EXHIBIT 10.16
LOAN AND SECURITY AGREEMENT
(RAIL TANK CARS)
Dated November 15, 1995
between
DSN CORPORATION,
as Borrower
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Lender
TABLE OF CONTENTS
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Page
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ARTICLE 1. DEFINITIONS............................................ 1
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ARTICLE 2. THE LOAN............................................... 8
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Section 2.1 The Loan..................................... 8
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Section 2.2 Disbursement................................. 8
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Section 2.3 Repayment of the Loan........................ 8
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Section 2.4 Interest Charges............................. 9
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Section 2.5 Late Charge Rate............................. 9
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Section 2.6 Maximum Interest............................. 9
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Section 2.7 Expenses..................................... 10
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Section 2.8 Prepayment................................... 10
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Section 2.9 Mandatory Prepayment/Event of Loss........... 10
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Section 2.10 Conditions of Lending........................ 11
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Section 2.11 Place and Form of Payments................... 13
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ARTICLE 3. SECURITY FOR THE OBLIGATIONS........................... 13
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Section 3.1 Grant of Security Interest................... 13
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Section 3.2 Continuing Obligation........................ 14
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ARTICLE 4. ADMINISTRATION OF THE COLLATERAL....................... 15
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Section 4.1 The Equipment................................ 15
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Section 4.2 No Lender Liability.......................... 15
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Section 4.3 Use of Equipment; Identification............. 16
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES......................... 16
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Section 5.1 Organization and Qualification............... 16
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Section 5.2 Concerning the Loan Documents................ 16
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Section 5.3 Guaranties................................... 17
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Section 5.4 Equipment.................................... 17
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Section 5.5 Title to the Equipment....................... 17
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Section 5.6 Financial Condition.......................... 17
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Section 5.7 Litigation................................... 18
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Section 5.8 Disclosure................................... 18
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Section 5.9 Tax Returns and Payments..................... 18
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Section 5.10 Compliance with Other Instruments............ 18
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Section 5.11 Pension Plans................................ 19
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Section 5.12 Labor Relations.............................. 19
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Section 5.13 Environmental Laws........................... 19
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Section 5.14 Trade Names.................................. 20
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Section 5.15 Subsidiaries................................. 20
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Section 5.16 Loans and Affiliate Payments................. 20
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Section 5.17 Permits...................................... 20
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Section 5.18 Broker's or Transaction Fees................. 20
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Section 5.19 Taxpayer ID No. and Chief
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Executive Office............................. 20
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Section 5.20 No Default................................... 21
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ARTICLE 6. AFFIRMATIVE COVENANTS................................. 21
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Section 6.1 Financial and Other Information............. 21
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Section 6.2 Access...................................... 24
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Section 6.3 Taxes....................................... 24
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Section 6.4 Maintenance of Properties: Insurance........ 24
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Section 6.5 Business.................................... 26
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Section 6.6 Compliance.................................. 26
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Section 6.7 Litigation.................................. 26
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Section 6.8 Environmental Laws.......................... 26
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Section 6.9 Notices..................................... 27
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Section 6.10 Tangible Net Worth.......................... 27
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Section 6.11 Change of Ownership......................... 27
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Section 6.12 Use of Proceeds............................. 27
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Section 6.13 Books....................................... 28
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ARTICLE 7. NEGATIVE COVENANTS.................................... 28
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Section 7.1 Corporate Structure......................... 28
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Section 7.2 Dividends, Distributions, Redemptions....... 28
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Section 7.3 Loans, Investments, Affiliate Payments,
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Salaries.................................... 28
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Section 7.4 Change in Business, Structure or Business
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Location.................................... 28
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Section 7.5 Guaranties.................................. 28
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Section 7.6 Sale of Property............................ 28
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Section 7.7 Prepayment.................................. 29
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Section 7.8 Liens....................................... 29
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Section 7.9 Pension Plans............................... 29
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Section 7.10 Borrower's Name............................. 29
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Section 7.11 Changes to Railcar Documents................ 29
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Section 7.12 Other Debts................................. 29
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Section 7.13 Transactions with Affiliates................ 30
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ARTICLE 8. DEFAULT............................................... 30
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Section 8.1 Events of Default........................... 30
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Section 8.2 Rights Upon Default......................... 32
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ARTICLE 9. MISCELLANEOUS......................................... 34
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Section 9.1 Survival.................................... 34
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Section 9.2 Waiver of Notices........................... 34
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Section 9.3 Assignment.................................. 34
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Section 9.4 Complete Agreement Modification............. 34
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Section 9.5 Applicable Law.............................. 35
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Section 9.6 Indemnification............................. 35
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Section 9.7 Stamp or other Tax.......................... 36
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Section 9.8 Captions.................................... 36
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Section 9.9 Notices..................................... 36
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Section 9.10 No Waiver, Lender Performance............... 37
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Section 9.11 Evidence of Obligations; Admissibility of
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Lender's Books and Records.................. 37
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Section 9.12 No Liability for Brokers.................... 37
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Section 9.13 Further Assurances.......................... 37
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Section 9.14 Counterparts................................ 38
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Section 9.15 Notice of Breach by Lender.................. 38
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Section 9.16 Time........................................ 38
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Section 9.17 Exhibits.................................... 38
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Section 9.18 Authorization to Date, Complete Blanks and
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Correct Errors.............................. 38
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Section 9.19 No Oral Agreements; Entire Agreement........ 38
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Section 9.20 Venue and Jurisdiction...................... 39
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Section 9.21 Waiver of Trial by Jury..................... 39
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LOAN AND SECURITY AGREEMENT
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(Rail Tank Cars)
This LOAN AND SECURITY AGREEMENT (the "Agreement"), dated _______________,
1995, is made and entered into by and between DSN CORPORATION, an Oklahoma
corporation ("Borrower"), and THE CIT GROUP/EQUIPMENT FINANCING, INC., a New
York corporation ("Lender").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and of any loans or other credit facilities now or hereafter
made to Borrower by Lender, the parties hereto covenant and agree as follows:
ARTICLE 1.
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DEFINITIONS
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The following capitalized terms have the following meanings when used in
this Agreement:
"Affiliate" means any of LSB, EDC, LSBC, Prime Financial Corp., Total
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Energy Systems, Ltd., Slurry Explosive Corporation, Universal Tech Corporation,
LSB Holdings, Inc., and any other Person controlling or controlled by or under
common control with LSB Industries, Inc. or any of their Subsidiaries,
successors or assigns.
"Business Day" means any day which is not a Saturday, Sunday or day on
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which banks in New York are closed.
"Casualty Prepayment Percentage" shall mean, on the date of the required
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prepayment of a Note pursuant to Section 2.9 of this Agreement, the product
obtained by multiplying 10% by a fraction, the numerator of which shall be the
number of Installment Payment Dates with respect to the Note remaining after
such date of prepayment (including the Installment Payment Date, if any, on
which such prepayment is made) and the denominator of which shall be the total
number of Installment Payment Dates with respect to such Note.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Cost" shall mean, with respect to each Unit of Equipment, the
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manufacturer's or supplier's invoiced purchase price therefor (after giving
effect to any discount or other reduction) payable by Borrower, which amount
shall be set forth in Exhibit "B" pertaining to such Unit of Equipment.
"Collateral" means: (i) all personal property referred to in Section 3.1;
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and (ii) all other property and interests in property, real or personal, now
owned or leased or hereafter acquired or leased, which is hereafter pledged or
assigned to Lender as collateral security for payment of any of the Obligations.
"Default" means any Event of Default or event which, with notice or passage
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of time or both, would constitute an Event of Default.
"Disclosure Schedule" means the disclosure schedule annexed to this
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Agreement as Exhibit "A".
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"DSN Plant Loan" means that certain loan in the original principal amount
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of $12,750,000, as subsequently amended to $16,500,000, made by Lender to
Borrower pursuant to the DSN Plant Loan Documents.
"DSN Plant Loan Documents" means that certain Loan and Security Agreement
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(DSN Plant) dated October 31, 1994, as amended, executed between Lender and
Borrower, and all other loan documents described therein, relating to a loan by
Lender to Borrower to finance the acquisition and construction of strong nitric
acid plant in Arkansas.
"EDC" means El Dorado Chemical Company, an Oklahoma corporation.
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"Environmental Laws" means all federal, state and local laws, rules,
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regulations, ordinances, programs, permits, guidance, orders and consent decrees
relating to hazardous substances, discharges, releases or disposals of
pollutants, solid waste or hazardous materials, or any other environmental
matters applicable to Borrower's business or assets. Such laws and regulations
include the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
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as amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S) 9601 et seq., as amended; the Toxic Substances Control Act,
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15 U.S.C. (S) 2602 et seq., as amended; the Clean Water Act, 33 U.S.C. (S) 466
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et seq., as amended; the Clean Air Act, 42 U.S.C. (S) 7401 et seq., as amended;
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state and federal superlien and environmental cleanup programs; and U.S.
Department of Transportation regulations. The terms "hazardous substance" and
"release" shall have the meanings specified in the Federal Comprehensive
Environmental Responsibility Cleanup and Liability Act of 1980, as the
definition of such terms may be subsequently modified, supplemented or amended
("CERCLA") and the terms "solid waste" and "disposal" shall have the meanings
specified in the Federal Resource Conservation and Recovery Act of 1976, as the
definition of such terms may be subsequently modified, supplemented or amended
("RCRA"); provided, however, that in the event either CERCLA or RCRA is amended
so as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and provided,
further, however, that to the extent a parcel of real property is situated in a
state or other jurisdiction in which the applicable laws may establish a meaning
for "hazardous substance," "release," "solid waste," or "disposal" which is
broader than that specified in either CERCLA or RCRA, such broader meaning shall
apply.
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"Equipment" means the ten (10) rail tank cars purchased by Borrower from
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Trinity Industries, Inc. and more particularly described in Exhibit "B" hereto
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including all substitutions, attachments, accessions or accessories relating
thereto and all manuals, drawings, instructions, records, warranties and rights
with respect thereto, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Event of Default" means any event so described in Section 8.1.
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"Event of Loss" shall mean, with respect to any Unit of the Equipment, the
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actual or constructive loss of such Unit due to theft, destruction, damage
beyond repair, or damage from any reason whatsoever to an extent which makes the
repair uneconomical or rendition thereof unfit for normal use; or the
condemnation, confiscation or seizure of, or requisition of title to, or use of
such Unit, by any governmental authority or any other Person, whether or not
acting under color of governmental authority.
"Fair Market Value" means the price that a knowledgeable buyer would be
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willing to pay a knowledgeable seller, neither being under any duress to buy or
sell and both having reasonable knowledge of relevant facts, for the machinery
and equipment in place and in operation, taking advantage of all leasehold and
site improvements designed to facilitate its operation, with the seller
accurately and completely representing the existing condition and operability of
the machinery and equipment to the buyer. Consideration is given to each asset's
contribution to the operating facility, or the contribution of all the assets as
a whole, whichever appropriately addresses production capabilities of the plant.
It is assumed that all specially designed and built machinery and equipment will
continue to be utilized in the manner for which it was originally intended.
"Financial Statement" means any financial statement given to Lender
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pursuant to Section 6.1.
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"Fiscal Year" means, as to any Person, such Person's fiscal year for
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financial accounting purposes. Borrower's current Fiscal Year ends on December
31, 1995.
"Funding Date" means the date on which any Loan advance is made.
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"GAAP" means, as of any date of determination, generally accepted
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accounting principles consistently applied during each interval and from
interval to interval.
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"Guarantor" means any Person who has executed a Guaranty in favor of Lender
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with respect to the Obligations, including LSB and LSBC.
"Guaranty" means each continuing guaranty executed and delivered by LSB,
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LSBC and any other Guarantor in form and substance acceptable to Lender
guarantying the Obligations.
"Hazardous Substance" means any substance, material or waste (including
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petroleum and petroleum products) which is or becomes designated, classified or
regulated as being "toxic" or "hazardous" or a "pollutant," or which is or
becomes similarly designated, classified or regulated, under any Environmental
Laws.
"ICC" means the Interstate Commerce Commission and any agency or
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instrumentality of the United States government succeeding to its functions.
"Indebtedness" means, as to any Person, (a) all indebtedness of such Person
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for borrowed money, (b) that portion of the obligations of such Person under
capital leases which is properly recorded as a liability on a balance sheet of
that Person prepared in accordance with GAAP, (c) any obligation of such Person
that is evidenced by a promissory note or other instrument representing an
extension of credit to such Person, whether or not for borrowed money, or any
obligation of such Person for the deferred purchase price of property or
services (other than trade or other accounts payable in the ordinary course of
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business in accordance with terms customary to DSN or its Affiliates), (d) any
obligation of such Person that is secured by a Lien on assets of such Person,
whether or not that Person has assumed such obligation or whether or not such
obligation is non-recourse to the credit of such Person, but only to the extent
of the fair market value of the assets so subject to the Lien, (e) obligations
of such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (f) obligations of such
Person for unreimbursed draws under letters of credit issued for the account of
such Person.
"Installment Payment Date" shall mean, with respect to a Note, each date on
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which a regular installment of principal and interest is due on such Note.
"Late Charge Rate" shall mean a rate per annum, equal to the higher of 3%
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over the applicable interest rate set forth in Section 2.4 or 18%, but not to
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exceed the highest rate permitted by applicable law.
"Lien" means any mortgage, deed of trust, pledge, deed to secure debt,
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hypothecation, assignment, encumbrance, lien (statutory or other), security
interest or other security agreement, including any conditional sale or other
title retention
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agreement. "Lien" includes reservations, exceptions, easements, leases and other
restrictions and encumbrances affecting real property. For purposes hereof a
Person shall be deemed to own property acquired or held pursuant to a
conditional sale or similar security arrangement.
"Loan" shall have the meaning assigned in Section 2.1.
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"Loan Documents" means, collectively:
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a. this Agreement
b. the Note
c. the Railcar Lease
d. the Consulting Agreement
e. the Assignment of the Railcar Lease and Consulting Agreement
f. the Acknowledgment and Consent to Assignment of the Railcar Lease
and Consulting Agreement
g. sufficient UCC-1 Financing Statements
h. opinion of ICC counsel and filings sufficient for ICC priority
and perfection
i. the Reaffirmation of the Guaranty (LSB)
j. the Reaffirmation of the Guaranty (LSBC)
k. the Consent to Encumbrance
and any other opinions, resolutions, certificates, documents or agreements of
any nature or type heretofore or hereafter executed or delivered by Borrower,
Affiliates or Guarantors to Lender pursuant to this Agreement or any Loan
Document in each case either as originally executed or as the same may from time
to time be supplemented, modified, amended, restated or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation.
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"LSBC" means LSB Chemical Corp., an Oklahoma corporation.
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"Mixed Acid Plant Loan" means that certain loan in the original principal
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amount of $1,075,200.00, made or to be made by Lender to Borrower pursuant to
Mixed Acid Plant Loan Documents.
"Mixed Acid Plant Loan Documents" means that certain Loan and Security
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Agreement (Mixed Acid North Carolina Plant) dated as of April 5, 1995 between
Lender and Borrower, and all other "loan documents" described therein, relating
to a loan by Lender to Borrower to construct a mixed acid plant.
"Note" means a promissory note which evidences each Loan advance,
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substantially in the form of Exhibit "C".
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"Obligations" means and includes the aggregate of the unpaid principal
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balance of the Loan and all accrued interest thereon, and all other loans,
indebtedness, debts, liabilities, obligations,
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interest, fees, premiums, guarantees, amounts, indemnities, reimbursements,
covenants and duties owing by Borrower to Lender under any one or more of the
Loan Documents, of every kind and description (whether or not evidenced by any
note or other instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising. "Obligations" include: (i) all interest, fees, charges or
other costs and payments that Borrower is required to pay to Lender under or as
a result of the Loan Documents or by law and (ii) all costs and expenses
described in Section 2.7 or otherwise required to be paid by Borrower to Lender
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pursuant to any Loan Document.
"Pension Plan" means any pension plan as defined in Section 3(2) of ERISA
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which is a multi employer plan or a single employer plan as defined in Section
4001 of ERISA and subject to Title IV of ERISA and which is: (i) a plan
maintained by Borrower, or any Subsidiary or any Related Company; (ii) a plan to
which Borrower, or any Subsidiary or any Related Company contributes or is
required to contribute; (iii) a plan to which Borrower, or any Subsidiary or any
Related Company was required to make contributions at any time during the five
calendar years preceding the date of this Agreement; or (iv) any other plan with
respect to which Borrower, or any Subsidiary or any Related Company has incurred
or may incur. liability, including contingent liability, under Title IV of
ERISA, either to such plan or to the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (i) Liens for taxes not yet payable or being
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contested in good faith and by appropriate proceedings diligently pursued,
provided that the reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; (ii) Liens in favor of Lender;
and (iii) Liens described on the Disclosure Schedule in Exhibit "A" as such
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Disclosure Schedule is in effect on the date hereof.
"Person" means any individual, trust, firm, partnership, corporation or any
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other form of public, private or governmental entity or authority.
"Proceeds" means all products and proceeds (as defined in the UCC) of any
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Collateral, and all proceeds of any such proceeds, including all awards for
taking by eminent domain, all proceeds of fire or other insurance, all proceeds
obtained as a result of any legal action or proceeding with respect to any
Collateral and all leases, chattel paper, accounts, cash and noncash proceeds of
any of the Collateral.
"Railcar Lease" means that railcar lease dated to be effective as of
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_____________, 1995 between Borrower as lessor and EDC as lessee with respect to
the railcar Units relating thereto.
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"Related Company" means any member of any controlled group of corporations
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(as defined in the Code) of which Borrower is a party, or any trade or business
(whether or not incorporated) which together with Borrower would be treated as a
single employer under Section 4001 of ERISA.
"Reportable Event" shall have the meaning assigned to that term in Title IV
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of ERISA, including a reportable event described in Section 4043 of ERISA or the
regulations thereunder, a withdrawal from a Plan described in Section 4063 of
ERISA, or a creation of operations described in Section 4062(e) of ERISA.
"Security Interest" collectively means the Liens created for the benefit of
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Lender pursuant to the Loan Documents.
"Subsidiary" means any present or future corporation of which more than 50%
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of the outstanding stock having by its terms the ordinary voting power to elect
a majority of the board of directors, managers or trustees of such corporation
is at the time, directly or indirectly through one or more intermediaries, owned
or controlled by Borrower and/or one or more of its Subsidiaries, irrespective
of whether or not, at the time, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency. If at any time, and only for so long as, Borrower has no
Subsidiaries, provisions of this Agreement which refer to Subsidiaries shall be
of no force and effect insofar a they pertain to Subsidiaries although they
shall remain in full force and effect as to all other Persons in question.
"Treasury Rate" means the rate per annum equal to the yield to maturity for
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the U.S. Treasury Security having a remaining term to maturity closest to five
(5) years as at (and shall be fixed as of) the close of business on the third
Business Day prior to the first day of each Funding Date, as such yield to
maturity is reported on page 5 ("U.S. Treasury and Money Markets") of the
information ordinarily provided by Telerate Systems Incorporated (provided that
if Telerate Systems Incorporated ceases to report such information, then such
information shall be taken from any publicly available source of similar data
designated by Lender).
"UCC" means the Uniform Commercial Code (or any successor statute) as from
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time to time in effect in any applicable jurisdiction.
"Unit" means one or more of the railcars identified collectively as
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Equipment and as may be described in Exhibit "B" hereof.
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ARTICLE 2.
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THE LOAN
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Section 2.1 The Loan. On the basis of the covenants, agreements and
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representations; of Borrower contained herein and subject to the terms and
conditions hereinafter set forth, Lender agrees to lend to Borrower and Borrower
agrees to borrow from Lender a sum not to exceed the aggregate principal amount
of One Million One Hundred Sixty-Nine Thousand, Eight Hundred Dollars
($1,169,800.00) (collectively, the "Loan"), the proceeds of which are to be
disbursed by Lender exclusively for the payment in full of the approved costs
and expenses incurred in connection with the construction and the purchase of
the Equipment.
Section 2.2 Disbursement.
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(a) The proceeds of each Loan disbursed under this Agreement shall be
evidenced by a Note and shall be secured by Borrower's interest in the Railcar
Lease and the other Collateral and all such proceeds shall be disbursed, as
aforesaid, directly to and to reimburse Trinity Industries, Inc. for the full
purchase price for such Units.
(b) Limitations on Disbursements. Disbursement of the Loan proceeds shall
be made in two (2) fundings. The first disbursement shall be in the amount of
$_____________ and shall be made upon the delivery and acceptance of not less
than the first five Units. The second disbursement of the Loan proceeds shall
be made by Lender upon the final delivery and acceptance of all ten Units, or
less if approved by Lender in its sole discretion. In addition to compliance
with the conditions of lending provided in section 2.10 hereof, Borrower shall,
in connection with each disbursement, execute a pay proceeds letter in form and
substance acceptable to Lender directing payment of such loan proceeds directly
to Trinity Industries, Inc. and such other persons as may be acceptable to
Lender. Borrower shall also deliver to Lender prior to each funding, such
invoices, statements, vouchers and other sale documents and proof of ownership
by Borrower in connection with each Unit as may be acceptable to Lender.
Notwithstanding a partial funding of the Units by the first funding, Lender's
lien shall be a first priority lien in all of the Units at any time delivered to
Borrower.
Section 2.3 Repayment of the Loan. Borrower promises to repay the Loan
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as follows:
(a) The Loan shall be evidenced by the Notes. Each Note shall be dated
concurrently with each disbursement and shall be payable in eighty-four (84)
consecutive equal monthly installments of principal and interest from the date
thereof at the rate provided in Section 2.4 below, commencing the first day of
the month following each disbursement of the Loan proceeds.
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(b) In the event the second disbursement of the Loan proceeds is not
disbursed by October 15, 1995, any obligation of Lender to make any further Loan
disbursements shall, at Lender's option, terminate.
(c) Borrower's obligation to pay all amounts payable hereunder is absolute
and unconditional and shall not be affected by any circumstance of any character
whatsoever, including (i) any setoff, counterclaim, recoupment, defense,
abatement or reduction or any right which Borrower may have against Under, the
manufacturer or supplier of any of the Equipment or anyone else for any reason
whatsoever; (ii) the invalidity, enforceability or disaffirmance of this
Agreement or any other Loan Document related hereto; or (iii) the prohibition of
or interference with the use or possession by Borrower or any other authorized
Person of all or any part of the Equipment, for any reason whatsoever.
Section 2.4 Interest Charges. The outstanding principal balance of each
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Note shall bear interest at a rate per annum equal to the Treasury Rate plus two
point seven percent (2.7%) as fixed at the time of such disbursement. In each
instance, interest shall be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
Section 2.5 Late Charge Rate. In the event Borrower fails to pay any
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amount hereunder when due under any Note, the amount on all Notes shall bear
charges thereon calculated at the Late Charge Rate. At any time when any Event
of Default has occurred, irrespective of any cure periods, and continues for
over ten (10) days, Borrower will pay interest on the Loan at the Late Charge
Rate.
Section 2.6 Maximum Interest. In no event shall the interest charged
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with respect to the Obligations exceed the maximum amount permitted under
applicable law. Notwithstanding anything to the contrary herein or elsewhere, if
at any time the rate of interest called for hereunder or under the Notes or
other Loan Document (the "Stated Rate") exceeds the highest rate of interest
permissible under any applicable law (the "Maximum Lawful Rate"), then for so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable shall be equal to the Maximum Lawful Rate; provided, however, that if at
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any time thereafter the Stated Rate is less than the Maximum Lawful Rate,
Borrower shall, to the extent permitted by law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received by Lender is
equal to the total interest which Lender would have received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and until
the Stated Rate again exceeds the Maximum Lawful Rate, in which event this
provision shall again apply.
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Section 2.7 Expenses. Borrower agrees to pay on demand all reasonable
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out of pocket costs and expenses (including reasonable legal, appraisal,
accounting, auditing and similar fees) incurred at any time, before or after the
Obligations are paid in full, in connection with (i) the enforcement, attempted
enforcement, amendment or termination of this Agreement or any of the other Loan
Documents, the performance of any of Borrower's duties under this Agreement and
the other Loan Documents or any exercise by Lender of its rights and remedies
under this Agreement or any other of the Loan Documents, including in connection
with a reorganization or bankruptcy reorganization of Borrower or any Affiliate;
(ii) the filing or recordation of all documents or instruments relating to the
Collateral; (iii) realizing upon or protecting any Collateral and enforcing and
collecting any Obligations or guaranty thereof; and (iv) any Default or Event of
Default. Borrower also agrees to reimburse Lender, upon demand, for its legal
fees for outside counsel plus any appraisal fees, recording and search fees and
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related expenses, including travel and other out of pocket expenses of Lender's
agents and its counsel, incurred by it in connection with the preparation,
negotiation, execution, closing and delivery of the Loan Documents.
Section 2.8 Prepayment. Provided no Default has occurred and is
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continuing, Borrower may prepay a Note in whole, but not in part, on the first
day of any month, upon at least thirty (30) Business Days' prior written notice
to Lender. Such prepayment of a Note shall be accompanied by the payment of all
principal, all accrued but unpaid interest on such Note to the date of
prepayment and all outstanding and unpaid costs, fees and expenses. In addition,
the prepayment of such Note shall be made with a prepayment fee in an amount
equal to the greater of (a) two percent (2.0%) of the outstanding principal
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balance of such Note, or (b) the excess, if any, of (i) the present value of the
principal and interest payments which would have been payable during, the
remainder of the term in the absence of the prepayment, using a discount rate
equal to one percent (1.0%) plus the yield to maturity, as of the Third Business
----
Day prior to the date on which the prepayment is made, on U.S. Treasury
Securities having a remaining term to maturity closest to the remaining average
life of such Note, as such yield to maturity is reported on page 5. ("U.S.
Treasury and Money Markets") of the information ordinarily provided by Telerate
Systems Incorporated, over (ii) the principal amount being prepaid. Prepayment
of a Note shall not release the Collateral as security for the remaining
outstanding Obligations.
Section 2.9 Mandatory Prepayment/Event of Loss. In the event that any
----------------------------------
Unit of the Equipment shall suffer an Event of Loss, Debtor shall make a
prepayment on the Note which reflects the indebtedness relating to the
disbursement for that particular Unit, within 30 days after the occurrence of
such Event of Loss, in an amount determined (i) by multiplying (a) the unpaid
principal amount of such Note by (b) a fraction the numerator of which shall
10
be the Cost of the Unit which suffered the Event of Loss and the denominator of
which shall be the original principal amount of such Note (the amount obtained
by multiplying (i)(a) and (i)(b) hereof shall be herein referred to as the
"Prepaid Principal Amount") (ii) by adding interest accrued, with respect to the
Prepaid Principal Amount, to the date of such prepayment and (iii) by adding an
amount equal to (a) the applicable Casualty Prepayment Percentage multiplied by
(b) the Prepaid Principal Amount.
Section 2.10 Conditions of Lending. The obligation of Lender to make any
---------------------
advance hereunder is subject to the prior satisfaction (or waiver in writing and
signed by Lender in its sole discretion) of each of the following conditions
precedent:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by Borrower and the Guarantors in the Loan Documents and any
certificate, document or financial or other written statement furnished at
any time under or in connection herewith shall be true and correct in all
material respects on and as of the date given and on and as of the date of
the funding of any Loan advance as if made on and as of such date and
otherwise in exactly the same language.
(b) Compliance. Borrower shall have complied and shall then be in
----------
compliance with all the terms, covenants and conditions of the Loan
Documents.
(c) No Default. No Default shall have occurred and be continuing.
----------
(d) No Material Adverse Change. No material adverse change shall have
--------------------------
occur-red with respect to the business, financial condition or operations
of Borrower since the financial statement of LSB dated December 31, 1994
and Lender shall have received a certificate from the Chief Executive
Officer of Borrower to that effect; and no material adverse change shall
have occurred with respect to the business, financial condition or
operations of EDC or any Guarantor, as may be determined by Lender in the
exercise of its reasonable discretion.
(e) Delivery of Documents. Each of the Loan Documents shall have been
---------------------
executed and delivered to Lender in form and substance satisfactory to
Lender and shall be in full force and effect.
(f) No Change In Law. No change in state or federal law shall have
----------------
been enacted or proposed which would make the Loan unlawful to Lender.
(g) Opinions of Counsel. Prior to the initial advance, Lender shall
-------------------
have received an opinion of legal counsel for
11
Borrower, LSB, LSBC and EDC, in form and substance satisfactory to Lender
and its counsel, which opinion will include, among other things, opinions
affirming Borrower's authority to enter into this Agreement, the perfection
and priority of the Security Interest, LSB's and LSBC's authority to enter
into the Guaranties and EDC's authority to enter into the Railcar Lease and
the enforceability of the Loan Documents and an opinion of ICC counsel
relating to the perfection and priority of Lender's Lien in the Equipment.
(h) UCC Searches. Lender shall have received UCC searches reflecting
------------
Lender's first priority lien in the Collateral.
(i) Loan Fee and Expenses. Borrower shall pay all Lender's costs and
---------------------
expenses hereunder, including the expenses referenced in Section 2.7
hereof.
(j) Certificate of Good Standing and Tax Clearances. Lender shall have
-----------------------------------------------
received certified copies indicating Borrower and EDC are in good standing
under the laws of their state of incorporation and qualified to do business
in the states where they do business and such tax clearance certificates as
may be required by Lender.
(k) Proceedings. All proceedings and actions shall have been taken in
-----------
connection with the transactions contemplated by this Agreement, and all
documents contemplated in connection herewith shall be satisfactory in form
and substance to Lender and its counsel.
(l) Evidence of Insurance. Lender shall receive evidence of all
---------------------
insurance required by the terms of this Agreement and the Loan Documents.
(m) Termination of Liens. Lender shall have received duly executed UCC
--------------------
termination statements and other instruments in form and substance
satisfactory to Lender, as shall be necessary to terminate and satisfy any
Liens on the Collateral except for Permitted Liens.
(n) Certificate of Incumbency of Borrower. Prior to initial advance,
-------------------------------------
Lender shall have received a certificate of incumbency of Borrower signed
by Borrower's Secretary or Assistant Secretary, which certificate shall
certify the names of the officers of Borrower authorized to execute any
Loan Documents and any other related documents on behalf of Borrower,
together with the signatures of such officers, and Lender may conclusively
rely on such certificate until receipt of a further certificate of the
Secretary or Assistant Secretary of Borrower canceling or amending the
prior
12
certificate and submitting the signatures of the officers named in
such further certificate.
(o) Resolutions of Borrower. Prior to initial advance, Lender shall
-----------------------
have received a certified copy of all corporate proceedings of Borrower
evidencing that all action required to be taken in connection with the
authorization, execution, delivery, and performance of this Agreement, the
other Loan Documents, and the transactions contemplated hereby and thereby,
has been duly taken.
(p) Other Required Documentation. Borrower shall have executed and/or
----------------------------
delivered such other documents, instruments, agreements or items as Lender
may reasonably require.
Section 2.11 Place and Form of Payments. Unless Lender otherwise directs
--------------------------
in writing, all payments and prepayments permitted or required by any Loan
Document shall be made in immediately available funds and not later than the
time necessary for good funds to be credited on the same day received at
Lender's account in accordance with the instructions annexed hereto as Rider
-----
2.11 or to such other location as Lender shall hereafter designate to Borrower
----
in writing. Whenever any payment is stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees.
ARTICLE 3.
----------
SECURITY FOR THE OBLIGATIONS
----------------------------
Section 3.1 Grant of Security Interest. As collateral security for the
--------------------------
prompt and due payment and performance of the Obligations including all
indebtedness and obligations of Borrower to Lender under the Loan Documents, the
DSN Plant Loan Documents and the Mixed Acid Plant Loan Documents, Borrower
hereby assigns to Lender and grants to Lender a continuing first priority lien
on and security interest in all of Borrower's right, title and interest in and
to, but none of its obligations or liabilities respecting, the following
property, present or future, tangible or intangible, now owned or existing or
hereafter acquired or arising:
(a) All right, title and interest of Borrower in and to the Equipment
including each of the Units described in Exhibit "B" hereto, including all
-
additions, alterations or modifications thereto or replacements of any part
thereof, whether made, performed or acquired and all other items of
tangible personal property of any kind acquired by Borrower in connection
with the acquisition of the Equipment, in each case whether now owned by
Borrower or hereafter acquired, together with all logs, manuals and data
and inspection, maintenance and modifications, and overhaul records (and
all rights and
13
interests therein that Borrower may have) relating to the
Equipment whether maintained pursuant to applicable law or otherwise;
(b) the Railcar Lease and the Consulting Agreement including, without
limitation, all amounts of rent thereunder, insurance proceeds, sale
proceeds, requisition, indemnity and other payments of any kind for or with
respect to the Equipment or otherwise and all rights of Borrower as lessor
to exercise any election or option or to make any decision or determination
or to give any notice, consent or waiver or approval under or in respect of
the Railcar Lease or to accept any surrender of any Units or any part
thereof, as well as all rights, powers and remedies on the part of Borrower
as lessor, whether arising under the Railcar Lease or by statute or at law
or in equity or otherwise, arising out of an Event of Default;
(c) all tolls, rents, issues, profits, products, insurance proceeds,
revenues and other income of the property subject or required to be the
subject to the Len of this Agreement;
(d) all documents, instruments, rentals and other riots to payment
relating to the Equipment, the Railcar Lease and the Consulting Agreement
and all other agreements, contracts, chattel paper, contract rights, rights
to payment, general intangibles and insurance policies and surety bonds
relating thereto and all proceeds of the foregoing; and
(e) any and all Proceeds in the products of the foregoing, including
all monies, rentals, accounts, general intangibles, deposit accounts,
documents, instruments, chattel paper, goods, insurance proceeds, and any
other tangible or intangible property received with respect to any of the
foregoing, including any sale or other disposition thereof.
Section 3.2 Continuing Obligation. Except with respect to those
---------------------
Permitted Liens and those liens which by law are accorded a first priority,
Borrower shall take all action necessary to grant Lender a valid first priority
lien on and security interest in all Collateral on the first Funding Date, and
to maintain at all times the validity, enforceability, perfection and first
priority of the Security Interest. Until the Obligations are fully paid and
satisfied, Borrower will at all times do, make, execute, deliver, record,
register or file all such financing statements, fixture filings, deeds of trust,
mortgages, assignments, certificates, charges, instruments, acts, pledges,
assignments and transfers (or cause the same to be done) and will deliver to
Lender such
14
instruments constituting or evidencing the Collateral, as Lender may request, to
assure, continue or establish the validity, enforceability, perfection and first
priority (except for Permitted Liens) of the Security Interest. To the extent
permitted by applicable law, Borrower hereby authorizes Lender to: (i) sign
Borrower's name and on behalf of such Borrower to execute and file mortgages,
deeds of trust, financing statements, and notices of lien necessary to protect
or perfect the security interest granted herein in any or all of the Collateral
and (ii) file a carbon, photocopy or other reproduction of this Agreement or any
of the other Loan Documents as a financing statement in each case which Lender,
in its discretion, deems necessary or desirable to perfect or maintain the
perfection of the Security Interest.
ARTICLE 4.
----------
ADMINISTRATION OF THE COLLATERAL
--------------------------------
Section 4.1 The Equipment. Borrower, at its own cost and expense, will
-------------
keep, or cause EDC to keep, the Equipment in good operating condition and
repair, except for normal wear and tear, and will not waste or destroy, or allow
EDC to waste or destroy, such Equipment, or any part thereof, or be negligent in
the care and use thereof and will make all necessary replacements thereof and
repairs thereto. Borrower shall promptly inform Lender of any material additions
to such Equipment and of any material loss, damage, or destruction of such
Equipment. Borrower win not permit any Equipment to become a fixture to any real
property or an accession to any other personal property, unless Lender has a
first priority perfected Security Interest in such real or personal property or
has been provided with such waivers or consents as Lender may reasonably
require. Borrower shall, promptly upon Lender's request, deliver to Lender any
and all evidence of ownership of such Equipment.
Section 4.2 No Lender Liability. Lender shall have no duty of care with
-------------------
respect to any Collateral unless and until it takes the same into its own
possession or control. Lender shall be deemed to have satisfied its duty of due
care with respect to Collateral in its custody and control if it accords to such
Collateral treatment substantially equal to the treatment Lender accords its own
property, or if Lender takes such action with respect to the Collateral as
Borrower requests in writing, but no failure to comply with any such request nor
any omission to do any such act requested by Borrower shall be presumptively
deemed, from that failure or omission, an absence of reasonable care. Lender
shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof, unless caused by Lender's gross negligence
or willful misconduct. Lender does not, by anything contained herein or in any
other Loan Document or otherwise, assume any obligation of Borrower under
Railcar Lease or any other contract or agreement assigned to Lender or in which
15
Under is granted a security interest, and Lender shall not be responsible in any
way for the performance by Borrower of any of the terms and conditions thereof.
Section 4.3 Use of Equipment; Identification.
--------------------------------
(a) Borrower shall use the Equipment in a careful and proper manner,
will comply with and conform to all governmental laws, rules and
regulations relating thereto including all ICC rules and regulations, and
win cause the Equipment to be operated properly or in substantial
accordance with the manufacturer's or supplier's instructions or manuals
and only by competent and duly qualified personnel.
(b) Borrower shall not move any of the Equipment from the continental
United States without the prior written consent of Lender.
(c) Upon Under's written request and at Borrower's sole expense,
Borrower shall attach to each item of Equipment a notice satisfactory to
Lender disclosing Lender's security interest in such item of Equipment.
ARTICLE 5.
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Loan,
Borrower represents and warrants to Lender as set forth below. The
representations and warranties of Borrower contained in this Article 5 and
otherwise herein and in any other Loan Document shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Lender and shall survive the execution and delivery of this Agreement and the
other Loan Documents and the making of the Loan.
Section 5.1 Organization and Qualification. Borrower is duly
------------------------------
incorporated and organized and is validly, existing as a corporation in good
standing under the laws of the State of Oklahoma, with all power (corporate or
otherwise) to own, lease and operate the Equipment and its other properties and
assets and to carry on its business in the manner in which such business is now
conducted. Borrower is duly licensed and qualified to do business and is in good
standing in every state where failure to be so licensed or qualified and in good
standing would have a material adverse effect on its business, properties or
assets.
Section 5.2 Concerning the Loan Documents. Borrower has the power to
-----------------------------
authorize, execute and deliver the Loan Documents to which Borrower is a party,
to incur and perform its Obligations hereunder and thereunder, and, as
applicable, to grant the Security Interest. Borrower has duly taken all
necessary corporate action to authorize the execution, delivery and performance
of such Loan
16
Documents, and no consent, approval or authorization of, or declaration or
filing with, any governmental or other public body, or any other Person
(including without limitation any stockholders, trustees or holders of
Indebtedness of Borrower), is required in connection with such authorization,
execution, delivery and performance by Borrower or the consummation of the
transactions contemplated hereby or thereby. Such Loan Documents have been duly
authorized, executed and delivered by or on behalf of Borrower, and constitute
the legal, valid and binding Obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms.
Section 5.3 Guaranties. Each Guarantor has the power to authorize,
----------
execute and deliver its Guaranty and to incur and perform its obligations under
its Guaranty. Each Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of its Guaranty, and no
consent approval or authorization of, or declaration or filing with, any
governmental or other public body, or any other Person (including without
limitation any stockholders, trustees or holders of Indebtedness of such
Guarantor), is required in connection with such authorization, execution,
delivery and performance by such Guarantor. Each Guarantor's Guaranty has been
duly authorized, executed and delivered by or on behalf of such Guarantor, and
constitutes the legal valid and binding obligations of such Guarantor and is
enforceable against such Guarantor in accordance with its terms.
Section 5.4 Equipment. All Equipment is in good operating order and
---------
condition and repair, except for ordinary wear and tear, is used or useful in
the business of Borrower and is readily moveable without harm or damage. The
invoices previously delivered to Lender by Borrower respecting the Equipment are
genuine, true and accurate, and the descriptions of the Equipment set forth in
the Disclosure Schedule are true, complete and accurate.
Section 5.5 Title to the Equipment. Except for the Security Interest and
----------------------
Permitted Liens and subject to the right of quiet enjoyment under the Railcar
Lease, Borrower has good, and merchantable title to the Equipment and other
Collateral, and such Equipment or any other Collateral is not nor will be
subject to any Lien. The provisions of the Loan Documents create legal, valid
and enforceable security interests in and liens on all of the Equipment and
other Collateral, and the Loan Documents and such UCC and ICC filings create a
perfected and continuing first priority security interest upon the Equipment,
and are enforceable against Borrower and all third parties.
Section 5.6 Financial Condition. Borrower has furnished to Lender LSB's
-------------------
consolidated and consolidating financial statements as of December 31, 1994,
accompanied by the report of LSB's independent certified public accountants,
which statements present
17
fairly in all material respects the consolidated and consolidating financial
position of LSB and its consolidated Affiliates as of the date thereof. Such
financial statements have been prepared in accordance with GAAP. From the date
of such financial statements to the date of the execution of this Agreement,
there has not been any material adverse change from the financial condition
reflected in such financial statements or in Borrower's business or condition
since the date thereof. As of the date hereof, Borrower has no direct or
contingent material liabilities which are not provided for or reflected in such
financial statements.
Section 5.7 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or EDC as it may affect the Loan, Equipment or Railcar Lease
or the DSN Plant Loan or the Mixed Acid Plant Loan, nor to the knowledge of
Borrower is there any basis therefor on the date of this Agreement.
Section 5.8 Disclosure. No representation or warranty made by Borrower
----------
hereunder and no written information, exhibit, report, document or certificate
furnished by or on behalf of Borrower or any Affiliate to Lender in connection
with this Agreement, contained or will contain, as of its date or as of any
---
Funding Date, any material misstatement of fact or omits, as of its date, to
state a material fact or any fact necessary to make the statements contained
therein not misleading. There is no fact known to Borrower that materially
adversely affects or that, insofar as Borrower can now reasonably foresee, may
materially adversely affect, the condition, financial or otherwise, operations,
properties or prospects of Borrower and Affiliates, or the ability of Borrower
to carry out its Obligations under any Loan Document.
Section 5.9 Tax Returns and Payments. Borrower has filed all federal,
------------------------
state and local tax returns and other reports which it was required by law to
file on or prior to the date hereof and has paid all taxes, assessments, fees
and other governmental charges and penalties and interest, if any, payable
against it or its property, income or franchise, that are due and payable, and
Borrower does not have any knowledge of any actual or proposed deficiency or
additional assessment in connection therewith. The charges, accruals and
reserves on the books of Borrower in respect of federal, state and local taxes
for all open years, and for the current fiscal year, make adequate provision for
all unpaid tax liabilities for such periods.
Section 5.10 Compliance with Other Instruments. Neither Borrower nor EDC
---------------------------------
is in violation of any material term or provision of its certificate of
incorporation or by-laws, or of any material mortgage, indenture, contracts
agreement, instrument, or other undertaking to which Borrower or EDC is a party
or which purports to be binding on Borrower or EDC, or any of the assets of
Borrower
18
or EDC or, except as disclosed to Lender pursuant to Section 5.13 hereof, of any
judgment, decree, order or any material statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of this Agreement and
the other Loan Documents do not and will not violate or otherwise conflict with
any such term or provision or result in the creation of any security interest,
lien, charge or encumbrance upon any of the Collateral, except the Security
Interest.
Section 5.11 Pension Plans. Borrower has not participated in any
-------------
"prohibited transactions", as defined in Section 4975 of the Internal Revenue
Code, that could subject Borrower to any tax or penalty imposed by said Section
4975 (other than prohibited transactions that have been "corrected", as defined
in said Section 4975). Since the effective date of the Employee Retirement
Income Security Act of 1974, as from time to time amended ("ERISA"), Borrower
has not incurred any "accumulated funding deficiency", as such term is defined
in Section 302 of ERISA (other than any accumulated funding deficiency that has
been "corrected", as defined in Section 4971(c)(2) of the Internal Revenue Code.
Section 5.12 Labor Relations. To the best knowledge of Borrower after due
---------------
inquiry, Borrower and EDC are in material compliance with the Fair Labor
Standards Act. To the best knowledge of Borrower after due inquiry, neither
Borrower nor EDC is engaged in any unfair labor practice. To the best knowledge
of Borrower after due inquiry, there are: (i) no unfair labor practice
complaints pending or, to the bet knowledge of Borrower, threatened against
Borrower of EDC and no grievance or arbitration proceedings arising out of or
under collective bargaining agreements are so pending or, to the best knowledge
of Borrower, threatened; (ii) no strikes, work stoppages or controversies
pending or threatened between Borrower or EDC and any of their employees (other
than employee grievances arising in the ordinary course of business); and (iii)
no union representation questions exist with respect to the employees of
Borrower or EDC and no union organizing activities taking place which would have
a material adverse effect on the financial condition, results of operations or
business of Borrower or EDC;
Section 5.13 Environmental Laws. Except as disclosed by Borrower to
------------------
Lender ("Environmental Disclosure Documents"), to the best knowledge of Borrower
after due inquiry, as of the date hereof (a) the operations of Borrower or EDC
(with respect to the Mixed Acid Plan, the DSN Plan or the Equipment) comply in
all material respects with all applicable Environmental Laws; (b) none of the
operations of Borrower or EDC (with respect to the Mixed Acid Plant, the DSN
Plant or the Equipment) is subject to any judicial or administrative proceeding
alleging the violation of any Environmental Laws; (c) none of the operations of
Borrower or EDC (with respect to the Mixed Acid Plant, the DSN Plant or the
Equipment) is the subject of federal or state investigation
19
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Substance into the environment; (d) neither Borrower nor EDC (with
respect to the Mixed Acid Plant, the DSN Plant or the Equipment) has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a Hazardous Substance or reporting a spill or release of
a Hazardous Substance into the environment; and (e) neither Borrower nor EDC
(with respect to the Mixed Acid Plant, the DSN Plant or the Equipment) has any
known material contingent liability in connection with any release of any
Hazardous Substance into the environment. The materiality standard used in this
Section shall be exceeded if the facts giving rise to a breach or breaches of
the representations or warranties contained herein might result in liability in
excess of $250,000 in the aggregate.
Section 5.14 Trade Names. Other than as disclosed on the Disclosure
-----------
Schedule, Borrower, during the past five years, has not used any corporate name
other than its present corporate name (which is set forth in the introductory
paragraph of this Agreement) and has not been known by or used any fictitious,
trade or "doing business" name.
Section 5.15 Subsidiaries. The Disclosure Schedule contains a correct and
------------
complete list of the name and relationship to Borrower of each and all of
Borrower's Subsidiaries, if any, and the location of the chief executive office
of each Subsidiary.
Section 5.16 Loans and Affiliate Payments. The Disclosure Schedule fully
----------------------------
and completely sets forth all notes and Indebtedness together with the amount
and schedule of any material payments owed by Borrower to officers, directors,
stockholders and Affiliates of Borrower.
Section 5.17 Permits. Licenses. Borrower possesses all material permits,
-------
franchises, contracts and licenses required and owns or has the right to use all
trademarks, trade names, patents and fictitious name rights necessary to enable
it to conduct the business in which it is engaged without conflict with the
rights of others.
Section 5.18 Broker's or Transaction Fees. Borrower has no obligation to
----------------------------
any Person for any finder's, broker's or investment banker's fee in connection
with the transactions contemplated hereby.
Section 5.19 Taxpayer ID No. and Chief Executive Office. Borrower's
------------------------------------------
taxpayer identification number is ▇▇▇▇▇▇▇▇▇. Borrower's chief executive office
is located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and
Borrower's principal place of business is located in Oklahoma City.
20
Section 5.20 No Default. No Default has occurred under this Agreement.
----------
ARTICLE 6.
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, so long as all or any portion of the
Obligations remain unpaid or unsatisfied, it will, at its own cost and expense:
Section 6.1 Financial and Other Information. Promptly furnish to Lender
-------------------------------
or its agents all such financial or other information as Lender shall reasonably
request, and, at the request of Lender, notify its auditors and accountants that
Under is authorized to obtain such information directly from them. Without
limitation of the foregoing, Borrower will furnish to Lender in such detail as
Lender shall request:
(a) Not later than 120 days after the close of each Fiscal Year of
Borrower, unaudited balance sheets of Borrower as at the end of such Fiscal
Year and related unaudited statements of income, expense and retained
earnings and statements of cash flow of Borrower for such year, setting
forth in each case in comparative form figures for the previous Fiscal
Year, all in reasonable detail, fairly presenting in all material respects
the financial position of Borrower and the results of operations of
Borrower for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be accompanied by a certificate of the chief
financial officer or chief accounting officer of Borrower.
(b) Not later than 90 days after the close of each fiscal quarter of
Borrower, unaudited balance sheets of Borrower as at the end of such
period, and unaudited statements of income and expense from the beginning
of the Fiscal year to the end of each such period, for Borrower, all in
reasonable detail, fairly presenting in all material respects the financial
position and results of operations of Borrower, in each case, prepared in
accordance with GAAP and consistent with the audited financial statements
required pursuant to Section 6.1(e). Such statements shall be accompanied
by a certificate of the chief financial officer or accounting officer of
Borrower stating that, based upon such examination or investigation as such
officer shall have deemed necessary to enable him to render an informed
opinion in respect thereof, to the best of his knowledge and belief the
financial statements are materially correct and no Default exists under
this Agreement and is continuing except for those, if any, described in
such certificate in reasonable detail.
21
(c) Not later than 120 days after the close of each Fiscal Year of
EDC, audited consolidated and unaudited consolidating balance sheets of EDC
and its consolidated Subsidiaries as at the end of such Fiscal Year and
related audited consolidated and unaudited consolidating audited statements
of income, expense and retained earnings and statements of cash flow of EDC
and its consolidated Subsidiaries for such year, all in reasonable detail,
fairly presenting in all material respects the financial position of EDC
and its consolidated Subsidiaries and the results of operations of EDC and
its consolidated Subsidiaries for the Fiscal Year then ended, and prepared
in accordance with GAAP. Such statements required hereunder shall be
examined and accompanied by a report of independent certified public
accountants which shall not contain any qualifications or exceptions as to
scope.
(d) Not later than 90 days after the close of each fiscal quarter of
EDC, unaudited consolidated and consolidating balance sheets of EDC and its
consolidated Subsidiaries as at the end of such period, and consolidated
and consolidating statements of income and expense from the beginning of
the Fiscal Year to the end of each such period, for EDC and its
consolidated Subsidiaries, all in reasonable detail, fairly presenting in
all material respects the consolidated and consolidating financial position
and results of operations of EDC and its consolidated Subsidiaries, in each
case, prepared in accordance with GAAP and consistent with the audited
financial statements required pursuant to Section 6.1(c) above, and
------
certified to be materially correct by the chief financial officer or the
chief accounting officer of EDC.
(e) Not later than 120 days after the close of each Fiscal Year of
LSB, LSB's 10K Report filed with the Securities and Exchange Commission,
the audited consolidated and unaudited consolidating balance sheets of LSB
and its consolidated Affiliates as at the end of such Fiscal Year and
related audited consolidated and unaudited consolidating statements of
income, expense and retained earnings and audited statements of cash flow
of LSB and its consolidated Affiliates for such year, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the financial position of LSB and its
consolidated Affiliates and the results of operations of LSB and its
consolidated Affiliates for the Fiscal Year then ended, and prepared in
accordance with GAAP. Such statements required hereunder shall be examined
and accompanied by a report of independent certified public accountants
which shall not contain any qualifications as to scope; and such report
shall also be accompanied by a certificate of such accountants stating that
in the course of
22
performing their examination such accountants did not become aware of the
existence of any default under this Agreement, except for those, if any,
described in such certificate in reasonable detail. In addition, the chief
financial officer or accounting officer of LSB shall provide a certificate
which shall also include a statement by such officer that no breach,
default or event of default has occurred and is continuing under any
document to which LSB or any consolidated Affiliate is a party that
evidences any Indebtedness of LSB or any such Affiliate which exceeds,
individually or together with any related Indebtedness, $5,000,000, or if
any such breach, default or event of default has occurred, explaining the
nature of such breach, default or event of default and the status thereof.
Such certificate shall also include a statement from such officer that LSB
is in compliance with all covenants contained in this Agreement relating to
the financial condition of LSB, and such statement shall be accompanied by
the calculations of such financial covenants.
(f) Not later than 90 days after the close of each fiscal quarter of
▇▇▇, ▇▇▇'▇ ▇▇▇ Report filed with the Securities and Exchange Commission and
the unaudited consolidated balance sheets of LSB and its consolidated
Affiliates as at the end of such period, and unaudited consolidated
statements of income and expense from the beginning of the Fiscal year to
the end of each such period, for LSB and its consolidated Affiliates, all
in reasonable detail, fairly presenting in all material respects the
consolidated financial position and results of operations of LSB and
Affiliates, in each case, prepared in accordance with GAAP and consistent
with the audited financial statements required pursuant to Section 6.1(e)
------
above. Such statements shall be accompanied by a certificate of the chief
financial officer or the chief accounting officer of LSB stating that,
based upon such examination or investigation as such officer shall have
deemed necessary to enable him to render an informed opinion in respect
thereof, to the best of his knowledge and belief, such financial statements
are materially correct and no Default under this Agreement exists and is
continuing except for those, if any, described in such certificate in
reasonable detail. Such certificate shall also include a statement from
such officer that LSB is in compliance with all financial covenants
contained in this Agreement relating to the financial condition of LSB, and
such statement shall be accompanied by the actual calculations of such
financial covenants.
(g) Promptly after Borrower or any Affiliate receives the same,
copies of management letters provided to Borrower by its independent
certified public accountants;
23
(h) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Borrower, or LSB or EDC
sends to its shareholders or holders of its Indebtedness, and copies of any
and all periodic special reports, as well as registration statements, filed
by Borrower, LSB or EDC with the Securities and Exchange Commission or
similar State authority;
(i) Deliver to Lender within 30 days of the end of each quarter, a
compliance certificate signed by Borrower's Chief Financial Officer or the
Chief Accounting Officer certifying that Borrower is in compliance with all
of the terms and conditions of the Agreement and that no Default exists.
(j) Such additional information as Lender may from time to time
reasonably request regarding the financial and business affairs of Borrower
or any Subsidiary or Guarantor and which are kept in the ordinary course of
business.
Section 6.2 Access. At all reasonably times, and from time to time,
------
permit Lender or its agents to inspect the Collateral and to audit, examine and
make extracts from or copies of any of its books, ledgers, reports,
correspondence and other records.
Section 6.3 Taxes. Promptly pay and discharge all taxes, assessments and
-----
other governmental charges prior to the date on which same are past due,
establish adequate reserves for the payment of such taxes, assessments and other
governmental charges, make all required withholding and other tax deposits, and,
upon request, provide Lender with receipts or other proof that any or all of
such taxes, assessments or governmental charges have been paid in a timely
fashion; provided, however, that nothing contained herein shall require the
payment of any tax, assessment or other governmental charge so long as its
validity is being contested in good faith and by appropriate proceedings
diligently conducted.
Section 6.4 Maintenance of Properties: Insurance.
------------------------------------
(a) Borrower shall, at Borrower's sole cost and expense, defend all
Collateral against the claims or demands of all other parties; keep the
Collateral in good operating condition and repair and in compliance with
all laws (except normal wear and tear); and Borrower and EDC shall insure
all Equipment, including insurance relating to the leasing of the Units, in
coverage, form and amount satisfactory to Lender with a carrier reasonably
acceptable at all times to Lender with no greater deductible amount than
$250,000 per occurrence. Insurance on the Equipment shall be in an amount
equal to the greater of the full replacement value of each Unit thereof, or
100% of the outstanding balance of the Loan. Borrower and EDC shall also
maintain (i) all risk insurance covering 100% of the replacement cost of
each Unit of the Equipment in the
24
event of fire, lightning, windstorm, earthquake, vandalism, malicious
mischief and all other risks normally covered by "all risk" policies; (ii)
product liability insurance in an amount customary for the businesses
conducted by Borrower and EDC; and (iii) general public liability insurance
in an amount satisfactory to Lender, but in no event less than Fifteen
Million Dollars ($15,000,000) per occurrence, for bodily injury and
property damage. Borrower and EDC shall also maintain workers' compensation
insurance in accordance with Borrower's and EDC's usual practices. Each
insurance policy shall be endorsed in favor of Lender as additional loss
payee in form and substance satisfactory to under, and provide that any
proceeds payable thereunder will be paid to Borrower and Lender as their
interest may appear. Each policy shall provide that if such insurance is
cancelled for any reason whatsoever, or if any substantial change is made
in the coverage which affects Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to Lender until 30 days after receipt by Lender of
written notice from the carrier thereof. Borrower hereby directs all
insurers under such policies to pay all proceeds with respect to losses of
Collateral to Lender. With respect to occurrences giving rise to insurance
proceeds paid with respect to losses, Lender shall, so long as no uncured
Default exists, release such proceeds to Borrower after receipt of evidence
of satisfactory repair, replacement or reconstruction of the assets subject
to such casualty. All such insurance policies shall provide that they are
primary, without any right of contribution from any other insurance carried
by he Lender; that such insurers waive any rights of set-off, recoupment,
counterclaims, deduction or subrogation against under; and that all losses
are payable notwithstanding any act or negligence of Borrower or any other
Person, any breach of violation by Borrower or any other Person of any
warranty, declaration, condition or other provision contained in any such
policy or any foreclosure, notice of sale or other proceeding in respect of
the Units, or any change in title to or ownership of any of the Units.
(b) On each policy anniversary, Borrower shall furnish Lender with a
certification of all insurance required by this Section 6.4. Such
---
certification shall be in the form of Exhibit "D" hereto and shall identify
---
the insurers, underwriters, the type of insurance, the insurance limits and
the policy term, and shall specifically list the special provisions
enumerated for such insurance required by this Section 6.4.
---
Upon request, Borrower will furnish Lender with copies of all
insurance policies, binders, cover notes and other evidence of such
insurance.
25
(c) Borrower shall at its sole expense, and shall cause EDC, to (i)
keep and maintain the Units in good repair and operating condition in
conformance with the manufacturer's recommended normal maintenance
practices; the Interchange Rules of the Association of American Railroads
("AAR"); the Federal Railroad Administration safety requirements, and any
other manufacturer or governmental recommendations, guidelines or
regulations, as the same may be amended from time to time.
Section 6.5 Business. Take all necessary steps to preserve its corporate
--------
existence and its right to conduct business in all state in which the nature of
its business or the ownership of it property requires such qualification.
Section 6.6 Compliance. Use reasonable efforts to comply in all material
----------
respects with all applicable laws and duly observe all valid requirements of all
applicable governmental authorities, including all statutes, rules and
regulations relating to public and employee health and safety and social
security and withholding taxes. Borrower may contest or dispute any taxes,
assessments or impositions in good faith, so long as such contest or dispute
does not result in the creation or incurring of any liens against Lender's
Collateral and Borrower maintains adequate reserves as required under GAAP for
the satisfaction of the disputed tax, assessment or imposition.
Section 6.7 Litigation. Except as disclosed in the Environmental
----------
Disclosure Documents referred to in Section 5.13, promptly notify Lender in
----
writing of any action, suit, proceeding, or counterclaim against, or of any
investigation of, Borrower or any of the Collateral, if. (i) the outcome of such
litigation, proceeding, counterclaim, or investigation would materially and
adversely affect the Collateral or the finances or operations of Borrower or
EDC; or (ii) such litigation, proceeding, counterclaim, or investigation
questions the validity of this Agreement or any other Loan Document or any
action taken or to be taken pursuant thereto.- Borrower shall furnish to Lender
such information regarding any such litigation, proceeding, counterclaim, or
investigation as Lender shall. request.
Section 6.8 Environmental Laws.
------------------
(a) Except as disclosed in the Environmental Disclosure Documents
referred to in Section 5.13, give written notice to Lender immediately upon
----
receipt of any notice that (i) the operations of Borrower or EDC with
respect to the Equipment are not in material compliance with requirements
of applicable Environmental Laws; (ii) Borrower or EDC with respect to the
Equipment is subject to federal or state investigation evaluating whether
any remedial action is needed to respond to the release of any Hazardous
Substance into the environment
26
which would have a material adverse effect on Borrower; or (iii) any
properties or assets of Borrower or EDC with respect to the Equipment are
subject to an Environmental Lien. As used herein, "Environmental Lien"
means a lien in favor of any governmental entity for (A) any liability
under any Environmental Laws, or (B) damages arising from or costs incurred
by such governmental entity in response to a release of a Hazardous
Substance into the environment.
(b) Except as disclosed in the Environmental Disclosure Documents
referred to in Section 5.13, without limiting the generality of any of
----
Borrower's other covenants and agreements, the operations of Borrower or
EDC with respect to the Equipment shall at all times comply in all material
respects with all applicable Environmental Laws. The materiality standard
used in this Section 6.8, shall be exceeded if the facts giving rise to a
---
breach or breaches of the covenant herein is likely to result in liability
in excess of $125,000 in the aggregate.
Section 6.9 Notices. Promptly notify Lender in writing of any Default or
-------
of any default by any party under Railcar Lease, the Consulting Agreement, or as
required by Sections 6.7 and 6.8 of this Agreement. The failure of Borrower to
--- ---
promptly give Lender such notice of any Default of which it is aware, shall, at
Lender's option, eliminate any cure period for such Default.
Section 6.10 Tangible Net Worth. LSB shall maintain at all times, on a
------------------
consolidated basis, a minimum tangible net worth of $80,000,000 after
subtracting treasury stock and $91,421,000 before subtracting treasury stock
from the date hereof to December 31, 1995 and $92,800,000 at all times
thereafter. Notwithstanding the foregoing, the tangible net worth after
subtracting treasury stock shall not be less than $83,000,000 at December 31,
1995 and $85,000,000 at December 31, 1996 and thereafter. The term tangible net
worth is defined as total stockholders' equity, after deducting any treasury
stock, less all assets that are considered intangible assets under GAAP
----
(including but not limited to goodwill, patents, trademarks, certain deferred
charges (as approved by Lender) and customer lists).
Section 6.11 Change of Ownership. LSB shall at all times hold not less
-------------------
than one hundred percent (100%) of each class of stock of LSBC and, at all
times, LSBC shall hold, directly or indirectly, one hundred percent (100%) of
each class of stock of Borrower.
Section 6.12 Use of Proceeds. Use the proceeds of the Loan for Equipment
---------------
costs, fees and expenses in accordance with Article 2 hereof.
27
Section 6.13 Books. Keep proper books of record and account in which
-----
full, true and correct entries in accordance with GAAP will be made of all
dealings or transactions in relation to its business and activities.
ARTICLE 7.
----------
NEGATIVE COVENANTS
------------------
So long as all or any portion of the Obligations remains unpaid, Borrower
covenants and agrees that, without Lender's prior written consent, which consent
will not be unreasonably withheld, Borrower shall not:
Section 7.1 Corporate Structure. Merge, reorganize or consolidate with
-------------------
or acquire any Person or make any investment in the securities of any Person.
Section 7.2 Dividends, Distributions, Redemptions. Declare or pay any
-------------------------------------
dividends or other distributions upon any stock or make any distribution of
Borrower's property or assets or redeem, retire, purchase or otherwise acquire,
directly or indirectly, Borrower's stock.
Section 7.3 Loans, Investments, Affiliate Payments, Salaries. Make any
------------------------------------------------
loans or other advances of money (other than compensation) to any Person; make
any payments to any officers, directors, stockholders or Affiliates on any
existing loans except as set forth on the Disclosure Schedule or pursuant to the
Administrative Services Agreement between Borrower and LSB, or payments to LSB
for Borrower's pro rata share of taxes with respect to Borrower's business, or
permit the annual compensation and all other direct and indirect remuneration to
its officers to increase more than fifteen percent (15%) per year.
Section 7.4 Change in Business, Structure or Business Location. Make any
--------------------------------------------------
material change in the capital structure or any of Borrower's business
objectives, purposes and operations; engage, directly or indirectly, in any
business other than ownership of the Mixed Acid Plant, the Equipment acquired
with the Loan, the DSN Plant financed by the DSN Plant Loan, and all items
related thereto; or change the location of its chief executive office without
thirty days' prior written notice to Lender.
Section 7.5 Guaranties. Borrower shall not guaranty or otherwise, in any
----------
way, become liable with respect to the Indebtedness or liabilities of any
Person.
Section 7.6 Sale of Property. Offer to sell, convey, assign, transfer,
----------------
exchange, lease (except pursuant to the Railcar Lease, or to the extent
permitted in the Mixed Acid Plant Loan Documents or the DSN Plant Loan Documents
or the Rail Car Loan Documents) or otherwise dispose of any Collateral, or, on
an annual
28
basis, any other real or personal property having a value in excess of $25,000,
except sales of supplies, equipment and inventory in the ordinary course of
Borrower's business and trade-ins on new purchases, provided that Lender shall
have a first priority perfected lien on any new purchases of property.
Section 7.7 Prepayment. Borrower shall not prepay any Indebtedness,
----------
except the Obligations in accordance with this Agreement.
Section 7.8 Liens. Create, incur, assume or suffer to exist any Lien
-----
upon any Collateral except Liens in favor of Lender and Permitted Liens and the
Railcar Lease and the Consulting Agreement.
Section 7.9 Pension Plans. To the knowledge of Borrower, with respect to
-------------
all Pension Plans: (a) incur any liability to the Pension Benefit Guaranty
Corporation; (b) participate in any prohibited transaction involving any of such
plans or any trust created thereunder which would subject Borrower to a tax or
penalty on prohibited transactions imposed under Code Section 4975 or ERISA; (c)
fail to make any contribution which it is obligated to pay under the terms of
such plan; (d) allow or suffer to exist any occurrence of a Reportable Event, or
any other event or condition which presents a risk of termination by the Pension
Benefit Guaranty Corporation of any such plan; or (e) incur any withdrawal
liability with respect to any multiemployer Pension Plan which is not fully
bonded.
Section 7.10 Borrower's Name. Change Borrower's corporate name or use any
---------------
trade name or style unless Borrower shall first give Lender thirty days prior
written notice of the change in question.
Section 7.11 Changes to Railcar Documents. Make any alterations,
----------------------------
amendments or modifications of any provisions of (a) the Railcar Lease, (b) the
Consulting Agreement or (c) the Administrative Services Agreement dated
September 19, 1994 between LSB and Borrower.
Section 7.12 Other Debts. Except for Permitted liens, Borrower shall not
-----------
have outstanding or incur any direct or contingent Indebtedness (other than
those to Lender) or lease obligations or to become liable for the Indebtedness
of others without Lender's written consent. This does not prohibit (subject to
other restrictions herein):
(a) Acquiring goods, supplies, services or merchandise on normal
trade credit, or payroll obligations or obligations under the
Administrative Services Agreement between LSB and Borrower;
29
(b) Endorsing negotiable instruments received in the usual course of
business;
(c) Debts, lines of credit and leases in existence on the date of
this Agreement and disclosed to Lender on the Disclosure Schedule; or
(d) Taxes and lawsuits.
Section 7.13 Transactions with Affiliates. Not to enter transactions with
----------------------------
any Affiliate on terms less favorable than those available to Borrower from
persons or entitles not affiliated with Borrower except:
(a) taxes on consolidated tax returns;
(b) the Railcar Lease;
(c) the Consulting Agreement; and
(d) the Administrative Services Agreement.
None of the agreements in this Section 7.13(b) through (d) may be amended
or modified with Lender's prior written consent.
ARTICLE 8.
----------
DEFAULT
-------
Section 8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events for any reason whatsoever shall constitute an Event of Default:
(a) Any failure to pay any of the Obligations when due;
(b) Any representation or warranty made by Borrower in any Loan
Document or in any Financial Statement or other certificate furnished by
Borrower or any Affiliate at any time to Lender shall prove to be untrue in
any material respect as of the date on which made;
(c) Except with respect to cure periods as otherwise set forth herein
or therein, default shall occur in the observance or performance of any of
the other covenants and agreements contained in any Loan Document and
Borrower has not cured such default within ten (10) days of Borrower's
receipt of written notice identifying such failure, or if any such
agreement, instrument or document shall terminate or become void or
unenforceable without the written consent of Lender and Borrower refuses to
execute valid and enforceable substitute documents;
30
(d) Any Event of Default under the DSN Plant Loan Documents, the
Mixed Acid Plant Loan Documents and Borrower has not cured such Event of
Default within any cure period provided therein;
(e) Any default by Borrower under any material agreement or
instrument with any third party (other than an agreement or instrument
evidencing the lending of money) if such default continues for thirty (30)
days after such breach first occurs;
(f) Any default by Borrower in any payment on any indebtedness or
obligation owed to any trade creditor in excess of $100,000 in the
aggregate beyond any period of grace provided with respect thereto and
Borrower is not contesting same in good faith and diligently;
(g) Any uncured default beyond any applicable grace period by LSB or
any of its Subsidiaries under any agreement or instrument evidencing any
loan, extension of credit or other Indebtedness of LSB or any of its
Subsidiaries in an amount equal to or greater than $5,000,000;
(h) Any material part of the Collateral shall be nationalized,
expropriated, condemned, seized or otherwise appropriated, or custody or
control of such Collateral or of Borrower shall be assumed by any public
authority or any court of competent jurisdiction at the instance of any
public authority;
(i) One or more judgments for the payment of money aggregating an
excess of $1,000,000 (if not adequately covered by insurance) shall be
rendered against Borrower or EDC and there is a failure to pay or to bond
and stay enforcement of such judgment and commence appropriate proceedings
to appeal such judgment within the applicable appeal period or, after such
appeal is filed, Borrower or EDC fails to diligently prosecute such appeal
or such appeal is denied;
(j) Borrower, EDC or any Guarantor shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization,
arrangement or for any other relief under the Federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action or proceeding; (ii) apply for or acquiesce in
the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or a substantial
part of its property; (iii) make an assignment for the benefit of
creditors; or (iv) admit in writing that is unable generally to pay its
debts as they become due;
31
(k) An involuntary petition shall be filed or an action or proceeding
otherwise commenced seeking reorganization, arrangement or readjustment of
Borrower's EDC's or any Guarantor's debt or for any other relief under the
Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing; or a
receiver, assignee, liquidator, sequestrator, custodian, trustee or similar
officer for Borrower or EDC or any Affiliate or any Guarantor or for all or
a substantial part of their property shall be appointed involuntarily; or a
warrant of attachment, execution or similar process shall be issued against
any substantial part of the property of Borrower, EDC or any Guarantor; and
any of the foregoing remain undismissed or undischarged for a period of 60
days;
(l) Borrower, EDC or any Guarantor shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof without Lender's prior written
consent;
(m) The Security Interest shall cease to be a valid and perfected
first priority security interest in any material portion of the Collateral
then in existence and Borrower refuses to or cannot promptly cure any
deficiency and restore Lender's valid and first perfected priority security
interest;
(n) A material default or termination shall occur in the Consulting
Agreement or the Railcar Lease; or
(o) any Guarantor revokes or terminates any guaranty relating to the
Obligations or defaults under the terms of any such guaranty.
Section 8.2 Rights Upon Default. Upon the occurrence and during the
-------------------
continuance of any Event of Default:
(a) Lender may declare all the Obligations not otherwise due to be
forthwith due and payable, (provided that, in the case of the occurrence of
any Event of Default described in Sections 8.1(j) or (k), all the
------ ---
Obligations shall forthwith become due and payable without such
declaration) whereupon the unpaid amount of the Obligations (including any
applicable prepayment fee) shall become immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
(b) Notwithstanding the foregoing in Section 8.2(a) but subject to
the provisions of Section 9.10, the effect of an event described in Section
8.1(a) as an occurrence of an Event of Default shall be after Lender gives
notice of such payment
32
Default to Borrower and Borrower shall not have paid such amount within
three (3) days of such Notice. The effect as an Event of Default of any
other event described in Section 8.1 may be waived by Lender in writing.
(c) In addition to all other rights provided herein or at law, Lender
shall have all of the rights and remedies of a secured party under the UCC
and all of the rights and remedies granted under each of the Loan
Documents. At any time when an Event of Default has occurred and is
continuing, Lender may enter any premises where the Collateral is located,
take physical possession of the Collateral or any part thereof, and
maintain such possession on Borrower' premises or remove any or all of the
Collateral to such other place or places as Lender desires in its sole
discretion. If Lender exercises its right to take possession of any
Collateral upon the occurrence and during the continuance of any Event of
Default, Borrower, upon Lender's demand, will assemble the Collateral and
at Lender's option, make it available to Lender at Borrower' premises at
which it is located or deliver it to such place or places as Lender
directs. Borrower hereby waives to the full extent permitted by law all
rights to notice and hearing prior to Lender's exercise of its rights to
take possession of the Collateral without judicial process or to replevy,
claim and deliver, attach or levy upon the Collateral ex parte. Lender
-- -----
shall not be under any obligation to ▇▇▇▇▇▇▇▇ any assets in favor of
Borrower or any other party or against or in payment of any or all of the
Obligations.
(d) Lender may sell, lease or otherwise dispose of and deliver any or
all of the Collateral at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as Lender, in its sole
discretion, deems advisable, all in accordance with the applicable
provisions of the UCC including the standard of commercial reasonableness.
(e) The requirement of reasonable notice with respect to a
disposition of the Collateral shall be met if such notice is mailed both by
regular and certified mail, postage prepaid to Borrower at the address as
set forth herein at least ten days before the time of the event of which
notice is being given. Subject to the provisions of any applicable Loan
Document or law governing the enforcement of liens or security interests,
Lender may be the purchaser at any public sale, and to the extent permitted
by applicable law, at any private sale, free from any right of redemption,
which Borrower also waives.
(f) The Proceeds of any sale of any of the Collateral shall be
applied first to all costs and expenses of sale, including attorneys' fees,
and second to the payment (in whatever order Lender elects) of all of the
Obligations. Lender will return any excess Proceeds to Borrower, subject to
33
the claims of any other parties with an interest in the Collateral or the
Proceeds, and Borrower shall remain liable to Under for any deficiency. If
any Collateral is sold or leased by Lender upon credit or for future
payment or delivery, Lender shall not be liable for the failure of the
purchaser to pay for such Collateral, and in such event Lender may resell
or re-lease the same.
(g) Lender may exercise any other right or remedy it may have at law
or in equity with respect to the Obligations or the subject matter of this
Agreement. The rights and remedies provided for herein are cumulative and
not exclusive of any other of such rights and remedies or any other rights
or remedies provided by law.
ARTICLE 9.
----------
MISCELLANEOUS
-------------
Section 9.1 Survival. All agreements, representations and warranties
--------
contained in this Agreement or made in writing by or on behalf of Borrower in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement, notwithstanding any investigation at any time
made by Lender.
Section 9.2 Waiver of Notices. No notice to or demand on Borrower which
-----------------
Lender is not required hereunder or by law to give but nevertheless may elect to
give shall entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances.
Section 9.3 Assignment. The provisions of this Agreement shall be
----------
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto; provided, however, that no interest herein may be
assigned by Borrower without the prior written consent of Lender. The rights and
benefits of Lender hereunder shall, if Lender so agrees, inure to any party
acquiring any interest in the Obligations or any part thereof. In the event of
any such assignment by Lender, Borrower agrees that such assignment by Lender
shall be free from any set-off, counterclaim defense or other claim that any
such Borrower may have against such assignee, without waiving any claim such
Borrower may have against Lender. The terms "Lender" and "Borrower" as used
herein shall include the respective successors and assigns of such parties.
Section 9.4 Complete Agreement Modification. This Agreement is intended
-------------------------------
by Borrower and Lender to be the final, complete and exclusive expression of the
agreement between them and supersedes all prior agreements and understandings
regarding the Loan. No modification, rescission, waiver, release or amendment of
any provision of this Agreement shall be made, except by a written agreement
signed by Borrower and a duly authorized officer of Lender.
34
Section 9.5 Applicable Law. This Agreement and the Loan Documents
--------------
(except to the extent, if any, expressly provided to the contrary in any Loan
Document) shall be governed by, construed, applied and enforced in accordance
with the laws of the State of New York.
Section 9.6 Indemnification.
---------------
(a) If after receipt of any payment of all or any part of the
Obligations, Lender is for any reason compelled to surrender such payment
to any person or entity, because such payment is determined to be void or
voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, Borrower's Obligations under the Notes
shall continue in full force and Borrower shall indemnify and hold Lender
harmless for, the amount of such payment surrendered. The provisions of
this Section shall be and remain effective notwithstanding any contrary
action which may have been taken by Lender in reliance upon such payment,
and any such contrary action so taken shall be without prejudice to
Lender's rights under this Section and shall be deemed to have been
conditioned upon such payment having become final and irrevocable. The
provisions of this Section shall survive the termination of this Agreement.
(b) Borrower hereby indemnifies and holds Lender, and its directors,
officers, agents, employees and counsel, harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind (except claims brought by Borrower against Lender for
breach of this Agreement of the Loan Documents) including without
limitation, court costs and attorneys' fees imposed on or incurred by or
asserted against any of them, whether direct, indirect or consequential
arising out of or by reason of any litigation, investigations, claims, or
proceedings whether based on any federal, state or local laws or other
statutes or regulations commenced or threatened, which arise out of or are
in any way based upon the negotiation, preparation, execution, delivery,
enforcement, performance or administration of this Agreement or any other
Loan Document, or any undertaking or proceeding relating to any of the
transactions contemplated hereby or by any act, omission to act, event or
transaction related or attended thereto, except this indemnification shall
not apply to any losses, liabilities, damages, injuries, costs, expenses
and claims caused by the gross negligence or willful misconduct of Lender.
(c) Borrower hereby indemnifies Lender and agrees to hold Lender
harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation,
35
court costs and attorneys' fees) which at any time or from time to time may
be paid, incurred or suffered by, or asserted against Lender for, with
respect to, or as a direct result of the violation by Borrower of the
Environmental Laws or any laws or regulations relating to Hazardous
Substance, treatment, storage, disposal, generation and transportation,
air, water and noise pollution, soil or ground or water contamination, the
handling, storage or release into the environment of Hazardous Substance,
or with respect to, or as a direct or indirect result of the presence on or
under, or the escape, seepage, leakage, spillage, discharge, emission or
release from, properties utilized by Borrower or EDC in the conduct of
their respective business into or upon any land, the atmosphere, or any
watercourse, body of water or wetland, of any Hazardous Substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental
Laws).
(d) Without limiting any of the foregoing, if, by reason of any suit
or proceeding of any kind, nature or description against Borrower, which,
in Lender's sole discretion makes it advisable for Lender to seek counsel
for protection and preservation of its Lens, security or assets or to
defend its own interest, such reasonable expenses and counsel fees shall be
allowed to Lender. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement. All of the foregoing
costs and expenses shall be part of the Obligations and secured by the
Collateral.
Section 9.7 Stamp or other Tax. Should any stamp, excise, sales, use or
------------------
other tax, including mortgage, conveyance, deed, intangible or recording taxes
become payable in respect of this Agreement, or any other Loan Document, any
Obligations, or any Collateral, or any modification hereof or thereof, Borrower
shall pay the same (including interest and penalties, if any) and shall hold
Lender harmless with respect thereto, except for income taxes of Lender as a
result thereof.
Section 9.8 Captions. The captions of the various sections of this
--------
Agreement have been inserted only for purposes of convenience; such captions are
not a part of this Agreement and shall not be deemed in any manner to modify,
explain, enlarge or restrict any provision hereof.
Section 9.9 Notices. All notices or other communications which are
-------
required or permitted hereunder to be given to any party shall be in writing and
shall be deemed sufficiently delivered if delivered personally or by registered
or certified mail, return receipt requested, or by nationally recognized
overnight delivery service, to the address set forth below or to such other
address as each party may designate for itself by like notice. Such notice or
communication shall be deemed to have been given on the date
36
delivered; or if refused, on the date refused; or if marked, on the date of
actual receipt of such mailing as evidenced by the return receipt.
If to Lender: The CIT Group/Equipment Financing, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Senior Vice President, Credit
If to Borrower: DSN Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Any such notice, demand, or request shall be deemed given upon receipt, refusal
of delivery or return for failure to be called for.
Section 9.10 No Waiver, Lender Performance. No course of dealing between
-----------------------------
Borrower and Lender and no delay or omission by Lender in exercising any right
or remedy hereunder or under any other Loan Document or with respect to any
Obligations shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. All rights and
remedies of Lender hereunder or under any other Loan Document shall be
cumulative. Upon the failure of Borrower to perform any of its duties under this
Agreement Lender may, but shall not be obligated to, perform any or all such
duties and Borrower will upon demand reimburse Lender for all reasonable costs,
fees and expenses incurred in connection therewith.
Section 9.11 Evidence of Obligations; Admissibility of Lender's Books and
------------------------------------------------------------
Records. Borrower agrees that Lender's books and records showing the Obligations
-------
shall be admissible in any action or proceeding arising herefrom.
Section 9.12 No Liability for Brokers. Borrower covenant and agree that
------------------------
Lender shall have no liability for, and Borrower hereby indemnifies and holds
Lender harmless against, any brokerage fee or finder's fee or other commission,
or claim therefor, arising in connection with the transactions contemplated by
this Agreement.
Section 9.13 Further Assurances. Borrower shall, at its expense, do,
------------------
execute and delivery such further acts and documents as Lender from time to time
reasonably requires for the assuring and confirming to Lender of the rights
created or intended to be created hereunder, or for carrying out the intention
or facilitating the performance of the terms of any Loan Document or for
assuring the validity, perfection, priority or enforceability of any Lien under
any Loan Document.
37
Section 9.14 Counterparts. This Agreement and the other Loan Documents
------------
may be executed by the parties hereto and thereto in any number of separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 9.15 Notice of Breach by Lender. Borrower agrees to give Lender
--------------------------
notice of any action or inaction by Lender or any agent or attorney of Lender in
connection with this agreement, any other Loan Document, or the Obligations of
Borrower under this Agreement or any other Loan Document that may be actionable
against Lender or any agent or attorney of Lender or a defense to payment of any
Obligations of Borrower under this Agreement or any other Loan Document, for any
reason, including commission of a tort or violation of any contractual duty or
duty implied by law. Borrower agrees, to the fullest extent that it may lawfully
do so, that unless such notice is given promptly (and in any event within
fifteen (15) days after Borrower has knowledge, or with the exercise of
reasonable diligence could have had knowledge, of any such action or inaction),
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom to the extent that Lender could have
mitigated such claim or defense after receipt of such notice.
Section 9.16 Time. Time is of the essence.
----
Section 9.17 Exhibits. Exhibits and "D" attached hereto are incorporated
--------
herein by this reference.
Section 9.18 Authorization to Date, Complete Blanks and Correct Errors.
---------------------------------------------------------
Borrower hereby irrevocably authorizes Lender and Lender's agents,
representatives and employees to date, complete any blank spaces contained in,
and to correct any errors appearing in, this Agreement, the other Loan Documents
or in any other document relating hereto or thereto.
Section 9.19 No Oral Agreements; Entire Agreement. ORAL AGREEMENTS OR
------------------------------------
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, WHICH AGREEMENT AND OTHER LOAN
DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN
BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO
MODIFY THEM. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER
HEREOF. THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT WAS DRAFTED WITH THE JOINT
PARTICIPATION OF THE RESPECTIVE PARTIES
38
THERETO AND SHALL BE CONSTRUED NEITHER AGAINST NOR IN FAVOR OF ANY PARTY, BUT
RATHER IN ACCORDANCE WITH THE FAIR MEANING THEREOF.
Section 9.20 Venue and Jurisdiction. THIS AGREEMENT AND ANY OTHER LOAN
----------------------
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK BORROWER HEREBY IRREVOCABLY
CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
IN ANY WAY IN CONNECTION WITH THIS AGREEMENT MAY BE INSTITUTED OR BROUGHT IN ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF NEW YORK OR THE UNITED STATES
DISTRICT COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER MAY ELECT, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS
AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL
PROCEEDINGS IN SUCH COURTS. BORROWER IRREVOCABLE CONSENTS TO SERVICE OF ANY
SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED STATES AIR MAIL,
POSTAGE PREPAID, TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 9.9 HEREOF,
SUCH METHOD OF SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE
SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING. NOTHING IN THIS
AGREEMENT SHALL AFFECT THE RIGHT TO SERVICE OF PROCESS OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF LENDER TO BRING ACTIONS, SUITS OR
PROCEEDINGS IN THE COURTS OF ANY OTHER JURISDICTION. BORROWER FURTHER AGREES
THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL ACTION, SUIT OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, WITHIN OR
OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR
EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF LIABILITY.
Section 9.21 Waiver of Trial by Jury. THE PARTIES TO THIS AGREEMENT
-----------------------
ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT
OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS AGREEMENT AGREE AND STIPULATE
THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH
TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED
PROVISION OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
39
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"Borrower" "Lender"
DSN CORPORATION, an Oklahoma THE CIT GROUP/EQUIPMENT
corporation FINANCING, INC., a New York
corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By____________________________
------------------------ ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ V.P.
---------------------------
[Printed Name & Title] [Printed Name & Title]
Agreed as to Article 6:
LSB INDUSTRIES, INC.,
a Delaware corporation
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
[Printed Name & Title]
40
EXHIBIT "A"
-----------
Disclosure Schedule
-------------------
41
EXHIBIT "B"
-----------
Model/Mfgr. Description Serial Number Cost
---------- ----------- ------------- ----
42
EXHIBIT "C"
-----------
Promissory Note
---------------
43
EXHIBIT "D"
-----------
Certificate Insurance
---------------------
44
Rider 2.11
----------
Payment Funding Instructions
----------------------------
45