March 12, 1999
Herman Meinders Carlan K. Yates
3030 Northwest Expressway, 14701 Coles Road
Suite 1407 Edmond, OK 73013
Oklahoma City, OK 73112
Larry H. Lemon, Co-Trustee Prime Financial Corporation
Larry H. Lemon Living Trust 16 South Pennsylvania
3840 Northwest 44th Oklahoma City, OK 73107
Oklahoma City, OK 73112
LSB Industries, Inc.
16 South Pennsylvania
Oklahoma City, OK 73107
Gentlemen:
This letter will confirm that on Friday, March 12, 1999,
Kestrel Aircraft Company ("Kestrel") voluntarily and peacefully
surrendered possession of its assets, both tangible and intangible,
more particularly described in the schedule attached hereto as
Exhibit "A" (the "Collateral") to you as secured creditors.
Secondly, Kestrel hereby acknowledges and agrees that it is
indebted to:
(1) Herman Meinders, for the sum of One Million Three
Thousand Six Hundred Forty-Five and 83/100's Dollars
($1,003,645.83), the payment and performance of which is
secured by a first priority security interest in an
undivided 50% interest in the Collateral;
(2) Carlan K. Yates, for the sum of Two Hundred Fifty
Thousand Nine Hundred Eleven and 46/100's Dollars
($250,911.46), the payment and performance of which is
secured by a first priority security interest in an
undivided 12.5% interest in the Collateral;
(3) Larry H. Lemon Living Trust, for the sum of Two Hundred
Fifty Thousand Nine Hundred Eleven and 46/100's Dollars
($250,911.46), the payment and performance of which is
secured by a first priority security interest in an
undivided 12.5% interest in the Collateral;
(4) Prime Financial Corporation, for the sum of Five Hundred
One Thousand Eighty Hundred Twenty-Two and 91/100's
Dollars ($501,822.91), the payment and performance of
which is secured by a first priority security interest in
an undivided 25% interest in the Collateral; and
(5) LSB Industries, Inc. for the sum of Two Million Two
Hundred Twenty-Five Thousand Nine Hundred Seventy-Two and
21/100's Dollars ($2,225,972.21), the payment and
performance of which is secured by a junior, second
priority security interest in the Collateral.
Kestrel hereby offers to renounce its rights in the Collateral
pursuant to 12A O.S. Section 9-505(2) of Oklahoma's Uniform Commercial
Code, and thereupon absolutely and unconditionally grant, bargain,
sell, convey, transfer and set over to a nominee to be designated
by you, all of its right, title and interest in and to the
Collateral, subject only to certain purchase security interests
granted to those secured parties with respect to specific items of
equipment whose claims are identified on Exhibit "B" attached
hereto, in full settlement and satisfaction of your respective
claims as secured creditors.
Should you have any questions concerning any aspect of this
proposal, please call.
KESTREL AIRCRAFT COMPANY, an
Oklahoma corporation
By: ____________________________________
Michael Humphreys, President
EXHIBIT "A"
(a) All cash, cash equivalents, accounts and accounts
receivable of Kestrel and all other rights to payment of money held
by Kestrel, now existing or hereafter arising;
(b) All inventory of Kestrel, now owned or hereafter
acquired, and all additions, accessions and substitutions thereto
and therefor, and all accessories, parts and equipment now or
hereafter attached thereto or used in connection therewith,
including (without limitation) any such inventory which is
completed or is in the process of being completed;
(c) All goods, machinery, equipment, apparatus, work in
progress, motor vehicles and airplanes of Kestrel and all other
tangible personal property or every kind and description which is
used in Kestrel's business operations or is owned by Kestrel;
(d) All contract rights of Kestrel;
(e) All general intangibles, chattel paper, securities,
instruments, choses in action and causes of action of Kestrel and
all other intangible personal property of Kestrel of every kind and
nature, now existing or hereafter arising;
(f) All patents, trademarks, copyrights and other
intellectual property rights (and all pending applications for any
of the foregoing) now owned or hereafter acquired by Kestrel; and
(g) All other assets of Kestrel of any kind or nature.
EXHIBIT "B"
Schedule of Permitted Liens
___________________________
Creditor Equipment Acquired With Purchase Money Financing
________ _______________________________________________
1) Orix Credit Alliance, Inc. Power MacIntosh Computer, Model
#M2284LL-B; Apple Multi-Scan
Monitor, Model #M2611-LL-A;
Apple Tranceiver, Model
#M04372-B; Insignia Software
Package, Model #01705-1.0
2) Advanta Leasing Corp. Encad Cadjet Plotter 36"
3) AT&T Capital Leasing Computer equipment and software described
Services, Inc. in Financing Statement No. 00208
filed on January 20, 1995 with the
Oklahoma County Clerk, Oklahoma
4) Clark Credit Corporation 1 used Clark Model C-500-30 LPG lift
truck, S/N 235-161-5850
5) Clark Credit Corporation 1 1995 Komatsu Model FG-15C, LPG
powered, pneumatic tire lift truck,
S/N 313075A
6) AT&T Capital Leasing Gateway P5-90 Best Buy Computers
Services, Inc. 2565839 through 2565842
7) Community Bank & Trust Computer equipment, copier and
Company software described in Financing Statement
No. 065314 filed on December 15, 1995
with the Oklahoma County Clerk,
Oklahoma
8) LSB Industries, Inc. Office work station partitions
for 14 work stations
9) MIS Systems Corporation Equipment, computers and software
described in Financing Statement No.
006059 filed on February 7, 1997
with the Oklahoma County Clerk,
Oklahoma
10) AT&T Capital Leasing OCE 7065 Copier SN 705509204
Services, Inc.