their, Property, business, operations, or condition (financial or
otherwise).
(e) Within two Business Days after becoming aware of any pending
or threatened strike, work stoppage, material unfair labor practice claim, or
other material labor dispute affecting the either Borrower.
(f) Within five Business Days after a responsible officer of LSB
or either Borrower becomes aware of any violation of any law, statute,
regulation, or ordinance of a Public Authority applicable to the Borrowers, or
either of them, which, in the opinion of such officer, would materially and
adversely affect the Collateral, the repayment of the Obligations, the
Lender's rights under the Loan Documents, or the Borrowers', or either of
their, Property, business, operations, or condition (financial or otherwise).
(g) Within five Business Days after a responsible officer of LSB
or either Borrower becomes aware of any violation or any investigation of a
violation by the Borrowers, or either of them, of Environmental Laws which, in
the opinion of such officer, would materially and adversely affect the
Borrowers', or either of their, Property, Collateral, business, operation or
condition (financial or otherwise).
(h) Within five Business Days after a responsible officer of LSB
or either Borrower becomes aware of any Termination Event, accompanied by any
materials required to be filed with the PBGC with respect thereto; immediately
after either Borrower's receipt of any notice concerning the imposition of any
withdrawal liability under Section 4042 of ERISA with respect to a Plan;
immediately upon the establishment of any Pension Plan not existing at the
Closing Date or the commencement of contributions by either Borrower to any
Pension Plan to which such Borrower was not contributing at the Closing Date;
and immediately upon becoming aware of any other event or condition regarding
a Plan or either Borrower's or a Related Company's compliance with ERISA,
which, in the opinion of such officer, would materially and adversely affect
the Borrowers', or either of their, Property, business, operation or condition
(financial or otherwise).
(i) Thirty (30) days prior to either Borrower changing its name.
Each notice given under this Section 7.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrowers
have taken or proposes to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
Each Borrower continuously warrants and represents to the Lender,
at all times during the term of this Agreement and until all Obligations have
been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing in the exercise of its reasonable discretion:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. Each Borrower has the corporate power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents, to incur the Obligations, and to grant the Security Interest. Each
Borrower has taken all necessary corporate action to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents. No
consent, approval, or authorization of, or filing with, any Public Authority,
and no consent of, any other Person, is required in connection with such
Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for (a) those already duly obtained, (b) those
required to perfect the Lender's Security Interest, and (c) the compliance
with any of the conditions precedent set forth in Sections 10.4 and 10.11
hereof. This Agreement and the other Loan Documents have been duly executed
and delivered by each Borrower and constitute the legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in accordance
with its terms without defense, setoff, or counterclaim. Neither Borrower's
execution, delivery, and performance of this Agreement and the other Loan
Documents will conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any
Lien upon the Property of either Borrower (except as contemplated by this
Agreement and the other Loan Documents) by reason of the terms of (a) any
material mortgage, lease, agreement, or instrument to which either Borrower is
a party or which is binding upon it, (b) any judgment, law, statute, rule or
governmental regulation applicable to either Borrower, or (c) the Certificate
or Articles of Incorporation or By-Laws of either Borrower.
8.2 Validity and Priority of Security Interest. The provisions
of this Agreement and the other Loan Documents create legal and valid Liens on
all the Collateral in the Lender's favor and when all proper filings,
recordings, and other actions necessary to perfect such Liens have been made
or taken such Liens will constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, except for
Permitted Liens, securing all the Obligations and enforceable against the
Borrowers and all third parties after payment of the obligations due Congress
under the Congress Loan Agreement and Household under the Household Working
Capital Agreement and termination of all of the Agreements for Purchase of
Receivables between the Borrowers and Prime upon payment of the obligations
due Bank IV by Prime under the Prime Loan Agreement.
8.3 Organization and Qualification. Each Borrower is duly
incorporated and organized and validly existing in good standing under the
laws of the State of Oklahoma; (ii) is qualified to do business as a foreign
corporation and is in good standing in each state where, because of the nature
of its activities or properties, such qualification is required, except where
the failure to so qualify would not have a material adverse effect on such
Borrower; and (iii) has all requisite corporate power and authority to conduct
its business and to own its Property.
8.4 Corporate Name; Prior Transactions. Neither Borrower has,
during the past five years, been known by or used any other corporate or
fictitious name, or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
Property out of the ordinary course of business, except as set forth on
Exhibit E.
8.5 Subsidiaries and Affiliates. Exhibit F is a correct and
complete list of the name and relationship to the Borrowers of each and all of
each Borrower's Subsidiaries and other Affiliates, which list may be amended
by Borrower from time to time as LSB adds new or additional Subsidiaries or
Affiliates. Each Subsidiary is (a) duly incorporated and organized and
validly existing in good standing under the laws of its state of incorporation
set forth on Exhibit F and (b) qualified to do business as a foreign
corporation and in good standing in the states set forth opposite its name on
Exhibit F, which are the only states in which such qualification is necessary
in order for it to own or lease its Property and conduct its business, except
where the failure to so qualify would not have a material adverse effect on
the LSB Borrowing Group taken as a whole.
8.6 Financial Statements and Projections.
(a) LSB has delivered to the Lender the audited consolidated
balance sheet and related statements of income, retained earnings, statements
of cash flows, and changes in stockholders' equity for LSB, as of December 31,
1993 and for the Fiscal Year then ended, accompanied by the report thereon of
LSB's independent certified public accountants. LSB has also delivered to the
Lender the unaudited consolidated balance sheets and related statements of
income and cash flows for LSB, as at September 30, 1994 and for the nine
months and three months then ended. Such financial statements are attached
hereto as Exhibit G-1. All such financial statements have been prepared in
accordance with GAAP and present accurately and fairly each Borrower's
financial position as at the dates thereof and its results of operations for
the periods then ended.
(b) The Latest Forecasts, attached hereto as Exhibit G-2,
represent the Borrowers' best estimate of the Borrowers' future financial
performance for the periods set forth therein. The Latest Forecasts have been
or will be prepared on the basis of certain assumptions, which the Borrowers
believe are fair and reasonable in light of current and reasonably foreseeable
business conditions; provided, however, that although such forecasts represent
the Borrowers' best estimate, the Borrowers makes no representation that they
will achieve such forecasts.
8.7 Capitalization. LSB's authorized capital stock consists of
(i) 75,000,000 shares of Common Stock, par value $.10 per share; (ii) 250,000
shares of Preferred Stock, par value $100 per share; and (iii) 5,000,000
shares of Class C Preferred Stock, no par value. EDC's authorized capital
stock consists of 25,000 shares of Common Stock, par value $1.00 per share.
Slurry's authorized capital stock consists of 10,000 shares of Common Stock,
par value $1.00 per share.
8.8 Solvency. Each Borrower is solvent prior to and after
giving effect to the making of the Revolving Loans, and after taking into
account Intercompany Accounts. If at any time either Borrower should become
insolvent, LSB shall have a period of up to ten (10) Business Days after LSB
learns of either such Borrower's insolvency within which to recapitalize such
Borrower in order to restore such Borrower to a solvent state.
8.9 Title to Property. Except for Permitted Liens, and except
for Property which either Borrower leases, each Borrower has, to its
knowledge, good and marketable title in fee simple to the real property listed
in Exhibit H and good, indefeasible, and merchantable title to all of its
other Property free of all Liens except Permitted Liens.
8.10 Real Property; Leases. Exhibit H hereto is a correct and
complete list of all real property owned by each Borrower, and all leases and
subleases of real property by each Borrower as lessee or sublessee where
Collateral is located. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect and
no material default by any party to any such lease or sublease exists.
8.11 Proprietary Rights. Exhibit B hereto is a correct and
complete list of all of the Proprietary Rights owned each Borrower. None of
the Proprietary Rights is subject to any licensing agreement or similar
arrangement except as set forth on Exhibit B. To each Borrower's knowledge,
none of the Proprietary Rights infringes on or conflicts with any other
Person's Property. The Proprietary Rights described on Exhibit B constitute
all of the Property of such type necessary to the current and anticipated
future conduct of each Borrower's business.
8.12 Trade Names and Terms of Sale. All trade names or styles
under which either Borrower will sell Inventory or create Accounts, or to
which instruments in Payment of Accounts may be made payable, are listed on
Exhibit I hereto. The terms of sale on which such sales of Inventory will be
made are set forth on Exhibit I.
8.13 Litigation. Except as set forth on Exhibit J or as
described in the reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission, there is no pending or, to each Borrower's
knowledge, threatened suit, proceeding, or counterclaim by any Person, or
investigation by any Public Authority, or any basis for any of the foregoing,
which would have a material adverse effect on the LSB Borrowing Group, taken
as a whole, or (ii) involve damages or a claim for damages in excess of
$1,000,000 and not fully covered by insurance.
8.14 Labor Disputes. Except as set forth on Exhibit K or as
described in reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission: (a) there is no collective bargaining
agreement or other labor contract covering employees of either Borrower; (b)
no such collective bargaining agreement or other labor contract is scheduled
to expire during the term of this Agreement; (c) no union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of either Borrower; and (d) there is no pending
or, to either Borrower's knowledge, threatened strike, work stoppage, material
unfair labor practice claims, or other material labor dispute which would have
a material adverse effect on the LSB Borrowing Group, taken as a whole.
8.15 Environmental Laws. Except as disclosed on Exhibit M
hereto, and as hereafter disclosed by the Borrowers to Lender in writing, and
to each Borrower's knowledge:
(a) All environmental permits, certificates, licenses,
approvals, registrations and authorizations ("Permits") required under all
Environmental Laws in connection with the business of the Borrowers have been
obtained, unless the failure to obtain such Permits would not have a material
adverse effect on the LSB Borrowing Group, taken as a whole;
(b) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental entity with respect to any
generation, treatment, storage, recycling, transportation or disposal of any
hazardous or toxic waste (including petroleum products and radioactive
materials) generated or used ("Hazardous Substances") by the Borrowers, which
would have a material adverse effect on the LSB Borrowing Group, taken as a
whole;
(c) Neither Borrower has received any request for information
that is likely to lead to a claim, any notice of claim, demand or other
notification that either Borrower is or may be potentially responsible with
respect to any clean up of any threatened or actual release of any Hazardous
Substance;
(d) There are no underground storage tanks, active or abandoned,
at any property now owned, operated or leased by either Borrower.
(e) Neither Borrower has knowingly transported any Hazardous
Substances to any location which is listed on the National Priority List under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), which is the subject of any federal or state
enforcement actions which may lead to claims against either Borrower for clean
up costs, remedial work, damages to natural resources or for personal injury
claims, including, but not limited to, claims under CERCLA which would have a
material adverse effect on the LSB Borrowing Group, taken as a whole.
(f) No written notification of a release of Hazardous Substance
has been filed by or on behalf of either Borrower or in relation to any
Property now owned, operated or leased by either Borrower or previously owned,
operated or leased by either Borrower at the time such property was so owned,
operated or leased. No such Property is listed or proposed for listing on the
National Priority List promulgated pursuant to CERCLA, or on any similar state
list of sites requiring investigation or clean up.
(g) There are no environmental Liens on any material properties
owned or leased by either Borrower and no governmental actions have been taken
or are in process or pending which could subject any of such Properties to
such Liens.
(h) Each Borrower shall promptly forward a copy to Lender of any
environmental written inspections, investigations or studies prepared by or to
be prepared by such Borrower relating to Properties now owned, operated or
leased by such Borrower; provided, however, that neither Borrower makes any
representation or warranty with respect to environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted by
or on behalf of Lender.
8.16 No Violation of Law. Except as disclosed in Exhibit J or in
reports filed by LSB prior to the Closing Date with the Securities and
Exchange Commission, to each Borrower's knowledge, neither Borrower is in
violation of any law, statute, regulation, ordinance, judgment, order, or
decree applicable to it which violation would have a material adverse effect
on the LSB Borrowing Group, taken as a whole.
8.17 No Default. Neither Borrower is in default with respect to
any note, loan agreement, mortgage, lease, or other agreement to which such
Borrower is a party or bound, where the amount owed by such Borrower under
such note, loan agreement, mortgage, lease, or other agreement exceeds
$750,000.
8.18 Plans. Each Plan has been maintained at all times in
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code. All Pension Plans are listed on Exhibit L, and those, if
any, which are a Multi-employer Plan are designated as such, and a copy of
each such Pension Plan which has been requested in writing by Lender has been
furnished to Lender. Except as set forth on Exhibit L, no Pension Plan has
incurred any accumulated funding deficiency, as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, which would
have a material adverse effect on the LSB Borrowing Group, taken as a whole.
Except as set forth on Exhibit L, each Pension Plan, which is intended to be a
qualified Pension Plan under Section 401(a) of the Code, as currently in
effect has received a favorable determination letter from the Internal Revenue
Service finding that the current form of the Plan is qualified under Section
401(a) of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code. Neither Borrower has incurred any
liability to the PBGC other than the payment of premiums, and there are no
premium payments which have become due, are unpaid, and the non-payment of
which would have a material adverse effect on the LSB Borrowing Group.
Neither LSB nor any of its Subsidiaries, nor any fiduciary of or trustee to
any Plan has breached any of the responsibilities, obligations or duties
imposed on it under the terms of the Plan or by ERISA with respect to any Plan
the breach of which would have a material adverse effect on the LSB Borrowing.
The Borrowers or LSB have established reserves on its books to provide for the
benefits earned and other liabilities accrued under each such Plan in amounts
sufficient to substantially provide for such benefits and liabilities which
have not been funded through the trust, if any, established for such Plan.
8.19 Taxes. Each Borrower has filed all tax returns and other
reports which it was required by law to file on or prior to the date hereof
and has paid all taxes, assessments, fees, and other governmental charges, and
penalties and interest, if any, against it or its Property, income, or
franchise, that are due and payable, except such Taxes which are being
contested in good faith and for which appropriate reserves have been
established in connection therewith, or for which an extension as to the date
of filing has been authorized.
8.20 Use of Proceeds. None of the transactions contemplated in
this Agreement (including, without limitation, the use of certain proceeds
from such loans) will violate or result in the violation of Section 7 of the
Securities Exchange Act of 1934, as amended, 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 ("Federal Reserve
Board"), 12 C.F.R., Chapter II. Neither Borrower owns or intends to carry or
purchase any "margin stock" within the meaning of said Regulation G. None of
the proceeds of the loans will be used, directly or indirectly, to purchase or
carry (or refinance any borrowing, the proceeds of which were used to purchase
or carry) any "security" within the meaning of the Securities Exchange Act of
1934, as amended.
8.21 Private Offerings. Neither Borrower has, directly or
indirectly, offered the Revolving Loans for sale to, or solicited offers to
buy part thereof from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser other than Lender. Each Borrower
hereby agrees that neither it nor anyone acting on its behalf has offered or
will offer the Revolving Loan or any part thereof or any similar securities
for issue or sale to or solicit any offer to acquire any of the same from
anyone so as to bring the issuance thereof within the provisions of Section 5
of the Securities Act of 1933, as amended.
8.22 Broker's Fees. Each Borrower represents and warrants to
Lender that, with respect to the financing transaction herein contemplated, no
Person is entitled to any brokerage fee or other commission as a result of
acts by either Borrower and each Borrower agrees, jointly and severally, to
indemnify and hold Lender harmless against any and all such claims if such
claim is due to the acts of the Borrowers, or either of them.
8.23 No Material Adverse Change. No material adverse change has
occurred in the Property, business, operations, or conditions (financial or
otherwise) of the LSB Borrowing Group, taken as a whole, since the date of the
Financial Statements delivered to the Lender, except as otherwise disclosed in
that Special Report to LSB Shareholders dated September 15, 1994 and in the
reports filed by LSB with the Securities and Exchange Commission, if any.
8.24 Debt. After giving effect to the making of each Revolving
Loan, neither Borrower has Debt except Permitted Debt.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. Each Borrower covenants that,
so long as any of the Obligations remain outstanding or this Agreement is in
effect:
9.1 Taxes and Other Obligations. Each Borrower, no later than
ten days after such payments become due, shall: (a) file when due (including
extensions) all tax returns and other reports which it is required to file,
pay when due all taxes, fees, assessments and other governmental charges
against it or upon its Property, income, and franchises, make all required
withholding and other tax deposits, and establish adequate reserves for the
payment of all such items, and shall provide to the Lender, upon request,
satisfactory evidence of its timely compliance with the foregoing; and (b) pay
all Debt owed by it within normal business terms and consistent with past
practices; provided, however, that neither Borrower need pay any tax, fee,
assessment, governmental charge, or Debt, or perform or discharge any other
obligation, that it is contesting in good faith by appropriate proceedings
diligently pursued.
9.2 Corporate Existence and Good Standing. Each Borrower shall
maintain its corporate existence and its qualification and good standing in
all states necessary to conduct its business and own its Property, except
where the failure to so qualify would not have a material adverse effect on
such Borrower, and shall obtain and maintain all licenses, permits, franchises
and governmental authorizations necessary to conduct its business and own its
Property.
9.3 Maintenance of Property and Insurance. Each Borrower shall:
(a) maintain all of its Property necessary and material in its business in
good operating condition and repair, ordinary wear and tear excepted,
provided, however, that each Borrower shall have a period of ten (10) days
after learning that repair is necessary within which to repair any Property
which has not been so maintained before an Event of Default shall be deemed to
have occurred; and (b) in addition to the insurance required by Section 6.7,
maintain with financially sound and reputable insurers such other insurance
with respect to its Property and business against casualties and contingencies
of such types (including, without limitation, business interruption, public
liability, product liability, and larceny, embezzlement or other criminal
misappropriation), and in such amounts as is customary for Persons of
established reputation engaged in the same or a similar business and similarly
situated, naming the Lender, at its request, as additional insured under each
such policy as to the Collateral.
9.4 Environmental Laws. Except as disclosed to Lender in
writing prior to the Closing Date in connection with Section 8.15, each
Borrower will use all reasonable efforts to conduct its business in
substantial compliance with all Environmental Laws applicable to it,
including, without limitation, those relating to such Borrower's generation,
handling, use, storage, and disposal of hazardous and toxic wastes and
substances. Each Borrower shall take prompt and appropriate action to respond
to any noncompliance with Environmental Laws and shall regularly report to the
Lender on such response. Without limiting the generality of the foregoing,
whenever there is potential noncompliance with any Environmental Laws, each
Borrower shall, at the Lender's request and the Borrowers' expense: (a) cause
an independent environmental engineer acceptable to the Lender to conduct such
tests of the site where either Borrower's noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and deliver to
the Lender a report setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an
estimate of the costs thereof; and (b) provide to the Lender a Supplemental
report of such engineer whenever the scope of the environmental problems, or
either Borrower's response thereto or the estimated costs thereof, shall
materially change.
9.5 Mergers, Consolidations, Acquisitions, or Sales. Neither
Borrower shall enter into any transaction of merger, reorganization, or
consolidation in which the Borrower is not the survivor, or transfer, sell,
assign, lease, or otherwise dispose of all or substantially all of its
Property, or wind up, liquidate or dissolve, or agree to do any of the
foregoing, except (i) sales of Inventory in the ordinary course of its
business, or (ii) after thirty (30) days prior written notice to Lender,
mergers or consolidations of such Borrower into any of the Borrower
Subsidiaries or a merger of a Borrower Subsidiary or Guarantor Subsidiary into
such Borrower or the sale of all or substantially all of the assets of such
Borrower to any of the Borrower Subsidiaries or the sale of all or
substantially all of the assets of a Borrower Subsidiary or Guarantor
Subsidiary to such Borrower.
9.6 Guaranties. Neither Borrower shall make, issue, or become
liable on any secured Guaranty, except Guaranties in favor of the Lender and
endorsements of instruments for deposit.
9.7 Debt. Neither Borrower shall incur or maintain any Debt
other than Permitted Debt.
9.8 Prepayment. Neither Borrower shall voluntarily prepay any
Debt, except the Obligations in accordance with the terms of this Agreement.
9.9 Transactions with Affiliates. Except (a) as set forth
below, (b) as set forth in Section 9.14 hereof, or (c) as otherwise provided
in this Agreement, neither Borrower shall sell, transfer, distribute, or pay
any money or Property to any Affiliate, or lend or advance money or Property
to any Affiliate, or invest in (by capital contribution or otherwise) or
purchase or repurchase any stock or indebtedness, or any Property, of any
Affiliate, or become liable on any secured Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate, except nothing contained
herein shall limit or restrict either Borrower from (i) performing any
agreements entered into with an Affiliate prior to the date hereof, or (ii)
engaging in other transactions with Affiliates in the normal course of
business, in amounts and upon terms disclosed to the Lender, and which are no
less favorable to such Borrower than would be obtainable in a comparable arm's
length transaction with a third party who is not an Affiliate. Subject to
applicable law, each Borrower and other members of the LSB Borrowing Group may
borrow any amounts from each other and repay such amounts on terms agreed to
between them without any limitations.
9.10 Plans and Compensation. Neither Borrower shall take any
action, or shall fail to take any action, that will cause or be reasonably
expected to cause any representation or warranty contained in Section 8.18
(other than the listing of Pension Plans on Exhibit L), if made on and again
as of any date on or after the date of this Agreement, to not be true and,
without limitation and without excusing such violation, if such a prohibited
action or inaction occurs or fails to occur, such Borrower shall notify Lender
in writing of the nature of the resulting consequences or expected
consequences, and a description of the action such Borrower or any Subsidiary
is taking or proposing to take with respect thereto and, when known, any
action taken by the Internal Revenue Service of the Department of Labor, or
the PBGC, with respect thereto.
9.11 Business Conducted. Neither Borrower shall engage, directly
or indirectly, in any line of business which materially differs from the
business in which such Borrower is engaged on the Closing Date, except with
respect to a different line of business resulting from an Acquisition as
permitted under Section 9.14.
9.12 Liens. Neither Borrower nor any of such Borrower's
Subsidiaries shall create, incur, assume, or permit to exist any Lien on any
Property now owned or hereafter acquired by any of them, except Permitted
Liens.
9.13 New Subsidiaries. Neither Borrower shall, directly or
indirectly, organize or acquire any new subsidiary which would have any
interest in the Collateral.
9.14 Distributions and Restricted Investments. Neither Borrower
shall (a) directly or indirectly declare or make, or incur any liability to
make, any Distribution, or (b) make any Restricted Investments, except: (i)
each Borrower may make and receive Distributions and Restricted Investments by
the other members of the LSB Borrowing Group; (ii) so long as no Event of
Default has occurred and is continuing, currently scheduled Dividends by LSB
and performance of all of the terms, provisions and conditions by LSB,
relating to or in connection with or arising out of any and all series of
LSB's preferred stock issued and outstanding as of the date hereof and the
payments by LSB of an annual cash dividend on its Common Stock in an amount
equal to $.06 a share payable on a semi-annual basis; (iii) each Borrower may
make Restricted Investments to any Subsidiary of LSB other than the members of
the LSB Borrowing Group, provided, however, that the sum of all such
Restricted Investments from each such Borrower and all other members of the
LSB Borrowing Group shall not exceed $200,000 in the aggregate per annum; (iv)
each Borrower may make Restricted Investments in Affiliates outstanding as of
the date hereof; and (v) each Borrower may make other Restricted Investments
constituting Acquisitions not otherwise permitted above in this Section as
long as such Restricted Investments when aggregated with all other Restricted
Investments for the same Acquisition from all members of the LSB Borrowing
Group do not exceed $2,000,000 in cash investments and issued and/or assumed
interest-bearing debt per Acquisition and $10,000,000 in cash investments and
issued and/or assumed interest-bearing debt in the aggregate for all such
Acquisitions per annum; provided, however, that interest-bearing debt of the
acquired company which Lender in its sole and absolute discretion agrees to
refinance as a working capital facility shall not be included in the
$2,000,000 and the $10,000,000 limitations; and further provided that nothing
in this subsection (v) shall be construed to imply Lender's willingness in
advance to provide any such refinancing.
9.15 Capital Expenditures. Neither Borrower shall make or incur
any Capital Expenditure if, after giving effect thereto, the aggregate amount
of all Capital Expenditures by the LSB Borrowing Group during the following
periods would exceed the following amounts: Fiscal Year ending December 31,
1994: $20,000,000; Fiscal Year ending December 31, 1995 and each Fiscal Year
thereafter: $6,000,000; provided, however, that if the aggregate amount of
Capital Expenditures made or incurred by the LSB Borrowing Group during the
Fiscal Year ending December 31, 1994 (the "1994 Actual Capital Expenditures")
is less than $20,000,000, then the $6,000,000 amount available during the
Fiscal Year ending December 31, 1995 shall be increased by the difference
between $20,000,000 and the 1994 Actual Capital Expenditures.
9.16 Adjusted Tangible Net Worth. Adjusted Tangible Net Worth
(without taking into account any purchases of treasury stock) will not be less
than the following amounts at the end of each of the Fiscal Quarters during
the following Fiscal Years:
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Fiscal Year Ending
December 31, 1994 $ 86,000,000
Fiscal Year Ending
December 31, 1995 $ 85,000,0001 $ 88,000,0001 $ 90,000,0001 $ 92,000,0001
Fiscal Year Ending
December 31, 1996 $ 92,000,0001 $ 94,000,0001 $ 96,000,0001 $ 98,000,0001
Each Fiscal Quarter during each Fiscal Year ending thereafter: $ 98,000,0001
1 (footnote) - This number is to be reduced by the amount of any purchase of
treasury stock by LSB pursuant to Section 9.14 of the Loan and Security
Agreement between LSB and the Lender and by the purchase of treasury stock
in the amount of $885,000 in October and November, 1994.
9.17 Debt Ratio. The ratio of Debt of the LSB Borrowing Group
(excluding all loans to any Borrower Subsidiary from the Lender) to Adjusted
Tangible Net Worth will not be greater than the ratio of 0.85 to 01.0.
9.18 Compliance with Financial Covenants in Household Agreement.
Borrowers will remain at all times in full compliance with the financial
covenants currently set forth in Sections 10.6, 10.7, 11.1, 11.2 and 11.4 of
the HCFS Loan Agreement as they exist as of the Closing Date and
notwithstanding any modifications or amendments hereafter agreed to by
Borrowers and Household Commercial Financial Services, Inc.
9.19 Further Assurances. Each Borrower shall execute and
deliver, or cause to be executed and delivered, to the Lender such documents
and agreements, and shall take or cause to be taken such actions, as the
Lender may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
10. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated
to make any Loans or issue any Letters of Credit at the Closing unless the
following conditions precedent have been satisfied as reasonably determined by
the Lender:
10.1 Representations and Warranties; Covenants; Events. Each
Borrower's representations and warranties contained in this Agreement and the
other Loan Documents shall be correct and complete as of the Closing Date;
each Borrower shall have performed and complied with all covenants,
agreements, and conditions contained herein and in the other Loan Documents
which are required to have been performed or complied with on or before the
Closing Date; and there shall exist no Event of Default on the Closing Date.
10.2 Delivery of Documents. The Borrowers shall have delivered,
or cause to be delivered, to the Lender the documents listed on Exhibit N
hereto and such other documents, instruments and agreements as the Lender
shall request in connection herewith, duly executed by all parties thereto
other than the Lender, and in form and substance satisfactory to the Lender
and its counsel.
10.3 Aggregate LSB Gross Availability. After taking into account
the Revolving Loans made to and the Letters of Credit issued to or for the
benefit of the Borrower Subsidiaries under the LSB-Related Loan Agreements on
the Closing Date, there shall be remaining Aggregate LSB Gross Availability of
at least ten percent (10%) of the Aggregate LSB Gross Availability calculated
prior to the making of such Revolving Loans and the issuance of such Letters
of Credit.
10.4 Termination of Liens. The Lender shall have received such
duly executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate and
satisfy all Liens on the Property of each Borrower and its Subsidiaries except
Permitted Liens, including, but not limited to, (a) payment of the obligations
due (i) Congress Financial Corporation ("Congress") under the Loan Agreement,
dated March 29, 1994, as amended ("Congress Loan Agreement"), and (ii)
Household Commercial Financial Services, Inc. ("Household") under the Second
Amended and Restated Working Capital Loan Agreement, dated as of January 21,
1992, between Household, El Dorado Chemical and Slurry, as amended ("Household
Working Capital Agreement"), which Congress Loan Agreement and Household
Working Capital Agreement will be paid in full upon the closing of the LSB-
Related Loan Agreements using proceeds from Loans made on the Closing Date,
and (b) termination of all of the Agreements for Purchase of Receivables
between each Borrower and Prime Financial Corporation ("Prime"), which
termination will require payment by Prime of the obligations due Bank IV
Oklahoma, N.A. ("Bank IV") under the Loan Agreement, dated March 30, 1994, as
amended, between Prime and Bank IV ("Prime Loan Agreement") at the closing of
the LSB-Related Loan Agreements using proceeds from Loans made on the Closing
Date.
10.5 Facility Fee. The Borrowers shall have paid in full the
Facility Fee.
10.6 Required Approvals. The Lender shall have received
certified copies of all consents or approvals of any Public Authority or other
Person which the Lender reasonably determines is required in connection with
the transactions contemplated by this Agreement.
10.7 No Material Adverse Change. Except as disclosed in that
Special Report to LSB Shareholders dated September 15, 1994, there shall have
occurred no material adverse change in either Borrower's, LSB's, and the
Subsidiaries' business or financial condition or in the Collateral taken as a
whole, since September 30, 1994, and the Lender shall have received a
certificate of each Borrower's and LSB's chief executive officer to such
effect.
10.8 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents
contemplated in connection herewith, shall be satisfactory in form and
substance to the Lender and its counsel.
10.9 Legal Opinions. The Lender shall have received from counsel
to the Borrowers such legal opinions as the Lender may reasonably require with
respect to the Loan Documents.
10.10 September 30, 1994 Quarterly Financial Statements. The
Lender shall have received LSB's and the Subsidiaries' consolidated September
30, 1994, unaudited quarterly financial statements.
10.11 Repurchase of Accounts from Prime. Each Borrower and each
member of the LSB Borrowing Group shall have repurchased from Prime under
terms and conditions acceptable to Lender all of the outstanding Accounts
previously sold by each Borrower and the other members of the LSB Borrowing
Group which will be owned by members of the LSB Borrowing Group as of the
Closing Date and will serve as Collateral under the LSB-Related Loan
Agreements using proceeds from the Loans made on the Closing Date. Each
Borrower and the other members of the LSB Borrowing Group shall own such
Accounts free and clear of all liens, claims and encumbrances, and Prime and
each of its secured lenders shall have released all of its security interests
in such Accounts. The documents evidencing such repurchase shall be in form
and substance satisfactory to Lender and its counsel.
10.12 Conditions Precedent to Each Loan. The obligation of the
Lender to make each Revolving Loan or to provide for the issuance of any
Letter of Credit after the Closing and after the initial Revolving Loans on
the Closing Date are made, shall be subject to the further conditions
precedent that on the date of any such extension of credit, the following
statements shall be true, and the acceptance by the Borrowers, or either of
them, of any extension of credit shall be deemed to be a statement to the
effect set forth in clauses (i) and (ii), with the same effect as the delivery
to the Lender of a certificate signed by the chief executive officer and chief
financial officer of each Borrower, dated the date of such extension of
credit, stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent the Lender has been
notified by the Borrowers that any representation or warranty is no
longer correct and the reason therefor and the Lender has explicitly
accepted in writing such disclosure in the exercise of its reasonable
discretion; and
(ii) No Event has occurred and is continuing, or would
result from such extension of credit, which constitutes an Event of
Default.
11. DEFAULT; REMEDIES.
11.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to make payment of principal, interest, fees or
premium on any of the Obligations when due;
(b) any representation or warranty made by the Borrowers or any
Guarantor Subsidiaries, or any of them, in this Agreement, any of the other
Loan Documents, any Financial Statement, or any certificate furnished by the
Borrowers, or any of them, or any Subsidiary at any time to the Lender shall
prove to be untrue in any material respect as of the date when made or
furnished;
(c) default shall occur in the observance or performance of any
of the covenants and agreements contained in this Agreement, or in any of the
other Loan Documents, or if any such agreement or document shall terminate
(other than in accordance with its terms or the terms hereof or with the
written consent of the Lender) or become void or unenforceable without the
written consent of the Lender other than as a direct result of any conduct
solely on the part of the Lender;
(d) any default by either Borrower under any material agreement
or instrument (other than an agreement or instrument evidencing the lending of
money), which default would have a material adverse effect on the LSB
Borrowing Group, taken as a whole, and such default continues for thirty (30)
days after such breach first occurs; provided, however, that such grace period
shall not apply, and an Event of Default shall exist, promptly upon such
breach, if such breach may not, in Lender's reasonable determination, be cured
by either such Borrower during such thirty (30) day grace period;
(e) any default by either Borrower in any payment of principal
of or interest on any indebtedness (other than the Obligations) for borrowed
money where the then outstanding amount exceeds $500,000 beyond any period of
grace provided with respect thereto or in the performance of any other
agreement, term or condition contained in any agreement under which any such
obligation is created if (i) the effect of such default is to cause or permit
the holder or holders of such obligation to cause, such obligation to become
due prior to its stated maturity, and (ii) the effect of such default would
have a material adverse effect on the Borrowers, or either of them.
(f) either Borrower shall make a general assignment for benefit
of creditors; or any proceeding shall be instituted by either Borrower seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property or either Borrower shall take any
corporate action to authorize any of the actions set forth above in this
Subsection 11.1(f).
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against either Borrower seeking reorganization,
arrangement or readjustment of such Borrower's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy
or insolvency act or law, state or federal, now or hereafter existing and
remain undismissed or unvacated for a period of sixty (60) days;
(h) a receiver, assignee, liquidator, trustee or similar officer
for either Borrower or any Subsidiary or for all or substantially all of its
Property shall be appointed involuntarily;
(i) either Borrower shall file a certificate of dissolution
under applicable state law or shall be liquidated, dissolved or wound-up or
shall commence or have commenced against it any action or proceeding for
dissolution, winding-up or liquidation, or shall take any corporate action in
furtherance thereof, except if one Borrower merges or consolidates with
another Borrower;
(j) any guaranty of the Obligations shall be terminated, revoked
or declared void or invalid other than by an action undertaken by Lender;
(k) one or more final judgments for the payment of money
aggregating in excess of $1,000,000 (not covered by insurance) shall be
rendered against any members of the LSB Borrowing Group, and LSB or such other
member of the LSB Borrowing Group shall fail to discharge the same within
thirty (30) days from the date of notice of entry thereof or to appeal
therefrom or reach a negotiated settlement in connection therewith;
(l) any loss, theft, damage or destruction of any item or items
of Collateral occurs which: (i) materially and adversely affects the
operation of either business of the Borrowers, taken as a whole; or (ii) is
material in amount and is not adequately covered by insurance;
(m) LSB ceases to control either Borrower (the term control
having the meaning given to it in the definition of Affiliate herein);
(n) any event or condition shall occur, or exist with respect to
a Plan that would, in the Lender's reasonable judgment, subject either
Borrower or any Subsidiary to any tax, penalty or other liabilities under the
terms of the Plan, under ERISA or under the Code which in the aggregate are
material in relation to the business, operations, Property or financial or
other condition of the LSB Borrowing Group taken as a whole;
(o) there occurs after the date hereof an Ownership Change (as
defined below) in LSB. For purposes of this Agreement, an "Ownership Change"
in LSB is deemed to have occurred if any Person (except Jack E. Golsen,
members of his Immediate Family [as defined below] and any entity controlled
by Jack E. Golsen or members of his Immediate Family), together with such
Person's affiliates and associates, is or becomes the beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of LSB. The term "Immediate Family" of any Person means the
spouse, siblings, children, mothers and mothers-in-law, fathers and fathers-
in-law, sons and daughters-in-law, daughters and sons-in-law, nieces, nephews,
brothers and sisters-in-law, sisters and brothers -in-law;
(p) an event of default exists under any of the other LSB-
Related Loan Agreements; and
(q) an event of default occurs under the HCFS Loan Agreement (as
defined in Section 9.18 of this Agreement).
11.2 Remedies.
(a) If an Event of Default exists, the Lender may, without
notice to or demand on the Borrowers, or either of them, do one or more of the
following at any time or times and in any order: (i) reduce the amount of or
refuse to make Revolving Loans and restrict or refuse to arrange for Letters
of Credit; (ii) terminate this Agreement; (iii) declare any or all Obligations
to be immediately due and payable (provided however that upon the occurrence
of any Event of Default described in Sections 11.1(f), 11.1(g), or 11.1(h),
all Obligations shall automatically become immediately due and payable); and
(iv) pursue its other rights and remedies under the Loan Documents and
applicable law. The foregoing shall not be construed to limit the Lender's
discretion to take the actions described in clause (i) of this subparagraph
(a) at any other time.
(b) If an Event of Default exists: (i) the Lender shall have, in
addition to all other rights, the rights and remedies of a secured party under
the UCC; (ii) the Lender may, at any time, take possession of the Collateral
and keep it on either Borrower's premises, at no cost to the Lender, or remove
any part of it to such other place or places as the Lender may desire, or, the
Borrowers shall, upon the Lender's demand, at the Borrowers' cost, assemble
the Collateral and make it available to the Lender at a place reasonably
convenient to the Lender; and (iii) the Lender may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as the Lender deems advisable, in its sole
discretion, and may, if the Lender deems it reasonable, postpone or adjourn
any sale of the Collateral by an announcement at the time and place of sale or
of such postponed or adjourned sale without giving a new notice of sale.
Without in any way requiring notice to be given in the following manner, each
Borrower agrees that any notice by the Lender of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the
UCC or otherwise, shall constitute reasonable notice to the Borrowers if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five (5)
days prior to such action to each Borrower's address specified in or pursuant
to Section 13.10. If any Collateral is sold on terms other than payment in
full at the time of sale, no credit shall be given against the Obligations
until the Lender receives payment, and if the buyer defaults in payment, the
Lender may resell the Collateral without further notice to either Borrower.
In the event the Lender seeks to take possession of all or any portion of the
Collateral by judicial process, each Borrower irrevocably waives: (a) the
posting of any bond, surety or security with respect thereto which might
otherwise be required; (b) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (c) any requirement that
the Lender retain possession and not dispose of any Collateral until after
trial or final judgment. Each Borrower agrees that the Lender has no
obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. Following the occurrence of an Event of Default
that is continuing, the Lender is hereby granted a license or other right to
use, without charge, each Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter or any similar
property, in completing production of, advertising or selling any Collateral,
and each Borrower's rights under all licenses and all franchise agreements
shall inure to the Lender's benefit, as long as such does not violate in any
manner such other loan agreements that may be in place at such time. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and second, in whatever order the Lender elects, to all
Obligations. The Lender will return any excess to the Borrowers and the
Borrowers shall remain liable for any deficiency.
(c) If an Event of Default occurs and is continuing, each
Borrower hereby waives: (i) all rights to notice and hearing prior to the
exercise by the Lender of the Lender's rights to repossess the Collateral
without judicial process or to replevy, attach or levy upon the Collateral
without notice or hearing, and (ii) all rights of set-off and counterclaim
against Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction,
the Borrowers, jointly and severally, agree to pay the Lender, immediately
upon termination, an early termination penalty equal to the early termination
fee that would have been payable under Article 12 if this Agreement had been
terminated on that date pursuant to the Borrowers' election.
12. TERM AND TERMINATION. The initial term of this Agreement shall be
three (3) years from the Closing Date (the "Termination Date"). This
Agreement shall automatically be renewed thereafter for successive thirteen
(13) month terms, unless this Agreement is terminated as provided below. The
Lender and the Borrowers shall each have the right to terminate this
Agreement, without premium or penalty, at the end of the initial term or at
the end of any renewal term by giving the other written notice not less than
sixty (60) days prior to the end of such term by registered or certified mail.
Each Borrower may also terminate this Agreement at any time during its initial
term or any renewal periods if: (a) it gives the Lender sixty (60) days prior
written notice of termination by registered or certified mail; (b) it pays and
performs all Obligations on or prior to the effective date of termination; and
(c) except as otherwise provided herein, it pays the Lender, on or prior to
the effective date of termination, (i) two percent (2%) of the average daily
balance of the Loans and Letters of Credit outstanding under the Revolver
Facility for the preceding one hundred eighty day (180) day period (or from
the Closing Date up to and including the date of termination if less than one
hundred eighty (180) days from the Closing Date) if such termination is made
on or prior to the first anniversary of the Closing Date; and (ii) one percent
(1%) of the average daily balance of the Loans and Letters of Credit
outstanding under the Revolver Facility for the preceding one hundred eighty
(180) day period if such termination is made after the first anniversary but
on or prior to the second anniversary of the Closing Date; provided, however,
that prior to an Event of Default that is continuing, the Borrowers may prepay
at any time all outstanding Obligations due hereunder without penalty or
premium as provided in clause (c) above if (i) Lender under any condition or
for any reason changes the advance rates relating to Eligible Accounts or
Eligible Inventory from that set forth in the definition of Availability
contained herein, provided further that nothing contained in this clause shall
be construed as allowing the Lender to make any such change, or (ii) a public
offering by LSB of its securities (equity or debt) is consummated and the
proceeds thereof are used to prepay the Obligations after the date hereof.
The Lender may also terminate this Agreement without notice upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction.
Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations shall become immediately due and payable.
Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in full, the Lender shall retain all its rights and
remedies hereunder (including, without limitation, in all then existing and
after-arising Collateral).
13. MISCELLANEOUS.
13.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against the Borrowers, or either of them,
to collect the Obligations without any prior recourse to the Collateral.
13.2 No Implied Waivers. No act, failure or delay by the Lender
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement, or any other
Loan Document, or of breach or default hereunder or thereunder, or of any
right or remedy which the Lender may have, shall operate as a waiver of any
other provision, breach, default, right or remedy or of the same provision,
breach, default, right or remedy on a future occasion. No waiver by the
Lender shall affect its rights to require strict performance of this
Agreement.
13.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be effective only to
such extent, without invalidating the remainder of this Agreement.
13.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE EXCEPT THAT NO DOCTRINE OF CHOICE OF
LAW SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION.
13.5 Consent to Jurisdiction and Venue; Service of Process;
Arbitration.
(a) Each Borrower agrees that, in addition to any other courts
that may have jurisdiction under applicable laws, any action or proceeding to
enforce or arising out of this Agreement or any of the other Loan Documents
may be commenced in the appropriate court of the State of Oklahoma for
Oklahoma County, or in the United States District Court for the Western
District of Oklahoma, and each Borrower consents and submits in advance to
such jurisdiction and agrees that venue will be proper in such courts on any
such matter. Each Borrower hereby waives personal service of process and
agrees that a summons and complaint commencing an action or proceeding in any
such court shall be properly served and shall confer personal jurisdiction if
served by registered or certified mail to such Borrower. Should either
Borrower fail to appear or answer any summons, complaint, process or papers so
served within thirty (30) days after the mailing or other service thereof, it
shall be deemed in default and an order or judgment may be entered against it
as demanded or prayed for in such summons, complaint, process or papers. The
choice of forum set forth in this section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum, or the taking of any
action under this Agreement to enforce the same, in any appropriate
jurisdiction.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE
CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, INCLUDING BUT
NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT
THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY ARBITRATION. The
arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitration shall be conducted within
Oklahoma County, Oklahoma. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(c) No provision of subparagraph (a) shall limit the right of
either party to this Agreement to exercise self-help remedies such as setoff,
foreclosure against or sale of any Collateral, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any proceeding after the occurrence of an Event of
Default. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference.
13.6 Survival of Representations and Warranties. All of each
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or its agents, but after the
Closing Date it is recognized that such representations and warranties may be
amended from time to time during the term of this Agreement by written
agreement among the Borrowers and the Lender due to changes in circumstances.
13.7 Indemnification. EACH BORROWER HEREBY INDEMNIFIES, DEFENDS
AND HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL
ARISING OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR
PROCEEDINGS (WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER
STATUTES OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES,
ENVIRONMENTAL, OR COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT
EQUITABLE CAUSE, OR ON CONTRACT OR OTHERWISE) COMMENCED OR THREATENED, WHICH
ARISE OUT OF OR ARE IN ANY WAY BASED UPON THE NEGOTIATION, PREPARATION,
EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR PROCEEDING RELATED
TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION TO ACT,
EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING, WITHOUT
LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES
OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH LITIGATION,
INVESTIGATION, CLAIM OR PROCEEDING, EXCEPT THAT THIS INDEMNIFICATION SHALL NOT
APPLY TO ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES, JUDGMENTS, PENALTIES OR
EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE LENDER, AND ITS
DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, OR COUNSEL IF SUCH IS DUE TO AND
ARISES FROM OR IN CONNECTION WITH THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF ANY OF THEM OR THE INTENTIONAL AND WRONGFUL BREACH OF THIS AGREEMENT BY
LENDER. Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against the Borrowers, or
either of them, or by the Borrowers, or either of them, or any other party
against Lender, which in Lender's sole discretion makes it advisable for
Lender to seek counsel for protection and preservation of its liens and
security assets, or to defend its own interest, such reasonable expenses and
counsel fees shall be allowed to Lender. To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section 13.7 may be
unenforceable because it is violative of any law or public policy, each
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all
indemnified matters incurred by Lender. The foregoing indemnity shall survive
the payment of the Obligations and the termination of this Agreement. All of
the foregoing costs and expenses shall be part of the Obligations and secured
by the Collateral.
13.8 Other Security and Guaranties. The Lender may, without,
notice or demand and without affecting either Borrower's obligations
hereunder, from time to time: (a) take from any Person and hold collateral
(other than the Collateral) for the payment of all or any part of the
Obligations and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of all
or any part of the Obligations and release any such endorser or guarantor, or
any Person who has given any Lien in any other collateral as security for the
repayment of all or any part of the Obligations, or any other Person in any
way obligated to pay all or any part of the Obligations.
13.9 Fees and Expenses. The Borrowers jointly and severally
agree to pay to the Lender on demand all costs and expenses that the Lender
pays or incurs in connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and the other
Loan Documents, including, without limitation: (a) attorneys' and paralegals'
fees and disbursements of counsel to the Lender; (b) costs and expenses
(including attorneys' and paralegals' fees and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection
with the Loan Documents and the transactions contemplated thereby; (c) costs
and expenses of lien and title searches and title insurance; (d) fees and
other charges for recording and filing financing statements and continuations,
and other actions to perfect, protect, and continue the Security Interest; (e)
sums paid or incurred to pay any amount or take any action required of the
Borrowers, or either of them, under the Loan Documents that the Borrowers, or
either of them, was obligated to pay or take under the Loan Documents but
failed to pay or take; (f) the expenses of $500 per Lender's auditor per audit
day plus actual costs of appraisals, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and meals, for
inspections of the Collateral and the Borrowers' operations by the Lender's
agents up to three times per year and whenever an Event of Default exists; (g)
costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining Payment Accounts and lock
boxes; (h) all amounts that the Borrowers, or either of them, are required to
pay under the Letter of Credit Agreement; (i) costs and expenses of preserving
and protecting the Collateral; and (j) costs and expenses (including
attorneys' and paralegals' fees and disbursements and including, without
limitation, a reasonable estimate of the allocable cost of in-house counsel
and staff) paid or incurred to obtain payment of the Obligations, enforce the
Security Interest, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents, or to defend any
claims made or threatened against the Lender arising out of the transactions
contemplated hereby (including without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrowers. All of the foregoing costs and
expenses shall be charged to the Borrowers' loan account as Revolving Loans.
13.10 Notices. All notices, demands and requests that either
party is required or elects to give to the other shall be in writing, shall be
delivered personally against receipt, or sent by recognized overnight courier
service, or mailed by registered or certified mail, return receipt requested,
postage prepaid, and shall be addressed to the party to be notified as
follows:
If to the Lender: BankAmerica Business Credit, Inc.
Two North Lake Avenue, Suite 400
Pasadena, California 91101
Attn: Mr. Charles Burtch
Executive Vice President
with a copy to: Bank of America - Business Credit Legal Dept.
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
Assistant General Counsel
and with a copy to: Jenkens & Gilchrist, A Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75201
Attn: Linda D. Sartin, Esq.
and
If to EDC: El Dorado Chemical Company
16 Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: Tony M. Shelby
Vice President
or
if to Slurry: Slurry Explosives Corporation
5700 N. Portland
Oklahoma City, Oklahoma 73112
Attn: Tony M. Shelby
Vice President
with a copy to: LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: David M. Shear, Esq.
General Counsel
and with a copy to: Hastie and Steinhorn
3000 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102
Attn: Irwin H. Steinhorn, Esq.
or to such other address as each party may designate for itself by like
notice. Any such notice, demand, or request shall be deemed given when
received if personally delivered or sent by overnight courier, or when
deposited in the United States mails, postage paid, if sent by registered or
certified mail.
13.11 Waiver of Notices. Unless otherwise expressly provided
herein, each Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate and
notice of acceleration, as well as any and all other notices to which it might
otherwise be entitled. No notice to or demand on the Borrowers, or either of
them, which the Lender may elect to give shall entitle the Borrowers, or
either of them, to any further notice or demand in the same, similar or other
circumstances.
13.12 Binding Effect; Assignment; Disclosure. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors and assigns of the parties hereto:
provided, however, that no interest herein may be assigned by the Borrowers,
or either of them, without the prior written consent of the Lender. The
rights and benefits of the Lender hereunder shall, if the Lender so agrees,
inure to any party acquiring any interest in the Obligations or any part
thereof. Each Borrower agrees that the Lender may use such Borrower's name in
advertising and promotional materials and in conjunction therewith disclose
the general terms of this Agreement.
13.13 Modification. THIS AGREEMENT IS INTENDED BY THE BORROWERS
AND THE LENDER TO BE THE FINAL, COMPLETE, AND EXCLUSIVE EXPRESSION OF THE
AGREEMENT BETWEEN THEM. THIS AGREEMENT SUPERSEDES ANY AND ALL PRIOR ORAL OR
WRITTEN AGREEMENTS RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE, OR AMENDMENT OF ANY
PROVISION OF THIS AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT
SIGNED BY THE BORROWERS AND A DULY AUTHORIZED OFFICER OF THE LENDER.
13.14 Counterparts. This Agreement may be executed in any number
of counterparts, and by the Lender and each Borrower in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
13.15 Captions. The captions contained in this Agreement are for
convenience only, are without substantive meaning and should not be construed
to modify, enlarge, or restrict any provision.
13.16 Right of Set-Off. Whenever an Event of Default exists the
Lender is hereby authorized at any time and from time to time, to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by Lender or any affiliate of the Lender and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrowers against any and all of the
Obligations, whether or not then due and payable. Lender agrees promptly to
notify the Borrowers after any such set-off and application made by Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
13.17 Participating Lender's Security Interests. If a
Participating Lender shall at any time with the Borrowers' knowledge
participate with the Lender in the Loans, each Borrower hereby grants to such
Participating Lender, and the Lender and such Participating Lender shall have
and are hereby given, a continuing lien on and security interest in any money,
securities and other property of the such Borrower in the custody or
possession of the Participating Lender, including, the right of set-off, to
the extent of the Participating Lender's participation in the Obligations, and
such Participating Lender shall be deemed to have the, same right of set-off,
to the extent of the Participating Lender's participation in the Obligations
under this Agreement, as it would have if it were a direct lender.
13.18 WAIVER OF JURY TRIAL. LENDER AND EACH BORROWER ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT GROWING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT JURY. TRIAL BY A JUDGE SITTING WITHOUT A JURY WILL FURTHER
RESULT IN THE AVOIDANCE OF DELAYS, A STREAMLINING OF THE PROCEEDINGS INVOLVED
AND, AS A RESULT, WILL MINIMIZE THE EXPENSE OF ANY SUCH LAWSUIT FOR THE
BENEFIT OF EACH BORROWER AND LENDER. EACH BORROWER HEREBY WAIVES TRIAL BY
JURY, RIGHTS OF SET-OFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT FOR
COMPULSORY COUNTERCLAIMS) IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED
PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING,
AMONG THE BORROWERS, OR EITHER OF THEM, AND THE LENDER. EACH BORROWER HEREBY
CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWERS":
EL DORADO CHEMICAL COMPANY
By:
Tony M. Shelby
Vice President
SLURRY EXPLOSIVES CORPORATION
By:
Tony M. Shelby
Vice President
"LENDER":
BANKAMERICA BUSINESS CREDIT, INC.
By:
Joyce White
Senior Vice President
EXHIBITS TO LOAN AGREEMENT
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT C - Guarantor Subsidiaries
EXHIBIT D - List of Borrower's Locations
EXHIBIT E - Corporate History
EXHIBIT F - Subsidiaries and Affiliates
EXHIBIT G-1 - Financial Statements
EXHIBIT G-2 - Pro Forma Financial Statements
EXHIBIT H - Real Property Descriptions: Premises
EXHIBIT I - Trade Names, Trade Styles, Terms of Sale
EXHIBIT J - Pending Litigation
EXHIBIT K - Labor Matters
EXHIBIT L - ERISA Matters
EXHIBIT M - Schedule of Environmental Matters
EXHIBIT N - Closing Documents
EXHIBIT O - Letter of Credit Financing Agreement -
Supplement to Loan and Security Agreement
EXHIBIT P - Notice of Borrowing
sec\10k\tk94x413.wpe
Exhibit 10.10
AGREEMENT
FOR
PURCHASE AND SALE OF ANHYDROUS AMMONIA
THIS AGREEMENT is made this 1st day of January, 1994, by and between
Farmland Industries, Inc. (hereinafter "Seller"), a Kansas corporation, with
its principal place of business in Kansas City, Missouri, and El Dorado
Chemical Company (hereinafter "Buyer"), an Oklahoma corporation, with its
principal place of business in El Dorado, Arkansas.
WITNESSETH
WHEREAS, Seller represents that it has the right to sell certain
quantities of anhydrous ammonia as hereinafter defined; and
WHEREAS, Seller desires to sell and Buyer wishes to purchase the quantities of
anhydrous ammonia herein stipulated upon the conditions, covenants, and
agreements contained herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, Seller and Buyer agree as follows:
1. QUANTITY: Seller shall sell, transfer, convey, and deliver to
Buyer, and Buyer shall purchase and accept from Seller, not less than thirty-
four thousand (34,000) tons, nor more than fifty-one thousand (51,000) tons of
anhydrous ammonia during each quarter for use at El Dorado Chemical Company,
EL Dorado, Arkansas via the Gulf Central Pipeline or rail. All references
herein to quarters shall mean calendar quarters. Volumes are exclusive of any
tons supplied to El Dorado Chemical Company from customers of El Dorado
Chemical Company under tolling or conversion agreements. Seller shall not be
required to sell more than twenty-two thousand (22,000) tons in any one
calendar month. During the term of this Agreement, Seller shall make available
each quarter the amount of anhydrous ammonia forecasted by Buyer. In the event
Buyer does not take receipt of any amount made available in accordance with
Buyer's quarterly forecast, Seller shall have the right to invoice Buyer for,
and Buyer shall pay, within ten (10) days receipt of invoice, the full
purchase price the month the shortfall occurred for that quantity of Product
computed in accordance with the provisions of this Agreement. Any tons billed
in a period and not shipped in that period ("Shortfall Tons") will be shipped
and accepted no later than the end of the following quarter. The first Product
taken in the following quarter will be the Shortfall Tons from the previous
quarter. Notwithstanding the above, Buyer may take Shortfall Tons, if not
fully taken in the quarter following the forecast for such tons, at a time
such tons are reasonably available to Seller. Any tons shipped at a later
date shall not reduce the minimum ton requirement for that quarter. Buyer's
failure to forecast purchases does not relieve it from its quarterly purchase
obligations set forth in this paragraph. In the event Buyer fails to provide a
forecast, Buyer will be deemed to have forecasted the minimum thirty-four
thousand (34,000) ton per quarter. Failure of the parties to forecast
quarterly tonnage shall not excuse Buyer from its obligation to pay for
minimum volume hereunder.
2. FORECAST OF BUYER'S PURCHASES: During the term of this Agreement,
Buyer shall forecast quarterly by month, its purchases for each quarter of the
contract year. Buyer shall make this quarterly forecast and deliver it to
Seller on or before the 15th day of the month preceding the quarter.
3. TERM: This Agreement shall commence at 12:01 a.m., Central Standard
Time, January 1, 1994, and shall continue until 11:59 p.m., Central Standard
Time, December 31, 1996, unless terminated earlier in accordance with the
provisions hereof and shall continue in effect thereafter for successive
periods of three (3) years each, subject to the right of either party to
terminate this Agreement effective December 31, 1996 or upon December 31 of
the last year of each renewal period thereafter upon no less than one hundred
eighty (180) days prior written notice.
5. VERIFICATION OF POLLOCK, LA NATURAL GAS PRICES: Buyer shall have the
right, at any time during the term of this Agreement, to request Seller to
provide documentation to a mutually acceptable audit firm to verify that
excess charges for natural gas have not been made.
6. DELIVERY/FREIGHT:
(a) Pipeline - As shipper of record Seller shall invoice Buyer
for all actual Gulf Central Pipeline tariff charges plus a ten cents
($.10) per short ton meter fee for tons transported by pipeline to
Buyer's El Dorado, Arkansas facility. Seller will credit Buyer for all
shrink refunds allowed Seller by the Gulf Central Pipeline on tons
transported to El Dorado during the term of the Agreement.
(b) Rail - Freight charges on rail shipments shall be invoiced to
Buyer at either (a) the then current railroad tariff rate, or (b) a
negotiated contract freight rate as agreed by the parties. Seller may
invoice Buyer and Buyer shall pay Seller tank car demurrage at a daily
rate of Fifty Dollars ($50) per car per day for each day commencing with
the eighth day after constructive placement of the car at Buyer's
destination. Such rail shipments shall be priced at the time of the
order by Seller.
7. INVOICES AND PAYMENT: Seller shall deliver invoices to Buyer as soon
after the end of each calendar month as is reasonably possible. Buyer shall
make payment to Seller for each month's purchases, on or before the fifteenth
(15th) day of the following month. Payment shall be made by wire transfer to
such bank or banks as Seller shall designate. If at any time during the term
of this Agreement, Buyer becomes delinquent in payment or in Seller's
reasonable judgment there has occurred a material adverse change in the
financial condition of Buyer which could reasonably be expected to impair
Buyer's ability to carry out its financial obligations to Seller, Seller shall
have the sole and exclusive right to require the Buyer to open an irrevocable
letter of credit for the benefit of Farmland Industries, Inc., at a bank or
banks, acceptable to Farmland Industries, Inc. for an amount not to exceed the
result of multiplying twenty-two thousand (22,000) tons by the contract price
per ton of Product in the most recently completed calendar month.
8. DEFAULT AND NONPAYMENT: Default in payment, or failure to perform any
of the terms and conditions of this Agreement, shall constitute a default by
either party to this Agreement. In the event that either party (i) defaults in
making payment provided for herein when due or (ii) defaults in the
performance of any other material obligation provided for herein and, if such
default is susceptible of cure, fails to cure any such default of a material
obligation within 30 days of receipt of written notice from the non-defaulting
party thereof, the non-defaulting party shall have the right, by giving
written notice to the defaulting party, to immediately terminate this
Agreement.
On the occurrence of a default by either party, the nondefaulting party
shall have the option to terminate this Agreement without liability of any
kind as to future shipments; to alter credit terms provided to Buyer; to stop
any Product in transit; to treat any default as substantially impairing the
value of the whole Agreement, and hence a breach thereof. If Buyer does not
pay any invoice on its due date, then all outstanding invoices of Seller to
Buyer under this or any other agreement shall become immediately
due and payable, and Seller may assess a finance charge of one and five-tenths
percent (1.5%) per month, or the maximum legal rate, if less, on remittances
not received by their due date. On the occurrence of a default by either
party, the defaulting party shall be liable to the non-defaulting party for
all costs, losses, and expenses incurred by such non-defaulting party by
reason thereof, including reasonable attorneys' fees.
9. PRODUCT SPECIFICATION: "Product", where used in this
Agreement, means anhydrous ammonia solution of commercial grade, having
ammonia (NH3) content of not less than ninety-nine and five tenths percent
(99.5%), having water content of not more than five-tenths percent (0.5%), and
having oil content of not more than five (5) parts per million. Anhydrous
ammonia tendered to any pipeline shall meet or exceed such pipeline's Product
quality specifications for anhydrous ammonia shipped therein. Seller shall be
nominated as shipper of record on those volumes of anhydrous ammonia sold
pursuant to this Agreement and shipped via Gulf Central Pipeline.
10. DETERMINATION OF WEIGHTS: "Ton", where used in this Agreement, means
two thousand pounds (2,000 lbs.) avoirdupois, as measured by Gulf Central
Pipeline meter tickets if delivery is made by pipeline, by bills of lading if
delivery is made by rail or truck.
11. MANUFACTURE AND DELIVERY: Seller specifically reserves the
right to manufacture at, or exchange to, and to deliver from, any origin, all
of the anhydrous ammonia transferred to the location scheduled and agreed to
quarterly pursuant to this Agreement.
12. DISCLAIMER OF WARRANTIES: There are no warranties which
extend beyond the description on the face hereof, and SELLER MAKES NO WARRANTY
OF ANY KIND, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY OR FITNESS FOR ANY
PURPOSE OR AGAINST INFRINGEMENT OR OTHERWISE. Buyer assumes all risk and
liability for the use of the Product purchased, whether used singly or in
combination with other substances and for loss, damage, or injury to persons,
or property of Buyer or others arising out of the use or possession of the
Product; Buyer agrees to indemnify Seller from loss (including costs of
defense) in connection with claims arising from use or possession of the
Product.
13. CLAIMS BY BUYER OR SELLER: Notices by Seller or Buyer of claims as
to Product delivered, or for the nondelivery thereof, shall be made within
thirty (30) days after delivery, or the date fixed for delivery, as the case
may be, and failure to give such notice shall constitute a waiver by Seller or
Buyer of all claims in respect thereto. Buyer's sole claim for loss or damage
arising from nondelivery of Product hereunder shall be the difference between
the price for the Product specified in this Agreement and the average price of
such Product then charged by major suppliers of Product at the point of
shipment specified in this Agreement, duly adjusted for freight charges. In no
event shall any claims of any kind be greater than, nor shall Seller in any
event be liable for, any amount in excess of the purchase price of the Product
in respect of which a claim is made. SELLER SHALL NOT BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, ARISING
FROM SELLER'S PERFORMANCE OR BREACH OF THIS AGREEMENT AND/OR USE OR POSSESSION
OF THE PRODUCT, OR FOR LOSS OF PROFIT FROM RESALE OF PRODUCT. No suit or legal
proceeding arising upon this Agreement shall be maintainable against Seller or
Buyer unless commenced or made within one (1) year after passing of title to
Product, or delivery of or failure to delivery Product hereunder.
14. CONFLICTING TERMS: Notwithstanding any provision therein to the
contrary, no term in Seller's or Buyer's purchase order, acknowledgment form
or other document which conflicts with the terms hereof or increases Seller's
or Buyer's obligations hereunder, shall be binding on either party unless
accepted in writing by both parties hereunder.
15. WAIVER: Any waiver by Seller or Buyer of any term, provision, or
condition of this Agreement, or of any default hereunder in any one or more
instances shall not be deemed to be a further or continuing waiver of such
term, provision or condition, or of any subsequent default hereunder.
16. FORCE MAJEURE: Neither party will be liable for failure to perform
or for delay in performing this Agreement where such failure or delay is
occasioned by acts of any government, compliance with law or government
regulations, acts of God, war, riots, insurrections, civil commotion or
disturbances, fire, flood, or accident or by any other cause or circumstances
whether of like or different character, beyond the control of the party
affected thereby, including a declaration of force majeure by El Dorado
Chemical Company. Failure to obtain a supply of Product by Seller from a third
party supplier shall not be an event of force majeure
that can be exercised by Seller, herein referred to as "events for force
majeure". The party asserting that an event of force majeure has occurred
shall send the other party notice thereof by cable or telex no later than
three (3) days after the beginning of such claimed event setting forth a
description of the event of force majeure, an estimate of its effect upon the
party's ability to perform its obligations under this Agreement and the
duration thereof. The notice shall be supplemented by such other information
or documentation as the party receiving the notice may reasonably request. As
soon as possible after the cessation of any event of force majeure, the party
which asserted such event shall give the other party written notice of such
cessation. Whenever possible, each party shall give the other party notice of
any threatened or impending event of force majeure. If an event of force
majeure affecting Seller or Buyer performance by the party affected (the
"affected party") shall be excused during the continuation of the event of
force majeure and the other party shall send written notice to the affected
party whether the notifying party elects to (a) reduce the quantity of Product
specified in this Agreement by the amount which cannot be delivered or
received and/or (b) reschedule deliveries on a commercially reasonable basis
for delivery during the remainder of the applicable Contract Year.
"In the event of force majeure affecting Seller, Seller shall allocate
its available Product to Buyer in the same proportion as the quantity
delivered to Buyer's El Dorado, Arkansas facility hereunder during the twelve
(12) months preceding the event of force majeure is to the total quantity of
all Product sold or used by Seller during such twelve (12) month period."
(Provided, however, the total Product Buyer received shall not exceed the
quantities in Article 2.) In the event Seller has not given written notice of
cessation of force majeure, and such event of force majeure prevents
deliveries of Product for more than thirty (30) consecutive days, Buyer shall
have the right to terminate this Agreement.
17. CHANGE IN STATUS
Acquisition of Plant. In the event that El Dorado Chemical Company or
affiliated company having a common parent acquires more than fifty percent
(50%) interest in and to a plant or company that produces or has the capacity
to produce anhydrous ammonia, Buyer may upon twelve (12) months written notice
to Seller, terminate this Contract and thereafter have no further
responsibility to accept or pay for any quantity of anhydrous ammonia
hereunder.
18. COMMISSION/BROKER FEES: Seller and Buyer represent that
they are dealing with each other, that neither is the agent of the other, and
that no broker or agent has been involved, either directly or indirectly, in
consummating this Agreement and the sale of anhydrous ammonia hereunder.
SELLER AGREES TO INDEMNIFY, PROTECT AND SAVE BUYER HARMLESS from the claims of
any person or entity for commissions or finder's fees or similar fees in
connection with the transaction set forth herein where the claimant alleges
that his or its contact with this transaction is traceable to Seller. BUYER
AGREES TO INDEMNIFY, PROTECT, AND SAVE SELLER HARMLESS from the entity for
commissions or finder's fees or similar fees in connection with the
transaction set forth herein where the claimant alleges that his or its
contact with this transaction is traceable to Buyer.
19. TAXES: Any and all taxes of any type whatsoever levied, prior to
passage of title, against anhydrous ammonia transferred pursuant to this
Agreement shall be paid by Seller promptly as required by law. Any and all
taxes of any type whatsoever levied against the anhydrous ammonia at or upon,
or subsequent to, passage of title shall be paid by Buyer promptly as required
by law. Title to and risk of loss of the Product shall pass to the Buyer as
the Product progressively passes into tank cars, and/or pipeline.
Notwithstanding any provision to the contrary in this Agreement, with regard
to sales/purchases of Product pursuant to this Agreement Buyer shall pay any
and all taxes or charges that are due and owing under the federal Superfund
(Comprehensive Environmental Response, Compensation and Liability Act of 1986)
statutes, or regulations promulgated thereunder, as amended. Notwithstanding
any provision to the contrary in this Agreement with regard to sales/purchases
of Product pursuant to this Agreement, Buyer shall pay any and all taxes and
charges that may become in the future due and owing because of the future
enactment of any state law or regulation establishing a state tax or fee of
any kind whatsoever on the manufacturing and/or sale of anhydrous ammonia or
any constituent part thereof. All taxes hereunder are in addition to those
prices described herein.
20. NOTICES: No notice, actual or constructive, shall be effective
against any party unless it is (1) in writing; (2) signed
by the party giving the notice; and (3) sent by registered mail, postage
prepaid, or personally served on the party intended to receive said notice.
The address to be used on a mailed notice for each party shall be as
follows:
To Seller:
Farmland Industries, Inc. (via mail/fax)
P. O. Box 7305, Dept. 314
Kansas City, Missouri 64116
FAX 816/459-5913
Farmland Industries, Inc. (via delivery
3315 N. Oak Trafficway service)
Kansas City, Missouri 64116
To Buyer:
El Dorado Chemical Company (via mail/fax)
P.O. Box 231
El Dorado, Arkansas 71731
FAX: 501/863-1426
Attn: Kevin Brown
El Dorado Chemical Co. (via mail/fax)
16 S. Pennsylvania
Oklahoma City, OK 73007
FAX: 405/235-5067
Attn: James Wewers
David Shear
21. ALTERNATE DISPUTE RESOLUTION: In the event of any controversy
arising out of or relating to this Contract, or any breach thereof, the
parties agree to submit the dispute for resolution by Mini-trial, unless both
parties agree that such procedure is inappropriate for the matter in
controversy. Such Mini-trial shall be conducted in accordance with the Center
for Public Resources (CPR) Mini-trial Agreement for Business Disputes, a copy
of which is attached and may be initiated by either party by a written request
to the other party.
In the event the parties are unable to resolve the controversy through
the Mini-trial, the dispute shall be submitted to binding arbitration in
accordance with the rules of the Missouri Arbitration Act. V.A.M.S. 435 et.
seq. (or Uniform Arbitration Act). Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association. Alternate
strikes shall be made to the panel commencing with the party requesting the
arbitration until one name remains. Such individual shall be the arbitrator
for the controversy. The party requesting the arbitration shall notify the
arbitrator who shall hold a hearing(s) within 60 days of the notice. The
arbitrator shall render a decision within 20 days after the conclusion of the
hearing(s). Judgment upon the award rendered by the Arbitrator may be entered
in any Court having jurisdiction thereof. All fees for such arbitration will
be divided equally between the parties.
22. MISCELLANEOUS: Buyer may offer to supply natural gas to Farmland
Industries for only their monthly quantity of anhydrous ammonia for delivery
at either Texas Gas or Truckline and/or LIG to be redelivered to Farmland,
(Pollock), Louisiana plant. Seller will then add the appropriate interstate
tariff rate as established by the transporting pipeline plus the procurement
cost of two cents ($ .02) per MMBTU previously listed in Paragraph 4(b)1 of
this Contract. Buyer must offer natural gas to Seller not less than fifteen
(15) days before the close of the current month for the upcoming month. Seller
must accept or reject this offer within ten (10) business days before the
close of the current month. This option to offer natural gas must be
made to the Administrative Assistant to the Vice President of Purchasing,
Engineering, and Emerging Technologies.
This Agreement expresses the whole agreement of the parties. There are
no promises, conditions, or obligations, other than those enumerated herein.
This Agreement shall supersede all previous or contemporaneous communications,
representations, or agreement, verbal or written, between or among the
parties. No usage of trade or prior course of dealing or performance between
Buyer and Seller shall be deemed to modify the terms of this Agreement.
This Agreement shall not be assigned by either party without the prior
written consent of the other party except that either party may assign its
interest under this Agreement to a successor to all or any substantial portion
(more than 50%) of its business or assets, or to any parent, subsidiary, or
affiliated company having a common parent. Any purported assignment of this
Agreement or any part thereof, except as set forth above, shall be void.
This Agreement shall not be modified except in writing signed by the
party to be charged.
No termination of this Agreement shall affect the rights or obligations
theretofore accrued.
Headings are for reference only, and do not affect the meaning of any
paragraph.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect. Remedies herein reserved are
cumulative and in addition to any other or further remedies Seller or Buyer
may have at law or in equity.
This Agreement shall be governed in all respects, including, but not
limited to, interpretation and performance by the laws of the State of Kansas.
No terms and conditions of this Agreement shall be binding on either
Seller or Buyer, until this Agreement is signed and attested by authorized
representatives of both Seller and Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
FARMLAND INDUSTRIES, INC. EL DORADO CHEMICAL COMPANY
(Seller) (Buyer)
By: ____________________ By: _____________________
Title: __________________ Title: ___________________
Date: __________________ Date: ___________________
Exhibit 10.22
CHEMICAL GROUP OF MONSANTO
Contract for Toll Manufacturing
Contract: # T 1084A00
With: El Dorado Chemical Company
Prepared by:
Chemical Group of Monsanto
800 North Lindbergh Boulevard
St. Louis, Mo. 63167
TABLE OF CONTENTS (05/16/94)
TITLE DATE PAGES
Table of Contents (this page) 05/16/94 1
Toll Processing Agreement 01/01/94 10
Schedule A: Material Specification 08/01/88 1
Schedule B: Product Specification (Monsanto) 01/11/91 1
Contractor Internal Specification 05/07/92 1
Schedule C: Special Instructions 01/01/94 1
Schedule D: Delivery Schedule 01/01/94 1
Schedule E: Service Fee 01/01/94 2
Schedule F: Invoicing and Inventories 01/01/94 1
Schedule G: Representatives and Notices 01/01/94 1
Schedule H: Monthly Invoice & Mat. Balance 08/01/88 1
Schedule I: Material Safety Data Sheets 07/00/92 4
MONSANTO PROCESSING AGREEMENT
_________________________________________________________________
PROCESSING AGREEMENT dated January 1, 1994 between Monsanto Company, a
Delaware corporation with general offices at 800 North Lindbergh Boulevard,
St. Louis, Missouri 63167 ("Monsanto") and El Dorado Chemical Company, an
Oklahoma corporation with general offices at Old Smackover Highway 7B, El
Dorado, Arkansas 71730 ("Contractor").
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following defined meanings:
(a) "Material" shall mean the material to be provided by Monsanto to
Contractor, as described in Schedule A hereof, which Material shall meet the
Material specifications attached hereto and made a part hereof.
(b) "Product" shall mean the product described in Schedule B to be
produced by Contractor hereunder from the Material supplied by Monsanto, which
Product shall meet the Product specifications attached hereto and made a part
hereof.
(c) "Services" shall mean the services to be provided or performed by
Contractor pursuant to this Agreement at Contractor's Facilities with respect
to the Material and Product, including but not limited to the following: to
receive, handle and store, in suitable facilities free from contamination, the
Material required for the production of Product; to receive, order, handle and
store sufficient additional raw materials, if any, required for the production
of Product; to process the Material into Product; to sample and test the
Product for quality and to promptly deliver to Monsanto written reports on the
results of such sampling and testing, all according to the written
instructions of Monsanto and as may be set forth or referred to in Schedule C;
to keep records of each shipment of Product showing pertinent information
relating thereto including, without implied limitation, the loaded weight and
assay of Product and to provide one copy of each record to Monsanto; to load
and ship the Product to Monsanto's Plant (as hereinafter defined) at such
times as may be designated by Monsanto; dispose of all wastes and residues
generated in connection with the performance of services hereunder in a safe
and lawful manner; and to provide all operations, labor, supervision,
equipment, tools, machinery, facilities, supplies and materials (excepting the
Material) necessary or appropriate for Contractor's performance hereunder.
(d) "Facility" shall mean Contractor's plant located near El Dorado,
Arkansas
(e) "Plant" shall mean Monsanto's W. G. Krummrick Plant located at
Sauget, Illinois.
2. TERM. The term of this Agreement shall commence on the date first
stated above and shall continue in full force and effect through December 31,
1998. However, either party may terminate this Agreement at any time upon
notice to the other party if performance of this Agreement or the sale or use
of the Product is held to be a violation of, in whole or in part, any
governmental laws, ordinances, orders, rules, regulations and actions of the
United States and of any state, county, township or municipal subdivision or
other municipal subdivision or other governmental agency that would materially
affect such party's performance under this Agreement. Sections 7, 8, 9, 10,
11, 12 and 14 shall survive any termination or expiration of this Agreement.
Further either party may terminate this Agreement immediately without
liability by providing written notice to the other party hereto if such other
party is in breach or default under any of its obligations under this
Agreement and said breach or default shall continue unremedied for thirty (30)
days after written notice thereof is received by such defaulting party.
Monsanto may terminate this Agreement if Monsanto decides to process the
Material to Product itself, decides to terminate the product which is produced
from the Product or decides to sell the business of the product which is
produced from the Product. In the event of the sale of such business Monsanto
will exercise good faith efforts to assign this Agreement to such buyer if
Contractor so desires.
3. CHANGE IN MATERIAL, PROCESS OR PROCEDURE. Prior to making any change
in raw material or methods of manufacture employed in producing Product
hereunder which Contractor knew, or should have known, would make such Product
unsuitable to Monsanto, Contractor shall notify Monsanto of Contractor's
intent to do so.
If, at any time, any Product to be supplied to Monsanto does not meet
specifications set forth in Schedule B attached hereto, or the process or
procedure utilized by the Contractor for manufacture of such Product changes
materially without Monsanto's prior written consent so that, in either event,
such Product is unsuitable to Monsanto, Monsanto may notify Contractor of such
problem and thereafter suspend shipments hereunder. Monsanto agrees to work in
good faith with Contractor to attempt to resolve any such problem. However, if
no resolution satisfactory to both parties, is achieved within thirty (30)
days after the giving of such notice, Monsanto may terminate this Agreement,
without liability upon at least thirty (30) days' prior written notice.
4. REQUIREMENTS, QUANTITY, CONVERSION RATIO AND INVENTORIES OF MATERIAL
(a) Except as otherwise expressly provided in this Agreement, Contractor
agrees to perform Services and deliver all of Monsanto's requirements for the
Product to Monsanto in accordance with the requirements of this Agreement.
(b) Except as otherwise expressly provided in this Agreement, Monsanto
agrees that during the term of this Agreement (i) the Contractor shall process
all of Monsanto's requirements for the Product pursuant to the terms hereof
and (ii) Monsanto shall purchase from the Contractor all of its requirements
for the Product. In the event Monsanto at any time is offered a lower
conversion fee for Product of equal quality in quantities greater than one
half of the total requirements by a reputable manufacturer and furnished
Contractor proof of same, Contractor shall supply Product at the lower
conversion fee or permit Monsanto to purchase such quantity elsewhere. If
Monsanto should purchase such quantity elsewhere, Contractor may give notice
of pricing revisions to Monsanto. If no agreement satisfactory to both
parties, is achieved within thirty (30) days after the giving of such notice,
either party may terminate this Agreement, without liability, upon at least
thirty (30) days' prior written notice.
Monsanto shall be allowed to take up to six tank cars of Product from a
third party supplier in order to certify the quality of the Product. After
such certification of quality of Product from a third party in the event
Contractor is unable to supply Product to Monsanto from its Facility,
Contractor shall purchase at its expense certificated Product from the third
party and supply such Product to Monsanto at the Services Fee then stated in
the Agreement. This third party certification shall be accomplished by
December 31, 1994. A re-certification of the third party shall be completed by
December 31, 1996 using up to six tank cars of Product.
(c) Contractor shall convert Material delivered to Contractor by
Monsanto hereunder into Product for Monsanto at the Facility at the following
Conversion Ratio ("Conversion Ratio"):
For each ton of Material supplied by Monsanto to Contractor hereunder,
Contractor shall produce and deliver to Monsanto 3.31 tons of Product
(100% acid basis).
Monsanto estimates its requirements hereunder to be approximately 26,000 to
28,000 tons of Product (100% acid basis) per Contract Year to be taken in
approximately equal monthly installments. This volume is not to be considered
a guaranteed volume. For purposes of enabling Contractor to plan its
production Monsanto shall supply to Contractor estimated monthly Product
volumes per Schedule D.
Within thirty (30) days of termination or expiration of this Agreement, a
final Material balance shall be sent to Monsanto. Should balance show that
Monsanto is owed Material, Contractor will make provisions to tender Material
to Monsanto within sixty (60) days of termination or expiration of this
Agreement. Material will be tendered on the Gulf Central Pipeline System at an
injection point between Fortier, Louisiana and Sterlington, Louisiana.
In order for Contractor to comply with this Agreement, Monsanto recognizes
that Monsanto must supply Material to Contractor on an uninterrupted basis,
which Material is to be provided to Contractor by Monsanto at Monsanto's cost
and expense. Monsanto shall, at its expense and cost, delivery Material to
Contractor at a rate which is sufficient, through application of the
Conversion Ratio set forth in this Section 4(c) to produce the quantities of
Product required by Monsanto hereunder, and to maintain at the Facility such
appropriate amount of inventory of Material so that Contractor can comply with
the terms hereof. Monsanto shall maintain a minimum amount of inventory of
Material at the Facility of 500 tons at all times.
Notwithstanding anything herein to the contrary, the Contractor's obligations
under this Agreement to perform the Services hereunder and to deliver Product
to Monsanto are subject to and conditioned upon Monsanto having delivered to
Contractor Material in sufficient time and in a sufficient amount through
application of the Conversion Ratio set forth in this Section 4(c), for
Contractor to perform the Services and produce the quantities of Product
required to be produced by Contractor for and delivered to Monsanto hereunder.
5. SERVICES FEE. As consideration for Contractor's delivery of Product
to Monsanto in accordance with this Agreement, Monsanto agrees to pay
Contractor a Services Fee as set forth in Schedule E attached hereto and made
a part hereof. The Services Fee shall constitute the total financial
obligation of Monsanto to Contractor as to the purchase price for the Product.
6. DELIVERY; TITLE AND RISK OF LOSS.
(a) Delivery of Material by Monsanto to Contractor hereunder shall be
made at the Facility in accordance with the terms of the Section called
"Delivery Schedule" set forth in Schedule D attached hereto and made a part
hereof, or otherwise as may be mutually agreed by the parties.
(b) Title to and other incidents of ownership of:
(i) The Material and the Product processed hereunder (all collectively
called "Monsanto's Material") shall be in Monsanto and shall remain the
property of Monsanto at all times, subject to Monsanto's compliance with the
terms of this Agreement;
(ii) All other products, by-products, wastes and residues resulting from
the processing of the Material, shall pass to Contractor as they are generated
in the performance of Services hereunder and shall remain the property of the
Contractor.
(c) Contractor shall be liable to Monsanto for all contamination, loss
or damage to Monsanto's Material after such is delivered to the Facility and
to the Product until such Product is delivered to Monsanto's Plant, unless
contamination is caused by reason of force majeure. In the event Contractor
shall be liable or responsible to Monsanto pursuant to this paragraph,
Contractor shall pay to Monsanto on demand, Monsanto's cost of the Material
and/or Product contaminated, lost or damaged, based on Monsanto's
manufacturing and other costs, plus freight expense, less net salvage value,
if any, received by Monsanto. Monsanto shall make a reasonable effort under
the then prevailing circumstances to dispose of the damaged Material and/or
Product at a fair and reasonable value indicating in advance to Contractor the
amount of net salvage value to be credited to Contractor.
7. CONTRACTOR'S AND MONSANTO'S COVENANTS AND WARRANTIES
(a) Contractor covenants with and warrants to Monsanto that:
1. Contractor has the requisite experience, knowledge and expertise,
suitable facilities and qualified personnel and legal right to perform the
Services hereunder in a sound, safe, lawful and workmanlike manner;
2. Contractor hereto recognizes the importance of maintaining a safe and
healthful workplace and knows and understands the potential health, safety
and/or environmental considerations associated with the Material and the
Product and the toxic nature of the Material and all other products, by-
products and residues resulting from or in any way referred to the processing
of the Material. Certain information as to the character of the Material and
certain recommended precautions for exposure to and handling of the Material
and Product have been provided to Contractor by Monsanto as described or
referred to in the Material Safety Data attached hereto as Schedule I.
Contractor shall advise and inform its employees, agents, representatives and
subcontractors of the nature of the Material and Product and the potential
hazards connected with it prior to such individuals' employment in connection
with the Product. Contractor hereto shall see that all appropriate safety and
handling precautions are followed and shall take all appropriate actions to
ensure a healthful workplace and the safety and well-being of persons,
property and the environment in the performance of their respective duties
hereunder. Each party hereto agrees to inform the other in writing of any
toxic or otherwise hazardous property relating to the Material or Product
which becomes known to Contractor or Monsanto subsequent to the date of this
Agreement.
3. Contractor will perform Services in a sound, safe, lawful and
workmanlike manner, and that the Product produced and delivered by it
hereunder shall conform to the attached Product specifications;
4. Contractor will own and dispose of all products, by-products, wastes
and residues resulting from the processing of the Material.
(b) Each party hereto agrees to comply with all laws, ordinances,
orders, rules, regulations and actions of the United States and of any state,
county, township or municipal subdivision or other governmental agency which
may now or hereafter be applicable to this Agreement, including but not
limited to those pertaining to employee safety and health and environmental
protection and TSCA Section 8 (a) through Section 8 (e) and that it has
obtained and will maintain in effect all permits, licenses and other
documentation required now or hereafter in order to comply with such
governmental laws, ordinances, orders, rules, regulations and actions and
shall furnish copies of same to the other party upon its request.
8. INVOICING AND INVENTORIES. Contractor shall invoice Monsanto for
Product delivered to Monsanto hereunder and Monsanto shall pay Contractor the
amounts covered by such invoices in accordance with the Section "INVOICING AND
INVENTORIES" in Schedule F attached hereto and made a part hereof.
9. WARRANTIES.
(a) Subject to subparagraphs (c) and (f) of this Section 9 Monsanto
warrants title and that the Material delivered to Contractor hereunder shall
meet the specifications set forth in Schedule A. Except as otherwise provided
in the preceding sentence and except as otherwise provided in this Agreement,
MONSANTO MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED,
AS TO MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR ANY OTHER MATTER
WITH RESPECT TO ANY MATERIAL DELIVERED UNDER THIS AGREEMENT, WHETHER OR NOT
SUCH MATERIAL MEETS SUCH SPECIFICATIONS and whether alone or in combination
with any other material.
(b) Subject to subparagraphs (d) and (e) of this Section 9, Contractor
warrants that the Product delivered to Monsanto hereunder shall meet the
specifications set forth in Schedule B Except as otherwise provided in the
preceding sentence and except as otherwise provided in this Agreement,
CONTRACTOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND EXPRESS OR IMPLIED
AS TO MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR ANY OTHER MATTER WITH
RESPECT TO ANY PRODUCT DELIVERED UNDER THIS AGREEMENT WHETHER OR NOT SUCH
PRODUCT MEETS SUCH SPECIFICATIONS and whether used alone or in combination
with any other material.
(c) Subject to Section 9(f) hereof, all claims by the Contractor for any
cause whatsoever (whether such cause be based in contract, negligence, strict
liability, other tort or otherwise) relating to breach by Monsanto of its
warranties contained in Section 9(a) hereof shall be deemed waived unless made
in writing and received by Monsanto within ninety (90) days after receipt of
the material in respect to which such claim is made, provided that as to any
such cause not reasonably discoverable within such ninety (90) day period
(including that discoverable only in processing, further manufacture or other
use) any claim shall be made in writing and received by Monsanto within one
hundred eighty (180) days after Contractor's receipt of the material in
respect to which such claim is made, or within sixty (60) days after
Contractor learns of the facts giving rise to such claim, whichever shall
first occur. Failure of Monsanto to receive written notice of any such claim
within the applicable time period shall be deemed an absolute and
unconditional waiver by Contractor of such claim.
(d) Subject to Section 9(e) hereof, all claims by Monsanto for any cause
whatsoever (whether such cause be based in contract, negligence, strict
liability, other tort or otherwise) relating to breach by Contractor of its
warranties contained in Section 9(b) hereof or for late or failure to deliver
Product to Monsanto shall be deemed waived unless made in writing and received
by Contractor within ninety (90) days after Monsanto's receipt of the Product
in respect to which such claim is made, or if such claim is for non-delivery
of Product within ninety (90) days after the date upon which such Product was
to have been delivered provided that as to any such cause not reasonably
discoverable within such ninety (90) day period (includinq that discoverable
only in processing, further manufacture, other use or resale), any claim shall
be made in writing and received by Contractor within one hundred eighty (180)
days after Monsanto's receipt of the Product in respect to which such claim is
made, or within sixty (60) days after Monsanto learns of the facts giving rise
to such claim, whichever shall first occur. Failure of Contractor to receive
written notice of any such claim within the applicable period shall be deemed
an absolute and unconditional waiver by Monsanto of such claim.
(e) Except for the extent covered by Section 11, Monsanto's exclusive
remedy, and Contractor's total liability, with respect to defective Product or
Services supplied or to be supplied under this Agreement (whether such cause
be based in contract negligence, strict liability, other tort or otherwise)
shall (i) if Monsanto's claim related solely to any loss or damage to
Materials supplied by it, not exceed the then current market value of the lost
or damaged Materials plus freight or, at Contractor's election, the
replacement thereof, or (ii) if Monsanto's claim relates to Products supplied
by Contractor, not exceed an amount equal to the sum of any Services Fee and
freight charges actually paid by Monsanto with respect to the Product as to
which the claim is made plus the then current market value of the Materials
supplied by Monsanto and used therein, or, at the election of Monsanto, the
replacement thereof with Product produced from Material supplied by and at the
sole expense of Contractor. In no event shall the Contractor be liable to
Monsanto for any indirect, incidental, consequential or punitive damages
however caused. Contractor shall not be liable for, and Monsanto assumes
liability for, all personal injury and property damage connected with the
handling, transportation, possession, or further processing of Product after
delivery to Monsanto hereunder, whether such Products are used alone or in
combination with any other material.
(f) Contractor's exclusive remedy, and Monsanto's total liability, with
respect to all defective Material supplied or to be supplied hereunder by
Monsanto to Contractor (whether such cause by based in contract, negligence,
strict liability, other tort or otherwise) shall in no event exceed the then
current market value of the Material for which the claim is made, or at the
election of Monsanto, the replacement thereof with Material. In no event shall
Monsanto be liable to Contractor for any indirect incidental, consequential or
punitive damages resulting from such defective material. Monsanto shall not be
liable for, and Contractor assumes liability for, all personal injury and
property damage connected with the handling, possession, processing, further
manufacture of other use of such Material after delivery to Contractor
hereunder, whether such Material is used alone or in combination with any
other material.
10. INDEMNIFICATION. Except as otherwise provided in this Section 10,
Contractor shall indemnify and hold harmless Monsanto, its present, past and
future employees and agents, from and against any and all claims, liabilities,
suits, and proceedings, judgments, orders, fines, penalties, damages, losses,
costs and expenses (including, without limitation, costs of defense, amounts
paid in settlement (provided such settlement is paid with the consent of
Contractor) and reasonable attorneys' fees and expenses) (all of the foregoing
herein collectively called "Liabilities, Proceedings, and Damages") arising
out of actions against Monsanto brought by an independent third party in
connection with (a) any of Monsanto's Material, or any part thereof, while in
the possession or custody of Contractor and resulting from Contractor's
negligence; (b) Contractor's negligence relating to any Services or any other
activities or operations of or by Contractor, its employees or agents under or
related to this Agreement; (c) any failure of Contractor or any of its
employees or agents to observe or comply with any of Contractor's duties or
obligations under this Agreement, including, without limiting the generality
of the foregoing, any failure to observe or comply with any applicable laws
ordinances, codes, orders, rules or regulations and including any failure to
properly dispose of wastes relating to this Agreement. The foregoing
obligations of Contractor shall include, but not be limited to, any and all
Liabilities, Proceedings and Damages arising due to the Contractor's
negligence resulting in (i) injury to or death of any person (including,
without limitation, employees or agents of Contractor or Monsanto), (ii)
damage to or loss or destruction of any property (including, without
limitation, property of Contractor or Monsanto, or their employees or agents),
and (iii) any contamination of, injury or damage to or adverse effect on
persons, animals, aquatic and wildlife, vegetation, waters or the environment.
The foregoing indemnification shall apply regardless of the basis of
liability or legal principle involved (including, without limitation,
contract, warranty, negligence, strict liability, other tort, violation of law
or otherwise), but shall not apply to Liabilities, Proceedings and Damages to
the extent caused by (i) Monsanto's negligence or willful or criminal
misconduct or (ii) Monsanto's breach or default of any of the terms or
provisions or any of its duties or obligations under this Agreement.
11. INSURANCE.
(a) Contractor shall not begin the performance under this Agreement
until:
(i) It has obtained all the insurance hereinafter required; and
(ii) It has furnished Monsanto with certificates of insurance
satisfactory to Monsanto evidencing such required insurance; and
(iii) Copies of any provisions in Contractor's contract of insurance
excluding coverage for pollution have been provided to Monsanto.
(b) Every contract of insurance providing the coverages required herein
shall provide that such coverage shall not be terminated or reduced without
the insurance carrier first giving Monsanto at least thirty (30) days' prior
written notice thereof, and Contractor shall make such arrangements as are
necessary to ensure that no termination, reduction or cancellation of the
insurance required herein becomes effective until thirty (30) days after
Monsanto receives such notice.
(c) Contractor shall take out and maintain, at its expense, during the
term of this Agreement, and for a minimum of two (2) years following the
expiration or termination of this Agreement, at least the following insurance
in insurance companies satisfactory to Monsanto:
COVERAGE LIMITS
(1) Worker's Compensation Statutory
(2) Employers' Liability $500,000 each occurrence
(3) Comprehensive General $1,000,000 each occurrence
Liability (Bodily Injury)
(4) Comprehensive General $1,000,000 each occurrence
Liability (Property Damage)
(5) Automobile Liability $1,000,000 combined single
(Bodily Injury and limit
Property Damage)
(d) The insurance certificates evidencing the required coverage shall
include a certification that the above-described insurance coverages include
coverage for Contractor's contractual liability under this Agreement.
(e) Contractor shall secure from the company carrying Contractor's
Worker's Compensation insurance a waiver of subrogation in favor of Monsanto
and its employees and shall furnish to Monsanto a copy of said waiver.
(f) Notwithstanding any other provision of this Agreement, Contractor's
general liability insurance shall (i) be provided on an "occurrence" form of
policy, (ii) name Monsanto as an additional insured, and (iii) include
coverage for all of Contractor's contractual liability under Section 10 with
limits not less than those set forth above. Additionally, the required
certificates shall indicate that such general liability insurance coverage
will be primary to any other valid and collectible insurance.
(g) The insurance requirements set forth herein are minimum coverage
requirements and are not to be construed in any way as a limitation on
Contractor's liability under this Agreement.
12. NOTIFICATION OF CITATIONS AND CLAIMS. Contractor agrees that it will
promptly notify Monsanto of any of the following which relates to or is
connected with any Services furnished pursuant to this Agreement: (i) any
warning, citation, indictment, claim, lawsuit, or proceeding issued or
instituted by any federal, state or local governmental entity or agency
against or upon Contractor, (ii) the revocation of any license or permit
issued to Contractor by any such entity or agency, or (iii) any other claim
(including, without limitation, claims for Workmen's Compensation) or lawsuit
against Contractor for personal injury, death or property damage.
13. EXCUSE OF PERFORMANCE. The performance or observance by either party
of any obligations of such party under this Agreement may be suspended by it
in whole or in part in the event of any of the following which prevents such
performance or observance: Act of God, war, riot, fire, explosion, accident,
flood, sabotage, strike, lockout, injunctions, inability to obtain fuel,
power, raw materials, labor, containers or transportation facilities, breakage
or failure of machinery or apparatus, national defense requirements,
compliance with governmental laws, regulations, orders or action, or any other
cause (whether similar or dissimilar) beyond the reasonable control of such
party; provided however, that the party so prevented from complying with its
obligations hereunder shall immediately notify in writing the other party
thereof and such party so prevented shall exercise diligence in an endeavor to
remove or overcome the cause of such inability to comply and provided further
that neither party shall be required to settle a labor dispute against its own
best judgment. Deliveries suspended or not made by reason of this Section
shall be cancelled without liability, but this Agreement shall otherwise
remain unaffected. Nothing in this Section 13 shall excuse Monsanto from
paying contractor the Service Fee for Products delivered by Contractor to
Monsanto, or excuse Contractor from performance or observance of its
obligations under this Agreement by reason of its failure or inability to
observe or comply with Section 7 (b) of this Agreement.
14. SECRECY PROVISIONS. Contractor shall treat and maintain and cause
its employees and agents to treat and maintain as Monsanto's confidential
property and not use or disclose to others during the term of this Agreement
and for five (5) years thereafter except as is necessary to perform the work
hereunder any written information (including any technical information,
experience or data) supplied by Monsanto to Contractor and marked as
"confidential information" regarding Monsanto's products, plans, programs,
plants, processes, costs, equipment, operations or customers which may be
heretofore or hereafter to Contractor, its employees or agents in the
performance of this Agreement without in each instance securing the prior
written consent of Monsanto. Contractor shall also treat as confidential and
shall not use or disclose to others, information relating to the chemical
composition or specifications of the Material or Product or the quantity of
Material or Product delivered to it by Monsanto or Product produced by
Contractor.
Upon the expiration or termination of this Agreement, or at any earlier
time at Monsanto's request, Contractor shall deliver to Monsanto all writings,
drawings, memoranda and other material, including all copies and extracts
thereof, delivered to Contractor by Monsanto prior to or during the term of
this Agreement, which contain or relate to said Monsanto confidential
information.
The provisions of this Section 14 shall not apply to any information
referred to in this Section which Contractor establishes (i) has been
published and has become part of the public domain other than by acts or
omissions of Contractor, its employees or agents, (ii) has been furnished or
made known to Contractor by third parties (other than those acting directly or
indirectly for or on behalf of Monsanto) as a matter of legal right and
without restriction on disclosure or use, or (iii) was lawfully in
Contractor's possession prior to disclosure thereof by Monsanto to Contractor
and was not acquired by Contractor, its employees or agents directly or
indirectly from Monsanto. Further, notwith-standing anything herein to the
contrary, any disclosures required by law of such confidential information
shall not be deemed a breach of this Section 14.
15. PATENT INFRINGEMENT. Contractor shall defend all suits and claims
for infringement of any patent rights relating to the Services and shall hold
Monsanto, its present, past and future employees and agents harmless from
loss, liability, costs and expenses on account thereof. Monsanto shall defend
all suits and claims for infringement of patent rights related to the
Materials and Product and shall hold Contractor, its present, past and future
employees and agents harmless for loss, liability, costs and expenses on
account thereof.
16. TAXES. Unless otherwise specifically set forth in this Agreement,
Contractor shall pay all applicable sales, consumer, use, service, occupation,
privilege or other similar taxes required by law relating to the Services
(including interest and penalties, if any) without reimbursement by Monsanto.
Contractor shall also pay all federal income, excise and privilege taxes and
all state and local income taxes, if any, relating to the Services without
reimbursement by Monsanto. Any property tax assessable against the Product
shall be paid by Monsanto, and Monsanto shall pay all sales, consumer, use,
excise, service, occupation, privilege, income or other similar taxes required
by law (local, state or federal) relating to the Material or Product
(including interest and penalties, if any) without reimbursement by
Contractor.
17. INDEPENDENT CONTRACTOR. Contractor is and shall always remain an
independent contractor in its performance of this Agreement. The provisions of
this Agreement shall not be construed as authorizing or reserving to Monsanto
any right to exercise any control or direction over the operations activities,
employees or agents of Contractor in connection with this Agreement, it being
understood and agreed that the entire control and direction of such operations
activities, employees or agents shall remain with Contractor as an independent
contractor. Neither party to this Agreement shall have any authority to employ
any person as an employee or agent for or on behalf of the other party to this
Agreement for any purpose, and neither party to this Agreement, nor any person
performing any duties or engaging in any work at the request of such party,
shall be deemed to be an employee or agent of the other party to this
Agreement.
18. ASSIGNMENT. Neither party shall, whether by operation of law or
otherwise, assign or otherwise transfer any of its rights nor delegate the
performance of its obligations under this Agreement without the other party's
prior written consent and any attempted assignment, transfer or delegation
without such content shall be void and of no effect. Subject to the foregoing,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.
19. NOTICE. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered by hand or deposited in the United States mails, postage
prepaid, addressed as specified on Schedule G attached hereto and made a part
hereof or to such other address as may be specified from time to time in a
written notice given by such party. Both parties agree to acknowledge receipt
of any notice delivered in person.
20. MISCELLANEOUS.
(a) This Agreement constitutes the full understanding of the parties, a
complete allocation of risks between them and a complete and exclusive
statement of the terms and conditions of this Agreement with respect to the
subject matter hereof; and all prior agreements, negotiations, dealings and
understandings, whether written or oral, regarding the subject matter hereof,
are hereby superseded and merged into this Agreement. No conditions, usage of
trade, course of dealing or performance, understanding or agreement purporting
to modify, vary, explain or supplement the terms or conditions of this
Agreement shall be binding unless hereafter made in writing and signed by the
party to be bound, and this Agreement shall not be considered amended or
modified by a purchase order, acknowledgement or acceptance of purchase order
or shipping instruction forms containing terms or conditions at variance with
or in addition to those set forth in this Agreement. No waiver by either party
with respect to any breach or default or of any right or remedy and no course
of dealing or performance shall be deemed to constitute a continuing waiver of
any other breach or default or of any other right or remedy, unless such
waiver be expressed in writing signed by the party to be bound.
(b) If Monsanto furnishes technical or other advice to Contractor,
whether or not at Contractor's request, Monsanto shall not be liable for, and
Contractor assumes all risk of, such advice and the results thereof, unless
such technical or other advice is given in bad faith or resulting from the
gross negligence of Monsanto. No inspection or review by Monsanto of the
Facility or Contractor's operations shall relieve Contractor of any of its
obligations under this Agreement.
(c) As used in this Agreement, employees or agents of a party hereto
shall be deemed to include such party's past, present and future officers and
directors.
(d) Section headings as to the contents of particular sections are for
convenience only and are in no way to be construed as part of this Agreement
or as a limitation of the scope of the particular sections to which they
refer.
(e) The validity, interpretation and performance of this Agreement and
any dispute connected herewith shall be governed and construed in accordance
with the laws of the State of Missouri.
(f) If any term or provision of this Agreement or any application
thereof shall be invalid or unenforceable, the remainder of this Agreement or
any other application of such term or provision shall not be affected thereby.
EL DORADO CHEMICAL COMPANY MONSANTO COMPANY
BY /s/ James L. Wewers BY /s/ Gary J. Page
______________________ _____________________
TITLE President TITLE Director, Trans-
portation and
Distribution
______________________ _____________________
ELDORADO.PA
SCHEDULE A
__________
08/01/88
"MATERIAL"
ANHYDROUS AMMONIA SPECIFICATIONS
________________________________
CHARACTERISTICS LIMITS METHOD NO.
_______________ ______ ______
Water 0.25% min. EDC-400
0.50% max.
Oil 5 ppm max. EDC-410
% Anhydrous Ammonia 99.5% min. Calculated by
NH3 difference
Iron 1 ppm max. EDC-420
EL DORADO CHEMICAL COMPANY
P.O. BOX 231
EL DORADO, ARKANSAS 71731-0231
(501) 883-1400 FAX NUMBER: (501) 883-1428
PRODUCT SPECIFICATION SHEET
_________________________________________________________________
_________________________________________________________________
EFFECTIVE DATE: 07-May-92 PRODUCT NAME: NITRIC ACID
ISSUE NUMBER: 12 PRODUCT CODE: 7000200
SUPERSEDES: 11 PRODUCT GRADE: CONCENTRATED
98% (MONSANTO GRADE)
_________________________________________________________________
_________________________________________________________________
APPROVALS:
PLANT MANAGER: PRODUCTION MANAGER:
/s/ 6/8/92 /s/ Marlyn Roberts 6-4-92
_________________________ _________________________
QUALITY CONTROL MANAGER: MARKETING PRODUCT MGR:
/s/ Ken Lane J T Carter /s/ Ann T. O'Donnell 6/12/92
_________________________ _________________________
_________________________________________________________________
GENERAL PRODUCT DESCRIPTION
A LIGHT YELLOW SOLUTION HAVING AN ODOR OF NITROGEN DIOXIDE
_________________________________________________________________
PRODUCT CHARACTERISTICS:
TEST
TEST SPECIFICATION TYPICAL METHOD
FREQUENCY PROPERTY LIMITS VALUES NO.
_________ ________________ ___________________________________
(R) ASSAY (as %HNO3) 96.0% Max. 98.97% EDC-141
(R) SULFATE (as %H2804) 0.07% Max. 0.047% EDC-130
(R) IRON (as Fe) 7.3 ppm Max. 2.87 ppm EDC-110
(R) OXIDES OF NITROGEN 0.04% (WINTER)
(AS N203) 0.15% Max. 0.10% (SUMMER)
EDC-145
(A) LEAD SALTS 0.10% Max. 5 ppm EDC-143
(A) ASH 0.10% Max. <0.01% EDC-144
(A) NITROBODIES NIL NIL EDC-160
(A) CHLORIDES (AS HC) 5.0 ppm Max. 2.0 ppm EDC-140
(B) ALUMINUM (AS A) 75.0 ppm Max. 12.5 ppm (WINTER) AA
(R) TURBIDITY (SEE NOTE: #1) CLEAR VISUAL
NOTE #1: CLEAR WITH NO VISIBLE RESIDUE
* THE PRODUCT MEETS THE 0.15% N203 LIMIT AT THE TIME OF SHIPPING.
DUE TO NORMAL BUILDUP, THE VALUE IS LIKELY TO BE HIGHER UPON
DELIVERY DURING HOT WEATHER CONDITIONS.
(R) ROUTINE ANALYSIS (A) CHECKED AT INTERVALS
* (B) THE ANALYSIS IS PERFORMED TWICE PER WEEK ON A BATCH BASIS
_________________________________________________________________
MONSANTO CHEMICAL COMPANY MATERIAL NO. DEPT. Page 1 of 1
___ ___
89119 221 Approvals - Date
______________________________________
RAW MATERIAL SPECIFICATION FOR USE IN ISSUE DATE MGR
MANUFACTURING
NCB 01/11/91 /s/ W. Herman
4/1/91
_________________________________________________________________
PLANT REVISION NO. REVIEW DATE SUPT.
MANUFACTURING
W.G. Krummrich Plant 1 02/01/94 /s/ J. D.
Garrison
3/12/91
_________________________________________________________________
MATERIAL (TRADE NAME) TOTAL QUALITY LEADER
Nitric Acid /s/T. M. Kreinbrook 3-19
_________________________________________________________________
MATERIAL (CHEMICAL NAME) PLANT PURCHASING AGENT
Nitric Acid /s/R. O. Cardwell 3/27/91
_________________________________________________________________
CHEMICAL FORMULA GROUP LEADER, R & D
/s/E. D. Clemons 2/20/91
HNO3 ______________________
OTHER:
_________________________________________________________________
SAMPLE FOR ANALYSIS MGR. PRODUCT SAFETY
1 x 8 Ounce GGS Bottle /s/J. E. Downes 4/2
_________________________________________________________________
APPROVED SUPPLIERS
El Dorado Chemical Company
_________________________________________________________________
_________________________________________________________________
Characteristics Limits Method No.
____________________ ______________________ ___________________
Typical
_______
Appearance Lt. yellow to 10,201
red brown liquid
Color 50 APHA, Max. -- 11,902
(Bleach 42 degree Be'
Acid Solution)
H2SO4 0.07% Max. 0.06% 10,203
HC1 5 ppm Max. 1 ppm 10,204
Foreign Odor None None 10,207
Nitric Acid 97.5% Min. 98.5% 10,200
(HNO3)
Lead Salts 0.1% Max. 0.002% --
Ash 0.1% Max. 0.0007% --
Iron 15 ppm Max. 3 ppm --
Oxides of 0.15% Max. 0.015% --
Nitrogen
as N2O3
Supplier's certificate of analysis to be sent on day of shipment to Chief
Chemist, Monsanto Company, 500 Monsanto Ave., Sauget, IL 62206-1198.
(UNCONTROLLED DOCUMENT)
_______________________
NOTE: THIS SPECIFICATION IS THE PROPERTY OF MONSANTO COMPANY AND IS FOR
INTERNAL USE ONLY. IT MAY NOT BE RELEASED WITHOUT WRITTEN APPROVAL.
_________________________________________________________________
_________________________________________________________________
SCHEDULE C
__________
01/01/94
SPECIAL INSTRUCTIONS
____________________
(Sampling, Testing, Packaging, Labeling, Shipping)
Contractor shall sample every shipment of Product manufactured under this
Agreement and test for acid concentration (% by weight), sulfate, oxides of
nitrogen, iron and aluminum. Contractor shall retain for a period of two (2)
months the laboratory sample from each shipment sufficient in size to permit
at least one (1) complete reanalysis of specification properties.
Packaging of Product is covered in Schedule D, entitled "Delivery
Schedule".
Product shall be properly prepared and tendered for transportation in
accordance with the United States Department of Transportation Hazardous
Materials Regulations, including but not limited to (i) product
classification, (ii) containers, (iii) loading, (iv) placarding and (v)
shipping paper preparation.
ELDORADO.PA
SCHEDULE D
01/01/94
DELIVERY SCHEDULE
All shipments of Product from Contractor to Monsanto will be made F.O.B. the
Facility, and shipped freight collect. Product shall be shipped in aluminum
tank cars furnished and maintained by Contractor. At some future time
Contractor and Monsanto agree to consider Contractor contracting of freight
and reimbursement by Monsanto if advantageous rates can be achieved.
Monsanto shall supply to Contractor an estimated Product usage rate forecast
for each calendar month. This information shall be provided to Contractor no
later than five working days before the end of the prior calendar month. In
addition, Monsanto and the Contractor shall communicate verbally on an as -
needed basis, but not less than twice each week to review the status of
inbound Product shipments, released rail cars, and changes in previously
reported Product usage rates.
Further, Monsanto shall supply Contractor with a schedule of planned shutdowns
of the Plant as soon as the dates are available.
Contractor shall, in good faith, meet Monsanto's "rolling inventory" Product
requirement of l,000 tons (100% acid basis). Product requirement of 1,000 tons
(100% acid basis). Rolling inventory is the sum of Product shipped from the
Facility to Monsanto and Product in place at the Plant. Should Contractor or
Monsanto desire to exceed the 1,000 tons "rolling inventory" requirement, a
verbal agreement between both parties is necessary.
From time to time, the Contractor may be required to ship by tank truck. In
the event said tank truck shipment is caused by the Contractor's inability to
supply Product in tank cars, in the quantity as defined by Monsanto's usage
rate forecast, as specified in this Schedule D, Contractor shall pay the
difference in freight charges between tank truck and tank car.
In the event said tank truck shipment is caused by Monsanto's (i) change in
usage rate forecast, as specified in this Section D, or (ii) inadequate supply
of Material, Monsanto shall pay the freight charges for tank truck shipment.
In the event said tank truck shipment is caused by a third party, the payment
of the difference in freight charges between tank truck and tank car shall be
negotiated on a case by case basis. Any use of tank truck must be approved in
advance by the Monsanto Representative.
Contractor's weights of Product will govern unless proven to be in error. For
all shipments made by tank car, Contractor's weights will be those weights of
Product made by the Union Pacific Railroad Company on their scales.
Delivery of Material to Contractor hereon shall be made by the Gulf Central
Pipeline System with all costs for delivery to be born by Monsanto, or
otherwise as may be mutually agreed to by the parties. Measurements of
material by the Gulf Central Pipeline System metering point at the Facility
will govern as weights of Material.
If either receiving party should question the Material or Product weights, the
shipping party shall promptly supply the receiving party with adequate
substantiation thereof. Empty Product tankcars are stick measured upon return
to Contractor. Heals greater than one inch will be credited to Monsanto.
The above Delivery Schedule shall be reviewed on an annual basis with the
Monsanto Representative and Contractor's Customer Service XXXXXXXXX
Representative.
ELDORADO.PA
SCHEDULE F
01/01/94
INVOICES AND INVENTORIES
Contractor will use its best efforts to mail invoices for the Service Fee
relative to Product delivered to Monsanto hereunder within seven (7) days of
the date of shipment of such Product by Contractor from Facility. Terms of
payment shall be net cash due thirty (30) days from date of receipt of the
invoice.
Product Service Fee invoices shall be sent to:
The Chemical Group of Monsanto Company
Arrangement Section
Attn: T. Smith - F3ED
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Copies of Product Service Fee invoices will be sent to others within Monsanto
per written instructions from The Monsanto Representative.
Contractor recognizes that Monsanto needs to have an uninterrupted supply of
Product. Subject to the terms of this Agreement and Monsanto maintaining with
Contractor at the Facility an inventory of Material in accordance with the
terms of this Agreement, Contractor agrees to maintain an appropriate
inventory of Product of between 800 and 1,200 tons at the Facility.
Contractor shall send Monsanto a monthly summary report of all Product Service
Fee invoices and material balances. An example of this report is described in
Schedule H.
ELDORADO.PA
SCHEDULE G
01/01/94
REPRESENTATIVES AND NOTICES
The Monsanto Representative for this contract shall be Mr. Robert E. Howard
(Monsanto telephone number (314) 694-8054, mail code G5NA). The Monsanto
Representative shall answer any technical and commercial questions relating to
this contract.
Notices by either party shall be made in writing through a contract
representative. "Monsanto Contract Representative" shall mean:
Mr. William F. Parker (F2WB)
Manager - Toll Manufacture
The Chemical Group of Monsanto Company
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
and whose telephone number is:
(314) 694-7030
"Contractor Representative" shall mean:
Ms. Anne T. O'Donnell
Manager, Industrial Chemicals
El Dorado Chemical Company
P.O. Box 419082
St. Louis, Missouri 63141-1782
and whose telephone number is:
(314) 991-2853
Both Monsanto and Contractor shall have the right to change such
representative at any time upon prior written notice to the other party.
ELDORADO.PA
29-Jun-88 08/01/88
SCHEDULE H
__________
EL DORADO CHEMICAL CO./MONSANTO CO. MONTHLY PRODUCT INVOICES
CONCENTRATED NITRIC ACID CONVERSION AND MATERIAL BALANCE
________________________
MAY 1988 ACID TONNAGE
______________________________________
SHIP SHIPPER INVOICE RAIL CAR TONS AS ASSAY TONS ACID EQUIV.
DATE NUMBER NUMBER NUMBER SHIPPED PERCENT 100% BASIS NH3 TONS
04-May 41323 86462 MCPX 6017 95.65 99.46% 95.133 28.741
05-May 41324 86905 ECDX 6200 125.95 99.50% 125.320 37.861
09-May 41325 88186 ECDX 2352 54.25 99.05% 53.735 16.234
09-May 41326 87000 ECDX 2353 61.85 99.36% 61.454 18.566
09-May 41327 87001 ECDX 2359 61.70 98.84% 60.984 18.424
16-May 41328 88187 ECDX 6201 124.70 98.92% 123.353 37.267
17-May 41329 88188 ECDX 6202 123.45 98.97% 122.178 36.912
17-May 41330 87887 ECDX 6015 95.15 99.07% 94.265 28.479
18-May 41331 88189 ECDX 6207 123.10 98.90% 122.339 36.961
23-May 41332 88602 ECDX 2357 61.95 98.46% 60.996 18.428
23-May 41333 88603 ECDX 2358 60.80 99.06% 60.228 18.196
24-May 41334 88708 ECDX 6200 123.90 98.85% 122.475 37.002
26-May 42645 88855 ECDX 6007 94.60 98.86% 93.522 28.254
26-May 42646 88856 ECDX 6010 95.05 99.16% 94.252 28.475
27-May 42647 89024 GATX 27013 99.10 99.24% 98.347 29.712
27-May 42648 89165 ECDX 2350 59.20 98.74% 58.454 17.660
27-May 42649 89166 ECDX 2352 60.35 98.55% 59.475 17.968
31-May 42650 89167 MONX 6204 120.75 98.93% 119.458 36.090
28-May 42651 89025 MCPX 6016 97.40 98.93% 96.358 29.111
May 42652 89168 ECDX 6015 94.75 98.85% 93.660 28.296
TOTALS: 1815.988 548.637
CONTRACT YEAR-TO-DATE BALANCE
AUGUST 1987 THRU JULY 1988(TONS XH3)
____________________________________________
BAL. DUE MONSANTO AT END
OF PRIOR CONTRACT YEAR: 799.757
YTD NH3 OWED TO MONSANTO: 912.866
PLUS CURRENT MONTH DELIVERIES: 498.500
__________
MONSANTO TOTAL YTD: 1411.366
LESS CURRENT MONTH CONVERTED: 548.637
__________
BALANCE OWED TO MONSANTO THRU MAY: 862.729
SUBMITTED BY: /s/A. T. O'Donnell Date: 6/3/88
__________________ _______________
YTD SHIPMENTS TO MONSANTO(TONS OF NITRIC): 22361.787
-25-
EL DORADO CHEMICAL COMPANY MATERIAL SAFETY DATA Page 1 of 4
_________________________________________________________________
SCHEDULE I
EL DORADO CHEMICAL COMPANY
El Dorado Chemical Company P.O. Box 231
Product Name EL DORADO, ARKANSAS 71731-0231
CONCENTRATED Plant Emergency Phone No.:
NITRIC ACID (98%) (501) 863-1400
Chemtrec: 1-800-424-9300
_________________________________________________________________
PRODUCT IDENTIFICATION
_________________________________________________________________
Chemical Name: Concentrated Nitric Acid
Synonyms: Hydrogen Nitrate, Aqua Fortis, White
Fuming Nitric Acid
Chemical Formula: HNO3
Concentration Range: 98 to 100%
CAS Reg. Number: 7697-37-2
DOT Proper Shipping Nitric Acid (other than red fuming with
Name: more than 70 percent nitric acid)
DOT/IMO Hazard Class: 8
DOT I.D. Number: UN 2031
DOT Label(s)/Placard(s): CORROSIVE
DOT Emergency Response
Guide Number: Guide Number 44
Hazardous Substance(s)/
RQ(s): Yes - 1,000 lbs. (See Additional Comments)
U.S. Surface Freight
Classification: NITRIC ACID, 8, UN 2031, PG I, RQ
_________________________________________________________________
WARNING STATEMENTS
_________________________________________________________________
DANGER!
THIS PRODUCT IS A STRONG OXIDIZER!
LIQUID AND VAPOR CAUSE SEVERE BURNS
HARMFUL IF INHALED AND MAY CAUSE DELAYED LUNG INJURY
SPILLAGE MAY CAUSE FIRE OR LIBERATE DANGEROUS GAS
_________________________________________________________________
PRECAUTIONARY MEASURES
_________________________________________________________________
Do not breathe vapor.
Do not get in eyes, on skin, on clothing.
Keep container closed.
Use with adequate ventilation.
Wash hands and/or other exposed areas thoroughly after handling.
_________________________________________________________________
EMERGENCY AND FIRST AID PROCEDURES
_________________________________________________________________
IN CASE OF EYE OR SKIN CONTACT, immediately flush with plenty of water for at
least 15 minutes while removing contaminated clothing and shoes. Call a
physician. Wash clothing before reuse.
IF INHALED, remove to fresh air. If not breathing give artificial
respiration, preferably mouth-to-mouth. If breathing is difficult, give
oxygen. Call a physician.
IF INGESTED, and the victim is conscious, give large amounts of water or
preferably milk. Do not induce vomiting. Transport the victim to a medical
facility immediately.
MATERIAL SAFETY DATA Concentrated Nitric Acid (98%)
______________________________
EL DORADO CHEMICAL COMPANY MATERIAL SAFETY DATA Page 2 of 4
_________________________________________________________________
PROTECTION INFORMATION
_________________________________________________________________
Eye Protection: Wear chemical safety goggles and face shield
when there is potential for eye and/or facial
contact with the liquid. Provide eye baths in
the immediate area of potential exposure.
Skin Protection: Wear impervious PVC or Neoprene rubber gloves
and protective long-sleeved clothes when there
is potential for skin contact with the liquid.
Wear impervious rubber boots, aprons and/or
suits as appropriate when splashing is likely.
Remove contaminated clothing promptly and
launder before reuse. Provide a safety shower
in the immediate vicinity of potential
exposure.
Respiratory
Protection: Wear an NIOSH approved full face respirator or
a positive pressure self-contained breathing
apparatus as appropriate for protection. When
worn, chemical safety goggles are removed.
Consult with respirator manufacturers to
determine the appropriate type of equipment for
a given application.
Ventilation: Provide sufficient ventilation to control
exposure levels below airborne exposure limits
of 0.2 ppm. Local exhaust ventilation is
preferred.
_________________________________________________________________
FIRE PROTECTION INFORMATION
_________________________________________________________________
Flash Point: Not Applicable; strong oxidizing agent
Ignition Temperature: Not Applicable
Flammable Limits: Not Applicable
Extinguishing Media: In case of FIRE, soak with water.
Special Fire Fighting Wear full acid protective clothing with
Instructions: self-contained breathing apparatus. Evac-
uate area and stay upwind.
Unusual Fire and Powerful oxidizing agent. May cause
Explosion Hazards: explosion when in contact with oxidizable
materials such as H2S, nitrate, wood,
cellulose, or other organic material.
_________________________________________________________________
HEALTH HAZARD DATA
_________________________________________________________________
Acute Effects: Nitric acid is highly corrosive, suffocating,
and fuming. The dilute acid can cause mild
irritation, harden skin epithelium without
destruction and cause chronic skin irritation.
The concentrated acid severely burns and stains
the skin, destroys the tissues and burns the
eyes.
Inhalation of nitric acid vapors is injurious
to the lungs. Evidences of lung damage
following exposure characteristically appear
after a 4-30 hour delay. This, in the form of
lung edema, may be severe and sometimes fatal.
Chronic Effects: Continued exposure to nitric acid fumes can
erode the teeth and is severely irritating and
corrosive to the mucous membranes of the
respiratory tract.
Ingestion: Ingestion of concentrated nitric acid causes
immediate pain and burning of the mouth,
throat, and stomach. Symptoms may range from
nausea, vomiting, circulatory collapse, to
death.
Carcinogenic Status: None suspected.
Airbone
Exposure Limits: Product: CONCENTRATED NITRIC ACID (98%)--100%
by wt.
Exposure should be kept below these
limits:
Nitric Acid:
OSHA PEL/TWA--2 ppm (8 hr)
ACGIH TLV(X)/TWA--2 ppm (8 hr)
STEL--4 ppm (15 min)
_________________________________________________________________
MATERIAL SAFETY DATA Concentrated Nitric Acid (98%)
______________________________
EL DORADO CHEMICAL COMPANY MATERIAL SAFETY DATA Page 3 of 4
_________________________________________________________________
PHYSICAL DATA
_________________________________________________________________
Appearance and Odor: Colorless to light brown
liquid with acrid odor.
Water Solubility: Miscible
Weight % HNO3: 98.0 minimum
Specific gravity @ 60/60F: 1.5088
Bulk Density, lbs/gal (60F, 100F): 12.52, 12.80
Freezing Point, F(Approx.): -42
Boiling Point, F(Approx.): 183
Viscosity, cp @ 20C(68F): 1.0
Vapor Density (Air=1): >1
pH: <1
Vapor Pressure (mm Hg): 51.0 @ 25C(77F)
Evaporation Rate (Butyl Acetate=1): >1
_________________________________________________________________
REACTIVITY DATA:
_________________________________________________________________
Conditions to Avoid: Avoid contact with organic refuse (wood,
alcohol, turpentine, charcoal, etc.)
Incompatibility: Nitric acid is a strong oxidizer. Avoid contact
with organic materials, reducing agents,
alkali, and metallic powders. Corrodes most
metals.
Hazardous Decomposition Oxides of nitrogen, a toxic gaseous
Products: material, are produced.
Hazardous Polymerization: Does not occur.
_________________________________________________________________
SPILL, LEAK & DISPOSAL INFORMATION
_________________________________________________________________
For a SPILL or LEAK, keep upwind of leak. Evacuate enclosed places until gas
has dispersed. Flush away spill by flooding with water applied quickly to
entire spill. Wear self-contained breathing apparatus if necessary to enter
spill area.
Avoid skin, eye and respiratory contact - See Protection Information.
Flush small leaks and spills with large quantities of water. Where possible,
contain and dilute large spills; then neutralize with limestone, soda ash, or
liquid caustic soda.
Caution: Neutralization can produce vigorous reactions, boiling, and fumes.
Remain upwind, evacuate downwind, if necessary. Dispose of any neutralization
sludges or heavily contaminated soils in an approved landfill.
NOTE: Cleaned-up material is an RCRA Hazardous Waste. Comply with
federal, state and local regulations for waste disposal.
_________________________________________________________________
REGULATORY INFORMATION
_________________________________________________________________
TOXIC SUBSTANCES CONTROL ACT (TSCA):
This substance is listed on the Toxic Substances Control Act inventory.
SUPPLIER NOTIFICATION REQUIREMENTS:
This product, concentrated nitric acid, is subject to the reporting
requirements of Section 313 of Title III of the Superfund Amendments and
Reauthorization Act (SARA) of 1986 and 40 CFR-Part 372.
HAZARD CATEGORIES, per 40 CFR-Part 370:
HEALTH: Immediate (Acute), Delayed (Chronic)
PHYSICAL: Reactivity, Oxidizer
_________________________________________________________________
MATERIAL SAFETY DATA Concentrated Nitric Acid (98%)
______________________________
EL DORADO CHEMICAL COMPANY MATERIAL SAFETY DATA Page 4 of 4
_________________________________________________________________
ADDITIONAL COMMENTS:
_________________________________________________________________
Concentrated nitric acid is a designated "Hazardous Substance". Spills of 1000
pounds or greater must be reported to the E.P.A. Call the National Response
Center at 800-424-8802, or a regional office.
_________________________________________________________________
EFFECTIVE DATE: July, 1992 SUPERSEDES: September, 1991
_________________________________________________________________
FOR ADDITIONAL NON-EMERGENCY INFORMATION CONTACT: (314) 991-2853
El Dorado Chemical Company
P.O. Box 419082
St. Louis, Missouri 63141-1782
_________________________________________________________________
Although the information and recommendations set forth herein (hereinafter
"Information") are presented in good faith and believed to be correct as of
the date hereof. El Dorado Chemical Company makes no representations as to the
completeness or accuracy thereof. Information is supplied upon the condition
that the persons receiving same will make their own determination as to its
suitability for their purposes prior to use. In no event will El Dorado
Chemical Company be responsible for damages of any nature whatsoever
(resulting from the use or reliance upon Information. NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESS OR IMPLIED, OR MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OF ANY OTHER NATURE ARE MADE HEREUNDER WITH RESPECT TO
INFORMATION OR THE PRODUCT TO WHICH INFORMATION REFERS
_________________________________________________________________
_________________________________________________________________
TLV is a registered trademark of the American Conference of Governmental
Hygienists. (ACGIH)
MATERIAL SAFETY DATA Concentrated Nitric Acid (98%)
______________________________
sec\10k\tk94xt22
Exhibit 10.25
LOAN AND SECURITY AGREEMENT
(DSN Plant)
Dated October 31, 1994
between
DSN CORPORATION,
as Borrower
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Lender
LOAN AND SECURITY AGREEMENT
(DSN Plant)
This LOAN AND SECURITY AGREEMENT (the "Agreement"), dated October 31,
1994, is made and entered into by and between DSN CORPORATION, an Oklahoma
corporation (the "Borrower"), and THE CIT GROUP/EQUIPMENT FINANCING, INC., a
New York corporation (the "Lender").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and of any loans or other credit facilities now
or hereafter made to Borrower by Lender, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms have the following meanings when used
in this Agreement:
"AFFILIATE" means any of LSB, EDC, LSBC, Prime Financial Corp., Total
Energy Systems, Ltd., Slurry Explosive Corporation, Universal Tech
Corporation, LSB Holdings, Inc., and any other Person controlling or
controlled by or under common control with LSB Industries, Inc. or any of
their Subsidiaries, successors or assigns.
"ASSIGNMENT OF CONSTRUCTION CONTRACT, PLANS AND
SPECIFICATIONS" means the Assignment of Construction Contract Plans and
Specifications in form and substance satisfactory to the Lender, wherein the
Lender is assigned the Construction Contract and the Plans and Specifications
as security for the Obligations.
"BONDING COMPANY" means American Bonding Company, the company issuing
payment and performance bond No. 9417875 in connection with the construction
of the DSN Plant.
"BUSINESS DAY" means any day which is not a Saturday, Sunday or day
on which banks in New York are required or permitted to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means: (i) all personal property referred to in Section
3.1; (ii) all real property interests of Borrower in the DSN Plant Location,
the DSN Plant and the Ground Lease and the Ground Sublease; and (iii) all
other property and interests in property, real or personal, now owned or
leased or hereafter acquired or leased, which is hereafter pledged or assigned
to Lender as collateral security for payment of any of the Obligations.
"CONSENT TO ENCUMBRANCE" means that certain Consent to Encumbrance of
Leasehold Estate and Landlord's Waiver of even date herewith executed by
Northwest Financial Corporation and Borrower in favor of Lender.
"CONSTRUCTION CONSULTANT" means Brown & Root, Inc., and any
subsequent consultant, selected by Lender as Construction Consultant under
Section 2.2(c) hereof.
"CONSTRUCTION CONTRACT" means, collectively, that certain
correspondence dated November 22, 1993 and November 24, 1993, between EDC and
Systems Contracting Corporation, which has been assigned to Borrower, together
with all other correspondence with Systems Contracting Corporation and all
other construction contracts and equipment purchase contracts related to the
construction of the DSN Plant.
"CONSTRUCTION PERIOD" means the period commencing on the date hereof
and ending on the first to occur of: (i) March 31, 1995 or (ii) the DSN Plant
Completion Date.
"CONSULTING AGREEMENT" means the Consulting Agreement dated October
31, 1994 between EDC and DSN relating to the DSN Plant.
"CONTRACTOR" means Systems Contracting Corporation and each other
Person who has entered into a Construction Contract with, or which has been
assigned to, Borrower.
"CONTRACTORS' CONSENTS" means, collectively, the Contractor's Consent
and Certification executed by each Contractor in favor of Lender.
"DEFAULT" means any Event of Default or event which, with notice or
passage of time or both, would constitute an Event of Default.
"DISBURSEMENT SCHEDULE" means the disbursement schedule and budget
annexed to this Agreement as Exhibit "D", in form and substance acceptable to
Lender.
"DISCLOSURE SCHEDULE" means the disclosure schedule annexed to this
Agreement as Exhibit "A".
"DSN PLANT" means Borrower's direct strong nitric acid plant located
at the DSN Plant Location.
"DSN PLANT EQUIPMENT LEASE" means that lease dated to be effective as
of the date hereof between Borrower as lessor and EDC as lessee with respect
to the DSN Plant and including
the Equipment relating thereto.
"DSN PLANT COMPLETION DATE" means the date on which Lender reasonably
determines that all of the following have occurred: (a) Borrower and EDC
shall have certified to Lender in writing that the DSN Plant has been fully
constructed and completed in substantial accordance with the Plans and
Specifications and is in operation, that the DSN Plant as completed complies
with applicable zoning, building and land use laws, and that the DSN Plant
Equipment Lease, the Ground Lease, the Ground Sublease and the Consulting
Agreement are in full force and effect; (b) the Construction Consultant shall
have confirmed to Lender that construction of the DSN Plant has been completed
in substantial accordance with the Plans and Specifications, and that direct
connection has been made to all pipelines, supply lines, and all water, gas,
sewer, telephone and electrical facilities necessary for the operation and use
of the DSN Plant, (c) a valid notice of completion has been filed for record
in the Office of the County Recorder for the County in which the DSN Plant is
located, (d) all inspections by any applicable governmental entities necessary
to permit the start-up of the DSN Plant have been completed and all necessary
certificates and approvals for occupation and operation of the DSN Plant have
been obtained, and (e) the period for filing mechanics' and materialmen's
liens has expired without any material liens having been filed or recorded or
lien waivers have been obtained from contractors which performed more than
$50,000 of work or provided more than $50,000 of materials, or, where
applicable, Lender's Title Policy has fully insured against mechanics' or
materialmen's liens.
"DSN PLANT LOCATION" means the location of the DSN Plant at El
Dorado, Union County, Arkansas, more particularly described in Exhibit "C."
"EDC" means El Dorado Chemical Company, an Oklahoma corporation.
"ENVIRONMENTAL LAWS" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent
decrees relating to hazardous substances, discharges, releases or disposals of
pollutants, solid waste or hazardous materials, or any other environmental
matters applicable to the Borrower's business, the DSN Plant or the DSN Plant
Location. Such laws and regulations include the Resource Conservation and
Recovery Act, 42 U.S.C. section 6901 et seq., as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. section 9601
et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. section 2602
et seq., as amended; the Clean Water Act, 33 U.S.C. section 466 et seq., as
amended; the Clean Air Act, 42 U.S.C. section 7401 et seq., as amended; state
and federal superlien and environmental cleanup programs; and U.S. Department
of Transportation regulations. The terms "hazardous substance" and "release"
shall have the meanings specified in the Federal Comprehensive Environmental
Responsibility Cleanup and Liability Act of 1980, as the definition of such
terms may be subsequently modified, supplemented or amended ("CERCLA") and the
terms "solid waste" and "disposal" shall have the meanings specified in the
Federal Resource Conservation and Recovery Act of 1976, as the definition of
such terms may be subsequently modified, supplemented or amended ("RCRA";
provided, however, that in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided,
further, however, that to the extent a parcel of real property is situated in
a state or other jurisdiction in which the applicable laws may establish a
meaning for "hazardous substance," "release," "solid waste," or "disposal"
which is broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply.
"EQUIPMENT" means all now or hereafter acquired equipment (as that
term is defined in the UCC) now or hereafter located at the DSN Plant or
relating to the DSN Plant, including machinery, data processing hardware and
software, furniture, fixtures, trade fixtures, leasehold improvements, office
equipment, strong acid plant equipment, storage tanks, strong acid building
structure, compressor building, refrigeration facilities, piping, valves,
plant equipment, machinery, electronics, instrumentation, panels, control
systems and other tangible personal property and all accessions, accretions,
replacements and additions to Equipment, and all other component and auxiliary
parts used or to be used in connection with or attached to any of the same,
and all manuals, drawings, instructions, warranties and rights with respect
thereto wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any event so described in Section 8.1.
"FAIR MARKET VALUE" means the price that a knowledgeable buyer would
be willing to pay a knowledgeable seller, neither being under any duress to
buy or sell and both having reasonable knowledge of relevant facts, for the
machinery and equipment in place and in operation, taking advantage of all
leasehold and site improvements designed to facilitate its operation, with the
seller accurately and completely representing the existing condition and
operability of the machinery and equipment to the buyer. Consideration is
given to each asset's contribution to the operating facility, or the
contribution of all the assets as a whole, whichever appropriately addresses
production capabilities of the plant. It is assumed that all specially
designed and built machinery and equipment will continue to be utilized in the
manner for which it was originally intended.
"FINANCIAL STATEMENT" means any financial statement given to the
Lender pursuant to Section 6.1.
"FISCAL YEAR" means, as to any Person, such Person's fiscal year for
financial accounting purposes. The Borrower's current Fiscal Year ends on
December 31, 1994.
"FUNDING DATE" means the date on which the initial advance is made.
"GAAP" means, as of any date of determination, generally accepted
accounting principles consistently applied during each interval and from
interval to interval.
"GROUND LEASE" means the lease agreement dated as of October 31, 1994
between the Borrower and Northwest Financial Corporation pursuant to which
Northwest Financial Corporation granted Borrower the right to occupy the real
property associated with the DSN Plant and to construct, use, occupy and
sublease the DSN Plant at the DSN Plant Location.
"GROUND SUBLEASE" means the sublease dated
October 31, 1994 of the Ground Lease from DSN to EDC.
"GUARANTOR" means any Person who has executed a Guaranty in favor of
the Lender with respect to the Obligations, including LSB and LSBC.
"GUARANTY" means each continuing guaranty executed and delivered by
LSB, LSBC and any other Guarantor in form and substance acceptable to Lender
guarantying the Obligations.
"HAZARDOUS SUBSTANCE" means any substance, material or waste
(including petroleum and petroleum products) which is or becomes designated,
classified or regulated as being "toxic" or "hazardous" or a "pollutant," or
which is or becomes similarly designated, classified or regulated, under any
Environmental Laws.
"INDEBTEDNESS" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) that portion of the obligations of such Person
under capital leases which is properly recorded as a liability on a balance
sheet of that Person prepared in accordance with GAAP, (c) any obligation of
such Person that is evidenced by a promissory note or other instrument
representing an extension of credit to such Person, whether or not for
borrowed money, or any obligation of such Person for the deferred purchase
price of property or services (other than trade or other accounts payable in
the ordinary course of business in accordance with terms customary to DSN or
its Affiliates), (d) any obligation of such Person that is secured by a Lien
on assets of such Person, whether or not that Person has assumed such
obligation or whether or not such obligation is non-recourse to the credit of
such Person, but only to the extent of the fair market value of the assets so
subject to the Lien, (e) obligations of such Person arising under acceptance
facilities or under facilities for the discount of accounts receivable of such
Person and (f) obligations of such Person for unreimbursed draws under letters
of credit issued for the account of such Person.
"LATE CHARGE RATE" shall mean a rate per annum equal to the higher of
3% over the applicable interest rate set forth in Section 2.4 or 18%, but not
to exceed the highest rate permitted by applicable law.
"LEASEHOLD MORTGAGE" means the leasehold mortgage, in form and
substance satisfactory to Lender, wherein Lender is granted a first priority
Lien in Borrower's right, title and interest in the DSN Plant Location, the
DSN Plant, the Ground Lease, and the Ground Sublease.
"LIBOR RATE" means the rate of interest equal to the 30-day London
Interbank Offered Rate. The Libor Rate shall be that which is reported and
published in The Wall Street Journal for the 15th day of each month (if the
15th day is not a day for which The Wall Street Journal reports the Libor
Rate, then on the first preceding day for which The Wall Street Journal
reports the Libor Rate), and shall become effective as of the first day of the
calendar month succeeding such determination and shall continue in effect to,
and including, the last day of such calendar month. If The Wall Street
Journal ceases to be published, or ceases to publish the Libor Rate, then the
Libor Rate shall be that which is reported and published on the day specified
above in any similar publicly available source designated by Lender.
"LIEN" means any mortgage, deed of trust, pledge, deed to secure
debt, hypothecation, assignment, encumbrance, lien (statutory or other),
security interest or other security agreement, including any conditional sale
or other title retention agreement. "Lien" includes reservations, exceptions,
easements, leases and other restrictions and encumbrances affecting real
property. For purposes hereof a Person shall be deemed to own property
acquired or held pursuant to a conditional sale or similar security
arrangement.
"LOAN" shall have the meaning assigned in Section 2.1.
"LOAN DOCUMENTS" means, collectively:
a. this Agreement
b. the Note
c. the DSN Plant Equipment Lease
d. the Assignment of the DSN Plant Equipment Lease
e. the acknowledgment and Consent to Assignment of the DSN Plant
Equipment Lease
f. sufficient UCC-1 Financing Statements for filing in Arkansas
and Oklahoma
g. the Leasehold Mortgage with Assignment to Leases and Rents
h the Guaranty (LSB)
i. the Guaranty (LSBC)
j. the Consent to Encumbrance
k. Request for Advance
l. the Assignment of Construction Contract, Plans and
Specifications
m. the Tenant Subordination Agreement
n. the Contractors' Consents
and any other opinions, resolutions, certificates, documents or agreements of
any nature or type heretofore or hereafter executed or delivered by Borrower,
Affiliates or Guarantors to Lender pursuant to this Agreement or any Loan
Document in each case either as originally executed or as the same may from
time to time be supplemented, modified, amended, restated or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation.
"LSBC" means LSB Chemical Corp., an Oklahoma corporation.
"MIXED ACID PLANT LOAN" means that certain loan in the original
principal amount of approximately $1,075,200 to be made by Lender to Borrower
pursuant to the Mixed Acid Plant Loan Documents.
"MIXED ACID PLANT LOAN DOCUMENTS" means that certain Loan and
Security Agreement (Mixed Acid Plant) which the parties intend to prepare and
execute between Lender and Borrower, and all other "Loan Documents" described
therein, relating to a loan by Lender to Borrower to finance the acquisition
and construction of a mixed acid plant in North Carolina.
"NOTE" means the promissory note which evidences the Loan,
substantially in the form of Exhibit "B".
"OBLIGATIONS" means and includes the aggregate of the unpaid
principal balance of the Loan and all accrued interest thereon, and all other
loans, indebtedness, debts, liabilities, obligations, interest, fees,
premiums, guarantees, amounts, indemnities, reimbursements, covenants and
duties owing by the Borrower to the Lender under any one or more of the Loan
Documents, of every kind and description (whether or not evidenced by any note
or other instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising. "Obligations" include: (i) all interest, fees, charges or
other costs and payments that the Borrower is required to pay to the Lender
under or as a result of the Loan Documents or by law and (ii) all costs and
expenses described in Section 2.7 or otherwise required to be paid by the
Borrower to the Lender pursuant to any Loan Document.
"PENSION PLAN" means any pension plan as defined in Section 3(2) of
ERISA which is a multi employer plan or a single employer plan as defined in
Section 4001 of ERISA and subject to Title IV of ERISA and which is: (i) a
plan maintained by the Borrower, or any Subsidiary or any Related Company;
(ii) a plan to which the Borrower, or any Subsidiary or any Related Company
contributes or is required to contribute; (iii) a plan to which the Borrower,
or any Subsidiary or any Related Company was required to make contributions at
any time during the five calendar years preceding the date of this Agreement;
or (iv) any other plan with respect to which the Borrower, or any Subsidiary
or any Related Company has incurred or may incur liability, including
contingent liability, under Title IV of ERISA, either to such plan or to the
Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means: (i) Liens for taxes not yet payable or
being contested in good faith and by appropriate proceedings diligently
pursued, provided that the reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; (ii) mechanics' and
similar liens incurred in the ordinary course of business or in the
construction of the DSN Plant, not to exceed, at any given time, an aggregate
of $150,000.00, securing non-overdue obligations or for which an adequate bond
has been posted; (iii) Liens in favor of the Lender; (iv) Liens described on
the Disclosure Schedule as such Disclosure Schedule is in effect on the date
hereof; and (v) all exceptions and Liens identified in the Title Policy.
"PERSON" means any individual, trust, firm, partnership, corporation
or any other form of public, private or governmental entity or authority.
"PLANS AND SPECIFICATIONS" means those Plans and Specifications
related to the construction of the DSN Plant, which Plans and Specifications
must be acceptable to Lender.
"PROCEEDS" means all products and proceeds (as defined in the UCC) of
any Collateral, and all proceeds of any such proceeds, including all awards
for taking by eminent domain, all proceeds of fire or other insurance and all
proceeds obtained as a result of any legal action or proceeding with respect
to any Collateral.
"RAIL CAR LOAN" means that certain loan in the original principal
amount of approximately $1,169,800, made by Lender to Borrower pursuant to
Rail Car Loan Documents.
"RAIL CAR LOAN DOCUMENTS" means that certain Loan and Security
Agreement (Rail Car) which the parties intend to prepare and execute between
Lender and Borrower, and all other "Loan Documents" described therein,
relating to a loan by Lender to Borrower to acquire ten new nitric acid rail
cars.
"RELATED COMPANY" means any member of any controlled group of
corporations (as defined in the Code) of which the Borrower is a party, or any
trade or business (whether or not incorporated) which together with the
Borrower would be treated as a single employer under Section 4001 of ERISA.
"REPORTABLE EVENT" shall have the meaning assigned to that term in
Title IV of ERISA, including a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a creation of operations described in Section
4062(e) of ERISA.
"REQUEST FOR ADVANCE" means a certificate executed and delivered by
Borrower in form acceptable to Lender which contains all of the information as
described in Section 2.2(b) hereof.
"SECURITY INTEREST" collectively means the Liens created for the
benefit of the Lender pursuant to the Loan Documents.
"SUBSIDIARY" means any present or future corporation of which more
than 50% of the outstanding stock having by its terms the ordinary voting
power to elect a majority of the board of directors, managers or trustees of
such corporation is at the time, directly or indirectly through one or more
intermediaries, owned or controlled by the Borrower and/or one or more of its
Subsidiaries, irrespective of whether or not, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency. If at any time, and only for so
long as, the Borrower has no Subsidiaries, provisions of this Agreement which
refer to Subsidiaries shall be of no force and effect insofar a they pertain
to Subsidiaries although they shall remain in full force and effect as to all
other Persons in question.
"TENANT SUBORDINATION AGREEMENT" means that certain Subordination,
Nondisturbance, Estoppel and Attornment Agreement dated October 31, 1994,
executed by EDC and Borrower in favor of Lender.
"TERM OUT PERIOD" has the meaning assigned to such term in Section
2.3(b) of this Agreement.
"TITLE POLICY" means the policy of title insurance referred to in
Section 2.9 hereof.
"TREASURY RATE" means the rate per annum equal to the yield to
maturity for the U.S. Treasury Security having a remaining term to maturity
closest to five (5) years as at (and shall be fixed as of) the close of
business on the third Business Day prior to the first day of the Term Out
Period, as such yield to maturity is reported on page 5 ("U.S. Treasury and
Money Markets") of the information ordinarily provided by Telerate Systems
Incorporated (provided that if Telerate Systems Incorporated ceases to report
such information, then such information shall be taken from any publicly
available source of similar data designated by Lender).
"UCC" means the Uniform Commercial Code (or any successor statute) as
from time to time in effect in any applicable jurisdiction.
ARTICLE 2
THE LOAN
Section 2.1 THE LOAN. On the basis of the covenants, agreements and
representations of Borrower contained herein and subject to the terms and
conditions hereinafter set forth, Lender agrees to lend to Borrower and
Borrower agrees to borrow from Lender a sum not to exceed the principal amount
of TWELVE MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($12,750,000.00) (the "Loan"), the proceeds of which are to be disbursed by
Lender exclusively for the payment of the following costs and expenses as
hereinafter provided: (i) costs and expenses incurred in connection with the
construction of the DSN Plant; (ii) other costs and expenses incidental to the
DSN Plant; and (iii) costs and expenses incurred in connection with the Loan
and Borrower's undertakings hereunder, which proceeds shall be disbursed in
accordance with the Disbursement Schedule and as follows:
(a) RECORDATION DISBURSEMENTS. Upon recordation of the
Leasehold Mortgage, provided that the title insurer has issued or
irrevocably committed in writing to issue to Lender the Title Policy,
Lender shall disburse to the Persons entitled thereto the amounts (if
acceptable to Lender) necessary to pay all or portions of: (i) out of
pocket costs, charges, expenses and legal fees incurred by (A) Lender and
payable by Borrower hereunder or (B) Borrower in connection with title
charges and premiums, tax and lien service charges, recording fees, escrow
fees, real property taxes and assessments, and insurance premiums payable
in connection with the Loan; and (ii) other DSN Plant costs and expenses
theretofore incurred by Borrower, all in accordance with the applicable
provisions of the Disbursement Schedule.
(b) COURSE-OF-CONSTRUCTION DISBURSEMENTS. Subsequent to
recordation of the Leasehold Mortgage and subject to the provisions of this
Agreement, including without limitation the provisions contained in Section
2.2 hereof, Lender shall disburse to Borrower, or if reasonably deemed
necessary by Lender, Lender shall disburse directly to such Persons as have
actually supplied labor, materials or services in connection with or
incidental to the construction of the DSN Plant, and subject to the
applicable retention percentage set forth in the Construction Contract,
such sums as are required to be used and which shall be used only for the
payment of (i) the costs and expenses of any of Borrower's undertakings in
this Agreement, the Note, the Leasehold Mortgage or any of the other Loan
Documents, (ii) interest on borrowings under the Note, (iii) the costs and
expenses of Lender which are payable by Borrower or reimbursable by
Borrower as set forth herein, and (iv) the costs and expenses of the labor
and materials used in constructing the DSN Plant and costs and expenses
incidental thereto, with all disbursements under this Agreement to be made
in accordance with the applicable provisions of the Disbursement Schedule.
Section 2.2 DISBURSEMENT METHODS.
(a) Notwithstanding any other terms of this Agreement, the
disbursements under the Loan shall be capped at $5,000,000 until such time
as LSB and certain of its subsidiaries shall have in full force and effect,
a new $75,000,000 revolving credit facility with BankAmerica Business
Credit or affiliate thereof on terms and conditions reasonably acceptable
to Lender.
(b) REQUEST FOR ADVANCE. From time to time, but not more
frequently than twice per month, Borrower shall furnish to Lender,
separately with respect to each request for any disbursement of proceeds of
the Loan, a Request for Advance duly signed and sworn to with all blanks
appropriately filled in, setting forth such details concerning construction
of the DSN Plant as Lender shall require, including (i) a detailed
breakdown of the applicable percentages of completion and costs of the
various phases of construction of the DSN Plant, showing the amounts
expended to date for such construction and the amounts then due and unpaid,
an itemized estimate of the amount necessary to complete construction of
the DSN Plant in its entirety, and a certification by Borrower and Mr. Leo
Hilinski or his designee that construction of the DSN Plant to the date of
such certificate complies with the Plans and Specifications; (ii) a list of
the names and addresses of all materials dealers, laborers and
subcontractors to whom payments are due under such Request for Advance; and
(iii) if required by Lender, receipted invoices or bills of sale and
unconditional partial releases of lien (on forms approved by Lender) from
each materials dealer, laborer and subcontractor who has done work or
furnished materials for construction of the portion of the DSN Plant
covered by each such Request for Advance acknowledging acceptance of such
payment in satisfaction of Borrower's obligations. A Request for Advance
must be for an amount not less than $500,000. Lender may disburse a part
of the funds requested if it approves part but not all of the Request for
Advance.
(c) CONSTRUCTION CONSULTANT. Throughout the course of
construction of the DSN Plant, Lender will employ, at Borrower's sole cost
and expense, Construction Consultant or Consultants who shall review as
agent for Lender all construction activities undertaken in regard to the
DSN Plant, which Construction Consultant(s) shall certify or otherwise
indicate to Lender that construction of the DSN Plant to the date of each
Request for Advance and certificate of Borrower is as set forth in the
Request for Advance and certificate submitted by Borrower, that such
construction substantially complies with the Plans and Specifications and
that the progress of construction is such that the construction of the DSN
Plant will be completed within the Construction Period, with each such
certificate and indication from such inspector or inspectors to be a
further condition precedent to Lender's approval of Borrower's then
submitted Request for Advance. Lender may change Construction Consultants
or modify the terms of its agreement with any Construction Consultant, if
deemed reasonably necessary by Lender.
(d) DISBURSEMENTS; DEFICIENCIES. The proceeds of the Loan
disbursed under this Agreement shall be evidenced by the Note and shall be
secured by the Borrower's interest in the DSN Plant Equipment Lease, the
Ground Lease, the Ground Sublease and the other Collateral, and all such
proceeds shall be disbursed, as aforesaid, directly to and to reimburse
such Persons, or to Borrower to reimburse such Persons as have actually
supplied labor, materials or services in connection with or incidental to
construction of the DSN Plant, or to reimburse Borrower in the event
Borrower shall have already paid such Persons. In no event shall Lender be
required to disburse any amount which, in Lender's reasonable opinion, will
either (i) reduce the total undisbursed amount of the Loan below the amount
necessary to pay for the balance of the work, labor and materials necessary
fully to complete construction of the DSN Plant in accordance with the
Plans and Specifications, or (ii) reduce the undisbursed amount of Loan
proceeds allocated to the cost category described in any paragraph
contained in the Disbursement Schedule below the amount which Lender
reasonably deems sufficient to pay in full the costs to which such amount
is allocated. In the event any amount in a cost category of the
Disbursement Schedule is deficient, and Borrower has not made alternative
payment arrangements for the costs in question, then upon ten (10) days'
written notice from Lender, Borrower shall furnish Lender with paid
invoices, bills and receipts indicating that Borrower has paid, from
Borrower's own funds, for the costs of completing the construction of the
DSN Plant or the costs in the cost category in question, as the case may
be, in a sufficient amount to make the undisbursed amount of the Loan or
the undisbursed portion thereof under the cost category in question
sufficient to pay for the entire balance of the costs of completing the
construction of the DSN Plant or the entire balance of the costs in such
cost category, but only if such work has been performed and materials have
been provided.
(e) LIMITATIONS ON DISBURSEMENTS. Disbursements of Loan
proceeds shall be made by Lender only to defray costs actually incurred by
Borrower and in accordance with the Disbursement Schedule. Disbursements
on account of the direct costs of constructing the DSN Plant shall be
limited to the lesser of (i) the actual cost to Borrower of work and labor
performed on the DSN Plant and materials incorporated into the DSN Plant or
suitably stored at the DSN Plant Location or (ii) the actual value (as
determined by Lender in its reasonable discretion) of said work and labor
performed and materials stored; disbursements on account of indirect or
"soft" costs relating to the construction of the DSN Plant, the Loan, the
preparation of the Plans and Specifications, and all of the other
transactions contemplated hereby shall be limited to the actual amounts of
such costs as indicated by invoices, statements, vouchers, receipts or
other written evidence satisfactory to Lender.
(f) CONTINUATION AND DATE-DOWN ENDORSEMENTS. After
recordation of the Leasehold Mortgage and as a condition precedent to each
disbursement under the Loan after the initial advance, Borrower shall, at
its own cost and expense, deliver or cause to be delivered to Lender from
time to time such continuation and date-down endorsements to be attached to
the Title Policy in form and substance satisfactory to Lender, as Lender
deems necessary to insure the priority of the Leasehold Mortgage as a valid
first priority lien on the DSN Plant Location and the DSN Plant as of the
date of and including the amount covered by each such disbursement, and
Borrower agrees to furnish to the title insurer such surveys and other
information as are reasonably required by Lender or the title insurer to
enable the title insurer to issue such endorsements to Lender.
(g) CHANGE ORDERS. Borrower shall not permit any amendments
or modifications of the Plans and Specifications, the Construction Contract
or any subcontracts, or the performance of any work pursuant to such
amendments or modifications, which individually exceed $250,000 or, when
added to the cumulative amount of all net increases in the prices payable
under the Construction Contract and all such subcontracts resulting from
all such amendments and modifications theretofore permitted by Borrower,
would result in a net increase in the total price payable under all such
subcontracts in excess of $750,000.
(h) OTHER GENERAL CONDITIONS. No Request for Advance will
include (i) any amounts previously disbursed hereunder, (ii) any costs not
approved, certified or verified as provided above, (iii) any costs for
which payment reimbursement was previously requested by Borrower and for
which proof of payment has been requested but not yet received by Lender,
and/or (iv) any real estate taxes, mechanics' liens, security interests,
claims or other charges against the Collateral, or any interest, fees or
other costs which Borrower may have failed to pay in accordance with this
Agreement or the other Loan Documents. If Lender considers that its best
interest and the best interest of the completion of the construction lies
in accelerating the amounts to be advanced hereunder, it shall be entitled
to do so, and no such advance shall be deemed to be a waiver of any
condition contained herein.
Section 2.3 REPAYMENT OF THE LOAN. The Borrower promises to repay
the Loan as follows:
(a) During the Construction Period, monthly interest
payments on outstanding principal balance of the Loan at the applicable
rate set forth in Section 2.4 shall be paid to Lender commencing December
1, 1994 and on the first day of each month thereafter.
(b) The principal balance outstanding under the Note,
and all accrued and unpaid interest, and all other Obligations owing under
any of the Loan Documents shall be due and payable in full on the date on
which the Construction Period terminates; provided, however, that if the
Construction Period ends on the DSN Plant Completion Date, then the Loan
shall be converted to a term Loan and shall be extended for a period (the
"Term Out Period") commencing on the day immediately succeeding the last
day of the Construction Period and ending on the date which is eight-four
(84) months after such date, subject to the following terms and conditions:
(i) no uncured Default has occurred and is
continuing, and no material adverse change in the business,
financial condition or operations of Borrower, any Guarantor or
EDC shall have occurred;
(ii) any undisbursed Loan proceeds existing
at the end of the Construction Period shall be cancelled, and
Borrower shall have no further right to request or receive any
further disbursements of Loan proceeds, provided, that this
limitation shall not apply if Borrower demonstrates to Lender
that additional conforming costs and expenses have been
incurred in connection with the DSN Plant and Lender approves
such additional costs and expenses for payment from such
undisbursed Loan Proceeds prior to the commencement of the Term
Out Period;
(iii) Lender shall have determined, based
upon an appraisal of the DSN Plant conducted at Borrower's sole
expense by an independent appraiser selected by Lender, that
the Fair Market Value of the DSN Plant and the Equipment equals
or exceeds the outstanding principal balance of the Loan. This
shall be performed and completed not later than January 1,
1995;
(iv) LSB and certain of its subsidiaries
shall have entered into a new $75,000,000 credit facility with
BankAmerica Business Credit or affiliate thereof on terms and
conditions reasonably acceptable to Lender;
(v) commencing on the first day of the
first month which begins not less than 31 days after the last
day of the Construction Period and thereafter on the first day
of each subsequent month, Borrower shall pay to Lender during
the Term Out Period in eighty-four (84) consecutive, equal
monthly payments of principal and interest, calculated by fully
amortizing the outstanding principal balance of the Loan as of
the commencement of the Term Out Period over an 84-month period
at the applicable interest rate set forth in Section 2.4; and
(vi) the principal balance outstanding under
the Note, and all accrued and unpaid interest not sooner paid
when due under the Note, and all other Obligations of Borrower
owing under any and all of the Loan Documents, shall due and
payable in full on the last day of the Term Out Period.
(c) In the event the Loan is not converted to a
term Loan because Borrower has chosen to finance the DSN Plant with a
lender other than Lender, not due to any default by Lender, then in
addition to all other sums owing on the date on which the
Construction Period ends, Borrower shall pay to Bank a termination
fee equal to five percent (5%) of the outstanding principal balance
of the Loan as of the date on which the Construction Period ends.
The Borrower's obligation to pay all amounts payable hereunder is absolute
and unconditional and shall not be affected by any circumstance of any
character whatsoever, including (i) any setoff, counterclaim, recoupment,
defense, abatement or reduction or any right which the Borrower may have
against the Lender, the manufacturer or supplier of any of the Equipment or
anyone else for any reason whatsoever; (ii) the invalidity, enforceability
or disaffirmance of this Agreement or any other Loan Document related
hereto; or (iii) the prohibition of or interference with the use or
possession-by the Borrower of all or any part of the DSN Plant Location or
the Equipment, for any reason whatsoever.
Section 2.4 INTEREST CHARGES. During the Construction Period,
the outstanding principal balance of the Loan shall bear interest at a rate
per annum equal to the Libor Rate plus 3.10%. During the Term Out Period,
the outstanding principal balance of the Loan shall bear interest at a per
annum rate equal to the Treasury Rate plus 2.70%. In each instance,
interest shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.5 LATE CHARGE RATE. In the event the Borrower fails
to pay any amount hereunder when due, the amount due shall bear charges
thereon calculated at the Late Charge Rate. At any time when any Event of
Default has occurred, irrespective of any cure periods, and continues for
over ten (10) days, the Borrower will pay interest on the Loan at the Late
Charge Rate.
Section 2.6 MAXIMUM INTEREST. In no event shall the interest
charged with respect to the Obligations exceed the maximum amount permitted
under applicable law. Notwithstanding anything to the contrary herein or
elsewhere, if at any time the rate of interest called for hereunder or
under the Note or other Loan Document (the "Stated Rate") exceeds the
highest rate of interest permissible under any applicable law (the "Maximum
Lawful Rate"), then for so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable shall be equal to the Maximum Lawful
Rate; provided, however, that if at any time thereafter the Stated Rate is
less than the Maximum Lawful Rate, the Borrower shall, to the extent
permitted by law, continue to pay interest at the Maximum Lawful Rate until
such time as the total interest received by the Lender is equal to the
total interest which the Lender would have received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and
until the Stated Rate again exceeds the Maximum Lawful Rate, in which event
this provision shall again apply.
Section 2.7 EXPENSES. The Borrower agrees to pay on demand
all reasonable out of pocket costs and expenses (including reasonable
legal, appraisal, accounting, auditing and similar fees) incurred at any
time, before or after the Obligations are paid in full, in connection with
(i) the enforcement, attempted enforcement, amendment or termination of
this Agreement or any of the other Loan Documents, the performance of any
of the Borrower's duties under this Agreement and the other Loan Documents
or any exercise by Lender of its rights and remedies under this Agreement
or any other of the Loan Documents, including in connection with a
reorganization or bankruptcy reorganization of the Borrower or any
Affiliate; (ii) the filing or recordation of all documents or instruments
relating to the Collateral; (iii) realizing upon or protecting any
Collateral and enforcing and collecting any Obligations or guaranty
thereof; and (iv) any Default or Event of Default. The Borrower also
agrees to reimburse the Lender, on the Funding Date, for its legal fees for
outside counsel plus any appraisal fees, recording and search fees and
related expenses, including travel and other out of pocket expenses of the
Lender's agents and its counsel, incurred by it in connection with the
preparation, negotiation, execution, closing and delivery of the Loan
Documents.
Section 2.8 PREPAYMENT. No prepayment of the Loan shall be
permitted during the Construction Period or prior to the date which is
forty-two (42) months after the date on which the Term Out Period begins.
Thereafter, provided no Default has occurred and is continuing, the
Borrower may prepay the Loan in whole, but not in part, on the first day of
any month, upon at least thirty (30) Business Days' prior written notice to
the Lender. Such prepayment of the Loan shall be accompanied by the
payment of all principal, all accrued but unpaid interest on the Loan to
the date of prepayment and all outstanding and unpaid costs, fees and
expenses. In addition, the prepayment of the Loan shall be made with a
prepayment fee in an amount equal to the greater of (a) two percent (2.0%)
of the outstanding principal balance of the Loan being prepaid, or (b) the
excess, if any, of (i) the present value of the principal and interest
payments which would have been payable during the remainder of the Term Out
Period in the absence of the prepayment, using a discount rate equal to one
percent (1.0%) plus the yield to maturity, as of the Third Business Day
prior to the date on which the prepayment is made, on U.S. Treasury
Securities having a remaining term to maturity closest to the remaining
average life of the Loan, as such yield to maturity is reported on page 5
("U.S. Treasury and Money Markets") of the information ordinarily provided
by Telerate Systems Incorporated, over (ii) the principal amount being
prepaid.
Section 2.9 CONDITIONS OF LENDING. The obligation of the
Lender to make the initial and any subsequent advance under the Loan is
subject to the prior satisfaction (or waiver in writing and signed by
Lender in its sole discretion) of each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Borrower and the
Guarantors in the Loan Documents and any certificate, document or
financial or other written statement furnished at any time under or
in connection herewith shall be true and correct in all material
respects on and as of the date given and on and as of the date of the
Funding Date as if made on and as of such date and otherwise in
exactly the same language.
(b) COMPLIANCE. The Borrower shall have complied and
shall then be in compliance with all the terms, covenants and
conditions of the Loan Documents.
(c) NO DEFAULT. No Default shall have occurred and be
continuing.
(d) NO MATERIAL ADVERSE CHANGE. No material adverse
change shall have occurred with respect to the business, financial
condition or operations of the Borrower since the financial statement
of LSB dated December 31, 1993 and the Lender shall have received a
certificate from the Chief Executive Officer of the Borrower to that
effect; and no material adverse change shall have occurred with
respect to the business, financial condition or operations of EDC or
any Guarantor, as may be determined by Lender in the exercise of its
reasonable discretion.
(e) DELIVERY OF DOCUMENTS. Each of the Loan Documents,
the Ground Lease, the DSN Plant Equipment Lease and the Ground
Sublease shall have been executed and delivered to the Lender in form
and substance satisfactory to the Lender and shall be in full force
and effect.
(f) NO CHANGE IN LAW. No change in state or federal
law shall have been enacted or proposed which would make the Loan
unlawful to the Lender.
(g) REVIEW OF REAL PROPERTY RECORDS. Prior to the
initial advance the Lender shall have reviewed and approved the real
property records and encumbrances relating to the DSN Plant Location,
including the Ground Lease and the Ground Sublease.
(h) LANDLORD/MORTGAGEE WAIVERS. Prior to the initial
advance the Borrower shall have provided to the Lender such
Landlord/Mortgagee Waivers, in form, substance and number as may be
reasonably required by the Lender.
(i) MORTGAGE AND TITLE INSURANCE. Prior to the initial
advance, the Lender shall have received the Leasehold Mortgage
encumbering Borrower's interest under the Ground Lease and the Ground
Sublease, in form and priority as may be acceptable to the Lender in
its sole discretion, and the Leasehold Mortgage shall have been
recorded and any recording fees and any Arkansas intangible recording
tax shall have been paid in full. The Lender shall also have
received an ALTA lender's policy of title insurance, issued by a
title insurer acceptable to Lender, in form, amount and with such
priority and endorsements as the Lender may reasonably require,
including:
(i) Coverage against mechanics' liens;
(ii) An endorsement insuring the continuing
priority of subsequent advances;
(iii) A single tax parcel endorsement; and
(iv) Proof that all real estate taxes for
the Premises due and owing as of the Closing Date have been
paid.
(j) OPINIONS OF COUNSEL. Prior to the initial advance
the Lender shall have received an opinion of legal counsel for
Borrower, LSB, LSBC and EDC, in form and substance satisfactory to
the Lender and its counsel, which opinion will include, among other
things, opinions affirming the Borrower's authority to enter into
this Agreement, the perfection and priority of the Security Interest,
LSB's and LSBC's authority to enter into the Guaranties and EDC's
authority to enter into the DSN Plant Equipment Lease and the Ground
Lease, the Ground Sublease, and the enforceability of the Loan
Documents.
(k) ENVIRONMENTAL COMPLIANCE. Not later than ten (10)
days prior to the initial advance, the Lender shall have received and
found satisfactory an environmental report on the DSN Plant location
in form acceptable to the Lender. Subject to Borrower's
environmental representations and warranties, Lender acknowledges
that an acceptable report has been received by Lender.
(l) BOND. The Bonding Company shall have named Lender
as an additional insured.
(m) CONSULTANT'S CONSTRUCTION REPORT. Lender shall
have received a report from the Construction Consultant regarding
such matters as Lender may reasonably request.
(n) PERMITS. Lender and the Construction Consultant
shall have received evidence that Borrower has obtained all necessary
governmental approvals, permits and other approvals (or no impediment
exists to them being timely obtained) for completion and operation of
the DSN Plant and other improvements to be constructed pursuant to
the Plans and Specifications, including building, site plan, and such
other permits or approvals as are requested by Lender, and that all
such permits and approvals are or are expected to be in full force
and effect, with no appeal of the granting of any thereof having been
made.
(o) CONTRACTOR'S CONSENTS. Lender shall receive a
complete copy of the fully executed Contractor's Consents, if any,
which shall permit assignment thereof to Lender and its successors
and assigns and shall recognize Lender as a permitted assignee of
such Construction Contract.
(p) UCC SEARCHES. Prior to the initial advance Lender
shall have received UCC searches for Oklahoma and Arkansas reflecting
Lender's first priority lien in the personal property Collateral.
(q) LOAN FEE AND EXPENSES. The Borrower shall have
paid in full the up front fee referenced in Section 2.12 hereof and,
from the initial funding, the expenses referenced in Section 2.7
hereof.
(r) CERTIFICATE OF GOOD STANDING AND TAX CLEARANCes.
Prior to the initial advance the Lender shall have received certified
copies indicating the Borrower is in good standing under the laws of
its state of incorporation and qualified to do business in the states
where it does business and such tax clearance certificates as may be
required by the Lender.
(s) PROCEEDINGS. All proceedings and actions shall
have been taken in connection with the transactions contemplated by
this Agreement, and all documents contemplated in connection herewith
shall be satisfactory in form and substance to the Lender and its
counsel.
(t) EVIDENCE OF INSURANCE. Prior to the initial
advance the Lender shall receive evidence of all insurance required
by the terms of this Agreement and the Loan Documents.
(u) TERMINATION OF LIENS. Prior to the initial advance
the Lender shall have received duly executed UCC termination
statements and other instruments in form and substance satisfactory
to the Lender, as shall be necessary to terminate and satisfy any
Liens on the Collateral except for Permitted Liens.
(v) CERTIFICATE OF INCUMBENCY OF BORROWER. Prior to
the initial advance Lender shall have received a certificate of
incumbency of Borrower signed by the Borrower's Secretary or
Assistant Secretary, which certificate shall certify the names of the
officers of the Borrower authorized to execute any Loan Documents and
any other related documents on behalf of Borrower, together with the
signatures of such officers, and Lender may conclusively rely on such
certificate until receipt of a further certificate of the Secretary
or Assistant Secretary of Borrower cancelling or amending the prior
certificate and submitting the signatures of the officers named in
such further certificate.
(w) RESOLUTIONS OF BORROWER. Prior to the initial
advance Lender shall have received a certified copy of all corporate
proceedings of Borrower evidencing that all action required to be
taken in connection with the authorization, execution, delivery, and
performance of this Agreement, the other Loan Documents, the Lease
and the DSN Plant Equipment Lease, and the transactions contemplated
hereby and thereby, has been duly taken.
(x) CERTIFICATE OF INCUMBENCY OF EACH GUARANTOR. Prior
to the initial advance Lender shall have received a certificate of
incumbency of each Guarantor signed by such Guarantor's Secretary or
Assistant Secretary, which certificate shall certify the names of the
officers of such Guarantor authorized to execute the Guaranty and any
other related documents on behalf of such Guarantor, together with
the signatures of such officers, and Lender may conclusively rely on
such certificate until receipt of a further certificate of the
Secretary or Assistant Secretary of such Guarantor cancelling of
amending the prior certificate and submitting the signatures of the
officers named in such further certificate.
(y) RESOLUTIONS OF EACH GUARANTOR. Prior to the
initial advance Lender shall have received a certified copy of all
corporate proceedings of each Guarantor evidencing that all action
required to be taken in connection with the authorization, execution,
delivery and performance of the Guaranty to be executed by such
Guarantor, and the transactions contemplated thereby, has been duly
taken.
(z) REFERENCES. Prior to the initial advance Lender
shall have received, reviewed and found satisfactory bank and
customer references for EDC and each Guarantor.
(aa) $75,000,000 CREDIT FACILITY. Prior to the initial
advance, LSB and certain of its subsidiaries shall have received and
accepted an executed commitment to lend, and shall be in the process
of completing a new $75,000,000 credit facility with BankAmerica
Business Credit or affiliate thereof on terms and conditions
reasonably acceptable to Lender.
(ab) OTHER REQUIRED DOCUMENTATION. Borrower shall
execute and/or deliver such other documents, instruments, agreements
or items as Lender may reasonably require.
Section 2.10 PLACE AND FORM OF PAYMENTS. Unless the Lender
otherwise directs in writing, all payments and prepayments permitted or
required by any Loan Document shall be made in immediately available funds
and not later than the time necessary for good funds to be credited on the
same day received at the Lender's account in accordance with the
instructions annexed hereto as Rider 2.10 or to such other location as the
Lender shall hereafter designate to the Borrower in writing. Whenever any
payment is stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees.
Section 2.11 HOLD BACK. Lender will hold back construction
fund advances in an amount of $2,500,000 until such time as Lender shall
have determined, based upon an appraisal of the DSN Plant performed at
Borrower's sole cost and expense by an independent appraiser selected by
Lender, that the Fair Market Value of the DSN Plant is at least equal to
$12,750,000.
Section 2.12 COMMITMENT FEE. In consideration of the Lender's
commitment to enter into this Agreement, the Mixed Acid Plant Loan
Documents and the Rail Car Loan Documents, the Borrower acknowledges that
the Lender has previously received a non-refundable fee in the amount of
$124,950, paid in connection with the Lender's proposal and commitment.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
Section 3.1 GRANT OF SECURITY INTEREST. As collateral
security for the prompt and due payment and performance of the Obligations
and all Indebtedness of Borrower to Lender under the Mixed Acid Plant Loan
Documents and the Rail Car Loan Documents, the Borrower hereby assigns to
the Lender and grants to the Lender a continuing lien on and security
interest in all of the Borrower's right, title and interest in and to the
following property, present or future, tangible or intangible, now owned or
existing or hereafter acquired or arising:
(a) All documents, instruments, rentals and other
rights to payment relating to the DSN Plant, the DSN Plant Equipment
Lease, the Ground Lease, the Ground Sublease and the Consulting
Agreement and all other agreements, contracts, chattel paper,
contract rights, rights to payment and insurance policies and surety
bonds relating thereto, and the Plans and Specifications and all
Construction Contracts, and all proceeds of all of the foregoing;
(b) All general intangibles, trade secrets, computer
programs, software, customer lists, trademarks, trade names, patents,
licenses, copyrights, technology, processes, proprietary information,
and insurance proceeds relating to the DSN Plant;
(c) All books and records, including books of account
and ledgers of every kind and nature, all electronically recorded
data relating to Borrower or the business thereof, all receptacles
and containers for such records, and all files and correspondence
relating to the DSN Plant;
(d) All Equipment, goods, including all inventory,
machinery, tools, molds, dies, furniture, furnishings, fixtures,
trade fixtures, motor vehicles and all other goods used in connection
with or in the conduct of Borrower's business relating to the DSN
Plant;
(e) All accessions, appurtenances, components, repairs,
repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the
foregoing;
(f) All rights, remedies, powers and/or privileges of
Borrower with respect to any of the foregoing; and
(g) Any and all Proceeds and products of any of the
foregoing, including all money, rentals, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible
property received upon the sale or disposition of any of the
foregoing.
Except in the ordinary or normal course of its operations in Section 7.6
herein, Borrower has no right to dispose of or sell any of the
above-described Collateral.
Section 3.2 CONTINUING OBLIGATION. Except with respect to
those Permitted Liens and those liens which by law are accorded a first
priority, the Borrower shall take all action necessary to grant the Lender
a valid first priority lien on and security interest in all Collateral on
the Funding Date, and to maintain at all times the validity,
enforceability, perfection and first priority of the Security Interest.
Until the Obligations are fully paid and satisfied, the Borrower will at
all times do, make, execute, deliver, record, register or file all such
financing statements, fixture filings, deeds of trust, mortgages,
assignments, certificates, charges, instruments, acts, pledges, assignments
and transfers (or cause the same to be done) and will deliver to the Lender
such instruments constituting or evidencing the Collateral, as the Lender
may request, to assure, continue or establish the validity, enforceability,
perfection and first priority (except for Permitted Liens) of the Security
Interest. To the extent permitted by applicable law, the Borrower hereby
authorizes the Lender to: (i) sign Borrower's name and on behalf of such
Borrower to execute and file mortgages, deeds of trust, financing
statements, and notices of lien necessary to protect or perfect the
security interest granted herein in any or all of the Collateral and (ii)
file a carbon, photocopy or other reproduction of this Agreement or any of
the other Loan Documents as a financing statement in each case which the
Lender, in its discretion, deems necessary or desirable to perfect or
maintain the perfection of the Security Interest.
ARTICLE 4
ADMINISTRATION OF THE COLLATERAL
Section 4.1 THE EQUIPMENT. The Borrower, at its own cost and
expense, will keep, or cause EDC to keep, the Equipment in good operating
condition and repair, except for normal wear and tear, and will not waste
or destroy, or allow EDC to waste or destroy, such Equipment, or any part
thereof, or be negligent in the care and use thereof and will make all
necessary replacements thereof and repairs thereto. The Borrower shall
promptly inform the Lender of any material additions to such Equipment and
of any material loss, damage, or destruction of such Equipment. The
Borrower will not permit any Equipment to become a fixture to any real
property or an accession to any other personal property, unless the Lender
has a first priority perfected Security Interest in such real or personal
property or has been provided with such waivers or consents as the Lender
may reasonably require. The Borrower shall, promptly upon the Lender's
request, deliver to Lender any and all evidence of ownership of such
Equipment.
Section 4.2 NO LENDER LIABILITY. The Lender shall have no
duty of care with respect to any Collateral unless and until it takes the
same into its own possession or control. The Lender shall be deemed to
have satisfied its duty of due care with respect to Collateral in its
custody and control if it accords to such Collateral treatment
substantially equal to the treatment the Lender accords its own property,
or if the Lender takes such action with respect to the Collateral as the
Borrower requests in writing, but no failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall
be presumptively deemed, from that failure or omission, an absence of
reasonable care. The Lender shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause
thereof, unless caused by the Lender's gross negligence or willful
misconduct. The Lender does not, by anything contained herein or in any
other Loan Document or otherwise, assume any obligation of the Borrower
under the Ground Lease, the Ground Sublease, or the DSN Plant Equipment
Lease or any other contract or agreement assigned to Lender or in which
Lender is granted a security interest, and the Lender shall not be
responsible in any way for the performance by the Borrower of any of the
terms and conditions thereof.
Section 4.3 USE OF EQUIPMENT; IDENTIFICATION.
(a) The Borrower shall use the Equipment in a careful
and proper manner, will comply with and conform to all governmental
laws, rules and regulations relating thereto, and will cause the
Equipment to be operated properly or in substantial accordance with
the manufacturer's or supplier's instructions or manuals and only by
competent and duly qualified personnel.
(b) The Borrower shall not move any of the Equipment
from the DSN Plant Location without the prior written consent of CIT.
(c) Upon Lender's written request and at the Borrower's
sole expense, the Borrower shall attach to each item of Equipment a
notice satisfactory to Lender disclosing Lender's security interest
in such item of Equipment.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
the Loan, the Borrower represents and warrants to the Lender as set forth
below. The representations and warranties of the Borrower contained in
this Article V and otherwise herein and in any other Loan Document shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Lender and shall survive the
execution and delivery of this Agreement and the other Loan Documents and
the making of the Loan.
Section 5.1 ORGANIZATION AND QUALIFICATION. The Borrower is
duly incorporated and organized and is validly existing as a corporation in
good standing under the laws of the State of Oklahoma, with all power
(corporate or otherwise) to own or lease and operate the DSN Plant and its
other properties and assets and to carry on its business in the manner in
which such business is now conducted. The Borrower is duly licensed and
qualified to do business and is in good standing in the state of Arkansas
and in every other state where failure to be so licensed or qualified and
in good standing would have a material adverse effect on its business,
properties or assets.
Section 5.2 CONCERNING THE LOAN DOCUMENTS. The Borrower has
the power to authorize, execute and deliver the Loan Documents to which
Borrower is a party, to incur and perform its Obligations hereunder and
thereunder, and, as applicable, to grant the Security Interest. The
Borrower has duly taken all necessary corporate action to authorize the
execution, delivery and performance of such Loan Documents, and no consent,
approval or authorization of, or declaration or filing with, any
governmental or other public body, or any other Person (including without
limitation any stockholders, trustees or holders of Indebtedness of the
Borrower), is required in connection with such authorization, execution,
delivery and performance by the Borrower or the consummation of the
transactions contemplated hereby or thereby. Such Loan Documents have been
duly authorized, executed and delivered by or on behalf of the Borrower,
and constitute the legal, valid and binding Obligations of the Borrower and
are enforceable against the Borrower in accordance with their respective
terms.
Section 5.3 GUARANTIES. Each Guarantor has the power to
authorize, execute and deliver its Guaranty and to incur and perform its
obligations under its Guaranty. Each Guarantor has duly taken all
necessary corporate action to authorize the execution, delivery and
performance of its Guaranty, and no consent, approval or authorization of,
or declaration or filing with, any governmental or other public body, or
any other Person (including without limitation any stockholders, trustees
or holders of Indebtedness of such Guarantor), is required in connection
with such authorization, execution, delivery and performance by such
Guarantor. Each Guarantor's Guaranty has been duly authorized, executed
and delivered by or on behalf of such Guarantor, and constitutes the legal
valid and binding obligations of such Guarantor and is enforceable against
such Guarantor in accordance with its terms.
Section 5.4 EQUIPMENT. All Equipment is in good operating
order and condition and repair, except for ordinary wear and tear, is used
or useful in the business of the Borrower and is readily moveable without
harm or damage. The invoices previously delivered to the Lender by the
Borrower respecting the Equipment are genuine, true and accurate, and the
descriptions and locations of the Equipment set forth in the Disclosure
Schedule are true, complete and accurate.
Section 5.5 THE DSN PLANT. Construction of the DSN Plant is
in full compliance with all requirements of the DSN Plant Equipment Lease
and the Ground Lease; the description of the DSN Plant Location in Exhibit
"C," and the description of the Ground Lease, the Ground Sublease and the
DSN Plant Equipment Lease in Article 1 above is accurate and complete. The
Ground Lease, the Ground Sublease and the DSN Plant Equipment Lease are
valid and enforceable in accordance with their respective terms and are in
full force and effect. Neither the Borrower nor any other party to the
Ground Lease, the Ground Sublease or the DSN Plant Equipment Lease is in
default of its obligations thereunder or has delivered or received any
notice of default under the Lease or the Equipment Lease (as applicable)
which default has not been waived or cured.
Section 5.6 TITLE TO THE DSN PLANT AND EQUIPMENT; SECURITY
INTEREST. Except for the Security Interest and Permitted Liens and all
items set forth in the Title Policy, under the Ground Lease and subject to
the right of quiet enjoyment under the Ground Sublease and the DSN Plant
Equipment Lease, the Borrower has good, and merchantable title to the DSN
Plant and all Equipment and other Collateral, and neither the DSN Plant nor
any of such Equipment nor any other Collateral is or will be subject to any
Lien. The provisions of the Loan Documents create legal, valid and
enforceable security interests in and liens on the DSN Plant and all
Equipment and other Collateral, and the Loan Documents and such UCC and
real property filings create a perfected and continuing first priority
security interest upon the DSN Plant and all the Equipment and other
Collateral securing the Obligations, and are enforceable against the
Borrower and all third parties.
Section 5.7 FINANCIAL CONDITION. The Borrower has furnished
to the Lender LSB's consolidated and consolidating financial statements as
of December 31, 1993, accompanied by the report of LSB's independent
certified public accountants, which statements present fairly in all
material respects the consolidated and consolidating financial position of
LSB and its consolidated Affiliates as of the date thereof. Such financial
statements have been prepared in accordance with GAAP. From the date of
such financial statements to the date of the execution of this Agreement,
there has not been any material adverse change from the financial condition
reflected in such financial statements or in the Borrower's business or
condition since the date thereof. As of the date hereof, the Borrower has
no direct or contingent material liabilities which are not provided for or
reflected in such financial statements.
Section 5.8 LITIGATION. There are no actions, suits,
proceedings or investigations pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or EDC as it may affect the
Ground Lease, the Ground Sublease or the DSN Plant Equipment Lease, nor to
the knowledge of Borrower is there any basis therefor on the date of this
Agreement.
Section 5.9 DISCLOSURE. No representation or warranty made by
the Borrower hereunder and no written information, exhibit, report,
document or certificate furnished by or on behalf of the Borrower or any
Affiliate to the Lender in connection with this Agreement, contained or
will contain, as of its date or as of the Funding Date, any material mis-
statement of fact or omits, as of its date, to state a material fact or any
fact necessary to make the statements contained therein not misleading.
There is no fact known to the Borrower that materially adversely affects or
that, insofar as the Borrower can now reasonably foresee, may materially
adversely affect, the condition, financial or otherwise, operations,
properties or prospects of the Borrower and Affiliates, or the ability of
the Borrower to carry out its Obligations under any Loan Document.
Section 5.10 TAX RETURNS AND PAYMENTS. The Borrower has filed
all federal, state and local tax returns and other reports which it was
required by law to file on or prior to the date hereof and has paid all
taxes, assessments, fees and other governmental charges and penalties and
interest, if any, payable against it or its property, income or franchise,
that are due and payable, and Borrower does not have any knowledge of any
actual or proposed deficiency or additional assessment in connection
therewith. The charges, accruals and reserves on the books of Borrower in
respect of federal, state and local taxes for all open years, and for the
current fiscal year, make adequate provision for all unpaid tax liabilities
for such periods.
Section 5.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the
Borrower nor EDC is in violation of any material term or provision of its
certificate of incorporation or by-laws, or of any material mortgage,
indenture, contract, agreement, instrument, or other undertaking to which
the Borrower or EDC is a party or which purports to be binding on Borrower
or EDC, or any of the assets of Borrower or EDC (including the Ground
Lease, the Ground Sublease and the DSN Plant Equipment Lease), or, except
as disclosed to Lender pursuant to Section 5.14 hereof, of any judgment,
decree, order or any material statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of this
Agreement and the other Loan Documents do not and will not violate or
otherwise conflict with any such term or provision or result in the
creation of any security interest, lien, charge or encumbrance upon any of
the Collateral, except the Security Interest.
Section 5.12 PENSION PLANS. The Borrower has not participated
in any "prohibited transactions", as defined in Section 4975 of the
Internal Revenue Code, that could subject the Borrower to any tax or
penalty imposed by said Section 4975 (other than prohibited transactions
that have been "corrected", as defined in said Section 4975). Since the
effective date of the Employee Retirement Income Security Act of 1974, as
from time to time amended ("ERISA"), the Borrower has not incurred any
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA (other than any accumulated funding deficiency that has been
"corrected", as defined in Section 4971(c)(2) of the Internal Revenue Code.
Section 5.13 LABOR RELATIONS. To the best knowledge of
Borrower after due inquiry, Borrower and EDC are in material compliance
with the Fair Labor Standards Act with respect to the DSN Plant. To the
best knowledge of Borrower after due inquiry, neither the Borrower nor EDC,
with respect to the DSN Plant, is engaged in any unfair labor practice. To
the best knowledge of Borrower after due inquiry, there are: (i) no unfair
labor practice complaints pending or, to the best knowledge of the
Borrower, threatened against the Borrower or EDC and no grievance or
arbitration proceedings arising out of or under collective bargaining
agreements are so pending or, to the best knowledge of the Borrower,
threatened; (ii) no strikes, work stoppages or controversies pending or
threatened between the Borrower or EDC and any of their employees (other
than employee grievances arising in the ordinary course of business); and
(iii) no union representation questions exist with respect to the employees
of the Borrower or EDC and no union organizing activities taking place
which would have a material adverse effect on the financial condition,
results of operations or business of the Borrower or EDC;
Section 5.14 ENVIRONMENTAL LAWS. Except as disclosed by
Borrower to Lender by delivery to Lender of copies of documents publicly
filed with the Securities and Exchange Commission, a report of the Arkansas
Department of Pollution and Control and Ecology to EDC dated July 18, 1994,
an environmental report of Woodward Clyde regarding the DSN Plant Location,
and correspondence from Borrower and Affiliates regarding the DSN Plant
Location (all collectively referred to as "Environmental Disclosure
Documents"), to the best knowledge of Borrower after due inquiry, as of the
date hereof (a) the operations of the Borrower or EDC (with respect to the
DSN Plant) comply in all material respects with all applicable
Environmental Laws; (b) none of the operations of the Borrower or EDC (with
respect to the DSN Plant) is subject to any judicial or administrative
proceeding alleging the violation of any Environmental Laws; (c) none of
the operations of the Borrower or EDC (with respect to the DSN Plant) is
the subject of federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous
Substance into the environment; (d) neither the Borrower nor EDC (with
respect to the DSN Plant) has filed any notice under any federal or state
law indicating past or present treatment, storage or disposal of a
Hazardous Substance or reporting a spill or release of a Hazardous
Substance into the environment; and (e) neither the Borrower nor EDC (with
respect to the DSN Plant) has any known material contingent liability in
connection with any release of any Hazardous Substance into the
environment. The materiality standard used in this Section 5.14 shall be
exceeded if the facts giving rise to a breach or breaches of the
representations or warranties contained herein might result in liability in
excess of $1,000,000 in the aggregate.
Section 5.15 TRADE NAMES. Other than as disclosed on the
Disclosure Schedule, the Borrower, during the past five years, has not used
any corporate name other than its present corporate name (which is set
forth in the introductory paragraph of this Agreement) and has not been
known by or used any fictitious, trade or "doing business" name.
Section 5.16 SUBSIDIARIES. The Disclosure Schedule contains a
correct and complete list of the name and relationship to the Borrower of
each and all of the Borrower's Subsidiaries, if any, and the location of
the chief executive office of each Subsidiary.
Section 5.17 LOANS AND AFFILIATE PAYMENTS. The Disclosure
Schedule fully and completely sets forth all notes and Indebtedness
together with the amount and schedule of any material payments owed by
Borrower to officers, directors, stockholders and Affiliates of Borrower.
Section 5.18 PERMITS, LICENSES. Borrower possesses all
material permits, franchises, contracts and licenses required and owns or
has the right to use all trademarks, trade names, patents and fictitious
name rights necessary to enable it to conduct the business in which it is
engaged without conflict with the rights of others.
Section 5.19 BROKER'S OR TRANSACTION FEES. Borrower has no
obligation to any Person for any finder's, broker's or investment banker's
fee in connection with the transactions contemplated hereby.
Section 5.20 TAXPAYER ID NO. AND CHIEF EXECUTIVE OFFICE.
Borrower's taxpayer identification number is 731456545. Borrower's chief
executive office is located at 16 South Penn, Oklahoma City, OK 73107, and
Borrower's principal place of business is located in Oklahoma City.
Section 5.21 NO DEFAULT. No Default has occurred under this
Agreement.
ARTICLE 6
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as all or any
portion of the Obligations remain unpaid or unsatisfied, it will, at its
own cost and expense:
Section 6.1 FINANCIAL AND OTHER INFORMATION. Promptly furnish
to the Lender or its agents all such financial or other information as the
Lender shall reasonably request, and, at the request of the Lender, notify
its auditors and accountants that the Lender is authorized to obtain such
information directly from them. Without limitation of the foregoing, the
Borrower will furnish to the Lender in such detail as the Lender shall
request:
(a) Not later than 120 days after the close of each
Fiscal Year of the Borrower, unaudited balance sheets of the Borrower
as at the end of such Fiscal Year and related unaudited statements of
income, expense and retained earnings and statements of cash flow of
the Borrower for such year, setting forth in each case in comparative
form figures for the previous Fiscal Year, all in reasonable detail,
fairly presenting in all material respects the financial position of
the Borrower and the results of operations of the Borrower for the
Fiscal Year then ended, and prepared in accordance with GAAP. Such
statements shall be accompanied by a certificate of the chief
financial officer or chief accounting officer of Borrower.
(b) Not later than 90 days after the close of each
fiscal quarter of Borrower, unaudited balance sheets of the Borrower
as at the end of such period, and unaudited statements of income and
expense from the beginning of the Fiscal year to the end of each such
period, for the Borrower, all in reasonable detail, fairly presenting
in all material respects the financial position and results of
operations of the Borrower, in each case, prepared in accordance with
GAAP and consistent with the audited financial statements required
pursuant to Section 6.1(e). Such statements shall be accompanied by
a certificate of the chief financial officer or accounting officer of
Borrower stating that, based upon such examination or investigation
as such officer shall have deemed necessary to enable him to render
an informed opinion in respect thereof, to the best of his knowledge
and belief the financial statements are materially correct and no
Default exists under this Agreement and is continuing except for
those, if any, described in such certificate in reasonable detail.
(c) Not later than 120 days after the close of each
Fiscal Year of EDC, audited consolidated and unaudited consolidating
balance sheets of EDC and its consolidated Subsidiaries as at the end
of such Fiscal Year and related audited consolidated and unaudited
consolidating audited statements of income, expense and retained
earnings and statements of cash flow of EDC and its consolidated
Subsidiaries for such year, all in reasonable detail, fairly
presenting in all material respects the financial position of EDC and
its consolidated Subsidiaries and the results of operations of EDC
and its consolidated Subsidiaries for the Fiscal Year then ended, and
prepared in accordance with GAAP. Such statements required hereunder
shall be examined and accompanied by a report of independent
certified public accountants which shall not contain any
qualifications or exceptions as to scope.
(d) Not later than 90 days after the close of each
fiscal quarter of EDC, unaudited consolidated and consolidating
balance sheets of EDC and its consolidated Subsidiaries as at the end
of such period, and consolidated and consolidating statements of
income and expense from the beginning of the Fiscal Year to the end
of each such period, for EDC and its consolidated Subsidiaries, all
in reasonable detail, fairly presenting in all material respects the
consolidated and consolidating financial position and results of
operations of EDC and its consolidated Subsidiaries, in each case,
prepared in accordance with GAAP and consistent with the audited
financial statements required pursuant to Section 6.1(c) above, and
certified to be materially correct by the chief financial officer or
the chief accounting officer of EDC.
(e) Not later than 120 days after the close of each
Fiscal Year of LSB, LSB's 10K Report filed with the Securities and
Exchange Commission, the audited consolidated and unaudited
consolidating balance sheets of LSB and its consolidated Affiliates
as at the end of such Fiscal Year and related audited consolidated
and unaudited consolidating statements of income, expense and
retained earnings and audited statements of cash flow of LSB and its
consolidated Affiliates for such year, setting forth in each case in
comparative form figures for the previous Fiscal Year, all in reason-
able detail, fairly presenting the financial position of LSB and its
consolidated Affiliates and the results of operations of LSB and its
consolidated Affiliates for the Fiscal Year then ended, and prepared
in accordance with GAAP. Such statements required hereunder shall be
examined and accompanied by a report of independent certified public
accountants which shall not contain any qualifications as to scope;
and such report shall also be accompanied by a certificate of such
accountants stating that in the course of performing their
examination such accountants did not become aware of the existence of
any default under this Agreement, except for those, if any, described
in such certificate in reasonable detail. In addition, the chief
financial officer or accounting officer of LSB shall provide a
certificate which shall also include a statement by such officer that
no breach, default or event of default has occurred and is continuing
under any document to which LSB or any consolidated Affiliate is a
party that evidences any Indebtedness of LSB or any such Affiliate
which exceeds, individually or together with any related
Indebtedness, $5,000,000, or if any such breach, default or event of
default has occurred, explaining the nature of such breach, default
or event of default and the status thereof. Such certificate shall
also include a statement from such officer that LSB is in compliance
with all covenants contained in this Agreement relating to the
financial condition of LSB, and such statement shall be accompanied
by the calculations of such financial covenants.
(f) Not later than 90 days after the close of each
fiscal quarter of LSB, LSB's 10Q Report filed with the Securities and
Exchange Commission and the unaudited consolidated balance sheets of
LSB and its consolidated Affiliates as at the end of such period, and
unaudited consolidated statements of income and expense from the
beginning of the Fiscal year to the end of each such period, for LSB
and its consolidated Affiliates, all in reasonable detail, fairly
presenting in all material respects the consolidated financial
position and results of operations of LSB and Affiliates, in each
case, prepared in accordance with GAAP and consistent with the
audited financial statements required pursuant to Section 6.1(e)
above. Such statements shall be accompanied by a certificate of the
chief financial officer or the chief accounting officer of LSB
stating that, based upon such examination or investigation as such
officer shall have deemed necessary to enable him to render an
informed opinion in respect thereof, to the best of his knowledge and
belief, such financial statements are materially correct and no
Default under this Agreement exists and is continuing except for
those, if any, described in such certificate in reasonable detail.
Such certificate shall also include a statement from such officer
that LSB is in compliance with all financial covenants contained in
this Agreement relating to the financial condition of LSB, and such
statement shall be accompanied by the actual calculations of such
financial covenants.
(g) Promptly after the Borrower or any Affiliate
receives the same, copies of management letters provided to the
Borrower by its independent certified public accountants;
(h) Promptly after their preparation, copies of any and
all proxy statements, financial statements, and reports which the
Borrower, or LSB or EDC sends to its shareholders or holders of its
Indebtedness, and copies of any and all periodic special reports, as
well as registration statements, filed by the Borrower, LSB or EDC
with the Securities and Exchange Commission or similar State
authority;
(i) Deliver to the Lender within 30 days of the end of
each quarter, a compliance certificate signed by the Borrower's Chief
Financial Officer or the Chief Accounting Officer certifying that the
Borrower is in compliance with all of the terms and conditions of the
Agreement and that no Default exists.
(j) Such additional information as the Lender may from
time to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary or Guarantor and which are
kept in the ordinary course of business.
Section 6.2 ACCESS. At all reasonable times, and from time to
time, permit the Lender or its agents to inspect the Collateral and to
audit, examine and make extracts from or copies of any of its books,
ledgers, reports, correspondence and other records.
Section 6.3 TAXES. Promptly pay and discharge all taxes,
assessments and other governmental charges prior to the date on which same
are past due, establish adequate reserves for the payment of such taxes,
assessments and other governmental charges, make all required withholding
and other tax deposits, and, upon request, provide the Lender with receipts
or other proof that any or all of-such taxes, assessments or governmental
charges have been paid in a timely fashion; provided, however, that nothing
contained herein shall require the payment of any tax, assessment or other
governmental charge so long as its validity is being contested in good
faith and by appropriate proceedings diligently conducted.
Section 6.4 MAINTENANCE OF PROPERTIES; INSURANCE. At the
Borrower's sole cost and expense, defend all Collateral against the claims
or demands of all other parties; keep the Collateral in good operating
condition and repair and in compliance with all laws (except normal wear
and tear); and insure all Equipment, the DSN Plant and DSN Plant Location
against risk, in coverage, form and amount satisfactory to the Lender with
a carrier reasonably acceptable at all times to Lender with no greater
deductible amount than $250,000 per occurrence. Insurance on the
Equipment, the DSN Plant and the DSN Plant Location shall be in an amount
equal to the greater of the full replacement value thereof, or 100% of the
outstanding balance of the Loan. The Borrower shall also maintain (a)
builder's all risk completed value hazard insurance covering 100% of the
replacement cost of the DSN Plant and Equipment during the course of
construction in the event of fire, lightning, windstorm, earthquake,
vandalism, malicious mischief and all other risks normally covered by "all
risk" policies in the area where the DSN Plant is located (including loss
by flood if the DSN Plant is located in an area designated as subject to
the danger of flood); (b) product liability insurance in an amount
customary for the businesses conducted by the Borrower; and (c) general
public liability insurance in an amount satisfactory to Lender, but in no
event less than Fifteen Million Dollars ($15,000,000) per occurrence, for
bodily injury and property damage. The Borrower and EDC shall also
maintain workers' compensation insurance in accordance with Borrower's and
EDC's usual practices. Each insurance policy shall be endorsed in favor of
the Lender as additional loss payee in form and substance satisfactory to
the Lender, and provide that any proceeds payable thereunder will be paid
to the Borrower and the Lender as their interest may appear. Each policy
shall provide that if such insurance is cancelled for any reason
whatsoever, or if any substantial change is made in the coverage which
affects the Lender, or if such insurance is allowed to lapse for nonpayment
of premium, such cancellation, change or lapse shall not be effective as to
the Lender until 30 days after receipt by the Lender of written notice from
the carrier thereof. The Borrower hereby directs all insurers under such
policies to pay all proceeds with respect to losses of Collateral to
the Borrower and to Lender. With respect to occurrences giving rise to
insurance proceeds paid with respect to losses, the Lender shall, so long
as no uncured Default exists, release such proceeds to the Borrower after
receipt of evidence of satisfactory repair, replacement or reconstruction
of the assets subject to such casualty.
Section 6.5 BUSINESS. Take all necessary steps to preserve
its corporate existence and its right to conduct business in all state in
which the nature of its business or the ownership of it property requires
such qualification.
Section 6.6 COMPLIANCE. Use reasonable efforts to comply in
all material respects with all applicable laws and duly observe all valid
requirements of all applicable governmental authorities, including all
statutes, rules and regulations relating to public and employee health and
safety and social security and withholding taxes. The Borrower may contest
or dispute any taxes, assessments or impositions in good faith, so long as
such contest or dispute does not result in the creation or incurring of any
liens against the Lender's Collateral and the Borrower maintains adequate
reserves as required under GAAP for the satisfaction of the disputed tax,
assessment or imposition.
Section 6.7 LITIGATION. Except as disclosed in the
Environmental Disclosure Documents referred to in Section 5.14, promptly
notify the Lender in writing of any action, suit, proceeding, or
counterclaim against, or of any investigation of, the Borrower, the DSN
Plant Location or any of the Collateral, if: (i) the outcome of such
litigation, proceeding, counterclaim, or investigation would materially and
adversely affect the Collateral or the finances or operations of Borrower
or EDC; or (ii) such litigation, proceeding, counterclaim, or investigation
questions the validity of this Agreement or any other Loan Document or any
action taken or to be taken pursuant thereto. Borrower shall furnish to
the Lender such information regarding any such litigation, proceeding,
counterclaim, or investigation as the Lender shall request.
Section 6.8 ENVIRONMENTAL LAWS.
(a) Except as disclosed in the Environmental Disclosure
Documents referred to in Section 5.14, give written notice to Lender
immediately upon receipt of any notice that (i) the operations of the
Borrower or EDC with respect to the DSN Plant are not in material
compliance with requirements of applicable Environmental Laws; (ii)
the Borrower or EDC with respect to the DSN Plant is subject to
federal or state investigation evaluating whether any remedial action
is needed to respond to the release of any Hazardous Substance into
the environment which would have a material adverse effect on
Borrower; or (iii) any properties or assets of the Borrower or EDC
with respect to the DSN Plant are subject to an Environmental Lien.
As used herein, "Environmental Lien" means a lien in favor of any
governmental entity for (A) any liability under any Environmental
Laws, or (B) damages arising from or costs incurred by such
governmental entity in response to a release of a Hazardous Substance
into the environment.
(b) Except as disclosed in the Environmental Disclosure
Documents referred to in Section 5.14, without limiting the
generality of any of the Borrower's other covenants and agreements,
the operations of the Borrower or EDC with respect to the DSN Plant
shall at all times comply in all material respects with all
applicable Environmental Laws. The materiality standard used in this
Section 6.8 shall be exceeded if the facts giving rise to a breach or
breaches of the covenant herein is likely to result in liability in
excess of $500,000 in the aggregate.
Section 6.9 NOTICES. Promptly notify the Lender in writing of
any Default or of any default by any party under any Construction Contract,
the Ground Lease, Ground Sublease, the DSN Plant Equipment Lease, the
Consulting Agreement, or as required by Sections 6.7 and 6.8 of this
Agreement. The failure of the Borrower to promptly give the Lender such
notice of any Default of which it is aware, shall, at the Lender's option,
eliminate any cure period for such Default.
Section 6.10 TANGIBLE NET WORTH. LSB shall maintain at all
times, on a consolidated basis, a minimum tangible net worth of $80,000,000
after subtracting treasury stock and $92,800,000 before subtracting
treasury stock. Notwithstanding the foregoing, the tangible net worth
after subtracting treasury stock shall not be less than $83,000,000 at
December 31, 1995 and $85,000,000 at December 31, 1996 and thereafter. The
term tangible net worth is defined as total stockholders' equity, after
deducting any treasury stock, less all assets that are considered
intangible assets under GAAP (including but not limited to goodwill,
patents, trademarks, certain deferred charges (as approved by Lender) and
customer lists).
Section 6.11 CHANGE OF OWNERSHIP. LSB shall at all times hold
not less than one hundred percent (100%) of each class of stock of LSBC
and, at all times, LSBC shall hold, directly or indirectly, one hundred
percent (100%) of each class of stock of the Borrower.
Section 6.12 USE OF PROCEEDS. Use the proceeds of the Loan
for construction and equipment costs, fees and expenses in accordance with
Article 2 hereof.
Section 6.13 BOOKS. Keep proper books of record and account
in which full, true and correct entries in accordance with GAAP will be
made of all dealings or transactions in relation to its business and
activities.
ARTICLE 7
NEGATIVE COVENANTS
So long as all or any portion of the Obligations remains
unpaid, the Borrower covenants and agrees that, without the Lender's prior
written consent, which consent will not be unreasonably withheld, the
Borrower shall not:
Section 7.1 CORPORATE STRUCTURE. Merge, reorganize or
consolidate with or acquire any Person or make any investment in the
securities of any Person.
Section 7.2 DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS. Declare or
pay any dividends or other distributions upon any stock or make any
distribution of the Borrower's property or assets or redeem, retire,
purchase or otherwise acquire, directly or indirectly, the Borrower's
stock.
Section 7.3 LOANS, INVESTMENTS, AFFILIATE PAYMENTS, SALARIES.
Make any loans or other advances of money (other than compensation) to any
Person; make any payments to any officers, directors, stockholders or
Affiliates on any existing loans except as set forth on the Disclosure
Schedule or pursuant to the Ground Lease or Administrative Services
Agreement between Borrower and LSB, or payments to LSB for the Borrower's
pro rata share of taxes with respect to the Borrower's business, or permit
the annual compensation and all other direct and indirect remuneration to
its officers to increase more than fifteen percent (15%) per year.
Section 7.4 CHANGE IN BUSINESS, STRUCTURE OR BUSINESS
LOCATION. Make any material change in the capital structure or any of
Borrower's business objectives, purposes and operations; engage, directly
or indirectly, in any business other than ownership of the DSN Plant, the
railcars acquired with the Rail Car Loan, the Mixed Acid Plant financed by
the Mixed Acid Plant Loan, and all items related thereto; or change the
location of its chief executive office without thirty days' prior written
notice to Lender.
Section 7.5 GUARANTIES. Borrower shall not guaranty or
otherwise, in any way, become liable with respect to the Indebtedness or
liabilities of any Person.
Section 7.6 SALE OF PROPERTY. Offer to sell, convey, assign,
transfer, exchange, lease (except pursuant to the DSN Plant Equipment
Lease, the Ground Sublease or to the extent permitted in the Mixed Acid
Plant Loan Documents or the Rail Car Loan Documents) or otherwise dispose
of any Collateral, or, on an annual basis, any other real or personal
property having a value in excess of $25,000, except sales of supplies,
equipment and inventory in the ordinary course of the Borrower's business
and trade-ins on new purchases, provided that Lender shall have a first
priority perfected lien on any new purchases of property.
Section 7.7 PREPAYMENT. Borrower shall not prepay any
Indebtedness, except the Obligations in accordance with this Agreement.
Section 7.8 LIENS. Create, incur, assume or suffer to exist
any Lien upon any Collateral, the DSN Plant Equipment Lease or the Ground
Lease, except Liens in favor of the Lender and Permitted Liens and the DSN
Plant Equipment Lease, the Ground Sublease and the Consulting Agreement.
Section 7.9 NEGATIVE PLEDGE ON LEASES. Pledge, encumber,
transfer or assign any of its right, title or interest in any of the real
property Collateral relating to the DSN Plant Location.
Section 7.10 PENSION PLANS. To the knowledge of Borrower,
with respect to all Pension Plans: (a) incur any liability to the Pension
Benefit Guaranty Corporation; (b) participate in any prohibited transaction
involving any of such plans or any trust created thereunder which would
subject the Borrower to a tax or penalty on prohibited transactions imposed
under Code Section 4975 or ERISA; (c) fail to make any contribution which
it is obligated to pay under the terms of such plan; (d) allow or suffer to
exist any occurrence of a Reportable Event, or any other event or condition
which presents a risk of termination by the Pension Benefit Guaranty
Corporation of any such plan; or (e) incur any withdrawal liability with
respect to any multiemployer Pension Plan which is not fully bonded.
Section 7.11 BORROWER'S NAME. Change Borrower's corporate
name or use any trade name or style unless the Borrower shall first give
the Lender thirty days prior written notice of the change in question.
Section 7.12 CHANGES TO DSN PLANT DOCUMENTS. Make any
alterations, amendments or modifications of any provisions of (a) the DSN
Plant Equipment Lease, (b) the Ground Lease, (c) the Ground Sublease, (d)
the Consulting Agreement, or (e) the Administrative Services Agreement
dated September 19, 1994 between LSB and the Borrower.
Section 7.13 OTHER DEBTS. Except for Permitted Liens,
Borrower shall not have outstanding or incur any direct or contingent
Indebtedness (other than those to Lender) or lease obligations (other than
the Ground Lease, DSN Plant Equipment Lease and Ground Sublease) or to
become liable for the Indebtedness of others without Lender's written
consent. This does not prohibit:
(a) Acquiring goods, supplies, services or merchandise
on normal trade credit, or payroll obligations or obligations under
the Administrative Services Agreement between LSB and Borrower;
(b) Endorsing negotiable instruments received in the
usual course of business;
(c) Debts, lines of credit and leases in existence on
the date of this Agreement and disclosed to Lender on the Disclosure
Schedule; or
(d) Taxes, Indebtedness associated with the
construction of the DSN Plant and lawsuits.
Section 7.14 TRANSACTIONS WITH AFFILIATES. Not to enter
transactions with any Affiliate on terms less favorable than those
available to Borrower from persons or entitles not affiliated with Borrower
except:
(a) taxes on consolidated tax returns;
(b) the DSN Plant Equipment Lease;
(c) the Ground Lease;
(d) the Ground Sublease;
(e) the Consulting Agreement; and
(f) the Administrative Services Agreement.
None of the agreements in this Section 7.14(b) through (f) may be amended
or modified with Lender's prior written consent.
ARTICLE 8
DEFAULT
Section 8.1 Events of Default. The occurrence of any one or
more of the following events for any reason whatsoever shall constitute an
Event of Default:
(a) Any failure to pay any of the Obligations when due;
(b) Any representation or warranty made by the Borrower
in any Loan Document or in any Financial Statement or other
certificate furnished by the Borrower or any Affiliate at any time to
the Lender shall prove to be untrue in any material respect as of the
date on which made;
(c) Except with respect to cure periods as otherwise
set forth herein or therein, default shall occur in the observance or
performance of any of the other covenants and agreements contained in
any Loan Document and Borrower has not cured such default within ten
(10) days of Borrower's receipt of written notice identifying such
failure, or if any such agreement, instrument or document shall
terminate or become void or unenforceable without the written consent
of Lender and Borrower refuses to execute valid and enforceable
substitute documents;
(d) The DSN Plant Completion Date has not occurred
prior to the end of the Construction Period;
(e) Any Event of Default under the Mixed Acid Plant
Loan Documents, the Rail Car Loan Documents and Borrower has not
cured such Event of Default within any cure period provided therein;
(f) Any default by the Borrower under any material
agreement or instrument with any third party (other than an agreement
or instrument evidencing the lending of money) if such default
continues for thirty (30) days after such breach first occurs;
(g) Any default by the Borrower in any payment on any
indebtedness or obligation owed to any trade creditor in excess of
$100,000 in the aggregate beyond any period of grace provided with
respect thereto and Borrower is not contesting same in good faith and
diligently;
(h) Any uncured default beyond any applicable grace
period by LSB or any of its Subsidiaries under any agreement or
instrument evidencing any loan, extension of credit or other
Indebtedness of LSB or any of its Subsidiaries in an amount equal to
or greater than $5,000,000;
(i) Any material part of the Collateral shall be
nationalized, expropriated, condemned, seized or otherwise
appropriated, or custody or control of such Collateral or of the
Borrower shall be assumed by any public authority or any court of
competent jurisdiction at the instance of any public authority;
(j) One or more judgments for the payment of money
aggregating an excess of $1,000,000 (if not adequately covered by
insurance) shall be rendered against the Borrower or EDC and there is
a failure to pay or to bond and stay enforcement of such judgment and
commence appropriate proceedings to appeal such judgment within the
applicable appeal period or, after such appeal is filed, Borrower or
EDC fails to diligently prosecute such appeal or such appeal is
denied;
(k) The Borrower, EDC or any Guarantor shall: (i) file
a voluntary petition in bankruptcy or file a voluntary petition or an
answer or otherwise commence any action or proceeding seeking
reorganization, arrangement or for any other relief under the Federal
Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing,
or consent to, approve of, or acquiesce in, any such petition, action
or proceeding; (ii) apply for or acquiesce in the appointment of a
receiver, assignee, liquidator, sequestrator, custodian, trustee or
similar officer for it or for all or a substantial part of its
property; (iii) make an assignment for the benefit of creditors; or
(iv) admit in writing that is unable generally to pay its debts as
they become due;
(l) An involuntary petition shall be filed or an action
or proceeding otherwise commenced seeking reorganization, arrangement
or readjustment of the Borrower's EDC's or any Guarantor's debt or
for any other relief under the Federal Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing; or a receiver, assignee,
liquidator, sequestrator, custodian, trustee or similar officer for
the Borrower or EDC or any Affiliate or any Guarantor or for all or a
substantial part of their property shall be appointed involuntarily;
or a warrant of attachment, execution or similar process shall be
issued against any substantial part of the property of the Borrower,
EDC or any Guarantor; and any of the foregoing remain undismissed or
undischarged for a period of 60 days;
(m) The Borrower, EDC or any Guarantor shall file a
certificate of dissolution under applicable state law or shall be
liquidated, dissolved or wound-up or shall commence or have commenced
against it any action or proceeding for dissolution, winding-up or
liquidation, or shall take any corporate action in furtherance
thereof without Lender's prior written consent;
(n) The Security Interest shall cease to be a valid and
perfected first priority security interest in any material portion of
the Collateral then in existence and Borrower refuses to or cannot
promptly cure any deficiency and restore the Lender's valid and first
perfected priority security interest;
(o) A material default shall occur in any Construction
Contract, the Consulting Agreement, the DSN Plant Equipment Lease,
the Ground Lease or the Ground Sublease and same are not being
contested diligently and in good faith, or the DSN Plant Equipment
Lease, the Lease, or the Ground Sublease shall expire or otherwise
terminate or become unenforceable;
(p) any Guarantor revokes or terminates any guaranty
relating to the Obligations or defaults under the terms of any such
guaranty; or
Section 8.2 RIGHTS UPON DEFAULT. Upon the occurrence and
during the continuance of any Event of Default:
(a) The Lender may declare all the Obligations not
otherwise due to be forthwith due and payable, (provided that, in the
case of the occurrence of any Event of Default described in Sections
8.l(i) or (j), all the Obligations shall forthwith become due and
payable without such declaration) whereupon the unpaid amount of the
Obligations (including any applicable prepayment penalty) shall
become immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived. Upon such acceleration, Lender shall not be obligated to
advance any further funds relating to the custodian of the DSN Plant.
(b) Notwithstanding the foregoing in Section 8.2(a) but
subject to the provisions of Section 9.10, the effect of an event
described in Section 8.1(a) as an occurrence of an Event of Default
shall be after Lender gives notice of such payment Default to
Borrower and Borrower shall not have paid such amount within three
(3) days of such Notice. The effect as an Event of Default of any
other event described in Section 8.1 may be waived by Lender in
writing.
(c) In addition to all other rights provided herein or
at law, the Lender shall have all of the rights and remedies of a
secured party under the UCC and all of the rights and remedies
granted under each of the Loan Documents. At any time when an Event
of Default has occurred and is continuing, the Lender may enter any
premises where the Collateral is located, take physical possession of
the Collateral or any part thereof, and maintain such possession on
the Borrower' premises or remove any or all of the Collateral to such
other place or places as the Lender desires in its sole discretion.
If the Lender exercises its right to take possession of any
Collateral upon the occurrence and during the continuance of any
Event of Default, the Borrower, upon the Lender's demand, will
assemble the Collateral and at the Lender's option, make it available
to the Lender at the Borrower' premises at which it is located or
deliver it to such place or places as the Lender directs. The
Borrower hereby waives to the full extent permitted by law all rights
to notice and hearing prior to the Lender's exercise of its rights to
take possession of the Collateral without judicial process or to
replevy, claim and deliver, attach or levy upon the Collateral ex
parte. The Lender shall not be under any obligation to marshall any
assets in favor of the Borrower or any other party or against or in
payment of any or all of the Obligations.
(d) The Lender may sell and deliver any or all of the
Collateral at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as the Lender, in its
sole discretion, deems advisable, all in accordance with the
applicable provisions of the UCC including the standard of commercial
reasonableness.
(e) The requirement of reasonable notice with respect
to a disposition of the Collateral shall be met if such notice is
mailed both by regular and certified mail, postage prepaid to the
Borrower at the address as set forth herein at least ten days before
the time of the event of which notice is being given. Subject to the
provisions of any applicable Loan Document or law governing the
enforcement of liens or security interests, the Lender may be the
purchaser at any public sale, and to the extent permitted by
applicable law, at any private sale, free from any right of
redemption, which the Borrower also waives.
(f) The Proceeds of any sale of any of the Collateral
shall be applied first to all costs and expenses of sale, including
attorneys' fees, and second to the payment (in whatever order the
Lender elects) of all of the Obligations. The Lender will return any
excess Proceeds to the Borrower, subject to the claims of any other
parties with an interest in the Collateral or the Proceeds, and the
Borrower shall remain liable to the Lender for any deficiency. If
any Collateral is sold by the Lender upon credit or for future
delivery, the Lender shall not be liable for the failure of the
purchaser to pay for such Collateral, and in such event the Lender
may resell the same.
(g) The Lender may exercise any right or remedy it may
have at law or in equity with respect to the Obligations or the
subject matter of this Agreement. The rights and remedies provided
for herein are cumulative and not exclusive of any other of such
rights and remedies or any other rights or remedies provided by law.
(h) Upon any Default, and during any applicable cure
period, Lender shall not be obligated to make any further advances or
Loans to Borrower.
ARTICLE 9
MISCELLANEOUS
Section 9.1 SURVIVAL. All agreements, representations and
warranties contained in this Agreement or made in writing by or on behalf
of the Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, notwithstanding
any investigation at any time made by the Lender.
Section 9.2 WAIVER OF NOTICES. No notice to or demand on the
Borrower which the Lender is not required hereunder or by law to give but
nevertheless may elect to give shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstances.
Section 9.3 ASSIGNMENT. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors
and assigns of the parties hereto; provided, however, that no interest
herein may be assigned by the Borrower without the prior written consent of
the Lender. The rights and benefits of the Lender hereunder shall, if the
Lender so agrees, inure to any party acquiring any interest in the
Obligations or any part thereof. In the event of any such assignment by
the Lender, the Borrower agrees that such assignment by the Lender shall be
free from any set-off, counterclaim defense or other claim that any such
Borrower may have against such assignee, without waiving any claim such
Borrower may have against the Lender. The terms "Lender" and "Borrower" as
used herein shall include the respective successors and assigns of such
parties.
Section 9.4 COMPLETE AGREEMENT MODIFICATION. This Agreement
is intended by the Borrower and the Lender to be the final, complete and
exclusive expression of the agreement between them and supersedes all prior
agreements and understandings regarding the DSN Plant. No modification,
rescission, waiver, release or amendment of any provision of this Agreement
shall be made, except by a written agreement signed by the Borrower and a
duly authorized officer of the Lender.
Section 9.5 APPLICABLE LAW. This Agreement and the Loan
Documents (except to the extent, if any, expressly provided to the contrary
in any Loan Document) shall be governed by, construed, applied and enforced
in accordance with the laws of the State of New York.
Section 9.6 INDEMNIFICATION.
(a) If after receipt of any payment of all or any part
of the Obligations, the Lender is for any reason compelled to
surrender such payment to any person or entity, because such payment
is determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason,
Borrower's Obligations under the Note shall continue in full force
and the Borrower shall indemnify and hold the Lender harmless for,
the amount of such payment surrendered. The provisions of this
Section shall be and remain effective notwithstanding any contrary
action which may have been taken by the Lender in reliance upon such
payment, and any such contrary action so taken shall be without
prejudice to the Lender's rights under this Section and shall be
deemed to have been conditioned upon such payment having become final
and irrevocable. The provisions of this Section shall survive the
termination of this Agreement.
(b) The Borrower hereby indemnifies and holds the
Lender, and its directors, officers, agents, employees and counsel,
harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind (except
claims brought by the Borrower against the Lender for breach of this
Agreement of the Loan Documents) including without limitation, court
costs and attorneys' fees imposed on or incurred by or asserted
against any of them, whether direct, indirect or consequential
arising out of or by reason of any litigation, investigations,
claims, or proceedings whether based on any federal, state or local
laws or other statutes or regulations commenced or threatened, which
arise out of or are in any way based upon the negotiation,
preparation, execution, delivery, enforcement, performance or
administration of this Agreement or any other Loan Document, or any
undertaking or proceeding relating to any of the transactions
contemplated hereby or by any act, omission to act, event or
transaction related or attended thereto, except this indemnification
shall not apply to any losses, liabilities, damages, injuries, costs,
expenses and claims caused by the gross negligence or willful
misconduct of Lender.
(c) The Borrower hereby indemnifies the Lender and
agrees to hold the Lender harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever (including, without limitation, court
costs and attorneys' fees) which at any time or from time to time may
be paid, incurred or suffered by, or asserted against the Lender for,
with respect to, or as a direct result of the violation by the
Borrower of the Environmental Laws or any laws or regulations
relating to Hazardous Substance, treatment, storage, disposal,
generation and transportation, air, water and noise pollution, soil
or ground or water contamination, the handling, storage or release
into the environment of Hazardous Substance, or with respect to, or
as a direct or indirect result of the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission or release
from, properties utilized by the Borrower or EDC with respect to the
DSN Plant in the conduct of their respective business into or upon
any land, the atmosphere, or any watercourse, body of water or
wetland, of any Hazardous Substance (including, without limitation,
any losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under the Environmental Laws).
(d) Without limiting any of the foregoing, if, by
reason of any suit or proceeding of any kind, nature or description
against the Borrower, which, in the Lender's sole discretion makes it
advisable for the Lender to seek counsel for protection and
preservation of its Liens, security or assets or to defend its own
interest, such reasonable expenses and counsel fees shall be allowed
to the Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement. All of the
foregoing costs and expenses shall be part of the Obligations and
secured by the Collateral.
Section 9.7 STAMP OR OTHER TAX. Should any stamp, excise,
sales, use or other tax, including mortgage, conveyance, deed, intangible
or recording taxes become payable in respect of this Agreement, or any
other Loan Document, any Obligations, or any Collateral, or any
modification hereof or thereof, the Borrower shall pay the same (including
interest and penalties, if any) and shall hold the Lender harmless with
respect thereto, except for income taxes of Lender as a result thereof.
Section 9.8 CAPTIONS. The captions of the various sections of
this Agreement have been inserted only for purposes of convenience; such
captions are not a part of this Agreement and shall not be deemed in any
manner to modify, explain, enlarge or restrict any provision hereof.
Section 9.9 NOTICES. All notices or other communications
which are required or permitted hereunder to be given to any party shall be
in writing and shall be deemed sufficiently delivered if delivered
personally or by registered or certified mail, return receipt requested, or
by nationally recognized overnight delivery service, to the address set
forth below or to such other address as each party may designate for itself
by like notice. Such notice or communication shall be deemed to have been
given on the date delivered; or if refused, on the date refused; or if
marked, on the date of actual receipt of such mailing as evidenced by the
return receipt.
If to the Lender: The CIT Group/Equipment
Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attn: Senior Vice President,
Credit
If to the Borrower: DSN Corporation
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
Any such notice, demand, or request shall be deemed given upon receipt,
refusal of delivery or return for failure to be called for.
Section 9.10 NO WAIVER, LENDER PERFORMANCE. No course of
dealing between the Borrower and the Lender and no delay or omission by the
Lender in exercising any right or remedy hereunder or under any other Loan
Document or with respect to any Obligations shall operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. All rights and remedies of the
Lender hereunder or under any other Loan Document shall be cumulative.
Upon the failure of the Borrower to perform any of its duties under this
Agreement the Lender may, but shall not be obligated to, perform any or all
such duties and the Borrower will upon demand reimburse the Lender for all
reasonable costs, fees and expenses incurred in connection therewith.
Section 9.11 EVIDENCE OF OBLIGATIONS; ADMISSIBILITY OF
LENDER'S BOOKS AND RECORDS. The Borrower agrees that the Lender's books
and records showing the Obligations shall be admissible in any action or
proceeding arising herefrom.
Section 9.12 NO LIABILITY FOR BROKERS. The Borrower covenant
and agree that the Lender shall have no liability for, and the Borrower
hereby indemnifies and holds the Lender harmless against, any brokerage fee
or finder's fee or other commission, or claim therefor, arising in
connection with the transactions contemplated by this Agreement.
Section 9.13 FURTHER ASSURANCES. The Borrower shall, at its
expense, do, execute and delivery such further acts and documents as the
Lender from time to time reasonably requires for the assuring and
confirming to the Lender of the rights created or intended to be created
hereunder, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document or for assuring the validity,
perfection, priority or enforceability of any Lien under any Loan Document.
Section 9.14 COUNTERPARTS. This Agreement and the other Loan
Documents may be executed by the parties hereto and thereto in any number
of separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 9.15 NOTICE OF BREACH BY LENDER. Borrower agrees to
give the Lender notice of any action or inaction by Lender or any agent or
attorney of the Lender in connection with this Agreement, any other Loan
Document, or the Obligations of Borrower under this Agreement or any other
Loan Document that may be actionable against Lender or any agent or
attorney of Lender or a defense to payment of any Obligations of Borrower
under this Agreement or any other Loan Document, for any reason, including
commission of a tort or violation of any contractual duty or duty implied
by law. Borrower agrees, to the fullest extent that it may lawfully do so,
that unless such notice is given promptly (and in any event within fifteen
(15) days after Borrower has knowledge, or with the exercise of reasonable
diligence could have had knowledge, of any such action or inaction),
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom to the extent that the Lender could have
mitigated such claim or defense after receipt of such notice.
Section 9.16 Time. Time is of the essence.
Section 9.17 EXHIBITS. Exhibits "A", "B", "C", "D" and "E"
attached hereto are incorporated herein by this reference.
Section 9.18 AUTHORIZATION TO DATE, COMPLETE BLANKS AND
CORRECT ERRORS. The Borrower hereby irrevocably authorizes Lender and
Lender's agents, representatives and employees to date, complete any blank
spaces contained in, and to correct any errors appearing in, this
Agreement, the other Loan Documents or in any other document relating
hereto or thereto.
Section 9.19 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL
AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH
DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, WHICH AGREEMENT AND OTHER LOAN DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT
AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS
AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF.
THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT WAS DRAFTED WITH THE JOINT
PARTICIPATION OF THE RESPECTIVE PARTIES THERETO AND SHALL BE CONSTRUED
NEITHER AGAINST NOR IN FAVOR OF ANY PARTY, BUT RATHER IN ACCORDANCE WITH
THE FAIR MEANING THEREOF.
Section 9.20 Venue and Jurisdiction. THIS AGREEMENT AND ANY
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. BORROWER
HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THIS AGREEMENT
MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, IN THE
COUNTY OF NEW YORK, OR THE UNITED STATES DISTRICT COURTS FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS LENDER MAY ELECT, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. BORROWER IRREVOCABLY CONSENTS TO SERVICE OF ANY SUMMONS AND/OR
LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED STATES AIR MAIL, POSTAGE
PREPAID, TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 9.9 HEREOF, SUCH
METHOD OF SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE
SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING. NOTHING IN THIS
AGREEMENT SHALL AFFECT THE RIGHT TO SERVICE OF PROCESS OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF LENDER TO BRING
ACTIONS, SUITS OR PROCEEDINGS IN THE COURTS OF ANY OTHER JURISDICTION.
BORROWER FURTHER AGREES THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT
ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF LIABILITY.
Section 9.21 Waiver of Trial by Jury. THE PARTIES TO THIS
AGREEMENT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS AGREEMENT
AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL
JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING,
AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
"Borrower" "Lender"
DSN CORPORATION, an Oklahoma THE CIT GROUP/EQUIPMENT FINANCING,
corporation INC., a New York corporation
By __________________________ By__________________________
__________________________ __________________________
(Printed Name & Title) (Printed Name & Title)
Agreed as to Article 6:
LSB INDUSTRIES, INC.,
a Delaware corporation
By __________________________
__________________________
[Printed Name & Title]
EXHIBIT "A"
Disclosure Schedule
EXHIBIT "B"
Promissory Note
EXHIBIT "C"
Legal Description of DSN Plant Location
EXHIBIT "D"
Disbursement Schedule
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE LOAN . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 The Loan . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Disbursement Methods . . . . . . . . . . . . . . 11
Section 2.3 Repayment of the Loan. . . . . . . . . . . . . . 15
Section 2.4 Interest Charges . . . . . . . . . . . . . . . . 16
Section 2.5 Late Charge Rate . . . . . . . . . . . . . . . . 17
Section 2.6 Maximum Interest . . . . . . . . . . . . . . . . 17
Section 2.7 Expenses . . . . . . . . . . . . . . . . . . . . 17
Section 2.8 Prepayment . . . . . . . . . . . . . . . . . . . 18
Section 2.9 Conditions of Lending. . . . . . . . . . . . . . 18
Section 2.10 Place and Form of Payments . . . . . . . . . . . 23
Section 2.11 Hold Back. . . . . . . . . . . . . . . . . . . . 23
Section 2.12 Commitment Fee . . . . . . . . . . . . . . . . . 23
ARTICLE 3 SECURITY FOR THE OBLIGATIONS . . . . . . . . . . . . . 23
Section 3.1 Grant of Security Interest . . . . . . . . . . . 23
Section 3.2 Continuing Obligation. . . . . . . . . . . . . . 24
ARTICLE 4 ADMINISTRATION OF THE COLLATERAL . . . . . . . . . . . 25
Section 4.1 The Equipment. . . . . . . . . . . . . . . . . . 25
Section 4.2 No Lender Liability. . . . . . . . . . . . . . . 25
Section 4.3 Use of Equipment; Identification . . . . . . . . 26
ARTICLE 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 26
Section 5.1 Organization and Qualification . . . . . . . . . 27
Section 5.2 Concerning the Loan Documents. . . . . . . . . . 27
Section 5.3 Guaranties . . . . . . . . . . . . . . . . . . . 27
Section 5.4 Equipment. . . . . . . . . . . . . . . . . . . . 27
Section 5.5 The DSN Plant. . . . . . . . . . . . . . . . . . 28
Section 5.6 Title to the DSN Plant and Equipment;
Security Interest. . . . . . . . . . . . . . . 28
Section 5.7 Financial Condition. . . . . . . . . . . . . . . 28
Section 5.8 Litigation . . . . . . . . . . . . . . . . . . . 29
Section 5.9 Disclosure . . . . . . . . . . . . . . . . . . . 29
Section 5.10 Tax Returns and Payments . . . . . . . . . . . . 29
Section 5.11 Compliance with Other Instruments. . . . . . . . 29
Section 5.12 Pension Plans. . . . . . . . . . . . . . . . . . 30
Section 5.13 Labor Relations. . . . . . . . . . . . . . . . . 30
Section 5.14 Environmental Laws . . . . . . . . . . . . . . . 30
Section 5.15 Trade Names. . . . . . . . . . . . . . . . . . . 31
Section 5.16 Subsidiaries . . . . . . . . . . . . . . . . . . 31
Section 5.17 Loans and Affiliate Payments . . . . . . . . . . 31
Section 5.18 Permits, Licenses. . . . . . . . . . . . . . . . 31
Section 5.19 Broker's or Transaction Fees . . . . . . . . . . 31
Section 5.20 Taxpayer ID No. and Chief Executive Office . . . 32
Section 5.21 No Default . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . 32
Section 6.1 Financial and Other Information. . . . . . . . . 32
Section 6.2 Access . . . . . . . . . . . . . . . . . . . . . 35
Section 6.3 Taxes. . . . . . . . . . . . . . . . . . . . . . 35
Section 6.4 Maintenance of Properties; Insurance . . . . . . 36
Section 6.5 Business . . . . . . . . . . . . . . . . . . . . 37
Section 6.6 Compliance . . . . . . . . . . . . . . . . . . . 37
Section 6.7 Litigation . . . . . . . . . . . . . . . . . . . 37
Section 6.8 Environmental Laws . . . . . . . . . . . . . . . 37
Section 6.9 Notices. . . . . . . . . . . . . . . . . . . . . 38
Section 6.10 Tangible Net Worth . . . . . . . . . . . . . . . 38
Section 6.11 Change of Ownership. . . . . . . . . . . . . . . 38
Section 6.12 Use of Proceeds. . . . . . . . . . . . . . . . . 38
Section 6.13 Books. . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . 39
Section 7.1 Corporate Structure. . . . . . . . . . . . . . . 39
Section 7.2 Dividends, Distributions, Redemptions. . . . . . 39
Section 7.3 Loans, Investments, Affiliate Payments,
Salaries . . . . . . . . . . . . . . . . . . . 39
Section 7.4 Change in Business, Structure or Business
Location . . . . . . . . . . . . . . . . . . . 39
Section 7.5 Guaranties . . . . . . . . . . . . . . . . . . . 39
Section 7.6 Sale of Property . . . . . . . . . . . . . . . . 39
Section 7.7 Prepayment . . . . . . . . . . . . . . . . . . . 40
Section 7.8 Liens. . . . . . . . . . . . . . . . . . . . . . 40
Section 7.9 Negative Pledge on Leases. . . . . . . . . . . . 40
Section 7.10 Pension Plans. . . . . . . . . . . . . . . . . . 40
Section 7.11 Borrower's Name. . . . . . . . . . . . . . . . . 40
Section 7.12 Changes to DSN Plant Documents . . . . . . . . . 40
Section 7.13 Other Debts. . . . . . . . . . . . . . . . . . . 40
Section 7.14 Transactions with Affiliates . . . . . . . . . . 41
ARTICLE 8 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 Events of Default. . . . . . . . . . . . . . . . 41
Section 8.2 Rights Upon Default. . . . . . . . . . . . . . . 44
ARTICLE 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 46
Section 9.1 Survival . . . . . . . . . . . . . . . . . . . . 46
Section 9.2 Waiver of Notices. . . . . . . . . . . . . . . . 46
Section 9.3 Assignment . . . . . . . . . . . . . . . . . . . 46
Section 9.4 Complete Agreement Modification. . . . . . . . . 46
Section 9.5 Applicable Law . . . . . . . . . . . . . . . . . 47
Section 9.6 Indemnification. . . . . . . . . . . . . . . . . 47
Section 9.7 Stamp or other Tax . . . . . . . . . . . . . . . 48
Section 9.8 Captions . . . . . . . . . . . . . . . . . . . . 48
Section 9.9 Notices. . . . . . . . . . . . . . . . . . . . . 49
Section 9.10 No Waiver, Lender Performance. . . . . . . . . . 49
Section 9.11 Evidence of Obligations; Admissibility of
Lender's Books and Records . . . . . . . . . . 50
Section 9.12 No Liability for Brokers . . . . . . . . . . . . 50
Section 9.13 Further Assurances . . . . . . . . . . . . . . . 50
Section 9.14 Counterparts.. . . . . . . . . . . . . . . . . . 50
Section 9.15 Notice of Breach by Lender . . . . . . . . . . . 50
Section 9.16 Time . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.17 Exhibits . . . . . . . . . . . . . . . . . . . . 50
Section 9.18 Authorization to Date, Complete Blanks and
Correct Errors . . . . . . . . . . . . . . . . 51
Section 9.19 No Oral Agreements; Entire Agreement . . . . . . 51
Section 9.20 Venue and Jurisdiction . . . . . . . . . . . . . 51
Section 9.21 Waiver of Trial by Jury. . . . . . . . . . . . . 52
Exhibits
A - Disclosure Statement
B - Promissory Note
C - Legal Description of DSN Plant Location
D - Disbursement Schedule
sec\10k\TK94xt25.wpe
Exhibit 22.1
SUBSIDIARIES OF LSB INDUSTRIES, INC.
------------------------------------
Aerobit Industries, Limited, an Israeli corporation
APR Corporation, an Oklahoma corporation
CHP Corporation, an Oklahoma corporation
Climate Master, Inc., a Delaware corporation
Climate Mate, Inc., a Canadian corporation
Climatex, Inc., a Texas corporation
Clipmate Corporation, an Oklahoma corporation
DSN Corporation, an Oklahoma corporation
El Dorado Chemical Company, an Oklahoma corporation
The Environmental Group, Inc., an Oklahoma corporation
Equipos Climatec S.A. de C.V., a Mexican corporation
Explosives Equipment Corporation, an Oklahoma corporation
Morey Machinery Manufacturing Corporation, an Oklahoma corporation
Hercules Energy Mfg. Corporation, an Oklahoma corporation
International Bearings, Inc., an Oklahoma corporation
International Environmental Corporation, an Oklahoma corporation
Koax Corp., an Oklahoma corporation
L & S Automotive Products Co., an Oklahoma corporation
L & S Automotive Technologies, Inc., an Oklahoma corporation
L & S Bearing Co., an Oklahoma corporation
LSB Chemical Corp., an Oklahoma corporation
LSB Europa Limited, an Oklahoma corporation
LSB Extrusion Co., an Oklahoma corporation
LSB Financial Corp., an Oklahoma corporation
LSB Indonesia Corporation, an Oklahoma corporation
LSB International Corp., an Oklahoma corporation
LSB South America Corporation, an Oklahoma Corporation
LSB Nitrogen Corporation, an Oklahoma corporation
Northwest Capital Corporation, an Oklahoma corporation
SUBSIDIARIES OF LSB INDUSTRIES, INC. (CONTINUED)
------------------------------------------------
Northwest Energy Enterprises, Inc., an Oklahoma corporation
Northwest Financial Corporation, an Oklahoma corporation
Prime Financial Corporation, an Oklahoma corporation
Rotex Corporation, an Oklahoma corporation
Saffron Corporation, an Oklahoma corporation
Slurry Australia Pty. Limited, an Australian corporation
Summit Machine Tool Inc. Corp., an Oklahoma corporation
Summit Machine Tool Manufacturing Corp., an Oklahoma corporation
Summit Machine Tool Systems, Inc., an Oklahoma corporation
Total Energy Systems, Limited, and Australian corporation
Tower IV Corporation, an Oklahoma corporation
Tower Land Development Corp., an Oklahoma corporation
Tribonetics Corporation, an Oklahoma corporation
Universal Tech Corporation, an Oklahoma corporation
sec\10k\tk94x22.wpe
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 33-8302) pertaining to the 1981 and 1986 Incentive Stock Option
Plans of LSB Industries, Inc. and the Registration Statement (Form S-3, No.
33-69800) of LSB Industries, Inc. and in the related Prospectus of our report
dated March 21, 1995, with respect to the consolidated financial statements
and schedule of LSB Industries, Inc. included in the Annual Report (Form 10-K)
for the year ended December 31, 1994.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
April 10, 1995