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FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: December 31, 1996
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File Number: 1-7677
LSB INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 73-1015226
____________________________ __________________
(State of Incorporation) (I.R.S. Employer
Identification No.)
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
_______________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(405) 235-4546
_______________
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
________________________________ _______________________
Common Stock, Par Value $.10 New York Stock Exchange
$3.25 Convertible Exchangeable
Class C Preferred Stock, Series 2 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
(Facing Sheet Continued)
Securities Registered Pursuant to Section 12(g) of the Act:
$3.25 Convertible Exchangeable Class C Preferred Stock, Series 2.
Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for the shorter period that the Registrant has had
to file the reports), and (2) has been subject to the filing requirements for
the past 90 days. YES X NO .
____ _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __________.
As of February 28, 1997, the aggregate market value of the 8,830,654
shares of voting stock of the Registrant held by non-affiliates of the Company
equaled approximately $44,153,270 based on the closing sales price for the
Company's common stock as reported for that date on the New York Stock
Exchange. That amount does not include (1) the 1,539 shares of Convertible
Non-Cumulative Preferred Stock (the "Non-Cumulative Preferred Stock") held by
non-affiliates of the Company, (2) the 20,000 shares of Series B 12%
Convertible, Cumulative Preferred Stock (the "Series B Preferred Stock"), and
(3) the 915,000 shares of $3.25 Convertible Exchangeable Class C Preferred
Stock, Series 2, excluding 5,000 shares held in treasury (the "Series 2
Preferred Stock"). An active trading market does not exist for the shares of
Non-Cumulative Preferred Stock or the Series B Preferred Stock. The shares of
Series 2 Preferred Stock do not have voting rights except under limited
circumstances.
As of February 28, 1997, the Registrant had 12,949,356 shares of common
stock outstanding (excluding 1,939,120 shares of common stock held as treasury
stock).
FORM 10-K OF LSB INDUSTRIES, INC.
TABLE OF CONTENTS
PART I
Page
____
Item 1. Business
General 1
Segment Information and Foreign
and Domestic Operations and Export Sales 1
Chemical Business 1
Environmental Control Business 5
Automotive Products Business 8
Industrial Products Business 10
Employees 11
Research and Development 11
Environmental Compliance 11
Item 2. Properties
Chemical Business 13
Environmental Control Business 14
Automotive Products Business 14
Industrial Products Business 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of
Security Holders 19
Item 4A. Executive Officers of the Company 19
PART II
Item 5. Market for Company's Common Equity
and Related Stockholder Matters
Market Information 20
Stockholders 20
Dividends 20
Item 6. Selected Financial Data 24
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview 26
Results of Operations 30
Liquidity and Capital Resources 34
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 42
PART III
Incorporated by reference from the Company's proxy
statement. 42
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 42
PART I
______
ITEM 1. BUSINESS
_______ ________
GENERAL
_______
LSB Industries, Inc. (the "Company") was formed in 1968 as an Oklahoma
corporation, and in 1977 became a Delaware corporation. The Company is a
diversified holding company which is engaged, through its subsidiaries, in (i)
the manufacture and sale of chemical products for the explosives, agricultural
and industrial acids markets (the "Chemical Business"), (ii) the manufacture
and sale of a broad range of air handling and heat pump products for use in
commercial and residential air conditioning systems (the "Environmental
Control Business"), and (iii) the manufacture or purchase and sale of certain
automotive and industrial products, including automotive bearings and other
automotive replacement parts (the "Automotive Products Business") and the
purchase and sale of machine tools (the "Industrial Products Business").
SEGMENT INFORMATION AND FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
________________________________________________________________________
Schedules of the amounts of sales, operating profit and loss, and
identifiable assets attributable to each of the Company's lines of business
and of the amount of export sales of the Company in the aggregate and by major
geographic area for each of the Company's last three fiscal years appear in
Note 15 of the Notes to Consolidated Financial Statements included elsewhere
in this report.
A discussion of any risks attendant as a result of a foreign operation
or the importing of products from foreign countries appears below in the
discussion of each of the Company's business segments.
CHEMICAL BUSINESS
_________________
GENERAL:
_______
The Chemical Business manufactures and sells the following types of
chemical products to the mining, agricultural and other industries: sulfuric
acid, concentrated nitric acid, prilled ammonium nitrate fertilizer and
ammonium nitrate-based blasting products. In addition, the Chemical Business
markets emulsions that it purchases from others for resale to the mining
industry.
The Chemical Business' principal manufacturing facility is located in El
Dorado, Arkansas ("El Dorado Facility") and its other manufacturing
facilities are located in Hallowell, Kansas, Wilmington, North Carolina, four
locations in Australia, and one location in New Zealand.
For 1996, approximately 26% of the sales of the Chemical Business
consisted of sales of fertilizer and related chemical products for
agricultural purposes, which represented approximately 14% of the Company's
1996 consolidated sales, and 61% consisted of sales of ammonium nitrate and
other chemical-based blasting products for the mining industry, which
represented approximately 33% of the Company's 1996 consolidated sales. The
Chemical Business accounted for approximately 54% and 51% of the Company's
1996 and 1995 consolidated sales, respectively.
SEASONALITY:
___________
The Company believes that the only seasonal products of the Chemical
Business are fertilizer and related chemical products sold to the agricultural
industry. The selling seasons for those products generally occur during the
spring and fall planting seasons, i.e., from March through June and from
September through November, which causes the Company to increase its inventory
prior to the beginning of each season. Sales to this Business' markets depend
upon weather conditions and other circumstances beyond the control of the
Company.
RAW MATERIALS:
_______________
Ammonia represents an essential component in the production of most of
the products of the Chemical Business, and the selling price of those products
generally fluctuates with the price of ammonia over time. The Company has
contracts with two suppliers of ammonia pursuant to which the suppliers have
agreed to supply the ammonia requirements of the Chemical Business on terms
the Company considers favorable. One contract is for a period of two (2)
years. One contract is for a period of 120 days, and the parties are in the
process of executing a long-term contract.
Substantial world-wide per ton price increases for ammonia were incurred
during 1995 and 1996 by most, if not all, users of ammonia that are not also
manufacturers of ammonia. Throughout 1995 and 1996, the Company's Chemical
Business has been able to increase its sales prices to cover a portion of the
price increases relating to the cost of ammonia that were incurred. However,
the Company's Chemical Business has not been able to recover all of these cost
increases by way of price increases during 1995 and 1996 on its products due
to market conditions. As a result, such inability to increase prices to cover
all price increases for ammonia for the Chemical Business' products had a
negative impact on the Company's 1995 and 1996 earnings. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
a discussion of negative impact on the Chemical Business as a result of high
ammonia prices.
The Company believes that it could obtain ammonia from other sources in
the event of a termination of the above referenced contracts, but such may not
be obtainable on as favorable terms as presently available to the Chemical
Business under its present agreements.
MARKETING AND DISTRIBUTION:
__________________________
The Chemical Business sells and markets its products to wholesalers and
directly through its own sales force using 32 distribution centers operated by
the Chemical Business. See "Properties". The Chemical Business sells low
density prilled ammonium nitrate-based explosives primarily to the surface
coal mining industry through six (6) Company-owned distribution centers, most
of which are located in close proximity to the customers' surface mines in the
coal producing states of Kentucky, Indiana, and Missouri, and through four (4)
company-owned distribution centers in Australia and one (1) location in New
Zealand located in the proximity of the mines. In addition, sales of
explosives are made on a wholesale basis to independent wholesalers and other
explosives companies.
The Chemical Business sells high density prilled ammonium nitrate for
use in agricultural markets in geographical areas within a freight-logical
distance from its El Dorado, Arkansas, manufacturing plant, primarily Texas,
Oklahoma, Arkansas, and Louisiana. The products are sold through 21
distribution centers, with 15 centers located in Northern and Eastern Texas,
one center located in Oklahoma, two centers located in Missouri, and three
centers located in Tennessee. The Chemical Business also sells its
agricultural products directly to wholesale customers.
The Chemical Business sells its industrial acids, consisting primarily
of high grade concentrated nitric acid and sulfuric acid, primarily to the
food, paper, chemical, and electronics industries. Concentrated nitric acid is
a special grade of nitric acid used in the manufacture of pharmaceuticals,
explosives, and other chemical products.
CUSTOMERS:
_________
The Chemical Business does not depend on any single customer or a few
customers. However, the Company does have a multi-year contract expiring in
December 1998, to supply a customer with nitric acid from ammonia provided by
such customer. The loss of that contract could have a material adverse effect
on the Chemical Business.
PATENTS:
________
The Company believes that the Chemical Business does not depend upon any
patent or license; however, the Chemical Business does own certain patents
that it considers important in connection with the manufacture of certain
blasting agents and high explosives. These patents expire from 1997 through
1999.
REGULATORY MATTERS:
__________________
Each of the Chemical Business' domestic blasting product distribution
centers are licensed by the Bureau of Alcohol, Tobacco and Firearms in order
to manufacture and distribute blasting products and is subject to comparable
requirements in its Australian operations. The Chemical Business also must
comply with substantial governmental regulations dealing with environmental
matters. See "Business - Environmental Compliance" for a discussion as to an
environmental issue regarding the Company's El Dorado, Arkansas, manufacturing
facility.
COMPETITION:
_____________
The Chemical Business competes with other chemical companies, in its
markets, many of whom have greater financial resources than the Company. The
Company believes that the Chemical Business is competitive as to price,
service, warranty, and product performance. The Company believes that the
Chemical Business' contracts with its suppliers of ammonia, which the Company
believes allows the Chemical Business to purchase ammonia at favorable prices
compared to the world market price of ammonia, allows the Chemical Business
the ability to favorably compete with its competitors as to price. The
Company believes that the Chemical Business is a leader in the Texas ammonium
nitrate market and the leading producer of concentrated nitric acid in the
United States for third party sales.
RECENT CONSTRUCTION:
____________________
During 1994, 1995 and 1996 the Chemical Business spent approximately
$26.8 million to install an additional concentrated nitric acid plant ("DSN
Plant") at its manufacturing facility located at El Dorado, Arkansas. The
DSN Plant began limited operations in 1995 and such limited operations have
continued through March 1997 due to certain mechanical problems at the DSN
Plant. As of the date of this report, the DSN Plant is operating at
approximately 80% of its design capacity.
RECENT DEVELOPMENT:
__________________
The Chemical Business has substantially finalized negotiations with the
Bayer Corporation ("Bayer") for the Chemical Business to build and operate on
a long-term basis a nitric acid plant located on property owned by Bayer in
Baytown, Texas. If the transaction is completed, the Chemical Business would
provide nitric acid from such plant to Bayer's Baytown, Texas, plant.
Execution of the agreement between the Chemical Business and Bayer is subject
to the Company finalizing the financing to construct the nitric acid plant and
the final terms upon which the Chemical Business would lease such nitric acid
plant. The Company has an agreement in principle with a lender to provide
financing which is subject to a number of conditions. Such nitric acid plant
would be owned by a party that is not an affiliate of the Company and would be
leased to the Chemical Business for a period expected to equal ten years under
an operating lease. It is currently expected that the cost to construct the
nitric acid plant would be approximately $60.0 million. Under the terms of the
proposed agreement with Bayer, such nitric acid plant is to be constructed and
become operational within 18 months from execution of the definitive
agreement. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
ENVIRONMENTAL CONTROL BUSINESS
______________________________
GENERAL:
_______
The Company's Environmental Control Business manufactures and sells a
broad range of fan coil, air handling, air conditioning, heating, water source
heat pump, geothermal water source heat pump, and dehumidification products
targeted to both commercial and residential new building construction and
renovation, as well as industrial applications. The fan coil products consist
of in-room terminal air distribution equipment utilizing air forced over a fin
tube heat exchanger which, when connected to centralized equipment
manufactured by other companies, creates a centralized air conditioning and
heating system that permits individual room temperature control. The heat
pump products manufactured by the Environmental Control Business consist of
heat-recovery, water-to-air heat pumps that include a self-contained
refrigeration circuit and blower, which allow the unit to heat or cool the
space it serves when supplied with recirculating water at mild temperatures.
The Environmental Control Business accounted for approximately 29% and 31% of
the Company's 1996 and 1995 consolidated sales, respectively.
PRODUCTION AND BACKLOG:
______________________
Most of the Environmental Control Business' production of the above-
described products occurs on a specific order basis. The Company manufactures
the units in many sizes, as required by the purchaser, to fit the space and
capacity requirements of hotels, motels, schools, hospitals, apartment
buildings, office buildings, and other commercial or residential structures.
As of December 31, 1996, the backlog of confirmed orders for the Environmental
Control Business was approximately $14.9 million, as compared to approximately
$12.1 million as of December 31, 1995. A customer generally has the right to
cancel an order prior to the order being released to production. Past
experience indicates that customers generally do not cancel orders after the
Company receives them. As of February 28, 1997, the Environmental Control
Business had released approximately $12.6 million of the December 31, 1996
backlog to production. All of the December 31, 1996 backlog is expected to be
filled by December 31, 1997.
DISTRIBUTION:
____________
The Environmental Control Business sells its products to mechanical
contractors, original equipment manufacturers and distributors. The Company's
sales to mechanical contractors primarily occur through independent
manufacturer's representatives, who also represent complimentary product lines
not manufactured by the Company. The Environmental Control Business' sales to
residential mechanical contractors are through distributors or sold directly
by the Environmental Control Business to the contractors. Original equipment
manufacturers generally consist of other air conditioning and heating
equipment manufacturers who resell under their own brand name the products
purchased from the Environmental Control Business as a separate item in
competition with the Company or as part of a package with other air
conditioning-heating equipment products to form a total air conditioning
system which they then sell to mechanical contractors, distributors or end-
users. Sales to original equipment manufacturers accounted for approximately
28% of the sales of the Environmental Control Business in 1996 and
approximately 8% of the Company's 1996 consolidated sales.
MARKET:
_______
The Environmental Control Business depends primarily on the commercial
construction industry, including new construction and the remodeling and
renovation of older buildings. In recent years this Business has introduced
geothermal products designed for residential markets for both new and
replacement markets.
RAW MATERIALS:
_____________
Numerous domestic and foreign sources exist for the materials used by
the Environmental Control Business, which materials include aluminum, copper,
steel, electric motors, and compressors. The Company does not expect to have
any difficulties in obtaining any necessary materials for the Environmental
Control Business.
COMPETITION:
___________
The Environmental Control Business competes with approximately eight
companies, several of whom are also customers of the Company. Some of the
competitors have greater financial resources than the Company. The Company
believes that the Environmental Control Business manufactures a broader line
of fan coil and water source heat pump products than any other manufacturer in
the United States, and, that it is competitive as to price, service, warranty,
and product performance.
JOINT VENTURES AND OPTIONS TO PURCHASE:
______________________________________
The Company has obtained an option to acquire 80% of the issued and
outstanding stock of an Entity ("Entity") that performs energy savings
contracts, primarily on U.S. government facilities (the "Option"). For the
Option, the Company has paid $1.1 million as of the date of this report. The
term of the Option expires May 4, 1997, but the Company may extend such for
two (2) additional years until 1999 upon payment of $100,000 for each year the
Company desires to extend such Option. As of the date of this report, the
Company has not decided whether it will exercise the Option. If the Company
decides to exercise the Option, the Company has agreed to pay an exercise
price of $4.0 million, less the amount already paid toward the Option ("Option
Price"), with a portion of the unpaid exercise price being payable in cash and
the balance over a certain period of time. The grantors of the Option have
entered into an employment agreement with the Entity. Under the terms of the
employment agreements, each of the three grantors will receive, among other
things, 12 1/2% of the net profits of the Entity for a period of three to five
years following the date of exercise of the Option. If the Company decides
not to exercise the Option, the grantors of the Option have agreed to repay to
the Company the amounts paid by the Company in connection with the Option
(less $100,000), which obligation is secured by the stock of the Entity and
other affiliates of the Entity. If the Company decides not to exercise the
Option, there is no assurance that the grantors of the Option will have funds
necessary to repay to the Company the amount paid for the Option. The
grantors of the option may, under certain conditions, require the Company to
accelerate its decision as to when it exercises the Option. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
For 1995 the Entity reported an unaudited net loss of approximately $.5
million. The Company believes that the Entity sustained a loss from
operations for 1996, but as of the date of this report, the amount of such
loss for 1996 is undeterminable.
During 1994, a subsidiary of the Company obtained an option to acquire
all of the stock of a French manufacturer of air conditioning and heating
equipment. The Company's subsidiary was granted the option as a result of the
subsidiary loaning to the parent company of the French manufacturer
approximately $2.1 million. Subsequent to the loan of $2.1 million, the
Company's subsidiary has loaned to the parent of the French manufacturer an
additional $1.8 million. The amount loaned is secured by the stock and assets
of the French manufacturer. The Company's subsidiary may exercise its option
to acquire the French manufacturer by converting approximately $150,000 of the
amount loaned into equity. The option is currently exercisable and will
expire June 15, 1999. As of the date of this report, the Company has not
decided whether it will exercise the option.
For 1996 and 1995, the French manufacturer had revenues of $16.0 million
and $15.9 million, respectively, and reported an approximate breakeven level
of operations in 1996 and a net loss of $900,000 in 1995. As a result of
cumulative losses by the French manufacturer, the Company has established
reserves aggregating approximately $1.5 million through December 31, 1996.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
AUTOMOTIVE PRODUCTS BUSINESS
____________________________
GENERAL:
_______
The Automotive Products Business is primarily engaged in the manufacture
and sale of a line of anti-friction bearings, which includes straight-thrust
and radial-thrust ball bearings, angular contact ball bearings, and certain
other automotive replacement parts (including universal joints, motor mounts,
and clutches). This Business also manufactures powertrain and drive line
parts for original equipment manufacturers. These products are used in
automobiles, trucks, trailers, tractors, farm and industrial machinery, and
other equipment. The Automotive Products Business accounted for approximately
12% of the Company's 1996 and 1995 sales. In 1996, the Automotive Products
Business manufactured approximately 44% of the products it sold and
approximately 37% in 1995, and purchased the balance of its products from
other sources, including foreign sources.
DISTRIBUTION AND MARKET:
__________________________
The automotive, truck, and agricultural equipment replacement markets
serve as the principal markets for the Automotive Products Business. This
Business sells its products domestically and for export, principally through
independent manufacturers' representatives who also sell other automotive
products. Those manufacturers' representatives sell to retailers (including
major chain stores), wholesalers, distributors, and jobbers. The Automotive
Products Business also sells its products directly to original equipment
manufacturers and certain major chain stores.
INVENTORY:
_________
The Company generally produces or purchases the products sold by the
Automotive Products Business in quantities based on a general sales forecast,
rather than on specific orders from customers. The Company fills most orders
for the automotive replacement market from inventory. The Company generally
produces products for original equipment manufacturers after receiving an
order from the manufacturer.
RAW MATERIALS:
_______________
The principal materials that the Automotive Products Business needs to
produce its products consist of high alloy steel tubing, steel bars, flat
strip coil steel, and bearing components produced to specifications. The
Company acquires those materials from a variety of domestic and foreign
suppliers at competitive prices. The Company does not anticipate having any
difficulty in obtaining those materials in the near future.
FOREIGN RISK:
____________
By purchasing a significant portion of the bearings and other automotive
replacement parts that it sells from foreign manufacturers, the Automotive
Products Business must bear certain import duties and international economic
risks, such as currency fluctuations and exchange controls, and other risks
from political upheavals and changes in United States or other countries'
trade policies. Contracts for the purchase of foreign-made bearings and other
automotive replacement parts provide for payment in United States dollars.
Circumstances beyond the control of the Company could eliminate or seriously
curtail the supply of bearings or other automotive replacement parts from any
one or all of the foreign countries involved.
COMPETITION:
___________
The Automotive Products Business engages in a highly competitive
business. Competitors include other domestic and foreign bearing
manufacturers, which sell in the original equipment and replacement markets.
Many of those manufacturers have greater financial resources than the Company.
INDUSTRIAL PRODUCTS BUSINESS
____________________________
GENERAL:
_______
The Industrial Products Business purchases and markets a proprietary
line of machine tools. The current line of machine tools distributed by the
Industrial Products Business includes milling, drilling, turning, and
fabricating machines. The Industrial Products Business purchases most of the
machine tools marketed by it from foreign companies, which manufacture the
machine tools to the Company's specifications. This Business manufactures CNC
bed mills and electrical control panels for machine tools. The Industrial
Products Business accounted for approximately 5% of the Company's consolidated
sales in each of the years 1996, 1995, and 1994.
DISTRIBUTION AND MARKET:
__________________________
The Industrial Products Business distributes its machine tools in the
United States, Mexico, Canada and certain other foreign markets. The
Industrial Products Business also sells its machine tools through independent
machine tool dealers throughout the United States and Canada, who purchase the
machine tools for resale to end users. The principal markets for machine
tools, other than machine tool dealers, consist of manufacturing and metal
working companies, maintenance facilities, and utilities.
FOREIGN RISK:
______________
By purchasing a majority of the machine tools from foreign manufacturers,
the Industrial Products Business must bear certain import duties and
international economic risks, such as currency fluctuations and exchange
controls, and other risks from political upheavals and changes in United
States or other countries' trade policies. Contracts for the purchase of
foreign-made machine tools provide for payment in United States dollars.
Circumstances beyond the control of the Company could eliminate or seriously
curtail the supply of machine tools from any one or all of the foreign
countries involved.
COMPETITION:
___________
The Industrial Products Business competes with manufacturers, importers,
and other distributors of machine tools many of whom have greater financial
resources than the Company. The Company's machine tool business generally is
competitive as to price, warranty, and service, and maintains personnel to
install and service machine tools.
EMPLOYEES:
__________
As of December 31, 1996, the Company employed 1,563 persons. As of that
date, (a) the Chemical Business employed 569 persons, with 105 represented by
unions under agreements expiring in August, 1998,(b) the Environmental Control
Business employed 577 persons, none of whom are represented by a union, and
(c) the Automotive Products Business employed 261 persons, with 14 represented
by unions under an agreement that expired in August, 1990 which has not been
renewed.
RESEARCH AND DEVELOPMENT:
________________________
The Company incurred approximately $532,000 in 1996, $501,000 in 1995,
and $606,000 in 1994 on research and development relating to the development
of new products or the improvement of existing products. All expenditures for
research and development related to the development of new products and
improvements are sponsored by the Company.
ENVIRONMENTAL COMPLIANCE:
________________________
The Chemical Business and its operations are subject to extensive
federal, state, and local environmental laws, rules, regulations and ordinances
relating to pollution, the protection of the environment or the release or
disposal of materials ("Environmental Laws") and is also subject to other
federal, state, and local laws regarding health and safety matters ("Health
Laws"). The operation of any chemical manufacturing plant and the
distribution of chemical products entail risks under the Environmental Laws
and Health Laws, many of which provide for substantial fines and criminal
sanctions for violations, and there can be no assurance that material costs or
liabilities will not be incurred to comply with such laws or to pay fines and
penalties. In addition, the Environmental Laws and Health Laws, and
enforcement policies thereunder, relating to the Chemical Business could bring
into question the handling, manufacture, use, emission or disposal of
substances or pollutants at the facilities of the Chemical Business or the
manufacture, use, or disposal or certain of its chemical products.
Potentially significant expenditures could be required in order to comply with
the Environmental Laws and Health Laws. The Company may be required to make
additional significant site or operational modifications, potentially
involving substantial expenditures and reduction or suspension of certain
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources". A subsidiary
of the Company in the Automotive Products Business was notified in 1987 that
it is a potentially responsible party as a result of having been a generator
of waste disposed of at a site in Oklahoma City, Oklahoma. See "Legal
Proceedings".
The Arkansas Department of Pollution Control & Ecology ("ADPC&E"), on
behalf of the EPA, performed a preliminary assessment at the Chemical
Business' El Dorado, Arkansas Plant site ("Site") in 1994. ADPC&E's
preliminary assessment report stated, in part, that a release of certain types
of contaminants is suspected to have occurred at the Site. In addition,
subsequent to the preliminary assessment, the ADPC&E conducted additional
inspections at the Site, which revealed certain instances of noncompliance
with applicable hazardous waste management activities at the Site. In 1995,
El Dorado Chemical Company ("EDC") and the ADPC&E entered into a Consent
Agreement to address certain groundwater contamination and other issues at the
Site. This Consent Agreement required EDC to undertake certain activities at
the Site, including action to reduce contaminants in the groundwater at the
Site. EDC submitted a groundwater monitoring work plan to the ADPC&E, which
the ADPC&E approved, and EDC initiated such plan. EDC has installed
additional monitoring wells at the Site to further test the groundwater. The
results of tests of water from the new monitoring wells indicated that a risk
assessment needed to be conducted on nitrates identified to be present in the
shallow groundwater. The ADPC&E has approved a work plan submitted by EDC for
the performance of such risk assessment. The risk assessment is currently
being performed.
During 1995 and the first half of 1996, EDC entered into two additional
Consent Administrative Agreements ("Agreements") with the ADPC&E to resolve
certain environmental compliance and certain other issues associated with
EDC's nitric acid concentrators. In the summer of 1996, EDC and the ADPC&E
entered into an amendment ("Amendment") to the Agreements to resolve various
compliance issues. In January 1997, EDC entered into a second amendment
("Second Amendment") to the Agreements, under which the ADPC&E acknowledged
EDC's completion of certain engineering activities and assessed a penalty of
$150,000 to resolve a number of permit issues relating to off-site emissions
and other air permit conditions. The Second Amendment also requires EDC to
modify its air permit to reflect the new pollution control and other equipment
installed. EDC is currently in compliance with the Agreements, as amended.
During 1996, the Chemical Business expended approximately $6.8 million
in connection with capital expenditures relating to compliance with federal,
state and local Environmental Laws at its El Dorado, Arkansas, facility,
including, but not limited to, compliance with the above- discussed consent
agreements with the ADPC&E. The Company estimates that the Chemical Business
is planning to spend approximately $1.2 million in 1997 for capital
expenditures relating to environmental control facilities at its El Dorado,
Arkansas, facility to comply with Environmental Laws, including, but not
limited to, such consent agreements. The amount to be spent in 1997 for
capital expenditures by the Chemical Business related to compliance with
Environmental Laws is a forward-looking statement and the results could
materially differ, if during 1997 there are additional releases or threatened
releases into the environment, changes in the Environmental Laws applicable to
the Chemical Business that require the Chemical Business to spend additional
amounts for capital expenditures not presently anticipated by the Company or
any federal or state environmental agencies or court of competent jurisdiction,
requires the Chemical Business to spend more for capital expenditures in order
to comply with Environmental Laws than presently contemplated by the Company.
The Chemical Business is also involved in various lawsuits pending in
federal court in El Dorado, Arkansas, relating to environmental issues at the
Chemical Business' El Dorado, Arkansas, facility. See Item 3. "Legal
Proceedings" for a discussion of such litigation and insurance coverage
relating thereto. The above discussion relating to the amount spent in 1996
and anticipated to be spent in 1997 for capital expenditures relating to
compliance with federal, state, and local Environmental Laws at the Chemical
Business' El Dorado, Arkansas, facility does not include fees and expenses
incurred, or to be incurred, in connection with such litigation or
expenditures, if any, that may be spent to comply with any order issued by the
court in connection with such lawsuits.
ITEM 2. PROPERTIES
___________________
CHEMICAL BUSINESS
_________________
The Chemical Business primarily conducts manufacturing operations (i) on
150 acres of a 1,400 acre tract of land located in El Dorado, Arkansas (the
"Site"), (ii) on 10 acres of land in a facility of approximately 60,000 square
feet located in Hallowell, Kansas ("Kansas facility") and (iii) a mixed acid
plant in Wilmington, North Carolina. In addition, the Chemical Business has
four manufacturing facilities in Australia and one in New Zealand that produce
blasting related products.
As of December 31, 1996, the manufacturing facility at the Site was
being utilized to the extent of approximately 76%, based on the continuous
operation of those facilities. As of December 31, 1996, manufacturing
operations at the Kansas facility were being utilized to the extent of
approximately 80% based on two 8 hour shifts per day and a 5 day week.
In addition, the Chemical Business distributes its products through 32
agricultural and blasting distribution centers. The Chemical Business
currently operates 21 agricultural distribution centers, with 15 of the
centers located in Texas (12 of which the Company owns and 3 of which it
leases); 1 center located in Oklahoma which the Company owns; 2 centers
located in Missouri (1 of which the Company owns and 1 of which it leases);
and 3 centers located in Tennessee (all of which the Company owns). The
Chemical Business currently operates 6 domestic explosives distribution
centers located in Bonne Terre, Missouri (owned); Owensboro, Combs, and
Pilgrim, Kentucky (leased); Midland, Indiana (leased); and Pryor, Oklahoma
(leased). The Chemical Business also has four (4) explosives distribution
centers in Australia, all of which are leased, and one (1) explosive
distribution center located in New Zealand, which is leased.
The Chemical Business operates its Kansas facility from buildings
located on an approximate ten acre site in southeastern Kansas, and a research
and testing facility comprising of a one square mile tract of land including
buildings and equipment thereon also located in southeastern Kansas which it
owns.
The Chemical Business' El Dorado, Arkansas facility is subject to
mortgages.
ENVIRONMENTAL CONTROL BUSINESS
__________________________________
The Environmental Control Business conducts its fan coil manufacturing
operations in two adjacent facilities located in Oklahoma City, Oklahoma,
consisting of approximately 265,000 square feet owned by the Company subject
to mortgage. As of December 31, 1996, the Environmental Control Business was
using the productive capacity of the above-referenced facilities to the extent
of approximately 55%, based on two eight-hour shifts per day and a five-day
week.
The Environmental Control Business manufactures most of its heat pump
products in a leased 270,000 square foot facility in Oklahoma City, Oklahoma.
The lease term began March 1, 1988 and expires February 28, 1998 with options
to renew for additional five year periods, and currently provides for the
payment of rent in the amount of $52,389 per month. The Company also has an
option to acquire the facility at any time in return for the assumption of the
then outstanding balance of the lessor's mortgage. As of December 31, 1996,
the productive capacity of this manufacturing operation was being utilized to
the extent of approximately 64%, based on one eight-hour shift per day and a
five-day week.
All of the properties utilized by the Environmental Control Business are
considered by Company management to be suitable and adequate to meet the
current needs of that Business.
AUTOMOTIVE PRODUCTS BUSINESS
____________________________
The Automotive Products Business conducts its operations in plant
facilities principally located in Oklahoma City, Oklahoma which are considered
by Company management to be suitable and adequate to meet its needs. One of
the manufacturing facilities occupies a building owned by the Company, subject
to mortgages, totaling approximately 178,000 square feet. The Automotive
Products Business also uses additional manufacturing facilities located in
Oklahoma City, Oklahoma, owned and leased by the Company totalling
approximately 158,000 square feet. During 1996, the Automotive Products
Business under-utilized the productive capacity of its facilities.
International Bearings, Inc. ("IBI"), a subsidiary of the Company
operating as a separate entity within the Automotive Products Division,
operates from a Company-owned warehouse of approximately 45,000 square feet in
an industrial park section of Memphis, Tennessee.
INDUSTRIAL PRODUCTS BUSINESS
____________________________
The Company owns several buildings, some of which are subject to
mortgages, totaling approximately 360,000 square feet located in Oklahoma
City, Oklahoma and Tulsa, Oklahoma, which the Industrial Products Business
uses for showrooms, offices, warehouse, and manufacturing facilities. The
Company also owns real property located near or adjacent to the above-
referenced buildings in Oklahoma City, Oklahoma, which the Industrial Products
Business uses for parking and storage. The Company also leases facilities in
Middletown, New York containing approximately 25,000 square feet for
manufacturing operations.
The Industrial Products Business also leases a facility from an entity
owned by the immediate family of the Company's President, which facility
occupies approximately seven acres in Oklahoma City, Oklahoma, with buildings
having approximately 44,000 square feet. The Industrial Products Business
also leases an office in Europe to coordinate its European activities.
All of the properties utilized by the Industrial Products Business are
considered by Company management to be suitable and adequate to meet the needs
of the Industrial Products Business.
SUBSEQUENT EVENT
________________
In February 1997, Prime Financial Corporation, a wholly-owned subsidiary
of the Company, exercised its option to acquire a 22 story office building
containing approximately 293,000 square feet of office space (the "Tower") in
Oklahoma City, Oklahoma, by foreclosing against the balance owed the
subsidiary under a note receivable recorded on the subsidiary's records at a
carrying value of approximately $14.0 million. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for further
discussion of the acquisition of the Tower by the subsidiary.
ITEM 3. LEGAL PROCEEDINGS
__________________________
In December 1987, the United States Environmental Protection Agency
("EPA") notified L&S Bearing Company ("L&S") of potential responsibility for
releases of hazardous substances at the Mosley Road Landfill in Oklahoma ("the
Mosley Site"). The recipients of such notification were: a) generators of
industrial waste allegedly sent to the Mosley Site (including L&S), and b) the
current owner/operator of the Mosley Site, Waste Management of Oklahoma
("WMO") (collectively, "PRPs"). Between February 20, and August 24, 1976, the
Mosley Site was authorized to accept industrial hazardous waste. During this
time, a number of industrial waste shipments allegedly were transported from
L&S to the Mosley Site. In February 1990, EPA added the Mosley Site to the
National Priorities List. WMO and the US Air Force conducted the remedial
investigation ("RI") and feasibility study ("FS"). It is too early to
evaluate the probability of a favorable or unfavorable outcome of the matter
for L&S. However, it is the PRP Group's position that WMO as the Mosley Site
owner and operator should be responsible for at least half of total liability
at the Mosley Site, and that 75% to 80% of the remaining liability, if
allocated on a volumetric basis, should be assignable to the US Air Force.
The Company is unable at this time to estimate the amount of liability, if
any, since the estimated costs of clean-up of the Mosley Site are continuing
to change and the percentage of the total waste which were alleged to have
been contributed to the Mosley Site by L&S has not yet been determined. If an
action is brought against the Company in this matter, the Company intends to
vigorously defend itself and assert the above position.
Roy Carr, et al. v. El Dorado Chemical Company ("Carr Case"); Richard
Detraz, et al. v. El Dorado Chemical Company ("Detraz Case"); Roy A. Carr,
Sr., et al. v. El Dorado Chemical Company ("Citizen Suit"). The Carr Case,
which was filed against El Dorado Chemical Company ("EDC") on June 26, 1996,
the Detraz Case, which was filed against EDC on October 14, 1996, and the
Citizen Suit, which was filed against EDC on October 17, 1996, are pending in
the United States District Court, Western District of Arkansas, El Dorado
Division. The plaintiffs in the Carr Case are comprised of eight (8) persons
who reside in the area surrounding EDC's El Dorado, Arkansas facility, while
the plaintiffs in the Detraz Case are comprised of sixteen (16) persons who
reside in various locations throughout the El Dorado, Arkansas, metropolitan
area. The plaintiffs in the Citizen Suit are substantially the same as the
plaintiffs in the Carr Case. The plaintiffs in both the Carr Case and the
Detraz Case allege that they have suffered an unspecified amount of damages
under various toxic tort theories for bodily injury and/or property damage as
a result of alleged releases of toxic substances into the environment from
EDC's El Dorado, Arkansas facility (the "Site"), plus punitive damages. In
addition, plaintiffs in the Detraz Case are seeking certification by the Court
as representatives of a class of persons who allegedly have been affected by
emissions from EDC's El Dorado, Arkansas facility, which certification EDC is
contesting. The plaintiffs in the Citizen Suit have brought a citizen's suit
alleging that EDC has violated the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended by the Emergency
Planning Community Right-To-Know Act ("EPCRA"), the Clean Air Act, and the
Clean Water Act and permits issued to EDC under certain of these acts, and, as
a result, under the terms of such acts the plaintiffs in the Citizen Suit are
seeking the Court to order EDC to pay penalties for each day in which EDC
violated such acts, if any, and injunctive relief requiring EDC to remediate
any such alleged violations. Recently, the Court in the Citizen Suit granted
EDC's motion to dismiss some of the plaintiffs' claims in the Citizen Suit,
but denied EDC's motion to dismiss other claims. It is expected that the
plaintiffs in the Citizen Suit will appeal the dismissal of certain of their
claims by the Court. EDC intends to vigorously defend the Carr Case, Detraz
Case, and the Citizen Suit.
The Company and the Chemical Business maintain an Environmental
Impairment Insurance Policy ("EIL Insurance") that provides coverage to the
Company and the Chemical Business for certain discharges, dispersals, releases,
or escapes of certain contaminants and pollutants into or upon land, the
atmosphere or any water course or body of water from the Site, which has
caused bodily injury, property damage, or contamination to others or to other
property not on the Site. The EIL Insurance provides limits of liability for
each loss up to $10.0 million and a similar $10.0 million limit for all losses
due to bodily injury or property damage, except $5 million for all remediation
expenses, with the maximum limit of liability for all claims under the EIL
Insurance not to exceed $10.0 million for each loss or remediation expense and
$10.0 million for all losses and remediation expenses. The EIL Insurance also
provides a retention of the first $500,000 per loss or remediation expense
that is to be paid by the Company. The Company has given notice to its
insurance carrier of the above claims. The Company believes that the EIL
Insurance will provide coverage for actual damages, if any, sustained by the
plaintiffs, in the Carr Case and the Detraz Case, if any, up to the limits of
the policy in excess of the $500,000 retention, but will not provide coverage
for punitive damages or penalties. As of the date of this report, the Company
is unaware whether such claims in the Carr Case and/or the Detraz Case will
exceed the limits of the coverage of the EIL Insurance. Although there can be
no assurances, the Company does not believe the outcome of these matters will
have a material adverse effect on the Company's financial position or results
of operation. Certain statements contained in this paragraph are forward-
looking statements that involve a number of risks and uncertainties that could
cause actual results to differ materially, such as, among other factors, the
following: the EIL Insurance does not provide coverage to the Company and the
Chemical Business for any material claims made by the claimants, the claimants
alleged damages are not covered by the EIL Policy which a court may find the
Company and/or the Chemical Business liable for, such as punitive damages, or
a court finds the Company and/or the Chemical Business liable for damages to
such claimants for a material amount in excess of the limits of coverage of
the EIL Insurance.
Arch Mineral Corporation, et al. v. ICI Explosives USA, Inc., et al. On
May 24, 1996, the plaintiffs filed this civil cause of action against EDC and
five (5) other unrelated commercial explosives manufacturers alleging that the
defendants allegedly violated certain federal and state antitrust laws in
connection with alleged price fixing of certain explosive products. This
cause of action is pending in the United States District Court, Southern
District of Indiana. The plaintiffs are suing for an unspecified amount of
damages, which, pursuant to statute, plaintiffs are requesting be trebled,
together with costs. Based on the information presently available to EDC, EDC
does not believe that EDC conspired with any party, including but not limited
to, the five (5) other defendants, to fix prices in connection with the sale
of commercial explosives. Discovery has only recently commenced in this
matter. EDC intends to vigorously defend itself in this matter.
ASARCO v. ICI, et al. The US District Court for the Eastern District
of Missouri has granted ASARCO and other plaintiffs in a lawsuit originally
brought against various commercial explosives manufacturers in Missouri, and
consolidated with other lawsuits in Utah, leave to add EDC as a defendant in
that lawsuit. An answer or other response is due in April 1997. This lawsuit
alleges a national conspiracy, as well as a regional conspiracy, directed
against explosive customers in Missouri and seeks unspecified damages. EDC
has been included in this lawsuit because it sold products to customers in
Missouri during a time in which other defendants have admitted to
participating in an antitrust conspiracy, and because it has been sued in the
Arch Case discussed above. Based on the information presently available to
EDC, EDC does not believe that EDC conspired with any party, to fix prices in
connection with the sale of commercial explosives. EDC intends to vigorously
defend itself in this matter.
Department of Justice Investigation of Explosives Industry. For several
years, the explosives industry has been under an investigation by the US
Department of Justice. Certain explosives companies plead guilty to antitrust
violations. In connection with that investigation, EDC received and has
complied with certain document subpoenas, and certain of EDC's employees have
been subpoenaed to testify in connection with such investigation. As of the
date of this report, EDC has not been identified as a target of this
investigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
____________________________________________________________
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
____________________________________________
IDENTIFICATION OF EXECUTIVE OFFICERS
____________________________________. The following table identifies
the executive officers of the Company.
Position and Served as
Offices with an Officer
Name Age the Company from
______________ _____ ____________ _____________
Jack E. Golsen 68 Board Chairman December 1968
and President
Barry H. Golsen 46 Board Vice Chairman August 1981
and President of the
Environmental
Control Business
David R. Goss 56 Senior Vice March 1969
President of
Operations and
Director
Tony M. Shelby 55 Senior Vice March 1969
President - Chief
Financial Officer,
and Director
Jim D. Jones 55 Vice President - April 1977
Treasurer and
Corporate Controller
David M. Shear 37 Vice President and March 1990
General Counsel
_________________________________________________________
The Company's officers serve one-year terms, renewable on an annual
basis by the Board of Directors. In March 1996, the Company executed an
employment agreement (the "Agreement") with Jack E. Golsen for an initial term
of three years followed by two additional three year terms. The Agreement
automatically renews for each successive three year term unless terminated by
either the Company or Jack E. Golsen giving written notice at least one year
prior to the expiration of the then three year term. All of the individuals
listed above have served in substantially the same capacity with the Company
and/or its subsidiaries for the last five years.
FAMILY RELATIONSHIPS.
____________________ The only family relationship that exists among the
executive officers of the Company is that Jack E. Golsen is the father of
Barry H. Golsen.
PART II
_______
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
_________________________________________________________________________
MATTERS
_______
MARKET INFORMATION
__________________
The Company's Common Stock trades on the New York Stock Exchange, Inc.
("NYSE"). The following table shows, for the periods indicated, the high and
low closing sales prices for the Company's Common Stock.
EL DORADO CHEMICAL COMPANY,
NORTHWEST FINANCIAL CORPORATION,
SLURRY EXPLOSIVE CORPORATION
and
THE PURCHASERS NAMED HEREIN
NOTE PURCHASE AGREEMENT
Dated February 13, 1997
$50,000,000 Notes due 2004
TABLE OF CONTENTS
ARTICLE PAGE
ARTICLE 1. - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms.. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2. - THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1. Authorization of Notes. . . . . . . . . . . . . . . . . . . . 11
2.2. Sale and Purchase of Notes. . . . . . . . . . . . . . . . . . 11
ARTICLE 3. - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4. - CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . 11
4.1. Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . 11
4.2. Representations, Warranties and Covenants . . . . . . . . . . 12
4.3. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4. Collateral Agreements.. . . . . . . . . . . . . . . . . . . . 12
4.5. Recordings, Filings and Priority. . . . . . . . . . . . . . . 12
4.6. Title Insurance; Survey.. . . . . . . . . . . . . . . . . . . 13
4.7. Compliance with Securities Laws.. . . . . . . . . . . . . . . 13
4.8. Proceedings and Documents.. . . . . . . . . . . . . . . . . . 13
4.9. No Event of Default or Potential Event of Default . . . . . . 13
4.10. Payment of Closing Fees.. . . . . . . . . . . . . . . . . . . 13
4.11. Original Documents. . . . . . . . . . . . . . . . . . . . . . 14
4.12. Loan to Appraised Values. . . . . . . . . . . . . . . . . . . 14
4.13. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.14. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . 14
4.15. Environmental Matters.. . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5. - REPRESENTATIONS AND WARRANTIES RELATING TO THE
BORROWERS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1. Organization, Standing, etc . . . . . . . . . . . . . . . . . 14
5.2. Qualification.. . . . . . . . . . . . . . . . . . . . . . . . 15
5.3. Business and Financial Statements.. . . . . . . . . . . . . . 15
5.4. Adverse Changes.. . . . . . . . . . . . . . . . . . . . . . . 15
5.5. Tax Returns and Payments. . . . . . . . . . . . . . . . . . . 15
5.6. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7. Title to Properties and Assets; Liens.. . . . . . . . . . . . 16
5.8. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9. Compliance with Collateral Agreements.. . . . . . . . . . . . 16
5.10. Compliance with Other Instruments.. . . . . . . . . . . . . . 16
5.11. Governmental Consents.. . . . . . . . . . . . . . . . . . . . 17
5.12. Permits and Licenses. . . . . . . . . . . . . . . . . . . . . 17
5.13. Federal Reserve Regulations.. . . . . . . . . . . . . . . . . 17
5.14. Status Under Certain Federal Statutes.. . . . . . . . . . . . 17
5.15. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 17
5.16. Matters Pertaining to Mortgaged Properties. . . . . . . . . . 19
5.17. Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 20
5.18. Solvency of the Borrowers.. . . . . . . . . . . . . . . . . . 20
5.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . 20
5.20. Brokers.. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.21. No Defaults.. . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6. - REPRESENTATIONS AND WARRANTIES OF PURCHASERS. . . . . . . . 21
6.1. Purchase for Investment.. . . . . . . . . . . . . . . . . . . 21
6.2. Purchasers' ERISA Representation. . . . . . . . . . . . . . . 21
ARTICLE 7. - INTEREST RATE PROVISIONS. . . . . . . . . . . . . . . . . . 22
7.1. Interest on Fixed Notes.. . . . . . . . . . . . . . . . . . . 22
7.2. Interest on Floating Notes. . . . . . . . . . . . . . . . . . 22
7.3. Interest Rate Lock. . . . . . . . . . . . . . . . . . . . . . 23
7.4. Past Due Payments . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 8. - PAYMENT OF NOTES. . . . . . . . . . . . . . . . . . . . . . 23
8.1. Required Payments of Notes. . . . . . . . . . . . . . . . . . 23
8.2. Optional Prepayments of Notes; Allocations. . . . . . . . . . 24
8.3. Notice of Prepayments; Officers' Certificate. . . . . . . . . 24
8.4. Maturity; Surrender.. . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 9. - ACCOUNTING, REPORTING AND INSPECTION
COVENANTS OF THE BORROWERS. . . . . . . . . . . . . . . . . . 25
9.1. Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2. Financial Statements and Other Information. . . . . . . . . . 25
9.3. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 10. - BUSINESS AND FINANCIAL COVENANTS OF THE BORROWERS. . . . . 29
10.1. Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Debt to Capitalization. . . . . . . . . . . . . . . . . . 29
(b) Combined Net Worth. . . . . . . . . . . . . . . . . . . . 29
(c) Combined Working Capital. . . . . . . . . . . . . . . . . 29
(d) Current Ratio.. . . . . . . . . . . . . . . . . . . . . . 29
(e) Fixed Charge Coverage.. . . . . . . . . . . . . . . . . . 29
(f) Liens.. . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Investments, Guaranties, etc. . . . . . . . . . . . . . . 30
(h) Restricted Payments.. . . . . . . . . . . . . . . . . . . 30
(i) Consolidation, Merger and Sale of Substantially All Assets. 30
(j) Formation of Subsidiaries.. . . . . . . . . . . . . . . . 31
(k) Interested Party Transactions.. . . . . . . . . . . . . . 31
(l) Existence.. . . . . . . . . . . . . . . . . . . . . . . . 31
(m) Payment of Taxes and Claims; Tax Consolidation. . . . . . 31
(n) Compliance with ERISA.. . . . . . . . . . . . . . . . . . 31
(o) Compliance with Laws. . . . . . . . . . . . . . . . . . . 32
(p) Maintenance of Properties; Insurance. . . . . . . . . . . 32
(q) Title.. . . . . . . . . . . . . . . . . . . . . . . . . . 32
(r) Conduct of Business.. . . . . . . . . . . . . . . . . . . 32
(s) Capital Improvements. . . . . . . . . . . . . . . . . . . 33
10.2. Calculations. . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11. - [intentionally omitted]. . . . . . . . . . . . . . . . . . 33
ARTICLE 12. - REGISTRATION, TRANSFER, AND SUBSTITUTION OF
NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.1. Note Register; Ownership of Notes.. . . . . . . . . . . . . . 33
12.2. Transfer and Exchange of Notes. . . . . . . . . . . . . . . . 33
12.3. Replacement of Notes. . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 13. - PAYMENTS ON NOTES. . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 14. - EVENTS OF DEFAULT AND ACCELERATION . . . . . . . . . . . . 34
14.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . 34
14.2. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . 36
14.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 15. - EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 16. - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 38
16.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
16.2. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 38
16.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 38
16.4. Usury Not Intended. . . . . . . . . . . . . . . . . . . . . . 39
16.5. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
16.6. Reproduction of Documents.. . . . . . . . . . . . . . . . . . 40
16.7. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 41
16.8. Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . 41
16.9. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 41
16.11. Further Action. . . . . . . . . . . . . . . . . . . . . . 41
16.12. Creditors . . . . . . . . . . . . . . . . . . . . . . . . 41
16.13. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.14. Entire Agreement. . . . . . . . . . . . . . . . . . . . . 41
16.15. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . 41
Schedule of Purchasers
Schedule of Information for Payment and Notices
EXHIBITS
A-1 Form of Fixed Note
A-2 Form of Floating Note
B-1 Form of Arkansas Mortgage and Security Agreement
B-2 Form of Assignment of Leases and Rents
C Environmental Indemnity Agreement
D Receipt of Funds
E Closing Certificate
F Officer's Certificate
Draft of 2/12/97
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement") dated February 13, 1997,
by and among the entities identified on Schedule I attached hereto (each a
"Purchaser" and collectively, "Purchasers"), El Dorado Chemical Company, an
Oklahoma corporation ("EDC"), Northwest Financial Corporation, an Oklahoma
corporation ("NFC"), and Slurry Explosive Corporation, an Oklahoma corporation
("Slurry") (EDC, NFC and Slurry are sometimes individually referred to as a
"Borrower" and collectively, the "Borrowers").
R E C I T A L S :
WHEREAS, EDC and NFC are each, directly or indirectly, wholly owned
subsidiaries of LSB Industries, Inc. and are affiliates of each other, and
Slurry is a wholly owned subsidiary of EDC;
WHEREAS, the Borrowers desire to jointly and severally issue and sell
Floating Notes and Fixed Notes in the aggregate principal amount of
$50,000,000 (the "Notes") to Purchasers for the purpose of refinancing
existing debt and other general corporate purposes; and
WHEREAS, Purchasers desire to purchase severally and not jointly the
Notes from the Borrowers upon the terms and conditions contained in this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement, the parties to this Agreement mutually
agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. As used herein the following terms have the
following respective meanings:
Affiliate: with respect to any Person, (a) any other Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with, such Person, or (b) any director, officer, partner or employee
of such Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
the ownership of voting securities, by contract or otherwise. The term
"control" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and shall in any event include the ownership or power to vote ten percent
(10%) or more of the outstanding equity interests of such other Person.
Appraised Value: The appraised value of the Mortgaged Properties, as
determined by AccuVal Associates, Inc., or such other appraiser selected by
Purchasers.
Bankruptcy Code: the meaning provided in Section 14.1(e).
Borrower: individually, EDC, NFC or Slurry, or any successor thereto by
merger, consolidation, or otherwise.
Business Day: any day on which national banks are open in Dallas,
Texas, Chicago, Illinois and Boston, Massachusetts.
Called Principal: with respect to any Fixed Note, the principal of such
Fixed Note that is to be prepaid pursuant to Section 8.2 or is declared to be
immediately due and payable pursuant to Article 14, as the context requires.
Capital Expenditures: for any period, expenditures (including, without
limitation, the aggregate amount of Capital Lease Obligations incurred during
such period) made by a Borrower or any of its respective Subsidiaries to
acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.
Capital Lease Obligations: all obligations to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) Property to
the extent such obligations are required to be classified and accounted for as
a capital lease on a balance sheet under GAAP, and for purposes of this
Agreement, the amount of such obligation shall be the capitalized amount
thereof, determined in accordance with GAAP.
Certificate: the meaning specified in Section 4.4(d).
Change of Control: the failure of LSB to directly or indirectly own and
control 100% of the capital stock of any Borrower.
Closing: the meaning specified in Article 3.
Closing Date: the meaning specified in Article 3.
Code: the Internal Revenue Code of 1986, as amended from time to time.
Collateral: the Mortgaged Properties.
Collateral Agreements: the Security Documents, the Financing
Statements, the Environmental Indemnity Agreement, the Receipt of Funds, the
Certificate and all other documents and instruments that may be executed or
delivered hereunder or in connection herewith.
Combined Debt: at any time, the total consolidated Debt of EDC and NFC
and their respective Subsidiaries determined on a combined basis, excluding
(without duplication in any instance) any Debt owed to EDC or NFC by any of
its respective Subsidiaries or another Subsidiary and any Debt owed by a
Borrower to any of its respective Subsidiaries or to another Borrower.
Combined Fixed Charge Coverage Ratio: the ratio of (A) EBITDA plus
total lease payments (other than payments under Capital Lease Obligations and
rents paid by a Borrower to another Borrower) to (B) the sum of (i) Combined
Interest Expense, (ii) total lease payments (other than Capital Lease
Obligations), (iii) principal payments due on or scheduled mandatory
redemptions of Debt (including the Notes) within one year, whether or not
actually paid and (iv) the current portion of Capital Lease Obligations, all
determined on a consolidated and combined basis for EDC and NFC and their
respective Subsidiaries.
Combined Interest Expense: for any period, the total consolidated
interest expense of EDC and NFC and their respective Subsidiaries for such
period, determined in accordance with GAAP (minus, to the extent included
therein, any interest expense not paid in cash and interest expense paid by a
Borrower to another Borrower) including, without limitation (and without
duplication in any instance), (a) all interest paid on Debt of a Borrower and
its Subsidiaries (other than Debt owing from one Borrower to another
Borrower), (b) all commissions, discounts and other fees and charges owed with
respect to letters of credit and banker's acceptances allocable to or
amortized over such period, (c) net costs under Interest Rate Agreements and
(d) the portion of any amount payable under Capital Lease Obligations that is,
in accordance with GAAP, allocable to interest expense, determined on a
combined basis.
Combined Net Income: for any period, the total of all amounts which, in
conformity with GAAP, would be included under net income (or deficit) on a
consolidated income statement of each of EDC and NFC and their respective
Subsidiaries for such period, after deducting all operating expenses,
provisions for all taxes and reserves (including, but not limited to, reserves
for deferred income taxes), and all other proper deductions, determined on a
combined basis.
Combined Net Worth: the total consolidated assets of EDC and NFC and
their respective Subsidiaries (in accordance with GAAP) less in each case
Total Liabilities, determined on a combined basis.
Combined Working Capital: total Current Assets less Current Liabilities
of EDC and NFC and their respective Subsidiaries, determined on a combined
basis.
Commission: the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
Current Assets: the consolidated assets of EDC and NFC and their
respective Subsidiaries, as the case may be, which can be readily converted
into cash within one year and all other assets deemed current assets in
accordance with GAAP, determined on a combined basis.
Current Liabilities: the consolidated Debt, trade payables, accrued
expenses and other obligations of EDC and NFC and their respective
Subsidiaries, which must be satisfied or have maturities within one year, as
determined in accordance with GAAP, and the outstanding balance of any
revolving credit facility, determined on a combined basis, but excluding any
Debt owing by one Borrower to another Borrower.
Debt: as of any date of determination, all items (other than trade
payables, accrued expenses, advance payments from customers, capital stock,
capital surplus and retained earnings, and long-term deferred taxes) that in
accordance with GAAP would constitute a liability as shown on the liability
side of a balance sheet of a Borrower including Capital Lease Obligations.
Without limiting the generality of the foregoing, with respect to any Person,
the term "Debt" in any event shall include indebtedness for borrowed money,
including long-term and short-term debt, obligations and liabilities secured
by any Lien existing on property owned subject to such Lien, whether or not
the indebtedness, obligation or liability secured thereby shall have been
assumed.
Default Rate: (i) with respect to the Fixed Notes, 12.57% per annum and
(ii) with respect to the Floating Notes, two percent (2%) above the then
current interest rate on the Floating Notes, but in each instance not to
exceed the Highest Lawful Rate.
Discounted Value: with respect to the Called Principal of any Fixed
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on a semiannual
basis) equal to the Reinvestment Yield with respect to such Called Principal.
EBITDA: for any period, shall mean the Combined Net Income after
restoring amounts deducted for depreciation, amortization, interest expense
and taxes for each of EDC and NFC and their respective Subsidiaries,
determined on a combined basis.
Eligible Subsidiary: any corporation or other entity organized under
the laws of a state of the United States and located entirely within the
United States and 100% of all equity interests of which is owned by a Borrower
either directly or through another Eligible Subsidiary.
Environmental Consultant: the meaning specified in Section 4.15.
Environmental Indemnity Agreement: the meaning specified in Section
4.4(c).
ERISA: the Employee Retirement Income Security Act of 1974, as amended
from time to time.
Event of Default: the meaning specified in Section 14.1.
Exchange Act: the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be
in effect at the time.
Financial Statements: the meaning specified in Section 5.3.
Financing Statements: the meaning specified in Section 4.4(b).
Fiscal Year: the fiscal year of each Borrower for purposes of
Article 9.
Fixed Note: the meaning specified in Section 2.1. Fixed Notes shall
also include any Floating Notes for which the interest rate is permanently set
pursuant to Section 7.3.
Floating Note: the meaning specified in Section 2.1.
Funded Debt: the consolidated Debt (excluding any Guaranty, the
outstanding balance of any revolving credit facility and Debt owing from one
Borrower to another Borrower) of EDC and NFC and their respective
Subsidiaries, other than Debt that by its terms matures within one year of the
date of determination, determined on a combined basis.
GAAP: generally accepted accounting principles as set forth from time
to time in the opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements of the Financial
Accounting Standards Board or in such opinions and statements of such other
entities as shall be approved by a significant segment of the accounting
profession.
Guaranty: all obligations by a Person which in any manner directly or
indirectly guarantee the payment or performance of any indebtedness or other
obligation of any other Person or assure or in effect assure the holder of any
guaranteed obligation against the loss in respect thereof.
Hancock: John Hancock Mutual Life Insurance Company and its successors
and assigns.
Highest Lawful Rate: the meaning specified in Section 16.4.
Indemnified Party: the meaning specified in Section 11.2.
Interest Option Notice: the meaning specified in Section 7.2.
Interest Period: with respect to the Floating Notes, a period
commencing (i) in the case of the initial Interest Period thereunder, on the
Closing Date or (ii) in the case of subsequent Interest Periods thereunder, on
the termination date of the immediately preceding Interest Period applicable
thereto in the case of a rollover to a new Interest Period in accordance with
Section 7.2, and ending in each case three months, six months or one year
thereafter as the Borrowers shall select in accordance with Section 7.2;
provided, however, that (A) any Interest Period that would otherwise end on a
day that is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day unless such next succeeding LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding LIBOR Business Day and (B) any Interest Period that would
otherwise end after the Maturity Date shall end on the Maturity Date.
Interest Rate Agreement: any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge or arrangement under which a Borrower or any
of its respective Subsidiaries is a party or a beneficiary.
Interest Rate Set Window: the period of time not more than ten (10)
days nor less than five (5) days prior to the commencement of each Interest
Period.
Investment: any direct or indirect purchase or other acquisition by a
Person of stock or other securities of any other Person, or any direct or
indirect loan, advance or capital contribution (other than any Guaranty) by a
Person to any other Person, including all indebtedness and accounts receivable
from such other Person that did not arise from sales to such other Person in
the ordinary course of business.
LIBOR Business Day: a Business Day on which dealings in dollars are
carried out in the London interbank eurodollar market.
LIBOR Premium: with respect to any Floating Note, a premium of (i)
three percent (3%) of the principal amount prepaid, if the prepayment occurs
on or before March 31, 2000, (ii) two percent (2%) of the principal amount
prepaid, if the prepayment occurs on or after April 1, 2000 and on or before
March 31, 2001 and (iii) one percent (1%) of the principal amount prepaid, if
the prepayment occurs on or after April 1, 2001 and on or before March 31,
2002.
LIBOR Rate: for any Interest Period in effect under the Floating Notes,
the rate announced in The Wall Street Journal (Northeast Edition) as the
London Interbank Offered Rates (LIBOR) for a period of corresponding duration.
Lien: with respect to any Property, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such Property. For
purposes of this Agreement, a Person shall be deemed to own, subject to a
Lien, any Property that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement (other than an operating lease) relating to such
Property.
LSB: LSB Industries, Inc., a Delaware corporation and the parent
corporation, directly or indirectly, of each Borrower.
Majority Holders: a registered holder or holders (other than a Borrower
or any Affiliate thereof) of, in the aggregate, a majority in principal amount
of the Notes at any time outstanding (excluding any Note directly or
indirectly owned by a Borrower or any Affiliate thereof).
Make-Whole Premium: with respect to any Fixed Note (including any
Floating Note that becomes a Fixed Note pursuant to the Borrowers' election to
fix the interest rate thereunder in accordance with Section 7.3), a premium
equal to the excess, if any, of the Discounted Value of the Called Principal
of such Fixed Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Make-Whole Premium shall in no
event be less than zero.
Material Adverse Effect: a material adverse effect on the business,
operations, affairs, condition or properties of the Borrowers, taken as a
whole, or a matter which materially affects the ability of any Borrower to
perform its respective obligations hereunder or under the Collateral
Agreements.
Maturity Date: April 1, 2004 or such earlier date upon which the
maturity of the Notes is accelerated pursuant to Section 14.2.
Moody's: Moody's Investors Services, Inc.
Mortgaged Properties: the aggregate of all properties pledged, conveyed
and encumbered under or pursuant to the Security Documents.
Net Income: for any period, the total of all amounts which, in
conformity with GAAP, would be included under net income (or deficit) on a
consolidated income statement of such Person for such period, after deducting
all operating expenses, provisions for all taxes and reserves (including, but
not limited to, reserves for deferred income taxes), and all other proper
deductions.
Net Tangible Assets: total consolidated assets of EDC and NFC and their
respective Subsidiaries less intangible assets of EDC or NFC and their
respective Subsidiaries such as goodwill, patents and similar assets that
would be of an intangible nature in accordance with GAAP, determined on a
combined basis.
Notes: collectively, the Fixed Notes and the Floating Notes.
Officers' Certificate: a certificate executed by the President and the
Secretary of each Borrower.
PBGC: the Pension Benefit Guaranty Corporation or any governmental
authority succeeding to any of its functions.
Payment Date: the first day of each calendar quarter, but if such day
is not a Business Day, the first Business Day of such quarter.
Permitted Exceptions: those Liens permitted under the Security
Documents.
Permitted Investments: (a) direct obligations of the United States, or
of any agency thereof, or obligations guaranteed as to principal and interest
by the United States, or of any agency thereof, in either case maturing not
more than one year from the date of acquisition thereof; (b) direct
obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of the acquisition thereof and, at the time of
such acquisition, having the highest rating obtainable from either S&P or
Moody's; (c) certificates of deposit issued by any bank or trust company
organized under the laws of the United States or any state thereof and having
capital, surplus and undivided profits of at least $200,000,000, maturing not
more than six months from the date of acquisition thereof; (d) commercial
paper rated A-1 or better or P-1 or better by S&P or Moody's, respectively,
maturing not more than six months from the date of acquisition thereof; and
(e) Eurodollar time deposits having a maturity of less than six months
purchased directly from any such bank (whether such deposit is with such bank
or any other such bank).
Person: a corporation, an association, a partnership, a limited
liability company, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
Plan: an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) that is or has been established or maintained, or to which
contributions are or have been made, by the Borrower or any of the
Subsidiaries or any Related Person with respect to any of them, or an employee
pension benefit plan as to which the Borrower or any of the Subsidiaries or
any Related Person with respect to any of them, would be treated as a
contributory sponsor under Section 4069 of ERISA if it were to be terminated.
Potential Event of Default: a default that, with notice or lapse of
time or both, becomes an Event of Default.
Premium: a LIBOR Premium or a Make-Whole Premium, as the case may be.
Property: any right or interest in or to property of any kind
whatsoever, whether real, personal (including, without limitation, cash) or
mixed and whether tangible or intangible.
Purchasers: the Persons identified on Schedule I attached hereto and
their respective successors and assigns.
Receipt of Funds: the meaning specified in Section 4.4(d).
Reinvestment Yield: with respect to the Called Principal of any Note,
the yield to maturity implied by (a) the yields reported, as of 10:00 a.m.
(New York City time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display designated as "Page 5"
on the Telerate Service (or such other display as may replace Page 5 on the
Telerate Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Life of such Called Principal as of such
Settlement Date, plus 100 basis points, or (b) if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Life of such Called
Principal as of such Settlement Date, plus 100 basis points. Such implied
yield shall be determined, if necessary, by (x) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (y) interpolating linearly between reported yields.
Related Person: as to any Person, either (a) any corporation or trade
or business that is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person, or (b) is
under common control (within the meaning of Section 414(c) of the Code) with
such Person, or (c) is a member of any affiliated service group (within the
meaning of Section 414(m) of the Code) that includes such Person, or (d) is
otherwise treated as part of the controlled group that includes such Person
(within the meaning of Section 414(o) of the Code).
Remaining Life: with respect to the Called Principal of any Fixed Note,
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal and
the scheduled due date of such Remaining Scheduled Payment.
Remaining Scheduled Payments: with respect to the Called Principal of
any Fixed Note, all payments of such Called Principal and interest thereon
that would be due on or after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date.
Responsible Officer: the President, the Chief Executive Officer, the
Chief Operating Officer or the Chief Financial Officer of a Borrower.
S&P: Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
Schedule of Information for Payment and Notices: the meaning specified
in Article 13.
Secured Debt: all indebtedness for borrowed money or evidenced by a
bond, debenture, note or similar evidence of indebtedness, which is secured by
a Lien on any assets of a Borrower or any of its respective Subsidiaries or
any shares of stock or Debt of any Subsidiary of a Borrower.
Securities Act: the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Security Documents: the meaning specified in Section 4.4(a).
Settlement Date: with respect to the Called Principal of any Fixed
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or is declared to be immediately due and payable pursuant to
Article 14.
Special Counsel: Locke Purnell Rain Harrell (A Professional
Corporation) as special counsel to Purchasers in connection with this
Agreement.
Stock: all shares, options, warrants, interests, participations or
other equity equivalents (regardless of how designated) of a corporation or
equivalent entity whether voting or nonvoting, including, without limitation,
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3(a)11-1 of the General Rules and Regulations promulgated by
the Commission under the Exchange Act).
Subordinated Debt: Debt of a Borrower that by its terms is subordinated
to the Notes.
Subsidiary: any corporation or other entity of which more than 50% of
the outstanding voting shares are at the time owned (either alone or through
Subsidiaries or together with Subsidiaries) by a Borrower or another
Subsidiary of such Borrower.
Total Capitalization: total stockholder's equity of EDC and NFC and
their respective Subsidiaries on a consolidated basis plus total Funded Debt,
all determined on a combined basis.
Total Liabilities: total consolidated liabilities of EDC and NFC and
their respective Subsidiaries, as the case may be, as shown on its annual
balance sheet in accordance with GAAP, determined on a combined basis
Unfunded Current Liability: as to any Plan, the amount, if any, by
which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year, determined in accordance
with Statement of Financial Accounting Standards No. 35, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan, exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the Code.
Welfare Plan: an employee welfare benefit plan (as defined in Section
3(1) of ERISA) or a group health plan (as defined in Section 4980B(g)(2) of
the Code) which is or has been established or maintained, or to which
contributions are or have been made, by the Borrower or any of the
Subsidiaries or any Related Person with respect to any of them.
1.2. Miscellaneous. References herein to an "Exhibit" or "Schedule"
are, unless otherwise specified, to one of the exhibits or schedules attached
to this Agreement, and references herein to a "Section" are, unless otherwise
specified, to one of the Sections of this Agreement. As used in this
Agreement, the words "herein," "hereof," "hereby," and "hereunder" refer to
this Agreement as a whole and not to any particular Section or subdivision of
this Agreement. References herein to masculine or neuter are construed to
include masculine, feminine or neuter, where applicable, and references herein
to singular include plural and to plural include singular, where applicable.
When a definition or calculation in Section 1.1 refers to a matter on a
"combined basis," it shall mean a determination based on the combined
financial statements of EDC and NFC and their respective Subsidiaries.
ARTICLE 2.
THE NOTES
2.1. Authorization of Notes. The Borrowers have authorized the
issuance and sale on a joint and several basis of (i) $25,000,000 aggregate
principal amount of 10.57% Fixed Rate Notes (together with all notes issued in
substitution or exchange therefor pursuant to Article 12, the "Fixed Notes")
and (ii) $25,000,000 aggregate principal amount of Floating Rate Notes
(together with all notes issued in substitution or exchange therefor pursuant
to Article 12, the "Floating Notes") pursuant to this Agreement. Each Note
will be in the amount of $1,000 or a multiple thereof, will bear interest on
the unpaid principal balance thereof from the date of the Note as prescribed
herein, payable as set forth in Articles 7 and 8, will mature on April 1, 2004
and will be substantially in the form of Exhibit A-1 (for the Fixed Notes) and
Exhibit A-2 (for the Floating Notes). In addition, any note issued following
a permanent setting of the interest rate in accordance with Section 7.3 shall
be in the form of Exhibit A-1 and shall be deemed a Fixed Note.
2.2. Sale and Purchase of Notes. Subject to the terms and conditions
hereof, the Borrowers will issue and sell to Purchasers and, subject to the
terms and conditions hereof, each Purchaser will purchase severally and not
jointly from the Borrowers, at the Closing provided for in Article 3, the
aggregate principal amount of Fixed Notes and Floating Notes as indicated on
Schedule I attached hereto.
ARTICLE 3.
CLOSING
The closing of the sale of the Notes to the Purchasers (the "Closing")
shall take place at the offices of Locke Purnell Rain Harrell (A Professional
Corporation), 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201, at 10:00 a.m.
Dallas, Texas time (with funding to occur no later than 12:00 p.m.), on
February 13, 1997 (the "Closing Date"). At the Closing the Borrowers will
deliver to each Purchaser the Notes (in the amounts provided on Schedule I) in
the form prescribed by each such Purchaser, dated the Closing Date and
registered in such Purchaser's name (or the name of its nominee), against
delivery by such Purchaser to EDC, on behalf of each Borrower, of immediately
available funds in the aggregate amount of the purchase price therefor.
ARTICLE 4.
CONDITIONS TO CLOSING
Each Purchaser's obligation to purchase and pay for the Notes is subject
to the fulfillment to such Purchaser's satisfaction, by the time of Closing,
of the following conditions:
4.1. Opinion of Counsel. Purchaser shall have received an opinion,
dated the Closing Date and satisfactory in form and substance to Purchaser,
from Conner & Winters, counsel for the Borrowers, covering such matters
relevant to the transactions contemplated hereby as Purchaser or Special
Counsel may reasonably request.
4.2. Representations, Warranties and Covenants. The representations
and warranties of each Borrower contained in this Agreement shall be true and
correct at the time of Closing as if made at and as of such time, and each
Borrower shall have complied with all agreements and covenants hereunder
required to be performed by such Borrower on or prior to the time of Closing.
4.3. Notes. The Notes (with appropriate insertions) to be issued to
and accepted by Purchaser, shall have been duly executed and delivered to
Purchaser by the Borrowers and shall be in full force and effect and no term
or condition thereof shall have been amended, modified or waived, except with
the prior written consent of Purchaser and the Borrowers.
4.4. Collateral Agreements.
(a) The Arkansas Mortgage and Security Agreement substantially
in the form of Exhibit B-1 and the Assignment of Leases and Rents
substantially in the form of Exhibit B-2 (collectively, the "Security
Documents"), shall have been duly executed and delivered by the Borrowers for
the benefit of Purchasers, the registered holders from time to time of the
Notes, and the beneficiaries named in the Security Documents and shall be in
full force and effect.
(b) UCC-1 Financing Statements (the "Financing Statements")
shall have been duly executed and delivered by each Borrower.
(c) The Environmental Indemnity Agreement substantially in the
form of Exhibit C (the "Environmental Indemnity Agreement") shall have been
duly executed and delivered by the Borrowers and shall be in full force and
effect.
(d) A Receipt of Funds, substantially in the form of Exhibit D
(the "Receipt of Funds"), shall have been duly executed and delivered by the
Borrowers and shall be in full force and effect.
(e) A certificate, substantially in the form of Exhibit E (the
"Certificate"), shall have been duly executed and delivered by each Borrower
and shall be in full force and effect.
4.5. Recordings, Filings and Priority. Except as waived in writing by
Purchaser, all recordings and filings of or with respect to the Security
Documents and the Financing Statements shall have been duly made and all other
instruments relating thereto shall have been duly executed, delivered and
recorded or filed, in all such places as may be required by law, or as may be
deemed necessary or desirable by Special Counsel, in order to establish,
protect and perfect as of the Closing Date the interests and rights (and the
priority thereof) created or intended to be created thereby. The Lien of the
Security Documents and Financing Statements shall constitute a first Lien of
record on and a first security interest of record in the Mortgaged Properties,
subject only to the Permitted Exceptions.
4.6. Title Insurance; Survey. Purchaser shall have received (a) a
title insurance policy with respect to the Mortgaged Properties in the form of
the American Land Title Association Loan Policy (10/17/92) issued by a title
underwriter acceptable to Purchaser, issued by a title underwriter acceptable
to Purchaser, and containing affirmative coverages and reinsurance
arrangements and agreements satisfactory in form and substance to Purchaser
and Special Counsel, insuring in the amount of $50,000,000, Purchaser's
interest under the Security Documents as the holder of a valid first lien of
record on the Mortgaged Properties or, in the case of leased properties, a
valid first Lien on the Borrower's leasehold interest, subject only to the
Permitted Exceptions, containing no exception as to creditors' rights, and
containing affirmative zoning endorsements, affirmative coverage as to claims
and liens of mechanics and materialmen, affirmative endorsements as to claims
relating to the environmental conditions of the Mortgaged Properties, and such
other affirmative conditions and coverages as are available and as Purchaser
may request, all satisfactory in substance and form to Purchaser and Special
Counsel; (b) reports of Uniform Commercial Code searches in the Uniform
Commercial Code central filing offices of the Secretary of State of Arkansas
issued by the State of Arkansas, and such other evidence concerning Uniform
Commercial Code filings as is requested by Purchasers, in each case reasonably
satisfactory in form and substance to Purchasers and Special Counsel; (c) a
report of a tax and judgment lien search in the recording district of each
county or similar jurisdiction where the Mortgaged Properties are located,
satisfactory in form and substance to Purchasers and Special Counsel; and (d)
surveys of each part of the Mortgaged Properties and surveyors' certifications
as Purchaser shall approve.
4.7. Compliance with Securities Laws. The offering and sale of the
Notes to be issued at the Closing shall have complied with all applicable
requirements of federal and state securities laws, and Purchaser shall have
received evidence thereof reasonably satisfactory to Purchaser and Special
Counsel.
4.8. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory to Purchaser
and Special Counsel, and Purchaser and Special Counsel shall have received an
original executed counterpart of this Agreement, and all such other
counterpart originals or certified or other copies of such documents as
Purchaser or Special Counsel may reasonably request.
4.9. No Event of Default or Potential Event of Default. There shall
not exist and, upon consummation of the transactions contemplated hereby,
there shall not exist any Event of Default or Potential Event of Default.
4.10. Payment of Closing Fees. The Borrowers shall have paid the
reasonable fees, expenses and disbursements of Special Counsel and special
local counsel relating to the preparation and completion of the transactions
contemplated by this Agreement that are reflected in statements of such
counsel rendered prior to or on the Closing Date, without limitation on the
Borrowers' obligation to pay any additional fees and disbursements of all such
counsel pursuant to Article 15.
4.11. Original Documents. Purchaser shall have received an original
executed counterpart of the Notes, the Security Documents, the Financing
Statements, the Receipt of Funds, the Certificate, and the title insurance
policies and surveys referred to in Section 4.6.
4.12. Loan to Appraised Values. The Appraised Value of the Mortgaged
Properties shall not be less than $77,000,000.
4.13. Insurance. Purchaser shall have received certificates
satisfactory to Purchaser as to, or copies of, all insurance policies required
by the Security Documents
4.14. Due Diligence. The results of any due diligence review of the
Borrowers and their respective Subsidiaries and Properties, businesses,
operations, affairs, results of operations, financial condition and prospects
and the proposed organizational, legal and tax aspects of the proposed
transactions, performed by or on behalf of Purchaser shall be satisfactory to
Purchaser and Special Counsel.
4.15. Environmental Matters. The Borrowers shall have delivered to
Purchaser a Phase I environmental assessment and environmental compliance
audit, addressed to Purchaser, in form and substance acceptable to Purchaser
and prepared by Law Engineering and Environmental Services, Inc. (the
"Environmental Consultant"), to the effect that, except as otherwise disclosed
on Schedule 5.19, (i) nothing has come to the attention of the Environmental
Consultant that the current activities at the Mortgaged Properties do not
comply in all material respects with applicable requirements of any applicable
governmental authority relating to air or water pollution, hazardous substance
or waste management and disposal, or other Environmental Laws, and (ii) none
of the Mortgaged Properties is impacted by Hazardous Substances in any respect
that would require investigation, reporting, monitoring, cleanup or other
response under applicable Environmental Laws that could have a Material
Adverse Effect. The terms of engagement of the Environmental Consultant shall
be approved by Hancock and the engagement agreement shall specify that Hancock
shall be the principal client and the Borrowers shall be exclusively liable
for all payments and any indemnification or similar obligations under the
engagement agreement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES RELATING TO THE BORROWERS
The Borrowers jointly and severally represent and warrant that:
5.1. Organization, Standing, etc. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Oklahoma and has all requisite power and authority (i) to own and operate
its properties, (ii) to carry on its business as now conducted and as proposed
to be conducted, (iii) to enter into this Agreement, the Security Documents
and each of the other Collateral Agreements to which it is a party, (iv) to
issue and sell the Notes, and (v) to carry out the terms of this Agreement,
the Notes, the Security Documents and each of the other Collateral Agreements
to the extent it is a party thereto. This Agreement, the Notes, the Security
Documents and the other Collateral Agreements have been duly executed and
delivered and are valid and binding agreements of each Borrower, enforceable
in accordance with their terms, except as enforceability may be subject to and
limited by applicable principles of equity and by bankruptcy, reorganization,
moratorium, insolvency or other similar laws from time-to-time in effect
affecting the enforcement of creditors' rights generally.
5.2. Qualification. Each Borrower is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its activities or the character of the
properties it owns or leases makes such qualification necessary, except where
the failure to so qualify would not have Material Adverse Effect. Set forth
on Schedule 5.2 is a list of each jurisdiction in which each Borrower owns
Property or otherwise conducts business.
5.3. Business and Financial Statements. The Borrowers have delivered
to Purchasers true, complete and correct copies of (i) LSB's audited
consolidated financial statements for the Fiscal Year ended December 31, 1995,
and the unaudited financial statements of LSB for the nine months ended
September 30, 1996, EDC's audited consolidated financial statements for the
Fiscal Year ended December 31, 1995, and the unaudited financial statements of
EDC for the nine months ended September 30, 1996 and (iii) NFC unaudited
financial statements for the year ended December 31, 1995 and the nine months
ended September 30, 1996 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP (except that
the unaudited financial statements contain no footnotes) applied on a
consistent basis throughout the periods specified and present fairly the
historical financial positions of LSB and the Borrowers as of the respective
dates and for the respective periods specified.
5.4. Adverse Changes. There has been no Material Adverse Effect on any
Borrower since December 31, 1995, except as disclosed on Schedule 5.4.
5.5. Tax Returns and Payments. Each Borrower is a corporation subject
to United States federal income taxation. Each Borrower has timely and
accurately filed all tax returns required by law to be filed by it and has
paid all taxes, assessments and other governmental charges levied upon it or
any of its properties, assets, income or franchises that are due and payable,
other than those presently being contested in good faith by appropriate
proceedings diligently conducted for which such reserves and other appropriate
provision as are required by GAAP have been made. There are no material tax
Liens upon any of the assets of any Borrower except for statutory liens in
respect of taxes or assessments the payment of which is not yet delinquent.
If a Borrower is contesting any such tax or assessment in accordance with this
Section 5.5, such Borrower has disclosed to Purchasers, in writing, the nature
and extent of such contest.
5.6. Debt. Other than the Notes and the indebtedness disclosed in the
Financial Statements or as listed on Schedule 5.6, no Borrower has any secured
or unsecured Debt outstanding. Other than as provided in this Agreement and
the Collateral Agreements, or in the instruments or agreements listed on
Schedule 5.6, no instrument or agreement applicable to or binding on a
Borrower contains any restrictions on the incurrence by such Borrower of any
Debt.
5.7. Title to Properties and Assets; Liens. Each Borrower has good and
marketable fee title to all the real property purported to be owned by it and
good and marketable title to all other property and assets purported to be
owned by it. The Mortgaged Properties are owned free and clear of all Liens,
except for Liens and other matters that constitute Permitted Exceptions or
Liens that are permitted under Section 10.1(f) hereof. At the time of the
Closing and upon giving effect to the transactions contemplated hereby, and
except for the Permitted Exceptions and Liens permitted under Section 10.1(f)
hereof, (a) no currently effective financing statement under the Uniform
Commercial Code that names a Borrower as debtor or lessee relating to the
Mortgaged Properties will be on file in any jurisdiction in which the
Mortgaged Properties are located, and (b) no Borrower nor any of its
respective Subsidiaries has signed any currently effective financing statement
or any currently effective security agreement authorizing any secured party
thereunder to file any such financing statement relating to the Mortgaged
Properties, except (i) as required to perfect the Liens created by the
Collateral Agreements, (ii) as listed on Schedule 5.7, or (iii) as evidenced
by any Permitted Exception or Liens permitted under Section 10.1(f) hereof.
5.8. Litigation. Except as set forth on Schedule 5.8, there is no
action, proceeding or investigation pending or, to the best knowledge of the
Borrowers, threatened against LSB, any Borrower or any of the Borrowers'
respective Subsidiaries or any of their respective Properties which if
adversely determined, could have a Material Adverse Effect.
5.9. Compliance with Collateral Agreements. Each Borrower has
performed and complied in all material respects with every term, covenant,
condition and provision of the Collateral Agreements to be performed or
complied with by such Borrower on or prior to the date hereof, every
representation or warranty of the Borrowers contained in the Collateral
Agreements is true and correct in all material respects on and as of the date
hereof, and no default or Event of Default (as any such term may be defined in
the Collateral Agreements) has occurred and is continuing (without regard to
any applicable cure period) under the Collateral Agreements.
5.10. Compliance with Other Instruments. Except as disclosed on
Schedule 5.10, no Borrower (a) is in violation of any term of any agreement or
instrument to which it is a party or by which it is bound, or of any
applicable law, ordinance, rule or regulation of any governmental authority,
or of any applicable order, judgment or decree of any court, arbitrator or
governmental authority (including, without limitation, any such law,
ordinance, rule, regulation, order, judgment or decree relating to
environmental protection or pollution control, occupational health and safety
standards and controls, consumer protection or equal employment practice
requirements), the consequence of any of which violations could reasonably be
expected to result in a Material Adverse Effect; or (b) is in violation of any
term of its respective Articles of Incorporation or Bylaws. Neither the
execution, delivery and performance by any Borrower of this Agreement, any
Collateral Agreement, or the Notes nor the consummation of the transactions
contemplated hereby or thereby will result in any violation of or be in
conflict with or constitute a default under any such term or result in the
creation of (or impose any obligation on such Borrower to create) any Lien
upon any of the properties of such Borrower pursuant to any such term which
could reasonably be expected to result in a Material Adverse Effect.
5.11. Governmental Consents. Other than those that have been duly
obtained and are in full force and effect (copies of which have been delivered
to Purchasers or Special Counsel) and any filings contemplated by the Security
Documents and the Financing Statements (which filings will be made promptly
after Closing), no consent, approval or authorization of, or declaration or
filing with, any governmental authority on the part of the Borrowers is
currently required for the valid execution and delivery of this Agreement or
any Collateral Agreement, or the consummation of the transactions contemplated
hereby or thereby, or the valid offer, issue, sale and delivery of the Notes
pursuant to this Agreement.
5.12. Permits and Licenses. Except for any failure to obtain or recover
permits and licenses that could not reasonably be expected to have a Material
Adverse Effect, each Borrower has all permits and licenses necessary for the
operation of its business as presently conducted.
5.13. Federal Reserve Regulations. No Borrower will use any of the
proceeds of the sale of the Notes for the purpose, whether immediate,
incidental or ultimate, of buying any "margin stock" or of maintaining,
reducing or retiring any indebtedness originally incurred to purchase a stock
that is currently any "margin stock," or for any other purpose that would
constitute this transaction a "purpose credit," in each case within the
meaning of Regulation G of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207, as amended), or otherwise take or permit to be taken
any action that would involve a violation of such Regulation G or of
Regulation T (12 C.F.R. 220, as amended), Regulation U (12 C.F.R. 221, as
amended) or Regulation X (12 C.F.R. 224, as amended) or any other regulation
of such board. No indebtedness being reduced or retired out of the proceeds
of the sale of the Notes was incurred for the purpose of purchasing or
carrying any such "margin stock," and no Borrower owns nor has any present
intention of acquiring any such "margin stock."
5.14. Status Under Certain Federal Statutes. No Borrower is (a) a
"holding company" or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, (b) a "public utility," as such term is defined in the
Federal Power Act, as amended, (c) an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or (d) a "rail carrier," or a "person
controlled by or affiliated with a rail carrier," within the meaning of Title
49, U.S.C., or a "carrier" to which 49 U.S.C. Section 11301(b)(1) is applicable.
5.15. Compliance with ERISA. Except as otherwise disclosed on Schedule
5.15,
(a) Each Plan that is or has been maintained for employees of
any Borrower or any of its respective Subsidiaries, or any Related Person with
respect to any of them, or to which any Borrower or any of its respective
Subsidiaries, or any Related Person with respect to any of them, has made or
was required to make contributions has been administered in material
compliance with its terms and all applicable statutes (including but not
limited to ERISA and the Code, and all regulations and interpretations
thereunder), the failure of which would have a Material Adverse Effect. No
reportable event (as defined in Section 4043 of ERISA and regulations issued
thereunder) has occurred with respect to any Plan that is a defined benefit
plan (as defined in Section 3(35) of ERISA and regulations issued thereunder)
and subject to Title IV of ERISA ("Title IV Plan"). No material liability to
the PBGC has been incurred, or is expected to be incurred, by any Borrower or
any of its respective Subsidiaries or any Related Person with respect to any
Title IV Plan. The PBGC has not instituted any proceedings, and there exists
no event or condition that would constitute grounds for institution of
proceedings, against any Borrower, its respective Subsidiaries or any Related
Person by the PBGC to terminate any Title IV Plan under Section 4042 of ERISA
that would have a Material Adverse Effect. No case, matter or action with
respect to any Plan, pursuant to any federal or state law, has been brought,
is pending or is threatened, against any Borrower, its respective Subsidiaries
or any Related Person with respect to any of them, or any officer, director or
employee of any of them, or any fiduciary of any Plan that would have a
Material Adverse Effect.
(b) No Title IV Plan had an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA and regulations issued
thereunder) as of the last day of the most recent plan year of such Plan ended
prior to the date hereof that would have a Material Adverse Effect. All
contributions payable to each qualified Plan of any Borrower or its respective
Subsidiaries (that is an employee pension benefit plan as defined in
Section 3(2) of ERISA and regulations issued thereunder and that is intended
to meet the qualification requirements of the Code ("Qualified Plan")), for
all benefits earned or other liabilities accrued through the end of the latest
plan year for such Qualified Plan, determined in accordance with the terms and
conditions of such Qualified Plan, ERISA and the Code, have been paid or
otherwise provided for, the result of which would have a Material Adverse
Effect. No waiver of the minimum funding standard requirements of Section 302
of ERISA and Section 412 of the Code has been obtained, applied for or is
contemplated with respect to any Title IV Plan.
(c) None of the Borrowers or any of their respective Subsidiaries
nor any Related Person with respect to any of them, is or has been a
contributor to any multi-employer plan within the meaning of Section 3(37) of
ERISA and regulations issued thereunder.
(d) The execution and delivery of this Agreement and the
Collateral Agreements, the issue of the Notes hereunder and the consummation
of the transactions contemplated hereby will not involve any transaction that
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax would be imposed pursuant to Section 4975 of the Code which would
result in a Material Adverse Effect.
(e) No Lien imposed under Section 412(n) of the Code exists in
favor of any Plan upon any property belonging to any Borrower or any of its
respective Subsidiaries, or any Related Person of any of them which would
result in an Material Adverse Effect.
(f) The consummation of the transactions contemplated by this
Agreement will neither result in a "prohibited transaction" as described in
Section 406(a) of ERISA nor a tax under Section 4975 of the Internal Revenue
Code of 1986, as amended, that would result in a Material Adverse Effect. The
foregoing representation is made in reliance upon the Purchasers'
representations in Section 6.2 as to the source of funds to be used to
purchase the Notes.
5.16. Matters Pertaining to Mortgaged Properties.
(a) Each of EDC and NFC has all easements and other rights,
including those for use, maintenance, repair and replacement of and access to
structures, facilities or space for support, mechanical systems, roads,
utilities (including electricity, gas, water, sewer disposal, telephone and
CATV) and any other private or municipal improvements, services and facilities
necessary or appropriate to the proper operation, repair, maintenance,
occupancy or use of the Mortgaged Properties as currently being and proposed
to be used.
(b) There are no service (other than utility) or construction
contracts currently outstanding relating to any part of the Mortgaged
Properties, except those contracts that are set forth on Schedule 5.16, nor
have any labor or materials been supplied to the Mortgaged Properties, other
than in the ordinary course of business, that have not been fully paid for,
except as disclosed on Schedule 5.16.
(c) There are no permits, licenses, certificates or approvals
that are required to occupy or operate (except as specified in Section 5.8)
any part of the Mortgaged Properties as presently operated, except those
permits, licenses, certificates and approvals that are set forth on
Schedule 5.16 or which have been delivered to Purchasers.
(d) The Borrowers do not possess and are not aware of any
reports of engineers, architects or other Persons relating to any part of the
Mortgaged Properties which would be material to the Mortgaged Properties,
except those reports that are set forth on Schedule 5.16 or which have been
delivered to Purchasers.
(e) The Borrowers do not possess and are not aware of any plans
and specifications relating to any part of the Mortgaged Properties which are
material to the Mortgaged Properties, except those plans and specifications
that are set forth on Schedule 5.16 or which have been delivered to
Purchasers.
(f) Other than Phase I and Phase II environmental studies which
have been delivered to Purchasers, there are no soil reports in the possession
of any Borrower relating to any part of the Mortgaged Properties that would be
material to the Mortgaged Properties, except as set forth on Schedule 5.16 or
which have been delivered to Purchasers.
(g) The Mortgaged Properties that constitute real property are
zoned in the manner that permits the use of the Mortgaged Properties as
currently being and proposed to be used by the Borrowers and their
Subsidiaries.
(h) No certificates of occupancy or similar permits are required
with respect to the Mortgaged Properties.
(i) Slurry does not own any interest in, or conduct any
activities at, any of the Mortgaged Properties.
5.17. Use of Proceeds. The Borrowers will apply the proceeds of the
sale of the Notes to refinance existing debt, to make an intercompany advance
from EDC to LSB in an amount not to exceed $15,000,000, and for general
corporate purposes.
5.18. Solvency of the Borrowers. Each Borrower is solvent prior to and
after giving effect to the issuance and sale of the Notes, and after taking
into account any intercompany debt. If at any time a Borrower should become
insolvent, such Borrower shall within ten (10) Business Days after such
Borrower learns of such insolvency cause LSB to recapitalize such Borrower in
order to restore such Borrower to a solvent state. No Borrower, upon giving
effect to the transactions contemplated hereby, will be engaged in any
business or transaction, or about to engage in any business or transaction,
for which such Borrower has an unreasonably small capital, and no Borrower has
any intent (a) to hinder, delay or defraud any entity to which it is, or will
become, on or after the Closing Date, indebted, or (b) to incur debts that
would be beyond its ability to pay as they mature.
5.19. Environmental Matters. Except as disclosed on Schedule 5.19, each
Borrower has been complying with, and is in compliance with, all Environmental
Laws in each jurisdiction where it is presently doing business except for
failures to comply which would not have a Material Adverse Effect. Except as
disclosed on Schedule 5.19, to the best knowledge of the Borrowers, none of
the Mortgaged Properties is impacted by Hazardous Substances in any respect
that would require investigation, reporting, monitoring, cleanup or other
response under any Environmental Law which could reasonably be expected to
have a Material Adverse Effect.
5.20. Brokers. No Borrower nor any of its Affiliates has dealt with any
brokers or finders in connection with the transactions contemplated by this
Agreement.
5.21. No Defaults. At the time of the Closing, there exists no Event of
Default or Potential Event of Default.
5.22. Disclosure. Neither this Agreement, the Financial Statements nor
any other document, certificate or instrument delivered to Purchaser by or on
behalf of the Borrowers in connection with the transactions contemplated
hereby, when all such documents, certificates and instruments are taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact actually known to a Borrower that
may have a Material Adverse Effect that has not been set forth herein or in
the other documents, certificates and instruments delivered to Purchasers by
or on behalf of a Borrower specifically for use in connection with the
transactions contemplated hereby.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
6.1. Purchase for Investment. Each Purchaser represents and warrants
to the Borrowers and the other Purchasers that it is an "Accredited Investor,"
as defined in Regulation D under the Securities Act, and that it is purchasing
the Notes for investment and not with a view to the distribution thereof
except in compliance with the Securities Act and applicable state securities
laws, provided that the disposition of such Purchaser's property shall at all
times be within such Purchaser's control and without prejudice to such
Purchaser's right at all times to sell or otherwise dispose of all or any part
of the Notes by registration under the Securities Act and applicable state
securities laws or under an exemption from such registration available under
the Securities Act (including, without limitation, (a) a disposition to an
institutional investor in a private sale, (b) a disposition pursuant to
Rule 144 under the Securities Act, (c) a disposition to a qualified
institutional buyer pursuant to Rule 144A under the Securities Act, or (d) a
disposition under any other rules that may be promulgated by the Commission
under the Securities Act providing for the resale of securities to
institutional or other sophisticated investors or others without registration
under the Securities Act) and applicable state securities laws. Each
Purchaser covenants that it will not sell any Notes except in compliance with
the registration requirements, or an exemption therefrom, under the Securities
Act and applicable state securities laws.
6.2. Purchasers' ERISA Representation. Each Purchaser represents and
warrants that, with respect to each source of funds to be used by it to
purchase the Notes (respectively, the "Source"), at least one of the following
statements is accurate as of the Closing Date:
(a) the Source is an "insurance company general account," as
such term is defined in section V(e) of prohibited Transaction Class Exemption
95-60 (issued July 12, 1995) (PTE 95-60), and the purchase is exempt under the
provisions of PTE 95-60;
(b) the Source is a "governmental plan" as defined in Title I,
Section 3 (32) of ERISA;
(c) the Source is either (i) an insurance company pooled
separate account, and the purchase is exempt in accordance with Prohibited
Transaction Exemption 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, in which case the purchaser is exempt in
accordance with PTE 91-38 (issued July 12, 1991);
(d) the Source is an "investment fund" managed by a "qualified
professional asset manager" or "QPAM" (as defined in Part V of PTE 84-14,
issued March 13, 1984) which QPAM has been identified in writing, and the
purchase is exempt under PTE 84-14 provided that no other party to the
transaction described in this Agreement and no "affiliate" of such other party
(as defined in Section V(c) of PTE 84-14) has at this time, and has not
exercised at any time during the immediately preceding year, the authority to
appoint or terminate said QPAM as manager of the assets of any "plan"
identified in writing pursuant to this Section 6.2(d) or to negotiate the
terms of said QPAM's management agreement on behalf of any such identified
"plans"; or
(e) the Source is one or more "plans" or a separate account or
trust fund compromised of one or more "plans," each of which has been
identified in writing pursuant to this Section 6.1(e).
As used in this section, "plan" or "plans" shall have the meaning set
forth in Title I, Section 3 (3) of ERISA.
ARTICLE 7.
INTEREST RATE PROVISIONS
7.1. Interest on Fixed Notes. Interest on the outstanding principal
balance of the Fixed Notes shall accrue at the lesser of (i) 10.57% per annum
or (ii) the Highest Lawful Rate, and shall be due and payable in accordance
with Section 8.1. Interest on the unpaid principal of the Fixed Notes shall
be calculated on the basis of the actual days elapsed in a year consisting of
365 or 366 days, as applicable.
7.2. Interest on Floating Notes.
(a) Interest on the outstanding principal balance of the Floating
Notes shall accrue at an interest rate per annum during the applicable
Interest Period equal to the lesser of (i) the LIBOR Rate plus 4.20% or (ii)
the Highest Lawful Rate. Interest on the Floating Notes accrued during a
calendar month shall be due and payable in accordance with Section 8.1.
Interest on the unpaid principal of the Floating Notes shall be calculated on
the basis of the actual days elapsed in a year consisting of 360 days.
(b) Not more than ten days nor less than five days prior to
Closing and during each Interest Rate Set Window, EDC, on behalf of all the
Borrowers, shall notify Hancock on behalf of all Purchasers of their selection
of the duration of the immediately following Interest Period with respect to
the Floating Notes, which may be three months, six months or one year (the
"Interest Option Notice"). The duration of the Interest Period selected shall
be the same for all then outstanding Floating Notes. The Interest Option
Notice must be in writing and may be sent via telecopy, with the originally
executed copy delivered to Hancock immediately thereafter. The LIBOR Rate for
the following Interest Period shall be the applicable rate for a period of
corresponding duration announced in The Wall Street Journal (Northeast
Edition) on the first Business Day following receipt of the Interest Option
Notice.
(c) In connection with determining the applicable LIBOR Rate for
the following Interest Period, Purchasers shall calculate the principal and
interest payments due on the Floating Notes during such Interest Period, as
required under Section 8.1(b), and shall provide such amount to EDC on behalf
of the Borrowers.
7.3. Interest Rate Lock. With respect to the Floating Notes, during
any Interest Rate Set Window, the Borrowers shall have the option to
permanently set the interest rate on the Floating Notes. EDC, on behalf of
all the Borrowers, shall provide notice to Hancock on behalf of Purchasers of
their desire to set the rate and Hancock shall promptly thereafter notify EDC,
on behalf of the Borrowers, of the then prevailing fixed interest rates (based
on Purchasers' interest rate spreads and the average remaining life of the
Floating Notes) (the "Fixed Rate"). If the Borrowers elect to have the
Floating Notes accrue interest at the Fixed Rate, EDC, on behalf of all the
Borrowers, shall so notify Hancock on behalf of Purchasers in the Interest
Option Notice (which election shall be irrevocable) and immediately following
the then current Interest Period, the Floating Notes shall thereafter accrue
interest at the Fixed Rate, and the Floating Notes shall for all purposes be
deemed Fixed Notes. Any such election shall be with respect to all then
outstanding Floating Notes and shall be made in full and not in part.
Purchasers shall recompute the principal and interest payments required under
Section 8.1(b) based on the outstanding principal balance on the Floating
Notes and the Fixed Rate, and the Borrowers shall thereafter make principal
and interest payments on the Floating Notes equal to such amount.
7.4. Past Due Payments. All payments of principal and, to the extent
permitted by law, the applicable Premium (if any) and interest on or in
respect of any Note or this Agreement that are not made when due shall bear
interest at the applicable Default Rate from the date due and payable to the
date paid. Any payment in respect of any other obligation or amount payable
hereunder that is not paid when due shall bear interest at the applicable
Default Rate from the date due and payable to the date paid.
ARTICLE 8.
PAYMENT OF NOTES
8.1. Required Payments of Notes.
(a) On April 1, 1997, the Borrowers shall make a payment of all
accrued and unpaid interest on the Fixed Notes. On each Payment Date
thereafter while the Fixed Notes are outstanding, commencing July 1, 1997, the
Borrowers shall make a payment on the Fixed Notes, in immediately available
funds, in an amount equal to $416,666 of principal plus accrued and unpaid
interest thereon. Each such payment shall be applied pro rata against all
outstanding Fixed Notes and paid to the accounts as provided in the Schedule
of Information for Payment and Notices. On the Maturity Date, the entire
outstanding principal balance of the Fixed Notes, together with interest
accrued thereon, shall be due and payable.
(b) On April 1, 1997, the Borrowers shall make a payment of all
accrued and unpaid interest on the Floating Notes. On each Payment Date
thereafter while the Floating Notes are outstanding, commencing July 1, 1997,
the Borrowers shall make a payment on the Floating Notes, in immediately
available funds, in an amount equal to $416,666 of principal plus accrued and
unpaid interest thereon. Each such payment shall be applied pro rata against
all outstanding Floating Notes and paid to the accounts as provided in the
Schedule of Information for Payment and Notices. On the Maturity Date, the
entire outstanding principal balance of the Floating Notes, together with
interest accrued thereon, shall be due and payable.
(c) No partial prepayment of the Notes pursuant to Section 8.2
shall relieve the Borrowers from their obligation to make the payments
required under this Section 8.1, except to the extent that the outstanding
principal balance of the Notes is less than the amount of the scheduled
payment otherwise due under this Section 8.1.
8.2. Optional Prepayments of Notes; Allocations.
(a) At any time or from time to time, the Borrowers are hereby
granted the right, at their option, upon notice as provided in Section 8.3, to
prepay all or any part (in integral multiples of principal of $100,000) of the
Fixed Notes, which prepayment shall be applied pro rata among all outstanding
Fixed Notes and shall be applied to the outstanding principal amount thereof
in the inverse order of maturity.
(b) From time to time from and after February 1, 1999, the
Borrowers shall have the right, at their option, upon notice as provided in
Section 8.3, to prepay all or any part (in integral multiples of principal of
$100,000) of the Floating Notes, which prepayment shall be applied pro rata
among all outstanding Floating Notes and shall be applied to the outstanding
principal amount thereof in the inverse order of maturity.
(c) Each such prepayment shall include the principal amount of
the Notes so prepaid, plus interest accrued thereon to the date of payment,
plus the Premium described in Section 8.2(d) (based on such principal amount
so prepaid). In the case of each partial prepayment of the Notes, unless the
Borrowers otherwise direct, the principal amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment, rounded upward to the
nearest $1,000 for each Note, with adjustments to the extent practicable, to
compensate for any prior prepayments not made exactly in such proportion.
(d) Any prepayment of the Fixed Notes shall be subject to and
include the Make-Whole Premium. Any prepayment of the Floating Notes shall be
subject to and include the LIBOR Premium. Notwithstanding the foregoing, no
Premium shall be due if the Notes are prepaid pursuant to Section 8.1(c).
8.3. Notice of Prepayments; Officers' Certificate. EDC on behalf of
the Borrowers will give each registered holder of any Note written notice of
each prepayment of the Notes under Section 8.2 not less than fifteen (15)
Business Days and not more than sixty (60) days prior to the date fixed for
such prepayment, which notice shall be irrevocable. Each such notice and each
such prepayment shall be accompanied by an Officers' Certificate (a) stating
the principal amount and serial number of each Note to be prepaid and the
principal amount thereof to be prepaid; (b) stating the proposed date of
prepayment; (c) stating the accrued interest on each such Note to such date to
be paid in accordance with Section 8.4; and (d) estimating the Make-Whole
Premium or LIBOR Premium required under Section 8.2 (calculated as of the date
of such prepayment and proffered solely as an estimate of the Make-Whole
Premium or LIBOR Premium, as applicable, due upon prepayment) and setting
forth the method of determination and calculations used in computing such
Premium, accompanied by a copy of the Statistical Release H.15(519) (or other
source of market data) used in determining the United States Treasury Yield.
8.4. Maturity; Surrender. In the case of each prepayment of the Notes,
the principal amount of each Note to be prepaid shall mature and become due
and payable on the date fixed for such prepayment, together with interest on
such principal amount accrued to such date and the applicable Premium payable,
if any. From and after such date, unless the Borrowers shall fail to pay such
principal amount when so due and payable, together with the interest and
premium, if any, as aforesaid, interest on such principal amount shall cease
to accrue. Any Note paid or prepaid in full shall be surrendered to the
Borrowers and canceled and shall not be reissued, and no Note shall be issued
in lieu of any prepaid principal amount of any Note.
ARTICLE 9.
ACCOUNTING, REPORTING AND INSPECTION
COVENANTS OF THE BORROWERS
From the date hereof through the Closing and thereafter so long as any
Note shall be outstanding, the Borrowers will perform and comply with each of
the following covenants:
9.1. Accounting. The Borrowers will maintain a system of accounting
established and administered in accordance with GAAP and will accrue all such
liabilities as shall be required by GAAP.
9.2. Financial Statements and Other Information. The Borrowers will
deliver (in duplicate) to each Purchaser (except as hereinafter provided) so
long as such Purchaser or Purchaser's nominee shall hold any Note, and to each
other registered holder of a Note:
(a) within ninety (90) days after the end of each Fiscal Year
(unless LSB has filed with the Commission a Form 12b-25 pursuant to the
Exchange Act, in which case the financial statements prescribed herein shall
be due within one hundred five (105) days after such Fiscal Year end):
(i) the balance sheet of EDC as of the end of such Fiscal
Year and the related statements of income and retained earnings and of cash
flows of EDC for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year, all in reasonable detail and
(1) accompanied by the report thereon of any independent public accountants of
recognized national standing selected by EDC, which report shall state that
(v) such financial statements present fairly the financial position of EDC as
of the dates indicated and the results of its operations and cash flows for
the periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise specified in the report), and (w) the
audit by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, (2)
accompanied by a written statement of such accountants that (x) the
accountants have confirmed the ratios and other financial calculations
required to be set forth in the officer's certificate for such Fiscal Year
pursuant to subsection (c) below, (y) without any independent investigation
except that conducted in the ordinary course of their audit, the accountants
do not have knowledge of the existence of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof, and (z) the accountants have confirmed that the officer's
certificate provided in connection with such financial statements satisfies,
in form, the requirements of subsection (c) below, and (3) certified by the
chief financial officer or vice president and corporate controller of EDC as
presenting fairly, in accordance with GAAP, applied (except as specifically
set forth therein) on a basis consistent with such prior fiscal periods, the
information contained therein;
(ii) the balance sheet of NFC as of the end of such Fiscal
Year and the related statements of income and retained earnings and of cash
flows of NFC of such year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all in reasonable detail and certified
by the chief financial officer of NFC as presenting fairly, in accordance with
GAAP, applied (except as specifically set forth therein) on a basis consistent
with such prior fiscal periods, the information contained therein;
(iii) the balance sheet of EDC and NFC on a combined basis
as of the end of such Fiscal Year and the related statements of income, and
retained earnings and of cash flows of EDC and NFC on a combined basis, all in
reasonable detail and certified by the chief financial officers of EDC and NFC
as presenting fairly, in accordance with GAAP (except as specifically set
forth therein), the information contained therein; and
(iv) the audited financial statements of LSB for the Fiscal
Year then ended;
(b) within forty-five (45) days after the end of the first three
fiscal quarters of each Fiscal Year (unless LSB has filed with the Commission
a Form 12b-25 pursuant to the Exchange Act, in which case the financial
statements prescribed herein shall be due within fifty (50) days after such
quarter ended), the consolidated balance sheet of each of EDC and NFC as of
the end of such fiscal quarter and the related consolidated statements of
income and retained earnings and of cash flows of each of EDC and NFC for such
fiscal quarter and for the portion of the Fiscal Year from the first day of
such Fiscal Year through the end of such fiscal quarter, setting forth in each
case in comparative form the figures for the corresponding periods in the
previous Fiscal Year, all in reasonable detail and certified by the chief
financial officer or vice president and corporate controller of such Borrower
as presenting fairly, in accordance with GAAP, applied (except as specifically
set forth therein) on a basis consistent with such prior fiscal periods, the
information contained therein;
(c) together with each delivery of financial statements pursuant
to subsections (a) or (b) above, an officer's certificate in the form of
Exhibit F (i) showing in detail the determination of the ratios and other
financial calculations specified in Sections 10.1(a) through (e) during the
accounting period covered by such financial statements, (ii) stating that the
signer has reviewed the terms hereof and of the Notes and has made, or caused
to be made under his supervision, a review of the transactions and condition
of the Borrowers during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or at
the end of such accounting period, and that the signer does not have knowledge
of the existence as of the date of such officer's certificate, of any
condition or event that constitutes an Event of Default or Potential Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Borrowers have
taken or are taking or propose to take with respect thereto; and (iii) if not
specified in the related financial statements being delivered pursuant to sub-
section (a) above, specifying the aggregate amount of interest and rentals
received or accrued by the Borrowers, and the aggregate amount of
depreciation, depletion and amortization charged on the books of the Borrowers
during the accounting period covered by such financial statements;
(d) promptly upon receipt thereof, copies of all reports
submitted to LSB or any Borrower by independent public accountants in
connection with each annual, interim or special audit of the books of LSB or a
Borrower made by such accountants, including, without limitation, any comment
letter submitted to management by such accountants in connection with their
annual audit;
(e) promptly upon their becoming available, copies of all press
releases and other statements made available generally by LSB or a Borrower to
the public concerning material developments in the business of the Borrower;
(f) within five (5) days of any officer of any Borrower
obtaining knowledge of any condition or event that constitutes an Event of
Default or Potential Event of Default, or that the registered holder of any
Note has given any notice or taken any other action with respect to a claimed
Event of Default or Potential Event of Default under this Agreement or that
any person has given notice to a Borrower or taken any other action with
respect to a claimed default or event or condition of the type referred to in
Article 14, an Officers' Certificate describing the same and the period of
existence thereof and specifying what action the Borrowers have taken, are
taking and propose to take with respect thereto;
(g) promptly upon (and in any event within ten (10) Business
Days of) any officer of any Borrower obtaining knowledge of the occurrence of
any (i) "reportable event," as such term is defined in Section 4043 of ERISA,
or (ii) "prohibited transaction," as such term is defined in Section 4975 of
the Code, that is not exempt by law or ruling in connection with any Plan or
any trust created thereunder, a written notice specifying the nature thereof,
what action the Borrowers have taken, are taking and propose to take with
respect thereto, and any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto, provided that, with respect to the
occurrence of any "reportable event" as to which the PBGC has waived the
30-day reporting requirement, such written notice need not be given;
(h) immediately upon the occurrence of any of the following
events, an Officers' Certificate describing such event: (i) the respective
Articles of Incorporation or Bylaws of any Borrower shall have been amended or
any Borrower shall have changed its jurisdiction of organization; or (ii) any
Borrower shall have changed its name or shall do business under any name other
than as set forth on Schedule 9.2; or (iii) any Borrower shall have changed
its principal place of business or its chief executive offices; or (iv) any
Borrower shall have become a party to any suit, action or proceeding that, if
adversely determined, would have a Material Adverse Effect or in which the
projected settlement amount involved therein would equal $1,000,000 or more
and not fully covered by insurance; or (v) any Borrower shall have opened or
closed any material place of business; or (vi) there shall occur any strike,
walkout, work stoppage or other material employee disruption relating to any
of the Mortgaged Properties, or the expiration of any labor contract affecting
any of the Mortgaged Properties (unless there exists a new labor contract in
substitution therefor); or (vii) any Borrower shall have obtained knowledge
that any of its insurance policies or any insurance policies affecting any of
the Mortgaged Properties will be canceled or not renewed (unless there exists
a similar insurance policy in substitution therefor);
(i) promptly (i) upon receipt thereof, copies of any notices to
any Borrower from any federal or state administrative agency relating to any
order, ruling, statute or other law or regulation that would, with reasonable
probability, have a Material Adverse Effect; (ii) following filing with the
Commission, any reports or statements filed with the Commission by LSB; and
(iii) upon preparation thereof, copies of any reports or financial statements
that any Borrower files annually with any state regulatory agency;
(j) promptly upon receipt thereof, copies of any notice
delivered pursuant to Article 14; and
(k) with reasonable promptness, such other information and data
with respect to any Borrower as from time to time may be reasonably requested
by any registered holder of a Note, including, without limitation, any final
projections or business plans prepared by or for the Borrowers.
9.3. Inspection. The Borrowers will permit, subject to rights of
parties in possession, any authorized representatives designated by any
Purchaser, so long as such Purchaser or its nominee shall hold any Notes, or
designated by any other registered holder of any Notes, without expense to the
Borrowers, at such reasonable times and as often as may be reasonably
requested, (a) to visit and inspect the Mortgaged Properties, including its
books of account, and to make copies and take extracts therefrom, and (b) to
discuss the Borrowers' affairs, finances and accounts with each respective
Borrower's directors, officers and independent public accountants (and by this
provision each Borrower authorizes such directors, officers and accountants to
discuss with such representatives the affairs, finances and accounts of such
Borrower, whether or not an officer or other representative of such Borrower
is present, provided that such Borrower shall receive notice of any such
meeting and be given a reasonable opportunity to have a representative
attend).
ARTICLE 10.
BUSINESS AND FINANCIAL COVENANTS OF THE BORROWERS
10.1. Covenants. So long as any Note shall be outstanding, the
Borrowers will jointly and severally perform and comply, and will cause each
Subsidiary to perform and comply, as applicable, with each of the following
covenants:
(a) Debt to Capitalization. EDC and NFC shall at all times
maintain a ratio of Funded Debt to Total Capitalization of not more than 0.7
to 1.0.
(b) Combined Net Worth. EDC and NFC shall at all times maintain
a Combined Net Worth of not less than $35,000,000, as increased from time to
time after the date hereof by (i) the proceeds of any Stock of EDC or NFC or
any of their respective Subsidiaries issued and sold to third Persons, (ii)
the amount of Subordinated Debt of EDC or NFC or any of their respective
Subsidiaries owed by third parties converted into or exchanged for Stock of
EDC or NFC or any of their respective Subsidiaries, and (iii) 50% of the
annual positive Combined Net Income of EDC and NFC.
(c) Combined Working Capital. EDC and NFC shall at all times
maintain Combined Working Capital of not less than $8,000,000.
(d) Current Ratio. EDC and NFC shall at all times maintain a
ratio of Current Assets to Current Liabilities of not less that 1.25 to 1.0.
(e) Fixed Charge Coverage. EDC and NFC shall at all times
maintain for the period of eight consecutive fiscal quarters most recently
ended a Combined Fixed Charge Coverage Ratio of not less than 1.20 to 1.0.
(f) Liens. The Borrowers will not, directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any of
the Mortgaged Properties, whether now owned or held or hereafter acquired,
other than (i) the Liens and security interests created to secure the Notes;
(ii) Liens that constitute Permitted Exceptions; (iii) Liens set forth on
Schedule 10.1; (iv) any Lien on any property acquired, constructed or improved
by a Borrower after Closing and created contemporaneously with or within 12
months of such acquisition, construction or improvement to secure Debt
incurred to provide for all or a portion of the purchase price of such
property as acquired, constructed or improved; (v) Liens on property of a
Borrower in favor of the United States of America or any political subdivision
thereof to secure partial payments pursuant to any contract; (vi) Liens,
pledges or deposits to secure obligations under worker's compensation,
unemployment insurance, social security or similar laws or laws or judgments
being appealed that are not currently dischargeable, and pledges, deposits,
performance bonds, appeal bonds or similar security interests in connection
with bids, tenders, contracts and leases to which a Borrower is a party (all
of which are in the ordinary course of business and which do not relate to
indebtedness of such Borrower); (vii) Liens for taxes, assessments or
governmental charges not then due and delinquent or the validity of which is
being contested in good faith and a reserve has been established for such
taxes, as required by GAAP; (viii) Liens arising in connection with court
proceedings, provided the execution of such Liens is effectively stayed and
such Liens are contested in good faith and a bond or other security
satisfactory to Purchasers has been posted by the Borrowers; (ix) Liens
arising in the ordinary course of business (including easements and similar
encumbrances) that are not incurred in connection with the borrowing of money,
provided that such Liens do not materially interfere with the conduct of the
business of such Borrower; (x) inchoate Liens; (xi) reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and similar title exceptions to real property; (xii) Liens on goods
consigned to any Borrower; (xiii) mechanics, materialmen and like liens
arising in the ordinary course of business securing obligations which are not
overdue or are being contested in good faith by appropriate proceedings and
adequately reserved against; (xiv) Liens on (A) accounts, (B) inventory, (C)
documents and instruments representing such accounts and inventory,
(D) guarantees, collateral and other rights, agreements and property securing
or relating to payment of accounts, (E) books and records relating to the
foregoing, and (F) proceeds, products and insurance of, or relating to, the
foregoing; and (xv) any Lien resulting from renewing, extending or refunding
outstanding Secured Debt provided that the principal amount of the Debt
secured thereby is not increased and the Lien is not extended to any other
property.
(g) Investments, Guaranties, etc. The Borrowers shall not,
directly or indirectly, (i) make or own any Investment other than (A)
Permitted Investments, (B) the purchase or ownership of assets or stock and
other securities of a Subsidiary, (C) loans to officers, directors, employees
or Subsidiaries to the extent that following such loan, no Event of Default or
Potential Event of Default would exist, (D) loans, advances and Investments in
an amount allowed as a dividend or distribution under Section 10.1(h)(ii) less
any such amount paid by a Borrower as a dividend or distribution in accordance
with Section 10.1(h)(ii), (E) loans, advances and Investments permitted under
Section 5.17, (F) Investments outstanding as of the Closing Date, (G)
Investments in and to El Dorado Nitrogen Company, (H) Investments in other
Borrowers and (I) other Investments not otherwise permitted under this
Section 10.1(g) in an amount not to exceed $5,000,000 in the aggregate at any
time; or (ii) create or become liable with respect to any Guaranty, except for
(A) Guaranties outstanding as of the Closing Date, and (B) Guaranties on
behalf of other Borrowers or Subsidiaries or not otherwise permitted under
this Section 10.1(g), in an amount not to exceed $3,000,000 in the aggregate
(on a consolidated and combined basis) at any time.
(h) Restricted Payments. No Borrower shall directly or
indirectly, (i) redeem, purchase, or otherwise acquire for value any shares of
its capital stock, except out of the net cash proceeds received by such
Borrower after Closing from the issuance of additional shares of capital stock
or other securities subsequently converted into capital stock, or (ii) declare
or pay any dividends or any other distributions on any shares of a Borrower's
capital stock after Closing in excess of (A) an amount equal to such
Borrower's federal income tax liability owing in any Fiscal Year (calculated
as if such Borrower was a stand-alone entity) and (B) an amount not to exceed
50% of such Borrower's Net Income for the immediately preceding Fiscal Year.
(i) Consolidation, Merger and Sale of Substantially All Assets.
No Borrower shall, directly or indirectly, (i) consolidate with or merge into
any other Person or permit any other Person to consolidate with or merge into
it (other than a consolidation or merger between a Borrower and an Eligible
Subsidiary or between Eligible Subsidiaries); (ii) sell, transfer, lease,
abandon or otherwise dispose of all or substantially all of its assets in a
single or series of related transactions; or (iii) permit a Change of Control
with respect to such Borrower to occur.
(j) Formation of Subsidiaries. Borrowers shall have the right
from time to time to form new Subsidiaries; provided, however, that Borrowers
shall not be permitted to make any loans or advances to any such new
Subsidiary unless such Subsidiary satisfies the representation and warranty of
Section 5.18 and guarantees the obligations of the Borrowers hereunder
pursuant to a guaranty agreement in form and substance satisfactory to the
Majority Holders.
(k) Interested Party Transactions. No Borrower shall conduct
any transactions (including payments of management or similar fees) with any
Affiliate on terms that are not fair and reasonable and no less favorable to
such Borrower or such Subsidiary than it would obtain in a comparable arm's-
length transaction with a Person not an Affiliate; provided, however, that no
Borrower may pay management, administrative or similar fees to any Affiliate
in excess of $70,000 in the aggregate per calendar month; and provided
further, that upon the occurrence of an Event of Default or Potential Event of
Default, no Borrower shall be permitted to pay any management, administrative
or similar fees to any of its Affiliates.
(l) Existence. The Borrowers will, or will cause to be done all
things necessary to, preserve keep and maintain in full force and effect their
respective corporate existence, rights (charter and statutory), franchises and
authority to do business and the corporate existence, rights (charter and
statutory), franchises and authority to do business of each of the
Subsidiaries.
(m) Payment of Taxes and Claims; Tax Consolidation. The
Borrowers will pay and cause to be paid all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of the franchises, business, income or profits of each such
Borrower before any penalty or interest accrues thereon or within ten (10)
days thereafter, but in any event prior to such time as such taxes,
assessments or charges become delinquent, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums that
have become due and payable and that by law have or would become a Lien upon
any of the properties or assets of each such Borrower, provided that no such
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, such bonds or escrows
are in place as the Majority Holders at the time shall request, or if such
reserves or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor. No Borrower will file or permit the filing of
any consolidated income tax return with any Person (other than LSB).
(n) Compliance with ERISA. No Borrower will, nor permit any
employee pension benefit plan (as that term is defined in Section 3 of ERISA)
maintained by such Borrower, any Subsidiary or any Related Person to (a)
engage in any "prohibited transaction" as such term is defined in Section 4975
of the Code, as amended from time to time, which is likely to result in a
liability for such Person; (b) incur any "accumulated funding deficiency", as
such term is defined in Section 302 of ERISA, whether or not waived which is
likely to result in a liability of such Person; or (c) terminate any such
benefit plan in a manner which could result in the imposition of a lien or
encumbrance on the assets of such Person pursuant to Section 4068 of ERISA,
the occurrence of which would have a Material Adverse Effect.
(o) Compliance with Laws. The Borrowers will (i) comply with
all laws, rules, regulations, orders, writs, judgments, injunctions, decrees
or awards (collectively, "Laws") to which it may be subject, except where such
noncompliance would not have a Material Adverse Effect or if any such Laws are
being contested in good faith by appropriate proceedings promptly initiated
and diligently conducted and (ii) promptly obtain, maintain, apply for
renewal, and not allow to lapse, any authorization, consent, approval, license
or order, and accomplish any filing or registration with, any court or
judicial, administrative or governmental authority which is or becomes
necessary in order that it perform in all material respects all of its
obligations under this Agreement and the Security Documents and in order that
the same are and remain valid and binding and effective in accordance with
their terms and in order that the Purchasers may be able freely to exercise
and enforce any and all of their rights under this Agreement and the Security
Documents. Without affecting the Purchasers' or other registered holders'
rights subsequent to the Closing Date, any matter disclosed in the Schedules
hereto shall not be deemed a default under this Section 10.1(o) solely by
virtue of its existence prior to the Closing Date.
(p) Maintenance of Properties; Insurance. (i) The Borrowers
will maintain or cause to be maintained in good repair, working order and
condition (reasonable wear and tear excepted) all properties used or useful
in, and deemed material to, the business of any Borrower and from time to time
will make or cause to be made all appropriate repairs, renewals and
replacements thereof, the failure of which could reasonably be expected to
have a Material Adverse Effect. (ii) The Borrowers will maintain or cause to
be maintained, with financially sound and reputable insurers, insurance with
respect to their respective properties and business, against loss or damage of
the kinds customarily insured against by companies of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other companies. In any event, the Borrowers shall, at a minimum, comply
with all maintenance, insurance and similar requirements under the Security
Documents.
(q) Title. As of the Closing Date and upon giving effect to the
transactions contemplated hereby, except Liens and other matters that may
constitute Permitted Exceptions and Liens permitted under Section 10.1(f), the
Borrowers will have good and marketable title to all of the Mortgaged
Properties and none of the Mortgaged Properties will be subject to any Liens,
other than Permitted Exceptions and Liens permitted under Section 10.1(f)
hereof.
(r) Conduct of Business. No Borrower will engage in any
business other than businesses engaged in by such Borrower on the date hereof,
other businesses or activities substantially similar or related thereto, and
other lines of business consented to by the registered holders of the Notes.
(s) Capital Improvements. The Borrowers shall incur not less
than $750,000 in the aggregate (and on a combined basis) per Fiscal Year for
capital improvements and repair and maintenance of the Collateral.
(t) Release of Guaranty. Within 90 days following the Closing
Date, EDC shall have obtained a full release of its obligations as a guarantor
under the Loan Agreement dated May 4, 1995, as amended, by and between Prime
Financial Corporation and Bank IV Oklahoma, N.A.
(u) Supply Contracts. Borrowers shall cause the suppliers of
all supply contracts for ammonia and/or sulphur, pertaining to the Mortgaged
Properties, now or hereafter entered into, to give their written consent (in
form reasonably acceptable to Purchasers) to the security interest of
Purchasers and other registered holders of Notes in and to such supply
contracts within thirty (30) days after entering into such supply contracts
and to deliver evidence of such written consent to Purchasers within such
thirty (30) day period.
10.2. Calculations. It is the understanding of the parties hereto that
notwithstanding the obligation of the Borrowers to comply at all times with
the covenants set forth in Sections 10.1(a), (b), (c), (d) and (e), the
Borrowers shall have an affirmative obligation to calculate the ratios and
other financial tests in Sections 10.1(a) through (d) once per quarter and
Section 10.1(e) once per Fiscal Year, and shall demonstrate compliance in
accordance with Section 9.2(c).
ARTICLE 11.
[intentionally omitted]
ARTICLE 12.
REGISTRATION, TRANSFER, AND SUBSTITUTION OF NOTES
12.1. Note Register; Ownership of Notes. EDC, on behalf of the
Borrowers, will keep at its principal office a register in which EDC will
provide for the registration of the Notes and the registration of transfers of
the Notes. EDC may treat the Person in whose name any Note is registered on
such register as the owner thereof for the purpose of receiving payment of the
principal of and the Premiums, if any, and interest on such Note and for all
other purposes, whether or not such Note shall be overdue, and the Borrowers
shall not be affected by any notice to the contrary.
12.2. Transfer and Exchange of Notes. Upon surrender of any Note for
registration of transfer or for exchange to EDC at its principal office, at
the expense of the transferring parties, the Borrowers will execute and
authenticate and deliver in exchange therefor a new Note or Notes in
denominations, as requested by the registered holder or transferee, which
aggregate the unpaid principal amount of such surrendered Note, provided such
transfer or exchange does not violate applicable federal or state securities
laws. Each such new Note shall be registered in the name of such Person as
such registered holder or transferee may request, shall be dated so that there
will be no loss of interest on such surrendered Note and shall be otherwise of
like tenor.
12.3. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to EDC of the loss, theft, destruction or mutilation of any Note
and, in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory to EDC from the registered holder
of such Note and financial information reasonably satisfactory to EDC
verifying such registered holder's ability to provide such indemnification, or
in the case of any such mutilation, upon the surrender of such Note for
cancellation to EDC at its principal office, at the expense of the party
requesting replacement, the Borrowers will execute, authenticate and deliver,
in lieu thereof, a new Note of like tenor, dated so that there will be no loss
of interest on such lost, stolen, destroyed or mutilated Note. Any Note in
lieu of which any such new Note has been executed and delivered by the
Borrowers shall not be deemed to be an outstanding Note for any purpose
hereof.
ARTICLE 13.
PAYMENTS ON NOTES
So long as a Purchaser or its nominee shall hold any Note, the Borrowers
will pay all sums becoming due on such Note for principal, Premiums, if any,
and interest in immediately available funds by the method and at the address
specified for such purpose in the Schedule of Information for Payment and
Notices at the end hereof (the "Schedule of Information for Payment and
Notices"), or by such other method or at such other address as such Purchaser
shall have specified from time to time to the Borrowers in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that any Note paid or prepaid in full shall be
surrendered to the Borrowers for cancellation at its principal office. Prior
to any sale or other disposition of any Note held by a Purchaser or its
nominee, such Purchaser will, at its election, either (a) endorse thereon the
amount of principal paid thereon and the last date to which interest has been
paid thereon, or (b) surrender such Note to the Borrowers in exchange for a
new Note or Notes pursuant to Section 12.2. The Borrowers will afford the
benefits of this Article 13 to any registered holder of a Note that has made
the same agreement relating to such Note as a Purchaser have made in this
Article 13.
ARTICLE 14.
EVENTS OF DEFAULT AND ACCELERATION
14.1. Events of Default. The occurrence of any of the following
conditions or events shall constitute an "Event of Default" under this
Agreement:
(a) Payments. The Borrowers shall default in the payment when
due of any principal, Premium, if any, or interest on any Note (whether the
same becomes due and payable at maturity, by declaration or otherwise) or any
other amounts owing hereunder; or
(b) Representations, Etc. Any representation or warranty made
in writing by or on behalf of any Borrower herein or in any Collateral
Agreement or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
(c) Covenants. Any Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained
in Sections 10.1(f), (g), (h), (i), (j), (k), (l), (m), (n), (q), (r), (s),
(t) or (u) or clause (ii) of subsection (p), or (ii) default in the due
performance or observance by it of any term, covenant or agreement contained
in Sections 10.1(a), (b), (c), (d), (e) or (o) or clause (i) of subsection (p)
and such default shall continue unremedied for a period of at least 10
calendar days after the earlier of (x) written notice to the defaulting party
by any registered holder of a Note or (y) a Responsible Officer has knowledge
of such default, or (iii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to in
subsections (a) and (b) of this Section 14.1 or clauses (i) and (ii) of this
subsection (c)) contained in this Agreement and such default shall continue
unremedied for a period of at least 30 calendar days after the earlier of (x)
written notice to the defaulting party by any registered holder of a Note or
(y) a Responsible Officer has knowledge of such default; or
(d) Default Under Other Agreements. Any Borrower shall be in
default under the Security Documents or the Environmental Indemnity Agreement;
or
(e) Default Under Other Debt. (i) Any Borrower shall default in
the payment when due of any principal of or interest on any Debt (which Debt
is in an aggregate principal amount of $2,000,000 or more) and such default
shall not be waived or accrued within any applicable grace or cure period; or
(ii) the maturity of any Debt of a Borrower in an aggregate principal amount
of $2,000,000 shall be accelerated or subject to acceleration due to a default
thereunder; or
(f) Bankruptcy, etc. Any Borrower shall commence a voluntary
case concerning itself under title 11 of the United States Code entitled
"Bankruptcy", as now or hereafter in effect, or any successor statute thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against a
Borrower under the Bankruptcy Code and the petition is not controverted within
10 Business Days, or is not dismissed within 60 days, after commencement of
the case; or a custodian (as defined in the Bankruptcy Code) is appointed for,
or takes charge of, all or substantially all of the property of a Borrower; or
a Borrower commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to such Borrower; or there is commenced against a Borrower any
such proceeding which remains undismissed for a period of 60 days; or a
Borrower is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or a Borrower suffers
any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
a Borrower makes a general assignment for the benefit of creditors; or any
corporate action is taken by a Borrower for the purpose of effecting any of
the foregoing; or
(g) ERISA. (i) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of
such standard or extension of any amortization period is sought or granted
under Section 412 of the Code, any Plan is, shall have been or is reasonably
likely to be terminated or the subject of termination proceedings under ERISA,
any Plan shall have an Unfunded Current Liability, a Borrower or any Related
Person has incurred or is reasonably likely to incur a liability to or on
account of a Plan under Section 409, 502(i), 501(1), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Code, or a
Borrower or any Related Person has incurred or is reasonably likely to incur
liabilities pursuant to one or more Welfare Plans that provide benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA); and (ii) there shall result from any event or events described
in clause (i) of this subsection (g) the imposition or granting of a Lien, or
a liability or a material risk of incurring a liability; and (iii) any Lien or
liability referred to in clause (ii) of this subsection (g) could reasonably
be expected to have a Material Adverse Effect; or
(h) Judgments. There shall remain in force, undischarged,
unsatisfied, unstayed and unbounded, for more than 60 days, any final judgment
entered against any one or more of the Borrowers which is not funded by
insurance in due course in accordance with applicable insurance coverage, from
which no further appeal may be taken and which, with other outstanding
undischarged, unsatisfied, unstayed and unbounded final judgments against such
Person not funded by insurance in due course in accordance with applicable
insurance coverage, exceeds $2,000,000 in the aggregate.
14.2. Acceleration.
(a) Upon the occurrence of any Event of Default described in
Section 14.1(f), the unpaid principal amount of and accrued interest on the
Notes shall automatically become due and payable, and there shall also be due
and payable the applicable Premium in respect of the unpaid principal amount
of the Notes, all without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration, or any other notice of any kind, which are
hereby waived.
(b) (i) Upon the occurrence of an Event of Default described in
Section 14.1(a), any Purchaser or any other registered holder of a Note and
(ii) upon the occurrence of any Event of Default other than as described in
Section 14.1(a) or 14.1(f), any registered holder (if authorized by the
Majority Holders) may at any time (unless all defaults shall theretofore have
been remedied and all costs and expenses including, without limitation,
reasonable attorneys' fees and expenses incurred by or on behalf of the
registered holders of the Notes by reason thereof shall have been paid in full
by the Borrowers) at its or their option, by written notice or notices to the
Borrowers, declare all the Notes to be due and payable, whereupon the same
shall forthwith mature and become due and payable, together with interest
accrued thereon, and there shall also be due and payable the applicable
Premium in respect of the principal amount of the Notes so declared due and
payable, all without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration, or any other notice of any kind (except as
otherwise specifically provided herein), which are hereby waived. The
Borrowers acknowledge that Purchasers purchased the Notes on the basis and
assumption that Purchasers and the registered holders from time to time of the
Notes would receive the payments of principal and/or interest set forth in
Section 2.1 and Articles 7 and 8 hereof for the full term of the Notes;
therefore, whenever the maturity of the Notes has been accelerated by reason
of an Event of Default, a tender of the amount necessary to satisfy any part
or all of the indebtedness represented by the Notes paid at any time following
such Event of Default and prior to a foreclosure or trustee's sale shall be
deemed a voluntary prepayment, and such payment shall include the applicable
Premium. Similarly, any purchase at a foreclosure sale or a trustee's sale
shall be deemed a voluntary prepayment, and the registered holders of the
Notes shall, to the extent permitted by law, receive out of the proceeds of
such sale, in addition to all other amounts to which they are entitled, the
applicable Premium.
14.3. Remedies. If any Event of Default shall occur and be continuing,
the registered holder of any Note at the time outstanding may proceed to
protect and enforce the rights available to such registered holder at law, in
equity, by statute or otherwise, whether for the specific performance of any
agreement contained herein or, in the case of any registered holder of Notes,
in such Note, or for an injunction against a violation of any of the terms
hereof or thereof, or in aid of the exercise of any power granted hereby or
thereby or by law or otherwise. In case of a default in the payment of any
principal of or Premium, if any, or interest on any Note, the Borrowers will
pay to the registered holder thereof such further amount as shall be
sufficient to cover the costs and expenses of collection, including, without
limitation, reasonable attorneys' fees, expenses and disbursements incurred in
connection therewith. No course of dealing and no delay on the part of any
registered holder of any Note in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such registered holder's
rights, powers or remedies except as expressly provided for herein. No right,
power or remedy conferred hereby upon any registered holder of any Note or by
any Note upon any registered holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Subject to Section
14.2(b), any registered holder or registered holders (other than a Borrower or
any Affiliate) of, in the aggregate, a majority in principal amount of the
Notes at the time outstanding (excluding any Notes directly or indirectly
owned by a Borrower or any Affiliate) may at any time pursue any remedies
available under this Agreement or any of the Collateral Agreements.
ARTICLE 15.
EXPENSES
The Borrowers will jointly and severally pay all reasonable out-of-
pocket expenses in connection with the negotiation, execution and delivery,
performance and enforcement, and amendment or waiver of any terms or
provisions of this Agreement, any Collateral Agreement, and the Notes,
including, without limitation: (a) the cost and expenses of preparing and
reproducing this Agreement, the Collateral Agreements and the Notes, of
furnishing all opinions of Special Counsel, Purchasers' special local counsel,
and counsel for the Borrowers (including any opinions requested by Special
Counsel as to any legal matter arising hereunder) and all certificates on
behalf of the Borrowers and of the Borrowers' performance of and compliance
with all agreements and conditions contained therein on its part to be
performed or complied with; (b) the cost of delivering to each Purchaser's
principal office, insured to such Purchaser's satisfaction, the Notes sold to
such Purchaser hereunder; (c) the reasonable out-of pocket expenses and
reasonable fees, expenses and disbursements of Special Counsel and Purchasers'
special local counsel in connection with any amendments or waivers hereunder;
and (d) the reasonable cost and expense related to title insurance and
charges, survey, environmental audit, engineering and architect fees,
recording fees, and real estate taxes contemplated herein or in the Collateral
Agreements. The Borrowers also will pay, and will save Purchasers and each
registered holder of any Notes harmless from, (i) all claims in respect of the
fees of any brokers and finders, except those engaged by Purchasers, and (ii)
any and all liabilities with respect to any taxes (including interest and
penalties), other than federal income taxes, that may be payable in respect of
(A) the execution and delivery hereof and of the Collateral Agreements, (B)
the issue of the Notes hereunder, and (C) any amendment or waiver under or in
respect hereof, of any Collateral Agreement or of the Notes.
ARTICLE 16.
MISCELLANEOUS
16.1. Survival. All representations, warranties and covenants
contained herein, in the Notes and in any other Collateral Agreement or made in
writing by or on behalf of the Borrowers in connection with the transactions
contemplated hereby and thereby shall survive the execution and delivery
hereof, any investigation at any time made by Purchasers or on Purchasers'
behalf, the purchase of the Notes hereunder, or any disposition or payment of
the Notes. All statements contained in any certificate delivered by or on
behalf of a Borrower pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties of the
Borrowers hereunder.
16.2. Amendments and Waivers. Any term hereof or of the Notes may be
amended (with written consent of the Borrowers), and the observance of any
term hereof or of the Notes may be waived (either generally or in a particular
instance and either retroactively or prospectively), only upon the written
consent of the Majority Holders, provided that without the prior written
consent of the registered holders of all the Notes at the time outstanding
(excluding any Notes directly or indirectly owned by the Borrower or any
Affiliate), no such amendment or waiver shall (a) extend the fixed maturity or
reduce the amount or extend the time of payment of any principal or premium
payable (whether as an installment or upon any prepayment) on any Note of such
class; (b) reduce the percentage set forth above of the principal amount of
the Notes, the registered holders of which are required to consent to any
amendment or waiver set forth in such subdivision; or (c) change the
percentage of the principal amount of the Notes, the registered holders of
which may declare the Notes to be due and payable as provided in Section 14.2.
Any amendment or waiver effected in accordance with this Section 16.2 shall be
binding upon each registered holder of any Note, at the time outstanding, each
future registered holder of any Note, and the Borrowers.
16.3. Indemnification. The Borrowers will jointly and severally
indemnify and hold harmless each Indemnified Party from and against any and
all losses, claims, damages and liabilities, joint or several (including all
reasonable legal fees or other expenses reasonably incurred by any Indemnified
Party in connection with the preparation for or defense of any pending or
threatened claim, action or proceeding, whether or not resulting in any
liability), to which such Indemnified Party may become subject (whether or not
such Indemnified Party is a party thereto) under any applicable federal or
state law or otherwise caused by or arising out of, or allegedly caused by or
arising out of, this Agreement, any Collateral Agreement, or any transaction
contemplated hereby, other than losses, claims, damages or liabilities
resulting from any grossly negligent or unlawful act by Indemnified Party
seeking indemnification hereunder. THESE PROVISIONS ARE INTENDED TO INDEMNIFY
THE INDEMNIFIED PARTIES AGAINST THE RESULTS OF THEIR OWN NEGLIGENCE.
Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnity hereunder, such Indemnified Party will notify EDC on behalf of the
Borrowers of such claim or the commencement of such action or proceeding,
provided that the failure of an Indemnified Party to give notice as provided
herein shall not relieve the Borrowers of their obligations under this Section
16.3 with respect to such Indemnified Party, except to the extent that the
Borrowers are actually prejudiced by such failure. The Borrowers will assume
the defense of such claim, action or proceeding and will employ counsel
satisfactory to the Indemnified Party and will pay the fees and expenses of
such counsel. Notwithstanding the preceding sentence, the Indemnified Party
will be entitled, at the expense of the Borrowers, to employ counsel separate
from counsel for the Borrowers, and for any other party in such action, if the
Indemnified Party reasonably determines that a conflict of interest and in
such event Borrowers shall not be responsible for the payment of reasonable
fees and expenses to more than one law firm to represent all of the
Indemnified Parties. If an Indemnified Party appears as a witness in any
action or proceeding brought against a Borrower or any of its respective
Affiliates (or any of their partners, officers, directors or employees) in
which an Indemnified Party is not named as a defendant, the Borrowers agree to
reimburse such Indemnified Party for all out-of-pocket expenses incurred by it
(including fees and expenses of counsel) in connection with the appearance as
a witness. The Indemnified Party shall settle no claim or take any other
action prejudicing a Borrower's defense without the consent of such Borrower,
which consent will not be unreasonably withheld or delayed. Purchaser agrees
to reasonably cooperate with the Borrowers in the defense of any such action
or proceeding.
16.4. Usury Not Intended. The Borrowers, Purchasers and all other
registered holders of any Notes intend to conform strictly to the usury laws
in force that apply to the transactions evidenced or contemplated hereby.
Accordingly, all agreements among the Borrowers, Purchasers, and any other
registered holder of any Notes, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no contingency, whether
by reason of acceleration of the maturity of the Notes, or otherwise, shall
the interest (and all other sums that are deemed to be interest) contracted
for, charged, received, paid or agreed to be paid exceed the Highest Lawful
Rate (as defined below). The Borrowers and Purchasers stipulate and agree
that the terms and provisions contained in this Agreement and the Collateral
Agreements are not intended to and shall never be construed to create a
contract to pay for the use, forbearance or detention of money an amount in
excess of the maximum amount permitted to be charged by applicable law, if
any.
Anything in this Agreement or the Collateral Agreements to the contrary
notwithstanding, neither the Borrowers nor any other party now or hereafter
becoming liable for payment of the Notes shall ever be required to pay
interest on or with respect to the Notes or any other obligation hereunder at
a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest that would otherwise be payable under this Agreement or on or with
respect to the Notes would exceed the Highest Lawful Rate, or if the
registered holders of such Notes or obligation shall receive anything of value
that is deemed or determined to constitute interest that would increase the
effective rate of interest payable under this Agreement or on or with respect
to the Notes or the Collateral Agreements to a rate in excess of the Highest
Lawful Rate, then (a) the amount of interest that would otherwise be payable
under this Agreement, the Notes or the Collateral Agreements shall be reduced
to the amount allowed at the Highest Lawful Rate under applicable law, and
(b) any unearned interest paid by the Borrowers or any interest paid by the
Borrowers in excess of the Highest Lawful Rate shall, at the option of the
registered holders of the Notes, be either refunded to the Borrowers or
credited on the principal of such Notes. It is further agreed that, without
limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received by any registered holder of the Notes, or
under this Agreement, that are made for the purpose of determining whether
such rate exceeds the Highest Lawful Rate, shall be made, to the extent
permitted by applicable law (now or, to the extent permitted by law, hereafter
enacted) governing the Highest Lawful Rate, by (i) characterizing any
nonprincipal payment as an expense, fee or premium rather than as interest,
and (ii) amortizing, prorating, allocating and spreading in equal parts during
the period of the full term of the Notes (including the period of any renewal
or extension thereof), all interest at any time contracted for, charged or
received by such registered holder in connection therewith. As used in this
Section 16.4, the term "Highest Lawful Rate" means the maximum nonusurious
rate of interest permitted from time to time to be contracted for, taken,
charged or received with respect to the Notes by the registered holders
thereof, under applicable law as in effect with respect to this Agreement or
the Notes.
16.5. Notices.
(a) For all purposes under this Agreement, the address of the
Borrowers shall be c/o El Dorado Chemical Company, 16 South Pennsylvania,
Oklahoma City, OK 73107, Attention: , telecopy no. (405)
235-5067, with a copy to the General Counsel of LSB at the above address,
telecopy no. (405) 236-1209, and for each Purchaser shall be the address set
forth on the Schedule of Information for Payment and Notices or such other
address of which all such Persons have received ten (10) days prior written
notice.
(b) Any notice, demand, request or report required or permitted
to be given or made to the Borrowers or Purchasers under this Agreement shall
be in writing and shall be deemed given or made when delivered in person, when
sent if by overnight courier or telecopy (if followed by hard copy) or five
(5) Business Days after the date when sent by United States registered or
certified mail to any such Person at its address referenced in Section 16.5(a)
above.
16.6. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents received by
Purchasers at the Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter
furnished to Purchasers, may be reproduced by a Purchaser or the registered
holder of any Notes by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and Purchaser or the
registered holder of any Notes may destroy any original document so
reproduced. The Borrowers agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by such Purchaser or the registered
holder of any Notes in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
16.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not, and shall inure to
the benefit of and be enforceable by any registered holder or registered
holders from time to time of any Notes. The representations, warranties and
covenants of the Borrowers hereunder are intended to be for the benefit of,
and inure to, all registered holders from time to time of any of the Notes.
16.8. Invalid Provisions. If any provision hereof or any application
thereof shall be invalid or unenforceable, the remainder hereof and any other
application of such provision shall not be affected thereby.
16.9. Headings. The Table of Contents and Section headings herein are
for purposes of reference only and shall not constitute a part hereof.
16.10. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
16.11. Further Action. The parties shall execute all documents,
provide all information, and take or refrain from taking all actions as may be
necessary or appropriate to achieve the purposes of this Agreement.
16.12. Creditors. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the Borrower, except
as otherwise expressly provided herein.
16.13. Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement
or to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition. No single or partial exercise of any power or right shall
preclude any other or further exercise thereof or the exercise of any other
power or right. No waiver by a party of any right hereunder or of any default
by another shall be binding upon such party unless in writing.
16.14. Entire Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
16.15. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF OKLAHOMA (WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BORROWERS:
EL DORADO CHEMICAL COMPANY
By:
Name:
Title:
NORTHWEST FINANCIAL CORPORATION
By:
Name:
Title:
SLURRY EXPLOSIVE CORPORATION
By:
Name:
Title:
PURCHASERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
Name:
Title:
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By:
Name:
Title:
JOHN HANCOCK LIFE INSURANCE COMPANY OF
AMERICA
By:
Name:
Title:
NYNEX MASTER PENSION TRUST
By: Mellon Bank, N.A., as Trustee
By:
Name:
Title:
THE LONG-TERM INVESTMENT TRUST
By: Mellon Bank, N.A., as Trustee
By:
Name:
Title:
SIGNATURE 1A (CAYMAN), LTD.
By: John Hancock Mutual Life Insurance
Company, Portfolio Adviser
By:
Name:
Title:
SCHEDULE I
Purchaser
Fixed Notes
Floating Notes
John Hancock Mutual Life Insurance
Company - General Account
$13,000,000
$13,000,000
John Hancock Mutual Life Insurance
Company - GBSA
$1,500,000
$1,500,000
John Hancock Variable Life Insurance
Company
$2,000,000
$2,000,000
John Hancock Life Insurance Company
of America
$1,000,000
$1,000,000
The Long-Term Investment Trust
$3,000,000
$3,000,000
NYNEX Master Pension Trust
$2,000,000
$2,000,000
Signature 1A (Cayman), Ltd.
$2,500,000
$2,500,000
FIFTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
dated as of November 18, 1996, and entered into by and between BANKAMERICA
BUSINESS CREDIT, INC. ("Lender") and LSB INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain Loan and
Security Agreement dated December 12, 1994, as amended by (i) that certain
First Amendment to Loan and Security Agreement dated as of August 17, 1995,
(ii) that certain Second Amendment to Loan and Security Agreement dated as of
December 1, 1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, and (iv) that certain Fourth Amendment to
Loan and Security Agreement dated as of July 1, 1996 (as so amended, the
"Agreement");
WHEREAS, Lender and Borrower desire to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
Section 1.02. New Definitions. The following new definitions are
hereby added to the Agreement:
"Fifth Amendment Date" means November 18, 1996.
"First Source Payment" means the final payment in the amount of
$7,500,000 due and owing to First Source under the HCFS Loan Agreement as
defined in the Loan and Security Agreement entered into by and among Lender
and EDC & Slurry.
Section 1.03. Amended Definitions. The definition of "Adjusted
Tangible Assets" is hereby amended to read as follows:
"'Adjusted Tangible Assets' means all of the assets of the
LSB Consolidated Group, on a consolidated basis, except: (a)
goodwill; (b) unamortized debt discount and expense; (c) assets
constituting Intercompany Accounts; (d) fixed assets to the extent
of any write-up in the book value thereof resulting from a
revaluation effective after the Closing Date; and (e) any
intangibles, as determined in accordance with GAAP."
ARTICLE II
Amendments
Section 2.01. Amendment to Section 3.1(a) of the Agreement. Subsections
(i) and (ii) of Section 3.1(a) of the Agreement are hereby amended to read in
their entirety as follows:
"(i) For all amounts charged as Revolving Loans other than
Eurodollar Rate Loans, including all Revolving Loans which are Reference
Rate Loans, then at a fluctuating per annum rate equal to two percent
(2%) per annum (the "Reference Rate Margin") plus the Reference Rate;
and
(ii) If the Revolving Loans are Eurodollar Rate Loans, then at a
per annum rate equal to: four and three-eighths percent (4.375%) per
annum (the "Eurodollar Margin") plus the Eurodollar Rate determined for
the applicable Interest Period.
Notwithstanding the foregoing, if the LSB Borrowing Group has, during
any month, a combined average excess Availability of at least (a)
$13,300,000 (prior to making the First Source Payment, or (b) $6,300,000
after making the First Source Payment, then, during the following month,
the Reference Rate Margin and the Eurodollar Margin will be reduced by
one-half of one percent (.50%).
In addition, if Adjusted Tangible Net Worth equals or exceeds
$72,500,000, as reflected on Borrower's most current quarterly Financial
Statements, provided no Event of Default has occurred and is continuing,
then for so long as Adjusted Tangible Net Worth is at least $72,500,000,
both the Reference Rate Margin and the Eurodollar Margin with respect to
the Revolving Loans will be reduced by an additional one-half of one
percent (.50%), and the reduction will be effective as of the first day
of the month following receipt by Lender of the applicable quarterly
Financial Statements.
Finally, if Adjusted Tangible Net Worth equals or exceeds $84,000,000,
as reflected on Borrower's most current quarterly Financial Statements,
provided no Event of Default has occurred and is continuing, then for so
long as Adjusted Tangible Net Worth is at least $84,000,000, both the
Reference Rate Margin and the Eurodollar Margin with respect to the
Revolving Loans will be reduced by an additional one-half of one percent
(.50%), and the reduction will be effective as of the first day of the
month following receipt by Lender of the applicable quarterly Financial
Statements.
Each change in the Reference Rate shall be reflected in the interest
rate described in (i) above as of the effective date of such change. All
interest charges shall be computed on the basis of a year of three hundred
sixty (360) days and actual days elapsed. Except as otherwise provided
herein, (1) interest accrued on each Eurodollar Rate Loan shall be payable in
arrears on each Eurodollar Interest Payment Date applicable to such Eurodollar
Rate Loan and upon payment thereof in full, and (2) interest accrued on the
Reference Rate Loans will be payable in arrears on the first day of each month
hereafter.
The remaining provisions of Sectiono 3.1(a) are unchanged.
Section 2.02. Amendment to Section 9.15. Section 9.15 of the
Agreement is hereby amended to read in its entirety as follows:
"9.15 Capital Expenditures. Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto, the aggregate
amount of all Capital Expenditures by the LSB Borrowing Group during the
following periods would exceed the following amounts: Fiscal Year
ending December 31, 1996; $11,000,000; Fiscal Year ending December 31,
1997 and each Fiscal Year thereafter: $6,000,000."
Section 2.03. Amendment to Section 9.16. Section 9.16 of the Agreement
is hereby amended to read in its entirety as follows:
9.16 Adjusted Tangible Net Worth. Adjusted Tangible Net Worth
will not be less than the following amounts at the end of each of the
Fiscal Quarters during the following Fiscal Years:
SIXTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
dated as of February 13, 1997, and entered into by and between BANKAMERICA
BUSINESS CREDIT, INC. ( Lender ) and LSB INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain Loan and
Security Agreement dated December 12, 1994, as amended by (i) that certain
First Amendment to Loan and Security Agreement dated as of August 17, 1995,
(ii) that certain Second Amendment to Loan and Security Agreement dated as of
December 1, 1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, (iv) that certain Fourth Amendment to
Loan and Security Agreement dated as of July 1, 1996, and (v) that certain
Fifth Amendment to Loan and Security Agreement dated as of November 18, 1996
(as so amended, the "Agreement");
WHEREAS, Lender and Borrower desire to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
Section 1.02. Amended Definitions. The definition of "Guarantor
Subsidiaries" is hereby amended to read as follows:
"'Guarantor Subsidiaries' means Universal Tech Corporation,
LSB Chemical Corp., L&S Automotive Products, Co. (f/k/a LSB
Bearing Corp.), International Bearing, Inc., LSB Extrusion Co.,
Rotex Corporation, Tribonetics Corporation, Summit Machine Tool
Systems, Inc., Hercules Energy Manufacturing Corporation, Morey
Machinery Manufacturing Corporation, CHP Corporation, Koax Corp.,
APR Corporation, and El Dorado Nitrogen Company."
ARTICLE II
Amendments
Section 2.01. Amendment to Section 9.15. Section 9.15 of the Agreement
is hereby amended to read in its entirety as follows:
"9.15 Capital Expenditures. Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto, the aggregate
amount of all Capital Expenditures by the LSB Borrowing Group during the
following periods would exceed the following amounts: Fiscal Year
ending December 31, 1996; $14,500,000; Fiscal Year ending December 31,
1997 and each Fiscal Year thereafter: $6,000,000."
Section 2.02. Amendment to Section 11.1. Section 11.1 is hereby amended
by adding a new subsection (q) which reads as follows:
(q) any of the LSB-Related Loan Agreements are terminated
independently of the other LSB-Related Loan Agreements without
Lender's prior written consent, or as otherwise provided in such
LSB-Related Loan Agreement.
All other subsections of Section 11.1 remain unchanged.
Section 2.03. Amendment to Section 13.10. The Lender's address and
the address of Borrower's legal counsel as provided in the Notices provision
in Section 13.10 of the Agreement are hereby amended and restated to read as
follows:
If to the Lender: BankAmerica Business Credit, Inc.
55 South Lake Avenue, Suite 900
Pasadena, California 91101
Attn: Mr. Charles Burtch,
Executive Vice President
with a copy to: Bank of America - Legal Department
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
If to Borrower: [no change]
with a copy to: Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102-7101
Attn: Irwin H. Steinhorn, Esq.
All other provisions of Section 13.10 remain unchanged.
ARTICLE III
Ratifications, Representations and Warranties
Section 3.01.Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by
this Amendment, the terms and provisions of the Agreement, including, without
limitation, all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender and Borrower
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 3.02.Representations and Warranties. Borrower hereby represents and
warrants to Lender that the execution, delivery and performance of this
Amendment and all other loan, amendment or security documents to which
Borrower is or is to be a party hereunder (hereinafter referred to
collectively as the "Loan Documents") executed and/or delivered in connection
herewith, have been authorized by all requisite corporate action on the part
of Borrower and will not violate the Articles of Incorporation or Bylaws of
Borrower.
ARTICLE IV
Conditions Precedent
Section 4.01.Conditions. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent (unless specifically
waived in writing by the Lender):
(a) Lender shall have received all of the following, each dated (unless
otherwise indicated) as of the date of this Amendment, in form and substance
satisfactory to Lender in its sole discretion:
(i) Company Certificate. A certificate executed by the Secretary or Assistant
Secretary of Borrower certifying (A) that Borrower's Board of Directors has
met and adopted, approved, consented to and ratified the resolutions attached
thereto which authorize the execution, delivery and performance by Borrower of
the Amendment and the Loan Documents, (B) the names of the officers of
Borrower authorized to sign this Amendment and each of the Loan Documents to
which Borrower is to be a party hereunder, (C) the specimen signatures of such
officers, and (D) that neither the Articles of Incorporation nor Bylaws of
Borrower have been amended since the date of the Agreement;
(ii) No Material Adverse Change. There shall have occurred
no material adverse change in the business, operations, financial
condition, profits or prospects of Borrower, or in the Collateral,
and the Lender shall have received a certificate of Borrower's
chief executive officer to such effect;
(iii) Other Documents. Borrower shall have executed and
delivered such other documents and instruments as well as required
record searches as Lender may require.
(b) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel, Jenkens & Gilchrist, a
Professional Corporation.
ARTICLE V
Miscellaneous
Section 5.01. Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation
by Lender or any closing shall affect the representations and warranties or
the right of Lender to rely thereon.
Section 5.02. Reference to Agreement. The Agreement, each of the
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Agreement as amended hereby, are hereby amended so that
any reference therein to the Agreement shall mean a reference to the Agreement
as amended hereby.
Section 5.03. Severability. Any provision of this Amendment held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.
Section 5.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.
Section 5.05. Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of Lender and Borrower and their
respective successors and assigns; provided, however, that Borrower may not
assign or transfer any of its rights or obligations hereunder without the
prior written consent of Lender. Lender may assign any or all of its rights
or obligations hereunder without the prior consent of Borrower.
Section 5.06. Counterparts. This Amendment may be executed in one
or more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
Section 5.07. Effect of Waiver. No consent or waiver, express or
implied, by Lender to or of any breach of or deviation from any covenant or
condition of the Agreement or duty shall be deemed a consent or waiver to or
of any other breach of or deviation from the same or any other covenant,
condition or duty. No failure on the part of Lender to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power, or
privilege under this Amendment, the Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Amendment, the Agreement or any other
Loan Document preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege. The rights and remedies provided for
in the Agreement and the other Loan Documents are cumulative and not exclusive
of any rights and remedies provided by law.
Section 5.08. Headings. The headings, captions and arrangements
used in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 5.09. Releases. As a material inducement to Lender to enter
into this Amendment, Borrower hereby represents and warrants that there are no
claims or offsets against, or defenses or counterclaims to, the terms and
provisions of and the other obligations created or evidenced by the Agreement
or the other Loan Documents. Borrower hereby releases, acquits, and forever
discharges Lender, and its successors, assigns, and predecessors in interest,
their parents, subsidiaries and affiliated organizations, and the officers,
employees, attorneys, and agents of each of the foregoing (all of whom are
herein jointly and severally referred to as the "Released Parties") from any
and all liability, damages, losses, obligations, costs, expenses, suits,
claims, demands, causes of action for damages or any other relief, whether or
not now known or suspected, of any kind, nature, or character, at law or in
equity, which Borrower now has or may have ever had against any of the
Released Parties, including, but not limited to, those relating to (a) usury
or penalties or damages therefor, (b) allegations that a partnership existed
between Borrower and the Released Parties, (c) allegations of unconscionable
acts, deceptive trade practices, lack of good faith or fair dealing, lack of
commercial reasonableness or special relationships, such as fiduciary, trust
or confidential relationships, (d) allegations of dominion, control, alter
ego, instrumentality, fraud, misrepresentation, duress, coercion, undue
influence, interference or negligence, (e) allegations of tortious
interference with present or prospective business relationships or of
antitrust, or (f) slander, libel or damage to reputation, (hereinafter being
collectively referred to as the "Claims"), all of which Claims are hereby
waived.
Section 5.10. Expenses of Lender. Borrower agrees to pay on demand
(i) all costs and expenses reasonably incurred by Lender in connection with
the preparation, negotiation and execution of this Amendment and the other
Loan Documents executed pursuant hereto and any and all subsequent amendments,
modifications, and supplements hereto or thereto, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated
cost of staff counsel and (ii) all costs and expenses reasonably incurred by
Lender in connection with the enforcement or preservation of any rights under
the Agreement, this Amendment and/or other Loan Documents, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated
cost of staff counsel.
Section 5.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN LENDER
AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND BORROWER.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
"BORROWER"
LSB INDUSTRIES, INC.
By:
Name: Tony M. Shelby
Title: Vice President
"LENDER"
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name: Michael J. Jasaitis
Title: Vice President
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution of, and
consents to, the terms and conditions of that certain Sixth Amendment to Loan
and Security Agreement dated as of February 13, 1997, between LSB Industries,
Inc., and BankAmerica Business Credit, Inc. ("Creditor") and reaffirms its
obligations under that certain Cross-Collateralization and Cross-Guaranty
Agreement (the Cross-Collateralization Agreement ) dated as of December 12,
1994, made by the undersigned in favor of the Creditor, and acknowledges and
agrees that the Cross-Collateralization Agreement remains in full force and
effect and the Cross-Collateralization Agreement is hereby ratified and
confirmed.
Dated as of February 13, 1997.
CLIMATE MASTER, INC.
By:
Name: Tony M. Shelby
Title: Vice President
L&S BEARING CO.
By:
Name: Tony M. Shelby
Title: Vice President
SUMMIT MACHINE TOOL MANUFACTURING CORP.
By:
Name: Tony M. Shelby
Title: Vice President
INTERNATIONAL ENVIRONMENTAL
CORPORATION
By:
Name: Tony M. Shelby
Vice President
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution of, and
consents to, the terms and conditions of that certain Sixth Amendment to Loan
and Security Agreement dated as of February 13, 1997, between LSB Industries,
Inc., and BankAmerica Business Credit, Inc. ("Creditor") and reaffirms its
obligations under (i) that certain Continuing Guaranty with Security Agreement
(the "Guaranty") dated as of December 12, 1994, and (ii) that certain Cross-
Collateralization and Cross-Guaranty Agreement (the Cross-Collateralization
Agreement ) dated as of December 12, 1994, each made by the undersigned in
favor of the Creditor, and acknowledges and agrees that the Guaranty and the
Cross-Collateralization Agreement remain in full force and effect and the
Guaranty and the Cross-Collateralization Agreement are hereby ratified and
confirmed.
Dated as of February 13, 1997.
UNIVERSAL TECH CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
LSB CHEMICAL CORP.
By:
Name: Tony M. Shelby
Title: Vice President
L&S AUTOMOTIVE PRODUCTS CO.
(f/k/a LSB Bearing Corp.)
By:
Name: Tony M. Shelby
Title: Vice President
INTERNATIONAL BEARINGS, INC.
By:
Name: Tony M. Shelby
Title: Vice President
LSB EXTRUSION CO.
By:
Name: Tony M. Shelby
Title: Vice President
ROTEX CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
TRIBONETICS CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
SUMMIT MACHINE TOOL SYSTEMS, INC.
By:
Name: Tony M. Shelby
Title: Vice President
HERCULES ENERGY MFG. CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
MOREY MACHINERY MANUFACTURING
CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
CHP CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
KOAX CORP.
By:
Name: Tony M. Shelby
Title: Vice President
APR CORPORATION
By:
Name: Tony M. Shelby
Title: Vice President
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement") made as of this 13th day
of February, 1997, by and between BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation, with offices at 55 South Lake Avenue, Suite 900,
Pasadena, California 91101 ("BABC"), and JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY, JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY, JOHN HANCOCK LIFE
INSURANCE COMPANY OF AMERICA, NYNEX MASTER PENSION TRUST, THE LONG-TERM
INVESTMENT TRUST and SIGNATURE 1A (CAYMAN), LTD. (collectively referred to
herein as "TERM LENDER") with respect to certain financing arrangements with
EL DORADO CHEMICAL COMPANY ("EDC"), SLURRY EXPLOSIVES CORPORATION ("Slurry")
and NORTHWEST FINANCIAL CORPORATION ("Northwest") (collectively referred to
herein as "Borrower").
R E C I T A L S:
TERM LENDER has made a seven year term loan to Borrower in the principal
amount of $50,000,000 pursuant to the TERM LENDER Loan Documents (as defined
in this Agreement).
BABC has made and intends to continue making loans and advances from
time to time to EDC and Slurry pursuant to and subject to the BABC Loan
Documents (as defined in this Agreement). BABC and TERM LENDER desire to
confirm and agree as to the relative priority of their respective security
interests in, and liens on, the Collateral (as defined in this Agreement) and
certain other rights, priorities and interests.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. In addition to other words and terms defined
elsewhere in this Agreement, the following words and terms have the following
meanings, respectively, unless the context otherwise clearly requires:
"BABC Claim" means all of the obligations of EDC and Slurry to BABC as
set forth in the BABC Loan Documents, including but not limited to, all sums
loaned and advanced to or for the benefit of EDC and Slurry at any time, any
interest on such sums (including interest accruing after the commencement of a
bankruptcy proceeding by or against EDC and Slurry), any future advances, any
costs of preservation of the Collateral and of collection or enforcement,
including reasonable attorneys' and paralegals' fees and any prepayment
premiums.
"BABC Collateral" means collectively (i) all Receivables, Inventory,
documents and instruments representing the Receivables and all Proceeds
thereof, wherever located and whether now existing or hereafter arising or
acquired; (ii) all moneys, securities and other property and the Proceeds
thereof, now or hereafter held or received by, or in transit to, BABC from or
for Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, including, without limitation, all of Borrower's
deposit accounts, credits, and balances with BABC and all claims of EDC and
Slurry against BABC at any time existing; (iii) all of the deposit accounts
with any financial institutions with which EDC or Slurry maintains deposits;
and (iv) all books, records and other property relating to or referring to any
of the foregoing, including, without limitation, all books, records, ledger
cards, data processing records, computer software and other property and
general intangibles at any time evidencing or relating to the Receivables,
Inventory, Documents, Instruments, Proceeds, and other property referred to
above.
"BABC Loan Documents" means, singularly or collectively as the context
may require, the Loan and Security Agreement dated as of December 12, 1994,
executed and delivered by and among EDC, Slurry and BABC (the "Loan and
Security Agreement), the "Loan Documents" as defined in the Loan and Security
Agreement, and any and all other documents, instruments, certificates, and
agreements executed and delivered in connection therewith, as any of them may
be amended, modified, extended or supplemented from time to time.
"Claim" means either the TERM LENDER Claim or the BABC Claim.
"Code" means the Uniform Commercial Code as in effect on the date of
this Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the Collateral from time to
time. Unless otherwise defined in this agreement or unless the context
otherwise requires, all terms used in this agreement which are defined by the
Code shall have the meanings stated in the Code.
"Collateral" means the BABC Collateral and the TERM LENDER Collateral
and the Proceeds and products of such collateral, and where applicable, the
proceeds of insurance or escrow accounts covering any such property.
"Enforcement Action" means, with respect to any Collateral:
repossessing, foreclosing, selling, leasing or otherwise disposing of all or
any part of such Collateral, or exercising notification or collection rights
with respect to all or any portion thereof, or attempting or agreeing to do
so; commencing the enforcement with respect to such Collateral of any of the
default remedies under any of the BABC or TERM LENDER Loan Documents, the UCC
or other applicable laws; or appropriating, setting off, or coming into the
possession of such Collateral, by BABC or TERM LENDER or its agent or bailee,
with respect to its Claim.
"Equipment" means all of Borrower's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property located at EDC's Union County, Arkansas facility (except
Inventory and rolling stock), including, without limitation, data processing
hardware and software, dies, tools, jigs, and office equipment, as well as all
of such types of property leased by Borrower and all of Borrower's rights and
interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.
"Inventory" means all of the now owned and hereafter acquired inventory,
goods, merchandise, and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work-in-process, finished goods, returned goods, and materials and
supplies of any kind, nature or description which are or might be used or
consumed in the business of EDC or Slurry or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise and such other personal property, and all documents, of
title or other documents representing them.
"Proceeds" shall have the meaning given to that term in the Code and
shall include without limitation all products and proceeds of any Collateral,
and all proceeds of such proceeds and products, including, without limitation,
all cash and credit balances, all payments under any indemnity, warranty, or
guaranty payable with respect to any Collateral, all awards for taking by
eminent domain, all proceeds of fire or other insurance, and all money and
other Property obtained as a result of any claims against third parties or any
legal action or proceeding with respect to Collateral.
"Receivables" means all of the now owned and hereafter arising or
acquired: Accounts (as defined in the Loan and Security Agreement, whether or
not earned by performance), including Accounts owed to EDC or Slurry by any of
their Subsidiaries (as defined in the Loan and Security Agreement) or
Affiliates (as defined in the Loan and Security Agreement), (but excluding
Accounts arising solely from the sale of Equipment, Real Property [as defined
in the Loan and Security Agreement] or other fixed assets) together with all
interest, late charges, penalties, collection fees, and other sums which shall
be due and payable in connection with any Account; proceeds of any letters of
credit naming EDC or Slurry as beneficiary except such letters of credit as
are issued solely in connection with the purchase of Equipment, Real Property
or other fixed assets; contract rights, chattel paper, instruments, documents,
general intangibles (including without limitation choices in action, causes of
action, tax refunds, tax refund claims, and Reversions (as defined in the Loan
and Security Agreement) and other amounts payable to EDC or Slurry from or
with respect to any Plan (as defined in the Loan and Security Agreement) and
all forms of obligations owing to EDC or Slurry (including, without
limitation, in respect of loans, advances, and extensions of credit by EDC or
Slurry to their Subsidiaries and Affiliates); guarantees and other security
for any of the foregoing; rights of stoppage in transit, replevin, and
reclamation; and other rights or remedies of an unpaid vendor, lienor, or
secured party.
"TERM LENDER Claim" means all of the obligations of Borrower to TERM
LENDER as set forth in the TERM LENDER Loan Documents, including but not
limited to, all sums loaned and advanced to Borrower pursuant to the TERM
LENDER Loan Documents, any interest on such sums including interest accruing
after the commencement of a bankruptcy proceeding by or against Borrower and
any costs of preservation of the TERM LENDER Collateral and of collection or
enforcement, including reasonable attorney's and paralegal fees and any
prepayment premiums.
"TERM LENDER Collateral" means all Equipment and Mortgaged Properties
(as defined in the Term Lender Loan Documents) located at the Union County,
Arkansas facility of Borrower.
"TERM LENDER Loan Documents" means, singularly or collectively as the
context may require, (a) the Note Purchase Agreement dated on or about
February 13, 1997 executed and delivered by and between Borrower and TERM
LENDER; (b) the Floating Notes and Fixed Notes dated on or about February 13,
1997 in the aggregate original principal amount of $50,000,000, executed and
delivered by Borrower to TERM LENDER; and (c) any and all other documents,
instruments, certificates and agreements executed and delivered in connection
with such Note Purchase Agreement.
ARTICLE II
INTERCREDITOR AGREEMENT
2.01 Lien Priorities and Distribution of Proceeds. Notwithstanding the
date, manner or order of perfection of the security interests and liens
granted BABC or TERM LENDER or whether either BABC or TERM LENDER holds
possession of all or any part of the Collateral, and notwithstanding any
provisions of the BABC Loan Documents or the TERM LENDER Loan Documents or of
the Code or any applicable law or decision, the following, as between BABC and
TERM LENDER, shall be the relative priority of the security interests and
liens of BABC and TERM LENDER in the Collateral:
(a) BABC shall have a first and prior assignment of, or security
interest in, the BABC Collateral and all Proceeds of the BABC Collateral
including all insurance proceeds relating to the BABC Collateral and products
of the BABC Collateral. TERM LENDER shall not have, take or receive any
assignment of, security interest in or lien of any nature with respect to the
BABC Collateral.
(b) TERM LENDER shall have a first and prior assignment of, or
security interest in, the TERM LENDER Collateral and all Proceeds thereof,
including insurance proceeds relating to the TERM LENDER Collateral and
products of the TERM LENDER Collateral. BABC shall not have, take or receive
any assignment of, security interest in, or lien of any nature with respect to
the TERM LENDER Collateral.
2.02 Distribution of Proceeds of Collateral. All proceeds of
Collateral shall be distributed in accordance with the following procedure to
the extent permitted by law:
(a) All Proceeds of the BABC Collateral shall be paid to BABC
for application to the BABC Claim.
(b) All Proceeds of the TERM LENDER Collateral shall be paid to
TERM LENDER for application to the TERM LENDER Claim.
2.03 Enforcement Actions. BABC and TERM LENDER agree that upon the
commencement of an Enforcement Action by TERM LENDER, TERM LENDER grants to
BABC a non-exclusive ninety (90) day license to use the TERM LENDER Collateral
at the place or places where the TERM LENDER Collateral may be located as may
be necessary for the disposition of the BABC Collateral. BABC agrees to
insure (including naming TERM LENDER as a loss payee) and to take such other
steps as are necessary to protect, preserve and maintain the TERM LENDER
Collateral, while it is using such TERM LENDER Collateral. BABC shall
indemnify, defend and hold harmless TERM LENDER against any loss, damage or
claim resulting from the exercise of the license and the use of such TERM
LENDER Collateral, its agents or employees, including property damage
(including damage to the TERM LENDER Collateral). BABC shall compensate TERM
LENDER for the use of the TERM LENDER Collateral during the term of this
license at the fair market rental value at such time. In no event shall the
license granted hereunder restrict or limit TERM LENDER'S ability and right to
enter upon the TERM LENDER Collateral and commence any Enforcement Action.
2.04 Proceeds Received in Contravention of Agreement. All payments or
distributions with respect to the Collateral which are received by TERM LENDER
or BABC contrary to the provisions of this Agreement shall be received in
trust for the benefit of the other, shall be segregated from other funds and
property held by such lender in respect of any such payments or distributions
and shall be forthwith paid over to the other lender, in the same form as so
received (with any necessary endorsement).
2.05 Insurance. The lender having a security interest or lien in the
applicable Collateral shall, subject to such lender's rights under its
agreements with Borrower, have the sole and exclusive right, as against the
other lender, to adjust settlement of any insurance policy in the event of any
loss. All Proceeds of such policy shall be paid to the lender named in the
Loss Payable Endorsement and having the claim as set forth in this Agreement.
2.06 Waiver of Right to Require Marshaling. BABC and TERM LENDER
each hereby expressly waive any right that it otherwise might have to require
the other to marshal assets or to resort to Collateral in any particular order
or manner, whether provided for by common law or statute, provided that this
paragraph shall not override any specific provision of this Agreement.
Neither BABC or TERM LENDER shall be required to enforce any guaranty or any
security interest given by any person or entity other than Borrower as a
condition precedent or concurrent to the taking of any Enforcement Action.
2.07 UCC Notices. In the event that BABC or TERM LENDER shall be
required by the Code or any other applicable law to give notice to the other
of intended disposition of Collateral, such notice shall be given in
accordance with paragraph 3.01 of this Agreement, and ten (10) days' notice
shall be deemed to be commercially reasonable.
ARTICLE III
MISCELLANEOUS
3.01 Notices. All notices under this Agreement shall be effective upon
receipt, shall be in writing, and shall be sent by either certified mail,
return receipt requested, mailgram, telecopy, telegram or telex, if to BABC,
BankAmerica Business Credit, Inc., 55 South Lake Avenue, Suite 900, Pasadena,
California 91101, Attention: Mr. Charles Burtch; if to TERM LENDER, John
Hancock Mutual Life Insurance Company, John Hancock Place, P. O. Box 111, 200
Clarendon Street, Boston, Massachusetts 02117, Attn: Bond and Corporate
Finance Dept. T-57, with a copy to John Hancock Mutual Life Insurance Company,
12770 Coit Road, Suite 1020, Dallas, Texas 75251, Attention: William Hasson,
or to such other address or person as any of the parties to this Agreement may
designate in writing to the other parties. Notice shall be deemed received
when presented for delivery to the United States Post Office or the
transmitting utility.
3.02 No Benefit to Third Parties. The terms and provisions of this
Agreement shall be for the sole benefit of BABC and TERM LENDER and their
respective successors and assigns, provided such assignment is not in
violation of this Agreement, and no other person, firm, entity or corporation
(including Borrowers) shall have any right, benefit, priority or interest
under or because of this Agreement.
3.03 Independent Credit Investigation. Neither of the lenders nor any
of their respective directors, officers, agents or employees shall be
responsible to the other or to any other person, firm or corporation, for (i)
Borrower's solvency, financial condition, or ability to repay the BABC Claim
or the TERM LENDER Claim; (ii) statements of Borrower, oral or written; (iii)
the validity, sufficiency or enforceability of the BABC Claim, the TERM LENDER
Claim, the BABC Loan Documents, or the TERM LENDER Loan Documents; or (iv) any
liens or security interests granted by Borrower to the lenders in connection
with such loan documents. Each lender has entered into its respective
financing agreements with Borrower based upon its own independent
investigation, and makes no warranty or representation to the other lender nor
does it rely upon any representation of the other lender with respect to
matters identified or referred to in this paragraph.
3.04 Limitation on Liability of Lenders to Each Other. Except as
provided in this Agreement, neither of BABC or TERM LENDER shall have any
liability to the other.
3.05 Amendments to this Agreement. All modifications or amendments of
this Agreement must be in writing and duly executed by an authorized officer
of each party to be binding and enforceable.
3.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of BABC and TERM
LENDER, provided such assignment is not in violation of the provisions of this
Agreement. BABC consents to the assignment or replacement of the term loan
made to Debtor by TERM LENDER by a replacement lender provided BABC has
received from such assignee or replacement lender a written acknowledgment
stating that it has received a copy of this agreement and agrees to be bound
by the terms hereof. BABC agrees to enter into and execute an Intercreditor
Agreement containing substantially the same terms and conditions as this
Agreement, with any lender who succeeds TERM LENDER in providing a term loan
to Debtor secured by the TERM LENDER Collateral, or any part thereof.
3.07 Governing Law. This Agreement shall be governed as to validity,
interpretation, enforcement and effect by the laws of the State of Oklahoma.
3.08 Termination. This Agreement shall terminate upon the earlier to
occur of (i) the written termination agreement executed by both TERM LENDER
and BABC, or (ii) the payment in full of the TERM LENDER Claim or the BABC
Claim.
3.09 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be a single instrument.
IN WITNESS WHEREOF, BABC and TERM LENDER have executed this Agreement as
of the day and year first above written.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:
Name:
Title:
JOHN HANCOCK LIFE INSURANCE
COMPANY OF AMERICA
By:
Name:
Title:
NYNEX MASTER PENSION TRUST
By: Mellon Bank, N.A., as Trustee
By:
Name:
Title:
THE LONG-TERM INVESTMENT TRUST
By: Mellon Bank, N.A., as Trustee
By:
Name:
Title:
SIGNATURE 1A (CAYMAN), LTD.
By: John Hancock Mutual Life Insurance
Company, Portfolio Adviser
By:
Name:
Title:
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name:
Title:
ACKNOWLEDGMENT
EL DORADO CHEMICAL COMPANY, an Oklahoma corporation, SLURRY EXPLOSIVES
CORPORATION, an Oklahoma corporation, and NORTHWEST FINANCIAL CORPORATION, an
Oklahoma corporation (collectively, the "Borrower"), intending to be legally
bound hereby, each acknowledges and agrees to the terms and provisions of the
foregoing Intercreditor Agreement (the "Intercreditor Agreement") by and
between BANKAMERICA BUSINESS CREDIT, INC. ("BABC") and JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY, JOHN HANCOCK LIFE INSURANCE COMPANY OF AMERICA, NYNEX
MASTER PENSION TRUST, THE LONG-TERM INVESTMENT TRUST and SIGNATURE 1A
(CAYMAN), LTD. (collectively, the "TERM LENDER") (including, without
limitation, the terms of Section 2.05 of this Agreement). By executing this
Acknowledgment, the Borrower agrees to be bound by the provisions of the
Intercreditor Agreement, as those provisions relate to the relative rights of
TERM LENDER and BABC as between such lenders; provided, however, that nothing
in the Intercreditor Agreement shall amend, modify, change or supersede the
respective terms of the TERM LENDER Loan Documents or the BABC Loan Documents
(or any other document to which the undersigned may be a party) as between the
parties and the Borrower. The Borrower further agrees that the terms of the
Intercreditor Agreement shall not give the Borrower any substantive rights
with respect to either TERM LENDER or BABC. If either BABC or TERM LENDER
shall enforce its rights or remedies in violation of the terms of the
Intercreditor Agreement, the Borrower agrees that it shall not use such
violations as a defense to the enforcement by either party of its rights under
the BABC Loan Documents or the TERM LENDER Loan Documents or assert such
violation as a counterclaim or basis for set-off or recoupment against either
lender, provided that the Borrower may assert as a defense against either
lender the payment and performance of the Borrower of its obligations to such
lender.
EL DORADO CHEMICAL COMPAMY
By:
Name:
Title:
SLURRY EXPLOSIVES CORPORATION
By:
Name:
Title:
NORTHWEST FINANCIAL CORPORATION
By:
Name:
Title:
THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
dated as of April 1, 1996, and entered into by and between BANKAMERICA
BUSINESS CREDIT, INC. ("Lender") and LSB INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain Loan and
Security Agreement dated December 12, 1994, as amended by that certain First
Amendment to Loan and Security Agreement dated as of August 17, 1995, and that
certain Second Amendment to Loan and Security Agreement dated as of December
1, 1995 (as so amended, the "Agreement");
WHEREAS, Lender and Borrower desire to further amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.01. Amendment to Definition of "Maximum Revolving Credit
Line". The definition of "Maximum Revolving Credit Line" contained in Section
1.1 of the Agreement is hereby amended in its entirety to read as follows:
"Maximum Revolving Credit Line" means, for the period beginning
April 1, 1996 and ending June 30, 1996, Seventy-Five Million Dollars
($75,000,000) less the Gross Availability Reductions, and for the period
beginning July 1, 1996 and continuing thereafter, Sixty-Five Million
Dollars ($65,000,000) less the Gross Availability Reductions."
ARTICLE III
Ratifications, Representations and Warranties
Section 3.01. Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Agreement and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Agreement,
including, without limitation, all financial covenants contained therein, are
ratified and confirmed and shall continue in full force and effect. Lender
and Borrower agree that the Agreement as amended hereby shall continue to be
legal, valid, binding and enforceable in accordance with its terms.
Section 3.02 Representations and Warranties. Borrower hereby
represents and warrants to Lender that the execution, delivery and performance
of this Amendment and all other loan, amendment or security documents to which
Borrower is or is to be a party hereunder (hereinafter referred to
collectively as the "Loan Documents") executed and/or delivered in connection
herewith, have been authorized by all requisite corporate action on the part
of Borrower and will not violate the Articles of Incorporation or Bylaws of
Borrower.
ARTICLE IV
Conditions Precedent
Section 4.01. Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by the Lender):
(a) Lender shall have received all of the following, each dated
(unless otherwise indicated) as of the date of this Amendment, in form and
substance satisfactory to Lender in its sole discretion:
(i) Company Certificate. A certificate executed by the
Secretary or Assistant Secretary of Borrower certifying (A) the
Borrower's Board of Directors has met and adopted, approved,
consented to and ratified the resolutions attached thereto which
authorize the execution, delivery and performance by Borrower of
the Amendment and the Loan Documents, (B) the names of the
officers of Borrower authorized to sign this Amendment and each of
the Loan Documents to which Borrower is to be a party hereunder,
(C) the specimen signatures of such officers, and (D) that neither
the Articles of Incorporation nor Bylaws of Borrower have been
amended since the date of the Agreement;
(ii) No Material Adverse Change. There shall have occurred
no material adverse change in the business, operations, financial
condition, profits or prospects of Borrower, or in the Collateral,
and the Lender shall have received a certificate of Borrower's
chief executive officer to such effect;
(iii) Other Documents. Borrower shall have executed and
delivered such other documents and instruments as well as required
record searches as Lender may require.
(b) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments,
and other legal matters incident thereto shall be satisfactory to Lender and
its legal counsel, Jenkens & Gilchrist, a Professional Corporation.
ARTICLE V
Miscellaneous
Section 5.01. Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation
by Lender or any closing shall affect the representations and warranties or
the right of Lender to rely thereon.
Section 5.02 Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Agreement as amended hereby, are hereby amended so that any
reference therein to the Agreement shall mean a reference to the Agreement as
amended hereby.
Section 5.03. Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.
Section 5.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.
Section 5.05 Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Lender and Borrower and their respective
successors and assigns; provided, however, that Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Lender. Lender may assign any or all of its rights or obligations
hereunder without the prior consent of Borrower.
Section 5.06 Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
Section 5.07. Effect of Waiver. No consent or waiver, express or
implied, by Lender to or of any breach of or deviation from any covenant or
condition of the Agreement or duty shall be deemed a consent or waiver to or
of any other breach of or deviation from the same or any other covenant,
condition or duty. No failure on the part of Lender to exercise and no delay
in exercising, and no course of dealing with respect to any right, power, or
privilege under this Amendment, the Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Amendment, the Agreement or any other
Loan Document preclude any other or further exercise thereof or theexercise of
any other right, power, or privilege. The rights and remedies provided for in
the Agreement and the other Loan Documents are cumulative and not exclusive of
any rights and remedies provided by law.
Section 5.08. Headings. The headings, captions and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 5.09 Releases. As a material inducement to Lender to enter
into this Amendment, Borrower hereby represents and warrants that there are no
claims or offsets against or defenses or counterclaims to, the terms and
provisions of and the other obligations created or evidenced by the Agreement
or the other Loan Documents. Borrower hereby releases, acquits and forever
discharges Lender, and its successors, assigns, and predecessors in interest,
their parents, subsidiaries and affiliated organizations, and the officers,
employees, attorneys, and agents of each of the foregoing (all of whom are
herein jointly and severally referred to as the "Released Parties") from any
and all liability, damages, losses, obligations, costs, expenses, suits,
claims, demands, causes of action for damages or any other relief, whether or
not now known or suspected, of any kind, nature, or character, at law or in
equity, which Borrower now has or may have ever had against any of the
Released Parties, including, but not limited to, those relating to (a) usury
or penalties or damages therefor, (b) allegations that a partnership existed
between Borrower and the Released Parties, (c) allegations of unconscionable
acts, deceptive trade practices, lack of good faith or fair dealing, lack of
commercial reasonableness or special relationships, such as fiduciary, trust
or confidential relationships, (d) allegations of dominion, control, alter
ego, instrumentality, fraud, misrepresentation, duress, coercion, undue
influence, interference or negligence, (e) allegations of tortious
interference with present or prospective business relationships or of
antitrust, or (f) slander, libel or damage to reputation, (hereinafter being
collectively referred to as the "Claims"), all of which Claims are hereby
waived.
Section 5.10. Expenses of Lender. Borrower agrees to pay on demand (i)
all costs and expenses reasonably incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all subsequent amendments,
modifications, and supplement hereto or thereto, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated
cost of staff counsel and (ii) all costs and expenses reasonably incurred by
Lender in connection with the enforcement or preservation of any rights under
the Agreement, this Amendment and/or other Loan Documents, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated
cost of staff counsel.
Section 5.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN LENDER
AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND BORROWER.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
"BORROWER"
LSB INDUSTRIES, INC.
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
"LENDER"
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Michael Jasaitis
Name: Michael J. Jasaitis
Title: V.P.
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution of, and
consents to, the terms and conditions of that Third Amendment to Loan and
Security Agreement dated as of April 1, 1996, between LSB Industries, Inc.,
and BankAmerica Business Credit, Inc. ("Creditor") and reaffirms its
obligations under (i) that certain Continuing Guaranty with Security Agreement
(the "Guaranty") dated as of December 12, 1994, and (ii) that certain Cross-
Collateralization and Cross-Guaranty Agreement (the "Cross-Collateralization
Agreement") dated as of December 12, 1994, each made by the undersigned in
favor of the Creditor, and acknowledges and agrees that the Guaranty and the
Cross-Collateralization Agreement remain in full force and effect and the
Guaranty and the Cross-Collateralization Agreement are hereby ratified and
confirmed.
Dated as of April 1, 1996
UNIVERSAL TECH CORPORATION
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
LSB CHEMICAL CORP.
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
L&S AUTOMOTIVE PRODUCTS CO.
(f/k/a/ LSB Bearing Corp.)
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
INTERNATIONAL BEARING, INC.
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
LSB EXTRUSION CO.
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
ROTEX CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
TRIBONETICS CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
SUMMIT MACHINE TOOL SYSTEMS, INC.
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
HERCULES ENERGY MFG. CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
MOREY MACHINERY MANUFACTURING
CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
CHP CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
KOAX CORP.
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
APR CORPORATION
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution of, and
consents to, the terms and conditions of that Third Amendment to Loan and
Security Agreement dated as of April 1, 1996, between LSB Industries, Inc.,
and BankAmerica Business Credit, Inc. ("Creditor") and reaffirms its
obligations under that certain Cross-Collateralization and Cross-Guaranty
Agreement (the "Cross-Collateralization Agreement") dated as of December 12,
1994, made by the undersigned in favor of the Creditor, and acknowledges and
agrees that the Cross-Collateralization Agreement remains in full force and
effect and the Cross-Collateralization Agreement is hereby ratified and
confirmed.
Dated as of April 1, 1996.
INTERNATIONAL ENVIRONMENTAL
CORPORATION
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
L&S BEARING CO.
By: /s/ David R. Goss
Name: David R. Goss
Title: V.P.
CLIMATE MASTER, INC.
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
SUMMIT MACHINE TOOL MANUFACTURING
CORP.
By: /s/ Tony M. Shelby
Name: Tony M. Shelby
Title: V.P.
FOURTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
dated as of July 1, 1996, and entered into by and between BANKAMERICA BUSINESS
CREDIT, INC. ("Lender") and LSB INDUSTRIES, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into that certain Loan and
Security Agreement dated December 12, 1994, as amended by (i) that certain
First Amendment to Loan and Security Agreement dated as of August 17, 1995,
(ii) that certain Second Amendment to Loan and Security Agreement dated as of
December 1, 1995, and (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996 (as so amended, the "Agreement");
WHEREAS, El Dorado Chemical Company ("EDC") and Slurry Explosive
Corporation ("Slurry"), who are Affiliates of Borrower and are part of the LSB
Borrowing Group, as defined in the Agreement, have requested that Lender make
a term loan to EDC and Slurry of even date herewith in principle amount of
$10,000,000 (the "Term Loan") the terms of which are set forth in that certain
Term Note dated of even date herewith executed by EDC and Slurry and payable
to the order of Lender (the "Term Note");
WHEREAS, Lender has agreed to make the Term Loan and to thereby extend
the total credit facility available to the LSB Borrowing Group to $75,000,000,
until such time as the Term Loan has been repaid in full, whereupon the total
credit facility will once again be limited to the Maximum Revolving Credit
Line;
WHEREAS, EDC intends to enter into a leasing/financing transaction with
Security Pacific Leasing Corporation ("SPLC") on or before August 15, 1996
(the "SPLC Transaction") whereby SPLC will make certain periodic advances to
EDC and Slurry, the first such advance to be in the amount of $12,000,000 (the
"Initial SPLC Advance"); and
WHEREAS, the Initial SPLC Advance will be used in part to repay in
full the Term Loan;
WHEREAS, Lender and Borrower desire to further amend the Agreement
as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
Section 1.02. New Definitions. The following new definitions are
hereby added to the Agreement:
"Fourth Amendment Date" means July 1, 1996.
"Initial SPLC Advance" means the first advance in the amount of
$12,000,000 under the SPLC Transaction.
"Maximum Credit Facility" means the Maximum Revolving Credit Line plus
the Term Loan.
"SPLC Transaction" means the leasing/financing transaction to be entered
into by and between EDC and Security Pacific Leasing Corporation on or before
August 15, 1996.
"Term Loan" means the Term Loan made by Lender to EDC and Slurry of even
date herewith in the principal amount of $10,000,000.
"Term Note" means that certain Term Note dated of even date herewith
executed by EDC and Slurry in the principal amount of $10,000,000 and payable
to the order of Lender.
Section 1.03. Amended Definition. The definition of Maximum Revolving
Credit Line is hereby amended to read as follows:
"Maximum Revolving Credit Line" means Sixty-Five Million Dollars
($65,000,000) less the Goss Availability Reductions; provided, however, that
following the making of the Initial SPLC Advance, Maximum Revolving Credit
Line shall mean Sixty-Three Million Dollars ($63,000,000) less the Gross
Availability Reductions."
ARTICLE II
Amendments
Section 2.01. Amendment to Article 2. Article 2 of the Agreement is
hereby amended by adding a new Section 2.4 which reads as follows:
"2.4. Term Loan. The Lender has, of even date herewith, made available
to EDC and Slurry a Term Loan in the principal amount of $10,000,000, the
terms and conditions of which are set forth in the Term Note."
Section 2.02. Amendment to Section 3.1(a). Section 3.1(a) of the
Agreement is hereby amended by adding a new subsection (iii) which reads as
follows:
"(iii) The Term Loan shall bear interest at the Reference Rate plus
three percent (3%)."
Section 2.03. Amendment to Section 9.15. Section 9.15 of the Agreement
is hereby amended to read in its entirety as follows:
"9.15. Capital Expenditures. Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto, the aggregate amount of
all Capital Expenditures by the LSB Borrowing Group during the following
periods would exceed the following amounts: Fiscal Year ending December 31,
1996: $9,000,000; Fiscal Year ending December 31, 1997 and each Fiscal Year
thereafter: $6,000,000."
Section 2.04. Amendment to Section 9.16. Section 9.16 of the Agreement
is hereby amended to read in its entirety as follows:
"9.16 Adjusted Tangible Net worth. Adjusted Tangible Net Worth
(without taking into account any purchases of treasury stock) will not be less
than the following amounts at the end of each of the Fiscal Quarters during
the following Fiscal Years:
AGREEMENT FOR PURCHASE AND SALE
OF ANHYDROUS AMMONIA
THIS AGREEMENT ("Agreement") is made this 1st day of January, 1997, by and
between Farmland Industries, Inc. (hereinafter "Seller"), a Kansas
corporation, with its principal place of business in Kansas City, Missouri,
and El Dorado Chemical Company (hereinafter "Buyer"), an Oklahoma corporation,
with its principal place of business in El Dorado, Arkansas.
WITNESSETH
WHEREAS, Seller represents that it has the right to sell certain
quantities of anhydrous ammonia as hereinafter defined ("Product"); and
WHEREAS, Seller desires to sell and Buyer wishes to purchase the
quantities of Product herein stipulated upon the conditions, covenants, and
agreements contained herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, Seller and Buyer agree as follows:
1. Quantity: Seller shall deliver to Buyer at El Dorado, Arkansas a
volume of Product of not less than seventy five thousand (75,000) tons and not
more than one hundred forty thousand (140,000) tons, during each contract
year, commencing January 1, 1997.
A: Purchased Product. Of the quantities set forth in Paragraph 1
above, Seller shall sell, transfer and convey to Buyer, f.o.b. Pollock,
Louisiana and Buyer shall purchase and accept from Seller a volume of not less
that seventy five thousand (75,000) tons of Product during each contract year
commencing January 1, 1997.
B: Tolled Product. Of the quantities set forth in Paragraph 1
above, forty five thousand (45,000) tons shall be tolled into ammonium nitrate
by Buyer for Seller at Seller's option pursuant to a Tolling agreement to be
entered into between the parties and shall not be considered as a sale to
Buyer hereunder.
C. Additional Product. In the event Seller elects not to toll
all or a portion of the 45,000 tons of Product, Buyer shall have the right to
purchase all or a part of the Product not tolled at a price as set forth in
Paragraph 5 herein, f.o.b. Pollock, Louisiana.
In addition, and subject to the force majeure provisions of paragraph 17
herein, in the event that Buyer does not purchase any volumes of Product for
two (2) consecutive calendar quarters, or does not purchase a minimum of
seventy five thousand (75,000) tons of Product during any contract year,
Farmland shall have the right to immediately terminate this Agreement in its
entirety, with no further obligations of any type whatsoever on the part of
either Seller or Buyer, except that (a) Buyer shall make timely payment for
any volumes of Product shipped by Seller prior to such termination; and (b)
Buyer shall make payment for all penalties provided for herein.
2. Maximum/Minimum Quarterly Quantity: Seller shall not be
required to deliver more than thirty-five thousand (35,000) tons of Product in
any one (1) calendar quarter and no more than fourteen thousand (14,000) tons
in any one month. Seller understands and agrees that Buyer may, at any time,
desire to receive more than thirty-five thousand (35,000) tons of Product in
any one calendar quarter and more than fourteen thousand (14,000) tons in any
one month. With mutual agreement, these maximums may be waived in any one
calendar quarter or any one month. However, no more than thirteen thousand
five hundred (13,500) tons may be used for tolling in any one calendar
quarter. During the term of this Agreement, Seller shall supply each quarter
the amount of Product forecasted for purchase by Buyer. In the event Buyer
does not purchase and accept during any calendar quarter at least fifty
percent (50%) of the number of tons of Product manufactured in accordance with
Buyer's forecast, Seller shall have the right to invoice Buyer and Buyer shall
pay the contract price for all such tons not purchased and accepted. Any
Product paid for and not taken in any quarter shall be taken in the next
succeeding quarter or quarters during which supply is available as determined
by Seller.
3. Forecast of Buyer's Purchases: During the term of this Agreement,
Buyer shall provide a written forecast quarterly by month, for purchases for
each quarter of the contract year. Buyer shall make this quarterly forecast
and deliver it to Seller on or before the 15th day of the month preceding the
quarter.
4. Term: This Agreement shall commence at 12:01 a.m., Central Standard
Time, January 1, 1997, and shall continue until 11:59 p.m., Central Standard
Time, December 31, 1998, unless terminated earlier in accordance with the
provisions hereof.
5. Price:
(a) The parties to this Agreement have intentionally left
the purchase price to be paid by Buyer open for periodic
determinations, pursuant to the contract pricing formula
contained herein. It is the intention of the parties that
there be a binding agreement for the date of the signing of
this Agreement, even if the price is not determined at that
time since a contract pricing formula is contained herein.
(b) The contract price per ton of Product, for each
calendar month during the term of this Agreement, shall be
calculated as follows:
(1) On or before the first day of each calendar
month during the term of this Agreement, Seller shall
calculate on a million British Thermal Unit basis
(hereinafter, MMBTU), its nominated weight average,
laid in to the plant (Pollock, Louisiana) cost of
natural gas, for such calendar month; plus a nominal
fee of two cents ($.02) per MMBTU for the procurement
and expense incurred in gas negotiation and purchase.
Such cost shall exclude gains or losses pursuant to
Paragraph 5(d) herein;
(2) The natural gas price per MMBTU, as calculated
in 5(b)(1) above, shall be multiplied by thirty-four
(34);
(3) To the results of 5(b)(2) shall be added an
amount of thirty dollars ($30.00);
(4) The results in 5(b)(3) shall be multiplied by
1.075.
The total amount in 5(b)(4) shall be denominated herein as
the "Base Price".
If at any time during the term of the Agreement the "Gulf Coast Ammonia
Price" (defined hereinafter) is below the "Base Price", the sale/purchase
price per ton of Product hereunder shall be "Gulf Coast Ammonia Price".
If at any time during the term of this Agreement the "Gulf Coast Ammonia
Price" (defined hereunder) exceeds the "Base Price", the sale/purchase price
per ton of Product hereunder shall be calculated as follows:
i. The "Base Price" shall be noted;
ii. The "Gulf Coast Ammonia Price" (defined hereunder) shall be noted;
iii. From 5(b)(4)ii shall be subtracted 5(b)(4)i;
iv. Sixty-five percent (65%) of 5(b)(4)iii shall be noted;
v. The f.o.b. sale/purchase price at any time during the term of this
Agreement when the "Gulf Coast Ammonia Price" exceeds the "Base
Price" shall be an amount equal to 5(b)(4)i added to 5(b)(4)iv.
The "Gulf Coast Ammonia Price" for each month during the term of this
Agreement shall be calculated as follows:
The weekly Green Markets for the calendar month shall be noted;
The Green Markets lowpoint price average in such issues for Product
f.o.b. United States Gulf Coast, less one dollar ($1.00), shall be the "Gulf
Coast Ammonia Price". All prices hereunder shall be f.o.b. Pollock, Louisiana
plant of Seller. Freight charges to Buyer's destination shall be added to
invoices as a separate line item.
(c) All Product for shipments to Buyer's El Dorado, Arkansas
location shall be delivered to Buyer via Koch Pipeline unless such pipeline
becomes unavailable due to mechanical failure of the pipeline. In the event
the Koch Pipeline is unavailable for that reason, Product shall be shipped by
rail cars and each party hereto shall use its best efforts to minimize the
cost of shipment by rail car. In the event Product is shipped by rail car,
the purchase price for Product shall be adjusted to reflect the actual cost of
such transportation.
(d) Gains or losses resulting from Seller's activities in the
natural gas Futures market shall not be incorporated into the gas cost
calculations irrespective of whether delivery is taken by Farmland in any
Futures transaction.
6. Verification of Pollock, LA Natural Gas Prices: Buyer shall have
the right, at any time during the term of this Agreement, to request
Seller to provide documentation to a mutually acceptable audit firm to
verify that excess charges for natural gas have not been made.
7. Delivery/Freight:
(a) Pipeline - As shipper of record Seller shall invoice
Buyer for all actual Koch Pipeline tariff charges plus a ten cent ($.10)
per short ton meter fee for tons transported by pipeline to Buyer's El
Dorado, Arkansas facility. Seller will credit Buyer for all shrink
refunds allowed Seller by the Koch Pipeline on tons transported to El
Dorado during the term of the Agreement.
(b) Rail - Freight charges on rail shipments shall be
invoiced to Buyer at either (i) the then current railroad tariff rate,
or (ii) a negotiated contract freight rate as agreed by the parties.
Seller may invoice Buyer and Buyer shall pay Seller tank car demurrage
at a daily rate of Fifty Dollars ($50) per car per day for each day
commencing with the eight day after constructive placement of the car at
Buyer's destination. Such rail shipments shall be priced at the time of
the order by Seller.
8. Invoices and Payment: Seller shall deliver invoices to Buyer
as soon after the end of each calendar month as is reasonably possible. Buyer
shall make payment to Seller for each month's purchases, on or before the
fifteenth (15th) day of the following month. Payment shall be made by wire
transfer to such bank or banks as Seller shall designate. If at any time
during the term of this Agreement, Buyer becomes delinquent in payment or in
Seller's reasonable judgment there has occurred a material adverse change in
the financial condition of Buyer which could reasonably be expected to impair
Buyer's ability to carry out its financial obligations to Seller, Seller shall
have the sole and exclusive right to require the Buyer to open an irrevocable
letter of credit for the benefit of Farmland Industries, Inc., at a bank or
banks, acceptable to Farmland Industries, Inc. for an amount not to exceed the
result of multiplying twenty-two thousand (22,000) tons by the contract price
per ton of Product in the most recently completed calendar month.
9. Default and Nonpayment: Default in payment, or failure to perform
any of the terms and conditions of this Agreement, shall constitute a default
by either party to this Agreement. In the event that either party (I)
defaults in making payment provided for herein when due or (ii) defaults in
the performance of any other material obligation provided for herein and, if
such default is susceptible of cure, fails to cure any such default of a
material obligation within 30 days of receipt of written notice from the non-
defaulting party thereof, the non-defaulting party shall have the right, by
giving written notice to the defaulting party, to immediately terminate this
Agreement
On the occurrence of a default by either party, the non-defaulting party
shall have the option to terminate this Agreement without liability of any
kind as to future shipments; to alter credit terms provided to Buyer; to stop
any Product in transit; to treat any default as substantially impairing the
value of the whole Agreement, and hence a breach thereof. If Buyer does not
pay any invoice on its due date, then all outstanding invoices of Seller to
Buyer under this or any other agreement shall become immediately due and
payable, and Seller may assess a finance charge of one and five-tenths percent
(1.5%) per month, or the maximum legal rate if less, on remittances not
received by their due date. On the occurrence of a default by either party,
the defaulting party shall be liable to the non-defaulting party for all
costs, losses, and expenses incurred by such non-defaulting party by reason
thereof, including reasonable attorneys' fees.
10. Product Specifications: "Product", where used in this Agreement,
means Product solution of commercial grade, having ammonia (NH3) content of
not less than ninety-nine and five tenths percent (99.5%), having water
content of not more than five-tenths percent (0.5%), and having oil content of
not more than five (5) parts per million. Product tendered to any pipeline
shall meet or exceed such pipeline's Product quality specifications for
Product shipped therein. Seller shall be nominated as shipper of record on
those volumes of Product sold pursuant to this Agreement and shipped via Koch
Pipeline.
11. Determination of Weights: "Ton", where used in this Agreement,
means two thousand pounds (2,000 lbs.) avoirdupois, as measured by Koch
Pipeline meter tickets if delivery is made by pipeline, by bills of lading if
delivery is made by rail or truck.
12. Manufacture and Delivery; Seller specifically reserves the right
to manufacture at, or exchange to, and to deliver from, any origin, all of the
Product transferred to the location scheduled and agreed to quarterly pursuant
to this Agreement.
13. Disclaimer of Warranties: The are no warranties which extend
beyond the description of the face hereof, and SELLER MAKES NO WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY OR FITNESS FOR ANY
PURPOSE OR AGAINST INFRINGEMENT OR OTHERWISE. Buyer assumes all risk and
liability for the use of the Product purchased, whether used singly or in
combination with other substances and for loss, damage, or injury to persons,
or property of Buyer or others arising out of the use or possession of the
Product; Buyer agrees to indemnify Seller from loss (including cost of
defense) in connection with claims arising from use or possession of the
Product.
14. Claims by Buyer or Seller; Notices by Seller or Buyer of claims as
to Product delivered, or for the nondelivery thereof, shall be made within
thirty (30) days after delivery, or the date fixed for delivery, as the case
may be, and failure to give such notice shall constitute a waiver by Seller or
Buyer of all claims in respect thereto. Buyer's sole claim for loss or damage
arising from nondelivery of Product hereunder shall be the difference between
the price for the Product specified in this Agreement, and the average price
of such Product then charged by major suppliers of Product at the point of
shipment specified in this Agreement, duly adjusted for freight charges. In
no event shall any claims of any kind be greater than, nor shall Seller in any
event be liable for, any amount in excess of the purchase price of the Product
in respect of which claim is made. SELLER SHALL NOT BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, ARISING FROM SELLER'S
PERFORMANCE OR BREACH OF THIS AGREEMENT AND/OR USE OR POSSESSION OF THE
PRODUCT, OR FOR LOSS OF PROFIT FROM RESALE OF PRODUCT. No suit or legal
proceeding arising upon this Agreement shall be maintainable against Seller or
Buyer unless commenced or made within one (1) year after passing of title to
Product, or delivery of or failure to deliver Product hereunder.
15. Conflicting Terms: Notwithstanding any provision herein to the
contrary, no term in Seller's or Buyer's purchase order, acknowledgment form
or other document which conflicts with the terms hereof or increases Seller's
or Buyer's obligations hereunder, shall be binding on either party unless
accepted in writing by both parities hereunder.
16. Waiver: Any waiver by Seller or Buyer of any term, provision, or
condition of this Agreement, or of any default hereunder in any one or more
instances shall not be deemed to be a further or continuing waiver of such
term, provision or condition, or of any subsequent default hereunder.
17. Force Majeure: Neither party will be liable for failure to
perform or for delay in performing this Agreement where such failure or delay
is occasioned by acts of any government compliance with law or government
regulations, acts of God, war, riots insurrections, civil commotion or
disturbances, fire, flood, or accident or by any other cause or circumstances
whether of like or difference character, beyond the control of the party
affected thereby, herein referred to as "Events of Force Majeure". Failure to
obtain a supply of Product by Seller from a third party supplier shall not be
an Event of Force Majeure that can be exercised by Seller. The party
asserting that an Event Of Force Majeure has occurred shall send the other
party notice thereof by cable or telex no later than three (3) days after the
beginning of such claimed event setting forth a description of the Event Of
Force Majeure, an estimate of its effect upon the party's ability to perform
its obligations under this Agreement and the duration thereof. The notice
shall be supplemented by such other information or documentation as the party
receiving the notice may reasonably request. As soon as possible after the
cessation of any Event Of Force Majeure, the party which asserted such event
shall give the other party notice of any threatened or impending Event Of
Forced Majeure. If an Event Of Force Majeure affecting Seller's or Buyer's
performance by the party affected (the "affected party") shall be excused
during the continuation of the Event of Force Majeure and the other party
elects to (a) reduce the quantity of Product specified in this Agreement by
the amount which cannot be delivered or received and/or (b) reschedule
deliveries on a commercially reasonable basis for delivery during the
remainder of the applicable contract Year.
"In the Event Of Force Majeure affecting Seller, Seller shall allocate
its available Product to Buyer in the same proportion as the quantity
delivered to Buyer's El Dorado Arkansas facility hereunder during the twelve
(12) months preceding the event Of Force Majeure is to the total quantity of
all Product sold or sued by Seller during such twelve (12) month period".
(Provided, however, the total Product Buyer received shall not exceed the
quantities in Article 2). In the event Seller has not given written notice of
cessation of force majeure, and such Event Of Force Majeure prevents
deliveries of Product for more than thirty (30) consecutive days, Buyer shall
have the right to terminate this Agreement.
18. Acquisition of Plant: In the event that El Dorado Chemical
Company or affiliated company having a common parent acquires more than fifty
percent (50%) interest in and to a plant or company that produces or has the
capacity to produce Product, Buyer may upon twelve (12) months' written notice
to Seller, terminate this Contract and thereafter have no further
responsibility to accept or pay for any quantity of Product hereunder.
19. Commission/Broker Fees: Seller and Buyer represent that they are
dealing with each other, that neither is the agent of the other, and that no
broker or agent has been involved either directly or indirectly, in
consummating this Agreement and the sale of Product hereunder. SELLER AGREES
TO INDEMNIFY, PROTECT AND SAVE BUYER HARMLESS from the claims of any person or
entity for commissions or finder's fees or similar fees in connection with the
transaction set forth herein where the claimant alleges that his or its
contact with this transaction is traceable to Seller. BUYER AGREES TO
INDEMNIFY, PROTECT, AND SAVE SELLER HARMLESS from the claims of any person or
entity for commissions or finder's fees or similar fees in connection with the
transaction set forth herein where the claimant alleges that his or its
contact with the transaction is traceable to Buyer.
20. Taxes: Any and all taxes of any type whatsoever levied, prior to
passage of title against Product transferred pursuant to this Agreement shall
be paid by Seller promptly as required by law. Any and all taxes of any type
whatsoever levied against the Product at or upon, or subsequent to, passage of
title shall be paid by Buyer promptly as required by law. Title to and risk
of loss of the Product shall pass to the Buyer as the Product progressively
passes into tank cars, and/or pipeline. Notwithstanding any provision to the
contrary in this Agreement, with regard to sales/purchases of Product pursuant
to this Agreement, Buyer shall pay any and all taxes or charges that are due
and owing under the federal Superfund (Comprehensive Environmental Response,
Compensation and Liability Act of 1986) statutes, or regulations promulgated
thereunder, as amended. Notwithstanding any provision to the contrary in this
Agreement with regard to sales/purchases of Product pursuant to this
Agreement, Buyer shall pay any and all taxes and charges that may become in
the future due and owing because of the future enactment of any state law or
regulation establishing a state tax or fee of any kind whatsoever on the
manufacturing and/or sale of Product or any constituent part thereof. All
taxes hereunder are in addition to those prices described herein.
21. Notices: No notice, actual or constructive, shall be effective
against any party unless it is (a) in writing; (b) signed by the party giving
the notice; and (c) sent by register mail, postage prepaid, or personally
served on the party intended to receive said notice.
The address to be used on a mailed notice for each party shall be as
follows:
To Seller: Farmland Industries, Inc.
3315 N. Oak Trafficway
P.O. Box 7305, Dept. 314
Kansas City, Missouri 64116
Facsimile: 816/459-5913
To Buyer: El Dorado Chemical Company
P.O. Box 231
El Dorado, Arkansas 71731
Facsimile: 501/863-1426
Attn: Warren Jones
El Dorado Chemical Co.
16 S. Pennsylvania
Oklahoma City, OK 73007
Facsimile: 405/235-5067
Attn: James Wewers
David Shear
22. Alternate Dispute Resolution: In the event of any controversy
arising out of or relating to this Contract, or any breach thereof, the
parties agree to submit the dispute for resolution to a senior executive of
both parties. Such executives shall meet within thirty (30) days of written
request of either party.
In the event the parties are unable to resolve the controversy through
such meeting, the dispute shall be submitted to binding arbitration in
accordance with the rules of the Missouri Arbitration Act. V.A.M.S. 435 et.
Seq. (or Uniform Arbitration Act). Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association. Alternate
strikes shall be made to the panel commencing with the party requesting the
arbitration until one name remains. Such individual shall be the arbitrator
for the controversy. The party requesting the arbitration shall notify the
arbitrator who shall hold a hearing(s) within sixty (60) days of the notice.
The arbitrator shall render a decision within twenty (20) days after the
conclusion of the hearing(s). Judgement upon the award rendered by the
Arbitrator may be entered in any court having jurisdiction thereof.
23. Confidentiality. The parties agree to maintain as confidential the
terms of this Agreement and not to divulge such terms to any third party
without the written consent of the other.
24. Miscellaneous. This Agreement expresses the whole agreement of the
parties. There are no promises, conditions, or obligations, other than those
enumerated herein. This Agreement shall supersede all previous or
contemporaneous communications, representations, or agreement, verbal or
written, between or among the parties. No usage of trade or prior course of
dealing or performance between Buyer and Seller shall be deemed to modify the
terms of this Agreement. This Agreement shall not be modified except in
writing signed by the party to be charged. Headings are for reference only,
and do not affect the meaning of any paragraph.
This Agreement shall not be assigned by either party without the prior
written consent of the other party except that either party may assign its
interest under this Agreement to a successor to all or any substantial portion
(more than 50%) of its business or assets, or to any parents, subsidiary, or
affiliated company having a common parent. Any purported assignment of this
Agreement or any part thereof, except as set forth above, shall be void.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
This Agreement shall be governed in all respects, including, but not
limited to, interpretation and performance by the law of the Sate of Kansas.
Remedies herein reserved are cumulative and in addition to any other or
further remedies Seller or Buyer may have at law or in equity.
No termination of this Agreement shall affect the rights or obligations
theretofore accrued.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
FARMLAND INDUSTRIES, INC. EL DORADO CHEMICAL COMPANY
(Seller) (Buyer)
By: /s/Robert W. Honse By: James L. Wewers
--------------------- ---------------------
Title: Exec. V.P. & Chief Title: President
Operating officer ------------------
Ag Input Business
------------------
Date: 3/20/97 Date: 3/20/97
------------------ ------------------
KOCH
______________________________________________________________________________
Koch Nitrogen Company December 31, 1996
El Dorado Chemical Co. Sale 12133
Attn: Jim Wewers Effective Date 01/01/97
Box 231 Customer Reference #
El Dorado, AR 71731
WE HEREBY ACKNOWLEDGE THIS AGREEMENT MADE BETWEEN
Koch Nitrogen Company AND EL DORADO CHEMICAL CO.
______________________________________________________________________________
PRODUCT: Ammonia
ORIGIN FOB SHIPMENT MODE
Sterlincgon LA - KNC El Dorado, AR - El Dorado Pipeline
QUANTITY PRICE
27,000.00 tons See Remarks
DELIVERY TIME: 01/01/97 through 03/31/97
TERMS: Net 15 days
REMARKS: Price = Green Markets NOLA low monthly average + pipeline
tariff. Upon management approval by 3-31-97 of a 3 yr NH3
supply agreement between El Dorado Chemical and Koch, Koch
to rebate to El Dorado Chemical the difference between NOLA
low and the lower of NOLA low less 3% or price agreed to in
3 yr supply contract on tons delivered per this contract.
Volume - Jan. 8000 tons, Feb. 5000 tons, Mar. 14000 tons.
We appreciate your business!
______________________________________________________________________________
______________________________________________________________________________
All the terms and conditions of the Koch Nitrogen Company (Seller) General
Terms and Conditions of Sale are hereby incorporated into and made part of
this contract as essential term and conditions. These terms of sale are
accepted by buyer, if not otherwise accepted, by buyer's purchase or taking
delivery of product from Seller. Acceptance is expressly limited to these
terms and conditions without any alteration or addition thereto,
notwithstanding the use of any other acknowledgement or acceptance by buyer.
ACCEPTED ________________ 19_____ KOCH NITROGEN COMPANY
EL DORADO CHEMICAL CO. by /s/ L.P. Snodgrass
_____________________________
/S/ James L. Wewers, President L.P. "Bud" Snodgrass
______________________________ ______________________________
______________________________
LSB INDUSTRIES, INC. Exhibit 11.1
Page 1 of 6
PRIMARY EARNINGS PER SHARE COMPUTATION