SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as
of May 4, 2000 by and among Congress Financial Corporation
(Southwest), a Texas corporation ("Lender"), LSB Industries, Inc.
("Subordinated Creditor"), DriveLine Technologies, Inc.,
(formerly known as Tribonetics Corporation), an Oklahoma
corporation ("DriveLine") and L&S Manufacturing Corp. ("LSMC").
LSMC and DriveLine are hereinafter referred to individually and
collectively as "Borrower".
RECITALS:
WHEREAS, L&S Automotive Products Co. ("LSAP"), a Delaware
corporation, DriveLine and MC Automotive Acquisition Corp., an
Oklahoma corporation ("MCAA") are parties to that certain Stock
Purchase and Sale Agreement of even date herewith (the "Stock
Purchase Agreement"), pursuant to which MCAA will purchase all
shares of common stock in DriveLine owned by Subordinated
Creditor; and
WHEREAS, LSAP, L&S Bearing Co. ("L&SB"), an Oklahoma
corporation, LSB Extrusion Co. ("LSBE"), an Oklahoma corporation
and Rotex Corporation ("Rotex"), an Oklahoma corporation as
sellers ("Sellers") and DriveLine as purchaser have entered into
an Asset Purchase and Sale Agreement of even date herewith (the
"Asset Sale Agreement") pursuant to which DriveLine will purchase
all or substantially all of the assets of the Sellers (the "Asset
Sale"); and
WHEREAS, pursuant to the Stock Purchase Agreement and the
Asset Sale Agreement Borrower has entered into certain credit
accommodations and contractual obligations with Subordinated
Creditor, including but not limited to those notes, credit
accommodations and agreements described in Exhibit A attached
hereto (the "Subordinated Notes"); and
WHEREAS, the Subordinated Notes are secured by among other
documents, instruments and agreements, (a) that certain Secured
Guaranty Agreement of even date herewith between MCAA and
Subordinated Creditor (the "MCAA Guaranty"); (b) that certain
Security Agreement of even date herewith by and among Borrower
and Subordinated Creditor (the "Borrower Security Agreement");
(c) that certain Stock Pledge Agreement of even date herewith
between Murray Cohen Revocable Trust #2 and Subordinated Creditor
(the "Cohen Stock Pledge"); (d) that certain Stock Pledge
Agreement of even date herewith by and between MCAA and
Subordinated Creditor (the "MCAA Stock Pledge"); and (e) that
certain Stock Pledge Agreement of even date herewith between
DriveLine and Subordinated Creditor (the "DriveLine Stock
Pledge"); and
WHEREAS, the Subordinated Notes, the Stock Purchase
Agreement, the Asset Sale Agreement, the MCAA Stock Pledge, the
MCAA Guaranty, the Borrower Security Agreement, the Cohen Stock
Pledge and the DriveLine Stock Pledge, and all agreements,
documents, instruments evidencing, governing or executed or
delivered in connection therewith, including without limitation,
all amendments, modifications, renewals and extensions of the
foregoing are collectively referred to herein as the
"Subordinated Documents;" and
WHEREAS, Lender has made, or in the future may make, credit
accommodations available to Borrower pursuant to the terms and
provisions of that certain Amended and Restated Loan and Security
Agreement of even date herewith by and among Lender and Borrower,
as amended, modified extended and restated from time to time (the
"Loan Agreement"); and
WHEREAS, in order to induce Lender to make the credit
accommodations described above available to Borrower,
Subordinated Creditor has agreed to subordinate all of its rights
and claims now existing or hereafter arising pursuant to the
Subordinated Documents to the rights and claims of Lender now
existing or hereafter arising against Borrower, all in accordance
with the terms and provisions of this Agreement;
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms
defined above shall have their respective meanings set forth
above and the following terms shall have the following meanings:
"Borrower Stock" shall mean any and all shares of
capital stock now or hereafter issued by Borrower.
"Collateral" shall mean any and all property which now
constitutes or hereafter will constitute collateral or other
security for payment of the Senior Indebtedness pursuant to
the Senior Documents.
"Distribution" by any Person shall mean (a) with
respect to any stock or partnership interest issued by such
Person, the retirement, redemption, purchase or other
acquisition for value of any such stock or partnership
interest, (b) the declaration or payment of any dividend or
other distribution on or with respect to any such stock or
partnership interest, (c) any loan or advance by such Person
to, or other investment by such Person in, the holder of any
such stock or partnership interest, and (d) any other
payment (other than ordinary salaries to employees or
advances made in the ordinary course of business to
employees for travel or other expenses incurred in the
ordinary course of business) and other than as permitted in
the Senior Documents by such Person to or for the benefit of
the holder of any such stock or partnership interest.
"Person" shall mean and include an individual, a
partnership, a corporation, a business trust, a joint stock
company, a trust, an unincorporated association, a joint
venture or other entity or a governmental authority.
"Proceeds" shall have the meaning assigned to it under
the Uniform Commercial Code, shall also include "products"
(as defined in the Uniform Commercial Code), and, in any
event, shall include, but not be limited to (a) any and all
proceeds of any insurance, indemnity, warranty, letter of
credit or guaranty or collateral security payable to any
grantor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to the owner of the
Collateral from time to time in connection with any
requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any
Person acting under color of governmental authority) and (c)
any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Senior Creditor" shall mean Lender and its successors
and assigns.
"Senior Documents" shall mean any and all agreements,
documents and instruments evidencing, governing or executed
or delivered in connection with the Senior Indebtedness,
including, without limitation, the Loan Agreement.
"Senior Indebtedness" shall mean any and all
indebtedness, obligations and liabilities of every kind and
character of Borrower or any obligor now or hereafter owing
to Senior Creditor, whether such indebtedness, obligations
and liabilities are direct or indirect, primary or
secondary, joint, several or joint and several, fixed or
contingent and whether incurred by Borrower as maker,
endorser, guarantor or otherwise, including, without
limitation, any and all indebtedness, obligations and
liabilities of Borrower now or hereafter owing to Senior
Creditor pursuant to or evidenced by the Senior Documents.
"Subordinated Indebtedness" shall mean any and all
indebtedness, obligations and liabilities of every kind and
character of Borrower, MCAA, Murray Cohen Revocable Trust #2
or any other obligor under the Subordinated Documents now or
hereafter owing to Subordinated Creditor, including, without
limitation, the indebtedness evidenced and to be evidenced
by the Subordinated Documents, whether such indebtedness,
obligations and liabilities are direct or indirect, primary
or secondary, joint, several or joint and several, fixed or
contingent and whether incurred by Borrower, MCAA, Murray
Cohen Revocable Trust #2 or any other obligor under the
Subordinated Documents as maker, endorser, guarantor.
ARTICLE II
RIGHTS IN COLLATERAL
2.1 Priorities Regarding Collateral. Until the Senior
Indebtedness has been finally and irrevocably paid in full and
the commitments of Senior Creditor under the Loan Agreement shall
have terminated as provided herein, any and every lien and
security interest in the Collateral in favor of or held for the
benefit of the Senior Creditor has and shall have priority over
any lien or security interest that Subordinated Creditor might
have or acquire in the Collateral notwithstanding any statement
or provision contained in the Subordinated Documents or otherwise
to the contrary and irrespective of the time or order of filing
or recording of financing statements, deeds of trust, mortgages
or other notices of security interests, liens or assignments
granted pursuant thereto, and irrespective of anything contained
in any filing or agreement to which any party hereto or its
respective successors and assigns may now or hereafter be a
party, and irrespective of the ordinary rules for determining
priorities under the Uniform Commercial Code or under any other
law governing the relative priorities of secured creditors. Any
lien or security interest of Subordinated Creditor in the
Collateral and any and all rights of Subordinated Creditor to the
Collateral are and shall be inferior and subordinate to the
rights of Senior Creditor thereto. Until the Senior Indebtedness
has been finally and irrevocably paid in full and the commitments
of Senior Creditor under the Loan Agreement shall have terminated
as provided herein, Subordinated Creditor shall not make or
permit any assignment, transfer, pledge or disposition of all or
any part of the Subordinated Indebtedness (or any collateral or
other security for the Subordinated Indebtedness).
2.2 Management of Collateral. Senior Creditor shall have
the exclusive right to manage, perform and enforce the terms of
the Senior Documents with respect to the Collateral, to exercise
and enforce all privileges and rights thereunder according to its
discretion and the exercise of its business judgment, including,
but not limited to, the exclusive right to take or retake
possession of the Collateral and to hold, prepare for sale,
process, sell, lease, dispose of, or liquidate the Collateral,
pursuant to a foreclosure or otherwise. Notwithstanding anything
to the contrary contained in any document, instrument or
agreement evidencing, securing or otherwise executed in
connection with the incurrence of the Subordinated Indebtedness,
only the Senior Creditor shall have the right to restrict or
permit, or approve or disapprove, the sale, transfer or other
disposition of Collateral. Accordingly, should Senior Creditor
elect to exercise its rights and remedies with respect to any of
the Collateral, Senior Creditor may proceed to do so without
regard to any interest of Subordinated Creditor, and Subordinated
Creditor waives any claims that it may have against Senior
Creditor for any disposition of the Collateral. Subordinated
Creditor agrees, whether or not a default has occurred in the
payment of any indebtedness or the performance of any other
obligations to it, that any liens on and security interests in
the Collateral or any portion thereof that it might have or
acquire shall automatically be fully released with respect only
to the purchaser(s) of such Collateral, as to all indebtedness
and other obligations secured thereby owing to Subordinated
Creditor if and when Senior Creditor releases its lien in and
security interest on such Collateral or any portion thereof,
provided, however, that after satisfaction in full of all
Obligations, the remaining proceeds, if any, shall be payable to
the parties legally entitled thereto, including Subordinated
Creditor (giving effect to Subordinated Creditor's Security
Interest in the Collateral).
ARTICLE III
PROCEEDS
3.1 Distribution of Proceeds of Collateral. At any time
during which (i) all or any part of the Senior Indebtedness
remains outstanding, and whether or not the same is then due and
payable, or (ii) the commitments of the Senior Creditor under the
Loan Agreement remain in effect, the Proceeds of any sale,
disposition or other realization by Senior Creditor or other
party hereto (or any agent therefor) upon all or any part of the
Collateral shall be applied in the following order of priorities
irrespective of the application of any rule of law or the defect
or impairment of any Senior Document, Subordinated Document or
security interest, lien or assignment thereunder:
first, to the payment of all costs and expenses of Senior
Creditor and/or its agent or agents (including,
without limitation, the reasonable fees and expenses
of counsel to Senior Creditor) incurred in
connection with the collection of such Proceeds or
the protection of the rights and interests of Senior
Creditor therein;
second,to the payment in full of all Senior Indebtedness in
such order as Senior Creditor shall determine in its
sole discretion; and
finally, to pay any surplus then remaining to the
parties legally entitled thereto, including the
Subordinated Creditor, the owner of the Collateral
or its successors or assigns or as a court of
competent jurisdiction may direct.
3.2 Contingent Obligations. For purposes of distributing
the Proceeds of Collateral pursuant to this Article III, the
portion of Senior Indebtedness consisting of loans or advances
not yet made by Senior Creditor to Borrower under the Senior
Documents shall be considered Senior Indebtedness then
outstanding, and the Senior Creditor shall have the right to
retain, in a cash collateral account, cash collateral equal to
the amount thereof which Senior Creditor determines, in its sole
discretion, may arise or exist from time to time.
3.3 Holding of Proceeds in Trust. In the event the
Subordinated Creditor (or an affiliate thereof) or any party to
this Agreement other than Senior Creditor receives the Proceeds
of the Collateral, such party shall be deemed to hold all of such
Proceeds in trust for the benefit of Senior Creditor until the
application thereof in accordance with Section 3.1 hereof. No
party to this Agreement shall seek to challenge the validity,
enforceability, priority or perfection of any of the Senior
Documents if the purpose or effect thereof would in any manner
defeat or delay the distribution of the Proceeds of any
Collateral in the manner set forth in Section 3.1 hereof.
ARTICLE IV
SUBORDINATION
Subordinated Creditor covenants and agrees that the
Subordinated Indebtedness, howsoever evidenced and whether now
existing or hereafter incurred, shall be subordinate and
subordinated in right of payment, to the extent and in the manner
hereinafter set forth, of all Senior Indebtedness:
(a) The holder of the Senior Indebtedness shall first
be finally and irrevocably paid in cash an aggregate amount
equal to the principal thereof and termination fees, if any,
interest at the time due thereon, and all other costs, fees,
expenses and/or obligations now or hereafter owing
thereunder, and the Senior Creditor's commitments under the
Loan Agreement shall have terminated as provided herein
before any payment or Distribution (other than Permitted
Payments (as defined below)) of any character, whether in
cash, securities or other property, shall be made on account
of the Subordinated Indebtedness or otherwise to or for the
benefit of the Subordinated Creditor in respect of the
Subordinated Indebtedness; and any payment or Distribution
of any character, whether in cash, securities or other
property, which would otherwise, but for the provisions of
this Article IV, be payable or deliverable in respect of the
Subordinated Indebtedness or otherwise shall be paid or
delivered directly to the holder of the Senior Indebtedness
(or its duly authorized representatives), until all the
Senior Indebtedness shall have been irrevocably paid in full
and the Senior Creditor's commitments under the Loan
Agreement shall have terminated as provided herein.
(b) Notwithstanding the provisions of subparagraph (a)
of this Article IV, Borrower may make its regularly
scheduled (i.e. uncollected and not prepaid) interest
payment obligations to the Subordinated Creditor under the
promissory notes of Borrower to LSB Industries, Inc., one
such note in the amount of $5,934,000, and one such note in
the amount of $2,732,000, executed pursuant to or
contemporaneously with the Asset Purchase and Sale
Agreement, substantially in the form attached hereto as
Exhibit B, as and when the same are due and payable as
presently provided therein and at the rate provided therein
(the "Permitted Payments"); provided, however, that as a
condition precedent to Borrower's right to make (and the
Subordinated Creditor's right to receive) any and all such
Permitted Payments:
(i) there shall not have occurred or then exist a
default or event of default that is continuing under
any of the Senior Indebtedness or any of the Senior
Documents, or an event or condition which with notice,
lapse of time or the making of such payment would
constitute a default or event of default under any of
the foregoing;
(ii) Borrower's Excess Availability (as defined in
the Loan Agreement) shall be greater than or equal to
$1,000,000 on the date of and after giving effect to
each Permitted Payment;
(iii) Subordinated Creditor shall have
completed the Asset Sale and the Stock Purchase (as
defined in the Senior Documents) and there shall be no
default under the terms and conditions thereof;
(iv) there shall at all times be at least a $_____
[Balance as of May 4, 2000] outstanding principal
balance owing on the Subordinated Notes; and
(v) the Senior Creditor, on or before the
fifteenth (15th) day preceding the date of any such
payment, shall have received a certificate, executed by
the Chief Executive Officer and Chief Financial Officer
of the of Borrower, which certifies, in form, substance
and detail satisfactory to the Senior Creditor in its
sole discretion, that the foregoing conditions
precedent to any payment to the Subordinated Creditor
as set forth in subparagraph (b)(i), (b)(ii), and
(b)(iii) of this Article IV have been satisfied.
(c) The Subordinated Creditor agrees to promptly
notify the Senior Creditor in writing of any default or
event of default that is continuing on any Subordinated
Indebtedness or otherwise or under any of the Subordinated
Documents and further agrees not to exercise any right or
remedy or take any enforcement action with respect to any
default or event of default on any of the Subordinated
Indebtedness or otherwise or under any of the Subordinated
Documents until such time as the Senior Indebtedness has
been irrevocably paid in full and the Senior Creditor's
commitments under the Loan Agreement shall have terminated
as provided herein. Without limiting any of the foregoing,
any failure of Borrower to perform any of its obligations to
the Subordinated Creditor as a result of any of the
prohibitions, restrictions or limitations set forth in this
Agreement shall not constitute the basis for a default or
event of default on any Subordinated Indebtedness or under
any Subordinated Documents. An Event of Default (as defined
in the Loan Agreement) under the Loan Agreement shall not be
the cause of an event of default under the Subordinated
Notes.
(d) Except as provided in (b) above, no reimbursement,
payment, direct or indirect, or disbursement of other
property or assets of Borrower shall be made by Borrower on
account of the Subordinated Indebtedness or otherwise or
received, accepted, retained or applied by the Subordinated
Creditor on Borrower's account with respect to the
Subordinated Indebtedness (except for the account and
benefit of Senior Creditor, which shall be held in trust for
Senior Creditor, or except as specifically permitted in
Subparagraph (b) of this Article IV) until such time as the
Senior Indebtedness has been finally and irrevocably paid in
full and the commitments of Senior Creditor under the Loan
Agreement shall have terminated as provided herein.
(e) Without affecting the Subordinated Creditor's
obligations set forth in this Agreement not to exercise any
remedy as set forth in this Article IV under the
circumstances described herein, in the event that the
Subordinated Creditor exercises any remedy permitted under
applicable law with respect to any of the assets or
properties of Borrower or receives any other payment of any
character, whether in cash, securities, or other properties,
that would, but for the provisions of this Article IV, be
payable or deliverable in respect of the Subordinated
Indebtedness, such cash, securities or other properties
shall be held in trust for the benefit of the holder of the
Senior Indebtedness and shall be paid or delivered to the
holder of the Senior Indebtedness (or its authorized
representatives), in the proportions in which it holds same,
until all the Senior Indebtedness shall have been paid in
full and the Senior Creditor's commitments under the Loan
Agreement shall have terminated as provided herein.
(f) The provisions of this Agreement are and are
intended solely for the purpose of defining the relative
rights of the holder of the Subordinated Indebtedness, on
the one hand, and the holder of the Senior Indebtedness on
the other hand. Nothing contained in this Agreement is
intended to or shall impair, as between Borrower and the
holder of the Subordinated Indebtedness, the obligation of
Borrower which is absolute and unconditional, to pay to the
holder of the Subordinated Indebtedness the principal
thereof and interest thereon as and when the same shall
become due and payable in accordance with its terms, or is
intended to or shall affect the relative rights against
Borrower of the holder of the Senior Indebtedness.
(g) No right of any present or future holder of any of
the Senior Indebtedness to enforce the subordination as
herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of
Borrower or by any act in good faith or failure to act in
good faith by any such holder, or by any noncompliance by
Borrower with the covenants, agreements and conditions of
the Subordinated Indebtedness, regardless of any knowledge
thereof any such holder may have or be otherwise charged
with.
(h) Senior Creditor shall have no obligation to
preserve the rights of the Collateral against any prior
parties or to marshal any of the Collateral for the benefit
of any Person.
ARTICLE V
PROHIBITION OF DISTRIBUTIONS
Except as may be expressly permitted pursuant to the Loan
Agreement, Borrower hereby agrees that it will not declare, pay
or make any Distribution with respect to the Borrower Stock or,
otherwise to any holder of the Borrower Stock. Until such time
as the Senior Indebtedness has been paid in full and the Senior
Creditor's commitments under the Loan Agreement shall have
terminated as provided herein, except as may be expressly
permitted pursuant to the Loan Agreement, Borrower hereby agrees
that it will not authorize or approve the issuance of, or issue,
any shares of any class of such its capital stock or any
security, right, option or warrant convertible into or
exercisable for any shares of any class of its capital stock.
Subordinated Creditor hereby agrees that, until such time as the
Senior Indebtedness has been paid in full and the Senior
Creditor's commitments under the Loan Agreement shall have
terminated as provided herein, it (A) will not cause to be
declared, paid or made any Distribution with respect to the
Borrower Stock, or, except as expressly permitted pursuant to the
Loan Agreement, to it, (B) will not cause to be authorized,
approved, or issued any shares of any class of its capital stock
or any security, right, option or warrant convertible into or
exercisable for any shares of any class of its capital stock, and
(C) shall on Senior Creditor's request or automatically on the
occurrence of any Event of Default cause the certificates
evidencing the Borrower Stock owned and/or held by such
Subordinated Creditor to be marked with a legend with a statement
that such Borrower Stock is subject to the terms and provisions
of this Agreement.
ARTICLE VI
FURTHER ASSURANCES
Each of the parties hereto hereby agrees to promptly execute
and deliver to the other parties hereto any and all such further
instruments and documents and take such further action as such
other parties may reasonably request in order to fully effect the
purposes of this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PARTIES
7.1 General Representations and Warranties. Each of the
Subordinated Creditor and the Borrower hereby represents and
warrants to Senior Creditor that:
(a) such party has full power, authority and legal
right to execute, deliver and perform this Agreement, and
has taken all necessary corporate or partnership action to
authorize the execution, delivery and performance of this
Agreement;
(b) this Agreement constitutes a legal, valid and
binding obligation of such party enforceable against it in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
other similar laws affecting creditors rights generally and
except as enforceability may be limited by general
principles of equity (whether considered in a suit at law or
in equity); and
(c) Subordinated Creditor is the only holder of the
indebtedness evidenced by the Subordinated Notes.
7.2 Additional Representations and Warranty. Subordinated
Creditor hereby represents and warrants to Senior Creditor that a
true and correct copy of the draft documents, instruments or
Agreements evidencing or governing the terms of the Subordinated
Notes is attached hereto as Exhibit A and that the final
definitive version of such documents, instruments or agreements
will be in substantial conformity therewith.
ARTICLE VIII
CONSENT OF SUBORDINATED CREDITOR
Subordinated Creditor hereby consents to the execution and
delivery of the Senior Documents and any borrowings thereunder
and agrees that the performance (including, without limitation,
the making of future borrowings) by Borrower of its obligations
under the Senior Documents will not constitute a default or an
event of default under the Subordinated Documents. Subordinated
Creditor further consents to and covenants that, without the
necessity of any reservation of rights against Subordinated
Creditor, and without notice to or further assent by Subordinated
Creditor, (a) any demand for payment of any Senior Indebtedness
may be rescinded in whole or in part and any Senior Indebtedness
may be continued, and the Senior Indebtedness, or the liability
of Borrower or any other Person upon or for any part thereof, or
any collateral security or guaranty therefor or right of offset
with respect thereto, or any obligation or liability of Borrower
or any other Person under the Senior Documents may, from time to
time, in whole or in part, be renewed, extended, modified,
accelerated, compromised, waived and surrendered, or released,
and (b) the Senior Documents, any document or instrument
evidencing or governing the terms of the Senior Indebtedness or
any collateral security documents or guaranties or documents in
connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Senior Creditor or its
agent may deem advisable from time to time, and any collateral
security at any time held for the benefit of the Senior Creditor
for the payment of any of the Senior Indebtedness may be sold,
exchanged, waived, surrendered or released, in each case all
without notice to or further assent by the Subordinated Creditor
which will remain bound under this Agreement, and all without
impairing, abridging, releasing or affecting the subordination
provided for herein, notwithstanding any such renewal, extension,
modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender or release. The
Subordinated Creditor waives any and all notice of the creation,
renewal, extension, subsequent advance or accrual of any of the
Senior Indebtedness and notice of or proof of reliance by the
Senior Creditor upon this Agreement, and the Senior Indebtedness
shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Agreement, and all dealings
between Borrower and the Senior Creditor have been deemed to have
been consummated in reliance upon this Agreement. The
Subordinated Creditor acknowledges and agrees that the Senior
Creditor has relied upon the subordination and consent provided
for herein in entering into the Senior Loan Documents and in
providing for the credit facilities described therein. The
Subordinated Creditor waives notice of or proof of reliance on
this Agreement and protest, demand for payment and notice of
default. Any agreements, documents or instruments which at any
time evidence the Subordinated Indebtedness or any part thereof
shall be marked with a legend stating that payment thereunder is
subject to the terms and provisions of this Agreement. The
Subordinated Creditor agrees that it shall not, under any
circumstances, take or initiate any action or proceeding under
any federal or state bankruptcy or insolvency law, or any other
reorganization, liquidation, receivership or similar action or
proceeding involving Borrower without the prior written consent
of every Senior Creditor, which consent may be granted or
withheld by each Senior Creditor in such Senior Creditor's sole
and absolute discretion.
ARTICLE IX
BORROWER'S AGREEMENT
The Borrower hereby acknowledges that the Subordinated
Indebtedness is payable as stated herein, and agrees to make no
payment of principal of or interest on the Subordinated
Indebtedness so long as the Borrower shall be indebted to Senior
Creditor, except (i) such payments as may be made to Senior
Creditor, (ii) such payments as may be made with the prior
written consent of Senior Creditor, and (iii) such payments as
are permitted by Article IV herein. If (a) the Borrower makes
any other payment of the Subordinated Indebtedness, except such
payments as are permitted by Article IV herein, (b) any term of
this Agreement is breached by the Borrower, or (c) the Borrower
fails to make any payment of the Subordinated Indebtedness when
due after Senior Creditor has given its written consent to the
making of such payment, then, notwithstanding any contrary
provisions of the Loan Agreement, Senior Creditor may, at its
sole election, declare all or any portion of the Senior
Indebtedness to be immediately due and payable without demand or
notice of any kind.
ARTICLE X
PROVISIONS TO APPLY AFTER BANKRUPTCY
The provisions of this Agreement shall continue in full
force and effect, notwithstanding the commencement of a case
under Title 11 of the United States Code, as amended and/or
superseded (the "Federal Bankruptcy Code") by or against Borrower
or any of its property. In furtherance of the foregoing, if
Subordinated Creditor receives any property of, or payments from
Borrower after the commencement of such a case on account of a
secured claim which is subordinated by the terms of this
Agreement (whether as "adequate protection" payments or
otherwise), Subordinated Creditor shall immediately turn such
property or payments over to the Senior Creditor for distribution
by it in accordance with the applicable provisions of
Article III. To the extent that Subordinated Creditor has or
acquires any rights under Section 363 or Section 364 of the
Federal Bankruptcy Code with respect to collateral, Subordinated
Creditor hereby agrees not to assert such rights without the
prior written consent of the Senior Creditor. The Subordinated
Creditor hereby grants to the Senior Creditor the right, but
Senior Creditor shall not be obligated, to file, prove and vote
claims on account of the Subordinated Indebtedness in any
receivership, bankruptcy, or other proceeding under the Federal
Bankruptcy Code commenced by or against Borrower. The
Subordinated Creditor shall not prove or vote any claim on
account of the Subordinated Indebtedness in any receivership,
bankruptcy, or other proceeding under the Federal Bankruptcy Code
commenced by or against Borrower in a manner which adversely
effects the rights, claims and interests of the Senior Creditor
now existing or hereafter arising concerning the Collateral or
against the Borrower.
ARTICLE XI
NO WAIVER, CUMULATIVE REMEDIES
No failure to exercise, and no delay in exercising on the
part of Senior Creditor, any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise by Senior Creditor of any right, power or
privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege by Senior Creditor. The rights and remedies by Senior
Creditor provided in this Agreement are cumulative and shall not
be exclusive of any rights or remedies provided by law.
ARTICLE XII
NOTICES
All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by
telegraph, facsimile, or telex) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made
when delivered by hand, or if by certified mail, return receipt
requested, five days after being deposited in the mail or, in the
case of facsimile notice, when sent, acknowledgment of receipt is
received, or if sent by reputable overnight delivery service for
next business day delivery, on the next business day addressed as
set forth below or to such address or other address as may be
hereafter notified in writing by the respective parties hereto:
To Senior Creditor: Congress Financial Corporation
(Southwest)
1201 Main Street, Suite 1625
Dallas, Texas 75250
Attn: Portfolio Manager
Telecopy No.: (214) 748-9131
With copies to: Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Telecopy No.: (214) 758-1550
To Borrower: L & S Automotive Products Co.
6 South Pennsylvania Ave.
Oklahoma City, OK 73101
Attn: President
Fax: (405) 236-1209
With copy to:
David Shear
16 South Pennsylvania Ave.
Oklahoma City, OK 73101
To Subordinated Creditor:LSB Industries, Inc.
16 South Pennsylvania Ave.
Oklahoma City, OK 73101
Attn:
Fax: (405) 236-1209
With copy to:
David Shear
16 South Pennsylvania Ave.
Oklahoma City, OK 73101
ARTICLE XIII
GOVERNING LAW
This Agreement has been executed, delivered and accepted at
and shall be deemed to have been made in Dallas County, Texas and
shall be interpreted and the rights and obligations of the
parties under this Agreement shall be governed by, and construed
and interpreted in accordance with, the internal laws of the
State of Texas and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors,
transferees and assigns.
ARTICLE XIV
AMENDMENTS AND WAIVERS
Neither this Agreement nor any of the terms hereof may be
amended, waived, discharged or terminated unless such amendment,
waiver, discharge or termination is in writing signed by each of
the parties hereto. Each of the Borrower and the Subordinated
Creditor agree not to amend the Subordinated Documents without
the prior written consent of the Senior Creditor.
ARTICLE XV
EXCULPATION
Neither the Senior Creditor nor its agents have made to the
other parties hereto nor do any of them hereby or otherwise make
any representations or warranties, express or implied, nor do
they assume any liability with respect to (i) obligors under any
instruments of guarantee; (ii) the enforceability, validity,
value or collectibility of the Senior Indebtedness, any
Collateral therefor, or any guarantee or security which may have
been granted to any of them in connection with the Senior
Documents; or (iii) Borrower's title or right to transfer any
collateral or security. Senior Creditor shall not be liable to
any other party hereto for any action or failure to act or any
error of judgment, negligence, or mistake or oversight whatsoever
on its part or its respective agents, officers, employees or
attorneys with respect to any transaction relating to the
Collateral or this Agreement. To the maximum extent permitted by
law, except as otherwise provided herein, Subordinated Creditor
waives any claim it might have against Senior Creditor with
respect to, or arising out of, the handling of the Collateral
(including, without limitation, any such claim based upon the
timing or method of realizing upon such Collateral).
ARTICLE XVI
THIRD PARTY RIGHTS
This Agreement is solely for the benefit of the parties
hereto and their respective successors and assigns, and no other
Person shall have any right, benefit, priority or other interest
under, or because of the existence of, this Agreement.
ARTICLE XVII
TERMINATION
This Agreement shall terminate upon the final and
indefeasible payment in full of all the Senior Indebtedness, the
termination of Senior Creditor's commitments under the Loan
Agreement and the termination of all of the Senior Documents.
ARTICLE XVIII
COUNTERPARTS
This Agreement may be executed by one or more of the parties
hereto in any number of separate counterparts, each of which
shall be an original, but all of which shall constitute but one
agreement.
ARTICLE XIX
ASSIGNMENT OF SUBORDINATED DEBT
Subordinated Creditor shall not sell, assign, or transfer
any part of the Subordinated Notes unless such purchaser,
assignee or transferee agrees to be bound by this Agreement.
ARTICLE XX
JURY WAIVER
SUBORDINATED CREDITOR, BORROWER AND SENIOR CREDITOR HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. SUBORDINATED CREDITOR,
BORROWER AND SENIOR CREDITOR HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY AND THAT SUBORDINATED CREDITOR,
BORROWER OR SENIOR CREDITOR MAY FILE AN ORIGINAL COUNTERPART OF A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY. SUBORDINATED CREDITOR, BORROWER AND SENIOR
CREDITOR HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT SUBORDINATED CREDITOR, BORROWER OR SENIOR
CREDITOR MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
[The Remainder of This Page is Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their proper and duly authorized
officers or partners as of the day and year first above written.
SUBORDINATED CREDITOR:
LSB INDUSTRIES, INC.
By:
Name:
Title:
BORROWER:
DRIVELINE TECHNOLOGIES, INC.,
(formerly known as Tribonetics
Corporation)
By:
Name:
Title:
L&S MANUFACTURING CORP.
By:
Name:
Title:
LENDER:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By:
Name:
Title: