AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
BANKAMERICA BUSINESS CREDIT, INC.
as Lender
and
LSB INDUSTRIES, INC.
as Borrower
Dated: November 21, 1997
TABLE OF CONTENTS
SECTION
Table of Contents-i-
Preamble1
1. DEFINITIONS2
1.1 As used herein:2
Account2
Account Debtor2
Affiliate2
Applicable Interest Rate2
Acquisition2
Availability2
Availability Reductions2
Bank3
Bearings3
Bearings Availability3
Bearings Availability Reduction Reserve3
Bearings Availability Reductions4
Bond Debt4
Bond Indenture4
Borrower Subsidiaries4
Business Day4
Capital Expenditures4
Capital Lease4
CCI4
CCI Borrower Subsidiaries4
CCI Consolidated Borrowing Group4
CCI Consolidated Group4
CCI Guarantor Subsidiaries4
Closing Date5
Code5
Collateral5
Debt5
Distribution5
Dollars5
EDC5
Eligible Accounts5
Eligible Inventory8
Environmental Compliance Reserve8
Environmental Laws8
Equipment9
ERISA9
Eurocurrency Liabilities9
Eurodollar Business Day9
Eurodollar Base Rate9
Eurodollar Interest Payment Date9
Eurodollar Interest Rate Determination Date9
Eurodollar Rate10
Eurodollar Rate Loan10
Eurodollar Rate Reserve Percentage10
Event10
Event of Default10
Financial Statements10
Fiscal Quarter10
Fiscal Year10
GAAP10
Gross Availability Reductions10
Gross LSB Accounts Availability11
Guaranty11
Intercompany Accounts11
Interest Period11
Inventory11
IRS11
Latest Forecasts11
Letter of Credit11
Letter of Credit Agreement11
Letter of Credit Fee11
Lien11
Loans12
Loan Documents12
LSB12
LSB Adjusted Tangible Assets12
LSB Adjusted Tangible Net Worth12
LSB Borrower Subsidiaries12
LSB Borrowing Group12
LSB Consolidated Borrowing Group12
LSB Guarantor Subsidiaries13
LSB-Related Loan Agreements13
Maximum Inventory Advance Amount13
Maximum Revolving Credit Line13
Multi-employer Plan13
Obligations13
Offering Memorandum14
Original Loan Agreement14
Participating Lender14
Patent and Trademark Assignments14
Payment Account14
PBGC14
Pension Plan14
Permitted Debt14
Permitted Liens15
Person15
Plan16
Proceeds16
Property16
Proprietary Rights16
Public Authority16
Real Property16
Receivables16
Reference Rate17
Reference Rate Loan17
Reference Rate Margin17
Related Company17
Reportable Event17
Restricted Investment17
Reversions18
Revolving Loans18
SBL Debt18
Security Interest18
Subordinated Debt18
Subsidiary" or "Subsidiaries18
Subsidiary Guaranties18
Swap Transaction Fee18
Swap Transaction Reserves18
Swap Transactions18
Termination Event18
UCC19
1.2 Accounting Terms19
1.3 Other Terms19
1.4 Exhibits19
2. LOANS AND LETTERS OF CREDIT19
2.1 Revolving Loans19
2.2 Availability Determination20
2.3 Letters of Credit20
2.4 Swap Transactions20
3. INTEREST AND OTHER CHARGES21
3.1 Interest21
3.2 Eurodollar Borrowings: Conversion or Continuation22
3.3 Special Provisions Governing Eurodollar Rate Loans23
3.4 Maximum Interest Rate27
3.5 Capital Adequacy28
4. PAYMENTS AND PREPAYMENTS28
4.1 Revolving Loans28
4.2 Place and Form of Payments: Extension of Time29
4.3 Apportionment, Application and Reversal of Payments29
4.4 INDEMNITY FOR RETURNED PAYMENTS29
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS30
6. COLLATERAL30
6.1 Grant of Security Interest30
6.2 Perfection and Protection of Security Interest30
6.3 Location of Collateral31
6.4 Title to, Liens on, and Sale and Use of Collateral32
6.5 Appraisals32
6.6 Access and Examination32
6.7 Insurance32
6.8 Collateral Reporting33
6.9 Accounts34
6.10 Collection of Accounts35
6.11 Inventory35
6.12 Documents and Instruments36
6.13 Right to Cure36
6.14 Power of Attorney36
6.15 Lender's Rights, Duties, and Liabilities36
6.16 Release of Collateral and Borrower37
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES37
7.1 Books and Records37
7.2 Financial Information38
7.3 Notices to Lender39
8. GENERAL WARRANTIES AND REPRESENTATIONS40
8.1Authorization, Validity, and Enforceability of this Agreement and the
Loan Documents41
8.2 Validity and Priority of Security Interest41
8.3 Organization and Qualification41
8.4 Corporate Name; Prior Transactions41
8.5 Subsidiaries and Affiliates42
8.6 Financial Statements and Projections42
8.7 Capitalization42
8.8 Solvency42
8.9 Title to Property42
8.10 Real Property; Leases43
8.11 Proprietary Rights43
8.12 Trade Names and Terms of Sale43
8.13 Litigation43
8.14 Labor Disputes43
8.15 Environmental Laws43
8.16 No Violation of Law45
8.17 No Default45
8.18 Plans45
8.19 Taxes45
8.20 Use of Proceeds46
8.21 Private Offerings46
8.22 Broker's Fees46
8.23 No Material Adverse Change46
8.24 Debt46
9. AFFIRMATIVE AND NEGATIVE COVENANTS46
9.1 Taxes and Other Obligations47
9.2 Corporate Existence and Good Standing47
9.3 Maintenance of Property and Insurance47
9.4 Environmental Laws47
9.5 Mergers, Consolidations, Acquisitions, or Sales48
9.6 Guaranties48
9.7 Debt48
9.8 Prepayment48
9.9 Transactions with Affiliates48
9.10 Plans and Compensation48
9.11 Reserved49
9.12 Liens49
9.13 New Subsidiaries49
9.14 Distributions and Restricted Investments49
9.15 Capital Expenditures50
9.16 LSB Adjusted Tangible Net Worth50
9.17 Debt Ratio50
9.18 Further Assurances50
10. CLOSING; CONDITIONS TO CLOSING51
10.1 Representations and Warranties; Covenants; Events51
10.2 Delivery of Documents51
10.3 Required Approvals51
10.4 No Material Adverse Change51
10.5 Proceedings51
10.6 Legal Opinions51
10.7 September 30, 1997 Quarterly Financial Statements51
10.8 CCI Bond Offering52
10.9 Conditions Precedent to Each Loan52
11. DEFAULT; REMEDIES52
11.1 Events of Default52
11.2 Remedies54
12. TERM AND TERMINATION56
13. MISCELLANEOUS56
13.1 Cumulative Remedies; No Prior Recourse to Collateral56
13.2 No Implied Waivers57
13.3 Severability57
13.4 Governing Law57
13.5 Consent to Jurisdiction and Venue; Service of Process57
13.6 Survival of Representations and Warranties57
13.7 Indemnification57
13.8 Other Security and Guaranties58
13.9 Fees and Expenses59
13.10 Notices59
13.11 Waiver of Notices60
13.12 Binding Effect; Assignment; Disclosure61
13.13 Modification61
13.14 Counterparts61
13.15 Captions61
13.16 Right of Set-Off61
13.17 Participating Lender's Security Interests61
13.18 WAIVER OF JURY TRIAL62
13.19 AMENDMENT AND RESTATEMENT; LIMITATIONS OF SUBSIDIARY LIABILITY;
WAIVERS OF CLAIMS62
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated November
21, 1997, and is entered into by and between BANKAMERICA BUSINESS CREDIT,
INC., a Delaware corporation, with offices at 55 South Lake Avenue, Suite 900,
Pasadena, California 91101 (the "Lender"), and LSB INDUSTRIES, INC., a
Delaware corporation, with offices at 16 South Pennsylvania, Oklahoma City,
Oklahoma 73107 (the "Borrower" or "LSB").
W I T N E S S E T H
WHEREAS, Lender and Borrower have entered into that certain Loan and
Security Agreement dated December 12, 1994, as amended by (i) that certain
First Amendment to Loan and Security Agreement dated as of August 17, 1995,
(ii) that certain Second Amendment to Loan and Security Agreement dated as of
December 1, 1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, (iv) that certain Fourth Amendment to
Loan and Security Agreement dated as of July 1, 1996, (v) that certain Fifth
Amendment to Loan and Security Agreement dated as of November 18, 1996, (vi)
that certain Sixth Amendment to Loan and Security Agreement dated as of
February 13, 1997, (vii) that certain Seventh Amendment to Loan and Security
Agreement dated as of April 11, 1997, (viii) that certain Eighth Amendment to
Loan and Security Agreement dated as of May 19, 1997, (ix) that certain Ninth
Amendment to Loan and Security Agreement dated as of June 30, 1997, (x) that
certain Tenth Amendment to Loan and Security Agreement dated as of September
10, 1997, and (xi) that certain Eleventh Amendment to Loan and Security
Agreement dated as of October 23, 1997 (as so amended, collectively referred
to as the "Original Loan Agreement"); and
WHEREAS, of even date herewith, Lender has entered into three (3) related
amended and restated loan transactions with L&S Bearing Co., Climate Master,
Inc., International Environmental Corporation, El Dorado Chemical Company,
Slurry Explosive Corporation and Summit Machine Tool Manufacturing Corp.
(which, along with Borrower, are referred to as the "Borrower Subsidiaries");
and
WHEREAS, Lender has agreed to make loans and letters of credit available
to Borrower based on certain assets of the Borrower and six (6) of Borrower's
other Subsidiaries (the "LSB Guarantor Subsidiaries"), which loans and letters
of credit are secured by guaranties of the LSB Guarantor Subsidiaries, and
Borrower has represented to Lender that Borrower will, in turn, make such
loans and letters of credit available to the LSB Guarantor Subsidiaries; and
WHEREAS, the aggregate amount of all loans and letters of credit to be
made by Lender to the Borrower Subsidiaries will not exceed Sixty-Five Million
and No/100 Dollars ($65,000,000) in the aggregate at any time outstanding;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. DEFINITIONS.
1.1 As used herein:
"Account" means the Borrower's or any LSB Guarantor Subsidiary's right to
payment for a sale or lease and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated to the Borrower or any LSB
Guarantor Subsidiary on an Account.
"Affiliate" means: a Person who, directly or indirectly, controls, is
controlled by or is under common control with LSB, which includes the LSB
Consolidated Borrowing Group. The term "control" (including the terms
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"Applicable Interest Rate" has the meaning given to such term in Section
3.1(a).
"Acquisition" means the investment in or purchase of a corporation,
association, business, entity, partnership or limited liability company by
Borrower by means of the purchase of stock, assets, memberships, partnership
interests or otherwise.
"Availability" means at any time the lesser of:
A. The Maximum Revolving Credit Line; or
B.The lesser of $5,000,000 less the Availability Reductions; or
C. The sum of:
(1)eighty-five percent (85%) of the value of Eligible Accounts other than
Eligible Accounts of Morey Machinery Manufacturing Corporation, plus eighty
percent (80%) of the Eligible Accounts of Morey Machinery Manufacturing
Corporation ("Accounts Availability"), plus
(2)the lesser of (a) the Maximum Inventory Advance Amount or (b) sixty percent
(60%) of the value of Eligible Inventory; less
(3)the Availability Reductions.
"Availability Reductions" means the sum of the following amounts:
(i) the unpaid balance of outstanding Revolving Loans at such time;
(ii) one hundred percent (100%) of the aggregate undrawn face amount
of all outstanding Letters of Credit at such time which the Lender has, or has
caused to be, issued or obtained for the account of Borrower or any LSB
Guarantor Subsidiary;
(iii) reserves for accrued interest on the Revolving Loans which is
past due;
(iv) the Environmental Compliance Reserve (Note: There is no
Environmental Compliance Reserve as of the Closing Date); and
(v) all other reasonable reserves which the Lender in its reasonable
discretion deems necessary or desirable to maintain with respect to Borrower's
account, including, without limitation, any amounts which the Lender could
reasonably be obligated to pay within a six-month period for the account of
Borrower.
"Bank" means Bank of America N.T. & S.A.
"Bearings" means International Bearings, Inc., an Oklahoma corporation.
"Bearings Availability" means at any time the lesser of:
A. Availability; or
B.$3,000,000 less the Bearings Availability Reductions; or
C. The sum of:
(1)eighty-five percent (85%) of the value of Eligible Accounts of Bearings,
plus
(2)the lesser of (x) $1,000,000 or (y) (i) sixty percent (60%) of the value of
Eligible Inventory of Bearings less (ii) the Bearings Availability Reduction
Reserve; less
(3)the Bearings Availability Reductions.
"Bearings Availability Reduction Reserve" means a permanent inventory
reserve of $1,000,000 which reduces the Availability of Bearings based on
Eligible Inventory under this Agreement until such time as this Agreement is
terminated, whereupon this inventory reserve reduces the availability of L&S
Bearing Co. under the L&S Bearing Loan Agreement until such time as the L&S
Bearing Loan Agreement is terminated, whereafter this inventory reserve
reduces the availability of Summit Machine Tool Manufacturing Corp. under the
Summit Loan Agreement.
"Bearings Availability Reductions" means the Availability Reductions that
pertain solely to Bearings.
"Bond Debt" means Debt owed by any member of the CCI Consolidated Group
on Senior Notes due 2007 (the "Notes") in the principal amount not to exceed
$125,000,000 issued pursuant to the Bond Indenture.
"Bond Indenture" means that certain Indenture dated as of November 26,
1997 by and among CCI and other members of the CCI Consolidated Group and Bank
One, NA relating to the Bond Debt.
"Borrower Subsidiaries" means LSB, L&S Bearing Co., El Dorado Chemical
Company, Slurry Explosive Corporation, Climate Master, Inc., International
Environmental Corporation and Summit Machine Tool Manufacturing Corp.
"Business Day" means any day that is not a Saturday, Sunday, or day on
which banks in Los Angeles, California are required or permitted to close.
"Capital Expenditures" means all costs incurred, whether payable in the
Fiscal Year incurred or thereafter, (including financing costs required to be
capitalized under GAAP) for purchases made during a Fiscal Year for any fixed
asset or improvement, or replacement, substitution, or addition thereto, which
has a useful life of more than one year, including, without limitation, those
costs arising in connection with the direct or indirect acquisition of such
assets by way of increased product or service charges or offset items or in
connection with Capital Leases.
"Capital Lease" means any lease of Property that, in accordance with
GAAP, should be reflected as a liability on a Person's balance sheet.
"CCI" means ClimaChem, Inc., an Oklahoma corporation, and a wholly-owned
Subsidiary of LSB.
"CCI Borrower Subsidiaries" means Climate Master, Inc., International
Environmental Corporation, El Dorado Chemical Company, and Slurry Explosive
Corporation.
"CCI Consolidated Borrowing Group" means the CCI Borrower Subsidiaries
and the CCI Guarantor Subsidiaries.
"CCI Consolidated Group" means CCI and all of its Subsidiaries, including
the CCI Borrower Subsidiaries and the CCI Guarantor Subsidiaries.
"CCI Guarantor Subsidiaries" means Climate Mate, Inc., LSB Chemical
Corp., Universal Tech Corporation, The Environmental Group, Inc.,CHP
Corporation, Koax Corp. and APR Corporation.
"Closing Date" means the date of this Agreement, being the date first
above written.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 6.1.
"Debt" means all liabilities, obligations and indebtedness of the
Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, as would be shown on the balance sheet of the Borrower prepared in
accordance with GAAP.
"Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of Property in respect of capital
stock of such corporation, other than distributions in capital stock; and (b)
the redemption or other acquisition of any capital stock of such corporation
"Dollars" and "$" means lawful money of the United States of America.
"EDC" means Eldorado Chemical Company, a CCI Borrower Subsidiary.
"Eligible Accounts" means all Accounts of Borrower and each LSB Guarantor
Subsidiary which are not ineligible. Accounts shall be ineligible as the
basis for Revolving Loans based on the following criteria. Eligible Accounts
shall not include any Account:
(i) where such Account is "Past Due". For the purposes of this
provision, "Past Due" means: (a) where the Account has terms of payment of
less than ninety-one (91) days from the invoice date, the payment thereof is
more than 90 days past due; and (b) where the Account has terms of payment of
ninety-one to three hundred sixty (91 to 360) days from the Invoice Date, the
payment thereof is more than 30 days past due; notwithstanding the foregoing
all advances to Borrower and the other Borrower Subsidiaries with respect to
"eligible accounts" under the LSB-Related Loan Agreements that have terms of
payment of more than one hundred eighty (180) days (the "180-Day Accounts")
shall not exceed in the aggregate at any time the lesser of (i) $1,500,000 or
(ii) five percent (5%) of the Gross LSB Accounts Availability (without taking
into account the 180-Day Accounts);
(ii) where, with respect to such Account, any of the representations,
warranties, covenants and agreements contained in Sections 6.9 and 8.2 of this
Agreement are not or have ceased to be complete and correct or have been
breached;
(iii) where such Account represents a progress billing or as to which
the Borrower or a LSB Guarantor Subsidiary has extended the time for payment
after issuance of the invoice relating to such Account. For the purpose
hereof, "progress billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to which the Account
Debtor's obligation to pay such invoice is expressly conditioned upon the
completion by Borrower or the applicable LSB Guarantor Subsidiary of any
further performance under the contract or agreement, provided, however, that
performance required under a warranty claim or provision shall not make such
Account a "progress billing";
(iv) where Borrower or a LSB Guarantor Subsidiary has become aware
that any one or more of the following events has occurred with respect to an
Account Debtor on such Account: death or judicial declaration of incompetency
of an Account Debtor who is an individual; the filing by or against the
Account Debtor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the Account
Debtor for the benefit of creditors; the appointment of a receiver or trustee
for the Account Debtor or for any of the assets of the Account Debtor; the
institution by or against the Account Debtor of any other type of insolvency
proceeding (under the bankruptcy laws of the United States or otherwise) or of
any formal or informal proceeding for the dissolution or liquidation of, or
winding up of affairs of, the Account Debtor; the sale, assignment, or
transfer of all or any material part of the assets of the Account Debtor; or
the cessation of the business of the Account Debtor as a going concern;
(v) where an Account is not a valid, legally enforceable obligation
of the Account Debtor thereunder or is subject to offset, counterclaim or
other defenses on the part of such Account Debtor denying liability thereunder
in whole or in part;
(vi) where the Borrower or a LSB Guarantor Subsidiary does not have
good and marketable title to such Account, free and clear of all Liens, other
than Liens arising under this Agreement and the documents delivered in
connection herewith;
(vii) which is owed by an Account Debtor which: (i) does not maintain
its chief executive office in the United States or territory thereof or
Canada; or (ii) is not organized under the laws of the United States or any
state or territory thereof or Canada; or (iii) is the government of any
foreign country or any state, province, municipality or other political
subdivision thereof (all of the foregoing being referred to as "Foreign
Accounts"); except that, to the extent that such Foreign Accounts are secured
or payable by letters of credit or bank guarantees reasonably acceptable to
Lender, such Foreign Accounts shall be considered Eligible Accounts.
Notwithstanding the foregoing, Lender has agreed that Foreign Accounts, if
they otherwise meet all eligibility requirements, will be Eligible Accounts
even though such Foreign Accounts are not secured or payable by letters of
credit or bank guaranties reasonably acceptable to Lender up to an amount not
to exceed at any one time more than five percent (5%) of the Gross LSB
Accounts Availability (without taking into account such Foreign Accounts);
(viii) which is owed by an Account Debtor which is an Affiliate;
(ix) which is owed by the government of the United States of America,
or any department, agency, or other instrumentality thereof, unless the
Federal Assignment of Claims Act of 1940, as amended, or any other steps
necessary to perfect the Lender's Security Interest therein, have been
complied with to the Lender's reasonable satisfaction with respect to such
Account;
(x) which is owed by any state or municipality, or any department,
agency, or other instrumentality thereof, and as to which the Lender's
Security Interest therein is not or cannot be perfected;
(xi) which arises out of a sale to an Account Debtor on a bill
and hold, guaranteed sale, sale and return, sale on approval, consignment, or
other repurchase or return basis;
(xii) which is evidenced by a promissory note or other
instrument (unless such note or instrument is part of chattel paper in which
Lender has a first priority perfected Security Interest) or by chattel paper
(unless Lender has a first priority perfected Security Interest therein);
(xiii) where the goods giving rise to such Account have not been
shipped and delivered to and accepted by the Account Debtor (provided,
however, that where the Account Debtor has agreed in writing to accept
billings for such goods, with a copy of such writing being provided to Lender,
then such Account shall be an Eligible Account if it otherwise qualifies) or
the services giving rise to such Account have not been performed by the
Borrower or the LSB Guarantor Subsidiary and accepted by the Account Debtor;
or
(xiv) if Lender believes in its reasonable credit judgment that the
prospect of collection of such Account is impaired; or
(xv) which Account is owing from an Account Debtor in which fifty
percent (50%) or more of the Accounts owing from whom are Past Due as set
forth in subsection (i) of this definition of Eligible Accounts; or
(xvi) as to which either the perfection, enforceability, or validity
of the Security Interest in such Account, or the Lender's right or ability to
obtain direct payment to the Lender of the Proceeds of such Account, is
governed by any federal, state, or local statutory requirements other than
those of the UCC; or
(xvii) with respect to which the Account Debtor is located in any
state requiring the filing of a Business Activity Report or similar document
in order to permit the Borrower or the LSB Guarantor Subsidiary to seek
judicial enforcement in such state of payment of such Account, unless Borrower
or the LSB Guarantor Subsidiary has qualified to do business in such state, or
has filed a Notice of Business Activities Report or equivalent report with the
applicable state office for the then current year.
"Eligible Inventory" means Inventory valued at the lower of cost or
market on a "first in-first out" ("FIFO") basis that constitutes (i) raw
materials (including raw materials stored or held by the Borrower or any LSB
Guarantor Subsidiary in the work-in-progress area and fifty percent (50%) of
Inventory classified as components) and (ii) first quality finished goods and
that (a) is not obsolete or unmerchantable, (b) upon which the Lender has a
first priority perfected Security Interest, and (c) the Lender otherwise deems
eligible as the basis for Revolving Loans based on such other credit and
collateral considerations as the Lender may from time to time establish in its
reasonable discretion. Without intending to limit the Lender's discretion to
establish other reasonable criteria of eligibility, no work-in-progress,
service or spare parts, packaging, used parts, shipping materials, supplies,
containers, defective Inventory, Inventory consisting of machines being
rebuilt, Inventory acquired in trade in connection with the sale of other
Inventory, slow-moving Inventory, Inventory in transit (except for Inventory
in transit owned by Borrower or any LSB Guarantor Subsidiary, covered by
insurance, and in which Lender has a Security Interest), fifty percent (50%)
of Inventory classified as components, or Inventory delivered to Borrower or
any LSB Guarantor Subsidiary on consignment shall constitute Eligible
Inventory. Eligible Inventory shall not include Inventory stored at locations
other than those locations either owned by the Borrower or a LSB Guarantor
Subsidiary or locations for which a landlord's waiver acceptable to Lender or
a consignment agreement (with appropriate UCC filings) has been signed by the
owner of such location and delivered to Lender. In addition, the amount of
all finished goods reserves (excluding reserves for "last-in-first-out"
valuation) shown on the books of Borrower or any of the LSB Guarantor
Subsidiaries shall be deducted from the value of the Eligible Inventory as
used in computing Availability, except to the extent that any such reserve has
already been taken into account in connection with any of the above criteria.
"Environmental Compliance Reserve" means all reserves which the Lender
from time to time establishes for amounts that are liabilities required to be
paid by the Borrower or any LSB Guarantor Subsidiary within 180 days in order
to correct any violation by the Borrower or such LSB Guarantor Subsidiary or
the operations or Property of Borrower or any LSB Guarantor Subsidiary with
respect to Environmental Laws.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, and consent decrees relating to hazardous substances,
and environmental matters applicable to the business and facilities of
Borrower or any LSB Guarantor Subsidiary (whether or not owned by it). Such
laws and regulations include but are not limited to the Resource Conservation
and Recovery Act, 42 U.S.C. § 6901 et seq., as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601
et seq., as amended: the Toxic Substances Control Act, 15 U.S.C. § 2601
et seq., as amended; the Clean Water Act, 33 U.S.C. § 466 et seq., as
amended; the Clean Air Act, 42 U.S.C. § 7401 et seq., as amended; state
and federal superlien and environmental cleanup programs; and U.S. Department
of Transportation regulations.
"Equipment" means, with respect to the Borrower and each LSB Guarantor
Subsidiary, all of the now owned and hereafter acquired machinery, equipment,
furniture, furnishings, fixtures, and other tangible personal property (except
Inventory), including, without limitation, data processing hardware and
software, motor vehicles, aircraft, dies, tools, jigs, and office equipment,
as well as all of such types of property which are leased and all of the
rights and interests with respect thereto under such leases (including,
without limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto wherever any of the
foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Business Day" means any Business Day in which commercial
banks are open for international business (including dealings in dollar
deposits) in London, England and Los Angeles, California.
"Eurodollar Base Rate" means, for any Interest Period, an interest rate
determined by the Lender to be the rate per annum at which deposits in Dollars
are offered to Bank in the London interbank market at 11:00 a.m. (London time)
two (2) Business Days before the first day of such Interest Period for
delivery on the first day of such Interest Period in an amount substantially
equal to the Eurodollar Rate Loans requested for such Interest Period and for
a period equal to such Interest Period.
"Eurodollar Interest Payment Date" means the first day of each month
during any Interest Period and the last day of such Interest Period.
"Eurodollar Interest Rate Determination Date" means each date of
calculating the Eurodollar Rate for purposes of determining the interest rate
with respect to an Interest Period. The Eurodollar Interest Rate
Determination Date for any Eurodollar Rate Loan shall be the second Business
Day prior to the first day of the related Interest Period for such Eurodollar
Rate Loan.
"Eurodollar Rate" means, for any Interest Period, a per annum interest
rate (rounded upward to the next 1/1000th of 1%) equal to the quotient of (a)
the Eurodollar Base Rate for such Interest Period, divided by (b) one hundred
percent (100%) minus the Eurodollar Rate Reserve Percentage for such Interest
Period.
"Eurodollar Rate Loan" means a Revolving Loan during any period in which
it bears interest at the rate provided in Section 3.1(a)(ii), as such amount
may be adjusted pursuant to Section 3.1(b).
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
reserve percentage applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such percentages
for those days in such Interest Period during which any such percentage shall
be so applicable) under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event" means any event or condition which, with notice, the passage of
time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
"Event of Default" has the meaning given to such term in Section 11.1.
"Financial Statements" means, according to the context in which it is
used, the financial statements attached hereto as Exhibit G-1, and the Latest
Forecasts attached hereto as Exhibit G-2, and any other financial statements
required to be given by the Borrower to the Lender under this Agreement.
"Fiscal Quarter" means any three-month period ending March 31, June 30,
September 30 or December 31.
"Fiscal Year" means LSB's fiscal year for financial accounting purposes.
The current Fiscal Year of LSB will end on December 31, 1997.
"GAAP" means at any particular time generally accepted accounting
principles as in effect at such time.
"Gross Availability Reductions" means the sum of all "Availability
Reductions" as such term is defined in and calculated under the LSB-Related
Loan Agreements.
"Gross LSB Accounts Availability" means the sum of the amounts calculated
as "Accounts Availability" as such term is defined in and as calculated under
all of the LSB-Related Loan Agreements.
"Guaranty" by any Person means all obligations of such Person which in
any manner directly or indirectly guarantee the payment or performance of any
indebtedness or other obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against the loss in respect thereof, including, without
limitation, any such obligations incurred through an agreement, (a) to
purchase the guaranteed obligations or any Property constituting security
therefor or (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the Borrower
to, or which otherwise arise from any transaction by the Borrower with, any
Affiliate.
"Interest Period" means, with respect to each Eurodollar Rate Loan the
90-day interest period applicable to such Eurodollar Rate Loan as determined
pursuant to Section 3.3(b).
"Inventory" means all of the Borrower's and each LSB Guarantor
Subsidiary's now owned and hereafter acquired inventory, wherever located, to
be held for sale or lease, all raw materials, work-in-process, finished goods,
returned and repossessed goods, and materials and supplies of any kind, nature
or description which are or might be used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such inventory, and
all documents of title or other documents representing them.
"IRS" means the Internal Revenue Service or any successor agency.
"Latest Forecasts" means, (a) on the Closing Date and thereafter until
the Lender receives new forecasts pursuant to Section 8.6, the forecasts of
the Borrower's monthly financial condition, results of operations, and cash
flows through the year ending December 31, 1997, attached hereto as Exhibit
G-2; and (b) thereafter, the forecasts most recently received by the Lender
pursuant to Section 7.2.
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Agreement" has the meaning specified in Section 2.3.
"Letter of Credit Fee" means the commissions charged under the Letter of
Credit Agreement on the outstanding amount of each Letter of Credit.
"Lien" means: any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, or conditional sale, or a lease, consignment
or bailment for security purposes.
"Loans" means, collectively, all loans and advances by the Lender to or
on behalf of the Borrower provided for in Article 2.
"Loan Documents" means all documents executed by Borrower and/or any LSB
Guarantor Subsidiary, including this Agreement, the Letter of Credit
Agreement, the Patent and Trademark Assignments, the Guaranties, the
Collateral Assignment of Notes and Liens, and all other agreements,
instruments, and documents heretofore, now or hereafter evidencing, securing
or guaranteeing the Obligations under this Agreement, the Collateral or the
Security Interest, as the same may hereafter be amended, modified, restated
and/or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation, the Borrower
under this Agreement.
"LSB Adjusted Tangible Assets" means all of the assets of the LSB
Consolidated Group, on a consolidated basis, except: (a) goodwill; (b)
unamortized debt discount and expense; (c) assets constituting Intercompany
Accounts; (d) fixed assets to the extent of any write-up in the book value
thereof resulting from a revaluation effective after the Closing Date; and (e)
any intangibles, as determined in accordance with GAAP.
"LSB Adjusted Tangible Net Worth" means, at any date: (a) the book value
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with GAAP) at which the
LSB Adjusted Tangible Assets would be shown on a consolidated balance sheet of
the LSB Consolidated Group at such date prepared in accordance with GAAP less
(b) (i) the amount at which the LSB Consolidated Group's liabilities would be
shown on such balance sheet prepared in accordance with GAAP, and (ii) LSB's
redeemable preferred stock which is valued at $146,000 as of the Closing Date.
"LSB Borrower Subsidiaries" means LSB, L&S Bearing Co. and Summit Machine
Tool Manufacturing Corp.
"LSB Borrowing Group" means the LSB Borrower Subsidiaries and the LSB
Guarantor Subsidiaries.
"LSB Consolidated Borrowing Group" means the LSB Borrowing Group and the
CCI Consolidated Borrowing Group.
"LSB Guarantor Subsidiaries" means International Bearings, Inc., LSB
Extrusion Co., Rotex Corporation, Tribonetics Corporation ("Tribonetics"),
Morey Machinery Manufacturing Corporation, and L&S Automotive Products Co.
"LSB-Related Loan Agreements" means all of the following loan
agreements: (i) this Agreement; (ii) the Loan and Security Agreement dated of
even date herewith between Lender and L & S Bearing Co. (the "L&S Bearing Loan
Agreement"); (iii) the Loan and Security Agreement dated of even date herewith
between Lender, El Dorado Chemical Company, Slurry Explosive Corporation,
Climate Master, Inc., and International Environmental Corporation; and (iv)
the Loan and Security Agreement dated of even date herewith between Lender and
Summit Machine Tool Manufacturing Corp. (the "Summit Loan Agreement").
"Maximum Inventory Advance Amount" means the lesser of (a) $32,500,000
less all then outstanding revolving loans, advances, and outstanding letters
of credit based on the "Eligible Inventory" (as defined in each of the
LSB-Related Loan Agreements) of the LSB Consolidated Borrowing Group under the
LSB-Related Loan Agreements, or (b) $1,500,000 less all then outstanding
Revolving Loans, advances, and outstanding Letters of Credit based on the
Eligible Inventory.
"Maximum Revolving Credit Line" means Sixty-Five Million Dollars
($65,000,000) less the Gross Availability Reductions.
"Multi-employer Plan" means a Plan which is described in Section 3(37) of
ERISA.
"Obligations" means all present and future loans, advances, liabilities,
obligations, covenants, duties and Debts owing by the Borrower to the Lender,
arising under this Agreement or any other Loan Document, whether or not
evidenced by any note, or other instrument or document, whether arising from
an extension of credit, opening of a letter of credit, loan, guaranty,
indemnification (including any indemnity to Bank by Lender in connection with
the Swap Transactions or otherwise for the benefit of the Borrower), whether
direct or indirect (including, without limitation, those acquired by
assignment from others relating to Swap Transactions), absolute or contingent,
due or to become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to the Borrower
hereunder or under another Loan Document, or under any other agreement or
instrument with Lender relating to the Swap Transactions. "Obligations"
includes, without limitation, (a) all debts, liabilities, and obligations now
or hereafter owing from Borrower to Lender under or in connection with the
Letters of Credit and the Letter of Credit Agreement, (b) all debts,
liabilities, and obligations now or hereafter owing from any Borrower to the
Lender arising from or related to the Swap Transactions, and (c) all debts,
liabilities, and obligations owing by the Borrower to the Lender under the
Continuing Guaranty executed by the Borrower dated of even date herewith.
"Offering Memorandum" means that certain Offering Memorandum dated
November 21, 1997, as amended or supplemented, issued by CCI describing CCI
and the CCI Consolidated Group, the Bond Debt, and the Bond Indenture.
"Original Loan Agreement" has the meaning set forth in the recital
clauses of this Agreement.
"Participating Lender" means any Person who shall have been granted the
right by the Lender to participate in the Revolving Loans and who shall have
entered into a participation agreement in form and substance satisfactory to
the Lender.
"Patent and Trademark Assignments" means the Patent Security Agreement
and the Trademark and Trade Names Security Agreement dated as of December 12,
1994, executed and delivered by the Borrower to the Lender to evidence and
perfect the Lender's Security Interest in the Borrower's present and future
patents, trademarks, trade names and related licenses and rights, each as
amended and modified from time to time.
"Payment Account" means each blocked bank account, established pursuant
to Section 6.10, to which Proceeds of Accounts and other Collateral are
deposited or credited, and which is maintained in the name of the Borrower on
terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Pension Plan" means any employee benefit plan, including a Multiemployer
Plan, which is subject to Title IV of ERISA, where either (a) the Plan is
maintained by the Borrower or any Related Company; or (b) Borrower or any
Related Company contributes or is required to contribute to it; or (c)
Borrower or any Related Company has incurred or may incur liability, including
contingent liability, under Title IV of ERISA, either to it, or to the PBGC
with respect to it.
"Permitted Debt" means: (i) the Obligations; (ii) Debt set forth in the
most recent Financial Statements delivered to the Lender, or the notes
thereto; (iii) Debt incurred since the date of such Financial Statements to
finance Capital Expenditures permitted hereby; (iv) Debt issued or assumed by
any Borrower in connection with an Acquisition permitted under Section 9.14
hereof; (v) Debt resulting from a judgment having been rendered against the
Borrower that is being appealed by the Borrower in good faith and in a timely
manner, for which an adequate reserve has been recorded on Borrower's books,
and which is not fully covered by insurance; (vi) Subordinated Debt; (vii)
Debt resulting from the refinancing of any other Permitted Debt as long as (a)
such Debt does not exceed the amount of the refinanced Debt, and (b) such Debt
does not result in payment acceleration of the refinanced Debt; (viii) Debt
resulting from trade payables and other obligations arising in the ordinary
course of business, (ix) other Debt not otherwise permitted by this definition
in an amount not to exceed $5,000,000 at any one time; (x) Debt of the
Borrower (a) to CCI, or (b) to a member of the LSB Consolidated Borrowing
Group, or (c) to a member of the CCI Consolidated Borrowing Group, or (d) to
an Affiliate in accordance with Section 9.9 hereof, or (e) to any other
Subsidiary of LSB that is not CCI, a member of the CCI Consolidated Borrowing
Group or the LSB Consolidated Borrowing Group, provided however that the
aggregate amount of Debt outstanding to all such other Subsidiaries under (e)
shall at no time exceed $200,000 in the aggregate; (xi) the Bond Debt; (xii)
the SBL Debt; and (xiii) Debt of Tribonetics to the Stillwater National Bank &
Trust Company in the original principal sum of $2,000,000 (the "Tribonetics
Loan"). Notwithstanding the foregoing, Permitted Debt described in subsection
(ix) of this definition, when combined with Permitted Debt allowed under
subsection (ix) of the definition of Permitted Debt under all of the other
LSB-Related Loan Agreements, shall not exceed $5,000,000 at any one time.
"Permitted Liens" means: (a) Liens for taxes not yet payable or Liens for
taxes being contested in good faith and by proper proceedings diligently
pursued, provided that a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor on the applicable
Financial Statements, and further provided that, with respect to the
Collateral, a stay of enforcement of any such Lien is in effect; (b) Liens in
favor of the Lender; (c) reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting the Real Property; (d) Liens or
deposits under workmen's compensation, unemployment insurance, social security
and other similar laws, (e) Liens relating to obligations with respect to
surety, appeal bonds, performance bonds, bids, tenders and other obligations
of a like nature, (f) Liens existing as of the Closing Date and granted after
the date hereof in connection with the Equipment, Real Property or other fixed
assets, provided that such Liens attach only to such Property and the proceeds
thereof, and so long as the indebtedness secured thereby does not exceed 100%
of the fair market value of such Property at the time of acquisition; (g)
Liens on goods consigned to the Borrower or a LSB Guarantor Subsidiary or not
owned by Borrower or a LSB Guarantor Subsidiary so long as such Lien attaches
only to such goods and so long as Lender has been given notice of such Lien,
(h) mechanic, materialmen and other like Liens arising in the ordinary course
of business securing obligations which are not overdue or are being contested
in good faith by appropriate proceedings and adequately reserved against, (i)
statutory Liens in favor of landlords, (j) Liens against any life insurance
policy or the cash surrender value thereof which relate to borrowings incurred
to finance the premiums made under such policy; (k) Liens not to exceed
$1,000,000 at any one time in amounts secured, which are junior in priority to
the Security Interest and which arise or are placed inadvertently against the
assets of Borrower or any LSB Guarantor Subsidiary and are removed within ten
(10) days from receipt of notice by the Borrower or such LSB Guarantor
Subsidiary of such Lien; and (l) Liens reflected on Exhibit A hereto.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, Public
Authority, or any other entity.
"Plan" means, individually and collectively, all Pension Plans, all
additional employee benefit plans as defined in Section 3(3) of ERISA, and all
other plans, programs, agreements, arrangements, and methods of contribution
or compensation providing any material remuneration or benefits, other than
the cash payment of wages or salary, to any current or former employee(s) of
the Borrower.
"Proceeds" means all products and proceeds of any Collateral, and all
proceeds of such proceeds and products, including, without limitation, all
cash and credit balances, all payments under any indemnity, warranty, or
guaranty payable with respect to any Collateral, all proceeds of fire or other
insurance, and all money and other Property obtained as a result of any claims
against third parties or any legal action or proceeding with respect to
Collateral.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of the Borrower's and each LSB Guarantor
Subsidiary's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, trade names, trade styles, patent
and trademark applications and licenses and rights thereunder, including
without limitation those patents, trademarks and copyrights set forth on
Exhibit B hereto, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for past,
present, and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards, goodwill, customer and
other lists in whatever form maintained, and trade secret rights, copyright
rights, right in works of authorship, and contract rights relating to computer
software programs, in whatever form created or maintained.
"Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other
instrumentality of any of the foregoing.
"Real Property" means all of Borrower's and LSB Guarantor Subsidiaries'
rights, title, and interest in real property now owned or hereafter acquired
by Borrower or any of the LSB Guarantor Subsidiaries, including, without
limitation, the real property more particularly described in Exhibit H
attached hereto, including all rights and easements in connection therewith
and all buildings and improvements now or hereafter constructed thereon.
"Receivables" means all of the Borrower's and each LSB Guarantor
Subsidiary's now owned or hereafter arising or acquired: Accounts (whether or
not earned by performance), including Accounts owed to the Borrower by any of
its Subsidiaries or Affiliates (but excluding Accounts arising solely from the
sale of Equipment, Real Property or other fixed assets), together with all
interest, late charges, penalties, collection fees, and other sums which shall
be due and payable in connection with any Account; proceeds of any letters of
credit naming the Borrower or any LSB Guarantor Subsidiary as beneficiary;
contract rights, chattel paper, instruments, documents, general intangibles
(including, without limitation, choses in action, causes of action, tax
refunds, tax refund claims, Reversions and other amounts payable to the
Borrower from or with respect to any Plan, rights and claims against shippers
and carriers, rights to indemnification and business interruption insurance),
and all forms of obligations owing to Borrower (including, without limitation,
obligations owing to the Borrower by its Subsidiaries and Affiliates);
guarantees and other security for any of the foregoing; and rights of stoppage
in transit, replevin, and reclamation; and other rights or remedies of an
unpaid vendor, lienor, or secured party.
"Reference Rate" means the per annum rate of interest publicly announced
from time to time by the Bank at its San Francisco, California main office as
its reference rate. It is a rate set by Bank based upon various factors
including Bank's costs and desired return, general economic conditions, and
other factors, and is used as a reference point for pricing some loans;
however, Bank may price loans at, above or below the Reference Rate. Any
change in the Reference Rate shall take effect on the day specified in the
public announcement of such change.
"Reference Rate Loan" means a Revolving Loan during any period in which
it bears interest at the rate provided in Section 3.1(a)(i).
"Reference Rate Margin" has the meaning specified in Section 3.1(a)(i).
"Related Company" means any member of any controlled group of
corporations including, or under common control with, Borrower (as defined in
Section 414(b) or (c) of the Code or Section 4001(a)(14) of ERISA).
"Reportable Event" means, with respect to a Pension Plan, a reportable
event described in Section 4043 of ERISA or the regulations thereunder, a
withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of
operations described in Section 4062(e) of ERISA.
"Restricted Investment" means any acquisition of Property by the Borrower
in exchange for cash or other Property, whether in the form of an acquisition
of stock, indebtedness or other obligation, or by loan, advance, capital
contribution, or otherwise, except the following: (a) Property to be used in
the business of Borrower or any of the LSB Guarantor Subsidiaries; (b) assets
arising from the sale or lease of goods or rendition of services in the
ordinary course of business of the Borrower or any of the LSB Guarantor
Subsidiaries; (c) direct obligations of the United States of America, or any
agency thereof, or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof; (d) certificates of deposit maturing within one year from
the date of acquisition, bankers acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least $100,000,000; and (e)
commercial paper given the highest rating by a national credit rating agency
and maturing not more than 270 days from the date of creation thereof.
"Reversions" means any funds which may become due to the Borrower in
connection with the termination of any Plan.
"Revolving Loans" has the meaning specified in Section 2.1.
"SBL Debt" means the $3 Million Dollar loan made by SBL Corporation to
LSB and/or the other Subsidiaries of LSB during the month of October, 1997.
"Security Interest" means collectively the Liens granted by Borrower and
the LSB Guarantor Subsidiaries to the Lender in the Collateral pursuant to
this Agreement or the other Loan Documents.
"Subordinated Debt" shall mean Debt that is unsecured and is subordinated
to the payment of the Obligations.
"Subsidiary" or "Subsidiaries" means any present or future corporation or
corporations of which LSB owns, directly or indirectly, more than 50% of the
voting stock.
"Subsidiary Guaranties" means the continuous guaranties of the
Obligations made by the LSB Guarantor Subsidiaries in favor of the Lender.
"Swap Transaction Fee" has the meaning specified in Section 2.4.
"Swap Transaction Reserves" means all reserves which the Lender from time
to time establishes for amounts that are liabilities owed by EDC to the Bank
and for which Lender has agreed to indemnify the Bank. As of the Closing
Date, the amount of the Swap Transaction Reserves is $1,850,000.
"Swap Transactions" means interest rate swaps, treasury locks, and all
other forward rate agreements entered into by the Bank for the account of or
otherwise for the benefit of EDC.
"Termination Event" means: (a) a Reportable Event (other than a
Reportable Event described in Section 4043 of ERISA which is not subject to
the provision for 30-day notice to the PBGC under applicable regulations); or
(b) the withdrawal of the Borrower or any Related Company from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA with respect to such Pension Plan; or (c) the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or (d)
the institution of proceedings by the PBGC to terminate or have a trustee
appointed to administer a Pension Plan; or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan, or (f)
the partial or complete withdrawal of Borrower or any Related Company from a
Multi-employer Plan, or (g) the withdrawal of Borrower from any state workers'
compensation system.
"UCC" means the Uniform Commercial Code (or any successor statute) of the
State of Oklahoma or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
1.2 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed, unless otherwise specifically
provided herein, in accordance with GAAP as consistently applied and using the
same method for inventory valuation as used in the preparation of the
Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
1.4 Exhibits. All references in this Agreement to Exhibits are,
unless otherwise specified, references to exhibits attached hereto, and all
such exhibits are hereby deemed incorporated herein by this reference.
2. LOANS AND LETTERS OF CREDIT.
2.1 Revolving Loans. The Lender shall, subject to the terms and
conditions set forth in this Agreement, and upon the Borrower's request from
time to time, make revolving loans (the "Revolving Loans") to the Borrower up
to the limits of the Availability. The Lender, in its discretion, may elect
to exceed the limits of the Availability on one or more occasions, but if it
does so, the Lender shall not be deemed thereby to have changed the limits of
the Availability or to be obligated to exceed the limits of the Availability
on any other occasion. If the unpaid balance of the Revolving Loans exceeds
the Availability (with Availability for this purpose determined as if the
amount of the Revolving Loans were zero), then the Lender may refuse to make
or otherwise restrict Revolving Loans on such terms as the Lender determines
until such excess has been eliminated. The Borrower may request Revolving
Loans either orally or in writing, provided, however, that each such request
with respect to Reference Rate Loans shall be made no later than 1:00 p.m.
(Los Angeles, California time). Each oral request for a Revolving Loan shall
be conclusively presumed to be made by a person authorized by the Borrower to
do so and the crediting of a Revolving Loan to the Borrower's deposit account,
or transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of the Borrower to repay such Revolving Loan. The
Lender will charge all Revolving Loans and other Obligations to a loan account
of the Borrower maintained with the Lender. All fees, commissions, costs,
expenses, and other charges due from the Borrower pursuant to the Loan
Documents, and all payments made and out-of-pocket expenses incurred by Lender
and authorized to be charged to the Borrower pursuant to the Loan Documents,
will be charged as Revolving Loans to the Borrower's loan account as of the
date due from the Borrower or the date paid or incurred by the Lender, as the
case may be.
2.2 Availability Determination. Availability will be determined
by the Lender in accordance with the terms of this Agreement, each day on the
basis of such relevant information as the Lender deems appropriate to
consider, including the collateral summary reports and such other information
regarding the Accounts and the Inventory as the Lender shall obtain from the
Borrower.
2.3 Letters of Credit. The Lender will, subject to the terms
and conditions of this Agreement and the Letter of Credit Agreement as
hereafter defined, and upon the Borrower's request from time to time, cause
merchandise letters of credit (the "Merchandise L/C's") or standby letters of
credit (the "Standby L/C's") to be issued for the Borrower's account (the
Merchandise L/C's and the Standby L/C's being referred to collectively as the
"Letters of Credit"). The Lender will not cause to be opened any Letter of
Credit if: (a) the maximum face amount of the requested Letter of Credit,
plus the aggregate undrawn face amount of all outstanding Letters of Credit
under this Agreement and the other LSB-Related Loan Agreements, would exceed
Eleven Million and No/100 Dollars ($11,000,000); or (b) the maximum face
amount of the requested Letter of Credit, and all commissions, fees, and
charges due from Borrower to Lender in connection with the opening thereof,
would cause the Availability to be exceeded at such time. In addition, with
respect to any Merchandise L/C, the requested term of such Letter of Credit
may not exceed 180 days, and no Merchandise L/C may by its terms be scheduled
to be outstanding on the Termination Date. Standby L/C's may have terms that
extend beyond the Termination Date but upon termination of this Agreement, all
Letters of Credit must be either terminated with the consent of the
beneficiary thereof, replaced with a letter of credit provided by a financial
institution acceptable to Lender, collateralized by cash or cash equivalent,
or otherwise satisfied in a manner acceptable to Lender. The Letters of
Credit shall be governed by a Letter of Credit Financing Agreement -
Supplement to Loan and Security Agreement between the Lender and the Borrower
("Letter of Credit Agreement"), in the form attached hereto as Exhibit "O" and
made a part hereof, in addition to the terms and conditions hereof. All
payments made and expenses incurred by the Lender pursuant to or in connection
with the Letters of Credit and the Letter of Credit Agreement will be charged
to the Borrower's loan account as Revolving Loans.
2.4 Swap Transactions. EDC has requested and the Lender has, in
its sole and absolute discretion, arranged for EDC to obtain Swap Transactions
from the Bank in amounts to be agreed to between EDC and Bank. Borrower
agrees to indemnify and hold the Lender harmless from any and all obligations
now or hereafter owing by the Lender to the Bank arising from or related to
such Swap Transactions pursuant to the indemnity referred to in clause (c)
below. EDC has agreed to pay the Bank all amounts owing to the Bank pursuant
to the Swap Transactions. In the event EDC shall not have paid to the Bank
such amounts, the Lender shall pay the Bank and such amounts when paid by the
Lender shall constitute a Revolving Loan of EDC which shall be deemed to have
been requested by EDC. Borrower acknowledges and agrees that the obtaining of
Swap Transactions from the Bank (a) is in the sole and absolute discretion of
the Bank, (b) is subject to all rules and regulations of the Bank, and (c) is
due to the Bank relying on the indemnity of the Lender to the Bank with
respect to the obligations of EDC to the Bank in connection with the Swap
Transactions.
3. INTEREST AND OTHER CHARGES
3.1 Interest.
(a) Interest Rates. All amounts charged as Revolving Loans
shall bear interest on the unpaid principal amount thereof from the date made
until paid in full in cash at the Applicable Interest Rate as described in
Sections 3.1(a)(i) and (ii) but not to exceed the maximum rate permitted by
applicable law. Subject to the provisions of Section 3.2, any of the
Revolving Loans may be converted into, or continued as, Reference Rate Loans
or Eurodollar Rate Loans in the manner provided in Section 3.2. If at any
time Revolving Loans are outstanding with respect to which notice has not been
delivered to Lender in accordance with the terms of this Agreement specifying
the basis for determining the interest rate applicable thereto, then those
Revolving Loans shall be Reference Rate Loans and shall bear interest at a
rate determined by reference to the Reference Rate until notice to the
contrary has been given to the Lender and such notice has become effective.
Except as otherwise provided herein, the amounts charged as Revolving Loans
shall bear interest at the following rates (the "Applicable Interest Rate"):
(i) For all amounts charged as Revolving Loans other than
Eurodollar Rate Loans, including all Revolving Loans which are Reference Rate
Loans, then at a fluctuating per annum rate equal to one and one-half percent
(1.50%) per annum (the "Reference Rate Margin") plus the Reference Rate; and
(ii) If the Revolving Loans are Eurodollar Rate Loans, then at a
per annum rate equal to: three and seven-eighths percent (3.875%) per annum
(the "Eurodollar Margin") plus the Eurodollar Rate determined for the
applicable Interest Period.
Notwithstanding the foregoing, if, during any month, the sum of the average
"Availability" (as defined in each of the LSB-Related Loan Agreements) of the
LSB Consolidated Borrowing Group under the LSB-Related Loan Agreements is less
than $6,300,000, then, during the following month, the Reference Rate Margin
will be increased to two percent (2%) and the Eurodollar Margin will be
increased to four and three-eighths percent (4.375%).
In addition, if the LSB Adjusted Tangible Net Worth equals or exceeds
$72,500,000, as reflected on LSB's most current quarterly Financial
Statements, provided no Event of Default has occurred and is continuing, then
for so long as the LSB Adjusted Tangible Net Worth is at least $72,500,000,
the Reference Rate Margin will be reduced to one percent (1%) and the
Eurodollar Margin will be reduced to three and three-eighths percent (3.375%),
and the reduction will be effective as of the first day of the month following
receipt by Lender of the applicable quarterly Financial Statements.
Finally, if the LSB Adjusted Tangible Net Worth equals or exceeds $84,000,000,
as reflected on LSB's most current quarterly Financial Statements, provided no
Event of Default has occurred and is continuing, then for so long as the LSB
Adjusted Tangible Net Worth is at least $84,000,000, the Reference Rate Margin
will be reduced to one-half of one percent (.50%) and the Eurodollar Margin
will be reduced to two and seven-eighths percent (2.875%), and the reduction
will be effective as of the first day of the month following receipt by Lender
of the applicable quarterly Financial Statements.
Each change in the Reference Rate shall be reflected in the interest rate
described in (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of three hundred sixty (360)
days and actual days elapsed. Except as otherwise provided herein, (1)
interest accrued on each Eurodollar Rate Loan shall be payable in arrears on
each Eurodollar Interest Payment Date applicable to such Eurodollar Rate Loan,
and (2) interest accrued on the Reference Rate Loans will be payable in
arrears on the first day of each month hereafter.
(b) Default Rate. If any Event of Default occurs, then, while
any such Event of Default is continuing, all Loans shall bear interest at an
increased rate of interest equal to the Applicable Interest Rate thereto plus
two percent (2.0%) per annum, and the Letter of Credit Fee shall be increased
to three percent (3%) per annum.
3.2 Eurodollar Borrowings: Conversion or Continuation.
(a) Subject to the provisions of Section 3.3, the Borrower shall
have the option: (i) to request the Lender to make a Revolving Loan as a
Eurodollar Rate Loan; (ii) to convert all or any part of the outstanding
Revolving Loans from Reference Rate Loans to Eurodollar Rate Loans, (iii) to
convert all or any part of the outstanding Revolving Loans from Eurodollar
Rate Loans to Reference Rate Loans on the expiration of the Interest Period
applicable thereto; (iv) upon the expiration of any Interest Period applicable
to any outstanding Eurodollar Rate Loan, to continue all or any portion of
such Eurodollar Rate Loan as a Eurodollar Rate Loan; provided, however, that
no outstanding Loans may be converted into or continued as, Eurodollar Rate
Loans when any Event or Event of Default has occurred and is continuing.
(b) Whenever the Borrower elects to borrow, convert into or
continue Eurodollar Rate Loans under this Section 3.2, the Borrower shall
notify the Lender in writing or telephonically no later than 11:00 a.m. (Los
Angeles, California time) two (2) Business Days in advance of the requested
borrowing/conversion/continuation date. The Borrower shall specify (1) the
borrowing/conversion/continuation date (which shall be a Business Day), (2)
the amount and type of the Revolving Loans to be borrowed/converted/continued,
and (3) the nature of the requested borrowing/ conversion/continuation. In
the event that the Borrower should fail to timely notify the Lender to
continue to convert any existing Eurodollar Rate Loan, such Loan shall, on the
last day of the Interest Period with respect to such Revolving Loan, convert
to a Reference Rate Loan.
(c) The officer of the Borrower authorized by the Borrower to
request Revolving Loans on behalf of the Borrower shall also be authorized to
request a conversion/continuation on behalf of the Borrower. The Lender shall
be entitled to rely on such officer's authority until the Lender is notified
to the contrary in writing. The Lender shall have no duty to verify the
authenticity of the signature appearing on any written notification or request
and, with respect to an oral notification or request, the Lender shall have no
duty to verify the identity of any individual representing himself as one of
the officers authorized to make such notification or request on behalf of the
Borrower. The Lender shall incur no liability to the Borrower in acting upon
any telephonic notice or request referred to in this Section 3.2, which the
Lender believes in good faith to have been given by an officer authorized to
do so on behalf of the Borrower, or for otherwise acting in good faith under
this Section 3.2 and, upon lending/conversion/continuation by the Lender in
accordance with this Agreement pursuant to any such telephonic notice, the
Borrower shall have effected the borrowing/conversion/continuation of the
applicable Loans hereunder.
(d) Any written or telephonic notice of conversion to, or
borrowing or continuation of, Revolving Loans made pursuant to this Section
3.2 shall be irrevocable and the Borrower shall be bound to borrow, convert or
continue in accordance therewith.
3.3 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provisions to the contrary contained in this
Agreement, the following provisions shall govern with respect to Eurodollar
Rate Loans as to the matters covered:
(a) Amount of Eurodollar Rate Loans. Each election of,
continuation of, or conversion to a Eurodollar Rate Loan, shall be in a
minimum amount of Five Million Dollars ($5,000,000) and in integral multiples
of One Million Dollars ($1,000,000) in excess of that amount.
(b) Determination of Interest Period. The Interest Period for
each Eurodollar Rate Loan shall be for a three (3) month period. The
determination of Interest Periods shall be subject to the following
provisions:
(i) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to expire
on the next succeeding Business Day; provided, however, that if the next
succeeding Business Day occurs in the following calendar month, then such
Interest Period shall expire on the immediately preceding Business Day.
(iii) The Borrower may not select an Interest Period for any
Eurodollar Rate Loan, which Interest Period expires later than the Stated
Termination Date.
(iv) There shall be not more than two (2) Interest Periods in
effect at any one time, and no more than two (2) Interest Periods may begin
during any calendar month.
(v) If an Interest Period starts on a date for which no
numerical correspondent exists in the month in which such Interest Period
ends, such Interest Period will end on the last Business Day of such month.
(c) Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (Los Angeles, California time) on the Eurodollar Interest
Rate Determination Date, the Lender shall determine (which determination
shall, absent manifest error, be presumptively correct) the Interest Rate for
the Eurodollar Rate Loans for which an Interest Rate is then being determined
and shall promptly give notice thereof (in writing or by telephone confirmed
in writing) to the Borrower.
(d) Substituted Rate of Borrowing. In the event that on any
Eurodollar Interest Rate Determination Date the Lender shall have determined
(which determination shall, absent manifest error, be presumptively correct
and binding upon all parties) that:
(i) by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market or affecting the position
of Bank or Lender in such market, adequate and fair means do not exist for
ascertaining the applicable interest rates by reference to which the
Eurodollar Rate then being determined is to be fixed; or
(ii) by reason of (1) any change after the date of this
Agreement in any applicable law or governmental rule, regulation or order (or
any interpretation thereof and including the introduction of any new law or
governmental rule, regulation or order) or (2) any other circumstances
affecting Bank or Lender or the interbank Eurodollar market or the position of
Bank or Lender in such market (such as, for example, but not limited to,
official reserve requirements required by Regulation D of the Board of
Governors of the Federal Reserve System to the extent not given effect in the
Eurodollar Rate), the Eurodollar Rate shall not represent the effective
pricing to Lender for Dollar deposits of comparable amounts for the relevant
period;
then, and in any such event, the right of the Borrower to request application
of the Eurodollar Rate to some or all of the Loans shall be suspended until
the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and such Loans shall be Reference Rate Loans.
(e) Illegality. In the event that on any date Lender shall have
reasonably determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties) that the making of,
conversion into, or the continuation of, Lender's Eurodollar Rate Loans has
become unlawful as the result of compliance by Lender or Bank in good faith
with any law, governmental rule, regulation or order (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful), then, and in any such event, Lender shall promptly give notice (by
telephone confirmed in writing) to the Borrower of such determination. In
such case and except as provided in Section 3.3(f), the obligation of Lender
to make or maintain any Eurodollar Rate Loans during any such period shall be
terminated at the earlier of the termination of the Interest Period then in
effect or when required by law, and the Borrower shall, no later than the
earlier of the termination of the Interest Period in effect at the time any
such determination pursuant to this Section 3.3(e) is made, or when required
by law, repay the Eurodollar Rate Loans, together with all interest accrued
thereon.
(f) Options of the Borrower. In lieu of prepaying the
Eurodollar Rate Loans as required by Section 3.3(e), the Borrower may exercise
either of the following options:
(i) Upon written notice to the Lender, the Borrower may release
Lender from its obligations to make or maintain Loans as Eurodollar Rate Loans
and in such event, the Borrower shall, at the end of the then current Interest
Period (or at such earlier time as prepayment is otherwise required), convert
all of the Eurodollar Rate Loans into Reference Rate Loans in the manner
contemplated by Section 3.2, but without satisfying the advance notice
requirements therein; or
(ii) The Borrower may, by giving notice (by telephone confirmed
immediately by telecopy) to Lender require Lender to continue to maintain its
outstanding Reference Rate Loans as Reference Rate Loans, but without
satisfying the advance notice requirements set forth in such Section 3.2.
(g) Compensation. In addition to such amounts as are required
to be paid by the Borrower pursuant to the other Sections of this Article 3,
the Borrower agrees to compensate the Lender for all expenses and liabilities,
including, without limitation, any loss or expense incurred by Lender by
reason of the liquidation or reemployment of deposits or other funds acquired
by Lender to fund or maintain the Lender's Eurodollar Rate Loans to the
Borrower, which Lender sustains (i) if due to the fault of the Borrower a
funding of any Eurodollar Rate Loans does not occur on a date specified
therefor by Borrower in a telephonic or written request for borrowing or
conversion/continuation, or a successive Interest Period does not commence
after notice therefor is given pursuant to Section 3.2, (ii) if any voluntary
or mandatory prepayment of any Eurodollar Rate Loans occurs for any reason on
a date which is not the last scheduled day of an Interest Period, or (iii) as
a consequence of any other failure by the Borrower to repay Eurodollar Rate
Loans when required by the terms of this Agreement.
(h) Quotation of Eurodollar Rate. Anything herein to the
contrary notwithstanding, if on any Eurodollar Interest Rate Determination
Date no Eurodollar Rate is available by reason of the failure of Bank to be
offered quotations in accordance with the definition of "Eurodollar Base
Rate," the Lender shall give the Borrower prompt notice thereof and (i) any
Eurodollar Rate Loan requested to be made at the Eurodollar Rate to be
determined on any Eurodollar Interest Rate Determination Date shall be made as
a Reference Rate Revolving Loan, and (ii) any notice given by the Borrower to
convert any Loans into or to continue any Loans as Eurodollar Rate Loans at
the Eurodollar Rate to be determined on any such Eurodollar Interest Rate
Determination Date shall be ineffective.
(i) Eurodollar Rate Taxes. The Borrower agrees that it will
pay, prior to the date on which penalties attach thereto, all present and
future income, stamp and other taxes, levies, or costs and charges whatsoever
imposed, assessed, levied or collected on or from the Lender on or in respect
of the Borrower's Loans from the Lender solely as a result of the interest
rate being determined by reference to the Eurodollar Rate and/or the
provisions of this Agreement relating to the Eurodollar Rate and/or the
recording, registration, notarization or other formalization of any of the
foregoing and/or any payments of principal, interest or other amounts made on
or in respect of the Loans from the Lender when the interest rate is
determined by reference to the Eurodollar Rate (all such taxes, levies, cost
and charges being herein collectively called "Eurodollar Rate Taxes");
provided, however, that Eurodollar Rate Taxes shall not include taxes imposed
on or measured by the overall net income of the Lender by the United States of
America or any political subdivision or taxing authority thereof or therein,
or taxes on or measured by the overall net income by any foreign branch or
subsidiary of the Lender by any foreign country or subdivision thereof in
which that branch or subsidiary is doing business. Promptly after the date on
which payment of any such Eurodollar Rate Tax is due pursuant to applicable
law, the Borrower will, at the request of the Lender, furnish to the Lender
evidence, in form and substance satisfactory to the Lender, that the Borrower
has met its obligation under this Section 3.3(i), an addition, the Borrower
will indemnify the Lender against, and reimburse Lender on demand for, any
Eurodollar Rate Taxes for which the Lender is or may be liable by reason of
the making or maintenance of any Eurodollar Rate Loans hereunder, as
determined by the Lender in its discretion exercised in good faith and
pursuant to standards of commercial reasonableness. The Lender shall provide
Borrower with appropriate receipts for any payments or reimbursements made by
Borrower pursuant to this Section 3.3(i).
(j) Booking of Eurodollar Rate Loans. The Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices or the office of any of its Affiliates.
(k) Increased Costs. If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Reserve Percentage) in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Public Authority (whether
or not having the force of law), there shall be any increase in the cost to
the Lender of agreeing to make or making, funding or maintaining Eurodollar
Rate Loans, then the Borrower agrees that it shall, from time to time, upon
demand by the Lender in writing to the Borrower, within sixty (60) days from
the date of such increased cost, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost relating to the
outstanding Eurodollar Rate Loans made to the Borrower. A certificate as to
the amount of such increased cost and the method of determination thereof,
submitted to the Borrower by the Lender, shall be rebuttably presumptive
evidence of the correctness of such amount. Notwithstanding the above, the
Lender shall promptly advise Borrower of any increased costs covered by this
paragraph (k) of which Lender is aware that have been made or which are
proposed to be made which may require the Borrower to be required to pay the
increased cost under this paragraph (k) prior to or at the time that Borrower
requests additional Eurodollar Rate Loans.
3.4 Maximum Interest Rate.
(a) Notwithstanding the foregoing provisions of Sections 3.1
through 3.3 regarding the rates of interest applicable to the Loans, if at any
time the amount of such interest computed on the basis of the Applicable
Interest Rate would exceed the amount of such interest computed upon the basis
of the maximum rate of interest permitted by applicable state or federal law
in effect from time to time hereafter, after taking into account, to the
extent required by applicable law, any and all fees, payments, charges and
calculations provided for in this Agreement or in any other agreement between
Borrower and Lender (the "Maximum Legal Rate"), the interest payable under
this Agreement shall be computed upon the basis of the Maximum Legal Rate, but
any subsequent reduction in the Reference Rate or the Eurodollar Rate shall
not reduce such interest thereafter payable hereunder below the amount
computed on the basis of the Maximum Legal Rate until the aggregate amount of
such interest accrued and payable under this Agreement equals the total amount
of interest which would have accrued if such interest had been at all times
computed solely on the basis of the Applicable Interest Rate.
(b) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between the Borrower and the Lender or default of the Borrower, or the
exercise by the Lender of the right to accelerate the payment of the maturity
of principal and interest, or to exercise any option whatsoever contained in
this Agreement or any other agreement between the Borrower and the Lender, or
the arising of any contingency whatsoever, shall entitle the Lender to
collect, in any event, interest exceeding the Maximum Legal Rate and in no
event shall the Borrower be obligated to pay interest exceeding such Maximum
Legal Rate and all agreements, conditions or stipulations, if any, which may
in any event or contingency whatsoever operate to bind, obligate or compel the
Borrower to pay a rate of interest exceeding the Maximum Legal Rate, shall be
without binding force or effect, at law or in equity, to the extent only of
the excess of interest over such Maximum Legal Rate. In the event any
interest is charged in excess of the Maximum Legal Rate ("Excess"), the
Borrower acknowledges and stipulates that any such charge shall be the result
of an accidental and bona fide error, and such Excess shall be, first, applied
to reduce the principal then unpaid hereunder; second, applied to reduce the
Obligations; and third, returned to the Borrower, it being the intention of
the parties hereto not to enter at any time into a usurious or otherwise
illegal relationship. The Borrower recognizes that, with fluctuations in the
Applicable Interest Rate and the Maximum Legal Rate, such an unintentional
result could inadvertently occur. By the execution of this Agreement, the
Borrower covenants that (i) the credit or return of any Excess shall
constitute the acceptance by the Borrower of such Excess, and (ii) the
Borrower shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon the charging or receiving of
any interest in excess of the maximum authorized by applicable law. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all interest at any time contracted for,
charged or received by the Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the entire
term of this Agreement.
(c) The provisions of Section 3.4 shall be deemed to be
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of the Lender with respect to the Borrower (or any other
obligor in respect of Obligations), whether or not any provision of Section
3.4 is referred to therein. All such documents and communications and all
figures set forth therein shall, for the sole purpose of computing the extent
of the liabilities and obligations of the Borrower (or other obligor) asserted
by the Lender thereunder, be automatically recomputed by any Borrower or
obligor, and by any court considering the same, to give effect to the
adjustments or credits required by Section 3.4.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
or any other Loan Documents than is presently allowed by applicable state or
federal law, then the limitation of interest under Section 3.4 shall be
increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to the Lender
by reason thereof shall be payable upon demand.
3.5 Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting Lender or any of Lender's affiliated
companies there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, minimum capital, capital ratio, or similar
requirement against or with respect to or measured by reference to loans made
or to be made to Borrower hereunder, or to Letters of Credit issued on behalf
of Borrower pursuant to the Letter of Credit Agreement, and the result shall
be to increase the cost to Lender or to any of Lender's affiliated companies
of making or maintaining any Revolving Loan or Letter of Credit hereunder, or
reduce any amount receivable in respect of any such Revolving Loan and which
increase in cost, or reduction in amount receivable, shall be the result of
Lender's or Lender's affiliated company's reasonable allocation among all
affected customers of the aggregate of such increases or reductions resulting
from such event, then, within ten (10) days after receipt by Borrower of a
certificate from Lender containing the information described in this Section
3.5 which shall be delivered to Borrower, Borrower agrees from time to time to
pay Lender such additional amounts as shall be sufficient to compensate Lender
or any of Lender's affiliated companies for such increased costs or reductions
in amounts which Lender determines in Lender's reasonable discretion are
material. Notwithstanding the foregoing, all such amounts shall be subject to
the provisions of Section 3.4. The certificate requesting compensation under
this Section 3.5 shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the
amount of such additional cost or reduction in the amount receivable and the
way in which such amount has been calculated.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, upon the termination of this Agreement. In addition, the Borrower
shall pay to the Lender, on demand, the amount by which the unpaid principal
balance of the Revolving Loans at any time exceeds the Availability at such
time (with Availability for this purpose determined as if the amount of the
Revolving Loans were zero).
4.2 Place and Form of Payments: Extension of Time. All payments
of principal, interest, and other sums due to the Lender shall be made at the
Lender's address set forth in Section 13.10. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately
available funds. If any payment of principal, interest, or other sum to be
made hereunder becomes due and payable on a day other than a Business Day, the
due date of such payment shall be extended to the next succeeding Business Day
and interest thereon shall be payable at the applicable interest rate during
such extension.
4.3 Apportionment, Application and Reversal of Payments. Except
as otherwise expressly provided hereunder, the Lender shall determine in its
discretion the order and manner in which proceeds and other payments that the
Lender receives are applied to the Revolving Loans, interest thereon, and the
other Obligations, and the Borrower hereby irrevocably waives the right to
direct the application of any payment or proceeds; provided, however, unless
so directed by the Borrower, the Lender shall not apply any such payments
which it receives to any Eurodollar Rate Loan, except: (a) on the expiration
date of the Interest Period applicable to any such Eurodollar Rate Loan; or
(b) in the event, and only to the extent, that there are not outstanding
Reference Rate Loans. Following an Event of Default that is continuing, the
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such proceeds and payments to any portion of the
Obligations subject to the terms of this Section 4.3 and the Borrower's right
to direct prepayments of Eurodollar Rate Loans.
4.4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY
PAYMENT OF, OR PROCEEDS APPLIED TO THE PAYMENT OF, ALL OR ANY PART OF THE
OBLIGATIONS, THE LENDER IS FOR ANY REASON REQUIRED TO SURRENDER SUCH PAYMENT
OR PROCEEDS TO ANY PERSON, BECAUSE SUCH PAYMENT OR PROCEEDS IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE
OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND
CONTINUE AND THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT OR
PROCEEDS HAD NOT BEEN RECEIVED BY THE LENDER AND THE BORROWER SHALL BE LIABLE
TO PAY TO THE LENDER, AND HEREBY DOES INDEMNIFY THE LENDER AND HOLD THE LENDER
HARMLESS FOR THE AMOUNT OF SUCH PAYMENT OR PROCEEDS SURRENDERED. The
provisions of this Section 4.4 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Lender in reliance upon
such payment or Proceeds, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment or Proceeds having become
final and irrevocable. The provisions of this Section 4.4 shall survive the
termination of this Agreement.
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. The Borrower
agrees that the Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom irrespective of
whether any Obligation is also evidenced by a promissory note or other
instrument, and shall constitute presumptive proof thereof until such time as
Borrower has reviewed the monthly statement as hereinafter provided. The
Lender will provide to the Borrower a monthly statement of Loans, payments,
and other transactions pursuant to this Agreement. Such statement shall be
deemed correct, accurate, and binding on the Borrower and as an account stated
and shall constitute prima facie proof thereof (except for reversals and
reapplications of payments made as provided in Section 4.3 and corrections of
errors discovered by the Lender), unless the Borrower notifies the Lender in
writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Borrower, only the items to which exception is expressly made will be
considered to be disputed by the Borrower.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, the Borrower and each LSB
Guarantor Subsidiary hereby grants to the Lender a continuing security
interest in, lien on, and assignment of: (i) all Receivables, Inventory,
Proprietary Rights, and Proceeds, wherever located and whether now existing or
hereafter arising or acquired; (ii) all moneys, securities and other property
and the Proceeds thereof, now or hereafter held or received by, or in transit
to, the Lender from or for the Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, including, without limitation,
all of the Borrower's deposit accounts, credits and balances with the Lender
and all claims of the Borrower against the Lender at any time existing; (iii)
all of Borrower's deposit accounts containing Collateral with any financial
institutions with which Borrower maintains deposits; and (iv) all books,
records, ledger cards, data processing records, computer software and other
property and general intangibles at any time evidencing or relating to the
Receivables, Inventory, Proprietary Rights, Proceeds, and other property
referred to above (all of the foregoing, together with all other property in
which Lender may at any time be granted a Lien, being herein collectively
referred to as the "Collateral"). The Lender shall have all of the rights of
a secured party with respect to the Collateral under the UCC and other
applicable laws.
(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, (i) exchange, waive,
or release any of the Collateral, (ii) after the occurrence of an Event of
Default that is continuing, apply Collateral and direct the order or manner of
sale thereof as the Lender may determine, and (iii) after the occurrence of an
Event of Default that is continuing, settle, compromise, collect, or otherwise
liquidate any Collateral in any manner, all without affecting the Obligations
or the Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. The
Borrower and each LSB Guarantor Subsidiary shall, at its expense, perform all
steps requested by the Lender at any time to perfect, maintain, protect, and
enforce the Security Interest in the Collateral including, without limitation:
(a) executing and recording of the Patent and Trademark Assignments and
executing and filing financing or continuation statements, and amendments
thereof, relating to the Collateral in form and substance satisfactory to the
Lender; (b) delivering to the Lender, upon Lender's request therefor, the
originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Lender determines it should have physical possession
in order to perfect and protect the Security Interest therein, duly endorsed
or assigned to the Lender without restriction; (c) delivering to the Lender
warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued; (d) after an Event of
Default that is continuing, causing notations to be placed on the Borrower's
and each LSB Guarantor Subsidiary's books of account to disclose the Security
Interest; (e) delivering to the Lender, upon Lender's request therefor, all
letters of credit on which the Borrower or any LSB Guarantor Subsidiary is a
named beneficiary; (f) after an Event of Default that is continuing
transferring Inventory to warehouses designated by the Lender; and (g) taking
such other steps as are deemed necessary by the Lender to maintain the
Security Interest. The Lender may file, without the Borrower's signature or
that of any LSB Guarantor Subsidiary, one or more financing statements
disclosing the Security Interest. The Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If any Collateral
is at any time in the possession or control of any warehouseman, bailee or any
of the agents or processors of Borrower or any LSB Guarantor Subsidiary, then
the Borrower shall notify the Lender thereof and shall notify such Person of
the Security Interest in such Collateral and, upon the Lender's request
following an Event of Default that is continuing, instruct such Person to hold
all such Collateral for the Lender's account subject to the Lender's
instructions. If at any time any Collateral is located on any premises that
are not owned by the Borrower or a LSB Guarantor Subsidiary, then the Borrower
shall obtain written waivers, in form and substance reasonably satisfactory to
the Lender, of all present and future Liens to which the owner or lessor of
such premises may be entitled to assert against the Collateral. From time to
time, the Borrower shall, upon Lender's request, cause to be executed and
delivered confirmatory written instruments pledging to the Lender the
Collateral, but the Borrower's failure to do so shall not affect or limit the
Security Interest. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Security Interest shall continue in
full force and effect in all Collateral (whether or not deemed eligible for
the purpose of calculating the Availability or as the basis for any advance,
loan, or other financial accommodation). Upon termination of this Agreement
and payment of all Obligations, the Lender shall release all Security
Interests held by the Lender.
6.3 Location of Collateral. The Borrower represents and
warrants to the Lender that: (a) Exhibit D hereto is a correct and complete
List of the Borrower's chief executive office, the location of its books and
records as well as the books and records of the LSB Guarantor Subsidiaries,
the locations of the Collateral, and the locations of all of its other places
of business; and (b) Exhibit H correctly identifies any of such facilities and
locations that are not owned by the Borrower or the LSB Guarantor Subsidiaries
and sets forth the names of the owners and lessors of, and, to the best of the
Borrower's knowledge, the holders of any mortgages on such facilities and
locations. Except for Inventory that is consigned by a Borrower or a LSB
Guarantor Subsidiary to a customer or warehouse, the Borrower agrees that it
will not maintain, nor will it allow any LSB Guarantor Subsidiary to maintain,
any Collateral at any location other than those listed on Exhibit D, and it
will not otherwise change or add to any of such locations, unless it gives the
Lender at least thirty (30) days prior written notice and executes or has
executed, such financing statements and other documents that the Lender
requests in connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral. The
Borrower represents and warrants to the Lender that: (a) all Collateral is and
will continue to be owned by the Borrower or a LSB Guarantor Subsidiary free
and clear of all Liens whatsoever, except for the Security Interest and other
Permitted Liens; (b) the Security Interest will not be subject to any prior
Lien except the Permitted Liens; (c) the Borrower and each LSB Guarantor
Subsidiary will use, store, and maintain the Collateral with all reasonable
care and will use the Collateral for lawful purposes only; and (d) neither the
Borrower nor the LSB Guarantor Subsidiaries will, without the Lender's prior
written approval, sell, or dispose of or permit the sale or disposition of any
Collateral, except for (i) sales of Inventory in the ordinary course of
business, and (ii) as otherwise provided or allowed by this Agreement or any
of the other Loan Documents. The inclusion of Proceeds in the Collateral
shall not be deemed the Lender's consent to any sale or other disposition of
the Collateral except as expressly permitted herein.
6.5 Appraisals. Following the occurrence of an Event of Default
that is continuing, the Borrower shall, at the request of the Lender, provide
the Lender, at the Borrower's expense, with appraisals or updates thereof of
any or all of the Collateral from an appraiser satisfactory to the Lender.
6.6 Access and Examination. The Lender may at all reasonable
times have access to, examine, audit, make extracts from and inspect the
Borrower's records, files, and books of account and those of each LSB
Guarantor Subsidiary, as well as the Collateral and may discuss the Borrower's
affairs and the affairs of each LSB Guarantor Subsidiary with the Borrower's
officers and management and with the officers and management of each LSB
Guarantor Subsidiary. The Borrower will deliver to the Lender any instrument
necessary for the Lender to obtain records from any service bureau maintaining
records for the Borrower or any LSB Guarantor Subsidiary. The Lender may, at
any time when an Event of Default exists and at the Borrower's expense, make
copies of all of the Borrower's books and records, or require the Borrower to
deliver such copies to the Lender. After the occurrence of an Event of
Default that is continuing, the Lender may, without expense to the Lender, use
such of the Borrower's personnel, supplies, and premises as well as those of
the LSB Guarantor Subsidiaries as may be reasonably necessary for maintaining
or enforcing the Security Interest. Lender shall have the right, at any time,
in Lender's name or in the name of a nominee of the Lender, to verify the
validity, amount or any other matter relating to the Accounts, by mail,
telephone, or otherwise.
6.7 Insurance. The Borrower shall insure the Collateral and
Equipment against loss or damage by fire with extended coverage, theft,
burglary, pilferage, loss in transit, and such other hazards as the Lender
shall specify, in amounts, under policies and by insurers acceptable to the
Lender. Borrower shall also maintain flood insurance, in the event of a
designation of the area in which any Real Property is located as "flood prone"
or a "flood risk area," as defined by the Flood Disaster Protection Act of
1973, in an amount to be reasonably determined by Lender, and shall comply
with the additional requirements of the National Flood Insurance Program as
set forth therein. The Borrower shall cause the Lender to be named in each
such policy as secured party of the Inventory that constitutes part of the
Collateral and loss payee or additional insured, in a manner acceptable to the
Lender, as to the Collateral. Each policy of insurance shall contain a clause
or endorsement requiring the insurer to give not less than thirty (30) days
prior written notice to the Lender in the event of cancellation of the policy
for any reason whatsoever and a clause or endorsement stating that the
interest of the Lender shall not be impaired or invalidated by any act or
neglect of the Borrower or the owner of any premises where Collateral is
located nor by the use of such premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by
the Borrower when due, and certificates of insurance and, if requested,
photocopies of the policies shall be delivered to the Lender. If the Borrower
fails to procure such insurance or to pay the premiums therefor when due, the
Lender may (but shall not be required to) do so and charge the costs thereof
to the Borrower's loan account. After becoming aware of any loss, damage or
destruction to Collateral, the Borrower shall promptly notify the Lender of
any such loss, damage, or destruction that exceeds $200,000, whether or not
covered by insurance. The Lender is hereby authorized to collect all
insurance proceeds directly following the occurrence of an Event of Default
that is continuing. After deducting from such proceeds the expenses, if any,
incurred by Lender in the collection or handling thereof, if an Event of
Default has occurred and is continuing, the Lender may apply such proceeds to
the reduction of the Obligations, in such order as Lender determines, or at
the Lender's option may permit or require the Borrower to use such money, or
any part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction. If no Event of Default has occurred and is continuing, Lender
hereby authorizes Borrower to collect all such insurance proceeds and to use
such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.
6.8 Collateral Reporting. The Borrower will provide the Lender
with the following documents at the following times in form satisfactory to
the Lender: (a) on a daily basis, a schedule of Accounts created since the
last such schedule, a schedule of remittance advices, credit memos and reports
and a schedule of collections of Accounts since the last such schedule; (b) no
later than fifteen (15) days after the last day of each month, monthly summary
and detailed agings of Accounts aged by due date and by invoice date; (c) no
later than twenty (20) days after the last day each month, monthly
reconciliations of Accounts balances per the aging to the general ledger
accounts receivable balance and to the financial statements provided to Lender
under Section 7.2(c); (d) no later than twenty (20) days after the last day
each month, monthly Inventory reports by category and by location; (e) no
later than twenty (20) days after the last day each month, monthly
reconciliations of the detailed Inventory reports to the general ledger and to
the financial statements provided to Lender under Section 7.2(c); (f) upon
request, copies of invoices, credit memos, shipping and delivery documents,
purchase orders; (g) such other reports as to the Collateral as the Lender
shall request from time to time; and (h) certificates of an officer of the
Borrower certifying as to the foregoing. If any of the Borrower's records or
reports of the Collateral are prepared by an accounting service or other
agent, the Borrower hereby authorizes such service or agent to deliver such
records, reports, and related documents to the Lender.
6.9 Accounts. (a) The Borrower hereby represents and warrants
to the Lender that: (i) each existing Account represents, and each future
Account will represent, a bona fide sale or lease and delivery of goods by the
Borrower or a LSB Guarantor Subsidiary, or rendition of services by the
Borrower or a LSB Guarantor Subsidiary, in the ordinary course of business;
(ii) each existing Account is, and each future Account will be, for a
liquidated amount payable by the Account Debtor thereon on the terms set forth
in the invoice therefor or in the schedule thereof delivered to the Lender,
without offset, deduction, defense, or counterclaim (other than claims
relating to warranty issues); (iii) no payment will be received with respect
to any Account, and no credit, discount, or extension, or agreement therefor
will be granted to any Account, except as reported to or otherwise agreed to
by the Lender in accordance with this Agreement; (iv) each copy of an invoice
requested by and delivered to the Lender by the Borrower will be a genuine
copy of the original invoice sent to the Account Debtor named therein; and (v)
all goods described in each invoice will have been delivered to the Account
Debtor and all services described in each invoice will have been performed,
except where the Account Debtor has previously agreed in writing to accept
billings for such goods.
(b) The Borrower shall not re-date or allow any LSB Guarantor
Subsidiary to re-date any invoice or sale or make sales on extended dating
beyond that customary in the business of the applicable Borrower or a LSB
Guarantor Subsidiary or extend or modify any Account which alters its
eligibility status, or, with respect to ineligible Accounts, which are
inconsistent with prudent business practice and industry standards. If the
Borrower becomes aware of any matter adversely affecting any Account in an
amount in excess of $100,000, including information regarding the Account
Debtor's creditworthiness, the Borrower will promptly so advise the Lender.
(c) The Borrower shall not accept or allow any LSB Guarantor
Subsidiary to accept any note or other instrument (except a check or other
instrument for the immediate payment of money) with respect to any Eligible
Account without the Lender's written consent. If the Lender consents to the
acceptance of any such instrument, it shall be considered as evidence of the
Account and not payment thereof and the Borrower will upon Lender's request,
promptly deliver such instrument to the Lender appropriately endorsed.
Regardless of the form of presentment, demand, notice of dishonor, protest,
and notice of protest with respect thereto, the Borrower or the appropriate
LSB Guarantor Subsidiary will remain liable thereon until such instrument is
paid in full.
(d) The Borrower shall notify the Lender promptly of all
disputes and claims with an Account Debtor relating to an Eligible Account
that exceeds $100,000 and when no Event of Default exists hereunder, may
settle or adjust them at no expense to the Lender, but no discount, credit or
allowance in excess of $100,000 shall be granted to any Account Debtor without
the Lender's consent, except for discounts, credits and allowances made or
given in the ordinary course of the business of the applicable Borrower or LSB
Guarantor Subsidiary. The Borrower shall send the Lender a copy of each
credit memorandum in excess of $100,000 as soon as issued. The Lender may, at
all times when an Event of Default exists hereunder, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms which the
Lender considers advisable and, in all cases, the Lender will credit the
Borrower's loan account with only the net amounts received by the Lender in
payment of any Accounts.
6.10 Collection of Accounts. (a) Until the occurrence of an
Event of Default that is continuing, the Borrower and each LSB Guarantor
Subsidiary shall collect all Accounts, shall receive all payments relating to
Accounts, and shall promptly deposit all such collections into a Payment
Account established for the account of the Borrower and the LSB Guarantor
Subsidiaries at a bank acceptable to the Borrower and the Lender. All
collections relating to Accounts received in any such Payment Account or
directly by the Borrower or any LSB Guarantor Subsidiary or the Lender, and
all funds in any Payment Account or other account to which such collections
are deposited, shall be the sole property of the Lender and subject to the
Lender's sole control. After the occurrence of an Event of Default that is
continuing, the Lender may, at any time, notify obligors that the Accounts
have been assigned to the Lender and of the Security Interest therein, and may
collect them directly and charge the collection costs and expenses to the
Borrower's loan account. After the occurrence of an Event of Default that is
continuing, the Borrower, at Lender's request, shall execute and deliver to
the Lender such documents as the Lender shall require to grant the Lender
access to any post office box in which collections of Accounts are received.
(a) If sales of Inventory are made for cash, the Borrower and
each LSB Guarantor Subsidiary shall immediately deliver to the Lender the
identical checks, cash, or other forms of payment which the Borrower or such
LSB Guarantor Subsidiary receives.
(b) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrower's loan account (conditional upon final collection)
after allowing one (1) Business Day for collection.
(c) In the event the Borrower repays all of the Obligations upon
the termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrower's loan
account one (1) Business Day after the Lender's receipt thereof.
6.11 Inventory. The Borrower and each LSB Guarantor Subsidiary
represents and warrants to the Lender that all of the Inventory is and will be
held for sale or lease, or to be furnished in connection with the rendition of
services, in the ordinary course of business, and is and will be fit for such
purposes. The Borrower and each LSB Guarantor Subsidiary will cause the
Inventory to be kept in good and marketable condition, at its own expense.
The Borrower agrees that all Inventory produced by the Borrower or any LSB
Guarantor Subsidiary in the United States will be produced in accordance with
the Federal Fair Labor Standards Act of 1938. The Borrower will conduct a
physical count of the Inventory at least once per Fiscal Year, except as
otherwise agreed to between the Lender and the Borrower, and will, upon
request of the Lender, supply the Lender with a copy of such count accompanied
by a report of the value of such Inventory (valued at the lower or cost, on a
first-in, first-out basis, or market value). Neither the Borrower nor any LSB
Guarantor Subsidiary will, without the Lender's written consent, allow any
Inventory to be sold on a bill and hold basis (except as provided in
subsection (xiii) of the definition of Eligible Accounts set forth in this
Agreement), guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis.
6.12 Documents and Instruments. The Borrower and each LSB
Guarantor Subsidiary represents and warrants to the Lender that: (a) all
Documents and Instruments describing, evidencing, or constituting Collateral,
and all signatures and endorsements thereon, are and will be complete, valid,
and genuine and (b) all goods evidenced by such Documents and Instruments
were, at the time of their sale, owned by the Borrower or such LSB Guarantor
Subsidiary free and clear of all Liens other than Permitted Liens.
6.13 Right to Cure. The Lender may in its sole discretion pay
any amount or do any act required of the Borrower or any LSB Guarantor
Subsidiary hereunder in order to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Security Interest, and which the Borrower
or such LSB Guarantor Subsidiary fails to pay or do, including, without
limitation, payment of any judgment against the Borrower or such LSB Guarantor
Subsidiary, any insurance premium, any warehouse charge, processing charge,
any landlord's claim, and any other Lien upon the Collateral. All payments
that the Lender makes under this Section 6.13 and all out-of-pocket costs and
expenses that the Lender pays or incurs in connection with any action, taken
by it hereunder shall be charged to the Borrower's loan account; provided that
Lender will make a good faith effort to notify the Borrower and provide the
Borrower with a written, itemized invoice covering such charge. Any payment
made or other action taken by the Lender under this Section 6.13 shall be
without prejudice to any right Lender may have to assert an Event of Default
hereunder and to proceed accordingly.
6.14 Power of Attorney. The Borrower and each LSB Guarantor
Subsidiary appoints the Lender and the Lender's designees as the Borrower's or
such LSB Guarantor Subsidiary's attorney, with power: (a) to endorse the
Borrower's or such LSB Guarantor Subsidiary's name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come
into the Lender's possession; (b) to sign the Borrower's or such LSB Guarantor
Subsidiary's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records and on verifications of Accounts to Account Debtors; (c) to notify the
post office authorities, when an Event of Default exists, to change the
address for delivery of the Borrower's or such LSB Guarantor Subsidiary's mail
to an address designated by the Lender and to receive, open and dispose of all
mail addressed to the Borrower or such LSB Guarantor Subsidiary; (d) to send
requests for verification of Accounts to Account Debtors; and (e) to do all
things necessary to carry out this Agreement. The Borrower and each LSB
Guarantor Subsidiary ratifies and approves all acts of such attorney. Neither
the Lender nor the attorney will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable until this Agreement has been terminated and
the Obligations have been fully satisfied.
6.15 Lender's Rights, Duties, and Liabilities. The Borrower and
each LSB Guarantor Subsidiary assumes all responsibility and liability arising
from or relating to the use, sale or other disposition of the Collateral.
Neither the Lender nor any of its officers, directors, employees, and agents
shall be liable or responsible in any way for the safekeeping of any of the
Collateral, or for any act or failure to act with respect to the Collateral,
or for any loss or damage thereto, or for any diminution in the value thereof,
or for any act of default by any warehouseman, carrier, forwarding agency or,
other person whomsoever, all of which shall be at the Borrower's sole risk.
The Obligations shall not be affected by any failure of the Lender to take any
steps to perfect the Security Interest or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release the Borrower
from any of the Obligations. After the occurrence of an Event of Default that
has not been cured or otherwise waived by Lender, the Lender may (but shall
not be required to), without notice to or consent from the Borrower or any LSB
Guarantor Subsidiary, sue upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash or
credit, grant other indulgences, extensions, renewals, compositions, or
releases, and take or omit to take other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any
insurance applicable thereto, or any Person liable directly or indirectly in
connection with any of the foregoing, without discharging or otherwise
affecting the liability of the Borrower for the Obligations.
6.16 Release of Collateral and Borrower.
(a) If LSB sells any LSB Borrower Subsidiary or LSB Guarantor
Subsidiary or any LSB Borrower Subsidiary or LSB Guarantor Subsidiary sells
all or substantially all of its assets, then such LSB Borrower Subsidiary or
LSB Guarantor Subsidiary shall be allowed to prepay, without penalty or
prepayment premium, all of the outstanding Revolving Loans applicable to such
LSB Borrower Subsidiary or LSB Guarantor Subsidiary, plus the accrued interest
relating to such Revolving Loans, and upon payment of such Revolving Loans,
the Lender shall release and terminate its Security Interest as to the
Collateral of such LSB Borrower Subsidiary or LSB Guarantor Subsidiary and
release such LSB Borrower Subsidiary or LSB Guarantor Subsidiary from any
further liability and responsibility under the Loan Documents.
(b) Upon payment in full of all Obligations, Lender shall
immediately release its Security Interest in and to all of the Collateral.
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
7.1 Books and Records. The Borrower shall maintain, at all
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with
GAAP. The Borrower shall, by means of appropriate entries, reflect in such
accounts and in all Financial Statements proper liabilities and reserves for
all taxes and proper provision for depreciation and amortization of Property
and bad debts, all in accordance with GAAP. The Borrower shall maintain at
all times books and records pertaining to the Collateral in such detail, form,
and scope as the Lender shall reasonably require, including without limitation
records of: (a) all payments received and all credits and extensions granted
with respect to the Accounts; (b) the return, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral.
7.2 Financial Information. The Borrower shall promptly furnish
to the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is authorized
to obtain such information directly from them. Without limiting the
foregoing, Borrower will furnish to the Lender, in such detail as the Lender
shall request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, audited consolidated and
unaudited consolidating balance sheet, statement of income and expense,
retained earnings, and statement of cash flows and stockholders' equity for
the LSB Consolidated Group for such Fiscal Year, and the accompanying notes
thereto, setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting the
financial position and the results of operations of the LSB Consolidated Group
as at the date thereof and for the Fiscal Year then ended, and prepared in
accordance with GAAP. The audited statements shall be examined in accordance
with generally accepted auditing standards by, and accompanied by a report
thereon unqualified as to scope of, independent certified public accountants
selected by LSB and reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than
forty-five (45) days after the close of each Fiscal Quarter other than the
fourth quarter of a Fiscal Year, unaudited consolidated and consolidating
balance sheets of the LSB Consolidated Borrowing Group as at the end of such
quarter, and consolidated and consolidating unaudited statements of income and
expense and consolidated statements of cash flows for the LSB Consolidated
Borrowing Group for such quarter and for the period from the beginning of the
Fiscal Year to the end of such quarter, together with a report of Capital
Expenditures for such Fiscal Quarter, all in reasonable detail, fairly
presenting the financial position and results of operation of the LSB
Consolidated Borrowing Group as at the date thereof and for such periods,
prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 7.2(a). Such statements shall be
certified to be correct by the chief financial officer or an executive officer
of LSB, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than thirty
(30) days after the end of each month, unaudited consolidated balance sheets
of the LSB Consolidated Group as at the end of such month, and consolidated
and consolidating unaudited statements of income and expenses for the LSB
Consolidated Group for such month and for the period from the beginning of the
Fiscal Year to the end of such month, all in reasonable detail (although not
as detailed as the reports required under Sections 7.2(a) and 7.2(b), fairly
presenting the financial position and results of operation of the LSB
Consolidated Group as at the date thereof and for such periods, and prepared
in accordance with GAAP consistent with the audited Financial Statements
required pursuant to Section 7.2(a). Such statements shall be certified to be
correct by the chief financial officer, treasurer or chief accounting officer
of LSB, subject to normal year end adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have
reviewed and are familiar with the Loan Documents and that, in examining such
Financial Statements, they did not become aware of any fact or condition which
then constituted an Event of Default, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 7.2(a) and 7.2(b), a
certificate of the chief financial officer, treasurer or chief accounting
officer of the Borrower (i) setting forth in reasonable detail the
calculations required to establish that the LSB Consolidated Group was in
compliance with the covenants set forth in Sections 9.16 and 9.17 hereof as of
the end of the Fiscal Year and most recent Fiscal Quarter covered in such
Financial Statements; and, (ii) stating that, except as explained in
reasonable detail in such certificate, (A) nothing has come to the attention
of such officer that would lead such officer to believe that all of the
representations, warranties and covenants of the Borrower contained in this
Agreement and the other Loan Documents are not correct and complete as of the
date of such certificate and (B) no Event of Default then exists or existed
during the period covered by such Financial Statements. If such certificate
discloses that a representation or warranty is not correct or complete, or
that a covenant has not been complied with, or that an Event of Default
existed or exists, such certificate shall set forth what action the Borrower
has taken or proposes to take with respect thereto.
(f) No sooner than ninety (90) days and no less than thirty (30)
days prior to the beginning of each Fiscal Year, projected consolidated and
consolidating balance sheets, statements of income and expense, and statements
of cash flow for the Borrower and Subsidiaries as at the end of and for each
Fiscal Quarter of such Fiscal Year.
(g) Promptly upon their becoming available, copies of each proxy
statement, financial statement and report which LSB sends to its stockholders
or files with the Securities and Exchange Commission.
(h) Promptly after filing with the PBGC and the IRS a copy of
each annual report or other filing filed with respect to each Plan of the
Borrower or any Related Company.
(i) Such additional, reasonable information as the Lender may
from time to time reasonably request regarding the financial and business
affairs of the Borrower or the Subsidiaries.
7.3 Notices to Lender. The Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Within two Business Days after becoming aware of the
existence of any Event of Default.
(b) Within two Business Days after becoming aware that the
holder of any Debt in excess of $1,000,000 has given notice or taken any
action with respect to a claimed default.
(c) Within five Business Days after a responsible officer of LSB
becomes aware of any change which LSB deems to be a material adverse change in
the Borrower's Property, business, operations, or condition (financial or
otherwise).
(d) Within five Business Days after a responsbile officer of LSB
becomes aware of any pending or threatened action, proceeding, or counterclaim
by any Person, or any pending or threatened investigation by a Public
Authority, which, in the opinion of such officer, would materially and
adversely affect the Collateral, the repayment of the Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property,
business, operations, or condition (financial or otherwise).
(e) Within two Business Days after becoming aware of any pending
or threatened strike, work stoppage, material unfair labor practice claim, or
other material labor dispute affecting the Borrower.
(f) Within five Business Days after a responsible officer of LSB
becomes aware of any violation of any law, statute, regulation, or ordinance
of a Public Authority applicable to Borrower, which, in the opinion of such
officer, would materially and adversely affect the Collateral, the repayment
of the Obligations, the Lender's rights under the Loan Documents, or the
Borrower's Property, business, operations, or condition (financial or
otherwise).
(g) Within five Business Days after a responsible officer of LSB
becomes aware of any violation or any investigation of a violation by the
Borrower of Environmental Laws which, in the opinion of such officer, would
materially and adversely affect the Borrower's Property, Collateral, business,
operation or condition (financial or otherwise).
(h) Within five Business Days after a responsible officer of LSB
becomes aware of any Termination Event, accompanied by any materials required
to be filed with the PBGC with respect thereto; immediately after the
Borrower's receipt of any notice concerning the imposition of any withdrawal
liability under Section 4042 of ERISA with respect to a Plan; immediately upon
the establishment of any Pension Plan not existing at the Closing Date or the
commencement of contributions by the Borrower to any Pension Plan to which the
Borrower was not contributing at the Closing Date; and immediately upon
becoming aware of any other event or condition regarding a Plan or the
Borrower's or a Related Company's compliance with ERISA, which, in the opinion
of such officer, would materially and adversely affect the Borrower's
Property, business, operation or condition (financial or otherwise).
(i) Thirty (30) days prior to the Borrower changing its name.
Each notice given under this Section 7.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrower
has taken or proposes to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
The Borrower continuously warrants and represents to the Lender, at
all times during the term of this Agreement and until all Obligations have
been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing in the exercise of its reasonable discretion:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. The Borrower has the corporate power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents, to incur the Obligations, and to grant the Security Interest. The
Borrower has taken all necessary corporate action to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents. No
consent, approval, or authorization of, or filing with, any Public Authority,
and no consent of, any other Person, is required in connection with the
Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for (a) those already duly obtained, (b) those
required to perfect the Lender's Security Interest, and (c) the compliance
with any of the conditions precedent set forth in Sections 10.4 and 10.10
hereof. This Agreement and the other Loan Documents have been duly executed
and delivered by the Borrower and constitute the legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its
terms without defense, setoff, or counterclaim. The Borrower's execution,
delivery, and performance of this Agreement and the other Loan Documents do
not and will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition of any
Lien upon the Property of the Borrower (except as contemplated by this
Agreement and the other Loan Documents) by reason of the terms of (a) any
material mortgage, lease, agreement, or instrument to which the Borrower is a
party or which is binding upon it, (b) any judgment, law, statute, rule or
governmental regulation applicable to the Borrower, or (c) the Certificate or
Articles of Incorporation or By-Laws of the Borrower.
8.2 Validity and Priority of Security Interest. The provisions
of this Agreement and the other Loan Documents create legal and valid Liens on
all the Collateral in the Lender's favor and when all proper filings,
recordings, and other actions necessary to perfect such Liens have been made
or taken such Liens will constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, except for
Permitted Liens, securing all the Obligations and enforceable against the
Borrower and all third parties.
8.3 Organization and Qualification. Borrower is duly
incorporated and organized and validly existing in good standing under the
laws of the State of Delaware; (ii) is qualified to do business as a foreign
corporation and is in good standing in each state where, because of the nature
of its activities or properties, such qualification is required, except where
the failure to so qualify would not have a material adverse effect on the
Borrower; and (iii) has all requisite corporate power and authority to conduct
its business and to own its Property.
8.4 Corporate Name; Prior Transactions. The Borrower has not,
during the past five years, been known by or used any other corporate or
fictitious name, or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
Property out of the ordinary course of business, except as set forth on
Exhibit E.
8.5 Subsidiaries and Affiliates. Exhibit F is a correct and
complete list of the name and relationship to the Borrower of each and all of
the Borrower's Subsidiaries and other Affiliates, which list may be amended by
Borrower from time to time as LSB adds new or additional Subsidiaries or
Affiliates. Each Subsidiary is (a) duly incorporated and organized and
validly existing in good standing under the laws of its state of incorporation
set forth on Exhibit F and (b) qualified to do business as a foreign
corporation and in good standing in the states set forth opposite its name on
Exhibit F, which are the only states in which such qualification is necessary
in order for it to own or lease its Property and conduct its business, except
where the failure to so qualify would not have a material adverse effect on
the LSB Borrowing Group taken as a whole.
8.6 Financial Statements and Projections.
(a) LSB has delivered to the Lender the audited consolidated
balance sheet and related statements of income, retained earnings, statements
of cash flows, and changes in stockholders' equity for LSB, as of December 31,
1996 and for the Fiscal Year then ended, accompanied by the report thereon of
LSB's independent certified public accountants. LSB has also delivered to the
Lender the unaudited consolidated balance sheets and related statements of
income and cash flows for LSB, as at September 30, 1997 and for the nine
months and three months then ended. Such financial statements are attached
hereto as Exhibit G-1. All such financial statements have been prepared in
accordance with GAAP and present accurately and fairly the Borrower's
financial position as at the dates thereof and its results of operations for
the periods then ended.
(b) The Latest Forecasts, attached hereto as Exhibit G-2,
represent the Borrower's best estimate of the Borrower's future financial
performance for the periods set forth therein. The Latest Forecasts have been
or will be prepared on the basis of certain assumptions, which the Borrower
believes are fair and reasonable in light of current and reasonably
foreseeable business conditions; provided, however, that although such
forecasts represent the Borrower's best estimate, the Borrower makes no
representation that it will achieve such forecasts.
8.7 Capitalization. LSB's authorized capital stock consists of
(i) 75,000,000 shares of Common Stock, par value $.10 per share; (ii) 250,000
shares of Preferred Stock, par value $100 per share; and (iii) 5,000,000
shares of Class C Preferred Stock, no par value. The authorized Capital Stock
of each of the LSB Guarantor Subsidiaries is described on Schedule 8.7.
8.8 Solvency. The Borrower is solvent prior to and after giving
effect to the making of the Revolving Loans, and after taking into account
Intercompany Accounts.
8.9 Title to Property. Except for Permitted Liens, and except
for Property which the Borrower or any LSB Guarantor Subsidiary leases, the
Borrower and each LSB Guarantor Subsidiary has, to its knowledge, good and
marketable title in fee simple to the real property listed in Exhibit H and
good, indefeasible, and merchantable title to all of its other Property free
of all Liens except Permitted Liens.
8.10 Real Property; Leases. Exhibit H hereto is a correct and
complete list of all real property owned by the Borrower or any LSB Guarantor
Subsidiary, and all leases and subleases of real property by the Borrower or
any LSB Guarantor Subsidiary as lessee or sublessee where Collateral is
located. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect and no material
default by any party to any such lease or sublease exists.
8.11 Proprietary Rights. Exhibit B hereto is a correct and
complete list of all of the Proprietary Rights owned by Borrower or any LSB
Guarantor Subsidiary. None of the Proprietary Rights is subject to any
licensing agreement or similar arrangement except as set forth on Exhibit B.
To the Borrower's knowledge, none of the Proprietary Rights infringes on or
conflicts with any other Person's Property. The Proprietary Rights described
on Exhibit B constitute all of the Property of such type necessary to the
current and anticipated future conduct of the Borrower's business.
8.12 Trade Names and Terms of Sale. All trade names or styles
under which the Borrower or any LSB Guarantor Subsidiary will sell Inventory
or create Accounts, or to which instruments in payment of Accounts may be made
payable, are listed on Exhibit I hereto. The terms of sale on which such
sales of Inventory will be made are set forth on Exhibit I.
8.13 Litigation. Except as set forth on Exhibit J or as
described in the reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission or in the Offering Memorandum, there is no
pending or, to the Borrower's knowledge, threatened suit, proceeding, or
counterclaim by any Person, or investigation by any Public Authority, or any
basis for any of the foregoing, which would have a material adverse effect on
the LSB Consolidated Group, taken as a whole, or (ii) involve damages or a
claim for damages in excess of $1,000,000 and not fully covered by insurance.
8.14 Labor Disputes. Except as set forth on Exhibit K or as
described in reports filed by LSB prior to the Closing Date with the
Securities and Exchange Commission: (a) there is no collective bargaining
agreement or other labor contract covering employees of the Borrower or any
LSB Guarantor Subsidiary; (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this Agreement; (c)
no union or other labor organization is seeking to organize, or to be
recognized as, a collective bargaining unit of employees of the Borrower or
any LSB Guarantor Subsidiary; and (d) there is no pending or, to the
Borrower's knowledge, threatened strike, work stoppage, material unfair labor
practice claims, or other material labor dispute which would have a material
adverse effect on the LSB Consolidated Group, taken as a whole.
8.15 Environmental Laws. Except as disclosed on Exhibit M
hereto, and or as described in reports filed by LSB prior to the Closing Date
with the Securities and Exchange Commission or in the Offering Memorandum, and
as hereafter disclosed by Borrower to Lender in writing, and to the Borrower's
knowledge:
(a) All environmental permits, certificates, licenses,
approvals, registrations and authorizations ("Permits") required under all
Environmental Laws in connection with the business of the Borrower and each
LSB Guarantor Subsidiary have been obtained, unless the failure to obtain such
Permits would not have a material adverse effect on the LSB Borrowing Group,
taken as a whole;
(b) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental entity with respect to any
generation, treatment, storage, recycling, transportation or disposal of any
hazardous or toxic waste (including petroleum products and radioactive
materials) generated or used ("Hazardous Substances") by the Borrower or any
LSB Guarantor Subsidiary, which would have a material adverse effect on the
LSB Borrowing Group, taken as a whole;
(c) Neither Borrower nor any LSB Guarantor Subsidiary has
received any request for information that is likely to lead to a claim, any
notice of claim, demand or other notification that the Borrower or any LSB
Guarantor Subsidiary is or may be potentially responsible with respect to any
clean up of any threatened or actual release of any Hazardous Substance;
(d) There are no underground storage tanks, active or abandoned,
at any property now owned, operated or leased by the Borrower or any LSB
Guarantor Subsidiary.
(e) Neither Borrower nor any LSB Guarantor Subsidiary has
knowingly transported any Hazardous Substances to any location which is listed
on the National Priority List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), which is the
subject of any federal or state enforcement actions which may lead to claims
against Borrower or any LSB Guarantor Subsidiary for clean up costs, remedial
work, damages to natural resources or for personal injury claims, including,
but not limited to, claims under CERCLA which would have a material adverse
effect on the LSB Borrowing Group, taken as a whole.
(f) No written notification of a release of Hazardous Substance
has been filed by or on behalf of the Borrower or any LSB Guarantor Subsidiary
or in relation to any Property now owned, operated or leased by the Borrower
or any LSB Guarantor Subsidiary or previously owned, operated or leased by the
Borrower or any LSB Guarantor Subsidiary at the time such property was so
owned, operated or leased. No such Property is listed or proposed for listing
on the National Priority List promulgated pursuant to CERCLA, or on any
similar state list of sites requiring investigation or clean up.
(g) There are no environmental Liens on any material properties
owned or leased by the Borrower or any LSB Guarantor Subsidiary and no
governmental actions have been taken or are in process or pending which could
subject any of such Properties to such Liens.
(h) The Borrower shall promptly forward a copy to Lender of any
environmental written inspections, investigations or studies prepared by or to
be prepared by the Borrower or any LSB Guarantor Subsidiary relating to
Properties now owned, operated or leased by the Borrower or any LSB Guarantor
Subsidiary; provided, however, that Borrower makes no representation or
warranty with respect to environmental inspections, investigations, studies,
audits, tests, reviews or other analyses conducted by or on behalf of Lender.
8.16 No Violation of Law. Except as disclosed in Exhibit J or
in reports filed by LSB prior to the Closing Date with the Securities and
Exchange Commission or in the Offering Memorandum, to the Borrower's
knowledge, neither the Borrower nor any LSB Guarantor Subsidiary is in
violation of any law, statute, regulation, ordinance, judgment, order, or
decree applicable to it which violation would have a material adverse effect
on the LSB Borrowing Group, taken as a whole.
8.17 No Default. Neither the Borrower nor any LSB Guarantor
Subsidiary is in default with respect to any note, loan agreement, mortgage,
lease, or other agreement to which the Borrower or any LSB Guarantor
Subsidiary is a party or bound, where the amount owed by Borrower or any LSB
Guarantor Subsidiary under such note, loan agreement, mortgage, lease, or
other agreement exceeds $750,000.
8.18 Plans. Each Plan has been maintained at all times in
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code. All Pension Plans are listed on Exhibit L, and those, if
any, which are a Multi-employer Plan are designated as such, and a copy of
each such Pension Plan which has been requested in writing by Lender has been
furnished to Lender. Except as set forth on Exhibit L, no Pension Plan has
incurred any accumulated funding deficiency, as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, which would
have a material adverse effect on the LSB Borrowing Group, taken as a whole.
Except as set forth on Exhibit L, each Pension Plan, which is intended to be a
qualified Pension Plan under Section 401(a) of the Code, as currently in
effect has received a favorable determination letter from the Internal Revenue
Service finding that the current form of the Plan is qualified under Section
401(a) of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code. The Borrower has not incurred any
liability to the PBGC other than the payment of premiums, and there are no
premium payments which have become due, are unpaid, and the non-payment of
which would have a material adverse effect on the LSB Borrowing Group, taken
as a whole. Neither LSB nor any of its Subsidiaries, nor any fiduciary of or
trustee to any Plan has breached any of the responsibilities, obligations or
duties imposed on it under the terms of the Plan or by ERISA with respect to
any Plan the breach of which would have a material adverse effect on the LSB
Borrowing Group, taken as a whole. LSB has established reserves on its books
to provide for the benefits earned and other liabilities accrued under each
such Plan in amounts sufficient to substantially provide for such benefits and
liabilities which have not been funded through the trust, if any, established
for such Plan.
8.19 Taxes. The Borrower and each LSB Guarantor Subsidiary has
filed all tax returns and other reports which it was required by law to file
on or prior to the date hereof and has paid all taxes, assessments, fees, and
other governmental charges, and penalties and interest, if any, against it or
its Property, income, or franchise, that are due and payable, except such
Taxes which are being contested in good faith and for which appropriate
reserves have been established in connection therewith, or for which an
extension as to the date of filing has been authorized.
8.20 Use of Proceeds. None of the transactions contemplated in
this Agreement (including, without limitation, the use of certain proceeds
from such loans) will violate or result in the violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"), 12 C.F.R., Chapter II. Borrower does not own or intend to carry or
purchase any "margin stock" within the meaning of said Regulation G. None of
the proceeds of the loans will be used, directly or indirectly, to purchase or
carry (or refinance any borrowing, the proceeds of which were used to purchase
or carry) any "security" within the meaning of the Securities Exchange Act of
1934, as amended.
8.21 Private Offerings. Borrower has not, directly or
indirectly, offered the Revolving Loans for sale to, or solicited offers to
buy part thereof from, or otherwise approached or negotiated with respect
thereto with, any prospective purchaser other than Lender. Borrower hereby
agrees that neither it nor anyone acting on its behalf has offered or will
offer the Revolving Loan or any part thereof or any similar securities for
issue or sale to or solicit any offer to acquire any of the same from anyone
so as to bring the issuance thereof within the provisions of Section 5 of the
Securities Act of 1933, as amended.
8.22 Broker's Fees. Borrower represents and warrants to Lender
that, with respect to the financing transaction herein contemplated, no Person
is entitled to any brokerage fee or other commission as a result of acts by
the Borrower and Borrower agrees to indemnify and hold Lender harmless against
any and all such claims if such claim is due to the acts of the Borrower.
8.23 No Material Adverse Change. Except as disclosed in the
Offering Memorandum or in the written materials delivered to Lender at a
meeting held with Borrower on October 7, 1997, no material adverse change has
occurred in the Property, business, operations, or conditions (financial or
otherwise) of the LSB Consolidated Group, taken as a whole, since the date of
the Financial Statements delivered to the Lender, except as otherwise
disclosed to Lender in the written materials delivered to Lender at a meeting
held with Borrower on October 7, 1997, and in the reports filed by LSB with
the Securities and Exchange Commission, if any.
8.24 Debt. After giving effect to the making of each Revolving
Loan, the Borrower has no Debt except Permitted Debt.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrower and, where
applicable, each LSB Guarantor Subsidiary covenants that, so long as any of
the Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. The Borrower and each LSB
Guarantor Subsidiary, no later than ten days after such payments become due,
shall: (a) file when due (including extensions) all tax returns and other
reports which it is required to file, pay when due all taxes, fees,
assessments and other governmental charges against it or upon its Property,
income, and franchises, make all required withholding and other tax deposits,
and establish adequate reserves for the payment of all such items, and shall
provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (b) pay all Debt owed by it within normal
business terms and consistent with past practices; provided, however, that
neither the Borrower nor any LSB Guarantor Subsidiary need pay any tax, fee,
assessment, governmental charge, or Debt, or perform or discharge any other
obligation, that it is contesting in good faith by appropriate proceedings
diligently pursued.
9.2 Corporate Existence and Good Standing. The Borrower and
each LSB Guarantor Subsidiary shall maintain its corporate existence and its
qualification and good standing in all states necessary to conduct its
business and own its Property, except where the failure to so qualify would
not have a material adverse effect on the Borrower or such LSB Guarantor
Subsidiary, and shall obtain and maintain all licenses, permits, franchises
and governmental authorizations necessary to conduct its business and own its
Property.
9.3 Maintenance of Property and Insurance. The Borrower and
each LSB Guarantor Subsidiary shall: (a) maintain all of its Property
necessary and material in its business in good operating condition and repair,
ordinary wear and tear excepted, provided, however, that Borrower shall have a
period of ten (10) days after learning that repair is necessary within which
to repair any Property which has not been so maintained before an Event of
Default shall be deemed to have occurred; and (b) in addition to the insurance
required by Section 6.7, maintain with financially sound and reputable
insurers such other insurance with respect to its Property and business
against
casualties and contingencies of such types (including, without limitation,
business interruption, public liability, product liability, and larceny,
embezzlement or other criminal misappropriation), and in such amounts as is
customary for Persons of established reputation engaged in the same or a
similar business and similarly situated, naming the Lender, at its request, as
additional insured under each such policy as to the Collateral.
9.4 Environmental Laws. Except as disclosed to Lender in
writing prior to the Closing Date in connection with Section 8.15, the
Borrower and each LSB Guarantor Subsidiary will use all reasonable efforts to
conduct its business in substantial compliance with all Environmental Laws
applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. The Borrower shall take prompt and appropriate action to
respond to any noncompliance with Environmental Laws and shall regularly
report to the Lender on such response. Without limiting the generality of the
foregoing, whenever there is potential noncompliance with any Environmental
Laws, the Borrower shall, at the Lender's request and the Borrower's expense:
(a) cause an independent environmental engineer acceptable to the Lender to
conduct such tests of the site where the Borrower's or any LSB Guarantor
Subsidiary's noncompliance or alleged noncompliance with Environmental Laws
has occurred and prepare and deliver to the Lender a report setting forth the
results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof; and (b)
provide to the Lender a Supplemental report of such engineer whenever the
scope of the environmental problems, or the Borrower's response thereto or the
estimated costs thereof, shall materially change.
9.5 Mergers, Consolidations, Acquisitions, or Sales. Neither
the Borrower nor any LSB Guarantor Subsidiary shall enter into any transaction
of merger, reorganization, or consolidation in which Borrower or, in the case
of the LSB Guarantor Subsidiaries, another LSB Guarantor Subsidiary, is not
the survivor or transfer, sell, assign, lease, or otherwise dispose of all or
substantially all of its Property, or wind up, liquidate or dissolve, or agree
to do any of the foregoing, except (i) sales of Inventory in the ordinary
course of its business, or (ii) after thirty (30) days prior written notice to
Lender, mergers or consolidations of the Borrower into any of the Borrower
Subsidiaries or a merger of a Borrower Subsidiary or LSB Guarantor Subsidiary
into the Borrower or the sale of all or substantially all of the assets of the
Borrower to any of the Borrower Subsidiaries or the sale of all or
substantially all of the assets of a Borrower Subsidiary or LSB Guarantor
Subsidiary to the Borrower.
9.6 Guaranties. Neither the Borrower nor any LSB Guarantor
Subsidiary shall make, issue, or become liable on any secured Guaranty, except
Guaranties in favor of the Lender and endorsements of instruments for deposit.
9.7 Debt. Neither Borrower nor any LSB Guarantor Subsidiary
shall incur or maintain any Debt other than Permitted Debt.
9.8 Prepayment. Neither the Borrower nor any LSB Guarantor
Subsidiary shall voluntarily prepay any Debt, except the Obligations in
accordance with the terms of this Agreement and as provided in Section 10.8
hereof.
9.9 Transactions with Affiliates. Except (a) as set forth
below, or (b) as set forth in Section 9.14 hereof, or (c) transactions
described in the "Certain Relationships and Related Transactions" section of
the Offering Memorandum, or (d) as otherwise provided in this Agreement, the
Borrower or any LSB Guarantor Subsidiary shall not sell, transfer, distribute,
or pay any money or Property to any Affiliate, or lend or advance money or
Property to any Affiliate, or invest in (by capital contribution or otherwise)
or purchase or repurchase any stock or indebtedness, or any Property, of any
Affiliate, or become liable on any secured Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate, except nothing contained
herein shall limit or restrict the Borrower from (i) performing any agreements
entered into with an Affiliate prior to the date hereof, or (ii) engaging in
other transactions with Affiliates in the normal course of business, in
amounts and upon terms disclosed to the Lender, and which are no less
favorable to the Borrower than would be obtainable in a comparable arm's
length transaction with a third party who is not an Affiliate. Subject to
applicable law, Borrower and the LSB Guarantor Subsidiaries may borrow any
amounts from each other and repay such amounts on terms agreed to between them
without limitations.
9.10 Plans and Compensation. Neither the Borrower nor any LSB
Guarantor Subsidiary shall take any action, or shall fail to take any action,
that will cause or be reasonably expected to cause any representation or
warranty contained in Section 8.18 (other than the listing of Pension Plans on
Exhibit L), if made on and again as of any date on or after the date of this
Agreement, to not be true and, without limitation and without excusing such
violation, if such a prohibited action or inaction occurs or fails to occur,
Borrower and the LSB Guarantor Subsidiaries shall notify Lender in writing of
the nature of the resulting consequences or expected consequences, and a
description of the action Borrower or any LSB Guarantor Subsidiary is taking
or proposing to take with respect thereto and, when known, any action taken
by the Internal Revenue Service of the Department of Labor, or the PBGC, with
respect thereto.
9.11 Reserved.
9.12 Liens. The Borrower shall not create, incur, assume, or
permit to exist any Lien on any Property now owned or hereafter acquired by
the Borrower or any LSB Guarantor Subsidiary, except Permitted Liens.
9.13 New Subsidiaries. The Borrower shall not, directly or
indirectly, organize or acquire any new subsidiary which would have an
interest in the Collateral.
9.14 Distributions and Restricted Investments. Borrower and the
LSB Guarantor Subsidiaries shall not (a) directly or indirectly declare or
make, or incur any liability to make, any Distribution, or (b) make any
Restricted Investments, except: (i) Borrower and the LSB Guarantor
Subsidiaries may make Distributions and Restricted Investments to CCI and the
other members of the LSB Consolidated Borrowing Group; (ii) so long as no
Event of Default has occurred and is continuing, currently scheduled Dividends
by LSB and performance of all of the terms, provisions and conditions by LSB,
relating to or in connection with or arising out of any and all series of
LSB's preferred stock issued and outstanding as of the date hereof and the
payments of an annual cash dividend on its Common Stock in an amount equal to
$.06 a share payable on a semi-annual basis; (iii) in addition to (i) above,
each Borrower may make Restricted Investments to any Subsidiary of LSB other
than to CCI and the members of the LSB Borrowing Group, provided, however,
that the sum of all such Restricted Investments from each such Borrower and
all other members of the LSB Consolidated Borrowing Group shall not exceed
$200,000 in the aggregate per annum; (iv) each Borrower may make Restricted
Investments in Affiliates outstanding as of the date hereof; and (v) each
Borrower may make other Restricted Investments constituting Acquisitions not
otherwise permitted above in this Section as long as such Restricted
Investments when aggregated with all other Restricted Investments for the same
Acquisition from all members of the LSB Consolidated Borrowing Group do not
exceed $2,000,000 in cash investments and issued and/or assumed
interest-bearing debt per Acquisition and $10,000,000 in cash investments and
issued and/or assumed interest-bearing debt in the aggregate for all such
Acquisitions per annum; provided, however, that interest-bearing debt of the
acquired company which Lender in its sole and absolute discretion agrees to
refinance as a working capital facility shall not be included in the
$2,000,000 and the $10,000,000 limitations; and further provided that nothing
in this subsection (iv) shall be construed to imply Lender's willingness in
advance to provide any such refinancing; and (v) CCI may make the
Distributions described on Schedule 10.8. Notwithstanding any provision to
the contrary contained herein, the Account currently owing to EDC by its
Affiliate, TES, may be converted to preferred stock to be owned and controlled
by EDC.
9.15 Capital Expenditures. Neither Borrower nor any LSB
Guarantor Subsidiary shall not make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures by the
LSB Consolidated Borrowing Group during the Fiscal Year ending December 31,
1997 and during each Fiscal Year ending thereafter would exceed $6,000,000.
9.16 LSB Adjusted Tangible Net Worth. The LSB Adjusted Tangible
Net Worth (without taking into account any purchases of treasury stock) will
not be less than the following amounts at the end of each of the Fiscal
Quarters during the following Fiscal Years:
Fiscal Quarters
in the Following
Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th
Quarter
Fiscal Year Ending
December 31, 1997 $40,000,000
Fiscal Year Ending
December 31, 1998 $36,900,000 $36,700,000 $33,000,000
$28,800,000
Fiscal Year Ending
December 31, 1999 $28,800,000 $28,800,000 $28,800,000
$28,800,000
Each Fiscal Quarter during each Fiscal Year ending thereafter: $28,800,000
9.17 Debt Ratio. The ratio of Debt of the LSB Consolidated
Group to the LSB Adjusted Tangible Net Worth will not be greater than the
following ratios at the end of each of the Fiscal Quarters during the
following Fiscal Years:
Fiscal Quarters
in the Following
Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th
Quarter
Fiscal Year Ending
December 31, 1997 4.10:1
Fiscal Year Ending
December 31, 1998 4.73:1 4.73:1 5.13:1 6.15:1
Fiscal Year Ending
December 31, 1999 6.15:1 6.15:1 6.15:1 6.15:1
Each Fiscal Quarter during each Fiscal Year ending thereafter: 6.15:1
9.18 Further Assurances. The Borrower and each LSB Guarantor
Subsidiary shall execute and deliver, or cause to be executed and delivered,
to the Lender such documents and agreements, and shall take or cause to be
taken such actions, as the Lender may, from time to time, reasonably request
to carry out the terms and conditions of this Agreement and the other Loan
Documents.
10. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated
to make any Loans or issue any Letters of Credit at the Closing unless the
following conditions precedent have been satisfied as reasonably determined by
the Lender:
10.1 Representations and Warranties; Covenants; Events. The
Borrower's representations and warranties contained in this Agreement and the
other Loan Documents shall be correct and complete as of the Closing Date; the
Borrower shall have performed and complied with all covenants, agreements, and
conditions contained herein and in the other Loan Documents which are required
to have been performed or complied with on or before the Closing Date; and
there shall exist no Event of Default on the Closing Date.
10.2 Delivery of Documents. The Borrower shall have delivered,
or cause to be delivered, to the Lender the documents listed on Exhibit N
hereto and such other documents, instruments and agreements as the Lender
shall request in connection herewith, duly executed by all parties thereto
other than the Lender, and in form and substance satisfactory to the Lender
and its counsel.
10.3 Required Approvals. The Lender shall have received
certified copies of all consents or approvals of any Public Authority or other
Person which the Lender reasonably determines is required in connection with
the transactions contemplated by this Agreement.
10.4 No Material Adverse Change. Except as disclosed to Lender
in the written materials delivered to Lender at a meeting held with Borrower
on October 7, 1997, there shall have occurred no material adverse change in
the Borrower's and the Subsidiaries' business or financial condition or in the
Collateral taken as a whole, since September 30, 1997, and the Lender shall
have received a certificate of Borrower's chief executive officer to such
effect.
10.4 Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement, and all documents
contemplated in connection herewith, shall be satisfactory in form and
substance to the Lender and its counsel.
10.5 Legal Opinions. The Lender shall have received from
counsel to the Borrower such legal opinions as the Lender may reasonably
require with respect to the Loan Documents.
10.6 September 30, 1997 Quarterly Financial Statements. The
Lender shall have received LSB's and the Subsidiaries' consolidated September
30, 1997, unaudited quarterly financial statements.
10.7 CCI Bond Offering. CCI will have raised at least
$100,000,000 in Bond Debt, part of the proceeds of which will have been used
to repay all Debt owed to John Hancock, and the remainder of the proceeds
shall have been distributed in accordance with Schedule 10.8.
10.8 Conditions Precedent to Each Loan. The obligation of the
Lender to make each Revolving Loan or to provide for the issuance of any
Letter of Credit after the Closing and after the initial Revolving Loans on
the Closing Date are made, shall be subject to the further conditions
precedent that on the date of any such extension of credit, the following
statements shall be true, and the acceptance by the Borrower of any extension
of credit shall be deemed to be a statement to the effect set forth in clauses
(i) and (ii), with the same effect as the delivery to the Lender of a
certificate signed by the chief executive officer and chief financial officer
of the Borrower, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such extension of credit as though made on and as of
such date, except to the extent the Lender has been notified by the Borrower
that any representation or warranty is no longer correct and the reason
therefor and the Lender has explicitly accepted in writing such disclosure in
the exercise of its reasonable discretion; and
(ii) No Event has occurred and is continuing, or would result
from such extension of credit, which constitutes an Event of Default.
11. DEFAULT; REMEDIES.
11.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure by Borrower to make payment of principal,
interest, fees or premium on any of the Obligations when due;
(b) any representation or warranty made by the Borrower or any
LSB Guarantor Subsidiary in this Agreement, any of the other Loan Documents,
any Financial Statement, or any certificate furnished by the Borrower at any
time to the Lender shall prove to be untrue in any material respect as of the
date when made or furnished;
(c) default shall occur in the observance or performance of any
of the covenants and agreements contained in this Agreement, or in any of the
other Loan Documents, or if any such agreement or document shall terminate
(other than in accordance with its terms or the terms hereof or with the
written consent of the Lender) or become void or unenforceable without the
written consent of the Lender other than as a direct result of any conduct
solely on the part of the Lender;
(d) any default by Borrower or any LSB Guarantor Subsidiary
under any material agreement or instrument (other than an agreement or
instrument evidencing the lending of money), which default would have a
material adverse effect on the LSB Borrowing Group, taken as a whole, and such
default continues for thirty (30) days after such breach first occurs;
provided, however, that such grace period shall not apply, and an Event of
Default shall exist, promptly upon such breach, if such breach may not, in
Lender's reasonable determination, be cured by Borrower during such thirty
(30) day grace period;
(e) any default by Borrower or any LSB Guarantor Subsidiary in
any payment of principal of or interest on any indebtedness (other than the
Obligations) for borrowed money where the then outstanding amount exceeds
$500,000 beyond any period of grace provided with respect thereto or in the
performance of any other agreement, term or condition contained in any
agreement under which any such obligation is created if (i) the effect of such
default is to cause or permit the holder or holders of such obligation to
cause, such obligation to become due prior to its stated maturity, and (ii)
the effect of such default would have a material adverse effect on the
Borrower.
(f) Borrower or any LSB Guarantor Subsidiary shall make a
general assignment for benefit of creditors; or any proceeding shall be
instituted by Borrower seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors or seeking
entry of an order for relief or the appointment of a receiver, trustee or
other similar official for it or for any substantial part of its property or
Borrower shall take any corporate action to authorize any of the actions set
forth above in this Subsection 11.1(f).
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against the Borrower or any LSB Guarantor
Subsidiary seeking reorganization, arrangement or readjustment of the
Borrower's debts or for any other relief under the Federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing and remain undismissed or unvacated for a
period of sixty (60) days;
(h) a receiver, assignee, liquidator, trustee or similar officer
for the Borrower or any LSB Guarantor Subsidiary for all or substantially all
of its Property shall be appointed involuntarily;
(i) the Borrower or any LSB Guarantor Subsidiary shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any
action or proceeding for dissolution, winding-up or liquidation, or shall take
any corporate action in furtherance thereof, except if one Borrower merges or
consolidates with another Borrower;
(j) any guaranty of the Obligations shall be terminated, revoked
or declared void or invalid other than by an action undertaken by Lender;
(k) one or more final judgments for the payment of money
aggregating in excess of $1,000,000 (not covered by insurance) shall be
rendered against any members of the LSB Borrowing Group, and LSB or such other
member of the LSB Borrowing Group shall fail to discharge the same within
thirty (30) days from the date of notice of entry thereof or to appeal
therefrom or reach a negotiated settlement in connection therewith;
(l) any loss, theft, damage or destruction of any item or items
of Collateral occurs which: (i) materially and adversely affects the
operation of the Borrower's and the LSB Guarantor Subsidiaries' business taken
as a whole; or (ii) is material in amount and is not adequately covered by
insurance;
(m) any event or condition shall occur, or exist with respect to
a Plan that would, in the Lender's reasonable judgment, subject the Borrower
or any Subsidiary to any tax, penalty or other liabilities under the terms of
the Plan, under ERISA or under the Code which in the aggregate are material in
relation to the business, operations, Property or financial or other condition
of the LSB Borrowing Group taken as a whole;
(n) there occurs after the date hereof an Ownership Change (as
defined below) in LSB. For purposes of this Agreement, an "Ownership Change"
in LSB is deemed to have occurred if any Person (except Jack E. Golsen,
members of his Immediate Family [as defined below] and any entity controlled
by Jack E. Golsen or members of his Immediate Family), together with such
Person's affiliates and associates, is or becomes the beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of LSB. The term "Immediate Family" of any Person means the
spouse, siblings, children, mothers and mothers-in-law, fathers and
fathers-in-law, sons and daughters-in-law, daughters and sons-in-law, nieces,
nephews, brothers and sisters-in-law, sisters and brothers -in-law;
(o) an event of default exists under any of the other
LSB-Related Loan Agreements or under any of the Loan Documents;
(p) any "event of default" (as such term is defined in the Bond
Indenture) occurs under the Bond Indenture or any of the Notes issued in
connection therewith; and
(q) if any one or more of the LSB-Related Loan Agreements
terminates prior to the termination of the other LSB-Related Loan Agreements
without the Lender's prior consent thereto, unless as otherwise provided in
Section 6.16(a).
11.2 Remedies.
(a) If an Event of Default exists, the Lender may, without
notice to or demand on the Borrower, do one or more of the following at any
time or times and in any order: (i) reduce the amount of or refuse to make
Revolving Loans and restrict or refuse to arrange for Letters of Credit; (ii)
terminate this Agreement; (iii) declare any or all Obligations to be
immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Sections 11.1(f), 11.1(g), or 11.1(h), all
Obligations shall automatically become immediately due and payable); and (iv)
pursue its other rights and remedies under the Loan Documents and applicable
law. The foregoing shall not be construed to limit the Lender's discretion to
take the actions described in clause (i) of this subparagraph (a) at any other
time.
(b) If an Event of Default exists: (i) the Lender shall have, in
addition to all other rights, the rights and remedies of a secured party under
the UCC; (ii) the Lender may, at any time, take possession of the Collateral
and keep it on the Borrower's or any LSB Guarantor Subsidiary's premises, at
no cost to the Lender, or remove any part of it to such other place or places
as the Lender may desire, or, the Borrower shall, upon the Lender's demand, at
the Borrower's cost, assemble the Collateral and make it available to the
Lender at a place reasonably convenient to the Lender; and (iii) the Lender
may sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as the Lender deems
advisable, in its sole discretion, and may, if the Lender deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Without in any way requiring notice to be given in the
following manner, the Borrower and each LSB Guarantor Subsidiary agrees that
any notice by the Lender of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the UCC or otherwise,
shall constitute reasonable notice to the Borrower and such LSB Guarantor
Subsidiary if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally against
receipt, at least five (5) days prior to such action to the Borrower's address
specified in or pursuant to Section 13.10. If any Collateral is sold on terms
other than payment in full at the time of sale, no credit shall be given
against the Obligations until the Lender receives payment, and if the buyer
defaults in payment, the Lender may resell the Collateral without further
notice to the Borrower or any LSB Guarantor Subsidiary. In the event the
Lender seeks to take possession of all or any portion of the Collateral by
judicial process, the Borrower and each LSB Guarantor Subsidiary irrevocably
waives: (a) the posting of any bond, surety or security with respect thereto
which might otherwise be required; (b) any demand for possession prior to the
commencement of any suit or action to recover the Collateral; and (c) any
requirement that the Lender retain possession and not dispose of any
Collateral until after trial or final judgment. The Borrower and each LSB
Guarantor Subsidiary agrees that the Lender has no obligation to preserve
rights to the Collateral or marshal any Collateral for the benefit of any
Person. Following the occurrence of an Event of Default that is continuing,
the Lender is hereby granted a license or other right to use, without charge,
the Borrower's and each LSB Guarantor Subsidiary's labels, patents,
copyrights, name, trade secrets, trade names, trademarks, and advertising
matter or any similar property, in completing production of, advertising or
selling any Collateral, and the Borrower's and each LSB Guarantor Subsidiary's
rights under all licenses and all franchise agreements shall inure to the
Lender's benefit, as long as such does not violate in any manner such other
loan agreements that may be in place at such time. The proceeds of sale shall
be applied first to all expenses of sale, including attorneys' fees, and
second, in whatever order the Lender elects, to all Obligations. The Lender
will return any excess to the Borrower and the Borrower shall remain liable
for any deficiency.
(c) If an Event of Default occurs and is continuing, the
Borrower and each LSB Guarantor Subsidiary hereby waives: (i) all rights to
notice and hearing prior to the exercise by the Lender of the Lender's rights
to repossess the Collateral without judicial process or to replevy, attach or
levy upon the Collateral without notice or hearing, and (ii) all rights of
set-off and counterclaim against Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction,
the Borrower shall pay the Lender, immediately upon termination, an early
termination penalty equal to the early termination fee that would have been
payable under Article 12 if this Agreement had been terminated on that date
pursuant to the Borrower's election.
12. TERM AND TERMINATION. The term of this Agreement shall extend
until April 1, 1999 (the "Termination Date"). This Agreement shall
automatically be renewed thereafter for successive terms of thirteen (13)
months each, unless this Agreement is terminated as provided below. The
Lender and the Borrower shall each have the right to terminate this Agreement,
without premium or penalty, at the end of the initial term or at the end of
any renewal term by giving the other written notice not less than sixty (60)
days prior to the end of such term by registered or certified mail. The
Borrower may also terminate this Agreement at any time during its initial term
or any renewal periods if: (a) it gives the Lender sixty (60) days prior
written notice of termination by registered or certified mail; (b) it pays all
Revolving Loans and reimburses Lender for all Letter of Credit obligations
under this Agreement on or prior to the effective date of termination; and (c)
except as otherwise provided herein, it pays the Lender, on or prior to the
effective date of termination, one percent (1%) of the average daily balance
of the Revolving Loans and Letters of Credit outstanding under this Agreement
for the preceding one hundred eighty (180 day period (or from the Closing Date
up to and including the date of termination if less than one hundred eighty
(180) days from the Closing Date) if such termination is made on or prior to
the Termination Date. The Lender may also terminate this Agreement without
notice upon an Event of Default that has not been cured or otherwise waived to
Lender's satisfaction. Upon the effective date of termination of this
Agreement for any reason whatsoever, all Obligations shall become immediately
due and payable. Notwithstanding the termination of this Agreement, until all
Obligations are paid and performed in full, the Lender shall retain all its
rights and remedies hereunder (including, without limitation, in all then
existing and after-arising Collateral).
13. MISCELLANEOUS.
13.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against the Borrower to collect the
Obligations without any prior recourse to the Collateral.
13.2 No Implied Waivers. No act, failure or delay by the Lender
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement, or any other
Loan Document, or of breach or default hereunder or thereunder, or of any
right or remedy which the Lender may have, shall operate as a waiver of any
other provision, breach, default, right or remedy or of the same provision,
breach, default, right or remedy on a future occasion. No waiver by the
Lender shall affect its rights to require strict performance of this
Agreement.
13.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be effective only to
such extent, without invalidating the remainder of this Agreement.
13.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE EXCEPT THAT NO DOCTRINE OF CHOICE OF
LAW SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION.
13.5 Consent to Jurisdiction and Venue; Service of Process. The
Borrower agrees that, in addition to any other courts that may have
jurisdiction under applicable laws, any action or proceeding to enforce or
arising out of this Agreement or any of the other Loan Documents may be
commenced in the appropriate court of the State of Oklahoma for Oklahoma
County, or in the United States District Court for the Western District of
Oklahoma, and each Borrower consents and submits in advance to such
jurisdiction and agrees that venue will be proper in such courts on any such
matter. Borrower hereby waives personal service of process and agrees that a
summons and complaint commencing an action or proceeding in any such court
shall be properly served and shall confer personal jurisdiction if served by
registered or certified mail to the Borrower. Should the Borrower fail to
appear or answer any summons, complaint, process or papers so served within
thirty (30) days after the mailing or other service thereof, it shall be
deemed in default and an order or judgment may be entered against it as
demanded or prayed for in such summons, complaint, process or papers. The
choice of forum set forth in this section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum, or the taking of any
action under this Agreement to enforce the same, in any appropriate
jurisdiction.
13.6 Survival of Representations and Warranties. All of the
Borrower's representations and warranties of the Borrower and each LSB
Guarantor Subsidiary contained in this Agreement shall survive the execution,
delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Lender or its agents, but after the Closing Date it is
recognized that such representations and warranties may be amended from time
to time during the term of this Agreement by written agreement between the
Borrower to the Lender due to changes in circumstances.
13.7 Indemnification. BORROWER HEREBY INDEMNIFIES , DEFENDS AND
HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL
ARISING OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR
PROCEEDINGS (WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER
STATUTES OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES,
ENVIRONMENTAL, OR COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT
EQUITABLE CAUSE, OR ON CONTRACT OR OTHERWISE) COMMENCED OR THREATENED, WHICH
ARISE OUT OF OR ARE IN ANY WAY BASED UPON THE NEGOTIATION, PREPARATION,
EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR PROCEEDING RELATED
TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION TO ACT,
EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING, WITHOUT
LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES
OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH LITIGATION,
INVESTIGA
TION, CLAIM OR PROCEEDING, EXCEPT THAT THIS INDEMNIFICATION SHALL NOT APPLY TO
ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES, JUDGMENTS, PENALTIES OR EXPENSES
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE LENDER, AND ITS DIRECTORS,
OFFICERS, AGENTS, EMPLOYEES, OR COUNSEL IF SUCH IS DUE TO AND ARISES FROM OR
IN CONNECTION WITH THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THEM
OR THE INTENTIONAL AND WRONGFUL BREACH OF THIS AGREEMENT BY LENDER. Without
limiting the foregoing, if, by reason of any suit or proceeding of any kind,
nature, or description against Borrower, or by Borrower or any other party
against Lender, which in Lender's sole discretion makes it advisable for
Lender to seek counsel for protection and preservation of its liens and
security assets, or to defend its own interest, such reasonable expenses and
counsel fees shall be allowed to Lender. To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section 13.7 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all indemnified
matters incurred by Lender. The foregoing indemnity shall survive the payment
of the Obligations and the termination of this Agreement. All of the
foregoing costs and expenses shall be part of the Obligations and secured by
the Collateral.
13.8 Other Security and Guaranties. The Lender may, without,
notice or demand and without affecting the Borrower's obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than
the Collateral) for the payment of all or any part of the Obligations and
exchange, enforce or release such collateral or any part thereof; and (b)
accept and hold any endorsement or guaranty of payment of all or any part of
the Obligations and release any such endorser or guarantor, or any Person who
has given any Lien in any other collateral as security for the repayment of
all or any part of the Obligations, or any other Person in any way obligated
to pay all or any part of the Obligations.
13.9 Fees and Expenses. The Borrower shall pay to the Lender on
demand all costs and expenses that the Lender pays or incurs in connection
with the negotiation, preparation, consummation, administration, enforcement,
and termination of this Agreement and the other Loan Documents, including,
without limitation: (a) attorneys' and paralegals' fees and disbursements of
counsel to the Lender (including, without limitation, a reasonable estimate of
the allocable cost of in-house counsel); (b) costs and expenses (including
attorneys' and paralegals' fees and disbursements, including, without
limitation, a reasonable estimate of the allocable cost of in-house counsel)
for any amendment, supplement, waiver, consent, or subsequent closing in
connection with the Loan Documents and the transactions contemplated thereby;
(c) costs and expenses of lien and title searches and title insurance; (d)
fees and other charges for recording and filing financing statements and
continuations, and other actions to perfect, protect, and continue the
Security Interest; (e) sums paid or incurred to pay any amount or take any
action required of the Borrower under the Loan Documents that the Borrower was
obligated to pay or take under the Loan Documents but failed to pay or take;
(f) the expenses of $500 per Lender's auditor per audit day plus actual costs
of appraisals, inspections, and verifications of the Collateral, including,
without limitation, travel, lodging, and meals, for inspections of the
Collateral and the Borrower's operations by the Lender's agents up to three
times per year and whenever an Event of Default exists; (g) costs and expenses
of forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining Payment Accounts and lock boxes; (h) all amounts
that the Borrower is required to pay under the Letter of Credit Agreement; (i)
costs and expenses of preserving and protecting the Collateral; and (j) costs
and expenses (including attorneys' and paralegals' fees and disbursements and
including, without limitation, a reasonable estimate of the allocable cost of
in-house counsel) paid or incurred to obtain payment of the Obligations,
enforce the Security Interest, sell or otherwise realize upon the Collateral,
and otherwise enforce the provisions of the Loan Documents, or to defend any
claims made or threatened against the Lender arising out of the transactions
contemplated hereby (including without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and
expenses shall be charged to the Borrower's loan account as Revolving Loans.
13.10 Notices. All notices, demands and requests that either
party is required or elects to give to the other shall be in writing, shall be
delivered personally against receipt, or sent by recognized overnight courier
service, or mailed by registered or certified mail, return receipt requested,
postage prepaid, and shall be addressed to the party to be notified as
follows:
If to the Lender: BankAmerica Business Credit, Inc.
55 South Lake Avenue, Suite 900
Pasadena, California 91101
Attn: Ms. Joyce White
Executive Vice President, West Division Manager
with a copy to: Bank of America - Business Credit Legal Dept.
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
Assistant General Counsel
and with a copy to:Jenkens & Gilchrist, A Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75201
Attn: Linda D. Sartin, Esq.
If to the Borrower:LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: Mr. Jack E. Golsen
President
with a copy to:LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: Mr. Tony M. Shelby
Senior Vice President
with a copy to:LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: David M. Shear, Esq.
General Counsel
and with a copy to: Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102-7101
Attn: Irwin H. Steinhorn, Esq.
or to such other address as each party may designate for itself by like
notice. Any such notice, demand, or request shall be deemed given when
received if personally delivered or sent by overnight courier, or when
deposited in the United States mails, postage paid, if sent by registered or
certified mail.
13.11 Waiver of Notices. Unless otherwise expressly provided
herein, the Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate and
notice of acceleration, as well as any and all other notices to which it might
otherwise be entitled. No notice to or demand on the Borrower which the
Lender may elect to give shall entitle the Borrower to any further notice or
demand in the same, similar or other circumstances.
13.12 Binding Effect; Assignment; Disclosure. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors and assigns of the parties hereto:
provided, however, that no interest herein may be assigned by the Borrower
without the prior written consent of the Lender. The rights and benefits of
the Lender hereunder shall, if the Lender so agrees, inure to any party
acquiring any interest in the Obligations or any part thereof. The Borrower
agrees that the Lender may use the Borrower's name in advertising and
promotional materials and in conjunction therewith disclose the general terms
of this Agreement.
13.13 Modification. THIS AGREEMENT IS INTENDED BY THE BORROWER
AND THE LENDER TO BE THE FINAL, COMPLETE, AND EXCLUSIVE EXPRESSION OF THE
AGREEMENT BETWEEN THEM. THIS AGREEMENT SUPERSEDES ANY AND ALL PRIOR ORAL OR
WRITTEN AGREEMENTS RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE, OR AMENDMENT OF ANY
PROVISION OF THIS AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT
SIGNED BY THE BORROWER AND A DULY AUTHORIZED OFFICER OF THE LENDER.
13.14 Counterparts. This Agreement may be executed in any
number of counterparts, and by the Lender and the Borrower in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
13.15 Captions. The captions contained in this Agreement are
for convenience only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
13.16 Right of Set-Off. Whenever an Event of Default exists the
Lender is hereby authorized at any time and from time to time, to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by Lender or any affiliate of the Lender and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations, whether or not then due and payable. Lender agrees promptly to
notify Borrower after any such set-off and application made by Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
13.17 Participating Lender's Security Interests. If a
Participating Lender shall at any time with the Borrower's knowledge
participate with the Lender in the Loans, the Borrower hereby grants to such
Participating Lender, and the Lender and such Participating Lender shall have
and are hereby given, a continuing lien on and security interest in any money,
securities and other property of the Borrower in the custody or possession of
the Participating Lender, including, the right of set-off, to the extent of
the Participating Lender's participation in the Obligations, and such
Participating Lender shall be deemed to have the, same right of set-off, to
the extent of the Participating Lender's participation in the Obligations
under this Agreement, as it would have if it were a direct lender.
13.18 WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT GROWING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT JURY. TRIAL BY A JUDGE SITTING WITHOUT A JURY WILL FURTHER
RESU
LT IN THE AVOIDANCE OF DELAYS, A STREAMLINING OF THE PROCEEDINGS INVOLVED AND,
AS A RESULT, WILL MINIMIZE THE EXPENSE OF ANY SUCH LAWSUIT FOR THE BENEFIT OF
BORROWER AND LENDER. BORROWER HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SET-OFF,
AND THE RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT FOR COMPULSORY UNTERCLAIMS) IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE
COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR
THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE
BORROWER, AND THE LENDER. BORROWER HEREBY CONFIRMS THAT THE FOREGOING WAIVERS
ARE INFORMED AND FREELY MADE.
13.19 AMENDMENT AND RESTATEMENT; LIMITATIONS OF SUBSIDIARY
LIABILITY; WAIVERS OF CLAIMS. THIS AGREEMENT AMENDS, EXTENDS AND RESTATES IN
ITS ENTIRETY THE ORIGINAL LOAN AGREEMENT. THE EXECUTION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH DOES NOT EXTINGUISH
THE INDEBTEDNESS OUTSTANDING IN CONNECTION THEREWITH NOR DOES IT CONSTITUTE A
NOVATION WITH RESPECT TO THE INDEBTEDNESS OUTSTANDING IN CONNECTION WITH THE
ORIGINAL LOAN AGREEMENT. BORROWER REPRESENTS AND WARRANTS THAT AS OF THE
CLOSING DATE THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE ORIGINAL LOAN AGREEMENTS OR ANY
OTHER LOAN DOCUMENTS. BORROWER WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS,
DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE
CLOSING DATE.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER":
LSB INDUSTRIES, INC.
By:
Jimmie D. Jones
Vice President
"LENDER":
BANKAMERICA BUSINESS CREDIT, INC.
By:
Daniel J. Ujfalusy
Senior Vice President
ACKNOWLEDGED AND AGREED TO:
Each of the following "LSB Guarantor Subsidiaries" hereby grants to the
Lender a Security Interest in and to the Collateral now owned and hereafter
acquired by such LSB Guarantor Subsidiary pursuant to Section 6.1 hereof and
has executed this Agreement to acknowledge its agreement to comply with and be
bound by all those particular warranties, representations, covenants and
agreements set forth herein that are expressly applicable to the LSB Guarantor
Subsidiaries by the terms of this Agreement. In addition to its grant to
Lender of a Security Interest in the Collateral, L&S Automotive Products Co.,
LSB Extrusion Co., International Bearings, Inc., Rotex Corporation, and
Tribonetics Corporation (referred to collectively as the "Automotive
Subsidiaries" and individually as an "Automotive Subsidiary") each hereby
grants to the Lender a Security Interest in its now owned and hereafter
acquired Equipment and Real Property except the Equipment listed on Exhibit A,
as well as all Proceeds thereof, and agrees to execute all documents required
by Lender in order to perfect Lender's Security Interest therein. With
respect to the Equipment and Real Property only, if at any time any or all of
the Equipment or Real Property of the Automotive Subsidiary is either sold,
financed or refinanced at a future date, then Lender agrees to either
subordinate its Lien in such financed or refinanced Collateral or release its
Lien upon the sale of such Collateral as required, provided however, that the
net proceeds of such sale or refinancing shall be delivered to Lender to be
applied to reduce the then outstanding Loans of such Automotive Subsidiary.
L&S AUTOMOTIVE PRODUCTS, CO.
By:
David R. Goss
Vice President
INTERNATIONAL BEARINGS, INC.
By:
David R. Goss
Vice President
LSB EXTRUSION CO.
By:
David R. Goss
Vice President
ROTEX CORPORATION
By:
David R. Goss
Vice President
TRIBONETICS CORPORATION
By:
David R. Goss
Vice President
MOREY MACHINE TOOL
MANUFACTURING CORPORATION
By:
David R. Goss
Vice President
ACKNOWLEDGED AND AGREED TO:
BANKAMERICA BUSINESS CREDIT, INC.
By:
Name:
Title: EXHIBITS TO LOAN AGREEMENT
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT C - LSB Guarantor Subsidiaries
EXHIBIT D - List of Borrower's Locations
EXHIBIT E - Corporate History
EXHIBIT F - Subsidiaries and Affiliates
EXHIBIT G-1 - Financial Statements
EXHIBIT G-2 - Pro Forma Financial Statements
EXHIBIT H - Real Property Descriptions: Premises
EXHIBIT I - Trade Names, Trade Styles, Terms of Sale
EXHIBIT J - Pending Litigation
EXHIBIT K - Labor Matters
EXHIBIT L - ERISA Matters
EXHIBIT M - Schedule of Environmental Matters
EXHIBIT N - Closing Documents
EXHIBIT O -Letter of Credit Financing Agreement - Supplement to
Amended and Restated Loan and Security Agreement
EXHIBIT P - Notice of Borrowing
SCHEDULE 8.7 Capitalization of LSB Guarantor Subsidiaries
SCHEDULE 10.8 Use of Bond Proceeds
Exhibit 4.13
FIRST AMENDMENT
TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(the "Amendment") is dated as of March 12, 1998, and entered into by and
between BANKAMERICA BUSINESS CREDIT, INC. ("Lender") and LSB INDUSTRIES, INC.
("Borrower").
WHEREAS, Lender and Borrower have entered into that certain Amended and
Restated Loan and Security Agreement dated as of November 21, 1997 (the
"Agreement");
WHEREAS, certain Events of Default have occurred under the Agreement;
WHEREAS, the Borrower desires that the Lender waive the Events of
Default and amend the Agreement in certain respects; and
WHEREAS, the Lender is willing to waive the Events of Default and to
amend the Agreement subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Capitalized terms used in this Amendment,
to the extent not otherwise defined herein, shall have the same meanings as in
the Agreement, as amended hereby.
ARTICLE II
Amendments
Section 2.01. Amendment to Definition of "Swap Transaction Reserves".
The definition of "Swap Transaction Reserves" contained in Section 1.1 of the
Agreement is hereby amended in its entirety to read as follows:
"Swap Transaction Reserves" means all reserves which the Lender
from time to time establishes for amounts that are liabilities owed by EDC to
the Bank and for which Lender has agreed to indemnify the Bank. As of March
12, 1998, the amount of the Swap Transaction Reserves is $5,000,000."
Section 2.02. Amendment to Section 9.14. Section 9.14 of the Agreement
is hereby amended to read in its entirety as follows:
9.14 Distributions and Restricted Investments. Borrower and the LSB
Guarantor Subsidiaries shall not (a) directly or indirectly declare or make,
or incur any liability to make, any Distribution, or (b) make any Restricted
Investments, except: (i) Borrower and the LSB Guarantor Subsidiaries may make
Distributions and Restricted Investments to CCI and the other members of the
LSB Consolidated Borrowing Group; (ii) so long as no Event of Default has
occurred and is continuing, currently scheduled Dividends by LSB and
performance of all of the terms, provisions and conditions by LSB, relating to
or in connection with or arising out of any and all series of LSB's preferred
stock issued and outstanding as of the date hereof and the payments of an
annual cash dividend on its Common Stock in an amount equal to $.06 a share
payable on a semi-annual basis; (iii) in addition to (i) above, each Borrower
may make Restricted Investments to any Subsidiary of LSB other than to CCI and
the members of the LSB Consolidated Borrowing Group, provided, however, that
the sum of all such Restricted Investments from each such Borrower and all
other members of the LSB Consolidated Borrowing Group shall not exceed
$200,000 in the aggregate per annum; (iv) each Borrower may make Restricted
Investments in Affiliates outstanding as of the date hereof; (v) each Borrower
may make other Restricted Investments constituting Acquisitions not otherwise
permitted above in this Section as long as such Restricted Investments when
aggregated with all other Restricted Investments for the same Acquisition from
all members of the LSB Consolidated Borrowing Group do not exceed $2,000,000
in cash investments and issued and/or assumed interest-bearing debt per
Acquisition and $10,000,000 in cash investments and issued and/or assumed
interest-bearing debt in the aggregate for all such Acquisitions per annum;
provided, however, that interest-bearing debt of the acquired company which
Lender in its sole and absolute discretion agrees to refinance as a working
capital facility shall not be included in the $2,000,000 and the $10,000,000
limitations; and further provided that nothing in this subsection (iv) shall
be construed to imply Lender's willingness in advance to provide any such
refinancing; (vi) CCI may make the Distributions described on Schedule 10.8;
and (vii) Borrower may purchase up to $6,000,000 in the aggregate of its
treasury stock from January 1, 1998 through the termination of this Agreement
provided that, at the time of and immediately following any such purchase
thereof Borrower Subsidiaries' aggregate Availability is at least $3,000,000.
Notwithstanding any provision to the contrary contained herein, the Account
currently owing to EDC by its Affiliate, TES, may be converted to preferred
stock to be owned and controlled by EDC."
Section 2.03. Amendment to Section 9.16. Section 9.16 of the Agreement
is hereby amended to read in its entirety as follows:
"9.16 LSB Adjusted Tangible Net Worth. The LSB Adjusted Tangible Net
Worth (without taking into account any purchases of treasury stock) will not
be less than the following amounts at the end of each of the Fiscal Quarters
during the following Fiscal Years:
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Fiscal Year Ending
December 31, 1998 $44,000,000 $45,000,000 $46,000,000 $45,000,000
First Fiscal Quarter
during Fiscal Year
Ending December 31,
1999 The LSB Adjusted Tangible Net Worth as of December 31,
1998 less $4,500,000 and less all Dividends actually
paid by LSB in cash from January 1, 1999 until the
date of calculation.
Second Fiscal Quarter
during Fiscal Year
Ending December 31,
1999 The LSB Adjusted Tangible Net Worth as of March 31,
1999 and less all Dividends actually paid by LSB in
cash from January 1, 1999 until the date of
calculation.
Third Fiscal Quarter
during Fiscal Year
Ending December 31,
1999 and each Fiscal
Quarter during each
Fiscal Year ending
thereafter: The LSB Adjusted Tangible Net Worth as of June 30,
1999 plus fifty percent (50%) of the profits for each
fiscal quarter thereafter, if any, and less all
Dividends actually paid by LSB in cash from January 1,
1999 until the date of calculation."
Section 2.04. Amendment to Section 9.17. Section 9.17 of the
Agreement is hereby amended to read in its entirety as follows:
"9.17 LSB Debt Ratio. The ratio of Debt of the LSB Consolidated
Group to the LSB Adjusted Tangible Net Worth (without taking into
account any purchase of treasury stock) will not be greater than the
following ratios at the end of each of the Fiscal Quarters during the
following Fiscal Years:
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Fiscal Year Ending
December 31, 1998 3.80 to 1 3.70 to 1 3.50 to 1 3.50 to 1
Fiscal Year Ending
December 31, 1999 3.50 to 1 3.50 to 1 3.50 to 1 3.50 to 1
Each Fiscal Quarter during each Fiscal Year ending thereafter: 3.50
to 1."
Section 2.05. Amendment to Section 12. The first sentence of
Section 12 is hereby amended to read as follows:
"The initial term of this Agreement shall be from the Closing Date
until December 31, 2000 (the "Termination Date")."
All other provisions of Section 12 remain unchanged.
ARTICLE III
Waivers
Section 3.01. Waiver of Events of Default.
(a) The Lender hereby waives the following Events of Default: (i)
the LSB Adjusted Tangible Net Worth for the Fiscal Quarter ending December 31,
1997 was less than $40,000,000, in breach of Section 9.16 of the Loan Agreement;
and (ii) the LSB Debt Ratio for the Fiscal Quarter ending December 31, 1997 was
greater than 4.10 to 1.0, in breach of Section 9.17 of the Loan Agreement.
(b) The foregoing waiver is only applicable to and shall only be
effective to the extent described above. The waiver is limited to the facts and
circumstances referred to herein and shall not operate as (i) a waiver of or
consent to non-compliance with any other section or provision of the Loan
Agreement, (ii) a waiver of any right, power, or remedy of the Lender under the
Loan Agreement (except as provided herein), or (iii) a waiver of any other Event
of Default or Event which may exist under the Loan Agreement.
ARTICLE IV
Ratifications, Representations and Warranties
Section 4.01. Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms and provisions
set forth in the Agreement and, except as expressly modified and superseded by
this Amendment, the terms and provisions of the Agreement, including, without
limitation, all financial covenants contained therein, are ratified and
confirmed and shall continue in full force and effect. Lender and Borrower
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.02. Representations and Warranties. Borrower hereby
represents and warrants to Lender that the execution, delivery and performance
of this Amendment and all other loan, amendment or security documents to which
Borrower is or is to be a party hereunder (hereinafter referred to collectively
as the "Loan Documents") executed and/or delivered in connection herewith, have
been authorized by all requisite corporate action on the part of Borrower and
will not violate the Articles of Incorporation or Bylaws of Borrower.
ARTICLE V
Conditions Precedent
Section 5.01. Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by the Lender):
(a) Lender shall have received all of the following, each dated
(unless otherwise indicated) as of the date of this Amendment, in form and
substance satisfactory to Lender in its sole discretion:
(i) Company Certificate. A certificate executed by the
Secretary or Assistant Secretary of Borrower certifying (A) that
Borrower's Board of Directors has met and adopted, approved,
consented to and ratified the resolutions attached thereto which
authorize the execution, delivery and performance by Borrower of the
Amendment and the Loan Documents, (B) the names of the officers of
Borrower authorized to sign this Amendment and each of the Loan
Documents to which Borrower is to be a party hereunder, (C) the
specimen signatures of such officers, and (D) that neither the
Articles of Incorporation nor Bylaws of Borrower have been amended
since the date of the Agreement;
(ii) No Material Adverse Change. There shall have occurred
no material adverse change in the business, operations, financial
condition, profits or prospects of Borrower, or in the Collateral
since December 31, 1997, and the Lender shall have received a
certificate of Borrower's chief executive officer to such effect;
(iii) Other Documents. Borrower shall have executed and
delivered such other documents and instruments as well as required
record searches as Lender may require.
(b) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments
and other legal matters incident thereto shall be satisfactory to Lender
and its legal counsel, Jenkens & Gilchrist, a Professional Corporation.
ARTICLE VI
Miscellaneous
Section 6.01. Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
Lender or any closing shall affect the representations and warranties or the
right of Lender to rely thereon.
Section 6.02. Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement as amended hereby, are hereby amended so that any
reference therein to the Agreement shall mean a reference to the Agreement as
amended hereby.
Section 6.03. Severability. Any provision of this Amendment held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.
Section 6.04. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.
Section 6.05. Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Lender and Borrower and their respective
successors and assigns; provided, however, that Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Lender. Lender may assign any or all of its rights or obligations
hereunder without the prior consent of Borrower.
Section 6.06. Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
Section 6.07. Effect of Waiver. No consent or waiver, express or
implied, by Lender to or of any breach of or deviation from any covenant or
condition of the Agreement or duty shall be deemed a consent or waiver to or of
any other breach of or deviation from the same or any other covenant, condition
or duty. No failure on the part of Lender to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power, or
privilege under this Amendment, the Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Amendment, the Agreement or any other Loan
Document preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. The rights and remedies provided for in the
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law.
Section 6.08. Headings. The headings, captions and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 6.09. Releases. As a material inducement to Lender to enter
into this Amendment, Borrower hereby represents and warrants that there are no
claims or offsets against, or defenses or counterclaims to, the terms and
provisions of and the other obligations created or evidenced by the Agreement or
the other Loan Documents. Borrower hereby releases, acquits, and forever
discharges Lender, and its successors, assigns, and predecessors in interest,
their parents, subsidiaries and affiliated organizations, and the officers,
employees, attorneys, and agents of each of the foregoing (all of whom are
herein jointly and severally referred to as the "Released Parties") from any
and all liability, damages, losses, obligations, costs, expenses, suits,
claims,
demands, causes of action for damages or any other relief, whether or not now
known or suspected, of any kind, nature, or character, at law or in equity,
which Borrower now has or may have ever had against any of the Released
Parties,
including, but not limited to, those relating to (a) usury or penalties or
damages therefor, (b) allegations that a partnership existed between Borrower
and the Released Parties, (c) allegations of unconscionable acts,
deceptive trade practices, lack of good faith or fair dealing, lack of
commercial
reasonableness or special relationships, such as fiduciary, trust or
confidential relationships, (d) allegations of dominion, control, alter ego,
instrumentality, fraud, misrepresentation, duress, coercion, undue influence,
interference or negligence,(e) allegations of tortious interference with
present or prospective business relationships or of antitrust, or (f) slander,
libel or damage to reputation, (hereinafter being collectively referred to as
the "Claims"), all of which Claims are hereby waived.
Section 6.10. Expenses of Lender. Borrower agrees to pay on demand (i)
all costs and expenses reasonably incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all subsequent amendments,
modifications, and supplements hereto or thereto, including, without
limitation,
the costs and fees of Lender's legal counsel and the allocated cost of staff
counsel and (ii) all costs and expenses reasonably incurred by Lender in
connection with the enforcement or preservation of any rights under the
Agreement, this Amendment and/or other Loan Documents, including, without
limitation, the costs and fees of Lender's legal counsel and the allocated cost
of staff counsel.
Section 6.11. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN LENDER
AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND BORROWER.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
"BORROWER"
LSB INDUSTRIES, INC.
By:
Tony M. Shelby, Vice President
"LENDER"
BANKAMERICA BUSINESS CREDIT, INC.
By:
Michael J. Jasaitis, Vice President
ACKNOWLEDGED AND AGREED TO:
Each of the following "LSB Guarantor Subsidiaries" hereby acknowledges the
execution of and consents to the terms and conditions of that certain First
Amendment to Amended and Restated Loan and Security Agreement dated as of March
12, 1998 between LSB Industries, Inc., and BABC.
L&S AUTOMOTIVE PRODUCTS, CO.
INTERNATIONAL BEARINGS, INC.
LSB EXTRUSION CO.
ROTEX CORPORATION
TRIBONETICS CORPORATION
MOREY MACHINE TOOL MANUFACTURING
CORPORATION
By:
Tony M. Shelby,
Vice President acting on behalf of each of
the above.
CONSENTS AND REAFFIRMATIONS
Each of the undersigned hereby acknowledges the execution of, and consents
to, the terms and conditions of that certain First Amendment to Amended and
Restated Loan and Security Agreement dated as of March 12, 1998, between LSB
Industries, Inc. and BankAmerica Business Credit, Inc. ("Creditor") and
reaffirms
its obligations under (i) that certain Continuing Guaranty with Security
Agreement (the "Guaranty") dated as of November 21, 1997, and (ii) that certain
Cross-Collateralization and Cross-Guaranty Agreement (the "Cross-
Collateralization Agreement") dated as of November 21, 1997, each made by the
undersigned in favor of the Creditor, and acknowledges and agrees that the
Guaranty and the Cross-Collateralization Agreement remain in full force and
effect and the Guaranty and the Cross-Collateralization Agreement are hereby
ratified and confirmed.
Dated as of March 12, 1998.
LSB INDUSTRIES, INC.
L&S BEARING CO.
SUMMIT MACHINE TOOL MANUFACTURING
CORP.
L&S AUTOMOTIVE PRODUCTS CO.
INTERNATIONAL BEARINGS, INC.
LSB EXTRUSION CO.
ROTEX CORPORATION
TRIBONETICS CORPORATION
MOREY MACHINERY MANUFACTURING
CORPORATION
By:
Tony M. Shelby, Vice President
acting on behalf of each of the
above