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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1996
---------------------------------------------
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The transition period from to
--------------- ---------------------
Commission file number 1-7677
LSB INDUSTRIES, INC.
----------------------------------------------------
Exact name of Registrant as specified in its charter
DELAWARE 73-1015226
- ------------------------------ ---------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
16 South Pennsylvania, Oklahoma City, Oklahoma 73107
-------------------------------------------------------
Address of principal executive offices (Zip Code)
(405) 235-4546
--------------------------------------------------
Registrant's telephone number, including area code
None
------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
------ ------
The number of shares outstanding of the Registrant's voting Common Stock, as
of August 9, 1996 is 12,908,487 shares excluding 1,849,469 shares held as
treasury stock.
PART I
FINANCIAL INFORMATION
Company or group of companies for which report is filed: LSB Industries, Inc.
and all of its wholly-owned subsidiaries.
The accompanying condensed consolidated balance sheet of LSB Industries, Inc.,
at June 30, 1996, the condensed consolidated income statements for the six
month and three month periods ended June 30, 1996 and 1995 and the
consolidated statements of cash flows for the six month periods ended June 30,
1996 and 1995 have been subjected to a review, in accordance with standards
established by the American Institute of Certified Public Accountants, by
Ernst & Young LLP, independent auditors, whose report with respect thereto
appears elsewhere in this Form 10-Q. The financial statements mentioned above
are unaudited and reflect all adjustments, consisting primarily of adjustments
of a normal recurring nature, which are, in the opinion of management,
necessary for a fair presentation of the interim periods. The results of
operations for the six months and three months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year. The
condensed consolidated balance sheet at December 31, 1995, was derived from
audited financial statements as of that date.
LSB INDUSTRIES, INC. Exhibit 11.1
Page 1 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
1996 quarter ended
---------------------------
March 31 June 30
Shares for primary earnings per share: ------------ ----------
Weighted average shares:
Common shares outstanding from
beginning of period 12,911,447 12,909,487
Common shares issued on conversion
of redeemable preferred stock;
calculated on weighted average
basis 270 -
Common shares issued upon exercise
of employee or director stock
options; calculated on weighted
average basis - -
Purchases of treasury stock;
calculated on weighted average
basis (330) (978)
---------- ----------
12,911,387 12,908,509
Common Stock equivalents:
Shares issuable upon exercise of
options and warrants (including
the weighted average for shares
subject to options and warrants
granted during the period) - 737,640
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on average market price for
the period) - (359,676)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - 62,080
---------- ----------
- 440,044
12,911,387 13,348,553
========== ==========
Earnings for primary earnings per share:
Net earnings (loss) $ (531,218) $ 2,371,797
Dividends on cumulative preferred stocks (75,520) (60,000)
Dividends on convertible, exchangeable
Class C preferred Stock (6.5% annually) (743,438) (743,438)
Earnings applicable to common stock $(1,350,176) $ 1,568,359
========== ==========
Earnings per share $(.10) $ .12
==== ====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 2 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
Six months
ended
June 30, 1996
-------------
Net earnings applicable to common Stock $ 218,183
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,129,970
==========
Earnings per share $ .02
====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 3 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
1995 quarter ended
-----------------------------
March 31 June 30
-------- -------
Shares for primary earnings per share:
Weighted average shares:
Common shares outstanding from
beginning of period 13,060,566 13,045,912
Common shares issued on conversion
of redeemable preferred stock;
calculated on weighted average
basis 180 -
Common shares issued upon exercise
of employee or director stock
options; calculated on weighted
average basis - 96,692
Purchases of treasury stock;
calculated on weighted average
basis (13,950) (146,176)
---------- ----------
13,046,796 12,996,428
Common Stock equivalents:
Shares issuable upon exercise of
options and warrants (including
the weighted average for shares
subject to options and warrants
granted during the period) 823,140 817,448
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on average market price for
the period) (317,680) (393,498)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - 63,520
---------- ----------
505,460 487,470
---------- ----------
13,552,256 13,483,898
Earnings for primary earnings per share:
Net earnings $ 1,448,092 $ 1,502,431
Dividends on cumulative preferred stocks (75,880) (60,000)
Dividends on convertible, exchangeable
Class C preferred Stock (6.5% annually) (743,437) (743,437)
---------- ----------
Earnings applicable to common stock $ 628,775 $ 698,994
========== ==========
Earnings per share $ .05 $ .05
==== ====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 4 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION
Six months
ended
June 30, 1996
-------------
Net earnings applicable to common Stock $ 1,327,769
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,518,077
==========
Earnings per share $ .10
====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 5 of 6
FULLY DILUTED EARNINGS PER SHARE COMPUTATION
1996 quarter ended
-----------------------------
March 31 June 30
-------- -------
Shares for fully diluted earnings per
share:
Weighted average shares outstanding
for primary earnings per share 12,911,387 12,908,509
Shares issuable upon exercise of
options and warrants - 737,640
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on ending market price
for the quarter if greater than
the average) - (359,676)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above on
actual conversion - 62,080
Common shares issuable upon conversion
of convertible note payable - 4,000
Common shares issuable upon conversion
of convertible preferred stock, if
dilutive, from date of issue:
Series B - 666,666
Series 2 - -
---------- ----------
12,911,387 14,019,219
========== ==========
Earnings for fully diluted earnings
per share:
Net earnings (loss) $ (531,218) $2,371,797
Dividends on cumulative preferred
stocks:
Series B (75,520) -
Series 2 Class C (743,438) (743,438)
---------- ----------
Earnings applicable to common stock $(1,350,176) $1,628,359
========== =========
Earning (loss) per share $(.10) $ .12
==== ====
Six months
ended
June 30, 1996
-------------
Net earnings applicable to common stock $ 278,183
==========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,465,303
==========
Earnings per share $ .02
=====
LSB INDUSTRIES, INC. Exhibit 11.1
Page 6 of 6
FULLY DILUTED EARNINGS PER SHARE COMPUTATION
1995 quarter ended
__________________________________
March 31 June 30
------------- -----------
Shares for fully diluted earnings
per share:
Weighted average shares outstanding
for primary earnings per share 13,046,796 12,996,428
Shares issuable upon exercise of
options and warrants 823,140 817,448
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on ending market price for
the quarter if greater than the
average) (300,737) (380,135)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - 63,520
Common shares issuable upon conversion
of convertible note payable 4,000 4,000
Common shares issuable upon conversion
of convertible preferred stock,
if dilutive, from date of issue:
Series B - -
Series 2 - -
13,573,199 13,501,261
========== ==========
Earnings for fully diluted
earnings per share:
Net earnings $ 1,448,092 $ 1,502,431
Interest on convertible note 180 180
Dividends on cumulative convertible
preferred stocks:
Series B (75,880) (60,000)
Series 2 Class C (743,437) (743,437)
---------- ----------
Earnings applicable to common stock $ 628,955 $ 699,174
========== ==========
Earnings per share $.05 $.05
=== ===
Six months
ended
June 30, 1995
-------------
Net earnings applicable to common stock $ 1,328,129
===========
Weighted average number of common and common
equivalent shares (average of two quarters
above) 13,537,230
==========
Earnings per share $.10
===
410q-10k\tq694x11.wp
Exhibit 15.1
ERNST & YOUNG LLP 100 North Broadway Phone: 405 278 6800
Oklahoma City, OK 73102 Fax: 405 278 6823
Fax: 405 278 6834
August 19, 1996
The Board of Directors
LSB Industries, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-8302) and the Registration Statement (Form S-3 No. 33-69800)
of LSB Industries, Inc. and in the related Prospectus of our report dated
August 2, 1996 relating to the unaudited condensed consolidated interim
financial statements of LSB Industries, Inc. which are included in its Form
10-Q for the quarter ended June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Very truly yours,
/s/ Ernst & Young LLP
EXHIBIT 4.1
CREDIT AGREEMENT
Dated as of August 8, 1996
between
SECURITY PACIFIC LEASING CORPORATION,
as a Lender and as
Collateral Agent for the Benefit of the Lenders
and
EL DORADO CHEMICAL COMPANY,
the Company
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms
1.02 Other Interpretive Provisions
1.03 Accounting Principles
ARTICLE II
THE TERM LOAN
2.01 Amount and Terms of Term Loan 16
2.02 Notes
2.03 Optional Prepayments.
2.04 Repayment
2.05 Interest
2.06 Commitment Fee
2.07 Computation of Fees and Interest.
2.08 Payments by the Company
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes
3.02 Increased Costs and Reduction of Return
3.03 Survival
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Advance
4.02 Conditions to Subsequent Advance
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Corporate Existence and Power
5.02 Corporate Authorization; No Contravention
5.03 Governmental Authorization
5.04 Binding Effect
5.05 Litigation
5.06 No Default
5.07 ERISA Compliance
5.08 Use of Proceeds; Margin Regulations
5.09 Title to Properties
5.10 Taxes.
5.11 Financial Condition
5.12 Environmental Matters
5.13 Regulated Entities.
5.14 No Burdensome Restrictions
5.15 Copyrights, Patents, Trademarks and Licenses, etc.
5.16 Subsidiaries
5.17 Insurance
5.18 Validity and Priority of Security Interest
5.19 Capitalization
5.20 Solvency 29
5.21 Labor Disputes 29
5.22 No Violation of Law
5.23 No Default
5.24 Broker's Fees
5.25 Distribution Center Liens
5.26 Contingent Obligations
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01 Financial Statements 30
6.02 Certificates; Other Information
6.03 Notices
6.04 Preservation of Corporate Existence, Etc. 32
6.05 Maintenance of Property
6.06 Insurance
6.07 Payment of Obligations 36
6.08 Compliance with Laws
6.09 Compliance with ERISA
6.10 Inspection of Property and Books and Records 37
6.11 Environmental Laws 37
6.12 Use of Proceeds
6.13 Supply Agreements Assignments 38
6.14 Compliance with Leases 38
6.15 Certain Financial Covenants and Ratios 38
6.16 First Lien on Collateral 39
6.17 Rate Cap Agreement 39
6.18 Distribution Center Title Reports 39
6.19 New Distribution Centers 39
ARTICLE VII
NEGATIVE COVENANTS
7.01 Limitation on Liens
7.02 Disposition of Assets
7.03 Consolidations and Mergers 42
7.04 Loans and Investments 42
7.05 Limitation on Indebtedness 43
7.06 Transactions with Affiliates 44
7.07 Use of Proceeds
7.08 Contingent Obligations. 45
7.09 Joint Ventures 45
7.10 Lease Obligations 45
7.11 Restricted Payments 45
7.12 ERISA 46
7.13 Change in Business 46
7.14 Accounting Changes 46
7.15 Certain Expenditures 46
7.16 Operating Leases 46
7.17 Rolling Stock 46
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. 46
8.02 Remedies 49
8.03 Rights Not Exclusive 49
ARTICLE IX
THE COLLATERAL AGENT
9.01 Appointment and Authorization; "Collateral Agent" 50
9.02 Delegation of Duties 50
9.03 Liability of Collateral Agent 50
9.04 Reliance by Collateral Agent 50
9.05 Notice of Default 51
9.06 Credit Decision 52
9.07 Indemnification of Collateral Agent 52
9.08 Collateral Agent in Individual Capacity 53
9.09 Successor Collateral Agent 53
9.10 Withholding Tax 53
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers 55
10.02 Notices 55
10.03 No Waiver; Cumulative Remedies 56
10.04 Costs and Expenses 56
10.05 Indemnity 57
10.06 Payments Set Aside. 57
10.07 Successors and Assigns 57
10.08 Assignments, Participations, etc. 57
10.09 Set-off. 59
10.10 Counterparts 59
10.11 Severability 59
10.12 No Third Parties Benefited 59
10.13 Governing Law and Jurisdiction 59
10.14 Waiver of Jury Trial 60
10.15 Entire Agreement 60
SCHEDULES Schedule 1.01 Subordinated Debt Definition
Schedule 2.04(A) Principal Amortization - Term Loan Schedule 2.04(B)
Principal Amortization - Converted Term Loan Schedule 4.02(d) Fixed Rate
Option Parameters Schedule 5.05 Litigation Schedule 5.07
ERISA Compliance
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.15 Patents, Trademarks and Patent Litigation
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 6.06 Required Insurance Coverage
Schedule 7.01 Permitted Liens
Schedule 7.04 Loans and Investments Outstanding
Schedule 7.05 Permitted Indebtedness
Schedule 7.08 Contingent Obligations
Schedule 10.02 Addresses for Notices and Wire Transfer Instructions
EXHIBITS
Exhibit A Distribution Leases
Exhibit B Form of Compliance Certificate
Exhibit C Real Property Description (Facility)
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Labor Disputes
Exhibit H Violations of Law
Exhibit I Distribution Center Tracts
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of August 8, 1996, between El
Dorado Chemical Company, an Oklahoma corporation (the "Company"), and Security
Pacific Leasing Corporation, a Delaware corporation ("SPLC"), as a Lender and
as the Collateral Agent.
WHEREAS, the Company desires to borrow up to $45,000,000.00 to refinance
existing indebtedness of the Company and to loan an affiliate, Northwest
Financial Corporation, up to $20,000,000.00 to enable affiliates of the
Company to refinance existing indebtedness; and
WHEREAS, SPLC has agreed to make available to the Company a term loan
upon the terms and conditions set forth in this Agreement in the amount of
$12,000,000.00 and one or more additional lenders (the "Additional Lenders")
may become parties to this Agreement to provide the remainder of such
$45,000,000.00;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a)
the acquisition of all or substantially all of the assets of a Person, or of
any business or division of a Person, (b) the acquisition of in excess of 50%
of the capital stock, partnership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a
Person that is a Subsidiary) provided that the Company or the Subsidiary is
the surviving entity.
"Additional Lenders" shall have the meaning set forth in the
preamble of this Agreement.
"Adjustment Date" means the first day of the month following the Initial
Advance of the Term Loan and the first day of the month every three months
thereafter.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another Person
if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Affiliated Outflows" shall have the meaning set forth in Section
7.06.
"Agent-Related Person" means SPLC and any successor Collateral Agent
arising under this Credit Agreement, together with their respective Affiliates
and the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Agreement" means this Credit Agreement.
"Assignee" has the meaning specified in subsection 10.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel.
"BA Business Credit Loan" means that certain loan by BankAmerica
Business Credit, Inc., as lender, to the Company and Slurry Explosive
Corporation, as borrowers, pursuant to that certain Loan and Security
Agreement dated December 12, 1994.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978
(11 U.S.C. 101, et seq.).
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco are
authorized or required by law to close.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
"Capital Expenditure" means any expenditure by the Company for (i)
rent or other amounts payable under a Capital Lease, (ii) an asset which is
properly classifiable under GAAP in relevant financial statements of the
Company as property, equipment, improvements or fixed assets, or (iii) any
similar type of asset capitalized in accordance with GAAP.
"Capital Lease" means, as of any date, any lease of property, real
or personal, which is or should be capitalized on a balance sheet of the
lessee prepared as of such date, in accordance with GAAP, together with any
other lease by such lessee which is in substance a financing lease.
"Change of Control" means any time that LSB Industries, Inc.
("LSBI") shall own less than 100% of all capital stock of the Company and 100%
of all capital stock of Northwest Financial Corporation ("NWFC"), either
directly or indirectly through Wholly-Owned Subsidiaries.
"Closing Date" means the date on which all conditions precedent
set forth in Section 4.01 are satisfied by the Company or waived by SPLC.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all of (a) the property now owned or hereafter
acquired by the Company other than accounts receivable, inventory and
documents, instruments, contracts and records relating to such accounts and
inventory, and proceeds thereof, but including the Company's equipment
(excluding rolling stock), machines, general intangibles, patents, the
leasehold interests of the Company established by the Facility Lease and the
Distribution Leases, the fee simple title of the Company in certain of the
Distribution Centers, and all of the Company's right, title and interest in
the Facility improvements and fixtures, the Supply Agreement and the NWFC
Note; and (b) the property now owned or hereafter acquired by NWFC, excluding
real property owned by NWFC other than the Facility and accounts receivable
and inventory but including equipment (excluding rolling stock), machines,
general intangibles, fixtures and patents, and a first and prior lien on the
Facility.
"Collateral Agent" means SPLC, and any permitted successors or
assigns of SPLC, in its capacity as agent for the ratable benefit of all the
Lenders with respect to the Collateral.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit B.
"Construction Consultant" shall have the meaning set forth in
Section 6.06.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect to any Surety Instrument issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings or
payments; or (c) to purchase any materials, supplies or other property from,
or to obtain the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such materials,
supplies or other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in respect
of any swap, hedging or similar contract agreement not entered by such Person
in the ordinary course of business. Notwithstanding the foregoing, the Rate
Cap Agreement is not a Contingent Obligation for purposes of this Agreement.
"Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement
to which such Person is a party or by which it or any of its property is
bound.
"Current Assets" means, as of any date, the current assets which
would be reflected on a consolidated balance sheet of the Company prepared as
of such date in accordance with GAAP, but excluding (i) Intangible Assets,
(ii) amounts due from employees who are not Affiliates, and (iii) amounts due
from Affiliates which are not generated in the normal sale of goods and
services by the Company in its ordinary course of business.
"Current Liabilities" means, as of any date, the current
liabilities which would be reflected on a consolidated balance sheet of the
Company prepared as of such date in accordance with GAAP.
"Default" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section
2.05(c).
"Distribution Centers" means those certain distribution centers
leased or owned by the Company located on the tracts of real property
described on Exhibit I to this Agreement.
"Distribution Leases" means those certain leases or subleases
entered into between NWFC, as lessor or sublessor therein, and the Company, as
lessee or sublessee therein, relating to certain of the Distribution Centers
not owned by the Company and more particularly described on Exhibit A to this
Agreement.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"DSN Plant Loan" means that certain loan by The CIT
Group/Equipment Financing, Inc., a New York corporation to DSN Corporation, an
Oklahoma corporation, in the original principal amount of up to
$16,500,000.00.
"Earnings Before Interest, Taxes, Depreciation and Amortization"
means for any period, the sum of (i) the consolidated net earnings of the
Company before provision for income taxes for such period, plus (ii) Interest
Expense, depreciation and amortization adjustments which were deducted in
arriving at consolidated net earnings.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Indemnity Agreement" means that certain
Environmental Indemnity Agreement, dated of even date herewith, by and among
SPLC, the Company and the Guarantors, relating to environmental indemnities
with respect to the Facility.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, licenses, authorizations and permits
of, and agreements with, any Governmental Authorities, in each case relating
to environmental matters.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer
Plan is in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which would
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan or Multiemployer Plan; or (f) the imposition of any liability under Title
IV of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Company or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances
specified in Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Facility" means the tracts of real property described on Exhibit
C to this Agreement, together with all improvements thereon, and all water
rights and rights of access appurtenant thereto.
"Facility Lease" means that certain Lease Agreement dated March 7,
1988, as heretofore amended, executed by NWFC, as landlord, and the Company,
as tenant, pursuant to which the Company leases the Facility, said lease being
evidenced of record by a certain Memorandum of Lease Agreement dated as of
March 7, 1988 and recorded in the Office of the County Clerk of Union County,
Arkansas.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the
caption "Federal Funds (Effective)"; or, if for any relevant day such rate is
not so published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Collateral Agent of the rates
for the last transaction in overnight Federal Funds arranged prior to 9:00
a.m. (New York City time) on that day by each of three leading brokers of
Federal Funds transactions in New York City selected by the Collateral Agent.
"First Lien Collateral Date" means the earlier to occur of (a)
March 31, 1997, or (b) the date, if any, on which the Subsequent Advance is
made by any Lender.
"First Source" means First Source Financial L.L.P., formerly known
as Household Commercial Financial Services, Inc., a Delaware corporation.
"First Source Loan" means that certain loan from First Source and
Massachusetts Mutual to the Company in the original principal amount of
$38,500,000.00 and a current principal amount not to exceed $7,500,000.00.
"Fixed Rate Option" shall have the meaning set forth in Section
4.02(d).
"FRB" means the Board of Governors of the Federal Reserve System,
and any Governmental Authority succeeding to any of its principal functions.
"Funded Debt" means, as of any date, to the extent that would be
reflected upon financial statement prepared in accordance with GAAP, the sum
of the following (without duplication): (i) the aggregate of all Indebtedness
for borrowed money of the Company as of such date, other than Current
Liabilities, (ii) all Indebtedness which would be classified as "funded
indebtedness" or "long-term indebtedness" (or other similar classification) on
a consolidated balance sheet of the Company prepared as of such date in
accordance with GAAP, (iii) all Indebtedness, whether secured or unsecured, of
the Company, having a final maturity (or which is renewable or extendible at
the option of the obligor for a period ending) more than one year after the
date of creation thereof, notwithstanding the fact that payments in respect
thereof (whether installment, serial maturity or sinking fund payments, or
otherwise) are required to be made by the obligor less than one year after the
date of the creation, and shall include such payments required to be made
during such year, (iv) the aggregate of all Indebtedness of the Company
outstanding under any revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more than
one year, notwithstanding the fact that any such Indebtedness is created
within one year of the expiration of such agreement and (v) the present value
(discounted at the implicit rate, if known, or 10% per annum otherwise) of all
obligations in respect of Capital Leases of the Company.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards Board
(or agencies with similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the circumstances as
of the date of determination.
"Governmental Authority" means any federal, state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory (authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantor" or "Guarantors" means any one or more of LSBI, a
Delaware corporation, LSB Chemical Corp., an Oklahoma corporation, Slurry
Explosive Corporation, an Oklahoma corporation, NWFC, an Oklahoma corporation,
and Prime Financial Corporation, an Oklahoma corporation, as the context
requires.
"Guaranty Obligation" has the meaning specified in the definition
of "Contingent Obligation."
"Implicit Interest Rate" means a nominal rate per annum equal to 425
basis points in excess of the Index Rate (as defined below) in effect on each
Adjustment Date.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (excluding indebtedness where the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property); (f) all obligations
with respect to Capital Leases; (g) swap, hedging or other similar contracts
or agreements; (h) all indebtedness referred to in clauses (a) through (g)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (g)
above.
"Indemnified Liabilities" has the meaning specified in Section
10.05.
"Indemnified Person" has the meaning specified in Section 10.05.
"Independent Auditor" has the meaning specified in subsection
6.01(a).
"Index Rate" means the annual equivalent of the three-month "adjusted"
LIBOR rate in effect at or about 11:00 a.m. London time as quoted by Bank of
America London Branch on the second London business day preceding the
Adjustment Date.
"Initial Advance" has the meaning specified in Section 2.01.
"Initial Advance Accelerated Maturity Date" means December 31,
1999.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion
of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Intangible Assets" of any Person means those assets of such
Person which are (i) Intellectual Property, (ii) goodwill, experimental
expenses, organizational costs, and other assets which would be classified as
intangible assets on a balance sheet of such Person, prepared in accordance
with GAAP, (iii) unamortized debt discount and expense, and (iv) costs in
excess of fair value of the net assets acquired.
"Intellectual Property" means all patents, patent applications,
franchise agreements, license agreements, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos,
formulae, recipes, trade secrets, other source and business identifiers,
copyrights and the like.
"Interest Expense" means for any period, the consolidated interest
charges paid or accrued by the Company during such period (including imputed
interest on Capital Lease obligations, but excluding amortization of debt
discount and expense) on Indebtedness of the Company.
"Interest Payment Date" means the last day of each calendar month,
commencing on August 30, 1996, and ending on the Maturity Date.
"Interest Period" means the first day of the month until last day
of the third month thereafter.
"Interest Rate" means the lesser of (a) the maximum rate that may
be charged under applicable laws or (b) the Implicit Interest Rate.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation, partnership,
joint venture or other similar legal arrangement (whether created by contract
or conducted through a separate legal entity) now or hereafter formed by the
Company or any of its Subsidiaries with another Person in order to conduct a
common venture or enterprise with such Person.
"Leasehold Mortgages" means those certain agreements whereby the
Company assigns to the Collateral Agent all of its right, title and interest
in and to the Distribution Leases and the Facility Lease.
"Lender" or "Lenders" means SPLC, and the Additional Lenders, if
any, that may become a party to this Agreement and which makes all or a
portion of the Subsequent Advance to the Company as set forth in this
Agreement, as the context requires.
"Lender-Related Persons" means a Lender and its Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge, encumbrance, or lien (statutory or
other) of any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a lessor under a Capital Lease, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform Commercial Code
or any comparable law) and any contingent or other agreement to provide any of
the foregoing, but not including the interest of a lessor under an operating
lease.
"Loan Documents" means this Agreement, the Notes, the Guaranties,
the Mortgages, the Security Agreements, the Leasehold Mortgages, the
Environmental Indemnity Agreement, the Other Creditor Agreements, and all
other documents delivered to Lenders in connection herewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Massachusetts Mutual" means Massachusetts Mutual Life Insurance
Company, formerly known as C.M. Life Insurance Company and formerly known as
Connecticut Mutual Life Insurance Company.
"Material Adverse Effect" means (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the Company
and its Subsidiaries taken as a whole or the Guarantors taken as a whole; (b)
a material impairment of the ability of the Company or the Guarantors taken as
a whole to perform under any Loan Document and to avoid any Event of Default;
(c) a material adverse effect upon the legality, validity, binding effect or
enforceability against the Company or the Guarantors taken as a whole of any
Loan Document; or (d) a material adverse change in, or a material adverse
effect upon the operation or physical condition of the Facility.
"Maturity Date" means July 31, 2003.
"Monsanto Indemnity" means those certain indemnification rights
granted by MONSANTO COMPANY as indemnitor to E.D.C., Inc., as indemnitee,
contained in that certain agreement between Monsanto Company, a Delaware
corporation, and E.D.C., Inc., an Oklahoma corporation, dated June 2, 1983,
relating to certain environmental matters affecting the Facility.
"Mortgages" means (i) that one certain Deed of Trust dated of even
date herewith, executed by NWFC as grantor, for the benefit of the Collateral
Agent, granting a Lien upon the Facility subject only to the liens securing
the First Source Loan, Permitted Liens, and such other matters as may be
acceptable to the Lenders; and (ii) those certain deeds of trust executed of
even date herewith executed by the Company as Grantor, for the benefit of the
Collateral Agent, granting a Lien upon the three Distribution Centers owned by
the Company subject only to the liens securing the First Source Loan,
Permitted Liens, and such other matters as may be acceptable to the Lenders.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate makes, is making, or is obligated to make contributions or, during
the preceding three calendar years, has made, or been obligated to make,
contributions.
"Net Worth" means, as of any date, the total shareholders' equity
(including common stock and preferred stock, other than mandatorily redeemable
stock, at stated value, additional paid-in capital and retained earnings after
deducting treasury stock) which would appear on a consolidated balance sheet
of the Company prepared as of such date in accordance with GAAP, plus
Subordinated Debt.
"Note" means a promissory note executed by the Company in favor of
a Lender pursuant to subsection 2.02 in substantially the form of Exhibit F.
"Notes" mean all or more than one of promissory notes so delivered
to the Lenders.
"NWFC Loan" means a loan, in the amount of up to $20,000,000.00 to
be made by the Company to NWFC on the date of the Subsequent Advance and
evidenced by a promissory note in the amount of the loan (the "NWFC Note").
The NWFC Note shall be endorsed to the order of and delivered to the
Collateral Agent as further security for the Obligations.
"Obligations" means all advances, debts, liabilities and
obligations arising under any Loan Document owing by the Company to Lenders,
or any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders
of such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation.
"Other Creditor Agreements" means those certain agreements by and
between the Lenders and CIT or First Source relating to use rights of shared
property and notices of default.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other
Loan Documents.
"Participant" has the meaning specified in subsection 10.08(c).
"Payment Date" means any Interest Payment Date or Principal
Payment Date.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or
to which it makes, is making, or is obligated to make contributions, or in the
case of a multiple employer plan (as described in Section 4064(a) of ERISA)
has made contributions at any time during the immediately preceding five (5)
plan years.
"Permits" means any action, approval, consent, waiver, exemption,
variance, franchise, order, permit, authorization, certificate, right or
license of or from a Governmental Authority, that is necessary at any given
time in light of the stage of development, construction, or operation of the
Facility to construct, test, operate, maintain, repair, own, or use the
Facility to manufacture ammonia nitrate products.
"Permitted Liens" has the meaning specified in Section 7.01.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture
or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"Principal Payment Date" has the meaning specified in Section
2.04.
"Rate Cap Agreement" shall have the meaning set forth in Section
4.02(d).
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Required Lenders" means the Lenders holding at least 67% of the
Term Loan in terms of Dollars.
"Requirement of Law" means, as to any Person, any Permits, any law
(statutory or common), treaty, final rule or final regulation or final
determination of an arbitrator or of a Governmental Authority, not subject to
appeal in each case applicable to or binding upon the Person or any of its
property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Security Agreements" means those certain Security Agreements
dated of even date herewith, executed by the Company and NWFC as debtors,
pledging certain items of each of the Company's and NWFC's equipment,
machinery, general intangibles, and patents (but excluding accounts receivable
and inventory) to the Collateral Agent for the ratable benefit of the Lenders.
"Subordinated Debt" shall have the meaning set forth in Schedule
1.01.
"Subsequent Advance" shall have the meaning specified in Section
2.01 of this Agreement.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
"Supply Agreements" means that certain Supply Agreement dated
January 1, 1994, between Farmland Industries, Inc., a Kansas corporation
("Farmland") and the Company, together with any future supply agreement
entered into by the Company, relating to the provision of ammonia.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside
bonds, surety bonds and similar instruments.
"Tangible Net Worth" means Net Worth, minus Intangible Assets.
"Taxes" means any and all present or future taxes, levies,
imposts, and all liabilities with respect thereto, excluding, in the case of
the Lenders, such taxes (including income taxes or franchise taxes) as are
imposed on or measured by such Lender's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Lender is
organized or maintains a lending office.
"Term Loan" means the term loans provided to the Company by the
Lenders, to be advanced in two advances as set forth herein, up to an
aggregate amount not to exceed $45,000,000.00. If no Additional Lenders
become a party to this Agreement, the Term Loan shall be the $12,000,000.00
Initial Advance from SPLC to the Company.
"Term Loan Conversion Date" means December 31, 1996.
"Total Liabilities" means Funded Debt, plus Current Liabilities,
minus Subordinated Debt, of the Company on a consolidated basis.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which (other
than directors' qualifying shares required by law) 100% of the capital stock
of each class having ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which any determination is
being made, is owned, beneficially and of record, by the Company, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including";
the words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to Lenders, the
Company, the Guarantors, and the other parties, and are the products of all
parties. Accordingly, they shall not be construed against Lenders merely
because of the Lenders' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE TERM LOAN
2.01 Amount and Terms of Term Loan. SPLC agrees, on the terms and
conditions set forth herein, to make an initial advance of the Term Loan in
the amount of $12,000,000.00 (the "Initial Advance") to the Company on the
Closing Date. Up to $33,000,000.00 in additional financing may be provided by
the Additional Lenders. If the Additional Lenders provide such additional
financing, this Agreement will be amended to add such Additional Lenders as
"Lenders" and the Additional Lenders will, on the terms and conditions set
forth herein, make an additional advance of the Term Loan subsequent to the
Initial Advance (the "Subsequent Advance") to the Company up to an aggregate
amount not to exceed $33,000,000.00. Principal repaid may not be reborrowed.
2.02 Notes. The Term Loan made by the Lenders will be evidenced by
Notes payable to the order of the Lenders, which Notes in the aggregate have a
stated principal amount equal to all amounts advanced by the Lenders hereunder
as the Initial Advance and the Subsequent Advance.
2.03 Optional Prepayments. The Company may not prepay any portion of
the Term Loan on or before the 36th Payment Date. The Company may, on any
Payment Date after the 36th Payment Date, upon not less than seven (7)
Business Days' irrevocable notice to each Lender, prepay the Term Loan in
whole. If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with accrued but unpaid
interest and a prepayment charge equal to 1% of the principal amount being
prepaid; provided, however, that if the First Lien Collateral Date has not
occurred prior to the Term Loan Conversion Date, then the Company may, on or
before June 30, 1997, on any Interest Payment Date or Principal Payment Date
upon not less than seven (7) Business Days' irrevocable notice to SPLC, prepay
the Term Loan in whole without any prepayment penalty.
2.04 Repayment.
(a) Initial Advance. The Company shall repay the Initial
Advance in eighty-three (83) monthly installments of principal in the amounts
shown on Schedule 2.04(A) of this Credit Agreement, commencing October 31,
1996 and continuing thereafter on the last day of each month, plus one final
balloon payment installment in an amount equal to all then unpaid principal on
the Maturity Date (each a "Principal Payment Date"); provided, however, that
notwithstanding the foregoing if the First Lien Collateral Date has not
occurred prior to the Term Loan Conversion Date, then the principal amount of
the Initial Advance shall be repaid in thirty-five (35) monthly installments
of principal in the amounts shown on Schedule 2.04(B) of this Credit
Agreement, commencing January 31, 1997 and continuing thereafter on the last
day of each month plus one final balloon payment installment in an amount
equal to all then unpaid principal on the Initial Advance Accelerated Maturity
Date.
(b) Subsequent Advance. If the Subsequent Advance is made it
shall be repaid in accordance with the amendment to this Agreement to be
entered into among the Company, SPLC and the Additional Lenders immediately
prior to the Subsequent Advance.
2.05 Interest. (a) The Term Loan shall bear interest on the
outstanding principal amount thereof from the Closing Date at a rate per annum
equal to the Interest Rate.
(b) Interest on the Term Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any
optional prepayment for the portion of the Term Loan so prepaid and upon
payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be paid on demand of the Lenders.
(c) Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest, or any other amount payable hereunder or
under any other Loan Document is not paid in full when due (whether at stated
maturity, by acceleration, demand or otherwise), the Company agrees to pay
interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the extent permitted by law, payable
on demand, at a rate per annum equal to the Interest Rate plus 3% per annum
(the "Default Rate").
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to the Lenders hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by the Lenders would be
contrary to the provisions of any law governing the Term Loan and applicable
to the Lenders limiting the highest rate of interest that may be lawfully
contracted for, charged or received by the Lenders, and in such event the
Company shall pay the Lenders interest at the highest rate permitted by
applicable law.
2.06 Commitment Fee. The Company has paid a $60,000.00 commitment fee
to SPLC, and upon execution of this Agreement, the Company shall pay to SPLC
an additional commitment fee of $60,000.00.
2.07 Computation of Fees and Interest. All computations of interest
for the Term Loan shall be made on the basis of a 360-day year and actual days
elapsed (which results in more interest being paid than if computed on the
basis of a 365-day year). Interest shall accrue during each period during
which interest is computed from the first day thereof to the last day thereof.
2.08 Payments by the Company.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to Collateral Agent by
federal wire transfer in accordance with the wire transfer instructions set
forth on Schedule 10.02, which will then distribute to each Lender its pro
rata share of such payment, and shall be made in Dollars and in immediately
available funds, no later than 11:00 a.m. (San Francisco time) on the date
specified herein. Any payment received by Collateral Agent later than 11:00
a.m. (San Francisco time) shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue. OTHER THAN DISTRIBUTING TO THE LENDERS THEIR PRO RATA SHARE OF EACH
PAYMENT MADE BY THE COMPANY AND ITS LIMITED ROLE AS COLLATERAL AGENT AS IS
SPECIFICALLY SET FORTH BELOW AND IN THE SECURITY AGREEMENTS, SPLC HAS NO OTHER
DUTY TO THE LENDERS. NEITHER SPLC, NOR ANY OF ITS AFFILIATES, ARE ACTING AS
"AGENT". EACH LENDER IS RESPONSIBLE, IN ALL RESPECTS AND UNDER ALL
CIRCUMSTANCES, FOR DECIDING TO EXTEND ITS CREDIT, MONITORING ITS CREDIT AND
ADMINISTERING ITS CREDIT.
(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day.
(c) Unless SPLC receives notice from the Company prior to the
date on which any payment is due to the Lenders that the Company will not make
such payment in full as and when required, SPLC may assume that the Company
has made such payment in full to SPLC on such date in immediately available
funds and SPLC may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made
such payment in full to SPLC, each Lender shall repay to SPLC on demand such
amount distributed to such Lender, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Any and all payments by the Company to a Lender under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company
shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless the
Lenders for the full amount of Taxes relating to amounts paid by the Company
to Lenders under this Agreement or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section) paid
by a Lender and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date a Lender makes
written demand therefor.
(c) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to a Lender, then:
(i) the Company shall also pay to such Lender at the time
interest is paid, all additional amounts which Lender specifies as necessary
so that after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under this
Section) such Lender receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings; and
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law.
(d) Within 30 days after the date of any payment by the Company
of Taxes or Other Taxes, the Company shall furnish the affected Lender the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Lender.
(e) If the Company is required to pay additional amounts to any
Lender pursuant to subsection (c) of this Section, then such Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its lending office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise disadvantageous to such
Lender.
3.02 Increased Costs and Reduction of Return. If any Lender shall have
determined that (i) the introduction of any Capital Adequacy Regulation, (ii)
any change in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by any
central bank or other Governmental Authority charged with the interpretation
or administration thereof, or (iv) compliance by such Lender (or its lending
office) or any corporation controlling such Lender with any Capital Adequacy
Regulation, affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy and such Lender's desired return on capital)
determines that the amount of such capital is increased as a consequence of
its portion of the Term Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Lender to the Company, the Company shall
pay to such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender for such increase. For purposes
of this Agreement, amounts payable by the Company pursuant to this Section
3.02 shall not be Contingent Obligations.
3.03 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Advance . The obligation of SPLC to make
the Initial Advance hereunder is subject to the condition that SPLC shall have
received on or before the Closing Date all of the following, in form and
substance satisfactory to SPLC:
(a) Loan Documents. Each of the Loan Documents, executed by each
party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of
the Company and of each of the Guarantors and each Subsidiary that may become
party to a Loan Document authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant Secretary of
such Person; and
(ii) A certificate of the Secretary or Assistant Secretary
of the Company, of each of the Guarantors, and each Subsidiary that may become
party to a Loan Document certifying the names and true signatures of the
officers of the Company, or each Guarantor or such Subsidiary authorized to
execute, deliver and perform, as applicable, this Agreement, and all other
Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of the Company and each Guarantor and each Subsidiary party to any Loan
Document as in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of such Person as of the Closing Date; and
(ii) a good standing and existence certificate(s) for the
Company, each Guarantor and each Subsidiary party to any Loan Document from
the Secretary of State (or similar, applicable Governmental Authority) of its
state of incorporation and each state where such Person is qualified to do
business as a foreign corporation, as of a recent date acceptable to SPLC;
(d) Appraisal. An appraisal of the Facility acceptable to SPLC
in its sole discretion;
(e) Landlord Subordination. A subordination agreement, executed
by NWFC for the benefit of the Lenders, in which NWFC subordinates its rights
to receive rental payments and any landlord's liens in its favor to the
interests of the Lenders established by the Loan Documents. The subordination
agreement shall provide that rental payments by the Company to NWFC will be
permitted so long as no Event of Default has occurred and is continuing;
(f) Facility Lease and Distribution Lease Amendments. Evidence
that the Facility Lease and the Distribution Leases have been amended, in form
and substance acceptable to SPLC, to provide that the term shall not expire
prior to March 6, 2021 and other terms and conditions acceptable to SPLC;
(g) Management Subordination. A subordination agreement,
executed by LSBI for the benefit of the Lenders, in which LSBI subordinates
its rights to receive amounts payable under that certain Service Agreement
dated October 13, 1990 between LSBI and the Company relating to the provision
of certain accounting, financial, collections, legal, and personnel services
by LSBI to the Company, to the interests of the Lenders established by the
Loan Documents;
(h) Monsanto Indemnity. A certificate, executed by the
appropriate officer of the Company, certifying to the Lenders that, to the
best of its knowledge, the Monsanto Indemnity is (i) in full force and effect;
and (ii) has not been amended. In addition, the Company shall furnish to the
Lenders a true and correct copy of the Monsanto Indemnity;
(i) Supply Agreement Assignment and Consent. The Supply
Agreement shall have been assigned to the Lenders by the Company, and the
Company shall have used its best efforts to obtain the consent of Farmland to
such assignment;
(j) Legal Opinions.
(i) an opinion of David M. Shear counsel to the Company
and each Guarantor and addressed to Lenders, substantially in the form of
Exhibit D;
(ii) an opinion of Wright, Lindsey & Jennings, in form and
substance satisfactory to SPLC; and
(iii) an opinion of Hughes & Luce, L.L.P., in form and
substance satisfactory to SPLC;
(k) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of the Lenders to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Lenders' reasonable estimate of
Attorney Costs incurred or to be incurred by them through the closing
proceedings (provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and Lenders); including any such
costs, fees and expenses arising under or referenced in Sections 2.06 and
10.04;
(l) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that to his knowledge after due inquiry:
(i) the representations and warranties contained in
Article V are true and correct on and as of such date, as though made on and
as of such date;
(ii) no Default or Event of Default exists or would result
from the funding of the Initial Advance after giving effect thereto; and
(iii) there has occurred since June 30, 1996, no event or
circumstance that has resulted or is likely to result in a Material Adverse
Effect;
(m) Title Policy. A mortgagee's policy of title insurance (the
"Policy") covering the Facility from an insurer acceptable to SPLC, in an
amount equal to the Initial Advance, subject to a "pending disbursements"
provision up to the amount of the Term Loan. The Policy shall insure
Collateral Agent's lien position as a valid second lien upon the Facility,
subject only to the first lien of First Source (the "First Source Lien"),
shall be free and clear of all other liens and encumbrances, other than
Permitted Liens, and will exclude tax and survey exceptions;
(n) Survey. A survey of the Facility (the "Survey") acceptable
to SPLC in its sole discretion. The Survey shall include a certificate of the
surveyor addressed to SPLC, acceptable to SPLC as to form and substance;
(o) Toxicology Reports. Toxicology and emissions reports with
respect to the Facility acceptable to SPLC in its sole discretion; and
(p) Other Documents. Such other approvals, opinions, documents
or materials as SPLC may reasonably request.
4.02 Conditions to Subsequent Advance. The obligation of the Lenders
to make the Subsequent Advance is subject to satisfaction of the following
conditions:
(a) Amendment to Loan Documents. The Company and the Lenders
shall have executed an appropriate amendment to this Agreement and all of the
other Loan Documents including but not limited to the Security Agreements and
any financing statements filed in connection therewith;
(b) Notes, Guaranties and Indemnity Agreements. The Company
shall have executed and delivered to each Additional Lender an original
promissory note payable to such Additional Lender in the amount of its portion
of the Subsequent Advance, together with a Guaranty executed by each of the
Guarantors and an Environmental Indemnity Agreement executed by the Company;
(c) First Lien Position. The First Lien Collateral Date must
have occurred, or will occur simultaneously with the date of the Subsequent
Advance;
(d) Rate Cap Agreement. Unless the Company, in accordance with
the procedures set forth in Schedule 4.02(d), has elected to have the Term
Loan governed by a fixed rate (the "Fixed Rate Option"), and has satisfied all
conditions to implementation of the Fixed Rate Option, an interest rate cap
agreement (the "Rate Cap Agreement") limiting the Company's interest rate risk
to a maximum satisfactory to the Lenders for the term of the Term Loan,
acceptable to the Lenders in their reasonable discretion;
(e) Initial Advance Conditions. All of the conditions to the
Initial Advance set forth in Section 4.01 must have occurred in favor of SPLC
and any such Additional Lender may require that the same conditions be
complied with in favor of such Lender;
(f) No Default. No Default or Event of Default shall exist
either before or after giving effect to such Subsequent Advance;
(g) Other Documentation. Such other approvals, opinions,
exhibits, inspections, reports, documents or materials as any Additional
Lender or SPLC shall reasonably request;
(h) Payment of Fees. Payment by the Company of all accrued and
unpaid fees, costs and expenses to the extent due on the date of the
Subsequent Advance together with Attorney Costs of the Lenders to the extent
invoiced prior to or on the date of the Subsequent Advance, plus such
additional amounts of Attorney Costs as shall constitute the Lenders'
reasonable estimate of Attorney Costs incurred or to be incurred by them
through the closing proceedings related to the Subsequent Advance (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and Lenders); including any such costs, fees and expenses
arising under or referenced in Section 10.04; and
(i) Other Conditions. Such other conditions as may be
reasonably imposed by any Additional Lender or SPLC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
5.01 Corporate Existence and Power. The Company, each Guarantor and
each of its Subsidiaries:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) has the corporate power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification or license except where failure to so qualify would not have a
Material Adverse Effect; and
(d) is in compliance with all Requirements of Law in which the
failure to so comply would have a Material Adverse Effect.
5.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company and each Guarantor and its
Subsidiaries of this Agreement and each other Loan Document to which such
Person is party, have been duly authorized by all necessary corporate action,
and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its property is
subject that would have a Material Adverse Effect; or
(c) violate any Requirement of Law that would have a Material
Adverse Effect.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company,
any Guarantor or any of its Subsidiaries of the Agreement or any other Loan
Document except filings of financing statements, mortgages and deeds of trust
as may be required by the appropriate Governmental Authority.
5.04 Binding Effect. This Agreement and each other Loan Document to
which the Company, each Guarantor or any of its Subsidiaries is a party
constitute the legal, valid and binding obligations of the Company and each
Guarantor or any of its Subsidiaries to the extent it is a party thereto,
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.05 Litigation. Except as set forth on Schedule 5.05 to this
Agreement, there are no actions, suits, proceedings, claims or disputes
pending, or to the best knowledge of the Company, threatened or contemplated,
at law, in equity, in arbitration or before any Governmental Authority,
against the Company, any Guarantor, or its Subsidiaries or any of their
respective properties which:
(a) purport to affect or pertain to this Agreement or any other
Loan Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.
To the reasonable belief of the officer of the Company executing this
Agreement, based on his knowledge as of the date of execution of this
Agreement, there is no reason to believe the actions or proceedings which are
set forth in Schedule 5.05 are likely to result in a Material Adverse Effect.
5.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults is likely to have a Material Adverse Effect, or that would,
if such default had occurred after the Closing Date, create an Event of
Default under Section 8.01.
5.07 ERISA Compliance.
(a) Except as disclosed in Schedule 5.07 attached hereto, each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law. Each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the Company,
nothing has occurred which would cause the loss of such qualification. The
Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) or ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Term
Loan are to be used solely for the purposes set forth in and permitted by
Section 6.12 and Section 7.07. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their
respective businesses, including the leasehold interests of the Company
pursuant to the Facility Lease and the Distribution Leases, except for such
defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Closing Date, the property of the Company
and its Subsidiaries is subject to no Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
5.11 Financial Condition.
(a) The audited consolidated balance sheets of the Company and
its Subsidiaries dated December 31, 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year ended on that date were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein and:
(i) present fairly in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof and the consolidated results of its operations for the period
covered thereby; and
(ii) except as specifically disclosed in Schedule 5.11,
show all material indebtedness and other direct liabilities of the Company and
its consolidated Subsidiaries as of the date thereof.
(b) Since June 30, 1996, there has been no Material Adverse
Effect.
5.12 Environmental Matters. Except as disclosed on Schedule 5.12
hereto or in the filings of LSBI with the SEC under the Exchange Act, and as
hereafter disclosed by the Company to the Lenders in writing, to the Company's
knowledge:
(a) All environmental permits, certificates, licenses,
approvals, registrations and authorizations ("Environmental Permits") required
under all Environmental Laws in connection with the business of the Company
have been obtained, unless the failure to obtain such Environmental Permits
would not have a Material Adverse Effect on the Company;
(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 Company, which
would have a Material Adverse Effect on the Company;
(c) The Company has not received any request for information
that is likely to lead to a claim, any notice of claim, demand or other
notification that the Company is or may be potentially responsible with
respect to any clean up of any threatened or actual release of any Hazardous
Substance which would have a Material Adverse Effect;
(d) There are no underground storage tanks, active or abandoned,
at any property now owned, operated or leased by the Company;
(e) The Company has not 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 the Company 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 Company;
(f) No written notification of a release of Hazardous Substance
has been filed by or on behalf of the Company or in relation to any property
now owned, operated or leased by the Company or previously owned, operated or
leased by the Company at the time such property was so owned, operated or
leased. No such property now owned or leased by the Company 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 which would have a Material Adverse Effect on the Company;
(g) There are no environmental Liens on any material properties
owned or leased by the Company and no governmental actions have been taken or
are in process or pending which could subject any of such properties to such
Liens; and
(h) Upon the written request of any Lender, the Company shall
promptly forward a copy to such Lender of any environmental written
inspections, investigations or studies prepared by or to be prepared by the
Company relating to material properties now owned, operated or leased by the
Company; provided, however, that the Company makes no representation or
warranty with respect to environmental inspections, investigations, studies,
audits, tests, reviews or other analyses conducted by or on behalf of any
Lender.
5.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning
of the Investment Company Act of 1940. The Company is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or
any other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
is likely to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc.. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. The patents, trademarks, service marks, tradenames,
copyright and franchise rights owned by the Company are described on Schedule
5.15. To the best knowledge of the Company, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or any Subsidiary
infringes upon any rights held by any other Person. Except as specifically
disclosed in Schedule 5.15, no claim or litigation regarding any of the
foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either
case, is likely to have a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in Schedule 5.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Company or such Subsidiary operates.
5.18 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 SPLC's favor and when all proper filings, records, and
other actions necessary to perfect such Liens have been made or taken, to the
knowledge of the Company, 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 Company and all third parties.
5.19 Capitalization. The Company's authorized capital stock consists
of 25,000 shares of common stock, par value $1.00 per share.
5.20 Solvency. The Company is solvent prior to and after giving effect
to the making of the Term Loan. If at any time the Company should become
insolvent, LSBI shall have a period of up to twenty (20) Business Days after
LSBI learns of the Company's insolvency within which to recapitalize the
Company in order to restore the Company to a solvent state.
5.21 Labor Disputes. Except as set forth on Exhibit G or as described
in reports filed by LSBI prior to the Closing Date with the SEC: (a) there is
no collective bargaining agreement or other labor contract covering employees
of the Company; (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 Company; and (d) there is
no pending or, to the Company'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 Company.
5.22 No Violation of Law. Except as disclosed in Exhibit H or in
reports filed by LSBI prior to the Closing Date with the SEC, to the Company's
knowledge, the Company is not 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 Company.
5.23 No Default. The Company is not in default with respect to any
note, loan agreement, mortgage, lease or other agreement to which the Company
is a party or bound, where the amount owed by the Company under such note,
loan agreement, mortgage, lease, or other agreement exceeds $500,000.00.
5.24 Broker's Fees. The Company represents and warrants to each 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 Company and the Company agrees to indemnify and hold each Lender harmless
against any and all such claims if such claim is due to the acts of the
Company.
5.25 Distribution Center Liens. To the knowledge of the officer of the
Company executing this Agreement as of the date hereof, other than the Liens
of Lenders pursuant to the Loan Documents, no Liens have been filed affecting
NWFC's or the Company's fee simple title to the Distribution Centers except
Permitted Liens.
5.26 Contingent Obligations. Except as permitted by Section 7.08 of
this Agreement, the Company has no Contingent Obligations.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as the Term Loan or other Obligations shall remain unpaid or
unsatisfied:
6.01 Financial Statements. The Company shall deliver to each of the
Lenders, in form and detail satisfactory to the Lenders:
(a) as soon as available, but not later than 120 days after the
end of each fiscal year, a copy of the audited consolidated balance sheets for
the Company and LSBI as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year, and accompanied by the opinion of Ernst & Young or
another nationally-recognized independent public accounting firm ("Independent
Auditor") which report shall state that such consolidated financial statements
present fairly the financial position for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years. Such opinion shall
not be qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Company's records; and
(b) as soon as available, but not later than sixty (60) days
after the end of each fiscal quarter of each fiscal year, including fiscal
year end, a copy of the unaudited consolidated balance sheets for the Company
and LSBI as of the end of such quarter and the related consolidated statements
of income, shareholders' equity and cash flows, for the period commencing on
the first day and ending on the last day of such quarter, and certified by a
Responsible Officer of such Person as fairly presenting, in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and LSBI; and
(c) as soon as available, but not later than one hundred twenty
(120) days after the end of each fiscal year, a copy of the unaudited
consolidated and consolidating balance sheets for the Company and LSBI as of
the end of such year and the related consolidated and consolidating statements
of income, shareholders' equity and cash flows, for the period commencing on
the first day and ending on the last day of such year, and certified by a
Responsible Officer of such Person as fairly presenting, in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and LSBI.
6.02 Certificates; Other Information. The Company shall furnish to
each of the Lenders:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.01(a), (b) and (c), a Compliance Certificate
executed by a Responsible Officer, which shall include a calculation of the
financial covenants required by this Agreement and a certification of
compliance with any financial covenants in any other Loan Document by the
Company of a Lender;
(c) promptly, copies of all financial statements and reports
that LSBI sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10K, 10Q and 8K)
that LSBI or any Subsidiary of LSBI may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the
business, financial or corporate affairs of the Company, each of the
Guarantors, or any Subsidiary as the Lenders may from time to time request.
6.03 Notices. The Company shall promptly notify each of the Lenders:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted in a Material Adverse
Effect, including (i) breach or non-performance of, or any default under, a
Contractual Obligation of the Company or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between the Company or any
Subsidiary and any Governmental Authority; or (iii) the commencement of, or
any material development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate (but in no event more than 10 days after
such event), and deliver to the Lenders a copy of any notice with respect to
such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate
with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; and
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 6.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all Permits,
and all other governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal conduct of its
business the failure of which would have a Material Adverse Effect;
(c) use reasonable efforts, in the ordinary course of business,
to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which is likely to have
a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and operating condition,
ordinary wear and tear excepted in which the failure to so maintain would have
a Material Adverse Effect; provided, however, that the Company shall, as soon
as practicable after learning that repair is necessary, repair any property
which has not been so maintained. The Company shall at its own cost and
expense, operate, maintain and repair the Facility in accordance with prudent
industry operating and maintenance standards and practices, and shall obtain
and maintain in full force and effect all material Permits required to operate
and maintain the Facility.
6.06 Insurance. The Company shall maintain, and shall cause NWFC and
each Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, in the types and in such amounts as set forth on
Schedule 6.06 of this Agreement.
Any loss benefits ("Benefits") under any of the insurance policies
maintained by the Company pursuant to this Agreement shall be applied as
follows:
(a) if either an (i) Event of Default has occurred and is
continuing; or (ii) 50% or more of the replacement value of the Facility is
damaged or destroyed, then such Benefits, together with any interest thereon,
shall, at the option of the Required Lenders, be held by the Collateral Agent,
for the ratable benefit of the Lenders as additional Collateral hereunder. If
no Event of Default has occurred and is continuing and less than 50% of the
replacement value of the Facility is damaged or destroyed, then such Benefits
may, at the Company's discretion, be either:
(i) applied by the Lenders to the repayment of the Term Loan,
subject to all of the terms and conditions of this Agreement; or
(ii) subject to the following paragraph (b), used by the Company
to repair or replace the damaged or destroyed portion of the Facility giving
rise to such Benefits. If less than 50% but more than 10% of the value of the
Facility (in terms of replacement costs) is damaged or destroyed and the
Company elects repair or replacement under this subsection (a)(ii), then the
Lenders shall have the right to employ a construction consultant (the
"Construction Consultant") to advise the Lenders with respect to the
disbursement of insurance proceeds as set forth in subsection (b), to monitor
construction progress and to provide inspections and reports with respect
thereto to the Lenders. The Lenders shall be entitled to rely on the advice
and direction of the Construction Consultant with respect to the matters set
forth in this Section 6.06, and the Company agrees that the Lenders shall have
no liability to the Company for any action or inaction of the Lenders made in
accordance with such advice or direction. The Company shall reimburse the
Lenders for all reasonable fees and costs of the Construction Consultant.
(b) Notwithstanding paragraph (a)(ii) above, the Lenders shall
have no obligation to release any Benefits to the Company for the Company's
use in repairing or replacing the damaged or destroyed portion of the Facility
unless all of the following conditions are satisfied:
(i) to the extent commercially available for the type of repair
or replacement in question, the Company shall have submitted to the Lenders
plans and specifications for the repair or replacement of the damaged or
destroyed Facility reasonably satisfactory to the Required Lenders, which
plans and specifications shall not be substantially modified, changed or
revised without the Required Lenders' prior written consent;
(ii) to the extent commercially available for the type of repair
or replacement in question, the Company, if so requested by the Required
Lenders, shall have submitted to the Lenders fixed price contracts with good
and responsible contractors and materialmen covering all work and materials
necessary to complete any proposed repair or replacement of the damaged or
destroyed portion of the Facility;
(iii) the insurance proceeds used for restoration, repair or
replacement of the (hereinafter referred to as the "Work") Facility shall be
paid to the Collateral Agent for the benefit of the Lenders and the Collateral
Agent shall disburse such insurance proceeds from time to time to the Company
(or, at the option of the Required Lenders, jointly to the Company and the
persons furnishing labor and/or material incident to the Work or directly to
those persons) as the Work progresses, subject to the following conditions:
(A) prior to beginning the Work (other than Work to be performed on an
emergency basis to protect the Facility), (1) an architect or engineer,
approved by the Required Lenders, is retained by the Company (at the Company's
expense) and charged with the supervision of the Work and (2) the Company must
have prepared, submitted to the Lenders and secured the Required Lenders'
written approval of the plans and specifications for the Work; (B) each
request for payment by the Company must be made by ten (10) days prior written
notice to the Lenders and must be accompanied by a certificate made by the
architect or engineer supervising the Work, stating, among other matters as
may be reasonably required by the Required Lenders, that: (1) all of the Work
completed has been done in compliance with the approved plans and
specifications; (2) the sum requested is justly required to reimburse the
Company for payments by the Company to, or is justly due to, the contractor,
subcontractors, material men, laborers, engineers, architects or other persons
rendering services or materials for the Work (giving a brief description of
the services and materials), (3) when added to all sums previously paid by the
Company, the sum requested does not exceed 90% of the value of the Work done
to the date of that certificate; and (4) the amount of insurance proceeds
remaining in the hands of the Collateral Agent will be sufficient upon
completion of the Work to pay for the Work in full (giving in reasonable
detail as the Lenders may require an estimate of the cost of completion); (C)
each request must be accompanied by waivers of lien satisfactory in form and
substance to the Lenders, covering that part of the Work for which payment or
reimbursement is being requested and by a search prepared by a title company
or licensed abstractor or by other evidence satisfactory to the Lenders that
there has not been filed with respect to the real estate any mechanic's lien
or other lien, affidavit or instrument asserting any lien or any lien rights
with respect to the real estate; (D) no Event of Default has occurred and is
continuing; and (E) in the case of the request for the final disbursement, the
request is accompanied by a certificate from the architect supervising the
work that all work has been completed in a good and workmanlike manner in
substantial accordance with the approved plans and specifications and by a
copy of any certificate of occupancy or other certificate required by any
legal requirement to render occupancy of the damaged portion of the Facility
lawful. If at any time the Required Lenders, in their reasonable judgment,
determine that the insurance proceeds are insufficient to complete the
restoration, repair or replacement, the Lenders may withhold further
disbursement until the Company deposits with the Lenders additional funds
which in the Required Lenders' reasonable judgment, are sufficient; and if the
Company fails to make the additional deposit within thirty (30) days after
required by the Required Lenders, then the Required Lenders may, at their
option, direct the Collateral Agent to apply the balance of the insurance
proceeds toward the payment of the Obligations. Any failure by the Company to
make such a deposit within thirty (30) days after required by the Required
Lenders shall, at the discretion of the Required Lenders, be an Event of
Default hereunder. If, upon completion of the Work, any portion of the
insurance proceeds has not been disbursed to the Company (or one or more of
the other persons) incident thereto, the Lenders may, at the Required Lenders'
option, apply such portion toward the payment of the Obligations or disburse
the balance to the Company. Nothing herein shall be interpreted to prohibit
the Lenders from withholding from each disbursement ten percent (10%) (or such
greater amount, if permitted or required by any legal requirement) of the
amount to be disbursed, and from continuing to withhold that sum, until the
time permitted for perfecting liens against the real estate has expired, at
which time the amount withheld shall be disbursed to the Company (or to the
Company and any person or person furnishing labor and/or material for the Work
or directly to those persons), nothing contained herein shall be construed to
prevent the Lenders from applying at any time the whole or any part of the
insurance proceeds to the curing of any Event of Default;
(iv) the Lenders may impose such further conditions upon the
release of insurance proceeds (including the receipt of title insurance) as
are customarily imposed by prudent construction lenders to insure the
completion of the restoration work free and clear of all liens or claims for
lien;
(v) all title insurance charges and other costs and expenses
paid to or for the account of the Company in connection with the release of
such insurance proceeds shall constitute so much additional Obligations and
shall be payable upon demand with interest thereafter at the Default Rate, or
such lower maximum rate as shall be legal under applicable law. The Lenders
may deduct any such costs and expenses from insurance proceeds at any time
held by the Collateral Agent; and
(vi) if the Company fails to complete restoration within a
reasonable time, as determined in the reasonable discretion of the Required
Lenders, but in all cases in compliance with any time period provided under
applicable requirements of Governmental Authorities and insurance
underwriters, the Lenders shall have the right, but not the obligation, to
restore or rebuild the Facility, or any part thereof, for or on behalf of the
Company in lieu of applying said proceeds to the Obligations and for such
purpose may do all necessary acts, including using funds deposited by the
Company as aforesaid and advancing additional funds for the purpose of
restoration, all such additional funds to constitute part of the indebtedness
hereby secured payable upon demand with interest at the Default Rate. In the
event of an Event of Default which is continuing, the Company hereby empowers
the Lenders, in their discretion, to settle, compromise and adjust any and all
claims or rights under any insurance policy maintained by the Company relating
to the Facility. Nothing contained in this Agreement shall create any
responsibility or obligation on the Lenders to collect any amounts owing on
any insurance policy or resulting from any condemnation, to rebuild or replace
any damaged or destroyed portion of the Facility or to perform any other act
hereunder. The Lenders shall not by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any insurance, incur any
liability for or with respect to the amount of insurance carried, the form or
legal sufficiency of insurance contracts, solvency of insurance companies, or
payment or defense of lawsuits, and the Company hereby expressly assumes full
responsibility therefor and all liability, if any, with respect thereto.
6.07 Payment of Obligations. The Company, no later than ten (10) days
after such payments become due, shall, and shall cause each Subsidiary to:
(a) file when due (including extensions) all tax returns and other reports
which they are required to file, pay when due all taxes, fees, assessments and
other governmental charges against such parties or upon their 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 Lenders, upon request, satisfactory evidence of their timely
compliance with the foregoing; and (b) pay all Indebtedness owed by such
parties within normal business terms and consistent with past practices;
provided, however, that neither the Company nor any Subsidiary need pay any
tax, fee, assessment, governmental charge, or Indebtedness, or perform or
discharge any other obligation, that it is contesting in good faith by
appropriate proceedings diligently pursued and for which adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary.
6.08 Compliance with Laws. The Company shall use reasonable efforts to
comply, and shall use reasonable efforts to cause each Subsidiary to comply,
in all material respects with all Requirements of Law of any Governmental
Authority where the failure to so comply would have a Material Adverse Effect
on the Company having jurisdiction over it or its business (including the
Federal Fair Labor Standards Act). Notwithstanding the foregoing, the Company
shall not be obligated to comply with any Requirements of Law (i) whose
application or validity is being contested diligently and in good faith by
appropriate proceedings, (ii) compliance with which shall have been excused or
exempted by a permit, waiver, variance, consent, extension or forbearance
exempting it from the application of such Requirements of Law, or (iii) if
failure or compliance would result in no material adverse consequences to the
Facility so long as, in the case of each of clauses (i) through (iii) of this
sentence such failure of compliance does not result in any material risk or
danger of (A) the sale, forfeiture or loss of any part of the Facility, or the
subjection thereof to any Lien (other than Permitted Liens), or interference
with the operation, use or disposition of any of the Facility, title thereto
or any interest therein, or (B) any Material Adverse Effect.
6.09 Compliance with ERISA. The Company shall use reasonable efforts,
and shall cause each of its ERISA Affiliates to use reasonable efforts to:
(a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required contributions to any
Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record
and account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Lenders to visit and
inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at the expense of the Company and at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company; provided, however, when an Event of
Default exists the Lenders may do any of the foregoing at the expense of the
Company at any time during normal business hours and without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, the failure of which would result in a
Material Adverse Effect. The Company shall promptly notify each of the
Lenders of any event, circumstance, dispute, claim or other action affecting
the Environmental Permits, Hazardous Substances generated or used by the
Company or otherwise affecting the Facility or any of the Distribution
Centers, or any other environmental matter affecting the Company, regardless
of whether such action would have a Material Adverse Effect. The Company
will, at all times, use all reasonable efforts necessary to preserve the
Monsanto Indemnity. Whenever there is potential noncompliance with any
Environmental Laws which would result in a Material Adverse Effect, the
Company shall, at any Lender's request and the Company's expense: (a) cause
an independent environmental engineer acceptable to such Lender to conduct
such tests of the site where either the Company's noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and deliver to
such 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 Company's response thereto or the estimated costs thereof, shall
materially change.
6.12 Use of Proceeds. The Company shall use the proceeds of the Term
Loan to refinance the existing indebtedness of the Company, and to enable the
Company to make a loan to NWFC in the amount of the NWFC Note, to be used by
NWFC or its Affiliates to refinance existing indebtedness of NWFC, under terms
and conditions satisfactory to the Lenders.
6.13 Supply Agreements Assignments. The Company shall cause all Supply
Agreements to be assigned to the Lenders, and shall use its best efforts to
cause such assignments to be consented to by any such ammonia suppliers, in
form and substance acceptable to the Lenders.
6.14 Compliance with Leases. The Company will use the Facility and
Distribution Centers and related rights granted by the Facility Lease and the
Distribution Leases solely as permitted by the terms of such leases.
6.15 Certain Financial Covenants and Ratios.
(a) The Company shall not have net losses for two (2)
consecutive fiscal quarters within the same calendar year;
(b) The ratio of Current Assets to Current Liabilities
(excluding the current portion of the First Source Loan) of the Company,
tested as of the end of each calendar quarter, shall be at least 1.50:1;
(c) At no time during the following quarterly periods will the
Company permit its ratio of Total Liabilities excluding deferred taxes to
Tangible Net Worth to exceed the following:
(i) From the Closing Date through September 30, 1997 -
3.50:1;
(ii) From October 1, 1997 through June 30, 1998 - 3.25:1;
(iii) From July 1, 1998 through December 31, 1998 - 2.75:1;
(iv) From January 1, 1999 through June 30, 1999 - 2.50:1;
and
(v) From July 1, 1999 and thereafter - 2.25:1;
(d) The ratio of (i) the Company's Earnings Before Interest,
Taxes, Depreciation and Amortization less Taxes paid to (ii) the amount of the
Company's Funded Debt maturing in the succeeding 12-month period plus Interest
Expense shall not be less than 1.35:1 for the fiscal year 1996, and thereafter
shall be not less than 1.5:1 for each fiscal year; and
(e) The Company shall, at all times, maintain a Tangible Net
Worth of not less than the greater of (i) $21,100,000.00, or (ii) the
Company's Tangible Net Worth at the end of the preceding fiscal year less
$1,500,000.00.
6.16 First Lien on Collateral. SPLC acknowledges that on the Closing
Date the liens in favor of SPLC covering the Collateral granted by the Company
and NWFC are second priority liens subordinate and inferior only to the First
Source Liens covering the Collateral and Permitted Liens. Borrower shall, on
or before the First Lien Collateral Date, cause the liens of Lenders secured
by the Collateral to be first and prior Liens, subject only to Permitted Liens
excluding the First Source Liens. Compliance with this covenant shall be a
condition precedent to the Subsequent Advance. If the liens of Lenders
covering the Collateral have not become first and prior liens on or before the
Term Loan Conversion Date, subject only to Permitted Liens excluding the First
Source Liens, the Initial Advance shall convert to a term loan with an
accelerated principal amortization and maturity date as more particularly set
forth in Section 2.04.
6.17 Rate Cap Agreement. On the earlier to occur of (i) December 31,
1996; or (ii) the date of the Subsequent Advance, the Company shall either
elect and have satisfied all conditions to implementation of the Fixed Rate
Option in accordance with Schedule 4.02(d) or shall enter into the Rate Cap
Agreement.
6.18 Distribution Center Title Reports. The Company shall, on the
earlier to occur of (i) 45 days after the date of this Agreement; or (ii) the
date of the Subsequent Advance, furnish to the Lenders title reports prepared
by a title insurance company acceptable to the Lenders showing fee simple
title to each of the Distribution Centers to be vested in either NWFC or the
Company, as appropriate, subject to no liens or other encumbrances except
Permitted Liens and other Liens as may be acceptable to the Lenders in their
sole discretion.
6.19 New Distribution Centers. The Company shall execute Mortgages for
the benefit of the Lenders covering any new distribution centers acquired by
the Company in fee simple, and shall execute Leasehold Mortgages for the
benefit of the Lenders covering any new distribution centers leased by the
Company, all in form and substance acceptable to the Lenders. With respect to
leased distribution centers, the Company shall also provide to the Lenders a
consent of the landlord under the related lease acceptable to the Lenders.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Term Loan or other Obligations shall remain unpaid or
unsatisfied, unless the Required Lenders waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur,
assume or suffer to exist and shall promptly discharge, at its own cost and
expense, any Lien upon or with respect to any part of its property, whether
now owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.01 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for Taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.07, provided that
(i) no notice of lien has been filed or recorded under the Code; or (ii) which
are being contested in good faith and by appropriate proceedings so long as,
in the case of each of clauses (i) and (ii), such non-payment does not result
in any material risk or danger of (A) the sale, forfeiture or loss of any part
of the Facility, or the subjection thereof to any lien (other than Permitted
Liens), or interference with the operation, use or disposition of any of the
Facility, title thereto or any interest therein, or (B) any Material Adverse
Effect;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on property owned or leased by the Company or any
Subsidiary securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other
non-delinquent obligations of a like nature; in each case, incurred in the
ordinary course of business, provided all such Liens in the aggregate would
not (even if enforced) cause a Material Adverse Effect;
(g) easements, rights-of-way, restrictions and other similar
encumbrances which do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the
businesses of the Company and its Subsidiaries;
(h) purchase money security interests on any property acquired
or held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such
Lien attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so
acquired and proceeds thereof in such transaction, (iii) the principal amount
of the debt secured thereby does not exceed 100% of the cost of such property,
and (iv) the principal amount of the Indebtedness secured by any and all such
purchase money security interests shall not at any time exceed, $1,500,000.00
in any fiscal year;
(i) Liens securing obligations in respect of Capital Leases on
assets subject to such leases, provided that such Capital Leases are otherwise
permitted hereunder;
(j) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by the Company or
any Subsidiary to provide collateral to the depository institution;
(k) Liens on the Facility in favor of NWFC, such Liens to be
subordinate and inferior, in all respects, to the Liens of the Lenders,
established by the Loan Documents;
(l) Liens on goods consigned to the Company or the Subsidiary or
not owned by either the Company or the Subsidiary so long as such Lien
attaches only to such goods and SPLC has been given notice of such Lien;
(m) Liens against life insurance policy or the cash surrender
value thereof which relate to borrowings incurred to finance the premiums made
under such policy;
(n) Liens on accounts, inventory, documents, instruments,
contracts or records relating to such accounts and inventory, and proceeds
thereof to secure revolving working capital line of credit; and
(o) Liens not to exceed $1,000,000.00 in the aggregate at any
one time in amounts secured which are junior in priority to the Lenders' Lien
and which arise or are placed inadvertently against either the Company's or
the Subsidiary's assets and are removed within fifteen (15) Business Days from
receipt by the Company of such Lien.
7.02 Disposition of Assets. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing other
than sales or dispositions for fair consideration not to exceed, in the
aggregate, ten percent (10%) of the value of such Person's assets, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business; and
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary, provided such Wholly-Owned Subsidiary guarantees all
of the Company's Obligations under the Loan Documents.
7.04 Loans and Investments. Except as permitted in Section 7.06 of
this Agreement, the Company shall not purchase or acquire, or suffer or permit
any Subsidiary to purchase or acquire, or make any commitment therefor, any
capital stock, equity interest, or any obligations or other securities of, or
any interest in, any Person, or make or commit to make any Acquisitions, or
make or commit to make any advance, loan, extension of credit or capital
contribution to or any other investment in, any Person including any Affiliate
of the Company, except for:
(a) investments in cash equivalents;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) loans and investments outstanding as of the date hereof and
identified on Schedule 7.04 to this Agreement;
(d) loans or investments in and to a Subsidiary that is a
Guarantor; and
(e) investments constituting Acquisitions not otherwise
permitted above in this Section as long as such investments when aggregated
with all other investments for the same Acquisition do not exceed
$3,000,000.00 in cash investments and issued and/or assumed interest-bearing
debt per Acquisition and $12,000,000.00 in cash investments and issued and/or
assumed interest-bearing debt in the aggregate for all such Acquisitions
during the term of the Term Loan.
7.05 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 7.08;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 7.05; provided, however, that during the period from the Closing Date
to the First Lien Collateral Date, the outstanding principal amount under the
First Source Loan shall not, at any time, exceed $7,500,000.00 and the total
outstanding Indebtedness secured by the Collateral (including the Initial
Advance) shall not, at any time, exceed $19,500,000.00 unless and until the
Subsequent Advance is made;
(d) Indebtedness arising under leases permitted pursuant to
Section 7.10;
(e) Indebtedness which is revolving debt, other than the
existing Indebtedness set forth on Schedule 7.05;
(f) Indebtedness relating to Capitalized Leases, provided such
Capitalized Leases are permitted hereunder;
(g) Indebtedness for purchase money security interests as
allowed by Section 7.01(h);
(h) Indebtedness incurred in connection with other Permitted
Liens;
(i) Indebtedness issued solely to the sellers by the Company in
connection with any acquisition permitted by Section 7.04(e) of this
Agreement, not to exceed $5,000,000.00 in the aggregate at any time;
(j) Indebtedness resulting from a judgment having been rendered
against either the Company or Subsidiary that is being appealed by such
Company or Subsidiary in good faith and in a timely manner, for which an
adequate reserve has been recorded on the Company's or Subsidiary's books, and
which is not fully covered by insurance;
(k) Indebtedness resulting from the refinancing of Indebtedness
permitted by this Section 7.05 as long as (i) such Indebtedness does not
exceed the amount of the refinanced Indebtedness; and (ii) such Indebtedness
does not result in payment acceleration of the refinanced Indebtedness;
(l) Indebtedness resulting from trade payables and other
obligations arising in the ordinary course of business;
(m) Indebtedness incurred pursuant to Section 7.06 hereof;
(n) Other Indebtedness not otherwise permitted by this Section
7.05 which is unsecured, in an amount not to exceed $1,000,000.00 at any one
time;
(o) Indebtedness consisting of swap, hedging or other similar
contracts or agreements entered into in the ordinary course of business; and
(p) Subordinated Indebtedness.
7.06 Transactions with Affiliates. Except for the NWFC Loan, the
Company shall not, and shall not suffer or permit any Subsidiary to, enter
into any transaction with any Affiliate of the Company, except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate of the Company or such Subsidiary. In addition to the foregoing,
and without the restrictions and limitations set forth in the foregoing
sentence, the Company, for any given fiscal year, may make payments in the
form of dividends, distributions, treasury stock, advances or loans to
Affiliates of the Company ("Affiliated Outflows") up to an amount equal to 50%
of the Company's net income after taxes for the prior fiscal year, provided
that immediately after giving effect to such action no Default or Event of
Default would exist. The term "Affiliated Outflows" shall exclude payments
made to Affiliates which are classified as expenses of the Company which
comply with the first sentence of this Section and which reduce the Company's
income as shown on the annual consolidated balance sheet of the Company. The
parties acknowledge that current payments under the Services Agreement between
LSB and the Company comply with this Section 7.06 so long as the Company and
LSB complies with the terms of that certain Subordination and Service
Agreement of even date herewith executed by LSB in favor of the Lenders.
7.07 Use of Proceeds.
(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Term Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
7.08 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist
any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary
course of business; and
(b) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 7.08.
(c) Contingent Obligations of the Company and its Subsidiaries
consisting of unsecured guaranties, not to exceed $5,000,000.00 in the
aggregate at any given time.
7.09 Joint Ventures. The Company shall not, and shall not suffer or
permit any Subsidiary to, enter into any Joint Venture, other than Joint
Ventures with wholly-owned Subsidiaries of such Person.
7.10 Lease Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except
for:
(a) the Facility Lease and the Distribution Leases;
(b) leases of the Company and of Subsidiaries in existence on
the Closing Date; and
(c) operating leases including leases of distribution centers
entered into by the Company or any Subsidiary after the Closing Date in the
ordinary course of business, subject to the limitations set forth in Section
7.16 of this Agreement.
7.11 Restricted Payments. Except as permitted in Section 7.06 of this
Agreement, the Company shall not, and shall not suffer or permit any
Subsidiary to, declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of its capital stock, or purchase, redeem or otherwise
acquire for value any shares of its capital stock or any warrants, rights or
options to acquire such shares, now or hereafter outstanding; except that the
Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock; and
(b) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its common
stock.
7.12 ERISA. The Company shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect; or (b) engage in a transaction that could be subject to Section 4069
or 4212(c) of ERISA.
7.13 Change in Business. The Company shall not, and shall not suffer
or permit any Subsidiary to, engage in any material line of business
substantially different from that type of business carried on by the Company
and its Subsidiaries on the date hereof.
7.14 Accounting Changes. The Company shall not, and shall not suffer
or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any Subsidiary.
7.15 Certain Expenditures. The Company shall not, for any given fiscal
year, make Capital Expenditures in excess of $3,000,000.00 plus an amount up
to $5,000,000.00 in the aggregate over the term of the Term Loan for Capital
Expenditures required to be made by the Company as a result of federal or
state-mandated environmental expenditures.
7.16 Operating Leases. At no time will the Company, for any given
fiscal year, allow amounts owed by it as operating lease or other rental
payments, including real estate lease payments, to exceed $10,000,000.00.
7.17 Rolling Stock. The Company shall not, directly or indirectly,
make, create, incur, assume or suffer to exist and shall promptly discharge,
at its own cost and expense, any Lien upon or with respect to any equipment
owned by the Company which is rolling stock, including but not limited to
railcars, trucks and trailers, other than Liens which are purchase money
security interests securing only the acquisition costs of such rolling stock.
This sentence shall not apply to rolling stock which is leased by the Company.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, within three (3)
days of being due, any amount of principal, or interest, fee or any other
amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by the Company, any Subsidiary or any Guarantor, or any of them, made or
deemed made herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the Company, any
Subsidiary, or any Responsible Officer, furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect in any
material respect on or as of the date made or deemed made; or
(c) Covenant Defaults. The Company or any Subsidiary party
thereto fails in any material respect to perform or observe any other term or
covenant contained in this Agreement or any other Loan Document, and such
failure is not cured within thirty (30) days from the date of receipt by the
Company of notice of such default 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 Lenders) or become void or unenforceable without
the written consent of the Lenders other than as a direct result of any
conduct solely on the part of Lenders; provided, however, that if the Company
or any Subsidiary fails to maintain the insurance required by Section 6.06 of
this Agreement, such notice and cure period shall not apply; or
(d) Cross-Default. The Company, or any Guarantor or any
Subsidiary (i) fails to make any payment in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than:
(A) $500,000.00 in the case of the Company or NWFC; or
(B) $5,000,000.00 in the case of any Guarantor other than NWFC,
when due, beyond any period of grace provided with respect thereto (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise);
or (ii) fails to perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, if the effect of
such failure, event or condition is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to (A) cause such Indebtedness to be declared to
be due and payable prior to its stated maturity, or such Contingent Obligation
to become payable or cash collateral in respect thereof to be demanded; or (B)
the effect of such default would have a Material Adverse Effect on the
Company; or
(e) Insolvency; Voluntary Proceedings. The Company, any
Guarantor, or any Subsidiary (i) ceases or fails to be solvent, or admits in
writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; (iv) seeks the
appointment of a trustee, receiver, liquidator, custodian or other similar
officer for itself or for any substantial part of its property; or (v) takes
any action to effectuate or authorize any of the foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company, any Guarantor, or any
Subsidiary, or is commenced seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar officer or agency of it or any
substantial part of its property or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part
of the Company's or any Subsidiary's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) the
Company or any Subsidiary admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief (or similar
order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for either the Company or any
Subsidiary or for all or a substantial portion of its property or business
shall be appointed involuntarily; or
(g) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan that would, in the Lender's reasonable
judgment, subject Borrower or any Subsidiary to any tax penalty or other
liabilities under the terms of such Plan which would result in a Material
Adverse Effect to the Company or LSBI; or
(h) Monetary Judgments. One or more final judgments or orders,
decrees or arbitration awards is entered against the Company or any Subsidiary
involving in the aggregate a liability as to any single or related series of
transactions, incidents or conditions, of $1,000,000.00 or more, and the same
shall remain unsatisfied, or unvacated and unstayed pending appeal for a
period of thirty (30) days after the entry thereof; or
(i) Change of Control. There occurs any Change of Control; or
(j) Loss of Environmental Permits. Any Governmental Authority
revokes or fails to renew any Environmental Permit, which would result in a
Material Adverse Effect and such Environmental Permit is not unrevoked or
renewed within 180 days thereafter; or
(k) Guarantor Defaults. Any of the Guarantors fail in any
material respect to perform or observe any term, covenant or agreement in the
Guaranty of such Guarantor; or any Guaranty is for any reason partially
(including with respect to future advances) or wholly terminated, revoked or
invalidated, or otherwise ceases to be in full force and effect other than by
an action undertaken by a Lender, or any Guarantor or any other Person
contests in any manner the validity or enforceability thereof or denies that
it has any further liability or obligation thereunder; or any event described
at subsections (e) or (f) of this Section occurs with respect to any
Guarantor; or
(l) Invalidity of Subordination Provisions. The Landlord
Subordination Agreement or the subordination provisions of the Landlord
Subordination Agreement or any agreement or instrument governing any other
Subordinated Debt is for any reason revoked or invalidated, or otherwise cease
to be in full force and effect NWFC or any other Person contests in any manner
the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder, or the Indebtedness hereunder is for any
reason subordinated or does not have the priority contemplated by this
Agreement or the Landlord Subordination Agreement and a replacement
subordination agreement from the relevant Person, acceptable to the Lenders in
their sole discretion, is not executed by such Person for the benefit of the
Lenders within 10 days thereafter; or
(m) Lease Default. An event of default occurs and is continuing
under the terms of the Facility Lease or any of the Distribution Leases; or
(n) First Source Default. An event of default occurs and is
continuing under the First Source Loan; or
(o) DSN Plant Loan Default. An event of default occurs and is
continuing under the DSN Plant Loan; or
(p) BA Business Credit Default. An event of default occurs and
is continuing under the BA Business Credit Loan or any working capital loan of
the Company which replaces the BA Business Credit Loan.
8.02 Remedies. If an Event of Default occurs under Section 8.01(a) of
this Agreement, or under Section 8.01(c) which is due to the Company's failure
to maintain the insurance required by Schedule 6.06, then the Collateral Agent
may, unless instructed otherwise by the Required Lenders within the time
period set forth in Section 9.05, accelerate the maturity of the Term Loan and
pursue any other remedy available to the Lenders under the Loan Documents. If
any other Event of Default occurs and is continuing, then Collateral Agent
may, and upon the vote of the Required Lenders shall, accelerate the maturity
of the Term Loan and/or pursue any other remedy available to the Lenders
including the exercise of any rights and remedies of the Lenders under the
Loan Documents. The Lenders may exercise all rights and remedies available to
them under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (e) or (f) of Section 8.01, the unpaid principal amount of the Term
Loan and all interest and other amounts as aforesaid shall automatically
become due and payable without further act of the Lenders or Collateral Agent.
8.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE COLLATERAL AGENT
9.01 Appointment and Authorization; "Collateral Agent". Each Lender
hereby irrevocably (subject to Section 9.09) appoints, designates and
authorizes the Collateral Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms
of this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Collateral Agent have or be deemed
to have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities or liabilities
shall be read into this Agreement or any other Loan Document or otherwise
exist against the Collateral Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Collateral Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.02 Delegation of Duties. The Collateral Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Collateral Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
9.03 Liability of Collateral Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by it under or
in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Collateral Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.04 Reliance by Collateral Agent.
(a) The Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Collateral Agent. The Collateral Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Lenders as it
deems appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Collateral Agent shall be in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Lenders and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01 or Section 4.02, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Collateral
Agent to such Lender for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender.
9.05 Notice of Default. The Collateral Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Collateral Agent for the account of the Lenders,
unless the Collateral Agent shall have received written notice from a Lender
or the Company referring to this Agreement, describing such Default or Event
of Default and stating that such notice is a "notice of default". The
Collateral Agent will notify the Lenders of its receipt of any such notice.
Subject to the rights of the Collateral Agent to resign as is set forth below,
the Collateral Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Lenders in accordance with Article
VIII; provided, however, that unless and until the Collateral Agent has
received any such request, the Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to an Event of Default as it shall deem advisable or in the best
interest of the Lenders.
To assure that a timely response is provided by all Lenders in the
event that an Event of Default occurs, if the Collateral Agent notifies the
Lenders that it has received a notice of default and that an Event of Default
has occurred or that it otherwise believes an Event of Default has occurred
and, together with such notification, Collateral Agent recommends that the
Lenders take some specified action in response to such default, then unless a
Lender notifies the Collateral Agent in writing that such Lender disapproves
the taking of such action within one (1) Business Day of Collateral Agent's
notice, such Lender, for all purposes, shall be deemed to have approved
Collateral Agent's recommended action and Collateral Agent may take the
specified action together with any other action reasonably related thereto or
reasonably necessary as a result thereof, including exercising the Lenders'
remedies as set forth in Section 8.02.
9.06 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Collateral Agent hereinafter taken, including any review of the
affairs of the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Collateral Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business prospects, operations, property, financial and
other condition and credit worthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking
or not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
credit worthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Collateral Agent, the Collateral Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
conditions or credit worthiness of the Company which may come into the
possession of any of the Agent-Related Persons.
9.07 Indemnification of Collateral Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the Company to do
so), pro rata, from and against any and all Indemnified Liabilities and from
any and all loss, cost, expense and liability, such Person may incur as a
result of such Person pursuing any action approved by the Required Lenders or
deemed approved pursuant to Section 9.05; provided, however, that no Lender
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from the Agent-Related Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse the Collateral Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Collateral Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
other Loan Document, or any document contemplated by or referred to herein, to
the extent that the Collateral Agent is not reimbursed for such expenses by or
on behalf of the Company. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Collateral Agent.
9.08 Collateral Agent in Individual Capacity. SPLC and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company and
its Subsidiaries and Affiliates as though SPLC were not the Collateral Agent
hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, SPLC or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such subsidiary) and acknowledge that the Collateral Agent shall be
under no obligation to provide such information to them. With respect to the
Term Loan, SPLC shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though it were not the
Collateral Agent, and the terms "Lender" and "Lenders" include SPLC in its
individual capacity.
9.09 Successor Collateral Agent. The Collateral Agent shall have the
right to assign its rights, powers and duties of collateral agent hereunder to
any Affiliate of Collateral Agent upon 30 days' notice to the Lenders. Upon
such assignment, the assignee of Collateral Agent shall have the rights and
obligations of Collateral Agent under the Loan Documents and the assignor
Collateral Agent shall have no further obligations under the Loan Documents.
In addition, the Collateral Agent at any time may resign as Collateral Agent
upon notice to the Lenders. If the Collateral Agent resigns under this
Agreement, (i) such Collateral Agent shall be relieved of all obligations to
pursue any actions in its capacity as Collateral Agent and (ii) the Lenders
holding at least 51% of the Term Loan in terms of Dollars shall appoint from
among the Lenders and their Affiliates a successor collateral agent for the
Lenders. If no successor collateral agent is appointed prior to the effective
date of the resignation of the Collateral Agent, the Collateral Agent may
appoint, after consulting with the Lenders and the Company, a successor
collateral agent from among the Lenders. Upon the acceptance of its
appointment as successor collateral agent hereunder, such successor collateral
agent shall succeed to all the rights, powers and duties of the retiring
Collateral Agent and the term "Collateral Agent" shall mean such successor
collateral agent and the retiring Collateral Agent's appointment, powers and
duties as Collateral Agent shall be terminated. If no successor collateral
agent has accepted appointment as Collateral Agent by the date which is five
(5) Business Days following a retiring Collateral Agent's notice of
resignation, the retiring Collateral Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Collateral Agent hereunder until such time, if any, as the Lenders holding
at least 51% of the Term Loan in terms of Dollars appoint a successor
collateral agent as provided for above. After any assigning or retiring
Collateral Agent's assignment or resignation hereunder, the provisions of this
Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
this Agreement. The Company, NWFC and the Lenders shall take all actions
necessary to continue the effectiveness of all security interests and Liens
created for the benefit of the Lenders pursuant to the Loan Documents,
including the execution of amended security agreements, modifications of
Liens, and UCC-3 financing statement amendments as the substituted Collateral
Agent may reasonably deem advisable.
9.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Lender claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Lender agrees with and in favor of the Collateral Agent, to deliver
to the Collateral Agent:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed and
executed copies of IRS Form 1001 before the payment of any interest in the
first calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender,
two properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax;
Such Lender agrees to promptly notify the Collateral Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of the Company to such Lender, such
Lender agrees to notify the Collateral Agent of the percentage amount in which
it is no longer the beneficial owner of Obligations of the Company to such
Lender. To the extent of such percentage amount, the Collateral Agent will
treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Collateral Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Company to such Lender, such Lender agrees to undertake
sole responsibility for complying with the withholding tax requirements
imposed by Section 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Collateral Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. However, if the forms or other
documentation required by subsection (a) of this Section are not delivered to
the Collateral Agent, then the Collateral Agent may withhold from any interest
payment to such Lender not providing such forms or other documentation an
amount equivalent to the applicable withholding tax imposed by Sections 1441
and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Collateral Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or was not properly executed,
or because such Lender failed to notify the Collateral Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify the
Collateral Agent fully for all amounts paid, directly or indirectly, by the
Collateral Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Collateral Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Collateral Agent.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by the Company or any Guarantor therefrom, shall be effective
unless the same shall be in writing and signed by the Required Lenders and the
Company, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, modification, waiver, or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any
of the conditions specified in Article IV, (b) increase the commitment amount
of any Lender, (c) reduce the amount of principal, interest, or fees payable
under the Loan Documents, or postpone the payment thereof, or (d) change the
percentage of Lenders required to take any action under this Agreement or the
Notes. No modification, waiver, or consent shall, unless in writing and
signed by the Collateral Agent affect the rights or obligations of the
Collateral Agent under the other Loan Documents.
10.02 Notices.
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 10.02, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed,
faxed or delivered, to the address or facsimile number specified for notices
on Schedule 10.02; or, as directed to the Company or the Lenders, to such
other address as shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other address as
shall be designated by such party in a written notice to the Company and the
Lenders.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the
date deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II shall not be effective until actually received
by a Lender at the address specified on the applicable signature page hereof.
(c) Any agreement of the Lenders to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of the
Company. The Lenders shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and
Lenders shall not have any liability to the Company or other Person on account
of any action taken or not taken by the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of the Company to repay the
Term Loan shall not be affected in any way or to any extent by any failure by
Lenders to receive written confirmation of any telephonic or facsimile notice
or the receipt by Lenders of a confirmation which is at variance with the
terms understood by Lenders to be contained in the telephonic or facsimile
notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Lenders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Lenders within five Business Days after
demand (subject to subsection 4.01(n)) for all out-of-pocket costs and
expenses incurred by the Lenders, including but not limited to the Collateral
Agent, in connection with the development, preparation and delivery of, and
any amendment, supplement, waiver or modification to (in each case, whether or
not consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable
out-of-pocket Attorney Costs incurred by the Lenders with respect thereto; and
(b) pay or reimburse the Lenders, including but not limited to
the Collateral Agent, within five Business Days after demand (subject to
subsection 4.01(n)) for all reasonable out-of-pocket costs and expenses
(including Attorney Costs) incurred by the Lenders in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Term Loan (including in
connection with any "workout" or restructuring regarding the Term Loan, and
including in any Insolvency Proceeding or appellate proceeding).
10.05 INDEMNITY. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY
ARE CONSUMMATED, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER-RELATED
PERSONS AND THE LENDERS AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, COUNSEL, AGENTS AND ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES,
EXPENSES AND DISBURSEMENTS (INCLUDING ATTORNEY COSTS) OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF
THE TERM LOAN) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON
IN ANY WAY AS A RESULT OF AN ACTION BROUGHT AGAINST THE INDEMNIFIED PERSON BY
A PERSON NOT A PARTY TO THIS AGREEMENT RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN, OR THE
TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACTION TAKEN OR OMITTED BY ANY SUCH
PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING WITH
RESPECT TO ANY INVESTIGATION, LITIGATION OR PROCEEDING (INCLUDING ANY
INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT OF
THIS AGREEMENT OR THE LOAN OR THE USE OF THE PROCEEDS THEREOF, WHETHER OR NOT
ANY INDEMNIFIED PERSON IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY,
THE "INDEMNIFIED LIABILITIES"); PROVIDED, THAT THE COMPANY SHALL HAVE NO
OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
LIABILITIES RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH INDEMNIFIED PERSON. THE AGREEMENTS IN THIS SECTION SHALL SURVIVE
PAYMENT OF ALL OTHER OBLIGATIONS.
10.06 Payments Set Aside. To the extent that the Company makes a
payment to a Lender, or a Lender exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by a Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then to the extent of
such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred.
10.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Lenders.
10.08 Assignments, Participations, etc.
(a) Any Lender may, at any time, assign and delegate to one or
more Eligible Assignees (each an "Assignee") all, or any ratable part of all,
of the Term Loan and the other rights and obligations of such Lender
hereunder, in a minimum amount of $2,500,000; provided, however, that the
Company may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Company, with a copy to the Collateral Agent, by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the Company, with a
copy to the Collateral Agent, an Assignment and Acceptance in the form of
Exhibit E ("Assignment and Acceptance") together with any Note or Notes
subject to such assignment. From and after such date that Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents,
and (iii) the assignor Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Loan Documents.
(b) Within five Business Days thereafter, the Company shall
execute and deliver to the assignee Lender, new Notes evidencing such
Assignee's assigned Loan and its portion of the Term Commitment and, if the
assignor Lender has retained a portion of the Term Loan and its portion of the
Term Commitment, replacement Note(s) in the principal amount of the Term Loan
retained by the assignor Lender (such Note(s) to be in exchange for, but not
in payment of, the Note(s) held by such Lender). Immediately upon each
Assignee's making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee.
(c) Any Lender may at any time sell to one or more financial
institutions or other Persons not Affiliates of the Company (a "Participant")
participating interests in the Term Loan, such Lender's portion of the Term
Commitment and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the
performance of such obligations, (iii) the Company and Lenders shall continue
to deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first proviso to Section
10.01. In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents, and all
amounts payable by the Company hereunder shall be determined as if such Lender
had not sold such participation; except that, if amounts outstanding under
this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to
it as a Lender under this Agreement.
(d) Notwithstanding any other provision in this Agreement, a
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Note in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB
or U.S. Treasury Regulation 31 CFR 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
10.09 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists or the Term Loan has been
accelerated, the Lenders are authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, any Lender to or
for the credit or the account of the Company against any and all Obligations
owing to such Lender, now or hereafter existing, irrespective of whether or
not such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. The
Lenders agree promptly to notify the Company after any such set-off and
application made by a Lender; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application.
10.10 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.11 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.12 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders,
and the Lender-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.13 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAWS) OF THE STATE OF OKLAHOMA, PROVIDED THAT THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF OKLAHOMA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF OKLAHOMA, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE
LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE
LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY OKLAHOMA
LAW.
10.14 Waiver of Jury Trial. THE COMPANY AND THE LENDERS EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY LENDER-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
COMPANY AND THE LENDERS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
10.15 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company
and the Lenders, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof. This Agreement supersedes and replaces that
certain letter agreement between the Company and SPLC dated June 26, 1996 and
all other prior agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
THE COMPANY: EL DORADO CHEMICAL COMPANY
By:
Tony M. Shelby, Vice President
THE LENDERS: SECURITY PACIFIC LEASING CORPORATION
By:
Art Hyman, Vice President
By its execution of this Agreement, Northwest Financial Corporation
evidences its agreement to comply with the terms of Section 9.09 hereof.
Executed this ___ day of August, 1996.
NORTHWEST FINANCIAL CORPORATION
By:
Tony M. Shelby, Vice President