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EXHIBIT 10.62
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
BANK OF AMERICA, N.A.
AS LENDER
AND
SUMMIT MACHINE TOOL MANUFACTURING CORP.,
AS BORROWER
DATED: APRIL 16, 2001
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TABLE OF CONTENTS
SECTION
Table of Contents.......................................................................................-i-
Preamble.................................................................................................1
1. DEFINITIONS..............................................................................................2
1.1 As used herein:.................................................................................2
Account.........................................................................................2
Account Debtor..................................................................................2
Affiliate.......................................................................................2
Applicable Interest Rate........................................................................2
Applicable Margin...............................................................................2
Acquisition.....................................................................................3
Availability....................................................................................3
Availability Reductions.........................................................................3
Bank............................................................................................4
Bank Products...................................................................................4
Business Day....................................................................................4
Capital Expenditures............................................................................4
Capital Lease...................................................................................4
Closing Date....................................................................................4
Code............................................................................................4
Collateral......................................................................................4
Debt............................................................................................4
Distribution....................................................................................4
Dollars.........................................................................................4
Eligible Accounts...............................................................................5
Eligible Inventory..............................................................................7
Environmental Compliance Reserve................................................................8
Environmental Laws..............................................................................8
Equipment.......................................................................................8
ERISA...........................................................................................8
Event...........................................................................................8
Event of Default................................................................................8
Financial Statements............................................................................8
Fiscal Quarter..................................................................................9
Fiscal Year.....................................................................................9
GAAP............................................................................................9
Guaranty........................................................................................9
Intercompany Accounts...........................................................................9
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Inventory.......................................................................................9
IRS.............................................................................................9
Latest Forecasts................................................................................9
Letter of Credit................................................................................9
Letter of Credit Agreement......................................................................9
Letter of Credit Fee............................................................................9
Lien...........................................................................................10
Loans..........................................................................................10
Loan Documents.................................................................................10
LSB............................................................................................10
Maximum Revolving Credit Line..................................................................10
Mortgage.......................................................................................10
Multi-employer Plan............................................................................10
Obligations....................................................................................10
Participating Lender...........................................................................11
Patent and Trademark Assignments...............................................................11
Payment Account................................................................................11
PBGC...........................................................................................11
Pension Plan...................................................................................11
Permitted Debt.................................................................................11
Permitted Liens................................................................................11
Person.........................................................................................12
Plan...........................................................................................12
Proceeds.......................................................................................12
Property.......................................................................................12
Proprietary Rights.............................................................................12
Public Authority...............................................................................13
Real Property..................................................................................13
Receivables....................................................................................13
Reference Rate.................................................................................13
Related Company................................................................................13
Reportable Event...............................................................................13
Restricted Investment..........................................................................14
Reversions.....................................................................................14
Revolving Loans................................................................................14
Security Interest..............................................................................14
Subordinated Debt..............................................................................14
Subsidiary.....................................................................................14
Termination Event..............................................................................14
UCC............................................................................................15
1.2 Accounting Terms...............................................................................15
1.3 Other Terms....................................................................................15
1.4 Exhibits.......................................................................................15
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2. LOANS AND LETTERS OF CREDIT.............................................................................15
2.1 Revolving Loans................................................................................15
2.2 Availability Determination.....................................................................16
2.3 Letters of Credit..............................................................................16
2.4 Bank Products..................................................................................16
3. INTEREST AND OTHER CHARGES..............................................................................17
3.1 Interest.......................................................................................17
3.2 Maximum Interest Rate..........................................................................17
3.3 Capital Adequacy...............................................................................18
4. PAYMENTS AND PREPAYMENTS................................................................................19
4.1 Revolving Loans................................................................................19
4.2 Place and Form of Payments: Extension of Time..................................................19
4.3 Apportionment, Application and Reversal of Payments............................................19
4.4 INDEMNITY FOR RETURNED PAYMENTS................................................................19
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS.........................................................20
6. COLLATERAL..............................................................................................20
6.1 Grant of Security Interest.....................................................................20
6.2 Perfection and Protection of Security Interest.................................................21
6.3 Location of Collateral.........................................................................22
6.4 Title to, Liens on, and Sale and Use of Collateral.............................................22
6.5 Appraisals.....................................................................................22
6.6 Access and Examination.........................................................................22
6.7 Insurance......................................................................................23
6.8 Collateral Reporting...........................................................................23
6.9 Accounts.......................................................................................24
6.10 Collection of Accounts.........................................................................25
6.11 Inventory......................................................................................25
6.12 Documents and Instruments......................................................................26
6.13 Right to Cure..................................................................................26
6.14 Power of Attorney..............................................................................26
6.15 Lender's Rights, Duties, and Liabilities.......................................................26
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.......................................................27
7.1 Books and Records..............................................................................27
7.2 Financial Information..........................................................................27
7.3 Notices to Lender..............................................................................29
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8. GENERAL WARRANTIES AND REPRESENTATIONS..................................................................30
8.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents...........30
8.2 Validity and Priority of Security Interest.....................................................31
8.3 Organization and Qualification.................................................................31
8.4 Corporate Name; Prior Transactions.............................................................31
8.5 Financial Statements and Projections...........................................................31
8.6 Capitalization.................................................................................31
8.7 Solvency.......................................................................................32
8.8 Title to Property..............................................................................32
8.9 Real Property; Leases..........................................................................32
8.10 Proprietary Rights.............................................................................32
8.11 Trade Names and Terms of Sale..................................................................32
8.12 Litigation.....................................................................................32
8.13 Labor Disputes.................................................................................32
8.14 Environmental Laws.............................................................................33
8.15 No Violation of Law............................................................................34
8.16 No Default.....................................................................................34
8.17 Plans..........................................................................................34
8.18 Taxes..........................................................................................34
8.19 Use of Proceeds................................................................................35
8.20 Private Offerings..............................................................................35
8.21 Broker's Fees..................................................................................35
8.22 No Material Adverse Change.....................................................................35
8.23 Debt...........................................................................................35
9. AFFIRMATIVE AND NEGATIVE COVENANTS......................................................................35
9.1 Taxes and Other Obligations....................................................................35
9.2 Corporate Existence and Good Standing..........................................................36
9.3 Maintenance of Property and Insurance..........................................................36
9.4 Environmental Laws.............................................................................36
9.5 Mergers, Consolidations, Acquisitions, or Sales................................................36
9.6 Guaranties.....................................................................................36
9.7 Debt...........................................................................................37
9.8 Prepayment.....................................................................................37
9.9 Transactions with Affiliates...................................................................37
9.10 Plans and Compensation.........................................................................37
9.11 Liens..........................................................................................37
9.12 New Subsidiaries...............................................................................37
9.13 Distributions and Restricted Investments.......................................................37
9.14 Capital Expenditures...........................................................................38
9.15 Further Assurances.............................................................................38
10. CONDITIONS PRECEDENT TO EACH LOAN.......................................................................38
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11. DEFAULT; REMEDIES.......................................................................................38
11.1 Events of Default..............................................................................38
11.2 Remedies.......................................................................................40
12. TERM AND TERMINATION....................................................................................41
13. MISCELLANEOUS...........................................................................................42
13.1 Cumulative Remedies; No Prior Recourse to Collateral...........................................42
13.2 No Implied Waivers.............................................................................42
13.3 Severability...................................................................................42
13.4 Governing Law..................................................................................42
13.5 Consent to Jurisdiction and Venue; Service of Process..........................................42
13.6 Survival of Representations and Warranties.....................................................43
13.7 Indemnification................................................................................43
13.8 Other Security and Guaranties..................................................................44
13.9 Fees and Expenses..............................................................................44
13.10 Notices........................................................................................45
13.11 Waiver of Notices..............................................................................45
13.12 Binding Effect; Assignment; Disclosure.........................................................46
13.13 Modification...................................................................................46
13.14 Counterparts...................................................................................46
13.15 Captions.......................................................................................46
13.16 Right of Set-Off...............................................................................46
13.17 Participating Lender's Security Interests......................................................46
13.18 WAIVER OF JURY TRIAL...........................................................................47
13.19 AMENDMENT AND RESTATEMENT; LIMITATIONS OF SUBSIDIARY LIABILITY; WAIVERS OF CLAIMS..............47
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THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the
"Agreement") is dated April 16, 2001, and is entered into by and between BANK OF
AMERICA, N.A., with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender"), and SUMMIT MACHINE TOOL MANUFACTURING CORP., an
Oklahoma corporation, with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
WITNESSETH
WHEREAS, Lender, LSB Industries, Inc. ("LSB") and ▇▇▇▇▇ Machinery
Manufacturing Corporation ("▇▇▇▇▇"), in addition to other related parties,
entered into a Loan and Security Agreement dated December 12, 1994 (which as
thereafter amended from time to time is referred to as the "Original LSB Loan
Agreement"); and
WHEREAS, Lender and Borrower entered into a Loan and Security Agreement
dated December 12, 1994 (which as thereafter amended from time to time is
referred to as the "Original Summit Loan Agreement"); and
WHEREAS, on November 21, 1997 the parties to the Original LSB Loan
Agreement entered into an Amended and Restated Loan and Security Agreement
(which as thereafter amended from time to time is referred to as the "First
Amended LSB Loan Agreement"); and
WHEREAS, on November 21, 1997 the parties to the Original Summit Loan
Agreement entered into an Amended and Restated Loan and Security Agreement
(which as thereafter amended from time to time is referred to as the "First
Amended Summit Loan Agreement"); and
WHEREAS, on May 10, 1999 LSB obtained alternative financing for (i)
several of its subsidiaries, including several parties to the First Amended LSB
Loan Agreement, and (ii) L&S Bearing Co. which was party to a separate but
related Amended and Restated Loan and Security Agreement with Lender; and
WHEREAS, on November 21, 1997 Lender entered into a related amended and
restated loan agreement (which, as thereafter amended from time to time, is
referred to as the "ClimaChem Loan Agreement") with Climate Master, Inc.,
International Environmental Corporation, El Dorado Chemical Company, and Slurry
Explosive Corporation (collectively, the "CCI Borrower Subsidiaries", which,
along with Borrower, LSB, and ▇▇▇▇▇ and certain Subsidiaries of the CCI Borrower
Subsidiaries, are referred to as the "LSB Consolidated Borrowing Group"); and
WHEREAS, Lender, LSB, ▇▇▇▇▇ and the Borrower agreed to consolidate the
First Amended LSB Loan Agreement and the First Amended Summit Loan Agreement
into a single loan agreement, the "Second Amended and Restated Loan and Security
Agreement", which was dated May 10, 1999 and which, as amended from time to
time, is referred to as the "Second Amended Loan Agreement"; and
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WHEREAS, of even herewith, all Obligations of the CCI Borrower
Subsidiaries under the ClimaChem Loan Agreement are being repaid in full to
Lender, and Lender has agreed to release ▇▇▇▇▇ and LSB as parties to the Second
Amended Loan Agreement; and
WHEREAS, Summit, as sole remaining Borrower, and Lender have agreed to
enter into this Agreement which amends and restates in its entirety the Second
Amended Loan Agreement but does not constitute a novation of the indebtedness
described therein; and
WHEREAS, LSB has agreed to unconditionally guaranty all Obligations
owed by Borrower to Lender under this Agreement and to renew its pledge, as
collateral for its guaranty, in the common stock of Borrower; and
WHEREAS, the aggregate amount of all loans and letters of credit to be
made by Lender to the Borrower will not exceed Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000) in the aggregate at any time outstanding;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1 DEFINITIONS.
1.1 As used herein:
"Account" means Borrower's right to payment for a sale or
lease and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated to Borrower on an
Account.
"Affiliate" means: a Person who, directly or indirectly,
controls, is controlled by or is under common control with LSB. The
term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of the Person in question.
"Applicable Interest Rate" has the meaning given to such term
in Section 3.1(a).
"Applicable Margin" means two and one-half percent (2.50%) per
annum from the date of this Agreement through and including June 30,
2001 with an additional one-half percent (.50%) per annum added to the
prior month's Applicable Margin on the first day of each month
thereafter to be effective during that month with the first such
increase to begin on July 1, 2001. For example: on July 1, 2001, the
Applicable Margin increases to 3% for
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the month of July; on August 1, 2001 to 3.50% for the month of August;
on September 1, 2001 to 4% for the month of September; etc., until the
Termination Date.
"Acquisition" means the investment in or purchase of a
corporation, association, business, entity, partnership or limited
liability company by Borrower by means of the purchase of stock,
assets, memberships, partnership interests or otherwise.
"Availability" means at any time the lesser of:
A The Maximum Revolving Credit Line; or
B. The sum of:
(1) eighty percent (80%) of the Eligible
Accounts ("Accounts Availability"), plus
(2) the lesser of (a) $2,000,000 or (b) the sum
of (i) sixty percent (60%) of the value of
Eligible Inventory other than vertical
boring machines ("VBM's") and machine tools
acquired in trade in connection with the
sale of other Inventory
("Trade-in-Inventory"), plus (ii)
twenty-five percent (25%) of the value of
Eligible Inventory consisting of VBM's, plus
(iii) twenty-five percent (25%) of the value
of Eligible Inventory consisting of
Trade-in-Inventory; provided, however, that
advances against the Trade-in-Inventory
shall not exceed $500,000 in the aggregate
at any one time; less
(3) the Availability Reductions.
"Availability Reductions" means the sum of the following
amounts:
(i) the unpaid balance of outstanding Revolving Loans
at such time;
(ii) one hundred percent (100%) of the aggregate
undrawn face amount of all outstanding Letters of Credit at
such time which the Lender has, or has caused to be, issued or
obtained for the account of Borrower;
(iii) reserves for accrued interest on the Revolving
Loans which is past due;
(iv) the Environmental Compliance Reserve; and
(v) all other reasonable reserves which the Lender in
its reasonable discretion deems necessary or desirable to
maintain with respect to Borrower's account, including,
without limitation, any amounts which the Lender could
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reasonably be obligated to pay within a six-month period for
the account of Borrower.
"Bank" means Bank of America, N.A., a national banking
association, or any successor entity thereto.
"Bank Products" means any one or more of the following types
of services or facilities extended to the Borrower or its Affiliates by
the Bank or any affiliate of the Bank in reliance on the Bank's
agreement to indemnify such affiliate: (i) credit cards; (ii) ACH
transactions; (iii) cash management, including controlled disbursement
services; and (iv) hedge agreements.
"Business Day" means any day that is not a Saturday, Sunday,
or day on which banks in Los Angeles, California are required or
permitted to close.
"Capital Expenditures" means all costs incurred, whether
payable in the Fiscal Year incurred or thereafter, (including financing
costs required to be capitalized under GAAP) for purchases made during
a Fiscal Year for any fixed asset or improvement, or replacement,
substitution, or addition thereto, which has a useful life of more than
one year, including, without limitation, those costs arising in
connection with the direct or indirect acquisition of such assets by
way of increased product or service charges or offset items or in
connection with Capital Leases.
"Capital Lease" means any lease of Property that, in
accordance with GAAP, should be reflected as a liability on a Person's
balance sheet.
"Closing Date" means November 21, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section
6.1.
"Debt" means all liabilities, obligations and indebtedness of
Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred,
acquired or owing, as would be shown on the balance sheet of Borrower
prepared in accordance with GAAP.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of Property in
respect of capital stock of such corporation, other than distributions
in capital stock; and (b) the redemption or other acquisition of any
capital stock of such corporation
"Dollars" and "$" means lawful money of the United States of
America.
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"Eligible Accounts" means all Accounts of Borrower which are
not ineligible. Accounts shall be ineligible as the basis for Revolving
Loans based on the following criteria. Eligible Accounts shall not
include any Account:
(i) where such Account is "Past Due". For the
purposes of this provision, "Past Due" means: (a) where the
Account has terms of payment of less than ninety-one (91) days
from the invoice date, the payment thereof is more than 90
days past due; and (b) where the Account has terms of payment
of ninety-one to three hundred sixty (91 to 360) days from the
invoice date, the payment thereof is more than 30 days past
due;
(ii) where, with respect to such Account, any of the
representations, warranties, covenants and agreements
contained in Sections 6.9 and 8.2 of this Agreement are not or
have ceased to be complete and correct or have been breached;
(iii) where such Account represents a progress
billing or as to which the Borrower has extended the time for
payment after issuance of the invoice relating to such
Account. For the purpose hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a
contract or agreement pursuant to which the Account Debtor's
obligation to pay such invoice is expressly conditioned upon
the completion by Borrower of any further performance under
the contract or agreement, provided, however, that performance
required under a warranty claim or provision shall not make
such Account a "progress billing";
(iv) where Borrower has become aware that any one or
more of the following events has occurred with respect to an
Account Debtor on such Account: death or judicial declaration
of incompetency of an Account Debtor who is an individual; the
filing by or against the Account Debtor of a request or
petition for liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, winding-up,
or other relief under the bankruptcy, insolvency, or similar
laws of the United States, any state or territory thereof, or
any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by the Account Debtor for the
benefit of creditors; the appointment of a receiver or trustee
for the Account Debtor or for any of the assets of the Account
Debtor; the institution by or against the Account Debtor of
any other type of insolvency proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or
informal proceeding for the dissolution or liquidation of, or
winding up of affairs of, the Account Debtor; the sale,
assignment, or transfer of all or any material part of the
assets of the Account Debtor; or the cessation of the business
of the Account Debtor as a going concern;
(v) where an Account is not a valid, legally
enforceable obligation of the Account Debtor thereunder or is
subject to offset, counterclaim or other defenses on the part
of such Account Debtor denying liability thereunder in whole
or in part;
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(vi) where the Borrower does not have good and
marketable title to such Account, free and clear of all Liens,
other than Liens arising under this Agreement and the
documents delivered in connection herewith;
(vii) which is owed by an Account Debtor which: (i)
does not maintain its chief executive office in the United
States or territory thereof or Canada; or (ii) is not
organized under the laws of the United States or any state or
territory thereof or Canada; or (iii) is the government of any
foreign country or any state, province, municipality or other
political subdivision thereof (all of the foregoing being
referred to as "Foreign Accounts"); except that, to the extent
that such Foreign Accounts are secured or payable by letters
of credit or bank guarantees reasonably acceptable to Lender,
such Foreign Accounts shall be considered Eligible Accounts.
Notwithstanding the foregoing, Lender has agreed that Foreign
Accounts, if they otherwise meet all eligibility requirements,
will be Eligible Accounts even though such Foreign Accounts
are not secured or payable by letters of credit or bank
guaranties reasonably acceptable to Lender up to an amount not
to exceed at any one time more than five percent (5%) of the
Availability (without taking into account such Foreign
Accounts);
(viii) which is owed by an Account Debtor which is an
Affiliate;
(ix) which is owed by the government of the United
States of America, or any department, agency, or other
instrumentality thereof, unless the Federal Assignment of
Claims Act of 1940, as amended, or any other steps necessary
to perfect the Lender's Security Interest therein, have been
complied with to the Lender's reasonable satisfaction with
respect to such Account;
(x) which is owed by any state or municipality, or
any department, agency, or other instrumentality thereof, and
as to which the Lender's Security Interest therein is not or
cannot be perfected;
(xi) which arises out of a sale to an Account Debtor
on a ▇▇▇▇ and hold, guaranteed sale, sale or return, sale on
approval, consignment, or other repurchase or return basis;
(xii) which is evidenced by a promissory note or
other instrument (unless such note or instrument is part of
chattel paper in which Lender has a first priority perfected
Security Interest) or by chattel paper (unless Lender has a
first priority perfected Security Interest therein);
(xiii) where the goods giving rise to such Account
have not been shipped and delivered to and accepted by the
Account Debtor (provided, however, that where the Account
Debtor has agreed in writing to accept ▇▇▇▇▇▇▇▇ for such
goods, with a
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copy of such writing being provided to Lender, then such
Account shall be an Eligible Account if it otherwise
qualifies) or the services giving rise to such Account have
not been performed by the Borrower and accepted by the Account
Debtor;
(xiv) if Lender believes in its reasonable credit
judgment that the prospect of collection of such Account is
impaired;
(xv) which Account is owing from an Account Debtor in
which fifty percent (50%) or more of the Accounts owing from
whom are Past Due as set forth in subsection (i) of this
definition of Eligible Accounts;
(xvi) as to which either the perfection,
enforceability, or validity of the Security Interest in such
Account, or the Lender's right or ability to obtain direct
payment to the Lender of the Proceeds of such Account, is
governed by any federal, state, or local statutory
requirements other than those of the UCC; or
(xvii) with respect to which the Account Debtor is
located in any state requiring the filing of a Business
Activities Report or similar document in order to permit the
Borrower to seek judicial enforcement in such state of payment
of such Account, unless Borrower has qualified to do business
in such state, or has filed a Notice of Business Activities
Report or equivalent report with the applicable state office
for the then current year.
"Eligible Inventory" means Inventory of Borrower valued at the
lower of cost or market on a "first in-first out" ("FIFO") basis that
constitutes (i) raw materials (including raw materials stored or held
by Borrower in the work-in-progress area and fifty percent (50%) of
Inventory classified as components) and (ii) first quality finished
goods and that (a) is not obsolete or unmerchantable, (b) upon which
the Lender has a first priority perfected Security Interest, and (c)
the Lender otherwise deems eligible as the basis for Revolving Loans
based on such other credit and collateral considerations as the Lender
may from time to time establish in its reasonable discretion. Without
intending to limit the Lender's discretion to establish other
reasonable criteria of eligibility, no work-in-progress, service or
spare parts, packaging, used parts, shipping materials, supplies,
containers, defective Inventory, Inventory consisting of machines being
rebuilt, Inventory acquired in trade in connection with the sale of
other Inventory, slow-moving Inventory, Inventory in transit (except
for Inventory in transit owned by Borrower, covered by insurance, and
in which Lender has a Security Interest), fifty percent (50%) of
Inventory classified as components, or Inventory delivered to Borrower
on consignment shall constitute Eligible Inventory. Eligible Inventory
shall not include Inventory stored at locations other than those
locations either owned by the Borrower or locations for which a
landlord's waiver acceptable to Lender or a consignment agreement (with
appropriate UCC filings) has been signed by the owner of such location
and delivered to Lender. In addition, the amount of all finished goods
reserves (excluding reserves for "last-in-first-out" valuation) shown
on the books of Borrower shall be deducted from the value of the
Eligible Inventory as used in computing Availability, except to the
extent that
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any such reserve has already been taken into account in connection with
any of the above criteria.
"Environmental Compliance Reserve" means all reserves which
the Lender from time to time establishes for amounts that are
liabilities required to be paid by Borrower within 180 days in order to
correct any violation by the Borrower or the operations or Property of
Borrower with respect to Environmental Laws.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, and consent decrees relating to
hazardous substances, and environmental matters applicable to the
business and facilities of Borrower (whether or not owned by Borrower).
Such laws and regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. ' 6901 et seq., as amended;
the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ' 9601 et seq., as amended: the Toxic Substances Control
Act, 15 U.S.C. ' 2601 et seq., as amended; the Clean Water Act, 33
U.S.C. ' 466 et seq., as amended; the Clean Air Act, 42 U.S.C. ' 7401
et seq., as amended; state and federal superlien and environmental
cleanup programs; and U.S. Department of Transportation regulations.
"Equipment" means, all of Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including, without
limitation, data processing hardware and software, motor vehicles,
aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property which are leased and all of the rights and
interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all
manuals, drawings, instructions, warranties and rights with respect
thereto wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Event of Default" has the meaning given to such term in
Section 11.1.
"Financial Statements" means, according to the context in
which it is used, the financial statements attached hereto as Exhibit
G-1, and the Latest Forecasts attached hereto as Exhibit G-2, and any
other financial statements required to be given by the Borrower to the
Lender under this Agreement.
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"Fiscal Quarter" means any three-month period ending March 31,
June 30, September 30 or December 31.
"Fiscal Year" means LSB's fiscal year for financial accounting
purposes. The current Fiscal Year of LSB will end on December 31, 2001.
"GAAP" means at any particular time generally accepted
accounting principles as in effect at such time.
"Guaranty" by any Person means all obligations of such Person
which in any manner directly or indirectly guarantee the payment or
performance of any indebtedness or other obligation of any other Person
(the "guaranteed obligations"), or assure or in effect assure the
holder of the guaranteed obligations against the loss in respect
thereof, including, without limitation, any such obligations incurred
through an agreement, (a) to purchase the guaranteed obligations or any
Property constituting security therefor or (b) to advance or supply
funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition.
"Intercompany Accounts" means all assets and liabilities,
however arising, which are due to the Borrower from, which are due from
the Borrower to, or which otherwise arise from any transaction by the
Borrower with, any Affiliate.
"Inventory" means all of Borrower's now owned and hereafter
acquired inventory, wherever located, to be held for sale or lease, all
raw materials, work-in-process, finished goods, returned and
repossessed goods, and materials and supplies of any kind, nature or
description which are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of
such inventory, and all documents of title or other documents
representing them.
"IRS" means the Internal Revenue Service or any successor
agency.
"Latest Forecasts" means, (a) the forecasts of the Borrower's
monthly financial condition, results of operations, and cash flows
through the year ending December 31, 2001, attached hereto as Exhibit
G-2; and (b) thereafter, the forecasts most recently received by the
Lender pursuant to Section 7.2.
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Agreement" has the meaning specified in
Section 2.3.
"Letter of Credit Fee" means the commissions charged under the
Letter of Credit Agreement on the outstanding amount of each Letter of
Credit.
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"Lien" means: any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute, or contract,
and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, or
conditional sale, or a lease, consignment or bailment for security
purposes.
"Loans" means, collectively, all loans and advances by the
Lender to or on behalf of the Borrower provided for in Article 2.
"Loan Documents" means all documents executed by the Borrower
and/or LSB, including this Agreement, the Letter of Credit Agreement,
the Patent and Trademark Assignments, the Mortgage and all other
agreements, instruments, and documents heretofore, now or hereafter
evidencing, securing or guaranteeing the Obligations under this
Agreement, the Collateral or the Security Interest, as the same may
hereafter be amended, modified, restated and/or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation,
Parent of Borrower and guarantor of all Obligations under this
Agreement.
"Maximum Revolving Credit Line" means Two Million Five Hundred
Thousand Dollars ($2,500,000).
"Mortgage" means the Mortgage executed by Borrower dated of
even date herewith granting to Lender a first priority lien on certain
Real Property in Oklahoma County, Oklahoma.
"Multi-employer Plan" means a Plan which is described in
Section 3(37) of ERISA.
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties and Debts owing by the
Borrower to the Lender, arising under this Agreement or any other Loan
Document, whether or not evidenced by any note, or other instrument or
document, whether arising from an extension of credit, opening of a
letter of credit, loan, guaranty, indemnification (including any
indemnity by Lender in connection with the Bank Products or otherwise
for the benefit of the Borrower), whether direct or indirect
(including, without limitation, those acquired by assignment from
others relating to Bank Products), absolute or contingent, due or to
become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees,
attorneys' fees, filing fees and any other sums chargeable to the
Borrower hereunder or under another Loan Document, or under any other
agreement or instrument with Lender relating to the Bank Products.
"Obligations" includes, without limitation, (a) all debts, liabilities,
and obligations now or hereafter owing from Borrower to Lender under or
in connection with the Letters of Credit and the Letter of Credit
Agreement, and (b) all debts, liabilities, and obligations now or
hereafter arising from or related to the Bank Products.
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"Participating Lender" means any Person who shall have been
granted the right by the Lender to participate in the Revolving Loans
and who shall have entered into a participation agreement in form and
substance satisfactory to the Lender.
"Patent and Trademark Assignments" means the Patent Security
Agreement and the Trademark and Trade Names Security Agreement dated as
of December 12, 1994, executed and delivered by the Borrower to the
Lender to evidence and perfect the Lender's Security Interest in the
Borrower's present and future patents, trademarks, trade names and
related licenses and rights, each as amended and modified from time to
time.
"Payment Account" means each blocked bank account, established
pursuant to Section 6.10, to which Proceeds of Accounts and other
Collateral are deposited or credited, and which is maintained in the
name of the Borrower on terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Pension Plan" means any employee benefit plan, including a
Multiemployer Plan, which is subject to Title IV of ERISA, where either
(a) the Plan is maintained by the Borrower or any Related Company; or
(b) Borrower or any Related Company contributes or is required to
contribute to it; or (c) Borrower or any Related Company has incurred
or may incur liability, including contingent liability, under Title IV
of ERISA, either to it, or to the PBGC with respect to it.
"Permitted Debt" means: (i) the Obligations; (ii) Debt set
forth in the most recent Financial Statements delivered to the Lender,
or the notes thereto; (iii) Debt incurred since the date of such
Financial Statements to finance Capital Expenditures permitted hereby;
(iv) Debt resulting from a judgment having been rendered against
Borrower that is being appealed by the Borrower in good faith and in a
timely manner, for which an adequate reserve has been recorded on
Borrower's books, and which is not fully covered by insurance; (v)
Subordinated Debt; (vi) Debt resulting from the refinancing of any
other Permitted Debt as long as (a) such Debt does not exceed the
amount of the refinanced Debt, and (b) such Debt does not result in
payment acceleration of the refinanced Debt; (vii) Debt resulting from
trade payables and other obligations arising in the ordinary course of
business, (viii) other Debt existing as of the date hereof plus up to
$500,000 of additional Debt; and (ix) Debt to Affiliates in accordance
with Section 9.9 hereof.
"Permitted Liens" means: (a) Liens for taxes not yet payable
or Liens for taxes being contested in good faith and by proper
proceedings diligently pursued, provided that a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made therefor on the applicable Financial Statements, and further
provided that, with respect to the Collateral, a stay of enforcement of
any such Lien is in effect; (b) Liens in favor of the Lender; (c)
reservations, exceptions, encroachments, easements, rights of way,
covenants,
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conditions, restrictions, leases and other similar title exceptions or
encumbrances affecting the Real Property; (d) Liens or deposits under
workmen's compensation, unemployment insurance, social security and
other similar laws, (e) Liens relating to obligations with respect to
surety, appeal bonds, performance bonds, bids, tenders and other
obligations of a like nature, (f) Liens existing as of the Closing Date
and granted after the date hereof in connection with the Equipment,
Real Property or other fixed assets, provided that such Liens attach
only to such Property and the proceeds thereof, and so long as the
indebtedness secured thereby does not exceed 100% of the fair market
value of such Property at the time of acquisition; (g) Liens on goods
consigned to the Borrower or not owned by Borrower so long as such Lien
attaches only to such goods and so long as Lender has been given notice
of such Lien, (h) mechanic, materialmen and other like Liens arising in
the ordinary course of business securing obligations which are not
overdue or are being contested in good faith by appropriate proceedings
and adequately reserved against, (i) statutory Liens in favor of
landlords, (j) Liens against any life insurance policy or the cash
surrender value thereof which relate to borrowings incurred to finance
the premiums made under such policy; and (k) Liens reflected on Exhibit
A hereto.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, Public Authority, or any other entity.
"Plan" means, individually and collectively, all Pension
Plans, all additional employee benefit plans as defined in Section 3(3)
of ERISA, and all other plans, programs, agreements, arrangements, and
methods of contribution or compensation providing any material
remuneration or benefits, other than the cash payment of wages or
salary, to any current or former employee(s) of the Borrower.
"Proceeds" means all products and proceeds of any Collateral,
and all proceeds of such proceeds and products, including, without
limitation, all cash and credit balances, all payments under any
indemnity, warranty, or guaranty payable with respect to any
Collateral, all proceeds of fire or other insurance, and all money and
other Property obtained as a result of any claims against third parties
or any legal action or proceeding with respect to Collateral.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, trade names, trade styles, patent and trademark
applications and licenses and rights thereunder, including without
limitation those patents, trademarks and copyrights set forth on
Exhibit B hereto, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to ▇▇▇
for past, present, and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings,
designs, blueprints, surveys, reports, manuals, and operating
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standards, goodwill, customer and other lists in whatever form
maintained, and trade secret rights, copyright rights, right in works
of authorship, and contract rights relating to computer software
programs, in whatever form created or maintained.
"Public Authority" means the government of any country or
sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or any department, agency, public
corporation or other instrumentality of any of the foregoing.
"Real Property" means all of Borrower's rights, title, and
interest in real property now owned or hereafter acquired by Borrower,
including, without limitation, the real property more particularly
described in Exhibit H attached hereto, including all rights and
easements in connection therewith and all buildings and improvements
now or hereafter constructed thereon.
"Receivables" means all of Borrower's now owned or hereafter
arising or acquired: Accounts (whether or not earned by performance),
including Accounts owed to the Borrower by any of its Subsidiaries or
Affiliates (but excluding Accounts arising solely from the sale of
Equipment, Real Property or other fixed assets), together with all
interest, late charges, penalties, collection fees, and other sums
which shall be due and payable in connection with any Account; proceeds
of any letters of credit naming the Borrower as beneficiary; contract
rights, chattel paper, instruments, documents, general intangibles
(including, without limitation, chooses in action, causes of action,
tax refunds, tax refund claims, Reversions and other amounts payable to
the Borrower from or with respect to any Plan, rights and claims
against shippers and carriers, rights to indemnification and business
interruption insurance), and all forms of obligations owing to Borrower
(including, without limitation, obligations owing to the Borrower by
its Subsidiaries and Affiliates); guarantees and other security for any
of the foregoing; and rights of stoppage in transit, replevin, and
reclamation; and other rights or remedies of an unpaid vendor, lienor,
or secured party.
"Reference Rate" means the per annum rate of interest publicly
announced from time to time by the Lender at its San Francisco,
California main office as its reference rate. It is a rate set by
Lender based upon various factors including Lender's costs and desired
return, general economic conditions, and other factors, and is used as
a reference point for pricing some loans; however, Lender may price
loans at, above or below the Reference Rate. Any change in the
Reference Rate shall take effect on the day specified in the public
announcement of such change.
"Related Company" means any member of any controlled group of
corporations including, or under common control with, Borrower (as
defined in Section 414(b) or (c) of the Code or Section 4001(a)(14) of
ERISA).
"Reportable Event" means, with respect to a Pension Plan, a
reportable event described in Section 4043 of ERISA or the regulations
thereunder, a withdrawal from a Plan
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described in Section 4063 of ERISA, or a cessation of operations
described in Section 4062(e) of ERISA.
"Restricted Investment" means any acquisition of Property by
Borrower in exchange for cash or other Property, whether in the form of
an acquisition of stock, indebtedness or other obligation, or by loan,
advance, capital contribution, or otherwise, except the following: (a)
Property to be used in the business of Borrower; (b) assets arising
from the sale or lease of goods or rendition of services in the
ordinary course of business of the Borrower; (c) direct obligations of
the United States of America, or any agency thereof, or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition
thereof; (d) certificates of deposit maturing within one year from the
date of acquisition, bankers acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a
bank or trust company organized under the laws of the United States or
any state thereof having capital and surplus aggregating at least
$100,000,000; and (e) commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from
the date of creation thereof.
"Reversions" means any funds which may become due to the
Borrower in connection with the termination of any Plan.
"Revolving Loans" has the meaning specified in Section 2.1.
"Security Interest" means collectively the Liens granted by
Borrower to the Lender in the Collateral pursuant to this Agreement or
the other Loan Documents.
"Subordinated Debt" shall mean Debt that is unsecured and is
subordinated to the payment of the Obligations.
"Subsidiary" or "Subsidiaries" means any present or future
corporation or corporations of which LSB owns, directly or indirectly,
more than 50% of the voting stock.
"Termination Event" means: (a) a Reportable Event (other than
a Reportable Event described in Section 4043 of ERISA which is not
subject to the provision for 30-day notice to the PBGC under applicable
regulations); or (b) the withdrawal of the Borrower or any Related
Company from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA with
respect to such Pension Plan; or (c) the filing of a notice of intent
to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (d) the
institution of proceedings by the PBGC to terminate or have a trustee
appointed to administer a Pension Plan; or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer,
any Pension Plan, or (f) the partial or complete withdrawal of Borrower
or any Related Company from a Multi-employer Plan, or (g) the
withdrawal of Borrower from any state workers' compensation system.
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"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of Oklahoma or of any other state the laws of
which are required by Section 9-103 thereof to be applied in connection
with the issue of perfection of security interests.
1.2 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
1.4 Exhibits. All references in this Agreement to Exhibits
are, unless otherwise specified, references to exhibits attached hereto, and all
such exhibits are hereby deemed incorporated herein by this reference.
2. LOANS AND LETTERS OF CREDIT.
2.1 Revolving Loans. The Lender shall, subject to the terms
and conditions set forth in this Agreement, and upon Borrower's request from
time to time, make revolving loans (the "Revolving Loans") to the Borrower up to
the limits of the Availability. The Lender, in its discretion, may elect to
exceed the limits of the Availability on one or more occasions, but if it does
so, the Lender shall not be deemed thereby to have changed the limits of the
Availability or to be obligated to exceed the limits of the Availability on any
other occasion. If the unpaid balance of the Revolving Loans exceeds the
Availability (with Availability for this purpose determined as if the amount of
the Revolving Loans were zero), then the Lender may refuse to make or otherwise
restrict Revolving Loans on such terms as the Lender determines until such
excess has been eliminated. The Borrower may request Revolving Loans either
orally or in writing, provided, however, that each such request shall be made no
later than 1:00 p.m. (Los Angeles, California time). Each oral request for a
Revolving Loan shall be conclusively presumed to be made by a person authorized
by the Borrower to do so and the crediting of a Revolving Loan to the Borrower's
deposit account, or transmittal to such Person as the Borrower shall direct,
shall conclusively establish the obligation of the Borrower to repay such
Revolving Loan. The Lender will charge all Revolving Loans and other Obligations
to a loan account of the Borrower maintained with the Lender. All fees,
commissions, costs, expenses, and other charges due from the Borrower pursuant
to the Loan Documents, and all payments made and out-of-pocket expenses incurred
by Lender and authorized to be charged to the Borrower pursuant to the Loan
Documents, will be charged as Revolving Loans to the Borrower's loan account as
of the date due from the Borrower or the date paid or incurred by the Lender, as
the case may be.
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2.2 Availability Determination. Availability will be
determined by the Lender in accordance with the terms of this Agreement, each
day on the basis of such relevant information as the Lender deems appropriate to
consider, including the collateral summary reports and such other information
regarding the Accounts and the Inventory as the Lender shall obtain from the
Borrower.
2.3 Letters of Credit. The Lender will, subject to the terms
and conditions of this Agreement and the Letter of Credit Agreement as hereafter
defined, and upon Borrower's request from time to time, cause merchandise
letters of credit (the "Merchandise L/C's") or standby letters of credit (the
"Standby L/C's") to be issued for the Borrower's account (the Merchandise L/C's
and the Standby L/C's being referred to collectively as the "Letters of
Credit"). The Lender will not cause to be opened any Letter of Credit if: (a)
the maximum face amount of the requested Letter of Credit, plus the aggregate
undrawn face amount of all outstanding Letters of Credit under this Agreement
would exceed Three Hundred Thousand and No/100 Dollars ($300,000); or (b) the
maximum face amount of the requested Letter of Credit, and all commissions,
fees, and charges due from Borrower to Lender in connection with the opening
thereof, would cause the Availability to be exceeded at such time. In addition,
with respect to any Merchandise L/C, the requested term of such Letter of Credit
may not exceed 180 days, and no Merchandise L/C may by its terms be scheduled to
be outstanding on the Termination Date. Standby L/C's may have terms that extend
beyond the Termination Date but upon termination of this Agreement, all Letters
of Credit must be either terminated with the consent of the beneficiary thereof,
replaced with a letter of credit provided by a financial institution acceptable
to Lender, collateralized by cash or cash equivalent, or otherwise satisfied in
a manner acceptable to Lender. The Letters of Credit shall be governed by a
Letter of Credit Financing Agreement - Supplement to Third Amended and Restated
Loan and Security Agreement between the Lender and the Borrower ("Letter of
Credit Agreement"), in the form attached hereto as Exhibit "O" and made a part
hereof, in addition to the terms and conditions hereof. All payments made and
expenses incurred by the Lender pursuant to or in connection with the Letters of
Credit and the Letter of Credit Agreement will be charged to the Borrower's loan
account as Revolving Loans.
2.4 Letters of Credit. The Borrower may request and the Lender
may, in its sole and absolute discretion, arrange for the Borrower to obtain
from the Bank or the Bank's Affiliates Bank Products although the Borrower is
not required to do so. If Bank Products are provided by an Affiliate of the
Bank, the Borrower agrees to indemnify and hold the Bank and the Lender harmless
from any and all costs and obligations now or hereafter incurred by the Bank or
the Lender which arise from any indemnity given by the Lender to its Affiliates
related to such Bank Products; provided, however, (i) such indemnification shall
not apply to any acts of gross negligence or willful misconduct of Lender or its
Affiliates, and (ii) nothing contained herein is intended to limit the
Borrower's rights, with respect to the Bank or its Affiliates, if any, which
arise as a result of the execution of documents by and between the Borrower and
the Bank which relate to Bank Products. The agreement contained in this Section
shall survive termination of this Agreement. The Borrower acknowledges and
agrees that the obtaining of Bank Products from the Bank or the Bank's
Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank's
Affiliates, and (b) is subject to all rules and regulations of the Bank or the
Bank's Affiliates.
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3. INTEREST AND OTHER CHARGES
3.1 Interest.
(a) Interest Rates. All amounts charged as Revolving Loans
shall bear interest on the unpaid principal amount thereof from the date made
until paid in full in cash at a fluctuating per annum rate (the "Applicable
Interest Rate") equal to the Applicable Margin plus the Reference Rate, but not
to exceed the maximum rate permitted by applicable law.
Each change in the Reference Rate shall be reflected in the interest
rate described above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of three hundred sixty (360)
days and actual days elapsed. Except as otherwise provided herein interest
accrued on the Revolving Loans will be payable in arrears on the first day of
each month hereafter.
(b) Default Rate. If any Event of Default occurs, then, while
any such Event of Default is continuing, all Loans shall bear interest at an
increased rate of interest equal to the Applicable Interest Rate plus two
percent (2.0%) per annum, and the Letter of Credit Fee shall be increased to
three percent (3%) per annum.
3.2 Maximum Interest Rate.
(a) Notwithstanding the foregoing provisions of Section 3.1
regarding the rates of interest applicable to the Loans, if at any time the
amount of such interest computed on the basis of the Applicable Interest Rate
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter, after taking into account, to the extent required by
applicable law, any and all fees, payments, charges and calculations provided
for in this Agreement or in any other agreement between Borrower and Lender (the
"Maximum Legal Rate"), the interest payable under this Agreement shall be
computed upon the basis of the Maximum Legal Rate, but any subsequent reduction
in the Reference Rate shall not reduce such interest thereafter payable
hereunder below the amount computed on the basis of the Maximum Legal Rate until
the aggregate amount of such interest accrued and payable under this Agreement
equals the total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of the Applicable Interest
Rate.
(b) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between Borrower and the Lender or default of Borrower, or the exercise by the
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other agreement between Borrower and the Lender, or the arising of any
contingency whatsoever, shall entitle the Lender to collect, in any event,
interest exceeding the Maximum Legal Rate and in no event shall Borrower be
obligated to pay interest exceeding such Maximum Legal
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Rate and all agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel Borrower to
pay a rate of interest exceeding the Maximum Legal Rate, shall be without
binding force or effect, at law or in equity, to the extent only of the excess
of interest over such Maximum Legal Rate. In the event any interest is charged
in excess of the Maximum Legal Rate ("Excess"), Borrower acknowledges and
stipulates that any such charge shall be the result of an accidental and bona
fide error, and such Excess shall be, first, applied to reduce the principal
then unpaid hereunder; second, applied to reduce the Obligations; and third,
returned to the Borrower, it being the intention of the parties hereto not to
enter at any time into a usurious or otherwise illegal relationship. Borrower
recognizes that, with fluctuations in the Applicable Interest Rate and the
Maximum Legal Rate, such an unintentional result could inadvertently occur. By
the execution of this Agreement, Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by Borrower of such Excess,
and (ii) the Borrower shall not seek or pursue any other remedy, legal or
equitable, against Lender, based in whole or in part upon the charging or
receiving of any interest in excess of the maximum authorized by applicable law.
For the purpose of determining whether or not any Excess has been contracted
for, charged or received by Lender, all interest at any time contracted for,
charged or received by the Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the entire term
of this Agreement.
(c) The provisions of Section 3.2 shall be deemed to be
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of the Lender with respect to the Borrower (or any other obligor
in respect of Obligations), whether or not any provision of Section 3.2 is
referred to therein. All such documents and communications and all figures set
forth therein shall, for the sole purpose of computing the extent of the
liabilities and obligations of the Borrower (or other obligor) asserted by the
Lender thereunder, be automatically recomputed by Borrower or obligor, and by
any court considering the same, to give effect to the adjustments or credits
required by Section 3.2.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement or
any other Loan Documents than is presently allowed by applicable state or
federal law, then the limitation of interest under Section 3.2 shall be
increased to the maximum rate of interest allowed by applicable state or federal
law as amended, which increase shall be effective hereunder on the effective
date of such amendment, and all interest charges owing to the Lender by reason
thereof shall be payable upon demand.
3.3 Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting Lender or any of Lender's affiliated companies
there shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made to Borrower
hereunder, or to Letters of Credit issued on behalf of Borrower pursuant to the
Letter of Credit Agreement, and the result shall be to increase the cost to
Lender or to any of Lender's affiliated companies of making or maintaining any
Revolving Loan or Letter of Credit hereunder, or reduce any amount receivable in
respect of any such Revolving Loan and which increase in cost, or reduction in
amount receivable, shall be the result of Lender's or Lender's affiliated
company's
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reasonable allocation among all affected customers of the aggregate of such
increases or reductions resulting from such event, then, within ten (10) days
after receipt by Borrower of a certificate from Lender containing the
information described in this Section 3.3 which shall be delivered to Borrower,
Borrower agrees from time to time to pay Lender such additional amounts as shall
be sufficient to compensate Lender or any of Lender's affiliated companies for
such increased costs or reductions in amounts which Lender determines in
Lender's reasonable discretion are material. Notwithstanding the foregoing, all
such amounts shall be subject to the provisions of Section 3.2. The certificate
requesting compensation under this Section 3.3 shall identify the regulatory
change which has occurred, the requirements which have been imposed, modified or
deemed applicable, the amount of such additional cost or reduction in the amount
receivable and the way in which such amount has been calculated.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, upon the termination of this Agreement. In addition, the Borrower shall
pay to the Lender, on demand, the amount by which the unpaid principal balance
of the Revolving Loans at any time exceeds the Availability at such time (with
Availability for this purpose determined as if the amount of the Revolving Loans
were zero).
4.2 Place and Form of Payments: Extension of Time. All
payments of principal, interest, and other sums due to the Lender shall be made
at the Lender's address set forth in Section 13.10. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately available
funds. If any payment of principal, interest, or other sum to be made hereunder
becomes due and payable on a day other than a Business Day, the due date of such
payment shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable interest rate during such extension.
4.3 Apportionment, Application and Reversal of Payments.
Except as otherwise expressly provided hereunder, the Lender shall determine in
its discretion the order and manner in which proceeds and other payments that
the Lender receives are applied to the Revolving Loans, interest thereon, and
the other Obligations, and Borrower hereby irrevocably waives the right to
direct the application of any payment or proceeds. Following an Event of Default
that is continuing, the Lender shall have the continuing and exclusive right to
apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations.
4.4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY
PAYMENT OF, OR PROCEEDS APPLIED TO THE PAYMENT OF, ALL OR ANY PART OF THE
OBLIGATIONS, THE LENDER IS FOR ANY REASON REQUIRED TO SURRENDER SUCH PAYMENT OR
PROCEEDS TO ANY PERSON, BECAUSE SUCH PAYMENT OR PROCEEDS IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE
OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND
CONTINUE
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AND THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT OR PROCEEDS
HAD NOT BEEN RECEIVED BY THE LENDER AND THE BORROWER SHALL BE LIABLE TO PAY TO
THE LENDER, AND HEREBY DOES INDEMNIFY THE LENDER AND HOLD THE LENDER HARMLESS
FOR THE AMOUNT OF SUCH PAYMENT OR PROCEEDS SURRENDERED. The provisions of this
Section 4.4 shall be and remain effective notwithstanding any contrary action
which may have been taken by the Lender in reliance upon such payment or
Proceeds, and any such contrary action so taken shall be without prejudice to
the Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment or Proceeds having become final and irrevocable.
The provisions of this Section 4.4 shall survive the termination of this
Agreement.
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS. The Borrower agrees
that the Lender's books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be admissible in
any action or proceeding arising therefrom irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument, and shall
constitute presumptive proof thereof until such time as Borrower has reviewed
the monthly statement as hereinafter provided. The Lender will provide to the
Borrower a monthly statement of Loans, payments, and other transactions pursuant
to this Agreement. Such statement shall be deemed correct, accurate, and binding
on the Borrower and as an account stated and shall constitute prima facie proof
thereof (except for reversals and reapplications of payments made as provided in
Section 4.3 and corrections of errors discovered by the Lender), unless the
Borrower notifies the Lender in writing to the contrary within thirty (30) days
after such statement is rendered. In the event a timely written notice of
objections is given by the Borrower, only the items to which exception is
expressly made will be considered to be disputed by the Borrower.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, Borrower hereby grants to
the Lender a continuing security interest in, lien on, and assignment of: (i)
all Receivables, Inventory, Proprietary Rights, the Real Property, and Proceeds,
wherever located and whether now existing or hereafter arising or acquired; (ii)
all moneys, securities and other property and the Proceeds thereof, now or
hereafter held or received by, or in transit to, the Lender from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, including, without limitation, all of Borrower's deposit accounts,
credits and balances with the Lender and all claims of the Borrower against the
Lender at any time existing; (iii) all of Borrower's deposit accounts containing
Collateral with any financial institutions with which Borrower maintains
deposits; and (iv) all books, records, ledger cards, data processing records,
computer software and other property and general intangibles at any time
evidencing or relating to the Receivables, Inventory, Proprietary Rights, the
Real Property and Proceeds, and other property referred to above (all of the
foregoing, together with all other property in which Lender may at any time be
granted a Lien, being herein collectively
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referred to as the "Collateral"). The Lender shall have all of the rights of a
secured party with respect to the Collateral under the UCC and other applicable
laws.
(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, (i) exchange, waive, or
release any of the Collateral, (ii) after the occurrence of an Event of Default
that is continuing, apply Collateral and direct the order or manner of sale
thereof as the Lender may determine, and (iii) after the occurrence of an Event
of Default that is continuing, settle, compromise, collect, or otherwise
liquidate any Collateral in any manner, all without affecting the Obligations or
the Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. Borrower
shall, at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and enforce the Security Interest in the Collateral
including, without limitation: (a) executing and recording of the Patent and
Trademark Assignments and executing and filing financing or continuation
statements, and amendments thereof, relating to the Collateral in form and
substance satisfactory to the Lender; (b) delivering to the Lender, upon
Lender's request therefor, the originals of all instruments, documents, and
chattel paper, and all other Collateral of which the Lender determines it should
have physical possession in order to perfect and protect the Security Interest
therein, duly endorsed or assigned to the Lender without restriction; (c)
delivering to the Lender warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are issued;
(d) after an Event of Default that is continuing, causing notations to be placed
on Borrower's books of account to disclose the Security Interest; (e) delivering
to the Lender, upon Lender's request therefor, all letters of credit on which
Borrower is a named beneficiary; (f) after an Event of Default that is
continuing transferring Inventory to warehouses designated by the Lender; and
(g) taking such other steps as are deemed necessary by the Lender to maintain
the Security Interest. The Lender may file, without Borrower's signature, one or
more financing statements disclosing the Security Interest. Borrower agrees that
a carbon, photographic, photostatic, or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. If any
Collateral is at any time in the possession or control of any warehouseman,
bailee or any of the agents or processors of Borrower, then Borrower shall
notify the Lender thereof and shall notify such Person of the Security Interest
in such Collateral and, upon the Lender's request following an Event of Default
that is continuing, instruct such Person to hold all such Collateral for the
Lender's account subject to the Lender's instructions. If at any time any
Collateral is located on any premises that are not owned by Borrower, then the
Borrower shall obtain written waivers, in form and substance reasonably
satisfactory to the Lender, of all present and future Liens to which the owner
or lessor of such premises may be entitled to assert against the Collateral.
From time to time, the Borrower shall, upon Lender's request, cause to be
executed and delivered confirmatory written instruments pledging to the Lender
the Collateral, but the Borrower's failure to do so shall not affect or limit
the Security Interest. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Security Interest shall continue in
full force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Availability or as the basis for any advance, loan,
or other financial accommodation). Upon termination of this Agreement and
payment of all Obligations, the Lender shall release all Security Interests held
by the Lender.
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6.3 Location of Collateral. Borrower represents and warrants
to the Lender that: (a) Exhibit D hereto is a correct and complete List of
Borrower's chief executive office, the location of its books and records as well
as the locations of the Collateral and the locations of all of its other places
of business; and (b) Exhibit H correctly identifies any of such facilities and
locations that are not owned by Borrower and sets forth the names of the owners
and lessors of, and, to the best of Borrower's knowledge, the holders of any
mortgages on such facilities and locations. Except for Inventory that is
consigned by Borrower to a customer or warehouse, Borrower agrees that it will
not maintain any Collateral at any location other than those listed on Exhibit
D, and it will not otherwise change or add to any of such locations, unless it
gives the Lender at least thirty (30) days prior written notice and executes or
has executed, such financing statements and other documents that the Lender
requests in connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral.
Borrower represents and warrants to the Lender that: (a) all Collateral is and
will continue to be owned by Borrower free and clear of all Liens whatsoever,
except for the Security Interest and other Permitted Liens; (b) the Security
Interest will not be subject to any prior Lien except the Permitted Liens; (c)
the Borrower will use, store, and maintain the Collateral with all reasonable
care and will use the Collateral for lawful purposes only; and (d) the Borrower
will not, without the Lender's prior written approval, sell, or dispose of or
permit the sale or disposition of any Collateral, except for (i) sales of
Inventory in the ordinary course of business, (ii) sales of worn out or obsolete
Equipment or Equipment no longer used in Borrower's business, and (iii) as
otherwise provided or allowed by this Agreement or any of the other Loan
Documents. The inclusion of Proceeds in the Collateral shall not be deemed the
Lender's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
6.5 Appraisals. Following the occurrence of an Event of
Default that is continuing, Borrower shall, at the request of the Lender,
provide the Lender, at the Borrower's expense, with appraisals or updates
thereof of any or all of the Collateral from an appraiser satisfactory to the
Lender.
6.6 Access and Examination. The Lender may at all reasonable
times have access to, examine, audit, make extracts from and inspect Borrower's
records, files, and books of account, as well as the Collateral and may discuss
the Borrower's affairs with the Borrower's officers and management. The Borrower
will deliver to the Lender any instrument necessary for the Lender to obtain
records from any service bureau maintaining records for the Borrower. The Lender
may, at any time when an Event of Default exists and at the Borrower's expense,
make copies of all of the Borrower's books and records, or require the Borrower
to deliver such copies to the Lender. After the occurrence of an Event of
Default that is continuing, the Lender may, without expense to the Lender, use
such of the Borrower's personnel, supplies, and premises as may be reasonably
necessary for maintaining or enforcing the Security Interest. Lender shall have
the right, at any time, in Lender's name or in the name of a nominee of the
Lender, to verify the validity, amount or any other matter relating to the
Accounts, by mail, telephone, or otherwise.
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6.7 Insurance. Borrower shall insure the Collateral and
Equipment against loss or damage by fire with extended coverage, theft,
burglary, pilferage, loss in transit, and such other hazards as the Lender shall
specify, in amounts, under policies and by insurers acceptable to the Lender.
Borrower shall also maintain flood insurance, in the event of a designation of
the area in which any Real Property is located as "flood prone" or a "flood risk
area," as defined by the Flood Disaster Protection Act of 1973, in an amount to
be reasonably determined by Lender, and shall comply with the additional
requirements of the National Flood Insurance Program as set forth therein.
Borrower shall cause the Lender to be named in each such policy as secured party
of the Inventory that constitutes part of the Collateral and loss payee or
additional insured, in a manner acceptable to the Lender, as to the Collateral.
Each policy of insurance shall contain a clause or endorsement requiring the
insurer to give not less than thirty (30) days prior written notice to the
Lender in the event of cancellation of the policy for any reason whatsoever and
a clause or endorsement stating that the interest of the Lender shall not be
impaired or invalidated by any act or neglect of the Borrower or the owner of
any premises where Collateral is located nor by the use of such premises for
purposes more hazardous than are permitted by such policy. All premiums for such
insurance shall be paid by the Borrower when due, and certificates of insurance
and, if requested, photocopies of the policies shall be delivered to the Lender.
If the Borrower fails to procure such insurance or to pay the premiums therefor
when due, the Lender may (but shall not be required to) do so and charge the
costs thereof to the Borrower's loan account. After becoming aware of any loss,
damage or destruction to Collateral, the Borrower shall promptly notify the
Lender of any such loss, damage, or destruction that exceeds $200,000, whether
or not covered by insurance. The Lender is hereby authorized to collect all
insurance proceeds directly following the occurrence of an Event of Default that
is continuing. After deducting from such proceeds the expenses, if any, incurred
by Lender in the collection or handling thereof, if an Event of Default has
occurred and is continuing, the Lender may apply such proceeds to the reduction
of the Obligations, in such order as Lender determines, or at the Lender's
option may permit or require the Borrower to use such money, or any part
thereof, to replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction. If no Event of
Default has occurred and is continuing, Lender hereby authorizes Borrower to
collect all such insurance proceeds and to use such money, or any part thereof,
to replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.
6.8 Collateral Reporting. The Borrower will provide the Lender
with the following documents at the following times in form satisfactory to the
Lender: (a) on a daily basis, a schedule of Accounts created since the last such
schedule, a schedule of remittance advices, credit memos and reports and a
schedule of collections of Accounts since the last such schedule; (b) no later
than fifteen (15) days after the last day of each month, monthly summary and
detailed agings of Accounts aged by due date and by invoice date; (c) no later
than twenty (20) days after the last day each month, monthly reconciliations of
Accounts balances per the aging to the general ledger accounts receivable
balance and to the financial statements provided to Lender under Section 7.2(c);
(d) no later than twenty (20) days after the last day each month, monthly
Inventory reports by category and by location; (e) no later than twenty (20)
days after the last day each month, monthly
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reconciliations of the detailed Inventory reports to the general ledger and to
the financial statements provided to Lender under Section 7.2(c); (f) upon
request, copies of invoices, credit memos, shipping and delivery documents,
purchase orders; (g) such other reports as to the Collateral as the Lender shall
request from time to time; and (h) certificates of an officer of the Borrower
certifying as to the foregoing. If any of the Borrower's records or reports of
the Collateral are prepared by an accounting service or other agent, the
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
6.9 Accounts.
(a) The Borrower hereby represents and warrants to the Lender
that: (i) each existing Account represents, and each future Account will
represent, a bona fide sale or lease and delivery of goods by the Borrower, or
rendition of services by the Borrower, in the ordinary course of business; (ii)
each existing Account is, and each future Account will be, for a liquidated
amount payable by the Account Debtor thereon on the terms set forth in the
invoice therefor or in the schedule thereof delivered to the Lender, without
offset, deduction, defense, or counterclaim (other than claims relating to
warranty issues); (iii) no payment will be received with respect to any Account,
and no credit, discount, or extension, or agreement therefor will be granted to
any Account, except as reported to or otherwise agreed to by the Lender in
accordance with this Agreement; (iv) each copy of an invoice requested by and
delivered to the Lender by the Borrower will be a genuine copy of the original
invoice sent to the Account Debtor named therein; and (v) all goods described in
each invoice will have been delivered to the Account Debtor and all services
described in each invoice will have been performed, except where the Account
Debtor has previously agreed in writing to accept ▇▇▇▇▇▇▇▇ for such goods.
(b) The Borrower shall not re-date any invoice or sale or make
sales on extended dating beyond that customary in the business of the Borrower
or extend or modify any Account which alters its eligibility status, or, with
respect to ineligible Accounts, which are inconsistent with prudent business
practice and industry standards. If Borrower becomes aware of any matter
adversely affecting any Account in an amount in excess of $100,000, including
information regarding the Account Debtor's creditworthiness, the Borrower will
promptly so advise the Lender.
(c) The Borrower shall not accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Eligible Account without the Lender's written consent. If the
Lender consents to the acceptance of any such instrument, it shall be considered
as evidence of the Account and not payment thereof and the Borrower will upon
Lender's request, promptly deliver such instrument to the Lender appropriately
endorsed. Regardless of the form of presentment, demand, notice of dishonor,
protest, and notice of protest with respect thereto, the Borrower will remain
liable thereon until such instrument is paid in full.
(d) The Borrower shall notify the Lender promptly of all
disputes and claims with an Account Debtor relating to an Eligible Account that
exceeds $100,000 and when no Event of Default exists hereunder, may settle or
adjust them at no expense to the Lender, but no discount,
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credit or allowance in excess of $100,000 shall be granted to any Account Debtor
without the Lender's consent, except for discounts, credits and allowances made
or given in the ordinary course of the business of the applicable Borrower. The
Borrower shall send the Lender a copy of each credit memorandum in excess of
$100,000 as soon as issued. The Lender may, at all times when an Event of
Default exists hereunder, settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which the Lender considers advisable
and, in all cases, the Lender will credit the Borrower's loan account with only
the net amounts received by the Lender in payment of any Accounts.
6.10 Collection of Accounts. (a) Until the occurrence of an
Event of Default that is continuing, Borrower shall collect all Accounts, shall
receive all payments relating to Accounts, and shall promptly deposit all such
collections into a Payment Account established for the account of the Borrower
at a bank acceptable to the Borrower and the Lender. All collections relating to
Accounts received in any such Payment Account or directly by the Borrower or the
Lender, and all funds in any Payment Account or other account to which such
collections are deposited, shall be the sole property of the Lender and subject
to the Lender's sole control. After the occurrence of an Event of Default that
is continuing, the Lender may, at any time, notify obligors that the Accounts
have been assigned to the Lender and of the Security Interest therein, and may
collect them directly and charge the collection costs and expenses to the
Borrower's loan account. After the occurrence of an Event of Default that is
continuing, Borrower, at Lender's request, shall execute and deliver to the
Lender such documents as the Lender shall require to grant the Lender access to
any post office box in which collections of Accounts are received.
(a) If sales of Inventory are made for cash, Borrower shall
immediately deliver to the Lender the identical checks, cash, or other forms of
payment which the Borrower receives.
(b) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrower's loan account (conditional upon final collection)
after allowing one (1) Business Day for collection.
(c) In the event the Borrower repays all of the Obligations
upon the termination of this Agreement, other than through the Lender's receipt
of payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrower's loan
account one (1) Business Day after the Lender's receipt thereof.
6.11 Inventory. Borrower represents and warrants to the Lender
that all of the Inventory is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of business, and is and will be fit for such purposes. The Borrower will cause
the Inventory to be kept in good and marketable condition, at their own expense.
Borrower agrees that all Inventory produced by the Borrower in the United States
will be produced in accordance with the Federal Fair Labor Standards Act of
1938. The Borrower will conduct a physical count of the Inventory at least once
per Fiscal Year, except as otherwise agreed to between the Lender and the
Borrower, and will, upon request of the Lender, supply the Lender with a copy of
such count accompanied by a report of the value of such Inventory (valued at the
lower or cost,
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on a first-in, first-out basis, or market value). The Borrower will not, without
the Lender's written consent, allow any Inventory to be sold on a ▇▇▇▇ and hold
basis (except as provided in subsection (xiii) of the definition of Eligible
Accounts set forth in this Agreement), guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis.
6.12 Documents and Instruments. Borrower represents and
warrants to the Lender that: (a) all Documents and Instruments describing,
evidencing, or constituting Collateral, and all signatures and endorsements
thereon, are and will be complete, valid, and genuine and (b) all goods
evidenced by such Documents and Instruments were, at the time of their sale,
owned by the Borrower free and clear of all Liens other than Permitted Liens.
6.13 Right to Cure. The Lender may in its sole discretion pay
any amount or do any act required of Borrower hereunder in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Security
Interest, and which the Borrower fails to pay or do, including, without
limitation, payment of any judgment against the Borrower, any insurance premium,
any warehouse charge, processing charge, any landlord's claim, and any other
Lien upon the Collateral. All payments that the Lender makes under this Section
6.13 and all out-of-pocket costs and expenses that the Lender pays or incurs in
connection with any action, taken by it hereunder shall be charged to the
Borrower's loan account; provided that Lender will make a good faith effort to
notify the Borrower and provide the Borrower with a written, itemized invoice
covering such charge. Any payment made or other action taken by the Lender under
this Section 6.13 shall be without prejudice to any right Lender may have to
assert an Event of Default hereunder and to proceed accordingly.
6.14 Power of Attorney. Borrower appoints the Lender and the
Lender's designees as the Borrower's attorney, with power: (a) to endorse the
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Lender's possession; (b) to sign the
Borrower's name on any invoice, ▇▇▇▇ of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records and on verifications of Accounts to Account Debtors; (c) to notify the
post office authorities, when an Event of Default exists, to change the address
for delivery of the Borrower's mail to an address designated by the Lender and
to receive, open and dispose of all mail addressed to the Borrower; (d) to send
requests for verification of Accounts to Account Debtors; and (e) to do all
things necessary to carry out this Agreement. The Borrower ratifies and approves
all acts of such attorney. Neither the Lender nor the attorney will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable until this
Agreement has been terminated and the Obligations have been fully satisfied.
6.15 Lender's Rights, Duties, and Liabilities. Borrower
assumes all responsibility and liability arising from or relating to the use,
sale or other disposition of the Collateral. Neither the Lender nor any of its
officers, directors, employees, and agents shall be liable or responsible in any
way for the safekeeping of any of the Collateral, or for
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any act or failure to act with respect to the Collateral, or for any loss or
damage thereto, or for any diminution in the value thereof, or for any act of
default by any warehouseman, carrier, forwarding agency or, other person
whomsoever, all of which shall be at the Borrower's sole risk. The Obligations
shall not be affected by any failure of the Lender to take any steps to perfect
the Security Interest or to collect or realize upon the Collateral, nor shall
loss of or damage to the Collateral release the Borrower from any of the
Obligations. After the occurrence of an Event of Default that has not been cured
or otherwise waived by Lender, the Lender may (but shall not be required to),
without notice to or consent from Borrower, ▇▇▇ upon or otherwise collect,
extend the time for payment of, modify or amend the terms of, compromise or
settle for cash or credit, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take other action with respect to
the Collateral, any security therefor, any agreement relating thereto, any
insurance applicable thereto, or any Person liable directly or indirectly in
connection with any of the foregoing, without discharging or otherwise affecting
the liability of the Borrower for the Obligations.
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
7.1 Books and Records. Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP. The
Borrower shall, by means of appropriate entries, reflect in such accounts and in
all Financial Statements proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of Property and bad debts,
all in accordance with GAAP. The Borrower shall maintain at all times books and
records pertaining to the Collateral in such detail, form, and scope as the
Lender shall reasonably require, including without limitation records of: (a)
all payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
7.2 Financial Information. Borrower shall promptly furnish to
the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is authorized
to obtain such information directly from them. Without limiting the foregoing,
Borrower will furnish to the Lender, in such detail as the Lender shall request,
the following:
(a) As soon as available, but in any event not later than
ninety (90) days after the close of each Fiscal Year, audited consolidated and
unaudited consolidating balance sheet, statement of income and expense, retained
earnings, and statement of cash flows and stockholders' equity for the LSB and
its Subsidiaries (the "LSB Group") for such Fiscal Year, and the accompanying
notes thereto, setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting the financial
position and the results of operations of the LSB Group as at the date thereof
and for the Fiscal Year then ended, and prepared in accordance with GAAP. The
audited statements shall be examined in accordance with generally accepted
auditing standards by, and accompanied by a report thereon unqualified as to
scope of, independent certified public accountants selected by LSB and
reasonably satisfactory to the Lender.
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(b) As soon as available, but in any event not later than
forty-five (45) days after the close of each Fiscal Quarter other than the
fourth quarter of a Fiscal Year, unaudited consolidated and consolidating
balance sheets of the LSB Group as at the end of such quarter, and consolidated
and consolidating unaudited statements of income and expense and consolidated
statements of cash flows for the LSB Group for such quarter and for the period
from the beginning of the Fiscal Year to the end of such quarter, together with
a report of Capital Expenditures for such Fiscal Quarter, all in reasonable
detail, fairly presenting the financial position and results of operation of the
LSB Group as at the date thereof and for such periods, prepared in accordance
with GAAP consistent with the audited Financial Statements required pursuant to
Section 7.2(a). Such statements shall be certified to be correct by the chief
financial officer or an executive officer of LSB, subject to normal year-end
adjustments.
(c) As soon as available, but in any event not later than
thirty (30) days after the end of each month, unaudited consolidated balance
sheets of the LSB Group as at the end of such month, and consolidated and
consolidating unaudited statements of income and expenses for the LSB Group for
such month and for the period from the beginning of the Fiscal Year to the end
of such month, all in reasonable detail (although not as detailed as the reports
required under Sections 7.2(a) and 7.2(b), fairly presenting the financial
position and results of operation of the LSB Group as at the date thereof and
for such periods, and prepared in accordance with GAAP consistent with the
audited Financial Statements required pursuant to Section 7.2(a). Such
statements shall be certified to be correct by the chief financial officer,
treasurer or chief accounting officer of LSB, subject to normal year end
adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have reviewed
and are familiar with the Loan Documents and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted an Event of Default, except for those, if any, described in
reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 7.2(a) and 7.2(b), a
certificate of the chief financial officer, treasurer or chief accounting
officer of the Borrower stating that, except as explained in reasonable detail
in such certificate, (A) nothing has come to the attention of such officer that
would lead such officer to believe that all of the representations, warranties
and covenants of the Borrower contained in this Agreement and the other Loan
Documents are not correct and complete as of the date of such certificate and
(B) no Event of Default then exists or existed during the period covered by such
Financial Statements. If such certificate discloses that a representation or
warranty is not correct or complete, or that a covenant has not been complied
with, or that an Event of Default existed or exists, such certificate shall set
forth what action the Borrower has taken or proposes to take with respect
thereto.
(f) No sooner than ninety (90) days and no less than thirty
(30) days prior to the beginning of each Fiscal Year, projected consolidated and
consolidating balance sheets, statements
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of income and expense, and statements of cash flow for the Borrower and
Subsidiaries as at the end of and for each Fiscal Quarter of such Fiscal Year.
(g) Promptly upon their becoming available, copies of each
proxy statement, financial statement and report which LSB sends to its
stockholders or files with the Securities and Exchange Commission.
(h) Promptly after filing with the PBGC and the IRS a copy of
each annual report or other filing filed with respect to each Plan of the
Borrower or any Related Company.
(i) Such additional, reasonable information as the Lender may
from time to time reasonably request regarding the financial and business
affairs of the Borrower or the Subsidiaries.
7.3 Notices to Lender. Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Within two Business Days after becoming aware of the
existence of any Event of Default.
(b) Within two Business Days after becoming aware that the
holder of any Debt in excess of $1,000,000 has given notice or taken any action
with respect to a claimed default.
(c) Within five Business Days after a responsible officer of
LSB becomes aware of any change which LSB deems to be a material adverse change
in the Borrower's Property, business, operations, or condition (financial or
otherwise).
(d) Within five Business Days after a responsible officer of
LSB becomes aware of any pending or threatened action, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Public Authority, which, in the opinion of such officer, would materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).
(e) Within two Business Days after becoming aware of any
pending or threatened strike, work stoppage, material unfair labor practice
claim, or other material labor dispute affecting the Borrower.
(f) Within five Business Days after a responsible officer of
LSB becomes aware of any violation of any law, statute, regulation, or ordinance
of a Public Authority applicable to Borrower, which, in the opinion of such
officer, would materially and adversely affect the Collateral, the repayment of
the Obligations, the Lender's rights under the Loan Documents, or the Borrower's
Property, business, operations, or condition (financial or otherwise).
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(g) Within five Business Days after a responsible officer of
LSB becomes aware of any violation or any investigation of a violation by the
Borrower of Environmental Laws which, in the opinion of such officer, would
materially and adversely affect the Borrower's Property, Collateral, business,
operation or condition (financial or otherwise).
(h) Within five Business Days after a responsible officer of
LSB becomes aware of any Termination Event, accompanied by any materials
required to be filed with the PBGC with respect thereto; immediately after the
Borrower's receipt of any notice concerning the imposition of any withdrawal
liability under Section 4042 of ERISA with respect to a Plan; immediately upon
the establishment of any Pension Plan not existing at the Closing Date or the
commencement of contributions by the Borrower to any Pension Plan to which the
Borrower was not contributing at the Closing Date; and immediately upon becoming
aware of any other event or condition regarding a Plan or the Borrower's or a
Related Company's compliance with ERISA, which, in the opinion of such officer,
would materially and adversely affect the Borrower's Property, business,
operation or condition (financial or otherwise).
(i) Thirty (30) days prior to the Borrower changing its name.
Each notice given under this Section 7.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrower
has taken or proposes to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
Borrower continuously warrants and represents to the Lender,
at all times during the term of this Agreement and until all Obligations have
been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing in the exercise of its reasonable discretion:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. The Borrower has the corporate power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents, to incur the Obligations, and to grant the Security Interest. The
Borrower has taken all necessary corporate action to authorize its execution,
delivery, and performance of this Agreement and the other Loan Documents. No
consent, approval, or authorization of, or filing with, any Public Authority,
and no consent of, any other Person, is required in connection with the
Borrower's execution, delivery, and performance of this Agreement and the other
Loan Documents, except for (a) those already duly obtained, (b) those required
to perfect the Lender's Security Interest, and (c) the compliance with any of
the conditions precedent set forth in Sections 10.4 and 10.10 hereof. This
Agreement and the other Loan Documents have been duly executed and delivered by
the Borrower and constitute the legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with its terms without defense,
setoff, or counterclaim. The Borrower's execution, delivery, and performance of
this Agreement and the other Loan Documents do not and will not conflict with,
or constitute a violation or breach of, or constitute a default under, or result
in the creation or imposition of any Lien upon the Property of the Borrower
(except as contemplated by this Agreement and the other Loan Documents) by
reason of the terms of (a) any material mortgage, lease, agreement, or
instrument to which the Borrower is a party or
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which is binding upon it, (b) any judgment, law, statute, rule or governmental
regulation applicable to the Borrower, or (c) the Certificate or Articles of
Incorporation or By-Laws of the Borrower.
8.2 Validity and Priority of Security Interest. The provisions
of this Agreement and the other Loan Documents create legal and valid Liens on
all the Collateral in the Lender's favor and when all proper filings,
recordings, and other actions necessary to perfect such Liens have been made or
taken such Liens will constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral, except for
Permitted Liens, securing all the Obligations and enforceable against the
Borrower and all third parties.
8.3 Organization and Qualification. Borrower is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation; (ii) is qualified to do business as a foreign
corporation and is in good standing in each state where, because of the nature
of its activities or properties, such qualification is required, except where
the failure to so qualify would not have a material adverse effect on the
Borrower; and (iii) has all requisite corporate power and authority to conduct
its business and to own its Property.
8.4 Corporate Name; Prior Transactions. The Borrower has not,
during the past five years, been known by or used any other corporate or
fictitious name, or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any of its
Property out of the ordinary course of business.
8.5 Financial Statements and Projections.
(a) LSB has delivered to the Lender the audited consolidated
balance sheet and related statements of income, retained earnings, statements of
cash flows, and changes in stockholders' equity for LSB, as of December 31, 1998
and for the Fiscal Year then ended, accompanied by the report thereon of LSB's
independent certified public accountants. LSB has also delivered to the Lender
the unaudited consolidated balance sheets and related statements of income and
cash flows for LSB, as at _______________, 200__ and for the _____ months then
ended. Such financial statements are attached hereto as Exhibit G-1. All such
financial statements have been prepared in accordance with GAAP and present
accurately and fairly the Borrower's financial position as at the dates thereof
and its results of operations for the periods then ended.
(b) The Latest Forecasts, attached hereto as Exhibit G-2,
represent the Borrower's best estimate of the Borrower's future financial
performance for the periods set forth therein. The Latest Forecasts have been or
will be prepared on the basis of certain assumptions, which the Borrower
believes are fair and reasonable in light of current and reasonably foreseeable
business conditions; provided, however, that although such forecasts represent
the Borrower's best estimate, the Borrower makes no representation that it will
achieve such forecasts.
8.6 Capitalization. Borrower's authorized capital stock
consists of 300 shares of Common Stock, par value $.10 per share.
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8.7 Solvency. Borrower is solvent prior to and after giving
effect to the making of the Revolving Loans, and after taking into account
Intercompany Accounts. If at any time Borrower becomes insolvent, LSB shall have
a period of up to ten (10) Business Days after LSB learns of Borrower's
insolvency within which to recapitalize Borrower in order to restore Borrower to
a solvent state.
8.8 Title to Property. Except for Permitted Liens, and except
for Property which the Borrower leases, the Borrower has, to its knowledge, good
and marketable title in fee simple to the real property listed in Exhibit H and
good, indefeasible, and merchantable title to all of its other Property free of
all Liens except Permitted Liens.
8.9 Real Property; Leases. Exhibit H hereto is a correct and
complete list of all real property owned by the Borrower, and all leases and
subleases of real property by the Borrower as lessee or sublessee where
Collateral is located. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect and no
material default by any party to any such lease or sublease exists.
8.10 Proprietary Rights. Exhibit B hereto is a correct and
complete list of all of the Proprietary Rights owned by Borrower. None of the
Proprietary Rights is subject to any licensing agreement or similar arrangement
except as set forth on Exhibit B. To the Borrower's knowledge, none of the
Proprietary Rights infringes on or conflicts with any other Person's Property.
The Proprietary Rights described on Exhibit B constitute all of the Property of
such type necessary to the current and anticipated future conduct of the
Borrower's business.
8.11 Trade Names and Terms of Sale. All trade names or styles
under which the Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Exhibit I
hereto. The terms of sale on which such sales of Inventory will be made are set
forth on Exhibit I.
8.12 Litigation. Except as set forth on Exhibit J or as
described in reports filed by LSB with the SEC, there is no pending or, to the
Borrower's knowledge, threatened suit, proceeding, or counterclaim by any
Person, or investigation by any Public Authority, or any basis for any of the
foregoing, which would have a material adverse effect on the Borrower.
8.13 Labor Disputes. Except as set forth on Exhibit K or as
described in reports filed by LSB with the Securities and Exchange Commission:
(a) there is no collective bargaining agreement or other labor contract covering
employees of the Borrower; (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this Agreement; (c) no
union or other labor organization is seeking to organize, or to be recognized
as, a collective bargaining unit of employees of the Borrower; and (d) there is
no pending or, to the Borrower's knowledge, threatened strike, work stoppage,
material unfair labor practice claims, or other material labor dispute which
would have a material adverse effect on the Borrower.
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8.14 Environmental Laws. Except as disclosed on Exhibit M
hereto, and as hereafter disclosed by Borrower to Lender in writing, and to the
Borrower's knowledge:
(a) All environmental permits, certificates, licenses,
approvals, registrations and authorizations ("Permits") required under all
Environmental Laws in connection with the business of the Borrower have been
obtained unless the failure to obtain such Permits would not have a material
adverse effect on the Borrower.
(b) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental entity with respect to any
generation, treatment, storage, recycling, transportation or disposal of any
hazardous or toxic waste (including petroleum products and radioactive
materials) generated or used ("Hazardous Substances") by the Borrower, which
would have a material adverse effect on the LSB Borrower;
(c) Borrower has not received any request for information that
is likely to lead to a claim, any notice of claim, demand or other notification
that the Borrower is or may be potentially responsible with respect to any clean
up of any threatened or actual release of any Hazardous Substance;
(d) There are no underground storage tanks, active or
abandoned, at any property now owned, operated or leased by the Borrower.
(e) Borrower has not knowingly transported any Hazardous
Substances to any location which is listed on the National Priority List under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), which is the subject of any federal or state
enforcement actions which may lead to claims against Borrower for clean up
costs, remedial work, damages to natural resources or for personal injury
claims, including, but not limited to, claims under CERCLA which would have a
material adverse effect on the Borrower Subsidiaries.
(f) No written notification of a release of Hazardous
Substance has been filed by or on behalf of the Borrower or in relation to any
Property now owned, operated or leased by the Borrower or previously owned,
operated or leased by the Borrower at the time such property was so owned,
operated or leased. No such Property is listed or proposed for listing on the
National Priority List promulgated pursuant to CERCLA, or on any similar state
list of sites requiring investigation or clean up.
(g) There are no environmental Liens on any material
properties owned or leased by the Borrower and no governmental actions have been
taken or are in process or pending which could subject any of such Properties to
such Liens.
(h) The Borrower shall promptly forward a copy to Lender of
any environmental written inspections, investigations or studies prepared by or
to be prepared by the Borrower relating
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to Properties now owned, operated or leased by the Borrower; provided, however,
that Borrower makes no representation or warranty with respect to environmental
inspections, investigations, studies, audits, tests, reviews or other analyses
conducted by or on behalf of Lender.
8.15 No Violation of Law. Except as disclosed in Exhibit J or
in reports filed by LSB with the SEC, to the Borrower's knowledge, the Borrower
is not in violation of any law, statute, regulation, ordinance, judgment, order,
or decree applicable to it which violation would have a material adverse effect
on the Borrower.
8.16 No Default. The Borrower is not in default with respect
to any note, loan agreement, mortgage, lease, or other agreement to which the
Borrower is a party or bound, where the amount owed by Borrower under such note,
loan agreement, mortgage, lease, or other agreement exceeds $750,000.
8.17 Plans. Each Plan has been maintained at all times in
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code. All Pension Plans are listed on Exhibit L, and those, if
any, which are a Multi-employer Plan are designated as such, and a copy of each
such Pension Plan which has been requested in writing by Lender has been
furnished to Lender. Except as set forth on Exhibit L, no Pension Plan has
incurred any accumulated funding deficiency, as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code, whether or not waived, which would have a
material adverse effect on the LSB Group, taken as a whole. Except as set forth
on Exhibit L, each Pension Plan, which is intended to be a qualified Pension
Plan under Section 401(a) of the Code, as currently in effect has received a
favorable determination letter from the Internal Revenue Service finding that
the current form of the Plan is qualified under Section 401(a) of the Code and
the trust related thereto is exempt from federal income tax under Section 501(a)
of the Code. The Borrower has not incurred any liability to the PBGC other than
the payment of premiums, and there are no premium payments which have become
due, are unpaid, and the non-payment of which would have a material adverse
effect on the Borrower. Neither LSB nor any of its Subsidiaries, nor any
fiduciary of or trustee to any Plan has breached any of the responsibilities,
obligations or duties imposed on it under the terms of the Plan or by ERISA with
respect to any Plan the breach of which would have a material adverse effect on
the Borrower and its Subsidiaries, taken as a whole. LSB has established
reserves on its books to provide for the benefits earned and other liabilities
accrued under each such Plan in amounts sufficient to substantially provide for
such benefits and liabilities which have not been funded through the trust, if
any, established for such Plan.
8.18 Taxes. The Borrower has filed all tax returns and other
reports which it was required by law to file on or prior to the date hereof and
has paid all taxes, assessments, fees, and other governmental charges, and
penalties and interest, if any, against it or its Property, income, or
franchise, that are due and payable, except such Taxes which are being contested
in good faith and for which appropriate reserves have been established in
connection therewith, or for which an extension as to the date of filing has
been authorized.
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8.19 Use of Proceeds. None of the transactions contemplated in
this Agreement (including, without limitation, the use of certain proceeds from
such loans) will violate or result in the violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations T, U and X of the Board of
Governors of the Federal Reserve System ("Federal Reserve Board"), 12 C.F.R.,
Chapter II. Borrower does not own or intend to carry or purchase any "margin
stock" within the meaning of said Regulation U. None of the proceeds of the
loans will be used, directly or indirectly, to purchase or carry (or refinance
any borrowing, the proceeds of which were used to purchase or carry) any
"security" within the meaning of the Securities Exchange Act of 1934, as
amended.
8.20 Private Offerings. Borrower has not, directly or
indirectly, offered the Revolving Loans for sale to, or solicited offers to buy
part thereof from, or otherwise approached or negotiated with respect thereto
with, any prospective purchaser other than Lender. Borrower hereby agrees that
neither it nor anyone acting on its behalf has offered or will offer the
Revolving Loan or any part thereof or any similar securities for issue or sale
to or solicit any offer to acquire any of the same from anyone so as to bring
the issuance thereof within the provisions of Section 5 of the Securities Act of
1933, as amended.
8.21 Broker's Fees. Borrower represents and warrants to Lender
that, with respect to the financing transaction herein contemplated, no Person
is entitled to any brokerage fee or other commission as a result of acts by the
Borrower and Borrower agrees to indemnify and hold Lender harmless against any
and all such claims if such claim is due to the acts of the Borrower.
8.22 No Material Adverse Change. No material adverse change
has occurred in the Property, business, operations, or conditions (financial or
otherwise) of the Borrower, since the date of the most recent Financial
Statements delivered to the Lender, except as otherwise disclosed in the reports
filed by LSB with the Securities and Exchange Commission, if any.
8.23 Debt. After giving effect to the making of each Revolving
Loan, the Borrower has no Debt except Permitted Debt.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. BORROWER covenants that, so long
as any of the Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. The Borrower, no later than
ten days after such payments become due, shall: (a) file when due (including
extensions) all tax returns and other reports which it is required to file, pay
when due all taxes, fees, assessments and other governmental charges against it
or upon its Property, income, and franchises, make all required withholding and
other tax deposits, and establish adequate reserves for the payment of all such
items, and shall provide to the Lender, upon request, satisfactory evidence of
its timely compliance with the foregoing; and (b) pay all Debt owed by it within
normal business terms and consistent with past practices; provided, however,
that the Borrower need not pay any tax, fee, assessment, governmental charge, or
Debt, or perform or discharge any other obligation, that it is contesting in
good faith by appropriate proceedings diligently pursued.
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9.2 Corporate Existence and Good Standing. The Borrower shall
maintain its corporate existence and its qualification and good standing in all
states necessary to conduct its business and own its Property, except where the
failure to so qualify would not have a material adverse effect on the Borrower,
and shall obtain and maintain all licenses, permits, franchises and governmental
authorizations necessary to conduct its business and own its Property.
9.3 Maintenance of Property and Insurance. The Borrower shall:
(a) maintain all of its Property necessary and material in its business in good
operating condition and repair, ordinary wear and tear excepted, provided,
however, that Borrower shall have a period of ten (10) days after learning that
repair is necessary within which to repair any Property which has not been so
maintained before an Event of Default shall be deemed to have occurred; and (b)
in addition to the insurance required by Section 6.7, maintain with financially
sound and reputable insurers such other insurance with respect to its Property
and business against casualties and contingencies of such types (including,
without limitation, business interruption, public liability, product liability,
and larceny, embezzlement or other criminal misappropriation), and in such
amounts as is customary for Persons of established reputation engaged in the
same or a similar business and similarly situated, naming the Lender, at its
request, as additional insured under each such policy as to the Collateral.
9.4 Environmental Laws. Except as disclosed to Lender in
writing prior to the Closing Date in connection with Section 8.14, the Borrower
will use all reasonable efforts to conduct its business in substantial
compliance with all Environmental Laws applicable to it, including, without
limitation, those relating to the generation, handling, use, storage, and
disposal of hazardous and toxic wastes and substances. The Borrower shall take
prompt and appropriate action to respond to any noncompliance with Environmental
Laws and shall regularly report to the Lender on such response. Without limiting
the generality of the foregoing, whenever there is potential noncompliance with
any Environmental Laws, the Borrower shall, at the Lender's request and the
Borrower's expense: (a) cause an independent environmental engineer acceptable
to the Lender to conduct such tests of the site where the Borrower's
noncompliance or alleged noncompliance with Environmental Laws has occurred and
prepare and deliver to the Lender a report setting forth the results of such
tests, a proposed plan for responding to any environmental problems described
therein, and an estimate of the costs thereof; and (b) provide to the Lender a
Supplemental report of such engineer whenever the scope of the environmental
problems, or the Borrower's response thereto or the estimated costs thereof,
shall materially change.
9.5 Mergers, Consolidations, Acquisitions, or Sales. The
Borrower shall not enter into any transaction of merger, reorganization, or
consolidation in which Borrower is not the survivor, or transfer, sell, assign,
lease, or otherwise dispose of all or substantially all of its Property, or wind
up, liquidate or dissolve, or agree to do any of the foregoing, except sales of
Inventory in the ordinary course of its business.
9.6 Guaranties. The Borrower shall not make, issue, or become
liable on any secured Guaranty, except Guaranties in favor of the Lender and
endorsements of instruments for deposit.
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9.7 Debt. Borrower shall not incur or maintain any Debt other
than Permitted Debt.
9.8 Prepayment. The Borrower shall not voluntarily prepay any
Debt, except the Obligations in accordance with the terms of this Agreement.
9.9 Transactions with Affiliates. Except (a) as set forth
below, or (b) as otherwise provided in this Agreement, the Borrower shall not
sell, transfer, distribute, or pay any money or Property to any Affiliate, or
lend or advance money or Property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness,
or any Property, of any Affiliate, or become liable on any secured Guaranty of
the indebtedness, dividends, or other obligations of any Affiliate, except
nothing contained herein shall limit or restrict the Borrower from (i)
performing any agreements entered into with an Affiliate prior to the date
hereof, or (ii) engaging in other transactions with Affiliates in the normal
course of business, in amounts and upon terms disclosed to the Lender, and which
are no less favorable to the Borrower than would be obtainable in a comparable
arm's length transaction with a third party who is not an Affiliate, or (iii)
borrowing funds from LSB in amounts not to exceed in the aggregate $500,000 more
than the amounts owed to LSB and outstanding as of April 15, 2001.
9.10 Plans and Compensation. The Borrower shall not take any
action, or shall fail to take any action, that will cause or be reasonably
expected to cause any representation or warranty contained in Section 8.17
(other than the listing of Pension Plans on Exhibit L), if made on and again as
of any date on or after the date of this Agreement, to not be true and, without
limitation and without excusing such violation, if such a prohibited action or
inaction occurs or fails to occur, Borrower shall notify Lender in writing of
the nature of the resulting consequences or expected consequences, and a
description of the action Borrower is taking or proposing to take with respect
thereto and, when known, any action taken by the Internal Revenue Service of the
Department of Labor, or the PBGC, with respect thereto.
9.11 Liens. The Borrower shall not create, incur, assume, or
permit to exist any Lien on any Property now owned or hereafter acquired by the
Borrower, except Permitted Liens.
9.12 New Subsidiaries. The Borrower shall not, directly or
indirectly, organize or acquire any new subsidiary which would have an interest
in the Collateral.
9.13 Distributions and Restricted Investments. Borrower shall
not (a) directly or indirectly declare or make, or incur any liability to make,
any Distribution, or (b) make any Restricted Investments except Borrower may
make Distributions and Restricted Investments to LSB and its Affiliates in an
amount not to exceed $500,000 plus the amount of existing Distributions and
Restricted Investments as of April 15, 2001.
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9.14 Capital Expenditures. Borrower shall not make or incur
any Capital Expenditure if, after giving effect thereto, the aggregate amount of
all Capital Expenditures Borrower during the Fiscal Year would exceed $100,000.
9.15 Further Assurances. The Borrower shall execute and
deliver, or cause to be executed and delivered, to the Lender such documents and
agreements, and shall take or cause to be taken such actions, as the Lender may,
from time to time, reasonably request to carry out the terms and conditions of
this Agreement and the other Loan Documents.
10. CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lender to
make each Revolving Loan or to provide for the issuance of any Letter of Credit
shall be subject to the conditions precedent that on the date of any such
extension of credit, the following statements shall be true, and the acceptance
by Borrower of any extension of credit shall be deemed to be a statement to the
effect set forth in clauses (i) and (ii), with the same effect as the delivery
to the Lender of a certificate signed by the chief executive officer and chief
financial officer of the Borrower, dated the date of such extension of credit,
stating that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all material
respects on and as of the date of such extension of credit as though
made on and as of such date, except to the extent the Lender has been
notified by the Borrower that any representation or warranty is no
longer correct and the reason therefor and the Lender has explicitly
accepted in writing such disclosure in the exercise of its reasonable
discretion; and
(ii) No Event has occurred and is continuing, or
would result from such extension of credit, which constitutes an Event
of Default.
11. DEFAULT; REMEDIES.
11.1 Events of Default. It shall constitute an event of
default ("Event of Default") if any one or more of the following shall occur for
any reason:
(a) any failure by Borrower to make payment of principal,
interest, fees or premium on any of the Obligations when due;
(b) any representation or warranty made by Borrower in this
Agreement, any of the other Loan Documents, any Financial Statement, or any
certificate furnished by Borrower at any time to the Lender shall prove to be
untrue in any material respect as of the date when made or furnished;
(c) default shall occur in the observance or performance of
any of the covenants and agreements contained in this Agreement, or in any of
the other Loan Documents, or if any such agreement or document shall terminate
(other than in accordance with its terms or the terms hereof
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or with the written consent of the Lender) or become void or unenforceable
without the written consent of the Lender other than as a direct result of any
conduct solely on the part of the Lender;
(d) any default by Borrower under any material agreement or
instrument (other than an agreement or instrument evidencing the lending of
money), which default would have a material adverse effect on the Borrower, and
such default continues for thirty (30) days after such breach first occurs;
provided, however, that such grace period shall not apply, and an Event of
Default shall exist, promptly upon such breach, if such breach may not, in
Lender's reasonable determination, be cured by Borrower during such thirty (30)
day grace period;
(e) any default by Borrower in any payment of principal of or
interest on any indebtedness (other than the Obligations and Intercompany
Accounts) for borrowed money where the then outstanding amount exceeds $500,000
beyond any period of grace provided with respect thereto or in the performance
of any other agreement, term or condition contained in any agreement under which
any such obligation is created if (i) the effect of such default is to cause or
permit the holder or holders of such obligation to cause, such obligation to
become due prior to its stated maturity, and (ii) the effect of such default
would have a material adverse effect on the Borrower.
(f) Borrower shall make a general assignment for benefit of
creditors; or any proceeding shall be instituted by Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property or Borrower shall take any corporate action
to authorize any of the actions set forth above in this Subsection 11.1(f).
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced against Borrower seeking reorganization,
arrangement or readjustment of the Borrower's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing and remain
undismissed or unvacated for a period of sixty (60) days;
(h) a receiver, assignee, liquidator, trustee or similar
officer for Borrower for all or substantially all of its Property shall be
appointed involuntarily;
(i) Borrower shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in furtherance
thereof;
(j) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid other than by an action undertaken by
Lender;
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(k) one or more final judgments for the payment of money
aggregating in excess of $1,000,000 (not covered by insurance) shall be rendered
against Borrower, and LSB or Borrower shall fail to discharge the same within
thirty (30) days from the date of notice of entry thereof or to appeal therefrom
or reach a negotiated settlement in connection therewith;
(l) any loss, theft, damage or destruction of any item or
items of Collateral occurs which: (i) materially and adversely affects the
operation of the Borrower's business taken as a whole; or (ii) is material in
amount and is not adequately covered by insurance;
(m) any event or condition shall occur, or exist with respect
to a Plan that would, in the Lender's reasonable judgment, subject the Borrower
or any Subsidiary to any tax, penalty or other liabilities under the terms of
the Plan, under ERISA or under the Code which in the aggregate are material in
relation to the business, operations, Property or financial or other condition
of the Borrower;
(n) there occurs after the date hereof an Ownership Change (as
defined below) in LSB. For purposes of this Agreement, an "Ownership Change" in
LSB is deemed to have occurred if any Person (except ▇▇▇▇ ▇. ▇▇▇▇▇▇, members of
his Immediate Family [as defined below] and any entity controlled by ▇▇▇▇ ▇.
▇▇▇▇▇▇ or members of his Immediate Family), together with such Person's
affiliates and associates, is or becomes the beneficial owner, directly or
indirectly, of more than fifty percent (50%) of the outstanding Common Stock of
LSB. The term "Immediate Family" of any Person means the spouse, siblings,
children, mothers and mothers-in-law, fathers and fathers-in-law, sons and
daughters-in-law, daughters and sons-in-law, nieces, nephews, brothers and
sisters-in-law, sisters and brothers -in-law;
11.2 Remedies.
(a) If an Event of Default exists, the Lender may, without
notice to or demand on Borrower, do one or more of the following at any time or
times and in any order: (i) reduce the amount of or refuse to make Revolving
Loans and restrict or refuse to arrange for Letters of Credit; (ii) terminate
this Agreement; (iii) declare any or all Obligations to be immediately due and
payable (provided however that upon the occurrence of any Event of Default
described in Sections 11.1(f), 11.1(g), or 11.1(h), all Obligations shall
automatically become immediately due and payable); and (iv) pursue its other
rights and remedies under the Loan Documents and applicable law. The foregoing
shall not be construed to limit the Lender's discretion to take the actions
described in clause (i) of this subparagraph (a) at any other time.
(b) If an Event of Default exists: (i) the Lender shall have,
in addition to all other rights, the rights and remedies of a secured party
under the UCC; (ii) the Lender may, at any time, take possession of the
Collateral and keep it on the Borrower's premises, at no cost to the Lender, or
remove any part of it to such other place or places as the Lender may desire,
or, the Borrower shall, upon the Lender's demand, at the Borrower's cost,
assemble the Collateral and make it available to the Lender at a place
reasonably convenient to the Lender; and (iii) the Lender may sell and deliver
any Collateral at public or private sales, for cash, upon credit or otherwise,
at such prices
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and upon such terms as the Lender deems advisable, in its sole discretion, and
may, if the Lender deems it reasonable, postpone or adjourn any sale of the
Collateral by an announcement at the time and place of sale or of such postponed
or adjourned sale without giving a new notice of sale. Without in any way
requiring notice to be given in the following manner, Borrower agrees that any
notice by the Lender of sale, disposition or other intended action hereunder or
in connection herewith, whether required by the UCC or otherwise, shall
constitute reasonable notice to the Borrower if such notice is mailed by
registered or certified mail, return receipt requested, postage prepaid, or is
delivered personally against receipt, at least five (5) days prior to such
action to the Borrower's address specified in or pursuant to Section 13.10. If
any Collateral is sold on terms other than payment in full at the time of sale,
no credit shall be given against the Obligations until the Lender receives
payment, and if the buyer defaults in payment, the Lender may resell the
Collateral without further notice to the Borrower. In the event the Lender seeks
to take possession of all or any portion of the Collateral by judicial process,
Borrower irrevocably waives: (a) the posting of any bond, surety or security
with respect thereto which might otherwise be required; (b) any demand for
possession prior to the commencement of any suit or action to recover the
Collateral; and (c) any requirement that the Lender retain possession and not
dispose of any Collateral until after trial or final judgment. Borrower agrees
that the Lender has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. Following the occurrence
of an Event of Default that is continuing, the Lender is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, name, trade secrets, trade names, trademarks, and advertising matter
or any similar property, in completing production of, advertising or selling any
Collateral, and the Borrower's rights under all licenses and all franchise
agreements shall inure to the Lender's benefit, as long as such does not violate
in any manner such other loan agreements that may be in place at such time. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and second, in whatever order the Lender elects, to all
Obligations. The Lender will return any excess to the Borrower and the Borrower
shall remain liable for any deficiency.
(c) If an Event of Default occurs and is continuing, Borrower
hereby waives: (i) all rights to notice and hearing prior to the exercise by the
Lender of the Lender's rights to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without notice or
hearing, and (ii) all rights of set-off and counterclaim against Lender.
12. TERM AND TERMINATION. The term of this Agreement shall extend until
April 1, 2002 (the "Termination Date"). This Agreement shall automatically be
renewed thereafter for successive terms of one month each, unless this Agreement
is terminated as provided below. The Borrower shall have the right to terminate
this Agreement, without premium or penalty, at any time during the term hereof,
and the Lender shall have the right to terminate this Agreement at the end of
fifteen (15) days prior to the end of such term by registered or certified mail.
The Lender may also terminate this Agreement without notice upon an Event of
Default that has not been cured or otherwise waived to Lender's satisfaction.
Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations shall become immediately due and payable.
Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in
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full, the Lender shall retain all its rights and remedies hereunder (including,
without limitation, in all then existing and after-arising Collateral)."
13. MISCELLANEOUS.
13.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative. The Lender may, without
limitation, proceed directly against the Borrower to collect the Obligations
without any prior recourse to the Collateral.
13.2 No Implied Waivers. No act, failure or delay by the
Lender shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement, or any other
Loan Document, or of breach or default hereunder or thereunder, or of any right
or remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
13.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be effective only to such
extent, without invalidating the remainder of this Agreement.
13.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE
BEEN MADE IN THE STATE OF OKLAHOMA AND SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW
SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION.
13.5 Consent to Jurisdiction and Venue; Service of Process.
Borrower agrees that, in addition to any other courts that may have jurisdiction
under applicable laws, any action or proceeding to enforce or arising out of
this Agreement or any of the other Loan Documents may be commenced in the
appropriate court of the State of Oklahoma for Oklahoma County, or in the United
States District Court for the Western District of Oklahoma, and Borrower
consents and submits in advance to such jurisdiction and agrees that venue will
be proper in such courts on any such matter. Borrower hereby waives personal
service of process and agrees that a summons and complaint commencing an action
or proceeding in any such court shall be properly served and shall confer
personal jurisdiction if served by registered or certified mail to the Borrower.
Should the Borrower fail to appear or answer any summons, complaint, process or
papers so served within thirty (30) days after the mailing or other service
thereof, it shall be deemed in default and an order or judgment may be entered
against it as demanded or prayed for in such summons, complaint, process or
papers. The
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choice of forum set forth in this section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum, or the taking of any action
under this Agreement to enforce the same, in any appropriate jurisdiction.
13.6 Survival of Representations and Warranties. All of
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or its agents, but after the
Closing Date it is recognized that such representations and warranties may be
amended from time to time during the term of this Agreement by written agreement
between the Borrower to the Lender due to changes in circumstances.
13.7 Indemnification. BORROWER HEREBY INDEMNIFIES , DEFENDS
AND HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL ARISING
OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR PROCEEDINGS
(WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER STATUTES OR
REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES, ENVIRONMENTAL, OR
COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON
CONTRACT OR OTHERWISE) COMMENCED OR THREATENED, WHICH ARISE OUT OF OR ARE IN ANY
WAY BASED UPON THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY
UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR ANY ACT, OMISSION TO ACT, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO,
INCLUDING, WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE
FEES AND EXPENSES OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH
LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING, EXCEPT THAT THIS INDEMNIFICATION
SHALL NOT APPLY TO ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES, JUDGMENTS,
PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE LENDER,
AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, OR COUNSEL IF SUCH IS DUE TO AND
ARISES FROM OR IN CONNECTION WITH THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ANY OF THEM OR THE INTENTIONAL AND WRONGFUL BREACH OF THIS AGREEMENT BY LENDER.
Without limiting the foregoing, if, by reason of any suit or proceeding of any
kind, nature, or description against Borrower, or by Borrower or any other party
against Lender, which in Lender's sole discretion makes it advisable for Lender
to seek counsel for protection and preservation of its liens and security
assets, or to defend its own interest, such reasonable expenses and counsel fees
shall be allowed to Lender. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section 13.7 may be unenforceable because it
is violative of any law or public policy,
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Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all indemnified
matters incurred by Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination of this Agreement. All of the foregoing
costs and expenses shall be part of the Obligations and secured by the
Collateral.
13.8 Other Security and Guaranties. The Lender may, without,
notice or demand and without affecting Borrower's obligations hereunder, from
time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release any such endorser or guarantor, or any Person who has given any Lien in
any other collateral as security for the repayment of all or any part of the
Obligations, or any other Person in any way obligated to pay all or any part of
the Obligations.
13.9 Fees and Expenses. The Borrower shall pay to the Lender
on demand all costs and expenses that the Lender pays or incurs in connection
with the negotiation, preparation, consummation, administration, enforcement,
and termination of this Agreement and the other Loan Documents, including,
without limitation: (a) attorneys' and paralegals' fees and disbursements of
counsel to the Lender (including, without limitation, a reasonable estimate of
the allocable cost of in-house counsel); (b) costs and expenses (including
attorneys' and paralegals' fees and disbursements, including, without
limitation, a reasonable estimate of the allocable cost of in-house counsel) for
any amendment, supplement, waiver, consent, or subsequent closing in connection
with the Loan Documents and the transactions contemplated thereby; (c) costs and
expenses of lien and title searches and title insurance; (d) fees and other
charges for recording and filing financing statements and continuations, and
other actions to perfect, protect, and continue the Security Interest; (e) sums
paid or incurred to pay any amount or take any action required of the Borrower
under the Loan Documents that Borrower was obligated to pay or take under the
Loan Documents but failed to pay or take; (f) the expenses of $750 per Lender's
auditor per audit day plus actual costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, travel, lodging,
and meals, for inspections of the Collateral and the Borrower's operations by
the Lender's agents up to three times per year and whenever an Event of Default
exists; (g) costs and expenses of forwarding loan proceeds, collecting checks
and other items of payment, and establishing and maintaining Payment Accounts
and lock boxes; (h) all amounts that Borrower is required to pay under the
Letter of Credit Agreement; (i) costs and expenses of preserving and protecting
the Collateral; and (j) costs and expenses (including attorneys' and paralegals'
fees and disbursements and including, without limitation, a reasonable estimate
of the allocable cost of in-house counsel) paid or incurred to obtain payment of
the Obligations, enforce the Security Interest, sell or otherwise realize upon
the Collateral, and otherwise enforce the provisions of the Loan Documents, or
to defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and expenses
shall be charged to the Borrower's loan account as Revolving Loans.
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13.10 Notices. All notices, demands and requests that either
party is required or elects to give to the other shall be in writing, shall be
delivered personally against receipt, or sent by recognized overnight courier
service, or mailed by registered or certified mail, return receipt requested,
postage prepaid, and shall be addressed to the party to be notified as follows:
If to the Lender: Bank of America, N.A.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Ms. ▇▇▇▇▇ ▇▇▇▇▇
Executive Vice President, West Division Manager
with a copy to: Jenkens & ▇▇▇▇▇▇▇▇▇, A Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Borrower: LSB Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
President
with a copy to: LSB Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
with a copy to: LSB Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
General Counsel
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
13.11 Waiver of Notices. Unless otherwise expressly provided
herein, Borrower waives presentment, protest and notice of demand or dishonor
and protest as to any instrument, notice of intent to accelerate and notice of
acceleration, as well as any and all other notices to which it might otherwise
be entitled. No notice to or demand on the Borrower which the Lender may elect
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to give shall entitle the Borrower to any further notice or demand in the same,
similar or other circumstances.
13.12 Binding Effect; Assignment; Disclosure. The provisions
of this Agreement shall be binding upon and inure to the benefit of the
respective representatives, successors and assigns of the parties hereto:
provided, however, that no interest herein may be assigned by Borrower without
the prior written consent of the Lender. The rights and benefits of the Lender
hereunder shall, if the Lender so agrees, inure to any party acquiring any
interest in the Obligations or any part thereof. Borrower agrees that the Lender
may use the Borrower's name in advertising and promotional materials and in
conjunction therewith disclose the general terms of this Agreement.
13.13 Modification. THIS AGREEMENT IS INTENDED BY BORROWER AND
THE LENDER TO BE THE FINAL, COMPLETE, AND EXCLUSIVE EXPRESSION OF THE AGREEMENT
BETWEEN THEM. THIS AGREEMENT SUPERSEDES ANY AND ALL PRIOR ORAL OR WRITTEN
AGREEMENTS RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE, OR AMENDMENT OF ANY PROVISION OF THIS
AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND A
DULY AUTHORIZED OFFICER OF THE LENDER.
13.14 Counterparts. This Agreement may be executed in any
number of counterparts, and by the Lender and the Borrower in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
13.15 Captions. The captions contained in this Agreement are
for convenience only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
13.16 Right of Set-Off. Whenever an Event of Default exists
the Lender is hereby authorized at any time and from time to time, to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by Lender or any affiliate of the Lender and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations, whether or not then due and payable. Lender agrees promptly to
notify Borrower after any such set-off and application made by Lender, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
13.17 Participating Lender's Security Interests. If a
Participating Lender shall at any time with the Borrower's knowledge participate
with the Lender in the Loans, Borrower hereby grants to such Participating
Lender, and the Lender and such Participating Lender shall have and are hereby
given, a continuing lien on and security interest in any money, securities and
other property of the Borrower in the custody or possession of the Participating
Lender, including, the right of set-off,
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to the extent of the Participating Lender's participation in the Obligations,
and such Participating Lender shall be deemed to have the, same right of
set-off, to the extent of the Participating Lender's participation in the
Obligations under this Agreement, as it would have if it were a direct lender.
13.18 WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT GROWING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT JURY. TRIAL BY A JUDGE SITTING WITHOUT A JURY WILL FURTHER
RESULT IN THE AVOIDANCE OF DELAYS, A STREAMLINING OF THE PROCEEDINGS INVOLVED
AND, AS A RESULT, WILL MINIMIZE THE EXPENSE OF ANY SUCH LAWSUIT FOR THE BENEFIT
OF BORROWER AND LENDER. BORROWER HEREBY WAIVES TRIAL BY JURY, RIGHTS OF SET-OFF,
AND THE RIGHT TO IMPOSE COUNTERCLAIMS (EXCEPT FOR COMPULSORY COUNTERCLAIMS) IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT
OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL,
OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER
CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE BORROWER AND THE LENDER.
BORROWER HEREBY CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY
MADE.
13.19 AMENDMENT AND RESTATEMENT; LIMITATIONS OF SUBSIDIARY
LIABILITY; WAIVERS OF CLAIMS. THIS AGREEMENT AMENDS, EXTENDS AND RESTATES IN ITS
ENTIRETY THE SECOND AMENDED LOAN AGREEMENT. THE EXECUTION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH DOES NOT EXTINGUISH THE
INDEBTEDNESS OUTSTANDING IN CONNECTION THEREWITH NOR DOES IT CONSTITUTE A
NOVATION WITH RESPECT TO THE INDEBTEDNESS OUTSTANDING IN CONNECTION WITH THE
SECOND AMENDED LOAN AGREEMENT. BORROWER REPRESENTS AND WARRANTS THAT AS OF THE
CLOSING DATE OF THIS AGREEMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR
DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE SECOND AMENDED LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENTS. BORROWER WAIVES ANY AND ALL SUCH CLAIMS,
OFFSETS, DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO
THE CLOSING DATE OF THIS AGREEMENT.
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SIGNATURE PAGE 1 OF 2.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER":
SUMMIT MACHINE TOOL MANUFACTURING
CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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SIGNATURE PAGE 2 OF 2.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"LENDER":
BANK OF AMERICA, N.A.
By:
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
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EXHIBITS TO LOAN AGREEMENT
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT D - List of Borrower's Locations
EXHIBIT F - Subsidiaries and Affiliates
EXHIBIT G-1 - Financial Statements
EXHIBIT G-2 - Pro Forma Financial Statements
EXHIBIT H - Real Property Descriptions: Premises
EXHIBIT I - Trade Names, Trade Styles, Terms of Sale
EXHIBIT J - Pending Litigation
EXHIBIT K - Labor Matters
EXHIBIT L - ERISA Matters
EXHIBIT M - Schedule of Environmental Matters
EXHIBIT O - Amended and Restated Letter of Credit Financing
Agreement - Supplement to Second Amended and
Restated Loan and Security Agreement
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