ORICA
David P. Taylor
Chief Executive Officer
Orica USA Inc.
9781 South Meridian Boulevard
Suite 400
Englewood, Colorado 80112
Telephone: 303-268-5000
August 23, 2000
BY MAIL AND VIA FACSIMILE: 405-236-0728
James L. Wewers, President
LSB Chemical Corp.
Post Office Box 754
Oklahoma City. Oklahoma 73101
Re: Purchase of LaRoche Assets*
__________________________
Dear Mr. Ewers:
Orica USA Inc. and/or an affiliate of ("Orica") intends to
submit to LaRoche Industries, Inc. ("LaRoche") a bid (the "Bid") to
acquire certain of the assets of LaRoche's ammonium nitrate
manufacturing business (as specified in the Bid, the "Acquired
Assets"). Orica and LSB Chemical Corp. ("LSB") intend that LSB will
acquire certain of the Acquired Assets directly from LaRoche. When
executed by an authorized signatory of LSB, this letter shall
constitute the agreement of arica and LSB relating to the matters
set forth below:
1. The parties agree that Orica shall, in its sole
discretion. have the ability to attend an auction being
held for the sale of the Acquired Assets on August 24,
2000 in Atlanta, Georgia. Orica shall have the authority
to submit a Bid that, if successful, will obligate LS13
to the terms of this letter.
2. The parties contemplate that Orica will submit an initial
Bid for an aggregate cash purchase price for the Acquired
Assets of $36.140,000.00 (the "Purchase Price"). Orica
may thereafter, in its sole discretion, increase the
amount of said Bid. Any such Bid shall include an amount
of *** attributable and allocated to that portion of the
Acquired Assets comprising LaRoche's manufacturing
business located in Cherokee, Alabama and in Crystal
City, Missquri ("collectively, the "LSB Acquired
Assets").
Page 1 of 5
*INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED FROM THIS PUBLIC
FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL
TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
***INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED
FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF
SUCH REQUEST.
3. No later than 9:30 a.m., Denver local time, on August 23;
2000, LSB shall transmit by wire transfer to Orica a
refundable deposit in the amount of *** representing
LSB's portion of the earnest money deposit required by
LaRoche. Orica shall provide complete account information
for said wire transfer to LSB. Orica intends to make a
$3,614,000.00 earnest money deposit to LaRoche in
conjunction with the Bid, which will include the *** from
LSB. In the event Orica is not the successful bidder at
auction, Orica shall promptly refund said deposit to LSB
upon receipt of its aggregate earnest money deposit from
LaRoche.
4. In the event Orica is the successful bidder at auction,
Orica shall enter into an Asset Purchase Agreement with
LaRoche, whereby LaRoche shall be directed to assign all
right, title and interest to the LSB Acquired Assets
directly to LSB or, in the case of real property
interests included within the LSB Acquired Assets, to
LSB's agent, designee or nominee. Subject only to
execution and delivery of said Asset Purchase Agreement,
and closing of the transactions contemplated therein.
LSB unconditionally agrees to pay to Orica a total of ***
(the "LSB Purchase Price), less the aforementioned
deposit, in consideration of the assignment of said
assets. The LSB Purchase Price shall be adjusted
downward in the event the actual inventory quantities
included in the LSB Acquired Assets are less than the
inventory quantities set forth in Exhibit A to this
letter agreement. In the event the actual inventory
quantities are more than the inventory quantities set
forth in Exhibit A, LSB agrees to reimburse Orica for any
amount over the Purchase Price Orica is required to pay
to LaRoche due to such increase in inventory.
5. In consideration of its execution and performance of this
letter agreement, and for other good and valuable
consideration, LSB hereby grants, and Orica shall have,
an option to acquire, with an obligation to physically
remove from the site , the 550 ton/day Weatherly nitric
acid plant located at the Crystal City, Missouri site
(the "Nitric Acid Plant") and the contracts and
agreements to manufacture, toll or sell industrial grade
ammonium nitrate priil or solution at or from the Nitric
Acid Plant (the "AN Contracts") from LSB. Such option
shall be exercisable, if at all, by the delivery to LSB
of a written election notice within 365 days of closing
(the "Option Period") under the Asset Purchase Agreement.
The parties shall determine a mutually. acceptable date
of closing of the option transaction, on which date Orica
shall pay LSB an option exercise price of $150,000.00 in
consideration of the delivery by LSB of title to and
possession of the Nitric Acid Plant and AN Contracts,
free and clear of any liens, claims or encumbrances
created by, through or under LSB, but not otherwise.
During the Option Period, LSB shall maintain the Nitric
Acid Plant, at Orica's expense, in substantially its
current operating condition.
6. Orica and LSB acknowledge and agree that although this
letter agreement contemplates the purchase by LSB of
owned and leased real property included in the LSB
Acquired Assets, LSB shall, subject to the consent of
Page 2 of 5
***INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED
FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF
SUCH REQUEST.
LaRoche, have the right to assign and delegate its rights
and obligations to acquire such real property to a third
party, and that of the LSB Purchase Price, $5,000 shall be
allocated to such real property and paid or reimbursed by
such third party.
7. The factual terms of the letter agreement are
confidential, and shall not be disclosed by either party
to a third party without the prior written consent of the
nondisclosing party.
8. This letter agreement shall be interpreted in accordance
with the laws of the State of Delaware, without regard to
its conflict of law provisions. The parties agree that
venue for the resolution of any dispute arising from this
letter agreement shall be proper in and only in a court
of competent subject matter jurisdiction in the State of
Delaware, and the parties each agree to submit to the
personal jurisdiction of the courts therein.
Sincerely,
ORICA USA INC.
/s/ Milt MacGregory
__________________________
Milt B. MacGregor
VP - Ammonium Nitrate
ACKNOWLEDGED AND AGREED TO:
LSB CHEMICAL CORP.
By: /s/ James L. Wewers
______________________________
James L. Wewers
President
Page 3 of 5
EXHIBIT A
CHEROKEE, AL
ADJUSTMENT
UNIT OF PRICE
VOLUME* MEASURE ($/UNIT)
______ _______ _________
Finished Goods and Raw Materials (LaRoche information as of June 30, 2000)
Ammonia 1,318.97 Tons ***
High Density A.N. 2,683.38 Tons ***
Nitric Acid 490.30 Tons ***
A.N. 83% Solution 3,152.28 Tons ***
A.N. Ammonia Solution 164.70 Tons ***
Magnesium Oxide 99.31 Tons ***
Galoryl 8.33 Tons ***
Ammonium Thiosultate 23.07 Tons ***
Inhibitor 0.75 Tons ***
Nitrogen Solution (UAN) 1,590.79 Tons ***
Stores Inventory $ *** Actual
(LaRoche information as of June 30, 2000) Stores Value
Precious Metals
(LaRoche information as of June 30, 2000)
Platinum 3,244.76 Troy Ounce 400.00
Rhodium 170.78 Troy Ounce 440.00
*Based on quantities and costs associated with the Cherokee Plant as of
June 30, 2000
***INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM
THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL
TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES
AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
Page 4 of 5
EXHIBIT A (continued)
CRYSTAL CITY, MISSOURI
ADJUSTMENT
UNIT OF PRICE
VOLUME** MEASURE ($/UNIT)
_______ _______ __________
Finished Goods and Raw Materials (LaRoche information as of June 30, 2000)
Ammonia 1,616.95 Tons ***
High Density A.N. 5,400.88 Tons ***
Nitric Acid 30.00 Tons ***
Nitrogen Solution (UAN) 981.81 Tons ***
Lilamin 4.33 Tons ***
Galoryl 8.00 Tons ***
A.N. 83% Solution 805.09 Tons ***
Stores Inventory $ *** Actual
(LaRoche information as of June 30, 2000) Stores Value
Precious Metals
(LaRoche information as of June 30, 2000)
Platinum 675.99 Troy Ounce 400.00
Rhodium 35.58 Troy Ounce 440.00
**Based on quantities and costs associated with the Crystal City Plant as of
June 30, 2000
***INDICATES INFORMATION IN THIS DOCUMENT WHICH HAS BEEN OMITTED FROM
THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR CONFIDENTIAL
TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES
AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
Page 5 of 5