SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Lender
and
LSB INDUSTRIES, INC.,
SUMMIT MACHINE TOOL MANUFACTURING CORP.,
and
MOREY MACHINERY MANUFACTURING CORPORATION
jointly and severally as Borrowers
Dated: May 10, 1999
TABLE OF CONTENTS
SECTION
Table of Contents . . . . . . . . . . . . . . . . . . . .-i-
Preamble. . . . . . . . . . . . . . . . . . . . . . . . . .1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . .2
1.1 As used herein:. . . . . . . . . . . . . . . . . . . .2
Account. . . . . . . . . . . . . . . . . . . . . . . .2
Account Debtor . . . . . . . . . . . . . . . . . . . .2
Affiliate. . . . . . . . . . . . . . . . . . . . . . .2
Applicable Interest Rate . . . . . . . . . . . . . . .2
Acquisition. . . . . . . . . . . . . . . . . . . . . .2
Availability . . . . . . . . . . . . . . . . . . . . .2
Availability Reductions. . . . . . . . . . . . . . . .3
Bond Debt. . . . . . . . . . . . . . . . . . . . . . .3
Bond Indenture . . . . . . . . . . . . . . . . . . . .3
Borrower Subsidiaries. . . . . . . . . . . . . . . . .3
Business Day . . . . . . . . . . . . . . . . . . . . .3
Capital Expenditures . . . . . . . . . . . . . . . . .4
Capital Lease. . . . . . . . . . . . . . . . . . . . .4
CCI. . . . . . . . . . . . . . . . . . . . . . . . . .4
CCI Borrower Subsidiaries. . . . . . . . . . . . . . .4
CCI Consolidated Borrowing Group . . . . . . . . . . .4
CCI Consolidated Group . . . . . . . . . . . . . . . .4
CCI Guarantor Subsidiaries . . . . . . . . . . . . . .4
Code . . . . . . . . . . . . . . . . . . . . . . . . .4
Collateral . . . . . . . . . . . . . . . . . . . . . .4
Debt . . . . . . . . . . . . . . . . . . . . . . . . .4
Distribution . . . . . . . . . . . . . . . . . . . . .4
Dollars. . . . . . . . . . . . . . . . . . . . . . . .4
Early Termination Fee. . . . . . . . . . . . . . . . .5
EDC. . . . . . . . . . . . . . . . . . . . . . . . . .5
Eligible Accounts. . . . . . . . . . . . . . . . . . .5
Eligible Inventory . . . . . . . . . . . . . . . . . .7
Environmental Compliance Reserve . . . . . . . . . . .8
Environmental Laws . . . . . . . . . . . . . . . . . .8
Equipment. . . . . . . . . . . . . . . . . . . . . . .8
ERISA. . . . . . . . . . . . . . . . . . . . . . . . .8
Eurocurrency Liabilities . . . . . . . . . . . . . . .8
Eurodollar Business Day. . . . . . . . . . . . . . . .9
i
Eurodollar Base Rate . . . . . . . . . . . . . . . . .9
Eurodollar Interest Payment Date . . . . . . . . . . .9
Eurodollar Interest Rate Determination Date. . . . . .9
Eurodollar Rate. . . . . . . . . . . . . . . . . . . .9
Eurodollar Rate Loan . . . . . . . . . . . . . . . . .9
Eurodollar Rate Reserve Percentage . . . . . . . . . .9
Event. . . . . . . . . . . . . . . . . . . . . . . . .9
Event of Default . . . . . . . . . . . . . . . . . . .9
Financial Statements . . . . . . . . . . . . . . . . 10
Fiscal Quarter . . . . . . . . . . . . . . . . . . . 10
Fiscal Year. . . . . . . . . . . . . . . . . . . . . 10
GAAP . . . . . . . . . . . . . . . . . . . . . . . . 10
Gross Availability Reductions. . . . . . . . . . . . 10
Gross LSB Accounts Availability. . . . . . . . . . . 10
Guaranty . . . . . . . . . . . . . . . . . . . . . . 10
Intercompany Accounts. . . . . . . . . . . . . . . . 10
Interest Period. . . . . . . . . . . . . . . . . . . 10
Inventory. . . . . . . . . . . . . . . . . . . . . . 10
IRS. . . . . . . . . . . . . . . . . . . . . . . . . 11
Latest Forecasts . . . . . . . . . . . . . . . . . . 11
Letter of Credit . . . . . . . . . . . . . . . . . . 11
Letter of Credit Agreement . . . . . . . . . . . . . 11
Letter of Credit Fee . . . . . . . . . . . . . . . . 11
Lien . . . . . . . . . . . . . . . . . . . . . . . . 11
Loans. . . . . . . . . . . . . . . . . . . . . . . . 11
Loan Documents . . . . . . . . . . . . . . . . . . . 11
LSB. . . . . . . . . . . . . . . . . . . . . . . . . 11
LSB Adjusted Tangible Assets . . . . . . . . . . . . 11
LSB Adjusted Tangible Net Worth. . . . . . . . . . . 11
LSB Borrower Subsidiaries. . . . . . . . . . . . . . 12
LSB Consolidated Borrowing Group . . . . . . . . . . 12
LSB-Related Loan Agreements. . . . . . . . . . . . . 12
Maximum Inventory Advance Amount . . . . . . . . . . 12
Maximum Revolving Credit Line. . . . . . . . . . . . 12
Morey. . . . . . . . . . . . . . . . . . . . . . . . 12
Multi-employer Plan. . . . . . . . . . . . . . . . . 12
Obligations. . . . . . . . . . . . . . . . . . . . . 12
Offering Memorandum. . . . . . . . . . . . . . . . . 13
Overadvance Amount . . . . . . . . . . . . . . . . . 13
Overadvance Facility . . . . . . . . . . . . . . . . 13
Overadvance Facility Termination Date. . . . . . . . 13
Participating Lender . . . . . . . . . . . . . . . . 13
Patent and Trademark Assignments . . . . . . . . . . 13
Payment Account. . . . . . . . . . . . . . . . . . . 13
PBGC . . . . . . . . . . . . . . . . . . . . . . . . 13
ii
Pension Plan . . . . . . . . . . . . . . . . . . . . 13
Permitted Debt . . . . . . . . . . . . . . . . . . . 14
Permitted Liens. . . . . . . . . . . . . . . . . . . 14
Person . . . . . . . . . . . . . . . . . . . . . . . 15
Plan . . . . . . . . . . . . . . . . . . . . . . . . 15
Proceeds . . . . . . . . . . . . . . . . . . . . . . 15
Property . . . . . . . . . . . . . . . . . . . . . . 15
Proprietary Rights . . . . . . . . . . . . . . . . . 15
Public Authority . . . . . . . . . . . . . . . . . . 16
Real Property. . . . . . . . . . . . . . . . . . . . 16
Receivables. . . . . . . . . . . . . . . . . . . . . 16
Reference Rate . . . . . . . . . . . . . . . . . . . 16
Reference Rate Loan. . . . . . . . . . . . . . . . . 16
Reference Rate Margin. . . . . . . . . . . . . . . . 16
Related Company. . . . . . . . . . . . . . . . . . . 16
Reportable Event . . . . . . . . . . . . . . . . . . 16
Restricted Investment. . . . . . . . . . . . . . . . 17
Reversions . . . . . . . . . . . . . . . . . . . . . 17
Revolving Loans. . . . . . . . . . . . . . . . . . . 17
SBL Debt . . . . . . . . . . . . . . . . . . . . . . 17
Security Interest. . . . . . . . . . . . . . . . . . 17
Springing Covenant Event . . . . . . . . . . . . . . 17
Subordinated Debt. . . . . . . . . . . . . . . . . . 17
Subsidiary" or "Subsidiaries . . . . . . . . . . . . 17
Summit Adjusted Tangible Assets. . . . . . . . . . . 17
Summit Adjusted Tangible Net Worth . . . . . . . . . 18
Swap Transaction Reserves. . . . . . . . . . . . . . 18
Swap Transactions. . . . . . . . . . . . . . . . . . 18
Termination Event. . . . . . . . . . . . . . . . . . 18
UCC. . . . . . . . . . . . . . . . . . . . . . . . . 18
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 18
1.3 Other Terms. . . . . . . . . . . . . . . . . . . . . 18
1.4 Exhibits . . . . . . . . . . . . . . . . . . . . . . 19
2. LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . 19
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . 19
2.2 Availability Determination . . . . . . . . . . . . . 19
2.3 Letters of Credit. . . . . . . . . . . . . . . . . . 19
2.4 Swap Transactions. . . . . . . . . . . . . . . . . . 20
2.5 Overadvance Facility. . . . . . . . . . . . . . . . . 20
3. INTEREST AND OTHER CHARGES. . . . . . . . . . . . . . . . 20
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Eurodollar Borrowings: Conversion or Continuation. . 21
3.3 Special Provisions Governing Eurodollar Rate Loans . 22
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3.4 Maximum Interest Rate. . . . . . . . . . . . . . . . 26
3.5 Capital Adequacy . . . . . . . . . . . . . . . . . . 27
4. PAYMENTS AND PREPAYMENTS. . . . . . . . . . . . . . . . . 27
4.1 Revolving Loans. . . . . . . . . . . . . . . . . . . 27
4.2 Place and Form of Payments: Extension of Time. . . . 28
4.3 Apportionment, Application and Reversal of Payments. 28
4.4 INDEMNITY FOR RETURNED PAYMENTS. . . . . . . . . . . 28
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS . . . . . 29
6. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Grant of Security Interest . . . . . . . . . . . . . 29
6.2 Perfection and Protection of Security Interest . . . 29
6.3 Location of Collateral . . . . . . . . . . . . . . . 30
6.4 Title to, Liens on, and Sale and Use of Collateral . 31
6.5 Appraisals . . . . . . . . . . . . . . . . . . . . . 31
6.6 Access and Examination . . . . . . . . . . . . . . . 31
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . 31
6.8 Collateral Reporting . . . . . . . . . . . . . . . . 32
6.9 Accounts . . . . . . . . . . . . . . . . . . . . . . 32
6.10 Collection of Accounts . . . . . . . . . . . . . . . 33
6.11 Inventory. . . . . . . . . . . . . . . . . . . . . . 34
6.12 Documents and Instruments. . . . . . . . . . . . . . 34
6.13 Right to Cure. . . . . . . . . . . . . . . . . . . . 35
6.14 Power of Attorney. . . . . . . . . . . . . . . . . . 35
6.15 Lender's Rights, Duties, and Liabilities . . . . . . 35
6.16 Release of Collateral and Borrower . . . . . . . . . 36
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES . . . . 36
7.1 Books and Records. . . . . . . . . . . . . . . . . . 36
7.2 Financial Information. . . . . . . . . . . . . . . . 36
7.3 Notices to Lender. . . . . . . . . . . . . . . . . . 38
8. GENERAL WARRANTIES AND REPRESENTATIONS. . . . . . . . . . 39
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents . . . . . . . . . . 40
8.2 Validity and Priority of Security Interest . . . . . 40
8.3 Organization and Qualification . . . . . . . . . . . 40
8.4 Corporate Name; Prior Transactions . . . . . . . . . 40
8.5 Subsidiaries and Affiliates. . . . . . . . . . . . . 40
8.6 Financial Statements and Projections . . . . . . . . 41
8.7 Capitalization . . . . . . . . . . . . . . . . . . . 41
8.8 Solvency . . . . . . . . . . . . . . . . . . . . . . 41
8.9 Title to Property. . . . . . . . . . . . . . . . . . 41
iv
8.10 Real Property; Leases. . . . . . . . . . . . . . . . 41
8.11 Proprietary Rights . . . . . . . . . . . . . . . . . 42
8.12 Trade Names and Terms of Sale. . . . . . . . . . . . 42
8.13 Litigation . . . . . . . . . . . . . . . . . . . . . 42
8.14 Labor Disputes . . . . . . . . . . . . . . . . . . . 42
8.15 Environmental Laws . . . . . . . . . . . . . . . . . 42
8.16 No Violation of Law. . . . . . . . . . . . . . . . . 43
8.17 No Default . . . . . . . . . . . . . . . . . . . . . 44
8.18 Plans. . . . . . . . . . . . . . . . . . . . . . . . 44
8.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 44
8.20 Use of Proceeds. . . . . . . . . . . . . . . . . . . 44
8.21 Private Offerings. . . . . . . . . . . . . . . . . . 45
8.22 Broker's Fees. . . . . . . . . . . . . . . . . . . . 45
8.23 No Material Adverse Change . . . . . . . . . . . . . 45
8.24 Debt . . . . . . . . . . . . . . . . . . . . . . . . 45
9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . 45
9.1 Taxes and Other Obligations. . . . . . . . . . . . . 45
9.2 Corporate Existence and Good Standing. . . . . . . . 45
9.3 Maintenance of Property and Insurance. . . . . . . . 46
9.4 Environmental Laws . . . . . . . . . . . . . . . . . 46
9.5 Mergers, Consolidations, Acquisitions, or Sales. . . 46
9.6 Guaranties . . . . . . . . . . . . . . . . . . . . . 46
9.7 Debt . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8 Prepayment . . . . . . . . . . . . . . . . . . . . . 47
9.9 Transactions with Affiliates . . . . . . . . . . . . 47
9.10 Plans and Compensation . . . . . . . . . . . . . . . 47
9.11 Reserved . . . . . . . . . . . . . . . . . . . . . . 47
9.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 New Subsidiaries . . . . . . . . . . . . . . . . . . 47
9.14 Distributions and Restricted Investments . . . . . . 47
9.15 Capital Expenditures . . . . . . . . . . . . . . . . 48
9.16 LSB Adjusted Tangible Net Worth. . . . . . . . . . . 48
9.17 LSB Debt Ratio . . . . . . . . . . . . . . . . . . . 49
9.18 Summit Adjusted Tangible Net Worth . . . . . . . . . 49
9.19 Summit Debt Ratio. . . . . . . . . . . . . . . . . . 49
9.20 Further Assurances . . . . . . . . . . . . . . . . . 50
10. CONDITIONS PRECEDENT TO EACH LOAN . . . . . . . . . . . . 50
11. DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . 50
11.1 Events of Default. . . . . . . . . . . . . . . . . . 50
11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 52
12. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . 54
v
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 54
13.1 Cumulative Remedies; No Prior Recourse to Collateral 54
13.2 No Implied Waivers . . . . . . . . . . . . . . . . . 54
13.3 Severability . . . . . . . . . . . . . . . . . . . . 55
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . 55
13.5 Consent to Jurisdiction and Venue; Service of Process55
13.6 Survival of Representations and Warranties . . . . . 55
13.7 Indemnification. . . . . . . . . . . . . . . . . . . 55
13.8 Other Security and Guaranties. . . . . . . . . . . . 56
13.9 Fees and Expenses. . . . . . . . . . . . . . . . . . 56
13.10 Notices . . . . . . . . . . . . . . . . . . . . 57
13.11 Waiver of Notices . . . . . . . . . . . . . . . 58
13.12 Binding Effect; Assignment; Disclosure. . . . . 58
13.13 Modification. . . . . . . . . . . . . . . . . . 59
13.14 Counterparts. . . . . . . . . . . . . . . . . . 59
13.15 Captions. . . . . . . . . . . . . . . . . . . . 59
13.16 Right of Set-Off. . . . . . . . . . . . . . . . 59
13.17 Participating Lender's Security Interests . . . 59
13.18 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . 59
13.19 AMENDMENT AND RESTATEMENT; LIMITATIONS OF
SUBSIDIARY LIABILITY; WAIVERS OF CLAIMS . . . . 60
13.20 CROSS-COLLATERALIZATION AND CROSS-GUARANTIES. . 60
vi
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
is dated May 10, 1999, and is entered into by and between BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (successor-in-
interest to 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.
("LSB"), a Delaware corporation, SUMMIT MACHINE TOOL MANUFACTURING
CORP. ("Summit"), an Oklahoma corporation, MOREY MACHINERY
MANUFACTURING CORPORATION ("Morey"), an Oklahoma corporation, each
with offices at 16 South Pennsylvania, Oklahoma City, Oklahoma
73107 (each individually a "Borrower" and collectively the
"Borrowers").
W I T N E S S E T H
WHEREAS, Lender, LSB and Morey, in addition to other related
parties, entered into a Loan and Security Agreement dated December
12, 1994 (which as thereafter amended from time to time is referred
to as the "Original LSB Loan Agreement"); and
WHEREAS, Lender and Summit entered into a Loan and Security
Agreement dated December 12, 1994 (which as thereafter amended from
time to time is referred to as the "Original Summit Loan
Agreement"); and
WHEREAS, on November 21, 1997 the parties to the Original LSB
Loan Agreement entered into an Amended and Restated Loan and
Security Agreement (which as thereafter amended from time to time
is referred to as the "First Amended LSB Loan Agreement"); and
WHEREAS, on November 21, 1997 the parties to the Original
Summit Loan Agreement entered into an Amended and Restated Loan and
Security Agreement (which as thereafter amended from time to time
is referred to as the "First Amended Summit Loan Agreement"); and
WHEREAS, on May 10, 1999 LSB obtained alternative financing
for several of its subsidiaries, including several parties to the
First Amended LSB Loan Agreement, and L&S Bearing Co. which was
party to a separate but related Amended and Restated Loan and
Security Agreement with Lender; and
WHEREAS, on November 21, 1997 Lender entered into a related
amended and restated loan transaction with Climate Master, Inc.,
International Environmental Corporation, El Dorado Chemical
Company, and Slurry Explosive Corporation (collectively, the "CCI
Borrower Subsidiaries", which, along with Borrowers and certain
Subsidiaries of the CCI Borrower Subsidiaries, are referred to as
the "LSB Consolidated Borrowing Group"); and
WHEREAS, Lender and the Borrowers have agreed to consolidate
the First Amended LSB Loan Agreement and the First Amended Summit
Loan Agreement into a single loan agreement, the "Second Amended
and Restated Loan and Security Agreement"; and
1
WHEREAS, the aggregate amount of all loans and letters of
credit to be made by Lender to the LSB Consolidated Borrowing Group
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
Borrowers and the Lender hereby agree as follows:
1. DEFINITIONS.
1.1 As used herein:
"Account" means each Borrower's right to payment for a
sale or lease and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated to a
Borrower 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 $6,000,000 less the Availability
Reductions; or
C. The sum of:
(1) eighty percent (80%) of the Eligible Accounts
("Accounts Availability"), plus
(2) the lesser of (a) the Maximum Inventory
Advance Amount or (b) the sum of (i) sixty
percent (60%) of the value of Eligible
Inventory other than vertical boring machines
("VBM's") and machine tools acquired in trade
in connection with the sale of other Inventory
("Trade-in-Inventory"), plus (ii) twenty-five
percent (25%) of the value of Eligible
2
Inventory consisting of VBM's, plus (iii)
twenty-five percent (25%) of the value of
Eligible Inventory consisting of Trade-in-
Inventory; provided, however, that advances
against the Trade-in-Inventory shall not
exceed $500,000 in the aggregate at any one
time; plus
(3) until the Overadvance Facility Termination
Date, the Overadvance Amount; less
(4) 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 any Borrower;
(iii) reserves for accrued interest on the
Revolving Loans which is past due;
(iv) the Environmental Compliance Reserve; and
(v) all other reasonable reserves which the Lender
in its reasonable discretion deems necessary or desirable
to maintain with respect to any 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 any Borrower.
"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, Morey, Summit Machine Tool
Manufacturing Corp., El Dorado Chemical Company, Slurry Explosive
Corporation, Climate Master, Inc., and International
Environmental Corporation.
"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.
3
"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 November 21, 1997.
"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 any 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 such 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.
4
"Early Termination Fee" means a single fee of $500,000
which shall be jointly and severally due and owing from the
LSB Consolidated Borrowing Group if, prior to December 31,
2000, any of the LSB-Related Loan Agreements are terminated
other than in accordance with their terms.
"EDC" means El Dorado Chemical Company, a CCI Borrower
Subsidiary.
"Eligible Accounts" means all Accounts of any Borrower
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;
(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 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 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 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
5
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 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 or return, sale
on approval, consignment, or other repurchase or return
basis;
6
(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 and accepted by the Account
Debtor;
(xiv) if Lender believes in its reasonable
credit judgment that the prospect of collection of such
Account is impaired;
(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;
(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 Activities Report or similar document in order
to permit the Borrower to seek judicial enforcement in
such state of payment of such Account, unless Borrower
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 of any Borrower
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 any Borrower 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
7
transit owned by Borrower, covered by insurance, and in which
Lender has a Security Interest), fifty percent (50%) of
Inventory classified as components, or Inventory delivered to
Borrower 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 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 Borrowers 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 any Borrower
within 180 days in order to correct any violation by the
Borrower or the operations or Property of Borrower 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 Borrowers
(whether or not owned by any Borrower). Such laws and
regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as
amended; the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended: the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq., as amended; the Clean Water Act, 33 U.S.C. Section 466 et
seq., as amended; the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
as amended; state and federal superlien and environmental
cleanup programs; and U.S. Department of Transportation
regulations.
"Equipment" means, with respect to any Borrower, 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.
8
"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 Lender 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 1/100th 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 Lender
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.
9
"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, 1999.
"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 each Borrower'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.
10
"IRS" means the Internal Revenue Service or any successor
agency.
"Latest Forecasts" means, (a) the forecasts of the
Borrower's monthly financial condition, results of operations,
and cash flows through the year ending December 31, 1999,
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 Borrowers provided for in
Article 2.
"Loan Documents" means all documents executed by the
Borrowers, 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,
a Borrower under this Agreement.
"LSB Adjusted Tangible Assets" means all of the assets of
the LSB Consolidated Borrowing 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 Borrowing Group at such
date prepared in accordance with GAAP less (b) (i) the amount
11
at which the LSB Consolidated Borrowing Group's liabilities
would be shown on such balance sheet prepared in accordance
with GAAP, and (ii) LSB's redeemable preferred stock which was
valued at $146,000 as of the Closing Date.
"LSB Borrower Subsidiaries" means LSB, Summit Machine
Tool Manufacturing Corp., and Morey Machinery Manufacturing
Corporation.
"LSB Consolidated Borrowing Group" means the LSB Borrower
Subsidiaries and the CCI Consolidated Borrowing Group.
"LSB-Related Loan Agreements" means all of the following
loan agreements: (i) this Agreement; and (ii) the Amended and
Restated Loan and Security Agreement dated November 21, 1997
between Lender, El Dorado Chemical Company, Slurry Explosive
Corporation, Climate Master, Inc., and International
Environmental Corporation.
"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) $5,000,000 less all
then outstanding Revolving Loans, advances, and outstanding
Letters of Credit based on the Eligible Inventory under this
Agreement.
"Maximum Revolving Credit Line" means Sixty-Five Million
Dollars ($65,000,000) less the Gross Availability Reductions.
"Morey" means Morey Machinery Manufacturing Corporation,
a Borrower under this Agreement.
"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 Borrowers 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 by
Lender in connection with the Swap Transactions or otherwise
for the benefit of the Borrowers), 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 Borrowers 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
Borrowers to Lender under or in connection with the Letters of
12
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 Borrowers to the Lender under the original
"Continuing Guaranty with Security Agreement" documents
executed by each of the Borrowers as of the Closing Date, as
amended from time to time and 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.
"Overadvance Amount" means $500,000 before October 31,
1999; $333,334 between October 31, 1999 and November 29, 1999;
and $166,668 between November 30, 1999 and December 30, 1999.
"Overadvance Facility" means the Revolving Loans then
outstanding in an amount not to exceed the Overadvance Amount
from May __, 1999 until the Overadvance Facility Termination
Date.
"Overadvance Facility Termination Date" means December
31, 1999.
"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 Borrowers to the Lender to evidence and
perfect the Lender's Security Interest in the Borrowers'
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 Borrowers 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 con-
tributes 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.
13
"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 any 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 $6,000,000 at any one time;
(x) Debt of the Borrowers (a) to CCI (i) existing as of November 26, 1997
and (ii) thereafter in an amount not to exceed $2,000,000 per annum, 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; and (xii) the SBL Debt. 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 the other LSB-Related Loan Agreement,
shall not exceed $11,000,000 at any one time. In addition to the
foregoing, Permitted Debt shall include the letter of credit in the
original amount of $1,000,000 issued by Lender for the account
of LSB and for the benefit of Congress Financial Corporation.
"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 not owned by Borrower so
long as such Lien attaches only to such goods and so long as
Lender has been given notice of such Lien, (h) mechanic,
14
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 Borrowers and are removed
within ten (10) days from receipt of notice by the Borrowers
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 each Borrower'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.
15
"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 each Borrower's rights,
title, and interest in real property now owned or hereafter
acquired by such Borrower, 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 each Borrower'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
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 Lender at its San
Francisco, California main office as its reference rate. It
is a rate set by Lender based upon various factors including
Lender's costs and desired return, general economic
conditions, and other factors, and is used as a reference
point for pricing some loans; however, Lender 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.
16
"Restricted Investment" means any acquisition of Property
by any 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 any Borrower; (b) assets arising
from the sale or lease of goods or rendition of services in
the ordinary course of business of the Borrower; (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 Borrowers to the Lender in the Collateral pursuant to this
Agreement or the other Loan Documents.
"Springing Covenant Event" means three consecutive
Business Days when the aggregate Availability of the LSB
Consolidated Borrowing Group under all of the LSB-Related Loan
Agreements is less than Fifteen Million Dollars ($15,000,000)
(with Availability calculated for this purpose without taking
into account any then outstanding Overadvance Amount) on each
such Business Day.
"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.
"Summit Adjusted Tangible Assets" means all of the assets
of Summit, 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
17
the book value thereof resulting from a revaluation effective
after the Closing Date; and (e) any intangibles, as determined
in accordance with GAAP.
"Summit 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
Summit Adjusted Tangible Assets would be shown on a balance
sheet of Summit at such date prepared in accordance with GAAP
less (b) (i) the amount at which Summit's liabilities would be
shown on such balance sheet prepared in accordance with GAAP,
and (ii) LSB's redeemable preferred stock which was valued at
$146,000 as of the Closing Date.
"Swap Transaction Reserves" means all reserves which the
Lender from time to time establishes for amounts that are
liabilities owed by EDC to the Lender.
"Swap Transactions" means interest rate swaps, treasury
locks, and all other forward rate agreements entered into by
the Lender 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,
18
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 any
Borrower's request from time to time, make revolving loans (the
"Revolving Loans") to the Borrowers 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 Borrowers 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 Borrowers to do
so and the crediting of a Revolving Loan to the Borrowers' deposit
account, or transmittal to such Person as the Borrowers shall
direct, shall conclusively establish the obligation of the
Borrowers to repay such Revolving Loan. The Lender will charge all
Revolving Loans and other Obligations to a loan account of the
Borrowers maintained with the Lender. All fees, commissions,
costs, expenses, and other charges due from the Borrowers pursuant
to the Loan Documents, and all payments made and out-of-pocket
expenses incurred by Lender and authorized to be charged to the
Borrowers pursuant to the Loan Documents, will be charged as
Revolving Loans to the Borrowers' loan account as of the date due
from the Borrowers 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 any 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 Borrowers' 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
19
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 in amounts to be agreed to between EDC and
Lender. Each Borrower agrees to indemnify and hold the Lender
harmless from any and all obligations now or hereafter owing
arising from or related to such Swap Transactions. EDC has agreed
to pay the Lender all amounts owing to the Lender pursuant to the
Swap Transactions. In the event EDC shall not have paid to the
Lender such amounts, such amounts shall constitute a Revolving Loan
of EDC which shall be deemed to have been requested by EDC.
2.5 Overadvance Facility. Subject to all of the terms
and conditions of this Agreement, the Lender agrees to provide to
Borrowers the Overadvance Facility.
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
20
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-half
percent
(.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 two and seven-eighths percent (2.875%)
per annum (the "Eurodollar Margin") plus the Eurodollar Rate determined
for the applicable Interest Period.
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
Borrowers 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 Borrowers elect 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 Borrowers 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 Borrowers 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.
21
(c) The officer of the Borrowers authorized by the
Borrowers to request Revolving Loans on behalf of the Borrowers
shall also be authorized to request a conversion/continuation on
behalf of the Borrowers. 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 Borrowers.
The Lender shall incur no liability to any 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 Borrowers, 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
Borrowers 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 Borrowers 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.
22
(iii) The Borrowers 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 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 Lender or the interbank Eurodollar market or the
position of 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 Borrowers to request
application of the Eurodollar Rate to some or all of the Loans
shall be suspended until the Lender shall notify the Borrowers 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
23
of, Lender's Eurodollar Rate Loans has become unlawful as the
result of compliance by Lender 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 Borrowers 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 Borrowers 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 Borrowers
may exercise either of the following options:
(i) Upon written notice to the Lender, the
Borrowers may release Lender from its obligations to make or
maintain Loans as Eurodollar Rate Loans and in such event, the
Borrowers 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 Borrowers 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 Borrowers pursuant to the other Sections
of this Article 3, the Borrowers agree 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 Borrowers,
which Lender sustains (i) if due to the fault of the Borrowers a
funding of any Eurodollar Rate Loans does not occur on a date
specified therefor by Borrowers 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 Borrowers 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 to be offered quotations in accordance with the
definition of "Eurodollar Base Rate," the Lender shall give the
Borrowers 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
24
Reference Rate Revolving Loan, and (ii) any notice given by the
Borrowers 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 Borrowers agree that
they 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 Borrowers' 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
Borrowers will, at the request of the Lender, furnish to the Lender
evidence, in form and substance satisfactory to the Lender, that
the Borrowers have met their obligation under this Section 3.3(i),
an addition, the Borrowers 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 Borrowers with appropriate receipts for any payments
or reimbursements made by Borrowers 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 Borrowers agree that
they shall, from time to time, upon demand by the Lender in writing
to the Borrowers, 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 Borrowers. A
certificate as to the amount of such increased cost and the method
of determination thereof, submitted to the Borrowers by the Lender,
shall be rebuttably presumptive evidence of the correctness of such
amount. Notwithstanding the above, the Lender shall promptly
advise Borrowers of any increased costs covered by this paragraph
25
(k) of which Lender is aware that have been made or which are
proposed to be made which may require the Borrowers to be required
to pay the increased cost under this paragraph (k) prior to or at
the time that Borrowers request 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 any 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 any Borrower and the Lender or
default of any 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 any 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 any 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 such
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"), each 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
Borrowers, it being the intention of the parties hereto not to
enter at any time into a usurious or otherwise illegal
relationship. Each 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, each Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by such
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
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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 Borrowers (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 Borrowers (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 Borrowers
hereunder, or to Letters of Credit issued on behalf of Borrowers
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 Borrowers of a certificate from Lender containing the
information described in this Section 3.5 which shall be delivered
to Borrowers, each 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 reason-
able 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 Borrowers shall repay, and be
jointly and severally liable for, the outstanding principal balance
of the Revolving Loans, plus all accrued but unpaid interest
27
thereon, upon the termination of this Agreement. In addition, the
Borrowers 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
each Borrower hereby irrevocably waives the right to direct the
application of any payment or proceeds; provided, however, unless
so directed by the Borrowers, 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
Borrowers' 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 BORROWERS
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.
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5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. The
Borrowers agree 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
Borrowers have reviewed the monthly statement as hereinafter
provided. The Lender will provide to the Borrowers a monthly
statement of Loans, payments, and other transactions pursuant to
this Agreement. Such statement shall be deemed correct, accurate,
and binding on the Borrowers 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
Borrowers notify 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 Borrowers, only
the items to which exception is expressly made will be considered
to be disputed by the Borrowers.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, each Borrower
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 such
Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, including, without limitation, all of such
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.
Each Borrower shall, at its expense, perform all steps requested by
the Lender at any time to perfect, maintain, protect, and enforce
29
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 each Borrower'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 any Borrower 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 any Borrower's signature, one or more
financing statements disclosing the Security Interest. Each
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 any Borrower, then such 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 a Borrower, then the
Borrowers 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 Borrowers
shall, upon Lender's request, cause to be executed and delivered
confirmatory written instruments pledging to the Lender the
Collateral, but the Borrowers' 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. Each Borrower represents
and warrants to the Lender that: (a) Exhibit D hereto is a correct
and complete List of each Borrower's chief executive office, the
location of its books and records as well as 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 a Borrower and sets
forth the names of the owners and lessors of, and, to the best of
each Borrower's knowledge, the holders of any mortgages on such
facilities and locations. Except for Inventory that is consigned
by a Borrower to a customer or warehouse, each Borrower agrees that
it will not 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
30
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.
Each Borrower represents and warrants to the Lender that: (a) all
Collateral is and will continue to be owned by the Borrower 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 will use, store, and maintain the Collateral with all
reasonable care and will use the Collateral for lawful purposes
only; and (d) the Borrower will not, 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, each 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 each Borrower's records, files, and books of account,
as well as the Collateral and may discuss the Borrower's affairs
with the Borrower's officers and management. 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. The Lender may, at any time when an Event of Default
exists and at the Borrowers' expense, make copies of all of the
Borrowers' 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 Borrowers' personnel, supplies, and
premises 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. Each 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. Each 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. Each 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
31
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 Borrowers 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. The following apply to each Borrower:
(a) The Borrower hereby represents and warrants to the Lender that:
(i) each existing Account represents, and each future Account will
32
represent, a bona fide sale or lease and delivery of goods by the
Borrower, or rendition of services by the Borrower, 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 any invoice or sale
or make sales on extended dating beyond that customary in the
business of the applicable Borrower 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 any 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 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 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. 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, each Borrower shall collect
all Accounts, shall receive all payments relating to Accounts, and
33
shall promptly deposit all such collections into a Payment Account
established for the account of the Borrowers at a bank acceptable
to the Borrowers and the Lender. All collections relating to
Accounts received in any such Payment Account or directly by the
Borrowers 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 Borrowers' loan account.
After the occurrence of an Event of Default that is continuing,
each 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, each
Borrower shall immediately deliver to the Lender the identical
checks, cash, or other forms of payment which the Borrower
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 Borrowers' loan account
(conditional upon final collection) after allowing one (1) Business
Day for collection.
(c) In the event the Borrowers repay 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 Borrowers' loan account
one (1) Business Day after the Lender's receipt thereof.
6.11 Inventory. Each Borrower 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 Borrowers will cause the Inventory to
be kept in good and marketable condition, at their own expense.
Each Borrower agrees that all Inventory produced by the Borrowers
in the United States will be produced in accordance with the
Federal Fair Labor Standards Act of 1938. The Borrowers will
conduct a physical count of the Inventory at least once per Fiscal
Year, except as otherwise agreed to between the Lender and the
Borrowers, 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). The Borrowers will not, 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. Each Borrower 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,
34
valid, and genuine and (b) all goods evidenced by such Documents
and Instruments were, at the time of their sale, owned by the
Borrower 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 any Borrower
hereunder in order to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Security Interest, and which the
Borrower fails to pay or do, including, without limitation,
payment of any judgment against the Borrower, 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
Borrowers' loan account; provided that Lender will make a good
faith effort to notify the Borrowers and provide the Borrowers 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. Each Borrower appoints the
Lender and the Lender's designees as the Borrower's attorney, with
power: (a) to endorse the Borrower'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
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 mail to an address designated by the
Lender and to receive, open and dispose of all mail addressed to
the Borrower; (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 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. Each
Borrower 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 any Borrower, 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
35
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 any LSB Borrower
Subsidiary sells all or substantially all of its assets, then such LSB
Borrower
Subsidiary shall be allowed to prepay, without penalty or prepayment premium,
all of the outstanding Revolving Loans applicable to such LSB Borrower
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
and release such LSB Borrower Subsidiary from any further liability and
responsibility under the Loan Documents.
(b) If LSB or any LSB Borrower Subsidiary obtains alternative
financing for its working capital needs at any time during the term of this
Agreement and indefeasibly repays all Loans and Letter of Credit obligations
applicable to LSB or such LSB Borrower Subsidiary under this Agreement, then
Lender will release and terminate its Security Interest as to the Collateral
of LSB or such LSB Borrower Subsidiary and will release LSB or the LSB
Borrower Subsidiary from all Obligations arising under the Loan Documents with
the exception that LSB shall remain liable under its Continuing Guaranty with
Security Agreement dated as of November 21, 1997, provided, however, that
Lender shall release any and all Collateral pledged by LSB pursuant to such
Guaranty.
(c) 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. Each 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. Each 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:
36
(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 Borrowing
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 Borrowing 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 Borrowing Group
as at the end of such month, and consolidated and consolidating
unaudited statements of income and expenses for the LSB
Consolidated Borrowing 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 Borrowing
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.
37
(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
(i) that the LSB Consolidated Borrowing Group was in compliance
with the covenants set forth in Sections 9.16 and 9.17 hereof and
(ii) that Summit was in compliance with the covenants set forth in
Sections 9.18 and 9.19 hereof, in each instance 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 Borrowers 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
Borrowers 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 Borrowers or the
Subsidiaries.
7.3 Notices to Lender. Each 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).
38
(d) Within five Business Days after a responsible
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.
EACH 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:
39
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 judg-
ment, 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 its incorporation; (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
40
(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, 1998 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 _______________,
1999 and for the _____ 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 repre-
sent 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.
8.8 Solvency. Each Borrower is solvent prior to and
after giving effect to the making of the Revolving Loans, and after
taking into account Intercompany Accounts. If at any time any
Borrower, other than LSB, becomes insolvent, LSB shall have a
period of up to ten (10) Business Days after LSB learns of
Borrower's insolvency within which to recapitalize Borrower in
order to restore Borrower to a solvent state.
8.9 Title to Property. Except for Permitted Liens, and
except for Property which the Borrower leases, the Borrower 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
41
Borrower, and all leases and subleases of real property by the
Borrower 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. 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 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 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
Borrowing 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 with the Securities and
Exchange Commission: (a) there is no collective bargaining
agreement or other labor contract covering employees of the
Borrower; (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; 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
Borrowing 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 have been obtained, unless the failure to obtain such
Permits would not have a material adverse effect on the LSB
Borrower Subsidiaries, 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
42
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, which would have a material adverse effect on the LSB
Borrower Subsidiaries, taken as a whole;
(c) No Borrower 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 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.
(e) Borrower has not 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 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 Borrower Subsidiaries, 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 in
relation to any Property now owned, operated or leased by the
Borrower or previously owned, operated or leased by the Borrower 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 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 relating to
Properties now owned, operated or leased by the Borrower; 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, the Borrower is not 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 Borrower Subsidiaries, taken as a whole.
43
8.17 No Default. The Borrower is not in default with
respect to any note, loan agreement, mortgage, lease, or other
agreement to which the Borrower is a party or bound, where the
amount owed by Borrower 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 Borrower Subsidiaries,
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 Borrower
Subsidiaries, 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 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 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
U. None of the proceeds of the loans will be used, directly or
indirectly, to purchase or carry (or refinance any borrowing, the
44
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. No material adverse
change has occurred in the Property, business, operations, or
conditions (financial or otherwise) of the LSB Consolidated
Borrowing Group, taken as a whole, since the date of the most
recent Financial Statements delivered to the Lender, except as
otherwise disclosed 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. EACH BORROWER
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, 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 the
Borrower need not 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
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
45
have a material adverse effect on the Borrower, 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
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 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 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.
The Borrower shall not enter into any transaction of merger,
reorganization, or consolidation in which Borrower 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 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 to the
Borrower.
9.6 Guaranties. The Borrower shall not make, issue, or
become liable on any secured Guaranty, except Guaranties in favor
of the Lender and endorsements of instruments for deposit.
46
9.7 Debt. Borrower shall not incur or maintain any Debt
other than Permitted Debt.
9.8 Prepayment. The Borrower shall not 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 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, Borrowers may borrow any
amounts from each other and repay such amounts on terms agreed to
between them without limitations.
9.10 Plans and Compensation. The Borrower shall not 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 shall notify Lender in
writing of the nature of the resulting consequences or expected
consequences, and a description of the action Borrower 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, 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. No Borrower
shall (a) directly or indirectly declare or make, or incur any liability to
make, any Distribution, or (b) make any Restricted Investments, except:
(i) Borrowers 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
47
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, Borrowers 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
Borrowers and all other members of the LSB Consolidated Borrowing Group shall
not exceed $200,000 in the aggregate per annum; (iv) Borrowers may make
Restricted Investments in Affiliates outstanding as of the date hereof;
(v) Borrowers 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 (v) 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) LSB 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.
9.15 Capital Expenditures. No Borrower shall 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 would exceed $10,000,000.
9.16 LSB Adjusted Tangible Net Worth. At all times after a Springing
Covenant Event has occurred whereafter such financial covenant shall remain in
effect until the termination of this Agreement, the following financial
covenant shall be in effect:
The LSB Adjusted Tangible Net Worth increased by an amount equal to the
purchase price paid by LSB for its treasury stock for purchases from
January 1, 1998 through termination of this Agreement, which amount
shall not exceed $6,000,000, 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 Quarter during
Fiscal Year Ending
December 31, 1999 $21,300,000 $23,600,000 $24,000,000 $23,500,000
48
First Fiscal Quarter The LSB Adjusted Tangible Net Worth as of
during Fiscal Year Ending December 31, 1999 less $4,500,000 and less all
dividends paid by LSB in cash from January 1,
December 31, 2000 2000 until the date of calculation.
Second Fiscal Quarter The LSB Adjusted Tangible Net Worth as of
during Fiscal Year Ending March 31, 2000 plus fifty percent (50%) of
the profits for the fiscal quarter then
ending, if any, with no
December 31, 2000 deductions for losses, less all dividends paid by
LSB in cash from January 1, 2000 until the date
of calculation
Third Fiscal Quarter The LSB Adjusted Tangible Net Worth as of
during Fiscal Year Ending June 30, 2000 plus fifty percent (50%) of
the profits for the fiscal quarter then
ending, if any, with no
December 31, 2000 and deductions for losses, less all dividends paid by
each Fiscal Quarter during LSB in cash from January 1, 2000 until the
each Fiscal Quarter ending date of calculation
thereafter:
9.17 LSB Debt Ratio. At all times after a Springing Covenant Event
has occurred whereafter such financial covenant shall remain in effect until
the termination of this Agreement, the following financial covenant shall be
in effect:
The ratio of Debt of the LSB Consolidated Borrowing Group to the LSB
Adjusted Tangible Net Worth increased by an amount equal to the purchase price
paid by LSB for its treasury stock for purchases from January 1, 1998 through
termination of this Agreement, which amount shall not exceed $6,000,000, 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, 1999 9.3:1 8.4:1 8.1:1 8.1:1
Fiscal Year Ending
December 31, 2000 8.1:1 8.1:1 8.1:1 8.1:1
Each Fiscal Quarter during each Fiscal Year ending thereafter: 8.1:1
9.18 Summit Adjusted Tangible Net Worth. At all times after a
Springing Covenant Event has occurred whereafter such financial
covenant shall remain in effect until the termination of this
Agreement, the Summit Adjusted Tangible Net Worth (without taking
into account any purchases of treasury stock) will not be less
than $7,200,000 at the end of each Fiscal Quarter during each
Fiscal Year.
9.19 Summit Debt Ratio. At all times after a Springing
Covenant Event has occurred whereafter such financial covenant
shall remain in effect until the termination of this Agreement,
the ratio of Debt of Summit to the Summit Adjusted Tangible Net
Worth will not be greater than 1.0 to 1.0 at the end of each
Fiscal Quarter during each Fiscal Year.
49
9.20 Further Assurances. The Borrowers 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. 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 shall be subject to the conditions
precedent that on the date of any such extension of credit, the
following statements shall be true, and the acceptance by any
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 any Borrower to make payment of
principal, interest, fees or premium on any of the Obligations when
due;
(b) any representation or warranty made by any Borrower
in this Agreement, any of the other Loan Documents, any Financial
Statement, or any certificate furnished by any 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 any Borrower under any material
agreement or instrument (other than an agreement or instrument
evidencing the lending of money), which default would have a
50
material adverse effect on the LSB Borrower Subsidiaries, 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 any Borrower 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) any Borrower shall make a general assignment for
benefit of creditors; or any proceeding shall be instituted by any
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 any 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 any Borrower 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 any Borrower for all or substantially all of its
Property shall be appointed involuntarily;
(i) any Borrower 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;
51
(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 of the LSB Borrower Subsidiaries, and
LSB or any Borrower 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 Borrowers' 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 Borrower Subsidiaries 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.
11.2 Remedies.
(a) If an Event of Default exists, the Lender may,
without notice to or demand on any 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
52
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
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, each Borrower 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 Borrowers 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 Borrowers. In the event the Lender seeks to take
possession of all or any portion of the Collateral by judicial
process, each Borrower 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.
Each Borrower 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, each Borrower'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 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 Borrowers and the Borrowers shall
remain liable for any deficiency.
(c) If an Event of Default occurs and is continuing,
each Borrower 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.
53
(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 Borrowers 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 December 31, 2000 (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 Borrowers shall
each have the right to terminate this Agreement, without premium or
penalty, (i) 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, or (ii) as provided in Section 6.16. The Borrowers may also
terminate this Agreement at any time during its initial term or any
renewal periods if: (a) they give the Lender sixty (60) days prior
written notice of termination by registered or certified mail; (b)
they pay all Revolving Loans and reimburse 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, they pay the Lender, on or prior to the effective date of
termination, the Early Termination Fee if such termination is made
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)
except as otherwise provided in Section 6.16 of this Agreement.
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
54
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. Each 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. Each 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
each Borrower's representations and warranties 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 Borrowers to the Lender due to changes in
circumstances.
13.7 Indemnification. EACH 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
55
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,
INVESTIGATION, 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 any 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 any 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 Borrowers 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
56
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 Borrowers under the Loan Documents that any
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 any 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 Borrowers' 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: Bank of America National Trust and
Savings Association
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 National Trust and
Savings Association
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
Assistant General Counsel
57
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, each 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 any 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
58
interest in the Obligations or any part thereof. Each 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
EACH 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 SUCH 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 Borrowers
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 Borrowers against any and all of
the Obligations, whether or not then due and payable. Lender
agrees promptly to notify Borrowers 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 Borrowers'
knowledge participate with the Lender in the Loans, each 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 EACH BORROWER
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
59
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
RESULT 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 BORROWERS AND LENDER. EACH
BORROWER HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SET-OFF, AND THE
RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT FOR COMPULSORY COUNTERCLAIMS)
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. EACH
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 FIRST AMENDED LSB LOAN
AGREEMENT AND THE FIRST AMENDED SUMMIT 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 FIRST AMENDED LSB LOAN AGREEMENT OR THE FIRST AMENDED
SUMMIT LOAN AGREEMENT. EACH 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 FIRST
AMENDED LSB LOAN AGREEMENT AND THE FIRST AMENDED SUMMIT LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENTS. EACH BORROWER WAIVES ANY
AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR COUNTERCLAIMS, WHETHER
KNOWN OR UNKNOWN, ARISING PRIOR TO THE CLOSING DATE.
13.20 CROSS-COLLATERALIZATION AND CROSS-GUARANTIES.
EACH BORROWER UNDER THIS AGREEMENT HEREBY IRREVOCABLY, ABSOLUTELY,
AND UNCONDITIONALLY GUARANTEES THE FULL AND PROMPT PAYMENT TO
LENDER WHEN DUE, WHETHER BY ACCELERATION OR OTHERWISE, OF ANY AND
ALL OBLIGATIONS OF EACH OTHER BORROWER UNDER THIS AGREEMENT,
WHETHER SUCH OBLIGATIONS EXIST NOW OR ARE HEREAFTER INCURRED. IN
ADDITION ALL INDEBTEDNESS, OBLIGATIONS, AND LIABILITIES OWING AND
60
WHICH MAY HEREAFTER BE OWING TO LENDER UNDER THIS AGREEMENT, BY ANY
OF THE LSB BORROWER SUBSIDIARIES, JOINTLY AND SEVERALLY OR BY ANY
INDIVIDUAL MEMBER OF THE LSB BORROWER SUBSIDIARIES UNDER THIS
AGREEMENT, SHALL BE SECURED BY ALL OF THE COLLATERAL FROM TIME TO
TIME GRANTED TO LENDER PURSUANT TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT EXECUTED AND/OR DELIVERED IN CONNECTION
HEREWITH, AND LENDER MAY HOLD AND APPLY AND REAPPLY ALL MONEY,
PROPERTY AND OTHER SUCH COLLATERAL AT ANY TIME RECEIVED BY LENDER
IN PAYMENT OF ANY INDEBTEDNESS, OBLIGATIONS OR LIABILITIES OF THE
LSB BORROWER SUBSIDIARIES OR ANY MEMBER THEREOF UNDER THIS
AGREEMENT OR UNDER ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND/OR
DELIVERED IN CONNECTION HEREWITH TO ANY INDEBTEDNESS OWING BY ANY
OF THE LSB BORROWER SUBSIDIARIES.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
"BORROWERS":
LSB INDUSTRIES, INC.
By:
______________________________
Name:
____________________________
Title:
___________________________
SUMMIT MACHINE TOOL MANUFACTURING CORP.
By:
_______________________________
Name:
_____________________________
Title:
____________________________
MOREY MACHINERY MANUFACTURING
CORPORATION
By:
_______________________________
Name:
_____________________________
Title:
____________________________
61
"LENDER":
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:
_______________________________
Name:
_____________________________
Title:
____________________________
62
EXHIBITS TO LOAN AGREEMENT
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT D - List of Borrowers' Locations
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 O - Letter of Credit Financing
Agreement - Supplement to Second Amended
and Restated Loan and Security Agreement
EXHIBIT P - Notice of Borrowing
SCHEDULE 10.8 Use of Bond Proceeds
63