Exhibit 10.25
LOAN AND SECURITY AGREEMENT
(DSN Plant)
Dated October 31, 1994
between
DSN CORPORATION,
as Borrower
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Lender
LOAN AND SECURITY AGREEMENT
(DSN Plant)
This LOAN AND SECURITY AGREEMENT (the "Agreement"), dated October 31,
1994, is made and entered into by and between DSN CORPORATION, an Oklahoma
corporation (the "Borrower"), and THE CIT GROUP/EQUIPMENT FINANCING, INC., a
New York corporation (the "Lender").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and of any loans or other credit facilities now
or hereafter made to Borrower by Lender, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms have the following meanings when used
in this Agreement:
"AFFILIATE" means any of LSB, EDC, LSBC, Prime Financial Corp., Total
Energy Systems, Ltd., Slurry Explosive Corporation, Universal Tech
Corporation, LSB Holdings, Inc., and any other Person controlling or
controlled by or under common control with LSB Industries, Inc. or any of
their Subsidiaries, successors or assigns.
"ASSIGNMENT OF CONSTRUCTION CONTRACT, PLANS AND
SPECIFICATIONS" means the Assignment of Construction Contract Plans and
Specifications in form and substance satisfactory to the Lender, wherein the
Lender is assigned the Construction Contract and the Plans and Specifications
as security for the Obligations.
"BONDING COMPANY" means American Bonding Company, the company issuing
payment and performance bond No. 9417875 in connection with the construction
of the DSN Plant.
"BUSINESS DAY" means any day which is not a Saturday, Sunday or day
on which banks in New York are required or permitted to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means: (i) all personal property referred to in Section
3.1; (ii) all real property interests of Borrower in the DSN Plant Location,
the DSN Plant and the Ground Lease and the Ground Sublease; and (iii) all
other property and interests in property, real or personal, now owned or
leased or hereafter acquired or leased, which is hereafter pledged or assigned
to Lender as collateral security for payment of any of the Obligations.
"CONSENT TO ENCUMBRANCE" means that certain Consent to Encumbrance of
Leasehold Estate and Landlord's Waiver of even date herewith executed by
Northwest Financial Corporation and Borrower in favor of Lender.
"CONSTRUCTION CONSULTANT" means Brown & Root, Inc., and any
subsequent consultant, selected by Lender as Construction Consultant under
Section 2.2(c) hereof.
"CONSTRUCTION CONTRACT" means, collectively, that certain
correspondence dated November 22, 1993 and November 24, 1993, between EDC and
Systems Contracting Corporation, which has been assigned to Borrower, together
with all other correspondence with Systems Contracting Corporation and all
other construction contracts and equipment purchase contracts related to the
construction of the DSN Plant.
"CONSTRUCTION PERIOD" means the period commencing on the date hereof
and ending on the first to occur of: (i) March 31, 1995 or (ii) the DSN Plant
Completion Date.
"CONSULTING AGREEMENT" means the Consulting Agreement dated October
31, 1994 between EDC and DSN relating to the DSN Plant.
"CONTRACTOR" means Systems Contracting Corporation and each other
Person who has entered into a Construction Contract with, or which has been
assigned to, Borrower.
"CONTRACTORS' CONSENTS" means, collectively, the Contractor's Consent
and Certification executed by each Contractor in favor of Lender.
"DEFAULT" means any Event of Default or event which, with notice or
passage of time or both, would constitute an Event of Default.
"DISBURSEMENT SCHEDULE" means the disbursement schedule and budget
annexed to this Agreement as Exhibit "D", in form and substance acceptable to
Lender.
"DISCLOSURE SCHEDULE" means the disclosure schedule annexed to this
Agreement as Exhibit "A".
"DSN PLANT" means Borrower's direct strong nitric acid plant located
at the DSN Plant Location.
"DSN PLANT EQUIPMENT LEASE" means that lease dated to be effective as
of the date hereof between Borrower as lessor and EDC as lessee with respect
to the DSN Plant and including
the Equipment relating thereto.
"DSN PLANT COMPLETION DATE" means the date on which Lender reasonably
determines that all of the following have occurred: (a) Borrower and EDC
shall have certified to Lender in writing that the DSN Plant has been fully
constructed and completed in substantial accordance with the Plans and
Specifications and is in operation, that the DSN Plant as completed complies
with applicable zoning, building and land use laws, and that the DSN Plant
Equipment Lease, the Ground Lease, the Ground Sublease and the Consulting
Agreement are in full force and effect; (b) the Construction Consultant shall
have confirmed to Lender that construction of the DSN Plant has been completed
in substantial accordance with the Plans and Specifications, and that direct
connection has been made to all pipelines, supply lines, and all water, gas,
sewer, telephone and electrical facilities necessary for the operation and use
of the DSN Plant, (c) a valid notice of completion has been filed for record
in the Office of the County Recorder for the County in which the DSN Plant is
located, (d) all inspections by any applicable governmental entities necessary
to permit the start-up of the DSN Plant have been completed and all necessary
certificates and approvals for occupation and operation of the DSN Plant have
been obtained, and (e) the period for filing mechanics' and materialmen's
liens has expired without any material liens having been filed or recorded or
lien waivers have been obtained from contractors which performed more than
$50,000 of work or provided more than $50,000 of materials, or, where
applicable, Lender's Title Policy has fully insured against mechanics' or
materialmen's liens.
"DSN PLANT LOCATION" means the location of the DSN Plant at El
Dorado, Union County, Arkansas, more particularly described in Exhibit "C."
"EDC" means El Dorado Chemical Company, an Oklahoma corporation.
"ENVIRONMENTAL LAWS" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent
decrees relating to hazardous substances, discharges, releases or disposals of
pollutants, solid waste or hazardous materials, or any other environmental
matters applicable to the Borrower's business, the DSN Plant or the DSN Plant
Location. Such laws and regulations include the Resource Conservation and
Recovery Act, 42 U.S.C. section 6901 et seq., as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. section 9601
et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. section 2602
et seq., as amended; the Clean Water Act, 33 U.S.C. section 466 et seq., as
amended; the Clean Air Act, 42 U.S.C. section 7401 et seq., as amended; state
and federal superlien and environmental cleanup programs; and U.S. Department
of Transportation regulations. The terms "hazardous substance" and "release"
shall have the meanings specified in the Federal Comprehensive Environmental
Responsibility Cleanup and Liability Act of 1980, as the definition of such
terms may be subsequently modified, supplemented or amended ("CERCLA") and the
terms "solid waste" and "disposal" shall have the meanings specified in the
Federal Resource Conservation and Recovery Act of 1976, as the definition of
such terms may be subsequently modified, supplemented or amended ("RCRA";
provided, however, that in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided,
further, however, that to the extent a parcel of real property is situated in
a state or other jurisdiction in which the applicable laws may establish a
meaning for "hazardous substance," "release," "solid waste," or "disposal"
which is broader than that specified in either CERCLA or RCRA, such broader
meaning shall apply.
"EQUIPMENT" means all now or hereafter acquired equipment (as that
term is defined in the UCC) now or hereafter located at the DSN Plant or
relating to the DSN Plant, including machinery, data processing hardware and
software, furniture, fixtures, trade fixtures, leasehold improvements, office
equipment, strong acid plant equipment, storage tanks, strong acid building
structure, compressor building, refrigeration facilities, piping, valves,
plant equipment, machinery, electronics, instrumentation, panels, control
systems and other tangible personal property and all accessions, accretions,
replacements and additions to Equipment, and all other component and auxiliary
parts used or to be used in connection with or attached to any of the same,
and all manuals, drawings, instructions, warranties and rights with respect
thereto wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any event so described in Section 8.1.
"FAIR MARKET VALUE" means the price that a knowledgeable buyer would
be willing to pay a knowledgeable seller, neither being under any duress to
buy or sell and both having reasonable knowledge of relevant facts, for the
machinery and equipment in place and in operation, taking advantage of all
leasehold and site improvements designed to facilitate its operation, with the
seller accurately and completely representing the existing condition and
operability of the machinery and equipment to the buyer. Consideration is
given to each asset's contribution to the operating facility, or the
contribution of all the assets as a whole, whichever appropriately addresses
production capabilities of the plant. It is assumed that all specially
designed and built machinery and equipment will continue to be utilized in the
manner for which it was originally intended.
"FINANCIAL STATEMENT" means any financial statement given to the
Lender pursuant to Section 6.1.
"FISCAL YEAR" means, as to any Person, such Person's fiscal year for
financial accounting purposes. The Borrower's current Fiscal Year ends on
December 31, 1994.
"FUNDING DATE" means the date on which the initial advance is made.
"GAAP" means, as of any date of determination, generally accepted
accounting principles consistently applied during each interval and from
interval to interval.
"GROUND LEASE" means the lease agreement dated as of October 31, 1994
between the Borrower and Northwest Financial Corporation pursuant to which
Northwest Financial Corporation granted Borrower the right to occupy the real
property associated with the DSN Plant and to construct, use, occupy and
sublease the DSN Plant at the DSN Plant Location.
"GROUND SUBLEASE" means the sublease dated
October 31, 1994 of the Ground Lease from DSN to EDC.
"GUARANTOR" means any Person who has executed a Guaranty in favor of
the Lender with respect to the Obligations, including LSB and LSBC.
"GUARANTY" means each continuing guaranty executed and delivered by
LSB, LSBC and any other Guarantor in form and substance acceptable to Lender
guarantying the Obligations.
"HAZARDOUS SUBSTANCE" means any substance, material or waste
(including petroleum and petroleum products) which is or becomes designated,
classified or regulated as being "toxic" or "hazardous" or a "pollutant," or
which is or becomes similarly designated, classified or regulated, under any
Environmental Laws.
"INDEBTEDNESS" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) that portion of the obligations of such Person
under capital leases which is properly recorded as a liability on a balance
sheet of that Person prepared in accordance with GAAP, (c) any obligation of
such Person that is evidenced by a promissory note or other instrument
representing an extension of credit to such Person, whether or not for
borrowed money, or any obligation of such Person for the deferred purchase
price of property or services (other than trade or other accounts payable in
the ordinary course of business in accordance with terms customary to DSN or
its Affiliates), (d) any obligation of such Person that is secured by a Lien
on assets of such Person, whether or not that Person has assumed such
obligation or whether or not such obligation is non-recourse to the credit of
such Person, but only to the extent of the fair market value of the assets so
subject to the Lien, (e) obligations of such Person arising under acceptance
facilities or under facilities for the discount of accounts receivable of such
Person and (f) obligations of such Person for unreimbursed draws under letters
of credit issued for the account of such Person.
"LATE CHARGE RATE" shall mean a rate per annum equal to the higher of
3% over the applicable interest rate set forth in Section 2.4 or 18%, but not
to exceed the highest rate permitted by applicable law.
"LEASEHOLD MORTGAGE" means the leasehold mortgage, in form and
substance satisfactory to Lender, wherein Lender is granted a first priority
Lien in Borrower's right, title and interest in the DSN Plant Location, the
DSN Plant, the Ground Lease, and the Ground Sublease.
"LIBOR RATE" means the rate of interest equal to the 30-day London
Interbank Offered Rate. The Libor Rate shall be that which is reported and
published in The Wall Street Journal for the 15th day of each month (if the
15th day is not a day for which The Wall Street Journal reports the Libor
Rate, then on the first preceding day for which The Wall Street Journal
reports the Libor Rate), and shall become effective as of the first day of the
calendar month succeeding such determination and shall continue in effect to,
and including, the last day of such calendar month. If The Wall Street
Journal ceases to be published, or ceases to publish the Libor Rate, then the
Libor Rate shall be that which is reported and published on the day specified
above in any similar publicly available source designated by Lender.
"LIEN" means any mortgage, deed of trust, pledge, deed to secure
debt, hypothecation, assignment, encumbrance, lien (statutory or other),
security interest or other security agreement, including any conditional sale
or other title retention agreement. "Lien" includes reservations, exceptions,
easements, leases and other restrictions and encumbrances affecting real
property. For purposes hereof a Person shall be deemed to own property
acquired or held pursuant to a conditional sale or similar security
arrangement.
"LOAN" shall have the meaning assigned in Section 2.1.
"LOAN DOCUMENTS" means, collectively:
a. this Agreement
b. the Note
c. the DSN Plant Equipment Lease
d. the Assignment of the DSN Plant Equipment Lease
e. the acknowledgment and Consent to Assignment of the DSN Plant
Equipment Lease
f. sufficient UCC-1 Financing Statements for filing in Arkansas
and Oklahoma
g. the Leasehold Mortgage with Assignment to Leases and Rents
h the Guaranty (LSB)
i. the Guaranty (LSBC)
j. the Consent to Encumbrance
k. Request for Advance
l. the Assignment of Construction Contract, Plans and
Specifications
m. the Tenant Subordination Agreement
n. the Contractors' Consents
and any other opinions, resolutions, certificates, documents or agreements of
any nature or type heretofore or hereafter executed or delivered by Borrower,
Affiliates or Guarantors to Lender pursuant to this Agreement or any Loan
Document in each case either as originally executed or as the same may from
time to time be supplemented, modified, amended, restated or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation.
"LSBC" means LSB Chemical Corp., an Oklahoma corporation.
"MIXED ACID PLANT LOAN" means that certain loan in the original
principal amount of approximately $1,075,200 to be made by Lender to Borrower
pursuant to the Mixed Acid Plant Loan Documents.
"MIXED ACID PLANT LOAN DOCUMENTS" means that certain Loan and
Security Agreement (Mixed Acid Plant) which the parties intend to prepare and
execute between Lender and Borrower, and all other "Loan Documents" described
therein, relating to a loan by Lender to Borrower to finance the acquisition
and construction of a mixed acid plant in North Carolina.
"NOTE" means the promissory note which evidences the Loan,
substantially in the form of Exhibit "B".
"OBLIGATIONS" means and includes the aggregate of the unpaid
principal balance of the Loan and all accrued interest thereon, and all other
loans, indebtedness, debts, liabilities, obligations, interest, fees,
premiums, guarantees, amounts, indemnities, reimbursements, covenants and
duties owing by the Borrower to the Lender under any one or more of the Loan
Documents, of every kind and description (whether or not evidenced by any note
or other instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising. "Obligations" include: (i) all interest, fees, charges or
other costs and payments that the Borrower is required to pay to the Lender
under or as a result of the Loan Documents or by law and (ii) all costs and
expenses described in Section 2.7 or otherwise required to be paid by the
Borrower to the Lender pursuant to any Loan Document.
"PENSION PLAN" means any pension plan as defined in Section 3(2) of
ERISA which is a multi employer plan or a single employer plan as defined in
Section 4001 of ERISA and subject to Title IV of ERISA and which is: (i) a
plan maintained by the Borrower, or any Subsidiary or any Related Company;
(ii) a plan to which the Borrower, or any Subsidiary or any Related Company
contributes or is required to contribute; (iii) a plan to which the Borrower,
or any Subsidiary or any Related Company was required to make contributions at
any time during the five calendar years preceding the date of this Agreement;
or (iv) any other plan with respect to which the Borrower, or any Subsidiary
or any Related Company has incurred or may incur liability, including
contingent liability, under Title IV of ERISA, either to such plan or to the
Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means: (i) Liens for taxes not yet payable or
being contested in good faith and by appropriate proceedings diligently
pursued, provided that the reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; (ii) mechanics' and
similar liens incurred in the ordinary course of business or in the
construction of the DSN Plant, not to exceed, at any given time, an aggregate
of $150,000.00, securing non-overdue obligations or for which an adequate bond
has been posted; (iii) Liens in favor of the Lender; (iv) Liens described on
the Disclosure Schedule as such Disclosure Schedule is in effect on the date
hereof; and (v) all exceptions and Liens identified in the Title Policy.
"PERSON" means any individual, trust, firm, partnership, corporation
or any other form of public, private or governmental entity or authority.
"PLANS AND SPECIFICATIONS" means those Plans and Specifications
related to the construction of the DSN Plant, which Plans and Specifications
must be acceptable to Lender.
"PROCEEDS" means all products and proceeds (as defined in the UCC) of
any Collateral, and all proceeds of any such proceeds, including all awards
for taking by eminent domain, all proceeds of fire or other insurance and all
proceeds obtained as a result of any legal action or proceeding with respect
to any Collateral.
"RAIL CAR LOAN" means that certain loan in the original principal
amount of approximately $1,169,800, made by Lender to Borrower pursuant to
Rail Car Loan Documents.
"RAIL CAR LOAN DOCUMENTS" means that certain Loan and Security
Agreement (Rail Car) which the parties intend to prepare and execute between
Lender and Borrower, and all other "Loan Documents" described therein,
relating to a loan by Lender to Borrower to acquire ten new nitric acid rail
cars.
"RELATED COMPANY" means any member of any controlled group of
corporations (as defined in the Code) of which the Borrower is a party, or any
trade or business (whether or not incorporated) which together with the
Borrower would be treated as a single employer under Section 4001 of ERISA.
"REPORTABLE EVENT" shall have the meaning assigned to that term in
Title IV of ERISA, including a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a creation of operations described in Section
4062(e) of ERISA.
"REQUEST FOR ADVANCE" means a certificate executed and delivered by
Borrower in form acceptable to Lender which contains all of the information as
described in Section 2.2(b) hereof.
"SECURITY INTEREST" collectively means the Liens created for the
benefit of the Lender pursuant to the Loan Documents.
"SUBSIDIARY" means any present or future corporation of which more
than 50% of the outstanding stock having by its terms the ordinary voting
power to elect a majority of the board of directors, managers or trustees of
such corporation is at the time, directly or indirectly through one or more
intermediaries, owned or controlled by the Borrower and/or one or more of its
Subsidiaries, irrespective of whether or not, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency. If at any time, and only for so
long as, the Borrower has no Subsidiaries, provisions of this Agreement which
refer to Subsidiaries shall be of no force and effect insofar a they pertain
to Subsidiaries although they shall remain in full force and effect as to all
other Persons in question.
"TENANT SUBORDINATION AGREEMENT" means that certain Subordination,
Nondisturbance, Estoppel and Attornment Agreement dated October 31, 1994,
executed by EDC and Borrower in favor of Lender.
"TERM OUT PERIOD" has the meaning assigned to such term in Section
2.3(b) of this Agreement.
"TITLE POLICY" means the policy of title insurance referred to in
Section 2.9 hereof.
"TREASURY RATE" means the rate per annum equal to the yield to
maturity for the U.S. Treasury Security having a remaining term to maturity
closest to five (5) years as at (and shall be fixed as of) the close of
business on the third Business Day prior to the first day of the Term Out
Period, as such yield to maturity is reported on page 5 ("U.S. Treasury and
Money Markets") of the information ordinarily provided by Telerate Systems
Incorporated (provided that if Telerate Systems Incorporated ceases to report
such information, then such information shall be taken from any publicly
available source of similar data designated by Lender).
"UCC" means the Uniform Commercial Code (or any successor statute) as
from time to time in effect in any applicable jurisdiction.
ARTICLE 2
THE LOAN
Section 2.1 THE LOAN. On the basis of the covenants, agreements and
representations of Borrower contained herein and subject to the terms and
conditions hereinafter set forth, Lender agrees to lend to Borrower and
Borrower agrees to borrow from Lender a sum not to exceed the principal amount
of TWELVE MILLION SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($12,750,000.00) (the "Loan"), the proceeds of which are to be disbursed by
Lender exclusively for the payment of the following costs and expenses as
hereinafter provided: (i) costs and expenses incurred in connection with the
construction of the DSN Plant; (ii) other costs and expenses incidental to the
DSN Plant; and (iii) costs and expenses incurred in connection with the Loan
and Borrower's undertakings hereunder, which proceeds shall be disbursed in
accordance with the Disbursement Schedule and as follows:
(a) RECORDATION DISBURSEMENTS. Upon recordation of the
Leasehold Mortgage, provided that the title insurer has issued or
irrevocably committed in writing to issue to Lender the Title Policy,
Lender shall disburse to the Persons entitled thereto the amounts (if
acceptable to Lender) necessary to pay all or portions of: (i) out of
pocket costs, charges, expenses and legal fees incurred by (A) Lender and
payable by Borrower hereunder or (B) Borrower in connection with title
charges and premiums, tax and lien service charges, recording fees, escrow
fees, real property taxes and assessments, and insurance premiums payable
in connection with the Loan; and (ii) other DSN Plant costs and expenses
theretofore incurred by Borrower, all in accordance with the applicable
provisions of the Disbursement Schedule.
(b) COURSE-OF-CONSTRUCTION DISBURSEMENTS. Subsequent to
recordation of the Leasehold Mortgage and subject to the provisions of this
Agreement, including without limitation the provisions contained in Section
2.2 hereof, Lender shall disburse to Borrower, or if reasonably deemed
necessary by Lender, Lender shall disburse directly to such Persons as have
actually supplied labor, materials or services in connection with or
incidental to the construction of the DSN Plant, and subject to the
applicable retention percentage set forth in the Construction Contract,
such sums as are required to be used and which shall be used only for the
payment of (i) the costs and expenses of any of Borrower's undertakings in
this Agreement, the Note, the Leasehold Mortgage or any of the other Loan
Documents, (ii) interest on borrowings under the Note, (iii) the costs and
expenses of Lender which are payable by Borrower or reimbursable by
Borrower as set forth herein, and (iv) the costs and expenses of the labor
and materials used in constructing the DSN Plant and costs and expenses
incidental thereto, with all disbursements under this Agreement to be made
in accordance with the applicable provisions of the Disbursement Schedule.
Section 2.2 DISBURSEMENT METHODS.
(a) Notwithstanding any other terms of this Agreement, the
disbursements under the Loan shall be capped at $5,000,000 until such time
as LSB and certain of its subsidiaries shall have in full force and effect,
a new $75,000,000 revolving credit facility with BankAmerica Business
Credit or affiliate thereof on terms and conditions reasonably acceptable
to Lender.
(b) REQUEST FOR ADVANCE. From time to time, but not more
frequently than twice per month, Borrower shall furnish to Lender,
separately with respect to each request for any disbursement of proceeds of
the Loan, a Request for Advance duly signed and sworn to with all blanks
appropriately filled in, setting forth such details concerning construction
of the DSN Plant as Lender shall require, including (i) a detailed
breakdown of the applicable percentages of completion and costs of the
various phases of construction of the DSN Plant, showing the amounts
expended to date for such construction and the amounts then due and unpaid,
an itemized estimate of the amount necessary to complete construction of
the DSN Plant in its entirety, and a certification by Borrower and Mr. Leo
Hilinski or his designee that construction of the DSN Plant to the date of
such certificate complies with the Plans and Specifications; (ii) a list of
the names and addresses of all materials dealers, laborers and
subcontractors to whom payments are due under such Request for Advance; and
(iii) if required by Lender, receipted invoices or bills of sale and
unconditional partial releases of lien (on forms approved by Lender) from
each materials dealer, laborer and subcontractor who has done work or
furnished materials for construction of the portion of the DSN Plant
covered by each such Request for Advance acknowledging acceptance of such
payment in satisfaction of Borrower's obligations. A Request for Advance
must be for an amount not less than $500,000. Lender may disburse a part
of the funds requested if it approves part but not all of the Request for
Advance.
(c) CONSTRUCTION CONSULTANT. Throughout the course of
construction of the DSN Plant, Lender will employ, at Borrower's sole cost
and expense, Construction Consultant or Consultants who shall review as
agent for Lender all construction activities undertaken in regard to the
DSN Plant, which Construction Consultant(s) shall certify or otherwise
indicate to Lender that construction of the DSN Plant to the date of each
Request for Advance and certificate of Borrower is as set forth in the
Request for Advance and certificate submitted by Borrower, that such
construction substantially complies with the Plans and Specifications and
that the progress of construction is such that the construction of the DSN
Plant will be completed within the Construction Period, with each such
certificate and indication from such inspector or inspectors to be a
further condition precedent to Lender's approval of Borrower's then
submitted Request for Advance. Lender may change Construction Consultants
or modify the terms of its agreement with any Construction Consultant, if
deemed reasonably necessary by Lender.
(d) DISBURSEMENTS; DEFICIENCIES. The proceeds of the Loan
disbursed under this Agreement shall be evidenced by the Note and shall be
secured by the Borrower's interest in the DSN Plant Equipment Lease, the
Ground Lease, the Ground Sublease and the other Collateral, and all such
proceeds shall be disbursed, as aforesaid, directly to and to reimburse
such Persons, or to Borrower to reimburse such Persons as have actually
supplied labor, materials or services in connection with or incidental to
construction of the DSN Plant, or to reimburse Borrower in the event
Borrower shall have already paid such Persons. In no event shall Lender be
required to disburse any amount which, in Lender's reasonable opinion, will
either (i) reduce the total undisbursed amount of the Loan below the amount
necessary to pay for the balance of the work, labor and materials necessary
fully to complete construction of the DSN Plant in accordance with the
Plans and Specifications, or (ii) reduce the undisbursed amount of Loan
proceeds allocated to the cost category described in any paragraph
contained in the Disbursement Schedule below the amount which Lender
reasonably deems sufficient to pay in full the costs to which such amount
is allocated. In the event any amount in a cost category of the
Disbursement Schedule is deficient, and Borrower has not made alternative
payment arrangements for the costs in question, then upon ten (10) days'
written notice from Lender, Borrower shall furnish Lender with paid
invoices, bills and receipts indicating that Borrower has paid, from
Borrower's own funds, for the costs of completing the construction of the
DSN Plant or the costs in the cost category in question, as the case may
be, in a sufficient amount to make the undisbursed amount of the Loan or
the undisbursed portion thereof under the cost category in question
sufficient to pay for the entire balance of the costs of completing the
construction of the DSN Plant or the entire balance of the costs in such
cost category, but only if such work has been performed and materials have
been provided.
(e) LIMITATIONS ON DISBURSEMENTS. Disbursements of Loan
proceeds shall be made by Lender only to defray costs actually incurred by
Borrower and in accordance with the Disbursement Schedule. Disbursements
on account of the direct costs of constructing the DSN Plant shall be
limited to the lesser of (i) the actual cost to Borrower of work and labor
performed on the DSN Plant and materials incorporated into the DSN Plant or
suitably stored at the DSN Plant Location or (ii) the actual value (as
determined by Lender in its reasonable discretion) of said work and labor
performed and materials stored; disbursements on account of indirect or
"soft" costs relating to the construction of the DSN Plant, the Loan, the
preparation of the Plans and Specifications, and all of the other
transactions contemplated hereby shall be limited to the actual amounts of
such costs as indicated by invoices, statements, vouchers, receipts or
other written evidence satisfactory to Lender.
(f) CONTINUATION AND DATE-DOWN ENDORSEMENTS. After
recordation of the Leasehold Mortgage and as a condition precedent to each
disbursement under the Loan after the initial advance, Borrower shall, at
its own cost and expense, deliver or cause to be delivered to Lender from
time to time such continuation and date-down endorsements to be attached to
the Title Policy in form and substance satisfactory to Lender, as Lender
deems necessary to insure the priority of the Leasehold Mortgage as a valid
first priority lien on the DSN Plant Location and the DSN Plant as of the
date of and including the amount covered by each such disbursement, and
Borrower agrees to furnish to the title insurer such surveys and other
information as are reasonably required by Lender or the title insurer to
enable the title insurer to issue such endorsements to Lender.
(g) CHANGE ORDERS. Borrower shall not permit any amendments
or modifications of the Plans and Specifications, the Construction Contract
or any subcontracts, or the performance of any work pursuant to such
amendments or modifications, which individually exceed $250,000 or, when
added to the cumulative amount of all net increases in the prices payable
under the Construction Contract and all such subcontracts resulting from
all such amendments and modifications theretofore permitted by Borrower,
would result in a net increase in the total price payable under all such
subcontracts in excess of $750,000.
(h) OTHER GENERAL CONDITIONS. No Request for Advance will
include (i) any amounts previously disbursed hereunder, (ii) any costs not
approved, certified or verified as provided above, (iii) any costs for
which payment reimbursement was previously requested by Borrower and for
which proof of payment has been requested but not yet received by Lender,
and/or (iv) any real estate taxes, mechanics' liens, security interests,
claims or other charges against the Collateral, or any interest, fees or
other costs which Borrower may have failed to pay in accordance with this
Agreement or the other Loan Documents. If Lender considers that its best
interest and the best interest of the completion of the construction lies
in accelerating the amounts to be advanced hereunder, it shall be entitled
to do so, and no such advance shall be deemed to be a waiver of any
condition contained herein.
Section 2.3 REPAYMENT OF THE LOAN. The Borrower promises to repay
the Loan as follows:
(a) During the Construction Period, monthly interest
payments on outstanding principal balance of the Loan at the applicable
rate set forth in Section 2.4 shall be paid to Lender commencing December
1, 1994 and on the first day of each month thereafter.
(b) The principal balance outstanding under the Note,
and all accrued and unpaid interest, and all other Obligations owing under
any of the Loan Documents shall be due and payable in full on the date on
which the Construction Period terminates; provided, however, that if the
Construction Period ends on the DSN Plant Completion Date, then the Loan
shall be converted to a term Loan and shall be extended for a period (the
"Term Out Period") commencing on the day immediately succeeding the last
day of the Construction Period and ending on the date which is eight-four
(84) months after such date, subject to the following terms and conditions:
(i) no uncured Default has occurred and is
continuing, and no material adverse change in the business,
financial condition or operations of Borrower, any Guarantor or
EDC shall have occurred;
(ii) any undisbursed Loan proceeds existing
at the end of the Construction Period shall be cancelled, and
Borrower shall have no further right to request or receive any
further disbursements of Loan proceeds, provided, that this
limitation shall not apply if Borrower demonstrates to Lender
that additional conforming costs and expenses have been
incurred in connection with the DSN Plant and Lender approves
such additional costs and expenses for payment from such
undisbursed Loan Proceeds prior to the commencement of the Term
Out Period;
(iii) Lender shall have determined, based
upon an appraisal of the DSN Plant conducted at Borrower's sole
expense by an independent appraiser selected by Lender, that
the Fair Market Value of the DSN Plant and the Equipment equals
or exceeds the outstanding principal balance of the Loan. This
shall be performed and completed not later than January 1,
1995;
(iv) LSB and certain of its subsidiaries
shall have entered into a new $75,000,000 credit facility with
BankAmerica Business Credit or affiliate thereof on terms and
conditions reasonably acceptable to Lender;
(v) commencing on the first day of the
first month which begins not less than 31 days after the last
day of the Construction Period and thereafter on the first day
of each subsequent month, Borrower shall pay to Lender during
the Term Out Period in eighty-four (84) consecutive, equal
monthly payments of principal and interest, calculated by fully
amortizing the outstanding principal balance of the Loan as of
the commencement of the Term Out Period over an 84-month period
at the applicable interest rate set forth in Section 2.4; and
(vi) the principal balance outstanding under
the Note, and all accrued and unpaid interest not sooner paid
when due under the Note, and all other Obligations of Borrower
owing under any and all of the Loan Documents, shall due and
payable in full on the last day of the Term Out Period.
(c) In the event the Loan is not converted to a
term Loan because Borrower has chosen to finance the DSN Plant with a
lender other than Lender, not due to any default by Lender, then in
addition to all other sums owing on the date on which the
Construction Period ends, Borrower shall pay to Bank a termination
fee equal to five percent (5%) of the outstanding principal balance
of the Loan as of the date on which the Construction Period ends.
The Borrower's obligation to pay all amounts payable hereunder is absolute
and unconditional and shall not be affected by any circumstance of any
character whatsoever, including (i) any setoff, counterclaim, recoupment,
defense, abatement or reduction or any right which the Borrower may have
against the Lender, the manufacturer or supplier of any of the Equipment or
anyone else for any reason whatsoever; (ii) the invalidity, enforceability
or disaffirmance of this Agreement or any other Loan Document related
hereto; or (iii) the prohibition of or interference with the use or
possession-by the Borrower of all or any part of the DSN Plant Location or
the Equipment, for any reason whatsoever.
Section 2.4 INTEREST CHARGES. During the Construction Period,
the outstanding principal balance of the Loan shall bear interest at a rate
per annum equal to the Libor Rate plus 3.10%. During the Term Out Period,
the outstanding principal balance of the Loan shall bear interest at a per
annum rate equal to the Treasury Rate plus 2.70%. In each instance,
interest shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.5 LATE CHARGE RATE. In the event the Borrower fails
to pay any amount hereunder when due, the amount due shall bear charges
thereon calculated at the Late Charge Rate. At any time when any Event of
Default has occurred, irrespective of any cure periods, and continues for
over ten (10) days, the Borrower will pay interest on the Loan at the Late
Charge Rate.
Section 2.6 MAXIMUM INTEREST. In no event shall the interest
charged with respect to the Obligations exceed the maximum amount permitted
under applicable law. Notwithstanding anything to the contrary herein or
elsewhere, if at any time the rate of interest called for hereunder or
under the Note or other Loan Document (the "Stated Rate") exceeds the
highest rate of interest permissible under any applicable law (the "Maximum
Lawful Rate"), then for so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable shall be equal to the Maximum Lawful
Rate; provided, however, that if at any time thereafter the Stated Rate is
less than the Maximum Lawful Rate, the Borrower shall, to the extent
permitted by law, continue to pay interest at the Maximum Lawful Rate until
such time as the total interest received by the Lender is equal to the
total interest which the Lender would have received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and
until the Stated Rate again exceeds the Maximum Lawful Rate, in which event
this provision shall again apply.
Section 2.7 EXPENSES. The Borrower agrees to pay on demand
all reasonable out of pocket costs and expenses (including reasonable
legal, appraisal, accounting, auditing and similar fees) incurred at any
time, before or after the Obligations are paid in full, in connection with
(i) the enforcement, attempted enforcement, amendment or termination of
this Agreement or any of the other Loan Documents, the performance of any
of the Borrower's duties under this Agreement and the other Loan Documents
or any exercise by Lender of its rights and remedies under this Agreement
or any other of the Loan Documents, including in connection with a
reorganization or bankruptcy reorganization of the Borrower or any
Affiliate; (ii) the filing or recordation of all documents or instruments
relating to the Collateral; (iii) realizing upon or protecting any
Collateral and enforcing and collecting any Obligations or guaranty
thereof; and (iv) any Default or Event of Default. The Borrower also
agrees to reimburse the Lender, on the Funding Date, for its legal fees for
outside counsel plus any appraisal fees, recording and search fees and
related expenses, including travel and other out of pocket expenses of the
Lender's agents and its counsel, incurred by it in connection with the
preparation, negotiation, execution, closing and delivery of the Loan
Documents.
Section 2.8 PREPAYMENT. No prepayment of the Loan shall be
permitted during the Construction Period or prior to the date which is
forty-two (42) months after the date on which the Term Out Period begins.
Thereafter, provided no Default has occurred and is continuing, the
Borrower may prepay the Loan in whole, but not in part, on the first day of
any month, upon at least thirty (30) Business Days' prior written notice to
the Lender. Such prepayment of the Loan shall be accompanied by the
payment of all principal, all accrued but unpaid interest on the Loan to
the date of prepayment and all outstanding and unpaid costs, fees and
expenses. In addition, the prepayment of the Loan shall be made with a
prepayment fee in an amount equal to the greater of (a) two percent (2.0%)
of the outstanding principal balance of the Loan being prepaid, or (b) the
excess, if any, of (i) the present value of the principal and interest
payments which would have been payable during the remainder of the Term Out
Period in the absence of the prepayment, using a discount rate equal to one
percent (1.0%) plus the yield to maturity, as of the Third Business Day
prior to the date on which the prepayment is made, on U.S. Treasury
Securities having a remaining term to maturity closest to the remaining
average life of the Loan, as such yield to maturity is reported on page 5
("U.S. Treasury and Money Markets") of the information ordinarily provided
by Telerate Systems Incorporated, over (ii) the principal amount being
prepaid.
Section 2.9 CONDITIONS OF LENDING. The obligation of the
Lender to make the initial and any subsequent advance under the Loan is
subject to the prior satisfaction (or waiver in writing and signed by
Lender in its sole discretion) of each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Borrower and the
Guarantors in the Loan Documents and any certificate, document or
financial or other written statement furnished at any time under or
in connection herewith shall be true and correct in all material
respects on and as of the date given and on and as of the date of the
Funding Date as if made on and as of such date and otherwise in
exactly the same language.
(b) COMPLIANCE. The Borrower shall have complied and
shall then be in compliance with all the terms, covenants and
conditions of the Loan Documents.
(c) NO DEFAULT. No Default shall have occurred and be
continuing.
(d) NO MATERIAL ADVERSE CHANGE. No material adverse
change shall have occurred with respect to the business, financial
condition or operations of the Borrower since the financial statement
of LSB dated December 31, 1993 and the Lender shall have received a
certificate from the Chief Executive Officer of the Borrower to that
effect; and no material adverse change shall have occurred with
respect to the business, financial condition or operations of EDC or
any Guarantor, as may be determined by Lender in the exercise of its
reasonable discretion.
(e) DELIVERY OF DOCUMENTS. Each of the Loan Documents,
the Ground Lease, the DSN Plant Equipment Lease and the Ground
Sublease shall have been executed and delivered to the Lender in form
and substance satisfactory to the Lender and shall be in full force
and effect.
(f) NO CHANGE IN LAW. No change in state or federal
law shall have been enacted or proposed which would make the Loan
unlawful to the Lender.
(g) REVIEW OF REAL PROPERTY RECORDS. Prior to the
initial advance the Lender shall have reviewed and approved the real
property records and encumbrances relating to the DSN Plant Location,
including the Ground Lease and the Ground Sublease.
(h) LANDLORD/MORTGAGEE WAIVERS. Prior to the initial
advance the Borrower shall have provided to the Lender such
Landlord/Mortgagee Waivers, in form, substance and number as may be
reasonably required by the Lender.
(i) MORTGAGE AND TITLE INSURANCE. Prior to the initial
advance, the Lender shall have received the Leasehold Mortgage
encumbering Borrower's interest under the Ground Lease and the Ground
Sublease, in form and priority as may be acceptable to the Lender in
its sole discretion, and the Leasehold Mortgage shall have been
recorded and any recording fees and any Arkansas intangible recording
tax shall have been paid in full. The Lender shall also have
received an ALTA lender's policy of title insurance, issued by a
title insurer acceptable to Lender, in form, amount and with such
priority and endorsements as the Lender may reasonably require,
including:
(i) Coverage against mechanics' liens;
(ii) An endorsement insuring the continuing
priority of subsequent advances;
(iii) A single tax parcel endorsement; and
(iv) Proof that all real estate taxes for
the Premises due and owing as of the Closing Date have been
paid.
(j) OPINIONS OF COUNSEL. Prior to the initial advance
the Lender shall have received an opinion of legal counsel for
Borrower, LSB, LSBC and EDC, in form and substance satisfactory to
the Lender and its counsel, which opinion will include, among other
things, opinions affirming the Borrower's authority to enter into
this Agreement, the perfection and priority of the Security Interest,
LSB's and LSBC's authority to enter into the Guaranties and EDC's
authority to enter into the DSN Plant Equipment Lease and the Ground
Lease, the Ground Sublease, and the enforceability of the Loan
Documents.
(k) ENVIRONMENTAL COMPLIANCE. Not later than ten (10)
days prior to the initial advance, the Lender shall have received and
found satisfactory an environmental report on the DSN Plant location
in form acceptable to the Lender. Subject to Borrower's
environmental representations and warranties, Lender acknowledges
that an acceptable report has been received by Lender.
(l) BOND. The Bonding Company shall have named Lender
as an additional insured.
(m) CONSULTANT'S CONSTRUCTION REPORT. Lender shall
have received a report from the Construction Consultant regarding
such matters as Lender may reasonably request.
(n) PERMITS. Lender and the Construction Consultant
shall have received evidence that Borrower has obtained all necessary
governmental approvals, permits and other approvals (or no impediment
exists to them being timely obtained) for completion and operation of
the DSN Plant and other improvements to be constructed pursuant to
the Plans and Specifications, including building, site plan, and such
other permits or approvals as are requested by Lender, and that all
such permits and approvals are or are expected to be in full force
and effect, with no appeal of the granting of any thereof having been
made.
(o) CONTRACTOR'S CONSENTS. Lender shall receive a
complete copy of the fully executed Contractor's Consents, if any,
which shall permit assignment thereof to Lender and its successors
and assigns and shall recognize Lender as a permitted assignee of
such Construction Contract.
(p) UCC SEARCHES. Prior to the initial advance Lender
shall have received UCC searches for Oklahoma and Arkansas reflecting
Lender's first priority lien in the personal property Collateral.
(q) LOAN FEE AND EXPENSES. The Borrower shall have
paid in full the up front fee referenced in Section 2.12 hereof and,
from the initial funding, the expenses referenced in Section 2.7
hereof.
(r) CERTIFICATE OF GOOD STANDING AND TAX CLEARANCes.
Prior to the initial advance the Lender shall have received certified
copies indicating the Borrower is in good standing under the laws of
its state of incorporation and qualified to do business in the states
where it does business and such tax clearance certificates as may be
required by the Lender.
(s) PROCEEDINGS. All proceedings and actions shall
have been taken in connection with the transactions contemplated by
this Agreement, and all documents contemplated in connection herewith
shall be satisfactory in form and substance to the Lender and its
counsel.
(t) EVIDENCE OF INSURANCE. Prior to the initial
advance the Lender shall receive evidence of all insurance required
by the terms of this Agreement and the Loan Documents.
(u) TERMINATION OF LIENS. Prior to the initial advance
the Lender shall have received duly executed UCC termination
statements and other instruments in form and substance satisfactory
to the Lender, as shall be necessary to terminate and satisfy any
Liens on the Collateral except for Permitted Liens.
(v) CERTIFICATE OF INCUMBENCY OF BORROWER. Prior to
the initial advance Lender shall have received a certificate of
incumbency of Borrower signed by the Borrower's Secretary or
Assistant Secretary, which certificate shall certify the names of the
officers of the Borrower authorized to execute any Loan Documents and
any other related documents on behalf of Borrower, together with the
signatures of such officers, and Lender may conclusively rely on such
certificate until receipt of a further certificate of the Secretary
or Assistant Secretary of Borrower cancelling or amending the prior
certificate and submitting the signatures of the officers named in
such further certificate.
(w) RESOLUTIONS OF BORROWER. Prior to the initial
advance Lender shall have received a certified copy of all corporate
proceedings of Borrower evidencing that all action required to be
taken in connection with the authorization, execution, delivery, and
performance of this Agreement, the other Loan Documents, the Lease
and the DSN Plant Equipment Lease, and the transactions contemplated
hereby and thereby, has been duly taken.
(x) CERTIFICATE OF INCUMBENCY OF EACH GUARANTOR. Prior
to the initial advance Lender shall have received a certificate of
incumbency of each Guarantor signed by such Guarantor's Secretary or
Assistant Secretary, which certificate shall certify the names of the
officers of such Guarantor authorized to execute the Guaranty and any
other related documents on behalf of such Guarantor, together with
the signatures of such officers, and Lender may conclusively rely on
such certificate until receipt of a further certificate of the
Secretary or Assistant Secretary of such Guarantor cancelling of
amending the prior certificate and submitting the signatures of the
officers named in such further certificate.
(y) RESOLUTIONS OF EACH GUARANTOR. Prior to the
initial advance Lender shall have received a certified copy of all
corporate proceedings of each Guarantor evidencing that all action
required to be taken in connection with the authorization, execution,
delivery and performance of the Guaranty to be executed by such
Guarantor, and the transactions contemplated thereby, has been duly
taken.
(z) REFERENCES. Prior to the initial advance Lender
shall have received, reviewed and found satisfactory bank and
customer references for EDC and each Guarantor.
(aa) $75,000,000 CREDIT FACILITY. Prior to the initial
advance, LSB and certain of its subsidiaries shall have received and
accepted an executed commitment to lend, and shall be in the process
of completing a new $75,000,000 credit facility with BankAmerica
Business Credit or affiliate thereof on terms and conditions
reasonably acceptable to Lender.
(ab) OTHER REQUIRED DOCUMENTATION. Borrower shall
execute and/or deliver such other documents, instruments, agreements
or items as Lender may reasonably require.
Section 2.10 PLACE AND FORM OF PAYMENTS. Unless the Lender
otherwise directs in writing, all payments and prepayments permitted or
required by any Loan Document shall be made in immediately available funds
and not later than the time necessary for good funds to be credited on the
same day received at the Lender's account in accordance with the
instructions annexed hereto as Rider 2.10 or to such other location as the
Lender shall hereafter designate to the Borrower in writing. Whenever any
payment is stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees.
Section 2.11 HOLD BACK. Lender will hold back construction
fund advances in an amount of $2,500,000 until such time as Lender shall
have determined, based upon an appraisal of the DSN Plant performed at
Borrower's sole cost and expense by an independent appraiser selected by
Lender, that the Fair Market Value of the DSN Plant is at least equal to
$12,750,000.
Section 2.12 COMMITMENT FEE. In consideration of the Lender's
commitment to enter into this Agreement, the Mixed Acid Plant Loan
Documents and the Rail Car Loan Documents, the Borrower acknowledges that
the Lender has previously received a non-refundable fee in the amount of
$124,950, paid in connection with the Lender's proposal and commitment.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
Section 3.1 GRANT OF SECURITY INTEREST. As collateral
security for the prompt and due payment and performance of the Obligations
and all Indebtedness of Borrower to Lender under the Mixed Acid Plant Loan
Documents and the Rail Car Loan Documents, the Borrower hereby assigns to
the Lender and grants to the Lender a continuing lien on and security
interest in all of the Borrower's right, title and interest in and to the
following property, present or future, tangible or intangible, now owned or
existing or hereafter acquired or arising:
(a) All documents, instruments, rentals and other
rights to payment relating to the DSN Plant, the DSN Plant Equipment
Lease, the Ground Lease, the Ground Sublease and the Consulting
Agreement and all other agreements, contracts, chattel paper,
contract rights, rights to payment and insurance policies and surety
bonds relating thereto, and the Plans and Specifications and all
Construction Contracts, and all proceeds of all of the foregoing;
(b) All general intangibles, trade secrets, computer
programs, software, customer lists, trademarks, trade names, patents,
licenses, copyrights, technology, processes, proprietary information,
and insurance proceeds relating to the DSN Plant;
(c) All books and records, including books of account
and ledgers of every kind and nature, all electronically recorded
data relating to Borrower or the business thereof, all receptacles
and containers for such records, and all files and correspondence
relating to the DSN Plant;
(d) All Equipment, goods, including all inventory,
machinery, tools, molds, dies, furniture, furnishings, fixtures,
trade fixtures, motor vehicles and all other goods used in connection
with or in the conduct of Borrower's business relating to the DSN
Plant;
(e) All accessions, appurtenances, components, repairs,
repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the
foregoing;
(f) All rights, remedies, powers and/or privileges of
Borrower with respect to any of the foregoing; and
(g) Any and all Proceeds and products of any of the
foregoing, including all money, rentals, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible
property received upon the sale or disposition of any of the
foregoing.
Except in the ordinary or normal course of its operations in Section 7.6
herein, Borrower has no right to dispose of or sell any of the
above-described Collateral.
Section 3.2 CONTINUING OBLIGATION. Except with respect to
those Permitted Liens and those liens which by law are accorded a first
priority, the Borrower shall take all action necessary to grant the Lender
a valid first priority lien on and security interest in all Collateral on
the Funding Date, and to maintain at all times the validity,
enforceability, perfection and first priority of the Security Interest.
Until the Obligations are fully paid and satisfied, the Borrower will at
all times do, make, execute, deliver, record, register or file all such
financing statements, fixture filings, deeds of trust, mortgages,
assignments, certificates, charges, instruments, acts, pledges, assignments
and transfers (or cause the same to be done) and will deliver to the Lender
such instruments constituting or evidencing the Collateral, as the Lender
may request, to assure, continue or establish the validity, enforceability,
perfection and first priority (except for Permitted Liens) of the Security
Interest. To the extent permitted by applicable law, the Borrower hereby
authorizes the Lender to: (i) sign Borrower's name and on behalf of such
Borrower to execute and file mortgages, deeds of trust, financing
statements, and notices of lien necessary to protect or perfect the
security interest granted herein in any or all of the Collateral and (ii)
file a carbon, photocopy or other reproduction of this Agreement or any of
the other Loan Documents as a financing statement in each case which the
Lender, in its discretion, deems necessary or desirable to perfect or
maintain the perfection of the Security Interest.
ARTICLE 4
ADMINISTRATION OF THE COLLATERAL
Section 4.1 THE EQUIPMENT. The Borrower, at its own cost and
expense, will keep, or cause EDC to keep, the Equipment in good operating
condition and repair, except for normal wear and tear, and will not waste
or destroy, or allow EDC to waste or destroy, such Equipment, or any part
thereof, or be negligent in the care and use thereof and will make all
necessary replacements thereof and repairs thereto. The Borrower shall
promptly inform the Lender of any material additions to such Equipment and
of any material loss, damage, or destruction of such Equipment. The
Borrower will not permit any Equipment to become a fixture to any real
property or an accession to any other personal property, unless the Lender
has a first priority perfected Security Interest in such real or personal
property or has been provided with such waivers or consents as the Lender
may reasonably require. The Borrower shall, promptly upon the Lender's
request, deliver to Lender any and all evidence of ownership of such
Equipment.
Section 4.2 NO LENDER LIABILITY. The Lender shall have no
duty of care with respect to any Collateral unless and until it takes the
same into its own possession or control. The Lender shall be deemed to
have satisfied its duty of due care with respect to Collateral in its
custody and control if it accords to such Collateral treatment
substantially equal to the treatment the Lender accords its own property,
or if the Lender takes such action with respect to the Collateral as the
Borrower requests in writing, but no failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall
be presumptively deemed, from that failure or omission, an absence of
reasonable care. The Lender shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause
thereof, unless caused by the Lender's gross negligence or willful
misconduct. The Lender does not, by anything contained herein or in any
other Loan Document or otherwise, assume any obligation of the Borrower
under the Ground Lease, the Ground Sublease, or the DSN Plant Equipment
Lease or any other contract or agreement assigned to Lender or in which
Lender is granted a security interest, and the Lender shall not be
responsible in any way for the performance by the Borrower of any of the
terms and conditions thereof.
Section 4.3 USE OF EQUIPMENT; IDENTIFICATION.
(a) The Borrower shall use the Equipment in a careful
and proper manner, will comply with and conform to all governmental
laws, rules and regulations relating thereto, and will cause the
Equipment to be operated properly or in substantial accordance with
the manufacturer's or supplier's instructions or manuals and only by
competent and duly qualified personnel.
(b) The Borrower shall not move any of the Equipment
from the DSN Plant Location without the prior written consent of CIT.
(c) Upon Lender's written request and at the Borrower's
sole expense, the Borrower shall attach to each item of Equipment a
notice satisfactory to Lender disclosing Lender's security interest
in such item of Equipment.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
the Loan, the Borrower represents and warrants to the Lender as set forth
below. The representations and warranties of the Borrower contained in
this Article V and otherwise herein and in any other Loan Document shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Lender and shall survive the
execution and delivery of this Agreement and the other Loan Documents and
the making of the Loan.
Section 5.1 ORGANIZATION AND QUALIFICATION. The Borrower is
duly incorporated and organized and is validly existing as a corporation in
good standing under the laws of the State of Oklahoma, with all power
(corporate or otherwise) to own or lease and operate the DSN Plant and its
other properties and assets and to carry on its business in the manner in
which such business is now conducted. The Borrower is duly licensed and
qualified to do business and is in good standing in the state of Arkansas
and in every other state where failure to be so licensed or qualified and
in good standing would have a material adverse effect on its business,
properties or assets.
Section 5.2 CONCERNING THE LOAN DOCUMENTS. The Borrower has
the power to authorize, execute and deliver the Loan Documents to which
Borrower is a party, to incur and perform its Obligations hereunder and
thereunder, and, as applicable, to grant the Security Interest. The
Borrower has duly taken all necessary corporate action to authorize the
execution, delivery and performance of such Loan Documents, and no consent,
approval or authorization of, or declaration or filing with, any
governmental or other public body, or any other Person (including without
limitation any stockholders, trustees or holders of Indebtedness of the
Borrower), is required in connection with such authorization, execution,
delivery and performance by the Borrower or the consummation of the
transactions contemplated hereby or thereby. Such Loan Documents have been
duly authorized, executed and delivered by or on behalf of the Borrower,
and constitute the legal, valid and binding Obligations of the Borrower and
are enforceable against the Borrower in accordance with their respective
terms.
Section 5.3 GUARANTIES. Each Guarantor has the power to
authorize, execute and deliver its Guaranty and to incur and perform its
obligations under its Guaranty. Each Guarantor has duly taken all
necessary corporate action to authorize the execution, delivery and
performance of its Guaranty, and no consent, approval or authorization of,
or declaration or filing with, any governmental or other public body, or
any other Person (including without limitation any stockholders, trustees
or holders of Indebtedness of such Guarantor), is required in connection
with such authorization, execution, delivery and performance by such
Guarantor. Each Guarantor's Guaranty has been duly authorized, executed
and delivered by or on behalf of such Guarantor, and constitutes the legal
valid and binding obligations of such Guarantor and is enforceable against
such Guarantor in accordance with its terms.
Section 5.4 EQUIPMENT. All Equipment is in good operating
order and condition and repair, except for ordinary wear and tear, is used
or useful in the business of the Borrower and is readily moveable without
harm or damage. The invoices previously delivered to the Lender by the
Borrower respecting the Equipment are genuine, true and accurate, and the
descriptions and locations of the Equipment set forth in the Disclosure
Schedule are true, complete and accurate.
Section 5.5 THE DSN PLANT. Construction of the DSN Plant is
in full compliance with all requirements of the DSN Plant Equipment Lease
and the Ground Lease; the description of the DSN Plant Location in Exhibit
"C," and the description of the Ground Lease, the Ground Sublease and the
DSN Plant Equipment Lease in Article 1 above is accurate and complete. The
Ground Lease, the Ground Sublease and the DSN Plant Equipment Lease are
valid and enforceable in accordance with their respective terms and are in
full force and effect. Neither the Borrower nor any other party to the
Ground Lease, the Ground Sublease or the DSN Plant Equipment Lease is in
default of its obligations thereunder or has delivered or received any
notice of default under the Lease or the Equipment Lease (as applicable)
which default has not been waived or cured.
Section 5.6 TITLE TO THE DSN PLANT AND EQUIPMENT; SECURITY
INTEREST. Except for the Security Interest and Permitted Liens and all
items set forth in the Title Policy, under the Ground Lease and subject to
the right of quiet enjoyment under the Ground Sublease and the DSN Plant
Equipment Lease, the Borrower has good, and merchantable title to the DSN
Plant and all Equipment and other Collateral, and neither the DSN Plant nor
any of such Equipment nor any other Collateral is or will be subject to any
Lien. The provisions of the Loan Documents create legal, valid and
enforceable security interests in and liens on the DSN Plant and all
Equipment and other Collateral, and the Loan Documents and such UCC and
real property filings create a perfected and continuing first priority
security interest upon the DSN Plant and all the Equipment and other
Collateral securing the Obligations, and are enforceable against the
Borrower and all third parties.
Section 5.7 FINANCIAL CONDITION. The Borrower has furnished
to the Lender LSB's consolidated and consolidating financial statements as
of December 31, 1993, accompanied by the report of LSB's independent
certified public accountants, which statements present fairly in all
material respects the consolidated and consolidating financial position of
LSB and its consolidated Affiliates as of the date thereof. Such financial
statements have been prepared in accordance with GAAP. From the date of
such financial statements to the date of the execution of this Agreement,
there has not been any material adverse change from the financial condition
reflected in such financial statements or in the Borrower's business or
condition since the date thereof. As of the date hereof, the Borrower has
no direct or contingent material liabilities which are not provided for or
reflected in such financial statements.
Section 5.8 LITIGATION. There are no actions, suits,
proceedings or investigations pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or EDC as it may affect the
Ground Lease, the Ground Sublease or the DSN Plant Equipment Lease, nor to
the knowledge of Borrower is there any basis therefor on the date of this
Agreement.
Section 5.9 DISCLOSURE. No representation or warranty made by
the Borrower hereunder and no written information, exhibit, report,
document or certificate furnished by or on behalf of the Borrower or any
Affiliate to the Lender in connection with this Agreement, contained or
will contain, as of its date or as of the Funding Date, any material mis-
statement of fact or omits, as of its date, to state a material fact or any
fact necessary to make the statements contained therein not misleading.
There is no fact known to the Borrower that materially adversely affects or
that, insofar as the Borrower can now reasonably foresee, may materially
adversely affect, the condition, financial or otherwise, operations,
properties or prospects of the Borrower and Affiliates, or the ability of
the Borrower to carry out its Obligations under any Loan Document.
Section 5.10 TAX RETURNS AND PAYMENTS. The Borrower has filed
all federal, state and local tax returns and other reports which it was
required by law to file on or prior to the date hereof and has paid all
taxes, assessments, fees and other governmental charges and penalties and
interest, if any, payable against it or its property, income or franchise,
that are due and payable, and Borrower does not have any knowledge of any
actual or proposed deficiency or additional assessment in connection
therewith. The charges, accruals and reserves on the books of Borrower in
respect of federal, state and local taxes for all open years, and for the
current fiscal year, make adequate provision for all unpaid tax liabilities
for such periods.
Section 5.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the
Borrower nor EDC is in violation of any material term or provision of its
certificate of incorporation or by-laws, or of any material mortgage,
indenture, contract, agreement, instrument, or other undertaking to which
the Borrower or EDC is a party or which purports to be binding on Borrower
or EDC, or any of the assets of Borrower or EDC (including the Ground
Lease, the Ground Sublease and the DSN Plant Equipment Lease), or, except
as disclosed to Lender pursuant to Section 5.14 hereof, of any judgment,
decree, order or any material statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of this
Agreement and the other Loan Documents do not and will not violate or
otherwise conflict with any such term or provision or result in the
creation of any security interest, lien, charge or encumbrance upon any of
the Collateral, except the Security Interest.
Section 5.12 PENSION PLANS. The Borrower has not participated
in any "prohibited transactions", as defined in Section 4975 of the
Internal Revenue Code, that could subject the Borrower to any tax or
penalty imposed by said Section 4975 (other than prohibited transactions
that have been "corrected", as defined in said Section 4975). Since the
effective date of the Employee Retirement Income Security Act of 1974, as
from time to time amended ("ERISA"), the Borrower has not incurred any
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA (other than any accumulated funding deficiency that has been
"corrected", as defined in Section 4971(c)(2) of the Internal Revenue Code.
Section 5.13 LABOR RELATIONS. To the best knowledge of
Borrower after due inquiry, Borrower and EDC are in material compliance
with the Fair Labor Standards Act with respect to the DSN Plant. To the
best knowledge of Borrower after due inquiry, neither the Borrower nor EDC,
with respect to the DSN Plant, is engaged in any unfair labor practice. To
the best knowledge of Borrower after due inquiry, there are: (i) no unfair
labor practice complaints pending or, to the best knowledge of the
Borrower, threatened against the Borrower or EDC and no grievance or
arbitration proceedings arising out of or under collective bargaining
agreements are so pending or, to the best knowledge of the Borrower,
threatened; (ii) no strikes, work stoppages or controversies pending or
threatened between the Borrower or EDC and any of their employees (other
than employee grievances arising in the ordinary course of business); and
(iii) no union representation questions exist with respect to the employees
of the Borrower or EDC and no union organizing activities taking place
which would have a material adverse effect on the financial condition,
results of operations or business of the Borrower or EDC;
Section 5.14 ENVIRONMENTAL LAWS. Except as disclosed by
Borrower to Lender by delivery to Lender of copies of documents publicly
filed with the Securities and Exchange Commission, a report of the Arkansas
Department of Pollution and Control and Ecology to EDC dated July 18, 1994,
an environmental report of Woodward Clyde regarding the DSN Plant Location,
and correspondence from Borrower and Affiliates regarding the DSN Plant
Location (all collectively referred to as "Environmental Disclosure
Documents"), to the best knowledge of Borrower after due inquiry, as of the
date hereof (a) the operations of the Borrower or EDC (with respect to the
DSN Plant) comply in all material respects with all applicable
Environmental Laws; (b) none of the operations of the Borrower or EDC (with
respect to the DSN Plant) is subject to any judicial or administrative
proceeding alleging the violation of any Environmental Laws; (c) none of
the operations of the Borrower or EDC (with respect to the DSN Plant) is
the subject of federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous
Substance into the environment; (d) neither the Borrower nor EDC (with
respect to the DSN Plant) has filed any notice under any federal or state
law indicating past or present treatment, storage or disposal of a
Hazardous Substance or reporting a spill or release of a Hazardous
Substance into the environment; and (e) neither the Borrower nor EDC (with
respect to the DSN Plant) has any known material contingent liability in
connection with any release of any Hazardous Substance into the
environment. The materiality standard used in this Section 5.14 shall be
exceeded if the facts giving rise to a breach or breaches of the
representations or warranties contained herein might result in liability in
excess of $1,000,000 in the aggregate.
Section 5.15 TRADE NAMES. Other than as disclosed on the
Disclosure Schedule, the Borrower, during the past five years, has not used
any corporate name other than its present corporate name (which is set
forth in the introductory paragraph of this Agreement) and has not been
known by or used any fictitious, trade or "doing business" name.
Section 5.16 SUBSIDIARIES. The Disclosure Schedule contains a
correct and complete list of the name and relationship to the Borrower of
each and all of the Borrower's Subsidiaries, if any, and the location of
the chief executive office of each Subsidiary.
Section 5.17 LOANS AND AFFILIATE PAYMENTS. The Disclosure
Schedule fully and completely sets forth all notes and Indebtedness
together with the amount and schedule of any material payments owed by
Borrower to officers, directors, stockholders and Affiliates of Borrower.
Section 5.18 PERMITS, LICENSES. Borrower possesses all
material permits, franchises, contracts and licenses required and owns or
has the right to use all trademarks, trade names, patents and fictitious
name rights necessary to enable it to conduct the business in which it is
engaged without conflict with the rights of others.
Section 5.19 BROKER'S OR TRANSACTION FEES. Borrower has no
obligation to any Person for any finder's, broker's or investment banker's
fee in connection with the transactions contemplated hereby.
Section 5.20 TAXPAYER ID NO. AND CHIEF EXECUTIVE OFFICE.
Borrower's taxpayer identification number is 731456545. Borrower's chief
executive office is located at 16 South Penn, Oklahoma City, OK 73107, and
Borrower's principal place of business is located in Oklahoma City.
Section 5.21 NO DEFAULT. No Default has occurred under this
Agreement.
ARTICLE 6
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as all or any
portion of the Obligations remain unpaid or unsatisfied, it will, at its
own cost and expense:
Section 6.1 FINANCIAL AND OTHER INFORMATION. Promptly furnish
to the Lender or its agents all such financial or other information as the
Lender shall reasonably request, and, at the request of the Lender, notify
its auditors and accountants that the Lender is authorized to obtain such
information directly from them. Without limitation of the foregoing, the
Borrower will furnish to the Lender in such detail as the Lender shall
request:
(a) Not later than 120 days after the close of each
Fiscal Year of the Borrower, unaudited balance sheets of the Borrower
as at the end of such Fiscal Year and related unaudited statements of
income, expense and retained earnings and statements of cash flow of
the Borrower for such year, setting forth in each case in comparative
form figures for the previous Fiscal Year, all in reasonable detail,
fairly presenting in all material respects the financial position of
the Borrower and the results of operations of the Borrower for the
Fiscal Year then ended, and prepared in accordance with GAAP. Such
statements shall be accompanied by a certificate of the chief
financial officer or chief accounting officer of Borrower.
(b) Not later than 90 days after the close of each
fiscal quarter of Borrower, unaudited balance sheets of the Borrower
as at the end of such period, and unaudited statements of income and
expense from the beginning of the Fiscal year to the end of each such
period, for the Borrower, all in reasonable detail, fairly presenting
in all material respects the financial position and results of
operations of the Borrower, in each case, prepared in accordance with
GAAP and consistent with the audited financial statements required
pursuant to Section 6.1(e). Such statements shall be accompanied by
a certificate of the chief financial officer or accounting officer of
Borrower stating that, based upon such examination or investigation
as such officer shall have deemed necessary to enable him to render
an informed opinion in respect thereof, to the best of his knowledge
and belief the financial statements are materially correct and no
Default exists under this Agreement and is continuing except for
those, if any, described in such certificate in reasonable detail.
(c) Not later than 120 days after the close of each
Fiscal Year of EDC, audited consolidated and unaudited consolidating
balance sheets of EDC and its consolidated Subsidiaries as at the end
of such Fiscal Year and related audited consolidated and unaudited
consolidating audited statements of income, expense and retained
earnings and statements of cash flow of EDC and its consolidated
Subsidiaries for such year, all in reasonable detail, fairly
presenting in all material respects the financial position of EDC and
its consolidated Subsidiaries and the results of operations of EDC
and its consolidated Subsidiaries for the Fiscal Year then ended, and
prepared in accordance with GAAP. Such statements required hereunder
shall be examined and accompanied by a report of independent
certified public accountants which shall not contain any
qualifications or exceptions as to scope.
(d) Not later than 90 days after the close of each
fiscal quarter of EDC, unaudited consolidated and consolidating
balance sheets of EDC and its consolidated Subsidiaries as at the end
of such period, and consolidated and consolidating statements of
income and expense from the beginning of the Fiscal Year to the end
of each such period, for EDC and its consolidated Subsidiaries, all
in reasonable detail, fairly presenting in all material respects the
consolidated and consolidating financial position and results of
operations of EDC and its consolidated Subsidiaries, in each case,
prepared in accordance with GAAP and consistent with the audited
financial statements required pursuant to Section 6.1(c) above, and
certified to be materially correct by the chief financial officer or
the chief accounting officer of EDC.
(e) Not later than 120 days after the close of each
Fiscal Year of LSB, LSB's 10K Report filed with the Securities and
Exchange Commission, the audited consolidated and unaudited
consolidating balance sheets of LSB and its consolidated Affiliates
as at the end of such Fiscal Year and related audited consolidated
and unaudited consolidating statements of income, expense and
retained earnings and audited statements of cash flow of LSB and its
consolidated Affiliates for such year, setting forth in each case in
comparative form figures for the previous Fiscal Year, all in reason-
able detail, fairly presenting the financial position of LSB and its
consolidated Affiliates and the results of operations of LSB and its
consolidated Affiliates for the Fiscal Year then ended, and prepared
in accordance with GAAP. Such statements required hereunder shall be
examined and accompanied by a report of independent certified public
accountants which shall not contain any qualifications as to scope;
and such report shall also be accompanied by a certificate of such
accountants stating that in the course of performing their
examination such accountants did not become aware of the existence of
any default under this Agreement, except for those, if any, described
in such certificate in reasonable detail. In addition, the chief
financial officer or accounting officer of LSB shall provide a
certificate which shall also include a statement by such officer that
no breach, default or event of default has occurred and is continuing
under any document to which LSB or any consolidated Affiliate is a
party that evidences any Indebtedness of LSB or any such Affiliate
which exceeds, individually or together with any related
Indebtedness, $5,000,000, or if any such breach, default or event of
default has occurred, explaining the nature of such breach, default
or event of default and the status thereof. Such certificate shall
also include a statement from such officer that LSB is in compliance
with all covenants contained in this Agreement relating to the
financial condition of LSB, and such statement shall be accompanied
by the calculations of such financial covenants.
(f) Not later than 90 days after the close of each
fiscal quarter of LSB, LSB's 10Q Report filed with the Securities and
Exchange Commission and the unaudited consolidated balance sheets of
LSB and its consolidated Affiliates as at the end of such period, and
unaudited consolidated statements of income and expense from the
beginning of the Fiscal year to the end of each such period, for LSB
and its consolidated Affiliates, all in reasonable detail, fairly
presenting in all material respects the consolidated financial
position and results of operations of LSB and Affiliates, in each
case, prepared in accordance with GAAP and consistent with the
audited financial statements required pursuant to Section 6.1(e)
above. Such statements shall be accompanied by a certificate of the
chief financial officer or the chief accounting officer of LSB
stating that, based upon such examination or investigation as such
officer shall have deemed necessary to enable him to render an
informed opinion in respect thereof, to the best of his knowledge and
belief, such financial statements are materially correct and no
Default under this Agreement exists and is continuing except for
those, if any, described in such certificate in reasonable detail.
Such certificate shall also include a statement from such officer
that LSB is in compliance with all financial covenants contained in
this Agreement relating to the financial condition of LSB, and such
statement shall be accompanied by the actual calculations of such
financial covenants.
(g) Promptly after the Borrower or any Affiliate
receives the same, copies of management letters provided to the
Borrower by its independent certified public accountants;
(h) Promptly after their preparation, copies of any and
all proxy statements, financial statements, and reports which the
Borrower, or LSB or EDC sends to its shareholders or holders of its
Indebtedness, and copies of any and all periodic special reports, as
well as registration statements, filed by the Borrower, LSB or EDC
with the Securities and Exchange Commission or similar State
authority;
(i) Deliver to the Lender within 30 days of the end of
each quarter, a compliance certificate signed by the Borrower's Chief
Financial Officer or the Chief Accounting Officer certifying that the
Borrower is in compliance with all of the terms and conditions of the
Agreement and that no Default exists.
(j) Such additional information as the Lender may from
time to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary or Guarantor and which are
kept in the ordinary course of business.
Section 6.2 ACCESS. At all reasonable times, and from time to
time, permit the Lender or its agents to inspect the Collateral and to
audit, examine and make extracts from or copies of any of its books,
ledgers, reports, correspondence and other records.
Section 6.3 TAXES. Promptly pay and discharge all taxes,
assessments and other governmental charges prior to the date on which same
are past due, establish adequate reserves for the payment of such taxes,
assessments and other governmental charges, make all required withholding
and other tax deposits, and, upon request, provide the Lender with receipts
or other proof that any or all of-such taxes, assessments or governmental
charges have been paid in a timely fashion; provided, however, that nothing
contained herein shall require the payment of any tax, assessment or other
governmental charge so long as its validity is being contested in good
faith and by appropriate proceedings diligently conducted.
Section 6.4 MAINTENANCE OF PROPERTIES; INSURANCE. At the
Borrower's sole cost and expense, defend all Collateral against the claims
or demands of all other parties; keep the Collateral in good operating
condition and repair and in compliance with all laws (except normal wear
and tear); and insure all Equipment, the DSN Plant and DSN Plant Location
against risk, in coverage, form and amount satisfactory to the Lender with
a carrier reasonably acceptable at all times to Lender with no greater
deductible amount than $250,000 per occurrence. Insurance on the
Equipment, the DSN Plant and the DSN Plant Location shall be in an amount
equal to the greater of the full replacement value thereof, or 100% of the
outstanding balance of the Loan. The Borrower shall also maintain (a)
builder's all risk completed value hazard insurance covering 100% of the
replacement cost of the DSN Plant and Equipment during the course of
construction in the event of fire, lightning, windstorm, earthquake,
vandalism, malicious mischief and all other risks normally covered by "all
risk" policies in the area where the DSN Plant is located (including loss
by flood if the DSN Plant is located in an area designated as subject to
the danger of flood); (b) product liability insurance in an amount
customary for the businesses conducted by the Borrower; and (c) general
public liability insurance in an amount satisfactory to Lender, but in no
event less than Fifteen Million Dollars ($15,000,000) per occurrence, for
bodily injury and property damage. The Borrower and EDC shall also
maintain workers' compensation insurance in accordance with Borrower's and
EDC's usual practices. Each insurance policy shall be endorsed in favor of
the Lender as additional loss payee in form and substance satisfactory to
the Lender, and provide that any proceeds payable thereunder will be paid
to the Borrower and the Lender as their interest may appear. Each policy
shall provide that if such insurance is cancelled for any reason
whatsoever, or if any substantial change is made in the coverage which
affects the Lender, or if such insurance is allowed to lapse for nonpayment
of premium, such cancellation, change or lapse shall not be effective as to
the Lender until 30 days after receipt by the Lender of written notice from
the carrier thereof. The Borrower hereby directs all insurers under such
policies to pay all proceeds with respect to losses of Collateral to
the Borrower and to Lender. With respect to occurrences giving rise to
insurance proceeds paid with respect to losses, the Lender shall, so long
as no uncured Default exists, release such proceeds to the Borrower after
receipt of evidence of satisfactory repair, replacement or reconstruction
of the assets subject to such casualty.
Section 6.5 BUSINESS. Take all necessary steps to preserve
its corporate existence and its right to conduct business in all state in
which the nature of its business or the ownership of it property requires
such qualification.
Section 6.6 COMPLIANCE. Use reasonable efforts to comply in
all material respects with all applicable laws and duly observe all valid
requirements of all applicable governmental authorities, including all
statutes, rules and regulations relating to public and employee health and
safety and social security and withholding taxes. The Borrower may contest
or dispute any taxes, assessments or impositions in good faith, so long as
such contest or dispute does not result in the creation or incurring of any
liens against the Lender's Collateral and the Borrower maintains adequate
reserves as required under GAAP for the satisfaction of the disputed tax,
assessment or imposition.
Section 6.7 LITIGATION. Except as disclosed in the
Environmental Disclosure Documents referred to in Section 5.14, promptly
notify the Lender in writing of any action, suit, proceeding, or
counterclaim against, or of any investigation of, the Borrower, the DSN
Plant Location or any of the Collateral, if: (i) the outcome of such
litigation, proceeding, counterclaim, or investigation would materially and
adversely affect the Collateral or the finances or operations of Borrower
or EDC; or (ii) such litigation, proceeding, counterclaim, or investigation
questions the validity of this Agreement or any other Loan Document or any
action taken or to be taken pursuant thereto. Borrower shall furnish to
the Lender such information regarding any such litigation, proceeding,
counterclaim, or investigation as the Lender shall request.
Section 6.8 ENVIRONMENTAL LAWS.
(a) Except as disclosed in the Environmental Disclosure
Documents referred to in Section 5.14, give written notice to Lender
immediately upon receipt of any notice that (i) the operations of the
Borrower or EDC with respect to the DSN Plant are not in material
compliance with requirements of applicable Environmental Laws; (ii)
the Borrower or EDC with respect to the DSN Plant is subject to
federal or state investigation evaluating whether any remedial action
is needed to respond to the release of any Hazardous Substance into
the environment which would have a material adverse effect on
Borrower; or (iii) any properties or assets of the Borrower or EDC
with respect to the DSN Plant are subject to an Environmental Lien.
As used herein, "Environmental Lien" means a lien in favor of any
governmental entity for (A) any liability under any Environmental
Laws, or (B) damages arising from or costs incurred by such
governmental entity in response to a release of a Hazardous Substance
into the environment.
(b) Except as disclosed in the Environmental Disclosure
Documents referred to in Section 5.14, without limiting the
generality of any of the Borrower's other covenants and agreements,
the operations of the Borrower or EDC with respect to the DSN Plant
shall at all times comply in all material respects with all
applicable Environmental Laws. The materiality standard used in this
Section 6.8 shall be exceeded if the facts giving rise to a breach or
breaches of the covenant herein is likely to result in liability in
excess of $500,000 in the aggregate.
Section 6.9 NOTICES. Promptly notify the Lender in writing of
any Default or of any default by any party under any Construction Contract,
the Ground Lease, Ground Sublease, the DSN Plant Equipment Lease, the
Consulting Agreement, or as required by Sections 6.7 and 6.8 of this
Agreement. The failure of the Borrower to promptly give the Lender such
notice of any Default of which it is aware, shall, at the Lender's option,
eliminate any cure period for such Default.
Section 6.10 TANGIBLE NET WORTH. LSB shall maintain at all
times, on a consolidated basis, a minimum tangible net worth of $80,000,000
after subtracting treasury stock and $92,800,000 before subtracting
treasury stock. Notwithstanding the foregoing, the tangible net worth
after subtracting treasury stock shall not be less than $83,000,000 at
December 31, 1995 and $85,000,000 at December 31, 1996 and thereafter. The
term tangible net worth is defined as total stockholders' equity, after
deducting any treasury stock, less all assets that are considered
intangible assets under GAAP (including but not limited to goodwill,
patents, trademarks, certain deferred charges (as approved by Lender) and
customer lists).
Section 6.11 CHANGE OF OWNERSHIP. LSB shall at all times hold
not less than one hundred percent (100%) of each class of stock of LSBC
and, at all times, LSBC shall hold, directly or indirectly, one hundred
percent (100%) of each class of stock of the Borrower.
Section 6.12 USE OF PROCEEDS. Use the proceeds of the Loan
for construction and equipment costs, fees and expenses in accordance with
Article 2 hereof.
Section 6.13 BOOKS. Keep proper books of record and account
in which full, true and correct entries in accordance with GAAP will be
made of all dealings or transactions in relation to its business and
activities.
ARTICLE 7
NEGATIVE COVENANTS
So long as all or any portion of the Obligations remains
unpaid, the Borrower covenants and agrees that, without the Lender's prior
written consent, which consent will not be unreasonably withheld, the
Borrower shall not:
Section 7.1 CORPORATE STRUCTURE. Merge, reorganize or
consolidate with or acquire any Person or make any investment in the
securities of any Person.
Section 7.2 DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS. Declare or
pay any dividends or other distributions upon any stock or make any
distribution of the Borrower's property or assets or redeem, retire,
purchase or otherwise acquire, directly or indirectly, the Borrower's
stock.
Section 7.3 LOANS, INVESTMENTS, AFFILIATE PAYMENTS, SALARIES.
Make any loans or other advances of money (other than compensation) to any
Person; make any payments to any officers, directors, stockholders or
Affiliates on any existing loans except as set forth on the Disclosure
Schedule or pursuant to the Ground Lease or Administrative Services
Agreement between Borrower and LSB, or payments to LSB for the Borrower's
pro rata share of taxes with respect to the Borrower's business, or permit
the annual compensation and all other direct and indirect remuneration to
its officers to increase more than fifteen percent (15%) per year.
Section 7.4 CHANGE IN BUSINESS, STRUCTURE OR BUSINESS
LOCATION. Make any material change in the capital structure or any of
Borrower's business objectives, purposes and operations; engage, directly
or indirectly, in any business other than ownership of the DSN Plant, the
railcars acquired with the Rail Car Loan, the Mixed Acid Plant financed by
the Mixed Acid Plant Loan, and all items related thereto; or change the
location of its chief executive office without thirty days' prior written
notice to Lender.
Section 7.5 GUARANTIES. Borrower shall not guaranty or
otherwise, in any way, become liable with respect to the Indebtedness or
liabilities of any Person.
Section 7.6 SALE OF PROPERTY. Offer to sell, convey, assign,
transfer, exchange, lease (except pursuant to the DSN Plant Equipment
Lease, the Ground Sublease or to the extent permitted in the Mixed Acid
Plant Loan Documents or the Rail Car Loan Documents) or otherwise dispose
of any Collateral, or, on an annual basis, any other real or personal
property having a value in excess of $25,000, except sales of supplies,
equipment and inventory in the ordinary course of the Borrower's business
and trade-ins on new purchases, provided that Lender shall have a first
priority perfected lien on any new purchases of property.
Section 7.7 PREPAYMENT. Borrower shall not prepay any
Indebtedness, except the Obligations in accordance with this Agreement.
Section 7.8 LIENS. Create, incur, assume or suffer to exist
any Lien upon any Collateral, the DSN Plant Equipment Lease or the Ground
Lease, except Liens in favor of the Lender and Permitted Liens and the DSN
Plant Equipment Lease, the Ground Sublease and the Consulting Agreement.
Section 7.9 NEGATIVE PLEDGE ON LEASES. Pledge, encumber,
transfer or assign any of its right, title or interest in any of the real
property Collateral relating to the DSN Plant Location.
Section 7.10 PENSION PLANS. To the knowledge of Borrower,
with respect to all Pension Plans: (a) incur any liability to the Pension
Benefit Guaranty Corporation; (b) participate in any prohibited transaction
involving any of such plans or any trust created thereunder which would
subject the Borrower to a tax or penalty on prohibited transactions imposed
under Code Section 4975 or ERISA; (c) fail to make any contribution which
it is obligated to pay under the terms of such plan; (d) allow or suffer to
exist any occurrence of a Reportable Event, or any other event or condition
which presents a risk of termination by the Pension Benefit Guaranty
Corporation of any such plan; or (e) incur any withdrawal liability with
respect to any multiemployer Pension Plan which is not fully bonded.
Section 7.11 BORROWER'S NAME. Change Borrower's corporate
name or use any trade name or style unless the Borrower shall first give
the Lender thirty days prior written notice of the change in question.
Section 7.12 CHANGES TO DSN PLANT DOCUMENTS. Make any
alterations, amendments or modifications of any provisions of (a) the DSN
Plant Equipment Lease, (b) the Ground Lease, (c) the Ground Sublease, (d)
the Consulting Agreement, or (e) the Administrative Services Agreement
dated September 19, 1994 between LSB and the Borrower.
Section 7.13 OTHER DEBTS. Except for Permitted Liens,
Borrower shall not have outstanding or incur any direct or contingent
Indebtedness (other than those to Lender) or lease obligations (other than
the Ground Lease, DSN Plant Equipment Lease and Ground Sublease) or to
become liable for the Indebtedness of others without Lender's written
consent. This does not prohibit:
(a) Acquiring goods, supplies, services or merchandise
on normal trade credit, or payroll obligations or obligations under
the Administrative Services Agreement between LSB and Borrower;
(b) Endorsing negotiable instruments received in the
usual course of business;
(c) Debts, lines of credit and leases in existence on
the date of this Agreement and disclosed to Lender on the Disclosure
Schedule; or
(d) Taxes, Indebtedness associated with the
construction of the DSN Plant and lawsuits.
Section 7.14 TRANSACTIONS WITH AFFILIATES. Not to enter
transactions with any Affiliate on terms less favorable than those
available to Borrower from persons or entitles not affiliated with Borrower
except:
(a) taxes on consolidated tax returns;
(b) the DSN Plant Equipment Lease;
(c) the Ground Lease;
(d) the Ground Sublease;
(e) the Consulting Agreement; and
(f) the Administrative Services Agreement.
None of the agreements in this Section 7.14(b) through (f) may be amended
or modified with Lender's prior written consent.
ARTICLE 8
DEFAULT
Section 8.1 Events of Default. The occurrence of any one or
more of the following events for any reason whatsoever shall constitute an
Event of Default:
(a) Any failure to pay any of the Obligations when due;
(b) Any representation or warranty made by the Borrower
in any Loan Document or in any Financial Statement or other
certificate furnished by the Borrower or any Affiliate at any time to
the Lender shall prove to be untrue in any material respect as of the
date on which made;
(c) Except with respect to cure periods as otherwise
set forth herein or therein, default shall occur in the observance or
performance of any of the other covenants and agreements contained in
any Loan Document and Borrower has not cured such default within ten
(10) days of Borrower's receipt of written notice identifying such
failure, or if any such agreement, instrument or document shall
terminate or become void or unenforceable without the written consent
of Lender and Borrower refuses to execute valid and enforceable
substitute documents;
(d) The DSN Plant Completion Date has not occurred
prior to the end of the Construction Period;
(e) Any Event of Default under the Mixed Acid Plant
Loan Documents, the Rail Car Loan Documents and Borrower has not
cured such Event of Default within any cure period provided therein;
(f) Any default by the Borrower under any material
agreement or instrument with any third party (other than an agreement
or instrument evidencing the lending of money) if such default
continues for thirty (30) days after such breach first occurs;
(g) Any default by the Borrower in any payment on any
indebtedness or obligation owed to any trade creditor in excess of
$100,000 in the aggregate beyond any period of grace provided with
respect thereto and Borrower is not contesting same in good faith and
diligently;
(h) Any uncured default beyond any applicable grace
period by LSB or any of its Subsidiaries under any agreement or
instrument evidencing any loan, extension of credit or other
Indebtedness of LSB or any of its Subsidiaries in an amount equal to
or greater than $5,000,000;
(i) Any material part of the Collateral shall be
nationalized, expropriated, condemned, seized or otherwise
appropriated, or custody or control of such Collateral or of the
Borrower shall be assumed by any public authority or any court of
competent jurisdiction at the instance of any public authority;
(j) One or more judgments for the payment of money
aggregating an excess of $1,000,000 (if not adequately covered by
insurance) shall be rendered against the Borrower or EDC and there is
a failure to pay or to bond and stay enforcement of such judgment and
commence appropriate proceedings to appeal such judgment within the
applicable appeal period or, after such appeal is filed, Borrower or
EDC fails to diligently prosecute such appeal or such appeal is
denied;
(k) The Borrower, EDC or any Guarantor shall: (i) file
a voluntary petition in bankruptcy or file a voluntary petition or an
answer or otherwise commence any action or proceeding seeking
reorganization, arrangement or for any other relief under the Federal
Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing,
or consent to, approve of, or acquiesce in, any such petition, action
or proceeding; (ii) apply for or acquiesce in the appointment of a
receiver, assignee, liquidator, sequestrator, custodian, trustee or
similar officer for it or for all or a substantial part of its
property; (iii) make an assignment for the benefit of creditors; or
(iv) admit in writing that is unable generally to pay its debts as
they become due;
(l) An involuntary petition shall be filed or an action
or proceeding otherwise commenced seeking reorganization, arrangement
or readjustment of the Borrower's EDC's or any Guarantor's debt or
for any other relief under the Federal Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing; or a receiver, assignee,
liquidator, sequestrator, custodian, trustee or similar officer for
the Borrower or EDC or any Affiliate or any Guarantor or for all or a
substantial part of their property shall be appointed involuntarily;
or a warrant of attachment, execution or similar process shall be
issued against any substantial part of the property of the Borrower,
EDC or any Guarantor; and any of the foregoing remain undismissed or
undischarged for a period of 60 days;
(m) The Borrower, EDC or any Guarantor shall file a
certificate of dissolution under applicable state law or shall be
liquidated, dissolved or wound-up or shall commence or have commenced
against it any action or proceeding for dissolution, winding-up or
liquidation, or shall take any corporate action in furtherance
thereof without Lender's prior written consent;
(n) The Security Interest shall cease to be a valid and
perfected first priority security interest in any material portion of
the Collateral then in existence and Borrower refuses to or cannot
promptly cure any deficiency and restore the Lender's valid and first
perfected priority security interest;
(o) A material default shall occur in any Construction
Contract, the Consulting Agreement, the DSN Plant Equipment Lease,
the Ground Lease or the Ground Sublease and same are not being
contested diligently and in good faith, or the DSN Plant Equipment
Lease, the Lease, or the Ground Sublease shall expire or otherwise
terminate or become unenforceable;
(p) any Guarantor revokes or terminates any guaranty
relating to the Obligations or defaults under the terms of any such
guaranty; or
Section 8.2 RIGHTS UPON DEFAULT. Upon the occurrence and
during the continuance of any Event of Default:
(a) The Lender may declare all the Obligations not
otherwise due to be forthwith due and payable, (provided that, in the
case of the occurrence of any Event of Default described in Sections
8.l(i) or (j), all the Obligations shall forthwith become due and
payable without such declaration) whereupon the unpaid amount of the
Obligations (including any applicable prepayment penalty) shall
become immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived. Upon such acceleration, Lender shall not be obligated to
advance any further funds relating to the custodian of the DSN Plant.
(b) Notwithstanding the foregoing in Section 8.2(a) but
subject to the provisions of Section 9.10, the effect of an event
described in Section 8.1(a) as an occurrence of an Event of Default
shall be after Lender gives notice of such payment Default to
Borrower and Borrower shall not have paid such amount within three
(3) days of such Notice. The effect as an Event of Default of any
other event described in Section 8.1 may be waived by Lender in
writing.
(c) In addition to all other rights provided herein or
at law, the Lender shall have all of the rights and remedies of a
secured party under the UCC and all of the rights and remedies
granted under each of the Loan Documents. At any time when an Event
of Default has occurred and is continuing, the Lender may enter any
premises where the Collateral is located, take physical possession of
the Collateral or any part thereof, and maintain such possession on
the Borrower' premises or remove any or all of the Collateral to such
other place or places as the Lender desires in its sole discretion.
If the Lender exercises its right to take possession of any
Collateral upon the occurrence and during the continuance of any
Event of Default, the Borrower, upon the Lender's demand, will
assemble the Collateral and at the Lender's option, make it available
to the Lender at the Borrower' premises at which it is located or
deliver it to such place or places as the Lender directs. The
Borrower hereby waives to the full extent permitted by law all rights
to notice and hearing prior to the Lender's exercise of its rights to
take possession of the Collateral without judicial process or to
replevy, claim and deliver, attach or levy upon the Collateral ex
parte. The Lender shall not be under any obligation to marshall any
assets in favor of the Borrower or any other party or against or in
payment of any or all of the Obligations.
(d) The Lender may sell and deliver any or all of the
Collateral at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as the Lender, in its
sole discretion, deems advisable, all in accordance with the
applicable provisions of the UCC including the standard of commercial
reasonableness.
(e) The requirement of reasonable notice with respect
to a disposition of the Collateral shall be met if such notice is
mailed both by regular and certified mail, postage prepaid to the
Borrower at the address as set forth herein at least ten days before
the time of the event of which notice is being given. Subject to the
provisions of any applicable Loan Document or law governing the
enforcement of liens or security interests, the Lender may be the
purchaser at any public sale, and to the extent permitted by
applicable law, at any private sale, free from any right of
redemption, which the Borrower also waives.
(f) The Proceeds of any sale of any of the Collateral
shall be applied first to all costs and expenses of sale, including
attorneys' fees, and second to the payment (in whatever order the
Lender elects) of all of the Obligations. The Lender will return any
excess Proceeds to the Borrower, subject to the claims of any other
parties with an interest in the Collateral or the Proceeds, and the
Borrower shall remain liable to the Lender for any deficiency. If
any Collateral is sold by the Lender upon credit or for future
delivery, the Lender shall not be liable for the failure of the
purchaser to pay for such Collateral, and in such event the Lender
may resell the same.
(g) The Lender may exercise any right or remedy it may
have at law or in equity with respect to the Obligations or the
subject matter of this Agreement. The rights and remedies provided
for herein are cumulative and not exclusive of any other of such
rights and remedies or any other rights or remedies provided by law.
(h) Upon any Default, and during any applicable cure
period, Lender shall not be obligated to make any further advances or
Loans to Borrower.
ARTICLE 9
MISCELLANEOUS
Section 9.1 SURVIVAL. All agreements, representations and
warranties contained in this Agreement or made in writing by or on behalf
of the Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, notwithstanding
any investigation at any time made by the Lender.
Section 9.2 WAIVER OF NOTICES. No notice to or demand on the
Borrower which the Lender is not required hereunder or by law to give but
nevertheless may elect to give shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstances.
Section 9.3 ASSIGNMENT. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors
and assigns of the parties hereto; provided, however, that no interest
herein may be assigned by the Borrower without the prior written consent of
the Lender. The rights and benefits of the Lender hereunder shall, if the
Lender so agrees, inure to any party acquiring any interest in the
Obligations or any part thereof. In the event of any such assignment by
the Lender, the Borrower agrees that such assignment by the Lender shall be
free from any set-off, counterclaim defense or other claim that any such
Borrower may have against such assignee, without waiving any claim such
Borrower may have against the Lender. The terms "Lender" and "Borrower" as
used herein shall include the respective successors and assigns of such
parties.
Section 9.4 COMPLETE AGREEMENT MODIFICATION. This Agreement
is intended by the Borrower and the Lender to be the final, complete and
exclusive expression of the agreement between them and supersedes all prior
agreements and understandings regarding the DSN Plant. No modification,
rescission, waiver, release or amendment of any provision of this Agreement
shall be made, except by a written agreement signed by the Borrower and a
duly authorized officer of the Lender.
Section 9.5 APPLICABLE LAW. This Agreement and the Loan
Documents (except to the extent, if any, expressly provided to the contrary
in any Loan Document) shall be governed by, construed, applied and enforced
in accordance with the laws of the State of New York.
Section 9.6 INDEMNIFICATION.
(a) If after receipt of any payment of all or any part
of the Obligations, the Lender is for any reason compelled to
surrender such payment to any person or entity, because such payment
is determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason,
Borrower's Obligations under the Note shall continue in full force
and the Borrower shall indemnify and hold the Lender harmless for,
the amount of such payment surrendered. The provisions of this
Section shall be and remain effective notwithstanding any contrary
action which may have been taken by the Lender in reliance upon such
payment, and any such contrary action so taken shall be without
prejudice to the Lender's rights under this Section and shall be
deemed to have been conditioned upon such payment having become final
and irrevocable. The provisions of this Section shall survive the
termination of this Agreement.
(b) The Borrower hereby indemnifies and holds the
Lender, and its directors, officers, agents, employees and counsel,
harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind (except
claims brought by the Borrower against the Lender for breach of this
Agreement of the Loan Documents) including without limitation, court
costs and attorneys' fees imposed on or incurred by or asserted
against any of them, whether direct, indirect or consequential
arising out of or by reason of any litigation, investigations,
claims, or proceedings whether based on any federal, state or local
laws or other statutes or regulations commenced or threatened, which
arise out of or are in any way based upon the negotiation,
preparation, execution, delivery, enforcement, performance or
administration of this Agreement or any other Loan Document, or any
undertaking or proceeding relating to any of the transactions
contemplated hereby or by any act, omission to act, event or
transaction related or attended thereto, except this indemnification
shall not apply to any losses, liabilities, damages, injuries, costs,
expenses and claims caused by the gross negligence or willful
misconduct of Lender.
(c) The Borrower hereby indemnifies the Lender and
agrees to hold the Lender harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever (including, without limitation, court
costs and attorneys' fees) which at any time or from time to time may
be paid, incurred or suffered by, or asserted against the Lender for,
with respect to, or as a direct result of the violation by the
Borrower of the Environmental Laws or any laws or regulations
relating to Hazardous Substance, treatment, storage, disposal,
generation and transportation, air, water and noise pollution, soil
or ground or water contamination, the handling, storage or release
into the environment of Hazardous Substance, or with respect to, or
as a direct or indirect result of the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission or release
from, properties utilized by the Borrower or EDC with respect to the
DSN Plant in the conduct of their respective business into or upon
any land, the atmosphere, or any watercourse, body of water or
wetland, of any Hazardous Substance (including, without limitation,
any losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under the Environmental Laws).
(d) Without limiting any of the foregoing, if, by
reason of any suit or proceeding of any kind, nature or description
against the Borrower, which, in the Lender's sole discretion makes it
advisable for the Lender to seek counsel for protection and
preservation of its Liens, security or assets or to defend its own
interest, such reasonable expenses and counsel fees shall be allowed
to the Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement. All of the
foregoing costs and expenses shall be part of the Obligations and
secured by the Collateral.
Section 9.7 STAMP OR OTHER TAX. Should any stamp, excise,
sales, use or other tax, including mortgage, conveyance, deed, intangible
or recording taxes become payable in respect of this Agreement, or any
other Loan Document, any Obligations, or any Collateral, or any
modification hereof or thereof, the Borrower shall pay the same (including
interest and penalties, if any) and shall hold the Lender harmless with
respect thereto, except for income taxes of Lender as a result thereof.
Section 9.8 CAPTIONS. The captions of the various sections of
this Agreement have been inserted only for purposes of convenience; such
captions are not a part of this Agreement and shall not be deemed in any
manner to modify, explain, enlarge or restrict any provision hereof.
Section 9.9 NOTICES. All notices or other communications
which are required or permitted hereunder to be given to any party shall be
in writing and shall be deemed sufficiently delivered if delivered
personally or by registered or certified mail, return receipt requested, or
by nationally recognized overnight delivery service, to the address set
forth below or to such other address as each party may designate for itself
by like notice. Such notice or communication shall be deemed to have been
given on the date delivered; or if refused, on the date refused; or if
marked, on the date of actual receipt of such mailing as evidenced by the
return receipt.
If to the Lender: The CIT Group/Equipment
Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attn: Senior Vice President,
Credit
If to the Borrower: DSN Corporation
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
Any such notice, demand, or request shall be deemed given upon receipt,
refusal of delivery or return for failure to be called for.
Section 9.10 NO WAIVER, LENDER PERFORMANCE. No course of
dealing between the Borrower and the Lender and no delay or omission by the
Lender in exercising any right or remedy hereunder or under any other Loan
Document or with respect to any Obligations shall operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. All rights and remedies of the
Lender hereunder or under any other Loan Document shall be cumulative.
Upon the failure of the Borrower to perform any of its duties under this
Agreement the Lender may, but shall not be obligated to, perform any or all
such duties and the Borrower will upon demand reimburse the Lender for all
reasonable costs, fees and expenses incurred in connection therewith.
Section 9.11 EVIDENCE OF OBLIGATIONS; ADMISSIBILITY OF
LENDER'S BOOKS AND RECORDS. The Borrower agrees that the Lender's books
and records showing the Obligations shall be admissible in any action or
proceeding arising herefrom.
Section 9.12 NO LIABILITY FOR BROKERS. The Borrower covenant
and agree that the Lender shall have no liability for, and the Borrower
hereby indemnifies and holds the Lender harmless against, any brokerage fee
or finder's fee or other commission, or claim therefor, arising in
connection with the transactions contemplated by this Agreement.
Section 9.13 FURTHER ASSURANCES. The Borrower shall, at its
expense, do, execute and delivery such further acts and documents as the
Lender from time to time reasonably requires for the assuring and
confirming to the Lender of the rights created or intended to be created
hereunder, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document or for assuring the validity,
perfection, priority or enforceability of any Lien under any Loan Document.
Section 9.14 COUNTERPARTS. This Agreement and the other Loan
Documents may be executed by the parties hereto and thereto in any number
of separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 9.15 NOTICE OF BREACH BY LENDER. Borrower agrees to
give the Lender notice of any action or inaction by Lender or any agent or
attorney of the Lender in connection with this Agreement, any other Loan
Document, or the Obligations of Borrower under this Agreement or any other
Loan Document that may be actionable against Lender or any agent or
attorney of Lender or a defense to payment of any Obligations of Borrower
under this Agreement or any other Loan Document, for any reason, including
commission of a tort or violation of any contractual duty or duty implied
by law. Borrower agrees, to the fullest extent that it may lawfully do so,
that unless such notice is given promptly (and in any event within fifteen
(15) days after Borrower has knowledge, or with the exercise of reasonable
diligence could have had knowledge, of any such action or inaction),
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom to the extent that the Lender could have
mitigated such claim or defense after receipt of such notice.
Section 9.16 Time. Time is of the essence.
Section 9.17 EXHIBITS. Exhibits "A", "B", "C", "D" and "E"
attached hereto are incorporated herein by this reference.
Section 9.18 AUTHORIZATION TO DATE, COMPLETE BLANKS AND
CORRECT ERRORS. The Borrower hereby irrevocably authorizes Lender and
Lender's agents, representatives and employees to date, complete any blank
spaces contained in, and to correct any errors appearing in, this
Agreement, the other Loan Documents or in any other document relating
hereto or thereto.
Section 9.19 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL
AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH
DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, WHICH AGREEMENT AND OTHER LOAN DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT
AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS
AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF.
THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT WAS DRAFTED WITH THE JOINT
PARTICIPATION OF THE RESPECTIVE PARTIES THERETO AND SHALL BE CONSTRUED
NEITHER AGAINST NOR IN FAVOR OF ANY PARTY, BUT RATHER IN ACCORDANCE WITH
THE FAIR MEANING THEREOF.
Section 9.20 Venue and Jurisdiction. THIS AGREEMENT AND ANY
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. BORROWER
HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THIS AGREEMENT
MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, IN THE
COUNTY OF NEW YORK, OR THE UNITED STATES DISTRICT COURTS FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS LENDER MAY ELECT, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. BORROWER IRREVOCABLY CONSENTS TO SERVICE OF ANY SUMMONS AND/OR
LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED STATES AIR MAIL, POSTAGE
PREPAID, TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 9.9 HEREOF, SUCH
METHOD OF SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE
SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING. NOTHING IN THIS
AGREEMENT SHALL AFFECT THE RIGHT TO SERVICE OF PROCESS OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF LENDER TO BRING
ACTIONS, SUITS OR PROCEEDINGS IN THE COURTS OF ANY OTHER JURISDICTION.
BORROWER FURTHER AGREES THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT
ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF LIABILITY.
Section 9.21 Waiver of Trial by Jury. THE PARTIES TO THIS
AGREEMENT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS AGREEMENT
AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL
JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING,
AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT, EACH PARTY TO
THIS AGREEMENT EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
"Borrower" "Lender"
DSN CORPORATION, an Oklahoma THE CIT GROUP/EQUIPMENT FINANCING,
corporation INC., a New York corporation
By __________________________ By__________________________
__________________________ __________________________
(Printed Name & Title) (Printed Name & Title)
Agreed as to Article 6:
LSB INDUSTRIES, INC.,
a Delaware corporation
By __________________________
__________________________
[Printed Name & Title]
EXHIBIT "A"
Disclosure Schedule
EXHIBIT "B"
Promissory Note
EXHIBIT "C"
Legal Description of DSN Plant Location
EXHIBIT "D"
Disbursement Schedule
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE LOAN . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 The Loan . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Disbursement Methods . . . . . . . . . . . . . . 11
Section 2.3 Repayment of the Loan. . . . . . . . . . . . . . 15
Section 2.4 Interest Charges . . . . . . . . . . . . . . . . 16
Section 2.5 Late Charge Rate . . . . . . . . . . . . . . . . 17
Section 2.6 Maximum Interest . . . . . . . . . . . . . . . . 17
Section 2.7 Expenses . . . . . . . . . . . . . . . . . . . . 17
Section 2.8 Prepayment . . . . . . . . . . . . . . . . . . . 18
Section 2.9 Conditions of Lending. . . . . . . . . . . . . . 18
Section 2.10 Place and Form of Payments . . . . . . . . . . . 23
Section 2.11 Hold Back. . . . . . . . . . . . . . . . . . . . 23
Section 2.12 Commitment Fee . . . . . . . . . . . . . . . . . 23
ARTICLE 3 SECURITY FOR THE OBLIGATIONS . . . . . . . . . . . . . 23
Section 3.1 Grant of Security Interest . . . . . . . . . . . 23
Section 3.2 Continuing Obligation. . . . . . . . . . . . . . 24
ARTICLE 4 ADMINISTRATION OF THE COLLATERAL . . . . . . . . . . . 25
Section 4.1 The Equipment. . . . . . . . . . . . . . . . . . 25
Section 4.2 No Lender Liability. . . . . . . . . . . . . . . 25
Section 4.3 Use of Equipment; Identification . . . . . . . . 26
ARTICLE 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 26
Section 5.1 Organization and Qualification . . . . . . . . . 27
Section 5.2 Concerning the Loan Documents. . . . . . . . . . 27
Section 5.3 Guaranties . . . . . . . . . . . . . . . . . . . 27
Section 5.4 Equipment. . . . . . . . . . . . . . . . . . . . 27
Section 5.5 The DSN Plant. . . . . . . . . . . . . . . . . . 28
Section 5.6 Title to the DSN Plant and Equipment;
Security Interest. . . . . . . . . . . . . . . 28
Section 5.7 Financial Condition. . . . . . . . . . . . . . . 28
Section 5.8 Litigation . . . . . . . . . . . . . . . . . . . 29
Section 5.9 Disclosure . . . . . . . . . . . . . . . . . . . 29
Section 5.10 Tax Returns and Payments . . . . . . . . . . . . 29
Section 5.11 Compliance with Other Instruments. . . . . . . . 29
Section 5.12 Pension Plans. . . . . . . . . . . . . . . . . . 30
Section 5.13 Labor Relations. . . . . . . . . . . . . . . . . 30
Section 5.14 Environmental Laws . . . . . . . . . . . . . . . 30
Section 5.15 Trade Names. . . . . . . . . . . . . . . . . . . 31
Section 5.16 Subsidiaries . . . . . . . . . . . . . . . . . . 31
Section 5.17 Loans and Affiliate Payments . . . . . . . . . . 31
Section 5.18 Permits, Licenses. . . . . . . . . . . . . . . . 31
Section 5.19 Broker's or Transaction Fees . . . . . . . . . . 31
Section 5.20 Taxpayer ID No. and Chief Executive Office . . . 32
Section 5.21 No Default . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . 32
Section 6.1 Financial and Other Information. . . . . . . . . 32
Section 6.2 Access . . . . . . . . . . . . . . . . . . . . . 35
Section 6.3 Taxes. . . . . . . . . . . . . . . . . . . . . . 35
Section 6.4 Maintenance of Properties; Insurance . . . . . . 36
Section 6.5 Business . . . . . . . . . . . . . . . . . . . . 37
Section 6.6 Compliance . . . . . . . . . . . . . . . . . . . 37
Section 6.7 Litigation . . . . . . . . . . . . . . . . . . . 37
Section 6.8 Environmental Laws . . . . . . . . . . . . . . . 37
Section 6.9 Notices. . . . . . . . . . . . . . . . . . . . . 38
Section 6.10 Tangible Net Worth . . . . . . . . . . . . . . . 38
Section 6.11 Change of Ownership. . . . . . . . . . . . . . . 38
Section 6.12 Use of Proceeds. . . . . . . . . . . . . . . . . 38
Section 6.13 Books. . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . 39
Section 7.1 Corporate Structure. . . . . . . . . . . . . . . 39
Section 7.2 Dividends, Distributions, Redemptions. . . . . . 39
Section 7.3 Loans, Investments, Affiliate Payments,
Salaries . . . . . . . . . . . . . . . . . . . 39
Section 7.4 Change in Business, Structure or Business
Location . . . . . . . . . . . . . . . . . . . 39
Section 7.5 Guaranties . . . . . . . . . . . . . . . . . . . 39
Section 7.6 Sale of Property . . . . . . . . . . . . . . . . 39
Section 7.7 Prepayment . . . . . . . . . . . . . . . . . . . 40
Section 7.8 Liens. . . . . . . . . . . . . . . . . . . . . . 40
Section 7.9 Negative Pledge on Leases. . . . . . . . . . . . 40
Section 7.10 Pension Plans. . . . . . . . . . . . . . . . . . 40
Section 7.11 Borrower's Name. . . . . . . . . . . . . . . . . 40
Section 7.12 Changes to DSN Plant Documents . . . . . . . . . 40
Section 7.13 Other Debts. . . . . . . . . . . . . . . . . . . 40
Section 7.14 Transactions with Affiliates . . . . . . . . . . 41
ARTICLE 8 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.1 Events of Default. . . . . . . . . . . . . . . . 41
Section 8.2 Rights Upon Default. . . . . . . . . . . . . . . 44
ARTICLE 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 46
Section 9.1 Survival . . . . . . . . . . . . . . . . . . . . 46
Section 9.2 Waiver of Notices. . . . . . . . . . . . . . . . 46
Section 9.3 Assignment . . . . . . . . . . . . . . . . . . . 46
Section 9.4 Complete Agreement Modification. . . . . . . . . 46
Section 9.5 Applicable Law . . . . . . . . . . . . . . . . . 47
Section 9.6 Indemnification. . . . . . . . . . . . . . . . . 47
Section 9.7 Stamp or other Tax . . . . . . . . . . . . . . . 48
Section 9.8 Captions . . . . . . . . . . . . . . . . . . . . 48
Section 9.9 Notices. . . . . . . . . . . . . . . . . . . . . 49
Section 9.10 No Waiver, Lender Performance. . . . . . . . . . 49
Section 9.11 Evidence of Obligations; Admissibility of
Lender's Books and Records . . . . . . . . . . 50
Section 9.12 No Liability for Brokers . . . . . . . . . . . . 50
Section 9.13 Further Assurances . . . . . . . . . . . . . . . 50
Section 9.14 Counterparts.. . . . . . . . . . . . . . . . . . 50
Section 9.15 Notice of Breach by Lender . . . . . . . . . . . 50
Section 9.16 Time . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.17 Exhibits . . . . . . . . . . . . . . . . . . . . 50
Section 9.18 Authorization to Date, Complete Blanks and
Correct Errors . . . . . . . . . . . . . . . . 51
Section 9.19 No Oral Agreements; Entire Agreement . . . . . . 51
Section 9.20 Venue and Jurisdiction . . . . . . . . . . . . . 51
Section 9.21 Waiver of Trial by Jury. . . . . . . . . . . . . 52
Exhibits
A - Disclosure Statement
B - Promissory Note
C - Legal Description of DSN Plant Location
D - Disbursement Schedule
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