<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1998
REGISTRATION NO. 333-
---------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CLIMACHEM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
OKLAHOMA 6749 73-1528549
- --------------------------------- ---- ----------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
16 SOUTH PENNSYLVANIA
OKLAHOMA CITY, OKLAHOMA 73107
TELEPHONE: (405) 235-4546
--------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
<TABLE>
<CAPTION>
JACK E. GOLSEN COPY TO:
<S> <C>
CHIEF EXECUTIVE OFFICER IRWIN H. STEINHORN, ESQ.
ClimaChem, Inc. Conner & Winters
16 South Pennsylvania 211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73107 Oklahoma City, Oklahoma 73102
Telephone: (405) 235-4546 Telephone: (405) 272-5711
- ---------------------------------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
</TABLE>
<TABLE>
<CAPTION>
Primary
Standard
Jurisdiction Industrial I.R.S. Employer
of Classification Identification
Exact Name of Additional Registrants* Incorporation Number Number
- ----------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
APR Corporation Oklahoma 3585 73-1415062
CHP Corporation Oklahoma 3585 73-1094496
Climate Master, Inc. Delaware 3585 93-0857025
Climate Mate Inc. Canada 3585 N/A
DSN Corporation Oklahoma 2819 73-1456545
El Dorado Chemical Company Oklahoma 2873 73-1183488
International Environmental Corporation Oklahoma 3585 73-0754306
KOAX Corp. Oklahoma 3585 73-1284158
LSB Chemical Corp. Oklahoma 7392 73-1207958
Northwest Financial Corporation Oklahoma 6749 73-1131584
Slurry Explosive Corporation Oklahoma 2892 73-1330903
The Environmental Group, Inc. Oklahoma 3585 73-1431586
The Environmental Group International England 3585 N/A
Limited
Total Energy Systems Limited (1) Australia 2892 N/A
T.E.S. Mining Services Pty. Ltd. (1) Australia 2892 N/A
Total Energy Systems (NZ) Limited (1) New Zealand 2892 N/A
Universal Tech Corporation Oklahoma 8731 73-1364261
- --------------------------------------------------------------------------------------------
</TABLE>
*Address and telephone number of principal executive offices are the same as
those of ClimaChem, Inc., except as indicated below.
(1) The address and telephone number of the principal executive offices of
Total Energy Systems Limited and its subsidiaries, T.E.S. Mining Services Pty.
Ltd. and Total Energy Systems (NZ), Ltd., are Irvieta House, Level 9, 172
Edwards Street, Brisbane, Queensland, Australia 4000; 617-3-221-4406.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
----------
practicable after this Registration Statement becomes effective.
- ---------------------------------------------------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box:
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
10 3/4% Series B Senior Notes
due 2007...................... $105,000,000 100% $105,000,000 $31,818.18
Guarantees of 10 3/4 Series B
Senior Notes due 2007......... $105,000,000 (2) (2) None
________________________________
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2) No further fee is payable pursuant to Rule 457(n).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
CLIMACHEM, INC.
CROSS REFERENCE SHEET PURSUANT TO
ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROS
------------- ----------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Outside Front Cover Pages
Back Cover Pages of Prospectus..........................
2. Inside Front and Outside Back Cover Pages of Inside Front cover Page; Outside Back Cover
Prospectus.............................................. Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and Summary; Risk Factors; Selected Financial
Other Information....................................... Data
4. Terms of the Transaction................................ Summary; The Exchange Offer; Description
of Notes; Certain Federal Income Tax
Considerations; Plan of Distribution
5. Pro Forma Financial Information......................... Summary; Selected Consolidated Financial
Data
6. Material Contracts with the Company Being Acquired. Not Applicable
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters...........
8. Interests of Named Experts.............................. Not Applicable
9. Disclosure of Commission Position on Indemni- Not Applicable
fication for Securities Act Liabilities.................
B INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants............. Not Applicable
11. Incorporation of Certain Information by Reference....... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants...... Not Applicable
13. Incorporation of Certain Information by Reference....... Not Applicable
14. Information with Respect to Registrants other than S-2 Summary; The Company; Capitalization;
or S-3 Registrants...................................... Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Companies............... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
16. Information with Respect to S-2 or S-3 Companies........... Not Applicable.
17. Information with Respect to Companies Other Than S-2 Not Applicable.
S-3 Companies..............................................
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are Not Applicable
to be Solicited............................................
19. Information if Proxies, Consents or Authorizations are Management; Certain Relationships and Related
not to be Solicited, or in an Exchange Offer............... Transactions; Security Ownership of Management
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 26, 1998
PROSPECTUS
FEBRUARY __, 1998
CLIMACHEM, INC.
OFFER TO EXCHANGE ITS 10 3/4% SERIES B SENIOR NOTES DUE 2007 FOR
ANY AND ALL OF ITS
OUTSTANDING 10 3/4% SENIOR NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1998, UNLESS EXTENDED
ClimaChem, Inc., an Oklahoma corporation (the "Company"), a wholly
owned subsidiary of LSB Industries, Inc., a Delaware corporation ("LSB"), is
engaged, through its subsidiaries, in the manufacture and sale of (i) chemical
products for the explosives, agricultural and industrial acids markets and (ii)
a broad range of hydronic fan coils and water source heat pumps as well as other
products in commercial and residential heating, ventilation and air conditioning
("HVAC Systems"). See "The Company." The Company hereby offers (the "Exchange
Offer"), upon the terms and conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 10 3/4% Series B
Senior Notes due 2007 (the "New Notes") registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which this Prospectus is a part, for each $1,000 principal amount of its
outstanding 10 3/4% Senior Notes due 2007 (the "Old Notes"), of which $105
million principal amount is outstanding. The Old Notes were sold by the Company
on November 26, 1997, to Wasserstein Perella Securities, Inc., who subsequently
resold the Old Notes to qualified institutional buyers pursuant to Rule 144A
under the Securities Act ("Initial Offering"). See "Initial Offering." The
form and terms of the New Notes are the same as the form and terms of the Old
Notes (which they replace), except the New Notes will bear a Series B
designation and will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not contain
certain provisions relating to liquidated damages which were included in the
terms of the Old Notes in certain circumstances relating to the timing of the
Exchange Offer. The New Notes will evidence the same debt as the Old Notes
(which they replace) and will be issued under and be entitled to the benefits of
an Indenture, dated November 26, 1997 (the "Indenture"), between the Company ,
the Guarantors (as defined) and Bank One, NA, as trustee (the "Trustee")
governing the Old Notes and the New Notes. The Old Notes and the New Notes are
sometimes referred to herein collectively as the "Notes." See "The Exchange
Offer" and "Description of Securities-Notes."
(COVER PAGE CONTINUED ON FOLLOWING PAGES)
SEE "RISK FACTORS," BEGINNING ON PAGE 17, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOME
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
-1-
<PAGE>
(COVER PAGE CONTINUED)
The Notes bear interest at a rate of 10 3/4% per annum, payable
semiannually on June 1 and December 1 of each year, commencing June 1, 1998.
The Notes will mature on December 1, 2007, and will not be subject to a sinking
fund requirement. The Notes will be redeemable by the Company, in whole or in
part, at any time on and after December 1, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined herein), if any, to the redemption date. Notwithstanding the foregoing,
at any time on or before December 1, 2000, the Company, at its option, may
redeem in the aggregate up to $35 million aggregate principal amount of the
Notes at 110.750% of the aggregate principal amount so redeemed plus accrued and
unpaid interest and Liquidated Damages (as defined), if any, to the redemption
date with the net proceeds of one or more Public Equity Offerings (as defined),
provided not less than $65 million aggregate original principal amount of the
Notes are outstanding immediately after the occurrence of any such redemption.
See "Description of Notes-Optional Redemption."
The New Notes will be, as the Old Notes (which they replace) are,
senior unsecured obligations of Company, and will, as the Old Notes (which they
replace), rank pari passu in right of payment to all existing and future senior
unsecured indebtedness of Company. The New Notes will be, as the Old Notes
(which they replace) are, fully and unconditionally guaranteed (the
"Guarantees"), on an unsecured senior basis by substantially all of the existing
and future subsidiaries of the Company (the "Guarantors"). El Dorado Nitrogen
Company ("EDNC"), a current subsidiary of the Company, is not a Guarantor. The
Notes and the Guarantees will be effectively subordinated to all existing and
future secured indebtedness of Company and its subsidiaries, and to all existing
and future secured and unsecured indebtedness of the subsidiaries of the Company
which are not Guarantors. The lender under the Revolving Credit Facility (as
defined) has a security interest in the accounts receivable, inventory,
proprietary rights, books and records, and proceeds thereof, of certain
subsidiaries of the Company that are borrowers and guarantors under the
Revolving Credit Facility. The Company has guaranteed the obligations of those
subsidiaries of the Company that are borrowers under the Revolving Credit
Facility. In addition, certain other assets of certain subsidiaries of the
Company are subject to liens and security interests granted in connection with
certain other existing lending and leasing arrangements. See "Description of
Other Indebtedness." After giving effect to the application of the net proceeds
received by the Company from the Initial Offering, as of November 30, 1997, the
aggregate principal amount of secured indebtedness of the Company was
approximately $23.3 million. In addition, after giving effect to the
application of the net proceeds received by the Company from the Initial
Offering, the Company had $43.5 million of additional borrowing availability
under the Revolving Credit Facility as of November 30, 1997, and US$2.5 million
of additional borrowing availability under the TES Revolving Facility (as
defined) as of November 30, 1997. See "Description of Other Indebtedness." The
Indenture permits the Company and the Guarantors to incur additional
indebtedness, subject to certain limitations, and contains no limitation on the
ability of the Company's parent, LSB, to incur additional indebtedness. See
"Capitalization" and "Description of Notes."
In the event of a Change of Control (as defined), holders of the Notes
will have the right to require the Company to purchase its Notes at 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the repurchase date. See "Risk Factors-
Repurchase of Notes Upon Change of Control" and "Description of Notes." In
addition, the Company is obligated in certain instances to make offers to
repurchase the Notes at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid proceeds of certain asset sales. See
"Description of Notes-Certain Covenants."
The Company will accept for exchange any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time on
___________, 1998, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Old Notes were sold by Company on November 26, 1997,
to the Initial Purchaser (as defined) in a transaction (the "Initial Offering")
not registered under the Securities Act in reliance upon an exemption under the
Securities Act. The Initial Purchaser subsequently placed
-2-
<PAGE>
(COVER PAGE CONTINUED)
the Old Notes with qualified institutional buyers in reliance upon Rule 144A
under the Securities Act. Accordingly, the Old Notes may not be reoffered,
resold, or otherwise transferred in the United States unless registered under
the Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The New Notes are being offered
hereunder in order to satisfy the obligations of Company under the Registration
Rights Agreement (as defined) entered into between the Company, the Guarantors,
and the Initial Purchaser in connection with the Initial Offering. See "The
Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. See "The Exchange Offer-Resale of the New Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives New Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with the resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating Broker-
Dealer as a result of market making activities or other trading activities. The
Company has agreed that, for a period of 180 days after the consummation of the
Exchange Offer, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer
will continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not been previously any public market for the Old Notes or
the New Notes. The Company does not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. The Old Notes are currently eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market. However, there can be no assurance that an active market for the New
Notes will develop. See "Risk Factors-Absence of a Public Market Could
Adversely Affect the Value of the Notes." Moreover, to the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
The New Notes will be available initially in book-entry from, and the
Company expects that the New Notes issued pursuant to this Exchange Offer will
be issued in the form of a Global Note, which will be deposited with, or on
behalf of, The Depository Trust Company (the "Depository") and registered in its
name or in the name of Cede & Co., its nominee. Beneficial interests in the
Global Note will be shown on, and transfer thereof will be effected through,
records maintained by the Depository and its participants. After the initial
issuance of the Global Note, New Notes in certificated form will be issued in
exchange for the Global Note on the terms set forth in the Indenture. See
"Description of Notes-Book-Entry, Delivery and Form."
-3-
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS, INCLUDING WITHOUT
LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES,"' "ANTICIPATES,"'
"INTENDS," "EXPECTS" AND WORDS OF SIMILAR IMPORT CONSTITUTE "FORWARD-LOOKING
STATEMENTS." SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
ACHIEVEMENTS OF THE COMPANY OR INDUSTRY RESULTS TO BE MATERIALLY DIFFERENT FROM
ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, THE FACTORS DISCUSSED
UNDER "RISK FACTORS." SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: GENERAL
ECONOMIC AND BUSINESS CONDITIONS, BOTH DOMESTIC AND FOREIGN; INDUSTRY CAPACITY;
DEMOGRAPHIC CHANGES; EXISTING GOVERNMENT REGULATIONS AND CHANGES IN, OR THE
FAILURE TO COMPLY WITH, GOVERNMENT REGULATIONS; LEGISLATIVE PROPOSALS OR CHANGES
CONCERNING POLLUTION, PROTECTION OF THE ENVIRONMENT AND THE RELEASE OR DISPOSAL
OF REGULATED MATERIAL; THE EFFECT OF ADDITIONAL PRODUCTION CAPACITY OF ANHYDROUS
AMMONIA IN THE WESTERN HEMISPHERE; COMPETITION; THE LOSS OF ANY SIGNIFICANT
CUSTOMERS; MATERIAL REDUCTION IN REVENUES; CHANGES IN OPERATING STRATEGY OR
DEVELOPMENT PLANS; INABILITY TO COLLECT A MATERIAL AMOUNT OF RECEIVABLES;
INABILITY TO IMPLEMENT ON A PERMANENT BASIS THE CORRECTIVE ACTIONS NECESSARY FOR
THE DSN PLANT (AS DEFINED) TO OPERATE AT ITS STATED CAPACITY OR ACHIEVE COST
SAVINGS FROM THE CORRECTIVE ACTIONS AT THE DSN PLANT; INABILITY TO FUND THE
EXPANSION OF THE COMPANY'S BUSINESS; ADVERSE RESULTS IN ANY OF COMPANY'S
ENVIRONMENTAL LITIGATION AND ANTITRUST LITIGATION AND INVESTIGATION; AND OTHER
FACTORS REFERENCED IN THIS PROSPECTUS WHICH INDIVIDUALLY OR IN THE AGGREGATE
COULD IMPAIR THE COMPANY'S ABILITY TO ACHIEVE ITS GOALS OR TO MEET ITS
OBLIGATIONS UNDER THE NOTES. CERTAIN OF THESE FACTORS ARE DISCUSSED IN MORE
DETAIL ELSEWHERE IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, UNDER THE
CAPTIONS "SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND "BUSINESS." GIVEN THESE
UNCERTAINTIES, PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY OBLIGATION TO
UPDATE ANY SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE RESULT OF ANY REVISIONS TO
ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT FUTURE EVENTS
OR DEVELOPMENTS.
-4-
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (together with all amendments, exhibits,
annexes and schedules thereto, the "Exchange Offer Registration Statement")
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the New Notes being offered hereby. This Prospectus does
not contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Company and the Exchange
Offer, reference is made to the Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to
each such contract, agreement or other document filed as an exhibit to the
Exchange Offer Registration Statement, reference is made to the exhibit for a
more complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Exchange Offer Registration Statement, including the exhibits thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 7 World Trade Center, 13/th/ Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is http://www.sec.gov.
-------------------
As the result of the filing of the Exchange Offer Registration
Statement with the Commission, the Company and the Guarantors will become
subject to the information requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and in accordance therewith will be required to
file periodic reports and other information with the Commission. The obligation
of the Company and the Guarantors to file periodic reports and other information
with the Commission will be suspended if the New Notes are held of record by
fewer than 300 holders as of the beginning of any fiscal year of the Company
other than the fiscal year in which the Exchange Offer Registration Statement is
declared effective. The Company has agreed pursuant to the Indenture that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, the Company will
furnish to the holders of the Notes on the date it is, or would have been (if it
were subject to such reporting obligations), required to furnish such to the
Commission, subject to any extension as allowed under the Exchange Act, and to
each prospective holder who so requests, and file with the Commission (unless
the Commission will not accept such a filing) all quarterly and annual financial
information that would be required if the Company were subject to Sections 13
and 15(d) of the Exchange Act, including a management's discussion and analysis
of financial condition and results of operations in each case, and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants. In addition, for so long as any of the Notes remain
outstanding, the Company and each Guarantor, agree to make publicly available,
upon request of any holder, the information necessary to permit sales pursuant
to Rule 144 and Rule 144A.
__________________
The principal executive offices of the Company are located at 16 South
Pennsylvania Avenue, Oklahoma City, Oklahoma 73107, and its telephone number is
(405) 235-4546.
-5-
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE
COMPANY IS A WHOLLY OWNED SUBSIDIARY OF LSB. THE COMPANY OWNS, THROUGH ITS
SUBSIDIARIES, SUBSTANTIALLY ALL OF THE OPERATIONS COMPRISING THE CHEMICAL
BUSINESS AND CLIMATE CONTROL BUSINESS OWNED BY LSB PRIOR TO THE INITIAL
OFFERING. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE "COMPANY"
IN THIS PROSPECTUS REFERS TO CLIMACHEM, INC. AND ITS SUBSIDIARIES AND DOES NOT
REFER TO LSB AND ITS OTHER SUBSIDIARIES. THIS SUMMARY IS ALSO QUALIFIED BY THE
"SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
THE COMPANY
The Company, a wholly owned subsidiary of LSB, is engaged, through its
subsidiaries, in the manufacture and sale of (i) chemical products for the
explosives, agricultural and industrial acids markets (the "Chemical Business")
and (ii) a broad range of hydronic fan coils and water source heat pumps as well
as other products used in commercial and residential heating, ventilation and
air conditioning ("HVAC") systems (the "Climate Control Business"). For the
twelve months ended September 30, 1997, the Company had net sales of $260.2
million and EBITDA (as defined) of $21.4 million.
Chemical Business
The Company's Chemical Business manufactures three principal product
lines that are derived from anhydrous ammonia: (1) fertilizer grade ammonium
nitrate for the agricultural industry, (2) explosive grade ammonium nitrate for
the mining industry and (3) concentrated, blended and mixed nitric acid for
industrial applications. In addition, the Company also produces sulfuric acid
for commercial applications primarily in the paper industry. The Chemical
Business' products are sold in niche markets where the Company believes it can
establish a position as a market leader.
Agricultural Products. The Chemical Business is a major manufacturer
of fertilizer grade ammonium nitrate, which it markets primarily in Texas,
Arkansas and the surrounding regions. This market, which is in close proximity
to its El Dorado, Arkansas facility (the "El Dorado Facility"), includes a high
concentration of pasture land and row crops which favor ammonium nitrate over
other nitrogen-based fertilizers. The Company has developed the leading market
position in Texas by emphasizing high quality products, customer service and
technical advice. Using a proprietary prilling process, the Company produces a
high performance ammonium nitrate fertilizer that, because of its uniform size,
is easier to apply than many competing nitrogen-based fertilizer products. The
Company believes that its "E-2" brand ammonium nitrate fertilizer is recognized
as a premium product within its primary market. In addition, the Company has
developed long term relationships with end users through its network of 21 owned
and operated wholesale and retail distribution centers.
Explosives. The Chemical Business manufactures low density ammonium
nitrate-based explosives including bulk explosives used in surface mining. In
addition, the Company manufactures and sells a branded line of packaged
explosives used in construction, quarrying and other applications, particularly
where controlled explosive charges are required. The Company's bulk explosives
are marketed primarily through six Company-owned distribution centers, four of
which are located in close proximity to the customers' surface mines in the coal
producing states of Kentucky, West Virginia, Illinois, and Indiana. The Company,
through its Australian subsidiary, also manufactures and distributes bulk and
packaged explosives in Australia and New Zealand. The Company emphasizes value-
added customer services and specialized product applications for its bulk
explosives. Most of the sales of bulk explosives are to customers who work
closely with the Company's technical representatives in meeting their specific
product needs. In addition, the Company sells bulk explosives to independent
wholesalers and to other explosives companies. Packaged explosives are used for
-6-
<PAGE>
applications requiring controlled explosive charges and typically command a
premium price and produce higher margins. The Company believes its Slurry
packaged explosive products are among the most widely recognized in the
industry. Slurry packaged explosive products are sold nationally and
internationally to other explosive companies and end-users.
Industrial Acids. The Chemical Business manufactures and sells
industrial acids, primarily to the food, paper, chemical and electronics
industries. The Company is the leading supplier to third parties of concentrated
nitric acid which is a special grade of nitric acid used in the manufacture of
plastics, pharmaceuticals, herbicides, explosives and other chemical products.
In addition, the Company produces and sells regular, blended and mixed nitric
acid and a variety of grades of sulfuric acid. The Company competes on the basis
of price and service, including on-time reliability and distribution
capabilities. The Company operates the largest fleet of tankcars in the
concentrated nitric acid industry which provides it with a significant
competitive advantage in terms of distribution costs and capabilities. In
addition, the Company provides inventory management as part of the value-added
services it offers to its customers.
The Company has identified concentrated nitric acid as a strategic
product line for its Chemical Business due to attractive levels of
profitability, increased diversity of end markets and the ability to compete on
a value added service basis. To support further growth in its nitric acid
business, the Company undertook the construction of a concentrated nitric acid
plant (the "DSN Plant") located at the El Dorado Facility. The DSN Plant uses a
newer and more efficient process to produce concentrated nitric acid directly
from anhydrous ammonia, in contrast to the conventional process which requires
the input of regular nitric acid, an intermediate step, to produce concentrated
nitric acid.
The DSN Plant. Since January 1, 1994, the Chemical Business has
spent approximately $32.0 million to install the DSN Plant. The DSN Plant began
limited operations in 1995, and such limited operations continued due to certain
mechanical and design problems associated with the plant's construction and
installation. As a result of such problems, production at the DSN Plant was
limited to approximately 170 tons per day (60% of its stated capacity of 285
tons per day assuming 338 days of annual production) during the twelve months
ended September 30, 1997. In October 1997, management completed certain
corrective actions at the DSN Plant. As a result of these corrective actions,
the DSN Plant has the capacity to operate at approximately 285 tons per day.
However, due to customer specifications and inventory constraints, among other
things, the DSN Plant has been operating at approximately 260 tons per day since
the corrective actions were completed. Based on normalized production (assuming
338 days of annual production) at 260 tons per day, the Company believes it will
be able to produce concentrated nitric acid at a cost per ton approximately $65
per ton lower than at the production levels of 170 tons per day in the prior
period. While the Company will seek to market the additional capacity of
concentrated nitric acid output to commercial markets, there can be no assurance
that the Company will be able to sell all of the additional capacity in this
market. However, to the extent that there is insufficient demand for the
concentrated nitric acid, the Company believes it can profitably use
concentrated nitric acid in the production of mixed and blended acids and
ammonium nitrate based fertilizer and explosives (although at lower margins than
if the production were sold as concentrated nitric acid). See "Risk Factors -
DSN Plant Design Issues," "The Company - Chemical Business - DSN Plant" and
"Special Note Regarding Forward-Looking Statements."
Climate Control Business
The Company's Climate Control Business manufactures and sells a broad
range of standard and custom designed hydronic fan coils and water source heat
pumps as well as other products for use in commercial and residential HVAC
systems. Demand for the Climate Control Business products is driven by the
construction of commercial, institutional and residential buildings, the
renovation of existing buildings and the replacement of existing systems. The
Climate Control Business' commercial products are used in a wide variety of
buildings, such as hotels, motels, office buildings, schools, universities,
apartments, condominiums, hospitals, nursing homes, extended care facilities,
supermarkets and superstores. Many of the Company's products are targeted to
meet increasingly stringent indoor air quality and energy efficiency standards.
Hydronic Fan Coils. The Climate Control Business is the leading U.
S. provider of hydronic fan coils targeted
-7-
<PAGE>
to the commercial and institutional markets in the United States. Hydronic fan
coils use heated or chilled water, provided by a centralized chiller and boiler,
through a water pipe system to condition the air and allow individual room
control. Hydronic fan coil systems are quieter and have longer lives and lower
maintenance costs than comparable systems for individual room control
applications. The Company believes that its product line of hydronic fan coils
is the most extensive offered by any domestic producer. The breadth of this
product line coupled with customization capability provided by a flexible
manufacturing process are important components of the Company's strategy for
competing in the commercial and institutional renovation and replacement
markets.
Water Source Heat Pumps. The Company is a leading U.S. provider of
water source heat pumps to the commercial construction and renovation markets.
These are highly efficient heating and cooling units which enable individual
room climate control through the transfer of heat through a water pipe system
which is connected to a centralized cooling tower or heat injector. Water source
heat pumps enjoy a broad range of commercial applications, particularly in
medium to large sized buildings with many small, individually controlled spaces.
The Company believes the market for commercial water source heat pumps will
continue to grow due to the higher efficiency, lower operating cost and long
life of such systems as compared to other air conditioning and heating systems,
as well as to the emergence of the replacement market for these systems.
Geothermal Products. The Climate Control Business is a pioneer in
the use of geothermal water source heat pumps in residential and commercial
applications. Geothermal systems, which circulate water through an underground
heat exchanger, are among the most energy efficient systems available. The
Company believes that an aging installed base of residential HVAC systems,
coupled with the longer life, lower cost to operate and relatively short payback
periods of geothermal systems, will continue to increase demand for its
geothermal products, particularly in the residential replacement market.
-8-
<PAGE>
INITIAL OFFERING
Old Notes................... The Old Notes were sold by the Company on
November 26,1997 (the "Issue Date"), to
Wasserstein Perella Securities, Inc. (the
"Initial Purchaser") pursuant to a Purchase
Agreement dated as of November 21, 1997 (the
"Purchase Agreement"), between the Company and
the Initial Purchaser. The Initial Purchaser
subsequently resold the Old Notes to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Rights Agreement.. Pursuant to the Purchase Agreement, the Company,
the Guarantors and the Initial Purchaser entered
into a Registration Rights Agreement, dated as
November 26, 1997 (the "Registration Rights
Agreement"), which grants the holders of the Old
Notes certain exchange and registration rights.
The Exchange Offer is intended to satisfy such
exchange rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered............ $105 million aggregate principal amount of 10
3/4% Series B Notes due 2007 of the Company.
The Exchange Offer............ $1,000 principal amount of the New Notes in
exchange for each $1,000 principal amount of Old
Notes. As of the date hereof, $105 million
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New
Notes in exchange for the Old Notes to holders
of the Old Notes on or promptly after the
Expiration Date.
Transfer Restrictions........ Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which
is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired
in the ordinary course of such holder's business
and that such holder does not intend to
participate and has no arrangement or
understanding with any person to participate in
the distribution of such New Notes. Each holder
accepting the Exchange Offer is required to
represent to the Company in the Letter of
Transmittal that, among other things, the New
Notes will be acquired by the holder in the
ordinary course of business and the holder does
not intend to participate and has no arrangement
or understanding with any person to participate
in the distribution of such New Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives New
Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with
-9-
<PAGE>
any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a Participating Broker-Dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in
connection with resale of New Notes received in
exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as
a result of market-making activities or other
trading activities. The Company has agreed that,
for a period of 180 days after the Expiration
Date, it will make this Prospectus available to
any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the New Notes could not rely on the position of
the staff of the Commission enunciated in no-
action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction. Failure to comply
with such requirements in such instance may
result in such holder incurring liability under
the Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended.
Accrued Interest on the New
Notes and the Old
Notes......................... Each New Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the New Notes. Such
interest will be paid with the first interest
payment on the New Notes. Interest on the Old
Notes accepted for exchange will cease to accrue
upon issuance of the New Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by the
Company. See "The Exchange Offer-Conditions."
Procedures for Tendering
Old Notes..................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof or transmit an Agent's Message
(as defined) in connection with a book-entry
transfer, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
such facsimile or such Agent's Message,
-10-
<PAGE>
together with the Old Notes and any other
required documentation, to the Exchange Agent
(as defined) at the address set forth herein. By
executing the Letter of Transmittal or Agent's
Message, each holder will represent to the
Company that, among other things, the New Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such New Notes,
whether or not such person is the holder, that
neither the holder nor any such other person (i)
has any arrangement or understanding with any
person to participate in the distribution of
such New Notes, (ii) is engaging or intends to
engage in the distribution of such New Notes, or
(iii) is an "affiliate," as defined under Rule
405 of the Securities Act, of the Company. See
"The Exchange Offer-Purpose and Effect of the
Exchange Offer" and "-Procedures for Tendering."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange rights
and such Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be affected adversely.
Consequences of Failure
Exchange...................... The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act
or pursuant to some other exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the requirements
of Rule 904 under the Securities Act, or (iv)
pursuant to an effective registration statement
under the Securities Act. See "The Exchange
Offer-Consequences of Failure to Exchange."
Shelf Registration Statement.. If applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer or permit a Holder to
participate in the Exchange Offer or, in the
case of any Holder of Notes that participates in
the Exchange Offer, such Holder does not receive
freely tradable New Notes on the date of the
exchange for tendered Notes, or if for any
reason the Exchange Offer is not consummated
within 180 days after the Issue Date, or,
subject to certain conditions, upon the request
of the Initial Purchaser or the Holders of a
majority in aggregate principal amount of the
Notes, the Company will, at its cost, file with
the Commission a shelf registration statement
(the "Shelf Registration Statement") to cover
resales of Notes by the Holders thereof. The
Company will use its best efforts to cause the
applicable registration statement to be declared
effective by the Commission as promptly as
practicable after the date of filing. The
Company has agreed to maintain the effectiveness
of the Shelf Registration Statement for, under
certain circumstances, a maximum of 24 months
from a date which is 150 days following the
Issue Date, or such shorter period ending when
(i) the securities covered by the Shelf
Registration Statement have been sold or (ii) a
subsequent shelf registration statement covering
such securities has been declared effective
under the Securities Act.
-11-
<PAGE>
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact promptly
such registered holder and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer
of registered ownership may take considerable
time. The Company will keep the Exchange Offer
open for not less than 30 business days in order
to provide for the transfer of registered
ownership.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer-
Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
Acceptance of Old Notes
and Delivery of New Notes..... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer-Terms of the
Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer. See "Use of Proceeds."
Exchange Agent................ Bank One, NA.
-12-
<PAGE>
NEW NOTES
Issuer........................ ClimaChem, Inc.
General....................... The form and terms of the New Notes are the same
as the form and terms of the Old Notes (which
they replace) except that (i) the New Notes bear
a Series B designation, (ii) the New Notes have
been registered under the Securities Act and,
therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of New
Notes will not be entitled to certain rights
under the Registration Rights Agreement,
including the provisions providing for
liquidated damages in certain circumstances
relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange
Offer is consummated. See "The Exchange Offer-
Purpose and Effect of the Exchange Offer." The
New Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of
the Indenture. See "Description of Notes." The
Old Notes and the New Notes are sometimes
referred to herein collectively as the "Notes."
Interest Rate; Payment Dates.. Interest on the New Notes will accrue at the
rate of 10 3/4% per annum, payable semiannually
in arrears on June 1 and December 1 of each
year, commencing June 1, 1998.
Maturity Date................. December 1, 2007
Guarantees.................... The New Notes will be, as the Old Notes (which
they replace) are, fully and unconditionally
guaranteed by substantially all of the existing
and all of the future Subsidiaries of the
Company.
Original Redemption........... The New Notes are redeemable, in whole or in
part, at the option of the Company at any time
on or after December 1, 2002, at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, thereon, plus Liquidated
Damages, if any, to the date of redemption. In
addition, notwithstanding the foregoing, on or
prior to December 1, 2000, the Company may
redeem up to $35 million of the aggregate
principal amount of the New Notes originally
issued at a redemption price of 110.750% of the
principal amount thereof, plus accrued and
unpaid interest, if any, thereon, plus
Liquidated Damages, if any, to the date of
redemption, with the net cash proceeds of a
Public Equity Offering (as defined); provided,
however, that at least $65 million in aggregate
principal amount of the New Notes remain
outstanding following such redemption. See
"Description of Notes--Optional Redemption."
Change of Control............. Upon a Change of Control of LSB or the Company,
holders of the New Notes will have the right to
require that the Company repurchase the New
Notes in whole or in part at a redemption price
of 101% of the principal amount thereof plus
accrued and unpaid interest, if any, thereon,
plus Liquidated Damages, if any, to the date of
repurchase. See "Description of Notes--Certain
Covenants--Repurchase of New Notes at the Option
of the Holder Upon a Change of Control."
-13-
<PAGE>
Ranking....................... The New Notes will be, as Old Notes (which they
replace) are, senior unsecured obligations of
the Company and will rank pari passu in right of
payment to all future and existing senior
unsecured indebtedness of the Company. The New
Notes will be effectively subordinated to all
existing and future senior secured indebtedness
of the Company and its subsidiaries and to all
existing and future secured and unsecured
indebtedness of the subsidiaries of the Company
which are not Guarantors. As of November 30,
1997, after giving effect to the Initial
Offering and the application of the net proceeds
therefrom, the Company had a credit under the
Revolving Credit Facility (as defined) of $0.2
million, US$3.3 million of borrowings
outstanding under the TES Revolving Facility (as
defined), a maximum of $43.5 million of
availability for borrowings under the Revolving
Credit Facility, US$2.5 million of availability
for borrowings under the TES Revolving Facility,
and $20.2 million of other secured indebtedness,
all of which is effectively senior to the New
Notes. See "Description of Other Indebtedness."
Certain Covenants............. The Indenture contains certain covenants,
including limitations under certain conditions
on the ability of the Company and its
subsidiaries to: (i) incur additional
Indebtedness; (ii) incur certain liens; (iii)
engage in certain transactions with affiliates;
(iv) make certain restricted payments; (v) agree
to payment restrictions affecting subsidiaries;
(vi) engage in unrelated lines of business; or
(vii) engage in mergers, consolidations or the
transfer of all or substantially all of the
assets of the Company to another person. In
addition, in the event of certain Asset Sales
(as defined), the Company will be required to
use the proceeds to reinvest in the Company's
business, to repay certain debt or to offer to
purchase Notes at 100% of the principal amount
thereof, plus accrued and unpaid interest, if
any, thereon, plus Liquidated Damages, if any,
to the date of purchase. See "Description of
Notes--Certain Covenants."
Risk Factors.................. For a discussion of certain factors that should
be considered in connection with an investment
in the Notes, see "Risk Factors."
-14-
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information presented below for the
three years ended December 31, 1996 is derived from the audited consolidated
financial statements of the Company for such years. The information presented
for the years ended December 31, 1992, and 1993 and the twelve-month period
ended September 30, 1997, is derived from unaudited financial statements of the
Company. The information as of September 30, 1997, and for the nine-month
periods ended September 30, 1996, and 1997, has been derived from the unaudited
consolidated financial statements of the Company and reflects all adjustments,
consisting of adjustments of normal recurring nature, which are, in the opinion
of management, necessary for a fair presentation of the interim periods. The
information in this table should be read in conjunction with "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ---------- ---------
(IN THOUSANDS, EXCEPT RATIO, TONS AND PER TON AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ........................ $160,843 $184,383 $201,486 $220,743 $255,285 $195,447 $200,369
Gross profit(1) .................. 39,714 42,626 42,869 47,885 47,457 37,362 38,684
Operating profit(2) .............. 18,640 19,165 15,124 17,541 14,335 13,108 10,680
Interest expense, net(3) ......... 6,582 6,078 6,150 7,185 6,247 4,532 6,587
Income before income taxes ....... 12,906 13,470 9,388 11,154 8,421 8,616 4,602
Net income ....................... 7,512 7,842 5,449 5,899 5,753 5,687 2,781
OTHER FINANCIAL DATA:
Depreciation and amortization .... $ 5,434 $ 5,580 $ 6,137 $ 6,695 $ 7,426 $ 5,344 $ 6,038
Capital expenditures ............. 3,313 6,806 13,983 15,929 18,554 6,312 5,990
EBITDA(4) ........................ 25,266 25,510 23,079 25,790 23,469 19,677 17,637
SEGMENT INFORMATION:
Chemical Business
Net sales ............... $106,031 $114,946 $131,572 $136,900 $166,164 $129,133 $122,853
Gross profit(1) ......... 25,352 26,739 24,904 25,397 25,400 20,390 16,096
Gross profit margin ..... 23.9% 23.3% 18.9% 18.6% 15.3% 15.8% 13.1%
Average spot price of
anhydrous ammonia per
ton(5) ................. $ 93.84 $ 107.21 $ 189.74 $ 206.55 $ 188.48 $ 177.45 $ 193.50
Tons of anhydrous ammonia
consumed ............... 204,321 206,030 196,365 188,452 217,650 174,426 170,080
EBITDA(4) ............... $ 22,077 $ 21,935 $ 18,291 $ 18,848 $ 17,743 $ 14,948 $ 10,267
Climate Control Business
Net sales ............... $ 54,812 $ 69,437 $ 69,914 $ 83,843 $ 89,121 $ 66,314 $ 77,516
Gross profit(1) ......... 14,362 15,887 17,965 22,488 22,057 16,972 22,588
Gross profit margin ..... 26.2% 22.9% 25.7% 26.8% 24.7% 25.6% 29.1%
EBITDA(4) ............... $ 3,189 $ 3,575 $ 4,788 $ 6,942 $ 5,726 $ 4,729 $ 7,370
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED SEPTEMBER 30, 1997
------------------------
<S> <C>
Net sales ...................................................................... $260,207
EBITDA(4) ...................................................................... $ 21,429
Ratio of EBITDA to pro forma interest expense(3)(6) ............................ 1.8x
Ratio of EBITDA to pro forma total interest, including capitalized interest(6) . 1.6x
Ratio of total debt, as adjusted, to EBITDA(6) ................................ 6.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-----------------------------------
ACTUAL AS ADJUSTED(6)
------------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $ 40,700 $ 51,374
Property, plant and equipment, net.. 83,501 83,501
Total assets........................ 182,241 202,514
Total debt.......................... 106,853 129,853
Total stockholders' equity.......... 32,463 29,736
</TABLE>
______________
(1) Gross profit represents net sales less cost of sales.
(2) Operating profit represents net sales less cost of sales and operating
expenses before deducting interest expense and income taxes.
(3) Interest expense is calculated in accordance with generally accepted
accounting principles and excludes capitalized interest of $0.5 million,
$1.4 million and $2.4 million for the years ended December 31, 1994, 1995
and 1996, and $1.8 million and $1.1 million for the nine months ended
September 30, 1996, and 1997, respectively.
(4) EBITDA, as defined, is earnings before deduction for interest expense,
income taxes, depreciation and amortization and any other noncash charges
of the Company reducing net income. EBITDA is presented here to provide
additional information about the Company's ability to meet its future debt
service, capital expenditures and working capital requirements. EBITDA as
presented herein may not be comparable to other similarly titled measures
of other companies and differs from the definition of Consolidated Cash
Flow. See "Description of Notes."
(5) Average spot price of anhydrous ammonia represents F.O.B. New Orleans
Barge Price, Industrial User derived from 52 week average price as
published in Green Market.
(6) As adjusted to give effect to the issuance of the Notes and application of
the net proceeds therefrom. See "Capitalization."
Investors in the Notes should carefully review and consider, among other
things, the Risk Factors set forth below, as well as the other information
included in this Prospectus before tendering the Old Notes in exchange for the
New Notes.
-16-
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the factors set forth under
"Risk Factors," as well as the other information set forth in this Prospectus
before tendering the Old Notes in exchange for the New Notes.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company has a substantial amount of debt. At September 30, 1997, after
giving effect to the Initial Offering of the Notes and the application of the
net proceeds therefrom, the aggregate consolidated debt of the Company was
approximately $129.9 million, resulting in total debt as a percentage of total
capitalization of 81%. See "Capitalization."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing in the future for refinancing
indebtedness, acquisitions, working capital, capital expenditures or other
purposes may be impaired; (ii) funds available to the Company for its operations
and general corporate purposes or for capital expenditures will be reduced
because a substantial portion of the Company's consolidated cash flow from
operations will be dedicated to the payment of the principal and interest on its
indebtedness; (iii) the Company may be more highly leveraged than certain of its
competitors, which may place it at a competitive disadvantage; (iv) the
agreements governing the Company's long-term indebtedness (including
indebtedness under the Notes) and bank loans contain certain restrictive
financial and operating covenants; (v) an event of default, which is not cured
or waived, under financial and operating covenants contained in the Company's or
its subsidiaries' debt instruments, including the Indenture, could occur and
have a material adverse effect on the Company; (vi) the Company may be more
vulnerable to a downturn in general economic conditions; and (vii) certain of
the borrowings under debt agreements of the subsidiaries have floating rates of
interest, which causes the Company and its subsidiaries to be vulnerable to
increases in interest rates.
The terms of the Indenture allow for the incurrence of additional
Indebtedness (as defined). Except as set forth below, the incurrence of
additional Indebtedness is limited by certain conditions, including compliance
with a Consolidated Coverage Ratio (as defined). The Company and its
subsidiaries may incur, issue or guarantee certain other additional Indebtedness
without regard to compliance with the Consolidated Coverage Ratio or any other
financial ratio or covenant in the Indenture. See "Description of Notes." If the
Company or any of its subsidiaries incurs additional Indebtedness, whether for
acquisitions, investment in its business or other general corporate purposes,
the Company's leverage could increase, which in turn could make the Company more
susceptible to the factors described above.
The ability of the Company to make principal and interest payments, or to
refinance indebtedness, including the Notes, will depend on the Company's and
its subsidiaries' future operating performance and cash flow, which are subject
to prevailing economic conditions and interest rate levels, in addition to
financial, competitive, business and other factors affecting the Company and its
subsidiaries, many of which are beyond the Company's control. See "Description
of Other Indebtedness."
Because the Company's business is conducted through its subsidiaries, the
Company's ability to make scheduled payments of principal and interest on its
indebtedness, including the Notes, will depend on the future operating
performance and cash flows of its subsidiaries and on the ability of the
Company's subsidiaries to pay dividends or make loans to the Company. See
"Special Note Regarding Forward-Looking Statements."
RANKING OF NOTES
The Notes and the Guarantees issued by the Guarantors are effectively
subordinated to all existing and future secured indebtedness of the Company and
the Guarantors, including, but not limited to, the loans outstanding under the
Revolving Credit Facility, the DSN Loans, the TES Revolving Facility, TES
Capitalized Leases, the IEC Capitalized Leases, the CM Loan, the CM Equipment
Financing and the IEC Equipment Financing (each as defined). As of
-17-
<PAGE>
November 30, 1997, and after giving effect to the application of the net
proceeds received from the Initial Offering, the Company had approximately $23.3
million of secured indebtedness. See "Description of Other Indebtedness."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Holders of the Notes have a direct claim on the assets of the Guarantors
pursuant to the Guarantees. However, each Guarantor's guarantee of the
obligations of the Company under the Notes may be subject to review under
relevant federal and state fraudulent conveyance statutes in a bankruptcy,
reorganization or rehabilitation case or similar proceeding or a lawsuit by, or
on behalf of, unpaid creditors of such Guarantors. If a court were to find under
relevant fraudulent conveyance statutes that, at the time the Notes were issued,
(a) a Guarantor guaranteed the Notes with the intent of hindering, delaying or
defrauding current or future creditors or (b)(i) a Guarantor received less than
reasonably equivalent value or fair consideration for guaranteeing the Notes and
(ii)(A) was insolvent or was rendered insolvent by reason of such Guarantee, (B)
was engaged, or about to engage, in a business or transaction for which its
assets constituted unreasonably small capital, (C) intended to incur, or
believed that it would incur, obligations beyond its ability to pay as such
obligations matured (as all of the foregoing terms are defined in, or
interpreted under, such fraudulent conveyance statutes) or (D) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment, the judgment is
unsatisfied), such court could avoid or subordinate such guarantee of the Notes
to presently existing and future indebtedness of such Guarantor and take other
action detrimental to the holders of the Notes, including, under certain
circumstances, invalidating such guarantee of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Guarantor would be considered insolvent if
either (i) the fair market value (or fair saleable value) of its assets is less
than the amount required to pay the probable liability on its total existing
indebtedness and liabilities (including contingent liabilities) as they become
absolute and mature or (ii) it is incurring obligations beyond its ability to
pay as such obligations mature or become due.
RESTRICTIVE COVENANTS
The Indenture contains numerous restrictive covenants which limit the
discretion of management of the Company with respect to certain business
matters. However, the Indenture does not prohibit the incurrence of additional
Indebtedness by the Company, subject to certain conditions. In addition, the
Revolving Credit Facility contains financial covenants that require the Company
to meet certain financial ratios and tests and provides that a change of control
(as defined in the Revolving Credit Facility) constitutes an event of default.
Should the Company be unable to comply with the financial or other restrictive
covenants under the Revolving Credit Facility at any time in the future, there
can be no assurance that the lender would agree to any necessary amendments or
waivers. The ability of the Company to comply with such provisions of the
Revolving Credit Facility may be affected by events beyond its control. A
failure to comply with the obligations contained in the Revolving Credit
Facility, if not cured or waived, could have a material adverse effect upon the
Company and the ability to meet its obligations, including obligations with
respect to the Notes, and could permit acceleration of the related indebtedness
and acceleration of indebtedness of other instruments, including the Notes, that
contain cross-default provisions. See "Description of Other Indebtedness" and
"Special Note Regarding Forward-Looking Statements."
REPURCHASE OF NOTES AND ACCELERATION OF INDEBTEDNESS UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control of LSB or the Company, the
Company will be required to make an offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, plus Liquidated Damages, if any, to the date of repurchase. Certain
events involving a Change of Control could result in acceleration of the
Revolving Credit Facility and other indebtedness of the Company or its
subsidiaries that may be incurred in the future. There can be no assurance that
the Company will have sufficient resources to repurchase the Notes in the event
it becomes obligated to do so, particularly in the event of acceleration of, or
the need
-18-
<PAGE>
to comply with repurchase obligations with respect to, other indebtedness. The
failure to repurchase all of the tendered Notes in the event of a Change of
Control constitutes an event of default under the Indenture which may result in
the acceleration of the maturity of the Notes. See "Description of Notes--
Certain Covenants--Repurchase of Notes at the Option of the Holder Upon a Change
of Control," "--Events of Default and Remedies," "Security Ownership of Certain
Beneficial Owners and Management" and "Special Note Regarding Forward-Looking
Statements."
SENSITIVITY TO ECONOMIC CYCLES; AVAILABILITY AND PRICING OF RAW MATERIALS
A significant percentage of the Company's sales is affected by such
cyclical factors as interest rates, inflation, and the costs of certain raw
materials. Anhydrous ammonia, which is purchased from unrelated third parties,
represents the primary component in the production of most of the products of
the Chemical Business. The primary material utilized in anhydrous ammonia
production is natural gas, and fluctuations in the price of natural gas have a
significant effect on the cost of anhydrous ammonia. The Company's Chemical
Business has contracts with two suppliers of anhydrous ammonia to provide the
Chemical Business with all of its anhydrous ammonia requirements. If for any
reason the Chemical Business is unable to purchase anhydrous ammonia in
sufficient quantities to produce its product requirements, the lack of
availability would have a material effect on the Company. During 1994, 1995,
1996, and 1997, there were substantial increases in the price for anhydrous
ammonia. During each of these periods, the Company's Chemical Business was
unable to increase its sales prices to cover all of the higher anhydrous ammonia
costs incurred by the Company, and in the future the Company may not be able to
pass along to its customers the full amount of increases in anhydrous ammonia
costs. Accordingly, the Company's results of operations and financial condition
have in the past been, and may in the future be, adversely affected by cost
increases of raw materials, including anhydrous ammonia. The Company is not able
to predict, as of the date of this Prospectus, what impact, if any, will result
to the Company and the Company's earnings if the price of anhydrous ammonia
continues at or near current levels, which are high on a historical basis, or if
the price of anhydrous ammonia continues to increase further. See "Business--
Chemical Business--Seasonality" and "--Raw Materials," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Special Note
Regarding Forward-Looking Statements."
DSN PLANT DESIGN ISSUES
The Company's concentrated nitric acid plant, the DSN Plant, located at the
El Dorado Facility, encountered certain mechanical and design problems
associated with the plant's construction and installation. As a result of such
problems, production at the DSN Plant was limited to 170 tons per day (60% of
its stated capacity of 285 tons per day assuming 338 days of annual production)
during the twelve months ended September 30, 1997. Management implemented
certain corrective actions. Since completing the corrective actions during
October 1997, the DSN Plant is currently operating at approximately 260 tons per
day. Although the Company believes that it has corrected the mechanical and
design problems at the DSN Plant, there are no assurances that the DSN Plant can
sustain production at current levels. See "Summary-The Company-The DSN Plant,"
"Business--Chemical Business--DSN Plant" and "Special Note Regarding Forward-
Looking Statements."
COMPETITION
Substantially all of the markets in which the Company participates are
highly competitive with respect to product quality, price, design innovations,
distribution, service, warranties, reliability and efficiency. Certain of the
Company's competitors have greater financial, marketing and other resources and
brand awareness than the Company. Competitive factors could require price
reductions or increased spending on product development, marketing and sales
that would adversely affect the Company's operating results. See "Business--
Competition" and "Special Note Regarding Forward-Looking Statements."
-19-
<PAGE>
CONTROLLING INTERESTS
Jack E. Golsen, Chairman of the Board and President of LSB and the Company,
members of his immediate family (spouse and children), entities owned by them
and trusts for which they possess voting or dispositive power as trustee (the
"Golsen Group") owned as of November 30, 1997, an aggregate of 3,048,725 shares
of LSB's common stock and 20,000 shares of LSB's voting preferred stock, which
together represent approximately 24% of the issued and outstanding voting
securities of LSB as of such date. The Golsen Group has options, exercisable
within 60 days, rights and other convertible preferred stock which allow its
members to acquire an additional 866,843 shares of LSB's common stock. If the
Golsen Group were to acquire the additional 866,843 shares of common stock, the
Golsen Group would, in the aggregate, own 3,915,568 shares of LSB common stock,
or approximately 28.7% of the issued and outstanding shares of voting securities
of LSB. Thus, the Golsen Group may be considered to effectively control LSB.
Because LSB owns all of the issued and outstanding voting securities of the
Company, the Golsen Group may be considered to effectively control the Company.
See "Security Ownership of Certain Beneficial Owners and Management." A
corporation controlled by Jack E. Golsen has an outstanding proposal to acquire
a new series of convertible preferred stock of LSB. If this transaction were to
occur as proposed, the Golsen Group's percentage of voting securities of LSB
would increase substantially.
CONTROL BY AND POSSIBLE CONFLICTS OF INTEREST WITH LSB
The Company is a wholly owned subsidiary of LSB, and the Board of Directors
and executive officers of the Company are comprised of various executive
officers and directors of LSB. As a result, LSB possesses the power to direct,
or cause the direction of, the management and policies of the Company.
LSB and other companies affiliated with LSB may, directly or indirectly,
compete with the Company. The potential for conflicts of interest exist between
the Company and affiliated parties for future business opportunities that may
not be presented to the Company. See "Certain Relationships and Related
Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company relies heavily on Jack E. Golsen, Chairman of the Board and
President of the Company. Although the Company believes it has an experienced
and capable management team, the loss of Mr. Golsen's services may have a
material adverse impact on the Company. LSB, the parent of the Company, has an
employment agreement and severance agreement with Mr. Golsen and certain other
executive officers of the Company. See "Management--Employment Contracts;
Termination of Employment and Change in Control Agreements."
ENVIRONMENTAL MATTERS
The Company is subject to extensive federal, state and local environmental
laws, rules, regulations and risks relating to pollution, the protection of the
environment or the release or disposal of hazardous or toxic materials
("Environmental Laws"). In particular, the manufacture and distribution of
chemical products are activities which entail environmental risks and impose
obligations under the Environmental Laws, many of which provide for substantial
fines and criminal sanctions for violations, and there can be no assurance that
material costs or liabilities will not be incurred by the Company in complying
with such laws or in paying fines or penalties for violation of such laws. The
Environmental Laws and enforcement policies thereunder relating to the Chemical
Business have in the past resulted, and could in the future result, in
penalties, cleanup costs, or other liabilities relating to the handling,
manufacture, use, emission, discharge or disposal of pollutants or other
substances at or from the Company's facilities or the use or disposal of certain
of its chemical products. Potentially significant expenditures could be required
in order to comply with the Environmental Laws, including for additional site or
operational modifications at the El Dorado Facility. In addition, the Chemical
Business currently is subject to certain civil lawsuits and administrative
consent orders relating to various environmental matters which could result in
substantial liability for the Company. There can be no assurance
-20-
<PAGE>
that such matters will not have a material adverse effect on the Company's
operations or financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Chemical Business," "Business--
Chemical Business," "--Environmental Matters" and "--Legal Proceedings."
ANTITRUST ISSUES
The Company's Chemical Business is a defendant in certain pending civil
antitrust lawsuits. See "Business--Legal Proceedings." Discovery has only
recently begun in the pending lawsuits, and, as a result, it is impossible to
access the likelihood of the Chemical Business' success in these lawsuits. For
several years, certain members of the explosives industry have been the focus of
grand jury investigations being conducted by the U.S. Department of Justice (the
"DOJ") in connection with antitrust allegations involving price fixing. Certain
explosives companies, other than the Company, including all the Company's major
competitors, and individuals employed by certain of those competitors, were
indicted and have pled guilty to criminal antitrust violations. The guilty pleas
have resulted in a total of nearly $40 million in criminal fines. In connection
with the grand jury investigation, the Company's Chemical Business received and
has complied with two document subpoenas, certain of the Company's Chemical
Business employees have been interviewed by the DOJ under grants of immunity
from prosecution, and certain of the Company's Chemical Business employees have
testified under subpoena before a grand jury under grants of immunity in
connection with the investigation. The Company believes that it has cooperated
fully with the government's investigation. Recently, the Company was informed by
an official of the DOJ that it was not currently a target of the above
investigation or of any grand jury investigating criminal antitrust activity in
the explosives or ammonium nitrate industries.
The Company intends to vigorously defend itself in the lawsuits. There are
no assurances that the lawsuits or the investigation will not have a material
adverse effect on the Company.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been a public market for the Old Notes. The Old Notes have
not been registered under the Securities Act and will be subject to restrictions
on transferability to the extent that they are not exchanged for New Notes by
holders who are entitled to participate in this Exchange Offer. The holders of
Old Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Company is required to file a Shelf Registration Statement with respect
to such Old Notes. The New Notes will constitute a new issue of securities with
no established trading market. The Company does not intend to list the New
Notes on any national securities exchange or seek the admission thereof to
trading in the National Association of Securities Dealers Automated Quotation
System. The Initial Purchaser has advised the Company that it currently intends
to make a market in the New Notes, but the Initial Purchaser is not obligated to
do so and may discontinue such market making at any time. In addition, such
market making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer and the
pendency of any Shelf Registration Statement. Accordingly, there can be no
assurance that an active public or other market will develop for the New Notes
or as to the liquidity of the trading market for the New Notes. If a trading
market does not develop or is not maintained, holders of the New Notes may
experience difficulty in reselling the New Notes or may be unable to sell them
at all. If a market for the New Notes develops, any such market may be
discontinued at any time.
If a public trading market develops for the New Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Notes may trade at a discount from their
principal amount.
-21-
<PAGE>
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal or
Agent's Message (as defined) and all other required documents. Therefore,
holders of the Old Notes desiring to tender such Old Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. The Company is
under no duty to give notification of defects or irregularities with respect to
the tenders of Old Notes for exchange. Old Notes that are not tendered or are
tendered but not accepted will, following the consummation of the Exchange
Offer, continues to be subject to the existing restrictions upon transfer
thereof, and, upon consummation of the Exchange Offer, certain registration
rights under the Registration Rights Agreement will terminate. In addition, any
holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may be deemed to have received
restricted securities, and if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." To
the extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain Company obligations under
the Registration Rights Agreement. The Company will not receive any cash
proceeds from the issuance of the New Notes offered hereby. In consideration for
issuing the New Notes contemplated in this Prospectus, the Company will receive
Old Notes in like principal amount, the form and terms of which are the same as
the form and terms of the New Notes (which replace the Old Notes), except as
described herein.
The proceeds from the Initial Offering were approximately $105 million
before deducting commissions, Initial Purchaser's discounts, and estimated
expenses thereof. After deducting discounts and commissions to the Initial
Purchaser, but before deducting other expenses, the net proceeds to the Company
from the Initial Offering were $101.85 million. The net proceeds from the
Initial Offering were used to (i) repay approximately $53.2 million of
borrowings, interest and prepayment fees to retire the loans to the Company's
Chemical Business from John Hancock Mutual Life Insurance Company and others
(the "John Hancock Loan"); (ii) reduce by approximately $38.6 million amounts
outstanding under the revolving credit facilities with respect to the Chemical
Business and the Climate Control Business; and (iii) fund a loan to the
Company's parent, LSB, of $10 million. See "Description of Notes - Certain
Covenants - LSB Note."
-22-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1997, and as adjusted to give effect to the Initial Offering and
application of the net proceeds therefrom. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the consolidated financial statements of the
Company included elsewhere herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
<S> <C> <C>
(IN THOUSANDS)
Long-term debt, including current portion:
Revolving credit facilities ........................................... $ 36,310 $ 3,477
Secured term loans:
John Hancock Loan ..................................................... 49,167 --
DSN Loan .............................................................. 12,335 12,335
Other................................................................... 9,041 9,041
The Old Notes ......................................................... -- 105,000
-------- --------
Total long-term debt .................................................. 106,853 129,853
Stockholders' equity:
Common stock, $.10 par value; 500,000 shares authorized; 10,000 shares
issued and outstanding ................................................ 1 1
Capital in excess of par .............................................. 12,652 12,652
Cumulative translation adjustment ..................................... (582) (582)
Retained earnings(1) .................................................. 20,392 17,665
-------- --------
Total stockholders' equity ............................................ 32,463 29,736
-------- --------
Total capitalization ................................................... $139,316 $159,589
======== ========
</TABLE>
- -------------
(1) As adjusted to give effect to the early redemption of the John Hancock Loan
which resulted in the incurrence of a prepayment fee of approximately $4.1
million and write-off of John Hancock Loan deferred loan origination costs
of $0.4 million ($2.7 million, net of income taxes).
-23-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the three
years ended December 31, 1996, is derived from the audited consolidated
financial statements of the Company for such years. The information presented as
of December 31, 1992, 1993 and 1994, and for the years ended December 31, 1992,
and 1993, is derived from unaudited financial statements of the Company. The
information as of September 30, 1997, and for the nine-month periods ended
September 30, 1996, and 1997, has been derived from the unaudited consolidated
financial statements of the Company and reflects all adjustments, consisting of
adjustments of normal recurring nature, which are, in the opinion of management,
necessary for a fair presentation of the interim periods. The information in
this table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ---------- --------
(IN THOUSANDS, EXCEPT RATIO, TONS AND PER TON AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Net sales .................................. $160,843 $184,383 $201,486 $220,743 $255,285 $195,447 $200,369
Other income ............................... 848 383 414 798 333 40 509
-------- -------- -------- -------- -------- -------- --------
161,691 184,766 201,900 221,541 255,618 195,487 200,878
Costs and Expenses:
Cost of sales .............................. 121,129 141,757 158,617 172,858 207,828 158,085 161,685
Selling, general and administrative ........ 21,074 23,461 27,745 30,344 33,122 24,254 28,004
Interest expense, net (1) .................. 6,582 6,078 6,150 7,185 6,247 4,532 6,587
-------- -------- -------- -------- -------- -------- --------
148,785 171,296 192,512 210,387 247,197 186,871 196,276
-------- -------- -------- -------- -------- -------- --------
Income before income taxes ................. 12,906 13,470 9,388 11,154 8,421 8,616 4,602
Provision for income taxes ................. 5,394 5,628 3,939 5,255 2,668 2,929 1,821
-------- -------- -------- -------- -------- -------- --------
Net income ................................. $ 7,512 $ 7,842 $ 5,449 $ 5,899 $ 5,753 $ 5,687 $ 2,781
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
Depreciation and amortization .............. $ 5,434 $ 5,580 $ 6,137 $ 6,695 $ 7,426 $ 5,344 $ 6,038
Capital expenditures ....................... 3,313 6,806 13,983 15,929 18,554 6,312 5,990
EBITDA(2) .................................. 25,266 25,510 23,079 25,790 23,469 19,677 17,637
Ratio of earnings to fixed
charges(3) ..................... 2.7x 3.0x 2.2x 2.0x 1.6x 1.9x 1.4x
SEGMENT INFORMATION:
Chemical Business
Net sales ...................... $106,031 $114,946 $131,572 $136,900 $166,164 $129,133 $122,853
Gross profit(4) ................ 25,352 26,739 24,904 25,397 25,400 20,390 16,096
Gross profit margin ............ 23.9% 23.3% 18.9% 18.6% 15.3% 15.8% 13.1%
Average spot price of anhydrous
ammonia per ton(5) ............. $93.84 $107.21 $189.74 $206.55 $188.48 $177.45 $193.50
</TABLE>
-24-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Tons of anhydrous ammonia
consumed ....................... 204,321 206,030 196,365 188,452 217,650 174,426 170,080
EBITDA(2) ...................... $ 22,077 $ 21,935 $ 18,291 $ 18,848 $ 17,743 $ 14,948 $ 10,267
Climate Control Business
Net sales ...................... $ 54,812 $ 69,437 $ 69,914 $ 83,843 $ 89,121 $ 66,314 $ 77,516
Gross profit(4) ................ 14,362 15,887 17,965 22,488 22,057 16,972 22,588
Gross profit margin ............ 26.2% 22.9% 25.7% 26.8% 24.7% 25.6% 29.1%
EBITDA(2) ...................... $ 3,189 $ 3,575 $ 4,788 $ 6,942 $ 5,726 $ 4,729 $ 7,370
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, AS OF SEPTEMBER 30, 1997
------------------------------------------------ -------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED (6)
-------- -------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ............... $26,320 $ 29,871 $ 29,738 $ 29,926 $ 32,150 $ 40,700 $ 51,374
Property, plant and
equipment, net .......... 36,799 42,503 55,792 68,681 82,676 83,501 83,501
Total assets .................. 95,333 109,612 129,444 146,719 173,754 182,241 202,514
Total debt ................... 62,583 46,514 69,140 78,959 82,588 106,853 129,853
Total stockholders' equity .... 8,703 21,241 24,204 28,675 32,843 32,463 29,736
</TABLE>
_____________
(1) Interest expense is calculated in accordance with generally accepted
accounting principles and excludes capitalized interest of $0.5 million,
$1.4 million and $2.4 million for the years ended December 31, 1994, 1995,
and 1996, and $1.8 million and $1.1 million for the nine months ended
September 30, 1996, and 1997, respectively.
(2) EBITDA, as defined, is earnings before deduction for interest expense,
income taxes, depreciation and amortization and any other noncash charges of
the Company reducing net income. EBITDA is presented here to provide
additional information about the Company's ability to meet its future debt
service, capital expenditures and working capital requirements. EBITDA as
presented herein may not be comparable to other similarly titled measures of
other companies and differs from the definition of Consolidated Cash Flow.
See "Description of Notes."
(3) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes plus fixed charges,
less capitalized interest, plus amortization of interest capitalized in
prior periods. "Fixed charges" consists of interest expense, including
amortization of debt issuance costs, capitalized interest and the portion of
rental expense which the Company believes is representative of the interest
component of rental expense.
(4) Gross profit represents net sales less cost of sales
(5) Average spot price of anhydrous ammonia represents F.O.B. New Orleans Barge
Price, Industrial User, derived from 52 week average price as published in
Green Market.
(6) As adjusted to give effect to the issuance of the Notes and application of
the net proceeds therefrom. See "Capitalization."
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Company's
consolidated financial statements included elsewhere herein.
OVERVIEW
The following table contains selected historical financial information
about the Company's operating segments for each of the three years in the period
ended December 31, 1996, and for each of the nine month periods ended September
30, 1996, and 1997. The information for the nine month periods ended September
30, 1996 and 1997 is unaudited. The information for each of the three years in
the period ended December 31, 1996, was derived from the consolidated financial
statements of the Company included elsewhere herein and were audited by Ernst &
Young LLP independent auditors whose report with respect thereto appears
elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES
Chemical ............... $131,572 $136,900 $166,164 $129,133 $122,853
Climate Control ........ 69,914 83,843 89,121 66,314 77,516
-------- -------- -------- -------- --------
Total .................. $201,486 $220,743 $255,285 $195,447 $200,369
GROSS PROFIT(1)
Chemical ............... $ 24,904 $ 25,397 $ 25,400 $ 20,390 $ 16,096
Climate Control......... 17,965 22,488 22,057 16,972 22,588
-------- -------- -------- -------- --------
Total................... $ 42,869 $ 47,885 $ 47,457 $ 37,362 $ 38,684
OPERATING PROFIT(2)
Chemical................ $ 12,393 $ 12,684 $ 9,954 $ 9,208 $ 3,976
Climate Control......... 2,731 4,857 4,381 3,900 6,704
-------- -------- -------- -------- --------
Total................... $ 15,124 $ 17,541 $ 14,335 $ 13,108 $ 10,680
IDENTIFIABLE ASSETS
Chemical................ $ 95,004 $114,374 $133,794 $118,939 $134,587
Climate Control......... 34,440 32,345 39,960 40,618 47,654
-------- -------- -------- -------- --------
Total................... $129,444 $146,719 $173,754 $159,557 $182,241
</TABLE>
_____________
(1) Gross profit by industry segment represents net sales less cost of sales.
(2) Operating profit by industry segment represents gross profit less operating
expenses before deducting interest expense and income taxes.
CHEMICAL BUSINESS
The Company has grown the Chemical Business through the expansion of its El
Dorado Facility and the acquisition of new agricultural distribution centers in
key geographical markets that are freight logical to the El Dorado Facility.
During the period from December 31, 1993, through September 30, 1997, the net
investment in assets of the Chemical Business was increased from $76.9 million
to $134.6 million primarily due to the construction of additional capacity to
benefit future periods.
-26-
<PAGE>
Beginning in 1994, the results of operations of the Chemical Business have
been adversely impacted by the high cost of anhydrous ammonia. From its most
recent cyclical low in 1986 through 1993, the average Gulf Coast price (the
"Spot Price") of anhydrous ammonia was approximately $100 per ton. During 1994
and in each of the years since, a tightness in supply developed which resulted
in an increase in the Spot Price of anhydrous ammonia to an average of
approximately $195 per ton. The Company believes that the tightness in supply of
anhydrous ammonia that emerged in 1994 was a result of increased industrial
usage as the U.S. economy grew, a net consolidation of the domestic capacity and
a disruption in supply coming from the former Soviet Union. Although prices for
anhydrous ammonia vary considerably from month to month, the annual average
price has remained high for each of the last three years. The Company currently
purchases approximately 220,000 tons of anhydrous ammonia per year under two
contracts, both effective as of January 1, 1997. The Company's purchase price of
anhydrous ammonia under these contracts can be higher or lower than the Spot
Price of anhydrous ammonia. The higher prices have been partially passed on to
customers; however, the entire cost increase could not be offset resulting in
lower gross profit margins during each of the periods since the increase. The
Company believes there is approximately 2 million tons of additional capacity
being constructed in the western hemisphere scheduled for completion in 1998 and
1999. The Company believes this additional capacity may contribute to a decline
in the market price of anhydrous ammonia. See "Special Note Regarding Forward-
Looking Statements."
During 1994, the Company undertook construction of the DSN Plant. The DSN
Plant began operations in 1995, but due to certain mechanical and design
problems, production of concentrated nitric acid during the twelve months ended
September 30, 1997, was limited to an average of 170 tons per day, assuming 338
days of annual production, or 60% of the stated capacity of 285 tons per day.
The limitations on production resulted in significant fixed costs being expended
as period costs during the second half of 1996, and the first half of 1997,
rather than being absorbed as cost of product being produced and sold. In
addition, significant amounts were expended for engineering, consulting, and
other costs to bring the DSN Plant up to the stated capacity. During the annual
maintenance turnaround in September 1997, management implemented corrective
actions which it believes will now allow the DSN Plant to operate at its stated
capacity, depending upon customer specifications, and to fully absorb the costs
and produce a quality product. See "Special Note Regarding Forward-Looking
Statements." In early October 1997, the DSN Plant was restarted and is
currently operating at approximately 260 tons per day due to customer
specifications. See "Summary-The Company-The DSN Plant."
After the initial start up of the DSN Plant, certain residents of El
Dorado, Arkansas, and the ADPC&E (as defined) alleged that the El Dorado
Facility's air emissions were in violation of its existing permit requirements.
As a result, the Chemical Business entered into certain agreements with the
ADPC&E, including, in 1995, an administrative order which has since been
amended, and which imposed certain requirements on, and assessed penalties
against, the Company. See "Business--Environmental Matters." In addition,
certain lawsuits were filed by plaintiffs living in the El Dorado, Arkansas,
community. See "Business--Legal Proceedings." In order to address the ADPC&E's
concerns, and to defend itself in these lawsuits, significant expenditures were
made for consultants, lawyers, and other related fees and expenses, as well as
for significant capital improvements to the air emission control equipment at
the El Dorado Facility. A substantial portion of the litigation-related costs
are not expected to reoccur. Furthermore, although these expenses were absorbed
by the Company as they were incurred, the Company's EIL Insurance (as defined)
has reimbursed the Company $405,000 of its past legal fees and expenses relating
to the pending litigation (after taking into account the amount of the retention
under the EIL Insurance) and has agreed to pay such future fees and expenses
which may be incurred, subject to a reservation of rights regarding one of the
lawsuits. See "Business--Legal Proceedings."
During July 1997, a subsidiary of the Company entered into an agreement
with Bayer Corporation whereby the Company's subsidiaries would act as agent to
construct a nitric acid plant located within Bayer's Baytown, Texas chemical
plant complex. This plant, when constructed, will be operated by the Company's
subsidiary and will supply nitric acid for Bayer's polyurethane units under a
long-term supply contract. Management estimates that, after the initial startup
phase of operations at the plant, at full production capacity based on terms of
the Bayer Agreement and on current market conditions, the plant should generate
approximately $50 million in annual revenues. Construction is scheduled to be
completed by the end of 1998. See "Special Note Regarding Forward-Looking
Statements."
The Chemical Business' Australian subsidiary ("TES") results of operations
have been adversely affected due to the recent economic developments in certain
countries in Asia. These economic developments in Asia have had a negative
impact on the mining industry in Australia which TES services. If these adverse
economic conditions in Asia continue for an extended period of time, such could
have an adverse effect on the Company's consolidated results of operations for
1998. See "Special Note Regarding Forward-Looking Statements."
-27-
<PAGE>
CLIMATE CONTROL
The Climate Control Business maintains two modern, flexible manufacturing
and design facilities located in Oklahoma City, Oklahoma. The Climate Control
Business' two principal product lines are manufactured and sold through two
operating subsidiaries: International Environmental Corporation ("IEC"), which
manufactures and markets hydronic fan coil units, and Climate Master, Inc.
("CM"), which manufactures and markets water source heat pumps, geothermal water
source heat pumps, and packaged terminal air conditioners.
The Climate Control Business has generated an operating profit in each year
from 1992 through 1996. However, during that period, CM sustained consistent
operating losses which were more than offset by profitability at IEC.
CM's profitability was adversely affected by a sharp decline in the primary
market for its products sold to the new office construction market, which was
adversely affected by the passage of the Tax Reform Act of 1986. As a result,
the total sales of water source heat pumps in the U.S. plunged from 150,000
units per year in 1986 to 71,000 units per year in 1992. CM's sales revenue
decreased from a high of $47.8 million in 1986 to a low of $21.8 million in
1992.
Due to significant changes in its primary market, CM implemented a strategy
of diversification. Several new markets were targeted, and new products were
introduced. CM entered the original equipment manufacturer ("OEM") business,
introduced a new line of packaged terminal air conditioners and new rooftop
water source heat pumps, entered the "shared energy savings" market (which
primarily sells highly efficient water source heat pumps to retrofit large
government installations), and emphasized and expanded the residential
geothermal water source heat pump business. In addition, a new management team
was recruited, and CM's operations were reorganized.
These actions were implemented over the last two years and began to improve
operating performance in 1997. As a result of these actions, CM's sales
increased from $27.5 million to $37.5 million and its operating losses have
narrowed from $3.0 million to $0.1 million for the nine months ended September
30, 1996, and September 30, 1997, respectively.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Net Sales
Consolidated net sales for the nine months ended September 30, 1997, were
$200.4 million, compared to $195.4 million for the first nine months of 1996, an
increase of $5.0 million. This increase in sales resulted from increased sales
in the Climate Control Business of $11.2 million, primarily due to increased
sales of CM's heat pumps partially offset by decreased sales in the Chemical
Business of $6.3 million primarily due to reduced sales of the Company's
wholly-owned Australian subsidiary, Total Energy Systems Limited ("TES"), due to
expiration of certain customer contracts.
Gross Profit
Gross profit increased $1.3 million and was 19.3% of net sales for the
first nine months of 1997, compared to 19.1% of net sales for the first nine
months of 1996. The gross profit increase was primarily attributable to
increased absorption of costs due to higher production volumes and focus on
sales of more profitable product lines in the Climate Control Business. This
improvement was offset by higher production costs in the Chemical Business due
to (i) the higher cost of anhydrous ammonia which was only partially passed on
in the form of higher selling prices, (ii) unabsorbed overhead costs caused by
downtime related to modifications made to resolve problems associated with
mechanical failures and (iii) environmental matters at the Chemical Business'
primary manufacturing plant. These increased costs
-28-
<PAGE>
in 1997 were partially offset by a reduction in cost of sales of $2.1 million
through recapture of manufacturing variances of the Chemical Business in the
form of business interruption insurance settlements.
Selling, General and Administrative Expense
Selling, general and administrative ("SG&A") expenses, as a percent of net
sales, were 14.0% and 12.4% in the nine month periods ended September 30, 1997,
and 1996, respectively. The increase, as a percent of sales, was approximately
the same for the Chemical and Climate Control Businesses. The increase in the
Chemical Business was the result of an increased provision for one uncollectible
account receivable of approximately $350,000 and increased professional fees of
approximately $200,000, primarily related to environmental matters, compounded
by lower sales in this business. The increase in the Climate Control Business
was due to increased administrative and selling expenses as a percent of sales
in the heat pump product line associated with the implementation of a new
marketing plan for CM.
Interest Expense
Interest expense for the Company, before deducting capitalized interest,
was approximately $7.7 million during the nine months ended September 30, 1997,
compared to approximately $6.3 million during the nine months ended September
30, 1996. During the first nine months of 1997 and 1996, $1.1 million and $1.8
million, respectively, of interest expense was capitalized in connection with
construction of the DSN Plant. The 1997 increase of $1.4 million before the
effect of capitalization primarily resulted from increased borrowings needed to
support capital expenditures, higher inventory balances and to meet the
operational requirements of the Company.
Net Income
The Company had net income of $2.8 million in the first nine months of 1997
compared to net income of $5.7 million in the nine months ended September 30,
1996. The decreased profitability of $2.9 million was primarily due to the
factors discussed above.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales
Consolidated net sales for 1996 were $255.3 million, compared to $220.7
million for 1995, an increase of $34.6 million or 15.6%. This increase resulted
principally from: (i) increased sales in the Climate Control Business of $5.3
million, primarily due to the implementation of CM's diversification strategy
and the efforts of its new management, both as described above, and (ii)
increased sales in the Chemical Business of $29.3 million. The Chemical Business
had increases of approximately $7.0 million in sales of agricultural products
and approximately $6.0 million in sales of industrial products. These sales
increases involved both volume and price increases as higher raw material costs
were passed through to customers to the extent possible. Additionally, TES, the
Company's subsidiary located in Australia and New Zealand, had an increase in
sales of $16.0 million due to an expanded customer base.
Gross Profit
Gross profit decreased $0.4 million and was 18.6% of net sales for 1996,
compared to 21.7% of net sales for 1995. The gross profit percentage declined in
both the Chemical and Climate Control Businesses. The gross profit of the
Chemical Business was adversely affected due to the continued high cost of
anhydrous ammonia as discussed above and higher production costs due to
unabsorbed overhead costs resulting from excessive downtime at the Chemical
Business' El Dorado Facility related to modifications made to install air
emissions abatement equipment and resolve problems associated with mechanical
and design problems at the DSN Plant. See "Business--Environmental Matters." The
Climate Control Business' gross profit decreased as a percentage of net sales
due to decreased absorption of costs resulting from lower production volumes in
certain product lines and a less favorable product mix.
-29-
<PAGE>
Selling, General and Administrative Expense
SG&A, as a percent of net sales, was 13.0% in 1996 and 13.7% in 1995.
Climate Control Business SG&A expenses were approximately the same in 1996 as
1995, and net sales increased by 6.3% resulting in a lower percentage of SG&A to
sales. SG&A of the Chemical Business, as a percent of sales, was consistent with
sales increases, therefore generating no change as a percent of net sales. The
Chemical Business also incurred approximately $450,000 in 1996 for legal and
consulting fees for environmental and legal matters relating to the El Dorado
Facility's air emissions. See "Business--Environmental Matters." Also in 1996,
the Chemical Business expended approximately $1.0 million to increase its
provision for one uncollectible account receivable.
Interest Expense
Interest expense for the Company, before deducting capitalized interest,
was $8.7 million during 1996, compared to $8.5 million during 1995. During 1996,
$2.4 million of interest expense was capitalized in connection with construction
of the DSN Plant, compared to $1.4 million in 1995.
Net Income
The Company had net income of $5.8 million in 1996 compared to net income
of $5.9 million in 1995. Although 1996 consolidated net sales increased, the
consolidated gross profit declined and SG&A increased due to the factors
discussed above.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales
Consolidated net sales for 1995 were $220.7 million, compared to $201.5
million for 1994, an increase of $19.2 million or 9.5%. This sales increase
resulted principally from: (i) increased sales in the Climate Control Business
of $13.9 million, primarily due to increased sales in the fan coil segment of
the Climate Control Business and to increased sales in geothermal water source
heat pumps related to certain governmental projects and (ii) increased sales in
the Chemical Business of $5.3 million, which were primarily attributable to
higher anhydrous ammonia costs being passed through to customers and increased
sales of $2.5 million at TES due to the addition of new customers.
Gross Profit
Gross profit increased $5.0 million and was 21.7% of net sales for 1995,
compared to 21.3% of net sales for 1994. Although the Chemical Business' gross
profit increased by $0.5 million, the gross margin was adversely affected due to
the continued high cost of anhydrous ammonia as discussed above. The gross
profit of the Climate Control Business increased approximately $4.5 million due
to increased sales volume and improved absorption of fixed costs.
Selling, General and Administrative Expense
SG&A expenses increased $2.6 million in 1995 compared to 1994. As a percent
of net sales SG&A expenses were 13.7% in 1995 and 13.8% in 1994. SG&A, as a
percentage of sales, remained consistent in both the Chemical and Climate
Control Businesses.
Interest Expense
Interest expense for the Company, before deducting capitalized interest,
was $8.5 million during 1995, compared to $6.6 million during 1994. During 1995,
$1.4 million interest expense was capitalized in connection with construction of
the DSN Plant compared to $0.5 million in 1994. The increase in interest expense
primarily resulted
-30-
<PAGE>
from increased borrowings. The increased borrowings were necessary to support
capital expenditures, higher inventory levels, higher accounts receivable
balances and to meet the operational requirements of the Company. See "--
Liquidity and Capital Resources."
Net Income
The Company had net income of $5.9 million in 1995 compared to net income
of $5.4 million in 1994. This improvement in 1995 was primarily attributable to
increased sales volume with slightly higher profit margins offset by increased
interest expense and SG&A as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary cash needs have been for operating
expenses, working capital and capital expenditures. The Company has financed its
cash requirements primarily through internally generated cash flow and
borrowings under its revolving credit facilities.
Cash flows from operations before changes in working capital items were
$9.6 million and $12.4 million for the nine months ended September 30, 1997, and
1996, respectively. During the nine months ended September 30, 1997, net cash
flows used in operating activities were $2.0 million while the nine months ended
September 30, 1996, provided net cash flows of $9.6 million. This reduction in
cash flows provided from operations of $11.6 million resulted from lower
earnings of $2.9 million and an increase in working capital of $8.8 million. The
increase in working capital is due primarily to a net decrease in accounts
payable partially due to reduced inventory purchases under a product exchange
agreement and a net reduction in accounts receivable due to slower sales growth
during the first nine months of 1997 compared with the comparable period in
1996.
Cash flows from operations before changes in working capital items were
$14.3 million and $13.6 million for the year ended December 31, 1996, and 1995,
respectively. During the year ended December 31, 1996, and 1995, net cash
provided by operations were $15.0 million and $10.2 million, respectively. This
increase in cash flows provided from operations was due primarily to an increase
in accounts payable and accrued liabilities of $15.5 million partially offset by
a net increase in accounts receivable of $2.1 million and inventories of $7.7
million resulting from higher sales volume in both the Chemical and Climate
Control Businesses.
Cash flows from operations before changes in working capital items were
$13.6 million and $13.9 million for the year ended December 31, 1995, and 1994,
respectively. During the year ended December 31, 1995, and 1994, net cash flows
from operations were $10.2 million and $10.1 million, respectively. Cash flows
from operations were impacted by higher levels of accounts receivables due to
greater sales levels in 1995 offset by a net decrease in inventories and
accounts payable compared to 1994.
The Company made capital expenditures of $18.6 million, $15.9 million and
$14.0 million during the years ended December 31, 1996, 1995, and 1994,
respectively, and $6.0 million for the nine months ended September 30, 1997.
Approximately $6.5 million, $11.2 million, and $11.0 million of expenditures
made during 1996, 1995, and 1994, and $1.3 million of the expenditures made
during the first nine months of 1997 relate directly to the construction, start-
up and subsequent modification of the DSN Plant. The Company expects to make
capital expenditures totaling $6.0 million during 1997 and approximately $8.0
million in 1998. See "Special Note Regarding Forward-Looking Statements."
The Company incurred substantial indebtedness in connection with the
Initial Offering. After giving effect to the Initial Offering and application of
the net proceeds therefrom, as of September 30, 1997, the Company's indebtedness
increased from approximately $106.9 million to approximately $129.9 million,
consisting of $105 million of the Notes and $24.9 million under other debt
facilities, including capital leases.
-31-
<PAGE>
LSB, certain subsidiaries of LSB that are not subsidiaries of the Company,
and certain subsidiaries of the Company are parties to $65 million revolving
credit facility ("Revolving Credit Facility"). The Revolving Credit Facility is
evidenced by one loan agreement for the Company's subsidiaries that are parties
thereto and separate loan agreements for LSB and its other subsidiaries that are
not subsidiaries of the Company.
Under the terms of the Revolving Credit Facility, subsidiaries of the
Company may borrow up to $65 million on a revolving basis subject to limitations
based on (i) the amount of eligible receivables and inventory of such
subsidiaries and (ii) the aggregate amount of borrowings under the Revolving
Credit Facility by LSB and certain subsidiaries that are not subsidiaries of the
Company. Under the Revolving Credit Facility, LSB and certain subsidiaries of
LSB that are not subsidiaries of the Company have the right to borrow on a
revolving basis up to $24 million. Any amounts so borrowed by LSB and its
subsidiaries that are not subsidiaries of the Company will reduce the amount
that the subsidiaries of the Company may borrow at any one time under the
Revolving Credit Facility. The Revolving Credit Facility, as it relates to the
subsidiaries of the Company, will be secured by the receivables, inventory,
proprietary rights, general intangibles, books and records and proceeds thereof.
LSB guarantees all of the obligations under the Revolving Credit Facility,
including those of the Company's subsidiaries. The Company guarantees only the
obligations of its subsidiaries under the Revolving Credit Facility, and neither
the Company nor its subsidiaries that are parties to the Revolving Credit
Facility guarantee the obligations of LSB and the other subsidiaries of LSB that
are not subsidiaries of the Company under the Revolving Credit Facility. In
addition, a default by LSB and the other subsidiaries of LSB that are not
subsidiaries of the Company under the Revolving Credit Facility will not be
considered a default of the Company's subsidiaries under the Revolving Credit
Facility. The Revolving Credit Facility will terminate on December 31, 2000,
subject to the automatic renewal for terms of 13 months each thereafter, unless
terminated by either party.
Borrowings under the Revolving Credit Facility bear an annual rate of
interest at a floating rate based on the lender's prime rate plus 1.5% per annum
or, at LSB's option, on the lender's LIBOR rate plus 3.875% per annum (which
rates are subject to increase or reduction upon achieving specified availability
and adjusted tangible net worth, as defined).
The Company used a portion of the net proceeds from the Initial Offering to
repay a substantial portion of the unpaid principal due by certain of its
subsidiaries under their current revolving credit facilities. See "Use of
Proceeds." The Company intends to continue to borrow, from time to time, under
its existing revolving credit facilities as the Company may deem appropriate to
finance the working capital requirements of the Company and its subsidiaries. As
of November 30, 1997, and after giving effect to the application of the net
proceeds from the Initial Offering, the Company had availability under the
Revolving Credit Facility of approximately $43.5 million. In addition, as of
November 30, 1997, and after giving effect to the application of the net
proceeds from the Initial Offering, the Company's Australian subsidiary had
availability of approximately US$2.5 million under its revolving credit
facility. See "--Foreign Subsidiary Financing."
In addition to the Agreements discussed above, as of September 30, 1997,
the Company's wholly-owned subsidiary, DSN Corporation ("DSN"), is a party to
several loan agreements with a financial company (the "Financing Company") for
three projects. At September 30, 1997, DSN had outstanding borrowings of $14.1
million under these loans. The loans have repayment schedules of 84 consecutive
monthly installments of principal and interest. The interest rate on each of the
loans is fixed and range from 8.2% to 8.9%. Annual interest, for the three notes
as a whole, at September 30, 1997, at the agreed to interest rates would
approximate $1.2 million. The loans are secured by the various DSN property and
equipment. The loan agreements require the Company to maintain certain financial
ratios, including tangible net worth requirements.
FOREIGN SUBSIDIARY FINANCING
The Company's wholly-owned Australian subsidiary, TES, has a revolving
credit working capital facility (the "TES Revolving Facility") with Bank of New
Zealand, Australia, of approximately AUS$8.5 million (approximately
-32-
<PAGE>
US$6.4 million). The TES Revolving Facility allows for borrowings based on
specific percentages of qualified eligible assets. Based on the effective
exchange rate at September 30, 1997, approximately US $5.6 million (AUS $7.7
million approximately) was borrowed at September 30, 1997. Such debt is secured
by substantially all the assets of TES, plus an unlimited guarantee and
indemnity from LSB and certain subsidiaries of TES. The interest rate on this
debt is dependent upon the borrowing option elected by TES and had a weighted
average rate of 7.8% at September 30, 1997. TES is in technical noncompliance
with a certain financial covenant contained in the loan agreement involving the
TES Revolving Facility. However, this covenant was not met at the time of
closing of this loan and the Bank of New Zealand, Australia has continued to
extend credit under the Facility. The outstanding borrowing under the TES
Revolving Facility at September 30, 1997, has been classified as due within one
year in the accompanying consolidated financial statements.
The Company is in negotiations with Bank of New Zealand to amend the TES
Revolving Facility to allow for borrowings up to an aggregate of AUS$11 million
(approximately US$7.9 million). This AUS$11 million will be broken down into
three parts: (i) AUS$6 million revolving working capital facility; (ii) AUS$4.5
million long-term debt facility; and (iii) AUS$0.5 million leasing facility.
There are no assurances that such increase will be implemented.
Management believes that following the Initial Offering cash flows from
operations, availability under the Company's revolving credit facilities, and
other sources will be adequate to meet its presently anticipated capital
expenditure, working capital, and debt service requirements. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations, or that future financings will be available in an amount sufficient
to enable the Company to service its indebtedness, including the Notes, or to
make necessary capital expenditures, or that any refinancing would be available
on commercially reasonable terms, if at all. See "Special Note Regarding
Forward-Looking Statements."
BUSINESS
GENERAL
The Company, a wholly owned subsidiary of LSB, is engaged, through its
subsidiaries, in the manufacture and sale of (i) chemical products for the
explosives, agricultural and industrial acids markets and (ii) a broad range of
hydronic fan coils and water source heat pumps as well as other products used in
commercial and residential HVAC systems. For the twelve months ended September
30, 1997, the Company had net sales of $260.2 million and EBITDA of $21.4
million.
BUSINESS STRATEGY
The Company is pursuing a strategy of concentrating on businesses and
product lines in niche markets where it can establish a position as a market
leader. The Company believes that it can maximize its long-term profitability by
offering specialized products and value-added services to its customers. See
"Special Note Regarding Forward-Looking Statements."
The Chemical Business seeks to maximize profitability by (i) being a low
cost producer, (ii) focusing on a specific geographic area where it can develop
a freight and distribution advantage and establish a leading regional presence,
(iii) offering value added services as a means of building customer loyalty and
(iv) continuing to alter the product mix towards higher margin products. The
Company has developed a geographic advantage in the Texas, Oklahoma, Missouri
and Tennessee agricultural markets by establishing an extensive network of
wholesale and retail distribution centers for nitrogen-based fertilizer tailored
toward regional farming practices and by providing value added services. In its
continued focus toward reducing production costs, the Company undertook
construction of the DSN Plant in 1994. The Company believes that the DSN Plant's
more efficient and improved production of concentrated nitric acid will provide
for a greater volume of third party sales of concentrated nitric acid, a
relatively high margin product. The
-33-
<PAGE>
Company has also developed a proprietary line of explosives through a nationally
recognized branded product. Given the nature of the product, the Company
believes its branding strategy, emphasizing quality, safety and reliability,
gives it a competitive advantage over less recognized explosive products. See
"Special Note Regarding Forward-Looking Statements."
The Climate Control Business seeks to establish leadership positions in
niche markets by offering extensive product lines, custom tailored products and
proprietary new technologies. Under this focused strategy, the Company has
developed the most extensive line of hydronic fan coils and water source heat
pumps in the U. S. The Company has developed flexible production to allow it to
custom design units for the growing retrofit and replacement markets. The
Company believes that the Climate Control Business is one of the leaders in
commercializing new technology to satisfy increasingly stringent indoor air
quality standards. Products recently developed by the Company include heat pipe
technology for dehumidification, specialty filters for the removal of airborne
particles and gases, ultraviolet light units for bacteria removal and highly
energy efficient dual path heat pump products. The Climate Control Business is a
pioneer in the use of geothermal water source heat pumps in residential
applications. The Company believes that an aging installed base of residential
HVAC systems, coupled with relatively short payback periods of geothermal
systems, will continue to increase demand for its geothermal products in the
residential replacement market. See "Special Note Regarding Forward-Looking
Statements."
CHEMICAL BUSINESS
General
The Company's Chemical Business manufactures three principal product lines
that are derived from anhydrous ammonia: (1) fertilizer grade ammonium nitrate
for the agricultural industry, (2) explosive grade ammonium nitrate for the
mining industry and (3) concentrated, blended and mixed nitric acid for
industrial applications. In addition, the Company also produces sulfuric acid
for commercial applications primarily in the paper industry. The Chemical
Business' products are sold in niche markets where the Company believes it can
establish a position as a market leader. See "Special Note Regarding Forward-
Looking Statements."
[INSERT DIAGRAM]
The diagram is intended to illustrate the sequence of events through which
anhydrous ammonia is processed into the Chemical Business' three principal
product lines. The diagram reveals the following sequence: (1) anhydrous ammonia
is delivered to regular nitric acid plants and concentrated nitric acid plants;
(2) the regular nitric acid plants utilize a conventional process for the
manufacture of (a) fertilizer grade ammonium nitrate which is used by ranchers
and farmers and (b) industrial grade ammonium nitrate for explosive products
which are used for surface mining, quarries, general construction and highway
construction; and (3) the concentrated nitric acid plants utilize the DSN
Process to manufacture concentrated nitric acid and mixes which are used for
herbicides, plastics, explosives, and pharmaceuticals.
Agricultural Products
The Chemical Business produces ammonium nitrate, a nitrogen-based
fertilizer, at the El Dorado Facility. In 1996, the Company sold over 190,000
tons of ammonium nitrate fertilizer to farmers, fertilizer dealers and
distributors located primarily in the south central United States.
Ammonium nitrate is one of several forms of nitrogen-based fertilizers
which include anhydrous ammonia and urea. Although, to some extent, the various
forms of nitrogen-based fertilizers are interchangeable, each has its own
characteristics which produce agronomic preferences among end users. Farmers
decide which type of nitrogen-based fertilizer to apply based on the crop
planted, soil and weather conditions, regional farming practices and relative
nitrogen fertilizer prices.
The Chemical Business is a major manufacturer of fertilizer grade ammonium
nitrate, which it markets primarily in Texas, Arkansas and the surrounding
regions. This market, which is in close proximity to its El Dorado
-34-
<PAGE>
Facility, includes a high concentration of pasture land and row crops which
favor ammonium nitrate over other nitrogen-based fertilizers. The Company has
developed the leading market position in Texas by emphasizing high quality
products, customer service and technical advice. Using a proprietary prilling
process, the Company produces a high performance ammonium nitrate fertilizer
that, because of its uniform size, is easier to apply than many competing
nitrogen-based fertilizer products. The Company believes that its "E-2" brand
ammonium nitrate fertilizer is recognized as a premium product within its
primary market. In addition, the Company has developed long term relationships
with end users through its network of 21 owned and operated wholesale and retail
distribution centers.
Explosives
The Chemical Business manufactures low density ammonium nitrate-based
explosives, including bulk explosives used in surface mining. In addition, the
Company manufactures and sells a branded line of packaged explosives, used in
construction, quarrying and other applications, particularly where controlled
explosive charges are required. The Company's bulk explosives are marketed
primarily through six Company-owned distribution centers, four of which are
located in close proximity to the customers' surface mines in the coal producing
states of Kentucky, West Virginia, Illinois, and Indiana. Additionally, the
Company, through its Australian subsidiary, manufactures and distributes bulk
and packaged explosives in Australia and New Zealand. The Company emphasizes
value-added customer services and specialized product applications for its bulk
explosives. Most of the sales of bulk explosives are to customers who work
closely with the Company's technical representatives in meeting their specific
product needs. In addition, the Company sells bulk explosives to independent
wholesalers and to other explosives companies. Packaged explosives are used for
applications requiring controlled explosive charges and typically command a
premium price and produce higher margins. The Company believes its Slurry
packaged explosive products are among the most widely recognized in the
industry. Slurry packaged explosive products are sold nationally and
internationally to other explosive companies and end-users.
Industrial Acids
The Chemical Business manufactures and sells industrial acids, primarily to
the food, paper, chemical and electronics industries. The Company is the leading
supplier to third parties of concentrated nitric acid which is a special grade
of nitric acid used in the manufacture of plastics, pharmaceuticals, herbicides,
explosives, and other chemical products. In addition, the Company produces and
sells regular, blended and mixed nitric acid and a variety of grades of sulfuric
acid. The Company competes on the basis of price and service, including on-time
reliability and distribution capabilities. The Company operates the largest
fleet of tankcars in the concentrated nitric acid industry which provides it
with a significant competitive advantage in terms of distribution costs and
capabilities. In addition, the Company provides inventory management as part of
the value-added services it offers to its customers.
The Company has identified concentrated nitric acid as a strategic product
line for its Chemical Business due to attractive levels of profitability,
increased diversity of end markets and the ability to compete on a value added
service basis. To support further growth in its nitric acid business, the
Company undertook the construction of the DSN Plant located at the El Dorado
Facility. The DSN Plant uses a newer and more efficient process to produce
concentrated nitric acid directly from anhydrous ammonia, in contrast to the
conventional process which requires the input of regular nitric acid, an
intermediate step, to produce concentrated nitric acid.
DSN Plant
Since January 1, 1994, the Chemical Business has spent approximately $32.0
million to install the DSN Plant. The DSN Plant began limited operations in
1995, and such limited operations continued due to certain mechanical and design
problems associated with the plant's construction and installation. As a result
of such problems, production at the DSN Plant was limited to approximately 170
tons per day (60% of its stated capacity of 285 tons per day assuming 338 days
of annual production) during the twelve months ended September 30, 1997. In
October 1997, management completed certain corrective actions at the DSN Plant.
As a result of these corrective actions, the DSN Plant has the
-35-
<PAGE>
capacity to operate at approximately 285 tons per day. However, due to customer
specifications and inventory constraints, among other things, the DSN Plant has
been operating at approximately 260 tons per day since the corrective actions
were completed. Based on normalized production (assuming 338 days of annual
production) at 260 tons per day, the Company believes that it will be able to
produce concentrated nitric acid at a cost per ton approximately at $65 per ton
lower than at the production levels of 170 tons per day in the prior period.
While the Company will seek to market the additional capacity of concentrated
nitric acid output to commercial markets, there can be no assurance that the
Company will be able to sell all of the additional capacity in this market.
However, to the extent that there is insufficient demand for concentrated nitric
acid, the Company believes it can profitably use the concentrated nitric acid in
the production of mixed and blended acids and ammonium nitrate based fertilizer
and explosives (although at lower margins than if the production were sold as
concentrated nitric acid). See "Summary-The Company-The DSN Plant," "Risk
Factors-DSN Plant Design Issues," "The Company-Chemical Business-DSN Plant" and
"Special Note Regarding Forward-Looking Statements."
EDNC Baytown Plant
In June 1997, two wholly owned subsidiaries of the Company, El Dorado
Chemical Company ("EDC") and El Dorado Nitrogen Company ("EDNC"), entered into a
series of agreements with Bayer Corporation ("Bayer") (collectively, the "Bayer
Agreement"). Under the Bayer Agreement, EDNC will act as an agent to construct
and, upon completion of construction, will operate a nitric acid plant (the
"EDNC Baytown Plant") at Bayer's Baytown, Texas chemical facility. EDC has
guaranteed the performance of EDNC's obligations under the Bayer Agreement.
Under the terms of the Bayer Agreement, EDNC is to lease the EDNC Baytown
Plant pursuant to an operating lease from an unrelated third party with an
initial lease term of ten years from the date on which the EDNC Baytown Plant
becomes fully operational. Bayer will purchase from EDNC all of its requirements
for nitric acid to be used by Bayer at its Baytown, Texas facility for ten years
from the date on which the EDNC Baytown Plant becomes fully operational. EDNC
will purchase from Bayer its requirements for anhydrous ammonia for the
manufacture of nitric acid as well as utilities and other services. Subject to
certain conditions, EDNC will be entitled to sell the amount of nitric acid
manufactured at the EDNC Baytown Plant which is in excess of Bayer's
requirements to third parties. The Bayer Agreement provides that Bayer will make
certain net monthly payments to EDNC which will be sufficient for EDNC to
recover all of its costs plus a profit. Upon expiration of the initial ten-year
term from the date the EDNC Baytown Plant becomes operational, the Bayer
Agreement may be renewed for up to six renewal terms of five years each;
however, prior to each renewal period, either party to the Bayer Agreement may
opt against renewal.
If operations at the EDNC Baytown Plant are not commenced by February 1,
1999, or upon a change in control of LSB, EDC or EDNC, Bayer has an option to
terminate the Bayer Agreement. EDNC has an option to terminate the Bayer
Agreement upon the failure of Bayer to complete the construction of certain
delivery systems prior to January 1, 1999, and upon the occurrence of certain
events of default which remain uncured. Bayer retains the right of first refusal
with respect to any bona fide third-party offer to purchase any voting stock of
EDNC or any portion of the EDNC Baytown Plant. It is anticipated that
construction of the EDNC Baytown Plant will cost approximately $60 million and
will be completed by late 1998. Construction financing of the EDNC Baytown Plant
is to be provided by an unaffiliated lender. Neither the Company nor EDC has
guaranteed any of the lending obligations for the EDNC Baytown Plant.
Raw Materials
Anhydrous ammonia represents the primary component in the production of
most of the products of the Chemical Business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation." The Chemical Business
currently purchases approximately 220,000 tons of anhydrous ammonia per year for
use in its manufacture of its products. The Company has contracts with two
suppliers of anhydrous ammonia. One contract expires in December 1998 and the
other expires in April 2000. The Chemical Business is required to buy 120,000
tons of its annual requirements of anhydrous ammonia under the contract expiring
in 2000 and the balance under the other contract.
-36-
<PAGE>
The Company believes that it could obtain anhydrous ammonia from other
sources in the event of a termination of the above-referenced contracts, but
such may not be obtainable on as favorable terms. See "Special Note Regarding
Forward-Looking Statements."
Seasonality
The Company believes that the only seasonal products of the Chemical
Business are fertilizer and related chemical products sold to the agricultural
industry. The selling seasons for those products are primarily during the spring
and fall planting seasons, which typically extend from February through May and
from September through November in the geographical markets in which the
majority of the Company's agricultural products are distributed. As a result,
the Chemical Business increases its inventory of ammonium nitrate prior to the
beginning of each planting season. Sales to the agricultural markets depend upon
weather conditions and other circumstances beyond the control of the Company.
Regulatory Matters
Each of the Chemical Business' domestic blasting product distribution
centers are licensed by the Bureau of Alcohol, Tobacco and Firearms in order to
manufacture and distribute blasting products. The Australian and New Zealand
distribution centers are subject to comparable licensing requirements imposed by
their respective controlling government authorities. The Chemical Business is
also subject to extensive federal, state and local environmental laws, rules and
regulations. See "--Environmental Matters" and "--Legal Proceedings."
Competition
The Chemical Business competes with other chemical companies in its
markets, many of whom have greater financial and other resources than the
Company. The Company believes that competition within the markets served by the
Chemical Business is primarily based upon price, service, warranty and product
performance. The Company believes that the Chemical Business is the leader in
the Texas ammonium nitrate market and is the leading producer of concentrated
nitric acid in the United States for third party sales.
CLIMATE CONTROL BUSINESS
General
The Company's Climate Control Business manufactures and sells a broad range
of standard and custom designed hydronic fan coils and water source heat pumps
as well as other products for use in commercial and residential HVAC systems.
Demand for the Climate Control Business' products is driven by the construction
of commercial, institutional and residential buildings, the renovation of
existing buildings and the replacement of existing systems. The Climate Control
Business' commercial products are used in a wide variety of buildings, such as
hotels, motels, office buildings, schools, universities, apartments,
condominiums, hospitals, nursing homes, extended care facilities, supermarkets
and superstores. Many of the Company's products are targeted to meet
increasingly stringent indoor air quality and energy efficiency standards.
Hydronic Fan Coils
The Climate Control Business is the leading provider of hydronic fan coils
targeted to the commercial and institutional markets in the U.S. Hydronic fan
coils use heated or chilled water, provided by a centralized chiller and boiler
through a water pipe system, to condition the air and allow individual room
control. Hydronic fan coil systems are quieter and have longer lives and lower
maintenance costs than comparable systems used where individual room control is
required. The Company believes that its product line of hydronic fan coils is
the most extensive offered by any domestic producer. The breadth of this product
line coupled with customization capability provided by a flexible
-37-
<PAGE>
manufacturing process are important components of the Company's strategy for
competing in the commercial and institutional renovation and replacement
markets.
Water Source Heat Pumps
The Company is a leading U.S. provider of water source heat pumps to the
commercial construction and renovation markets. These are highly efficient
heating and cooling units which enable individual room climate control through
the transfer of heat through a water pipe system which is connected to a
centralized cooling tower or heat injector. Water source heat pumps enjoy a
broad range of commercial applications, particularly in medium to large sized
buildings with many small, individually controlled spaces. The Company believes
the market for commercial water source heat pumps will continue to grow due to
the relative efficiency and long life of such systems as compared to other air
conditioning and heating systems, as well as to the emergence of the replacement
market for those systems. See "Special Note Regarding Forward-Looking
Statements."
Geothermal Products
The Climate Control Business is a pioneer in the use of geothermal water
source heat pumps in residential and commercial applications. Geothermal
systems, which circulate water or antifreeze through an underground heat
exchanger, are among the most energy efficient systems available. The Company
believes that an aging installed base of residential HVAC systems, coupled with
the longer life, lower cost to operate, and relatively short payback periods of
geothermal systems will continue to increase demand for its geothermal products,
particularly in the residential replacement market. See "Special Note Regarding
Forward-Looking Statements."
Hydronic Fan Coil and Water Source Heat Pump Market
The Company has pursued a strategy of specializing in hydronic fan coils
and water source heat pump products. The annual U.S. market for hydronic fan
coils and water source heat pumps is approximately $225 million. Demand in these
markets is generally driven by levels of repair, replacement, and new
construction activity. The U.S. market for fan coils and water source heat pumps
products has grown on average 6% per year over the last 5 years. This growth has
been fueled by the aging of the installed base of units, the introduction of new
energy efficient systems, upgrades to central air conditioning and increased
governmental regulations restricting the use of ozone depleting refrigerants in
HVAC systems.
Production and Backlog
Most of the Climate Control Business' production of the above-described
products occurs on a specific order basis. The Company manufactures the units in
many sizes and configurations, as required by the purchaser, to fit the space
and capacity requirements of hotels, motels, schools, hospitals, apartment
buildings, office buildings and other commercial or residential structures. As
of September 30, 1997, the backlog of confirmed orders for the Climate Control
Business was approximately $27.2 million. As of the date of this Prospectus, the
Climate Control Business released substantially all of its September 30, 1997,
backlog to production.
Marketing and Distribution
The Climate Control Business sells its products to mechanical contractors,
original equipment manufacturers and distributors. The Company's sales to
mechanical contractors primarily occur through independent manufacturer's
representatives, who also represent complementary product lines not manufactured
by the Company. Original equipment manufacturers generally consist of other air
conditioning and heating equipment manufacturers who resell under their own
brand name the products purchased from the Climate Control Business in
competition with the Company. Sales to original equipment manufacturers
accounted for approximately 28% of the sales of the Climate Control Business in
1996.
-38-
<PAGE>
Competition
The Climate Control Business competes with approximately eight companies,
some of whom are also customers of the Company. Some of the competitors have
greater financial and other resources than the Company. The Climate Control
Business manufactures a broader line of fan coil and water source heat pump
products than any other manufacturer in the United States, and the Company
believes that it is competitive as to price, service, warranty and product
performance.
PROPERTIES
Chemical Business
The Chemical Business primarily conducts manufacturing operations (i) on
150 acres of a 1,400 acre tract of land located in El Dorado, Arkansas (the "El
Dorado Facility"), (ii) in a facility of approximately 60,000 square feet
located on 10 acres of land in Hallowell, Kansas ("Kansas Facility") and (iii)
in a mixed acid plant in Wilmington, North Carolina ("Wilmington Plant"). The
Chemical Business owns all of its manufacturing facilities, with the El Dorado
Facility and the Wilmington Plant subject to mortgages. In addition, the
Chemical Business has four manufacturing facilities in Australia and one in New
Zealand that produce bulk and packaged explosives.
As of September 30, 1997, the El Dorado Facility was utilized at
approximately 87% of capacity, based on continuous operation.
The Chemical Business operates its Kansas Facility from buildings located
on an approximate ten-acre site in southeastern Kansas, and a research and
testing facility comprising approximately ten acres, including buildings and
equipment thereon, located in southeastern Kansas, which it owns.
In addition, the Chemical Business distributes its products through 31
agricultural and explosive distribution centers. The Chemical Business currently
operates 21 agricultural distribution centers, with 15 of the centers located in
Texas (12 of which the Company owns and three of which it leases); one center
located in Oklahoma which the Company owns; two centers located in Missouri (one
of which the Company owns and one of which it leases); and three centers located
in Tennessee (all of which the Company owns). The Chemical Business currently
operates six domestic explosives distribution centers located in Hallowell,
Kansas (owned); Bonne Terre, Missouri (owned); Huntington, West Virginia
(leased); Owensboro and Combs, Kentucky (leased); and Pryor, Oklahoma (leased).
The Chemical Business also has four explosives distribution centers in
Australia, all of which are leased, and one explosives distribution center
located in New Zealand, which is leased.
Climate Control Business
The Climate Control Business conducts its fan coil manufacturing operations
in a facility located in Oklahoma City, Oklahoma, consisting of approximately
265,000 square feet. As of September 30, 1997, the Climate Control Business was
using the productive capacity of the above-referenced facilities to the extent
of approximately 92%, based on three, eight-hour shifts per day and a five-day
week in one department and one and one-half eight-hour shifts per day and a
five-day week in all other departments. The Climate Control Business leases its
fan coil manufacturing facility. The fan coil manufacturing facility is leased
under the terms of an agreement with Prime Financial Corporation ("Prime"), a
subsidiary of LSB but not a subsidiary of the Company ("Prime Lease"). The term
of the Prime Lease expires on September 7, 2002, and rent is payable at an
annual rate of $475,000. The Prime Lease may be extended for a period of ten
years following the expiration of the initial term. See "Certain Relationships
and Related Transactions."
The Climate Control Business manufactures most of its heat pump products in
a leased 270,000 square foot facility in Oklahoma City, Oklahoma, which it
leases from an unrelated party. The lease term began March 1, 1988, after
renewal in October 1997, and expires February 28, 2003, with options to renew
for additional five-year periods, and
-39-
<PAGE>
currently provides for the payment of rent in the amount of $52,389 per month.
The Company also has an option to acquire the facility at any time in return for
the assumption of the then outstanding balance of the lessor's mortgage. As of
September 30, 1997, the productive capacity of this manufacturing operation was
being utilized to the extent of approximately 86%, based on one eight-hour shift
per day and a five-day week.
All of the properties utilized by the Climate Control Business are
considered by the Company management to be suitable and adequate to meet the
current needs of that Business.
EMPLOYEES
As of September 30, 1997, the Company employed 1,222 persons. As of that
date, (i) the Chemical Business employed 571 persons, with 134 represented by
unions under agreements expiring July 31, 1998, and February 5, 1999, and (ii)
the Climate Control Business employed 651 persons, none of whom are represented
by a union.
ENVIRONMENTAL MATTERS
The Company and its operations are subject to numerous Environmental Laws
and to other federal, state and local laws regarding health and safety matters
("Health Laws"). In particular, the manufacture and distribution of chemical
products are activities which entail environmental risks and impose obligations
under the Environmental Laws and the Health Laws, many of which provide for
substantial fines and criminal sanctions for violations, and there can be no
assurance that material costs or liabilities will not be incurred by the Company
in complying with such laws or in paying fines or penalties for violation of
such laws. The Environmental Laws and Health Laws and enforcement policies
thereunder relating to the Chemical Business have in the past resulted, and
could in the future result, in penalties, cleanup costs, or other liabilities
relating to the handling, manufacture, use, emission, discharge or disposal of
pollutants or other substances at or from the Company's facilities or the use or
disposal of certain of its chemical products. Significant expenditures have been
incurred by the Chemical Business at the El Dorado Facility in order to comply
with the Environmental Laws and Health Laws. The Chemical Business may be
required to make additional significant site or operational modifications at the
El Dorado Facility, potentially involving substantial expenditures and
reduction, suspension or cessation of certain operations. See "Special Note
Regarding Forward-Looking Statements;" "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Chemical Business" and "-Legal
Proceedings."
The Arkansas Department of Pollution Control & Ecology ("ADPC&E") performed
an environmental inspection at the Chemical Business' El Dorado Facility in
1994, which included a review of the plant's compliance with Environmental Laws
relating to wastewater and stormwater discharges, air emissions, and solid and
hazardous waste practices. The reports prepared by the ADPC&E in connection with
the inspection noted, in part, that releases of contaminants to groundwater were
suspected to have occurred at the El Dorado Facility. In 1995, the Chemical
Business and the ADPC&E entered into an administrative consent order which
provided for penalties of $150,000 (including $125,000 to be spent on
environmental improvements at the El Dorado Facility), and required the Chemical
Business to investigate the nature and extent of the existing groundwater
contamination, to take steps to reduce future groundwater contamination, and to
address certain other environmental compliance issues at the El Dorado Facility
(the "Inspection Consent Order"). Pursuant to the Inspection Consent Order, the
Chemical Business installed additional monitoring wells at the El Dorado
Facility in accordance with a workplan approved by the ADPC&E, and submitted the
test results to ADPC&E. The results indicated that a risk assessment should be
conducted on nitrates present in the shallow groundwater. The Chemical Business'
consultant has completed this risk assessment, and has forwarded it to the
ADPC&E for approval. The risk assessment concludes that, although there are
contaminants at the El Dorado Facility and in the groundwater, the levels of
such contaminants at the El Dorado Facility and in the groundwater do not
present an unacceptable risk to human health and the environment. Based on this
conclusion, the Chemical Business' consultant has recommended continued
monitoring at the site for five years. The ADPC&E has not yet responded to the
Chemical Business' proposal. There can be no assurance that the risk assessment
will be approved by the ADPC&E, or that further work will not be required.
-40-
<PAGE>
In addition, in accordance with the Inspection Consent Order, the Chemical
Business currently plans to upgrade the El Dorado Facility's wastewater
treatment plant, and anticipates that significant related capital expenditures
will be incurred to complete this project. Because the Company is still
investigating this matter, the Company cannot predict the amount of such
expenditures. Furthermore, the El Dorado Facility's new wastewater permit
currently is being reviewed for renewal by the ADPC&E. The new permit may impose
additional or more stringent limitations on the plant's wastewater discharges.
The Company believes, although there can be no assurance, that any such new
limitations would not have a material adverse effect on the Company. See
"Special Note Regarding Forward-Looking Statements."
During May 1997, approximately 2,000 gallons of nitric acid spilled when a
valve in a storage vessel located at the El Dorado Facility failed, resulting in
a release of such acid to a stormwater drain, and according to ADPC&E records, a
minor fish kill in a creek near the El Dorado Facility. The Chemical Business
and the ADPC&E are currently negotiating a proposed civil consent administrative
order to resolve this matter, which would require the payment of a civil
penalty. Based on negotiations to date, the Company does not believe such
penalty will exceed $25,000. The Company also anticipates that the order will
require the Chemical Business to undertake certain additional compliance
measures and equipment improvements related to the El Dorado Facility's
wastewater treatment system. Although the Company does not believe the order
will have a material adverse effect on the Company's business, there can be no
assurance that penalties and required expenditures related to the order will not
have such an effect. See "Special Note Regarding Forward-Looking Statements."
The El Dorado Facility's air permit required it to cease operation of
certain older nitric acid concentrators (the "Older Nitric Acid Concentrators")
within a certain period of time after the initiation of operations of the DSN
Plant. Due to certain start-up problems with the DSN Plant, including excess
emissions from various emission sources, the Chemical Business and the ADPC&E
entered into certain agreements, including an administrative consent order (the
"Air Consent Order") in 1995 to resolve certain of the Chemical Business' past
violations and to permit the Chemical Business to operate the Older Nitric Acid
Concentrators until the ADPC&E has made a final decision regarding the El Dorado
Facility's air permit, including whether the Older Nitric Acid Concentrators may
continue to operate. Although the Company expects that the Chemical Business
will be able to continue to operate the Older Nitric Acid Concentrators, there
can be no assurance that the ADPC&E will allow it to continue to do so. The Air
Consent Order also provides for payment of a civil penalty of $50,000, which the
Chemical Business has paid, and requires installation of certain pollution
control equipment and completion of certain maintenance activities at the El
Dorado Facility to eliminate certain off-site hazing problems. The Air Consent
Order was amended in 1996 and 1997. The second amendment to the Air Consent
Order (the "1997 Amendment") provided for certain stipulated penalties of $1,000
per hour to $10,000 per day for continued off-site emission events and deferred
enforcement for other alleged air permit violations. The 1997 Amendment
acknowledges that the Chemical Business has completed the installation of the
pollution control equipment and maintenance activities required under the Air
Consent Order. Nonetheless, the Chemical Business was assessed an additional
penalty of $150,000, as well as a payment of an additional $50,000 to fund
certain environmental projects, with respect to a number of alleged permit
violations relating to off-site emissions and other air permit conditions. The
Chemical Business has paid both the penalty and the additional sums required by
the 1997 Amendment. Since the 1997 Amendment and as of the date of this
Prospectus, the Chemical Business has been assessed stipulated penalties of
approximately $55,000 by the ADPC&E for violations of certain provisions of the
1997 Amendment. The Chemical Business believes that the El Dorado Facility has
made progress in controlling certain off-site emissions; however, such off-site
emissions have occurred, and continue to occur, from time to time, which could
result in the assessment of additional penalties against the Chemical Business
by the ADPC&E and could have a material adverse effect on the Company. In
addition, the El Dorado Facility was identified as one of 33 significant
violators of the federal Clean Air Act in a recent review of Arkansas air
programs by the EPA Office of Inspector General. The Company is unable to
predict the impact, if any, of such designation. See "Special Note Regarding
Forward-Looking Statements."
During 1996, the Chemical Business expended approximately $6.8 million in
connection with capital expenditures relating to compliance with federal, state
and local Environmental Laws at its El Dorado Facility, including, but not
limited to, compliance with the Air Consent Order, as amended. For the period
from January 1, 1997, to September 30, 1997, the Chemical Business has spent
approximately $1.0 million for capital expenditures relating
-41-
<PAGE>
to environmental control facilities at its El Dorado Facility to comply with
Environmental Laws, including, but not limited to, the Air Consent Order, as
amended, and it is anticipated that such expenditures will total approximately
$1.0 million for the balance of 1997 and 1998. No assurance can be made that the
actual expenditures of the Chemical Business for such matters will not exceed
the estimated amounts by a substantial margin, which could have a material
adverse effect on the Company and its financial condition. The amount to be
spent during the balance of 1997 and 1998 for capital expenditures related to
compliance with Environmental Laws is dependent upon a variety of factors,
including, but not limited to, the occurrence of additional releases or
threatened releases (particularly air emissions) into the environment, or
changes in the Environmental Laws (or in the enforcement or interpretation by
any federal or state agency or court of competent jurisdiction). See "Special
Note Regarding Forward-Looking Statements." Failure to satisfactorily resolve
the pending noncompliance issues with the ADPC&E, or additional orders from the
ADPC&E imposing penalties, or requiring the Chemical Business to spend more for
environmental improvements or curtail production activities at the El Dorado
Facility, could have a material adverse effect on the Company.
The Chemical Business is also involved in various lawsuits pending in
federal court relating to environmental issues at the El Dorado Facility similar
to the environmental issues discussed above and covered by the Air Consent
Order, as amended, with the ADPC&E. The amounts to be spent during the balance
of 1997 and 1998, as discussed herein, for compliance with applicable federal,
state and local Environmental Laws at the El Dorado Facility do not include
expenditures, if any, that may be required to comply with any court order
resulting from such lawsuits. See "Business--Legal Proceedings."
LEGAL PROCEEDINGS
Roy Carr, et al. v. El Dorado Chemical Company ("Carr Case"); Richard
Detraz, et al. v. El Dorado Chemical Company ("Detraz Case"); Roy A. Carr, Sr.,
et al. v. El Dorado Chemical Company ("Citizen Suit"). The Carr Case, which was
filed against EDC on June 26, 1996, the Detraz Case, which was filed against EDC
on October 14, 1996, and the Citizen Suit, which was filed against EDC on
October 17, 1996, are pending in the United States District Court, Western
District of Arkansas, El Dorado Division. The plaintiffs in the Carr Case and
the Citizen Suit reside in the area surrounding EDC's El Dorado Facility, while
the plaintiffs in the Detraz Case reside in various locations throughout the El
Dorado, Arkansas, metropolitan area. Because the parties to the Carr Case and
the Citizen Suit are substantially the same, and the cases allege similar facts,
the court consolidated these two cases, although they are based on different
legal theories. The plaintiffs in the Citizen Suit allege violations of the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended by the Emergency Planning Community Right-To-Know Act ("EPCRA"), the
Clean Air Act and the Clean Water Act, and permits issued to EDC under certain
of these laws. Under the terms of such laws, the plaintiffs in the Citizen Suit
are seeking penalties of up to $25,000 for each day in which EDC violated such
acts, if any, and injunctive relief requiring EDC to remediate any such alleged
violations and relating to future violations. The plaintiffs in the Carr Case
seek an unspecified amount of damages under various toxic tort theories for
alleged bodily injury and property damage resulting from alleged releases of
toxic substances into the environment from the El Dorado Facility, as well as
punitive damages and damages for any diminution in the value of plaintiffs'
property resulting from the alleged releases. The Detraz Case, like the Carr
Case, is based on various toxic tort theories. The plaintiffs in the Detraz Case
are seeking to have the case certified as a class action for persons who
allegedly have been affected by emissions from the El Dorado Facility, which
certification EDC is contesting. During January 1998, the Company's Chemical
Business agreed in principal to settle the Detraz Case, which settlement, if
completed, will be funded from the Company's EIL Insurance (as defined below).
The settlement of the Detraz Case is subject to court approval, execution of
definitive settlement agreements, and confirmation from the Company's EIL
Insurance carrier that it will pay the full amount of such settlement. The
Company intends to vigorously defend itself in connection with the remaining
lawsuits described above.
In January 1997, EDC entered into an agreed order (the "Carr Order") in the
Carr Case pursuant to which EDC agreed (i) not to emit substances from the El
Dorado Facility which create a nuisance on the plaintiffs' property (as defined
in the Carr Order to include any off-site haze that reaches the plaintiffs'
property), (ii) to operate in compliance with emission limitations and certain
other requirements established by EDC's permit for the El Dorado Facility, (iii)
-42-
<PAGE>
to establish a system for monitoring and reporting (including to the plaintiffs)
permit exceedences and releases of reportable quantities of hazardous
substances. The Carr Order further provides that the court shall retain
jurisdiction of the issues covered by the Carr Order for the purposes of
enabling the parties in the Carr Case to apply to the court for any order that
may be necessary to interpret, carry out, modify or enforce the Carr Order. In
connection with the Carr Order, the plaintiffs have filed two motions for
contempt against EDC for violations, or alleged violations, of the Carr Order.
On one occasion, the court held that EDC had created a nuisance at the property
of one of the plaintiffs as a result of certain emissions from the El Dorado
Facility and assessed a $500 penalty against EDC and ordered EDC to pay
plaintiffs' attorneys' fees in connection with bringing such motion. The
plaintiffs in the Carr Case withdrew the other motion for contempt pending an
audit of the operation of the El Dorado Facility. The parties to the Carr Case
have entered into an audit agreement to evaluate facility operations and
emissions. An audit report is anticipated during the first half of 1998. Other
incidents have occurred or may occur in the future which could give rise to the
filing of additional motions for contempt alleging violations of the Carr Order,
and, if the Company is found to have violated the Carr Order, it could result in
the possible assessment of additional fines, penalties and costs against EDC
that could have a material adverse effect on the Company and/or the Chemical
Business. See "Special Note Regarding Forward-Looking Statements."
The Chemical Business maintains an Environmental Impairment Insurance
Policy ("EIL Insurance") that provides coverage to the Chemical Business for
certain discharges, dispersal, releases, or escapes of certain contaminants and
pollutants into or upon land, the atmosphere or any water course or body of
water from the El Dorado Facility, which has caused bodily injury, property
damage or contamination to others or to other property not located on the El
Dorado Facility site. The EIL Insurance provides limits of liability for each
loss up to $10 million, except $5 million for all remediation expenses, with the
maximum limit of liability for all claims under the EIL Insurance not to exceed
$10 million for all losses and remediation expenses. The EIL Insurance also
provides for a retention of the first $500,000 per loss or remediation expense
to be paid by the Chemical Business. The Chemical Business has given notice of
the pending legal actions in the Carr Case, the Detraz Case and the Citizen Suit
to the EIL Insurance carrier ("EIL Carrier"), and the EIL Carrier has agreed to
provide a defense for the Company in each case. The defense regarding the
Citizen Suit has been undertaken by the EIL Carrier subject to a reservation of
rights, indicating that the EIL Carrier may make a determination that it does
not believe that any liability in the Citizen Suit is covered by the EIL
Insurance, and, on that basis, deny coverage regarding the Citizens Suit and
seek reimbursement of its related legal expenditures paid in connection with the
Citizen Suit. The Company believes that the EIL Insurance will provide coverage
for actual damages, if any, sustained by the plaintiffs in the Carr Case and the
Detraz Case up to the limits of the policy in excess of the $500,000 retention,
but will not provide coverage for punitive damages, and may not provide coverage
for the costs of injunctive relief and penalties resulting from the litigation.
As of the date of this Prospectus, the Company has submitted claims to the EIL
Carrier of approximately $1.2 million for legal and consulting fees and
expenses, or approximately $700,000 in excess of the self-insured retention. The
EIL Carrier has reimbursed the Chemical Business for $405,000 of such fees and
expenses (after taking into account the amount of the retention under the EIL
Insurance) and has agreed to pay such future fees and expenses, subject to
reservation of rights relating to the Citizen Suit. The amount of the Detraz
settlement, if completed, and the amount paid under the EIL Insurance for legal
and other expenses relating to the defense of these lawsuits reduce the amount
that may be paid under the EIL Insurance.
Based on currently available information, the Company does not believe the
outcome of the Carr Case and the Citizen Suit, after settlement of the Detraz
Case, if completed, will have a material adverse effect on the Company's
financial position or results of operation. No assurance, however, can be given
that the actual results of these litigation matters will not have such an
effect, if, for example, the court assesses substantial penalties or fines
against the Chemical Business in the Citizen Suit; the EIL Insurance does not
provide coverage to the Chemical Business for additional claims asserted against
the Company in the pending cases; the damages or penalties awarded or assessed
are not covered by the EIL Insurance (such as fines and punitive damages); or
the damages awarded or assessed in connection with, and expenditures to defend,
such cases and the amount of the Detraz settlement, if completed, exceed the EIL
Insurance coverage limits. See "Special Note Regarding Forward-Looking
Statements."
-43-
<PAGE>
Arch Mineral Corporation, et al. v. ICI Explosives USA, Inc., et al. On
May 24, 1996, the plaintiffs filed this civil cause of action against EDC and
five other unrelated commercial explosives manufacturers alleging that the
defendants allegedly violated certain federal and state antitrust laws in
connection with alleged price fixing of certain explosive products. This cause
of action is pending in the United States District Court, Southern District of
Indiana. The plaintiffs are suing for an unspecified amount of damages, which,
pursuant to statute, plaintiffs are seeking be trebled, together with costs.
Plaintiffs are also seeking a permanent injunction enjoining defendants from
further alleged anti-competitive activities. Based on the information presently
available to EDC, EDC does not believe that EDC conspired with any party,
including, but not limited to, the five other defendants, to fix prices in
connection with the sale of commercial explosives. Discovery has only recently
commenced in this matter. EDC intends to vigorously defend itself in this
matter. See "Special Note Regarding Forward-Looking Statements."
ASARCO v. ICI, et al. The U. S. District Court for the Eastern District of
Missouri has granted ASARCO and other plaintiffs in a lawsuit originally
brought against various commercial explosives manufacturers in Missouri, and
consolidated with other lawsuits in Utah, leave to add EDC as a defendant in
that lawsuit. This lawsuit alleges a national conspiracy, as well as a regional
conspiracy, directed against explosive customers in Missouri and seeks
unspecified damages. EDC has been included in this lawsuit because it sold
products to customers in Missouri during a time in which other defendants have
admitted to participating in an antitrust conspiracy, and because it has been
sued in the Arch case discussed above. Based on the information presently
available to EDC, EDC does not believe that EDC conspired with any party, to fix
prices in connection with the sale of commercial explosives. EDC intends to
vigorously defend itself in this matter. See "Special Note Regarding Forward-
Looking Statements."
Department of Justice Investigation of Explosives Industry. For several
years, certain members of the explosives industry have been the focus of grand
jury investigations being conducted by the DOJ in connection with criminal
antitrust allegations involving price fixing. Certain explosives companies,
other than the Company, including all the Company's major competitors, and
individuals employed by certain of those competitors, were indicted and have
pled guilty to criminal antitrust violations. The guilty pleas have resulted in
a total of nearly $40 million in criminal fines. In connection with the grand
jury investigation, the Company's Chemical Business received and has complied
with two document subpoenas, certain of the Company's Chemical Business
employees have been interviewed by the DOJ under grants of immunity from
prosecution, and certain of the Company's Chemical Business employees have
testified under subpoena before a grand jury under grants of immunity in
connection with the investigation. The Company believes that it has cooperated
fully with the government's investigation. Recently, the Company had been
informed by an official of the DOJ that it was not currently a target of the
above investigation or of any grand jury investigating criminal antitrust
activity in the explosives or ammonium nitrate industries. See "Special Note
Regarding Forward-Looking Statements."
Eugene Lowe, et al. v. Teresa Trucking, Inc., pending in the Circuit Court
of Lincoln County, West Virginia. During the third quarter of 1997, EDC was
served with this lawsuit in which approximately 27 plaintiffs have sued
approximately 13 defendants, including EDC, alleging personal injury and
property damage for undifferentiated compensatory and punitive damages of
approximately $7,000,000. Specifically, the plaintiffs assert blast damage
claims, nuisance (road dust from coal trucks) and personal injury claims
(exposure to toxic materials in blasting materials) on behalf of residents
living near the Heartland Coal Company ("Heartland") strip mine in Lincoln
County, West Virginia. Heartland employed EDC to provide blasting materials and
personnel to load and shoot holes drilled by employees of Heartland. Down hole
blasting services were provided by EDC at Heartland's premises from
approximately August 1991, until approximately August 1994. Subsequent to August
1994, EDC supplied blasting materials to the reclamation contractor at
Heartland's mine. In connection with EDC's activities at Heartland, EDC has
entered into a contractual indemnity to Heartland to indemnify Heartland under
certain conditions for acts or actions taken by EDC or for which EDC failed to
take, and Heartland is alleging that EDC is liable thereunder for Heartland's
defense costs and any losses to, or damages sustained by, the plaintiffs in this
lawsuit.
Discovery has only recently begun in this matter, and the Company intends
to vigorously defend itself in this matter. EDC has provided notification of
this lawsuit to its three insurance carriers providing primary insurance
-44-
<PAGE>
coverage to EDC during the period covered by the plaintiff's allegations. The
one insurance carrier whose policy provides for defense has indicated it will
share in the defense of this lawsuit. The remaining two insurance carriers have
indicated that they will be defending this lawsuit under a reservation of
rights.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF LSB
The Company is a wholly owned subsidiary of LSB. Accordingly, the following
table lists the current executive officers and directors of LSB. Certain of the
directors and officers of LSB also serve as directors and executive officers of
the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE
------------------------------ --- ----------------------------------------------------
<S> <C> <C>
Jack E. Golsen ............... 69 Chairman of the Board, Chief Executive Officer and
President
Barry H. Golsen .............. 46 President of LSB's Climate Control Business and Vice
Chairman of the Board
David R. Goss ................ 56 Senior Vice President--Operations and Director
Tony M. Shelby ............... 56 Senior Vice President/Chief Financial Officer and
Director
Jim D. Jones ................. 55 Vice President-Treasurer/Controller
David M. Shear ............... 38 Vice President/General Counsel
Raymond B. Ackerman .......... 75 Director
Robert C. Brown, M. D. ...... 66 Director
Gerald J. Gagner. ............ 62 Director
Bernard G. Ille .............. 70 Director
Donald W. Munson ............. 64 Director
Horace G. Rhodes ............. 69 Director
Jerome D. Shaffer, M. D. .... 80 Director
</TABLE>
Jack E. Golsen, the founder of the LSB, has served as Chairman of the
Board, Chief Executive Officer and President of LSB since its inception in 1969.
During 1996, Mr. Golsen was inducted into the Oklahoma Commerce and Industry
Hall of Honor as one of Oklahoma's leading industrialists. Mr. Golsen has a
degree from the University of New Mexico in biochemistry.
Barry H. Golsen has served as the Vice Chairman of the Board of LSB since
August 1994, and has served for more than five years as the President of LSB's
Climate Control Business. Mr. Golsen has both his undergraduate and law degrees
from the University of Oklahoma.
Tony M. Shelby, a certified public accountant, has served as a director of
LSB since 1971 and has served as the Senior Vice President and Chief Financial
Officer of LSB for more than five years. Prior to becoming Senior Vice President
and Chief Financial Officer of LSB, Mr. Shelby served as Chief Financial Officer
of a subsidiary of LSB and was with the accounting firm of Arthur Young & Co., a
predecessor to Ernst & Young LLP. Mr. Shelby is a graduate of Oklahoma City
University.
-45-
<PAGE>
David R. Goss, a certified public accountant, has served as a director of
LSB since 1971 and has served as the Senior Vice President-Operations of LSB or
in a comparable capacity for more than five years. Mr. Goss is a graduate of
Rutgers University.
Jim D. Jones, a certified public accountant, has served in his present
capacity with LSB since 1976. Prior to that time he was an accountant with
Arthur Young & Co., a predecessor to Ernst & Young LLP. Mr. Jones is a graduate
of the University of Central Oklahoma.
David M. Shear has served as the Vice President-General Counsel of LSB
since 1990. Prior to that time, Mr. Shear was in private practice with a law
firm in Boston, Massachusetts, and served as an attorney with the Federal Trade
Commission. Mr. Shear is a graduate of Brandeis University and has a law degree
from Boston University.
Raymond B. Ackerman has served as a director of LSB since 1993. Mr.
Ackerman has served as Chairman of the Board and President of Ackerman, McQueen,
Inc., the largest public relations firm in Oklahoma from 1972 until his
retirement in 1992. Mr. Ackerman currently serves as Chairman Emeritus of
Ackerman, McQueen, Inc. Mr. Ackerman retired as a Rear Admiral from the United
States Naval Reserves. Mr. Ackerman is a graduate of Oklahoma City University,
and in 1996, he was awarded an honorary doctorate from Oklahoma City University.
Robert C. Brown, M.D., has served as a director of LSB since 1969. Dr.
Brown has practiced medicine for many years and is Vice President and Treasurer
of Plaza Medical Group, P.C. Dr. Brown is a graduate of Tufts University and
received his medical degree from Tufts University.
Gerald J. Gagner has served as a director of LSB since June 1997. Mr.
Gagner served as President, Chief Executive Officer and director of USPCI, Inc.,
a New York Stock Exchange Company involved in the waste management industry,
from 1984 until 1988, when USPCI was acquired by Union Pacific Corporation. From
1988 to the present, Mr. Gagner has been engaged as a private investor. Mr.
Gagner is presently serving as President and a director of Dragerton
Investments, Inc., which developed and sold one of the world's largest
industrial waste landfills, and is presently general partner of New West
Investors, L.P., which has investments principally in the financial service
industry. Mr. Gagner is also a director of Automation Robotics, A.G., a German
corporation. Mr. Gagner has an engineering degree from the University of Utah.
Bernard G. Ille has served as a director of LSB since 1971. Mr. Ille served
as President and Chief Executive Officer of First Life Assurance Company from
May 1988, until it was acquired in March 1994. In 1991, First Life was placed in
conservatorship by the Oklahoma Department of Insurance and operated under
conservatorship until sold in March 1994. For more than five years prior to
joining First Life, Mr. Ille served as President of United Founders Life
Insurance Company. Mr. Ille is a director of Landmark Land Company, Inc., which
was the parent company of First Life. Mr. Ille is currently a private investor.
He is a graduate of the University of Oklahoma.
Donald W. Munson has served as a director of LSB since June 1997. From
January 1988, until his retirement in August 1992, Mr. Munson served as
President and Chief Operating Officer of Lennox Industries. Prior to his
election as President and Chief Operating Officer of Lennox Industries, Mr.
Munson served as Executive Vice President of Lennox Industries' Canadian
operation and Managing Director of Lennox Industries' European operations. Prior
to joining Lennox Industries, Mr. Munson served in various capacities with the
Howden Group, a company located in the United Kingdom, and The Trane Company,
including serving as the managing director of various companies within the
Howden Group and Vice President-Europe for The Trane Company. Mr. Munson is
currently a consultant and international distributor for the Ducane Company, a
manufacturer of certain types of residential air conditioning, air furnaces and
other equipment, and is serving as a member of the Board of Directors of Multi-
Clima, a French manufacturer of air conditioning-heating equipment, which a
subsidiary of LSB that is not the Company or a subsidiary of the Company has an
option to acquire. See "Certain Relationships and Related Transactions -- Multi-
Clima." Mr. Munson is a resident of the United Kingdom and has degrees in
engineering and business administration from the University of Minnesota.
-46-
<PAGE>
Horace G. Rhodes has served as a director of LSB since 1996. Mr. Rhodes is
the managing partner of the law firm of Kerr, Irvine, Rhodes & Ables and has
served in such capacity and has practiced law for a period in excess of five
years. Since 1972, Mr. Rhodes has served as Executive Vice President and General
Counsel for the Association of Oklahoma Life Insurance Companies and since 1982
has served as Executive Vice President and General Counsel for the Oklahoma Life
and Health Insurance Guaranty Association. Mr. Rhodes received his undergraduate
and law degrees from the University of Oklahoma.
Jerome D. Shaffer, M.D., has served as a director of LSB since its
inception in 1969. He is currently and has been for the last five years a
private investor. Dr. Shaffer is a graduate of Penn State University and
received his medical degree from Jefferson Medical College.
Jack E. Golsen is the father of Barry H. Golsen. Dr. Robert C. Brown is the
brother-in-law and uncle of Jack E. Golsen and Barry H. Golsen, respectively.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the executive officers of the Company, each of
whom also serves as an executive officer of LSB, except for James L. Wewers. The
executive officers are elected by the Board of Directors. The Board of Directors
of the Company is comprised of the directors of LSB, except Messrs. Gagner and
Munson are not directors of the Company. The term of each director of the
Company is one year. See the above table setting forth the age, business
experience and family relationship of each of the executive officers and
directors of the Company, except for James L. Wewers.
<TABLE>
<CAPTION>
NAME OFFICE
--------------------- ------------------------------------------------------------
<S> <C>
Jack E. Golsen ..... Chairman of the Board, Chief Executive Officer and President
Barry H. Golsen .... Vice Chairman of the Board and Vice President
Tony M. Shelby ..... Vice President and Chief Financial Officer
David R. Goss ...... Vice President
Jim D. Jones ....... Vice President and Treasurer
James L. Wewers .... Vice President
David M. Shear ..... Secretary
</TABLE>
James L. Wewers has served for more than five years as the President of the
Chemical Business. Prior to becoming President of the Chemical Business, Mr.
Wewers was an executive with the Chemicals Group of Gulf Oil. Mr. Wewers is a
graduate of Rockhurst College and is 51 years old.
EXECUTIVE COMPENSATION
Compensation paid to the Chief Executive Officer and the other executive
officers of the Company have in the past been, and it is intended in the
foreseeable future will be, paid by LSB. Under the terms of the Services
Agreement (as defined) between the Company and LSB, the Company will reimburse
LSB for that portion of the compensation paid by LSB to the Company's executive
officers (other than the President, who also serves as the Chief Executive
Officer, and the Chief Financial Officer of LSB, who are also the Chief
Executive Officer and the Chief Financial Officer of the Company) and for all
direct and indirect costs and expenses for services performed for the Company.
If certain conditions contained in the Management Agreement (as defined) between
the Company and LSB are complied with, the Company shall pay to LSB a management
fee under the Management Agreement each year during the term of the Management
Agreement. The management fee paid by the Company to LSB, if any, under the
Management Agreement will cover, among other things, that portion of the
compensation paid by LSB to the President (Chief Executive Officer) and Chief
Financial Officer for services relating to the Company. See "Certain
Relationships and Related Transactions
-47-
<PAGE>
- - Contractual Arrangements." The only executive officer of the Company whose
services are solely for the Company and/or its subsidiaries is James L. Wewers,
Vice President of the Company and President of the Chemical Business. Mr.
Wewers' annual compensation, as President of the Chemical Business, included a
salary of $177,500, $156,000, and $146,000 in 1996, 1995, and 1994,
respectively, and a bonus of $70,000 for each of 1995 and 1994. Mr. Wewers did
not receive a bonus for 1996.
Each of the directors of the Company serves as a director of LSB, and the
directors of LSB who are not employees of LSB are compensated by LSB for
services provided as a director of LSB. The directors of the Company receive no
additional compensation for services rendered to the Company as directors of the
Company.
EMPLOYMENT CONTRACTS; TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Termination of Employment and Change in Control Agreements
LSB has entered into severance agreements with Jack E. Golsen, Barry H.
Golsen, Tony M. Shelby, David R. Goss, Jim D. Jones, James L. Wewers, David M.
Shear, and certain other officers of LSB and subsidiaries of LSB.
Each severance agreement provides (among other things) that if, within 24
months after the occurrence of a change in control of LSB, LSB terminates the
officer's employment other than for cause (as defined), or the officer
terminates his employment for good reason (as defined), LSB must pay the officer
an amount equal to 2.9 times the officer's base amount (as defined). The phrase
"base amount" means the average annual gross compensation paid by LSB to the
officer and includable in the officer's gross income during the period
consisting of the most recent five-year period immediately preceding the change
in control. If the officer has been employed by LSB for less than five years,
the base amount is calculated with respect to the most recent number of taxable
years ending before the change in control that the officer worked for LSB.
The severance agreements provide that a "change in control" means a change
in control of LSB of a nature that would require the filing of a Form 8-K with
the Securities and Exchange Commission and, in any event, would mean when (1)
any individual, firm, corporation, entity, or group (as defined in Section
13(d)(3) of the Exchange Act becomes the beneficial owner, directly or
indirectly, of 30% or more of the combined voting power of the LSB's outstanding
voting securities having the right to vote for the election of directors, except
acquisitions by (a) any person, firm, corporation, entity, or group which, as of
the date of the severance agreement, has that ownership, or (b) Jack E. Golsen;
his wife; his children and the spouses of his children; his estate; executor or
administrator of any estate, guardian or custodian for Jack E. Golsen, his wife,
his children, or the spouses of his children; any corporation, trust,
partnership, or other entity of which Jack E. Golsen, his wife, children, or the
spouses of his children own at least 80% of the outstanding beneficial voting or
equity interests, directly or indirectly, either by any one or more of the
above-described persons, entities, or estates; and certain affiliates and
associates of any of the above-described persons, entities, or estates; (2)
individuals who, as of the date of the severance agreement, constitute the Board
of Directors of LSB (the "Incumbent Board") and who cease for any reason to
constitute a majority of the Board of Directors except that any person becoming
a director subsequent to the date of the severance agreement, whose election or
nomination for election is approved by a majority of the Incumbent Board (with
certain limited exceptions), will constitute a member of the Incumbent Board; or
(3) the sale by LSB of all or substantially all of its assets.
Except for the severance agreement with Jack E. Golsen, the termination of
an officer's employment with LSB "for cause" means termination because of (a)
the mental or physical disability from performing the officer's duties for a
period of 120 consecutive days or 180 days (even though not consecutive) within
a 360 day period; (b) the conviction of a felony; (c) the embezzlement by the
officer of LSB of assets resulting in substantial personal enrichment of the
officer at the expense of LSB; or (d) the willful failure (when not mentally or
physically disabled) to follow a direct written order from LSB's Board of
Directors within the reasonable scope of the officer's duties performed during
the 60-day period prior to the change in control. The definition of "Cause"
contained in the severance agreement with Jack E. Golsen means termination
because of (a) the conviction of Mr. Golsen of a felony involving moral
turpitude after
-48-
<PAGE>
all appeals have been completed; or (b) if due to Mr. Golsen's serious, willful,
gross misconduct or willful, gross neglect of his duties has resulted in
material damages to LSB and its subsidiaries, taken as a whole, provided that
(i) no action or failure to act by Mr. Golsen will constitute a reason for
termination if he believed, in good faith, that such action or failure to act
was in LSB's or its subsidiaries' best interest, and (ii) failure of Mr. Golsen
to perform his duties hereunder due to disability shall not be considered
willful, gross misconduct or willful, gross negligence of his duties for any
purpose.
The termination of an officer's employment with LSB for "good reason" means
termination because of (a) the assignment to the officer of duties inconsistent
with the officer's position, authority, duties, or responsibilities during the
60-day period immediately preceding the change in control of LSB or any other
action which results in the diminishment of those duties, position, authority,
or responsibilities; (b) the relocation of the officer; (c) any purported
termination by LSB of the officer's employment with LSB otherwise than as
permitted by the severance agreement; or (d) in the event of a change in control
of LSB, the failure of the successor or parent company to agree, in form and
substance satisfactory to the officer, to assume (as to a successor) or
guarantee (as to a parent) the severance agreement as if no change in control
had occurred.
Except for the severance agreement with Jack E. Golsen, each severance
agreement is effective until the earlier of (a) three years after the date of
the severance agreement, or (b) the officer's normal retirement date from LSB;
however, beginning on the first anniversary of the severance agreement and on
each annual anniversary thereafter, the term of the severance agreement
automatically extends for an additional one-year period, unless LSB gives notice
otherwise at least 60 days prior to the anniversary date. The severance
agreement with Jack E. Golsen is effective for a period of three years from the
date of the severance agreement; except that, commencing on the date one year
after the date of such severance agreement and on each annual anniversary
thereafter, the term of such severance agreement shall be automatically extended
so as to terminate three years from such renewal date, unless LSB gives notices
otherwise at least one year prior to the renewal date.
Effective June 1, 1994, LSB extended until June 1, 1999, the option period
of a nonqualified stock option previously granted to Jack E. Golsen for the
purchase of 165,000 shares of LSB's Common Stock at an exercise price of $2.625
per share (the "Extended NQSO"). The Extended NQSO vests and becomes exercisable
at 20% per year on June 1, 1995, 1996, and 1997, and the remaining 40% becomes
exercisable on June 1, 1998. The terms of the Extended NQSO provide, in part,
that the Extended NQSO shall become immediately exercisable upon a change in
control of LSB. A "change in control" for purposes of the Extended NQSO, shall
occur upon any of the following events: (i) consummation of any of the following
transactions: any merger, recapitalization, or other business combination of LSB
pursuant to which LSB is the non-surviving corporation, unless the majority of
the holders of Common Stock immediately prior to such transaction will own at
least 50% of the total voting power of the then outstanding securities of the
surviving corporation immediately after such transaction; (ii) a transaction in
which any person, corporation, or other entity (A) shall purchase any Common
Stock pursuant to a tender offer or exchange offer, without the prior consent of
the Board of Directors or (B) shall become the "beneficial owner" (as such term
is defined in Rule 13(d)(3) under the Exchange Act of securities of LSB
representing 50% or more of the total voting power of the then outstanding
securities of LSB; or (iii) if, during any period of two consecutive years,
individuals who, at the beginning of such period, constituted the entire Board
of Directors and any new director whose election by the Board of Directors, or
nomination for election by LSB's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election by the
stockholders was previously approved, cease for any reason to constitute a
majority thereof.
Employment Agreement
In March 1996, LSB entered into an employment agreement with Jack E.
Golsen. The employment agreement requires LSB to employ Jack E. Golsen as an
executive officer of LSB for an initial term of three years and provides for two
automatic renewals of three years each unless terminated by either party by the
giving of written notice at least one year prior to the end of the initial or
first renewal period, whichever is applicable. Under the terms of such
-49-
<PAGE>
employment agreement, Mr. Golsen shall (i) be paid an annual base salary at his
1995 base rate, as adjusted from time to time by the Compensation Committee, but
such shall never be adjusted to an amount less than Mr. Golsen's 1995 base
salary, (ii) be paid an annual bonus in an amount as determined by the
Compensation Committee, and (iii) receive from LSB certain other fringe
benefits. The employment agreement provides that Mr. Golsen's employment may not
be terminated, except (i) upon conviction of a felony involving moral turpitude
after all appeals have been exhausted, (ii) Mr. Golsen's serious, willful, gross
misconduct or willful, gross negligence of duties resulting in material damage
to LSB and its subsidiaries, taken as a whole, unless Mr. Golsen believed, in
good faith, that such action or failure to act was in LSB's or its subsidiaries'
best interest, and (iii) Mr. Golsen's death; provided, however, no such
termination under (i) or (ii) above may occur unless and until LSB has delivered
to Mr. Golsen a resolution duly adopted by an affirmative vote of three-fourths
of the entire membership of the Board of Directors at a meeting called for such
purpose after reasonable notice given to Mr. Golsen finding, in good faith, that
Mr. Golsen violated (i) or (ii) above. If Mr. Golsen's employment is terminated
in breach of the employment agreement, then he shall, in addition to his other
rights and remedies, receive and LSB shall pay to Mr. Golsen (i) in a lump sum
cash payment, on the date of termination, a sum equal to the amount of Mr.
Golsen's annual base salary at the time of such termination and the amount of
the last bonus paid to Mr. Golsen prior to such termination times (a) the number
of years remaining under the employment agreement or (b) four, if such
termination occurs during the last 12 months of the initial period or the first
renewal period, and (ii) provide to Mr. Golsen all of the fringe benefits that
LSB was obligated to provide during his employment under the employment
agreement for the remainder of the term of the employment agreement, or, if
terminated at any time during the last 12 months of the initial period or first
renewal period, then during the remainder of the term and the next renewal
period.
If there is a "change in control" (as defined in the severance agreement
between Mr. Golsen and LSB) and within 24 months after such change in control
Mr. Golsen is terminated, other than for Cause (as defined in the severance
agreement), then in such event, the severance agreement between Mr. Golsen and
the Company shall be controlling.
If Mr. Golsen becomes disabled and is not able to perform his duties under
the employment agreement as a result thereof for a period of 12 consecutive
months within any two year period, the Company shall pay Mr. Golsen his full
salary for the remainder of the term of the employment agreement and thereafter
60% of such salary until Mr. Golsen's death.
Preferred Rights Plan
On February 17, 1989, LSB's Board of Directors declared a dividend to its
stockholders of record on February 27, 1989, of one preferred stock purchase
right on each of LSB's outstanding shares of common stock. The rights expire on
February 27, 1999. LSB issued the rights, among other reasons, in order to
assure that all of LSB's stockholders receive fair and equal treatment in the
event of any proposed takeover of LSB and to guard against partial tender
abusive tactics to gain control of LSB. The rights will become exercisable only
if a person or group acquires beneficial ownership of 30% or more of LSB's
common stock or announces a tender or exchange offer, the consummation of which
would result in the ownership by a person or group of 30% or more of the LSB
common stock, except any acquisition by Jack E. Golsen, Chairman of the Board
and President of LSB, and certain other related persons or entities.
Each right (other than the rights, owned by the acquiring person or members
of a group that causes the rights to become exercisable, which become void) will
entitle the stockholder to buy one one-hundredth of a share of a new series of
participating preferred stock at an exercise price of $14.00 per share. Each one
one-hundredth of a share of the new preferred stock purchasable upon the
exercise of a right has economic terms designed to approximate the value of one
share of LSB's common stock. If another person or group acquires LSB in a merger
or other business combination transaction, each right will entitle its holder
(other than rights owned by that person or group, which become void) to purchase
at the right's then current exercise price, a number of the acquiring company's
common shares which at the time of such transaction would have a market value
two times the exercise price of the right. In addition, if a person or
-50-
<PAGE>
group (with certain exceptions) acquires 30% or more of LSB's outstanding common
stock, each right will entitle its holder (other than the rights owned by the
acquiring person or members of the group that results in the rights becoming
exercisable, which become void), to purchase at the right's then current
exercise price, a number of shares of LSB's common stock having a market value
of twice the right's exercise price in lieu of the new preferred stock.
Following the acquisition by a person or group of beneficial ownership of
30% or more of LSB's outstanding common stock (with certain exceptions) and
prior to an acquisition of 50% or more of LSB's common stock by the person or
group, the Board of Directors may exchange the rights (other than rights owned
by the acquiring person or members of the group that results in the rights
becoming exercisable, which become void), in whole or in part, for shares of
LSB's common stock. That exchange would occur at an exchange ratio of one share
of common stock, or one one-hundredth of a share of the new series of
participating new preferred stock, per right.
Prior to the acquisition by a person or group of beneficial ownership of
30% or more of LSB's common stock (with certain exceptions), LSB may redeem the
rights for one cent per right at the option of LSB's Board of Directors. LSB's
Board of Directors also has the authority to reduce the 30% thresholds to not
less than 10%.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the Company's issued and outstanding capital stock is owned by LSB.
As a result, the following table sets forth certain information with respect to
the beneficial ownership of the voting common stock and voting preferred stock
of LSB as of November 30, 1997, with respect to each person (including any
"group" as used in Section 13(d)(3) of the Securities Act) that the Company
knows to have beneficial ownership of more than 5% of the LSB's voting common
stock and voting preferred stock. A person is deemed to be the beneficial owner
of shares which could be acquired by such person within 60 days of November 30,
1997, such as upon the exercise of options. Because of the requirements of the
Securities and Exchange Commission as to the method of determining the amount of
shares an individual or entity may beneficially own, the amounts shown as to
beneficial ownership of shares of LSB for an individual or entity may include
shares also considered beneficially owned by others.
<TABLE>
<CAPTION>
AMOUNTS
TITLE OF SHARES PERCENT
OF BENEFICIALLY OF
BENEFICIAL OWNER CLASS OWNED(1) CLASS
---------------------------------------- ---------------- ------------------ --------
<S> <C> <C> <C>
Jack E. Golsen and .......................... Common 3,915,568(3)(5)(6) 28.7%
members of his family(2)....................... Voting Preferred 20,000(4)(6) 92.7%
Riverside Capital Advisors, Inc.(7) .......... Common 1,478,340(7) 10.4%
Ryback Management Corporation ................ Common 1,822,899(8) 12.5%
Dimensional Fund Advisors, Inc. .............. Common 748,800(9) 5.9%
Wynnefield Partners Small Cap Value, L.P. and
Nelson Obus(10) .............................. Common 830,000(10) 6.4%
</TABLE>
_________
(1) The Company based the information, with respect to beneficial ownership,
on information furnished by the above-named individuals or entities or
contained in filings made with the Securities and Exchange Commission or
the Company's records.
-51-
<PAGE>
(2) Includes Jack E. Golsen and the following members of his family: wife,
Sylvia H. Golsen; son, Barry H. Golsen; son, Steven J. Golsen; and
daughter, Linda F. Rappaport. The address of Jack E. Golsen, Sylvia H.
Golsen, Barry H. Golsen, and Linda F. Rappaport is 16 South Pennsylvania
Avenue, Oklahoma City, Oklahoma 73107. Steven J. Golsen's address is 7300
SW 44th Street, Oklahoma City, Oklahoma 73179.
(3) Includes: (a) the following shares over which Jack E. Golsen ("J. Golsen")
has the sole voting and dispositive power: (i) 129,028 shares that he owns
of record, (ii) 99,000 shares that he has the right to acquire within 60
days under a non-qualified stock option, (iii) 4,000 shares that he has
the right to acquire upon conversion of a promissory note, (iv) 133,333
shares that he has the right to acquire upon the conversion of 4,000
shares of LSB's Series B 12% Cumulative Convertible Preferred Stock (the
"Series" B Preferred") owned of record by him, (v) 10,000 shares owned of
record by the MG Trust, of which he is the sole trustee, and (vi) 20,000
shares that he has the right to acquire within the next 60 days under the
LSB stock option plans; (b) 1,052,250 shares owned of record by Sylvia H.
Golsen, over which she and her husband, J. Golsen share voting and
dispositive power; (c) 246,616 shares over which Barry H. Golsen ("B.
Golsen") has the sole voting and dispositive power, 533 shares owned of
record by B. Golsen's wife, over which he shares the voting and
dispositive power, and 21,000 shares that he has the right to acquire
within the next 60 days under the LSB stock option plans; (d) 206,987
shares over which Steven J. Golsen ("S. Golsen") has the sole voting and
dispositive power and 17,000 shares that he has the right to acquire
within the next 60 days under the LSB stock option plans; (e) 217,460
shares held in trust for the grandchildren of J. Golsen and Sylvia H.
Golsen of which B. Golsen, S. Golsen and Linda F. Rappaport ("L.
Rappaport") jointly or individually are trustees; (f) 82,552 shares owned
of record by L. Rappaport, over which L. Rappaport has the sole voting and
dispositive power; (g) 1,042,699 shares owned of record by SBL Corporation
("SBL"), 39,177 shares that SBL has the right to acquire upon conversion
of 9,050 shares of LSB's nonvoting $3.25 Convertible Exchangeable Class C
Preferred Stock, Series 2 (the "Series 2 Preferred"), and 400,000 shares
that SBL has the right to acquire upon conversion of 12,000 shares of
Series B Preferred owned of record by SBL, and (h) 60,600 shares owned of
record by Golsen Petroleum Corporation ("GPC"), which is a wholly owned
subsidiary of SBL, and 133,333 shares that GPC has the right to acquire
upon conversion of 4,000 shares of Series B Preferred owned of record by
GPC. SBL is wholly owned by Sylvia H. Golsen (40% owner), B. Golsen (20%
owner), S. Golsen (20% owner), and L. Rappaport (20% owner) and, as a
result, SBL, J. Golsen, Sylvia H. Golsen, B. Golsen, S. Golsen, and L.
Rappaport share the voting and dispositive power of the shares
beneficially owned by SBL. SBL's address is 16 South Pennsylvania Avenue,
Oklahoma City, Oklahoma 73107. See "Risk Factors--Controlling Interest."
(4) Includes: (a) 4,000 shares of Series B Preferred owned of record by J.
Golsen, over which he has the sole voting and dispositive power; (b)
12,000 shares of Series B Preferred owned of record by SBL; and (c) 4,000
shares of Series B Preferred owned of record by SBL's wholly-owned
subsidiary, GPC, over which SBL, J. Golsen, Sylvia H. Golsen, B. Golsen,
S. Golsen, and L. Rappaport share the voting and dispositive power.
(5) Does not include 124,350 shares that L. Rappaport's husband owns of record
and 17,000 shares which he has the right to acquire within the next 60
days under the LSB stock option plans, all of which L. Rappaport disclaims
beneficial ownership. Does not include 219,520 shares owned of record by
certain trusts for the benefit of B. Golsen, S. Golsen, and L. Rappaport
over which B. Golsen, S. Golsen and L. Rappaport have no voting or
dispositive power.
(6) J. Golsen disclaims beneficial ownership of the shares that B. Golsen, S.
Golsen, and L. Rappaport each have the sole voting and investment power
over as noted in footnote (3) above. B. Golsen, S. Golsen, and L.
Rappaport disclaim beneficial ownership of the shares that J. Golsen has
the sole voting and investment power over as noted in footnotes (3) and
(4) and the shares owned of record by Sylvia H. Golsen. Sylvia H. Golsen
disclaims beneficial ownership of the shares that J. Golsen has the sole
voting and dispositive power over as noted in footnotes (3) and (4) above.
(7) Riverside Capital Advisors, Inc. ("Riverside") has advised LSB that it
owns 343,800 shares of Series 2 Preferred that is convertible into
1,478,340 shares of Common Stock. Riverside further advised LSB that it
has voting and dispositive power over such shares as a result of Riverside
having full discretionary investment authority over customers' accounts to
which it provides investment services. The address of Riverside is 1650
Southeast 17th Street Causeway, Fort Lauderdale, Florida 33316.
-52-
<PAGE>
(8) Ryback Management Corporation ("Ryback") is the Investment Company Advisor
for Lindner Dividend Fund, a registered investment company. Ryback has
advised LSB that it owns 423,930 shares of Series 2 Preferred that is
convertible into 1,822,899 shares of Common Stock. Ryback has sole voting
and dispositive power over these shares. The address of Ryback is 7711
Corondelet Avenue, Suite 700, St. Louis, Missouri 63105.
(9) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 748,800 shares, all of
which shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors, Inc.
serves as investment manager. Dimensional disclaims beneficial ownership
of all such shares. The address of Dimensional is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(10) Wynnefield Partners Small Cap Value, L.P. ("Wynnefield"), together with
Wynnefield Partners Small Cap Value, L.P. I ("Wynnefield I"), Channel
Partnership II, L.P. ("Channel"), Wynnefield Value Offshore Fund, Ltd.
("Wynnefield Offshore"), and Nelson Obus, an individual ("Obus")
(collectively, the Wynnefield Group"), filed a joint group Schedule 13D.
The Schedule 13D states that Wynnefield has sole voting and dispositive
power over 336,345 shares; Wynnefield I has sole voting and dispositive
power over 161,655 shares; Channel has sole voting and dispositive power
over 24,000 shares; Wynnefield Offshore has sole voting and dispositive
power over 125,700 shares, and Obus has sole voting and dispositive power
over 20,000 shares. However, Obus has advised LSB that he possesses voting
control over the 830,000 shares officially owned by the Wynnefield Group.
The address of Wynnefield and Obus is One Penn Plaza, Suite 4720, New
York, New York 10119.
-53-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT OF LSB
The following table sets forth certain information as of November 30, 1997,
with respect to the beneficial ownership of the voting stock and voting
preferred stock of LSB, the Company's parent, by (i) each director of LSB; (ii)
each executive officer of LSB; (iii) and all current executive officers
(regardless of salary and bonus level) and directors of LSB as a group. Unless
otherwise indicated, the persons listed in the table below have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
AMOUNTS
OF SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNED(1) OF CLASS
- ------------------------ ---------------- ---------------- ---------
<S> <C> <C> <C>
Raymond B. Ackerman ........................................ Common 11,000(2) *
Robert C. Brown, M.D. ...................................... Common 218,329(3) 1.7%
Gerald J. Gagner ........................................... Common 1,000(4) *
Barry H. Golsen ............................................ Common 2,161,418(5) 16.1%
Voting Preferred 16,000(5) 74.2%
Jack E. Golsen ............................................. Common 3,123,420(6) 22.9%
Voting Preferred 20,000(6) 92.7%
David R. Goss .............................................. Common 216,585(7) 1.7%
Bernard G. Ille ............................................ Common 100,000(8) *
Donald W. Munson ........................................... Common 432(9) *
Horace G. Rhodes ........................................... Common 5,000(10) *
Jerome D. Shaffer, M.D. ................................... Common 139,363(11) 1.1%
Tony M. Shelby ............................................. Common 220,879(12) 1.7%
Directors and Executive Officers as a group (14 persons) .... Common 4,687,394(13) 33.9%
Voting Preferred 20,000 92.7%
</TABLE>
_________
* Less than 1%.
(1) The Company based the information with respect to beneficial ownership on
information furnished by each director or officer, contained in filings
made with the Securities and Exchange Commission, or contained in the
Company's records. Because of the requirements of the Securities and
Exchange Commission as to the method of determining the amount of shares an
individual or entity may own beneficially, the amount shown below for an
individual may include shares also considered beneficially owned by others.
Any shares of stock which a
-54-
<PAGE>
person does not own, but which he or she has the right to acquire within 60
days of November 30, 1997, are deemed to be outstanding for the purpose
of computing the percentage of outstanding stock of the class owned by such
person, but are not deemed to be outstanding for the purpose of computing
the percentage of the class owned by any other person.
(2) Mr. Ackerman has sole voting and dispositive power over these shares. 1,000
of these shares are held in a trust for which Mr. Ackerman is both the
settlor and the trustee and in which he has the vested interest in both the
corpus and income. The remaining 10,000 shares of Common Stock included
herein are shares that Mr. Ackerman may acquire pursuant to currently
exercisable non-qualified stock options granted to him by the Company.
(3) The amount shown includes 10,000 shares of Common Stock that Dr. Brown may
acquire pursuant to currently exercisable non-qualified stock options
granted to him by the Company. The shares, with respect to which Dr. Brown
shares the voting and dispositive power, consist of 122,516 shares owned by
Dr. Brown's wife, 15,000 shares held jointly by Dr. Brown and his wife,
50,727 shares owned by Robert C. Brown, M.D., Inc., a corporation wholly-
owned by Dr. Brown, and 20,086 shares held by the Robert C. Brown M.D.,
Inc. Employee Profit Sharing Plan, of which Dr. Brown serves as the
trustee. The amount shown does not include 57,190 shares directly owned by
the children of Dr. Brown, all of which Dr. Brown disclaims beneficial
ownership.
(4) Mr. Gagner has sole voting and dispositive power over these shares.
(5) See footnotes (3), (4), and (6) of the table under "Security Ownership of
Certain Beneficial Owners" of this item for a description of the amount and
nature of the shares beneficially owned by B. Golsen, including 21,000
shares B. Golsen has the right to acquire within sixty (60) days.
(6) See footnotes (3), (4), and (6) of the table under "Security Ownership of
Certain Beneficial Owners" of this item for a description of the amount and
nature of the shares beneficially owned by J. Golsen, including the shares
J. Golsen has the right to acquire within sixty (60) days, except 792,148
shares owned by the children of Mr. Golsen and trusts for the benefit of
Mr. Golsen's children and grandchildren are not included in this table
since Mr. Golsen disclaims beneficial ownership of such shares.
(7) The amount shown includes 28,000 shares that Mr. Goss has the right to
acquire within sixty (60) days pursuant to options granted under the
Company's stock option plans, over which Mr. Goss has the sole voting and
dispositive power. Mr. Goss disclaims beneficial ownership of 2,429 shares
owned by Mr. Goss' wife, individually, and/or as custodian for Mr. Goss'
children.
(8) The amount includes (i) 10,000 shares that Mr. Ille may purchase pursuant
to currently exercisable non-qualified stock options, over which Mr. Ille
has the sole voting and dispositive power, and (ii) 90,000 shares owned of
record by Mr. Ille's wife. Mr. Ille disclaims beneficial ownership of the
90,000 shares owned by Mr. Ille's wife.
(9) These are shares of Common Stock that Mr. Munson has the right to acquire
upon conversion of 100 shares of non-voting Series 2 Preferred that he
beneficially owns and which Mr. Munson has sole voting and dispositive
power.
(10) Mr. Rhodes has sole voting and dispositive power over these shares.
(11) The amount includes (i) 95,034 shares held by Dr. Shaffer's revocable trust
over which Dr. Shaffer has the sole voting and dispositive power; (ii)
35,000 shares held by the revocable trust of Dr. Shaffer's wife over which
Dr. Shaffer shares voting and dispositive power; (iii) 10,000 shares that
Dr. Shaffer may purchase pursuant to currently exercisable non-qualified
stock options; and (iv) 4,329 shares that Dr. Shaffer has the right to
acquire upon conversion of 1,000 shares of Series 2 Preferred owned by Dr.
Shaffer.
(12) Mr. Shelby has the sole voting and dispositive power over these shares,
which include 28,000 shares that Mr. Shelby has the right to acquire within
60 days pursuant to options granted under the Company's ISOs and 15,152
shares that Mr. Shelby has the right to acquire upon conversion of 3,500
shares of Series 2 Preferred owned by Mr. Shelby.
(13) The amount shown includes 292,600 shares of Common Stock that executive
officers, directors, or entities controlled by executive officers and
directors of the Company have the right to acquire within 60 days.
-55-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION AND CAPITALIZATION OF COMPANY
The Company was formed as an Oklahoma corporation and a wholly owned
subsidiary of LSB on October 17, 1997. In November 1997, the Company acquired
its subsidiaries through capital contributions of each subsidiary's outstanding
stock from LSB to the Company, except Northwest Financial Corporation
("Northwest"), which was contributed to the Company by Prime, a wholly owned
subsidiary of LSB but not a subsidiary of the Company. As of the date of this
Prospectus, LSB owns 95% and Prime owns the remaining 5% of the issued and
outstanding capital stock of the Company.
IEC LEASE
Prime, a subsidiary of LSB but not a subsidiary of the Company, owns the
facilities utilized by the fan coil operations of the Climate Control Business.
The Climate Control Business has leased such facilities from Prime pursuant to a
lease agreement which provides for a term ending on March 6, 2000. The lease is
renewable by the Climate Control Business for an additional ten-year term on the
same terms, including rental amount. The rental amount is $475,000 per year,
payable in monthly installments.
EDC PURCHASE
In 1983, LSB Chemical Corp. ("LSBC"), a subsidiary of the Company, acquired
all of the outstanding stock of EDC from its then four stockholders ("Ex-
Stockholders"). A substantial portion of the purchase price consisted of an
earnout based primarily on the annual after-tax earnings of EDC for a 10-year
period. During 1989, two of the Ex-Stockholders received LSBC promissory notes
for a portion of their earnout, in lieu of cash, totaling approximately
$896,000, payable $496,000 in January 1990, and $400,000 in May 1994. LSBC
agreed to a buyout of the balance of the earnout from the four Ex-Stockholders
for an aggregate purchase amount of $1,231,000. LSBC purchased for cash the
earnout from two of the Ex-Stockholders and issued multi-year promissory notes
totaling $676,000 to the other two Ex-Stockholders. Jack E. Golsen guaranteed
LSBC's payment obligation under the promissory notes. These promissory notes
have been assigned in their entirety from LSBC to the Company, and the guarantee
by Jack E. Golsen remains in place. The unpaid balance of these notes at
November 30, 1997, was $400,000.
MULTI-CLIMA
During 1994, a subsidiary of LSB (which is not the Company or a subsidiary
of the Company) obtained an option to acquire all of the stock of Multi-Clima,
S.A., a French manufacturer of air conditioning and heating equipment ("Multi-
Clima"). LSB's subsidiary was granted the option as a result of the subsidiary
loaning to the parent company of Multi-Clima approximately $2.1 million.
Subsequent to the loan of $2.1 million, LSB's subsidiary has loaned to the
parent of Multi-Clima an additional $1.7 million. The amount loaned is secured
by the stock and assets of Multi-Clima. LSB's subsidiary may exercise its option
to acquire Multi-Clima by converting $150,000 of the amount loaned into equity.
The option is currently exercisable and will expire June 15, 1999. As of the
date of this Prospectus, LSB has not decided whether it will exercise the
option.
For 1996 and 1995, Multi-Clima had revenues of $16.0 million and $15.9
million, respectively, and reported an approximate break-even level of
operations in 1996 and a net loss of $900,000 in 1995.
Multi-Clima manufactures chillers, which are used in central air
conditioning systems, heat pump and computer room air conditioning and heat pump
units. It is believed that the air conditioning equipment manufactured by Multi-
Clima is generally compatible with the equipment manufactured by the Climate
Control Business. In addition, Multi-Clima may distribute equipment manufactured
by the Climate Control Business and the Climate Control Business may distribute
equipment manufactured by Multi-Clima.
-56-
<PAGE>
CONTRACTUAL ARRANGEMENTS
Services Agreement
Under the services agreement (the "Services Agreement"), dated November 21,
1997, between LSB and the Company, LSB provides to the Company and its
subsidiaries various services, including financial and accounting, order entry,
billing, credit, payable, insurance, legal, human resources, advertising and
marketing, and related administrative and management services, that LSB has
historically provided to the operations and businesses of the Company and its
subsidiaries (other than services provided by the President or Chief Financial
Officer of LSB, whose services will be compensated under the Management
Agreement (as defined)). The Company will pay to or reimburse LSB for all direct
and indirect costs and expenses incurred by LSB in the performance of the
Services Agreement. The term of the Services Agreement is ten years, except LSB
may terminate the Services Agreement on 30 days' written notice to the Company
if (i) the Company defaults under any of the terms or provisions of the Services
Agreement, and such default is not cured during the 30-day notice period, or
(ii) LSB sells 50% or more of the issued and outstanding stock of the Company,
or sells, transfers or disposes of all, or substantially all, of the assets of
the Company. The historical financial statements for the Company reflect
reimbursement to LSB for services of $1.8 million during each of 1994, 1995, and
1996 and $1.4 million during the nine month period from January 1, 1997, to
September 30, 1997.
The Services Agreement provides that the Company will pay to, or reimburse,
LSB for the value of the office facilities of LSB, including LSB's principal
offices and financial accounting offices utilized in the performance of the
Services Agreement. LSB will determine the proportionate usage of such
facilities by LSB and the Company, and the Company will pay to, or reimburse,
LSB for its proportionate share of such usage.
The Services Agreement also provides that LSB will permit employees of the
Company and its subsidiaries to participate in the benefit plans and programs
sponsored by LSB until the termination of the Services Agreement. So long as
employees of the Company and its subsidiaries continue to participate in LSB's
benefit plans and programs, the contributions of such employees to such plans
and programs and the costs of participation by such persons in such plans and
programs will be accounted for separately from contributions of, and costs of
participation by, employees of LSB and its other subsidiaries. The Company will
pay to, or reimburse, LSB for the costs associated with participation by the
employees of the Company and LSB's benefit plans and programs. Upon the
termination of the Services Agreement, each of LSB and the Company will be
responsible for all aspects of its respective benefit plans and programs.
Management Agreement
Under the management agreement (the "Management Agreement"), dated November
21, 1997, between LSB and the Company, which provides that LSB will provide to
the Company, on a nonexclusive basis, managerial oversight and guidance
concerning the broad policies, strategic decisions and operations of the Company
and the Subsidiaries, and the rendering of such further managerial assistance as
deemed reasonably necessary by LSB.
The term of the Management Agreement is ten years. The Management Agreement
may be terminated sooner by LSB upon 30 days' prior written notice to the
Company if (i) the Company defaults under the Management Agreement, and such
default is not cured to the reasonable satisfaction of LSB prior to the
expiration of such 30-day period or (ii) LSB sells 50% or more of the issued and
outstanding stock of the Company or sells, transfers or disposes of all, or
substantially all, of the assets of the Company. LSB has and will continue to
engage in activities, some of which activities may be in competition with the
Company's activities, other than those it will perform under the Management
Agreement. The Management Agreement will not limit or restrict the terms and
provisions of the Services Agreement.
The Management Agreement provides that the Company will pay LSB a
Management Fee each calendar year during the term of the Management Agreement of
an amount not to exceed $1,800,000, subject to adjustment under certain
conditions and subject to certain limitations. The Company shall pay LSB such
annual Management Fee on a
-57-
<PAGE>
quarterly basis based on the following: (i) if at the end of the first quarter
of the year (March 31), the Company has an EBITDA, on a consolidated basis, for
the three month period from January 1 to March 31 of $6,500,000 or more, a
Management Fee equal to the difference between the amount of such EBITDA, on a
consolidated basis, and $6,500,000, but not to exceed $450,000, (ii) if at the
end of the second quarter of the year (June 30) the Company has an EBITDA, on a
consolidated basis, for the six month period from January 1 to June 30 of such
year of $13,000,000, a Management Fee equal to the amount of such EBITDA, on a
consolidated basis, for the six month period less $13,000,000, but not to exceed
$900,000 less the amount of the Management Fee paid to LSB by the Company for
the first quarter of such year, (iii) if at the end of the third quarter of the
year (September 30) the Company has an EBITDA, on a consolidated basis, for the
nine month period from January 1 to September 30, of such year of $19,500,000, a
Management Fee equal to the amount of such EBITDA, on a consolidated basis, for
the nine month period less $19,500,000, but not to exceed $1,350,000 less the
amount of the Management Fee paid to LSB by the Company for the first and second
quarter of such year, and (iv) if at the end of such year the Company has an
EBITDA, on a consolidated basis, for the twelve months (January 1 to December
31) of $26,000,000, a Management Fee equal to the amount of such EBITDA, on a
consolidated basis, for such twelve month period less $26,000,000, but not to
exceed $1,800,000 less the amount of the Management Fee paid to LSB by the
Company for the first three quarters of such year. If the Company's EBITDA, on a
consolidated basis, is less than $26,000,000 for such year, then LSB shall
return to the Company any Management Fees paid to LSB for the first three
quarters of such year. If the Company's EBITDA for such year, on a consolidated
basis, equals or exceeds $26,000,000 but is less than $26,000,000 plus the
amount of Management Fees paid to LSB for the first three quarters of such year,
LSB shall refund to the Company the difference between $26,000,000 plus the
amount of Management Fees paid to LSB for the first three quarters of the year
and the amount of the Company's EBITDA, on a consolidated basis, for all of such
year. As of January 1 of each year, the quarterly and annual amount of
Management Fee to be paid by the Company to LSB shall be increased
proportionately based on the increase, if any, in the Consumer Price Index
during the preceding calendar year.
Tax Sharing Agreement
The tax sharing agreement (the "Tax Sharing Agreement"), dated November 21,
1997, between LSB and the Company provides for (i) the allocation of payments of
taxes for periods during which the Company and its subsidiaries and LSB are
included in the same consolidated group for federal income tax purposes or the
same consolidated, combined or unitary returns for state, local or foreign tax
purposes, (ii) the allocation of responsibility for the filing of tax returns,
(iii) the conduct of tax audits and the handling of tax controversies, and (iv)
various related matters. For tax periods beginning after December 1996 and
ending ten years thereafter, so long as the Company is included in LSB's
consolidated federal income tax returns or state consolidated, combined or
unitary tax returns, the Company will be required to pay to LSB an amount equal
to the Company's consolidated federal and state income tax liability calculated
as if the Company and its Subsidiaries were a separate consolidated tax group
and not part of LSB's consolidated tax group. Such amount is payable in
estimated quarterly installments. If the sum of the estimated quarterly
installments is (a) greater than the tax liability of the Company, as determined
by LSB, under the Tax Sharing Agreement, then LSB will refund the amount of the
excess to the Company, or (b) less than the Company's tax liability, as
determined by LSB, under the Tax Sharing Agreement, then the Company will pay to
LSB the amount of the deficiency.
In addition, subsidiaries of the Company have paid to LSB $1.6 million in
1994, $0.8 million in 1995, and $3.5 million in 1996, a portion of the net
income that subsidiaries of the Company earned on a consolidated basis and an
amount equal to the amount of federal and state income tax liability that those
subsidiaries would have been liable for on a stand-alone basis calculated as
though they were not part of LSB's consolidated group.
INDUSTRIAL SUPPLIES, MACHINES AND CLIMATE CONTROL EQUIPMENT
From January 1, 1996, to November 30, 1997, certain subsidiaries of LSB
that are not subsidiaries of the Company sold to subsidiaries of the Company
approximately $2.6 million in industrial supplies, machine tools and certain
thermostats. It is anticipated that such transactions will continue in the
future.
-58-
<PAGE>
AFFILIATED LOANS
The Company and its subsidiaries, at various times, maintained certain
unsecured borrowings from LSB and made loans to LSB and its subsidiaries (other
than the Company and its subsidiaries). At September 30, 1997, the Company had
loans to LSB of approximately $22.9 million and borrowings from LSB of
approximately $19.3 million. During November 1997, the Company and LSB offset
substantially all of the amounts due to each other. As of November 30, 1997,
LSB owed to the Company approximately $3.6 million, bearing interest at an
annual rate of interest of 7%, exclusive of the loan described in the paragraph
below.
From the net proceeds received by the Company in connection with the
Initial Offering, the Company loaned $10 million to LSB. See "Description of
Notes--Certain Covenants--LSB Note."
REVOLVING CREDIT FACILITY
LSB, certain subsidiaries of LSB that are not subsidiaries of the Company,
and certain subsidiaries of the Company are parties to the Revolving Credit
Facility. See "Description of Other Indebtedness--Revolving Credit Facility" for
a discussion of the Revolving Credit Facility. LSB and certain subsidiaries of
LSB that are not subsidiaries of the Company have guaranteed all of the
obligations of the Company's subsidiaries under the Revolving Credit Facility.
GUARANTY OF LOANS
LSB has unconditionally guaranteed the payment of the DSN Loans, which have
an unpaid balance, as of November 30, 1997, of approximately $13.7 million. LSB
has also guaranteed the lease payments due by IEC under a lease purchase
agreement, which provides for the payment of $960,000 over a term of five years
beginning November 1996 at an annual interest rate of 7.5%. In addition, LSB has
unconditionally guaranteed repayment by (i) CM of the CM Loan, the principal
amount of which is approximately $1.3 million as of November 30, 1997, and (ii)
the TES Revolving Facility. See "Description of Other Indebtedness."
EMPLOYEE BENEFIT PLANS
Prior to the formation of the Company, the employees of the Chemical
Business and the Climate Control Business were eligible to participate in LSB's
Employee Savings Plan, health insurance plan, and various stock option plans.
Under the Services Agreement, employees of the Company continue to be eligible
for all of such plans on the same terms and conditions as LSB's employees.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on the Issue Date to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act. As a condition to the Purchase
Agreement, the Company and the Initial Purchaser entered into the Registration
Rights Agreement pursuant to which the Company agreed to (i) file with the
Commission promptly (but in any event on or prior to 60 days) after the Issue
Date, the Exchange Offer Registration Statement relating to the Exchange Offer
for the New Notes, and (ii) use its best efforts to cause the Exchange Offer
Registration Statement to become effective within 150 days after the Issue Date.
Upon the effectiveness of the Exchange Offer Registration Statement, the Company
will offer the New Notes in exchange for the surrender of the Old Notes. The
Registration Rights Agreement provides further that if applicable
interpretations of the staff of the Commission do not permit the consummation of
the Exchange Offer prior to the 150th day following the Issue Date, subject to
certain
-59-
<PAGE>
conditions, in the case of any holder of Old Notes not permitted to participate
in the Exchange Offer or of any holder of Old Notes that participates in the
Exchange Offer that receives New Notes that may not be sold without registration
under state and federal securities laws (other than due solely to the status of
such holder as an affiliate of the Company within the meaning of the Securities
Act), or if for any reason the Exchange Offer is not consummated within 180 days
after the Issue Date, or, subject to certain conditions, upon the request of the
Initial Purchaser or the holders of a majority in aggregate principal amount of
the Notes, the Company will, at its cost, file a Shelf Registration Statement to
cover resales of Old Notes by the holders thereof. The Company will use its best
efforts to cause the applicable registration statement to be declared effective
by the Commission as promptly as practicable after the date of filing.
Based on an interpretation of the staff of the Commission set forth in
several no-action letters to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof without compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of Notes who is an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing the New Notes
(i) will not be able to rely on the interpretation of the staff of the
Commission set forth in the above referenced no-action letters, (ii) will not be
able to tender its Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Notes unless such sale or transfer
is made pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the Holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage in distribution of the
New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes within the meaning of the Securities Act or resale of the Exchange
Securities in violation of the Securities Act, (iv) neither the holder nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act, and (v) the holder or any such other person
acknowledges that if such holder or any other person participates in the
Exchange Offer for the purpose of distributing the New Notes it must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the New Notes and cannot rely on those no-action
letters. As indicated above, each Participating Broker-Dealer that receives a
New Note for its own account in exchange for Old Notes must acknowledge that it
(i) acquired the Old Notes for its own account as a result of market-making
activities or other trading activities, (ii) has not entered into any
arrangement or understanding with the Company or any "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act) to distribute the New
Notes to be received in the Exchange Offer and (iii) will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. For a description of the procedures for resales by
Participating Broker-Dealers, see "Plan of Distribution."
The Registration Rights Agreement provides that unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will have
commenced the Exchange Offer and will use its best efforts to issue on or prior
to 30 business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission New Notes in exchange for all
Old Notes tendered prior thereto in the Exchange Offer. If (i) neither of the
registration statements described above is filed on or before the 60th day
following the Issue Date, (ii) neither of such registration statements is
declared effective by the Commission on or prior to the 150th day after the
Issue Date, (iii) an Exchange Offer Registration Statement becomes effective,
and the Company fails to consummate the Exchange Offer within 30 business days
of the effective date of such registration statement, or (iv) the Shelf
Registration Statement is filed and declared effective but thereafter ceases to
be effective without being succeeded within 30 days by another effective
registration statement (each such event, a "Registration Default"), the Company
will pay liquidated damages ("Liquidated Damages"), to each holder of Old Notes
and New Notes that are received in the Exchange Offer that may not be sold
without restriction under federal or state securities law (together, the
"Registrable Securities") during the first 90-day period immediately following
the occurrence of a Registration Default in an amount equal to one-half of
-60-
<PAGE>
one percent (0.5%) per annum of the principal amount of the Registrable
Securities held by such Holder during the first 90-day period immediately
following the occurrence of such Registration Default. The amount of Liquidated
Damages payable to each Holder will increase by an additional one-half of one
percent (0.5%) per annum of the principal amount of such Registrable Securities
during each subsequent 90-day period, up to a maximum amount of Liquidated
Damages equal to two percent (2.0%) per annum of the principal amount of such
Registrable Securities, which provision for Liquidated Damages will continue
until all Registration Defaults have been cured. All accrued Liquidated Damages
will be paid on or before the semiannual interest payment date for the
Registrable Securities. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement in order to have
their Old Notes included in the Shelf Registration Statement. A Holder of Notes
that sells such Notes pursuant to the Shelf Registration Statement generally
would be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a Holder (including certain
indemnification obligations). The Company will provide a copy of the
Registration Rights Agreement to prospective investors upon request.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
Old Notes will not have any further registration rights and such Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for liquidated damages in certain circumstances relating to
the timing of the Exchange Offer, all of which rights will terminate when the
Exchange Offer is terminated. The New Notes will evidence the same debt as the
Old Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
________________, 1998, as the record date for the Exchange Offer for purposes
of determining the person to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Oklahoma General Corporation Act or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in
-61-
<PAGE>
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company will be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
exchange fees and expenses.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
___________, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" will mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension or oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions" shall
not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of
Old Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the Notes on June 1,
1998. Interest on the Old Notes accepted for exchange will cease to accrue upon
issuance of New Notes.
Interest on the New Notes is payable semiannually on each June 1 and
December 1, commencing on June 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must (i) complete, sign and date the
Letter of Transmittal, or a facsimile thereof, and have the signatures thereon
guaranteed if required by the Letter of Transmittal or such facsimile, or (ii)
transmit an Agent's Message in connection with a book-entry transfer, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, or Agent's
Message, together with the Old Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m. New York City time, on the Expiration Date.
To be tendered effectively, the Old Notes, Letter of Transmittal or an Agent's
Message and other required documents must be completed and received by the
Exchange Agent at the
-62-
<PAGE>
address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. Delivery of the Old Notes may be made by book-
entry transfer in accordance with the procedures described below. Confirmation
of such book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of book-entry, which states that such book-entry transfer facility
has received an express acknowledgment from the participant in such book-entry
transfer facility tendering the Old Notes that such participant has received and
agrees (1) to participate in the Automated Tender Option Program ("ATOP"); (ii)
to be bound by the terms of the Letter of Transmittal; and (iii) that the
Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message each holder will
make to the Company the representations set forth above in the third paragraph
under the heading "-Purpose and Effect of the Exchange Offer."
The tender of Old Notes by a holder and the acceptance thereof by the
Company will constitute agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS ARE ENCOURAGED TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANK, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions of Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined). In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or other acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
-63-
<PAGE>
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the Book-Entry Transfer Facility (as defined in the Letter of
Transmittal) for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book entry delivery of Old
Notes by causing such Book Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account with respect to the Old Notes in accordance
with Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, unless an Agent's
Message is received by the Exchange Agent, in compliance with ATOP, an
appropriate Letter of Transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole direction, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Act that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
a. the tender is made through an Eligible Institution;
b. prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes
(or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
c. such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or a confirmation or
book-entry transfer of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer
-64-
<PAGE>
Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Nots to be withdrawn (the
"Depositor"); (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited); (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described above
under "-Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange
Offer which, in the reasonable judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Company, or any of
its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the
reasonable judgment of the Company, might materially impair the
ability of the Company to proceed with Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company;
or
(c) any governmental approval has not been obtained, which approval the
Company, in its reasonable discretion, deems necessary for the
consummation of the Exchange Offer as contemplated hereby.
-65-
<PAGE>
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holder, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "-Withdrawal of Tenders") or (iii) waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn.
EXCHANGE AGENT
Bank One, NA has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
BY MAIL: BY OVERNIGHT COURIER AND BY
HAND AFTER 4:30 P.M.:
Bank One, NA
Post Office Box 710184 Bank One, NA
Columbus, Ohio 43271-0184 235 West Schrock Road
Attention: Corporate Trust Operations Westerville, Ohio 43081-0184
(registered or certified mail Attention: Corporate Trust Operations
recommended) OHI-0184
BY HAND BEFORE 4:30 P.M.:
Bank One, NA OR First Chicago Trust Company of New
235 West Schrock Road York
Westerville, Ohio 43081-0184 14 Wall Street, 8/th/ Floor
New York, New York 10005
Attention: Corporate Trust Operations
FACSIMILE TRANSMISSION: (614) 248-9987
CONFIRM BY TELEPHONE: (800) 346-5153
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The Company will bear the expense of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
-66-
<PAGE>
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company) , (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE NEW NOTES
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that a holder or
other person who receives New Notes, whether or not such person is the holder
(other than a person that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who receives New Notes in exchange for Old
Notes in the ordinary course of business, and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes, will be allowed to resell
the New Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the New Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff or the Commission enunciated in such no-action letters
or any similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. The Company has not sought, and does not intend to seek, its own no-
action letter, and there can be no assurance that the Staff of the Commission
would make a similar determination with respect to the Exchange Offer. Further,
each Participating Broker-Dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Company has agreed that for a
period of 180 days after the consummation of the Exchange Offer, it will make
this prospectus, as amended and supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
___________________, 1998 (90 days from the date of this prospectus), all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) any New Notes received by such
holder in the Exchange Offer will be acquired in the ordinary course of its
business; (ii) such holder has no arrangement or understanding with any person
to participate in the distribution of the New Notes within the meaning of the
Securities Act or resale of the New Notes in violation of the Securities Act;
(iii) if such holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the New Notes; (iv) if such holder
is a broker-dealer that will receive the New Notes for its own account in
exchange for Notes that were acquired as a result of market making or other
trading activities, that it will deliver a prospectus, as required by law, in
connection with any resale of such New Notes, and (v) if such holder is an
affiliate, that it will comply with the registration and
-67-
<PAGE>
prospectus delivery requirements of the Securities Act applicable to it. As
indicated above, each Participating Broker-Dealer that receives a New Note for
its own account in exchange for Old Notes must acknowledge that it will deliver
a Prospectus in connection with any resale of such New Notes. For a description
of the procedures for such resales by Participating Broker-Dealer, see "Plan of
Distribution."
DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
will be issued pursuant to the Indenture. The following summaries of certain
provisions of the Indenture are summaries only, do not purport to be complete
and are qualified in their entirety by reference to all of the provisions of the
Indenture. Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Indenture. Wherever particular provisions
of the Indenture are referred to in this summary, such provisions are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference. A copy of the form of
Indenture is available upon request. For purposes of this summary, the term
"Company" refers only to ClimaChem, Inc. and not to any of its Subsidiaries.
The Old Notes and the New Notes are sometimes referred to herein collectively as
the "Notes." Any descriptions of the Notes presented in the future tense shall
refer to the New Notes, where appropriate.
GENERAL
The terms of the New Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), as in effect on the date of the Indenture.
The form and terms of the New Notes are the same as the form and terms of the
Old Notes (which they replace) except that (i) the New Notes bear a Series B
designation, (ii) the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holder of New Notes will not be entitled to certain rights under the
Registration Rights Agreement, including the provisions providing for liquidated
damages in certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange Offer is consummated. The New
Notes are subject to all such terms, and holders of the New Notes are referred
to the Indenture and the Trust Indenture Act for a statement of such terms.
The Notes will be senior, unsecured, general obligations of the Company,
ranking pari passu in right of payment with all other senior, unsecured
obligations of the Company. The Notes will be limited in aggregate principal
amount to $105 million. The Notes are jointly and severally irrevocably and
unconditionally guaranteed on a senior basis by each of the Company's present
Subsidiaries (other than EDNC) and all of its future Subsidiaries (the
"Guarantors"). The guarantees will rank pari passu in right of payment with all
other senior, unsecured obligations of the Guarantors. The obligations of each
Guarantor under its guarantee, however, are limited in a manner intended to
avoid it being deemed a fraudulent conveyance under applicable law; provided,
however, there are no assurances that the guarantees will not be limited as a
fraudulent conveyance under applicable law. See "Risk Factors - Fraudulent
Conveyance Considerations" and "Certain Bankruptcy Limitations" below. The term
"Subsidiaries" as used herein, however, does not include Unrestricted
Subsidiaries. The Notes will be issued only in fully registered form, without
coupons, in denominations of $l,000 and integral multiples thereof.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations under the Indenture and the Notes, and the aggregate net
assets, earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on December 1, 2007. The Notes will bear interest at
the rate per annum stated on the cover page hereof from the date of issuance or
from the most recent Interest Payment Date to which interest has been
-68-
<PAGE>
paid or provided for, payable semi-annually on June 1 and December 1 of each
year, commencing June 1, 1998, to the Persons in whose names such Notes are
registered at the close of business on the May 15 or November 15 immediately
preceding such Interest Payment Date. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
Principal of, premium, if any, and interest and Liquidated Damages, if any,
on the Notes will be payable, and the Notes may be presented for registration of
transfer or exchange, at the office or agency of the Company maintained for such
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York, except as set forth below. At the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
the addresses set forth upon the registry books of the Company; provided that
all payments with respect to Global Notes and certificated Notes, the Holders of
which have given wire transfer instructions to the Company and the Paying Agent,
will be required to be made by wire transfers of immediately available funds to
the accounts specified by the Holders thereof. No service charge will be made
for any registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Until otherwise designated by the
Company, the Company's office or agency will be the corporate trust office of
the Trustee presently located at the office of the Trustee in the Borough of
Manhattan, The City of New York.
HOLDING COMPANY STRUCTURE
The Company is a holding company for its Subsidiaries, with no material
operations of its own. Accordingly, the Company is dependent upon the
distribution of the earnings of its Subsidiaries, whether in the form of
dividends, advances or payments on account of intercompany obligations, to
service its debt obligations. In addition, the claims of the Holders of the
Notes are subject to the prior payment of all secured indebtedness of the
Guarantors. There can be no assurance that, after providing for all such
secured claims, there would be sufficient assets available from the Company and
its subsidiaries to satisfy the claims of the Holders of the Notes. See "Risk
Factors - Substantial Coverage; Ability to Service Indebtedness."
CERTAIN BANKRUPTCY LIMITATIONS
The Company is a holding company, conducting all of its business through
Subsidiaries, which have guaranteed or will guarantee the Company's obligations
with respect to the Notes (with the exception of EDNC), and Unrestricted
Subsidiaries. See "Risk Factors." Holders of the Notes will be direct creditors
of each Guarantor by virtue of its guarantee. Nonetheless, in the event of the
bankruptcy or financial difficulty of a Guarantor, such Guarantor's obligations
under its guarantee may be subject to review and avoidance under state and
federal fraudulent transfer laws. Among other things, such obligations may be
avoided if a court concludes that such obligations were incurred for less than
reasonably equivalent value or fair consideration at a time when the Guarantor
was insolvent, was rendered insolvent, or was left with inadequate capital to
conduct its business. A court would likely conclude that a Guarantor did not
receive reasonably equivalent value or fair consideration to the extent that the
aggregate amount of its liability on its guarantee exceeds the economic benefits
it receives in the Offering. The obligations of each Guarantor under its
guarantee will be limited in a manner intended to cause it not to be a
fraudulent conveyance under applicable law, although no assurance can be given
that a court would give the holder the benefit of such provision. See "Risk
Factors--Fraudulent Conveyance Considerations."
If the obligations of a Guarantor under its guarantee were avoided, Holders
of Notes would have to look to the assets of any remaining Guarantors for
payment. There can be no assurance in that event that such assets would suffice
to pay the outstanding principal and interest on the Notes.
-69-
<PAGE>
OPTIONAL REDEMPTION
The Company will not have the right to redeem any Notes prior to
December 1, 2002 (other than out of the Net Cash Proceeds of a Public Equity
Offering, as described in the next following paragraph). The Notes will be
redeemable for cash at the option of the Company, in whole or in part, at any
time on or after December 1, 2002, upon not less than 30 days nor more than 60
days notice to each holder of Notes, at the following redemption prices
(expressed as percentages of the principal amount) if redeemed during the 12-
month period commencing December 1 of the years indicated below, in each case
(subject to the right of Holders of record on a Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Redemption Date)
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
2002 ........................ 105.375%
2003 ....................... 103.583%
2004 ........................ 101.792%
2005 and thereafter ......... 100.000%
</TABLE>
Until December 1, 2000, upon a Public Equity Offering of common stock
of the Company for cash, up to $35 million aggregate principal amount of the
Notes may be redeemed at the option of the Company within 120 days of such
Public Equity Offering, on not less than 30 days, but not more than 60 days,
notice to each Holder of the Notes to be redeemed, with cash from the Net Cash
Proceeds of such Public Equity Offering, at 110.750% of principal (subject to
the right of Holders of record on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided, however, that immediately following such redemption not
less than $65 million aggregate principal amount of the Notes are outstanding.
In the case of a partial redemption, the Trustee shall select the Notes
or portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. Any notice which relates to a Note to
be redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after the
date of redemption, interest will cease to accrue on the Notes or portions
thereof called for redemption, unless the Company defaults in the payment
thereof.
CERTAIN COVENANTS
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional offer by the Company (the "Change
of Control Offer"), to require the Company to repurchase all or any part of such
Holder's Notes (provided, that the principal amount of such Notes must be $1,000
or an integral multiple thereof) on a date (the "Change of Control Purchase
Date") that is no later than 35 Business Days after the occurrence of such
Change of Control, at a cash price equal to 101% of
-70-
<PAGE>
the principal amount thereof (the "Change of Control Purchase Price"), together
with accrued and unpaid interest and Liquidated Damages, if any, to the Change
of Control Purchase Date. The Change of Control Offer shall be made within 10
Business Days following a Change of Control and shall remain open for 20
Business Days following its commencement (the "Change of Control Offer Period").
Upon expiration of the Change of Control Offer Period, the Company promptly
shall purchase all Notes properly tendered in response to the Change of Control
Offer.
As used herein, a "Change of Control" means (i) any merger or
consolidation of any of the Company or LSB with or into any Person or any sale,
transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of either of the Company or LSB, on a
consolidated basis, in one transaction or a series of related transactions, if,
immediately after giving effect to such transaction(s), any "Person" or "group"
(as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable) (other than an Excluded Person) is or becomes
the "beneficial owner," directly or indirectly, of more than 50% of the total
voting power in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities, (ii) any "Person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of Capital Stock of either of the Company or LSB
then outstanding normally entitled to vote in elections of directors, or (iii)
during any period of 12 consecutive months after the Issue Date, individuals who
at the beginning of any such 12-month period constituted the Board of Directors
of LSB (together with any new directors whose election by such Board or whose
nomination for election by the shareholders of LSB was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of LSB then in office.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The Paying
Agent promptly will pay the Holders of Notes so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any), and the Trustee promptly will authenticate and
deliver to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered. Any Notes not so accepted will be delivered
promptly by the Company to the Holder thereof. The Company publicly will
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more
difficult or discourage a takeover of the Company or LSB, and, thus, the removal
of incumbent management.
The phrase "all or substantially all" of the assets of the Company or
LSB, as the case may be, will likely be interpreted under applicable state law
and will be dependent upon particular facts and circumstances. As a result,
there may be a degree of uncertainty in ascertaining whether a sale or transfer
of "all or substantially all" of the assets or the Company or LSB, as the case
may be, has occurred.
No assurances can be given that the Company will have available
sufficient funds to acquire Notes tendered upon the occurrence of a Change of
Control. In the event that the Company is required to purchase outstanding Notes
upon the occurrence of a Change of Control, the Company expects that it would
seek third party financing to the extent that it does not have available funds
to meet its purchase obligations. There can be no assurance that the Company
would be able to obtain such financing.
Any Change of Control Offer will be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation 14E
under the Exchange Act and the rules thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the
-71-
<PAGE>
terms hereof, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Indenture or the Notes by virtue thereof.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock
The Indenture provides that, except as set forth in this covenant, the
Company and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an "incurrence"),
any Indebtedness or any Disqualified Capital Stock (including Acquired
Indebtedness) other than Permitted Indebtedness. Notwithstanding the foregoing,
if (i) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis to, such
incurrence of Indebtedness or Disqualified Capital Stock and (ii) on the date of
such incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the
Company for the Reference Period immediately preceding the Incurrence Date,
after giving effect on a pro forma basis to such incurrence of such Indebtedness
or Disqualified Capital Stock and, to the extent set forth in the definition of
Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.0
to 1 or, for an Incurrence Date after January 1, 2000, at least 2.25 to 1 (each,
a "Debt Incurrence Ratio"), then the Company may incur such Indebtedness or
Disqualified Capital Stock and the Guarantors may incur such Indebtedness.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company, as applicable.
Limitation on Restricted Payments
The Indenture provides that the Company and the Guarantors will not,
and will not permit any of their Subsidiaries to, directly or indirectly, make
any Restricted Payment if, after giving effect to such Restricted Payment on a
pro forma basis, (1) a Default or an Event of Default shall have occurred and be
continuing, (2) the Company is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock," or (3) the aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including after giving effect to such proposed
Restricted Payment, from and after the Issue Date, would exceed the sum of (a)
50% of the aggregate Consolidated Net Income of the Company and its Consolidated
Subsidiaries for the period (taken as one accounting period), commencing on the
first day of the first full fiscal quarter commencing after the Issue Date, to
and including the last day of the fiscal quarter ended immediately prior to the
date of each such calculation (or, in the event Consolidated Net Income for such
period is a deficit, then minus 100% of such deficit), plus (b) the aggregate
Net Cash Proceeds received by the Company from the sale of its Qualified Capital
Stock (other than (i) to a Subsidiary of the Company and (ii) to the extent
applied in connection with a Qualified Exchange) after the Issue Date.
The immediately preceding paragraph, however, will not prohibit (i)
payments to LSB pursuant to the Management Agreement, the Services Agreement and
the Tax Sharing Agreement, each as in effect on the Issue Date, (ii) a Qualified
Exchange or (iii) the payment of any dividend on Qualified Capital Stock within
60 days after the date of its declaration if such dividend could have been made
on the date of such declaration in compliance with the foregoing provisions. The
full amount of any Restricted Payment made pursuant to clause (iii) (but not
pursuant to clauses (i) and (ii)) of the immediately preceding sentence,
however, will be deducted in the calculation of the aggregate amount of
Restricted Payments available to be made referred to in clause (3) of the
immediately preceding paragraph.
-72-
<PAGE>
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company and the Guarantors will not,
and will not permit any of their Subsidiaries to, directly or indirectly,
create, assume or suffer to exist any consensual restriction on the ability of
any Subsidiary of the Company to pay dividends or make other distributions to or
on behalf of, or to pay any obligation to or on behalf of, or otherwise to
transfer assets or property to or on behalf of, or make or pay loans or advances
to or on behalf of, the Company or any Subsidiary of the Company, except (a)
restrictions imposed by the Notes or the Indenture, (b) restrictions imposed by
applicable law, (c) existing restrictions under specified Indebtedness
outstanding on the Issue Date, (d) restrictions under any Acquired Indebtedness
not incurred in violation of the Indenture or any agreement relating to any
property, asset, or business acquired by the Company or any of its Subsidiaries,
which restrictions in each case existed at the time of acquisition, were not put
in place in connection with or in anticipation of such acquisition and are not
applicable to any Person, other than the Person acquired, or to any property,
asset or business, other than the property, assets and business so acquired, (e)
any such restriction or requirement imposed by Indebtedness incurred under
paragraph (b) of the definition of "Permitted Indebtedness" provided such
restriction or requirement is no more restrictive than that imposed by the
Credit Agreement as of the Issue Date, (f) restrictions with respect solely to a
Subsidiary of the Company imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary, provided such restrictions apply
solely to the Equity Interests or assets of such Subsidiary which are being
sold, and (g) in connection with and pursuant to permitted refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c) or (d) of this
paragraph that are not more restrictive than those being replaced and do not
apply to any other Person or assets than those that would have been covered by
the restrictions in the Indebtedness so refinanced. Notwithstanding the
foregoing, neither (a) customary provisions restricting subletting or assignment
of any lease entered into in the ordinary course of business, consistent with
industry practice, nor (b) Liens permitted under the terms of the Indenture
shall in and of themselves be considered a restriction on the ability of the
applicable Subsidiary to transfer such agreement or assets, as the case may be.
Limitation on Liens Securing Indebtedness
The Company and the Guarantors will not, and will not permit any of
their Subsidiaries to, create, incur, assume or suffer to exist any Lien of any
kind, other than Permitted Liens, upon any of their respective assets now owned
or acquired on or after the date of the Indenture or upon any income or profits
therefrom (any such Lien, the "Initial Lien"), unless the Company provides, and
causes its Subsidiaries to provide, concurrently therewith, that the Notes are
equally and ratably so secured, provided that, if such Indebtedness is
Subordinated Indebtedness, the Initial Lien securing such Subordinated
Indebtedness shall be subordinate and junior to the Lien securing the Notes with
the same relative priority as such Subordinated Indebtedness shall have with
respect to the Notes. Any such Lien thereby created in favor of the Notes will
be automatically and unconditionally released and discharged upon the release
and discharge of the Initial Lien to which it relates.
Limitation on Sale of Assets and Subsidiary Stock
The Indenture provides that (except as otherwise provided herein) the
Company and the Guarantors will not, and will not permit any of their
Subsidiaries to convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including by merger or
consolidation (in the case of a Guarantor or a Subsidiary of the Company), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Company, whether by the Company or a Subsidiary or through the
issuance, sale or transfer of Equity Interests by a Subsidiary of the Company,
and including any sale and leaseback transaction, in a single transaction or
through a series of related transactions, (any of the foregoing, an "Asset
Sale"), unless (l)(a) within 270 days after the date of such Asset Sale, the Net
Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the
optional redemption of the Notes in accordance with the terms of the Indenture
or to the repurchase of the Notes pursuant to an irrevocable, unconditional cash
offer (the "Asset Sale Offer") to repurchase Notes at a purchase price of 100%
of
-73-
<PAGE>
principal amount (the "Asset Sale Offer Price") together with accrued and unpaid
interest and Liquidated Damages, if any, to the date of payment, made within 240
days of such Asset Sale or (b) within 240 days following such Asset Sale, the
Asset Sale Offer Amount is (i) invested (or committed, pursuant to a binding
commitment subject only to reasonable, customary closing conditions, to be
invested, and in fact is so invested, within an additional 90 days) in assets
and property (other than notes, bonds, obligation and securities, except in
connection with the acquisition of a Wholly Owned Subsidiary) which in the good
faith reasonable judgment of the Board will immediately constitute or be a part
of a Related Business of the Company or such Subsidiary (if it continues to be a
Subsidiary) immediately following such transaction or (ii) used to reduce
Indebtedness permitted pursuant to paragraph (b) of the definition "Permitted
Indebtedness", (2) at least 85% of the total consideration received for such
Asset Sale or series of related Asset Sales consists of Cash or Cash
Equivalents, (3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro forma
basis, to, such Asset Sale, and (4) the Board of Directors of the Company
determines in good faith that the Company or such Subsidiary, as applicable,
receives fair market value for such Asset Sale.
The Indenture provides that an acquisition of Notes pursuant to an
Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds from
Asset Sales not applied to the uses set forth in (l) above (the "Excess
Proceeds") exceeds $5 million and that each Asset Sale Offer shall remain open
for 20 Business Days following its commencement (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, the Company shall apply the
Asset Sale Offer Amount plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Notes properly tendered (on a
pro rata basis if the Asset Sale Offer Amount is insufficient to purchase all
Notes so tendered) at the Asset Sale Offer Price (together with accrued
interest). To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Asset Sale Offer Amount, the Company may
use any remaining Net Cash Proceeds for general corporate purposes as otherwise
permitted by the Indenture and following each Asset Sale Offer the Excess
Proceeds amount shall be reset to zero. For purposes of (2) above, total
consideration received means the total consideration received for such Asset
Sales minus the amount of (a) Indebtedness which is not Subordinated
Indebtedness assumed by a transferee which assumption permanently reduces the
amount of Indebtedness outstanding on the Issue Date or permitted pursuant to
paragraph (d), (e) or (f) of the definition "Permitted Indebtedness" and (b)
property that within 30 days of such Asset Sale is converted into Cash or Cash
Equivalents).
Notwithstanding the foregoing provisions of the prior two paragraphs:
(i) the Company and its Subsidiaries may, in the ordinary course of
business, convey, sell, transfer, assign or otherwise dispose of
inventory acquired and held for resale in the ordinary course of
business;
(ii) the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of accounts receivable and notes receivable
consistent with past practice for face value;
(iii) the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets pursuant to and in accordance with
the covenant "Limitation on Merger, Sale or Consolidation";
(iv) the Company and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary,
as applicable;
(v) the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets to the Company or any of its wholly
owned Guarantors;
(vi) the Company and its Subsidiaries may grant Liens not prohibited by
this Indenture; and
-74-
<PAGE>
(vii) the Company and its Subsidiaries may convey, sell, transfer, assign
or otherwise dispose of assets having a value of $1 million or less
in a single transaction or a series of related transactions.
All Net Cash Proceeds from an Event of Loss shall be invested in the
business of the Company, used for prepayment of Indebtedness, or used to
repurchase Notes, all within the period and as otherwise provided above in
clause 1(a) or 1(b) of the first paragraph of this section.
In addition to the foregoing, the Company will not, and will not permit any
Subsidiary to, directly or indirectly make any Asset Sale of any of the Equity
Interests of any Subsidiary except (i) pursuant to an Asset Sale of all the
Equity Interests of such Subsidiary or (ii) pursuant to an Asset Sale of shares
of common stock of TES with no preferences or special rights or privileges and
with no redemption or prepayment privileges, provided that after such sale the
Company or its Subsidiaries own at least 50% of the voting and economic interest
of the Capital Stock of TES.
Notwithstanding the foregoing provisions, the Company or TES may contribute
all or substantially all the assets or Equity Interests of TES to a joint
venture in which the Company or its Subsidiaries own no less than 50% of the
voting and economic interests.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the terms hereof, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations hereunder by virtue thereof.
Limitation on Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Subsidiaries
will be permitted on or after the Issue Date to enter into or suffer to exist
any contract, agreement, arrangement or transaction with any Affiliate (an
"Affiliate Transaction"), or any series of related Affiliate Transactions,
(other than Exempted Affiliate Transactions) (i) unless it is determined that
the terms of such Affiliate Transaction are fair and reasonable to the Company,
and no less favorable to the Company than could have been obtained in an arm's
length transaction with a non-Affiliate, and (ii) if involving consideration to
either party in excess of $2.5 million, unless such Affiliate Transaction(s) is
evidenced by an Officers' Certificate addressed and delivered to the Trustee
certifying that such Affiliate Transaction (or Transactions) has been approved
by a majority of the members of the Board of Directors that are disinterested in
such transaction and (iii) if involving consideration to either party in excess
of $5 million, unless in addition the Company, prior to the consummation
thereof, obtains a written favorable opinion as to the fairness of such
transaction to the Company from a financial point of view from an accounting,
appraisal or investment banking firm of national reputation. A member of the
Board of Directors of the Company that is a non-employee director of LSB will be
deemed disinterested for purposes of this covenant. For purposes of compliance
with clauses (ii) and (iii) above, total consideration for a series of related
Affiliate Transactions involving purchases or sales entered into in the ordinary
course of business will only include purchases or sales made in the last twelve
months ended on the date of the most recent purchase.
Limitation on Merger, Sale or Consolidation
The Indenture provides that the Company will not, directly or indirectly,
consolidate with or merge with or into another Person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons or adopt a Plan of Liquidation,
unless (i) either (a) the Company is the continuing entity or (b) the resulting,
surviving or transferee entity or, in the case of a Plan of Liquidation, the
entity which receives the greatest value from such Plan of Liquidation is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Notes
-75-
<PAGE>
and the Indenture; (ii) no Default or Event of Default shall exist or shall
occur immediately after giving effect on a pro forma basis to such transaction;
(iii) immediately after giving effect to such transaction on a pro forma basis,
the Consolidated Net Worth of the resulting, surviving or transferee entity or,
in the case of a Plan of Liquidation, the entity which receives the greatest
value from such Plan of Liquidation is at least equal to the Consolidated Net
Worth of the Company immediately prior to such transaction; and (iv) immediately
after giving effect to such transaction on a pro forma basis, the resulting,
surviving or transferee entity or, in the case of a Plan of Liquidation, the
entity which receives the greatest value from such Plan of Liquidation would
immediately thereafter be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock."
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or consummation of a Plan of Liquidation in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made or, in the case of a Plan of Liquidation, the entity which receives the
greatest value from such Plan of Liquidation shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if such successor corporation had been
named therein as the Company, and the Company shall be released from the
obligations under the Notes and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
Limitation on Lines of Business
The Indenture provides that neither the Company nor any of its Subsidiaries
shall directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of the Company, is a Related Business.
Future Subsidiary Guarantors
The Indenture provides that all present Subsidiaries (except for EDNC) and
future Subsidiaries of the Company jointly and severally will guaranty
irrevocably and unconditionally all principal, premium, if any, and interest and
Liquidated Damages, if any, on the Notes on a senior basis.
Release of Guarantors
The Indenture provides that no Guarantor shall consolidate or merge with or
into (whether or not such Guarantor is the surviving Person) another Person
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form reasonably satisfactory to the Trustee, pursuant
to which such Person shall unconditionally guarantee, on a senior basis, all of
such Guarantor's obligations under such Guarantor's guarantee and the Indenture
on the terms set forth in the Indenture; and (ii) immediately before and
immediately after giving effect to such transaction on a pro forma basis, no
Default or Event of Default shall have occurred or be continuing.
Upon the sale or disposition (whether by merger, stock purchase, asset sale
or otherwise) of a Guarantor or all or substantially all of its assets to an
entity which is not a Guarantor, which transaction is otherwise in compliance
with the Indenture (including, without limitation, the provisions of the
covenant "Limitations on Sale of Assets and Subsidiary Stock"), such Guarantor
will be deemed released from its obligations under its Guarantee of the Notes;
-76-
<PAGE>
provided, however, that any such termination shall occur only to the extent that
all obligations of such Guarantor under all of its guarantees of, and under all
of its pledges of assets or other security interests which secure, any
Indebtedness of the Company or any other Subsidiary shall also terminate upon
such release, sale or transfer.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Subsidiaries from being
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act.
Limitation on Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into any sale and leaseback
transaction unless (a) immediately after giving pro forma effect to such sale
and leaseback transaction (the Attributable Value of such sale and leaseback
transaction being deemed to be Indebtedness of the Company, if not otherwise
treated so pursuant to the definition of Indebtedness), the Company could incur
at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio
set forth in the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock" and (b) such sale and leaseback transaction
complies with the covenant "Limitation on Sale of Assets and Subsidiary Stock."
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture, the Notes or the Guarantees unless such consideration is offered to
be paid or agreed to be paid to all holders of the Notes who so consent, waive
or agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement, which solicitation documents will be
mailed to all Holders of the Notes a reasonable amount of time prior to the
expiration of such solicitation.
LSB Note
In accordance with the terms of the Indenture, the Promissory Note, dated
November 26, 1997 (the "LSB Note"), representing the $10 million of proceeds of
the Offering loaned to LSB (i) bears interest at the rate of 10/3//4%, payable
semiannually on June 1 and December 1 of each year commencing June 1, 1998, (ii)
matures on December 1, 2007, (iii) is prepayable at par at any time prior to
maturity, (iv) is mandatorily prepayable with 50% of the net cash proceeds (net
of associated liabilities and expenses), within 30 days of the receipt of net
cash proceeds, from the sale of assets of LSB or its subsidiaries other than the
Company or subsidiaries of the Company (subject to certain customary exceptions
(including sales of inventory, accounts receivable and obsolete equipment),
currency exchangeability and transferability restrictions and an exception for
sales of assets having a value of $500,000 or less in a single transaction or
through a series of related transactions) to the extent that such net cash
proceeds are not used to prepay other senior indebtedness which requires such
prepayment under its terms, and (v) provides that the note may not be amended by
the Company without the consent of a majority aggregate principal amount of the
Notes then outstanding. The LSB Note will be a senior unsecured obligation of
LSB and will rank pari passu in right of payment will all existing and future
senior indebtedness of LSB.
REPORTS
The Indenture provides that, whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee, to each Holder and to each prospective Holder who
so requests annual and quarterly financial statements substantially equivalent
to financial statements that
-77-
<PAGE>
would have been included in reports filed with the Commission, if the Company
were subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, in each case, a management's discussion and analysis of financial
condition and results of operations and, with respect to annual information
only, a report thereon by the Company's certified independent public
accountants. In addition, the Company has agreed that it will file such reports
with the Commission, whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, provided the Commission
will accept such filings.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as:
(i) the failure by the Company to pay any installment of interest or
Liquidated Damages on the Notes as and when the same becomes due
and payable and the continuance of any such failure for 30 days,
(ii) the failure by the Company to pay all or any part of the principal,
or premium, if any, on the Notes when and as the same becomes due
and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, payment of the Change of Control
Purchase Price or the Asset Sale Offer Price, or otherwise,
(iii) the failure by the Company or any Subsidiary to observe or perform
any other covenant or agreement contained in the Notes or the
Indenture and the continuance of such failure for a period of 30
days after written notice is given to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes outstanding,
(iv) certain events of bankruptcy, insolvency or reorganization in
respect of the Company or any of its Subsidiaries,
(v) a default in Indebtedness of the Company or any of its Subsidiaries
with an aggregate principal amount in excess of $5 million at any
one time (a) resulting from the failure to pay principal or
interest or (b) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity, and
(vi) final unsatisfied judgments not covered by insurance aggregating in
excess of $5 million, at any one time rendered against the Company
or any of its Subsidiaries and not stayed, bonded or discharged
within 60 days.
The Indenture provides that if a Default occurs and is continuing, the
Trustee must, within 90 days after the occurrence of such Default, give to the
Holders notice of such Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above, relating to the Company or any
Subsidiary), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
25% in aggregate principal amount of the Notes then outstanding, by notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and premium, if any,
determined as set forth below, and accrued interest and Liquidated Damages, if
any, thereon to be due and payable immediately. If an Event of Default specified
in clause (iv), above, relating to the Company or any Subsidiary occurs, all
principal and premium, if any, and accrued interest and Liquidated Damages, if
any, thereon will be immediately due and payable on all outstanding Notes
without any declaration or other act on the part of Trustee or the Holders. The
Holders of a majority in aggregate principal amount of Notes generally are
authorized to rescind such acceleration if all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and interest and
Liquidated Damages on the Notes which have become
-78-
<PAGE>
due solely by such acceleration, have been cured or waived, except on default
with respect to any provision requiring a supermajority approval to amend, which
default may only be waived by such a supermajority.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 1, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to December 1, 2002, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a default
with respect to any provision requiring a supermajority approval to amend, which
default may only be waived by such a supermajority, and except a default in the
payment of principal of or interest on any Note not yet cured or a default with
respect to any covenant or provision which cannot be modified or amended without
the consent of the Holder of each outstanding Note affected. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable security or indemnity. Subject to
all provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Company is required, upon
becoming aware of any default or Event of Default, to deliver to the Trustee a
statement specifying such default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations and the obligations of the Guarantors discharged
with respect to the outstanding Notes ("Legal Defeasance"). Such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented, and the Indenture shall cease to be of
further effect as to all outstanding Notes and Guarantees, except as to (i)
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due from the trust
funds; (ii) the Company's obligations with respect to such Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and money
for security payments held in trust; (iii) the rights, powers, trust, duties,
and immunities of the Trustee, and the Company's obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including nonpayment, nonpayment of
guarantees, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. legal tender, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
such Notes on the stated date for payment thereof or on the redemption date of
such principal or installment of
-79-
<PAGE>
principal of, premium, if any, or interest or Liquidated Damages, if any, on
such Notes, and the Holders of Notes must have a valid, perfected, exclusive
security interest in such trust; (ii) in the case of the Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to Trustee confirming that (A) the Company has
received from, or there has been published by the Internal Revenue Service, a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of such Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the Holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a default
under, the Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of such Notes over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; and (vii) the Company
shall have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that the conditions precedent provided for in, in the case
of the Officers' Certificate, clauses (i) through (vi) and, in the case of the
opinion of counsel, clauses (i) (with respect to the validity and perfection of
the security interest), (ii), (iii) and (v) of this paragraph have been complied
with.
If the funds deposited with the Trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
and interest on the Notes when due, then the obligations of the Company under
the Indenture will be revived and no such defeasance will be deemed to have
occurred.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company, the Guarantors
and the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the Holders of
not less than a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, the Guarantors and the Trustee are permitted to amend
or supplement the Indenture or any supplemental indenture or modify the rights
of the Holders; provided that no such modification may without the consent of
Holders of at least 66 2/3% in aggregate principal amount of Notes at the time
outstanding modify the provisions (including the defined terms used therein) of
the covenant "Repurchase of Notes at the Option of the Holder upon a Change of
Control" and "Limitation on Sale of Assets and Subsidiary Stock" in a manner
adverse to the Holders and provided that no such modification may, without the
consent of each Holder affected thereby (i) change the Stated Maturity on any
Note, or reduce the principal amount thereof or the rate (or extend the time for
payment) of interest thereon or any premium payable upon the redemption thereof,
or change the place of payment where, or the coin or currency in which, any Note
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer
Price or alter the provisions (including the defined terms used therein)
regarding the right of the Company to redeem the Notes in a manner adverse to
the Holders, or (ii) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding Note
affected thereby, or (iv) cause the Notes or any Guarantee to become subordinate
in right of payment to any other Indebtedness.
-80-
<PAGE>
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company, the
Guarantors or any successor entity shall have any personal liability in respect
of the obligations of the Company or the Guarantors under the Indenture or the
Notes by reason of his or its status as such stockholder, employee, officer or
director, except to the extent such Person is the Company or a Guarantor.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will be issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Global Notes; Book-Entry Form. Except as set forth in the next paragraph,
the New Notes will initially be issued in the form of one or more global notes
(collectively, the "Global Note"). The Global Note will be deposited upon
issuance (the "Closing Date") with the trustee as custodian for The Depository
Trust Company, New York, New York ("DTC") and registered in the name of Cede &
Co. ("Cede") as DTC's nominee.
Notes that were issued as described below under "Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Such Certificated Securities may, unless the Global
Note has previously been exchanged for Certificated Securities, the exchange by
a qualified institutional buyer for an interest in the Global Note representing
the principal amount of Notes being transferred.
An investor may hold its interests in the Global Note directly through DTC
if such investor is a participant in DTC, or indirectly through organizations
which are participants in DTC (the "Participants"). Transfers between
Participants will be effected in the ordinary way in accordance with DTC rules
and will be settled in same-day funds. The laws of some states require that
certain Persons take physical delivery of securities in definitive form.
Consequently, the ability to transfer a beneficial interest in the Global Note
to such Person may be limited.
Investors who are not Participants may beneficially own interests in the
Global Note held by DTC only through Participants, or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). So long as Cede, as nominee of DTC, is the registered
owner of the Global Note, Cede for all purposes will be considered the sole
holder of the Global Note. Except as provided below, owners of beneficial
interests in the Global Note will not be entitled to have certificates
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form, and will not be considered holders
thereof.
Payment of principal, redemption price and purchase price of, and interest
on the Global Note will be made to Cede, the nominee for DTC, as the registered
owner of the Global Note by wire transfer of immediately available funds. None
of the Company, the Trustee or any paying agent will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the Global Note or for maintaining,
supervising, or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment of
principal, redemption price and purchase price of, and interest on the Global
Note, DTC's practice is to credit Participants' accounts on the payment date
therefor with payments in amounts proportionate to their respective beneficial
interests in the Notes represented by the Global Note, as shown on the records
of DTC, unless DTC has reason to believe that it will not receive payment on
such payment date. Payments by Participants to owners of beneficial interests in
Notes represented by the Global Note held through such Participants will be the
responsibility of such Participants, as is now the case with securities held for
the accounts of customers registered in "street name."
-81-
<PAGE>
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Person
having a beneficial interest in Notes represented by the Global Note to pledge
such interest to Persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such interest, may be affected by the
lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar or paying agent under
the Indenture) will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations. DTC has advised the Company
that it will take any action permitted to be taken by a holder of Notes only at
the direction of one or more Participants to whose account with DTC interests in
the Global Note are credited and only in respect of the principal amount of the
Notes represented by the Global Note as to which such Participant or
Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchaser. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants of DTC, they are
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause Notes to be issued in
definitive form in exchange for the Global Note. None of the Company, the
Trustee or any of their respective agents will have any responsibility for the
performance by DTS, their Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial ownership interests in Global
Note.
Certificated Securities. An investor may request that their Note be issued
in certificated form, and may request at any time that their interest in a
Global Note be exchanged for a Note in certificated form. Finally, certificated
Notes may be issued in exchange for Notes represented by the Global Note if no
successor depositary is appointed by the Company or in certain other
circumstances set forth in the Indenture.
Same-Day Settlement and Payment. The Indenture requires that payments in
respect of the Notes represented by the Global Note (including principal,
redemption price, purchase price and interest) be made by wire transfer of
immediately available funds to the accounts specified by Cede, the nominee for
DTC. With respect to certificated securities, the Company will make all payments
of principal, redemption price, purchase price and interest by wire transfer of
immediately available funds to the accounts specified by the holders thereof or,
if no such account is specified, by mailing a check to each such holder's
registered address. Secondary trading in long-term Notes and debentures of
corporate issuers not held in DTC is generally settled in clearing-house or
next-day funds. In contrast, the New Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL Market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the certificated securities will also be settled in
immediately available funds.
-82-
<PAGE>
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Holders of a majority in principal amount
of the then outstanding Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that in case of
Event of Default will occur (which will not be cured), the Trustee will be
required, in the exercise of its power, to use the same degree of care and skill
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder will have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any Person existing at the time such Person becomes a Subsidiary of the Company,
including by designation, or is merged or consolidated into or with the Company
or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or
substantially all the assets of any Person by any other Person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided that, with respect to ownership interest in the Company
and its Subsidiaries a Beneficial Owner of 10% or more of the total voting power
normally entitled to vote in the election of directors, managers or trustees, as
applicable, shall for such purposes be deemed to constitute control.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof, including any period for which such lease has been, or
may, at the option of the lessor, be extended, discounted from the last date of
such term to the date of determination at a rate per annum equal to the discount
rate which would be applicable to a Capitalized Lease Obligation with a like
term in accordance with GAAP. The net amount of rent required to be paid under
any lease for any such period shall be the aggregate amount of rent payable by
the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and similar charges. "Attributable Value" means, as to a Capitalized Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the discounted present value of
the rental obligations of such Person, as lessee, required to be capitalized on
the balance sheet of such Person in conformity with GAAP.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" has the meaning attributed to it
in Rules l3d-3 and l3d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "Person" shall be deemed to have
-83-
<PAGE>
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Capitalized Lease Obligation" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person, as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million and (iii) commercial paper issued by others rated at
least A-1 or the equivalent thereof by Standard & Poor's Corporation or at least
P-1 or the equivalent thereof by Moody's Investors Service, Inc., and in the
case of each of (i), (ii), and (iii) maturing within one year after the date of
acquisition.
"Consolidated Cash Flow" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person for such period adjusted to add
thereto (to the extent deducted in determining Consolidated Net Income), without
duplication, the sum of (i) consolidated income tax expense, (ii) consolidated
depreciation and amortization expense, provided that consolidated depreciation
and amortization of a Subsidiary that is a less than Wholly Owned Subsidiary
shall only be added to the extent of the equity interest of the Company in such
Subsidiary, (iii) other non-cash charges of the Company and its Subsidiaries
reducing Consolidated Net Income for such period, (iv) Consolidated Fixed
Charges and (v) any premium or penalty paid by the Company or any of its
Subsidiaries to prepay indebtedness as described in "Use of Proceeds."
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated Cash Flow of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such Person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such Person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided, that for purposes of
such calculation, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified
Capital Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebtedness) shall be
assumed to have occurred on the first day of such Reference Period, and (iv) the
Consolidated Fixed Charges of such Person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a pro forma basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless such
Person or any of its Subsidiaries is a party to an Interest Swap or Hedging
Obligation (which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the interest rate
on the date of computation, in which case such rate (whether higher or lower)
shall be used.
-84-
<PAGE>
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such Person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees owed with respect to bankers' acceptances
and letters of credit financings and currency and Interest Swap and Hedging
Obligations, in each case to the extent attributable to such period, and (b) the
amount of dividends accrued or payable (or guaranteed) by such Person or any of
its Consolidated Subsidiaries in respect of preferred stock (other than by
Subsidiaries of such Person to such Person or such Person's Wholly Owned
Subsidiaries). For purposes of this definition, interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any capital stock), (b) the net income, if positive, of any Person, other
than a Wholly Owned Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the amount of
any dividends or distributions actually paid in cash to such Person or a Wholly
Owned Consolidated Subsidiary of such Person during such period, but in any case
not in excess of such Person's pro rata share of such Person's net income for
such period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (d)
the net income, if positive, of any of such Person's Consolidated Subsidiaries
to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Consolidated
Subsidiary.
"Consolidated Net Worth" of any Person at any date means the aggregate
consolidated stockholders' equity of such Person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude, to the extent included in calculating such
equity, (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such Person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such Person or a Consolidated Subsidiary of such Person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in Persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
"Credit Agreement" means each of (i) the credit agreement dated November
21, 1997, by and among certain of the Company's subsidiaries and BankAmerica
Business Credit, Inc., and (ii) the credit agreement, dated December 19, 1996,
as amended, between TES and Bank of New Zealand, Australia, including, in each
case, any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, as such credit agreement and/or
related documents may be amended, restated, supplemented, renewed, replaced or
otherwise modified from time to time whether or not with the same agent,
trustee, representative lenders or holders, and, subject to the proviso to the
next succeeding sentence, irrespective of any changes in the terms and
conditions thereof. The credit agreement described under clause (i) of this
definition may be secured by accounts receivable, inventory, proprietary rights,
general intangibles, books and records and the proceeds thereof and under clause
(ii) of this definition may be secured by all the assets of TES. Without
limiting the generality of the foregoing, the term "Credit Agreement" shall
-85-
<PAGE>
include agreements in respect of Interest Swap and Hedging Obligations with
lenders party to the Credit Agreement and shall also include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any Credit Agreement and all refundings, refinancings and
replacements of any Credit Agreement, including any agreement (i) extending the
maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii)
adding or deleting borrowers or guarantors thereunder, so long as borrowers and
issuers include one or more of the Company and its Subsidiaries and their
respective successors and assigns, (iii) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder, provided that on the
date such Indebtedness is incurred it would not be prohibited by paragraph (b)
of the definition "Permitted Indebtedness," or (iv) otherwise altering the terms
and conditions thereof in a manner not prohibited by the terms hereof.
"Default" means any event, occurrence or condition that is or with the
passage of time or the giving of notice or both would be an Event of Default.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, any Equity Interest of such Person that, by its terms or
by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such Person or any of its Subsidiaries, in whole or in part,
on or prior to the Stated Maturity of the Notes and (b) with respect to any
Subsidiary of such Person (including with respect to any Subsidiary of the
Company), any Equity Interest other than any common equity with no preference,
privileges, or redemption or repayment provisions.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Excluded Person" means any of (i) Jack E. Golsen, his immediate family or
a trust or similar entity existing for his benefit or for the benefit of his
immediate family or any Person controlled directly or indirectly by him or his
immediate family or (ii) with respect to the Company, LSB.
"Exempted Affiliate Transaction" means (a) customary employee compensation
arrangements approved by a majority of disinterested (as to such transactions)
members of the Board of Directors of the Company, (b) dividends or distributions
permitted under the terms of the covenant discussed above under "Limitation on
Restricted Payments" above and payable, in form and amount, on a pro rata basis
to all holders of Common Stock of the Company, (c) transactions solely between
the Company and any of its Subsidiaries or solely among Subsidiaries of the
Company, (d) any payments to LSB pursuant to the Management Agreement, the
Services Agreement and the Tax Sharing Agreement, each as in effect on the date
hereof, (e) any purchase of goods or services from Affiliates who are in turn
purchasing such goods or services on an arm's length basis from unaffiliated
third parties and reselling them to the Company and any of its Subsidiaries at
their actual cost and (f) any transactions as in effect on the Issue Date as
described in "Certain Relationships and Related Transactions--IEC Lease," "--
Guaranty of Loans," "--Revolving Credit Facility" and "--Affiliate Loans."
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
-86-
<PAGE>
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such any Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except trade payables incurred in the ordinary course of its business, (iv)
evidenced by bankers' acceptances or similar instruments issued or accepted by
banks, (v) relating to any Capitalized Lease Obligation, or (vi) evidenced by a
letter of credit or a reimbursement obligation of such Person with respect to
any letter of credit; (b) all net obligations of such Person under Interest Swap
and Hedging Obligations; (c) all liabilities and obligations of others of the
kind described in the preceding clause (a) or (b) that such Person has
guaranteed or that is otherwise its legal liability or which are secured by any
assets or property of such Person; and (d) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of, or
amendments, modifications or supplements to, any liability of the kind described
in any of the preceding clauses (a), (b) or (c), or this clause (d), whether or
not between or among the same parties; and (e) all Disqualified Capital Stock of
such Person (measured at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends). For purposes hereof,
the "maximum fixed repurchase price" of any Disqualified Capital Stock which
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Capital Stock as if such Disqualified Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value to be determined in good faith by the board of directors of the
issuer (or managing general partner of the issuer) of such Disqualified Capital
Stock.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such Person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
Person; (b) the making by such Person of any deposit with, or advance, loan or
other extension of credit to, such other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension (but excluding accounts
receivable or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of the Company or any Guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," the entering into by such Person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Company of any person to be an
Unrestricted Subsidiary. The Company shall be deemed to make an Investment in an
amount equal to the fair market value of the net assets of any subsidiary (or,
if none of the Company or its Subsidiaries has theretofore made an Investment in
such subsidiary, in an amount equal to the Investments being made), at the time
that such subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall
be deemed an Investment valued at its fair market value at the time of such
transfer, provided, however, if in any such case such fair market value exceeds
$2 million, such determination of fair market value shall be based upon an
opinion or appraisal by an accounting, appraisal or investment banking firm of
national standing.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
-87-
<PAGE>
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Net Cash Proceeds" means the aggregate amount of Cash or Cash Equivalents
received by the Company in the case of a sale of Qualified Capital Stock and by
the Company and its Subsidiaries in respect of an Asset Sale plus, in the case
of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible or
exchangeable debt) of the Company that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and convertible
or exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and expenses (including, without limitation, the fees and expenses
of legal counsel and investment banking fees and expenses) incurred in
connection with such Asset Sale or sale of Qualified Capital Stock, and, in the
case of an Asset Sale only, less the amount (estimated reasonably and in good
faith by the Company) of income, franchise, sales and other applicable taxes
required to be paid by the Company or any of its respective Subsidiaries in
connection with such Asset Sale.
"Permitted Indebtedness" means any of the following:
(a) the Company and the Guarantors may incur Indebtedness evidenced by the
Notes and represented by the Indenture up to the amounts specified
therein as of the date thereof;
(b) the Company and the Guarantors may incur Indebtedness pursuant to the
Credit Agreement (including any Indebtedness issued to refinance,
refund or replace such Indebtedness) provided that the aggregate
principal amount of such Indebtedness outstanding at any time does not
exceed the greater of (i) $50 million (less, with respect to this
clause (i) only, the amount of any such Indebtedness retired with the
Net Cash Proceeds from any Asset Sale or assumed by a transferee in an
Asset Sale) or (ii) the sum of 85% of accounts receivable that are not
more than 90 days past due and 60% of inventories, determined in
accordance with GAAP, plus, in each case, accrued interest and such
additional amounts as may be deemed to be outstanding in the form of
Interest Swap and Hedging Obligations with lenders party to the Credit
Agreement or affiliates of such lenders;
(c) the Company and the Guarantors, as applicable, may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital
Stock, as applicable, described in clause (a) of this definition,
incurred under the Debt Incurrence Ratio test of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock," or which is outstanding on the Issue Date so long as
such Refinancing Indebtedness is secured only by the assets that
secured the Indebtedness so refinanced;
(d) the Company and the Guarantors may incur Indebtedness representing
Capitalized Lease Obligations in an aggregate amount incurred on or
after the Issue Date and outstanding at any one time (including any
Indebtedness issued to refinance, replace, or refund such
Indebtedness) of up to $5 million, provided that this clause (d) shall
not limit the ability of the Company to refinance outstanding
Indebtedness pursuant to clause (c);
(e) the Company and the Guarantors may incur other Indebtedness not
otherwise permitted pursuant to this definition in an aggregate amount
outstanding at any one time (including any Indebtedness issued to
refinance, replace, or refund such Indebtedness) of up to $10 million;
(f) the Company and the Guarantors may incur Purchase Money Indebtedness
(including any Indebtedness issued to refinance, replace or refund
such Indebtedness), provided, that (i) the aggregate amount of such
Indebtedness incurred on or after the Issue Date and outstanding at
any one
-88-
<PAGE>
time pursuant to this paragraph (f) shall not exceed $2.5 million, and
(ii) in each case, such Indebtedness shall not constitute more than
100% of the cost (determined in accordance with GAAP) to the Company
or such Guarantor, as applicable, of the property so purchased or
leased, provided that this clause (f) shall not limit the ability of
the Company to refinance outstanding Indebtedness pursuant to clause
(c);
(g) the Company and the Guarantors may incur Indebtedness solely in
respect of performance, surety or appeal bonds, workers compensation
claims, payment obligations in connection with self insurance and
other similar requirements (to the extent that such incurrence does
not result in the incurrence of any obligation to repay any obligation
relating to borrowed money of others), all in the ordinary course of
business in accordance with customary industry practices, in amounts
and for the purposes customary in the Company's industry;
(h) the Company may incur Indebtedness to any Wholly Owned Subsidiary, and
any Wholly Owned Subsidiary may incur Indebtedness to any other Wholly
Owned Subsidiary or to the Company; provided that, in the case of
Indebtedness of the Company, such obligations shall be unsecured and
the date of any event that causes such Subsidiary to no longer be a
Wholly Owned Subsidiary shall be an Incurrence Date;
(i) the Company and its Subsidiaries may incur Indebtedness arising from
the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business (provided, however, that such
Indebtedness is extinguished within five business days of notification
of incurrence) or from endorsement of instruments for deposit in the
ordinary course of business; and
(j) the Company and its Subsidiaries may suffer to exist Indebtedness
outstanding on the Issue Date.
"Permitted Investment" means (a) Investments in any of the Notes; (b)
Investments in Cash Equivalents; (c) Investments in intercompany notes to the
extent permitted under clause (h) of the definition of "Permitted Indebtedness";
(d) any Investment in a Person in a Related Business, which, after such
Investment, becomes a Subsidiary of the Company and a Guarantor of the Notes;
(e) Investments in the form of a contribution of all or substantially all the
assets or Equity Interests of TES to a joint venture in which the Company or its
Subsidiaries own no less than 50% of the economic and voting interests; and (f)
other Investments not to exceed $2 million.
"Permitted Lien" means (a) Liens created in connection with the incurrence
of Indebtedness under the Credit Agreement, as described in the definition
"Credit Agreement", regardless of whether such Indebtedness is incurred under
clause (b) of the definition "Permitted Indebtedness" or the Debt Incurrence
Ratio, and Liens incurred in connection with the incurrence of Indebtedness
under Capitalized Lease Obligations and Purchase Money Indebtedness, to the
extent permitted by clause (d) or (f), whichever is applicable, of the
definition "Permitted Indebtedness"; (b) Liens existing on the Issue Date; (c)
Liens imposed by governmental authorities for taxes, assessments or other
charges not yet subject to penalty or which are being contested in good faith
and by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (d) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (e) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(f) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Company or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Company or any
-89-
<PAGE>
of its Subsidiaries; (g) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto; (h) pledges or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security legislation; (i) Liens
securing the Notes; (j) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Subsidiary or is merged with or into the Company or a
Subsidiary or Liens securing Indebtedness incurred in connection with an
Acquisition, provided that such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any assets other than those acquired; (k) leases
or subleases granted to other Persons in the ordinary course of business not
materially interfering with the conduct of the business of the Company or any of
its Subsidiaries or materially detracting from the value of the relative assets
of the Company or any Subsidiary; (l) Liens arising from precautionary Uniform
Commercial Code financing statement filings regarding operating leases entered
into by the Company or any of its Subsidiaries in the ordinary course of
business; and (m) Liens securing Refinancing Indebtedness incurred to refinance
any Indebtedness that was previously so secured in a manner no more adverse to
the Holders of the Notes than the terms of the Liens securing such refinanced
Indebtedness provided that the Indebtedness secured is not increased and the
Lien is not extended to any additional assets or property.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
"Public Equity Offering" means an underwritten offering of Common Stock of
the Company for cash pursuant to an effective registration statement under the
Securities Act.
"Purchase Money Indebtedness" means any Indebtedness of such Person to any
seller or other Person incurred to finance the acquisition (including in the
case of a Capitalized Lease Obligation, the lease) of any real or personal
tangible property which, in the reasonable good faith judgment of the Board of
Directors of the Company, is directly related to a Related Business of the
Company and which is incurred substantially concurrently with such acquisition
and is secured only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the Company
issued on or after the Issue Date with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of Qualified Capital Stock or any
exchange of Qualified Capital Stock for any Capital Stock or Indebtedness of the
Company issued on or after the Issue Date.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person for which financial information in respect thereof is
available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, replace, discharge or otherwise retire for value, in whole or in
part, or (b) constituting an amendment, modification or supplement to, or a
deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"),
any Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of (i) reasonable and customary fees and expenses incurred in
connection with the Refinancing and (ii) any premium or penalty for prepayment
provided for in the instrument governing the Indebtedness so refinanced or
reasonably determined by the Board of Directors of the Company as necessary to
accomplish such Refinancing by means of a tender offer or privately negotiated
transaction) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the
-90-
<PAGE>
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, that (A) such Refinancing Indebtedness of any
Subsidiary of the Company shall only be used to refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) such
Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the Notes than was the Indebtedness or
Disqualified Capital Stock to be refinanced and (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness or Disqualified Capital Stock to be so
refinanced.
"Related Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses.
"Restricted Payment" means, with respect to any Person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such Person or any parent or Subsidiary of such Person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for value
of Equity Interests of such Person or any Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially concurrent sale of, or
in exchange for, Refinancing Indebtedness, any purchase, redemption, or other
acquisition or retirement for value of, any payment in respect of any amendment
of the terms of or any defeasance of, any Subordinated Indebtedness, directly or
indirectly, by such Person or a parent or Subsidiary of such Person prior to the
scheduled maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such Indebtedness and (d) any Investment by
such Person, other than a Permitted Investment; provided, however, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on or with respect to Equity Interests of an issuer to the extent
payable solely in shares of Qualified Capital Stock of such issuer; or (ii) any
dividend, distribution or other payment to the Company, or to any of its Wholly
Owned Subsidiaries, by the Company or any of its Subsidiaries.
"Stated Maturity," when used with respect to any Note, means December 1,
2007.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment to the Notes or such
Guarantee, as applicable, in any respect or has a stated maturity on or after
the Stated Maturity.
"Subsidiary," with respect to any Person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, (ii) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such Person or a Subsidiary of such Person is,
at the time, a general partner. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be a Subsidiary of the Company or of any Subsidiary of the
Company. Unless the context requires otherwise, Subsidiary means each direct and
indirect Subsidiary of the Company.
"Unrestricted Subsidiary" means any subsidiary of the Company that does not
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that shall be designated an
Unrestricted Subsidiary by the Board of Directors of the Company; provided that
(i) such subsidiary shall not engage, to any substantial extent, in any line or
lines of business activity other than a Related Business, (ii) neither
immediately prior thereto nor after giving pro forma effect to such designation
would there exist a Default or Event of Default and (iii) immediately after
giving pro forma effect thereto, the Company could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio contained in the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock." The Board of Directors of the Company may designate any Unrestricted
-91-
<PAGE>
Subsidiary to be a Subsidiary, provided, that (i) no Default or Event of Default
is existing or will occur as a consequence thereof and (ii) immediately after
giving effect to such designation, on a pro forma basis, the Company could incur
at least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio contained
in the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." Each such designation shall be evidenced by filing
with the Trustee a certified copy of the resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by the Company or one or more wholly owned Subsidiaries of the
Company.
DESCRIPTION OF OTHER INDEBTEDNESS
REVOLVING CREDIT FACILITY
LSB, certain subsidiaries of LSB that are not subsidiaries of the Company,
and certain subsidiaries of the Company are parties to a $65 million Revolving
Credit Facility. The Revolving Credit Facility is evidenced by one loan
agreement for the Company's subsidiaries that are parties thereto and separate
loan agreements for LSB and its other subsidiaries that are not subsidiaries of
the Company.
Under the terms of the Revolving Credit Facility, subsidiaries of the
Company may borrow up to $65 million on a revolving basis subject to limitations
based on (i) 85% of the amount of eligible receivables and 60% of the amount of
eligible inventory of such subsidiaries and (ii) the aggregate amount of
borrowings under the Revolving Credit Facility by LSB and certain subsidiaries
that are not subsidiaries of the Company. Under the Revolving Credit Facility,
LSB and certain subsidiaries of LSB that are not subsidiaries of the Company
have the right to borrow on a revolving basis up to $24 million. Any amounts so
borrowed by LSB and its subsidiaries that are not subsidiaries of the Company
will reduce the amount that the subsidiaries of the Company may borrow at any
one time under the Revolving Credit Facility. The Revolving Credit Facility, as
it relates to the subsidiaries of the Company, is secured by the accounts
receivable, inventory, proprietary rights, general intangibles, books and
records and proceeds thereof. All of the obligations under the Revolving Credit
Facility, including those of the Company's subsidiaries, are guaranteed and
cross-collateralized with certain assets by LSB. The Company has guaranteed only
the obligations of its subsidiaries under the Revolving Credit Facility, and
neither the Company nor its subsidiaries that are parties to the Revolving
Credit Facility have guaranteed the obligations of LSB and other subsidiaries of
LSB that are not subsidiaries of the Company under the Revolving Credit
Agreement. In addition, a default by LSB and its other subsidiaries that are not
subsidiaries of the Company under the Revolving Credit Facility will not be
considered a default of the Company's subsidiaries under the Revolving Credit
Facility. The agreement terminates on December 31, 2000, subject to automatic
renewal for terms of 13 months each thereafter, unless terminated by either
party.
Borrowings under the Revolving Credit Facility bear an annual rate of
interest at a floating rate based on the lender's prime rate plus 1.5% per annum
or, at LSB's option, on the lender's LIBOR rate plus 3.875% per annum (which
rates are subject to increase or reduction upon achieving specified availability
and adjusted tangible net worth, as defined).
The Revolving Credit Facility requires the Company to maintain certain
financial ratios (including adjusted tangible net worth and debt ratios), limits
the amount of capital expenditures, and contains other covenants which restrict,
among other things, (i) the incurrence of additional debt (other than as allowed
under the loan agreements); (ii) the payment of dividends and other
distributions in respect of capital stock of the Company; (iii) the making of
certain investments; (iv) certain mergers, acquisitions and dispositions; (v)
the issuance of secured guarantees; (vi) the granting of certain liens; and
(vii) prepayment of debt (including the Notes).
-92-
<PAGE>
Events of default under the Revolving Credit Facility include, among other
things, for both the Company or borrower (i) the failure to make payments of
principal, interest, and fees, when due; (ii) the inaccuracy of any
representation and warranty when made; (iii) the failure to perform covenants
contained therein; (iv) the occurrence of a change in control of LSB if any
party is or becomes the beneficial owner of more than 50% of the total voting
securities of LSB, except for Jack E. Golsen or members of his immediate family;
(v) default under any material agreement or instrument (other than an agreement
or instrument evidencing the lending of money) which would have a material
adverse effect on the Company or its subsidiaries which are borrowers under the
Revolving Credit Facility, taken as a whole; (vi) a default under any other
agreement relating to borrowed money exceeding certain limits; and (vii)
customary bankruptcy or insolvency defaults.
The Company used a portion of the proceeds from the Initial Offering to
repay a substantial portion of the unpaid principal and accrued interest due by
certain of its subsidiaries under their previous revolving credit facility. See
"Use of Proceeds." The Company intends to continue to borrow, from time to time,
under the Revolving Credit Facility as the Company may deem appropriate to
finance the working capital requirements of the Company and its subsidiaries.
DSN LOANS
DSN Corporation ("DSN"), a subsidiary of the Company, borrowed from an
unrelated lender approximately $18.8 million, which loans have an unpaid
balance, as of November 30, 1997, of approximately $13.7 million ("DSN Loans").
DSN has used the loan proceeds to acquire and/or construct assets for the
Chemical Business, including certain assets which are part of the Chemical
Business' El Dorado Facility. The proceeds of the DSN Loan were used to (i) buy
the assets relating to, and construct at, the Chemical Business' existing El
Dorado Facility, the DSN Plant, operated as part of the Chemical Business' El
Dorado Facility; (ii) construct the Wilmington Plant; and, (iii) purchase ten
rail cars ("10 Rail Cars"). Under the terms of the DSN Loan, DSN has granted to
the lender a lien, mortgage and security interest in and to (a) the DSN Plant,
including (i) the Ground Lease between DSN (as lessee) and Northwest Financial
Corporation ("Northwest"), a subsidiary of the Company (as lessor), in which DSN
leased approximately five acres of land at the El Dorado Facility, on which the
DSN Plant is located; (ii) the DSN Plant Ground Sublease between DSN (as lessor)
and EDC (as lessee), leasing to EDC the rights of DSN under the DSN Plant Ground
Lease; and (iii) the DSN Plant Equipment Lease between DSN (as lessor) and EDC
(as lessee), leasing to EDC the DSN Plant and the equipment now or hereafter
located at the DSN Plant or relating to the DSN Plant; (b) the Wilmington Plant,
including (i) the Wilmington Plant Equipment Lease between DSN (as lessor) and
EDC (as lessee), leasing to EDC the Wilmington Plant and the equipment located
thereon, (ii) the Wilmington Plant Ground Lease between DSN (as lessee) and an
unaffiliated corporation (as lessor), in which DSN leases approximately 10,000
square feet of land in North Carolina on which the Wilmington Plant is located,
(iii) the Wilmington Plant Land Sublease between DSN (as lessor) and EDC (as
lessee), leasing to EDC the rights of DSN under the Wilmington Plant Ground
Lease; (c) the 10 Rail Cars, including the Rail Car Lease between DSN (as
lessor) and EDC (as lessee), leasing to EDC the 10 Rail Cars, (d) general
intangibles, (e) equipment used in connection with, or in the conduct of, DSN's
business relating to the DSN Plant and the Wilmington Plant, (f) Consulting
Agreements between DSN and EDC whereby EDC has agreed to pay to DSN certain
amounts for providing consulting work for EDC, (g) proceeds relating to the
above, and (h) books and records of DSN regarding the above.
The DSN Loans are each for a term of seven years commencing in 1995, with
the DSN Loans bearing an annual rate of interest ranging from 8.2% to 8.9% per
annum. Principal and interest on the DSN Loans are payable monthly. The DSN
Loans contain covenants (i) requiring maintenance of an escalating tangible net
worth of the Company, (ii) restricting distributions and dividends by DSN to the
Company to 50% of DSN's annual net income, (iii) restricting a change of control
of the Company and (iv) requiring maintenance of a debt to tangible net worth
ratio. The payment and performance of the DSN Loans are unconditionally
guaranteed by the Company. Each DSN Loan is subject to cross-collateralization
provisions with respect to the other DSN Loans. See "Business--Chemical
Business--DSN Plant."
-93-
<PAGE>
TES REVOLVING FACILITY
TES, the Australian subsidiary of the Company, has an AUS$8.5 million
(approximately US$5.8 million) revolving credit facility (the "TES Revolving
Facility"), which is evidenced by a loan agreement (the "TES Revolving Facility
Agreement") with Bank of New Zealand, Australia ("BNZA"). Based on the effective
exchange rate at November 30, 1997, approximately US$3.3 million (AUS$4.9
million) was borrowed under this facility. The TES Revolving Facility is secured
by a first lien on the assets, rights, and undertakings of TES and the wholly
owned subsidiaries of TES, T.E.S. Mining Services, Pty. Ltd. ("TES Mining") and
Total Energy Systems (NZ), Ltd. ("TES (NZ)"). In addition, LSB, TES Mining, and
TES (NZ) each unconditionally guarantee payment under the TES Revolving
Facility.
Borrowings under the TES Revolving Facility bear varying rates of interest,
which had a weighted average of 7.1% at November 30, 1997. The TES Revolving
Facility does not have a stated term but is reviewed periodically by BNZA, which
reserves the right to continue the TES Revolving Facility at BNZA's discretion
on terms and conditions satisfactory to BNZA following the periodic review. TES
is currently negotiating with BNZA to increase the limit on borrowings under the
TES Revolving Facility to AUS$11.0 million (approximately US$7.5 million). TES
anticipates that if the TES Revolving Facility is so amended, future borrowings
under the TES Revolving Facility will be subject to terms similar to existing
terms. There can be no assurance that the limit on borrowings under the TES
Revolving Facility will be increased.
The TES Revolving Facility Agreement (i) requires TES to maintain certain
financial ratios, (ii) limits the incurrence of additional debt (other than as
expressly allowed), (iii) requires the trade debt of EDC to be subordinated to
the TES Revolving Facility, and (iv) restricts dividends and other distributions
on TES' capital stock. TES is in technical non-compliance with a certain
financial covenant contained in the loan agreement involving the TES Revolving
Facility. However, this covenant was not met at the time of closing of this loan
and BNZA has continued to extend credit under the TES Revolving Facility. The
outstanding borrowing under the TES Revolving Facility at September 30, 1997,
has been classified as due within one year in the accompanying consolidated
financial statements.
The Company used a portion of the proceeds from the Initial Offering to
reduce the amounts owing by TES under the TES Revolving Facility. See "Use of
Proceeds." The Company has maintained the TES Revolving Facility in place and
intends to continue to borrow, from time to time, under the terms thereof as TES
or the Company may deem appropriate to finance the working capital requirements
of TES and its subsidiaries. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
TES CAPITALIZED LEASES
TES has secured borrowings under a number of capitalized lease agreements
with various lenders (the "TES Capitalized Leases"). Under the terms thereof,
TES may, from time to time, lease equipment to be used in its business. TES has
the right to purchase the equipment under the Purchase Agreements for an amount
equal to the balance originally payable under the Purchase Agreement less
certain rebate amounts. Until purchased by TES, the equipment acquired by TES
remains the property of the lender. Each TES Capitalized Lease is for a term of
five years and is payable in monthly payments with the outstanding principal
balance due under the TES Capitalized Leases as of November 30, 1997, being
approximately US$2.2 million.
IEC AND CM EQUIPMENT FINANCING
CM is a party to five Equipment Purchase and Security Agreements, each
dated February 1994, pursuant to which CM financed the purchase price of certain
equipment totaling $2 million (the "CM Equipment Financing"). Each of the
foregoing Equipment Purchase and Security Agreements (a) provides for the
repayment of the purchase price over
-94-
<PAGE>
a term of five years at an interest rate of 8.5% and (b) is secured by the
related equipment. As of November 30, 1997, the outstanding principal balance of
the CM Equipment Financing is approximately $590,000
Under a loan agreement dated July 1997, IEC financed $587,000, being the
purchase price of certain equipment over a term of four years at an interest
rate of 10% per annum (the "IEC Equipment Financing"). Such loan is secured by
the equipment so purchased and has an outstanding principal balance as of
November 30, 1997, of approximately $536,000. Under a loan agreement dated March
1995, IEC financed $1.5 million, being the purchase price of certain equipment,
for a term of five years at a variable interest rate equal to the 30-day
commercial paper rate plus 2.45% per annum, which loan has an outstanding
principal balance as of November 30, 1997, of approximately $700,000. Each of
the foregoing loans is secured by the equipment purchased with the proceeds of
such loan. In addition, IEC has leased certain equipment under a lease-purchase
agreement, dated April 1996, which provides for the payment of $960,000 over a
term of five years at an interest rate of approximately 7%, in which LSB
guaranteed the payment of such lease payments, and has an outstanding principal
balance of $614,000 as of November 30, 1997.
CM LOAN
In July 1989, CM entered into a loan agreement (the "CM Loan") with the
Oklahoma County Financing Authority ("OCFA"), whereby the OCFA loaned to CM $2
million. The loan is due on August 1, 2004, and bears interest at a variable
rate equal to 3% plus the current rate under the State of Oklahoma $10 million
Taxable General Industrial Finance Bonds, Series P, with the minimum rate being
10% and the maximum rate being equal to the highest Oklahoma statutory rate. The
loan is secured by a mortgage on all of CM's interest in the lease covering CM's
facility in Oklahoma City, Oklahoma, and certain equipment located on such
property. LSB has unconditionally guaranteed the repayment of such loan. As of
November 30, 1997, the outstanding principal balance of this loan was
approximately $1.3 million.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary view,
and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders (including insurance companies,
tax exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends
that each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Old Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
THE EXCHANGE
The Company believes that the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because the New Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a
holder will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to
holders exchanging Old Notes for New Notes pursuant to the Exchange Offer.
THE NEW NOTES
Interest Payments on the New Notes. The Old Notes and the New Notes are
debt for Federal income tax purposes. The Old Notes were not issued with
original issue discount. The stated interest on the Initial Notes and New
-95-
<PAGE>
Notes should be considered to be "qualified stated interest" and, therefore,
will be includible in a holder's gross income (except to the extent attributable
to accrued interest at the time of purchase) as ordinary interest income for
federal income tax purposes in accordance with a holder's tax method of
accounting. If Liquidated Damages are paid (in addition to the accrual of
interest) on the Old Notes as described above under "The Exchange Offer; Purpose
and Effect of the Exchange Offer" such Liquidated Damages payments generally
should be includable in the Holder's gross income as ordinary income when such
payment is made.
Tax Basis. A holder's adjusted tax basis (determined by taking into account
accrued interest at the time of purchase) in a New Note received in exchange for
an Old Note will equal the cost of the Old Note to such holder, increased by the
amounts of market discount previously included in income by the holder and
reduced by any principal payments received by such holder with respect to the
New Notes and by amortized bond premium. A holder's adjusted tax basis in a New
Note purchased by such holder will be equal to the price paid for such New Note
(determined by taking into account accrued interest at the time of purchase),
increased by market discount previously included in income by the holder and
reduced by any principal payments received by such holder with respect to a New
Note and by amortized bond premium. See "Market Discount and Bond Premium"
below.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of a
New Note, a holder will recognize taxable gain or loss, if any, equal to the
difference between the amount realized on the sale, exchange or retirement and
such holder's adjusted tax basis in such New Note. Such gain or loss will be a
capital gain or loss (except to the extent of any accrued market discount), and
will be a (i) mid-term capital gain or loss if the New Note has been held for
more than 12 months but not more than 18 months at the time of such sale,
exchange or retirement, or (ii) long-term capital gain or loss if the New Note
has been held more than 18 months at the time of such sale, exchange or
retirement.
Market Discount and Bond Premium. Holders should be aware that the market
discount provisions of the Code may affect the New Notes. These rules generally
provide that a holder who purchases New Notes for an amount which is less than
their principal amount will be considered to have purchased the New Notes at a
"market discount" equal to the amount of such difference. Such holder will be
required to treat any gain realized upon the disposition of the New Note as
interest income to the extent of the market discount that is treated as having
accrued during the period that such holder held such New Note, unless an
election is made to include such market discount in income on a current basis. A
holder of a New Note who acquires the New Note at a market discount and who does
not elect to include market discount in income on a current basis may also be
required to defer the deduction of a portion of the interest on any indebtedness
incurred or continued to purchase or carry the New Note until the holder
disposes of such New Note in a taxable transaction.
If a holder's tax basis in a New Note immediately after acquisition exceeds
the stated redemption price at maturity of such New Note, such holder may be
eligible to elect to deduct such excess as amortizable bond premium pursuant to
Section 171 of the Code.
Purchasers of the New Notes should consult their own tax advisors as to the
application to such purchasers of the market discount and bond premium rules.
HOLDERS OF THE OLD NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR DISPOSING OF THE
OLD NOTES AND THE NEW NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN SUCH FEDERAL TAX LAWS.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that a holder or
other person who receives New Notes, whether or not such person is the holder
(other
-96-
<PAGE>
than a person that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who receives New Notes in exchange for Old Notes
in the ordinary course of business, and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes, will be allowed to resell
the New Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the New Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff or the Commission enunciated in such no-action letters
or any similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each Participating Broker-Dealer that receives New Notes
for its own account in exchange for Old Notes must acknowledge that it will
deliver a Prospectus in connection with any resale of such New Notes. The
Company has agreed that for a period of 180 days after the consummation of the
Exchange Offer, it will make this prospectus, as amended and supplemented,
available to any participating broker-dealer for use in connection with any such
resale. In addition, until ___________________, 1998 (90 days from the date of
this Prospectus), all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) any New Notes received by such
holder in the Exchange Offer will be acquired in the ordinary course of its
business; (ii) such holder has no arrangement or understanding with any person
to participate in the distribution of the New Notes within the meaning of the
Securities Act or resale of the New Notes in violation of the Securities Act;
(iii) if such holder is not a broker-dealer, that is not engaged in, and does
not intend to engage in, the distribution of the New Notes; (iv) if such holder
is a broker-dealer that will receive the New Notes for its own account in
exchange for Notes that were acquired as a result of market making or other
trading activities, that it will deliver a prospectus, as required by law, in
connection with any resale of such New Notes, (v) if such holder is an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act applicable to it. However, the Company has
not sought, and does not intend to seek, its own no-action letter, and there can
be no assurance that the Staff of the Commission would make a similar
determination with respect to the Exchange Offer. As indicated above, each
Participating Broker-Dealer that receives a New Note for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
The Company will not receive any proceeds from any sales of the New Notes
by Participating Broker-Dealers. New Notes received by Participating Broker-
Dealers for their own accounts pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the New Notes
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of such New Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days from the consummation of the Exchange Offer, the
Company will send a reasonable number of additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any Participating Broker-
Dealer that requests such documents in the Letter of Transmittal. The Company
will pay all the expenses incident to the Exchange Offer (which will not include
the expenses of any holder in connection with resales of the New Notes). The
Company has agreed to indemnify the holders of Old Notes, including any
Participating Broker-Dealer in the Exchange Offer, against certain liabilities,
including liabilities under the Securities Act.
-97-
<PAGE>
The Initial Purchaser has advised the Company that it currently intends to
make a market in the New Notes but is not obligated to do so and may discontinue
any such market-making at any time without notice. Accordingly, no assurance
can be given that an active trading market will develop for, or as to the
liquidity of, the New Notes.
The Initial Purchaser or its affiliates have provided and may in the future
provide investment banking or other financial services to LSB, the Company and
their affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the New Notes and Guarantees will be passed upon for the
Company by Conner & Winters, A Professional Corporation, Oklahoma City,
Oklahoma. The authorization, execution and delivery of the Guarantees (i) with
respect to Australian and New Zealand laws relating to the respective Guarantees
of TES, TES Mining and TES (NZ) will be passed upon by Corrs Chambers Westgarth,
Brisbane, Australia; with respect to Canadian law relating to the Guarantee of
Climate Mate, Inc. will be passed upon by McLean & Kerr, Toronto, Canada; and
with respect to the laws of the United Kingdom relating to the Guarantee of The
Environmental Group International Limited will be passed upon by Clyde & Co.,
London, England. Irwin H. Steinhorn, a shareholder and director of Conner &
Winters, owns 6,250 shares of LSB's common stock.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996,
and 1995, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement and the related
financial statement schedule appearing in the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing herein and/or in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
-98-
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Report of Independent Auditors ....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997 (unaudited) ....... F-3
Consolidated Statements of Operations and Retained Earnings for the years ended December 31, 1994,
1995 and 1996 and for the nine months ended September 30, 1996 and 1997 (unaudited) ................. F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and for
the nine months ended September 30, 1996 and 1997 (unaudited) ....................................... F-5
Notes to Consolidated Financial Statements ........................................................... F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ClimaChem, Inc.
We have audited the accompanying consolidated balance sheets of ClimaChem,
Inc. as of December 31, 1995 and 1996, and the related consolidated statements
of operations and retained earnings and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ClimaChem, Inc. at December 31, 1995 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Oklahoma City, Oklahoma
November 21, 1997,
except as it relates to paragraphs (A) and (C) of Note 6, as to which the date
is
November 26, 1997
F-2
<PAGE>
CLIMACHEM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------
1995 1996 1997
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets (Note 6):
Cash and cash equivalents .................................. $ 2,412 $ 1,109 $ 1,843
Trade accounts receivable, less allowance for doubtful
accounts of $1,424 in 1995, $1,296 in 1996 and $1,511 in
1997 ....................................................... 32,583 38,538 41,325
Inventories (Note 4) ....................................... 30,487 37,306 36,533
Supplies and prepaid items ................................. 4,309 6,232 6,792
Current deferred income taxes .............................. 357 1,307 1,307
-------- -------- --------
Total current assets ....................................... 70,148 84,492 87,800
Property, plant and equipment, net (Notes 5 and 6) .......... 68,681 82,676 83,501
Due from LSB and affiliates, net (Note 3) ................... -- -- 3,574
Other assets, net of allowance for doubtful accounts and
accumulated amortization of $4,897 in 1995, $6,209 in 1996
and $6,829 in 1997 ......................................... 7,890 6,586 7,366
-------- -------- --------
$146,719 $173,754 $182,241
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $ 20,345 $ 32,908 $ 25,979
Accrued liabilities ........................................ 5,440 8,609 7,599
Current portion of long-term debt (Note 6) ................. 14,437 10,825 13,522
-------- -------- --------
Total current liabilities .................................. 40,222 52,342 47,100
Due to LSB and affiliates, net (Note 3) ..................... 5,015 7,817 --
Long-term debt (Note 6) ..................................... 64,522 71,763 93,331
Commitments and contingencies (Note 9)
Deferred income taxes (Note 7) .............................. 8,285 8,989 9,347
Stockholders' equity (Notes 6 and 8):
Common stock, $.10 par value; 500,000 shares authorized,
10,000 shares issued ....................................... 1 1 1
Capital in excess of par value ............................. 12,652 12,652 12,652
Cumulative translation adjustment .......................... 278 276 (582)
Retained earnings .......................................... 15,744 19,914 20,392
-------- -------- --------
Total stockholders' equity ................................. 28,675 32,843 32,463
-------- -------- --------
$146,719 $173,754 $182,241
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
CLIMACHEM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales ................................. $201,486 $220,743 $255,285 $195,447 $200,369
Other income .............................. 414 798 333 40 509
-------- -------- -------- -------- --------
201,900 221,541 255,618 195,487 200,878
Costs and expenses:
Cost of sales ............................. 158,617 172,858 207,828 158,085 161,685
Selling, general and administrative ....... 27,745 30,344 33,122 24,254 28,004
Interest .................................. 6,150 7,185 6,247 4,532 6,587
-------- -------- -------- -------- --------
192,512 210,387 247,197 186,871 196,276
-------- -------- -------- -------- --------
Income before provision for income taxes ... 9,388 11,154 8,421 8,616 4,602
Provision for income taxes (Note 7) ........ 3,939 5,255 2,668 2,929 1,821
-------- -------- -------- -------- --------
Net income ................................. 5,449 5,899 5,753 5,687 2,781
Retained earnings at beginning of period ... 8,588 11,552 15,744 15,744 19,914
Dividends to parent ........................ (2,485) (1,707) (1,583) (1,870) (2,303)
-------- -------- -------- -------- --------
Retained earnings at end of period ......... $ 11,552 $ 15,744 $ 19,914 $ 19,561 $ 20,392
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
CLIMACHEM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
--------- --------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income ............................................ $ 5,449 $ 5,899 $ 5,753 $ 5,687 $ 2,781
Adjustments to reconcile net income to net cash
provided (used) by operations:
Depreciation, depletion and amortization:
Property, plant and equipment ........................ 5,214 5,794 6,707 4,804 5,479
Other ................................................ 923 901 719 540 559
Provision for losses:
Trade accounts receivable ............................ 971 756 280 70 137
Notes receivable ..................................... -- -- 1,015 1,015 --
Environmental matters ................................ 450 -- 100 100 --
Deferred income tax provision (credit) ............... 898 265 (246) 186 358
Loss (gain) on sales of assets ....................... (17) -- (20) -- 273
Cash provided (used) by changes in assets and
liabilities:
Trade accounts receivable ............................ (567) (4,161) (6,235) (9,512) (3,894)
Inventories .......................................... (7,405) 904 (6,819) (775) 773
Supplies and prepaid items ........................... (764) (288) (1,923) (1,725) (560)
Accounts payable ..................................... 5,525 (1,384) 12,563 9,533 (6,929)
Accrued liabilities .................................. (531) 1,468 3,069 (370) (1,010)
-------- -------- -------- ------- --------
Net cash provided (used) by operations ................ 10,146 10,154 14,963 9,553 (2,033)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .................................. (13,983) (15,929) (18,554) (6,312) (5,990)
Proceeds from sales of equipment ...................... 383 136 36 -- --
Decrease (increase) in other assets ................... (398) (341) (432) 271 (1,227)
-------- -------- -------- ------- --------
Net cash used by investing activities ................. (13,998) (16,134) (18,950) (6,041) (7,217)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term and other debt .................. (7,123) (7,570) (9,716) (8,253) (23,839)
Long-term and other borrowings ........................ 12,750 6,336 12,644 12,000 50,000
Net change in revolving debt facilities ............... 31,237 8,654 (1,463) 600 (2,483)
Net change in due to LSB and affiliates ............... (10,685) 2,522 2,802 (5,061) (11,391)
Net change in receivable financing previously provided
by an affiliate ...................................... (20,640) -- -- -- --
Dividends paid to parent .............................. (2,485) (1,707) (1,583) (1,870) (2,303)
-------- -------- -------- ------- --------
Net cash provided (used) by financing activities ...... 3,054 8,235 2,684 (2,584) 9,984
-------- -------- -------- ------- --------
Net increase (decrease) in cash and cash equivalents .. (798) 2,255 (1,303) 928 734
Cash and cash equivalents at beginning of period ...... 955 157 2,412 2,412 1,109
-------- -------- -------- ------- --------
Cash and cash equivalents at end of period ............ $ 157 $ 2,412 $ 1,109 $ 3,340 $ 1,843
======== ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
1. BASIS OF PRESENTATION
ClimaChem, Inc. (the "Company"), a wholly-owned subsidiary of LSB
Industries, Inc. ("LSB" or "Parent"), was organized under the laws of the State
of Oklahoma in October 1997. The Company's Certificate of Incorporation
authorizes the issuance of 500,000 shares of $.10 par value common stock. Prior
years' authorized, issued and outstanding shares of common stock in the
accompanying consolidated financial statements reflect this issuance as though
it occurred at the earliest period presented. The Company is a holding company
which maintains operations through various wholly-owned subsidiaries. The
Company owns, through its subsidiaries, a substantial portion, but not all, of
the operations comprising the Chemical Business and Climate Control Business as
previously owned by LSB. Prior to November 21, 1997, all of the Company's
subsidiaries were wholly-owned subsidiaries of LSB, directly or through one or
more intermediaries, and were contributed to the Company, following its
formation, by LSB or other subsidiaries in exchange for all of the outstanding
common stock of the Company. These exchanges have been accounted for as a
reorganization of entities under common control and, accordingly, reflect LSB's
and its subsidiaries' historical cost of such subsidiaries and net assets.
Accordingly, the consolidated financial statements of ClimaChem, Inc. and its
subsidiaries for all periods reflect this reorganization in a manner similar to
a pooling of interests.
The consolidated financial statements include the accounts of ClimaChem,
Inc. and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated in the accompanying financial statements.
The Company has historically had significant transactions with LSB and its
subsidiaries which are reflected in the accompanying financial statements on the
basis established between the Company and LSB and its subsidiaries. See Notes 3,
7 and 9.
2. ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash, overnight funds and interest bearing deposits with maturities when
purchased by the Company of 90 days or less.
F-6
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
2. ACCOUNTING POLICIES--(CONTINUED)
Supplemental cash flow information includes:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -----------------
1994 1995 1996 1996 1997
------ ------- ------ -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash payments for interest and income taxes:
Interest on long-term debt and other............ $6,056 $7,450 $8,259 $6,314 $6,613
Income taxes:
Paid to state taxing authorities.............. 529 188 263 238 101
Paid to Parent................................ 1,591 840 3,500 1,475 1,013
Noncash financing and investing activities--
Long-term debt issued for property, plant and
equipment...................................... 4,886 2,398 2,165 280 587
</TABLE>
Inventories
Inventory is priced at the lower of cost or market, with cost being
determined using the first-in, first-out (FIFO) basis, except for certain heat
pump products with a value of $5,981,000, $8,595,000 and $9,814,000 at December
31, 1995, 1996 and September 30, 1997, respectively, which are priced at the
lower of cost or market, with cost being determined using the last-in, first-out
(LIFO) basis. The difference between the LIFO basis and current cost is not
material at December 31, 1995 or 1996 or September 30, 1997.
Depreciation
For financial reporting purposes, depreciation, depletion and amortization
is primarily computed using the straight-line method over the estimated useful
lives of the assets.
Excess of Purchase Price Over Net Assets Acquired
The excess of purchase price over net assets acquired totaling $4,059,834,
$3,677,375 and $3,364,769, net of accumulated amortization, of $2,903,602,
$3,286,061 and $3,598,667 at December 31, 1995 and 1996 and September 30, 1997,
respectively, is included in other assets and is being amortized by the
straight-line method over periods of 10 to 22 years. The carrying value of the
excess of purchase price over net assets acquired is reviewed (using estimated
future net cash flows, including expected proceeds from disposal) if the facts
and circumstances indicate that it may be impaired. No impairment provisions
were required in 1994, 1995, 1996 or the nine months ended September 30, 1997.
F-7
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
2. ACCOUNTING POLICIES--(CONTINUED)
Income Taxes
Taxable income of the Company is included in the consolidated federal
income tax return of LSB. The provision for or benefit from income taxes is
calculated as if the Company filed a separate federal income tax return. To the
extent a state or other taxing jurisdiction requires or permits a consolidated,
combined, or unitary tax return to be filed, and such return includes the
Company, the principles expressed with respect to consolidated federal income
tax allocation shall apply.
Deferred income taxes result from the Company having different bases for
financial and income tax reporting principally from utilizing different lives
for income taxes purposes than for financial reporting purposes.
Research and Development Costs
Costs incurred in connection with product research and development are
expensed as incurred. Such costs amounted to $557,000, $479,000 and $514,000 for
the years ended December 31, 1994, 1995 and 1996 and $407,000 and $305,000 for
the nine months ended September 30, 1996 and 1997, respectively.
Advertising Costs
Costs incurred in connection with advertising and promotion of the
Company's products are expensed as incurred. Such costs amounted to $982,000,
$898,000 and $893,000 for the years ended December 31, 1994, 1995 and 1996 and
$667,000 and $775,000 for the nine months ended September 30, 1996 and 1997,
respectively.
Capitalized Interest
Interest costs of $491,000, $1,357,000 and $2,405,000 related to the
construction of a new nitric acid plant were capitalized for the years ended
December 31, 1994, 1995 and 1996 and $1,762,000 and $1,113,000 for the nine
months ended September 30, 1996 and 1997, respectively, and are being amortized
over the related plant's estimated useful life.
Translation of Foreign Currency
Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the fiscal year end
exchange rate. The related translation adjustments are recorded as cumulative
translation adjustments, a separate component of shareholders' equity. Revenues
and expenses are translated using average exchange rates prevailing during the
year.
Hedging
In 1997, the Company entered into an interest rate forward agreement to
effectively fix the interest rate on a long-term lease commitment to become
effective August 1998 (not for trading purposes). The Company accounts for this
agreement under the deferral method, whereby the net gain or loss upon
settlement will serve to adjust the item being hedged, the minimum lease rentals
in periods commencing with the lease execution. If the necessary correlation
(generally a correlation coefficient of between 80% and 125%) ceases, the
differential between the market value and the carrying value will be recognized
in operations as a gain or loss. Under the interest rate forward agreement, the
F-8
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
2. ACCOUNTING POLICIES--(CONTINUED)
Company is the fixed rate payor on notional amounts aggregating $50 million with
a weighted average interest rate of 7.12%. The agreement requires a net
settlement on maturity in August 1998, of which an unrelated third party is
contractually obligated for 50%. As of September 30, 1997, the financial
instruments' fair value (which is not reflected on the accompanying balance
sheet), net to the Company's 50% interest, represented a liability of
approximately $1.2 million. A change in the settlement index (the ten year U.
S. Treasury bond) of .25% will change the fair value of the hedge agreement by
approximately $350,000, net to the Company's interest.
Unaudited Financial Statements
The accompanying unaudited financial statements include all adjustments,
consisting of normal, recurring accruals, which the Company considers necessary
for a fair presentation of the financial position and the results of operations
for the indicated periods. The results of operations for the nine months ended
September 30, 1997, are not necessarily indicative of the results to be expected
for the full year ending December 31, 1997.
3. TRANSACTIONS WITH RELATED PARTIES
On November 21, 1997, the Company and LSB entered into a services agreement
(the "Services Agreement") pursuant to which LSB will continue to provide to
the Company various services, including financial and accounting, order entry,
billing, credit, payable, insurance, legal, human resources, advertising and
marketing, and related administrative and management services, that LSB has
historically provided to the operations and businesses of the Company. The
Company will pay to, or reimburse, LSB for the costs and expenses incurred by
LSB in the performance of the Services Agreement.
Under the terms of the Services Agreement, the Company will pay to, or
reimburse, LSB for the value of the office facilities of LSB, including LSB's
principal offices and financial accounting offices utilized in the performance
of the Services Agreement. LSB will determine the proportionate usage of such
facilities by LSB and the Company, and the Company will pay to, or reimburse,
LSB for its proportionate share of such usage.
The Services Agreement provides that LSB will permit employees of the
Company and its subsidiaries to continue to participate in the benefit plans and
programs sponsored by LSB. The Company will pay to, or reimburse, LSB for the
costs associated with participation by the employees of the Company and LSB's
benefit plans and programs.
Charges for such services aggregate $1,800,000 for each of the years ended
December 31, 1994, 1995 and 1996 and $1.4 million for each of the nine-month
periods ended September 30, 1996 and 1997. Management of the Company believes
these charges from LSB reasonably approximate additional general and
administrative costs which would have been incurred if the Company had been an
independent entity during such periods.
The Company also leases the facilities of one of its Climate Control
manufacturing subsidiaries from an affiliate under an operating lease. See Note
9. Rental expense associated with the lease was $447,000 in each of the years
1994, 1995 and 1996.
On November 21, 1997, LSB and the Company entered into a management
agreement (the "Management Agreement"), which provides that in future periods
LSB will provide to the Company, managerial oversight and
F-9
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
3. TRANSACTIONS WITH RELATED PARTIES-CONTINUED
guidance concerning the broad policies, strategic decisions and operations of
the Company and the subsidiaries and the rendering of such further managerial
assistance as deemed reasonably necessary by LSB. Under the Management
Agreement, the Company is to pay LSB a fee for such services which will not
exceed $1.8 million annually. The fee will be paid quarterly based upon the
excess of actual earnings before interest, income taxes, depreciation and
amortization ("EBITDA") for the quarter minus $6,500,000, not to exceed
$450,000. If at the end of the calendar year, EBITDA is less than $26 million,
management fees paid to LSB during the year shall be refunded to the Company for
the first three quarters of the year, not to exceed $1,350,000. The maximum
management fee amount to be paid to LSB by the Company will be increased
annually commensurate with the percentage increase, if any, in the Consumer
Price Index during the preceding calendar year, beginning January 1, 1998.
The Company has, at various times, maintained certain unsecured borrowings
from LSB and its subsidiaries and made loans to LSB which generally bear
interest. At December 31, 1996, net amounts due to LSB and its subsidiaries
aggregated $7.8 million. At September 30, 1997, the Company had loans to LSB of
approximately $22.9 million and borrowings from LSB and its affiliates of
approximately $19.3 million. The Company and LSB expect to repay substantially
all amounts owed to each other in 1997.
Interest on loans and intercompany borrowings with LSB and its affiliates
generally approximate 7% per annum. Interest expense on net borrowings from LSB
and affiliates was approximately $378,000, $62,000 and $338,000 for the years
ended December 31, 1994, 1995 and 1996 and $120,000 and interest income of
$86,000 for the nine months ended September 30, 1996 and 1997, respectively. The
estimated fair value of the net amounts due to LSB and affiliates at December
31, 1995 and 1996 approximated their carrying value.
4. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
FINISHED
(OR PURCHASED) WORK-IN- RAW
GOODS PROCESS MATERIALS TOTAL
-------------- -------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995:
Climate Control products............ $ 2,477 $1,153 $ 5,835 $ 9,465
Chemical products................... 6,914 6,787 7,321 21,022
------- ------ ------- -------
Total............................ $ 9,391 $7,940 $13,156 $30,487
======= ====== ======= =======
December 31, 1996:
Climate Control products............ $ 2,732 $2,376 $ 8,125 $13,233
Chemical products................... 8,735 6,252 9,086 24,073
------- ------ ------- -------
Total............................ $11,467 $8,628 $17,211 $37,306
======= ====== ======= =======
September 30, 1997:
Climate Control products............ $ 2,775 $3,045 $ 8,805 $14,625
Chemical products................... 7,458 4,306 10,144 21,908
------- ------ ------- -------
Total............................ $10,233 $7,351 $18,949 $36,533
======= ====== ======= =======
</TABLE>
F-10
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and improvements.................................... $ 1,368 $ 1,368 $ 1,340
Buildings and improvements............................... 7,965 8,259 7,836
Machinery, equipment and automotive...................... 94,304 114,474 122,203
Furniture and fixtures................................... 2,314 2,358 2,614
-------- -------- --------
105,951 126,459 133,993
Less accumulated depreciation............................ (37,270) (43,783) (50,492)
-------- -------- --------
$ 68,681 $ 82,676 $ 83,501
======== ======== ========
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-----------------
1995 1996 1997
------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Secured revolving credit facility with interest at a base rate of a
certain bank plus a specified percentage (9.42% aggregate rate
at December 31, 1996) (A) (D) ............................................ $36,349 $35,061 $ 30,698
Secured loans with interest payable quarterly at rates indicated (B)
(D):
10.415% to 12.72% term loans ............................................. 10,688 5,542 --
Revolving credit facility at a base rate of a certain bank plus
a specified percentage (10.5% at December 31, 1996) .................... 3,750 1,944 --
Secured loan with interest payable monthly (C) ............................. 15,728 13,855 12,335
Secured loan due in monthly installments of principal and interest
through July 31, 2003, interest at a rate equal to the ''three-
month adjusted LIBOR rate plus 4.25%'' (9.75% at December 31,
1996) (D) ................................................................ -- 11,820 --
Secured term loan due in quarterly installments of $833,332 plus
interest through April 1, 2004 (D):
10.57% fixed rate term loan ............................................ -- -- 24,583
Term loan with floating rate equal to ''The Wall Street Jour-
nal LIBOR rate'' plus 4.20% periodically adjusted
(10.35% for the period ended September 30, 1997) ..................... -- -- 24,583
Other, with interest at rates of 7.5% to 12.25%, most of which is
secured by machinery and equipment ....................................... 12,444 14,366 14,654
------- ------- --------
78,959 82,588 106,853
Less current portion of long-term debt ..................................... 14,437 10,825 13,522
------- ------- --------
Long-term debt due after one year .......................................... $64,522 $71,763 $ 93,331
======= ======= ========
</TABLE>
F-11
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
6. LONG-TERM DEBT (CONTINUED)
____________________
(A) In December 1994, LSB and certain of its subsidiaries (the ''Borrowing
Group'') and a bank entered into a series of asset-based revolving credit
facilities based upon defined eligible assets. The agreement provided for an
initial term of three years. In October 1997, LSB and certain subsidiaries
amended the agreement, revising certain financial covenants and extending
the term to at least October 1998. In November 1997, the Company amended the
agreement conditioned upon, among other things, completion of a senior note
offering to raise at least $100 million. See Note 12. The Amended Agreement
provides for a $65 million revolving credit facility (the ''Revolving Credit
Facility'') with four separate loan agreements (the ''Credit Facility
Agreement''), one for the subsidiaries of the Company and three for LSB and
its subsidiaries which are not subsidiaries of the Company. Under the
Revolving Credit Facility, LSB and certain subsidiaries of LSB that are not
subsidiaries of the Company have a right to borrow on a revolving basis, up
to $24 million. Any amounts borrowed by LSB and its subsidiaries that are
not subsidiaries of the Company will reduce the amount that the subsidiaries
of the Company may borrow at any one time under the Revolving Credit
Facility. Borrowings under the Revolving Credit Facility bear an annual rate
of interest at a floating rate based on the lender's prime rate plus 1.5%
per annum or, at the Company's option, on the lender's LIBOR rate plus
3.875% per annum (which rates are subject to increase or reduction upon
achieving specified availability and adjusted tangible net worth, as
defined). The agreement will terminate on December 31, 2000, subject to
automatic renewal for terms of 13 months each, unless terminated by either
party. The Credit Facility Agreement also requires the payment of an annual
facility fee equal to 0.5% of the unused Revolving Credit Facility. The
Company may terminate the Revolving Credit Facility prior to maturity;
however, should the Company do so, it would be required to pay a termination
fee equal to 1% of the average daily balance of loans and letters of credit
outstanding during the 180 day period immediately prior to termination.
Each of the Credit Facility Agreements specify a number of events of default
and requires the Company to maintain certain financial ratios (including
adjusted tangible net worth and debt ratios), limits the amount of capital
expenditures, and contains other covenants which restrict, among other
things, (i) the incurrence of additional debt (other than as allowed under
the loan agreements); (ii) the payment of dividends and other distributions;
(iii) the making of certain investments; (iv) certain mergers, acquisitions
and dispositions; (v) the issuance of secured guarantees; and (vi) the
granting of certain liens.
Events of default under the Revolving Credit Facility include, among other
things, (i) the failure to make payments of principal, interest, and fees,
when due; (ii) the failure to perform covenants contained therein; (iii) the
occurrence of a change in control of LSB if any party is or becomes the
beneficial owner of more than 50% of the total voting securities of LSB,
except for Jack E. Golsen or members of his immediate family; (iv) default
under any material agreement or instrument (other than an agreement or
instrument evidencing the lending of money) which would have a material
adverse effect on the Company and its subsidiaries which are borrowers under
the Revolving Credit Facility, taken as a whole, and which is not cured
within the grace period; (v) a default under any other agreement relating to
borrowed money exceeding certain limits; and (vi) customary bankruptcy or
insolvency defaults.
The Revolving Credit Facility is secured by the accounts receivable,
inventory, proprietary rights, general intangibles, books and records, and
proceeds thereof of the Company.
(B) This agreement between a subsidiary of the Company and two institutional
lenders provided for two series of term loans and a revolving credit
facility. The balance outstanding at December 31, 1996 was paid in February
1997. See Note (D).
F-12
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
6. LONG-TERM DEBT (CONTINUED)
(C) This agreement, as amended, between a subsidiary of the Company and an
institutional lender provided for a loan in the aggregate amount of $16.5
million, the proceeds of which were used in the construction of a nitric
acid plant, requiring 84 equal monthly payments of principal plus interest,
with interest at a fixed rate of 8.86%. This agreement is secured by the
plant, equipment and machinery, and proprietary rights associated with the
plant which has an approximate carrying value of $30.4 million at December
31, 1996.
In November 1997, the Company amended this agreement, conditioned upon,
among other things, completion of a senior note offering to raise at least
$100 million. See Note 12. The amended agreement restates the financial and
restrictive covenants to be applicable to the Company. This agreement, as
amended, contains covenants (i) requiring maintenance of an escalating
tangible net worth, (ii) restricting distributions and dividends from a
subsidiary of the Company to the Company to 50% of the subsidiary's annual
net income, as defined, (iii) restricting a change of control of the Company
and (iv) requiring maintenance of a debt to tangible net worth ratio.
(D) On February 13, 1997, certain subsidiaries of the Company entered into a $50
million financing arrangement with John Hancock Mutual Life Insurance
Company (the ''Note Agreement''). The Note Agreement consists of $25.0
million of fixed rate notes bearing interest at 10.57% per annum and $25.0
million of floating rate notes bearing interest at LIBOR plus 4.2%
(initially 9.76%). Repayment of the notes is due in quarterly installments
of principal of $833,332 plus interest commencing on July 1, 1997 through
maturity in April 2004. Approximately $19.3 million of the proceeds from the
Note Agreement were used to retire the principal balances outstanding on the
term and revolving credit facility discussed in (B) above and the secured
loan due in monthly installments through 2003. The remaining proceeds of the
Note Agreement (approximately $30.7 million) were used to pay down the
revolving credit facility described in (A) and the outstanding balance due
to LSB and affiliates. In connection with the financing, $9.5 million of
debt previously due within one year has been classified as due after one
year reflecting the payment terms of the Note Agreement. See Note 12.
The notes are secured by real and personal property of the subsidiaries. The
Note Agreement contains several financial covenants related to the borrowing
subsidiaries. These financial covenants, as defined, include the maintenance
of a debt to capitalization ratio, combined net worth, combined working
capital, current ratio and fixed charge coverage ratio. The Note Agreement
also restricts payments that can be made by the borrowing subsidiaries to
LSB or its subsidiaries and restricts the Company's ability to prepay the
floating rate notes prior to February 1999.
Maturities of long-term debt, after consideration of the Note Agreement and
Revolving Credit Facility discussed in (A) and (D) above, for each of the five
years after December 31, 1996 are: (in thousands) 1997--$10,825; 1998--$7,919;
1999--$8,016; 2000--$26,236; 2001--$7,068 and thereafter--$22,524.
F-13
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
7. INCOME TAXES
The provision for income taxes consists of the following for the year
indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal................................................ $2,582 $4,220 $2,456 $2,314 $1,217
State.................................................. 459 770 458 429 246
------ ------ ------ ------ ------
3,041 4,990 2,914 2,743 1,463
Deferred:
Federal................................................ 786 230 (222) 166 325
State.................................................. 112 35 (24) 20 33
------ ------ ------ ------ ------
898 265 (246) 186 358
------ ------ ------ ------ ------
Provision for income taxes............................. $3,939 $5,255 $2,668 $2,929 $1,821
====== ====== ====== ====== ======
</TABLE>
The approximate tax effects of each type of temporary difference and
carryforward that are used in computing deferred tax assets and liabilities
and the valuation allowance related to deferred tax assets at December 31,
1995 and 1996 and September 30, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-----------------
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities
Accelerated depreciation used for tax purposes ................... $ 7,687 $ 8,827 $ 9,375
Inventory basis difference resulting from a business
combination .................................................... 2,139 2,139 2,139
Other .......................................................... 719 271 84
------- ------- -------
Total deferred tax liabilities ............................... 10,545 11,237 11,598
Deferred tax assets
Allowances for doubtful accounts and other asset
impairments not deductible for tax purposes .................... 1,284 1,655 1,720
Capitalization of certain costs as inventory for tax
purposes ....................................................... 1,216 1,895 1,835
Other ............................................................ 117 5 3
------- ------- -------
Total deferred tax assets .................................... 2,617 3,555 3,558
Valuation allowance .......................................... -- -- --
------- ------- -------
Total deferred tax assets ................................... 2,617 3,555 3,558
------- ------- -------
Net deferred tax liabilities ................................. $ 7,928 $ 7,682 $ 8,040
======= ======= =======
</TABLE>
F-14
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
7. INCOME TAXES-(CONTINUED)
The provision for income taxes differs from the amount computed by
applying the federal statutory rate to ''Income before provision for income
taxes'' is due to the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------
1994 1995 1996 1996 1997
------ ------- ------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Provision for income taxes at federal statutory
rate ......................................................... $3,286 $3,904 $2,947 $3,016 $1,611
State income taxes, net of federal benefit ..................... 371 523 282 292 189
Amortization of excess of purchase price over net
assets acquired .............................................. 120 120 120 90 90
Foreign subsidiary loss (income) ............................... 8 655 (597) (447) (68)
Other ........................................................ 154 53 (84) (22) (1)
------ ------ ------ ------ ------
Provision for income taxes ..................................... $3,939 $5,255 $2,668 $2,929 $1,821
====== ====== ====== ====== ======
</TABLE>
8. STOCKHOLDERS' EQUITY
Stock Options
Certain employees of the Company, including members of management of
LSB devoting time to the Company, participate in the incentive stock option
plans of LSB (the ''Stock Option Plans''). As a result thereof, the Company has
elected to follow Accounting Principles Board Opinion No. 25, ''Accounting for
Stock Issued to Employees'' (''APB 25'') and related interpretations in
accounting for such employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
''Accounting for Stock-Based Compensation,'' requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the employee stock options equals the
market price of the underlying LSB stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income is required by Statement 123,
which also requires that the information be determined as if the Company has
accounted for such employee stock options granted subsequent to December 31,
1994 under the fair value method of that Statement. The fair value for these
options was estimated by LSB at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for 1996 and 1995,
respectively: risk-free interest rates of 6.0% and 6.2%; a dividend yield of
1.36% and 1.02%; volatility factors of the expected market price of the
Company's common stock of .42 and .42; and a weighted average expected life of
the option of 6.2 and 8.0 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of such employee stock options.
F-15
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
8. STOCKHOLDERS' EQUITY-(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
qualified options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
----------- ----------
(In Thousands)
<S> <C> <C>
Pro forma net income................ $5,867 $5,645
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
At December 31, 1996, there are 549,050 options outstanding under the
Stock Option Plans related to employees of the Company and members of LSB
management devoting time to the Company. These options become exercisable 20%
after one year from date of grant, 40% after two years, 70% after three years,
100% after four years and lapse at the end of ten years. The exercise price of
options to be granted under this plan is equal to the fair market value of LSB's
common stock at the date of grant.
Activity in the Stock Option Plans related to Company employees and
members of LSB management devoting time to the Company during each of the three
years in the period ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year ............................... 223,050 $2.46 231,050 $3.11 267,050 $3.86
Granted .............................. 33,000 6.63 59,000 5.88 332,000 4.44
Exercised ............................ (25,000) 1.93 (23,000) 1.48 (30,000) 2.46
Surrendered, forfeited or
expired ............................ -- -- -- -- (20,000) 2.64
------- ------- -------
Outstanding at end of year ........... 231,050 3.11 267,050 3.86 549,050 4.32
======= ======= =======
Exercisable at end of year ........... 147,850 $1.85 153,750 $2.41 149,450 $3.22
======= ======= =======
Weighted average fair value of
options granted during
year ............................... $3.60 $3.01 $1.91
</TABLE>
Outstanding options to acquire 549,050 shares of LSB's stock by employees
of the Company and members of LSB management devoting time to the Company at
December 31, 1996 had exercise prices ranging from $1.125 to $9.00 per share and
had a weighted average remaining contractual life of 6.07 years.
F-16
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain property, plant and equipment under operating
lease agreements from related parties (Note 3) and others. The Company also
leases certain precious metals under operating lease agreements from an
unrelated third party. Future annual minimum payments on operating leases with
initial or remaining terms of one year or more at December 31, 1996 are:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHERS
------- ------
(IN THOUSANDS)
<S> <C> <C>
1997.......................................... $ 475 $ 2,440
1998.......................................... 475 1,803
1999.......................................... 475 1,200
2000.......................................... 475 963
2001.......................................... 475 910
After 2001.................................... 317 7,340
------ -------
$2,692 $14,656
====== =======
</TABLE>
Rent expense under all operating lease agreements, including month-to-month
leases, was $2,798,000 in 1994, $2,692,000 in 1995 and $3,687,000 in 1996.
Renewal options are available under certain of the lease agreements for various
periods at approximately the existing annual rental amounts.
The Company leases certain precious metals for use in the Company's
manufacturing process under 90 day agreements. The agreement at December 31,
1996 required, among other things, rentals generally based on 7.85% of the
leased metals' market values. The agreement at September 30, 1997 requires
rentals generally based on 22% of the leased metals' market values from October
1997 through December 1997, contract expiration. The agreements also require the
Company to purchase 900 ounces of platinum at $450 per ounce if the spot price
for platinum is $450 per ounce or lower at the end of the lease term.
In July 1995, the Company entered into a product supply agreement with a
third party whereby the Company is required to make monthly facility fee and
other payments which aggregate $71,965. In return for this payment, the Company
is entitled to certain quantities of compressed oxygen produced by the third
party. Except in circumstances as defined by the agreement, the monthly payment
is payable regardless of the quantity of compressed oxygen used by the Company.
The term of this agreement, which has been included in the above minimum
operating lease commitments, is for a term of 15 years; however, after the
agreement has been in effect for 60 months, the Company can terminate the
agreement without cause at a cost of approximately $4.5 million. Based on the
Company's estimate of compressed oxygen demands of the plant, the cost of the
oxygen under this agreement is not expected to exceed market prices.
In June 1997, two wholly owned subsidiaries of the Company, El Dorado
Chemical Company (''EDC''), and El Dorado Nitrogen Company (''EDNC''), entered
into a series of agreements with Bayer Corporation (''Bayer'') (collectively,
the ''Bayer Agreement''). Under the Bayer Agreement, EDNC will act as an agent
to construct, and upon completion of construction, will operate a nitric acid
plant (the ''EDNC Baytown Plant'') at Bayer's Baytown, Texas chemical facility.
EDC has guaranteed the performance of EDNC's obligations under the Bayer
Agreement. Under the terms of the Bayer Agreement, EDNC is to lease the EDNC
Baytown Plant pursuant to an operating lease from an unrelated third party with
an initial lease term of ten years from the date on which the EDNC Baytown Plant
becomes
F-17
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - CONTINUED
fully operational. Upon expiration of the initial ten-year term from the date
the EDNC Baytown Plant becomes operational, the Bayer Agreement may be renewed
for up to six renewal terms of five years each; however, prior to each renewal
period, either party to the Bayer Agreement may opt against renewal. It is
anticipated that construction of the EDNC Baytown Plant will cost approximately
$60 million and will be completed by late 1998. Construction financing of the
EDNC Baytown Plant is to be provided by an unaffiliated lender. Neither the
Company nor EDC has guaranteed any of the lending obligations for the EDNC
Baytown Plant.
Legal Matters
Following is a summary of certain legal actions involving the Company:
A. The Company submitted to the State of Arkansas a "Groundwater
Monitoring Work Plan" which was approved by the State of Arkansas. Pursuant to
the Groundwater Monitoring Work Plan, the Company has performed phase I and II
groundwater investigations, and submitted a risk assessment report to the State
of Arkansas. The risk assessment report is currently being reviewed by the State
of Arkansas.
On February 12, 1996, the Company entered into a Consent Administrative
Agreement ("Administrative Agreement") with the state of Arkansas to resolve
certain compliance issues associated with nitric acid concentrators. Pursuant to
the Administrative Agreement, the Company installed additional pollution control
equipment to address the compliance issues. The Company was assessed $50,000 in
civil penalties associated with the Administrative Agreement. In the summer of
1996 and then on January 28, 1997, the Company executed amendments to the
Administrative Agreement ("Amended Agreements"). The Amended Agreements
imposed a $150,000 civil penalty, which penalty has been paid. Since the 1997
amendment, the Chemical business has been assessed stipulated penalties of
approximately $55,000 by the ADPC&E for violations of certain provisions of the
1997 Amendment. The Chemical Business believes that the El Dorado Plant has made
progress in controlling certain off-site emissions; however, such off-site
emissions have occurred and continue to occur from time to time, which could
result in the assessment of additional penalties against the Chemical Business
by the ADPC&E for violation of the 1997 Amendment.
B. In 1996, a lawsuit was filed against the Company's Chemical Business by
a group of residents of El Dorado, Arkansas, asserting a citizens' suit against
the Chemical Business as a result of certain alleged violations of the Clean Air
Act, the Clean Water Act, the Chemical Business' air and water permits and
certain other environmental laws, rules and regulations. The citizens' suit
requests the court to order the Chemical Business to cure such alleged
violations, if any, plus penalties as provided under the applicable statutes.
The Company's Chemical Business will assert all defenses available to it and
will vigorously defend itself.
In July 1996, several of the same individuals who are plaintiffs in the
citizens' suit referenced above filed a toxic tort lawsuit against the Company's
Chemical Business alleging that they suffered certain injuries and damages as a
result of alleged releases of toxic substances from the Chemical Business' El
Dorado, Arkansas manufacturing facility. In October 1996, another toxic tort
lawsuit was filed against the Company's Chemical Business. This subsequent
action asserts similar damage theories as the previously discussed lawsuit,
except this action attempts to have a class certified to represent substantially
all allegedly affected persons. The plaintiffs are suing for an unspecified
amount of actual and punitive damages.
The Company's insurance carriers have been notified of these matters. The
Company and the Chemical Business maintain an Environmental Impairment Insurance
Policy ("EIL Insurance") that provides coverage to the Company and the
Chemical Business for certain discharges, dispersals, releases, or escapes of
certain contaminants and pollutants into or upon land, the atmosphere or any
water course or body of water from the Site, which has caused bodily injury,
property damage or contamination to others or to other property not on the Site.
The EIL Insurance provides limits of liability for each loss up to $10.0 million
and a similar $10.0 million limit for all losses due to bodily injury or
property
F-18
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
damage, except $5.0 million for all remediation expenses, with the maximum limit
of liability for all claims under the EIL Insurance not to exceed $10.0 million
for each loss or remediation expense and $10.0 million for all losses and
remediation expenses. The EIL Insurance also provides a retention of the first
$500,000 per loss or remediation expense that is to be paid by the Company. The
Company's Chemical Business has spent an amount in excess of $500,000 in legal,
expert and other costs in connection with the toxic tort and citizen lawsuits
described in paragraph C, which the Company expensed and has made a claim
against its EIL Insurance for reimbursement of the legal, expert and other costs
paid by the Chemical Business in excess of $500,000 and to pay such legal,
expert and other costs on an on-going basis. In September 1997, the Company and
the EIL Insurance Carrier agreed that the EIL Insurance Carrier will reimburse
the Chemical Business for certain expenses in excess of retention, and pay such
future fees and expenses, subject to a reservation of rights relating to the
citizens' suit. See Note 12.
C. A civil cause of action has been filed against the Company's Chemical
Business and five (5) other unrelated commercial explosives manufacturers
alleging that the defendants allegedly violated certain federal and state
antitrust laws in connection with alleged price fixing of certain explosive
products. The plaintiffs are suing for an unspecified amount of damages, which,
pursuant to statute, plaintiffs are requesting be trebled, together with costs.
Based on the information presently available to the Company, the Company does
not believe that the Chemical Business conspired with any party, including but
not limited to, the five (5) other defendants, to fix prices in connection with
the sale of commercial explosives. Discovery has only recently commenced in this
matter. The Chemical Business intends to vigorously defend itself in this
matter.
The Company's Chemical Business has been added as a defendant in a separate
lawsuit pending in Missouri. This lawsuit alleges a national conspiracy, as well
as a regional conspiracy, directed against explosive customers in Missouri and
seeks unspecified damages. The Company's Chemical Business has been included in
this lawsuit because it sold products to customers in Missouri during a time in
which other defendants have admitted to participating in an antitrust
conspiracy, and because it has been sued in the preceding described lawsuit.
Based on the information presently available to the Company, the Company does
not believe that the Chemical Business conspired with any party, to fix prices
in connection with the sale of commercial explosives. The Chemical Business
intends to vigorously defend itself in this matter.
For several years, certain members of the explosives industry have been the
focus of a grand jury investigation being supervised by the U.S. Department of
Justice ("DOJ") in connection with criminal antitrust allegations involving
price fixing. Certain explosives companies, other than the Company, including
all the Company's major competitors, and individuals employed by certain of
those competitors, were indicted and have pled guilty to antitrust violations.
The guilty pleas have resulted in nearly $40 million in criminal fines. In
connection with the grand jury investigation, the Company's Chemical Business
received and has complied with two document subpoenas, certain of the Company's
Chemical Business' employees have been interviewed by the DOJ under grants of
immunity from prosecution, and certain of the Company's Chemical Business
employees have testified under subpoena before the grand jury under grants of
immunity in connection with the investigation. The Company believes that it has
cooperated fully with the government's investigation. Recently, the Company has
been informed by an official of the DOJ that it is not currently a target of the
above investigation or of any grand jury investigating criminal antitrust
activity in the explosives or ammonium nitrate industries.
During the third quarter of 1997, a subsidiary of the Company was
served with a lawsuit in which approximately 27 plaintiffs have sued
approximately 13 defendants, including a subsidiary of the Company alleging
personal injury and property damage for undifferentiated compensatory and
punitive damages of approximately $7,000,000. Specifically, the plaintiffs
assert blast damage claims, nuisance (road dust from coal trucks) and personal
injury claims
F-19
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
(exposure to toxic materials in blasting materials) on behalf of residents
living near the Heartland Coal Company ("Heartland") strip mine in Lincoln
County, West Virginia. Heartland employed the subsidiary to provide blasting
materials and personnel to load and shoot holes drilled by employees of
Heartland. Down hole blasting services were provided by the subsidiary at
Heartland's premises from approximately August 1991, until approximately August
1994. Subsequent to August 1994, the subsidiary supplied blasting materials to
the reclamation contractor at Heartland's mine. In connection with the
subsidiary's activities at Heartland, the subsidiary has entered into a
contractual indemnity to Heartland to indemnify Heartland under certain
conditions for acts or actions taken by the subsidiary for which the subsidiary
failed to take, and Heartland is alleging that the subsidiary is liable
thereunder for Heartland's defense costs and any losses to or damages sustained
by, the plaintiffs in this lawsuit. Discovery has only recently begun in this
matter, and the Company intends to vigorously defend itself in this matter.
The Company including its subsidiaries, is a party to various other claims,
legal actions, and complaints arising in the ordinary course of business. In the
opinion of management after consultation with counsel, all claims, legal actions
(including those described above) and complaints are not presently probable of
material loss, are adequately covered by insurance, or if not so covered, are
without merit or are of such kind, or involve such amounts that unfavorable
disposition would not have a material effect on the financial position of the
Company, but could have a material impact to the net income (loss) of a
particular quarter or year, if resolved unfavorably.
Other
LSB and, thus, the Company has retained certain risks associated with its
operations, choosing to self-insure up to various specified amounts under its
automobile, workers' compensation, health and general liability programs. LSB
reviews such programs on at least an annual basis to balance the cost/benefit
between its coverage and retained exposure. See the Services Agreement, Note 3.
The Company purchases substantial quantities of anhydrous ammonia for use
in manufacturing its products. The Company has contracts with two suppliers of
ammonia. One contract requires the Company to purchase not less than 75,000 tons
nor more than 140,000 tons of anhydrous ammonia each contract year and is for a
term expiring in December 1998. The other requires the Company to take or pay
for an average of 10,000 tons of anhydrous ammonia per month and expires April
2000. These contracts are at floating prices. The pricing volatility of such raw
material directly affects the operating profitability of the Company. The
Company also enters into agreements with suppliers of raw materials which
require the Company to provide finished goods in exchange therefore. At December
31, 1996, the Company had received quantities of anhydrous ammonia in exchange
for which the Company has a commitment to provide 72,184 tons of ammonium
nitrate and 5,130 tons of nitric acid. The Company believes these agreements are
generally favorable to the Company and can meet the delivery commitments in the
ordinary course of business. At September 30, 1997, the Company has a standby
letter of credit outstanding related to its Chemical Business of $3.5 million.
The Company operates a concentrated nitric acid plant which has a stated
production capacity of 285 tons per day. The Company has incurred significant
delays and costs in attempting to achieve the plant's stated capacity. The
Company anticipates maintaining an economically feasible rate of production. If
such rate of production is not maintained, the Company may sustain significant
future operating losses and possible impairment related thereto.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion of fair values is not indicative of the overall
fair value of the Company's balance sheet since the provisions of the SFAS No.
107, "Disclosures About Fair Value of Financial Instruments," do not apply to
all assets, including intangibles.
F-20
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS-CONTINUED
The following methods and assumptions were used by the Company in
estimating its fair value of financial instruments:
Fair values for fixed rate borrowings are estimated using a discounted cash
flow analysis that applies interest rates currently being offered on
borrowings of similar amounts and terms to those currently outstanding.
Carrying values for variable rate borrowings approximate their fair value.
As of December 31, 1995 and 1996 and September 30, 1997, carrying values of
variable rate and fixed-rate long-term debt which aggregated $79.0 million,
$82.6 million and $106.9 million, respectively, approximated their
estimated fair value.
As of December 31, 1996, the carrying values of cash and cash equivalents,
accounts receivable, accounts payable, and accrued liabilities approximated
their estimated fair value.
11. SEGMENT INFORMATION
The Company and its subsidiaries operate principally in two industries.
Chemical
This segment manufactures and sells chemical products for mining,
agricultural, electronic, paper and other industries. Production from the
Company's primary manufacturing facility in El Dorado, Arkansas, for the year
ended December 31, 1996 comprises approximately 72% of the chemical segment's
sales. Sales to customers of this segment primarily include coal mining
companies in Kentucky, West Virginia, Illinois and Indiana and farmers in Texas
and Arkansas.
The Chemical Business is subject to various federal, state and local
environmental regulations. Although the Company has designed policies and
procedures to help reduce or minimize the likelihood of significant chemical
accidents and/or environmental contamination, there can be no assurances that
the Company will not sustain a significant future operating loss related
thereto.
In May 1997, the Chemical Business completed constructing a concentrated
nitric acid plant (carrying value of $30.4 million at December 31, 1996; $30.6
million at September 30, 1997) which has a stated production capacity of 285
tons per day. The Company has incurred significant delays and costs in
attempting to achieve the plant's stated capacity. The Company anticipates
maintaining an economically feasible rate of production. If such rate of
production is not maintained, the Company may sustain significant future
operating losses and possible impairment related thereto.
Further, the Company purchases substantial quantities of anhydrous ammonia
for use in manufacturing its products. The pricing volatility of such raw
material directly affects the operating profitability of the chemical segment.
Climate Control
This business segment manufactures and sells, primarily from its various
facilities in Oklahoma City, a variety of hydronic fan coil, water source heat
pump products as well as other HVAC products for use in commercial and
residential air conditioning and heating systems. The Company's various
facilities in Oklahoma City comprise substantially all of the environment
control operations. Sales to customers of this segment primarily include
original equipment manufacturers, contractors and independent sales
representatives located throughout the world, are generally secured by a
mechanic's lien, except for sales to original equipment manufacturers.
F-21
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
11. SEGMENT INFORMATION--(CONTINUED)
Credit, which is generally unsecured, is extended to customers based on an
evaluation of the customers' financial condition and other factors. Credit
losses are provided for in the financial statements based on historical
experience and periodic assessment of outstanding accounts receivable,
particularly those accounts which are past due. The Company's periodic
assessment of accounts and credit loss provisions are based on the Company's
best estimate of amounts which are not recoverable. Concentrations of credit
risk with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer bases, and their dispersion across
many different industries and geographic areas.
Information about the Company's operations in different industry segments
is detailed below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales:
Chemical ................................. $131,572 $136,900 $166,164 $129,133 $122,853
Climate Control .......................... 69,914 83,843 89,121 66,314 77,516
-------- -------- -------- -------- --------
$201,486 $220,743 $255,285 $195,447 $200,369
======== ======== ======== ======== ========
Gross profit:
Chemical ................................. $ 24,904 $ 25,397 $ 25,400 $ 20,390 $ 16,096
Climate Control .......................... 17,965 22,488 22,057 16,972 22,588
-------- -------- -------- -------- --------
$ 42,869 $ 47,885 $ 47,457 $ 37,362 $ 38,684
======== ======== ======== ======== ========
Operating profit:
Chemical ................................. $ 12,393 $ 12,684 $ 9,954 $ 9,208 $ 3,976
Climate Control .......................... 2,731 4,857 4,381 3,900 6,704
-------- -------- -------- -------- --------
15,124 17,541 14,335 13,108 10,680
Other (income) expenses, net .................. (414) (798) (333) (40) (509)
Interest expense .............................. 6,150 7,185 6,247 4,532 6,587
-------- -------- -------- -------- --------
Income before provision for income taxes ...... $ 9,388 $ 11,154 $ 8,421 $ 8,616 $ 4,602
======== ======== ======== ======== ========
Depreciation of property, plant and equipment:
Chemical ................................. $ 3,987 $ 4,310 $ 5,329 $ 3,777 $ 4,435
======== ======== ======== ======== ========
Climate Control .......................... $ 1,227 $ 1,484 $ 1,378 $ 1,027 $ 1,044
======== ======== ======== ======== ========
Additions to property, plant and equipment:
Chemical ................................. $ 15,147 $ 17,811 $ 19,219 $ 6,143 $ 5,627
======== ======== ======== ======== ========
Climate Control .......................... $ 3,722 $ 516 $ 1,500 $ 449 $ 950
======== ======== ======== ======== ========
Identifiable assets:
Chemical ................................. $ 95,004 $114,374 $133,794 $118,939 $134,587
Climate Control .......................... 34,440 32,345 39,960 40,618 47,654
-------- -------- -------- -------- --------
$129,444 $146,719 $173,754 $159,557 $182,241
======== ======== ======== ======== ========
</TABLE>
Revenues by industry segment include revenues from unaffiliated customers,
as reported in the consolidated financial statements. Intersegment revenues,
which are accounted for at transfer prices ranging from the cost of producing or
acquiring the product or service to normal prices to unaffiliated customers, are
not significant.
F-22
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
11. SEGMENT INFORMATION--(CONTINUED)
Gross profit by industry segment represents net sales less cost of sales.
Operating profit by industry segment represents revenues less operating
expenses. In computing operating profit, none of the following items have been
added or deducted: income taxes or interest expense.
Identifiable assets by industry segment are those assets used in the
operations in each industry.
Information about the Company's domestic and foreign operations is detailed
below:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
GEOGRAPHIC REGION 1994 1995 1996 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales:
Domestic ............................ $187,115 $203,859 $220,632 $170,037 $179,078
Foreign:
Australia/New Zealand .......... 14,371 16,884 32,917 24,086 20,581
Others ......................... -- -- 1,736 1,324 710
-------- -------- -------- -------- --------
$201,486 $220,743 $255,285 $195,447 $200,369
======== ======== ======== ======== ========
Income before provision for income taxes:
Domestic ............................ $ 9,410 $ 13,025 $ 6,846 $ 7,269 $ 4,851
Foreign:
Australia/New Zealand .......... (22) (1,871) 1,705 1,414 71
Others ......................... -- -- (130) (67) (320)
-------- -------- -------- -------- --------
$ 9,388 $ 11,154 $ 8,421 $ 8,616 $ 4,602
======== ======== ======== ======== ========
Identifiable assets:
Domestic ............................ $117,836 $132,683 $152,863 $141,589 $161,394
Foreign:
Australia/New Zealand .......... 11,608 14,036 20,017 17,372 20,147
Others ......................... -- -- 874 596 700
-------- -------- -------- -------- --------
$129,444 $146,719 $173,754 $159,557 $182,241
======== ======== ======== ======== ========
</TABLE>
Revenues from unaffiliated customers include foreign export sales as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------- ----------------
GEOGRAPHIC REGION 1994 1995 1996 1996 1997
-------------------------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mexico and Central and South America.. $ 2,455 $ 2,799 $ 2,103 $ 1,325 $ 369
Canada................................ 11,335 10,018 9,255 7,089 3,785
Other................................. 15,679 15,782 14,002 10,166 9,714
------- ------- ------- ------- -------
$29,469 $28,599 $25,360 $18,580 $13,868
======= ======= ======= ======= =======
</TABLE>
F-23
<PAGE>
CLIMACHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
12. SUBSEQUENT EVENTS (UNAUDITED)
On November 26, 1997, the Company completed the sale of $105 million
principal amount of 10 3/4% Senior Notes due 2007 (the "Notes"). The proceeds of
the Notes were used to (a) fully repay the principal and prepayment fees of the
John Hancock Mutual Life Insurance Company loan described in Note 6(D), (b)
reduce amounts outstanding under various revolving credit facilities with
respect to the Chemical Business and the Climate Control Business; and (c) fund
a loan to LSB, the Company's parent, of $10 million. The Notes bear interest at
an annual rate of 10 3/4% payable semiannually in arrears on June 1 and December
1 of each year. The Notes are senior unsecured obligations of the Company and
rank pari passu in right of payment to all existing senior unsecured
indebtedness of the Company. The Notes are effectively subordinated to all
existing and future senior secured indebtedness of the Company and its
subsidiaries. As of November 30, 1997, after application of the net proceeds
from the sale of the Notes, the Company had $3.1 million of outstanding
borrowings under its revolving credit facilities and $20.2 million of other
secured indebtedness, all of which is effectively senior to the Notes.
The Notes were issued pursuant to an Indenture, which contains certain
covenants that, among other things, limit the ability of the Company and its
subsidiaries to: (i) incur additional indebtedness; (ii) incur certain liens;
(iii) engage in certain transactions with affiliates; (iv) make certain
restricted payments; (v) agree to payment restrictions affecting subsidiaries;
(vi) engage in unrelated lines of business; or (vii) engage in mergers,
consolidations or the transfer of all or substantially all of the assets of the
Company to another person. In addition, in the event of certain Asset Sales (as
defined), the Company will be required to use the proceeds to reinvest in the
Company's business, to repay certain debt or to offer to purchase Notes at 100%
of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon, plus Liquidated Damages (as defined), if any, to the date of purchase.
Except as described below, the Notes are not redeemable at the Company's
option prior to December 1, 2002. After December 1, 2002, the Notes will be
subject to redemption at the option of the Company, in whole or in part, at the
redemption prices set forth in the Indenture, plus accrued and unpaid interest
thereon, plus Liquidated Damages, if any, to the applicable redemption date. In
addition, until December 1, 2000, up to $35 million in aggregate principal
amount of Notes are redeemable, at the option of the Company, at a price of
110.75% of the principal amount of the Notes, together with accrued and unpaid
interest, if any, thereon, plus Liquidated Damages, if any, to the date of the
redemption, with the net cash proceeds of a Public Equity Offering (as defined);
provided, however, that at least $65 million in aggregate principal amount of
the Notes remain outstanding following such redemption.
In the event of a Change of Control of LSB or the Company, holders of the
Notes will have the right to require the Company to repurchase the Notes, in
whole or in part, at a redemption price of 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon, plus Liquidated Damages, if
any, to the date of repurchase.
The Company is a holding company with no assets or operations other than
its investments in its subsidiaries, and each of its subsidiaries is wholly
owned, directly or indirectly. ClimaChem's payment obligations under the Notes
are fully, unconditionally and joint and severally guaranteed by all of the
existing subsidiaries of the Company, except for El Dorado Nitrogen Company
("EDNC"). The assets, equity, and earnings of EDNC are inconsequential for all
periods presented and management of the Company does not believe separate
financial information of the guaranteeing subsidiaries is material to the
understanding of investors of the Notes.
During January 1998, the Company's Chemical Business agreed in principal to
settle the toxic tort lawsuit filed against the Company in October 1996, which
settlement, if completed, will be funded from the Company's EIL Insurance. The
settlement is subject to court approval, execution of definitive agreements, and
confirmation from the Company's EIL Insurance carrier that it will pay the full
amount of such settlement.
F-24
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTINUED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE GUARANTORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH
PERSON, NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATED ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................................ 5
Summary.............................................................. 6
Risk Factors......................................................... 17
Use of Proceeds...................................................... 22
Capitalization....................................................... 23
Selected Consolidated Financial Data................................. 24
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 26
Business............................................................. 33
Management........................................................... 45
Security Ownership of Certain Beneficial Owners and Management....... 51
Certain Relationships and Related Transactions....................... 56
The Exchange Offer................................................... 59
Description of Notes................................................ 68
Description of Other Indebtedness.................................... 92
Certain Federal Income Tax Consequences.............................. 95
Plan of Distribution................................................. 96
Legal Matters........................................................ 98
Experts.............................................................. 98
Index to Financial Statements........................................ F-1
</TABLE>
PROSPECTUS
$105,000,000
CLIMACHEM, INC.
OFFER TO EXCHANGE
ITS 10 3/4% SERIES B SENIOR NOTES
DUE 2007
FOR ANY AND ALL
OF ITS OUTSTANDING
10 3/4% SENIOR NOTES DUE 2007
______________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and each of the Guarantors (except as set forth below) are
incorporated under the laws of the State of Oklahoma. Section 1031 of the
Oklahoma General Corporation Act authorizes indemnification of the Company's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
Climate Master, Inc. ("CM") is incorporated under the laws of the
State of Delaware. Section 145 of the Delaware General Corporation Law (the
"Delaware Law") authorizes indemnification of CM's directors and officers under
a variety of circumstances which may include liabilities under the Securities
Act.
The general effect of the foregoing is to provide that each of the
domestic Registrants will indemnify its directors and officers against all
liabilities and expenses actually and reasonably incurred in connection with the
defense or settlement of any judicial or administrative proceedings in which
they have become involved by reason of their status as corporate directors or
officers, if they acted in good faith and in the reasonable belief that their
conduct was neither unlawful (in the case of criminal proceedings) nor
inconsistent with the best interests of a particular Registrant. With respect to
legal proceedings by, or in the right of, a Registrant, in which a director or
officer is adjudged liable for improper performance of his duty to the
Registrant or another enterprise which such person served in a similar capacity
at the request of the Registrant, indemnification is limited by such provisions
to that amount which is permitted by the court.
The Environmental Group International Limited ("TEGI") is incorporated
under the laws of the United Kingdom. Article 13(a) of TEGI's Articles of
Association provides that every director or other officer of TEGI shall be
indemnified out of the assets of TEGI against all losses or liabilities which he
may sustain or incur in or about the execution of the duties of his office or
otherwise in relation thereto, including any liability incurred by him in
defending any proceedings, whether civil or criminal, or in connection with any
application under certain provisions of the Companies Act of 1985 in which
relief is granted to him by the court, and no director or other officer shall be
liable for any loss, damage or misfortune which may happen to or be incurred by
TEGI in the execution of the duties of his office or in relation thereto;
provided that Article 13 shall only have effect insofar as its provisions are
not avoided by certain provisions of the Companies Act of 1985.
Climate Mate Inc. ("CMI") is incorporated under the laws of the
Province of Ontario, Canada. Section 2.08 of CM's Bylaws provides that, except
as provided in the Business Corporations Act of 1982--Ontario, every director
and officer of CMI, every former director and officer of CMI, and every person
who acts or acted at CMI's request as a director or officer of another
corporation of which CMI is, or was, a shareholder or creditor, and his heirs or
legal representatives, shall at all times be indemnified and saved harmless by
CMI from and against all costs, charges and expenses, including an amount paid
to settle any action or satisfy a judgment reasonably incurred by him in respect
of any civil, criminal or administrative action or proceeding to which he is
made a party by reason of, or having been a director or officer of, CMI or such
other corporation if (a) he acted honestly and in good faith with a view to the
best interests of CMI, and (b) in the case of a criminal or administrative
action or proceeding that is enforced by monetary penalty, he had reasonable
grounds for believing that his conduct was lawful.
Total Energy Systems Limited ("TES") and T.E.S. Mining Services Pty.
Ltd. ("TES Mining") are registered under the law of Queensland, Australia.
Article 26.1 of the TES Articles of Association provide that every officer,
auditor or agent of TES is indemnified by the Company for all liabilities
incurred by him in his capacity as, or by reason of his holding the position of,
officer, auditor or agent, as the case may be, to the extent permitted by law,
and such indemnity extends to any liability incurred by him in defending any
proceedings, whether civil or criminal, in which judgment is given in his favor
or in which he is acquitted or in connection with any application in relation to
any such proceedings
II-1
<PAGE>
in which relief is granted to him by the court under law. Article 38(a) of the
T.E.S. Mining Articles of Association provides that no director or manager,
secretary or other officer of TES Mining acting in good faith and within the
scope of his duties or what he believes to be the scope of his duties shall be
liable for any loss, damage or misfortune which may occur whether the same be
occasioned by any mistake, error, oversight or omission on his part or not.
Total Energy Systems (NZ) Limited ("TES (NZ") is incorporated under
the laws of New Zealand. Article 11.1 of the Constitution of TES (NZ) provides
that the board of TES (NZ) may cause TES (NZ) to indemnify a director and former
director and former employee or employee of TES (NZ) or a related company for
costs incurred by him or her in any proceeding that relates to (a) liability for
any act or omission in his or her capacity as a director or employee and (b) in
which judgment is given in his or her favor or in which he or she is acquitted
or which is discontinued. Article 11.1 provides further that the board may cause
TES (NZ) to indemnify a director or an employee or former director or former
employee of TES (NZ) or a related company in respect of (a) liability to any
person other than TES (NZ) or a related company for any act or omission in his
or her capacity as a director or employee; or (b) costs incurred by the director
or employee in defending or settling any claim or proceeding relating to any
liability under the foregoing sentence, provided that the liability is not
criminal or (in the case of a director) in respect of a breach of the duty to
act in good faith and in the best interests of TES (NZ) or (in the case of an
employee) in respect of a breach of any fiduciary duty owed to TES (NZ) or a
related company.
LSB, the Company or a Guarantor Subsidiary maintains officers' and
directors' liability insurance which insures against liabilities that officers
and directors of each Registrant may incur in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1. Purchase Agreement, dated November 26, 1992, between ClimaChem,
Inc. and certain subsidiaries of ClimaChem, and Wasserstein
Perella Securities, Inc.
3.1 Certificate of Incorporation of ClimaChem, Inc.
3.2 Bylaws of ClimaChem, Inc.
3.3 Certificate of Incorporation of APR Corporation
3.4 Bylaws of APR Corporation
3.5 Certificate of Incorporation of CHP Corporation
3.6 Bylaws of CHP Corporation
3.7 Articles of Incorporation of Climate Master, Inc.
3.8 Bylaws of Climate Master, Inc.
3.9 Certificate of Incorporation of Climate Mate Inc.
3.10 Bylaws of Climate Mate Inc.
3.11 Certificate of Incorporation of DSN Corporation
3.12 Bylaws of DSN Corporation
3.13 Certificate of Incorporation of El Dorado Chemical Company
3.14 Bylaws of El Dorado Chemical Company
II-2
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.15 Certificate of Incorporation of International Environmental
Corporation
3.16 Bylaws of International Environmental Corporation
3.17 Certificate of Incorporation of KOAX Corp.
3.18 Bylaws of KOAX Corp.
3.19 Certificate of Incorporation of LSB Chemical Corp.
3.20 Bylaws of LSB Chemical Corp.
3.21 Certificate of Incorporation of Northwest Financial Corporation
3.22 Bylaws of Northwest Financial Corporation
3.23 Certificate of Incorporation of Slurry Explosive Corporation
3.24 Bylaws of Slurry Explosive Corporation
3.25 Certificate of Incorporation of The Environmental Group, Inc.
3.26 Bylaws of The Environmental Group, Inc.
3.27 Memorandum and Articles of Association of The Environmental Group
International Ltd.
3.28 Certificate of Incorporation and Memorandum and Articles of
Association of T.E.S. Mining Services Pty. Ltd.
3.29 Certificate of Incorporation and Constitution of Total Energy
Systems (NZ) Ltd.
3.30 Memorandum of Association of Total Energy Systems Limited
3.31 Certificate of Incorporation of Universal Tech Corporation
3.32 Bylaws of Universal Tech Corporation
4.1 Indenture, dated as of November 26, 1997, by and among ClimaChem,
Inc., the Subsidiary Guarantors and BankOne, N.A., as trustee, is
incorporated by reference from Exhibit 4.1 to LSB Industries,
Inc.'s Form 8-K, dated November 26, 1997.
4.2 Registration Rights Agreement, dated as of November 26, 1997, by
and among ClimaChem, Inc., the Guarantors, and the Initial
Purchaser, is incorporated by reference from Exhibit 4.2 to LSB
Industries, Inc.'s Form 8-K, dated November 26, 1997.
4.3 Form of 10 3/4% Senior Notes due 2007 and 10 3/4% Series B Senior
Notes due 2007 (included in Exhibit 4.1 as Exhibit A)
5.1 Opinion of Conner & Winters, A Professional Corporation
5.2 Opinion of Corrs Chambers & Westgarth
5.3 Opinion of McLean & Kerr
5.4 Opinion of Clyde & Co.
8.1 Opinion of Conner & Winters with respect to certain tax matters
(included in Exhibit 5.1)
10.1 Promissory Note, dated November 26, 1997, executed by LSB
Industries, Inc. in favor of ClimaChem, Inc.
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.2 Amended and Restated Loan and Security Agreement, dated November
21, 1997, by and between BankAmerica Business Credit, Inc. and
Climate Master, Inc., International Environmental Corporation, El
Dorado Chemical Company, and Slurry Explosive Corporation.
10.3 Continuing Guaranty, dated November 21, 1997, between ClimaChem,
Inc. and BankAmerica Business Credit, Inc.
10.4 Services Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
10.5 Management Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
10.6 Tax Sharing Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
10.7 Agreement for Purchase and Sale of Anhydrous Ammonia, dated as of
January 1, 1997, between El Dorado Chemical Company and Farmland
Industries, Inc. is incorporated by reference from Exhibit 10.10
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1996.
10.8 Lease Agreement, dated November 12, 1987, between Climate Master,
Inc. and West Point Company and amendments thereto is
incorporated by reference from Exhibits 10.32, 10.36, and 10.37
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1988.
10.9 Severance Agreement, dated January 17, 1989, between LSB
Industries, Inc. and Jack E. Golsen, is incorporated by reference
from Exhibit 10.48 to LSB Industries, Inc.'s Form 10-K for the
fiscal year ended December 31, 1988. LSB Industries, Inc. also
entered into identical agreements with Tony M. Shelby, David R.
Goss, Barry H. Golsen, David M. Shear, and Jim D. Jones, and the
Company will provide copies thereof to the Commission upon
request.
10.10 Employment Agreement and Amendment to Severance Agreement, dated
January 12, 1989, between LSB Industries, Inc. and Jack E.
Golsen, dated March 21, 1996, is incorporated by reference from
Exhibit 10.15 to LSB Industries, Inc.'s Form 10-K for the fiscal
year ended December 31, 1995.
10.11 Processing Agreement, dated January 1, 1994, between Monsanto
Company and El Dorado Chemical Company is incorporated by
reference from Exhibit 10.22 to LSB Industries, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994.
10.12 Loan and Security Agreement (DSN Plant), dated October 31, 1994,
between DSN Corporation and The CIT Group/Equipment Financing,
Inc. is incorporated by reference from Exhibit 10.1 to LSB
Industries, Inc.'s Form 10-Q for the fiscal quarter ended
September 30, 1994.
10.13 First Amendment to Loan and Security Agreement (DSN Plant), dated
June 1, 1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
10.14 Loan and Security Agreement (Mixed Acid Plant), dated April 5,
1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc. is incorporated by reference from Exhibit 10.25
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1994.
10.15 First Amendment to Loan and Security Agreement (Mixed Acid
Plant), dated November 20, 1995, between DSN Corporation and The
CIT Group/Equipment Financing, Inc.
10.16 Loan and Security Agreement (Rail Tank Cars), dated November 15,
1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
II-4
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.17 First Amendment to Loan and Security Agreement (Rail Tank Cars),
dated November 15, 1995, between DSN Corporation and the CIT
Group/Equipment Financing, Inc.
10.18 Letter amendment, dated May 14, 1997, to Loan and Security
Agreement between DSN Corporation and The CIT Group/Equipment
Financing, Inc. is incorporated by reference from Exhibit 10.1 to
LSB Industries, Inc.'s Form 10-Q for the fiscal quarter ended
March 31, 1997.
10.19 Amendment to Loan and Security Agreement, dated November 21,
1997, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
10.20 Guaranty Agreement, dated November 21, 1997, executed by
ClimaChem, Inc. in favor of The CIT Group/Equipment Financing,
Inc.
10.21 Promissory Note, dated July 14, 1989, from Climate Master, Inc.
to Oklahoma County Finance Authority
10.22 Extension of Maturity on Promissory Note, dated February 7, 1997,
relating to the Promissory Note, dated July 14, 1989, from
Climate Master, Inc. to Oklahoma County Finance Authority
10.23 Mortgage of Tenant's Interest in Lease, dated July 1, 1989,
executed by Climate Master, Inc. in favor of the Oklahoma County
Finance Authority
10.24 Project Loan Agreement, dated July 1, 1989, between Climate
Master, Inc., and the Oklahoma County Finance Authority
10.25 Hire-Purchase Agreement, dated November 21, 1994, between Total
Energy Systems Limited and Toyota Finance Australia Limited
10.26 Lease Agreement, dated October 25, 1996, between Total Energy
Systems Limited and Sanwa Australia Finance Limited. Total Energy
Systems Limited has entered into a second Lease Agreement which
is substantially identical, copies of which will be provided to
the Commission upon request.
10.27 Master Lease Agreement, dated October 10, 1995, between Total
Energy Systems (NZ) Limited and GE Capital (NZ) Limited
10.28 Master Lease Agreement, dated December 15, 1994, between Total
Energy Systems Limited and KE Financial Corporation Limited
10.29 Land Lease, dated March 1, 1995, between DSN Corporation and Koch
Sulphur Products Company
10.30 Promissory Note, dated June 2, 1997, executed by International
Environmental Corporation in favor of ORIX Credit Alliance, Inc.
10.31 Security Agreement-Mortgage on Goods and Chattels dated April 18,
1997, executed by International Environmental Corporation in
favor of ORIX Credit Alliance, Inc.
10.32 Lease Agreement, dated March 7, 1988, between Northwest Financial
Corporation and International Environmental Corporation
10.33 First Amendment, dated August 17, 1995, to Lease Agreement dated
March 7, 1988, between Prime Financial Corporation and
International Environmental Corporation
10.34 Assignment, dated August 17, 1995, between Northwest Financial
Corporation and Prime Financial Corporation
II-5
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.35 Loan and Security Agreement, dated March 14, 1995, between
International Environmental Corporation and MetLife Capital
Corporation
10.36 Lease Agreement, dated April 3, 1996, between Amplicon Financial
and International Environmental Corporation
10.37 Equipment Purchase and Security Agreement, dated February 1,
1994, between U. S. Amada Ltd. and Climate Master, Inc. Climate
Master has entered into three other Equipment Purchase and
Security Agreements which are substantially identical in all
material respects except the principal amount is $380,000,
$88,000, and $330,000, respectively. Copies of each of the
foregoing will be provided to the Commission upon request.
10.38 Facility Letter, dated December 19, 1996, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.39 Variation Letter, dated April 11, 1997, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.40 Extension Letter, dated October 24, 1997, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.41 Debenture Charge, dated March 7, 1995, between Total Energy
Systems Limited and Bank of New Zealand. T.E.S. Mining Services
Pty. Ltd. and Total Energy Systems (NZ) Limited are each parties
to substantially identical Debentures, copies of which will be
provided to the Commission upon request.
10.42 Master Commercial Hire and Purchase Agreement (New South Wales),
dated November 14, 1994, between G.E. Capital Australia Limited
and Total Energy Systems Limited
10.43 Master Commercial Hire Purchase Agreement (Western Australia),
dated November 14, 1994, between G.E. Capital Australia Limited
and Total Energy Systems Limited
10.44 Master Commercial Hire Purchase Agreement (Queensland), dated
November 14, 1994, between G.E. Capital Australia Limited and
Total Energy Systems Limited
10.45 Anhydrous Ammonia Sales Agreement, dated May 28, 1997, to be
effective January 1, 1997, between Koch Nitrogen Company and El
Dorado Chemical Company is incorporated by reference from Exhibit
10.1 to the Quarterly Report on Form 10-Q of LSB Industries,
Inc., the parent of the Company, as filed on August 19, 1997.
CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AS IT IS
THE SUBJECT OF COMMISSION ORDER CF #5551, DATED SEPTEMBER 25,
1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT UNDER THE
FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
10.46 Baytown Nitric Acid Project and Supply Agreement dated June 27,
1997, by and among El Dorado Nitrogen Company, El Dorado Chemical
Company and Bayer Corporation is incorporated by reference from
Exhibit 10.2 to the Quarterly Report on Form 10-Q of LSB
Industries, Inc., the parent of the Company, as filed on August
19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN
OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551, DATED
SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
II-6
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.47 Services Agreement, dated June 27, 1997, between Bayer
Corporation and El Dorado Nitrogen Company is incorporated by
reference from Exhibit 10.3 to the Quarterly Report on Form 10-Q
of LSB Industries, Inc., the parent of the Company, as filed on
August 19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN
OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551, DATED
SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
10.48 Ground Lease dated June 27, 1997, between Bayer Corporation and
El Dorado Nitrogen Company is incorporated by reference from
Exhibit 10.4 to the Quarterly Report on Form 10-Q of LSB
Industries, Inc., the parent of the Company, as filed on August
19, 1997.
10.49 Participation Agreement, dated as of June 27, 1997, among El
Dorado Nitrogen Company, Boatmen's Trust Company of Texas as
Owner Trustee, Security Pacific Leasing Corporation, as Owner
Participant and a Construction Lender, Wilmington Trust Company,
Bayerische Landesbank, New York Branch, as a Construction Lender
and the Note Purchaser, and Bank of America National Trust and
Savings Association, as Construction Loan Agent is incorporated
by reference from Exhibit 10.5 to the Quarterly Report on Form
10-Q of LSB Industries, Inc., the parent of the Company, as filed
on August 19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS
BEEN OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551,
DATED SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
10.50 Lease Agreement, dated as of June 27, 1997, between Boatmen's
Trust Company of Texas as Owner Trustee and El Dorado Nitrogen
Company is incorporated by reference from Exhibit 10.6 to the
Quarterly Report on Form 10-Q of LSB Industries, Inc., the parent
of the Company, as filed on August 19, 1997.
10.51 Security Agreement and Collateral Assignment of Construction
Documents, dated as of June 27, 1997, made by El Dorado Nitrogen
Company is incorporated by reference from Exhibit 10.7 to the
Quarterly Report on Form 10-Q of LSB Industries, Inc., the parent
of the Company, as filed on August 19, 1997.
10.52 Security Agreement and Collateral Assignment of Facility
Documents, dated as of June 27, 1997, made by El Dorado Nitrogen
Company and consented to by Bayer Corporation is incorporated by
reference from Exhibit 10.8 to the Quarterly Report on Form 10-Q
of LSB Industries, Inc., the parent of the Company, as filed on
August 19, 1997.
10.53 Union Contracts, dated August 5, 1995, by and between EDC and the
Oil, Chemical and Atomic Workers, the International Association
of Machinists and Aerospace Workers, and the United Steel Workers
of America, dated November 1, 1995, is incorporated by reference
from Exhibit 10.7 to LSB Industries, Inc.'s Form 10-K for the
fiscal year ended December 31, 1995.
12.1 Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of ClimaChem, Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Conner & Winters, A Professional Corporation (included
in Exhibit 5.1)
23.3 Consent of Corrs Chambers & Westgarth (included in Exhibit 5.2)
II-7
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.4 Consent of McLean & Kerr (included in Exhibit 5.3)
23.5 Consent of Clyde & Co. (included in Exhibit 5.4)
24.1 Powers of Attorney (included in signature pages to the
Registration Statement)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instruction
99.4 Exchange Agent Agreement, dated February ___, 1998, between Bank
One, NA, as Exchange Agent, and each of the Registrants
(b) Financial Statement Schedule
Report of Independent Auditors
Schedule II - Valuation of Qualifying Allowances
The Company has omitted all other schedules because the conditions
requiring their filing do not exist or because the required information appears
in the Company's Consolidated Financial Statements, including the notes thereto.
II-8
<PAGE>
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business date of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ClimaChem, Inc.
We have audited the consolidated balance sheets of ClimaChem, Inc. as of
December 31, 1995 and 1996, and the related consolidated statements of
operations and retained earnings and cash flows for each of the three years in
the period ended December 31, 1996, and have issued our report thereon dated
November 21, 1997, except as it relates to paragraphs (A) and (C) of Note 6, as
to which the date is November 26, 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 21(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
November 21, 1997
II-10
<PAGE>
ClimaChem, Inc.
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions Deductions
----------- ------------
Balance at Charged to Write-offs/ Balance
Beginning Costs and Costs at End
Description of Year Expenses Incurred of Year
- ----------------------------------------------------------------------------------------------
Allowance for doubtful accounts (1):
<S> <C> <C> <C> <C>
1996 $1,424 $ 280 $ 408 $1,296
========== ========== ============ ===========
1995 $1,433 $ 756 $ 765 $1,424
========== ========== ============ ===========
1994 $1,200 $ 971 $ 738 $1,433
========== ========== ============ ===========
Other assets (1):
1996 $ 500 $1,015 $ - $1,515
========== ========== ============ ===========
1995 $ 500 $ - $ - $ 500
========== ========== ============ ===========
1994 $ 500 $ - $ - $ 500
========== ========== ============ ===========
</TABLE>
(1) Deducted in the balance sheet from the related assets to which the reserve
applies.
II-11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has duly caused the Registration Statement on Form S-4 to be signed on behalf by
the undersigned, thereunto duly authorized, in the City of Oklahoma City, State
of Oklahoma on January 22, 1998.
ClimaChem, Inc.
By: /s/ Jack E. Golsen
-----------------------------
Jack E. Golsen, President
and Chief Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen President, Chief Executive Officer, January 22, 1998
--------------------
Jack E. Golsen Chairman of the Board and Director
(Principal Executive Officer)
/s/ Barry H. Golsen Vice President, Vice Chairman January 22, 1998
--------------------
Barry H. Golsen of the Board and Director
/s/ Tony M. Shelby Vice President and Chief Financial January 22, 1998
---------------------
Tony M. Shelby Officer and Director
(Principal Financial Officer)
</TABLE>
II-13
<PAGE>
<TABLE>
<S> <C> <C>
/s/ David R. Goss Vice President and Director January 22, 1998
--------------------
David R. Goss
/s/ Jim D. Jones Vice President and Treasurer January 22, 1998
--------------------
Jim D. Jones (Principal Accounting Officer)
/s/ Raymond B. Ackerman Director January 22, 1998
-----------------------
Raymond B. Ackerman
/s/ Robert C. Brown Director January 22, 1998
--------------------
Robert C. Brown
/s/ Bernard G. Ille Director January 22, 1998
--------------------
Bernard G. Ille
/s/ Horace G. Rhodes Director January 22, 1998
--------------------
Horace G. Rhodes
/s/ Jerome D. Shaffer Director January 22, 1998
--------------------
Jerome D. Shaffer
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
APR Corporation
By: /s/ Jack E. Golsen
-------------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
Signature Capacity Dates
--------- -------- -----
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
--------------------
Jack E. Golsen and Director
/s/ Barry H. Golsen President; Director January 22, 1998
--------------------
Barry H. Golsen (Principal Executive Officer)
/s/ David R. Goss Vice President, Treasurer January 22, 1998
--------------------
David R. Goss Secretary and Director
(Principal Accounting Officer)
/s/ Tony M. Shelby Vice President January 22, 1998
--------------------
Tony M. Shelby (Principal Financial Officer)
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
CHP Corporation
By: /s/ Jack E. Golsen
-------------------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
--------------------
Jack E. Golsen and Director
/s/ Barry H. Golsen President and Director January 22, 1998
--------------------
Barry H. Golsen (Principal Executive Officer)
/s/ David R. Goss Vice President, Secretary January 22, 1998
--------------------
David R. Goss and Director
/s/ Tony M. Shelby Vice President January 22, 1998
--------------------
Tony M. Shelby (Principal Financial/Accounting Officer)
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Climate Master, Inc.
By: /s/ Jack E. Golsen
-----------------------------
Jack E. Golsen,
Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
--------------------
Jack E. Golsen and Director
/s/ Steven J. Golsen Chief Executive Officer, Co-Chairman January 22, 1998
---------------------
Steven J. Golsen of the Board and Director
(Principal Executive Officer)
/s/ Barry H. Golsen Executive Vice President and January 22, 1998
--------------------
Barry H. Golsen Director
/s/ David R. Goss Vice President, Secretary and January 22, 1998
--------------------
David R. Goss Director
/s/ Tony M. Shelby Vice President and Treasurer January 22, 1998
--------------------
Tony M. Shelby (Principal Financial/Accounting Officer)
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Climate Mate Inc.
By: /s/ David R. Goss
-------------------------------
David R. Goss, President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ David R. Goss President, Treasurer and Director January 22, 1998
--------------------
David R. Goss (Principal Executive/Financial/
Accounting Officer)
/s/ Arlene Wolfe Director January 22, 1998
--------------------
Arlene Wolfe
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
DSN Corporation
By: /s/ Jack E. Golsen
-------------------------------
Jack E. Golsen, President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen President, Chairman of the Board January 22, 1998
--------------------
Jack E. Golsen and Director
(Principal Executive Officer)
/s/ Barry H. Golsen Vice President and Director January 22, 1998
--------------------
Barry H. Golsen
/s/ Tony M. Shelby Vice President, Treasurer and January 22, 1998
--------------------
Tony M. Shelby Director (Principal Financial/
Accounting Officer)
/s/ David R. Goss Vice President, Secretary and January 22, 1998
--------------------
David R. Goss Director
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
El Dorado Chemical Company
By: /s/ Jack E. Golsen
-------------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
--------------------
Jack E. Golsen and Director
/s/ James L. Wewers President, Treasurer and Director January 22, 1998
--------------------
James L. Wewers (Principal Executive/Financial/
Accounting Officer)
/s/ Phil Gough Senior Vice President and Director January 22, 1998
--------------------
Phil Gough
/s/ Dick Milliken Senior Vice President and Director January 22, 1998
--------------------
Dick Milliken
/s/ Paul Rydlund Senior Vice President and Director January 22, 1998
--------------------
Paul Rydlund
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
The Environmental Group, Inc.
By: /s/ Jack E. Golsen
-------------------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board and Director January 22, 1998
--------------------
Jack E. Golsen
/s/ Barry H. Golsen President and Director January 22, 1998
--------------------
Barry H. Golsen (Principal Executive Officer)
/s/ Steven J. Golsen Executive Vice President January 22, 1998
--------------------
Steven J. Golsen and Director
/s/ David R. Goss Secretary, Treasurer and January 22, 1998
--------------------
David R. Goss Director (Principal Financial Officer)
/s/ Jerry Snellen Controller January 22, 1998
--------------------
Jerry Snellen (Principal Accounting Officer)
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
The Environmental Group
International Limited
By: /s/ Barry H. Golsen
-------------------------------
Barry H. Golsen, Director
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Barry H. Golsen Director January 22, 1998
--------------------
Barry H. Golsen (Principal Executive Officer)
/s/ Cathy Horton Assistant Secretary and Director January 22, 1998
--------------------
Cathy Horton
/s/ David R. Goss Director January 22, 1998
--------------------
David R. Goss (Principal Financial/Accounting Officer)
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
International Environmental Corporation
By: /s/ Jack E. Golsen
------------------------------
Jack E. Golsen,
Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
----------------------
Jack E. Golsen and Director
/s/ Barry H. Golsen Chief Executive Officer, January 22, 1998
----------------------
Barry H. Golsen Co-Chairman of the Board
and Director
(Principal Executive Officer)
/s/ David R. Goss Vice President, Secretary, January 22, 1998
----------------------
David R. Goss Treasurer and Director
/s/ Tony M. Shelby Vice President January 22, 1998
----------------------
Tony M. Shelby (Principal Financial/Accounting Officer)
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Koax Corp.
By: /s/ Jack E. Golsen
-------------------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
----------------------
Jack E. Golsen and Director
/s/ Barry H. Golsen President and Director January 22, 1998
----------------------
Barry H. Golsen (Principal Executive Officer)
/s/ David R. Goss Vice President and Director January 22, 1998
----------------------
David R. Goss
/s/ Tony M. Shelby Vice President January 22, 1998
----------------------
Tony M. Shelby (Principal Financial/Accounting Officer)
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
LSB Chemical Corp.
By: /s/ Jack E. Golsen
--------------------------
Jack E. Golsen,
Chief Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
Signature Capacity Dates
--------- -------- -----
/s/ Jack E. Golsen Chief Executive Officer, Chairman January 22, 1998
---------------------
Jack E. Golsen of the Board and Director
(Principal Executive Officer)
/s/ James L. Wewers President and Director January 22, 1998
---------------------
James L. Wewers
/s/ Barry H. Golsen Vice President and Director January 22, 1998
---------------------
Barry H. Golsen
/s/ Tony M. Shelby Vice President, Secretary and January 22, 1998
---------------------
Tony M. Shelby Director (Principal Financial/
Accounting Officer)
/s/ David R. Goss Vice President, Treasurer January 22, 1998
---------------------
David R. Goss and Director
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Northwest Financial Corporation
By: /s/ Jack E. Golsen
--------------------------
Jack E. Golsen, President and
Chief Executive Officer
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ Jack E. Golsen President, Chief Executive Officer, January 22, 1998
--------------------
Jack E. Golsen Chairman of the Board and Director
(Principal Executive Officer)
/s/ Tony M. Shelby Vice President, Treasurer, January 22, 1998
--------------------
Tony M. Shelby Secretary and Director
(Principal Financial/Accounting Officer)
/s/ Barry H. Golsen Vice President and Director January 22, 1998
--------------------
Barry H. Golsen
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Slurry Explosive Corporation
By: /s/ Jack E. Golsen
------------------------
Jack E. Golsen, Chief Executive
Officer and Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
Signature Capacity Dates
--------- -------- -----
/s/ Jack E. Golsen Chief Executive Officer, Chairman January 22, 1998
-------------------
Jack E. Golsen of the Board and Director
(Principal Executive Officer)
/s/ William Manion President and Director January 22, 1998
-------------------
William Manion
/s/ James L. Wewers Vice President and Director January 22, 1998
--------------------
James L. Wewers
II-27
<PAGE>
/s/ Paul Keeling Vice President, Treasurer, January 22, 1998
--------------------
Paul Keeling Secretary and Director
(Principal Accounting Officer)
/s/ Tony M. Shelby Vice President and Director January 22, 1998
--------------------
Tony M. Shelby (Principal Financial Officer)
/s/ David R. Goss Vice President and Director January 22, 1998
--------------------
David R. Goss
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
T.E.S. Mining Services Pty. Ltd.
By: /s/ James L. Wewers
---------------------------
James L. Wewers, Director
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ James L. Wewers Director January 22, 1998
----------------------
James L. Wewers (Principal Executive Officer)
/s/ Kevin J. Harman Director January 22, 1998
----------------------
Kevin J. Harman (Principal Financial/Accounting Officer)
/s/ Paul Rydlund Director January 22, 1998
----------------------
Paul Rydlund
/s/ William R. Manion Director January 22, 1998]
----------------------
William R. Manion
</TABLE>
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Total Energy Systems Limited
By: /s/ James L. Wewers
-------------------------
James L. Wewers,
Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ James L. Wewers Vice President and January 22, 1998
--------------------
James L. Wewers Chairman of the Board
(Principal Executive Officer)
/s/ Kevin Harman Managing Director January 22, 1998
--------------------
Kevin Harman (Principal Financial/Accounting Officer)
/s/ Paul Rydlund Director January 22, 1998
--------------------
Paul Rydlund
/s/ William Manion Director January 22, 1998
--------------------
William Manion
/s/ Peter Geroff Director January 22, 1998
--------------------
Peter Geroff
</TABLE>
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Total Energy Systems (NZ) Limited
By: James L. Wewers
----------------------------
James L. Wewers, Director
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
<TABLE>
<CAPTION>
Signature Capacity Dates
--------- -------- -----
<S> <C> <C>
/s/ James L. Wewers Director January 22, 1998
----------------------
James L. Wewers (Principal Executive Officer)
/s/ Kevin Harman Director January 22, 1998
----------------------
Kevin Harman (Principal Financial/Accounting Officer)
/s/ Paul Rydlund Director January 22, 1998
----------------------
Paul Rydlund
/s/ William R. Manion Director January 22, 1998
----------------------
William R. Manion
</TABLE>
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused the Registration Statement on Form S-4 to be signed on behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma on January 22, 1998.
Universal Tech Corporation
By: /s/ Jack E. Golsen
--------------------------
Jack E. Golsen, Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack E. Golsen and Tony M. Shelby, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement (and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the
offerings which this Registration Statement relates), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dated indicated:
Signature Capacity Dates
--------- -------- -----
/s/ Jack E. Golsen Chairman of the Board January 22, 1998
---------------------
Jack E. Golsen and Director
/s/ Oldrich Machacek President and Director January 22, 1998
---------------------
Oldrich Machacek (Principal Executive Officer)
/s/ James L. Wewers Vice President and Director January 22, 1998
---------------------
James L. Wewers
II-32
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Tony M. Shelby Vice President, Treasurer, January 22, 1998
----------------------
Tony M. Shelby Secretary and Director
(Principal Financial/Accounting Officer)
/s/ David M. Shear Assistant Secretary and Director January 22, 1998
----------------------
David M. Shear
</TABLE>
II-33
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
1. Purchase Agreement, dated November 26, 1992, between ClimaChem,
Inc. and certain subsidiaries of ClimaChem, and Wasserstein
Perella Securities, Inc.
3.1 Certificate of Incorporation of ClimaChem, Inc.
3.2 Bylaws of ClimaChem, Inc.
3.3 Certificate of Incorporation of APR Corporation
3.4 Bylaws of APR Corporation
3.5 Certificate of Incorporation of CHP Corporation
3.6 Bylaws of CHP Corporation
3.7 Articles of Incorporation of Climate Master, Inc.
3.8 Bylaws of Climate Master, Inc.
3.9 Certificate of Incorporation of Climate Mate Inc.
3.10 Bylaws of Climate Mate Inc.
3.11 Certificate of Incorporation of DSN Corporation
3.12 Bylaws of DSN Corporation
3.13 Certificate of Incorporation of El Dorado Chemical Company
3.14 Bylaws of El Dorado Chemical Company
3.15 Certificate of Incorporation of International Environmental
Corporation
3.16 Bylaws of International Environmental Corporation
3.17 Certificate of Incorporation of KOAX Corp.
3.18 Bylaws of KOAX Corp.
3.19 Certificate of Incorporation of LSB Chemical Corp.
3.20 Bylaws of LSB Chemical Corp.
3.21 Certificate of Incorporation of Northwest Financial Corporation
3.22 Bylaws of Northwest Financial Corporation
3.23 Certificate of Incorporation of Slurry Explosive Corporation
3.24 Bylaws of Slurry Explosive Corporation
3.25 Certificate of Incorporation of The Environmental Group, Inc.
3.26 Bylaws of The Environmental Group, Inc.
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
3.27 Memorandum and Articles of Association of The Environmental Group
International Ltd.
3.28 Certificate of Incorporation and Memorandum and Articles of
Association of T.E.S. Mining Services Pty. Ltd.
3.29 Certificate of Incorporation and Constitution of Total Energy
Systems (NZ) Ltd.
3.30 Memorandum of Association of Total Energy Systems Limited
3.31 Certificate of Incorporation of Universal Tech Corporation
3.32 Bylaws of Universal Tech Corporation
4.1 Indenture, dated as of November 26, 1997, by and among ClimaChem,
Inc., the Subsidiary Guarantors and BankOne, N.A., as trustee, is
incorporated by reference from Exhibit 4.1 to LSB Industries,
Inc.'s Form 8-K, dated November 26, 1997.
4.2 Registration Rights Agreement, dated as of November 26, 1997, by
and among ClimaChem, Inc., the Guarantors, and the Initial
Purchaser, is incorporated by reference from Exhibit 4.2 to LSB
Industries, Inc.'s Form 8-K, dated November 26, 1997.
4.3 Form of 10 3/4% Senior Notes due 2007 and 10 3/4% Series B Senior
Notes due 2007 (included in Exhibit 4.1 as Exhibit A)
5.1 Opinion of Conner & Winters, A Professional Corporation
5.2 Opinion of Corrs Chambers & Westgarth
5.3 Opinion of McLean & Kerr
5.4 Opinion of Clyde & Co.
8.1 Opinion of Conner & Winters with respect to certain tax matters
(included in Exhibit 5.1)
10.1 Promissory Note, dated November 26, 1997, executed by LSB
Industries, Inc. in favor of ClimaChem, Inc.
10.2 Amended and Restated Loan and Security Agreement, dated November
21, 1997, by and between BankAmerica Business Credit, Inc. and
Climate Master, Inc., International Environmental Corporation, El
Dorado Chemical Company, and Slurry Explosive Corporation.
10.3 Continuing Guaranty, dated November 21, 1997, between ClimaChem,
Inc. and BankAmerica Business Credit, Inc.
10.4 Services Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
10.5 Management Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
10.6 Tax Sharing Agreement, dated November 21, 1997, between LSB
Industries, Inc. and ClimaChem, Inc.
10.7 Agreement for Purchase and Sale of Anhydrous Ammonia, dated as of
January 1, 1997, between El Dorado Chemical Company and Farmland
Industries, Inc. is incorporated by reference from Exhibit 10.10
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1996.
10.8 Lease Agreement, dated November 12, 1987, between Climate Master,
Inc. and West Point Company and amendments thereto is
incorporated by reference from Exhibits 10.32, 10.36, and 10.37
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1988.
10.9 Severance Agreement, dated January 17, 1989, between LSB
Industries, Inc. and Jack E. Golsen, is incorporated by reference
from Exhibit 10.48 to LSB Industries, Inc.'s Form 10-K for the
fiscal year ended December 31, 1988. LSB Industries, Inc. also
entered into identical agreements with Tony M. Shelby, David R.
Goss, Barry H. Golsen, David M. Shear, and Jim D. Jones, and the
Company will provide copies thereof to the Commission upon
request.
10.10 Employment Agreement and Amendment to Severance Agreement, dated
January 12, 1989, between LSB Industries, Inc. and Jack E.
Golsen, dated March 21, 1996, is incorporated by reference from
Exhibit 10.15 to LSB Industries, Inc.'s Form 10-K for the fiscal
year ended December 31, 1995.
10.11 Processing Agreement, dated January 1, 1994, between Monsanto
Company and El Dorado Chemical Company is incorporated by
reference from Exhibit 10.22 to LSB Industries, Inc.'s Form 10-K
for the fiscal year ended December 31, 1994.
10.12 Loan and Security Agreement (DSN Plant), dated October 31, 1994,
between DSN Corporation and The CIT Group/Equipment Financing,
Inc. is incorporated by reference from Exhibit 10.1 to LSB
Industries, Inc.'s Form 10-Q for the fiscal quarter ended
September 30, 1994.
10.13 First Amendment to Loan and Security Agreement (DSN Plant), dated
June 1, 1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
10.14 Loan and Security Agreement (Mixed Acid Plant), dated April 5,
1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc. is incorporated by reference from Exhibit 10.25
to LSB Industries, Inc.'s Form 10-K for the fiscal year ended
December 31, 1994.
10.15 First Amendment to Loan and Security Agreement (Mixed Acid
Plant), dated November 20, 1995, between DSN Corporation and The
CIT Group/Equipment Financing, Inc.
10.16 Loan and Security Agreement (Rail Tank Cars), dated November 15,
1995, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
10.17 First Amendment to Loan and Security Agreement (Rail Tank Cars),
dated November 15, 1995, between DSN Corporation and the CIT
Group/Equipment Financing, Inc.
10.18 Letter amendment, dated May 14, 1997, to Loan and Security
Agreement between DSN Corporation and The CIT Group/Equipment
Financing, Inc. is incorporated by reference from Exhibit 10.1 to
LSB Industries, Inc.'s Form 10-Q for the fiscal quarter ended
March 31, 1997.
10.19 Amendment to Loan and Security Agreement, dated November 21,
1997, between DSN Corporation and The CIT Group/Equipment
Financing, Inc.
10.20 Guaranty Agreement, dated November 21, 1997, executed by
ClimaChem, Inc. in favor of The CIT Group/Equipment Financing,
Inc.
10.21 Promissory Note, dated July 14, 1989, from Climate Master, Inc.
to Oklahoma County Finance Authority
10.22 Extension of Maturity on Promissory Note, dated February 7, 1997,
relating to the Promissory Note, dated July 14, 1989, from
Climate Master, Inc. to Oklahoma County Finance Authority
10.23 Mortgage of Tenant's Interest in Lease, dated July 1, 1989,
executed by Climate Master, Inc. in favor of the Oklahoma County
Finance Authority
10.24 Project Loan Agreement, dated July 1, 1989, between Climate
Master, Inc., and the Oklahoma County Finance Authority
10.25 Hire-Purchase Agreement, dated November 21, 1994, between Total
Energy Systems Limited and Toyota Finance Australia Limited
10.26 Lease Agreement, dated October 25, 1996, between Total Energy
Systems Limited and Sanwa Australia Finance Limited. Total Energy
Systems Limited has entered into a second Lease Agreement which
is substantially identical, copies of which will be provided to
the Commission upon request.
10.27 Master Lease Agreement, dated October 10, 1995, between Total
Energy Systems (NZ) Limited and GE Capital (NZ) Limited
10.28 Master Lease Agreement, dated December 15, 1994, between Total
Energy Systems Limited and KE Financial Corporation Limited
10.29 Land Lease, dated March 1, 1995, between DSN Corporation and Koch
Sulphur Products Company
10.30 Promissory Note, dated June 2, 1997, executed by International
Environmental Corporation in favor of ORIX Credit Alliance, Inc.
10.31 Security Agreement-Mortgage on Goods and Chattels dated April 18,
1997, executed by International Environmental Corporation in
favor of ORIX Credit Alliance, Inc.
10.32 Lease Agreement, dated March 7, 1988, between Northwest Financial
Corporation and International Environmental Corporation
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
10.33 First Amendment, dated August 17, 1995, to Lease Agreement dated
March 7, 1988, between Prime Financial Corporation and
International Environmental Corporation
10.34 Assignment, dated August 17, 1995, between Northwest Financial
Corporation and Prime Financial Corporation
10.35 Loan and Security Agreement, dated March 14, 1995, between
International Environmental Corporation and MetLife Capital
Corporation
10.36 Lease Agreement, dated April 3, 1996, between Amplicon Financial
and International Environmental Corporation
10.37 Equipment Purchase and Security Agreement, dated February 1,
1994, between U. S. Amada Ltd. and Climate Master, Inc. Climate
Master has entered into three other Equipment Purchase and
Security Agreements which are substantially identical in all
material respects except the principal amount is $380,000,
$88,000, and $330,000, respectively. Copies of each of the
foregoing will be provided to the Commission upon request.
10.38 Facility Letter, dated December 19, 1996, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.39 Variation Letter, dated April 11, 1997, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.40 Extension Letter, dated October 24, 1997, between Bank of New
Zealand, Australia, and Total Energy Systems Limited
10.41 Debenture Charge, dated March 7, 1995, between Total Energy
Systems Limited and Bank of New Zealand. T.E.S. Mining Services
Pty. Ltd. and Total Energy Systems (NZ) Limited are each parties
to substantially identical Debentures, copies of which will be
provided to the Commission upon request.
10.42 Master Commercial Hire and Purchase Agreement (New South Wales),
dated November 14, 1994, between G.E. Capital Australia Limited
and Total Energy Systems Limited
10.43 Master Commercial Hire Purchase Agreement (Western Australia),
dated November 14, 1994, between G.E. Capital Australia Limited
and Total Energy Systems Limited
10.44 Master Commercial Hire Purchase Agreement (Queensland), dated
November 14, 1994, between G.E. Capital Australia Limited and
Total Energy Systems Limited
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
10.45 Anhydrous Ammonia Sales Agreement, dated May 28, 1997, to be
effective January 1, 1997, between Koch Nitrogen Company and El
Dorado Chemical Company is incorporated by reference from Exhibit
10.1 to the Quarterly Report on Form 10-Q of LSB Industries,
Inc., the parent of the Company, as filed on August 19, 1997.
CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AS IT IS
THE SUBJECT OF COMMISSION ORDER CF #5551, DATED SEPTEMBER 25,
1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT UNDER THE
FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
10.46 Baytown Nitric Acid Project and Supply Agreement dated June 27,
1997, by and among El Dorado Nitrogen Company, El Dorado Chemical
Company and Bayer Corporation is incorporated by reference from
Exhibit 10.2 to the Quarterly Report on Form 10-Q of LSB
Industries, Inc., the parent of the Company, as filed on August
19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN
OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551, DATED
SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
10.47 Services Agreement, dated June 27, 1997, between Bayer
Corporation and El Dorado Nitrogen Company is incorporated by
reference from Exhibit 10.3 to the Quarterly Report on Form 10-Q
of LSB Industries, Inc., the parent of the Company, as filed on
August 19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN
OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551, DATED
SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
10.48 Ground Lease dated June 27, 1997, between Bayer Corporation and
El Dorado Nitrogen Company is incorporated by reference from
Exhibit 10.4 to the Quarterly Report on Form 10-Q of LSB
Industries, Inc., the parent of the Company, as filed on August
19, 1997.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
10.49 Participation Agreement, dated as of June 27, 1997, among El
Dorado Nitrogen Company, Boatmen's Trust Company of Texas as
Owner Trustee, Security Pacific Leasing Corporation, as Owner
Participant and a Construction Lender, Wilmington Trust Company,
Bayerische Landesbank, New York Branch, as a Construction Lender
and the Note Purchaser, and Bank of America National Trust and
Savings Association, as Construction Loan Agent is incorporated
by reference from Exhibit 10.5 to the Quarterly Report on Form
10-Q of LSB Industries, Inc., the parent of the Company, as filed
on August 19, 1997. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS
BEEN OMITTED AS IT IS THE SUBJECT OF COMMISSION ORDER CF #5551,
DATED SEPTEMBER 25, 1997, GRANTING A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
10.50 Lease Agreement, dated as of June 27, 1997, between Boatmen's
Trust Company of Texas as Owner Trustee and El Dorado Nitrogen
Company is incorporated by reference from Exhibit 10.6 to the
Quarterly Report on Form 10-Q of LSB Industries, Inc., the parent
of the Company, as filed on August 19, 1997.
10.51 Security Agreement and Collateral Assignment of Construction
Documents, dated as of June 27, 1997, made by El Dorado Nitrogen
Company is incorporated by reference from Exhibit 10.7 to the
Quarterly Report on Form 10-Q of LSB Industries, Inc., the parent
of the Company, as filed on August 19, 1997.
10.52 Security Agreement and Collateral Assignment of Facility
Documents, dated as of June 27, 1997, made by El Dorado Nitrogen
Company and consented to by Bayer Corporation is incorporated by
reference from Exhibit 10.8 to the Quarterly Report on Form 10-Q
of LSB Industries, Inc., the parent of the Company, as filed on
August 19, 1997.
10.53 Union Contracts, dated August 5, 1995, by and between EDC and the
Oil, Chemical and Atomic Workers, the International Association
of Machinists and Aerospace Workers, and the United Steel Workers
of America, dated November 1, 1995, is incorporated by reference
from Exhibit 10.7 to LSB Industries, Inc.'s Form 10-K for the
fiscal year ended December 31, 1995.
12.1 Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of ClimaChem, Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Conner & Winters, A Professional Corporation (included
in Exhibit 5.1)
23.3 Consent of Corrs Chambers & Westgarth (included in Exhibit 5.2)
23.4 Consent of McLean & Kerr (included in Exhibit 5.3)
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
23.5 Consent of Clyde & Co. (included in Exhibit 5.4)
24.1 Powers of Attorney (included in signature pages to the
Registration Statement)
25.1 Statement of Eligibility of Trustee on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instruction
99.4 Exchange Agent Agreement, dated February ___, 1998, between Bank
One, NA, as Exchange Agent, and each of the Registrants
</TABLE>
-8-
<PAGE>
EXHIBIT 1
$105,000,000
CLIMACHEM, INC.
10 3/4% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
NOVEMBER 21, 1997
<PAGE>
$105,000,000
10 3/4% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
------------------
Wasserstein Perella Securities, Inc.
31 West 52nd Street
New York, New York 10019
Dear Sirs:
ClimaChem, Inc., an Oklahoma corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell to you, as the
initial purchaser (the "Initial Purchaser"), $105,000,000 aggregate principal
amount of its Senior Notes due 2007 (the "Notes"). The Notes are to be issued
pursuant to the provisions of an Indenture, to be dated as of November 26, 1997
(the "Indenture"), between the Company and Bank One, NA, as Trustee (the
"Trustee"). The Notes are to be unconditionally guaranteed (the "Guarantees")
by the guarantors signatory hereto (the "Guarantors"). Unless the context
requires otherwise, all references herein to the Notes shall be deemed to
include the Guarantees.
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Notes.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Notes will be offered and sold to the Initial Purchaser without registration
under the Securities Act of 1933, as amended (the "Act"), in reliance on an
exemption pursuant to Section 4(2) under the Act. The Company has prepared a
preliminary offering memorandum, dated October 30, 1997 (the "Preliminary
Offering Memorandum"), and an offering memorandum, dated November 21, 1997 (the
"Offering Memorandum"), setting forth information regarding the Company and the
Notes. Any references herein to the Preliminary Offering Memorandum shall be
deemed to include all amendments and supplements thereto. Any references herein
to the Offering Memorandum shall refer to the Offering Memorandum in the form
first furnished to the Initial Purchaser for use in connection with the offering
of the Notes. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Notes by the Initial Purchaser.
<PAGE>
The Initial Purchaser has advised the Company that it proposes to make
offers and sales (the "Exempt Resales") of the Notes purchased by it hereunder
only on the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof, as soon as it deems advisable after this Agreement has been
executed and delivered, (i) to persons in the United States whom the Initial
Purchaser reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Act, as such rule may
be amended from time to time ("Rule 144A"), in transactions under Rule 144A,
(ii) to a limited number of other institutional "accredited investors" (as
defined in Rule 501 (a) (1), (2), (3) and (7) under Regulation D of the Act)
("Accredited Investors") in private sales exempt from registration under the Act
and (iii) to certain persons in offshore transactions in reliance on Regulation
S under the Act ("Regulation S") (such persons specified in clauses (i), (ii)
and (iii) being referred to herein as the "Eligible Purchasers").
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Notes shall bear a legend substantially to the
effect set forth below:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY MAY NOT BE OFFERED
OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7)
UNDER THE SECURITIES ACT), WHO IS AN INSTITUTION (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS NOTE OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE
DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL
ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE
RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS
NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR
ITS
2
<PAGE>
OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN
CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE
RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (F) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN THE
CASE OF CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO
REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT
OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE REQUIREMENT OF LAW
THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT
BE AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY
SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE."
It is also understood and acknowledged that holders (including
subsequent transferees) of the Notes will have the registration rights set forth
in the registration rights agreement (the "Registration Rights Agreement") in
substantially the form of Exhibit A hereto, to be dated as of the Closing Date
(as defined).
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and
3
<PAGE>
conditions set forth herein, to issue and sell to the Initial Purchaser and,
upon the basis of the representations, warranties and agreements of the Company
herein contained and subject to all the terms and conditions set forth herein,
the Initial Purchaser agrees to purchase from the Company, at a purchase price
of 97% of the principal amount thereof, the Notes.
(b) The Initial Purchaser has advised the Company that it proposes to
offer the Notes for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that it (i) is a
Qualified Institutional Buyer, with such knowledge and experience in financial
and business matters as are necessary in order to evaluate the merits and risks
in an investment in the Notes and is purchasing the Notes pursuant to a private
sale exempt from registration under the Act, (ii) has not and will not solicit
offers for, or offer or sell, the Notes by means of any form of general
solicitation or general advertising or in any manner involving a public offering
within the meaning of Section 4(2) of the Act provided, however, that such
-------- -------
limitation shall not preclude the Initial Purchaser from placing any tombstone
announcement with respect to the resale by it of the Notes, (iii) will solicit
offers for the Notes only from, and will offer, sell or deliver the Notes as
part of its initial offering, only to (A) persons in the United States whom it
reasonably believes to be Qualified Institutional Buyers, or if any such person
is buying for one or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to such Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, in each case, in transactions under Rule 144A or (B) to a limited
number of Accredited Investors that make the representations to and agreements
with the Company specified in Annex A to the Offering Memorandum, in private
sales exempt from registration under the Act or (C) to certain persons in
offshore transactions in reliance in Regulation S and (iv) will, during its
initial distribution of the Notes, unless prohibited by applicable law, furnish
to each person to whom it sells any Notes a copy of the Offering Memorandum.
The Initial Purchaser represents and agrees that it has offered and
sold Notes and will offer and sell Notes (i) as part of its distribution at any
time and (ii) otherwise until forty days after the later of the date upon which
the offering of the Securities commences and the Closing Date, only in
accordance with Rule 903 of Regulation S or in
4
<PAGE>
accordance with clauses (A) and (B) above. Accordingly, neither the Initial
Purchaser, its affiliates nor any persons acting on their behalf have engaged or
will engage in any directed selling efforts with respect to Notes, and the
Initial Purchaser, its affiliates and any person acting on their behalf have
complied and will comply with the offering restriction requirements of
Regulation S. The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Notes (other than a sale of Notes pursuant to Rule 144A or to an
Accredited Investor), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases Notes
from it or through it during the restricted period a confirmation or notice to
substantially the following effect:
"The Notes covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act")
and may not be offered or sold within the United States or
to or for the account or benefit of U.S. persons (i) as part
of their distribution at any time and (ii) otherwise until
forty days after the later of the date upon which the
offering of the Notes commenced and the date of closing,
except in either case in accordance with Regulation S or
another available exemption from the registration
requirements of the Securities Act. Terms used above have
the meaning given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
The Initial Purchaser has advised the Company that it will offer the
Notes to Eligible Purchasers at a price and upon terms set forth in the Offering
Memorandum. Such price and terms may be changed by the Initial Purchaser at any
time thereafter without notice.
The Initial Purchaser understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 7
hereof, counsel to the Company and counsel to the Initial Purchaser, will rely
upon the accuracy and truth of the foregoing representations and agreements and
the Initial Purchaser hereby consents to such reliance.
5
<PAGE>
3. Delivery of the Notes and Payment Therefor. Delivery to the
Initial Purchaser of and payment for the Notes shall be made at the office of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York,
at 10:00 A.M., New York City time, on November 26 1997 (the "Closing Date").
The place of closing for the Notes and the Closing Date may be varied by
agreement between the Initial Purchaser and the Company.
The Notes which the Initial Purchaser may elect to purchase will be
delivered to the Initial Purchaser against payment of the purchase price
therefor in immediately available funds wired in accordance with the
instructions of the Company. The Notes will be evidence by a single global
security in definitive form (the "Global Debenture") and/or by additional
definitive securities, and will be registered, in the case of the Global
Debenture, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchaser shall request prior to 9:30 A.M., New York City time, on the
third business day preceding the Closing Date. The Notes to be delivered to the
Initial Purchaser shall be made available to the Initial Purchaser in New York
City for inspection and packaging not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date.
4. Agreements of the Company and the Guarantors. Each of the Company
and the Guarantors agrees with the Initial Purchaser as follows:
(a) The Company will advise the Initial Purchaser promptly and, if
requested by it, will confirm such advice in writing, within the period of time
referred to in the first sentence of subsection (e) below, of any material
change in the Company's condition (financial or other), business, prospects,
properties, net worth or results of operations, or of the happening of any event
which makes any material statement made in the Offering Memorandum (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Offering Memorandum (as then amended or supplemented) in order
to make the statements therein, in the light of the circumstances in which they
were made, not misleading, or of the necessity to amend or supplement the
Offering Memorandum (as then amended or supplemented) to comply with any law.
(b) The Company will furnish to the Initial Purchaser, without
charge, as of the date of the Offering Memorandum, such number of copies of the
Offering Memorandum
6
<PAGE>
as may then be amended or supplemented as it may reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchaser shall not previously have been advised or to which it shall
reasonably object after being so advised, and no such amendment or supplement
when it is made, shall contain an untrue statement of a material fact or will
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances in which
they were made, not misleading.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchaser, without charge,
in such quantities as it shall have requested or may hereafter reasonably
request, copies of the Preliminary Offering Memorandum. The Company consents to
the use, in accordance with the securities or Blue Sky laws of the jurisdictions
in which the Notes are offered by the Initial Purchaser and by dealers, prior to
the date of the Offering Memorandum, of each Preliminary Offering Memorandum so
furnished by the Company. The Company consents to the use of the Offering
Memorandum (and of any amendment or supplement thereto) in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Notes are offered
by the Initial Purchaser in connection with the offering and sale of the Notes.
(e) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchaser to Eligible Purchasers, any material event shall
occur that in the judgment of the Company or in the opinion of the Initial
Purchaser's counsel should be set forth in the Offering Memorandum (as then
amended or supplemented) in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Offering Memorandum in order to comply with
any law, the Company will forthwith prepare an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Initial Purchaser a
reasonable number of copies thereof.
(f) The Company will cooperate with the Initial Purchaser and with
its counsel in connection with the qualification of the Notes for offering and
sale by the Initial Purchaser and by dealers under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchaser may designate and will file
such consents to service of process or
7
<PAGE>
other documents necessary or appropriate in order to effect such qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Notes, in any jurisdiction where it
is not now so subject.
(g) So long as any of the Notes are outstanding, the Company will
furnish to the Initial Purchaser (i) as soon as available, a copy of each report
of the Company mailed to stockholders or filed with the Securities and Exchange
Commission and (ii) from time to time such other information concerning the
Company as the Initial Purchaser may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchaser terminating this Agreement pursuant to
Section 9 hereof) or if this Agreement shall be terminated by the Initial
Purchaser because of any failure or refusal on the part of the Company to comply
with the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Initial Purchaser for all out-of-pocket expenses
(including fees and expenses of its counsel) reasonably incurred by it in
connection herewith, but without further obligation on the part of the Company
for loss of profits or otherwise.
(i) The Company will apply the net proceeds from the sale of the
Notes to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Memorandum under the caption "Use of
Proceeds".
(j) Without the prior consent of the Initial Purchaser, prior to the
expiration of 90 days after the date of the Offering Memorandum the Company will
not offer, sell, contract to sell or otherwise dispose of any note or debenture
similar to the Notes having a maturity of more than one year.
(k) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, neither the Company nor any of its
Subsidiaries (as defined below) has taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Notes to
facilitate the sale or resale of the Notes. Except as permitted by the Act,
neither the Company nor any of
8
<PAGE>
its Subsidiaries will distribute any offering material in connection with the
Exempt Resales.
(l) The Company will use its reasonable best efforts to cause the
Notes to be eligible for trading on the PORTAL Market.
(m) From and after the Closing Date, so long as any of the Notes are
outstanding and during any period in which the Company is not subject to or
filing reports under Section 13 or 15(d) of the Exchange Act, the Company will
make available to holders of the Notes and prospective purchasers of Notes
designated by such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to Rule 144A (d)
(4) under the Act to permit compliance with Rule 144A in connection with resale
of the Notes.
(n) Each of the Company and the Guarantors agrees that it will not
and will cause its affiliates not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Notes in a manner that would
require the registration under the Act of the sale to the Initial Purchaser or
the Eligible Purchasers of the Notes.
(o) None of the Company and its affiliates will solicit any offer to
buy or offer or sell the Notes by means of any form of general solicitation or
general advertising.
(p) With respect to those Notes sold in reliance on Regulation S, (A)
none of the Company, its affiliates or any person acting on its or their behalf
(other than the Initial Purchaser, as to whom the Company makes no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S and (B) each of the Company and its
affiliates and any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Company makes no representation) has complied and will
comply with the offering restrictions requirement of Regulation S.
(q) During the period from the Closing Date to two years after the
Closing Date, the Company and the Guarantors will not, and will not permit any
"affiliate" (as defined in Rule 144 under the Act) of the Company or the
Guarantors to, resell any of the Notes that have been reacquired by them, except
for Notes purchased by the Company,
9
<PAGE>
the Guarantors or any of their affiliates and resold in a transaction registered
under the Act.
(r) The Company agrees to comply with all the terms and conditions of
the Registration Rights Agreement and all agreements set forth in the
representation letter of the Company to DTC relating to the approval of the
Notes by DTC for "book entry" transfer.
(s) The Company agrees that in connection with the registration of
the Notes pursuant to the Registration Rights Agreement, or at such earlier time
as may be required, the Indenture shall be qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act") and any necessary supplemental
indentures will be entered into in connection therewith.
(t) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any unaudited
interim consolidated financial statements of the Company for any period
subsequent to the period covered by the most recent consolidated financial
statements of the Company appearing in the Offering Memorandum.
(u) The Company and the Guarantors will not claim the benefit of
any usury laws against any holders of the Notes.
5. Representations and Warranties of the Company and the Guarantors.
Each of the Company and the Guarantors represents and warrants to the Initial
Purchaser that:
(a) The Preliminary Offering Memorandum and Offering Memorandum with
respect to the Notes have been prepared by the Company for use by the Initial
Purchaser in connection with the Exempt Resales. No order or decree preventing
the use of the Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act has been issued and no proceeding for that purpose has commenced or is
pending or, to the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates do not, and the Offering Memorandum as of the
Closing Date will not, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
10
<PAGE>
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Preliminary
Offering Memorandum and the Offering Memorandum made in reliance upon and in
conformity with information relating to the Initial Purchaser furnished to the
Company in writing by or on behalf of the Initial Purchaser expressly for use
therein.
(c) The Indenture has been duly and validly authorized by the Company
and, upon its execution and delivery by the Company and assuming due
authorization, execution, delivery and performance by the Trustee, will be a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' right generally and limits imposed by
equitable principles, and conforms in all material respects to the description
thereof in the Offering Memorandum; no qualification of the Indenture under the
1939 Act is required in connection with the offer and sale of the Notes
contemplated hereby or in connection with the Exempt Resales.
(d) The Notes and Guarantees have been duly authorized by the Company
and the Guarantors, respectively, and when the Guarantees is executed by the
Guarantors and the Notes are executed by the Company and authenticated by the
Trustee in accordance with the Indenture and the Notes are delivered to the
Initial Purchaser against payment therefor in accordance with the terms hereof,
the Notes and Guarantees will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company and the Guarantors,
respectively, entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
the enforcement of creditors' rights generally and limits imposed by equitable
principles, and the Notes will conform in all material respects to the
description thereof in the Offering Memorandum.
(e) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
(f) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Oklahoma with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum, and is duly
11
<PAGE>
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have, individually or in the aggregate, a
material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and the
Subsidiary (as hereinafter defined) taken as a whole (a "Material Adverse
Effect").
(g) The Company's only subsidiaries (as defined in the Act) are The
Environmental Group, Inc., International Environmental Corporation, Climate
Master, Inc., CHP Corporation, KOAX Corp., APR Corporation, Climate Mate, Inc.
(the "Canadian Subsidiary"), The Environmental Group International Limited (the
"United Kingdom Subsidiary"), LSB Chemical Corp., El Dorado Chemical Company,
Slurry Explosive Corporation, Universal Tech Corporation, Total Energy Systems
Limited ("TES"), Total Energy Systems (NZ) Ltd. ("TES-NZ"), T.E.S. Mining
Services Pty. Ltd. ("TES Mining"), Northwest Financial Corporation, DSN
Corporation and El Dorado Nitrogen Company (each a "Subsidiary" and collectively
the "Subsidiaries"). TES, TES-NZ and TES Mining Inc. collectively referred to
as the "Australian - New Zealand Subsidiaries." Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction, with full corporate power and authority to own, lease and operate
its properties and to conduct its business and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification. All the outstanding shares of capital stock or
other equity securities of each Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and are wholly owned by the Company,
directly or through one or more Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity or other encumbrance, except for (i)
the lien and security interest held by the Bank of New Zealand in the shares of
the Australian - New Zealand Subsidiaries, (ii) the right of first refusal on
the El Dorado Nitrogen Company shares and (iii) any restrictions on transfer
under the registration requirements of any federal or state securities laws.
(h) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary or to
which the Company or any Subsidiary or any of their respective
12
<PAGE>
properties is subject, that are not disclosed in the Offering Memorandum and
which, if adversely decided, would cause a Material Adverse Effect or to
materially affect the issuance of the Notes or the consummation of the
transactions contemplated by this Agreement.
(i) Neither any Company nor any of the Subsidiaries is (A) in
violation of its certificate or articles of incorporation, or bylaws or other
organizational documents, or (B) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any Subsidiary or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any Subsidiary, or (C) default in any
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the Company or
the Subsidiary a party or by which any of them or any of their respective
properties may be bound, except, in the case of (B) only, as disclosed in the
Offering Memorandum and, in the case of (B) and (C) only, where such violations
or defaults would not have, singly or in the aggregate, a Material Adverse
Effect.
(j) None of the issuance, offer, sale or delivery of the Notes, the
execution, delivery or performance of this Agreement, the Indenture or the
Registration Rights Agreement by the Company and the Guarantors or the
consummation by the Company and the Guarantors of the transactions contemplated
hereby or thereby (i) requires any consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required in connection with the registration under the Act of the
Notes and qualification of the Indenture under the 1939 Act in accordance with
the Registration Rights Agreement and compliance with the securities or Blue Sky
laws of various jurisdictions), or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the charter or
bylaws of the Company or the Subsidiary or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any material
agreement, indenture, lease or other instrument to which the Company or any
Subsidiary is a party or by which either of them or any of their respective
properties may be bound, or violates or will violate in any material respect any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any Subsidiary or any of their respective
properties, or will result in the creation or imposition of
13
<PAGE>
any lien, charge or encumbrance upon any material property or assets of the
Company or any Subsidiary pursuant to the terms of any agreement or instrument
to which either of them is a party or by which either of them may be bound or to
which any of the property or assets of any of them is subject.
(k) The accountants, Ernst & Young LLP, who have certified or shall
certify the financial statements included as part of the Offering Memorandum (or
any amendment or supplement thereto), are independent certified public
accountants with respect to the Company and the Subsidiaries within the meaning
of Regulation S-X under the Act.
(l) The financial statements, together with related schedules and
notes included in the Offering Memorandum, present fairly in all material
respects the consolidated financial position, results of operations and changes
in stockholders' equity and cash flows of the Company and the Subsidiaries at
the respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data included in the Offering Memorandum is
accurately presented and, to the extent such information and data is derived
from the financial books and records of the Company, is prepared on a basis
consistent with such financial statements and the books and records of the
Company and the Subsidiaries.
(m) Each of the Company and the Guarantors have all requisite power
and authority to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement; the execution and delivery of,
and the performance by the Company and the Guarantors of their obligations
under, this Agreement and the Registration Rights Agreement have been duly and
validly authorized by the Company and the Guarantors, respectively, and this
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and the Guarantors and constitute the valid and legally
binding agreements of the Company and the Guarantors, respectively, enforceable
against the Company and the Guarantors, respectively, in accordance with their
terms, except as the enforcement hereof and thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement or
creditors' rights generally and subject to the applicability of general
principles of equity, and except as rights to indemnity and contribution
hereunder and thereunder
14
<PAGE>
may be limited by Federal or state securities laws or principles of public
policy.
(n) Except as disclosed in the Offering Memorandum, subsequent
to the date as of which such information is given in the Offering Memorandum,
neither the Company nor any Subsidiary has incurred any liability or obligation,
direct or contingent, or entered into any transaction, not in the ordinary
course of business, that is material to the Company and the Subsidiaries taken
as a whole, and there has not been any material change in the capital stock, or
material increase in the short-term or long-term debt, of the Company or of any
Subsidiary or any material adverse change, or any development involving or which
would involve a prospective material adverse change, in the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole.
(o) The Company and each of the Subsidiaries has good and
marketable title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the Offering
Memorandum and all the property described in the Offering Memorandum as being
held under lease by the Company and each of the Subsidiaries is held by it under
valid, subsisting and enforceable leases, with only such exceptions as in the
aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company and the Subsidiaries
taken as a whole.
(p) The Company has not distributed and, prior to the later to
occur of the Closing Date and completion of the distribution of the Notes, will
not distribute any offering material in connection with the offering and sale of
the Notes other than the Preliminary Offering Memorandum and Offering
Memorandum.
(q) The Company and the Subsidiaries have such permits,
licenses, franchises, and other approvals or authorizations of governmental or
regulatory authorities ("Permits") as are necessary to own their respective
properties and to conduct their respective businesses in the manner described in
the Offering Memorandum, except such Permits the failure of which to possess
would not have, singly or in the aggregate, a Material Adverse Effect; the
Company and the Subsidiaries have fulfilled and performed all their respective
material obligations with respect to such Permits, except as described in the
Offering Memorandum, and no event
15
<PAGE>
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Memorandum; and, except as
described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company and the Subsidiaries,
taken as a whole.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Neither the Company nor any Subsidiary nor, to the Company's
knowledge, any employee or agent of the Company or any Subsidiary has made any
payment of funds of the Company or such Subsidiary or received or retained any
funds in violation of any law, rule or regulation, which violation would have a
Material Adverse Effect.
(t) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are true and correct, and neither
the Company nor any Subsidiary is in default in the payment of any taxes which
were payable pursuant to said returns or any assessments with respect thereto.
(u) No holder of any security of the Company, other than the
Notes, has any right to request or demand registration of such security because
of the consummation of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
(v) The Company and each of the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Offering Memorandum as being owned by any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to
16
<PAGE>
the rights of the Company and any Subsidiary with respect to the foregoing.
(w) The Company is not and, upon sale of the Notes to be issued
and sold thereby in accordance herewith and the application of the net proceeds
to the Company of such sale as described in the Offering Memorandum under the
caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(x) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning of Rule
144A (d) (3) under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated interdealer quotation system.
(y) Neither the Company nor any affiliate (as defined in Rule
501 (b) of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as to
the Initial Purchaser or any person acting on its behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or will be integrated with the
offering and sale of the Notes in a manner that would require the registration
of the Notes under the Act, (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offering of the Notes or (iii) engaged in any direct selling efforts within the
meaning of Regulation S or failed to comply with the offering restrictions
requirement of Regulation S.
(z) The Company is not required to deliver the information
specified in Rule 144A (d) (4) in connection with the offering and resale of the
Notes by the Initial Purchaser.
(aa) Assuming (i) that the representations and warranties in
Section 2 hereof are true, (ii) the Initial Purchaser complies with the
covenants set forth in Section 2 hereof, and (iii) that each person to whom the
Initial Purchaser offers, sells or delivers the Notes is a Qualified
Institutional Buyer or an Accredited Investor or is a person to whom the Notes
may be validly offered in an offshore transaction meeting the requirements
Regulation S, the purchase and sale of the Notes pursuant hereto (including the
Initial Purchaser's proposed offering of the Notes on the terms and in the
manner set forth in the Offering Memorandum
17
<PAGE>
and Section 2 hereof) is exempt from the registration requirements of the Act
and the Indenture is not required to be qualified under the 1939 Act.
(bb) The execution and delivery of this Agreement, the
Registration Rights Agreement and Indenture and the sale of the Notes to the
Initial Purchaser or by the Initial Purchaser to Eligible Purchasers will not
involve any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by the
Eligible Purchasers as set forth in the Offering Memorandum under the section
entitled "Notice to Investors."
(cc) Except as would not have a Material Adverse Effect or
otherwise be required to be disclosed in a registration statement under the Act,
or as disclosed in the Offering Memorandum, (i) the Company is not in violation
of any federal, state or local laws and regulations relating to pollution or
protection of human health or the environment or the use, treatment, storage,
disposal, transport or handling, emission, discharge, release or threatened
release of toxic or hazardous substances, materials or wastes, or petroleum and
petroleum products ("Materials of Environmental Concern") (collectively,
"Environmental Laws"), including, without limitation, noncompliance with or lack
of any permits or other environmental authorizations, and (ii) (A) the Company
has not received any communication from any person or entity alleging any
violation of or noncompliance with any Environmental Laws, and there are no past
or present circumstances that may lead to any such violation in the future, (B)
there is no pending or threatened claim, action, investigation or notice by any
person or entity against the Company or against any person or entity for whose
acts or omissions the Company is liable, either contractually or by operation of
law, alleging liability for investigatory, cleanup, or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to any Materi als of Environmental Concern
or any violation or potential violation, of any Environmental Law (collectively,
"Environ mental Claims"), and (C) there are no existing actions, activities,
circumstances, conditions, events or incidents that could form the basis of any
such Environmental Claim.
(dd) No labor dispute with the employees of the Company and any
of the Subsidiaries exists or is threatened or imminent that could result in a
material adverse change in the condition (financial or other), business,
18
<PAGE>
prospects, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(ee) The Company and LSB Industries, Inc. have completed the
reorganization and the Company's subsidiaries have entered into a revolving
credit facility with BankAmerica Business Credit, Inc. and the amendment with
respect to the secured facility with CIT Group/Equipment Financing, Inc., each
on or prior to the date of this Agreement, each on the terms disclosed in the
Offering Memorandum.
6. Indemnification and Contribution. (a) Subject to the provisions
of this Section 6, each of the Company and the Guarantors, jointly and
severally, agrees to indemnify and hold harmless the Initial Purchaser, its
affiliates and each person, if any, who controls the Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the
respective agents, employees, officers and directors of the Initial Purchaser,
its affiliates or such controlling persons (the "Initial Purchaser indemnified
parties"), from and against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation) arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or Offering Memorandum or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to the Initial
Purchaser indemnified parties furnished in writing to the Company by or on
behalf of the Initial Purchaser indemnified parties expressly for use in
connection therewith; provided, however, that the indemnification contained in
-------- -------
this paragraph (a) with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of the Initial Purchaser indemnified parties on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Notes by the Initial Purchaser to any person if the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
the Preliminary Offering Memorandum was corrected in the Offering Memorandum and
the Initial Purchaser sold Notes to that person without sending or giving at or
prior to the written confirmation of such sale, a copy of the Offering
Memorandum (as then amended or supplemented) if the
19
<PAGE>
Company has previously furnished sufficient copies thereof to the Initial
Purchaser on a timely basis to permit such sending or giving. The foregoing
indemnity agreement shall be in addition to any liability which the Company or
the Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against
an Initial Purchaser indemnified party in respect of which indemnity may be
sought against the Company or the Guarantors, the Initial Purchaser indemnified
party shall promptly notify the parties against whom indemnification is being
sought (the "indemnifying parties"), and such indemnifying parties shall assume
the defense thereof, including the employment of counsel and payment of all fees
and expenses. The Initial Purchaser indemnified party shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Initial Purchaser indemnified party unless (i)
the indemnifying parties have agreed in writing to pay such fees and expenses,
(ii) the indemnifying parties have failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both the Initial Purchaser indemnified
party and the indemnifying parties and the Initial Purchaser indemnified party
shall have been advised by its counsel that representation of such indemnified
party and any indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the indemnifying party shall not
have the right to assume the defense of such action, suit or proceeding on
behalf of the Initial Purchaser indemnified party). It is understood, however,
that the indemnifying parties shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all Initial Purchaser indemnified parties, which firm shall be designated in
writing by the Initial Purchaser, and that all such fees and expenses shall be
reimbursed on a monthly basis as provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify and
20
<PAGE>
hold harmless the Initial Purchaser indemnified parties, to the extent provided
in paragraph (a), from and against any loss, claim, damage, liability or expense
by reason of such settlement or judgment.
(c) The Initial Purchaser agrees to indemnify and hold harmless
the Company and the Guarantors, their affiliates, any person who controls the
Company or the Guarantors within the meaning of Section 15 of the Act or Section
20 of the Exchange Act and any of their respective officers, directors,
employees or agents (the "Company indemnified parties") to the same extent as
the indemnity from the Company and the Guarantors to the Initial Purchaser
indemnified parties set forth in paragraph (a) hereof, but only with respect to
information relating to the Initial Purchaser furnished in writing by or on
behalf of the Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company indemnified
parties based on the Preliminary Offering Memorandum or Offering Memorandum, or
any amendment or supplement thereto, and in respect of which indemnity may be
sought against the Initial Purchaser pursuant to this paragraph (c), the Initial
Purchaser shall have the rights and duties given to the Company and the
Guarantors by paragraph (b) above (except that if the Company and the Guarantors
shall have assumed the defense thereof such Initial Purchaser shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at such
Initial Purchaser's expense), and the Company indemnified parties shall have the
rights and duties given to the Initial Purchaser indemnified parties by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which the Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand and the Initial Purchaser on the
other hand from the offering of the Notes, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred
21
<PAGE>
to in clause (i) above but also the relative fault of the Company and the
Guarantors on the one hand and the Initial Purchaser on the other in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Guarantors on the one hand
and the Initial Purchaser on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Initial Purchaser, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company and the Guarantors on the one hand and the Initial Purchaser on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company and the Guarantors
on the one hand or by the Initial Purchaser on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company, the Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitation set
forth in this Section 6, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this Section
6, the Initial Purchaser shall not be required to contribute any amount in
excess of the amount by which the total price of the Notes underwritten by it
and distributed to the public exceeds the amount of any damages which the
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 6 shall be
22
<PAGE>
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 6 and the representations and warranties of
the Company and the Guarantors set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of the Initial Purchaser or any persons controlling the Initial
Purchaser, the Company and the Guarantors, their directors or officers or any
person controlling the Company or the Guarantors, (ii) acceptance of any Notes
and payment therefore hereunder, and (iii) any termination of this Agreement. A
successor to the Initial Purchaser indemnified parties or to the Company shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
7. Conditions of the Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase the Notes are subject to the
following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering Memorandum
or any amendment or supplement thereto, or any order asserting that the
transactions contemplated by the Agreement are subject to the registration
requirements of the Act shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending or, to the knowledge of
the Company, be contemplated. No stop order suspending the sale of the Notes in
any jurisdiction designated by any of the Initial Purchaser shall have been
issued and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company
23
<PAGE>
or the Subsidiary not contemplated by the Offering Memorandum, which in the
opinion of the Initial Purchaser, would materially adversely affect the market
for the Notes, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company which makes any material
statement made in the Offering Memorandum untrue or which, in the opinion of the
Company and its counsel or the Initial Purchaser and its counsel, requires the
making of any addition to or change in the Offering Memorandum in order to state
a material fact required by any law to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, if amending or supplementing the Offering Memorandum
to reflect such event or development would, in the opinion of the Initial
Purchaser, materially adversely affect the market for the Notes.
(c) The Initial Purchaser shall have received on the Closing
Date an opinion of Conner & Winters, counsel for the Company dated the Closing
Date and addressed to the Initial Purchaser, to the effect that:
(i) Each of the Company and Subsidiaries is a
corporation duly incorporated and validly existing in good
standing under the laws of its respective jurisdiction of
incorporation with full corporate power and authority to own,
lease and operate its respective properties and to conduct its
respective business as described in the Offering Memorandum (and
any amendment or supplement thereto), notwithstanding anything
herein to the contrary, whenever the terms "Subsidiary,"
"Subsidiaries," "Guarantor" and "Guarantors" are used in this
Section 7(c), such shall exclude for all purposes the United
Kingdom Subsidiary, the Australian -New Zealand Subsidiaries and
the Canadian Subsidiary except where indicated;
(ii) Each of the Company and the Guarantors have
the corporate power and authority to enter into this Agreement
and the Registration Rights Agreement and, in the case of the
Company, to issue, sell and deliver the Notes to be sold by it to
the Initial Purchaser as provided herein, and this Agreement and
the Registration Rights Agreement have been duly authorized,
executed and delivered by the Company and the Guarantors and are
the valid, legal and binding agreements of the Company and the
Guarantors (including TES),
24
<PAGE>
enforceable against the Company and the Guarantors in accordance
with their terms, except (A) as enforcement of rights to
indemnity and contribution hereunder and thereunder may be
limited by Federal or state securities laws or principles of
public policy and (B) subject to the qualification that the
enforceability of the Company's and the Guarantors's obligations
hereunder and thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other
similar laws affecting creditors' rights generally and by general
equitable principles;
(iii) The Indenture has been duly and validly
authorized, executed and delivered by the Company and the
Guarantors and, assuming due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the
Company and the Guarantors (including TES), enforceable in
accordance with its terms, subject to the qualification that the
enforceability of the Company's and the Guarantors's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and by general equitable
principles; no qualification of the Indenture under the 1939 Act
is required in connection with the offer and sale of the Notes
contemplated hereby or in connection with the Exempt Resales;
(iv) The Notes have been duly and validly authorized
by the Company and when executed by the Company in accordance
with the Indenture and, assuming due authentication of the Notes
by the Trustee, upon delivery to the Initial Purchaser against
payment therefor in accordance with the terms hereof, will have
been validly issued and delivered, and will constitute valid and
binding obligations of the Company enforceable in accordance with
their terms and entitled to the benefits of the Indenture,
subject to the qualification that the enforceability of the
Company's obligations thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights
generally and by general equitable principles;
25
<PAGE>
(v) Neither the offer, sale or delivery of the
Notes, the execution, delivery or performance by the Company and
the Guarantors of this Agreement, the Registration Rights
Agreement or the Indenture, compliance by the Company and the
Guarantors with the provisions hereof or thereof nor consummation
by the Company and the Guarantors of the transactions
contemplated hereby or thereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under,
the charter or by laws of the Company or the Subsidiary or any
material agreement, indenture, lease or other instrument to which
any of the Company or the Subsidiaries is a party or by which
either of them or any of their properties is bound or results or
will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any of the Company or
the Subsidiaries, nor will any such action result in any
violation in any material respect of any existing law, of any
regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or
decree known to such counsel, applicable to the Company, the
Subsidiaries or any of their respective properties, provided that
such counsel need express no opinion with respect to laws
involving fraudulent conveyances;
(vi) The Guarantees have been duly and validly
authorized by the Guarantors and when executed by the Guarantors
in accordance with the Indenture and, assuming due authentication
of the Notes by the Trustee, upon delivery to the Initial
Purchaser against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Guarantors
(including TES) enforceable in accordance with their terms and
entitled to the benefits of the Indenture, subject to the
qualification that the enforceability of the Guarantors'
obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights generally and by
general equitable principles;
(vii) No consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory
body,
26
<PAGE>
administrative agency or other governmental body, agency or
official is required on the part of the Company for the valid
issuance and sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Indenture (except such as
may be required under securities or Blue Sky laws of various
jurisdictions);
(viii) To the knowledge of such counsel after
reasonable inquiry, other than as described in the Offering
Memorandum (or any amendment or supplement thereto), there are no
legal or governmental proceedings pending or threatened against
the Company or the Subsidiaries or to which the Company or the
Subsidiaries or any of their properties are subject, which, if
adversely decided, are reasonably likely to cause a Material
Adverse Effect or materially affect the issuance of the Notes or
the consummation of the transactions contemplated by this
Agreement;
(ix) The statements contained in the Offering
Memorandum, insofar as they are descriptions of contracts,
agreements or other legal documents, or refer to statements of
law or legal conclusions, are, to the knowledge of such counsel
after making reasonable inquiry, accurate in all material
respects and present fairly the information required to be shown;
(x) Such counsel does not know of any person who
has the right, contractual or otherwise, to cause the Company to
sell or otherwise issue to them, or to permit them to underwrite
the sale of, any of the Notes or the right, as a result of the
consummation of the transactions contemplated by this Agreement
and the Registration Rights Agreement, to require registration
under the Act of any shares of Common Stock or other securities
of the Company, other than the holders of the Notes;
(xi) When the Notes are issued and delivered
pursuant to this Agreement, such Notes will not be of the same
class (within the meaning of Rule 144A(d) (3) under the Act) as
any security of the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange
Act or that is quoted in a United State automated interdealer
quotation system;
27
<PAGE>
(xii) No registration of the Notes under the Act or
qualification of the Indenture under the 1939 Act is required for
the sale of the Notes to the Initial Purchaser or for the Exempt
Resales in the manner contemplated by the Purchase Agreement and
the Offering Memorandum;
(xiii) The Company is not required to obtain
stockholder consent for the issuance of offering of the Notes;
(xiv) To the knowledge of such counsel after making
reasonable inquiry, the Company is duly registered and qualified
to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have,
individually or in the aggregate, a Material Adverse Effect;
(xv) All the outstanding shares of capital stock or
other equity securities of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and
nonassessable, and the shares of each of the Subsidiaries
(including the United Kingdom Subsidiary, the Australian -New
Zealand Subsidiaries and the Canadian Subsidiaries) are owned by
the Company, directly or through one or more Subsidiaries, and,
to the knowledge of such counsel after making reasonable inquiry,
with respect to such shares other than those of the United
Kingdom Subsidiary, the Australian - New Zealand Subsidiary and
the Canadian Subsidiary, are free and clear of any security
interest, lien, adverse claim, equity or other encumbrance,
except for (i) the lien and security interest held by the Bank of
New Zealand in the shares of the Australian - New Zealand
Subsidiaries, (ii) the right of first refusal on the El Dorado
Nitrogen Company shares and (iii) any restrictions on transfer
under the registration requirements of any federal or state
securities laws;
(xvi) To the knowledge of such counsel after making
reasonable inquiry, each of the Subsidiaries is duly registered
and qualified
28
<PAGE>
to conduct its business and is in good standing as a foreign
corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have,
individually or in the aggregate, a Material Adverse Effect;
(xvii) To the knowledge of such counsel after making
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation of its respective charter or bylaws,
or is in default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any material agreement,
indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, except for violations
or defaults which would not have, singly or in the aggregate, a
Material Adverse Effect or except as described in the Offering
Memorandum (or any amendment or supplement thereto);
(xviii) To the knowledge of such counsel after making
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation in any material respects of any
decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, except
for violations which would not, singly or in the aggregate, have
a Material Adverse Effect and except as disclosed or referenced
in the Offering Memorandum (or any amendment or supplement
thereto);
(xix) All the shares of capital stock of the Company
outstanding prior to the issuance of the Notes have been duly
authorized and validly issued and are fully paid and
nonassessable; and
(xx) Although such counsel has not undertaken,
except as otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in
the Offering Memorandum, such counsel has participated in the
preparation of the Offering
29
<PAGE>
Memorandum, including review and discussion of the contents
thereof, and nothing has come to the attention of such counsel
that has caused them to believe that the Offering Memorandum, as
of its date and as of the Closing Date, contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading or that any amendment or supplement to the
Offering Memorandum, as of its respective date and as of the
Closing Date, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included in
the Offering Memorandum).
Such opinion may state (A) as to the enforceability of the Indenture, the
Registration Rights Agreement and this Agreement, that such counsel assumes that
the laws of the State of New York which affect enforceability are not different
from the laws of the State of Oklahoma, (B) as to matters of Australian law, it
is relying on the opinion of Corrs Chambers Westgarth and (C) it is assuming
that the transactions contemplated by the Indenture, the Registration Rights
Agreement and this Agreement do not conflict with or constitute a default under
(i) any Australian law, rule, or regulation to which the Company, the Guarantors
or any of their properties is subject, (ii) any judicial or regulatory order or
decree of any Australian governmental authority, (iii) any consent, approval,
license, authorization or validation of, or filing, recording or registration
with any Australian governmental authority, and (iv) there is nothing to
preclude this Agreement, the Registration Rights Agreement and Indenture from
being a valid and binding agreement under Australian law.
(d) The Initial Purchaser shall have received on the Closing Date an
opinion of Corrs Chambers Westgarth, counsel for TES dated the Closing Date and
addressed to the Initial Purchaser, to the effect that:
(i) TES is a corporation duly incorporated and
validly existing in good standing
30
<PAGE>
under the laws of its jurisdiction of incorporation;
(ii) TES has the corporate power and authority to
enter into this Agreement, the Registration Rights Agreement and
the Indenture, and this Agreement, the Registration Rights
Agreement and the Indenture have been duly autho rized, executed
and delivered by TES, subject to TES receiving valid benefits
under the Guarantee; and
(iii) The Guarantee has been duly and validly
authorized by TES, subject to TES receiving valid benefits under
the Guarantee.
(e) The Initial Purchaser shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the
Initial Purchaser, dated the Closing Date, and addressed to the Initial
Purchaser, with respect to such matters as the Initial Purchaser may request.
(f) The Initial Purchaser shall have received letters addressed to it
and dated the Closing Date from Ernst & Young, independent certified public
accountants, substantially in the forms heretofore approved by the Initial
Purchaser, and the Initial Purchaser shall have received an executed audit
report addressed to the board of directors and stockholders of the Company in
exactly the form contained in the Offering Memorandum.
(g) (i) There shall not have been any change in the capital stock of
the Company nor any material increase in the short-term or long-term debt of the
Company (other than in the ordinary course of business) from that set forth in
the Offering Memorandum; (ii) there shall not have been, since the respective
dates as of which information is given in the Offering Memorandum, except as may
otherwise be stated therein, any material adverse change in the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole; (iii) the
Company and the Subsidiaries shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business), that
are material to the Company and the Subsidiaries, taken as a whole, other than
those reflected in the Offering Memorandum; and (iv) all the representations and
warranties of the Company and the Guarantors contained in this Agreement shall
be true and correct in all material respects
31
<PAGE>
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and the Initial Purchaser shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company and the Guarantors (or such other
officers as are acceptable to the Initial Purchaser), to the effect set forth in
this Section 7(g) and in Section 7(h) hereof.
(h) The Company and the Guarantors shall not have failed at or prior
to the Closing Date to have performed or complied with any of their agreements
herein contained and required to be performed or complied with by them hereunder
at or prior to the Closing Date.
(i) After the date hereto and at or prior to the Closing Date there
shall not have been any announcement by any "nationally recognized statistical
rating organization," as defined for purposes of Rule 436 (g) under the Act,
that (i) it is downgrading its rating assigned to any class of securities of the
Company, or (ii) it is reviewing its ratings assigned to any class of securities
of the Company with a view to possible downgrading, or with negative
implications, or direction not determined.
(j) The Notes shall have been approved for trading on PORTAL.
(k) The Company shall produce on the Closing Date evidence
satisfactory to the Initial Purchaser of the repayment and termination of the
term loan with the John Hancock Mutual Life Insurance Company.
(l) The Company shall have furnished or caused to be furnished to the
Initial Purchaser such further certificates and documents as the Initial
Purchaser shall have reasonably requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to the Initial Purchaser and counsel for the Initial Purchaser.
Any certificate or document signed by any officer of the Company or the
Guarantors and delivered to the Initial Purchaser, or to counsel for the Initial
Purchaser, shall be deemed a representation and warranty by the Company or such
Guarantors to the Initial Purchaser as to the statements made therein.
32
<PAGE>
8. Expenses. (a) Whether or not the purchase and sale of the Notes
hereunder is consummated or this Agreement is terminated pursuant to Section 9,
the Company agrees to pay the following costs and expenses and all other costs
and expenses incident to the performance by it of its obligations hereunder: (i)
the preparation, printing, or reproduction of the Preliminary Offering
Memorandum, Offering Memorandum (including financial statements thereto), and
each amendment or supplement to any of them; (ii) the delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the Offering Memorandum, the Preliminary Offering Memorandum, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Notes; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Notes,
including any stamp taxes in connection with the original issuance and sale of
the Notes; (iv) the printing (or reproduction) and delivery of this Agreement,
the preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Notes; (v) the application for quotation of the Notes on the PORTAL
market; (vi) the qualification of the Notes for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 4 (f)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Initial Purchaser relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
qualification); (vii) the performance by the Company of its obligations under
the Registration Rights Agreement; (viii) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company; and (ix) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Notes.
(b) If the purchase and sale of the Notes hereunder is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 9 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by the Initial Purchaser in payment for the Notes on the
Closing Date, the Company shall reimburse the Initial Purchaser promptly upon
demand for all out-of-pocket expenses (including fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase
33
<PAGE>
and sale of the Notes and the other transactions contemplated hereby.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, without
liability on the part of the Initial Purchaser to the Company, by notice to the
Company, if prior to the Closing Date, (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York or Oklahoma City,
Oklahoma shall have been declared, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other U.S. or international calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
the judgment of the Initial Purchaser, impracticable or inadvisable to commence
or continue the offering of the Notes on the terms set forth on the cover page
of the Offering Memorandum or to enforce contracts for the resale of the Notes
by the Initial Purchaser. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
10. Information Furnished by the Initial Purchaser. The statements
set forth in the stabilization legend on the inside front cover, the last
paragraph on the cover page and the statements in the first three paragraphs and
the last two paragraphs under the caption "Plan of Distribution" in the
Preliminary Offering Memorandum and Offering Memorandum, constitute the only
information furnished in writing by or on behalf of the Initial Purchaser as
such information is referred to in Sections 5 (b) and 6 hereof.
11. Miscellaneous. Except as otherwise provided in Sections 4 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at ClimaChem, Inc., P.O.
Box 754, 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73101, Attention:
Jack E. Golsen, with a copy to Conner & Winters, One Leadership Square, Suite
1700, 211 North Robinson, Oklahoma City, Oklahoma 73102, Attention: Irwin H.
Steinhorn, or (ii) if to the Initial Purchaser, at Wasserstein Perella & Co.,
Inc., 31 West 52nd Street, New York, NY 10019, Attention: Steven Fischer, with a
copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY
10022, Attention: Matthew J. Mallow.
34
<PAGE>
This Agreement has been and is made solely for the benefit of the
Initial Purchaser, the Company and the Guarantors, their directors and officers
and the controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchaser of any of the Notes in his
status as such purchaser.
12. Applicable Law; Governing Law; Consent to Jurisdiction; Waiver of
Immunity and of Right to Jury Trial; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York
and without regard to the conflicts of law principles thereof. Each of the
Company and the Guarantors agrees that any action or proceeding based hereon, or
arising out of the transactions contemplated hereunder, shall be brought and
maintained in the courts of the State of New York located in the city and county
of New York or in the United States District Court for the Southern District of
New York. Each of the Company and the Guarantors hereby irrevocably submits to
the exclusive jurisdiction of the courts of the State of New York located in the
city and county of New York and the United States District Court for the
Southern District of New York for the purpose of any such action or proceeding
as set forth above and irrevocably agrees to be bound by any judgment rendered
thereby in connection with such action or proceeding. Each of the Company and
the Guarantors hereby irrevocably appoints CT Corporation as their authorized
agent upon which process may be served in any action arising out of based upon
this Agreement. Each of the Company and the Guarantors hereby expressly and
irrevocably waives to the fullest extent permitted by law any immunity from
jurisdiction of any such court and any objection, claim or defense in any such
action or proceeding which they may have, or hereafter may have, based on a
claim of improper venue, forum non conveniens or any similar basis to which the
Company or the Guarantors might otherwise be entitled in any such action or
proceeding.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
35
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors and the Initial Purchaser.
Very truly yours,
CLIMACHEM, INC.
By: /s/ Tony M. Shelby
---------------------------
Name: Tony M. Shelby
Title: Vice President
THE GUARANTORS:
International Environmental Corporation
Climate Master, Inc.
CHP Corporation
KOAX Corp.
APR Corporation
LSB Chemical Corp.
Slurry Explosive Corporation
Universal Tech Corporation
Total Energy Systems Limited
Northwest Financial Corporation
DSN Corporation
By: /s/ Tony M. Shelby
---------------------------
Name: Tony M. Shelby
Title: Vice President
Climate Mate, Inc.
The Environmental Group
International Limited
By: /s/ David R. Goss
---------------------------
Name: David R. Goss
36
<PAGE>
Total Energy Systems (NZ) Ltd.
T.E.S. Mining Services Pty. Ltd.
El Dorado Chemical Company
By: /s/ James L. Wewers
--------------------------
Name: James L. Wewers
The Environmental Group, Inc.
By: /s/ Barry H. Golsen
--------------------------
Name: Barry H. Golsen
Confirmed as of the date first
above mentioned.
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ James C. Kingsbery
-----------------------------
Name: James C. Kingsbery
Title: Chief Financial Officer
37
<PAGE>
EXHIBIT 3.1
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
OF
CLIMACHEM, INC.
In testimony whereof, I have hereunto set my
hand and affixed the Great Seal of the State
of Oklahoma at the City of Oklahoma City this
21/st/ day, of November , A.D. 1997.
------ ---------
_______________________________
Secretary of State
By:____________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
WHEREAS, the Certificate of Incorporation of
CLIMACHEM, INC.
has been filed in the office of the Secretary of State as provided by the laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby issue this
certificate evidencing such filing.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this
17/th/ day of October , 1997.
------ -------- --
_______________________________
Secretary of State
By:______________________________
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CLIMACHEM, INC.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
FIRST: NAME. The name of this corporation is ClimaChem, Inc. (hereafter
----
this "Corporation").
SECOND: Registered Office. The name and address of the registered agent of
-----------------
this Corporation in the State of Oklahoma and the address of the registered
office of this Corporation in the State of Oklahoma, which is the same as the
address of its registered agent, are:
David M. Shear, General Counsel
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
THIRD: Term. The term of this Corporation shall be perpetual.
----
FOURTH: Purpose. The purpose of this Corporation is to engage in any
-------
lawful act or activity for which corporations may be organized under the
Oklahoma General Corporation Act.
FIFTH: Capital Stock. This Corporation is authorized to issue only one
-------------
(1) class of shares of capital stock, to be designated "Common Stock." The total
number of shares of Common Stock which this Corporation shall have authority to
issue and the par value of each share of Common Stock are as follows:
<TABLE>
<CAPTION>
Total Number Par Value Total Authorized
Of Shares of Each Share Common Stock
-------------- ------------- ----------------
<S> <C> <C>
500,000 $.010 $50,000
</TABLE>
SIXTH: Incorporator. The name and address of the incorporator is as
------------
follows:
J. Ann Muise
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
SEVENTH Directors. The names and mailing addresses of the persons who are
---------
to serve as directors until the first annual meeting of the shareholders or
until their removal or resignation are as follows:
<PAGE>
Name Mailing Address
---- ---------------
Jack E. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Barry H. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Tony M. Shelby 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
EIGHTH: Internal Affairs. The following constitute provisions for the
----------------
regulation of internal affairs of this Corporation:
(a) Bylaws. The Bylaws for the governing of this Corporation may be
------
adopted, amended, altered, repealed, or readopted by the Board of Directors
at any stated or special meeting of such board or by the written consent of
all directors. The powers of such directors in this regard shall at all
times be subject to the rights of the shareholders to adopt, alter or
repeal such Bylaws at any annual or special meeting of shareholders or by
written consent of a majority of the shareholders, and the power of the
Board of Directors shall not extend to any amendment of the Bylaws
respecting the number, qualifications, classifications, or term of office
of the members of the Board of Directors.
(b) Number of Directors. The number of directors of this Corporation
-------------------
shall be such as from time to time fixed by, or in the manner provided in,
the Bylaws. Election of directors need not be by ballot unless the Bylaws
so provide.
(c) Stock. The number of authorized shares of any class or classes of
-----
stock may, by amendment to the Corporation's Certificate of Incorporation,
be increased or decreased, but not below the number of shares of such class
or classes then outstanding, by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote, irrespective of
the provisions of Section 1077(B)(2) of the Oklahoma General Corporation
Act.
(d) Contracts. To the extent permitted by law, no contract or
---------
transaction between the Corporation and one or more of the Corporation's
directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or
more of the Corporation's directors or officers are directors or officers
2
<PAGE>
or have a financial interest, will be void or voidable solely for this
reason, or solely because the Corporation's directors or officers are
present at or participate in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction, or solely
because the Corporation's directors or officers or their votes are counted
for such purposes.
NINTH: Creditors Arrangements. Whenever a compromise or arrangement is
----------------------
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its shareholders or any class of them, any court of
equitable jurisdiction within the State of Oklahoma, on the application in a
summary way of this Corporation or of any creditor or shareholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 1106 of the Oklahoma General Corporation Act or
on the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 1100 of the
Oklahoma General Corporation Act, may order a meeting of the creditors or class
of creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, to be summoned in such manner as the court
directs. If a majority in the number representing three-fourths (3/4) in value
of the creditors or class of creditors, and/or of the shareholders or class of
shareholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the compromise or arrangement and the
reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, and/or on all
the shareholders or class of shareholders, of this Corporation, as the case may
be, and also on this Corporation.
TENTH: Director's Liability; Indemnification
-------------------------------------
(a) Director's Liability. To the maximum extent permitted by the
--------------------
Oklahoma General Corporation Act as it exists on the date hereof or as it
may hereafter be amended, no director of this Corporation shall be liable
to this Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision will not
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, or (b)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, or (c) under Section 1053 of
the Oklahoma General Corporation Act, or (d) for any transaction from which
the director derived an improper personal benefit. No amendment to or
repeal of this Article TENTH shall apply to or have any effect on the
liability or alleged liability of any director of this
3
<PAGE>
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
(b) Indemnification. The Corporation will indemnify and advance
---------------
litigation expenses to its officers, directors, employees and agents and to
persons who are or were serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise to the fullest extent permitted by
the Oklahoma General Corporation Act and all other laws of the State of
Oklahoma. On the request of any person who believes such person is entitled
to indemnification pursuant to the provisions of Section 1031(A) or (B) of
the Oklahoma General Corporation Act, the directors will by vote at a
special meeting, immediately called for such purpose or by unanimous
written consent, to determine whether such person has met the standards of
conduct set forth in Section 1031(A) or (B) of the Oklahoma General
Corporation Act, as amended, whichever is applicable, subject to the
provisions of Section 1031(D)(1) and (2) of the Oklahoma General
Corporation Act, as amended from time to time, and, if so, provide for such
indemnification.
ELEVENTH: Amendment. This Corporation reserves the right at any time and
---------
from time to time to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and other provisions authorized by the laws
of the State of Oklahoma at the time in force may be added or inserted in this
Certificate of Incorporation, in the manner now or hereafter prescribed by law;
and all rights, preferences and privileges of whatsoever nature conferred upon
shareholders, directors or any other persons by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted subject
to the right reserved in this Section ELEVENTH.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove
named, for the purpose of forming a corporation under the laws of the State of
Oklahoma, does certify that the facts herein stated are true, and accordingly,
has hereunto set her hand this 17th day of October, 1997.
_______________________________
J. Ann Muise, Incorporator
4
<PAGE>
FEE: $10.00
APPLICATION
FOR
RESERVATION OF NAME
PLEASE PRINT CLEARLY
FILE IN DUPLICATE
TO: THE OKLAHOMA SECRETARY OF STATE, 2300 N. Lincoln, Room 101, Oklahoma City,
OK 73105-4897
The undersigned hereby requests that the following name be reserved for a period
of sixty (60) days:
ClimateChem, Inc.
- --------------------------------------------------------------------------------
This name will be used for the following (please check appropriate blank):
Corporation XXXX
--------------------------------
Limited Partnership ________________________
Limited Liability Company __________________
_______________________________________________
Signature of Applicant
J. Ann Muise
-----------------------------------------------
Print Name of Applicant
16 South Pennsylvania
-----------------------------------------------
Address
Oklahoma City, Oklahoma 73107
-----------------------------------------------
City and State
PLEASE NOTE: If the name of the person listed on this reservation does NOT
---
appear in the documents containing this reserved name, a COPY of this name
reservation MUST accompany the document.
----
5
<PAGE>
EXHIBIT 3.2
TABLE OF CONTENTS
TO
BYLAWS
OF
CLIMACHEM, INC.
(AN OKLAHOMA CORPORATION)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - NAME........................................................... 1
ARTICLE II - OFFICES....................................................... 1
Section 2.1 Principal Office....................................... 1
Section 2.2 Other Offices.......................................... 1
ARTICLE III - MEETINGS OF SHAREHOLDERS..................................... 1
Section 3.1 Annual Meetings........................................ 1
Section 3.2 Failure to Hold Annual Meeting......................... 1
Section 3.3 Special Meetings....................................... 2
Section 3.4 Place of Meetings...................................... 2
Section 3.5 Notice of Meetings..................................... 2
Section 3.6 Voting List............................................ 2
Section 3.7 Quorum and Adjourned Meeting........................... 3
Section 3.8 Voting................................................. 3
Section 3.9 Vote Required.......................................... 4
Section 3.10 Proxies................................................ 4
Section 3.11 Order of Business...................................... 4
Section 3.12 Action Without Meeting................................. 5
Section 3.13 Inspectors of Election................................. 5
ARTICLE IV - BOARD OF DIRECTORS............................................ 6
Section 4.1 Powers................................................. 6
Section 4.2 Number, Election and Term of Office.................... 7
Section 4.3 Vacancies.............................................. 7
Section 4.4 Resignations........................................... 7
Section 4.5 Removal................................................ 8
Section 4.6 Annual Meeting......................................... 8
Section 4.7 Regular Meetings....................................... 8
Section 4.8 Special Meetings....................................... 8
Section 4.9 Place of Meetings...................................... 8
Section 4.10 Quorum and Required Vote; Adjourned Meetings........... 8
Section 4.11 Compensation........................................... 9
Section 4.12 Action without Meeting................................. 9
Section 4.13 Telephonic Meetings.................................... 9
ARTICLE V - EXECUTIVE COMMITTEE............................................ 9
Section 5.1 Election............................................... 9
Section 5.2 Duties................................................. 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.3 Meetings............................................... 10
Section 5.4 Quorum and Voting...................................... 10
Section 5.5 Waiver of Notice....................................... 10
Section 5.6 Removal................................................ 10
Section 5.7 Vacancies.............................................. 10
Section 5.8 Action Without Meeting; Telephonic Meeting............. 10
ARTICLE VI - COMMITTEES OF DIRECTORS....................................... 10
Section 6.1 Designation............................................ 10
Section 6.2 Procedural Rules....................................... 11
ARTICLE VII - OFFICERS..................................................... 11
Section 7.1 Officers............................................... 11
Section 7.2 Election............................................... 11
Section 7.3 Subordinate Officers................................... 11
Section 7.4 Removal................................................ 11
Section 7.5 Resignation............................................ 11
Section 7.6 Vacancies.............................................. 12
Section 7.7 Chairman of the Board.................................. 12
Section 7.8 Vice Chairman of the Board............................. 12
Section 7.9 Chief Executive Officer................................ 12
Section 7.10 President.............................................. 12
Section 7.11 Senior Vice-President.................................. 13
Section 7.12 Vice-President......................................... 13
Section 7.13 Secretary.............................................. 14
Section 7.14 Assistant Secretaries.................................. 14
Section 7.15 Treasure............................................... 14
Section 7.16 Assistant Treasurers................................... 15
Section 7.17 Delegation of Duties................................... 15
ARTICLE VIII - SHARES OF STOCK............................................. 15
Section 8.1 Certificates of Stock.................................. 15
Section 8.2 Record of Shareholders................................. 16
Section 8.3 Transfer Agents and Registrars......................... 16
Section 8.4 Transfer of Shares..................................... 16
Section 8.5 Shareholders Record Date and Closing Stock Books....... 16
Section 8.6 Registered Shareholders................................ 17
Section 8.7 Lost Certificates...................................... 17
Section 8.8 Treasury Shares........................................ 17
Section 8.9 Fractional Shares...................................... 17
ARTICLE IX - EXECUTION OF INSTRUMENTS...................................... 18
Section 9.1 Contracts.............................................. 18
Section 9.2 Checks and Drafts...................................... 18
Section 9.3 Deposits; Bank Accounts................................ 18
Section 9.4 Loans.................................................. 18
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.5 Sale or Transfer of Securities Held by the Corporation......... 19
Section 9.6 Execution of Proxies........................................... 19
ARTICLE X - INDEMNIFICATION........................................................ 19
Section 10.1 Indemnification; Actions Other Than by the Corporation......... 19
Section 10.2 Indemnification; Actions by the Corporation.................... 20
Section 10.3 Right to Indemnification....................................... 20
Section 10.4 Authorization of Indemnification............................... 20
Section 10.5 Advance Indemnification........................................ 21
Section 10.6 Non-Exclusive Indemnification.................................. 21
Section 10.7 Insurance...................................................... 21
Section 10.8 Constituent Corporation........................................ 21
Section 10.9 Definitions.................................................... 21
ARTICLE XI - GENERAL PROVISIONS.................................................... 22
Section 11.1 Fiscal Year.................................................... 22
Section 11.2 Seal........................................................... 22
Section 11.3 Dividends...................................................... 22
Section 11.4 Notice......................................................... 22
Section 11.5 Waiver of Notice............................................... 22
Section 11.6 Conflicts of Interest.......................................... 23
Section 11.7 Loans to Officers or Employees................................. 23
Section 11.8 Amendment...................................................... 24
</TABLE>
iii
<PAGE>
BYLAWS
OF
CLIMACHEM, INC.
(an Oklahoma corporation)
ARTICLE I
NAME
----
The name of the Corporation is ClimaChem. Inc. (the "Corporation").
ARTICLE II
OFFICES
-------
Section 2.1 Principal Office. The present location of the principal
----------------
office for the transaction of the business of the Corporation is 16 South
Pennsylvania, Oklahoma City, Oklahoma 73107. The Board of Directors may change
such principal office from time to time.
Section 2.2 Other Offices. The Corporation may have other offices at
-------------
such places, within or without the State of Oklahoma, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
ARTICLE III
MEETINGS OF SHAREHOLDERS
------------------------
Section 3.1 Annual Meetings. The annual meetings of shareholders shall
---------------
be held on the third Tuesday of the fourth month following the close of the
fiscal year; provided that if such day falls on a legal holiday, then any such
annual meeting of shareholders shall be held at the same time and place on the
next day thereafter which is a business day. Any such annual meeting may be held
at any other time which may be designated in a resolution adopted by the Board
of Directors or by the written consent of shareholders holding a majority of the
issued and outstanding voting shares of the Corporation. At the annual meeting,
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other proper business may be transacted.
Section 3.2 Failure to Hold Annual Meeting. A failure to hold the annual
------------------------------
meeting at the designated time or to elect a sufficient number of directors to
conduct the business of the Corporation will not affect otherwise valid
corporate acts, cause a forfeiture of the Corporation, or cause a dissolution of
the Corporation, except as may be otherwise specifically provided by
<PAGE>
law. If the annual meeting or election of directors is not held on the date
designated therefor, the directors will cause the meeting to be held as soon as
thereafter convenient.
Section 3.3 Special Meetings. Special meetings of the shareholders for
----------------
any purpose or purposes may be called at any time by: (a) the President, (b) in
the President's absence or disability, by a Vice President, (c) resolution
adopted by the Board of Directors; or (d) one or more shareholders holding a
majority of the issued and outstanding voting shares of the Corporation. Notices
of any special meeting shall be given to each shareholder as described in
Section 11.4 and shall state, in addition to the time, date and place of such
meeting, the purpose or purposes of the meeting. Business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice. Upon request being made by written notice to the President, or in his
absence or disability to any Vice-President, or in the absence of a Vice-
President, to the Secretary, by any person or persons herein empowered to call a
special meeting, if such officer is the Secretary, he shall give notice to the
shareholders, or if such officer is other than the Secretary, he shall cause the
Secretary, to give notice to the shareholders that such meeting has been called
for the purpose or purposes stated in such request and is to be held at a
specified time, which time as fixed by such officer shall not be less than ten
(10) days nor more than sixty (60) days after the receipt of such request. If
notice of such meeting is not given to the shareholders within seven (7) days
after the receipt of such request, such person or persons making such request
may fix the time of such special meeting and give notice thereof in the same
manner as herein provided for notice of special meetings of shareholders.
Section 3.4 Place of Meetings. All meetings of shareholders shall be
-----------------
held either at the principal office of the Corporation or at any other place
within or without the State of Oklahoma as may be designated either by the Board
of Directors or by the written consent of the shareholders entitled to vote at
such meeting holding at least a majority of such shares given either before or
after the meeting and filed with the Secretary of the Corporation.
Section 3.5 Notice of Meetings. Written notice of the time, date and
------------------
place of each annual meeting of the shareholders shall be given to each
shareholder as described in Section 11.4 not less than ten (10) nor more than
sixty (60) days before each annual meeting.
Section 3.6 Voting List. The Secretary shall prepare, at least ten (10)
-----------
days hours prior to each meeting of the shareholders, an alphabetical list of
all shareholders entitled to vote at such meeting, with the number of shares
entitled to be
2
<PAGE>
voted by each shareholder set forth opposite their respective names. The
Secretary shall produce the share ledger or a duplicate thereof, together with
such list and shall keep it open either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held
during the business hours of at least ten (10) full days immediately preceding
the convening thereof and until the close of such meeting, and it shall be
subject to inspection at any time during such period by any shareholder or
person representing shares. However, the Secretary shall not be required to
prepare and produce a list of shareholders in any case where the share ledger
reasonably shows in alphabetical order by classes of shares all persons entitled
to represent shares at such meeting with the number of shares entitled to be
voted by each shareholder.
Section 3.7 Quorum and Adjourned Meeting. The holders of a majority of
----------------------------
the stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided by
statute or the Certificate of Incorporation of the Corporation. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Any shareholders' meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the holders of a majority of the shares entitled to vote
thereat. present in person or by proxy, but in the absence of a quorum no other
business may be transacted at such meeting. It shall not be necessary to give
any notice of the time and place of the adjourned meeting or of the business to
be transacted thereat, other than by announcement at the meeting at which such
adjournment is taken, except that if any shareholders' meeting, either annual or
special, is adjourned for thirty (30) days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
Section 3.8 Voting. At each meeting of shareholders each shareholder
------
entitled to vote shall vote in person or by proxy and he shall have one vote for
each share standing registered in his name at the closing of the transfer books
for such meeting, or the record date fixed for such meeting by the Board of
Directors, as the case may be, or standing registered in his name at the time of
such meeting if neither a date for the closing of the transfer books nor a
record date for such meeting has been fixed by the Board of Directors. The
voting at all meetings of shareholders may be viva voce but any qualified voter
may demand a share vote by written ballot, whereupon such share vote shall be
taken by written ballot each of which shall state the name of the shareholder
voting and the number of shares voted by him, and
3
<PAGE>
if such ballot be cast by proxy, it shall also state the name of such proxy.
Section 3.9 Vote Required. Except as provided by law, the Certificate
-------------
of Incorporation and these Bylaws, in all matters other than the election of
directors, the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter will decide any question brought before such meeting.
Directors of the Corporation will be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors.
Section 3.10 Proxies. Any shareholder entitled to vote or execute
-------
consents shall have the right to do so either in person or by one or more agents
authorized by proxy. The appointment of a proxy shall be in writing and signed
by the shareholder but shall require no other attestation and shall be filed
with the Secretary of the Corporation at or prior to the meeting. If any
shareholder appoints two or more persons to act as proxies and if the instrument
does not otherwise provide, then a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such instrument upon all of the persons
so appointed; and if such proxies be equally divided as to the right and manner
of voting in any particular case, the vote shall be divided among the proxies.
Any person holding shares in a representative or fiduciary capacity which he may
represent in person may represent the same by proxy and confer general or
discretionary power upon such a proxy. The duly executed proxy will be
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. The authority of a proxy if
not coupled with an interest may be terminated at will. Unless otherwise
provided in the appointment, the proxy's authority shall cease three (3) years
after the appointment. The termination of a proxy's authority by act of the
shareholder shall, subject to the time limitation herein set forth, be
ineffective until written notice of the termination has been given to the
Secretary of the Corporation. Unless otherwise provided therein, an appointment
filed with the Secretary shall have the effect of revoking all proxy
appointments of prior date. A proxy's authority shall not be revoked by the
death or incapacity of the maker unless before the vote is cast or the authority
is exercised written notice of such death or incapacity is given to the
Secretary of the Corporation.
Section 3.11 Order of Business. The order of business at the annual
-----------------
meeting, and so far as practicable at all other meetings of the shareholders,
shall be as follows:
(a) Calling meeting to order;
4
<PAGE>
(b) Calling of roll and checking proxies;
(c) Proof of notice of meeting;
(d) Reading of any unapproved minutes;
(e) Reports of officers;
(f) Reports of committees;
(g) Election of directors;
(h) Unfinished business;
(i) New business, and
(j) Adjournment.
Section 3.12 Action Without Meeting. Any action which. under any
----------------------
provisions of the laws of the State of Oklahoma or under the provisions of the
Certificate of Incorporation or under these Bylaws may be taken at a meeting of
the shareholders. may be taken without a meeting, without prior notice and
without a vote if a consent in writing be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take action at a meeting at which all shares entitled to vote
thereon were present and voted. Every written consent will bear the date of
signature of each shareholder who signs the consent, and no written consent will
be effective to take the corporate action referred to therein unless, within
sixty (60) days of the earliest dated consent delivered to the Secretary,
written consent signed by sufficient number of holders to take action is
delivered to the Secretary of the Corporation or the Corporation's registered
office in Oklahoma. Such consent shall be filed with the Secretary of the
corporation and made a part of the corporate records. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those shareholders who have not consented in writing.
Section 3.13 Inspectors of Election. In advance of any meeting of
----------------------
shareholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or any adjournment thereof. If Inspectors of Election be not so
appointed, the Chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails or refuses to act, the vacancy may be filled
by appointment by the Board of
5
<PAGE>
Directors in advance of the meeting, or at the meeting by the Chairman. An
inspector need not be a shareholder of the Corporation, but no person who is a
candidate for office of the Corporation shall act as an inspector. The duties of
such inspectors shall include: determining the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the right to vote; counting and tabulating all
votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The inspectors
of the election shall perform their duties impartially in good faith, to the
best of their ability, and as expeditiously as is practical. If there be three
inspectors, the decision, act or certificate of a majority shall be effective in
all respects as the decision, act, or certificate of all.
ARTICLE IV
BOARD OF DIRECTORS
------------------
Section 4.1 Powers. All corporate powers, except those which are
------
conferred upon or reserved to the shareholders by the Certificate of
Incorporation, these Bylaws and the laws of the State of Oklahoma, shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed and conducted by, the Board of Directors. Without
prejudice to such general power, but subject to the same limitations, the Board
of Directors shall have the following powers:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with applicable law, with the Certificate of Incorporation or
these Bylaws and fix their compensation and to confer upon any officer of
the Corporation the power to appoint, remove and suspend subordinate
officers and agents;
(b) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as it may determine advisable;
(c) To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be in accordance with applicable
law and to declare dividends from time to time in accordance with
applicable law;
6
<PAGE>
(d) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust.
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor;
(e) To adopt such insurance, retirement and other benefits plans for
directors, officers and agents of the Corporation and its subsidiaries as
it may determine advisable; and
(f) To adopt regulations, not inconsistent with these Bylaws, for the
management of the Corporation's business and affairs.
Section 4.2 Number, Election and Term of Office. The Board of Directors
-----------------------------------
of the Corporation shall consist of one or more members. The shareholders at any
meeting shall determine the number which shall constitute the Board of Directors
and the number so determined shall remain fixed until changed at a subsequent
meeting of the shareholders. The directors shall be elected at each annual
meeting of the shareholders; however, if any such annual meeting is not held or
the directors are not elected thereat, the directors may be elected at any
meeting of shareholders held for that purpose. Each director shall hold office
for one (1) year or until his successor is elected (even though necessitating a
term in excess of one (1) year) or until his earlier death, resignation or
removal. A director need not be a shareholder of the Corporation.
Section 4.3 Vacancies. Vacancies in the Board of Directors may be
---------
filled by a majority of the directors then in office, though less than a quorum,
or by a sole remaining director, and each director so elected shall hold office
until his successor is elected at an annual or a special meeting of the
shareholders. A vacancy or vacancies in the Board of Directors shall be deemed
to exist in case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail, at any
annual or special meeting of shareholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting. The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors.
Section 4.4 Resignations. Upon the resignation of a director, a majority
------------
of the remaining directors or the sole remaining director shall have the power
to elect a successor to take office when the resignation is to become effective.
7
<PAGE>
Section 4.5 Removal. The entire Board of Directors or any individual
-------
director may be removed from office, with or without cause, by the vote of
shareholders holding a majority of the issued and outstanding shares entitled to
vote at any annual or special meeting of shareholders. New directors to fill
vacancies created by removal may be elected at the same meeting of shareholders.
Section 4.6 Annual Meeting. An annual meeting of the Board of Directors
--------------
for the purpose of election of officers of the Corporation and the transaction
of any other business coming before such meeting shall be held each year
immediately following the adjournment of the annual meeting of the shareholders
and no notice of such meeting to the elected directors shall be necessary in
order to legally constitute the meeting, provided a majority of the Board shall
be present. If a majority of the Board shall not be present, then such annual
meeting may be held at such time as shall be fixed by the consent, in writing,
of all of the directors.
Section 4.7 Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. No notice of such regular meeting shall be required.
Section 4.8 Special Meetings. Special meetings of the Board of
----------------
Directors for any purpose or purposes may be called at any time by the President
or the Secretary or by any two directors by notice of the time, date and place
thereof given to each director not less than two (2) days before such meeting.
No business shall be considered at any special meeting other than the purposes
mentioned in the notice given to each director of the meeting, except with the
consent of all directors.
Section 4.9 Place of Meetings. Meetings of the Board of Directors shall
-----------------
be held at any place within or without the State of Oklahoma which has been
designated from time to time by resolution adopted by the Board or by written
consent of all members of the Board. In the absence of such designation,
meetings shall be held at the principal office of the Corporation.
Section 4.10 Quorum and Required Vote; Adjourned Meetings. A majority of
--------------------------------------------
the directors shall constitute a quorum for the transaction of business at any
meeting of the directors, and the acts of a majority of the directors present at
a meeting at which a quorum is present shall be the acts of the Board of
Directors except as may be otherwise specifically provided by statute, by the
Certificate of Incorporation or by these Bylaws and except to adjourn as
hereinafter provided. A quorum of the directors may adjourn any meeting of the
directors to meet again at a stated
8
<PAGE>
day and hour; provided that in the absence of a quorum a majority of the
directors present at any meeting of the directors, either regular or special,
may adjourn to a later date but may not transact any business until a quorum has
been secured. At any adjourned meeting at which a required number of directors
shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified. Notice of the time and place
of holding an adjourned meeting need not be given to absent directors if the
time and place be fixed at the meeting adjourned.
Section 4.11 Compensation. Directors and members of committees may
------------
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed by resolution adopted by the Board of Directors.
Section 4.12 Action without Meeting. Any action required or permitted to
----------------------
be taken at a meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing. Such written Action by
unanimous consent shall have the same effect as action taken at a meeting of the
Board of Directors and shall be filed with the Secretary of the corporation and
made a part of the minute of proceeding of the Board of Directors.
Section 4.13 Telephonic Meetings. Members of the Board of Directors may
-------------------
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE V
EXECUTIVE COMMITTEE
-------------------
Section 5.1 Election. The Board of Directors may if it deems necessary,
--------
acting by resolution adopted by a majority of the number of directors, elect
from their own members an Executive Committee composed of two or more voting
members.
Section 5.2 Duties. The Executive Committee shall have and exercise all
------
of the authority of the Board of Directors in the management of the Corporation
in the interval between meetings of the Board of Directors, subject to the
control and direction of the Board of Directors, except to the extent, if any,
such authority shall be limited by the resolution appointing the Executive
Committee and except the power to declare dividends and to adopt, amend or
repeal these Bylaws and where action of the Board of Directors is required by
law. It shall keep regular
9
<PAGE>
minutes of its proceedings which shall be reported to the directors at their
next meeting.
Section 5.3 Meetings. The Executive Committee shall meet at such times
--------
as may be fixed by the Committee or on the call of the President. Notice of the
time and place of the meeting shall be given to each member of the Committee in
the manner provided for the giving of notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors or
in such other manner as the Executive Committee by resolution may prescribe.
Section 5.4 Quorum and Voting. A majority of the members of the
-----------------
Executive Committee shall constitute a quorum for the transaction of business.
The acts of the majority of the members of the Executive Committee present at a
meeting at which a quorum is present shall be the acts of the Executive
Committee. At all meetings of the Executive Committee, each member present shall
have one (1) vote which shall be cast by him in person.
Section 5.5 Waiver of Notice. Any actions taken or approved at any
----------------
meeting of the Executive Committee, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the meeting, each
of the members not present signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof.
Section 5.6 Removal. The entire Executive Committee or any individual
-------
member thereof may be removed from the Committee with or without cause by a vote
of a majority of the directors.
Section 5.7 Vacancies. The Board of Directors shall fill all vacancies
---------
in the Executive Committee which may occur from time to time.
Section 5.8 Action Without Meeting; Telephonic Meeting. Action may be
------------------------------------------
taken by the Executive Committee in the manner allowed by the Board of Directors
pursuant to Sections 4.12 and 4.13 of Article IV.
ARTICLE VI
COMMITTEES OF DIRECTORS
-----------------------
Section 6.1 Designation. The Board of Directors may, by resolution
-----------
passed by a majority of the directors, designate one or more committees, in
addition to the Executive Committee authorized in Article V hereof, each
committee to consist of two or more of the directors of the Corporation, which
to the extent
10
<PAGE>
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
except where action of the Board of Directors is required by law, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 6.2 Procedural Rules. Each committee shall comply with the same
----------------
procedural rules set forth in Section 5.3 through 5.8, both inclusive, of
Article V that are applicable to the Executive Committee.
ARTICLE VII
OFFICERS
--------
Section 7.1 Officers. The officers of the Corporation shall be a
--------
President, a Secretary and a Treasurer. The Corporation may also have, at the
discretion of the Board of Directors, a Chief Executive Officer, one or more
Senior Vice-Presidents, one or more Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as may be
appointed in accordance with Section 7.3. One person may hold two or more
offices; provided that no person shall at the same time hold the offices of
President and Secretary.
Section 7.2 Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with Section 7.3 or Section 7.6,
shall be elected annually by the Board of Directors, and each shall hold his
office until he shall resign or shall be removed or otherwise disqualified to
serve, or his successor shall be elected and qualified.
Section 7.3 Subordinate Officers. The Board of Directors may appoint,
--------------------
and may empower the President to appoint, such other officers as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
Section 7.4 Removal. Any officer may be removed, either with or without
-------
cause, by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors.
Section 7.5 Resignation. Any officer may resign at any time by giving
-----------
written notice to the Board of Directors, or to
11
<PAGE>
the President, or to the Secretary of the Corporation. Any such resignation
shall take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 7.6 Vacancies. A vacancy in any office because of death,
---------
removal, resignation, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.
Section 7.7 Chairman of the Board. The Chairman of the Board, shall, if
---------------------
present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by these Bylaws.
Section 7.8 Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if any, shall perform such duties as the Board of Directors shall prescribe. In
the absence or disability of the Chairman of the Board, the Vice Chairman shall
perform the duties and exercise the powers of the Chairman of the Board.
Section 7.9 Chief Executive Officer. The Chief Executive Officer shall
-----------------------
be subject to the control of the Board of Directors and exercise and perform
such powers and duties as may be assigned to him by the Board of Directors.
Section 7.10 President. The President shall be subject to the control of
---------
the Board of Directors, have general supervision, direction and control of the
business, finances and affairs of the Corporation and all other powers normally
held and exercised by the person serving as President of a corporation. The
President shall:
(a) Preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, at all meetings of the Board of Directors;
(b) Sign or countersign, as may be necessary, all such bills, notes,
checks, contracts and other instruments as may pertain to the ordinary
course of the business of the Corporation;
(c) Execute deeds, bonds, mortgages, and contracts required to be
executed under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation;
12
<PAGE>
(d) Have the power to appoint all employees and agents of the
Corporation whose appointment is not otherwise provided for and to fix the
compensation thereof subject to the provisions of these Bylaws and subject
to the approval of the Board of Directors and to remove or suspend any
employee or agent who shall not have been appointed by the Board of
Directors and to suspend for cause, pending final action by the body which
shall have appointed him, any officer other than an elected officer, or
any employee or agent who shall have been appointed by the Board of
Directors;
(e) Present a complete report of the business of the Corporation for
the preceding fiscal year at the annual meeting of the shareholders and
report to the Board of Directors from time to time all matters coming to
his attention which materially affect the business of the Corporation; and
(f) Serve as a member of the Board of Directors and an ex-officio
member of all standing committees, including the Executive Committee, if
any; and possess such usual powers and duties of supervision and
management as may pertain to the office of the President and such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
Section 7.11 Senior Vice-President. The Senior Vice-President, if any,
---------------------
shall be the executive officer of the Corporation next in authority to the
Chairman of the Board and the President, both of whom he shall assist in the
management of the business of the Corporation and the implementation of orders
and resolutions of the Board of Directors. In the absence of the Chairman of the
Board and the President, he shall preside at all meetings of the shareholders
and of the directors, and shall exercise all other powers and perform all other
duties of the Chairman of the Board and the President; and he shall perform such
other duties as the Board of Directors may from time to time prescribe. He shall
have all authority conferred upon a Vice-President by these Bylaws.
Section 7.12 Vice-President. In the absence or disability of the
--------------
President, the Vice-Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, the Vice-President designated by the Board
of Directors, shall perform all the duties of the President and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice-Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or these Bylaws.
13
<PAGE>
Section 7.13 Secretary. The Secretary shall:
---------
(a) Attend all meetings of the Board of Directors and the
shareholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like
duties for all committees of the Board of Directors;
(b) Duly give or cause to be given all notices in accordance with
these Bylaws or as required by law;
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its
seal is duly authorized;
(d) Sign, with the President or Vice-President, all deeds, bonds,
mortgages, contracts and other instruments when so ordered;
(e) Keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder;
(f) Have general charge of the stock transfer books of the
Corporation; and
(g) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 7.14 Assistant Secretaries. In the absence of the Secretary or in
---------------------
the event of his death, inability or refusal to act, the Assistant Secretaries
in the order of their length of service as Assistant Secretary, unless otherwise
determined by the Board of Directors, shall perform the duties of the Secretary,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Secretary. They shall perform such duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 7.15 Treasure. The Treasurer shall:
--------
(a) Keep and maintain adequate and correct accounts of the properties
and business transactions of the Corporation;
(b) Have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due
and payable to the Corporation from any source whatsoever, and deposit all
such moneys in
14
<PAGE>
the name of the Corporation in such depositories as shall be designated by
the Board of Directors;
(c) Sign or countersign, as may be necessary, all such bills, notes,
checks and other instruments relating to the fiscal affairs of the
Corporation in the ordinary course of the business of the Corporation;
(d) Prepare, or cause to be prepared, a true statement of the
Corporation's assets and liabilities as of the close of each fiscal year
and a true statement of the results of the operations of the Corporation
for the fiscal year then ended, all in reasonable detail; and
(e) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 7.16 Assistant Treasurers. In the absence of the Treasurer or in
--------------------
the event of his death, inability or refusal to act, the Assistant Treasurers,
in the order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them be the Treasurer, by the President, or by the Board of
Directors.
Section 7.17 Delegation of Duties. In case of the absence or disability
--------------------
of any officer of the corporation or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may, by a vote of a
majority of the whole Board, delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer or to any director.
ARTICLE VIII
SHARES OF STOCK
---------------
Section 8.1 Certificates of Stock. A certificate or certificates for
---------------------
shares of the capital stock of the Corporation shall be issued to each
shareholder when any such shares are fully paid, showing the number of the
shares of the Corporation standing on the books in his name. The form of such
certificate shall be determined by the Board of Directors. All such certificates
shall be signed by the President or a Vice-President and the Secretary or an
Assistant Secretary, or be authenticated by facsimiles of the signatures of the
President and Secretary or by a facsimile of the signature of the President and
the written signature of the Secretary or an Assistant Secretary. Every
certificate authenticated by a facsimile of a signature must be
15
<PAGE>
countersigned by a transfer agent or transfer clerk. Even though an officer who
signed, or whose facsimile signature has been written, printed or stamped on, a
certificate for shares shall have ceased by death, resignation or otherwise to
be an officer of the Corporation before such certificate is delivered by the
Corporation, such certificate shall be as valid as though signed by a duly
elected, qualified and authorized officer, if it be countersigned by a transfer
agent or transfer clerk. Such certificates shall also be numbered and sealed
with the seal of the Corporation.
Section 8.2 Record of Shareholders. There shall be kept at the
----------------------
registered office of the Corporation in the State of Oklahoma a record
containing the names and addresses of all shareholders of the Corporation,
arranged in alphabetical order, the number and class of shares held by each and
the dates when they respectively became the owners of record thereof; provided
that the foregoing shall not be required if the Corporation shall keep at its
registered office a statement containing the name and post office address,
including street number, if any, of the custodian of such record. Duplicate
lists may be kept in such other state or states as may, from time to time, be
determined by the Board of Directors.
Section 8.3 Transfer Agents and Registrars. The Board of Directors may,
------------------------------
in its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
Section 8.4 Transfer of Shares. Transfers of stock of the Corporation
------------------
shall be made on the books of the Corporation only upon authorization by the
registered holder thereof or by his attorney lawfully constituted in writing and
on surrender and cancellation of a certificate or certificates for a like number
of shares of the same class properly endorsed or accompanied by a duly executed
stock transfer power and payment of all taxes thereon, with such proof of
authenticity of the signatures as the Corporation or its transfer agents may
reasonably require.
Section 8.5 Shareholders Record Date and Closing Stock Books. The Board
------------------------------------------------
of Directors may fix, in advance, a time as a record date for the determination
of the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting not more than sixty (60) days prior to the
date of the meeting or action nor less than ten (10) days prior to the date of
the meeting or action. The Board of Directors may also fix, in advance, a time
as a record date for
16
<PAGE>
the determination of shareholders entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion, or exchange of shares or for the
purpose of any other lawful action which shall be not more than sixty (60) days
prior to the date of the event for the purpose of which it is fixed. When a
record date is so fixed, only shareholders of record on that date are entitled
to notice of and to vote at the meeting or to receive a dividend, distribution,
or allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date. In lieu of fixing a record date, the Board of Directors may
close the books of the Corporation against any transfer of shares for a stated
period but not to exceed in any case the maximum periods set forth above.
Section 8.6 Registered Shareholders. The Corporation shall be entitled
-----------------------
to recognize the holder of record of any share or shares of stock as the
exclusive owner thereof for all purposes, and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 8.7 Lost Certificates. No new certificate for shares shall be
-----------------
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time; provided that if any certificate for shares is lost, stolen,
mutilated or destroyed, the Board of Directors may authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions, including
indemnification of the Corporation reasonably satisfactory to it, as the Board
of Directors shall determine.
Section 8.8 Treasury Shares. Treasury shares, or other shares not at the
---------------
time issued and outstanding, shall not, directly or indirectly, be voted at any
meeting of the shareholders, or counted in calculating the actual voting power
of shareholders at any given time. Treasury shares shall not have dividend
rights.
Section 8.9 Fractional Shares. Certificates of fractional shares of
-----------------
stock may be issued at the discretion of the Board of Directors. The registered
ownership of any fractional share represented by such certificate or
certificates shall entitle the holder thereof to receive dividends, participate
in the corporate assets in the event of liquidation of the Corporation and to
exercise voting rights in person or by proxy.
17
<PAGE>
ARTICLE IX
EXECUTION OF INSTRUMENTS
------------------------
Section 9.1 Contracts. The Board of Directors or any committee
---------
thereunto, authorized may authorize any officer or officers, agent or agents, to
enter into any contract or to execute and deliver in the name and on behalf of
the Corporation any contract or other instn.unent, except certificates
representing shares of stock of the Corporation, and such authority may be
general or may be confined to specific instances.
Section 9.2 Checks and Drafts. All checks, drafts or other orders for
-----------------
the payment of money, notes, acceptances or other evidences of indebtedness
issued by or in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined from time to time by resolution of the Board of Directors.
Section 9.3 Deposits; Bank Accounts. All funds of the Corporation not
-----------------------
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board of
Directors may from time to time designate or as may be designated by an officer
or officers of the Corporation to whom such power of designation may from time
to time be delegated by the Board of Directors. The Board of Directors may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
Unless otherwise provided by resolution of the Board of Directors, endorsements
for deposit to the credit of the Corporation in any of its duly authorized
depositories may be made by handstamped legrend in the name of the Corporation
or by written endorsement by any officer without countersignature.
Section 9.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so authorized,
unless a particular officer or agent is directed to negotiate the same, may be
negotiated, up to the amount so authorized, by the President or a Vice-President
or the Treasurer; and such officers are hereby severally authorized to execute
and deliver in the name and on behalf of the Corporation notes or other
evidences of indebtedness countersigned by the President or a Vice-President for
the amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring any
part or all of the property of the Corporation, real or personal, at any time
owned by the Corporation.
18
<PAGE>
Section 9.5 Sale or Transfer of Securities Held by the Corporation.
------------------------------------------------------
Stock certificates, bonds or other securities at any time owned by the
Corporation may be held on behalf of the Corporation or sold, transferred or
otherwise disposed of pursuant to authorization by the Board of Directors, or of
any committee thereunto duly authorized, and when so authorized to be sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice-President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Section 9.6 Execution of Proxies. The President, or, in the absence or
--------------------
disability of the President, a Vice-President, may authorize from time to time
the signature and issuance of proxies to vote upon shares of stock of other
corporations standing in the name of the Corporation or authorize the execution
of consents to action taken or to be taken by such other corporation. All such
proxies and consents shall be signed in the name of the Corporation by the
President or a Vice-President and by the Secretary or an Assistant Secretary.
ARTICLE X
INDEMNIFICATION
---------------
Section 10.1 Indemnification; Actions Other Than by the Corporation. The
------------------------------------------------------
Corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments. fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and. with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of noto contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner in which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
19
<PAGE>
Section 10.2 Indemnification; Actions by the Corporation. The Corporation
-------------------------------------------
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
Section 10.3 Right to Indemnification. To the extent that any present or
------------------------
former director, officer or employee or any person who is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, or any agent
of the Corporation or any person who is or was serving at the request of the
Corporation as an agent of another corporation, partnership, joint venture,
trust or other enterprise, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2
of this Article X, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
Section 10.4 Authorization of Indemnification. Any indemnification under
--------------------------------
Sections 10.1 and 10.2 of this Article X, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 10.1 and 10.2 of this Article X. Such
determination shall be made: (a) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit or
proceeding; or (b) if such quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion; or (c) by the shareholders.
20
<PAGE>
Section 10.5 Advance Indemnification. Expenses incurred by a director,
-----------------------
officer, employee or agent in defending a civil or criminal action, suit or
proceeding as authorized by the Board of Directors in the specific case may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article X.
Section 10.6 Non-Exclusive Indemnification. The indemnification provided
-----------------------------
by this Article X shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, contract,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising our of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article X.
Section 10.8 Constituent Corporation. For the purposes of this Article X,
-----------------------
references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation, including any constituent of a
constituent, absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article X with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 10.9 Definitions. For purposes of this Article X, references to
-----------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan;
21
<PAGE>
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest in the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
ARTICLE XI
GENERAL PROVISIONS
------------------
Section 11.1 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board of Directors.
Section 11.2 Seal. The corporate seal of the Corporation shall be
----
circular in form and shall contain the name of the Corporation, the word
"Corporate Seal, OKLAHOMA" and such other words or information as shall be
determined by the Board of Directors. The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 11.3 Dividends. The Board of Directors may, out of funds legally
---------
available therefor, from time to time at any regular or special meeting,
declare, and the Corporation may pay, dividends on its outstanding shares of
capital stock. Such dividends may be made in cash, property or shares of the
capital stock or other securities of the Corporation.
Section 11.4 Notice. Whenever any notice is required or permitted to be
------
given under the provisions of any law, the Certificate of Incorporation or these
Bylaws, it shall not be construed to require personal notice unless expressly so
stated, but such notice may be given by depositing the same in the United States
mail, postage prepaid, addressed to the person entitled thereto at his address
as it appears on the records of the Corporation, and such notice shall be deemed
to have been given on the day of such mailing. Notice shall be deemed to have
been duly given on the date of service if served personally or by telex,
telecopier, cable, telegram or similar communication. Shareholders not entitled
to vote shall not be entitled to receive notice of any meetings except as
otherwise provided by statute.
Section 11.5 Waiver of Notice. Whenever any notice whatever is required
----------------
to be given under the provisions of any law or of the Certificate of
Incorporation or of these Bylaws, a written waiver thereof, signed by the person
or persons entitled
22
<PAGE>
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the shareholders. directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation.
Section 11.6 Conflicts of Interest. Except as may be otherwise provided
---------------------
by the laws of the State of Oklahoma or the Certificate of Incorporation, no
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are accounted for such purpose; if: (a) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or such committee, and the
Board of Directors or Executive Committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum, or (b)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders, or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors. a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors, or a committee which authorizes the contract
or transaction.
Section 11.7 Loans to Officers or Employees. The Corporation may lend
------------------------------
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance may
be with or without interest, and may be unsecured, or secured in such manner as
the Board of
23
<PAGE>
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing contained in this section shall be construed
to deny, limit or restrict the powers of guaranty or warranty of any Corporation
at common law or under any statute.
Section 11.8 Amendment. These Bylaws may be amended, altered,
---------
changed or repealed at any annual or special meeting of the shareholders,
provided notice of the proposed amendment, alteration, change or repeal is
contained in the notice of such meeting, by the affirmative vote of a majority
of the shares issued and outstanding, and entitled to vote thereat. These Bylaws
also may be amended, altered, changed or repealed as permitted by the
Certificate of Incorporation of the Corporation, at any annual or special
meeting of the Board of Directors, provided notice of the proposed amendment,
alteration, change or repeal is contained in the notice of such meeting, by the
affirmative vote of the members of the Board of Directors. Notwithstanding the
preceding sentence, the fact that such power to amend, alter, change or repeal
has been conferred upon the Board of Directors shall not divest the shareholders
of the power, nor limit their power to amend, alter, change or repeal these
Bylaws.
24
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that:
1. I am the duly elected and acting Secretary of ClimaChem, Inc.
("Corporation"), an Oklahoma corporation;
2. The foregoing Bylaws comprising twenty-two (22) pages constitute the
Bylaws of the Corporation as duly adopted by the Board of Directors of the
Corporation pursuant to a Unanimous Written Consent to Action of the Board of
Directors of the Corporation effective October 17, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Corporation this 24th day of November, 1997.
____________________________________________
David M. Shear, Secretary
[SEAL]
25
<PAGE>
FIRST AMENDMENT
TO
BYLAWS
OF
CLIMACHEM, INC.
---------------
The following amendment to the Bylaws of ClimaChem, Inc., an Oklahoma
corporation, was approved and adopted by the Board of Directors of ClimaChem,
Inc. by unanimous written consent, on November 28, 1997.
1. Section 9.4 of Article IX of the Bylaws of
ClimaChem, Inc. is hereby amended to read as follows:
Section 9.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so
authorized, unless a particular officer or agent is directed to negotiate
the same, may be negotiated, up to the amount so authorized, by the
President or a Vice President or the Treasurer; and such officers are
hereby severally authorized to execute and deliver, in the name and on
behalf of the Corporation, notes or other evidences of indebtedness for the
amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring
any part or all of the property of the Corporation, real or personal, at
any time owned by the Corporation.
The Bylaws of ClimaChem, Inc., as amended and modified by this First
Amendment to Bylaws of ClimaChem, Inc., set forth the entire Bylaws of
ClimaChem, Inc. The amendment to the Bylaws of ClimaChem, Inc., as combined in
this First Amendment to the Bylaws of ClimaChem, Inc., is effective as of the
28th day of November, 1997, the date that such amendment was approved by the
Board of Directors of ClimaChem, Inc.
CLIMACHEM, INC.
/s/ Jack E. Golsen
______________________________
Jack E. Golsen, President
/s/ David M. Shear
______________________________
[S E A L] David M. Shear, Secretary
<PAGE>
EXHIBIT 3.3
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office of which it purports to be a copy, and that the same is full, true and
correct copy of:
CERTIFICATE OF INCORPORATION
AND
ALL AMENDMENTS THERETO
OF
APR CORPORATION
In testimony whereof, I hereto set my hand and
cause to be affixed the Great Seal of the State of
Oklahoma, done at the City of Oklahoma City this
14/th/, day of November, A.D. 1997.
_____________________________________________
Secretary of State
By: _________________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
WHEREAS, the Certificate of Incorporation, executed and acknowledged by
APR CORPORATION
has been filed in the office of the Secretary of State as provided by the laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby issue this
certificate evidencing such filing.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 29/th/ day of
OCTOBER ,1992.
_____________________________________________
Secretary of State
By: _________________________________________
<PAGE>
FEE: $1.00 PER $1,000.00
On Authorized Capital
MINIMUM FEE: $50.00
CERTIFICATE OF INCORPORATION
(PROFIT)
FILE IN DUPLICATE
PRINT CLEARLY
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA
1. The name of this corporation is:
APR Corporation
- --------------------------------------------------------------------------------
(Please refer to procedure sheet for statutory words required to be included in
the corporate name.)
2. The address of the registered office in the State of Oklahoma and the name
of the registered agent at such address are:
David Shear 16 South Pennsylvania Oklahoma City, OK 73107
- --------------------------------------------------------------------------------
NAME NUMBER & STREET ADDRESS CITY COUNTY ZIP CODE
(P.O. BOXES ARE NOT ACCEPTABLE.)
---
3. The duration of the corporation is:
Perpetual
- --------------------------------------------------------------------------------
(Perpetual unless otherwise stated)
4. The purpose or purposes for which the corporation is formed are:
to engage in any lawful act or activity for which corporations may be
organized under the general corporation law of Oklahoma, and by such
statement all lawful acts and activities shall be within the purposes of
the corporation.
5. The aggregate number of shares which the corporation shall have the
authority to issue, the designation of each class, the number of shares of each
class, and the par value of the shares of each class are as follows:
<PAGE>
NUMBER OF SHARES SERIES PAR VALUE PER SHARE
None (Or, if without par value, so
state)
Common XX .10
-------------
Preferred
----------
TOTAL NO. SHARES: 100,000 TOTAL AUTHORIZED CAPITAL: 10,000
------- ------
6. If the powers of the incorporator(s) are to terminate upon the filing of
the certificate of incorporation, the names and mailing addresses of the persons
who are to serve as directors:
<TABLE>
<CAPTION>
ZIP
NAME MAILING ADDRESS CITY STATE CODE
---- --------------- ---- ----- -----
<S> <C> <C> <C> <C>
Jack E. Golsen 1299 Glenbrook Oklahoma City, OK 76113
Terrace
Barry H. Golsen 11209 Thorn Oklahoma City, OK 73120
Ridge
David R. Goss 12900 Cedar Oklahoma City, OK 73101
Springs Road
</TABLE>
7. The name and mailing address of the undersigned incorporator(s):
<TABLE>
<CAPTION>
ZIP
NAME MAILING ADDRESS CITY STATE CODE
---- --------------- ---- ----- -----
<S> <C> <C> <C> <C>
Heidi Brown 16 South Oklahoma City, OK 73107
Pennsylvania
</TABLE>
<PAGE>
THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the State of Oklahoma does certify that the facts herein stated are true, and
has accordingly hereunto set my hand this _____ day of __________ , 19____.
_________________________________________
Signature
_________________________________________
Signature
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF MERGER
WHEREAS, APR CORPORATION
------------------------------------------------------------------
_______________________________________________________________________________,
a corporation organized under the laws of the State of Oklahoma, has filed in
--------
the office of the Secretary of State duly authenticated evidence of a merger
whereby said corporation is the surviving corporation, as provided by the laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned Secretary of State of Oklahoma, by
virtue of the powers vested in me by law, do hereby issue this Certificate
evidencing such merger.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 4/th/ day of
February, 1993.
_____________________________________________
Secretary of State
By:__________________________________________
<PAGE>
FEE: $50.00
CERTIFICATE
OF
MERGER
OR
CONSOLIDATION
PLEASE PRINT CLEARLY
FILE IN DUPLICATE
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
PLEASE NOTE: Use this form ONLY when one more corporations, incorporated under
----
the laws of a jurisdiction other than Oklahoma merge with one or more Oklahoma
corporations and the surviving or resulting corporation is an OKLAHOMA
--------
corporation. This form MUST be filed with a letter from the Oklahoma Tax
----
Commission stating that the franchise tax, due yearly, has been paid for the
current fiscal year for each corporation involved in the merger or
consolidation. IF the authorized capital of the surviving or resulting
corporation is increased to a figure greater than the combined authorized of all
corporations involved plus $50,000.00, the filing fee shall be equal to one-
tenth (1/10th of 1%) of such increase. IF the surviving corporation is a NOT FOR
PROFIT corporation, the filing fee shall be $25.00.
A. This merger or consolidation is being filed pursuant to Section 1082 of the
Oklahoma General Corporation Act. PLEASE CONSULT THIS ACT CAREFULLY.
B. The Agreement of Merger or Consolidation, adopted, approved, certified,
executed and acknowledged by each of the constituent corporations if ATTACHED
--------
HERETO. In this case of a consolidation, the certificate of incorporation of the
- -------
resulting corporation shall be as is set forth in an attachment.
OR
--
C. IN LIEU OF filing an executed agreement of merger or consolidation, the
surviving or resulting corporation hereby states and certifies as follows:
1. The name and state of incorporation of each of the constituent corporations
are:
<PAGE>
NAME OF CORPORATION STATE OF INCORPORATION
APR Corporation Oklahoma
APR Corporation Illinois
________________________________________________________________________________
________________________________________________________________________________
2. An agreement of merger or consolidation (circle one) has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the provisions of Section 1082 of the Oklahoma
General Corporation Act. In the case of each foreign corporation, the agreement
shall be adopted, approved, executed and acknowledged in accordance with the
laws under which it is organized.
3. The name of the surviving or resulting corporation is:
APR Corporation
________________________________________________________________________________
4. XX If there are no amendments, the certificate of incorporation of the
----
surviving corporation shall be its certificate of incorporation.
OR
--
_____ The certificate of incorporation of the surviving corporation is
amended by the terms of the agreement of merger as follows:
a. As amended, the name of the corporation is:
________________________________________________________________________________
b. As amended, the address of the registered office in the state of Oklahoma
and the name of the registered agent at such address is:
________________________________________________________________________________
Name Street Address City County Zip Code
(P.O. Boxes are NOT acceptable.)
---
c. As amended, its period of duration is: ____________________________________
________________________________________________________________________________
d. As amended, the purpose or purposes of the corporation are:
<PAGE>
e. As amended, the aggregate number of shares which the corporation shall have
authority to issue, the designation of each class, the number of shares of each
class, and the par value of the shares of each class are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES CLASS PAR VALUE PER SHARE
- ---------------- -----
Or, if no par value, so state
-----------------------------
<S> <C> <C>
Common ___________ _____________
Preferred ________ _____________
TOTAL NO. SHARES: ____________ TOTAL AUTHORIZED CAPITAL: $_______
</TABLE>
<PAGE>
CONTINUATION OF SOS FORM 0024
MERGER OR CONSOLIDATION
5. In the case of a consolidation, the certificate of incorporation of the
resulting corporation shall be as is set forth in the attachment.
----------
6. The executed agreement of merger or consolidation is on file at the
principal place of business of the surviving corporation at the following
address:
16 South Pennsylvania Oklahoma City, Oklahoma 73107
- --------------------------------------------------------------------------------
Street Address City State Zip Code
7. A copy of the agreement of merger or consolidation will be furnished by the
surviving corporation, on request and without cost, to any shareholder of any
constituent corporation.
8. The authorized capital stock of each constituent corporation which is not a
corporation of this state:
<TABLE>
<CAPTION>
NO. OF
NAME OF CORPORATION SHARES AUTHORIZED PAR VALUE PER SHARE
- ------------------- ----------------- -------------------
<S> <C> <C>
APR Corporation 100,000 Without Par Value
(Illinois corporation)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>
IN WITNESS WHEREOF, the surviving or resulting corporation has caused this
certificate of merger or consolidation to be executed by its _________ President
and attested by its ________ Secretary, this 18/th/ day of November, 1992.
_________________________________ _____________________________________
By _____ President (Please Print Name)
ATTEST:
_________________________________ _____________________________________
By _____ Secretary (Please Print Name)
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 73194
ROBERT E. ANDERSON, Chairman
ROBERT V. CULLISON, Vice-Chairman
DON KILPATRICK, Sec'y-Member BUSINESS TAX
(405) 521-3161
January 20, 1993
John Kennedy
Secretary of State
State Capitol Building
Oklahoma City, OK 73105
RE: APR CORPORATION
QUALIFIED: 10/29/92
Dear Mr. Kennedy:
This is to certify that the records of this office show that the referenced
corporation has filed a Franchise Tax Return and is in good standing through
June 30, 1993.
No certification is made as to any corporate Franchise Taxes which may be due
but not yet assessed, nor which have been assessed and protested. This letter
may not, therefore, be accepted for purposes of dissolution or withdrawal.
Sincerely,
Jeff Kiser, Supervisor
Franchise Tax Section
JK:jj
<PAGE>
EXHIBIT 3.4
TABLE OF CONTENTS
TO
BYLAWS
OF
APR CORPORATION
(an Oklahoma corporation)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - OFFICES ....................................................... 4
Section 1.1 Principal Office ...................................... 4
Section 1.2 Other Offices ......................................... 4
ARTICLE II - MEETINGS OF SHAREHOLDERS..................................... 4
Section 2.1 Annual Meetings ...................................... 4
Section 2.2 Special Meetings ...................................... 4
Section 2.3 Place of Meetings ..................................... 5
Section 2.4 Notice of Meetings .................................... 5
Section 2.5 Voting List............................................ 5
Section 2.6 Quorum and Required Vote;
Adjourned Meetings .................................. 5
Section 2.7 Voting ................................................ 6
Section 2.8 Proxies................................................ 6
Section 2.9 Order of Business...................................... 7
Section 2.10 Action Without Meeting................................. 7
Section 2.11 Inspectors of Election................................. 8
ARTICLE III - BOARD OF DIRECTORS........................................... 8
Section 3.1 Powers ................................................ 8
Section 3.2 Number, Election and Term of Office.................... 9
Section 3.3 Vacancies.............................................. 9
Section 3.4 Resignations........................................... 10
Section 3.5 Removal................................................ 10
Section 3.6 Annual Meetings........................................ 10
Section 3.7 Regular Meetings....................................... 10
Section 3.8 Special Meetings....................................... 10
Section 3.9 Place of Meetings...................................... 10
Section 3.10 Quorum and Required Vote;
Adjourned Meetings................................... 11
Section 3.11 Compensation........................................... 11
Section 3.12 Action without Meeting................................. 11
Section 3.13 Telephonic Meetings.................................... 11
ARTICLE IV - EXECUTIVE COMMITTEE........................................... 11
Section 4.1 Election............................................... 11
Section 4.2 Duties................................................. 11
Section 4.3 Meetings............................................... 12
Section 4.4 Quorum and Voting...................................... 12
Section 4.5 Waiver of Notice....................................... 12
Section 4.6 Removal................................................ 12
Section 4.7 Vacancies.............................................. 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.8 Action Without Meeting;
Telephonic Meeting.................................. 12
ARTICLE V - COMMITTEES OF DIRECTORS....................................... 12
Section 5.1 Designation........................................... 13
Section 5.2 Procedural Rules...................................... 13
ARTICLE VI - OFFICERS..................................................... 13
Section 6.1 Officers.............................................. 13
Section 6.2 Election.............................................. 13
Section 6.3 Subordinate Officers.................................. 13
Section 6.4 Removal............................................... 13
Section 6.5 Resignation........................................... 14
Section 6.6 Vacancies............................................. 14
Section 6.7 Chairman of the Board................................. 14
Section 6.8 Vice Chairman of the Board............................ 14
Section 6.9 President............................................. 14
Section 6.10 Executive Vice-President.............................. 15
Section 6.11 Vice-President........................................ 15
Section 6.12 Secretary............................................. 15
Section 6.13 Assistant Secretaries................................. 16
Section 6.14 Treasurer............................................. 16
Section 6.15 Assistant Treasurers.................................. 17
Section 6.16 Delegation of Duties.................................. 17
ARTICLE VII - SHARES OF STOCK............................................. 17
Section 7.1 Certificates of Stock................................. 17
Section 7.2 Record of Shareholders................................ 18
Section 7.3 Transfer Agents and Registrars........................ 18
Section 7.4 Transfer of Shares.................................... 18
Section 7.5 Shareholders Record Date and
Closing Stock Book.................................. 18
Section 7.6 Registered Shareholders............................... 19
Section 7.7 Lost Certificates..................................... 19
Section 7.8 Treasury Shares....................................... 19
Section 7.9 Fractional Shares..................................... 19
ARTICLE VIII - EXECUTION OF INSTRUMENTS................................... 19
Section 8.1 Contracts............................................. 19
Section 8.2 Checks and Drafts..................................... 19
Section 8.3 Deposits; Bank Accounts............................... 20
Section 8.4 Loans................................................. 20
Section 8.5 Sale or Transfer of Securities
Held by the Corporation............................. 20
Section 8.6 Execution of Proxies.................................. 20
ARTICLE IX - INDEMNIFICATION.............................................. 21
Section 9.1 Indemnification: Actions Other
Than by the Corporation............................. 21
Section 9.2 Indemnification: Actions by
the Corporation..................................... 21
Section 9.3 Right to Indemnification.............................. 22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 9.4 Authorization of Indemnification....................... 22
Section 9.5 Advance Indemnification................................ 22
Section 9.6 Non-Exclusive Indemnification.......................... 22
Section 9.7 Insurance.............................................. 22
Section 9.8 Constituent Corporation................................ 23
Section 9.9 Definitions............................................ 23
ARTICLE X - GENERAL PROVISIONS............................................. 23
Section 10.1 Fiscal Year............................................ 23
Section 10.2 Seal................................................... 23
Section 10.3 Dividends.............................................. 24
Section 10.4 Notice................................................. 24
Section 10.5 Waiver of Notice....................................... 24
Section 10.6 Conflicts of Interest.................................. 24
Section 10.7 Loans to Officers or Employees......................... 25
Section 10.8 Amendment.............................................. 25
</TABLE>
iii
<PAGE>
BYLAWS
OF
APR CORPORATION
(an Oklahoma corporation)
ARTICLE I
OFFICES
-------
Section 1.1 Principal Office. The present location of the principal
----------------
office for the transaction of the business of the Corporation is 16 S.
Pennsylvania, Oklahoma city, Oklahoma. The Board of Directors may change such
principal office from time to time.
Section 1.2 Other Offices. The Corporation may have other offices at
-------------
such places, within or without the State of Oklahoma, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 2.1 Annual Meetings. The annual meetings of shareholders shall
---------------
be held on the third Tuesday of the fourth month following the close of the
fiscal year; provided that if such day falls on a legal holiday, then any such
annual meeting of share-holders shall be held at the same time and place on the
next day thereafter which is a business day. Any such annual meeting may be held
at any other time which may be designated in a resolution adopted by the Board
of Directors or by the written consent of shareholders holding a majority of the
issued and outstanding voting shares of the Corporation. At the annual meeting,
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other proper business may be transacted.
Section 2.2 Special Meetings. Special meetings of the shareholders for
----------------
any purpose or purposes may be called at any time by: (a) the President; (b)
resolution adopted by the Board of Directors; or (c) one or more shareholders
holding not less than one-fourth (1/4) of the issued and outstanding voting
shares of the Corporation. Notice of such special meetings shall be given in the
same manner as for annual meetings of shareholders. Notices of any special
meeting shall state, in addition to the time, date and place of such meeting,
the purpose or purposes of the meeting. Business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice.
Upon request being made by written notice to the President, or in his absence or
disability to any Vice-President, or in the absence of a Vice-President, to the
Secretary, by any person or persons herein
<PAGE>
empowered to call a special meeting, if such officer is the Secretary, he shall
give notice to the shareholders, or if such officer is other than the Secretary,
he shall cause the Secretary, to give notice to the shareholders that such
meeting has been called for the purpose or purposes stated in such request and
is to be held at a specified time, which time as fixed by such officer shall not
be less than ten (10) days nor more than sixty (60) days after the receipt of
such request. If notice of such meeting be not given to the shareholders within
seven (7) days after the receipt of such request, such person or persons making
such request may fix the time of such special meeting and give notice thereof in
the same manner as herein provided for notice of special meetings of
shareholders.
Section 2.3 Place of Meetings. All meetings of shareholders shall be
-----------------
held either at the principal office of the Corporation or at any other place
within or without the State of Oklahoma as may be designated either by the Board
of Directors or by the written consent of the shareholders entitled to vote at
such meeting holding at least a majority of such shares given either before or
after the meeting and filed with the Secretary of the Corporation.
Section 2.4 Notice of Meetings. Written notice of the time, date and
------------------
place of each annual meeting of the shareholders shall be given to each
shareholder as described in Section 10.4 not less than ten (10) nor more than
sixty (60) days before each annual meeting.
Section 2.5 Voting List. The Secretary shall prepare, at least forty-
-----------
eight (48) hours prior to each meeting of the shareholders, an alphabetical list
of all shareholders entitled to vote at such meeting, with the number of shares
entitled to be voted by each shareholder set forth opposite their respective
names. The Secretary shall produce the share ledger or a duplicate thereof,
together with such list and shall keep it open either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held during the business hours of at least one (1) full day immediately
preceding the convening thereof and until the close of such meeting, and it
shall be subject to inspection at any time during such period by any shareholder
or person representing shares. However, the Secretary shall not be required to
prepare and produce a list of shareholders in any case where the share ledger
reasonably shows in alphabetical order by classes of shares all persons entitled
to represent shares at such meeting with the number of shares entitled to be
voted by each shareholder.
Section 2.6 Quorum and Required Vote; Adjourned Meetings. The holders of
--------------------------------------------
a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the
2
<PAGE>
shareholders for the transaction of business, except as otherwise provided by
statute or the Certificate of Incorporation of the Corporation. When a quorum is
present at any meeting, a majority of the shares represented thereat and
entitled to vote thereat shall decide any question brought before such meeting.
The shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the holders of a majority of the shares entitled to vote
thereat, present in person or by proxy, but in the absence of a quorum no other
business may be transacted at such meeting. It shall not be necessary to give
any notice of the time and place of the adjourned meeting or of the business to
be transacted thereat, other than by announcement at the meeting at which such
adjournment is taken, except that if any shareholders' meeting, either annual or
special, is adjourned for thirty (30) days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
Section 2.7 Voting. At each meeting of shareholders each shareholder
------
entitled to vote shall vote in person or by proxy and he shall have one vote for
each share standing registered in his name at the closing of the transfer books
for such meeting, or the record date fixed for such meeting by the Board of
Directors, as the case may be, or standing registered in his name at the time of
such meeting if neither a date for the closing of the transfer books nor a
record date for such meeting has been fixed by the Board of Directors. The
voting at all meetings of shareholders may be viva voce but any qualified voter
may demand a share vote by written ballot, whereupon such share vote shall be
taken by written ballot each of which shall state the name of the shareholder
voting and the number of shares voted by him, and if such ballot be cast by
proxy, it shall also state the name of such proxy.
Section 2.8 Proxies. Any shareholder entitled to vote or execute
-------
consents shall have the right to do so either in person or by one or more agents
authorized by proxy. The appointment of a proxy shall be in writing and signed
by the shareholder but shall require no other attestation and shall be filed
with the Secretary of the Corporation at or prior to the meeting. If any
shareholder appoints two or more persons to act as proxies and if the instrument
does not otherwise provide, then a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such instrument upon all of the persons
so appointed; and if such proxies be equally divided as to the right and manner
of voting in any particular case, the vote shall be divided among the proxies.
Any person holding shares in a representative or fiduciary capacity which he may
represent in person may represent the same by proxy and confer general or
discretionary power upon such a proxy. The authority of a proxy if not coupled
with an
3
<PAGE>
interest may be terminated at will, unless otherwise provided in the
appointment, the proxy's authority shall cease three (3) years after the
appointment. The termination of a proxy's authority by act of the shareholder
shall, subject to the time limitation herein set forth, be ineffective until
written notice of the termination has been given to the Secretary of the
Corporation. Unless otherwise provided therein, an appointment filed with the
Secretary shall have the effect of revoking all proxy appointments of prior
date. A proxy's authority shall not be revoked by the death or incapacity of the
maker unless before the vote is cast or the authority is exercised written
notice of such death or incapacity is given to the Corporation.
Section 2.9 Order of Business. The order of business at the annual
-----------------
meeting, and so far as practicable at all other meetings of the shareholders,
shall be as follows:
(a) Calling meeting to order;
(b) Calling of roll and checking proxies;
(c) Proof of notice of meeting;
(d) Reading of any unapproved minutes;
(e) Reports of officers;
(f) Reports of committees;
(g) Election of directors;
(h) Unfinished business;
(i) New business; and
(j) Adjournment.
Section 2.10 Action Without Meeting. Any action which, under any
----------------------
provisions of the laws of the State of Oklahoma or under the provisions of the
Certificate of Incorporation or under these Bylaws may be taken at a meeting of
the shareholders, may be taken without a meeting, without prior notice and
without a vote if a consent in writing be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take action at a meeting at which all shares entitled to vote
thereon were present and voted. Such consent shall be filed with the Secretary
of the corporation and made a part of the corporate records. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who have not consented in
writing.
4
<PAGE>
Section 2.11 Inspectors of Election. In advance of any meeting of
----------------------
shareholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or any adjournment thereof. If Inspectors of Election be not so
appointed, the Chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one or three. if appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails or refuses to act, the vacancy may be filled
by appointment by the Board of Directors in advance of the meeting, or at the
meeting by the Chairman. An inspector need not be a shareholder of the
Corporation, but no person who is a candidate for office of the Corporation
shall act as an inspector. The duties of such inspectors shall include:
determining the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The inspectors of the election shall
perform their duties impartially in good faith, to the best of their ability,
and as expeditiously as is practical. If there be three inspectors, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act, or certificate of all.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 3.1 Powers. All corporate powers, except those which are
------
conferred upon or reserved to the shareholders by the Certificate of
Incorporation, these Bylaws and the laws of the State of Oklahoma, shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed and conducted by, the Board of Directors. Without
prejudice to such general power, but subject to the same limitations, the Board
of Directors shall have the following powers:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with applicable law, with the Certificate of Incorporation or
these Bylaws and fix their compensation and to confer upon any officer of
the Corporation the power to appoint, remove and suspend subordinate
officers and agents;
5
<PAGE>
(b) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as it may determine advisable;
(c) To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be in accordance with applicable
law and to declare dividends from time to time in accordance with
applicable law;
(d) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor;
(e) To adopt such insurance, retirement and other benefits plans for
directors, officers and agents of the Corporation and its subsidiaries as
it may determine advisable; and
(f) To adopt regulations, not inconsistent with these Bylaws, for the
management of the Corporation's business and affairs.
Section 3.2 Number, Election and Term of Office. The Board of Directors
-----------------------------------
of the Corporation shall consist of one or more members. The shareholders at any
meeting shall determine the number which shall constitute the Board of Directors
and the number so determined shall remain fixed until changed at a subsequent
meeting of the shareholders. The directors shall be elected at each annual
meeting of the shareholders; however, if any such annual meeting is not held or
the directors are not elected thereat, the directors may be elected at any
meeting of shareholders held for that purpose. Each director shall hold office
until his successor is elected or until his earlier resignation or removal. A
director need not be a shareholder of the Corporation.
Section 3.3 Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and each director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in
case of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting. The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
6
<PAGE>
Section 3.4 Resignations. Upon the resignation of a director, a majority
------------
of the remaining directors or the sole remaining director shall have the power
to elect a successor to take office when the resignation is to become effective.
Section 3.5 Removal. The entire Board of Directors or any individual
-------
director may be removed from office; with or without cause, by the vote of
shareholders holding a majority of the issued and outstanding shares entitled to
vote at any annual or special meeting of shareholders. New directors to fill
vacancies created by removal may be elected at the same meeting of shareholders.
Section 3.6 Annual Meetings. An annual meeting of the Board of Directors
---------------
for the purpose of election of officers of the Corporation and the transaction
of any other business coming before such meeting shall be held each year
immediately following the adjournment of the annual meeting of the shareholders
and no notice of such meeting to the elected directors shall be necessary in
order to legally constitute the meeting, provided a majority of the Board shall
be present. If a majority of the Board shall not be present, then such annual
meeting may be held at such time as shall be fixed by the consent, in writing,
of all of the directors. Other meetings of the Board may be held as shall from
time to time be determined by the Board provided notice of the time, date and
place of any such meeting is given to each director not less than two (2) days
before such meeting.
Section 3.7 Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. No notice of such regular meeting shall be required.
Section 3.8 Special Meetings. Special meetings of the Board of
----------------
Directors for any purpose or purposes may be called at any time by the President
or the Secretary or by any two directors by notice of the time, date and place
thereof given to each director not less than two (2) days before such meeting.
No business shall be considered at any special meeting other than the purposes
mentioned in the notice given to each director of the meeting, except with the
consent of all directors.
Section 3.9 Place of Meetings. Meetings of the Board of Directors shall
-----------------
be held at any place within or without the State of Oklahoma which has been
designated from time to time by resolution adopted by the Board or by written
consent of all members of the Board. In the absence of such designation,
meetings shall be held at the principal office of the Corporation.
Section 3.10 Quorum and Required Vote; Adjourned Meetings. A majority of
--------------------------------------------
the directors shall constitute a quorum for the transaction of business at any
meeting of the directors, and the
7
<PAGE>
acts of a majority of the directors present at a meeting at which a quorum is
present shall be the acts of the Board of Directors except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws and except to adjourn as hereinafter provided. A quorum of the
directors may adjourn any meeting of the directors to meet again at a stated day
and hour; provided that in the absence of a quorum a majority of the directors
present at any meeting of the directors, either regular or special, may adjourn
to a later date but may not transact any business until a quorum has been
secured. At any adjourned meeting at which a required number of directors shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified. Notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.
Section 3.11 Compensation. Directors and members of committees may
------------
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed by resolution adopted by the Board of Directors.
Section 3.12 Action without Meeting. Any action required or permitted to
----------------------
be taken at a meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing. Such written Action by
unanimous consent shall have the same effect as action taken at a meeting of the
Board of Directors and shall be filed with the Secretary of the corporation and
made a part of the minute of proceeding of the Board of Directors.
Section 3.13 Telephonic Meetings. Members of the Board of Directors may
-------------------
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE IV
EXECUTIVE COMMITTEE
-------------------
Section 4.1 Election. The Board of Directors may if it deems necessary,
--------
acting by resolution adopted by a majority of the number of directors, elect
from their own members an Executive Committee composed of two or more voting
members.
Section 4.2 Duties. The Executive Committee shall have and exercise all
------
of the authority of the Board of Directors in the management of the Corporation
in the interval between meetings of the Board of Directors, subject to the
control and direction of the Board of Directors, except to the extent, if any,
such authority shall be limited by the resolution appointing the Executive
8
<PAGE>
Committee and except the power to declare dividends and to adopt, amend or
repeal these Bylaws and where action of the Board of Directors is required by
law. It shall keep regular minutes of its proceedings which shall be reported to
the directors at their next meeting.
Section 4.3 Meetings. The Executive Committee shall meet at such times
--------
as may be fixed by the Committee or on the call of the President. Notice of the
time and place of the meeting shall be given to each member of the Committee in
the manner provided for the giving of notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors or
in such other manner as the Executive Committee by resolution may prescribe.
Section 4.4 Quorum and Voting. A majority of the members of the
-----------------
Executive Committee shall constitute a quorum for the transaction of business.
The acts of the majority of the members of the Executive Committee present at a
meeting at which a quorum is present shall be the acts of the Executive
Committee. At all meetings of the Executive Committee, each member present shall
have one (1) vote which shall be cast by him in person.
Section 4.5 Waiver of Notice. Any actions taken or approved at any
----------------
meeting of the Executive Committee, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the meeting, each
of the members not present signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof.
Section 4.6 Removal. The entire Executive Committee or any individual
-------
member thereof may be removed from the Committee with or without cause by a vote
of a majority of the directors.
Section 4.7 Vacancies. The Board of Directors shall fill all vacancies
---------
in the Executive Committee which may occur from time to time.
Section 4.8 Action Without Meeting; Telephonic Meeting. Action may be
------------------------------------------
taken by the Executive Committee in the manner allowed by the Board of Directors
pursuant to Sections 3.12 and 3.13 of Article III.
ARTICLE V
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation. The Board of Directors may, by resolution
-----------
passed by a majority of the directors, designate one or more committees, in
addition to the Executive Committee authorized in Article IV hereof, each
committee to consist of two or more of
9
<PAGE>
the directors of the Corporation, which to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except where
action of the Board of Directors is required by law, and may authorize the seal
of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 5.2 Procedural Rules. Each committee shall comply with the same
----------------
procedural rules set forth in Section 4.3 through 4.8, both inclusive, of
Article IV that are applicable to the Executive Committee.
ARTICLE VI
OFFICERS
--------
Section 6.1 Officers. The officers of the Corporation shall be a
--------
President, a Secretary and a Treasurer. The Corporation may also have at the
discretion of the Board of Directors, a Chairman of the Board, an Executive
Vice-President, one or more Vice-Presidents, one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers as may be appointed in
accordance with Section 6.3. One person may hold two or more offices; provided
that no person shall at the same time hold the offices of President and
Secretary.
Section 6.2 Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with Section 6.3 or Section 6.5,
shall be elected annually by the Board of Directors, and each shall hold his
office until he shall resign or shall be removed or otherwise disqualified to
serve, or his successor shall be elected and qualified.
Section 6.3 Subordinate Officers. The Board of Directors may appoint,
--------------------
and may empower the President to appoint, such other officers as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
Section 6.4 Removal. Any officer may be removed, either with or without
-------
cause, by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors.
Section 6.5 Resignation. Any officer may resign at any time by giving
-----------
written notice to the Board of Directors, or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such
10
<PAGE>
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 6.6 Vacancies. A vacancy in any office because of death,
---------
removal, resignation, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.
Section 6.7 Chairman of the Board. The Chairman of the Board, if any,
---------------------
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these Bylaws.
Section 6.8 Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if any, shall perform such duties as the Board of Directors shall prescribe. In
the absence or disability of the Chairman of the Board, the Vice Chairman shall
perform the duties and exercise the powers of the Chairman of the Board.
Section 6.9 President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business,
finances and affairs of the Corporation and all other powers normally held and
exercised by the person serving as President of a corporation. The President
shall:
(a) Preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, at all meetings of the Board of Directors;
(b) Sign or countersign, as may be necessary, all such bills, notes,
checks, contracts and other instruments as may pertain to the ordinary
course of the business of the Corporation;
(c) Execute deeds, bonds, mortgages, and contracts required to be
executed under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation;
(d) Have the power to appoint all employees and agents of the
Corporation whose appointment is not otherwise provided for and to fix the
compensation thereof subject to the provisions of these Bylaws and subject
to the approval of the Board of Directors and to remove or suspend any
employee or agent who shall not have been appointed by the Board of
Directors and to suspend for cause, pending final action by the body which
shall have appointed him, any officer other
11
<PAGE>
than an elected officer, or any employee or agent who shall have been
appointed by the Board of Directors;
(e) Present a complete report of the business of the Corporation for
the preceding fiscal year at the annual meeting of the shareholders and
report to the Board of Directors from time to time all matters coming to
his attention which materially affect the business of the Corporation; and
(f) Serve as a member of the Board of Directors and an ex-officio
member of all standing committees, including the Executive Committee, if
any; and possess such usual powers and duties of supervision and
management as may pertain to the office of the President and such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
Section 6.10 Executive Vice-President. The Executive Vice-President, if
------------------------
any, shall be the executive officer of the Corporation next in authority to the
Chairman of the Board and the President, both of whom he shall assist in the
management of the business of the Corporation and the implementation of orders
and resolutions of the Board of Directors. In the absence of the Chairman of the
Board and the President, he shall preside at all meetings of the shareholders
and of the directors, and shall exercise all other powers and perform all other
duties of the Chairman of the Board and the President; and he shall perform such
other duties as the Board of Directors may from time to time prescribe. He shall
have all authority conferred upon a Vice-President by these Bylaws.
Section 6.11 Vice-President. In the absence or disability of the
--------------
President, the Vice-Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, the Vice-President designated by the Board
of Directors, shall perform all the duties of the President and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice-Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or these Bylaws.
Section 6.12 Secretary. The Secretary shall:
---------
(a) Attend all meetings of the Board of Directors and the
shareholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like
duties for all committees of the Board of Directors;
(b) Duly give or cause to be given all notices in accordance with
these Bylaws or as required by law;
12
<PAGE>
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its
seal is duly authorized;
(d) Sign, with the President or Vice-President, all deeds, bonds,
mortgages, contracts and other instruments when so ordered;
(e) Keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder;
(f) Have general charge of the stock transfer books of the
Corporation; and
(g) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.13 Assistant Secretaries. In the absence of the Secretary or in
---------------------
the event of his death, inability or refusal to act, the Assistant Secretaries
in the order of their length of service as Assistant Secretary, unless otherwise
determined by the Board of Directors, shall perform the duties of the Secretary,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Secretary. They shall perform such duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 6.14 Treasurer. The Treasurer shall:
---------
(a) Keep and maintain adequate and correct accounts of the properties
and business transactions of the Corporation;
(b) Have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due
and payable to the Corporation from any source whatsoever, and deposit all
such moneys in the name of the Corporation in such depositories as shall
be designated by the Board of Directors;
(c) Sign or countersign, as may be necessary, all such bills, notes,
checks and other instruments relating to the fiscal affairs of the
Corporation in the ordinary course of the business of the Corporation;
(d) Prepare, or cause to be prepared, a true statement of the
Corporation's assets and liabilities as of the close of each fiscal year
and a true statement of the results of the
13
<PAGE>
operations of the Corporation for the fiscal year then ended, all in
reasonable detail; and
(e) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.15 Assistant Treasurers. In the absence of the Treasurer or in
--------------------
the event of his death, inability or refusal to act, the Assistant Treasurers,
in the order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them be the Treasurer, by the President, or by the Board of
Directors.
Section 6.16 Delegation of Duties. In case of the absence or disability
--------------------
of any officer of the corporation or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may, by a vote of a
majority of the whole Board, delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer or to any director.
ARTICLE VII
SHARES OF STOCK
---------------
Section 7.1 Certificates of Stock. A certificate or certificates for
---------------------
shares of the capital stock of the Corporation shall be issued$ to each
shareholder when any such shares are fully paid, showing the number of the
shares of the Corporation standing on the books in his name. The form of such
certificate shall be determined by the Board of Directors. All such certificates
shall be signed by the President or a Vice-President and the Secretary or an
Assistant Secretary, or be authenticated by facsimiles of the signatures of the
President and Secretary or by a facsimile of the signature of the President and
the written signature of the Secretary or an Assistant Secretary. Every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk. Even though an officer who signed, or whose
facsimile signature has been written, printed or stamped on, a certificate for
shares shall have ceased by death, resignation or otherwise to be an officer of
the Corporation before such certificate is delivered by the Corporation, such
certificate shall be as valid as though signed by a duly elected, qualified and
authorized officer, if it be countersigned by a transfer agent or transfer
clerk. Such certificates shall also be numbered and sealed with the seal of the
Corporation.
Section 7.2 Record of Shareholders. There shall be kept at the
----------------------
registered office of the Corporation in the State of Oklahoma
14
<PAGE>
a record containing the names and addresses of all shareholders of the
Corporation, arranged in alphabetical order, the number and class of shares held
by each and the dates when they respectively became the owners of record
thereof; provided that the foregoing shall not be required if the Corporation
shall keep at its registered office a statement containing the name and post
office address, including street number, if any, of the custodian of such
record. Duplicate lists may be kept in such other state or states as may, from
time to time, be determined by the Board of Directors.
Section 7.3 Transfer Agents and Registrars. The Board of Directors may,
------------------------------
in its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
Section 7.4 Transfer of Shares. Transfers of stock of the Corporation
------------------
shall be made on the books of the Corporation only upon authorization by the
registered holder thereof or by his attorney lawfully constituted in writing and
on surrender and cancellation of a certificate or certificates for a like number
of shares of the same class properly endorsed or accompanied by a duly executed
stock transfer power and payment of all taxes thereon, with such proof of
authenticity of the signatures as the Corporation or its transfer agents may
reasonably require.
Section 7.5 Shareholders Record Date and Closing Stock Books. The Board
------------------------------------------------
of Directors may fix, in advance, a time as a record date for the determination
of the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting not more than sixty (60) days prior to the
date of the meeting or action nor less than ten (10) days prior to the date of
the meeting or action. The Board of Directors may also fix, in advance, a time
as a record date for the determination of shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion, or
exchange of shares or for the purpose of any other lawful action which shall be
not more than sixty (60) days prior to the date of the event for the purpose of
which it is fixed. When a record date is so fixed, only shareholders of record
on that date are entitled to notice of and to vote at the meeting or to receive
a dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the record date. In lieu of fixing a record date, the Board of
Directors may close the books of the Corporation against any transfer of shares
for a stated period but not to exceed in any case the maximum periods set forth
above.
15
<PAGE>
Section 7.6 Registered Shareholders. The Corporation shall be entitled
-----------------------
to recognize the holder of record of any share or shares of stock as the
exclusive owner thereof for all purposest and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 7.7 Lost Certificates. No new certificate for shares shall be
-----------------
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time; provided that if any certificate for shares is lost, stolen,
mutilated or destroyed, the Board of Directors may authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions, including
indemnification of the Corporation reasonably satisfactory to it, as the Board
of Directors shall determine.
Section 7.8 Treasury Shares. Treasury shares, or other shares not at
---------------
the time issued and outstanding, shall not, directly or indirectly, be voted at
any meeting of the shareholders, or counted in calculating the actual voting
power of shareholders at any given time. Treasury shares shall not have dividend
rights.
Section 7.9 Fractional Shares. Certificates of fractional shares of
-----------------
stock may be issued at the discretion of the Board of Directors. The registered
ownership of any fractional share represented by such certificate or
certificates shall entitle the holder thereof to receive dividends, participate
in the corporate assets in the event of liquidation of the Corporation and to
exercise voting rights in person or by proxy.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
------------------------
Section 8.1 Contracts. The Board of Directors or any committee thereunto
---------
authorized may authorize any officer or officers, agent or agents, to enter into
any contract or to execute and deliver in the name and on behalf of the
Corporation any contract or other instrument, except certificates representing
shares of stock of the Corporation, and such authority Inay be general or may be
confined to specific instances.
Section 8.2 Checks and Drafts. All checks, drafts or other orders for
-----------------
the payment of money, notes, acceptances or other evidences of indebtedness
issued by or in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined from time to time by resolution of the Board of Directors.
Section 8.3 Deposits; Bank Accounts. All funds of the Corporation not
-----------------------
otherwise employed shall be deposited from time to
16
<PAGE>
time to the credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may from time to time designate or as may
be designated by an officer or officers of the corporation to whom such power
of designation may from time to time be delegated by the Board of Directors. The
Board of Directors may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these Bylaws, as it
may deem expedient. Unless otherwise provided by resolution of the Board of
Directors, endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories may be made by hand-stamped legend in the name
of the Corporation or by written endorsement by any officer without
countersignature.
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so authorized,
unless a particular officer or agent is directed to negotiate the same, may be
negotiated, up to the amount so authorized, by the President or a Vice-President
or the Treasurer; and such officers are hereby severally authorized to execute
and deliver in the name and on behalf of the Corporation notes or other
evidences of indebtedness countersigned by the President or a Vice-President for
the amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring any
part or all of the property of the corporation, real or personal, at any time
owned by the Corporation.
Section 8.5 Sale or Transfer of Securities Held by the Corporation.
------------------------------------------------------
Stock certificates, bonds or other securities at any time owned by the
Corporation may be held on behalf of the Corporation or sold, transferred or
otherwise disposed of pursuant to authorization by the Board of Directors, or of
any committee thereunto duly authorized, and when so authorized to be sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice-President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Section 8.6 Execution of Proxies. The President, or, in the absence or
--------------------
disability of the President, a Vice-President, may authorize from time to time
the signature and issuance of proxies to vote upon shares of stock of other
corporations standing in the name of the Corporation or authorize the execution
of consents to action taken or to be taken by such other corporation. All such
proxies and consents shall be signed in the name of the Corporation by the
President or a Vice-President and by the Secretary or an Assistant Secretary.
17
<PAGE>
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 Indemnification: Actions Other Than by the Corporation. The
------------------------------------------------------
Corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments,fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner in which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 9.2 Indemnification: Actions by the Corporation. The Corporation
-------------------------------------------
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
18
<PAGE>
Section 9.3 Right to Indemnification. To the extent that any present or
------------------------
former director, officer or employee or any person who is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, or any agent
of the Corporation or any person who is or was serving at the request of the
Corporation as an agent of another corporation, partnership, joint venture,
trust or other enterprise, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2
of this Article IX, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
Section 9.4 Authorization of Indemnification. Any indemnification under
--------------------------------
Sections 9.1 and 9.2 of this Article IX, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 9.1 and 9.2 of this Article IX. Such determination
shall be made: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding;
or (b) if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (c) by the shareholders.
Section 9.5 Advance Indemnification. Expenses incurred by a director,
-----------------------
officer, employee or agent in defending a civil or criminal action, suit or
proceeding as authorized by the Board of Directors in the specific case may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 9.6 Non-Exclusive Indemnification. The indemnification provided
-----------------------------
by this Article IX shali not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, contract,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9.7 Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or
19
<PAGE>
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising our of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
Section 9.8 Constituent Corporation. For the purposes of this Article
-----------------------
IX, references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation, including any constituent of a
constituent, absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 9.9 Definitions. For purposes of this Article IX, references to
-----------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest in the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board of Directors.
Section 10.2 Seal. The corporate seal of the Corporation shall be
----
circular in form and shall contain the name of the Corporation, the word
"OKLAHOMA" and such other words or information as shall be determined by the
Board of Directors. The seal may be used by causing it or a facsimile thereof to
be impressed, affixed or otherwise reproduced.
20
<PAGE>
Section 10.3 Dividends. The Board of Directors may, out of funds legally
---------
available therefor, from time to time at any regular or special meeting,
declare, and the Corporation may pay, dividends on its outstanding shares of
capital stock as and when it deems expedient. Such dividends may be made in
cash, property or shares of the capital stock or other securities of the
Corporation.
Section 10.4 Notice. Whenever any notice is required or permitted to be
------
given under the provisions of any law, the Certificate of Incorporation or these
Bylaws, it shall not be construed to require personal notice unless expressly so
stated, but such notice may be given by depositing the same in the United States
mail, postage prepaid, addressed to the person entitled thereto at his address
as it appears on the records of the Corporation, and such notice shall be deemed
to have been given on the day of such mailing. Notice shall be deemed to have
been duly given on the date of service if served personally or by telex,
telecopier, cable, telegram or similar communication. Shareholders not entitled
to vote shall not be entitled to receive notice of any meetings except as
otherwise provided by statute.
Section 10.5 Waiver of Notice. Whenever any notice whatever is required
----------------
to be given under the provisions of any law or of the Certificate of
Incorporation or of these Bylaws, a written waiver thereof, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation.
Section 10.6 Conflicts of Interest. Except as may be otherwise provided
---------------------
by the laws of the State of Oklahoma or the Certificate of Incorporation, no
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are accounted for such purpose; if: (a) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or such committee, and the
Board of Directors or Executive Committee in good faith authorizes the contract
or
21
<PAGE>
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (b)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors, or a committee which authorizes the contract
or transaction.
Section 10.7 Loans to Officers or Employees. The Corporation may lend
------------------------------
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance may
be with or without interest, and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing contained in this section shall be
construed to deny, limit or restrict the powers of guaranty or warranty of any
Corporation at common law or under any statute.
Section 10.8 Amendment. These Bylaws may be amended, altered, changed or
---------
repealed at any annual or special meeting of the shareholders, provided notice
of the proposed amendment, alteration, change or repeal is contained in the
notice of such meeting, by the affirmative vote of a majority of the shares
issued and outstanding, and entitled to vote thereat. These Bylaws also may be
amended, altered, changed or repealed a-t any annual or special meeting of the
Board of Directors, provided notice of the proposed amendment, alteration,
change or repeal is contained in the notice of such meeting, by the affirmative
vote of the members of the Board of Directors. Notwithstanding the preceding
sentence, the fact that such power to amend, alter, change or repeal has been
conferred upon the Board of Directors shall not divest the shareholders of the
power, nor limit their power to amend, alter, change or repeal these Bylaws.
22
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that:
1. I am the duly elected and acting Secretary of APR Corporation
("Corporation"), an Oklahoma corporation;
2. The foregoing Bylaws comprising twenty-three (23) pages constitute the
Bylaws of the Corporation as duly adopted by Consent to Action Without a Meeting
of the Board of Directors effective October 29, 1992.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 29th day of October, 1992.
_________________________________
David Goss, Secretary
(SEAL)
23
<PAGE>
FIRST AMENDMENT
TO
BYLAWS
OF
APR CORPORATION
---------------
The following amendment to the Bylaws of APR Corporation, an Oklahoma
corporation, was approved and adopted by the Board of Directors of APR
Corporation by unanimous written consent, on November 28, 1997.
1. Section 8.4 of Article VIII of the Bylaws of APR Corporation is hereby
amended to read as follows:
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so
authorized, unless a particular officer or agent is directed to negotiate
the same, may be negotiated, up to the amount so authorized, by the
President or a Vice President or the Treasurer; and such officers are
hereby severally authorized to execute and deliver, in the name and on
behalf of the Corporation, notes or other evidences of indebtedness for the
amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring
any part or all of the property of the Corporation, real or personal, at
any time owned by the Corporation.
The Bylaws of APR Corporation, as amended and modified by this First
Amendment to Bylaws of APR Corporation, set forth the entire Bylaws of APR
Corporation. The amendment to the Bylaws of APR Corporation, as combined in
this First Amendment to the Bylaws of APR Corporation, is effective as of the
28th day of November, 1997, the date that such amendment was approved by the
Board of Directors of APR Corporation.
APR CORPORATION
/s/ Barry H. Golsen
_____________________________
Barry H. Golsen, President
/s/ David M. Shear
______________________________
[S E A L] David M. Shear,
Assistant Secretary
<PAGE>
EXHIBIT 3.5
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office, of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
CHP CORPORATION
(FORMERLY: CALIFORNIA HEAT PUMP COMPANY)
In testimony whereof, I have hereto set my hand and
affixed the Great Seal of the State of Oklahoma at the
City of Oklahoma City this 14th, day of November,
1997.
______________________________________
Secretary of State
By: __________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
CALIFORNIA HEAT PUMP COMPANY
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 15/th/ day of
November , A.D. 1979.
______________________________________
Secretary of State
By: __________________________________
<PAGE>
ARTICLES OF INCORPORATION
OF
CALIFORNIA HEAT PUMP COMPANY
TO THE SECRETARY OF STATE
STATE OF OKLAHOMA:
We the undersigned incorporators, whose names and addresses are shown
below, being persons legally competent to enter into contracts, for the purpose
of forming a corporation under "The Business Corporation Act" of the State of
Oklahoma, do hereby adopt the following Articles of Incorporation:
1. The name of this Corporation is;
CALIFORNIA HEAT PUMP COMPANY
2. The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, County of Oklahoma, and the name of its
registered agent is Irwin H. Steinhorn, 16 South Pennsylvania, Oklahoma City,
Oklahoma.
3. The duration of the Corporation is perpetual.
4. The objects and purposes for which the Corporation is formed are:
(a) To carry on the business of distributors, wholesalers, or agents,
to buy, sell and deal in, at wholesale or retail, merchandise, goods, wares, and
commodities of every sort, kind or description, and to carry on any other
business, whether manufacturing or otherwise, which can be conveniently carried
on with any of the objects of this Corporation.
(b) To engage in the transportation of property by motor vehicle; to
engage in the general transportation and communication business and to buy,
sell, lease, own, or operate other motor
<PAGE>
carriers, broadcasting stations, and facilities; to buy, sell, lease, own, or
operate terminals and warehouses and engage in warehousing business; to buy,
sell, deal and engage in the sale of motor vehicles and parts.
(c) To make and purchase materials for the construction of buildings;
to erect buildings; to own, manage, operate, lease and sell buildings; to
conduct and carry on the business of builders for the purpose of building,
repairing or doing any other work in connection with any and all classes of
buildings and improvements, including the location laying out and constructing
of roads, avenues, sewers, bridges, well, and generally all classes of
buildings, erections and works, both public and private, or integral parts
thereof.
(d) To purchase, take, own, hold, deal in, mortgage or otherwise
encumber and to lease, sell, exchange, convey, transfer or in any manner
whatever dispose of real property; to acquire lands for the purpose of
prospecting for and obtaining oil, gas and other minerals; to drill oil wells,
and to acquire drilling rigs or other machinery necessary to such purposes; and
to produce and market oil and other minerals.
(e) To enter into partnership or other arrangement for sharing
profits or cooperate with any entity carrying on any business capable of being
conducted so as to benefit this Corporation; to acquire the assets and assume
the liabilities of any entity; to pay for the same in cash, stock or otherwise;
to
2
<PAGE>
hold or dispose of the property so purchased; and to conduct any business so
acquired.
(f) To finance, borrow and lend money and to negotiate loans; to
purchase, finance, draw, accept and endorse notes, accounts receivable, bonds,
stocks, debentures and other securities; to subscribe for, acquire, hold and
dispose of in any manner shares of stock, bonds, accounts, accounts receivable
and other securities of any government, person or corporation.
(g) To purchase or otherwise acquire, apply for, register, hold, use,
assign, sell or in any manner dispose of and to grant licenses, franchises, or
other rights in, and in any manner deal with, patents, inventions, improvements,
processes, formulas, trademarks, trade names, copyrights or otherwise.
(h) To have one or more office and to conduct any or all of its
operations and business and to promote its objects within or without the State
of Oklahoma, without restriction as to place or amount.
(i) To do any or all of the things herein set forth as principal,
agent, contractor, trustee or otherwise, alone or jointly with natural persons
or any legal entity.
(j) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall be
in no way limited nor restricted by reference to or inference from the terms of
any other clause or paragraph of these Articles of Incorporation.
3
<PAGE>
The foregoing shall be construed both as objects and powers, and the
enumeration thereof shall not be held to limit or restrict in any manner the
general powers conferred on this Corporation by the laws of the State of
Oklahoma.
5. All of the shares to be issued by the Corporation shall be of one
class, that is, Voting Common Stock, of a par value of $10.00 per share. The
aggregate number of shares which the Corporation shall have the authority to
allot is 50 shares.
6. The amount of stated capital with which this Corporation will begin
business is $500.00, which has been fully paid in.
7. The number of shares to be allotted by this Corporation before it
begins business, and the consideration received by the Corporation therefore,
are:
Number of Consideration
Shares Received
------ --------
50 $500.00
8. The number of directors of this Corporation shall be as specified in
the By-Laws, and such number may from time to time be increased or decreased
under the By-Laws or any amendment or change thereof provided the number of
directors of the Corporation shall not be less than three. The number of
directors to be elected at the first meeting of the shareholders is three.
Directors and officers need not be shareholders. In case of vacancies in the
Board of Directors, a majority of the remaining members of the Board, even
though less than a quorum, may elect directors to fill
4
<PAGE>
such vacancies to hold office until the next annual meeting of the shareholders.
9. No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected by the fact that any of the directors
of the Corporation __________________________________.
A majority of the stock issued and outstanding of this Corporation having
voting power may in the By-Laws confer power additional to the foregoing upon
the directors, in addition to the powers and authorities expressly conferred
upon them by law.
11. No shareholder of this Corporation shall have any pre-emptive or
preferential right of subscription to any shares of stock of this Corporation,
whether now or hereafter authorized, or to any obligations convertible into
stock of this Corporation, authorized, issued or sold.
Signed at Oklahoma City, Oklahoma this 5th day November, 1979.
__________________________________ _______________________________________
Irwin H. Steinhorn Tony M. Shelby
16 South Pennsylvania 16 South Pennsylvania
Oklahoma City, Oklahoma Oklahoma City, Oklahoma
5
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
Before me, the undersigned, a Notary Public in and for said county and
State, personally appeared the above named incorporators, to me known to be the
identical persons who executed the foregoing Articles of Incorporation, and
acknowledged to me that they executed the same as their free and voluntary act
and deed for the uses and purposes therein set forth, on this 5th day of
November, 1979.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year above written.
_____________________________________
Notary Public
My Commission Expires:
_________________
6
<PAGE>
AFFIDAVIT AS TO PAID IN CAPITAL
-------------------------------
(California Heat Pump Company)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The undersigned, of lawful age, being first duly sworn, each for himself,
deposes and says:
That they are the incorporators of the above named proposed Corporation,
and that the amount of stated capital with which said Corporation will begin
business, as set out in its attached Articles of Incorporation, has been fully
paid in.
_________________________________ __________________________________
Irwin H. Steinhorn Tony M. Shelby
_____________________________
Mary M. Phillips
Subscribed and sworn to before me this 5th day of November, 1979.
__________________________________
Notary Public
My Commission Expires:
________________________________
7
<PAGE>
AMENDED ARTICLES OF INCORPORATION FEE: $25.00
--------------------------------- (Minimum)
PLEASE NOTE: This form must be filed with a letter from the Oklahoma Tax
Commission stating the franchise tax has been paid for the current fiscal year.
If the authorized capital is increased in excess of Twenty-five Thousand Dollars
($25,000.00) the filing fee shall be an amount equal to one-tenth of one percent
(1/10 of 1%) of such increase.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
We, the undersigned, Address City and State
- --------------------------------------------------------------------
Jack E. Golsen 16 So. Pennsylvania Okla. City, OK 73107
- --------------------------------------------------------------------
David R. Goss 16 So. Pennsylvania Okla. City, OK 73107
- --------------------------------------------------------------------
Barry H. Golsen 5000 S.W. 7/th/ Okla. City, OK 73125
- --------------------------------------------------------------------
being persons legally competent to amend the Articles of Incorporation pursuant
to the provisions of the "Business Corporation Act" of the State of Oklahoma, do
hereby execute and submit the following amended Articles of Incorporation.
(1) The name of the corporation is changed from California Heat Pump Company to
--------------------------------------------
CHP Corporation
---------------------------------------------------------------------------
(If the corporate name is changed, please show the former name also).
(2) A. No Change, As Filed X
---
B. As Amended - The address of the registered office in Oklahoma
is __________________________________, City of _____________, and the name of
the registered agent at such address is _____________________________ .
(3) A. No Change, As Filed X
---
B. As Amended - The duration of the corporation is ____________________ years.
(4) A. No Change, As Filed X
---
B. As Amended - The purpose or purposes for which the corporation is formed
are:
(5) A. No Change, As filed X
---
B. As Amended - The aggregate number of the authorized shares, itemized by
class, par value of shares, shares without par value, and series, if any, within
a class is:
CLASS SERIES NUMBER OF SHARES PAR VALUE - NO PAR VALUE
- ----- ------ ---------------- ------------------------
<PAGE>
(6) A. No Change, As filed X
---
B. As Amended - The amount of stated capital with which the corporation shall
have is $___________, which has been fully paid in (must be at least $500).
(7) A. No Change, As filed X
---
B. As Amended - The number and class of shares to be allotted by the
corporation consideration to be received therefor are:
CLASS SERIES NUMBER OF SHARES PAR VALUE - NO PAR VALUE
- ----- ------ ---------------- ------------------------
(8) A. No Change, As filed X
---
B. As Amended - The number of directors is ________________ .
PLEASE COMPLETE ONE OF THE FOLLOWING, (9) (10) or (11), depending upon the
- ------------------------------------
method of execution of the amended Articles of Incorporation.
(9) IF SUCH AMENDMENT BE BY THE CORPORATION UPON THE APPROVAL OF THE
SHAREHOLDERS, SUCH AMENDED ARTICLES SHALL FURTHER SET FORTH:
(a) Such amendment was proposed by a resolution of the Board of Directors on
the ____ day of ________________, 19____.
(b) The amendment was adopted by a vote of the shareholders in accordance with
the provisions of 18 O.S. 1971, (S) 1.153.
(c) The meeting of the shareholders of the corporation at which the amendment
was adopted was held at ________________________________________________________
(d) Notice of the meeting was given by _______________________________ for a
period of ______________________________________________________________________
(e) The class and number of shares voted for and against such amendment was:
CLASS NUMBER OF SHARES VOTED FOR VOTED AGAINST
- ----- ---------------- --------- -------------
(Corporate Seal) ___________________________________
Exact Corporate Name
ATTEST:
__________________________________ ___________________________________
by its Secretary by its President
(10) IF SUCH AMENDMENT BE BY THE INCORPORATORS, SUCH AMENDED ARTICLES SHALL
FURTHER SET FORTH:
(a) No shares of the corporation have been allotted.
(b) The corporation has not begun or transacted any business or incurred any
indebtedness except such business or indebtedness as
2
<PAGE>
shall have been incidental to its organization or to the obtaining of
subscriptions or payment for its shares; and
(c) No subscriptions have been taken and no shares have been subscribed for; OR
--
Subscriptions have been taken and _______ shares subscribed for, and the
subscribers for at least two/thirds of such number of shares have signed and
filed with the Incorporators-Secretary of the corporation their written consent
to the amendment. As provided for in 18 O.S. 1971, (S) 1.152.
(Majority of Incorporators must sign)
__________________________
__________________________
__________________________
(Notarial Seal)
__________________________
NOTARY PUBLIC
My Commission expires ______________________ .
(11) IF SUCH AMENDMENT BE BY THE BOARD OF DIRECTORS, SUCH AMENDED ARTICLES SHALL
FURTHER SET FORTH:
(a) The general nature of the amendment is to change the name of California
--------------------------------
Heat Pump Company to CHP Corporation.
- --------------------------------------------------------------------------------
(b) As provided for in 18 O.S. 1971, (S) 1.162, a resolution of amendment was
adopted at a meeting duly called on the 11/th/ day of June, 1984.
(Majority of Directors must sign) __________________________
Jack E. Golsen
(Corporate Seal)
__________________________
David R. Goss
__________________________
Barry H. Golsen
Subscribed and Sworn to before me this 12th day of June, 1984.
(Notarial Seal) __________________________
NOTARY PUBLIC
My Commission expires July 30, 1987.
3
<PAGE>
FILE IN DUPLICATE FEE $5.00
CORPORATE TRADE NAME REPORT
TITLE 18, O.S. 1971 (S) 1.11
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned corporation hereby submits the following report of the
adoption of a trade name used in connection with its business in the State of
Oklahoma.
1. The name of the corporation is: California Heat Pump Company
----------------------------
2. The corporation was incorporated under the laws of the State of: Oklahoma
--------
3. The name and address of its registered agent in the State of Oklahoma is:
Irwin H. Steinhorn, 16 S. Pennsylvania, Oklahoma City, OK 73107
---------------------------------------------------------------
4. It is doing business in Oklahoma under the following trade name: Aqua-
----
Matic Co.
---------
5. The kind of business being transacted under such name may be briefly
described as follows:
The manufacture, distribution and sale of water source heat pump
units.
6. The corporation is carrying on such business under such name at the
following address(es) within the State of Oklahoma:
Street Address City or Town
-------------- ------------
4051 N.W. 3/rd/ Oklahoma City, OK
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
IN WITNESS WHEREOF, the corporation has caused this report to be executed
this 17 day of May, 1984.
California Heat Pump Company
---------------------------------
CORPORATE SEAL (Corporate Name)
OR
NOTARIZATION
By: _____________________________
Vice President
<PAGE>
ATTEST:
__________________________
Secretary
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
AMENDED
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
CHP CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City
this 15th day of June, A.D. 1984.
_____________________________________
Secretary of State
By: _________________________________
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 731940006
ODIE A. NANCE, Chairman
ROBERT L. WADLEY, Vice-Chairman FRANCHISE DIVISION
J. L. MERRILL, Sec'y-Member
June 6, 1984
Jeannette B. Edmondson, Secretary of State
Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105
Re: CALIFORNIA HEAT PUMP COMPANY
Qualified: 11/15/79
Dear Mrs. Edmondson:
Our records indicate the referenced entity has complied with the Franchise Tax
Law and is licensed for the current fiscal year ending June 30, 1984.
Very truly yours,
OKLAHOMA TAX COMMISSION
A. H. Stoabs, Director
Franchise Tax Division
AHS:jh
<PAGE>
FEE: $10.00
FILE IN DUPLICATE
PRINT CLEARLY
CORPORATE TRADE NAME REPORT
SOS CORP. KEY:
DB 342638
- ---------
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned corporation hereby submits the following report of the
adoption of the trade name used in connection with its business in the State of
Oklahoma pursuant to 18 O.S. 1981, (S) 1.11a.
1. The name of the corporation is: CHP Corporation
-------------------------------------------
2. The corporation was incorporated under the laws of the State of: Oklahoma
--------
3. The name of the registered agent and the address of the registered office
in the State of Oklahoma is:
Irwin H. Steinhorn 16 S. Pennsylvania Oklahoma City
---------------------------------------------------------------------------
NAME STREET ADDRESS CITY
Oklahoma 73107
---------------------------------------------------------------------------
COUNTY ZIP CODE
4. It is doing business in Oklahoma under the following trade name:
California Heat Pump Co.
------------------------
5. The kind of business being transacted under such name may be briefly
described as follows:
Manufacture, distribution and sale of water source heat pump units,
fan coil units, and related air conditioning components.
6. The corporation is carrying on such business under such name at the
following address(es) within the State of Oklahoma:
Street Address City or Town
-------------- ------------
4051 N.W. Third Street Oklahoma City, OK 73107
---------------------------------------------------------------------------
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
CHP CORPORATION
-----------------------------------
(CORPORATE SEAL) (EXACT CORPORATE NAME)
___________________________________
By its Vice President
ATTEST:
_______________________________
By its Secretary
The foregoing instrument was acknowledged before me this 4th day of February,
1986, by David R. Goss, Vice President
-----------------------------
___________________________________
(NOTARY PUBLIC)
My Commission expires: ________
(NOTARY SEAL)
<PAGE>
FEE $25.00
CHANGE
OF
REGISTERED AGENT
AND
LOCATION OF
REGISTERED OFFICE
OF
CHP CORPORATION
AN OKLAHOMA CORPORATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
CHP Corporation, an Oklahoma corporation (the "Corporation"), for the
purpose of changing its registered agent and registered office pursuant to
Section 1023 of the Oklahoma General Corporation Act, hereby certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
---------------------------------------------------------------------------
Street Name City County Zip Code
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
---------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this 26th
day of September, 1995.
CHP CORPORATION
Tony M. Shelby
____________________________ ------------------------------
by Vice President (Please print name)
ATTEST:
David M. Shear
____________________________ ------------------------------
by Asst. Secretary (Please print name)
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 731940006
ROBERT E. ANDERSON, Chairman BUSINESS TAX
ROBERT V. CULLISON, Vice-Chairman DIVISION
DON KILPATRICK, Sec'y-Member REGISTRATION SECTION
(405) 521-3161
FEI: 731094496
BOA 10/19/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK. 73105
RE: CHP CORPORATION
QUALIFICATION DATE: 11/15/79
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1996 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.6
BY-LAWS
-------
OF
--
CALIFORNIA HEAT PUMP COMPANY
----------------------------
ARTICLE I
Offices
-------
Section 1. The name and address of the registered agent in Oklahoma is
Irwin H. Steinhorn, 16 South Pennsylvania', Oklahoma City, Oklahoma, and the
principal office of this Corporation shall be located at Oklahoma City,
Oklahoma, or such other place as the directors may designate.
Section 2. The Corporation may also have offices at such other places as
the business of the Corporation requires.
ARTICLE II
Corporate Seal
--------------
Section 1. The corporate seal shall have inscribed thereon the name of the
Corporation, the year, and the words "Corporate Seal, Oklahoma".
ARTICLE III
Shareholders' Meetings
----------------------
Section 1. The annual meeting of the shareholders shall be held in the
principal office of the Corporation, or at such other place as may be designated
by the Board of Directors.
Section 2. The annual meeting of the shareholders after this year shall be
held at 10:00 a.m. on the second Tuesday in November in each year, when they
shall elect a Board of Directors and transact such other business as may be
properly brought before the meeting.
Section 3. The holders of a majority of the outstanding stock entitled to
vote, present in person or by proxy, shall constitute a quorum, except as
otherwise provided by law, the Articles of Incorporation or by these By-Laws.
Section 4. At each meeting of the shareholders every shareholder shall be
entitled to vote in person, or by written proxy. Each shareholder shall have one
vote for each share of stock entitled to vote, registered in his name on the
books of the Corporation for a period of not less than twenty days prior to such
meeting. All elections shall be had and all questions decided by a majority vote
of those present.
<PAGE>
Section 5. Written notice of the annual meeting shall be mailed to each
shareholder at least ten days prior to the meeting.
Section 6. Special meetings of the shareholders, unless otherwise provided
by statute, may be called by the President, and shall be called by the President
at the request in writing of a majority of the Board of Directors or
shareholders. Any such request shall state the purpose of the meeting.
Section 7. Written notice of all special meetings of the shareholders,
stating the time, place and objects thereof, shall be mailed, at least five days
before such meeting.
ARTICLE IV
Directors
---------
Section 1. The property and business of this Corporation shall be managed
by its Board of Directors, consisting of not less than three nor more than seven
in number. They shall be elected at the annual meetings of the shareholders, and
each director shall be elected to serve until his successor shall be elected and
shall qualify.
Section 2. The directors may hold their meetings and keep the books of the
Corporation at the principal office of the Corporation, or at such other place
or places within or without the State of Oklahoma as they may, from time to
time, determine.
Section 3. In addition to the powers and authorities by these By-Laws
expressly conferred upon them, the directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-Laws required to be done by the
shareholders.
Section 4. Any director, whether elected by the shareholders or appointed
by the directors, may be removed from office, with or without cause, at any time
by the shareholders.
ARTICLE V
Compensation of Directors
-------------------------
Section 1. Directors, as such, shall not receive any stated salary for
their services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each meeting of Board;
provided that nothing herein shall preclude any director from serving in any
other capacity and receiving compensation therefor.
2
<PAGE>
ARTICLE VI
Meetings of the Board
---------------------
Section 1. The annual meeting of the Board shall be held immediately
following the annual meeting of the shareholders, and no notice of such meeting
of the Board shall be necessary to the newly elected directors in order to
legally constitute such meeting.
Section 2. Special meetings of the Board may be called by the President on
three days' notice to each director. Special meetings shall be called by the
President in like manner and on like notice on the written request of two
directors.
Section 3. At all meetings of the Board, a majority of the directors shall
constitute a quorum, and the act of a majority of the directors present at any
meeting at which there is a quorum, shall be the act of the Board of Directors,
except as may otherwise be specifically provided by statute, or by the Articles
of Incorporation, or by these By-Laws.
ARTICLE VII
The President
-------------
Section 1. Either the Chief Executive Officer or President shall preside
at all meetings of the shareholders and directors. The President shall have
general and active management of the business of the Corporation in conjunction
with the Chief Executive Officer. He shall see that all orders and resolutions
of the Board are carried into effect, and shall in conjunction with the Chief
Executive Officer nave the general powers and duties of supervision and
management usually vested in the office of President of a Corporation.
ARTICLE VIII
Vice Presidents
---------------
Section 1. Any of the Vice Presidents who may be available shall, in the
absence of disability of the President, perform the duties and exercise the
powers of the President, and shall perform such other duties as the directors
shall prescribe.
ARTICLE IX
The Treasurer
-------------
Section 1. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the
3
<PAGE>
Corporation, and shall deposit all monies and other valuable effects in the name
and to the credit fo the Corporation in such depositories as may be designated
by the directors.
ARTICLE X
The Secretary
-------------
Section 1. The Secretary shall attend all sessions of the Board and all
meetings of the shareholders and record all votes and the minutes of all
meetings in a book to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the shareholders and of the directors, and
shall perform such other duties as may be prescribed by the President or the
directors, all subject to the supervision of the President.
ARTICLE XI
Vacancies
---------
Section 1. If the office of any director, or of any officer or agent,
becomes vacant by reason of death, resignation, disqualification, removal from
office, or otherwise, the directors may choose a successor who shall hold office
for the unexpired terms in respect of which such vacancy occurred.
ARTICLE XII
Certificate of Stock
--------------------
Section 1. The certificates of stock of the Corporation shall be numbered
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary.
ARTICLE XIII
Transfer of Stock
-----------------
Section 1. Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney, lawfully
constituted in writing, and upon surrender of the certificate therefor and a
full and complete compliance with all of the terms and conditions set forth on
such certificate, and in the Articles of Incorporation.
4
<PAGE>
ARTICLE XIV
Registered Shareholders
-----------------------
Section 1. The Corporation shall be entitled to treat the holder of record
of any share or shares as the holder and owner in fact thereof, and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof; except as may be otherwise expressly
provided by law.
ARTICLE XV
Fiscal Year
-----------
Section 1. The fiscal year shall be the twelve months ended January 31 of
each year, unless otherwise determined by the directors.
ARTICLE XVI
Dividends
---------
Section 1. Dividends upon the capital stock of the Corporation, when
earned, may be declared by the directors.
ARTICLE XVII
Notices
-------
Section 1. Whenever under any of the provisions of these By-Laws notice is
required to be given to any director, officer or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
depositing the same in the United States mail, postage prepaid, addressed to
such shareholder, officer or director at such address as appears on the records
of the Corporation, or in default of other address, to such director, officer or
shareholder at the general post office in the capitol city of the State of
Oklahoma, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
Section 2. Any shareholder, director or officer may waive any notice
required to be given under these By-Laws, or by statute, or the Articles of
Incorporation, to the extent permitted by law and by the Articles of
Incorporation.
5
<PAGE>
ARTICLE XVIII
Amendments
----------
Section 1. These By-Laws may be amended, altered, repealed, or revised, at
any meeting of the shareholders by an affirmative vote of a majority of common
stock at any meeting at which there is a quorum present, ro by an affirmative
vote of a majority of the directors present at any meeting at which there is a
quorum present, as the case may be; provided, however, that no change of the
time or place for the election of directors shall be made within sixty days
before the day on which such election is to be held, and that in case of any
change of such time or place, notice thereof, shall be given to each shareholder
entitled to vote, either in person or by letter mailed to his last known post
office address, at least twenty days before the election is held.
DIRECTORS:
________________________________ ________________________________
Jack E. Golsen Barry H. Golsen
________________________________
David R. Goss
6
<PAGE>
EXHIBIT 3.7
State of Delaware
Office of the Secretary of State
_________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FRIEDRICH CLIMATE MASTER, INC.", CHANGING ITS NAME FROM "FRIEDRICH CLIMATE
MASTER, INC." TO "CLIMATE MASTER, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY
OF AUGUST, A.D. 1987, AT 4 O'CLOCK P.M.
__________________________________________
Edward J. Freel, Secretary of State
AUTHENTICATION: 8764447
DATE: 11-18-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
FRIEDRICH CLIMATE MASTER, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of FRIEDRICH CLIMATE
MASTER, INC. held on August 16, 1985, resolutions were duly adopted setting
forth a proposed amendment to the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling a meeting of
the stockholders of said corporation for consideration thereof. The resolutions
which set forth the proposed amendment which authorized the corporation name of
this corporation to be changed to Climate Master, Inc. are as follows:
NOW THEREFORE, BE IT RESOLVED, that on or before August 15, 1987, the
Corporation is authorized and directed to change its corporate name by
removing therefrom the word "Friedrich"; and
FURTHER RESOLVED, that in connection with the Corporation changing its
corporate name on or before August 15, 1987, by removing therefrom the
word "Friedrich", the officers of the Corporation are hereby
authorized and directed to execute, deliver and file with the
Secretary of State of the State of Delaware, on or before August 15,
1987, for and on behalf of the Corporation, an amendment to the
certificate of incorporation of the Corporation changing the corporate
name by removing therefrom the word "Friedrich"; and
FURTHER RESOLVED, that a special meeting of the Stockholders of the
Corporation is hereby called for the purpose of approving such an
amendment to the Corporation's certificate of incorporation, which
amendment is to become of effective on or before August 15, 1987, to
change the corporate name of the
<PAGE>
Corporation by removing therefrom the word "Friedrich" on or before
August 15, 1987, and such meeting of the stockholders of the
corporation is to be hold immediately following this meeting of the
Board of Directors; and
FURTHER RESOLVED, that on or before August 15, 1987, the officers of
the Corporation are hereby authorized and directed, in the name of the
and on behalf of the corporation, to execute, deliver and file such
amendment to the certificate of incorporation of the Corporation and
such other documents and instruments and to do and perform such other
acts and things as may be necessary or proper to affect such change to
the name of the Corporation an or before August 15, 1987, and to carry
out the purpose and intent of the above resolutions.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
action of the shareholder was taken without a meeting by written consent, dated
August 16, 1985, signed by the sole stockholder of this Corporation which voted
in favor of the amendment.
THIRD: Based on the above resolutions of the Board of Directors and the
approval of the solo shareholder, the Certificate of Incorporation of this
Corporation is hereby amended by changing article 1 thereof so that, as amended
said article shall be and read as follows:
"1. The name of this corporation is Climate Master, Inc.
FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General corporation Law of the State of
Delaware.
2
<PAGE>
IN WITNESS WHEREOF, said FRIEDRICH CLIMATE MASTER, INC. has caused this
certificate to be signed by Barry H. Golsen, its President and attested by Irwin
H. Steinhorn, its Secretary, this 30th day of July, 1987.
FRIEDRICH CLIMATE MASTER, INC.
By: ________________________________
ATTEST:
By: _________________________
3
<PAGE>
State of Delaware
Office of the Secretary of State
_________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF IIHMWI ACQUISITION COMPANY", CHANGING ITS NAME FROM "HMWI ACQUISITION
COMPANY" TO "FRIEDRICH CLIMATE MASTER, INC.", FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF APRIL, A.D. 1984, AT 10 O'CLOCK A.M.
_______________________________________
Edward J. Freel, Secretary of State
AUTHENTICATION: 8764448
DATE: 11-18-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
HMWI ACQUISITION COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its ambers, filed with the minutes of the board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of HMWI ACQUISITION
COMPANY be amended by changing Articles I and 2 thereof so that as
amended, said Articles shall be and read as follows:
"1. The name of this corporation Is FRIEDRICH CLIMATE MASTER, INC."
"2. The address of its registered office to the State of Delaware is
100 West Tenth Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation
Trust Company."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted In accordance with the
applicable provisions of sections 242 and 228 of the General Corporation Law Of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said HMWI ACQUISITION COMPANY has caused
this certificate to be signed by Donald R. Bechen, its Vice President and
attested by Teresa Smith, its Assistant Secretary, this 24/th/ day of April,
1984.
HMWI ACQUISITION COMPANY
By: ______________________________
Vice President
ATTEST:
By: _____________________________
Assistant Secretary
2
<PAGE>
State of Delaware
Office of the Secretary of State
__________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "HMWI ACQUISITION COMPANY", FILED IN THIS OFFICE ON THE NINTH
DAY OF SEPTEMBER, A.D. 1983, AT 9 O'CLOCK A.M.
_________________________________________
Edward J. Freel, Secretary of State
AUTHENTICATION: 8764449
DATE: 11-18-97
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HMWI ACQUISITION COMPANY
1. The name of this corporation is:
HMWI ACQUISITION COMPANY.
2. The address of its registered office in the State of Delaware is 306
South State Street in the City of Dover, County of Kent. The name of its
registered agent at such address is United States Corporation Company.
3. The nature of business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is one thousand (1,000); and the par value of each share
shall be one dollar ($1.00) amounting in the aggregate to one thousand dollars
($1.000).
5. The name and mailing address of the incorporator is:
Michael D. McKee
LATHAM & WATKINS
555 South Flower Street
Lot Angeles, California 90071
6. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the bylaws of the corporation.
7. Election of directors need not be by written ballot unless the bylaws
of the corporation shall so provide.
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named. for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts hereto stated are true, and
accordingly have hereunto set my hand this 8th day of September. 1983.
__________________________________________
Michael D. McKee, Incorporator
2
<PAGE>
EXHIBIT 3.8
BYLAWS
OF
HMWI Acquisition Company
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES.......................................................
Section 1. Registered Office.......................................
Section 2. Other Offices...........................................
ARTICLE II - MEETINGS OF STOCKHOLDERS.....................................
Section 1. Place of Meetings.......................................
Section 2. Annual Meeting of Stockholders..........................
Section 3. Quorum; Adjourned Meetings
and Notice Thereof....................................
Section 4. Voting..................................................
Section 5. Proxies.................................................
Section 6. Special Meetings........................................
Section 7. Notice of Stockholder's Meetings........................
Section 8. Maintenance and Inspection
of Stockholder List...................................
Section 9. Stockholder Action by Written
Consent Without a Meeting.............................
ARTICLE III - DIRECTORS...................................................
Section 1. Number and Qualification of
Directors.............................................
Section 2. Vacancies...............................................
Section 3. Powers..................................................
Section 4. Place of Directors' Meetings............................
Section 5. Regular Meetings........................................
Section 6. Special Meetings........................................
Section 7. Quorum..................................................
Section 8. Action Without Meeting..................................
Section 9. Telephonic Meetings.....................................
Section 10. Committees of Directors.................................
Section 11. Minutes of Committee Meetings...........................
Section 12. Compensation of Directors...............................
Section 13. Indemnification.........................................
ARTICLE IV - OFFICERS.....................................................
Section 1. Officers................................................
Section 2. Election of Officers....................................
Section 3. Subordinate Officers....................................
Section 4. Compensation of Officers................................
Section 5. Term of Office; Removal
</TABLE>
<PAGE>
<TABLE>
<S> <C>
and Vacancies.........................................
Section 6. Chairman of the Board...................................
Section 7. President...............................................
Section 8. Vice President..........................................
Section 9. Secretary...............................................
Section 10. Assistant Secretaries...................................
Section 11. Treasurer...............................................
Section 12. Assistant Treasurer.....................................
ARTICLE V - CERTIFICATES OF STOCK.........................................
Section 1. Certificates............................................
Section 2. Signatures on Certificates..............................
Section 3. Statement of Stock Rights,
Preferences, Privileges...............................
Section 4. Lost Certificates.......................................
Section 5. Transfers of Stock......................................
Section 6. Fixing Record Date......................................
Section 7. Registered Stockholders.................................
ARTICLE VI - GENERAL PROVISIONS...........................................
Section 1. Dividends...............................................
Section 2. Payment of Dividends;
Directors' Duties.....................................
Section 3. Checks..................................................
Section 4. Fiscal Year.............................................
Section 5. Corporate Seal..........................................
Section 6. Manner of Giving Notice.................................
Section 7. Waiver of Notice........................................
Section 8. Annual Statement........................................
ARTICLE VII - AMENDMENTS..................................................
Section 1. Amendment by Directors
or Stockholders.......................................
</TABLE>
ii
<PAGE>
BYLAWS
OF
HMWI Acquisition Company
ARTICLE I
OFFICES
-------
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. All meetings of the stockholders shall be held in the City of
Portland, State of Oregon, at such place as may be fixed from time to time by
the Board of Directors, or at such other place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting.
Section 2. An annual meeting of stockholders shall be held on the second
Tuesday in April in each year, if not a legal holiday, and if a legal holiday,
then on the next secular day following, at 2:00 P.M. or at such other date and
time as may be determined from time to time by resolution adopted by the Board
of Directors, when they shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
<PAGE>
Section 3. A majority of the stock issued and outstanding and entitled to
vote at any meeting of stockholders, the holders of which are present in person
or represented by proxy, shall constitute a quorum for the transaction of
business except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes, or
the Certificate of Incorporation, or these By-Laws, a different vote is required
in
2
<PAGE>
which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the stockholders, each stockholder having
the right to vote may vote in person or may authorize another person or persons
to act for him by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to said meeting,
unless said instrument provides for a longer period. All proxies must be filed
with the Secretary of the corporation at the beginning of each meeting in order
to be counted in any vote at the meeting. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the books
of the corporation on the record date set by the Board of Directors as provided
in Article V, Section 6 hereof. All elections shall be had and all questions
decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or the Secretary at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding,
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
3
<PAGE>
Section 7. Whenever stockholders are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given which notice
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. The
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation.
Section 8. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
4
<PAGE>
Section 9. Unless otherwise provided in the Certificate of Incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
---------
Section 1. The number of directors which shall constitute the whole Board
shall be two (2). The directors need not be stockholders. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified; provided, however, that unless otherwise
restricted by the Certificate of Incorporation or by law, any director or the
entire Board of Directors may be removed, either with or without cause, from the
Board of Directors at any meeting of stockholders by a majority of the stock
represented and entitled to vote thereat.
5
<PAGE>
Section 2. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election of directors and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The property and business of the corporation shall be managed
by or under the direction of its Board of Directors. In addition to the powers
and authorities by these By-Laws expressly conferred upon them, the Board may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by
6
<PAGE>
statute or by the Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4. The directors may hold their meetings and have one or more
offices, and keep the books of the corporation outside of the State of Delaware.
Section 5. Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by the
Board.
Section 6. Special meetings of the Board of Directors may be called by the
President on forty-eight hours' notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the President or the
Secretary in like manner and on like notice on the written request of two
directors unless the Board consists of only one director; in which case special
meetings shall be called by the President or Secretary in like manner or on like
notice on the written request of the sole director.
Section 7. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of
7
<PAGE>
the Board of Directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. If only one director is authorized, such sole
director shall constitute a quorum.
Section 8. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 9. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
-----------------------
Section 10. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each such committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as
8
<PAGE>
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and, assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the By-Laws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority .to declare a dividend or to
authorize the issuance of stock.
Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
9
<PAGE>
COMPENSATION OF DIRECTORS
-------------------------
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
INDEMNIFICATION
---------------
Section 13(a). The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by-
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or .is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect
10
<PAGE>
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of
11
<PAGE>
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation shall be successful on the merits or otherwise in defense, of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
12
<PAGE>
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
manner provided in paragraph (d) upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this Section 13.
(f) The indemnification provided by this Section 13 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any statute, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(g) The Board of Directors may authorize, by a vote of a majority of a
quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation
13
<PAGE>
would have the power to indemnify him against such liability under the
provisions of this Section 13.
(h) For the purposes of this Section 13, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
ARTICLE IV
OFFICERS
--------
Section 1. The officers of this corporation shall be chosen by the Board
of Directors and shall include a President, a Secretary, and a Treasurer. The
corporation may also have at the discretion of the Board of Directors such other
officers as are desired, including a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such
other officers as may be appointed in
14
<PAGE>
accordance with the provisions of Section 3 hereof. In the event there are two
or more Vice Presidents, then one or more may be designated as Executive Vice
President, Senior Vice President, or other similar or dissimilar title. At the
time of the election of officers, the directors may by resolution determine the
order of their rank. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose the officers of the corporation.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. If the office of any
officer or officers becomes vacant for any reason, the vacancy shall be filled
by the Board of Directors.
15
<PAGE>
CHAIRMAN OF THE BOARD
---------------------
Section 6. The Chairman of the Board, if such an officer be elected,
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these By-Laws. If
there is no President, the Chairman of the Board shall in addition be the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article IV.
PRESIDENT
---------
Section 7. Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the Chief Executive Officer of the corporation
and shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these By-Laws.
16
<PAGE>
VICE PRESIDENTS
---------------
Section 8. In the absence or disability of the President, the Vice
Presidents in order of their rank as fixed by the Board of Directors, or if not
ranked, the Vice President designated by the Board of Directors, shall perform
all the duties of the President, and when so acting shall have all the powers of
and be subject to all the restrictions upon the President. The Vice Presidents
shall have such other duties as from time to time may be prescribed for them,
respectively, by the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
---------------------------------
Section 9. The Secretary shall attend all sessions of the Board of
Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these By-Laws. He shall keep
in safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board
17
<PAGE>
of Directors, or if there be no such determination, the Assistant Secretary
designated by the Board of Directors, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
TREASURER AND ASSISTANT TREASURER
---------------------------------
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation. If required by the Board of
Directors, he shall give the corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind
18
<PAGE>
in his possession or under his control belonging to the corporation.
Section 12. The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors, or
if there be no such determination, the Assistant Treasurer designated by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Every holder of stock of the corporation shall be entitled to
have a certificate signed by, or in the name of the corporation by, the Chairman
or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, o; registrar before such certificate is
issued, it
19
<PAGE>
may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 3. If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
--------------------------------------
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of
20
<PAGE>
stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
------------------
Section 5. Upon surrender to the corporation, or the transfer agent of the
corporation, of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
------------------
Section 6. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders, or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date
21
<PAGE>
which shall not be more than sixty nor less than tan days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
-----------------------
Section 7. The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of the State of
Delaware.
ARTICLE VI
GENERAL PROVISIONS
------------------
DIVIDENDS
---------
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their
22
<PAGE>
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
CHECKS
------
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
FISCAL YEAR
-----------
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
----
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
NOTICES
-------
Section 6. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
23
<PAGE>
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 7. Whenever any notice in required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ANNUAL STATEMENT
----------------
Section 8. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VII
AMENDMENTS
----------
Section 1. These By-Laws may be altered, amended or repealed or new By-
Laws may be adopted by the stockholders or by the Board of Directors, when such
power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new By-
Laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not
24
<PAGE>
divest or limit the power of the stockholders to adopt, amend or repeal By-Laws.
25
<PAGE>
EXHIBIT 3.9
For Ministry Use Only Ontario Corporation Number
Consumer and Commercial
Certificate 953394
This is to certify that these
articles are effective on
August 16
Trans Code A
Line No. 0
Stat 0
Comp Type A
Method Incorp. 3
Share 8
Notice Req'd N
Jurisdiction Ontario
ARTICLES OF INCORPORATION STATUTE CONSTITUTIFS
1. The name of the corporation is: CLIMA MATE INC.
2. The address of the registered office is: Suite 4400, P.O. Box 95, Royal
Trust Tower, Toronto-Dominion Centre, Toronto, Ontario M5K1G8, Municipality of
Metropolitan Toronto in the Judicial District of York
3. Number (or minimum and maxium number) of directors is: A MINIMUM OF TWO AND
A MAXIMUM OF FIVE
4. The first director(s) is/are: Arlene D. Wolfe, 64 Gerald Street,
Willowdale, Ontario M2L 2M7 Resident Canadian State Yes or No Resident Canadian.
Yes
5. Restrictions, if any on business the corporation may carry on or on powers
the corporation may exercise.
None
6. The classes and any maximum number of shares that the corporation is
authorized to issue.
The Corporation is authorized to issue an unlimited number of shares of one
class which are hereby designated as common shares.
<PAGE>
7. Rights, privileges, restrictions and conditions (if any) attaching to each
class of shares and directors authority with respect to any class of shares
which may issued in series:
N/A
8. The issue, transfer or ownership of shares is/is not restricted and the
restrictions (if any) are as follows:
(1) The number of shareholders of the Corporation, exclusive of persons in
its employment and exclusive of persons who, having been formerly in
the employment of the Corporation, were, while in that employment, and
have continued after termination of that employment to be,
shareholders of the Corporation, is limited to not more than fifty,
two or more persons who are the joint registered owners of one or more
shares being counted for such purposes as one shareholder.
(2) No shares in the capital of the Corporation shall be transferred
unless such transfer has either been approved by a resolution of the
directors of the Corporation or consented to in writing by the then
holders of not less than 60% of all of the shares of the Corporation
which are then outstanding which then carry the right to vote in an
election of directors.
(3) Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
9. Other provisions, if any, are:
(1) The directors may from time to time, in such amounts and on such
terms as they deem expedient:
(a) borrow money on the credit of the corporation;
(b) issue, sell of pledge debt obligations (including bonds,
debentures, notes or other similar obligations, secured or
unsecured) of the Corporation;
(c) charge, mortgage, hypothecate or pledge all or any of the
currently owned or subsequently acquired real or personal,
movable or immovable, property of the Corporation, including
book debts, rights, powers, franchises and undertaking, to
secure any debt obligations or money borrowed, or other debt
or liability of the Corporation.
The directors may from time to time delegate to such one or more
of the directors and officers of the Corporation as may be
designated by the directors all or any of the powers conferred on
the directors above to such
<PAGE>
extent and in such manner as the directors shall determine with
respect to each such delegation.
(2) For the purposes of the Special Corporate Powers Act of the
Province of Quebec, and without in any way limiting the powers
conferred upon the Corporation and its directors, for the
purposes of securing any bonds, debentures or debenture stock
which the Corporation is by law entitled to issue the Corporation
may hypothecate, mortgage, pledges, cede or transfer any
property, movable or immovable, present or future, which it may
own in the Province of Quebec.
10. The names and addresses of the incorporators are:
Arlene D. Wolfe
64 Gerald Street
Willowdale, Ontario M2L 2M7
These Articles are signed in duplicate.
________________________
Arlene D. Wolfe
<PAGE>
EXHIBIT 3.10
BY-LAW NO. 1
------------
A by-law relating generally to the conduct
of the business and affairs of
CLIMATE MATE, INC.
(herein called the "Corporation")
BE IT ENACTED as a by-law of the Corporation as follows:
I. Interpretation
------------------
1. In this by-law, unless the context otherwise clearly requires:
(a)"Act" means the Business Corporations Act, 1982 of Ontario and includes
the Regulations made pursuant thereto;
(b)"Articles" means the Articles of Incorporation of the Corporation as
then in force;
(c)"board" means the board of directors of the Corporation, or if there
shall only be one director of the Corporation at any particular time, such
director, and all references herein to the directors or the board means the
directors of the Corporation acting as such or any duly empowered committee
of the board;
(d)"by-laws" means all by-laws, including special by-laws, of the
Corporation as amended, from time to time;
(e)"Corporation" means this Corporation;
(f)"person" includes an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, corporation and a natural person in his capacity as
trustee, executor, administrator or other legal representative.
1.02 In this by-law where the context permits words importing the singular
include the plural and vice versa, and words importing gender include the
masculine, feminine and neuter genders.
1.03 All words and terms appearing in this by-law which are defined by the Act
as having a particular meaning shall be deemed to have
<PAGE>
the same meanings they are respectively thereby defined as having, unless the
context otherwise reasonably requires.
II. DIRECTORS
--------------
2.01 Place of Meetings. Meetings of the board may be held at the place where
-----------------
the registered office of the Corporation is then located, or at any place within
Metropolitan Toronto; and may be held at any other place within or outside
Ontario within the written consent of all of the directors for the time being of
the Corporation. Subject to the foregoing, a majority of the meetings of the
board held in any financial year of the Corporation need not be held at places
within Canada.
2.02 Calling of Meetings. Meetings of the board may be called for the
-------------------
transaction of any business by the Chairman, the President or a Vice-President
who is a director, or any two directors, and the Secretary shall by written
notice call meetings when directed or authorized by the Chairman, the President,
any Vice-President who is a director, or any two directors. Written notice of
the time and place for the holding of every meeting of the board specifying the
general nature of the business to be transacted at the meeting shall be given to
every director of the Corporation not less than 48 hours (excluding Sundays and
holidays) before the time when the meeting is to be held and need not be given
on any longer notice.
2.03 Regular Meetings. The board may appoint a day or days in any month or
----------------
months for regular meetings at a place and hour to be named. A copy of any
resolution of the board fixing the place and time of regular meetings of the
board shall be sent to each director forthwith after being passed, but no other
notice shall be required for any such regular meeting.
2.04 Chairman. The chairman of the meeting of the board shall be the first
--------
mentioned of such of the following officers as has then been appointed and who
is then a director and is present at the meeting.
Chairman of the Board
President
A Vice President who is then a director, if
there shall be not more than one Vice President
who is a director, and
the most senior of those Vice-Presidents who
are then directors, if more than one Vice President
is a director
-2-
<PAGE>
and if no such officer is present, the directors present shall choose one of
their number to act as the chairman of the meeting.
2.05 Votes to Govern. At all meetings of the board, every question shall be
---------------
decided by a majority of the votes cast on the question, and in the case of an
equality of votes on any question at a meeting of the board, the chairman of the
meeting shall not be entitled to a second or casting vote.
2.06 Remuneration. Any remuneration of the directors fixed by the board shall,
------------
in the absence of a provision to the contrary set forth in the resolution of the
board fixing the same, be in addition to any salary or professional fees payable
to a director who serves the Corporation in any other capacity. In addition,
the directors shall be paid such sums as the board may from time to time
determine in respect of their out-of-pocket expenses incurred in attending
board, committee or shareholders' meetings or otherwise in respect of the
performance by them of their duties.
2.07 Limitation of Liability. No director or office of the Corporation shall be
-----------------------
liable as such for the acts, receipts, neglects or defaults of any other
director or officer or employee, or for joining in any receipt or act for
conformity, or for any loss, damage or expense happening to the Corporation
through the insufficiency or deficiency of title to any property acquired for or
on behalf of the Corporation, or for the insufficiency or deficiency of any
security in or upon which any of the monies of the Corporation shall be
invested, or for any loss or damage arising from the bankruptcy, insolvency or
tortious act of any person with whom any of the monies, securities or effects of
the Corporation shall be deposited, or for any loss occasioned by any error in
judgment or oversight on his part, or for any other loss, damage or misfortune
whatever which shall happen in the execution of the duties of his office or in
relation thereto, unless the same are occasioned by his own wilful neglect or
default; provided that nothing herein shall relieve any director or officer form
the duty to act in accordance with the Act or from liability for any breach
thereof.
2.08 Indemnity of Directors and Officers. Except as provided in the Act, every
-----------------------------------
director and officer of the Corporation, every former director and officer of
the Corporation, and every person who acts or acted at the Corporation's request
as a director or officer of another corporation of which the Corporation is or
was a shareholder or creditor, and his heirs and legal representatives, shall at
all times be indemnified and saved harmless by the corporation from and against
all costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment,
-3-
<PAGE>
reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of or having been a
director or officer of the Corporation or such other corporation if, (a) he
acted honestly and in good faith with a view to the best interests of the
Corporation; and (b) in case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
2.09 Quorum at Meetings. The quorum at a meeting of the directors shall be as
------------------
provided for in the Act.
III. OFFICERS
--------------
3.01 Term, Remuneration or Removal. The terms of employment and remuneration of
-----------------------------
all officers of the Corporation shall be determined from time to time by
resolution of the board. The fact that any officer or employee is a director or
shareholder of the Corporation shall not disqualify him from receiving such
remuneration. All officers shall be subject to removal by resolution of the
board at any time with or without cause.
3.02 Officers. Nothing contained in this section 3 shall be in limitation of
--------
the powers conferred upon the board by the Act to designate the officers of the
Corporation, appoint officers, specify their duties and delegate them powers to
manage the business and affairs of the Corporation. In the absence of any
provision to the contrary contained in any resolution of the board, the persons
appointed to the following respective offices shall have the following
respective duties and powers, but, for certainty, the board may from time to
time vary, add to, withhold, or limit the powers and duties of any officer or
officers:
(a) Chairman of the Board - the Chairman of the Board, if one shall be
---------------------
appointed, shall be a director of the Corporation. The Chairman of the
Board shall preside at each meeting of the board at which he is
present and shall preside as Chairman of each meeting of the
shareholders at which he is present. Unless his power as chief
executive officer of the Corporation shall have been withheld by the
board, the Chairman of the Board shall be the chief executive officer
of the corporation and as such shall be charged, subject to the
authority of the board, with the general supervision of the business
and affairs of the Corporation.
(b) President - the board shall at all times have elected or appointed a
---------
President. The President need not be a
-4-
<PAGE>
director of the Corporation. The President shall be the chief
operating officer of the Corporation. As such, subject to the
supervision, control and direction of the Chairman of the Board, so
long as one shall have been elected and his authority as the chief
executive officer of the Corporation shall not have been withheld, and
subject to the authority of the board, the President shall be charged
with the general supervision of the day-to-day business and affairs of
the corporation, and subject as aforesaid the President shall have the
power to appoint or remove any and all officers, employees and agents
of the Corporation not elected or appointed directly by the board and
to settle the terms of their employment and remuneration. The
President shall exercise all of the powers and be charged with all of
the duties of the office of the Chairman of the Board during those
respective periods of time during which such office shall be vacant.
In the absence of the Chairman of the Board, if one has then been
elected, the President shall preside as chairman of each meeting of
the board at which he is present and acting as a director and as
chairman of each meeting of the shareholders at which he is present.
During the absence or inability of the Chairman of the board, if one
has then been elected, the President may perform the other duties and
exercise the other powers of that office, if any and if the President
shall perform any of such duties or exercise any of such powers the
absence or inability of the Chairman of the board shall be presumed
with respect thereto. If the authority of the Chairman of the Board to
act as chief executive officer of the Corporation shall have been
withheld by the board, the President shall also be the chief executive
officer of the Corporation and as such charged, subject to the
authority of the board, with the general supervision of the business
and affairs of the corporation.
(c) Secretary - the board shall at all times have elected or appointed a
---------
Secretary. The Secretary shall attend all meetings of the board and
the shareholders and shall enter or cause to be entered in books kept
for that purpose minutes of all proceedings at such meetings; he shall
give, or cause to be given, when instructed, notices required to be
given to shareholders, directors, auditors and others entitled to
notices of meetings; he shall be the custodian of the corporate seal
of the Corporation, if the Corporation has a corporate seal, and of
all books, papers, records, documents or other
-5-
<PAGE>
instruments belonging to the Corporation; and he shall perform such
other duties as may from time to time be prescribed by the board.
(d) Vice-President - the board may from time to time appoint one or more
--------------
Vice-Presidents. The Vice-President, or if there are more than one,
the Vice-Presidents in order of seniority (as determined by the board)
shall be vested with all of the powers and shall perform all of the
duties of the President in the absence or disability or refusal to act
of the President, except that a Vice-President shall not preside at
meetings of the board or of the shareholders except as may be
specifically provided in the Corporation's by-laws. If a Vice-
President exercises any duty or power of the President, the absence or
inability of the President shall be presumed with reference thereto. A
Vice-President shall also perform such other duties and exercise such
other powers as the President may from time to time delegate to him or
the board may prescribe.
(e) Treasurer - the Treasurer, if one shall be appointed, shall keep, or
---------
cause to be kept, proper accounting records as required by the Act; he
shall deposit or cause to be deposited all monies received by the
Corporation in the Corporation's bank account; he shall, under the
direction of the chief executive officer of the Corporation and the
Board, supervise the safekeeping of securities and the disbursement of
the funds of the Corporation; he shall render to the board, whenever
required, an account of all his transactions as Treasurer and of the
financial position of the Corporation; and he shall perform such other
duties as may from time to time be prescribed by the board.
(f) Other Officers - the duties of all other officers of the Corporation
--------------
shall be such as the terms of their engagement call for or the board
requires of them. Any of the powers and duties of an officer to whom
an assistant has been appointed may be exercised and performed by such
assistant, unless the board otherwise directs.
3.03 Agents and Attorneys. The board shall have the power from time to time to
--------------------
appoint agents or attorneys for the Corporation within or outside of Ontario
with such powers of management or otherwise (including the power to sub-
delegate) as may be thought fit.
-6-
<PAGE>
3.04 Fidelity Bonds. The board may require such officers, employees and agents
--------------
of the Corporation as it deems advisable to furnish bonds for the faithful
performance of their duties, in such form and with such surety as the board may
from time to time prescribe.
IV. SHAREHOLDERS
-----------------
4.01 Who is to Preside At Meetings. The Chairman of the board or, in his
-----------------------------
absence, the President, or in his absence a Vice-President who is a director,
shall preside as Chairman at any meeting of shareholders, but if there is no
Chairman of the Board, the President or such Vice-President, or if at a meeting
none of them is present within fifteen minutes after the time appointed for the
holding of the meeting, the shareholders present shall choose a person from
their number to be the Chairman.
4.02 Person Entitled to Be Present. The only persons entitled to attend a
-----------------------------
meeting of shareholders shall be those entitled to vote thereat, the directors
and the auditor of the Corporation and others who although not entitled to vote
are entitled or required under any provision of the Act or the by-laws of the
Corporation to be present at the e meeting. Any other person may be admitted
only on the invitation of the Chairman of the meeting or with the consent of the
meeting.
4.03 Scrutineers. At each meeting of shareholders one or more scrutineers may
-----------
be appointed by a resolution of the meeting or by the Chairman of the meeting
with the consent of the meeting to act as scrutineers at the meeting. Such
scrutineers need not be shareholders of the Corporation.
4.04 Quorum At Meetings. The quorum at a meeting of the shareholders shall be a
------------------
shareholder or shareholders present in person or represented by proxy and
holding in excess of one-half of the number of shares of the Corporation
entitled to be voted at such meeting.
V. SHARES
----------
5.01 Lien for Indebtedness. Subject to the Act, the Corporation has a lien on
---------------------
shares registered in the name of a shareholder or his legal representative for a
debt of that shareholder to the Corporation. The Corporation may enforce the
lien by:
(i) in the case of a lien on redeemable shares, redeeming the shares at
their redemption price and applying the redemption price to the debt of the
shareholder and paying any balance to
-7-
<PAGE>
the shareholder. If such redemption is made solely for the purpose of
enforcing such lien, then subject to any provision to the contrary
contained in the Act or the Articles the Corporation shall not be obliged
to redeem any shares other than the redeemable shares being redeemed for
such purpose; and
(ii) in the case of any such shares, including redeemable shares, by
selling such shares or such portions thereof as the directors may from time
to time in their discretion determine to such persons and on such terms as
the directors may in their discretion have authorized, provided that not
less than 30 days prior to the date of such sale the Corporation shall have
provided a notice to such shareholder or his legal representative demanding
payment of the debt and advising such shareholder or his legal
representative that unless such debt together with any interest accruing
thereon up to the time of payment shall have been paid within such 30 days,
the Corporation may thereafter without further notice to such shareholder
or his legal representative effect a sale of all or any part of the shares
of such shareholder pursuant to this provision. Such notice may be given
by prepaid ordinary mail addressed to the shareholder at his last known
address appearing on the records of the Corporation and in the event of
such mailing such notice shall be deemed to have been received three days
after the mailing thereof. The Corporation may, in lieu of such notice,
advertise such notice at least 30 days before the intended date of the sale
in a daily newspaper of general circulation published or distributed in the
place where the Corporation has its registered office. The title of such
shareholder or his legal representative to any such shares so sold shall,
by that sale, be divested and transferred to the respective purchasers of
such shares. The proceeds of such shale shall be applied, firstly, to pay
the reasonable costs and expenses incurred by the Corporation in providing
such notice or making such advertisement and in effecting such sale, and
nextly pro tanto on account of a payment of all indebtedness then owing by
such shareholder to the Corporation, and any balance thereafter remaining
shall be paid to such shareholder or his legal representative.
Any sums which are payable by the Corporation to a shareholder or his legal
representative pursuant to this section shall not bear interest unless payment
thereof shall have been demanded by such shareholder or his legal representative
and the Corporation shall have failed to pay the sum owing within a period of
five days after such demand. In lieu of making payment of any sum which is
payable
-8-
<PAGE>
to a shareholder or his legal representative pursuant to this section, the
Corporation may deposit such sum to the credit of such shareholder or his legal
representative with any Canadian chartered bank or trust company having an
office in the City of Toronto, Ontario, and such deposit shall be deemed to
satisfy all obligations of the Corporation to pay the sum so deposited to such
shareholder or his legal representative.
The enforcement of a lien pursuant to this section shall be without
prejudice to any other right which the Corporation may have to enforce the lien
which may in law be available to it or to any remedy available to the
Corporation for collection of the debt or any part thereof.
5.02 Transfer Agent and Registrar. The Board may from time to time appoint a
----------------------------
registrar to maintain any securities register and a transfer agent to maintain
the register of transfers of such securities and may also appoint one or more
branch registrars to maintain branch security registers of transfer, and any one
or more person may be appointed both registrar and transfer agent. The board
may at any time terminate any such appointment.
VI. DIVIDENDS
--------------
6.01 Payment. A dividend payable in cash shall be paid by cheque drawn on the
-------
Corporation's bankers or any one of them to the order of each registered holder
of shares of the class in respect of which it has been declared, when cheque may
be mailed by prepaid ordinary mail to such registered holder at his last address
appearing on the records of the Corporation. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct, be made payable to the
order of all of such joint holders and if more than one address appears in the
books of the corporation in respect of such joint holders the cheque shall be
mailed to the first address so appearing. The mailing of such cheque as
aforesaid shall satisfy and discharge all liability for the dividend to the
extent of the sum represented thereby, unless such cheque shall not be paid on
presentation. Upon proof being given to the Corporation of the non-receipt of
any such cheque by the person to whom it was so sent, as aforesaid, and upon
satisfactory indemnity being given to the Corporation in that regard, the
Corporation shall issue to such person a replacement cheque for a like amount.
6.02 Purchase of Business as of Past Date. Where any business is purchased by
------------------------------------
the Corporation as from a past date (whether such date be before or after the
incorporation of the Corporation) upon terms
-9-
<PAGE>
that the Corporation shall as from that date take the profits and bear the
losses of the business, such profits or losses, as the case may be, shall, at
the discretion of the directors, be credited or debited wholly or in part to
revenue account and in that case the amount so credited or debited shall, for
the purpose of ascertaining the funds available for dividends, be treated as a
profit or loss arising from the business of the Corporation.
VII. FINANCIAL YEAR
--------------------
7.01 The financial or fiscal year of the Corporation shall be as determined from
time to time by the Board.
VIII. NOTICES
--------------
8.01 Omissions and Errors. The accidental omission to give any notice to any
--------------------
shareholder, director, officer or auditor or the non-receipt of any notice by
any such person, or any error in any notice not affecting the substance thereof,
shall not invalidate any action taken at any meeting held pursuant to such
notice or otherwise founded thereon.
8.02 Notice to Joint Shareholders. All notices with respect to any shares
----------------------------
registered in the name of more than one holder may if more than one address
appears in the records of the Corporation in respect of such holders be given to
such holders at the first address so appearing, and notice so given shall be
sufficient notice to all of the holders of such shares.
8.03 Persons Entitled by Death or Operation of Law. Every person who by
---------------------------------------------
operation of law, by transfer, by the death of a shareholder, or otherwise,
becomes entitled to shares, is bound by every notice in respect of such shares
which has been duly given to the registered holder of such shares prior to the
name and address of such person being entered on the records of the Corporation
as the holder of such shares.
8.07 Signature to Notices. The signature to any notice to be given by the
--------------------
Corporation may be written, stamped, typewritten or printed or partly written,
stamped, typewritten or printed.
IX. EXECUTION OF DOCUMENTS
---------------------------
9.01 Deeds, transfers, assignments, contracts and obligations of the corporation
may be signed by the President and Secretary alone, if one person shall hold
both of such offices, and subject to the foregoing may be signed by the Chairman
of the Board together with
-10-
<PAGE>
the President, if two different persons shall hold such two offices, or by the
President or a Vice-President or a director together with the Secretary or
Treasurer or an Assistant Secretary or Assistant Treasurer or another director.
Notwithstanding the foregoing, the board may at any time and from time to time
direct the manner in which and the person or persons by whom any particular
deed, transfer, contract or obligation or any class of deeds, transfers,
contracts or obligations may be signed.
9.02 Seal. Any person authorized to sign any document may affix the corporate
seal of the Corporation thereto, if the Corporation has a corporate seal.
X. EFFECTIVE DATE
------------------
10.01 This by-law comes into force upon confirmation by the shareholders of the
Corporation in accordance with the Act.
ENACTED this 16/th/ day of August, 1991.
/s/ David R. Goss /s/ Brian Haggart
- ---------------------------- -----------------------------
PRESIDENT - David Goss SECRETARY - Brian Haggart
-11-
<PAGE>
EXHIBIT 3.11
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, THE UNDERSIGNED Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
OF
DSN CORPORATION
In testimony whereof, I have hereunto set my hand
and affixed the Great Seal of the State of Oklahoma
at the City of Oklahoma City this 14th day, of
November, A.D. 1997.
_____________________________________________________
Secretary of State
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
WHEREAS, the Certificate of Incorporation, executed and acknowledged by
DSN CORPORATION
has been filed in the office of the Secretary of State as provided by the laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby issue this
certificate evidencing such filing.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 25/th/
day of July, 1994.
______________________________________________
Secretary of State
By: _____________________________________
<PAGE>
CERTIFICATE OF INCORPORATION
OF
DSN CORPORATION
____________________________
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
FIRST: NAME. The name of this corporation is DSN Corporation (hereafter
----
this "Corporation").
SECOND: Registered Office. The name and address of the registered agent
-----------------
of this Corporation in the State of Oklahoma and the address of the registered
office of this Corporation in the State of Oklahoma, which is the same as the
address of its registered agent, are:
David M. Shear, General Counsel
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
THIRD: Term. The term of this Corporation shall be perpetual.
----
FOURTH: Purpose. The purpose of this Corporation is to engage in any
-------
lawful act or activity for which corporations may be organized under the
Oklahoma General Corporation Act.
FIFTH: Capital Stock. This Corporation is authorized to issue only one
-------------
(1) class of shares of capital stock, to be designated "Common Stock." The total
number of shares of Common Stock which this Corporation shall have authority to
allot and the par value of each share of Common Stock are as follows:
<TABLE>
<CAPTION>
Total Number Par Value of Total Authorized
Of Shares Each Share Common Stock
------------- ------------ ----------------
<S> <C> <C>
50,000 $1.00 50,000
</TABLE>
SIXTH: Incorporator. The name and address of the incorporator is as
------------
follows:
J. Ann Muise
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
SEVENTH: Directors. The names and mailing addresses of the persons who are
---------
to serve as directors until the first annual meeting of the shareholders or
until their removal or resignation are as follows:
<PAGE>
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Jack E. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Tony M. Shelby 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Barry H. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma 73107
</TABLE>
EIGHTH: Management of Corporation. The following constitute provisions
-------------------------
for the regulation of internal affairs of this Corporation:
(a) Bylaws. The Bylaws for the governing of this Corporation may be
------
adopted, amended, altered, repealed, or readopted by the Board of Directors
at any stated or special meeting of such board, but the powers of such
directors in this regard shall at all times be subject to the rights of the
shareholders to alter or repeal such Bylaws at any annual meeting of
shareholders, and the power of the Board of Directors shall not extend to
any amendment of the Bylaws respecting the number, qualifications,
classifications, or term of office of the members of the Board of
Directors.
(b) Number of Directors. The number of directors of this Corporation
-------------------
shall be such as from time to time shall be fixed by, or in the manner
provided in, the Bylaws. Election of directors need not be by ballot unless
the Bylaws so provide.
NINTH: Creditors Arrangements. Whenever a compromise or arrangement is
----------------------
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its shareholders or any class of them, any court of
equitable jurisdiction within the State of Oklahoma, on the application in a
summary way of this Corporation or of any creditor or shareholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 1106 of the Oklahoma General Corporation Act or
on the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 1100 of the
Oklahoma General Corporation Act, may order a meeting of the creditors or class
of creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, to be summoned in such manner as the court
directs. If a majority in the number representing three-fourths (3/4) in value
of the creditors or class of creditors, and/or of the shareholders or
2
<PAGE>
class of shareholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the compromise or arrangement and
the reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, and/or on all
the shareholders or class of shareholders, of this Corporation, as the case may
be, and also on this Corporation.
TENTH: Amendment. This Corporation reserves the right at any time and
---------
from time to time to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and other provisions authorized by the laws
of the State of Oklahoma at the time in force may be added or inserted in this
Certificate of Incorporate, in the manner now or hereafter prescribed by law;
and all rights, preferences and privileges of whatsoever nature conferred upon
shareholders, directors or any other persons by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted subject
to the right reserved in this Section TENTH.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove
named, for the purpose of forming a corporation under the laws of the State of
Oklahoma, does certify that the facts herein stated are true, and accordingly,
has hereunto set his hand this 25/th/ day of July, 1994.
_______________________________________
J. Ann Muise
3
<PAGE>
EXHIBIT 3.12
TABLE OF CONTENTS
TO
BYLAWS
OF
DSN CORPORATION
(an Oklahoma corporation)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES..................................................... 1
Section 1.1 Principal Office.................................... 1
Section 1.2 Other Offices....................................... 1
ARTICLE II - MEETINGS OF SHAREHOLDERS................................... 1
Section 2.1 Annual Meetings..................................... 1
Section 2.2 Special Meetings.................................... 1
Section 2.3 Place of Meetings................................... 2
Section 2.4 Notice of Meetings.................................. 2
Section 2.5 Voting List......................................... 2
Section 2.6 Quorum and Required Vote; Adjourned
Meetings....................................... 2
Section 2.7 Voting.............................................. 3
Section 2.8 Proxies............................................. 3
Section 2.9 Order of Business................................... 4
Section 2.10 Action Without Meeting.............................. 4
Section 2.11 Inspectors of Election.............................. 5
ARTICLE III - BOARD OF DIRECTORS........................................ 5
Section 3.1 Powers.............................................. 5
Section 3.2 Number, Election and Term of Office................. 6
Section 3.3 Vacancies........................................... 6
Section 3.4 Resignations........................................ 7
Section 3.5 Removal............................................. 7
Section 3.6 Annual Meetings..................................... 7
Section 3.7 Regular Meetings.................................... 7
Section 3.8 Special Meetings.................................... 7
Section 3.9 Place of Meetings................................... 7
Section 3.10 Quorum and Required Vote; Adjourned
Meetings....................................... 7
Section 3.11 Compensation........................................ 8
Section 3.12 Action without Meeting.............................. 8
Section 3.13 Telephonic Meetings................................. 8
ARTICLE IV - EXECUTIVE COMMITTEE........................................ 8
Section 4.1 Election............................................ 8
Section 4.2 Duties.............................................. 8
Section 4.3 Meetings............................................ 9
Section 4.4 Quorum and Voting................................... 9
Section 4.5 Waiver of Notice.................................... 9
Section 4.6 Removal............................................. 9
Section 4.7 Vacancies........................................... 9
Section 4.8 Action Without Meeting; Telephonic
Meeting........................................ 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V - COMMITTEES OF DIRECTORS..................................... 9
Section 5.1 Designation......................................... 9
Section 5.2 Procedural Rules.................................... 10
ARTICLE VI - OFFICERS................................................... 10
Section 6.1 Officers............................................ 10
Section 6.2 Election............................................ 10
Section 6.3 Subordinate Officers................................ 10
Section 6.4 Removal............................................. 10
Section 6.5 Resignation......................................... 10
Section 6.6 Vacancies........................................... 11
Section 6.7 Chairman of the Board............................... 11
Section 6.8 Vice Chairman of the Board.......................... 11
Section 6.9 Chief Executive Officer............................. 11
Section 6.10 President........................................... 11
Section 6.11 Executive Vice-President............................ 12
Section 6.12 Vice-President...................................... 12
Section 6.13 Secretary........................................... 12
Section 6.14 Assistant Secretaries............................... 13
Section 6.15 Treasurer........................................... 13
Section 6.16 Assistant Treasurers................................ 14
Section 6.17 Delegation of Duties................................ 14
ARTICLE VII - SHARES OF STOCK........................................... 14
Section 7.1 Certificates of Stock............................... 14
Section 7.2 Record of Shareholders.............................. 15
Section 7.3 Transfer Agents and Registrars...................... 15
Section 7.4 Transfer of Shares.................................. 15
Section 7.5 Shareholders Record Date and
Closing Stock Books............................ 15
Section 7.6 Registered Shareholders............................. 16
Section 7.7 Lost Certificates................................... 16
Section 7.8 Treasury Shares..................................... 16
Section 7.9 Fractional Shares................................... 16
ARTICLE VIII - EXECUTION OF INSTRUMENTS................................. 16
Section 8.1 Contracts........................................... 16
Section 8.2 Checks and Drafts................................... 16
Section 8.3 Deposits; Bank Accounts............................. 17
Section 8.4 Loans............................................... 17
Section 8.5 Sale or Transfer of Securities
Held by the Corporation........................ 17
Section 8.6 Execution of Proxies................................ 17
ARTICLE IX - INDEMNIFICATION............................................ 18
Section 9.1 Indemnification: Actions Other Than
by the Corporation............................. 18
Section 9.2 Indemnification: Actions by the
Corporation.................................... 18
Section 9.3 Right to Indemnification............................ 19
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.4 Authorization of Indemnification.................... 19
Section 9.5 Advance Indemnification............................. 19
Section 9.6 Non-Exclusive Indemnification....................... 19
Section 9.7 Insurance........................................... 19
Section 9.8 Constituent Corporation............................. 20
Section 9.9 Definitions......................................... 20
ARTICLE X - GENERAL PROVISIONS.......................................... 20
Section 10.1 Fiscal Year......................................... 20
Section 10.2 Seal................................................ 20
Section 10.3 Dividends........................................... 21
Section 10.4 Notice.............................................. 21
Section 10.5 Waiver of Notice.................................... 21
Section 10.6 Conflicts of Interest............................... 21
Section 10.7 Loans to officers or Employees...................... 22
Section 10.8 Amendment........................................... 22
</TABLE>
iii
<PAGE>
BYLAWS
OF
DSN CORPORATION
(an Oklahoma corporation)
ARTICLE I
OFFICES
-------
Section 1.1 Principal Office. The present location of the principal
----------------
office for the transaction of the business of the Corporation is 16 South
Pennsylvania, Oklahoma City, Oklahoma 73107. The Board of Directors may change
such principal office from time to time.
Section 1.2 Other Offices. The Corporation may have other offices at
-------------
such places, within or without the State of Oklahoma, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 2.1 Annual Meetings. The annual meetings of shareholders shall
---------------
be held on the third Tuesday of the fourth month following the close of the
fiscal year; provided that if such day falls on a legal holiday, then any such
annual meeting of shareholders shall be held at the same time and place on the
next day thereafter which is a business day. Any such annual meeting may be held
at any other time which may be designated in a resolution adopted by the Board
of Directors or by the written consent of shareholders holding a majority of the
issued and outstanding voting shares of the Corporation. At the annual meeting,
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other proper business may be transacted.
Section 2.2 Special Meetings. Special meetings of the shareholders for
----------------
any purpose or purposes may be called at any time by: (a) the President; (b)
resolution adopted by the Board of Directors; or (c) one or more shareholders
holding not less than one-fourth (1/4) of the issued and outstanding voting
shares of the Corporation. Notice of such special meetings shall be given in the
same manner as for annual meetings of shareholders. Notices of any special
meeting shall state, in addition to the time, date and place of such meeting,
the purpose or purposes of the meeting. Business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice.
Upon request being made by written notice to the President, or in his absence or
disability to any Vice-President, or in the absence of a Vice-President, to the
Secretary, by any person or persons herein
<PAGE>
empowered to call a special meeting, if such officer is the Secretary, he shall
give notice to the shareholders, or if such officer is other than the Secretary,
he shall cause the Secretary, to give notice to the shareholders that such
meeting has been called for the purpose or purposes stated in such request and
is to be held at a specified time, which time as fixed by such officer shall not
be less than ten (10) days nor more than sixty (60) days after the receipt of
such request. If notice of such meeting be not given to the shareholders within
seven (7) days after the receipt of such request, such person or persons making
such request may fix the time of such special meeting and give notice thereof in
the same manner as herein provided for notice of special meetings of
shareholders.
Section 2.3 Place of Meetings. All meetings of shareholders shall be
-----------------
held either at the principal office of the Corporation or at any other place
within or without the State of Oklahoma as may be designated either by the Board
of Directors or by the written consent of the shareholders entitled to vote at
such meeting holding at least a majority of such shares given either before or
after the meeting and filed with the Secretary of the Corporation.
Section 2.4 Notice of Meetings. Written notice of the time, date and
------------------
place of each annual meeting of the shareholders shall be given to each
shareholder as described in Section 10.4 not less than ten (10) nor more than
sixty (60) days before each annual meeting.
Section 2.5 Voting List. The Secretary shall prepare, at least forty-
-----------
eight (48) hours prior to each meeting of the shareholders, an alphabetical list
of all shareholders entitled to vote at such meeting, with the number of shares
entitled to be voted by each shareholder set forth opposite their respective
names. The Secretary shall produce the share ledger or a duplicate thereof,
together with such list and shall keep it open either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held during the business hours of at least one (1) full day immediately
preceding the convening thereof and until the close of such meeting, and it
shall be subject to inspection at any time during such period by any shareholder
or person representing shares. However, the Secretary shall not be required to
prepare and produce a list of shareholders in any case where the share ledger
reasonably shows in alphabetical order by classes of shares all persons entitled
to represent shares at such meeting with the number of shares entitled to be
voted by each shareholder.
Section 2.6 Quorum and Required Vote; Adjourned Meetings. The holders of
--------------------------------------------
a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the
2
<PAGE>
shareholders for the transaction of business, except as otherwise provided by
statute or the Certificate of Incorporation of the Corporation. When a quorum is
present at any meeting, a majority of the shares represented thereat and
entitled to vote thereat shall decide any question brought before such meeting.
The shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the holders of a majority of the shares entitled to vote
thereat, present in person or by proxy, but in the absence of a quorum no other
business may be transacted at such meeting. It shall not be necessary to give
any notice of the time and place of the adjourned meeting or of the business to
be transacted thereat, other than by announcement at the meeting at which such
adjournment is taken, except that if any shareholders' meeting, either annual or
special, is adjourned for thirty (30) days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting.
Section 2.7 Voting. At each meeting of shareholders each shareholder
------
entitled to vote shall vote in person or by proxy and he shall have one vote for
each share standing registered in his name at the closing of the transfer books
for such meeting, or the record date fixed for such meeting by the Board of
Directors, as the case may be, or standing registered in his name at the time of
such meeting if neither a date for the closing of the transfer books nor a
record date for such meeting has been fixed by the Board of Directors. The
voting at all meetings of shareholders may be viva voce but any qualified voter
may demand a share vote by written ballot, whereupon such share vote shall be
taken by written ballot each of which shall state the name of the shareholder
voting and the number of shares voted by him, and if such ballot be cast by
proxy, it shall also state the name of such proxy.
Section 2.8 Proxies. Any shareholder entitled to vote or execute
-------
consents shall have the right to do so either in person or by one or more agents
authorized by proxy. The appointment of a proxy shall be in writing and signed
by the shareholder but shall require no other attestation and shall be filed
with the Secretary of the Corporation at or prior to the meeting. If any
shareholder appoints two or more persons to act as proxies and if the instrument
does not otherwise provide, then a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such instrument upon all of the persons
so appointed; and if such proxies be equally divided as to the right and manner
of voting in any particular case, the vote shall be divided among the proxies.
Any person holding shares in a representative or fiduciary capacity which he may
represent in person may represent the same by proxy and confer general or
discretionary power upon
3
<PAGE>
such a proxy. The authority of a proxy if not coupled with an interest may be
terminated at will, unless otherwise provided in the appointment, the proxy's
authority shall cease three (3) years after the appointment. The termination of
a proxy's authority by act of the shareholder shall, subject to the time
limitation herein set forth, be ineffective until written notice of the
termination has been given to the Secretary of the Corporation. Unless otherwise
provided therein, an appointment filed with the Secretary shall have the effect
of revoking all proxy appointments of prior date. A proxy's authority shall not
be revoked by the death or incapacity of the maker unless before the vote is
cast or the authority is exercised written notice of such death or incapacity is
given to the Corporation.
Section 2.9 Order of Business. The order of business at the annual
-----------------
meeting, and so far as practicable at all other meetings of the shareholders,
shall be as follows:
(a) Calling meeting to order;
(b) Calling of roll and checking proxies;
(c) Proof of notice of meeting;
(d) Reading of any unapproved minutes;
(e) Reports of officers;
(f) Reports of committees;
(g) Election of directors;
(h) Unfinished business;
(i) New business; and
(j) Adjournment.
Section 2.10 Action Without Meeting. Any action which, under any
----------------------
provisions of the laws of the State of Oklahoma or under the provisions of the
Certificate of Incorporation or under these Bylaws may be taken at a meeting of
the shareholders, may be taken without a meeting, without prior notice and
without a vote if a consent in writing be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take action at a meeting at which all shares entitled to vote
thereon were present and voted. Such consent shall be filed with the Secretary
of the corporation and made a part of the corporate records. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who have not consented in
writing.
4
<PAGE>
Section 2.11 Inspectors of Election. In advance of any meeting of
----------------------
shareholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or any adjournment thereof. If Inspectors of Election be not so
appointed, the Chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails or refuses to act, the vacancy may be filled
by appointment by the Board of Directors in advance of the meeting, or at the
meeting by the Chairman. An inspector need not be a shareholder of the
Corporation, but no person who is a candidate for office of the Corporation
shall act as an inspector. The duties of such inspectors shall include:
determining the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The inspectors of the election shall
perform their duties impartially in good faith, to the best of their ability,
and as expeditiously as is practical. If there be three inspectors, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act, or certificate of all.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 3.1 Powers. All corporate powers, except those which are
------
conferred upon or reserved to the shareholders by the Certificate of
Incorporation, these Bylaws and the laws of the State of Oklahoma, shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed and conducted by, the Board of Directors. Without
prejudice to such general power, but subject to the same limitations, the Board
of Directors shall have the following powers:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with applicable law, with the Certificate of Incorporation or
these Bylaws and fix their compensation and to confer upon any officer of
the Corporation the power to appoint, remove and suspend subordinate
officers and agents;
5
<PAGE>
(b) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as it may determine advisable;
(c) To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be in accordance with applicable
law and to declare dividends from time to time in accordance with
applicable law;
(d) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor;
(e) To adopt such insurance, retirement and other benefits plans for
directors, officers and agents of the Corporation and its subsidiaries as
it may determine advisable; and
(f) To adopt regulations, not inconsistent with these Bylaws, for the
management of the Corporation's business and affairs.
Section 3.2 Number, Election and Term of Office. The Board of Directors
-----------------------------------
of the Corporation shall consist of one or more members and a Chairman. The
shareholders at any meeting shall determine the number which shall constitute
the Board of Directors and the number so determined shall remain fixed until
changed at a subsequent meeting of the shareholders. The directors shall be
elected at each annual meeting of the shareholders; however, if any such annual
meeting is not held or the directors are not elected thereat, the directors may
be elected at any meeting of shareholders held for that purpose. Each director
shall hold office until his successor is elected or until his earlier
resignation or removal. A director need not be a shareholder of the Corporation.
Section 3.3 Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and each director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in
case of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting. The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
6
<PAGE>
Section 3.4 Resignations. Upon the resignation of a director, a majority
------------
of the remaining directors or the sole remaining director shall have the power
to elect a successor to take office when the resignation is to become effective.
Section 3.5 Removal. The entire Board of Directors or any individual
-------
director may be removed from office, with or without cause, by the vote of
shareholders holding a majority of the issued and outstanding shares entitled to
vote at any annual or special meeting of shareholders. New directors to fill
vacancies created by removal may be elected at the same meeting of shareholders.
Section 3.6 Annual Meetings. An annual meeting of the Board of Directors
---------------
for the purpose of election of officers of the Corporation and the transaction
of any other business coming before such meeting shall be held each year
immediately following the adjournment of the annual meeting of the shareholders
and no notice of such meeting to the elected directors shall be necessary in
order to legally constitute the meeting, provided a majority of the Board shall
be present. If a majority of the Board shall not be present, then such annual
meeting may be held at such time as shall be fixed by the consent, in writing,
of all of the directors. Other meetings of the Board may be held as shall from
time to time be determined by the Board provided notice of the time, date and
place of any such meeting is given to each director not less than two (2) days
before such meeting.
Section 3.7 Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. No notice of such regular meeting shall be required.
Section 3.8 Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes may be called at any time by the President or the
Secretary or by any two directors by notice of the time, date and place thereof
given to each director not less than two (2) days before such meeting. No
business shall be considered at any special meeting other than the purposes
mentioned in the notice given to each director of the meeting, except with the
consent of all directors.
Section 3.9 Place of Meetings. Meetings of the Board of Directors shall
-----------------
be held at any place within or without the State of Oklahoma which has been
designated from time to time by resolution adopted by the Board or by written
consent of all members of the Board. In the absence of such designation,
meetings shall be held at the principal office of the Corporation.
Section 3.10 Quorum and Required Vote; Adjourned Meetings. A majority of
--------------------------------------------
the directors shall constitute a quorum for the transaction of business at any
meeting of the directors, and the
7
<PAGE>
acts of a majority of the directors present at a meeting at which a quorum is
present shall be the acts of the Board of Directors except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws and except to adjourn as hereinafter provided. A quorum of the
directors may adjourn any meeting of the directors to meet again at a stated day
and hour; provided that in the absence of a quorum a majority of the directors
present at any meeting of the directors, either regular or special, may adjourn
to a later date but may not transact any business until a quorum has been
secured. At any adjourned meeting at which a required number of directors shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified. Notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.
Section 3.11 Compensation. Directors and members of committees may
------------
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed by resolution adopted by the Board of Directors.
Section 3.12 Action without Meeting. Any action required or permitted to
----------------------
be taken at a meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing. Such written Action by
unanimous consent shall have the same effect as action taken at a meeting of the
Board of Directors and shall be filed with the Secretary of the corporation and
made a part of the minute of proceeding of the Board of Directors.
Section 3.13 Telephonic Meetings. Members of the Board of Directors may
-------------------
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE IV
EXECUTIVE COMMITTEE
-------------------
Section 4.1 Election. The Board of Directors may if it deems necessary,
--------
acting by resolution adopted by a majority of the number of directors, elect
from their own members an Executive Committee composed of two or more voting
members.
Section 4.2 Duties. The Executive Committee shall have and exercise all
------
of the authority of the Board of Directors in the management of the Corporation
in the interval between meetings of the Board of Directors, subject to the
control and direction of the Board of Directors, except to the extent, if any,
such authority shall be limited by the resolution appointing the Executive
8
<PAGE>
Committee and except the power to declare dividends and to adopt, amend or
repeal these Bylaws and where action of the Board of Directors is required by
law. It shall keep regular minutes of its proceedings which shall be reported to
the directors at their next meeting.
Section 4.3 Meetings. The Executive Committee shall meet at such times
--------
as may be fixed by the Committee or on the call of the President. Notice of the
time and place of the meeting shall be given to each member of the Committee in
the manner provided for the giving of notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors or
in such other manner as the Executive Committee by resolution may prescribe.
Section 4.4 Quorum and Voting. A majority of the members of the
-----------------
Executive Committee shall constitute a quorum for the transaction of business.
The acts of the majority of the members of the Executive Committee present at a
meeting at which a quorum is present shall be the acts of the Executive
Committee. At all meetings of the Executive Committee, each member present shall
have one (1) vote which shall be cast by him in person.
Section 4.5 Waiver of Notice. Any actions taken or approved at any
----------------
meeting of the Executive Committee, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the meeting, each
of the members not present signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof.
Section 4.6 Removal. The entire Executive Committee or any individual
-------
member thereof may be removed from the Committee with or without cause by a vote
of a majority of the directors.
Section 4.7 Vacancies. The Board of Directors shall fill all vacancies
---------
in the Executive Committee which may occur from time to time.
Section 4.8 Action Without Meeting; Telephonic Meeting. Action may be
------------------------------------------
taken by the Executive Committee in the manner allowed by the Board of Directors
pursuant to Sections 3.12 and 3.13 of Article III.
ARTICLE V
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation. The Board of Directors may, by resolution
-----------
passed by a majority of the directors, designate one or more committees, in
addition to the Executive Committee authorized in Article IV hereof, each
committee to consist of two or more of
9
<PAGE>
the directors of the Corporation, which to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except where
action of the Board of Directors is required by law, and may authorize the seal
of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 5.2 Procedural Rules. Each committee shall comply with the same
----------------
procedural rules set forth in Section 4.3 through 4.8, both inclusive, of
Article IV that are applicable to the Executive Committee.
ARTICLE VI
OFFICERS
--------
Section 6.1 Officers. The officers of the Corporation shall be a Chief
--------
Executive Officer, a President, a Secretary and a Treasurer. The Corporation may
also have, at the discretion of the Board of Directors, an Executive Vice-
President, one or more Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers as may be appointed in
accordance with Section 6.3. One person may hold two or more offices; provided
that no person shall at the same time hold the offices of President and
Secretary.
Section 6.2 Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with Section 6.3 or Section 6.5,
shall be elected annually by the Board of Directors, and each shall hold his
office until he shall resign or shall be removed or otherwise disqualified to
serve, or his successor shall be elected and qualified.
Section 6.3 Subordinate Officers. The Board of Directors may appoint,
--------------------
and may empower the President to appoint, such other officers as the business of
the Corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
Section 6.4 Removal. Any officer may be removed, either with or without
-------
cause, by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors.
Section 6.5 Resignation. Any officer may resign at any time by giving
-----------
written notice to the Board of Directors, or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such
10
<PAGE>
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 6.6 Vacancies. A vacancy in any office because of death,
---------
removal, resignation, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.
Section 6.7 Chairman of the Board. The Chairman of the Board, shall, if
---------------------
present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by these Bylaws.
Section 6.8 Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if any, shall perform such duties as the Board of Directors shall prescribe. In
the absence or disability of the Chairman of the Board, the Vice Chairman shall
perform the duties and exercise the powers of the Chairman of the Board.
Section 6.9 Chief Executive Officer. The Chief Executive Officer shall
-----------------------
be subject to the control of the Board of Directors and exercise and perform
such powers and duties as may be assigned to him by the Board of Directors.
Section 6.10 President. The President shall be subject to the control of
---------
the Board of Directors, have general supervision, direction and control of the
business, finances and affairs of the Corporation and all other powers normally
held and exercised by the person serving as President of a corporation. The
President shall:
(a) Preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, at all meetings of the Board of Directors;
(b) Sign or countersign, as may be necessary, all such bills, notes,
checks, contracts and other instruments as may pertain to the ordinary
course of the business of the Corporation;
(c) Execute deeds, bonds, mortgages, and contracts required to be
executed under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation;
(d) Have the power to appoint all employees and agents of the
Corporation whose appointment is not otherwise provided for and to fix the
compensation thereof subject to the provisions of these Bylaws and subject
to the approval of the
11
<PAGE>
Board of Directors and to remove or suspend any employee or agent who
shall not have been appointed by the Board of Directors and to suspend for
cause, pending final action by the body which shall have appointed him,
any officer other than an elected officer, or any employee or agent who
shall have been appointed by the Board of Directors;
(e) Present a complete report of the business of the Corporation for
the preceding fiscal year at the annual meeting of the shareholders and
report to the Board of Directors from time to time all matters coming to
his attention which materially affect the business of the Corporation; and
(f) Serve as a member of the Board of Directors and an ex-officio
member of all standing committees, including the Executive Committee, if
any; and possess such usual powers and duties of supervision and
management as may pertain to the office of the President and such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
Section 6.11 Executive Vice-President. The Executive Vice-President, if
------------------------
any, shall be the executive officer of the Corporation next in authority to the
Chairman of the Board and the President, both of whom he shall assist in the
management of the business of the Corporation and the implementation of orders
and resolutions of the Board of Directors. In the absence of the Chairman of the
Board and the President, he shall preside at all meetings of the shareholders
and of the directors, and shall exercise all other powers and perform all other
duties of the Chairman of the Board and the President; and he shall perform such
other duties as the Board of Directors may from time to time prescribe. He shall
have all authority conferred upon a Vice-Presidents by these Bylaws.
Section 6.12 Vice-President. In the absence or disability of the
--------------
President, the Vice-Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, the Vice-President designated by the Board
of Directors, shall perform all the duties of the President and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice-Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or these Bylaws.
Section 6.13 Secretary. The Secretary shall:
---------
(a) Attend all meetings of the Board of Directors and the
shareholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like
duties for all committees of the Board of Directors;
12
<PAGE>
(b) Duly give or cause to be given all notices in accordance with
these Bylaws or as required by law;
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its
seal is duly authorized;
(d) Sign, with the President or Vice-President, all deeds, bonds,
mortgages, contracts and other instruments when so ordered;
(e) Keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder;
(f) Have general charge of the stock transfer books of the
Corporation; and
(g) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.14 Assistant Secretaries. In the absence of the Secretary or in
---------------------
the event of his death, inability or refusal to act, the Assistant Secretaries
in the order of their length of service as Assistant Secretary, unless otherwise
determined by the Board of Directors, shall perform the duties of the Secretary,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Secretary. They shall perform such duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 6.15 Treasurer. The Treasurer shall:
---------
(a) Keep and maintain adequate and correct accounts of the properties
and business transactions of the corporation;
(b) Have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due
and payable to the Corporation from any source whatsoever, and deposit all
such moneys in the name of the Corporation in such depositories as shall
be designated by the Board of Directors;
(c) Sign or countersign, as may be necessary, all such bills, notes,
checks and other instruments relating to the fiscal affairs of the
Corporation in the ordinary course of the business of the Corporation;
13
<PAGE>
(d) Prepare, or cause to be prepared, a true statement of the
Corporation's assets and liabilities as of the close of each fiscal year
and a true statement of the results of the operations of the Corporation
for the fiscal year then ended, all in reasonable detail; and
(e) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.16 Assistant Treasurers. In the absence of the Treasurer or in
--------------------
the event of his death, inability or refusal to act, the Assistant Treasurers,
in the order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them be the Treasurer, by the President, or by the Board of
Directors.
Section 6.17 Delegation of Duties. In case of the absence or disability
--------------------
of any officer of the corporation or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may, by a vote of a
majority of the whole Board, delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer or to any director.
ARTICLE VII
SHARES OF STOCK
---------------
Section 7.1 Certificates of Stock. A certificate or certificates for
---------------------
shares of the capital stock of the Corporation shall be issued to each
shareholder when any such shares are fully paid, showing the number of the
shares of the Corporation standing on the books in his name. The form of such
certificate shall be determined by the Board of Directors. All such certificates
shall be signed by the President or a Vice-President and the Secretary or an
Assistant Secretary, or be authenticated by facsimiles of the signatures of the
President and Secretary or by a facsimile of the signature of the President and
the written signature of the Secretary or an Assistant Secretary. Every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk. Even though an officer who signed, or whose
facsimile signature has been written, printed or stamped on, a certificate for
shares shall have ceased by death, resignation or otherwise to be an officer of
the Corporation before such certificate is delivered by the Corporation, such
certificate shall be as valid as though signed by a duly elected, qualified and
authorized officer, if it be countersigned by a transfer agent or transfer
clerk. Such certificates shall also be numbered and sealed with the seal of the
Corporation.
14
<PAGE>
Section 7.2 Record of Shareholders. There shall be kept at the
----------------------
registered office of the Corporation in the State of Oklahoma a record
containing the names and addresses of all shareholders of the Corporation,
arranged in alphabetical order, the number and class of shares held by each and
the dates when they respectively became the owners of record thereof; provided
that the foregoing shall not be required if the Corporation shall keep at its
registered office a statement containing the name and post office address,
including street number, if any, of the custodian of such record. Duplicate
lists may be kept in such other state or states as may, from time to time, be
determined by the Board of Directors.
Section 7.3 Transfer Agents and Registrars. The Board of Directors may,
------------------------------
in its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
Section 7.4 Transfer of Shares. Transfers of stock of the Corporation
------------------
shall be made on the books of the Corporation only upon authorization by the
registered holder thereof or by his attorney lawfully constituted in writing and
on surrender and cancellation of a certificate or certificates for a like number
of shares of the same class properly endorsed or accompanied by a duly executed
stock transfer power and payment of all taxes thereon, with such proof of
authenticity of the signatures as the Corporation or its transfer agents may
reasonably require.
Section 7.5 Shareholders Record Date and Closing Stock Books. The Board
------------------------------------------------
of Directors may fix, in advance, a time as a record date for the determination
of the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting not more than sixty (60) days prior to the
date of the meeting or action nor less than ten (10) days prior to the date of
the meeting or action. The Board of Directors may also fix, in advance, a time
as a record date for the determination of shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion, or
exchange of shares or for the purpose of any other lawful action which shall be
not more than sixty (60) days prior to the date of the event for the purpose of
which it is fixed. When a record date is so fixed, only shareholders of record
on that date are entitled to notice of and to vote at the meeting or to receive
a dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the record date. In lieu of fixing a record date, the Board of
Directors may close the books of the
15
<PAGE>
Corporation against any transfer of shares for a stated period but not to exceed
in any case the maximum periods set forth above.
Section 7.6 Registered Shareholders. The Corporation shall be entitled
-----------------------
to recognize the holder of record of any share or shares of stock as the
exclusive owner thereof for all purposes, and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 7.7 Lost Certificates. No new certificate for shares shall be
-----------------
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time; provided that if any certificate for shares is lost, stolen,
mutilated or destroyed, the Board of Directors may authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions, including
indemnification of the Corporation reasonably satisfactory to it, as the Board
of Directors shall determine.
Section 7.8 Treasury Shares. Treasury shares, or other shares not at the
---------------
time issued and outstanding, shall not, directly or indirectly, be voted at any
meeting of the shareholders, or counted in calculating the actual voting power
of shareholders at any given time. Treasury shares shall not have dividend
rights.
Section 7.9 Fractional Shares. Certificates of fractional shares of
-----------------
stock may be issued at the discretion of the Board of Directors. The registered
ownership of any fractional share represented by such certificate or
certificates shall entitle the holder thereof to receive dividends, participate
in the corporate assets in the event of liquidation of the Corporation and to
exercise voting rights in person or by proxy.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
------------------------
Section 8.1 Contracts. The Board of Directors or any committee thereunto
---------
authorized may authorize any officer or officers, agent or agents, to enter into
any contract or to execute and deliver in the name and on behalf of the
Corporation any contract or other instrument, except certificates representing
shares of stock of the Corporation, and such authority may be general or may be
confined to specific instances.
Section 8.2 Checks and Drafts. All checks, drafts or other orders for
-----------------
the payment of money, notes, acceptances or other evidences of indebtedness
issued by or in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined from time to time by resolution of the Board of Directors.
16
<PAGE>
Section 8.3 Deposits; Bank Accounts. All funds of the Corporation not
-----------------------
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board of
Directors may from time to time designate or as may be designated by an officer
or officers of the Corporation to whom such power oi designation may from time
to time be delegated by the Board of Directors. The Board of Directors may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
Unless otherwise provided by resolution of the Board of Directors, endorsements
for deposit to the credit of the Corporation in any of its duly authorized
depositories may be made by hand-stamped legend in the name of the Corporation
or by written endorsement by any officer without countersignature.
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so authorized,
unless a particular officer or agent is directed to negotiate the same, may be
negotiated, up to the amount so authorized, by the President or a Vice-President
or the Treasurer; and such officers are hereby severally authorized to execute
and deliver in the name and on behalf of the Corporation notes or other
evidences of indebtedness countersigned by the President or a Vice-President for
the amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring any
part or all of the property of the Corporation, real or personal, at any time
owned by the Corporation.
Section 8.5 Sale or Transfer of Securities Held by the Corporation.
------------------------------------------------------
Stock certificates, bonds or other securities at any time owned by the
Corporation may be held on behalf of the Corporation or sold, transferred or
otherwise disposed of pursuant to authorization by the Board of Directors, or of
any committee thereunto duly authorized, and when so authorized to be sold,
transferred or otherwise disposed of, may be transferred from the name of the
Corporation by the signature of the President or a Vice-President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Section 8.6 Execution of Proxies. The President, or, in the absence or
--------------------
disability of the President, a Vice-President, may authorize from time to time
the signature and issuance of proxies to vote upon shares of stock of other
corporations standing in the name of the Corporation or authorize the execution
of consents to action taken or to be taken by such other corporation. All such
proxies and consents shall be signed in the name of the Corporation by the
President or a Vice-President and by the Secretary or an Assistant Secretary.
17
<PAGE>
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 Indemnification: Actions Other Than by the Corporation. The
------------------------------------------------------
Corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner in which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 9.2 Indemnification: Actions by the Corporation. The Corporation
-------------------------------------------
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the tact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
18
<PAGE>
Section 9.3 Right to Indemnification. To the extent that any present
------------------------
or former director, officer or employee or any person who is or was serving at
the request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, or any agent
of the Corporation or any person who is or was serving at the request of the
Corporation as an agent of another corporation, partnership, joint venture,
trust or other enterprise, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2 of
this Article IX, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
Section 9.4 Authorization of Indemnification. Any indemnification under
--------------------------------
Sections 9.1 and 9.2 of this Article IX, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 9.1 and 9.2 of this Article IX. Such determination
shall be made: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding;
or (b) if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (c) by the shareholders.
Section 9.5 Advance Indemnification. Expenses incurred by a director,
-----------------------
officer, employee or agent in defending a civil or criminal action, suit or
proceeding as authorized by the Board of Directors in the specific case may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 9.6 Non-Exclusive Indemnification. The indemnification provided
-----------------------------
by this Article IX shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, contract,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9.7 Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or
19
<PAGE>
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising our of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
Section 9.8 Constituent Corporation. For the purposes of this Article
-----------------------
IX, references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation, including any constituent of a
constituent, absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 9.9 Definitions. For purposes of this Article IX, references to
-----------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest in the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board of Directors.
Section 10.2 Seal. The corporate seal of the Corporation shall be
----
circular in form and shall contain the name of the Corporation, the word
"OKLAHOMA" and such other words or information as shall be determined by the
Board of Directors. The seal may be used by causing it or a facsimile thereof to
be impressed, affixed or otherwise reproduced.
20
<PAGE>
Section 10.3 Dividends. The Board of Directors may, out of funds legally
---------
available therefor, from time to time at any regular or special meeting,
declare, and the Corporation may pay, dividends on its outstanding shares of
capital stock as and when it deems expedient. Such dividends may be made in
cash, property or shares of the capital stock or other securities of the
Corporation.
Section 10.4 Notice. Whenever any notice is required or permitted to be
------
given under the provisions of any law, the Certificate of Incorporation or these
Bylaws, it shall not be construed to require personal notice unless expressly so
stated, but such notice may be given by depositing the same in the United States
mail, postage prepaid, addressed to the person entitled thereto at his address
as it appears on the records of the Corporation, and such notice shall be deemed
to have been given on the day of such mailing. Notice shall be deemed to have
been duly given on the date of service if served personally or by telex,
telecopier, cable, telegram or similar communication. Shareholders not entitled
to vote shall not be entitled to receive notice of any meetings except as
otherwise provided by statute.
Section 10.5 Waiver of Notice. Whenever any notice whatever is required
----------------
to be given under the provisions of any law or of the Certificate of
Incorporation or of these Bylaws, a written waiver thereof, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation.
Section 10.6 Conflicts of Interest. Except as may be otherwise provided
---------------------
by the laws of the State of Oklahoma or the Certificate of Incorporation, no
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are accounted for such purpose; if: (a) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or such committee, and the
Board of Directors or Executive Committee in good faith authorizes the contract
or
21
<PAGE>
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (b)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors, or a committee which authorizes the contract
or transaction.
Section 10.7 Loans to officers or Employees. The Corporation may lend
------------------------------
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance may
be with or without interest, and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing contained in this section shall be
construed to deny, limit or restrict the powers of guaranty or warranty of any
Corporation at common law or under any statute.
Section 10.8 Amendment. These Bylaws may be amended, altered, changed or
---------
repealed at any annual or special meeting of the shareholders, provided notice
of the proposed amendment, alteration, change or repeal is contained in the
notice of such meeting, by the affirmative vote of a majority of the shares
issued and outstanding, and entitled to vote thereat. These Bylaws also may be
amended, altered, changed or repealed at any annual or special meeting of the
Board of Directors, provided notice of the proposed amendment, alteration,
change or repeal is contained in the notice of such meeting, by the affirmative
vote of the members of the Board of Directors. Notwithstanding the preceding
sentence, the fact that such power to amend, alter, change or repeal has been
conferred upon the Board of Directors shall not divest the shareholders of the
power, nor limit their power to amend, alter, change or repeal these Bylaws.
22
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that:
1. I am the duly elected and acting Assistant Secretary of DSN
Corporation ("Corporation"), an Oklahoma corporation;
2. The foregoing Bylaws comprising twenty-four (24) pages constitute the
Bylaws of the Corporation as duly adopted by Consent to Action Without a Meeting
of the Board of Directors effective July 25, 1994.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 25th day of July, 1994.
______________________________
David M. Shear
Assistant Secretary
(SEAL)
23
<PAGE>
FIRST AMENDMENT
TO
BYLAWS
OF
DSN CORPORATION
---------------
The following amendment to the Bylaws of DSN Corporation, an Oklahoma
corporation, was approved and adopted by the Board of Directors of DSN
Corporation by unanimous written consent, on November 28, 1997.
1. Section 8.4 of Article VIII of the Bylaws of DSN Corporation is hereby
amended to read as follows:
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so
authorized, unless a particular officer or agent is directed to negotiate
the same, may be negotiated, up to the amount so authorized, by the
President or a Vice President or the Treasurer; and such officers are
hereby severally authorized to execute and deliver, in the name and on
behalf of the Corporation, notes or other evidences of indebtedness for the
amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring
any part or all of the property of the Corporation, real or personal, at
any time owned by the Corporation.
The Bylaws of DSN Corporation, as amended and modified by this First
Amendment to Bylaws of DSN Corporation, set forth the entire Bylaws of DSN
Corporation. The amendment to the Bylaws of DSN Corporation, as combined in
this First Amendment to the Bylaws of DSN Corporation, is effective as of the
28th day of November, 1997, the date that such amendment was approved by the
Board of Directors of DSN Corporation.
DSN CORPORATION
/s/ James L. Wewers
_____________________________
James L. Wewers,
Vice President
/s/ David M. Shear
____________________________
[S E A L] David M. Shear,
Assistant Secretary
<PAGE>
EXHIBIT 3.13
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned, Secretary of State of Oklahoma, do hereby certify that
the annexed transcript has been compared with the record on file in my office,
of which it purports to be a copy, and that the same is a full, true and correct
copy of:
ARTICLES OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
EL DORADO CHEMICAL COMPANY
(FORMERLY: E.D.C., INC.)
In testimony whereof, I have hereunto set my hand
and affixed the Great Seal of the State of
Oklahoma at the City of Oklahoma City this 14/th/
day of November, 1997.
__________________________________________________
Secretary of State
By: ______________________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
E.D.C., INC.
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City, this 3/rd/ day
of May, A.D. 1983
__________________________________________________
Secretary of State
By: ______________________________________________
<PAGE>
ARTICLES OF INCORPORATION
OF
E.D.C., INC.
_________________________________________
To the Secretary of State of the
State of Oklahoma:
We, the undersigned incorporators, SHARON D. MEIER, 525 South Main, Suite
300, Tulsa, Oklahoma; NATALIE ARGO, 525 South Main, Suite 300, Tulsa, Oklahoma;
and THOMAS A. MANN, 525 South Main, Suite 300, Tulsa, Oklahoma, being persons
legally competent to enter into contracts for the purpose of forming a
corporation under the Business Corporation Act of the State of Oklahoma, adopt
the following Articles of Incorporation.
ARTICLE ONE
-----------
The name of the corporation is: E.D.C., Inc.
ARTICLE TWO
-----------
The address of its registered office in the State of Oklahoma is 525 South
Main, Suite 300, Tulsa, Oklahoma, and the name of its registered agent is
Rosenstein, Fist & Ringold, Inc., 525 South Main, Suite 300, Tulsa, Oklahoma.
ARTICLE THREE
-------------
The purposes for which this corporation is formed are:
(a) To manufacture, buy, sell, import, export and otherwise deal in
products and articles of commerce of all types and to establish facilities
for such purposes;
(b) To erect, construct, lease, maintain, improve, rebuild, alter,
repair, manage and control, either directly or through ownership of stock
in any corporation, any and all kinds of equipment, facilities or
structures, either for the company or others;
(c) To sell, manager improve, develop, assign, transfer, convey,
lease, pledge or dispose of, and to mortgage or otherwise encumber
machinery, equipment, land, buildings, real property, oil, gas and other
mineral property, including oil and gas leaseholds, and any other property;
<PAGE>
(d) To purchase or otherwise acquire, in whole or in part, the
property, assets, business, good will, and rights of any corporation,
association, partnership, organization or person engaged in any business
included in the foregoing purposes and objects and to assume all or any
part of the franchises, leases, contracts, indebtedness, liabilities or
obligations of any such corporation, association, partnership, organization
or person, and to pay for the acquisition or any part thereof in cash, by
issuance of shares of the capital stock of this corporation or notes or
other obligations of this corporation, or otherwise, or by undertaking and
assuming all or any part of the liabilities or obligations of the
transferor; to hold or in any manner dispose of all or any part of the
assets so acquired or purchased; and to carry on and conduct, in any lawful
manner, all or any part of the business so acquired; and to exercise all
powers necessary or convenient in or about the conduct, management, and
carrying out of such business.
(e) To acquire, lease, hold, use and enjoy, whether as owner or as
licensee, United States and foreign patents and patent rights, secret
patented processes, methods, franchises and privileges in any way relating
to or considered as furthering the due and economical exercise of the
powers and rights belonging to the corporation;
(f) To do everything necessary, suitable, and proper for the
accomplishment of any of the purposes, the attainment of any of the
objects, and the furtherance of any of the powers herein set forth, either
alone or in association with other corporations, firms, or individuals, and
as principal or agent, and to do everything and all acts incidental,
appurtenant to, or growing out of or connected with these purposes,
objects, and powers, or any part thereof, not inconsistent with the laws of
the State of Oklahoma or any state in which the company is qualified;
(g) To borrow money for any corporate purpose, and to issue notes,
mortgages, bonds, debentures, and other evidence of indebtedness, either
non-convertible or convertible into the corporation's stock;
(h) To act as agent or factor for any person, firm, association,
organization or partnership;
(i) To guarantee, purchase, hold, sell, assign, transfer, mortgage,
pledge or otherwise dispose of or deal in shares of the capital stock of or
any bonds, securities or evidence of indebtedness created by any other
corporation or corporations organized under the laws of this state or any
other state, county, nation or government, and while the owner to exercise
all the rights, powers and privileges of
2
<PAGE>
ownership;
(j) To conduct its business in other states of the United States, in
the District of Columbia, and in all foreign countries.
ARTICLE FOUR
------------
The duration of the corporation is Perpetual.
ARTICLE FIVE
------------
The aggregate number of shares which the corporation shall have authority
to allot is 25,000 of one class. The designation of the class, the number of
shares of the class, and the par value of the shares of the class are as
follows:
<TABLE>
<CAPTION>
Number of
Class Shares Par Value Total
----- --------- --------- -----
<S> <C> <C> <C>
Common 25,000 $1.00 $25,000
TOTAL $25,000
</TABLE>
ARTICLE SIX
-----------
The amount of stated capital with which it will begin business is $500
which has been fully paid in.
ARTICLE SEVEN
-------------
The number of class of shares to be allotted by the corporation before it
shall begin business and the consideration to be received by the corporation
therefor are:
<TABLE>
<CAPTION>
Consideration
Class Number of Shares to be received
----- ---------------- --------------
<S> <C> <C>
Common 500 $500
</TABLE>
3
<PAGE>
ARTICLE EIGHT
-------------
The number of directors to be elected at the first meeting of shareholders
is three.
_____________________________________________
SHARON D. MEIER
_____________________________________________
NATALIE ARGO
_____________________________________________
THOMAS A. MANN
4
<PAGE>
STATE OF OKLAHOMA )
) SS:
COUNTY OF TULSA )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this 2nd day of May, 1983, personally appeared SHARON D. MEIER,
NATALIE ARGO and THOMAS A. MANN, to me known to be the identical persons who
executed the foregoing Articles of Incorporation, and acknowledged to me that
they executed the same as their free and voluntary act and deed for the uses and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2/nd/ day of
May, 1983.
_____________________________________________
Notary Public
My Commission Expires:
7-9-85
- ---------------------
(SEAL)
5
<PAGE>
AFFIDAVIT AS TO PAID-IN-CAPITAL
-------------------------------
STATE OF OKLAHOMA )
) SS:
COUNTY OF TULSA )
SHARON D. MEIER, NATALIE ARGO and THOMAS A. MANN, of lawful age, being
first duly sworn, each deposes and states that the above named affiants
constitute all of the incorporators of E.D.C., Inc., a proposed corporation, and
that the amount of stated capital with which said corporation will begin
business, as set out in its attached Articles of Incorporation, has been fully
paid.
_____________________________________________
SHARON D. MEIER
_____________________________________________
NATALIE ARGO
_____________________________________________
THOMAS A. MANN
Subscribed and sworn to before me this 2/nd/ day of May, 1983.
_____________________________________________
Notary Public
My Commission Expires:
7-9-85
- ---------------------
(SEAL)
6
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
AMENDED
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
EL DORADO CHEMICAL COMPANY
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City, this 5/th/ day
of April, A.D. 1984.
__________________________________________________
Secretary of State
By: ______________________________________________
<PAGE>
FEE: $25.00
(Minimum)
AMENDED ARTICLES OF INCORPORATION
---------------------------------
PLEASE NOTE: This form must be filed with a letter from the Oklahoma Tax
Commission stating the franchise tax has been paid for the current fiscal year.
If the authorized capital is increased in excess of Twenty-five Thousand Dollars
($25,000.00) the filing fee shall be an amount equal to one-tenth of one percent
(1/10 of 1%) of such increase.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
We, the undersigned, Address City and State
Leo S. Hilinski
- --------------------------------------------------------------------------------
John Garrison
- --------------------------------------------------------------------------------
________________________________________________________________________________
being persons legally competent to amend the Articles of Incorporation pursuant
to the provisions of the "Business Corporation Act" of the State of Oklahoma, do
hereby execute and submit the following amended Articles of Incorporation.
(1) The name of the corporation is E.D.C., INC. changing name to EL DORADO
CHEMICAL COMPANY.
(If the corporate name is changed, please show the former name also).
(2) A. No Change, As Filed X
-
B. As Amended - The address of the registered office in Oklahoma
is _______________, City of ___________________ , and the name of the
registered agent at such address is _________________________________.
.
(3) A. No Change, As Filed X
-
B. As Amended - The duration of the corporation is _________ years.
(4) A. No Change, As Filed X
-
B. As Amended - The purpose or purposes for which the corporation is
formed are:
<PAGE>
(5) A. No Change, As Filed X
-
B. As Amended - The aggregate number of the authorized shares, itemized
by class, par value of shares, shares without par value, and series,
if any, within a class is:
CLASS SERIES NUMBER OF SHARES PAR VALUE-NO PAR VALUE
------- ------ ---------------- ----------------------
(6) A. No Change, As Filed X
-
B. As Amended - The amount of stated capital with which the corporation
shall have is $_________, which has been fully paid in (must be at
least $500. )
(7) A. No Change, As Filed X
-
B. As Amended - The number and class of shares to be allotted by the
corporation consideration to be received therefor are:
CONSIDERATION TO BE
-------------------
CLASS SERIES NUMBER OF SHARES RECEIVED
----- ------ ---------------- --------
(8) A. No Change, As Filed X
-
B. As Amended - The number of directors is ___________________.
2
<PAGE>
FEE: $25.00
(Minimum)
AMENDED ARTICLES OF INCORPORATION
---------------------------------
PLEASE NOTE: This form must be filed with a letter from the Oklahoma Tax
Commission stating the franchise tax has been paid for the current fiscal year.
If the authorized capital is increased in excess of Twenty-five Thousand Dollars
($25,000.00) the filing fee shall be an amount equal to one-tenth of one percent
(1/10 of 1%) of such increase.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
We, the undersigned, Address City and State
Leo S. Hilinski
- --------------------------------------------------------------------------------
John Garrison
- --------------------------------------------------------------------------------
________________________________________________________________________________
being persons legally competent to amend the Articles of Incorporation pursuant
to the provisions of the "Business Corporation Act" of the State of Oklahoma, do
hereby execute and submit the following amended Articles of Incorporation.
(1) The name of the corporation is E.D.C., INC. changing name to EL DORADO
CHEMICAL COMPANY.
(If the corporate name is changed, please show the former name also).
(2) A. No Change, As Filed X
B. As Amended - The address of the registered office in Oklahoma
is _______________, City of __________________,and the name of the
registered agent at such address is __________________________________
________________________________________________________________.
(3) A. No Change, As Filed X
B. As Amended - The duration of the corporation is _________ years.
(4) A. No Change, As Filed X
B. As Amended - The purpose or purposes for which the corporation is
formed are:
<PAGE>
(5) A. No Change, As Filed X
B. As Amended - The aggregate number of the authorized shares, itemized
by class, par value of shares, shares without par value, and series,
if any, within a class is:
CLASS SERIES NUMBER OF SHARES PAR VALUE-NO PAR VALUE
----- ------ ---------------- ----------------------
(6) A. No Change, As Filed X
B. As Amended - The amount of stated capital with which the corporation
shall have is $_________, which has been fully paid in (must be at
least $500. )
(7) A. No Change, As Filed X
B. As Amended - The number and class of shares to be allotted by the
corporation consideration to be received therefor are:
CONSIDERATION TO BE
-------------------
CLASS SERIES NUMBER OF SHARES RECEIVED
----- ------ ---------------- --------
(8) A. No Change, As Filed X
B. As Amended - The number of directors is ______________________.
2
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 LINCOLN BLVD.
OKLAHOMA CITY, OKLAHOMA 731940006
March 6, 1984
ODIE A. NANCE, Chairman
ROBERT L. WADLEY, Vice-Chairman FRANCHISE DIVISION
J.L. MERRILL, Sec'y-Member
Jeannette B. Edmondson, Secretary of State
Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105
Re: E.D.C., INC.
Qualified: 5/3/83
Dear Mrs. Edmondson:
Our records indicate the referenced entity has complied with the Franchise
Tax Law and is licensed for the current fiscal year ending June 30, 1984.
Very truly yours,
OKLAHOMA TAX COMMISSION
A. H. Stoabs, Director
Franchise Tax Division
AHS: jh
<PAGE>
FEE: $25.00
CHANGE OR DESIGNATION
OF
REGISTERED AGENT
AND/OR
LOCATION OF
REGISTERED OFFICE
(Oklahoma Corporation)
FILE IN DUPLICATE
PLEASE PRINT CLEARLY
PLEASE NOTE: This form MUST be filed with a letter from the Oklahoma Tax
----
Commission stating the franchise tax has been paid by the corporation for the
current fiscal year, with the EXCEPTION of not for profit corporations.
---------
TO: THE OKLAHOMA SECRETARY OF STATE, 101 State Capitol, Oklahoma City, OK
73105
The undersigned, for the purpose of changing its registered agent and/or
registered office pursuant to Section 1023/1026 of the Oklahoma General
Corporation Act, hereby certifies:
1. The name of the corporation is: El Dorado Chemical Company
2. The location of the registered office of this corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
Street Address City County Zip Code
(P.O. Boxes are NOT acceptable).
---
3. The name of the registered agent at such address upon whom process against
this corporation may be served is:
David M. Shear
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this
27/th/ day of October, 1994 .
David R. Goss
___________________________________ ----------------------------------
by Vice President (Please print name)
ATTEST:
David M. Shear
___________________________________ ----------------------------------
by Asst. Secretary (Please print name)
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 LINCOLN BLVD.
OKLAHOMA CITY, OKLAHOMA 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX DIVISION
ROBERT L. WADLEY, Vice-chairman REGISTRATION SECTION
DON KILPATRICK, Sec'y-member (405) 521-3161
FEI: 731183488
BOA 10/26/94
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK, 73105
RE: EL DORADO CHEMICAL COMPANY
QUALIFICATION DATE: 05/03/83
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1995 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.14
E.D.C., INC.
BYLAWS
------
Adopted at the Organization Meeting of the
Incorporators and Subscribers to Stock of said Company
Held at Tulsa, Oklahoma, on
May 4, 1983
___________________________
ARTICLE I
---------
Shareholders
------------
Section 1. Annual Meeting. The annual meeting of the shareholders of the
-------------------------
corporation shall be held at the principal office of the corporation in Tulsaip
Oklahoma, or at such other place as may be specified in the notice of such
meeting by resolution of the Board of Directors, at 10:00 o'clock A.M., on the
lst day of February of each year, commencing in 1984, (unless the same is a
holiday, in which event said meeting shall be held on the next succeeding
business day) for the purpose of electing directors and for the transaction of
such other business as may be properly brought before the meeting.
Written or printed notice stating the time and place of the annual meeting
shall be mailed at least ten days prior to the date of said meeting to each
shareholder of record entitled to vote at the meeting at the address shown on
the stock book of the corporation or as shown on the records of the
corporation's transfer agent.
Section 2. Special Meetings. Special meetings of the shareholders may be
---------------------------
held at the principal office of the corporation in Tulsa, Oklahoma, or at Such
other place within or without the State of Oklahoma whenever called by the
Chairman of the Board, or
<PAGE>
the President, by the Executive Committee, or by a majority of the then members
of the Board of Directors. A special meeting shall be called by the Chairman of
the Board the President, Vice-President, or Secretary at the written request of
shareholders owning one-fourth of the shares of the corporation entitled to vote
at the meeting. The call shall be in writing and shall state the time, place and
purpose or purposes of the meeting.
Written notice of each special meeting of the shareholders, stating the
day, the hour, and the place thereof, and in general terms the business to be
transacted thereat, shall be mailed at least ten days prior to the meeting to
each shareholder of record entitled to vote at the meeting at the address shown
on the stock book of the corporation or shown on the records of the
corporation's transfer agent.
If all of the shareholders shall waive call and notice of any meeting, no
call or notice shall be required and whenever all of the shareholders shall meet
in person or by proxy, such meeting shall be valid for all purposes without call
or notice and at such meeting any corporate action may be taken.
Section 3. Quorum. At any meeting of the shareholders, the holders of a
-----------------
majority of the issued and outstanding shares of stock, entitled to vote,
present in person or by proxy, shall constitute a quorum for all purposes. If
the holders of the number of shares necessary to constitute a quorum shall fail
to attend in person or by proxy at the time and place fixed by these Bylaws for
an annual meeting, or fixed by notice as above provided for a
2
<PAGE>
special meeting, a majority of the shareholders actually present, in person or
by proxy, may adjourn from time to time without notice, other than by
announcement at the meeting, until holders of the number of shares entitled to
vote requisite to constitute a quorum shall attend. At any such adjourned
meeting, at which a quorum shall be present, any business may be transacted
which might have been transacted at the original meeting; however, in the event
of a meeting adjourned for thirty days or more, notice of the adjourned meeting
shall be given as in the case of the original meeting.
Section 4. Voting. At all meetings of shareholders, each shareholder owning
-----------------
stock which has voting power upon the matter in question at the time shall be
entitled to vote in person, or by proxy appointed by a written instrument
subscribed by such shareholder and delivered either to the Secretary at the
meeting or to the place designated on a proxy solicited by the corporation. Each
shareholder shall have one vote for each share of stock standing in his name,
but no stock shall be voted at any election which has been transferred on the
books of the corporation within ten days next preceding an election. No proxy
shall be voted on after six months from its date.
Section 5. Chairman. Meetings of the shareholders shall be presided over by
-------------------
the Chairman of the Board, or, if he is not present, by the President, or if
both the Chairman of the Board and the President are absent, by a Vice-
President, or if no such officer is present, by a chairman to be chosen at the
meeting. The
3
<PAGE>
Secretary of the corporation, or, in his absence, an Assistant Secretary, shall
act as Secretary of the meeting, if present.
Section 6. Inspectors of Election. At all elections of directors the voting
---------------------------------
shall be by written ballot, and a majority of the votes cast shall elect. The
Chairman of each meeting at which directors are to be elected may appoint one or
three inspectors of the election. The inspector, or each inspector if more than
one is appointed, shall first take and subscribe an oath or affirmation
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability, and shall take charge of
the polls and after the balloting shall make a certificate of the result of the
vote taken.
Section 7. Action Without a Meeting. Whenever the vote of shareholders at a
-----------------------------------
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the certificate of
incorporation, the meeting and vote of shareholders may be dispensed with, if
all the shareholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
ARTICLE II
----------
Board of Directors
------------------
Section 1. Number and Term of Office. The business and the property of the
------------------------------------
corporation shall be managed and controlled by a Board of Directors, which will
determine all questions of policy and supervise the business affairs by the
corporation. The Board
4
<PAGE>
shall consist of not less than three nor more than nine directors. Directors
shall be elected annually at the annual meeting of shareholders, and in the
election of directors the vote of shareholders representing a majority of the
outstanding stock entitled to vote for directors shall be necessary to a choice.
Directors shall hold office until the annual meeting of shareholders next
ensuing after their election and until their respective successors are elected
and qualified.
Section 2. Vacancies. Vacancies in the Board of Directors which shall occur
--------------------
among the directors by death, resignation or otherwise, or which result from any
increase in the authorized number of directors, may be filled by the remaining
directors, though less than a quorum, by affirmative vote of a majority thereof.
The directors so elected shall hold office for the unexpired portion of the term
of the director whose place shall be vacant (or, in the event of a director
elected due to an increase in the authorized number of directors, until the next
annual meeting of shareholders) and until the election of his successor, except
as provided in the next section.
Section 3. Removal of Directors. Any director (except directors elected by
-------------------------------
shares of preferred stock voting as a class) may be removed for any cause deemed
sufficient by a vote of the shareholders holding a majority of the outstanding
stock of this corporation entitled to vote for directors at a special meeting
held in compliance with these Bylaws. Meetings for this purpose may be called by
the Chairman of the Board, or by the President, or by
5
<PAGE>
the Executive Committee, or by a majority of the Board of Directors, or by
shareholders holding at least one-half of the outstanding issued stock. Such
calls must be in writing and addressed to the Secretary, and the Secretary must
then promptly give notice of such meeting, its time, place, purpose, and by whom
called. In the event the Secretary refuses to give such notice, or if there is
no Secretary, the call may be addressed directly to each shareholder and be
served in the manner provided in these Bylaws, in which case it must specify the
time and place of meeting. In the event of removal, such vacancy may be filled
by election at said meeting. Directors elected by preferred stock voting as a
class may only be removed by such stockholders at any special meeting for any
cause deemed sufficient.
Section 4. Regular Meetings. The Board of Directors may, in its discretion,
---------------------------
provide for regular meetings of the Board of Directors, to be held at such time
and place as the Board may designate and no notice of such regular meetings
shall be required, and each director shall be required to take notice of the
same. An annual meeting of the Board of Directors shall be held at the place of
the annual meeting of shareholders, immediately following the adjournment of the
annual meeting of shareholders.
Section 5. Special Meetings. Special meetings of the Board of Directors
---------------------------
shall be held whenever called by the Chairman of the Board, or by the President,
the Executive Committee or by a majority of the directors, and may be held at
such place within or without the State of Oklahoma as stated in the call. The
Secretary
6
<PAGE>
shall give notice of the time, place and purpose of each special meeting, by
mail, postage prepaid, at least ten days before the meeting or by telegraph at
least seven days before the meeting. Such notice may be waived by any director.
At any meeting at which all of the directors shall be present, even though
without notice, any business may be transacted.
Section 6. Quorum. A majority of the Board of Directors for the time being
-----------------
in office shall constitute a quorum for the transaction of business, but if at
any meeting of the Board there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum shall be
present. Directors need not be shareholders.
Section 7. Salaries of Officers. The Board of Directors shall fix the
-------------------------------
compensation of the officers of the corporation, and such officers shall be
under the direction of the Board.
Section 8. Regulating Issue and Transfer of Stock. The Board of Directors
-------------------------------------------------
shall have power and authority to make all such rules and regulations as they
may deem expedient concerning the issuance, transfer and registration of
certificates for shares of the capital stock of the corporation.
Section 9. Executive Committee. The Board of Directors may, by resolution
------------------------------
or resolutions passed by a majority of the whole Board, designate an Executive
Committee, to consist of the Chairman of the Board and the President and one or
more of the directors, as the Board may from time to time determine. The
Executive Committee shall have and may exercise when the Board is not in
session, all
7
<PAGE>
the powers of the Board of Directors in the management of the business and
affairs of the corporation to be affixed to all papers which may require it. The
Executive Committee shall not have power to fill vacancies in the Board, or to
change the membership of or to fill vacancies in said Committee, or to make or
amend Bylaws of the corporation. The Board shall have the power at any time to
change the membership of the Executive Committee, to fill vacancies in it, or to
dissolve it. The Executive Committee may make rules for the conduct of its
business and may appoint such committees and assistants as it shall from time to
time deem necessary. A majority of the members of the Executive Committee shall
constitute a quorum.
Section 10. Other Committees. The Board of Directors may also, by
----------------------------
resolution or resolutions passed by a majority of the whole board, designate one
or more other committees, each such committee to consist of two or more of the
directors of the corporation, which, to the extent provided in said resolution
or resolutions, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the corporation, and may have
power to authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolutions adopted by the Board of
Directors. A majority of the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of Directors
shall otherwise provide. The Board of Directors shall
8
<PAGE>
have power at any time to fill vacancies in, to change the membership of, or to
dissolve any such committee.
Section 11. Compensation. The directors may be paid their expenses, if any,
------------------------
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at any meeting of the Board of Directors or a stated salary
as directors. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE III
-----------
Officers
--------
Section 1. Number and Designation. The officers of this corporation shall
---------------------------------
be the Chairman of the Board, a President, one or more Vice-Presidents, a
Secretary, a Treasurer and such other officers as shall, from time to time, be
provided for by the Board of Directors. Such officers shall be elected at each
annual meeting of the Board of Directors, which shall be held immediately
following the annual meeting of shareholders and said officers shall hold office
for one year and until their respective successors shall have been duly elected
and qualified. The Chairman of the Board and the President shall be chosen from
among the directors, but no other officer need be a director. officers need not
be shareholders. All officers of the corporation shall be subject to removal at
any time by the affirmative vote of a majority of the whole Board of Directors.
Two or more offices may be held by the same person, except the offices of
Chairman of the Board and President, and Secretary or President and Vice-
President.
9
<PAGE>
Section 2. Powers and Duties of Chairman of the Board. The Chairman of the
-----------------------------------------------------
Board shall be the chief executive officer of the corporation. He shall preside
at all meetings of the shareholdrs and of the Board of Directors. He shall have
general charge and supervision of the business of the corporation, and shall
have power to appoint and discharge such employees and agents as he deems
necessary and to clothe them with such powers as he thinks will best serve the
business of the corporation. He may negotiate, consummate, sign and execute all
bonds, contracts and other obligations in the name of the corporation, and with
the Secretary may sign all certificates for shares of the capital stock of the
corporation. He shall do and perform such other duties as may be from time to
time assigned or delegated to him by the Board of Directors.
Section 3. Powers and Duties of President. The President shall perform the
-----------------------------------------
duties of the Chairman of the Board in the absence or disability of the Chairman
of the Board. He shall do and perform such other duties as may be assigned to
him from time to time by the Board of Directors.
Section 4. Powers and Duties of Vice-President. The Vice President, or if
----------------------------------------------
more than one, the Vice-Presidents, shall possess the powers and perform the
duties of the President in his absence or disability. He shall do and perform
such other duties as may be assigned to him from time to time by the Board of
Directors.
Section 5. Powers and Duties of Secretary. The Secretary shall attend all
-----------------------------------------
meetings of the Board of Directors, standing committees
10
<PAGE>
and shareholders, and shall record the proceedings thereof in a minute book to
be kept for that purpose. He shall prepare or cause to be prepared and publish
all notices required by the laws of the State of Oklahoma, by resolutions of the
shareholders, by the Board of Directors, or by the Bylaws. He shall prepare and
keep a book for the transfer of stock, to be known as the stock transfer book;
shall issue and attest all certificates of stock and shall attest all bonds,
contracts, notes and other papers executed on behalf of the corporation by its
Chairman of the Board or its President. He shall have custody of and authority
to affix the seal of the corporation and do and perform such other duties as
may, from time to time, be assigned to him by the Board of Directors.
Section 6. Assistant Secretaries. The Board of Directors may appoint one or
--------------------------------
more assistant secretaries. Each assistant secretary shall have such powers and
shall perform such duties as may be assigned to him by the Board of Directors.
Section 7. Powers and Duties of Treasurer. The Treasurer shall have charge
-----------------------------------------
of and account for all the monies, bills receivable, notes, bonds, stocks and
general property belonging to the corporation. He shall deposit all funds in the
name of the corporation in such bank or banks as may be designated by the Board
of Directors. He shall report the state of finances of the corporation at any
meeting of the shareholders or Board of Directors. He shall sign all receipts
and vouchers for payments made to the corporation and shall pay out and dispose
of the funds of the corporation under the direction of the Board. He shall keep
11
<PAGE>
a full and accurate account of all monies received and paid by him on account of
the corporation, and shall at all reasonable times, exhibit his books and
accounts to any director of the corporation during business hours. He shall,
whenever required by the Board of Directors, give bond in such sum and with such
sureties as required by the Board of the faithful performance of his duties as
such Treasurer.
Section 8. Assistant Treasurer. The Board of Directors may appoint one or
------------------------------
more assistant treasurers. Each assistant treasurer shall have such powers and
shall perform such duties as may be assigned to him by the Board of Directors.
ARTICLE IV
----------
Dividends
---------
Section 1. Payment of Dividends. The Board of Directors may, from time to
-------------------------------
time, when in their discretion they deem it advisable, declare dividends from
the surplus or from the net profits of the corporation, such dividends payable
in cash, stock or other property.
ARTICLE V
---------
Certificates of Stock
---------------------
Section 1. Ownership. Every holder of stock in the corporation shall be
--------------------
entitled to have a certificate, signed by, or in the name of the corporation by,
the Chairman of the Board, the President or a Vice-President, and the Secretary
or an Assistant Secretary of the corporation. Such certificate shall be in such
form as the Board of Directors may from time to time prescribe.
12
<PAGE>
Section 2. Facsimile Signatures. Where a certificate is signed (1) by a
-------------------------------
transfer agent or an assistant transfer agent, or (2) by a transfer clerk acting
on behalf of the corporation and a registrar, the signature of any such Chairman
of the Board, President, Vice-President, Secretary or Assistant Secretary may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation, whether because
of death, resignation or otherwise, before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation.
Section 3. Lost Certificate. No certificate for shares of stock in the
---------------------------
corporation shall be issued in place of any certificate alleged to have been
lost, stolen or destroyed, except upon production of evidence of such loss,
theft or destruction satisfactory to the Board of Directors and upon delivery to
the corporation of a bond of indemnity in such amount, upon such terms and
secured by such surety as the Board of Directors in its discretion may require.
Section 4. Closing of Transfer Books. The Board of Directors may close the
------------------------------------
stock transfer books of the corporation for a period
13
<PAGE>
not exceeding forty days preceding the date of any meeting of shareholders or
the date for payment of any dividend or the date for the allotment of rights or
the date when any change or conversion or exchange of capital stock shall go
into effect or for a period not exceeding forty days in connection with
obtaining the consent of shareholders for any purpose. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date, not
exceeding forty days preceding the date of any meeting of shareholders, or the
date for the payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining such consent, as a record
date for the determination of the shareholders entitled to notice of, and to
vote, at any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, or to give such consent, and in such case such shareholders and only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
14
<PAGE>
Section 5. Transfer. The shares of stock of the corporation shall be
-------------------
transferable on the books of the corporation by the holder thereof in person or
by his attorney upon surrender for cancellation of a certificate or certificates
for the same number of shares, with an assignment and power of transfer enclosed
thereon or attached thereto, duly executed, and with such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 6. Adverse Claimant. The corporation shall be entitled to recognize
---------------------------
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part or other notice thereof, except as otherwise
provided by the laws of Oklahoma.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
Section 1. Corporate Seal. The seal of the corporation shall be circular in
-------------------------
design with the words "Corporate Seal" in the center and the name of the
corporation and the word "Oklahoma" around the outer edge thereof. A facsimile
of the seal may be used.
Section 2. Annual Reports. Until otherwise provided, the Board of Directors
-------------------------
shall not be required to make annual reports to the shareholders.
15
<PAGE>
Section 3. Fiscal Year. The fiscal year of the corporation shall begin on
----------------------
January 1 and end on December 31 of each year.
Section 4. Corporate Books. The corporate books, except as may otherwise be
--------------------------
provided by the laws of the State of Oklahoma, may be kept within or without the
State of Oklahoma, at such place or places as the Board of Directors may from
time to time determine.
Section 5. Checks and Notes. All checks and drafts on the corporation's
---------------------------
bank accounts and all bills of exchange or promissory notes, and all
acceptances, obligations and other instruments for the payment of money, shall
be signed by such officer or officers or agent or agents as shall be authorized
from time to time by the Board of Directors.
Section 6. Indemnification of officers and Directors. Each director and
----------------------------------------------------
each officer of the corporation former director or officer, or any person who
may have served at its request as a director or officer of another corporation
in which it owns shares of captial stock, or of which it is a creditor, shall be
indemnified by the corporation against all costs and expenses of liability
thereof, including counsel fees reasonably incurred by or imposed upon him in
connection with or resulting from any action, suit or proceeding to which he may
be made a party by reason of his being or having been a director or officer of
the corporation (whether he continues to be a director or officer at the time of
incurring such costs or expenses), except in relation to matters as to which he
shall have been finally adjudged in such action, suit or proceeding, to be
liable to the corporation for negligence or
16
<PAGE>
misconduct in the performance of his duty as such director or officer. The
foregoing right of indemnification shall not be exclusive of other rights to
which any director or officer may be entitled as a matter of law or otherwise.
Section 7. Transactions with Directors. A director of the corporation shall
--------------------------------------
not, in the absence of fraud, be disqualified by his office from dealing or
contracting with the corporation either as a vendor, purchaser or otherwise, nor
in the absence of fraud shall any transaction or contract of the corporation be
void or voidable by reason of the fact that any director or any firm of which
any director is a shareholder or director is in any way interested in such
transaction or contract, provided that such transaction or contract is or shall
be authorized, ratified or approved either
(a) by vote of a majority of a quorum of the Board of Directors or of
the Executive Committee without counting in such majority or quorum any director
so interested or a member of a firm so interested or a shareholder or a director
of a corporation so interested, or
(b) by vote at a stockholders' meeting of the holders of record of a
majority of all the outstanding shares of stock of the corporation, or by
writing or writings signed by a majority of such holders; nor shall any director
be liable to account to the corporation for any profit realized by him from or
through any such transaction or contract of the corporation ratified or approved
as aforesaid by reason of the fact that he or any firm of which he is
17
<PAGE>
a member or any corporation of which he is a shareholder or director was
interested in such transaction or contract. Nothing herein contained shall
create any liability in the events above described or prevent the authorization,
ratification or approval of such contracts or transactions in any other manner
permitted by law.
Section 8. Amendment. The Bylaws, regardless of whether made by the
--------------------
shareholders or by the Board of Directors, may be amended, altered or repealed
at any meeting of the shareholders or Board of Directors; provided, no such
action shall be taken at a meeting of the shareholders unless notice of the
proposed change is given in the notice of the meeting. However, the Board shall
not adopt or alter any bylaw fixing their number, qualifications,
classifications or term of office.
* * * * * *
18
<PAGE>
CERTIFICATE OF BYLAWS
---------------------
The undersigned, being all of the Directors and the Secretary of E.D.C.,
INC., certify that the foregoing Bylaws are the true and correct Bylaws of this
Company, duly adopted at the organization meeting of the incorporators and
subscribers to stock of the corporation.
Dated May 4, 1983.
__________________________________
Richard F. Bagwell
__________________________________
John Garrison
__________________________________
Leo S. Hilinski
__________________________________
Ronald S. Harwood
_________________________
John Garrison, Secretary
<PAGE>
AMENDMENT TO BY-LAWS
--------------------
The undersigned, Secretary of the Corporation, does hereby certify that the
shareholders at a special meeting of the shareholders of the Corporation, held
on September 9, 1983, unanimously amended Section 1, Number and Term of Office,
-------------------------
of ARTICLE II, Board of Directors, of the By-Laws of the Corporation to read as
------------------
follows:
"Section 1. Number and Term of Office. The business and the property of
-------------------------
the corporation shall be managed and controlled by a Board of Directors,
which will determine all questions of policy and supervise the business and
affairs of the corporation. The Board shall consist of not less than three
nor more than eleven directors. Directors shall be elected annually at the
annual meeting of the shareholders, and in the election of directors the
vote of shareholders representing a majority of the outstanding stock
entitled to vote for directors shall be necessary to elect a director.
Directors shall hold office until the annual meeting of shareholders next
ensuing after their election and until their respective successors are
elected and qualified."
___________________________________
John Garrison, Secretary
(Seal)
<PAGE>
AMENDMENT TO BY-LAWS
OF
EL DORADO CHEMICAL COMPANY
The undersigned, Assistant Secretary of El Dorado Chemical Company, does
hereby certify that the sole shareholder, LSB Chemical Corp., at a special
meeting of the shareholders of the Corporation, held on November 29, 1984,
unanimously amended Section 1, Number and Term of Office, of ARTICLE II, Board
------------------------- -----
of Directors, of the By-Laws of the Corporation to read as follows:
- ------------
"Section 1. Number and Term of Office. The business and the property of
-------------------------
the corporation shall be managed and controlled by a Board of Directors,
which will determine all questions of policy and supervise the business and
affairs of the corporation. The Board shall consist of not less than three
nor more than thirteen directors. Directors shall be elected annually at
the annual meeting of the shareholder, and in the election of directors the
vote of shareholders representing a majority of the outstanding stock
entitled to vote for directors shall be necessary to elect a director.
Directors shall hold office until the annual meeting of shareholders next
ensuing after their election and until their respective successors are
elected and qualified."
_______________________________
Irwin H. Steinhorn
Assistant Secretary
<PAGE>
EXHIBIT 3.15
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned, Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office, of which it purports to be a copy, and that the same is a full, true
and correct copy of:
ARTICLES OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
(FORMERLY: INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.)
(FORMERLY: INTERNATIONAL ENVIRONMENTAL CORPORATION)
(FORMERLY: INTERNATIONAL AIR CONDITIONING CORPORATION)
In testimony whereof, I have hereunto set my hand and
affixed the Great Seal of the State of Oklahoma at the
City of Oklahoma City this 14/th/ day, of November ,
1997.
____________________________________________
Secretary of State
By: ________________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL AIR CONDITIONING CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State on the 29/th/ day of
December A.D., 1965, as provided by the Laws of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Done at the City of Oklahoma City, this 29/th/ day
of December , A.D. 1965.
____________________________________________________
Secretary of State
By:________________________________________________
Assistant Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
-------------------------
OF
--
INTERNATIONAL AIR CONDITIONING CORPORATION
------------------------------------------
TO THE SECRETARY OF STATE
STATE OF OKLAHOMA:
We, the undersigned incorporators, whose names and addresses are shown
below, being persons legally competent to enter into contracts, for the purpose
of forming a corporation under "The Business Corporation Act" of the State of
Oklahoma, do hereby adopt the following Articles of Incorporation:
1. The name of this Corporation is:
International Air Conditioning Corporation
2. The address of its registered office in the State of Oklahoma is 1800
United Founders Tower, Oklahoma City, County of Oklahoma, and the name of its
registered agent is John C. Andrews, 1800 United Founders Tower, Oklahoma City,
Oklahoma.
3. The duration of the Corporation is fifty (50) years.
4. The objects and purposes for which the Co is formed are:
(a) To carry on the business of distributors, wholesalers or agents, to
buy, sell and deal in, at wholesale or retail, merchandise, goods, wares and
commodities of every sort, kind, or description, and to carry on any other
business, whether manufacturing or otherwise, which can be conveniently carried
on with any of the objects of this Corporation.
(b) To engage in the transportation of property by motor vehicle; to
engage in the general transportation and communication
<PAGE>
business and to buy, sell, lease, own or operate other motor carriers,
broadcasting stations and facilities; to buy, sell, lease, own or operate
terminals and warehouses and engage in warehousing business; to buy, sell, deal
and engage in the sale of motor vehicles and parts.
(c) To make and purchase materials for the construction of buildings; to
erect buildings; to own, manage, operate, lease and sell buildings; to conduct
and carry on the business of builders for the purpose of building, repairing or
doing any other work in connection with any and all classes of buildings and
improvements, including the locating, laying out and construction of roads,
avenues, sewers, bridges, wells and generally all classes of buildings,
erections and works, both public and private, or integral parts thereof.
(d) To purchase, take, own, hold, deal in, mortgage or otherwise encumber
and to lease, sell, exchange, convey, transfer or in any manner whatever dispose
of real property; to acquire lands for the purpose of prospecting for and
obtaining oil, gas and other minerals; to drill oil wells, and to acquire
drilling rigs or other machinery necessary to such purposes; and to produce and
market oil or other minerals.
(e) To enter into partnership or other arrangement for sharing profits or
cooperate with any entity carrying on any business capable of being conducted so
as to benefit this Corporation; to acquire the assets and assume the liabilities
of any entity; to pay for the same in cash, stock or otherwise; to
2
<PAGE>
hold or dispose of the property so purchased; and to conduct any business so
acquired.
(f) To borrow and lend money and to negotiate loans; to draw, accept and
endorse notes, accounts receivable, bonds, stocks, debentures and other
securities; to subscribe for, acquire, hold and dispose of shares of stock,
bonds, accounts, and other securities of any government, person or corporation.
(g) To purchase or otherwise acquire, apply for, register, hold, use,
assign, sell or in any manner dispose of and to grant licenses, franchises, or
other rights in, and in any manner deal with, patents, inventions, improvements,
processes, formulas, trademarks trade names, copyrights or otherwise.
(h) To have one or more offices and to conduct any or all of its operations
and business and to promote its objects within or without the State of Oklahoma,
without restriction as to place or amount.
(i) To do any or all of the things herein set forth as principal, agent,
contractor, trustee or otherwise, alone or jointly with natural persons or any
legal entity.
(j) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall be
in no way limited nor restricted by reference to or inference from the terms of
any other clause or paragraph of these Articles of Incorporation.
The foregoing shall be construed both as objects and powers and the
enumeration thereof shall not be held to limit or restrict
3
<PAGE>
in any manner the general powers conferred on this Corporation by the laws of
the State of Oklahoma.
5. All of the shares to be issued by the Corporation shall be of one
class, that is, Voting Common Stock, of a par value of $10.00 per share. The
aggregate number of shares which the Corporation shall have the authority to
allot is 300.
6. The amount of stated capital with which this Corporation will begin
business is Five Hundred ($500.00) Dollars, which has been fully paid in.
7. The number of shares to be allotted by this Corporation before it
begins business, and the consideration received by the Corporation therefor,
are:
Number of Consideration
Shares Received
------ --------
50 $500.00
8. The number of directors of this Corporation shall be as specified in
the By-Laws, and such number may from time to time be increased or decreased
under the By-Laws or any amendment, or change thereof, provided the number of
directors of the Corporation shall not be less than three. The number of
directors to be elected at the first meeting of the shareholders is three.
Directors and officers need not be shareholders. In case of vacancies in the
Board of Directors, a majority of the remaining members of the Board, even
though less than a quorum, may elect directors to fill such vacancies to hold
office until the next annual meeting of the shareholders.
4
<PAGE>
9. No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected by the fact that any of the directors
of the Corporation are pecuniarily or otherwise interested in, or are directors
or officers of, such other corporation; any director individually, or any firm
of which such director may be a member, may be a party to, or may be pecuniarily
or otherwise interested in, any contract or transaction of the Corporation,
provided that the fact that he or such firm is so interested shall be disclosed
or shall have been known to the Board of Directors, or a majority thereof; and
any director of the Corporation who is also a director or officer of such other
corporation, or who is so interested, maybe counted in determining the existence
of a quorum at any meeting of the Board of Directors of the Corporation which
shall authorize such contract or transaction, and may vote thereat to authorize
such contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
10. In furtherance and not in limitation of the powers conferred by the
laws of the State of Oklahoma, the Board of Directors of this Corporation is
expressly authorized:
To make, alter, amend, add to, revise, or repeal the By-Laws in any manner
not contrary to the laws of the State of Oklahoma;
5
<PAGE>
To authorize and cause its officers to execute mortgages and liens upon the
property, both rea1 and personal, and upon the franchises of this Corporation;
To designate, by resolution passed by a majority of the whole Board, one or
more committees, each to consist of one or more directors, which committees, to
the extent provided in such resolution or in the By-Laws of the Corporation,
shall have and may exercise any or all of the powers of the Board of Directors
in the management of the business and affairs of this Corporation and shall have
power to authorize the seal of this Corporation to be affixed by its officers to
all papers which may require it;
A majority of the stock issued and outstanding of this Corporation having
voting power may in the By-Laws confer power additional to the foregoing upon
the directors, in addition to the powers and authorities expressly conferred
upon them by law.
11. No shareholder of this Corporation shall have any pre-emptive or
preferential right of subscription to any shares of stock of this Corporation,
whether now or hereafter authorized, or to any obligations convertible into
stock of this Corporation, authorized, issued or sold.
Signed at Oklahoma City, Oklahoma, this 29th day of December, 1965.
_______________________________ ___________________________________
Julian P. Kornfeld Larry D. Hartzog
1800 United Founders Tower 1800 United Founders Tower
Oklahoma City, Oklahoma Oklahoma City, Oklahoma
6
<PAGE>
__________________________
Theodore M. Elam
1800 United Founders Tower
Oklahoma City, Oklahoma
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared the above named incorporators, to me known to be the
identical persons who executed the foregoing Articles of Incorporation, and
acknowledged to me that they executed the same as their free and voluntary act
and deed for the uses and purposes therein set forth, on this 29th day of
December, 1965.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
above written.
____________________________________________
Notary Public
(Seal)
My commission expires: July 24, 1967
--------------------------------------------
7
<PAGE>
AFFIDAVIT AS TO PAID IN CAPITAL
-------------------------------
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The undersigned, of lawful age, being first duly sworn each for himself,
deposes and says:
That they are the incorporators of the above named proposed Corporation,
and that the amount of stated capital with which said Corporation will begin
business, as set out in its attached Articles of Incorporation, has been fully
paid in.
___________________________________________
Julian P. Kornfeld
___________________________________________
Larry D. Hartzog
____________________________________________
Theodore M. Elam
Subscribed and sworn to before me this 29/th/ day of December, 1965.
____________________________________________
Notary Public
(Seal)
My commission expires: July 24, 1967.
8
<PAGE>
ARTICLES OF INCORPORATION
OF
INTERNATIONAL AIR CONDITIONING CORPORATION
------------------------------------------
OKLAHOMA CITY, OKLAHOMA
FILED
DECEMBER 29, 1965
JAMES M. BULLARD
Secretary of State
FEES: $ 3.00 Charter
---------------
_______________ Rec. & Filing
8.00
--------------- Misc.
_______________ Cert. Copy
_______________ Seal
$ $11.00
DEL. TO: Mosteller, Andrews & Mosburg, Attys
1800 United Founders Tower
Oklahoma City, Oklahoma
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
AMENDED - INCREASE
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL AIR CONDITIONING CORPORATION
- -------------------------------------------------------------------------------
have been filed in the office of the Secretary of State on the 6/th/ day of
March A.D., 1967, as provided by the Laws of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Done at the City of Oklahoma City, this 6/th/ day of
March , A.D. 1967.
_______________________________________________________
Secretary of State
By: __________________________________________________
Assistant Secretary of State
<PAGE>
FIRST AMENDMENT TO
ARTICLES OF INCORPORATION OF
INTERNATIONAL AIR CONDITIONING CORPORATION
______________
We, the undersigned, do hereby certify that we hold the offices of
President and Secretary, respectively, of International Air Conditioning
Corporation, an Oklahoma corporation; that we are the persons legally competent
to sign, acknowledge and execute an amendment to its Articles of Incorporation,
pursuant to the provisions of The Business Corporation Act of the State of
Oklahoma, and we do hereby affirm that the following amendment was adopted in
the manner prescribed in said Act at a meeting of the shareholders held December
31, 1966.
Such amendment amends Paragraph 5 as follows:
"5. The aggregate number of shares which the Corporation shall have
authority to issue and the classes thereof are as follows:
300 shares of Voting Common shares, each of the par value of $10.00; and
2,000 shares of Preferred shares, each of the par value of $100.00.
The preferences, qualifications, limitations, restrictions and the special
or relative rights of the shares of stock of this Corporation are as
follows:
(a) All voting rights shall be vested exclusively in the holders of the
issued and outstanding Voting Common shares, the right to increase or
decrease the authorized shares of any class or classes, together with the
right to vote on the sale of all or of substantially all of the assets of
this Corporation, together with all other voting rights, being specifically
reserved to the holders of the issued and outstanding Voting Common shares.
(b) The holder of the issued and outstanding Preferred shares shall have
and possess no voting rights whatsoever, except as may be otherwise
provided by law.
<PAGE>
(c) Before any dividend shall be set aside and paid upon the Voting Common
shares, the holders of the shares of Preferred capital stock shall be and
are entitled to receive dividends on the par value of such shares at the
rate of 6% per annum, which shall be cumulative.
(d) All or any part of the Preferred shares may be redeemed at any time by
the directors upon thirty (30) days notice to the holders thereof and the
payment of $100.00 for each of such shares to be redeemed. The directors
may, in their sole discretion, determine which of the Preferred shares
shall be so redeemed without regard to the identity of the holder or
holders, and shall not be required to prorate such redemption.
(e) In the event of a voluntary or involuntary winding up or distribution
or liquidation or partial liquidation of this Corporation, the holders of
the Preferred shares shall be entitled to be paid $100.00 plus accumulated
dividends, for each of their Preferred shares before any amount shall be
paid to the holders of the Voting Common shares, but the holders of the
Preferred shares shall not participate in any further distribution of the
assets of the Corporation."
We do further certify that no other provision of the Articles of
Incorporation has been amended and that the Articles of Incorporation as filed
with the Secretary of State of the State of Oklahoma, on December 29, 1965,
remain in full force and effect.
Signed at Oklahoma City, Oklahoma, this 31st day of December, 1966.
INTERNATIONAL AIR CONDITIONING
CORPORATION
(Seal)
By ______________________________________
Attest: Al Braver, President
__________________________
John C. Andrews, Secretary
2
<PAGE>
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
On this 31st day of December, 1966, before me, the undersigned, a Notary
Public in and for the County and State aforesaid, personally appeared Al Braver
to me known to be the identical person who signed the name of the maker thereof
to the within and foregoing instrumentas its President and acknowledged to me
that he executed the same as his free and voluntary act and deed, and as the
free and voluntary act and deed of said Corporation, for the uses and purposes
therein set forth.
Given under my hand and seal the day and year last above written.
_______________________________________
Notary Public
(Seal)
My commission expires:_______________________
3
<PAGE>
AMENDED - INCREASE
ARTICLES OF INCORPORATION
OF
INTERNATIONAL AIR CONDITIONING CORPORATION
------------------------------------------
OKLAHOMA CITY, OKLAHOMA
FILED
MARCH 6, 1967
JOHN ROGERS
Secretary of State
FEES: $ 200.00
------------ Charter
____________ Rec. & Filing
8.00
------------ Misc.
____________ Cert. Copy
____________ Seal
$ 208.00
DEL. TO: MOSTELLER, ANDREWS & MOSBURG
18/TH/ FLOOR - UNITED FOUNDERS TOWER
OKLAHOMA CITY, OKLAHOMA
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
AMENDED
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL ENVIRONMENTAL CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State on the 17/th/ day of
June A.D., 1971, as provided by the Laws of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Done at the City of Oklahoma City, this 17/th/ day of
June , A.D. 1971.
_______________________________________________________
Secretary of State
By: ___________________________________________________
<PAGE>
SECOND AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
INTERNATIONAL AIR CONDITIONING CORPORATION
___________________
We, the undersigned, do hereby certify that we hold the offices of
President and Secretary, respectively, of International Air Conditioning
Corporation, an Oklahoma corporation; that we are the persons legally competent
to sign and acknowledge and execute an Amendment to its Articles of
Incorporation, pursuant to the provisions of the Business Corporations Act of
the State of Oklahoma, and we do hereby affirm that the following amendment was
adopted in a manner prescribed in said Act at the Special Meeting of the
Shareholders on June 2, 1971.
Article I of the Articles of Incorporation is amended as follows:
1. The name of the corporation shall hereinafter be:
INTERNATIONAL ENVIRONMENTAL CORPORATION
We do further certify that no other provision of the Articles of
Incorporation has been amended with the exception of the First Amendment filed
on March 6, 1967, and that the Articles of Incorporation, as filed with the
Secretary of State of the State of Oklahoma on the 29th day of December, 1965,
subject to this amendment and the First Amendment, remain in full force and
effect.
<PAGE>
Signed at Oklahoma City, Oklahoma, this 17 day of June, 1971.
INTERNATIONAL AIR CONDITIONING CORPORATION
By:______________________________________
Al Braver, President
ATTEST:
By: ________________________
David R. Goss, Secretary
STATE OF OKLAHOMA )
)
COUNTY OF OKLAHOMA )
Before me, the undersigned Notary Public in and for said County and State,
on this 17 day of June, 1971, personally appeared Al Braver to me known to be
the identical person who subscribed the name of International Air Conditioning
Corporation to the foregoing instrument as its President and acknowledged to me
that he executed the same as his free and voluntary act and deed and as the free
and voluntary act and deed of such corporation, for the uses and purposes
therein set forth.
Given under my hand and seal of office this 17 day of June, 1971.
_________________________________
Notary Public, Berniece Hull
My Commission Expires: July 26, 1973
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2101 Lincoln Blvd.
Oklahoma City, Oklahoma 73105
CLARENCE L. DeWEES, Chairman
L. L. LEININGER, Vice-Chairman
M. C. CONNORS, Sec'y-Member Franchise Tax Division
File No. 2-
June 17, 1971
Mr. John Rogers
Secretary of State
211 State Capitol Building
Oklahoma City, Oklahoma
Re: International Air Conditioning
Dear Sir:
This is to advise the files of this office show the above named corporation
has filed franchise tax returns for prior years, and all franchise taxes have
been paid, and such corporation holds a license for the current fiscal year
ending June 30, 1971.
OKLAHOMA TAX COMMISSION
By
J. Boyd Nay, Director
Franchise Tax Division
JBN:kb
<PAGE>
FORM NO. 5 FILE IN DUPLICATE FEE: $3.00
STATEMENT OF CHANGE OF REGISTERED OFFICE AND/OR AGENT
STATE OF OKLAHOMA )
--------
) SS
COUNTY OF OKLAHOMA )
--------
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned corporation, organized and existing under the laws of the
State of Oklahoma, for the purpose of changing its registered agent or its
--------
registered office, or both, in Oklahoma, as provided by the "Business
Corporation Act" of Oklahoma, represents that:
1. The name of the corporation is: International Air Conditioning
--------------------------------------
Corporation
----------------------------------------------------------------------
2. The present registered office (including Street and number) is: 1800
----
United Founders Tower, Oklahoma City, Oklahoma
----------------------------------------------------------------------
3. The registered office (POST OFFICE BOX NOT ACCEPTABLE) is changed to:
16 South Pennsylvania, Oklahoma City, Oklahoma
----------------------------------------------------------------------
4. The name and address of its present registered agent is: John C.
-------
Andrews
-------
5. The name and address (if Domestic Corporation must be identical to
registered office) of its new registered agent is: Irwin H.
------------------
Steinhorn, 16 South Pennsylvania, Oklahoma City, Oklahoma
----------------------------------------------------------------------
6. Such change was authorized by resolution duly adopted by the Board of
Directors.
IN WITNESS WHEREOF, the undersigned corporation has caused this statement
to be executed in its name by its ______ President, attested by its _______
Secretary, this 17th day of June, 1971.
International Air Conditioning Corporation
------------------------------------------
(CORPORATE SEAL) (Exact Corporate Name)
By_____________________________________________________
Its President
ATTEST:
__________________________
Its Secretary
<PAGE>
STATE OF OKLAHOMA )
--------
) SS
COUNTY OF OKLAHOMA )
--------
Before me, a Notary Public in and for said County and State, on this 14th
day of June, 1971, personally appeared Al Braver to me known to be the identical
person who subscribed the name of the maker thereof to the foregoing Statement,
as its _____ President, and acknowledged to me that he executed the same as his
free and voluntary act and deed, and as the free and voluntary act and deed of
such corporation, for the uses and purposes therein set forth.
___________________________________
NOTARY PUBLIC Berniece Hull
(NOTARIAL SEAL)
My Commission expires July 26, 1973
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
AMENDED
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
---------------------------------------------
have been filed in the office of the Secretary of State on the 30th day of July
A.D., 1971, as provided by the Laws of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Done at the City of Oklahoma City, this
30th day of July , A.D. 1971.
________________________________________
Secretary of State
By:_____________________________________
<PAGE>
THIRD AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
_____________________
We, the undersigned, do hereby certify that we hold the offices of
President and Secretary, respectively, of International Environmental
Corporation, an Oklahoma corporation; that we are the persons legally competent
to sign and acknowledge and execute an amendment to its Articles of
Incorporation, pursuant to the provisions of the Business Corporations Act of
the State of Oklahoma, and we do hereby affirm that the following amendment was
adopted in a manner prescribed in said Act at the Special Meeting of the
Shareholders on July 27, 1971.
Article 1 of the Articles of Incorporation is amended as follows:
1. The name of the corporation shall hereinafter be:
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
We do further certify that no other provision of the Articles of
Incorporation has been amended with the exception of the First Amendment filed
on March 6, 1967 and Second Amendment filed on June 17, 1971, and that the
Articles of Incorporation, as filed with the Secretary of State of the State of
Oklahoma on the 29th day of December, 1965, subject to this amendment and the
first and second amendments, remain in full force and effect.
<PAGE>
Signed at Oklahoma City, Oklahoma, this 27th day of July, 1971.
INTERNATIONAL ENVIRONMENTAL CORPORATION
By:______________________________________________
Al Braver, President
ATTEST:
By:__________________________
David R. Goss, Secretary
STATE OF OKLAHOMA )
)
COUNTY OF OKLAHOMA )
Before me, the undersigned Notary Public in and for said County and State,
on this 27th day of July, 1971, personally appeared Al Braver to me known to be
the identical person who subscribed the name of International Environmental
Corporation to the foregoing instrument as its President and acknowledged to me
that he executed the same as his free and voluntary act and deed and as the free
and voluntary act and deed of such corporation, for the uses and purposes
therein set forth.
Given under my hand and seal of office this 27th day of July, 1971.
_______________________________
Notary Public, Berniece Hull
My Commission Expires: July 27, 1973
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2101 Lincoln Blvd.
Oklahoma City, Oklahoma 73105
CLARENCE L. DeWEES, Chairman
L. L. LEININGER, Vice-Chairman
M. C. CONNORS, Sec'y-Member Franchise Tax Division
File No. 2-
June 30, 1971
Mr. John Rogers
Secretary of State
211 State Capitol Building
Oklahoma City, Oklahoma
Re: International Environment Corporation
Dear Sir:
This is to advise the files of this office show the above named corporation
has filed franchise tax returns for prior years, and all franchise taxes have
been paid, and such corporation holds a license for the current fiscal year
ending June 30, 1972.
OKLAHOMA TAX COMMISSION
By
J. Boyd Nay, Director
Franchise Tax Division
JBN:kb
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
MERGER
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL ENVIRONMENTAL CORPORATION
-----------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City,
this 3rd day of January , A.D. 1979.
________________________________________
Secretary of State
By:_____________________________________
<PAGE>
ARTICLES OF MERGER
(INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
INTERNATIONAL ENVIRONMENTAL CORPORATION)
_______________________
A Plan of Merger having been approved in accordance with the provisions of
the laws of the State of Oklahoma, by which the constituent corporations,
International Environmental Manufacturing Co., an Oklahoma corporation, and
International Environmental Corporation, an Oklahoma corporation, is merged into
International Environmental Manufacturing Co., as the surviving corporation,
effective as of the close of business on December 31, 1978, these Articles of
Merger are hereby executed for and on behalf of International Environmental
Manufacturing Co., the surviving corporation, under its corporate seal, signed
and acknowledged by its President and attested by its Secretary.
1. The Articles of Incorporation of International Environmental Manufacturing
Co., the surviving corporation, are not amended by the terms of the Plan of
Merger adopted by the above corporations, and remain as filed, except that
the name of International Environmental Manufacturing Co. is hereby changed
to International Environmental Corporation.
2. International Environmental Manufacturing Co.
---------------------------------------------
(a) International Environmental Manufacturing Co. is a constituent
corporation and is the surviving corporation.
(b) It was incorporated under the laws of the State of Oklahoma on
December 29, 1965.
(c) It is an Oklahoma domestic corporation.
<PAGE>
(d) The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, Oklahoma.
(e) On the 30th day of December, 1978, at an especially called meeting of
the board of directors, a resolution was adopted setting out a Plan of
Merger, a copy of which is attached as Exhibit "A". A copy of said
resolution, certified to by the Secretary of said Corporation, is
hereby attached as Exhibit "B".
(f) A copy of the resolution adopted by the Board of Directors on December
30, 1978, directing the submission of the Plan of Merger to the
shareholders at a special meeting called for December 30, 1978, and a
certificate of the Secretary that such resolution and Plan of Merger
was approved by the shareholders at such meeting, is attached as
Exhibit "C".
(g) Copies of the waivers of notice of the directors and shareholders
meetings are attached as Exhibit "D" and Exhibit "E".
(h) It has an authorized capital stock of$203,000.00 divided into 300
shares of voting common stock, of a par value of $10 per share all of
which are issued and outstanding, and 2,000 preferred @ $100.00 per
share.
(i) At an especially called meeting of the shareholders on December 31,
1978, the Plan of Merger was adopted with all shares of voting common
stock counted as voting for adoption of the merger.
<PAGE>
(j) Its officers and directors and their addresses are:
DIRECTORS
---------
Jack L. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma
Al Braver 5000 S.W. 7th Street
Oklahoma City, Oklahoma
Lew Alberico 5000 S.W. 7th Street
Oklahoma City, Oklahoma
OFFICERS
--------
Jack E. Golsen Chief Executive 16 S. Pennsylvania
Officer Oklahoma City, OK
Al Braver President 5000 S.W. 7th Street
Oklahoma City, OK
Lew Alberico Vice President 5000 S.W. 7th Street
Oklahoma City, OK
David R. Goss Vice President 16 South Pennsylvania
and Secretary- Oklahoma City, OK
Treasurer
Irwin H. Steinhorn Assistant 16 South Pennsylvania
Secretary- Oklahoma City, OK
Treasurer
3. International Environmental Corporation
---------------------------------------
(a) International Environmental Corporation is a constituent corporation.
(b) It was incorporated under the laws of the State of Oklahoma on July
30, 1971.
(c) It is an Oklahoma domestic corporation.
(d) The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, Oklahoma.
<PAGE>
(e) On the 30th day of December, 1978, at an especially called meeting of
the board of directors, a resolution was adopted setting out a Plan of
Merger, a copy of said resolution, certified to by the Secretary of
said corporation is hereto attached as Exhibit "B-1".
(f) A copy of the resolution adopted by the Board of Directors on December
30, 1978, directing the submission of the Plan of Merger to the
shareholders at a special meeting called for December 30, 1978, and of
the certificate of the Secretary that such resolution and Plan of
Merger was approved by the shareholders at such meeting, is attached
as Exhibit "C-l".
(g) Copies of the waivers of notice of the directors and shareholders
meetings are attached as Exhibit "D-l" and Exhibit "E-l".
(h) It has an authorized capital stock of $500 divided into 50 shares of
voting common stock, of a par value of $500 per share, 50 shares of
which are issued and outstanding.
(i) At an especially called meeting of the shareholders on December 30,
1978, the Plan of Merger was adopted with all shares of voting common
stock counted as voting for the adoption of the merger.
(j) Its officers and directors and their addresses are:
<PAGE>
DIRECTORS
---------
Jack L. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma
Al Braver 5000 S.W. 7th Street
Oklahoma City, Oklahoma
OFFICERS
--------
Al Braver President 5000 S.W. 7th Street
Oklahoma City, OK
David R. Goss Vice President 16 South Pennsylvania
and Secretary- Oklahoma City, OK
Treasurer
Steve Jennings Vice President 5000 S.W. 7th Street
Oklahoma City, OK
Irwin H. Steinhorn Secretary 16 South Pennsylvania
Oklahoma City, OK
IN WITNESS WHEREOF, we have hereunto set the hand and seal of
the surviving corporation this 30th day of December, 1978.
INTERNATIONAL ENVIRONMENTAL
MANUFACTURING CO.
______________________________
Al Braver, President
ATTEST:
_____________________________
David R. Goss, Secretary
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
On this 30th day of December, 1978, before me, appeared Al Braver, to me
personally known, who, being by me duly sworn, did say that he is President of
the above corporation, and that the seal affixed to said instrument is the
corporate seal of said
<PAGE>
corporation and that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and that he acknowledged
said instrument to be the free act and deed of said corporation.
Given under my hand this 30th day of December, 1978.
________________________________________
Notary Public
My Commission Expires:
_____________________
<PAGE>
PLAN OF MERGER
--------------
(INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
INTERNATIONAL ENVIRONMENTAL CORPORATION)
__________________________
This Plan of Merger, made and entered into this 30th day of December, 1978,
by and between International Environmental Manufacturing Co., an Oklahoma
corporation, and International Environmental Corporation, an Oklahoma
corporation;
WITNESSETH:
----------
In consideration of the mutual covenants and conditions hereinafter set
forth, said corporations hereby agree to merge into a single corporation upon
the following terms:
1. The surviving corporation shall be:
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
2. The merger shall be effective as of the close of business on December
31, 1978.
3. The Articles of Incorporation of the surviving corporation, including
its capital structure, shall not be amended by the merger, except that
Article 1 of The Articles of Incorporation of the surviving
corporation shall be amended by the merger as follows:
"(a) The name of the corporation shall hereinafter be:
INTERNATIONAL ENVIRONMENTAL CORPORATION"
<PAGE>
Signed at Oklahoma City, Oklahoma, this 30th day of December, 1978.
ATTEST: INTERNATIONAL ENVIRONMENTAL
MANUFACTURING CO.
________________________________ By_______________________________________
David R. Goss Al Braver
Secretary President
ATTEST: INTERNATIONAL ENVIRONMENTAL
CORPORATION
________________________________ By_______________________________________
Irwin H. Steinhorn Al Braver
Secretary President
<PAGE>
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
RESOLUTION OF BOARD OF DIRECTORS
December 30, 1978
____________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date in accordance with the
Bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolution, including the said extract, was duly adopted by the
unanimous vote of the directors present:
RESOLVED, That the Plan of Merger, which is effective as of
the close of business on December 31, 1978, of International
Environmental Manufacturing Co. and International
Environmental Corporation, with International Environmental
Manufacturing Co. as the survivor, dated December 30, 1978,
as submitted to and examined by the directors, a copy of
which is attached hereto, be and it hereby is authorized and
approved, and the officers of this Corporation are directed
to execute the Plan of Merger on behalf of this Corporation,
to submit such Plan for approval by the shareholders of this
Corporation, and to take such further action and to execute
such further instruments as may be necessary to consummate
the merger as set forth therein.
The undersigned does further certify that the said resolution has not been
changed or modified, is still in full force and effect, and does not in any way
conflict with the Bylaws or Articles of Incorporation of this Corporation.
<PAGE>
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation on the date shown
above.
________________________________________
David R. Goss, Secretary
Subscribed and sworn to before me this 30th day of December,
1978.
________________________________________
Notary Public
My Commission Expires:
____________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL CORPORATION
RESOLUTION OF BOARD OF DIRECTORS
December 30, 1978
__________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date in accordance with the
Bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolution, including the said extract, was duly adopted by the
unanimous vote of the directors present:
RESOLVED, That the Plan of Merger of International
Environmental Manufacturing Co., and International
Environmental Corporation, with International Environmental
Manufacturing Co. as the survivor, dated December 30, 1978,
as submitted to and examined by the directors, a copy of
which is attached hereto, be and it hereby is authorized and
approved, and the officers of this Corporation are directed
to execute the Plan of Merger on behalf of this Corporation,
and to take such further action and to execute such further
instruments as may be necessary to consummate the merger as
set forth therein.
The undersigned does further certify that the said resolution nas not been
changed or modified, is still in full force and effect, and does not in any way
conflict with the Bylaws or Articles of Incorporation of this Corporation.
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation on the date shown above.
________________________________________
David R. Goss, Secretary
<PAGE>
Subscribed and sworn to before me this 30th day of December,
1978.
________________________________________
Notary Public
My Commission Expires:
____________________
EXHIBIT "B-1"
<PAGE>
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
RESOLUTION OF BOARD OF DIRECTORS
December 31, 1978
__________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date, in accordance with the
Bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolutions, including the said extract, were duly adopted by the
unanimous vote of the directors present:
RESOLVED, That the Plan of Merger, having been approved by
the respective Board of Directors of the constituent
corporations, shall be submitted to the annual meeting of
the shareholders on December 31, 1978; and,
FURTHER RESOLVED, That written notice of such meeting be
given to each holder of outstanding shares of this
Corporation of all classes, setting forth that one of the
purposes of such meeting is to consider the proposed merger
naming the constituent corporations and given the domicile
and containing a summary of the Plan of Merger, unless
notice of time, place and purposes of such meeting be waived
by all the shareholders.
The undersigned does further certify that the foregoing resolutions of the
directors were presented to and approved by the shareholders on December 31,
1978, at a meeting duly called and held pursuant to written waiver of the time,
place and purposes of such meeting signed by all the shareholders.
<PAGE>
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation this 31st day of December, 1978.
________________________________________
David R. Goss, Secretary
Subscribed and sworn to before me this 31st day of December, 1978.
________________________________________
Notary Public
My Commission Expires:
____________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
RESOLUTION OF BOARD OF DIRECTORS
December 31, 1978
_________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date, in accordance with the
Bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolutions, including the said extract, were duly adopted by the
unanimous vote of the directors present:
RESOLVED, That the Plan of Merger, having been approved by the
respective Board of Directors of the constituent corporations,
shall be submitted to the annual meeting of the shareholders on
December 31, 1978; and,
FURTHER RESOLVED, That written notice of such meeting be given to
each holder of outstanding shares of this Corporation of all
classes, setting forth that one of the purposes of such meeting
is to consider the proposed merger naming the constituent
corporations and given the domicile and containing a summary of
the Plan of Merger, unless notice of time, place and purposes of
such meeting be waived by all the shareholders.
The undersigned does further certify that the foregoing resolutions of the
directors were presented to and approved by the shareholders on December 31,
1978, at a meeting duly called and held pursuant to written waiver of the time,
place and purposes of such meeting signed by all the shareholders.
<PAGE>
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation this 31st day of December, 1978.
___________________________________________
David R. Goss, Secretary
Subscribed and sworn to before me this 31st day of December, 1978.
___________________________________________
Notary Public
My Commission Expires:
_________________________
<PAGE>
WAIVER OF NOTICE OF A SPECIAL MEETING
OF THE DIRECTORS OF
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
December 30, 1978
_________________
The undersigned directors of-the above-named corporation, do hereby waive
notice of a special meeting of the directors of such Corporation to be held at
8:30 a.m., on December 30, 1978, at the offices of the Corporation in Oklahoma
City, Oklahoma, for the purpose of transacting such business as may come before
the meeting.
We waive all statutory and Bylaw requirements as to notice of the time,
place and purposes of such meeting and consent to the transaction of such
business as may come before it.
Signed this 30th day of December, 1978, at Oklahoma City, Oklahoma.
______________________________________
Jack E. Golsen
______________________________________
Al Braver
______________________________________
Lew Alberico
______________________________________
David R. Goss
______________________________________
Irwin H. Steinhorn
<PAGE>
WAIVER OF NOTICE OF A SPECIAL MEETING
OF THE DIRECTORS OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
December 30, 1978
_________________
The undersigned directors of the above-named corporation, do hereby waive
notice of a special meeting of the directors of such Corporation to be held at
2:30 p.m., on December 30, 1978, at the offices of the Corporation in Oklahoma
City, Oklahoma, for the purpose of transacting such business as may come before
the meeting.
We waive all statutory and Bylaw requirements as to notice of the time,
place and purposes of such meeting and consent to the transaction of such
business as may come before it.
Signed this 30th day of December, 1978, at Oklahoma City, Oklahoma.
_________________________________
Jack E. Golsen
_________________________________
David R. Goss
_________________________________
Al Braver
EXHIBIT "D-l"
<PAGE>
WAIVER OF NOTICE OF THE ANNUAL MEETING
OF THE SHAREHOLDERS OF
INTERNATIONAL ENVIRONMENTAL MANUFACTURING CO.
December 31, 1978
_________________
The undersigned sole shareholder of the above-named corporation, waives
notice of the annual meeting of the shareholders of such Corporation to be held
at 10:00 a.m., on December 31, 1978, in the offices of the Corporation in
Oklahoma City, Oklahoma, for the purpose of transacting such business as may
come before the meeting and to consider a merger with International
Environmental Corporation, an Oklahoma corporation, into and with the
Corporation.
The undersigned waives all statutory and Bylaw requirements as to notice of
the time, place and purpose of such meeting and consents to the transaction of
whatever business may come before it.
Dated this 31st day of December, 1978, at Oklahoma City, Oklahoma.
LSB INDUSTRIES, INC.
_______________________________________
David R. Goss, Vice President
EXHIBIT "E"
<PAGE>
WAIVER OF NOTICE OF A SPECIAL MEETING
OF THE SHAREHOLDERS OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
December 30, 1978
_________________
The undersigned sole shareholder of the above named corporation, waives
notice of a special meeting of the shareholders of such Corporation to be'held
at 3:00 p.m. on December 30, 1978, in the offices of the Corporation in Oklahoma
City, Oklahoma, for the purposes of considering a merger with International
Environmental Manufacturing Co., an Oklahoma corporations, and transacting such
other business as may come before the meeting.
The undersigned waived all statutory and bylaw requirements as to notice of
the time, place and purpose of such meeting and consents to the transaction of
whatever business may come before it.
Dated this 30th day of December, 1978, at Oklahoma City, Oklahoma.
INTERNATIONAL ENVIRONMENTAL
MANUFACTURING CO.
__________________________________
Al Braver, President
EXHIBIT "E-1"
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 73194
JAMES E. WALKER, Chairman
JOHN L. GARRETT, Vice-Chairman
J. L. MERRILL, Sec'y-Member FRANCHISE TAX DIVISION
December 20, 1978
Mr. Jerome W. Byrd
Secretary of State
101 State Capitol Building
Oklahoma City, Oklahoma
Re: International Environmental Corporation
Dear Sir:
This is to advise the files of this office show the above named corporation
has filed franchise tax returns for prior years, and all franchise taxes have
been paid, and such corporation holds a license for the current fiscal year
ending June 30, 1979.
OKLAHOMA TAX COMMISSION
A. H. Stoabs, Director
Franchise Tax Division
AHS:bb
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
MERGER
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
INTERNATIONAL ENVIRONMENTAL CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the Undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City,
this 28/th/ day of January, A.D.
1983.
____________________________________
Secretary of State
By: ________________________________
<PAGE>
ARTICLES OF MERGER
------------------
(INTERNATIONAL ENVIRONMENTAL CORPORATION)
(INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION)
A Plan of Merger having been approved in accordance with the provisions of
the laws of the State of Oklahoma, by which the constituent corporation,
International Environmental Export Corporation, an Oklahoma corporation is
merged into International Environmental Corporation, an Oklahoma corporation,
with International Environmental Corporation being the surviving corporation,
effective as of 12:00 a.m. on January 1, 1983. These Articles of Merger are
hereby executed for and on behalf of International Environmental Corporation,
the surviving corporation, under its corporate seal, signed and acknowledged by
its President and attested by its Secretary.
I. The Articles of Incorporation of the surviving corporation,
International Environmental Corporation, are not amended by the terms of the
Plan of Merger adopted by the above corporations, and remain as filed.
II. International Environmental Corporation
---------------------------------------
a. International Environmental Corporation is a constituent corporation
and is the surviving corporation.
b. It was incorporated under the laws of the State of Oklahoma on March
6, 1967.
c. It is an Oklahoma domestic corporation.
d. The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, Oklahoma.
e. On the 30th day of December, 1982, at a specially called meeting of
the board of directors, a resolution was adopted setting
<PAGE>
out a Plan of Merger, a copy of which is attached as Exhibit "A". A copy of said
resolution, certified to by the Secretary of said Corporation, is hereby
attached as Exhibit "B".
f. A copy of the resolution adopted by the board of directors on December
30, 1982, directing the submission of the Plan of Merger to the shareholders at
a special meeting called for December 30, 1982, and a certificate of the
Secretary that such resolution and Plan of Merger was approved by the
shareholders at such meeting, is attached as Exhibit "C".
g. Copies of the waivers of notice of the directors and shareholders
meetings are attached as Exhibit "D" and Exhibit "E".
h. It has an authorized capital stock of $3,000.00 divided into 300
shares of voting common stock, of a par value of $10.00 per share, all of which
are issued and outstanding, and 2,000 authorized shares of non-voting preferred
stock.@ $100.00 for a total of $203,000.00.
i. At a specially called meeting of the shareholders on December 30,
1982, the Plan of Merger was adopted with 300 shares of voting common stock
counted as voting for adoption of the merger.
j. Its officers and directors and their addresses are:
DIRECTORS:
---------
Jack E. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma
Barry H. Golsen 5000 Southwest 7/th/
Oklahoma City, Oklahoma
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma
<PAGE>
OFFICERS:
--------
Jack E. Golsen Chief Executive 16 South Pennsylvania
Officer Oklahoma City, Oklahoma
Barry H. Golsen President 5000 Southwest 7th
Oklahoma City, Oklahoma
David R. Goss Secretary 16 South Pennsylvania
and Treasurer Oklahoma City, Oklahoma
Irwin H. Steinhorn Assistant 16 South Pennsylvania
Secretary Oklahoma City, Oklahoma
Lew Alberico Sr. Vice 5000 Southwest 7th
President Oklahoma City, Oklahoma
Larry Jewell Vice-President 5000 Southwest 7th
Oklahoma City, Oklahoma
III. International Environmental Export Corporation
----------------------------------------------
a. International Environmental Export Corporation is a constituent
corporation.
b. It was incorporated under the laws of the State of, Oklahoma on
December 16, 1971.
c. It is an Oklahoma domestic corporation.
d. The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, Oklahoma.
e. On the 30th day of December, 1982, as a specially called meeting of
the board of directors, a resolution was adopted setting out a Plan of Merger, a
copy of said resolution, certified to by the Secretary of said corporation is
hereto attached as Exhibit "B-1".
f. A copy of the resolution adopted by the board of directors on
December 30, 1982, directing the submission of the Plan of Merger to the
shareholders at a special meeting called for December 30, 1982, and of the
certificate of the Secretary that
<PAGE>
such resolution and Plan of Merger was approved by the shareholders at such
meeting, is attached as Exhibit "C-l".
g. Copies of the waivers of notice of the directors and shareholders
meetings are attached as Exhibit "D-1" and Exhibit "E-1".
h. It has an authorized capital stock of $1,000.00 divided into 100
shares of voting common stock, of a par value of $10.00 per share, 50 shares of
which are issued and outstanding.
i. At a specially called meeting of the shareholders on December 30,
1982, the Plan of Merger was adopted with all 50 shares of voting common stock
counted as voting for the adoption of the merger.
j. Its officers and directors and their addresses are:
DIRECTORS:
---------
Jack E. Golsen 16 South Pennsylvania
Oklahoma City, Oklahoma
Barry H. Golsen 5000 Southwest 7th
Oklahoma City, Oklahoma
David R. Goss 16 South Pennsylvania
Oklahoma City, Oklahoma
OFFICERS:
--------
Jack E. Golsen President 16 South Pennsylvania
Oklahoma City, Oklahoma
Barry H. Golsen Vice President 5000 Southwest 7th
Oklahoma City, Oklahoma
David R. Goss Vice President 16 South Pennsylvania
Oklahoma City, Oklahoma
Irwin H. Steinhorn Secretary and 16 South Pennsylvania
Treasurer Oklahoma City, Oklahoma
<PAGE>
IN WITNESS WHEREOF, we have hereunto set the hand and seal of the
corporation this 31st day of December 1982.
ATTEST: INTERNATIONAL ENVIRONMENTAL
CORPORATION
_____________________________ By: _____________________________
David R. Goss, Secretary Barry H. Golsen, President
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
On this 31st day of December, 1982, before me, appeared Barry H. Golsen, to
me personally known, who, being by me duly sworn, did say that he is President
of the above corporation, and that the seal affixed to said instrument is the
corporate seal of said corporation and that said instrument was signed and
sealed on behalf of said corporation by authority of its board of directors, and
that he acknowledged said instrument to be the free act and deed of said
corporation.
Given under my hand this 31st day of December, 1982.
_____________________________
Notary Public
My commission expires: _____________________________
<PAGE>
PLAN OF MERGER
--------------
(INTERNATIONAL ENVIRONMENTAL CORPORATION)
(INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION)
______________________________
THIS PLAN OF MERGER, made and entered into this 30th day of December, 1982,
by and between International Environmental Corporation, an Oklahoma corporation,
and International Environmental Export Corporation, an Oklahoma corporation;
W I T N E S S E T H:
In consideration of the mutual covenants and conditions hereinafter set
forth, said corporations hereby agree to merge into a single corporation upon
the following terms:
1. The surviving corporation shall be:
International Environmental Corporation
2. The merger shall be effective as of 12:00 a.m. January 1, 1983.
3. The Articles of Incorporation of the surviving corporation, including
its capital structure, shall not be amended by the merger.
4. The surviving corporation being a wholly owned subsidiary of LSB
Industries, Inc. and International Environmental Export Corporation being a
wholly owned subsidiary of the surviving corporation, upon the merger becoming
effective, all 300 shares of voting common stock of the surviving corporation
shall remain issued to LSB Industries, Inc.
5. The foregoing Plan of Merger, having been approved by the officers of
each constituent corporation shall be submitted to separate meetings of the
directors of each corporation.
EXHIBIT "A"
<PAGE>
Signed at Oklahoma City, Oklahoma, this 30th day of December,
1982.
ATTEST: INTERNATIONAL ENVIRONMENTAL
CORPORATION
_____________________________ ____________________________________
David R. Goss, Secretary Barry H. Golsen, President
ATTEST: INTERNATIONAL ENVIRONMENTAL
EXPORT CORPORATION
_____________________________ ____________________________________
Irwin H. Steinhorn, Secretary Jack E. Golsen, President
<PAGE>
INTERNATIONAL ENVIRONMENTAL CORPORATION
RESOLUTION OF BOARD OF DIRECTORS
December 30, 1982
_________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date in accordance with the
bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolution, including the said extract, was duly adopted by the
unanimous vote of the directors present:
"RESOLVED, That the Plan of Merger of International Environmental
Corporation and International Environmental Export Corporation
with International Environmental Corporation as the survivor,
dated December 30, 1982, as submitted to and examined by the
directors, a copy of which is attached hereto, said merger being
effective as of 12:00 a.m. January 1, 1983, be and it hereby is
authorized and approved, and the officers of this Corporation are
directed to execute the Plan of Merger on behalf of this
Corporation, to submit such Plan for approval by the shareholders
of this Corporation, and to take such further action and to
execute such further instruments as may be necessary to
consummate the merger as set forth therein.
FURTHER RESOLVED, That the Plan of Merger having been approved by
the respective Board of Directors of the constituent
corporations, shall be submitted to a meeting of the shareholders
on December 30, 1982; and,
FURTHER RESOLVED, That written notice of such meeting be given to
each holder of outstanding shares of this Corporation of all
classes, setting forth that one of the purposes of such meeting
is to consider the proposed merger naming the constituent
corporations and giving the domicile and containing a summary of
the Plan of Merger, unless notice of time, place or purpose of
such meeting be waived by all shareholders."
EXHIBIT "B"
<PAGE>
The undersigned does further certify that the said resolution has not been
changed or modified, is still in full force and effect, and does not in any way
conflict with the bylaws or Articles of Incorporation of this Corporation.
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation on the date shown above.
_________________________________
David R. Goss, Secretary
Subscribed and sworn to before me this 30th day of December 1982.
(SEAL) _________________________________
Notary Public
My commission expires: ___________________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION
RESOLUTION OF BOARD OF DIRECTORS
December 30, 1982
_______________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
directors of the Corporation held on the above date in accordance with the
bylaws, at which a quorum of the directors was present and acted throughout, and
that the resolution, including the said extract, was duly adopted by the
unanimous vote of the directors present:
"RESOLVED, That the Plan of Merger of International Environmental
Corporation and International Environmental Export Corporation
with International Environmental Corporation as the survivor,
dated December 30, 1982, as submitted to and examined by the
directors, a copy of which is attached hereto, said merger being
effective as of 12:00 a.m. January 1, 1983, be and it hereby is
authorized and approved, and the officers of this Corporation are
directed to execute the Plan of Merger on behalf of this
Corporation, to submit such Plan for approval by the shareholders
of this Corporation, and to take such further action and to
execute such further instruments as may be necessary to
consummate the merger as set forth therein.
FURTHER RESOLVED, That the Plan of Merger having been approved by
the respective Board of Directors of the constituent
corporations, shall be submitted to a meeting of the shareholders
on December 30, 1982; and,
FURTHER RESOLVED, That written notice of such meeting be given to
each holder of outstanding shares of this Corporation of all
classes, setting forth that one of the purposes of such meeting
is to consider the proposed merger naming the constituent
corporations and giving the domicile and containing a summary of
the Plan of Merger, unless notice of time, place or purpose of
such meeting be waived by all shareholders."
EXHIBIT "B-1"
<PAGE>
The undersigned does further certify that the said resolution has not been
changed or modified, is still in full force and effect, and does not in any way
conflict with the bylaws or Articles of Incorporation of this Corporation.
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation on the date shown above.
_________________________________
Irwin H. Steinhorn, Secretary
Subscribed and sworn to before me this 30th day of December, 1982.
(SEAL) _________________________________
Notary Public
My commission expires: ___________________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL CORPORATION
RESOLUTION OF SHAREHOLDERS
December 30, 1982
__________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
shareholders of the Corporation held on the above date, in accordance with the
bylaws, at which a quorum of the shareholders was present and acted throughout,
and that the resolutions, including the said extract, were duly adopted by the
unanimous vote of the shareholders present:
RESOLVED, that the recommendation of the Board of Directors of
this Corporation as evidenced by the certified resolution
presented to the shareholder that International Environmental
Export Corporation be merged with International Environmental
Corporation, an Oklahoma corporation, with International
Environmental Corporation as the survivor, is hereby approved;
and,
FURTHER RESOLVED, that the Plan of Merger presented to the
shareholder of this Corporation and which is designated to
effectuate such merger, be and it is hereby approved by the
shareholder; and,
FURTHER RESOLVED, that the officers of this Corporation be and
they are hereby authorized and directed to execute said Plan of
Merger for and on behalf of this Corporation and to do any and
all acts required by law which may be required to effectuate such
merger.
The undersigned does further certify that the foregoing resolutions of the
shareholders has not been changed or modified, is still in full force and
effect, and does not in any way conflict with the bylaws or Articles of
Incorporation of this Corporation.
EXHIBIT "C"
<PAGE>
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation this 30th day of December, 1982.
___________________________________
David R. Goss, Secretary
Subscribed and sworn to before me this 30th day of December, 1982.
(SEAL) ___________________________________
Notary Public
My commission expires: __________________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION
RESOLUTION OF SHAREHOLDERS
December 30, 1982
_________________
The undersigned, Secretary of the above Corporation, does hereby certify
that the following is a true and correct extract from the meeting of the
shareholders of the Corporation held on the above date, in accordance with the
bylaws, at which a quorum of the shareholders was present and acted throughout,
and that the resolutions, including the said extract, were duly adopted by the
unanimous vote of the shareholders present:
RESOLVED, that the recommendation of the Board of Directors of
this Corporation as evidenced by the certified resolution
presented to the shareholder that International Environmental
Export Corporation be merged with International Environmental
Corporation, an Oklahoma corporation, with International
Environmental Corporation as the survivor, is hereby approved;
and,
FURTHER RESOLVED, that the Plan of Merger presented to the
shareholder of this Corporation and which is designated to
effectuate such merger, be and it is hereby approved by the
shareholder; and,
FURTHER RESOLVED, that the officers of this Corporation be and
they are hereby authorized and directed to execute said Plan of
Merger for and on behalf of this Corporation and to do any and
all acts required by law which may be required to effectuate such
merger.
The undersigned does further certify that the foregoing resolutions of the
shareholders has not been changed or modified, is still in full force and
effect, and does not in any way conflict with the bylaws or Articles of
Incorporation of this Corporation.
EXHIBIT "C-1"
<PAGE>
IN WITNESS WHEREOF, the undersigned has made this Certificate and affixed
hereto the seal of the Corporation this 30th day of December, 1982.
___________________________________
Irwin H. Steinhorn, Secretary
Subscribed and sworn to before me this 30th day of December, 1982.
(SEAL) ___________________________________
Notary Public
My commission expires: __________________________
<PAGE>
CALL AND WAIVER OF NOTICE OF SPECIAL MEETING
OF THE DIRECTORS OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
December 30, 1982
_________________
The undersigned directors of the above named corporation waive notice of
the special meeting of the directors of such corporation to be held at 9:30 a.m.
on December 30, 1982, at the offices of the Corporation in Oklahoma City,
Oklahoma for the purpose of transacting such business as may come before the
meeting.
We waive all statutory and bylaw requirements as to notice of the time,
place and purpose of such meeting and consent to the transaction of whatever
business may come before it.
Signed at Oklahoma City, Oklahoma, this 30th day of December, 1982.
___________________________________
Jack E. Golsen
___________________________________
Barry H. Golsen
___________________________________
David R. Goss
EXHIBIT "D"
<PAGE>
CALL AND WAIVER OF NOTICE OF SPECIAL MEETING
OF THE DIRECTORS OF
INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION
December 30, 1982
_________________
The undersigned directors of the above named corporation waive notice of
the special meeting of the directors of such corporation to be held at 11:00
a.m. on December 30, 1982, at the offices of the Corporation in Oklahoma City,
Oklahoma for the purpose of transacting such business as may come before the
meeting.
We waive all statutory and bylaw requirements as to notice of the time,
place and purpose of such meeting and consent to the transaction of whatever
business may come before it.
Signed at Oklahoma City, Oklahoma, this 30th day of December, 1982.
___________________________________
Jack E. Golsen
___________________________________
Barry H. Golsen
___________________________________
David R. Goss
EXHIBIT "D-1"
<PAGE>
WAIVER OF NOTICE OF SPECIAL MEETING
OF THE SHAREHOLDERS OF
INTERNATIONAL ENVIRONMENTAL CORPORATION
December 30, 1982
_________________
The undersigned sole shareholder of the above named corporation being the
holder of all outstanding stock, waives notice of the special meeting of the
shareholders of such Corporation to be held at 3:00 p.m. on December 30, 1982,
at the offices of the Corporation in Oklahoma City, Oklahoma, for the purpose of
considering a merger with International Environmental Export Corporation, an
Oklahoma corporation, and transacting such other business as may come before the
meeting.
The undersigned waives all statutory and bylaw requirements as to notice of
the time, place and purpose of such meeting and consents to the transaction of
whatever business may come before it.
Dated this 30th day of December, 1932, at Oklahoma City, Oklahoma.
LSB INDUSTRIES, INC.
___________________________________
Irwin H. Steinhorn, Secretary
EXHIBIT "E"
<PAGE>
WAIVER OF NOTICE OF SPECIAL MEETING
OF THE SHAREHOLDERS OF
INTERNATIONAL ENVIRONMENTAL EXPORT CORPORATION
December 30, 1982
_________________
The undersigned sole shareholder of the above named corporation being the
holder of all outstanding stock, waives notice of the special meeting of the
shareholders of such Corporation to be held at 4:00 p.m. on December 30, 1982,
at the offices of the Corporation in Oklahoma City, Oklahoma, for the purpose of
considering a merger with International Environmental Corporation, an Oklahoma
corporation, and transacting such other business as may come before the meeting.
The undersigned waives all statutory and bylaw requirements as to notice of
the time, place and purpose of such meeting and consents to the transaction of
whatever business may come before it.
Dated this 30th day of December, 1982, at Oklahoma City, Oklahoma.
INTERNATIONAL ENVIRONMENTAL CORPORATION
_______________________________________
David R. Goss, Secretary
EXHIBIT "E-l"
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 731940006
ODIE A. NANCE, Chairman
ROBERT L. WADLEY, Vice-Chairman
J. L. MERRILL, Sec'y-Member FRANCHISE DIVISION
January 21, 1983
Jeanette B. Edmondson, Secretary of State
Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105
Re: International Environmental Export Corporation
Qualified: 121671
Dear Mrs. Edmondson:
Our records indicate the referenced entity has cmiplied with the Franchise Tax
Law and is licensed for the current fiscal year ending June 30, 1983.
Very truly yours,
OKLAHOMA TAX COMMISSION
A. H. Stoabs, Director
Franchise Tax Division
AHS:lrb
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 731940006
ODIE A. NANCE, Chairman
ROBERT L. WADLEY, Vice-Chairman
J. L. MERRILL, Sec'y-Member FRANCHISE DIVISION
January 12, 1983
Jeannette B. Edmondson, Secretary of State
Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105
Re: International Environmental Corporation
Qualified: December 29, 1965
Dear Mrs. Edmondson:
Our records indicate the referenced entity has cmplied with the Franchise Tax
Law and is licensed for the current fiscal year ending June 30, 1983.
Very truly yours,
OKLAHOMA TAX COMMISSION
A. H. Stoabs, Director
Franchise Tax Division
AHS:at
<PAGE>
FEE: $10.00
FILE IN DUPLICATE
PRINT CLEARLY
CORPORATE TRADE NAME REPORT
SOS CORP. KEY:
DB330316
- --------
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned corporation hereby submits the following report of the
adoption of a trade name used in connection with its business in the State of
Oklahoma pursuant to 18 O.S. 1981, (S)1.11a.
1. The name of the corporation is: International Environmental Corporation
---------------------------------------
2. The corporation was incorporated under the laws of the State of: Oklahoma
--------
3. The name of the registered agent and the address of the registered office
in the State of Oklahoma is:
Irvin H. Steinhorn 16 S. Pennsylvania Oklahoma City OK 73107
---------------------------------------------------------------------------
NAME STREET ADDRESS CITY COUNTY ZIP
4. It is doing business in Oklahoma under the following trade name: Air Coil
--------
Technologies
---------------------------------------------------------------------------
5. The kind of business being transacted under such name may be briefly
described as follows:
Manufacture, distribution and sale of water source heat pump
units, fan coil units, and related air conditioning
components.
6. The corporation is carrying on such business under such name at the
following address(es) within the State of Oklahoma:
STREET ADDRESS CITY OR TOWN
-------------- ------------
5000 S.W. 7/th/ Oklahoma City, OK
---------------------------------------------------------------------------
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
INTERNATIONAL ENVIRONMENTAL
(CORPORATE SEAL) CORPORATION
-------------------------------------
(EXACT CORPORATE NAME)
_____________________________
By its Vice President
ATTEST:
____________________________
By its Secretary
The foregoing nstrument was acknowledged before me this 4/th/ day of February
1986, by _______________________________________________________________________
_____________________________
(NOTARY PUBLIC)
My Commission expires: _________________
(NOTARY SEAL)
(SOS FORM 0021)
<PAGE>
FEE: $25.00
Change
of
Registered Agent
and
Location of
Registered Office
of
INTERNATIONAL ENVIRONMENTAL CORPORATION,
an Oklahoma Corporation
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
International Environmental Corporation, an Oklahoma corporation (the
"Corporation"), for the purpose of changing its registered agent and registered
office pursuant to Section 1023 of the Oklahoma General Corporation Act, hereby
certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
---------------------------------------------------------------------------
Street Address City County Zip
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
---------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this 4th, day
of April, 1995.
INTERNATIONAL ENVIRONMENTAL CORPORATI0N
____________________________ ________________________________
by Vice President (Please print name)
----
ATTEST:
____________________________ ________________________________
by Asst. Secretary (Please print name)
-----
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX DIVISION
ROBERT V. CULLISON, Vice-Chairman REGISTRATION SECTION
DON KILPATRICK, Sec'y-Member (405) 521-3161
FEI: 730754306
BOA 04/04/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK. 73105
RE: INTERNATIONAL ENVIRONMENTAL CORPORATION
QUALIFICATION DATE: 01/03/79
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1995 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
OKLAHOMA SECRETARY OF STATE
2300 N. LINCOLN BLVD. ROOM 101
OKLAHOMA CITY, OKLAHOMA 73105-4897
405-521-3911
Fax # (405) 521-3771
Tom Cole Frank Keating
Secretary of State Governor
INTERNATIONAL ENVIRONMENTAL CODE#: 202
CORPORATION AMOUNT: $25.00
16 S PENNSYLVANIA AVE WI
OKLAHOMA CITY OK 73107
<PAGE>
EXHIBIT 3.16
BY-LAWS
-------
OF
--
INTERNATIONAL ENVIRONMENTAL CORPORATION
---------------------------------------
ARTICLE I
Offices
-------
Section 1. The name and address of the registered agent in Oklahoma is
Irwin H. Steinhorn, 16 South Pennsylvania, Oklahoma City, Oklahoma, and the
principal office of this Corporation shall be located at Oklahoma City,
Oklahoma.
Section 2. The Corporation may also have offices at such other places as
the business of the Corporation requires.
ARTICLE II
Corporate Seal
--------------
Section 1. The corporate seal shall have inscribed thereon the name of the
Corporation and the words "Corporate Seal, Oklahoma."
ARTICLE III
Stockholders' Meetings
----------------------
Section 1. The annual meetings of the stockholders shall be held in the
principal office of the Corporation.
Section 2. The annual meeting of the stockholders after this year shall be
held at 10:00 a.m. on the first Tuesday in April in each year, when they shall
elect a Board of Directors and transact such other business as may properly be
brought before the meeting.
Section 3. The holders of a majority of the outstanding stock entitled to
vote, present in person or by proxy, shall
<PAGE>
constitute a quorum, except as otherwise provided by law, by the Articles of
Incorporation or by these By-Laws.
Section 4. At each meeting of the stockholders every stockholder shall be
entitled to vote in person, or by written proxy. Each stockholder shall have one
vote for each share of stock entitled to vote, registered in his name on the
books of the Corporation for a period of not less than twenty days prior to such
meeting. All elections shall be had and all questions decided by a majority vote
of those present.
Section 5. Written notice of the annual meeting shall be mailed to each
stockholder at least ten days prior to the meeting.
Section 6. Special meetings of the stockholders, unless otherwise provided
by statute, may be called by the President, and shall be called by the President
at the request in writing of a majority of the Board of Directors or
stockholders. Any such request shall state the purpose of the meeting.
Section 7. Written notice of all special meetings of the stockholders,
stating the time, place and objects thereof, shall be mailed, at least five days
before such meeting.
ARTICLE IV
Directors
---------
Section 1. The property and business of this Corporation shall be managed
by its Board of Directors, consisting of not less than three nor more than seven
in number. They shall be elected at the annual meetings of the stockholders, and
each
2
<PAGE>
director shall be elected to serve until his successor shall be elected and
shall qualify.
Section 2. The directors may hold their meetings and keep the books of the
Corporation at the principal office of the Corporation, or at such other place
or places within or without the State of Oklahoma as they may from time to time
determine.
Section 3. In addition to the powers and authorities by these By-Laws
expressly conferred upon, the directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-Laws required to be done by the
stockholders.
Section 4. Any director, whether elected by the stockholders or appointed
by the directors, may be removed from office, with or without cause, at any time
by the stockholders.
ARTICLE V
Compensation of Directors
-------------------------
Section 1. Directors, as such, shall not receive any stated salary for
their services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each meeting of the Board;
provided that nothing herein shall preclude any director from serving in any
other capacity and receiving compensation therefor.
3
<PAGE>
ARTICLE VI
Meetings of the Board
---------------------
Section 1. The annual meeting of the Board shall be held immediately
following the annual meeting of the stockholders, and no notice of such meeting
of the Board shall be necessary to the newly elected directors in order legally
to constitute such meeting.
Section 2. Special meetings of the Board may be called by the President on
three days' notice to each director. Special meetings shall be called by the
President in like manner and on like notice on the written request of two
directors.
Section 3. At all meetings of the Board, a majority of the directors shall
constitute a quorum, and the act of a majority of the directors present at any
meeting at which there is a quorum, shall be the act of the Board of Directors,
except as may otherwise specifically be provided by statute, or by the Articles
of Incorporation, or by these By-Laws.
ARTICLE VII
Officers
--------
Section 1. The officers of the Corporation shall be chosen by the directors
and shall be a President, as many Vice Presidents as the directors shall from
time to time deem advisable, and a Secretary and a Treasurer. The Secretary and
Treasurer may be the same person, and any of the Vice Presidents may hold at the
same time the office of Secretary or Treasurer.
4
<PAGE>
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose a President from their own number, at
least one Vice President and a Secretary and a Treasurer, who need not be
members of the Board.
Section 3. The Board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as the Board shall determine from time to
time.
Section 4. The salaries of all officers of the Corporation shall be fixed
by the directors. They shall hold office until their successors are chosen and
qualified. Any officer may be removed from office, with or without cause, at any
time by the directors.
ARTICLE VIII
The President
-------------
Section 1. The President shall be the chief executive officer of the
Corporation; he shall preside at all meetings of the stockholders and directors;
he shall have general and active management of the business of the Corporation,
shall see that all orders and resolutions of the Board are carried into effect,
and shall have the general powers and duties of supervision and management
usually vested in the office of President of a corporation.
5
<PAGE>
ARTICLE IX
Vice Presidents
---------------
Section 1. Any of the Vice Presidents who may be available shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, and shall perform such other duties as the directors
shall prescribe.
ARTICLE X
The Treasurer
-------------
Section 1. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the directors.
ARTICLE XI
The Secretary
-------------
Section 1. The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes of all
meetings in a book to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the stockholders and of the directors, and
shall perform such other duties as may be prescribed by the President or the
directors, all subject to the supervision of the President.
6
<PAGE>
ARTICLE XII
Vacancies
---------
Section 1. If the office of any director, or of any officer or agent,
becomes vacant by reason of death, resignation, disqualification, removal from
office, or otherwise, the directors may choose a successor who shall hold office
for the unexpired term in respect of which such vacancy occurred.
ARTICLE XIII
Certificates of Stock
---------------------
Section 1. The certificates of stock of the Corporation shall be numbered and
shall be entered in the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary.
ARTICLE XIV
Transfer of Stock
-----------------
Section 1. Transfers of stock shall be made on the books of the Corporation
only by the person named in the certificate or by attorney, lawfully constituted
in writing, and upon surrender of the certificate therefor and a full and
complete compliance with all of the terms and conditions set forth on such
certificate, and in the Articles of Incorporation.
ARTICLE XV
Registered Stockholders
-----------------------
Section 1. The Corporation shall be entitled to treat the holder of record
of any share or shares as the holder and owner
7
<PAGE>
in fact thereof, and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof; except as may be
otherwise expressly provided by law.
ARTICLE XVI
Fiscal Year
-----------
Section 1. The fiscal year shall be the calendar year, unless otherwise
determined by the directors.
ARTICLE XVII
Dividends
---------
Section 1. Dividends upon the capital stock of the Corporation, when
earned, may be declared by the directors.
ARTICLE XVIII
Notices
-------
Section 1. Whenever under any of the provisions of these By-Laws notice is
required to be given to any director, officer or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
depositing the same in the post office or letter box postpaid, addressed to such
stockholder, officer or director at such address as appears on the records of
the Corporation, or in default of other address, to such director, officer or
stockholder at the general post office in the capitol city of the State of
Oklahoma, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
8
<PAGE>
Section 2. Any stockholder, director or officer may waive any notice
required to be given under these By-Laws, or by statute, or the Articles of
Incorporation, to the extent permitted by law and by the Articles of
Incorporation.
ARTICLE XIX
Amendments
----------
Section 1. These By-Laws may be amended, altered, repealed, or revised, at
any meeting of the stockholders by an affirmative vote of a majority of common
stock at any meeting at which there is a quorum present, or by an affirmative
vote of a majority of the directors present at any meeting at which there is a
quorum present, as the case may be; provided, however, that no change of the
time or place for the election of directors shall be made within sixty days next
before the day on which such election is to held, and that in case of any change
of such time or place, notice thereof shall be given to each stockholder
entitled to vote, either in person or by letter mailed to his last known post
office address, at least twenty days before the election is held.
9
<PAGE>
APPROVAL OF DIRECTORS
---------------------
The foregoing By-Laws were read and discussed section by section by the
directors, who have authority to adopt By-Laws which shall remain effective
until legally amended or repealed. Following such discussion, they were duly
approved at a meeting held in Oklahoma City, Oklahoma, on this 30th day of July,
1971.
DIRECTORS: ________________________________________
Jack E. Golsen
________________________________________
David R. Goss
________________________________________
Al Braver
10
<PAGE>
EXHIBIT 3.17
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned, Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office, of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
AND
ALL AMENDMENTS THERETO
OF
KOAX CORP.
In testimony whereof, I hereto set my hand and
caused to be affixed the Great Seal of the State
of Oklahoma, done at the City of Oklahoma City
this 14/th/ day, of November , A.D. 1997.
___________________________________
Secretary of State
By:________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
KOAX CORP.
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City, this 14/th/
day of November, A.D. 1985.
_________________________________
Secretary of State
By:______________________________
<PAGE>
ARTICLES OF INCORPORATION
OF
KOAX CORP.
We the undersigned incorporators, whose names and addresses are shown
below, being persons legally competent to enter into contracts, for purpose of
forming a corporation under "The Business Corporation Act" of the State of
Oklahoma, do hereby adopt the following Articles of Incorporation:
1. The name of this Corporation is:
KOAX CORP.
2. The address of its registered office in the state of Oklahoma is 16
South Pennsylvania, Oklahoma City, County of Oklahoma, and the name of its
registered agent is Irwin H. Steinhorn, 16 South Pennsylvania, Oklahoma City,
Oklahoma.
3. The duration of the Corporation is perpetual.
4. The objects and purposes for which the Corporation is formed are:
(a) To carry on the business of distributors, wholesalers, or agents, to
buy, sell and deal in, at wholesale or retail, merchandise, goods, wares, and
commodities of every sort, kind or description, and to carry on any other
business, whether manufacturing of otherwise, which can be conveniently carried
on with any of the objects of the Corporation.
(b) To engage in the transportation of property by motor vehicle; to
engage in the general transportation and communication business and to buy,
sell, lease, own, or operate other motor carriers, broadcasting stations, and
facilities; to buy, sell, lease, own or operate terminals and warehouses and
engage in
<PAGE>
warehousing business; to buy, sell deal and engage in the sale of
motor vehicles and parts.
(c) To make and purchase materials for the construction of buildings; to
erect buildings; to own manage, operate, lease and sell buildings; to conduct
and carry on the business of builders for the purpose of building, repairing or
doing any other work in connection with any and all classes of buildings and
improvements, including the location laying out and constructing of roads,
avenues, sewers, bridges, wells, and generally all classes of buildings,
erections and works, both public and private, or integral parts thereof.
(d) To purchase, take, own, hold, deal in, mortgage or otherwise encumber
and to lease, sell, exchange, convey, transfer or in any manner whatever dispose
of real property; to acquire lands for the purpose of prospecting for and
obtaining oil, gas and other minerals; to drill oil wells, and to acquire
drilling rigs or other machinery necessary to such purposes; and to produce and
market oil and other minerals.
(e) To enter into partnership or other arrangement for sharing profits or
cooperate with any entity carrying on any business capable of being conducted so
as to benefit this Corporation; to acquire the assets and assume the liabilities
of any entity; to pay for the same in cash, stock or otherwise; to hold or
dispose of the property so purchased; and to conduct any business so acquired.
2
<PAGE>
(f) To finance, borrow and lend money and to negotiate loans; to purchase,
finance, draw, accept and endorse notes, accounts receivable, bonds, stocks,
debentures and other securities; to subscribe for, acquire, hold and dispose of
in any manner shares of stock, bonds, accounts, accounts receivable and other
securities of any government, person or corporation.
(g) To purchase or otherwise acquire, apply for, register, hold, use,
assign, sell or in any manner dispose of and to grant licenses, franchises, or
other rights in, and in any manner deal with, patents, inventions, improvements,
processes, formulas, trademarks, trade names, copyrights or otherwise.
(h) To have one or more office and to conduct any or all of its operations
and business and to promote its objects within or without the State of Oklahoma,
without restriction as to place or amount.
(i) To do any or all of the things herein set forth as principal, agent,
contractor, trustee or otherwise, alone or jointly with natural persons or any
legal entity.
(j) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall be
in no way limited nor restricted by reference to or inference from the terms of
any other clause or paragraph of the Articles of Incorporation.
The foregoing shall be construed both as objects and powers, and the
enumeration thereof shall not be held to limit or restrict
3
<PAGE>
in any manner the general powers conferred on this Corporation by the
laws of the State of Oklahoma.
5. All of the shares to be issued by the Corporation shall be of one
class, that is, Voting Common Stock, of a par value of $10.00 per share, The
aggregate number of shares which the Corporation shall have the authority to
allot is 50 shares.
6. The amount of stated capital with which this Corporation will begin
business is $500.00, which has been fully paid in.
7. The number of shares to be allotted by this Corporation before it
begins business, and the consideration received by the Corporation therefore,
are:
Number of Shares Consideration Received
---------------- ----------------------
50 $500.00
8. The number of directors of this Corporation shall be as specified in
the By-Laws, and such number may from time to time be increased or decreased
under the By-Laws or any amendment or change thereof provided the number of
directors of the Corporation shall not be less than three. The number of
directors to be elected at the first meeting of the shareholders is three.
Directors and officers need not be shareholders. In case of vacancies in the
Board of Directors, a majority of the remaining members of the Board, even
though less than a quorum, may elect directors to fill such vacancies to hold
office until the next annual meeting of the shareholders.
9. No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares
4
<PAGE>
of the capital stock of such other corporation is owned by the Corporation, and
no act of the Corporation shall in any way be affected by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation; and dtrector individually,
or any firm of which such director may be a member, may be a party to, or may be
pecuniarily or otherwise interested in, any contract or transaction of the
Corporation, provided that the fact that he or such firm is so interested shall
be disclosed or shall have been known to the Board of Directors, or a majority
thereof; and any director of the Corporation who is also a director or officer
of such other corporation, or who is so interested, may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
of the Corporation which shall authorize such contract or transaction, and may
vote there at to authorize such contract or transaction, with like force and
effect as if he were not such director of officer of such other corporation or
not so interested.
10. In furtherance and not in limitation of the powers conferred by the
laws of the State of Oklahoma, the Board of Directors of this Corporation is
expressly authorized:
To make, alter, amend, add to, revise, or repeal the ByLaws in any manner
not contrary to the laws of the State of Oklahoma;
To authorize and cause its officers to execute mortgages and liens upon the
property, both real and personal, and upon the franchises of this Corporation;
5
<PAGE>
To designate, by resolution passed by a majority of the whole Board, one or
more committees, each to consist of one or more directors, which committees, to
the extent provided in such resolution or in the By-Laws of the Corporation,
shall have and may exercise any or all of the powers of the Board of Directors
in the management of the business and affairs of this Corporation and shall have
power to authorize the seal of this Corporation to be affixed by its officers to
all papers which may require it:
A majority of the stock issued and outstanding of this Corporation having
voting power may in the By-Laws confer power additional to the foregoing upon
the directors, in addition to the powers and authorities expressly conferred
upon them by law.
11. No shareholder of this Corporation shall have any preemptive or
preferential right of subscription to any shares of stock of this Corporation,
whether now or hereafter authorized, or to any obligations convertible into
stock of this Corporation, authorized, issued or sold.
Signed Oklahoma City, Oklahoma this 14th day of November, 1985.
/s/ Irwin H. Steinhorn /s/ James V. Barwick
- ---------------------------- --------------------------------
Irwin H. Steinhorn James V. Barwick
16 So. Pennsylvania 16 So. Pennsylvania
Oklahoma City, OK 73107 Oklahoma City, OK 73107
/s/ Leah Y. Brashear
--------------------------
Leah Y. Brashear
16 So. Pennsylvania
Oklahoma City, OK 73107
6
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
Before me, the undersigned, a Notary Public in and for said county and
state, personally appeared the above named incorporators, to me known to be the
identical persons who executed the foregoing Articles of Incorporation, and
acknowledged to me that they executed the same as their free and voluntary act
and deed for the uses and purposes therein set forth on this 14th day of
November, 1985.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
above written.
/s/ Claire Springer
---------------------------------
Notary Public
My Commission Expires:
October 25, 1988
- ----------------
(SEAL)
7
<PAGE>
AFFIDAVIT AS TO PAID IN CAPITAL
-------------------------------
KOAX CORP.
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The undersigned, of lawful age, being first duly sworn, each for himself,
deposes and says:
That they are the incorporators of the above named proposed Corporation,
and that the amount of stated capital with which said Corporation will begin
business, as set out in its attached Articles of Incorporation, has been fully
paid in.
/s/ Irwin H. Steinhorn /s/ James V. Barwick
- ---------------------------- ---------------------------------
Irwin H. Steinhorn James V. Barwick
/s/ Leah Y. Brashear
--------------------------
Leah Y. Brashear
Subscribed and sworn to before me this 14th day of November, 1985.
/s/ Claire Springer
---------------------------------
Notary Public
My Commission Expires:
October 25, 1988
- ----------------
(SEAL) ARTOFINC
8
<PAGE>
FEE: $25.00
Change
of
Registered Agent
and
Location of
Registered Office
of
KOAX CORP.
an Oklahoma Corporation
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
Koax Corporation, an Oklahoma corporation (the "Corporation"), for the
purpose of changing its registered agent and registered office pursuant to
Section 1023 of the Oklahoma General Corporation Act, hereby certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
---------------------------------------------------------------------
Street Address City County Zip Code
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
-------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its ____ Secretary, this 26/th/ day
----
of September, 1995.
KOAX CORP.
/s/ Tony M. Shelby Tony M. Shelby
- ---------------------------- ---------------------------------
by Vice President (Please print name)
----
ATTEST:
/s/ David M. Shear David M, Shear
- ---------------------------- ---------------------------------
by ______ Secretary (Please print name)
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX DIVISION
ROBERT V. CULLISON, Vice-Chairman REGISTRATION SECTION
DON KILPATRICK, Sec'y-Member (405) 521-3161
FEI: 731284158
BOA 10/19/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK. 73105
RE: KOAX CORP.
QUALIFICATION DATE: 11/14/85
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1996 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
/s/ W. E. Winters
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.18
BY-LAWS
OF
KOAX CORP.
Section 1. The name and address of the registered agent in Oklahoma is Irwin H.
- ----------
Steinhorn, 16 South Pennsylvania, Oklahoma City, and the principal office of
this Corporation shall be located at Oklahoma City, Oklahoma, or such other
place as the directors may designate.
Section 2. The Corporation may also have offices at such other places as the
- ----------
business of the Corporation requires.
ARTICLE II
----------
Corporate Seal
--------------
Section 1. The corporate seal shall have inscribed thereon the name of the
- ----------
Corporation, the year, and the words "Corporate Seal, Oklahoma".
ARTICLE III
-----------
Shareholders' Meetings
----------------------
Section 1. The annual meeting of the shareholders shall be held in the principal
- ----------
office of the Corporation or at such other place as may be designated by the
Board of Directors.
Section 2. The annual meeting of the shareholders after this year shall be held
- ----------
at 1:00 p.m. on the 2nd Tuesday day of August in each year, when they shall
elect a Board of Directors and transact such other business as may be properly
brought before the meeting.
Section 3. The holders of a majority of the outstanding stock entitled to vote,
- ----------
present in person or by proxy, shall constitute a quorum, except as otherwise
provided by law, the Articles of Incorporation or by these By-Laws.
<PAGE>
Section 4. At each meeting of the shareholders every shareholder shall be
- ----------
entitled to vote in person, or by written proxy. Each shareholder shall have one
vote for each share of stock entitled to vote, registered in his name on the
books of the Corporation for a period of not less than twenty days prior to such
meeting. All elections shall be had and all questions decided by a majority vote
of those present.
Section 5. Written notice of the annual meeting shall be mailed to each
- ----------
shareholder at least ten days prior to the meeting.
Section 6. Special meetings of the shareholders, unless otherwise provided by
- ----------
statute, may be called by the President, and shall be called by the President at
the request in writing of a majority of the Board of Directors or shareholders.
Any such request shall state the purpose of the meeting.
Section 7. Written notice of all special meetings of the shareholders, stating
- ----------
the time, place and objects thereof, shall be mailed, at least five days before
such meeting.
ARTICLE IV
----------
Directors
---------
Section 1. The property and business of this Corporation shall be managed by its
- ----------
Board of Directors, consisting of not less than three nor more than seven in
number. They shall be elected at the annual meetings of the shareholders, and
each director shall be elected to serve until his successor shall be elected and
shall qualify.
2
<PAGE>
Section 2. The directors may hold their meetings and keep the books of the
- ----------
Corporation at the principal office of the Corporation, or at such other place
or places within or without the State of Oklahoma as they may, from time to
time, determine.
Section 3. In addition to the powers and authorities by these By-Laws expressly
- ----------
conferred upon them the directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-Laws required to be done by the
shareholders.
Section 4. Any director, whether elected by the shareholders or appointed by the
- ----------
directors, may be removed from office, with or without cause, at any time by the
shareholders.
ARTICLE V
---------
Compensation of Directors
-------------------------
Section 1. Directors, as such, shall not receive any stated salary for their
- ----------
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each meeting of the Board:
provided that nothing herein shall preclude any director from serving in any
other capacity and receiving compensation therefor.
ARTICLE VI
----------
Meeting of the Board
--------------------
Section 1. The annual meeting of the Board shall be held immediately following
- ----------
the annual meeting of the shareholders, and no notice of such meeting of the
Board shall be necessary to the
3
<PAGE>
newly elected directors in order to legally constitute such meeting.
Section 2. Special meetings of the Board may be called by the President on three
- ----------
(3) days notice to each director. Special meetings shall be called by the
President in like manner and on like notice on the written request of two (2)
directors.
Section 3. At all meetings of the Board, a majority of the directors shall
- ----------
constitute a quorum and the act of a majority of the directors present at any
meeting at which there is a quorum, shall be the act of the Board of Directors,
except as may otherwise be specifically provided by statute, or by the Articles
of Incorporation, or by these By-Laws.
ARTICLE VII
-----------
The President
-------------
Section 1. Either the Chief Executive officer or President shall preside at all
- ----------
meetings of the shareholders and directors. The President shall have general and
active management of the business of the Corporation in conjunction with the
Chief Executive officer. The President shall see that all orders and resolutions
of the Board are carried out and shall in conjunction with the Chief Executive
Officer have the general powers and duties of supervision and management usually
vested in the office of President of a Corporation.
4
<PAGE>
ARTICLE VIII
------------
Vice President
--------------
Section 1. Any of the Vice Presidents who may be available shall, in the absence
- ----------
or the disability of the President, perform the duties and exercise the powers
of the President, and shall perform such other duties as the directors shall
prescribe.
ARTICLE IX
----------
The Treasurer
-------------
Section 1. The Treasurer shall have the custody of the corporate funds and
- ----------
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the directors.
ARTICLE X
---------
The Secretary
-------------
Section 1. The Secretary shall attend all sessions of the Board and all meetings
- ----------
of the shareholders and record all votes and the minutes of all meetings in a
book to be kept for that purpose. He shall give, or cause to be given, notice of
all meetings of the shareholders and of the directors, and shall perform such
other duties as may be prescribed by the President or the directors, all subject
to the supervision of the President.
5
<PAGE>
ARTICLE XI
----------
Vacancies
---------
Section 1. If the office of any director, or of any officer or agent, becomes
- ----------
vacant by reason of death, resignation, disqualification, removal from office,
or otherwise, the directors may choose a successor who shall hold office for the
unexpired terms in respect of which such vacancy occurred.
ARTICLE XII
-----------
Certificate of Stock
--------------------
Section 1. The certificate of stock of the Corporation shall be numbered and
- ----------
shall be entered in the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary.
ARTICLE XIII
------------
Transfer of Stock
-----------------
Section 1. Transfer of stock shall be made on the books of the corporation only
- ----------
by the person named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor and a full and complete
compliance with all of the terms and conditions set forth on such certificate,
and in the Articles of Incorporation.
ARTICLE XIV
-----------
Registered Shareholders
-----------------------
Section 1. The Corporation shall be entitled to treat the holder of record of
- ----------
any share or shares as the holder and owner in fact
6
<PAGE>
thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof; except as may be
otherwise expressly provided by law.
ARTICLE XV
----------
Fiscal Year
-----------
Section 1. The fiscal year shall be the twelve months ended December 31st of
- ----------
each year, unless otherwise determined by the directors.
ARTICLE XVI
-----------
Dividends
---------
Section 1. Dividends upon the capital stock of the Corporation when earned, may
- ----------
be declared by the directors.
ARTICLE XVII
------------
Notices
-------
Section 1. Whenever under any of the provisions of these By-Laws notice is
- ----------
required to be given to any director, officer or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
depositing the same in the United States mail, postage prepaid, addressed to
such shareholder, officer, or director at such address as appears on the records
of the Corporation, or in default of other address, to such director, officer or
shareholder at the general post office in the capital city of the State of
Oklahoma, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
7
<PAGE>
Section 2. Any shareholder, director or officer may waiver any notice required
- ----------
to be given under these By-Laws, or by statute, or the Articles of
Incorporation, to the extent permitted by law and by the Articles of
Incorporation.
ARTICLE XVIII
-------------
Amendments
----------
Section 1. These By-Laws may be amended, altered, repealed, or revised, at any
- ----------
meeting of the shareholders by an affirmative vote of a majority of common stock
at any meeting at which there is a quorum present, or by an affirmative vote of
a majority of the directors present at any meeting at which there is a quorum
present, as the case may be; provided, however, that no change of the time or
place for the election of directors shall be made within sixty days before the
day on which such election is to be held, and that in case of any change of such
time or place, notice thereof, shall be given to each shareholder entitled to
vote, either in person or by letter mailed to his last known post office
address, at least twenty days before the election is held.
DIRECTORS: /s/ Jack E. Golsen
--------------------------------------------
Jack E. Golsen
/s/ Barry H. Golsen
--------------------------------------------
Barry H. Golsen
/s/ David Goss
--------------------------------------------
David Goss
BYLAWS
8
<PAGE>
EXHIBIT 3.19
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office, of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
LSB CHEMICAL CORP.
In testimony whereof, I have hereunto set my
hand and affixed the Great Seal of the State
of Oklahoma at the City of Oklahoma City this
14/th/, day of November, A.D. 1997.
_________________________________________
Secretary of State
By: _____________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
LSB CHEMICAL CORP.
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City this 20/th/ day of
July , A.D. 1983.
______________________________________________________
Secretary of State
By: __________________________________________________
<PAGE>
ARTICLES OF INCORPORATION
OF
LSB CHEMICAL CORP.
TO THE SECRETARY OF STATE
STATE OF OKLAHOMA:
We the undersigned incorporators, whose names and addresses are shown
below, being persons legally competent to enter into contracts, for the purpose
of forming a corporation under "The Business Corporation Act" of the State of
Oklahoma, do hereby adopt the following Articles of Incorporation:
1. The name of this Corporation is:
LSB Chemical Corp.
2. The address of its registered office in the State of Oklahoma is 16
South Pennsylvania, Oklahoma City, County of Oklahoma, and the name of its
registered agent is Irwin H. Steinhorn, 16 South Pennsylvania, Oklahoma City,
Oklahoma.
3. The duration of the Corporation is perpetual.
4. The objects and purposes for which the Corporation is formed are:
(a) To carry on the business of distributors, wholesalers, or agents, to
buy, sell and deal in, at wholesale or retail, merchandise, goods, wares, and
commodities of every sort, kind or description, and to carry on any other
business, whether manufacturing or otherwise, which can be conveniently carried
on with any of the objects of this Corporation.
(b) To engage in the transportation of property by motor vehicle; to
engage in the general transportation and communication business and to buy,
sell, lease, own, or operate other motor
<PAGE>
carriers, broadcasting stations, and facilities; to buy, sell, lease, own, or
operate terminals and warehouses and engage in warehousing business; to buy,
sell, deal and engage in the sale of motor vehicles and parts.
(c) To make and purchase materials for the construction of buildings; to
erect buildings; to own, manage, operate, lease and sell buildings; to conduct
and carry on the business of builders for the purpose of building, repairing or
doing any other work in connection with any and all classes of buildings and
improvements, including the location laying out and constructing of roads,
avenues, sewers, bridges, well, and generally all classes of buildings,
erections and works, both public and private, or integral parts thereof.
(d) To purchase, take, own, hold, deal in, mortgage or otherwise encumber
and to lease, sell, exchange, convey, transfer or in any manner whatever dispose
of real property; to acquire lands for the purpose of prospecting for and
obtaining oil, gas and other minerals; to drill oil wells, and to acquire
drilling rigs or other machinery necessary to such purposes; and to produce and
market oil and other minerals.
(e) To enter into partnership or other arrangement for sharing profits or
cooperate with any entity carrying on any business capable of being conducted so
as to benefit this Corporation; to acquire the assets and assume the liabilities
of any entity; to pay for the same in cash, stock or otherwise; to
2
<PAGE>
hold or dispose of the property so purchased; and to conduct any business so
acquired.
(f) To finance, borrow and lend money and to negotiate loans; to purchase,
finance, draw, accept and endorse notes, accounts receivable, bonds, stocks,
debentures and other securities; to subscribe for, acquire, hold and dispose of
in any manner shares of stock, bonds, accounts, accounts receivable and other
securities of any government, person or corporation.
(g) To purchase or otherwise acquire, apply for, register, hold, use,
assign, sell or in any manner dispose of and to grant licenses, franchises, or
other rights in, and in any manner deal with, patents, inventions, improvements,
processes, formulas, trademarks, trade names, copyrights or otherwise.
(h) To have one or more office and to conduct any or all of its operations
and business and to promote its objects within or without the State of Oklahoma,
without restriction as to place or amount.
(i) To do any or all of the things herein set forth as principal, agent,
contractor, trustee or otherwise, alone or jointly with natural persons or any
legal entity.
(j) The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall be
in no way limited nor restricted by reference to or inference from the terms of
any other clause or paragraph of these Articles of Incorporation.
3
<PAGE>
The foregoing shall be construed both as objects and powers, and the
enumeration thereof shall not be held to limit or restrict in any manner the
general powers conferred on this Corporation by the laws of the State of
Oklahoma.
5. All of the shares to be issued by the Corporation shall be of one
class, that is, Voting Common Stock, of a par value of $10.00 per share. The
aggregate number of shares which the Corporation shall have the authority to
allot is 50 shares.
6. The amount of stated capital with which this Corporation will begin
business is $500.00, which has been fully paid in.
7. The number of shares to be allotted by this Corporation before it
begins business, and the consideration received by the Corporation therefore,
are:
Number of Consideration
Shares Received
------ --------
50 $500.00
8. The number of directors of this Corporation shall be as specified in
the By-Laws, and such number may from time to time be increased or decreased
under the By-Laws or any amendment or change thereof provided the number of
directors of the Corporation shall, not be less than three. The number of
directors to be elected at the first meeting of the shareholders is three.
Directors and officers need not be shareholders. In case of vacancies in the
Board of Directors, a majority of the remaining members of the Board, even
though less than a quorum, may elect directors to fill
4
<PAGE>
such vacancies to hold office until the next annual meeting of the shareholders.
9. No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected by the fact that any of the directors
of the Corporation are pecuniarily or otherwise interested in, or are directors
or officers of, such other corporation; any director individually, or any firm
of which such director may be a member, may be a party to, or may be pecuniarily
or otherwise interested in, any contract or transaction of the Corporation,
provided that the fact that he or such firm is so interested shall be disclosed
or shall, have been known to the Board of Directors, or a majority thereof; and
any director of the Corporation who is also a director or officer of such other
corporation, or who is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize such contract or transaction, and may vote
thereat to authorize such contract or transaction, with like force and effect as
if he were not such director or officer of such other corporation or not so
interested.
10. In furtherance and not in limitation of the powers conferred by the
laws of the State of Oklahoma, the Board of Directors of this Corporation is
expressly authorized:
To make, alter, amend, add to, revise, or repeal the By-Laws in any manner
not contrary to the laws of the State of Oklahoma;
5
<PAGE>
To authorize and cause its officers to execute mortgages and liens upon the
property, both real and personal, and upon the franchises of this Corporation;
To designate, by resolution passed by a majority of the whole Board, one or
more committees, each to consist of one or more directors, which committees, to
the extent provided in such resolution or in the By-Laws of the Corporation,
shall have and may exercise any or all of the powers of the Board of Directors
in the management of the business and affairs of this Corporation and shall have
power to authorize the seal of this Corporation to be affixed by its officers to
all papers which may require it:
A majority of the stock issued and outstanding of this Corporation having
voting power may in the By-Laws confer power additional to the foregoing upon
the directors, in addition to the powers and authorities expressly conferred
upon them by law.
11. No shareholder of this Corporation shall have any pre-emptive or
preferential right of subscription to any shares of stock of this Corporation,
whether now or hereafter authorized, or to any obligations convertible into
stock of this Corporation, authorized, issued or sold.
Signed at Oklahoma City, Oklahoma this l9th day of July, 1983.
/s/ Irwin H. Steinhorn /s/ Tony M. Shelby
- -------------------------- -----------------------------
Irwin H. Steinhorn Tony M. Shelby
16 South Pennsylvania 16 South Pennsylvania
Oklahoma City, Oklahoma Oklahoma City, Oklahoma
/s/ James V. Barwick
--------------------------
James V. Barwick
16 South Pennsylvania
0klahoma City, Oklahoma
6
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
Before me, the undersigned, a Notary Public in and for said county and
state, personally appeared the above named incorporators, to me known to be the
identical persons who executed the foregoing Articles of Incorporation, and
acknowledged to me that they executed the same as their free and voluntary act
and deed for the uses and purposes therein set forth on this 19th day of July,
1983.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
above written.
/s/ Angela Loveland
---------------------------------
Notary Public
My Commission Expires:
December 13, 1986
- ---------------------
7
<PAGE>
AFFIDAVIT AS TO PAID IN CAPITAL
-------------------------------
(LSB CHEMICAL CORP.)
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
The undersigned, of lawful age, being first duly sworn, each for himself,
deposes and says:
That they are the incorporators of the above named proposed Corporation,
and that the amount of stated capital with which said Corporation will begin
business, as set out in its attached Articles of Incorporation, has been fully
paid in.
/s/ Irwin H. Steinhorn /s/ Tony M. Shelby
- ----------------------------- --------------------------------
Irwin H. Steinhorn Tony M. Shelby
/s/ James V. Barwick
---------------------------
James V. Barwick
Subscribed and sworn to before me this 19th day of July, 1983.
/s/ Angela Loveland
--------------------------------
Notary Public
My Commission Expires:
December 13, 1986
- --------------------------
<PAGE>
FEE: $25.00
Change
of
Registered Agent
and
Location of
Registered Office
of
LSB CHEMICAL CORP.,
an Oklahoma Corporation
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
LSB Chemical Corp., an Oklahoma corporation (the "Corporation"), for the
purpose of changing its registered agent and registered office pursuant to
Section 1023 of the Oklahoma General Corporation Act, hereby certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
- ----------------------------------------------------------------------------
Street Address City County Zip
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
- ----------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this 30/th/
----
day of March, 1995.
LSB CHEMICAL CORP.
/s/ Barry H. Golsen Barry H. Golsen
- ----------------------------- ----------------------------------------
by Vice President (Please print name)
----
ATTEST:
/s/ David M. Shear David M. Shear
- ----------------------------- ------------------------------------------
by Asst. Secretary (Please print name)
----
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 731940006
ROBERT E. ANDERSON, Chairman
ROBERT V. CULLISON, Vice-Chairman
DON KILPATRICK, Sec'y-Member FRX
405-521-3161
April 4, 1995
Secretary of State
Room 101, State Capitol Building
Oklahoma City, OK 73105
RE: LSB CHEMICAL CORP.
Qualification date: 07/20/83
Dear Secretary:
This is to certify that the files of this office show the referenced corporation
has filed a Franchise Tax return of the fiscal year ending June 30, 1995 and has
paid the Franchise Tax as shown by said return.
No certification is made as to any corporate Franchise Taxes which may be due
but not yet assessed, nor which have been assessed and protested.
This letter may not therefore be accepted for purposes of dissolution or
withdrawal.
Sincerely,
OKLAHOMA TAX COMMISSION
Business Tax Division
Registration Section
<PAGE>
EXHIBIT 3.20
BY-LAWS
OF
LSB CHEMICAL CORP.
ARTICLE I
---------
Offices
-------
Section 1. The name and address of the registered agent in Oklahoma is Irwin H.
- ----------
Steinhorn, 16 South Pennsylvania, Oklahoma City, and the principal office of
this Corporation shall be located at Oklahoma City, Oklahoma, or such other
place as the directors may designate.
Section 2. The Corporation may also have offices at such other places as the
- ----------
business of the Corporation requires.
ARTICLE II
----------
Corporate Seal
--------------
Section 1. The corporate seal shall have inscribed thereon the name of the
- ----------
Corporation. the year, and the words "Corporate Seal, Oklahoma".
ARTICLE III
-----------
Shareholders' Meetings
----------------------
Section 1. The annual meeting of the shareholders shall be held in the principal
- ----------
office of the Corporation. or at such other place as may be designated by the
Board of Directors.
Section 2. The annual meeting of the shareholders after this year shall. be held
- ----------
at 10:00 a.m. on the second Tuesday in April in each year, when they shall elect
a Board of Directors and transact such other business as may be properly brought
before the meeting.
Section 3. The holders of a majority of the outstanding stock entitled to vote,
- ----------
present in person or by proxy, shall constitute
<PAGE>
a quorum, except as otherwise provided by law, the Articles of Incorporation or
by these By-Laws.
Section 4. At each meeting of the shareholders every share holder shall be
- ----------
entitled to vote in person, or by written proxy. Each shareholder shall have one
vote for each share of stock entitled to vote, registered in his name on the
books of the Corporation for a period of not less than twenty days prior to such
meeting. All elections shall. be had and all questions decided by a majority
vote of those present.
Section 5. Written notice of the annual meeting shall be mailed to each
- ----------
shareholder at least ten days prior to the meeting.
Section 6. Special meetings of the shareholders unless otherwise provided by
- ----------
statute, may be called by the President, and shall be called by the President at
the request in writing of a majority of the Board of Directors or shareholders.
Any such request shall state the purpose of the meeting.
Section 7. Written notice of all special meetings of the shareholders, stating
- ----------
the time. place and objects thereof, shall be mailed, at least five days before
such meeting.
ARTICLE IV
----------
Directors
---------
Section 1. The property and business of this Corporation shall be managed by its
- ----------
Board of Directors, consisting of not less than three nor more than seven in
number. They shall be elected at the annual meetings of the shareholders, and
each director shall be
2
<PAGE>
elected to serve until his successor shall be elected and shall qualify.
Section 2. The directors may hold their meetings and keep the books of the
- ----------
Corporation at the principal office of the Corporation, or at such other place
or places within. or without the State of Oklahoma as they may, from time to
time, determine.
Section 3. In addition to the powers and authorities by these By-Laws expressly
- ----------
conferred upon them, the directors may exercise all such powers of the
Corporation and do all. such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-Laws required to be done by the
shareholders.
Section 4. Any director, whether elected by the shareholders or appointed by the
- ----------
directors, may be removed from office, with or without cause, at any time by the
shareholders.
ARTICLE V
---------
Compensation of Directors
-------------------------
Section 1. Directors, as such, shall not receive any stated salary for their
- ----------
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each meeting of the Board:
provided that nothing herein shall. preclude any director from serving in any
other capacity and receiving compensation therefor.
ARTICLE VI
----------
Meeting of the Board
--------------------
Section 1. The annual meeting of the Board shall be held immediately following
- ----------
the annual meeting of the shareholders, and
3
<PAGE>
no notice of such meeting of the Board shall be necessary to the newly elected
directors in order to legally constitute such meeting.
Section 2. Special meetings of the Board may be called by the President on three
- ----------
(3) days' notice to each director. Special meetings shall be called by the
President in like manner and on like notice on the written request of two (2)
directors.
Section 3. At all meetings of the Board, a majority of the directors shall
- ----------
constitute a quorum and the act of a majority of the directors present at any
meeting at which there is a quorum, shall be the act of the Board of Directors,
except as may otherwise be specifically provided by statute, or by the Articles
of Incorporation, or by these By-Laws.
ARTICLE VII
-----------
The President
-------------
Section 1. Either the Chief Executive Officer or President shall preside at all
- ----------
meetings of the shareholders and directors. The President shall have general and
active management of the business of the Corporation in conjunction with the
Chief Executive Officer. The President shall see that all orders and resolutions
of the Board are carried out and shall in conjunction with the Chief Executive
Officer have the general powers and duties of supervision and management usually
vested in the office of President of a Corporation.
4
<PAGE>
ARTICLE VIII
------------
Vice President
--------------
Section 1. Any of the Vice Presidents who may be available shall, in the absence
- ----------
or the disability of the President, perform the duties and exercise the powers
of the President, and shall perform such other duties as the directors shall
prescribe.
ARTICLE IX
----------
The Treasurer
-------------
Section 1. The Treasurer shall have the custody of the corporate funds and
- ----------
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the directors.
ARTICLE X
---------
The Secretary
-------------
Section 1. The Secretary shall attend all sessions of the Board and all meetings
- ----------
of the shareholders and record all votes and the minutes of all meetings in a
book to be kept for that purpose. he shall give, or cause to be given, notice of
all meetings of the shareholders and of the directors, and shall perform such
other duties as may be prescribed by the President or the directors, all subject
to the supervision of the President.
5
<PAGE>
ARTICLE XI
----------
Vacancies
---------
Section 1. If the office of any director, or of any officer or agent, becomes
- ----------
vacant by reason of death, resignation, disqualification, removal from office,
or otherwise, the directors may choose a successor who shall hold office for the
unexpired terms in respect of which such vacancy occurred.
ARTICLE XII
-----------
Certificate of Stock
--------------------
Section 1. The certificate of stock of the Corporation shall be numbered and
- ----------
shall be entered in the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary.
ARTICLE XIII
------------
Transfer of Stock
-----------------
Section 1. Transfer of stock shall be made on the books of the Corporation only
- ----------
by the person named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor and a full and complete
compliance with all of the terms and conditions set forth on such certificate,
and in the Articles of Incorporation.
ARTICLE XIV
-----------
Registered Shareholders
-----------------------
Section 1. The Corporation shall be entitled to tr? at the holder of record of
- ----------
any share or shares as the holder and owner in fact
6
<PAGE>
thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall. have express or other notice thereof; except as may be
otherwise expressly provided by law.
ARTICLE XV
----------
Fiscal Year
-----------
Section 1. The fiscal year shall. be the twelve months ended December 31 of each
- ----------
year, unless otherwise determined by the directors.
ARTICLE XVI
-----------
Dividends
---------
Section 1. Dividends upon the capital stock of the Corporation when earned, may
- ----------
be declared by the directors.
ARTICLE XVII
------------
Notices
-------
Section 1. Whenever under any of the provisions of these By-Laws notice is
- ----------
required to be given to any director, officer or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
depositing the same in the United States mail, postage prepaid, addressed to
such shareholder, officer, or director at such address as appears on the records
of the Corporation, or in default of other address, to such director, officer or
shareholder at the general post office in the capital city of the State of
Oklahoma, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.
7
<PAGE>
Section 2. Any shareholder, director or officer may waiver any notice required
- ----------
to be given under these By-Laws, or by statute, or the Articles of
Incorporation, to the extent permitted by law and by the Articles of
Incorporation.
ARTICLE XVIII
-------------
Amendments
----------
Section 1. There By-Laws may be amended, altered, repealed, or revised, at any
- ----------
meeting of the shareholders by an affirmative vote of a majority of common stock
at any meeting at which there is a quorum present, or by an affirmative vote of
a majority of the directors present at any meeting at which there is a quorum
present, as the case may be; provided, however, that no change of the time or
place for the election of directors shall be made within sixty days before the
day on which such election is to be held, and that in case of any change of such
time or place, notice thereof, shall be given to each shareholder entitled to
vote, either in person or by letter mailed to his last known post office
address, at least twenty days before the election is held.
DIRECTORS: /s/ Jack E. Golsen
--------------------------------------------
Jack E. Golsen
/s/ Tony M. Shelby
--------------------------------------------
Tony M. Shelby
/s/ David R. Goss
--------------------------------------------
David R. Goss
8
<PAGE>
EXHIBIT 3.21
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned, Secretary of State of Oklahoma, do hereby certify that
the annexed transcript has been compared with the record on file in my office,
of which it purports to be a copy, and that the same is a full, true and correct
copy of:
CERTIFICATE OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
NORTHWEST FINANCIAL CORPORATION
In testimony whereof, I have hereunto set my hand
and affixed the Great Seal of the State of
Oklahoma at the City of Oklahoma City this 14/th/
day of November, A.D. 1997.
_________________________________________
Secretary of State
By:______________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, Articles of Incorporation duly signed and verified of
NORTHWEST FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City, this
2/nd/ day of October, A.D. 1981
-----------------------------------------
Secretary of State
By:______________________________________
<PAGE>
FILE IN DUPLICATE FEE: $1.00 per $1,000.00
On Authorized Capital
MINIMUM FEE: $25.00
ARTICLES OF INCORPORATION
STATE OF OKLAHOMA )
COUNTY OF WOODWARD )
TO SECRETARY OF STATE OF THE STATE OF OKLAHOMA
We, the undersigned Incorporates:
<TABLE>
<CAPTION>
NAME NUMBER STREET CITY STATE
<S> <C> <C> <C> <C>
DAVID L. HOUSTON 812 Main Street Woodward OK 73801
- --------------------------------------------------------------------------------
TOM Z. WRIGHT 1416 Main Street Woodward OK 73801
- --------------------------------------------------------------------------------
CURTIS H. WADDLE 3306 Cheyenne Woodward OK 73801
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>
being persons legally competent to enter into contracts, for the purpose of
forming a corporation under "The Business Corporation Act" of the State of
Oklahoma, do hereby adopt the following Articles of Incorporation:
ARTICLE ONE
The name of this Corporation is:
NORTHWEST FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name must end with "Corporation", "Company", "Incorporated" or "Limited" or an
abbreviation thereof).
ARTICLE TWO
The address of its registered office in the State of Oklahoma is 812 Main
--------
Street in the City of Woodward, County of Woodward, and the name of its
- ------ -------- --------
registered agent at such address is David L. Houston.
----------------
ARTICLE THREE
The duration of the corporation is: perpetual
---------
(Perpetual if not otherwise stated)
<PAGE>
ARTICLE FOUR
The purposes for which this corporation is formed are:
To engage in such activities as from time to time are authorized for a
service corporation of a savings and loan association, including, but not
limited to, the acquisition, development, improvement and management of
property;
The origination, sale, purchase, and servicing of secured and unsecured
loans;
The providing of services to savings and loan associations and to others;
The acting as a partner, member, associate, or manager of any partnership,
limited partnership, joint venture, trust or other enterprise;
The purchasing, holding, voting and selling stocks, bonds and debentures in
other corporations;
The purchasing, owning, financing, leasing and selling of equipment,
machinery and other personal property for all uses, including but not limited to
consumer, commercial and manufacturing activities;
And other lawful activities.
<PAGE>
THIS FORM MUST BE EXECUTED AND ATTACHED TO
ARTICLES OF INCORPORATION
AFFIDAVIT AS TO PAID IN CAPITAL
STATE OF OKLAHOMA )
--------
) SS.
COUNTY OF WOODWARD )
--------
DAVID L. HOUSTON
- --------------------------------------------------------------------------------
TOM Z. WRIGHT
- --------------------------------------------------------------------------------
CURTIS H. WADDLE
- --------------------------------------------------------------------------------
_______________________________________________________________________, of
lawful age, being first duly sworn, each for himself deposes and says that the
above-named affiants constitute a majority of the incorporators of NORTHWEST
---------
FINANCIAL CORPORATION, a proposed corporation, and that the amount of stated
- ---------------------
capital with which said corporation will begin business, as set out in its
attached articles of incorporation, has been fully paid in.
/s/ David L. Houston
---------------------------------
David L. Houston
/s/ Tom Z. Wright
---------------------------------
Tom Z. Wright
/s/ Curtis H. Waddle
---------------------------------
Curtis H. Waddle
<PAGE>
Subscribed and sworn to before me this 30/th/ day of September, 1981.
______________________________
Notary Public
(Seal)
My Commission Expires:
12-19-83
- ----------------------
<PAGE>
FEE: $5.00
FILE IN DUPLICATE
STATEMENT OF CHANGE OF REGISTERED OFFICE AND/OR AGENT
STATE OF Oklahoma )
--------
)
COUNTY OF Woodward )
--------
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned corporation, organized and existing under the laws of the
State of Oklahoma, for the purpose of changing its registered agent or its
--------
registered office, or both, in Oklahoma, as provided by the "Business
Corporation Act" of Oklahoma, represents that:
1. The name of the corporation is:
Northwest Financial Corporation
- --------------------------------------------------------------------------------
2. The present registered office (including Street and number) is:
Northwest Financial Corporation, 812 Main St., Woodward, OK 73801
- --------------------------------------------------------------------------------
3. The registered office (POST OFFICE BOX NOT ACCEPTABLE) is changed to:
Northwest Financial Corporation, 2519 Williams Ave., Woodward, OK
- --------------------------------------------------------------------------------
4. The name and address of its present registered agent is: Northwest
---------
Financial Corporation, David L. Houston, 812 Main Street, Woodward, Oklahoma
- ----------------------------------------------------------------------------
5. The name and address (if Domestic Corporation must be identical to
registered office) of its new registered agent is: Northwest Financial
-------------------
Corporation, David L. Houston, 2519 Williams Avenue, Woodward, Oklahoma
- -------------------------------------------------------------------------------
6. Such change was authorized by resolution duly adopted by the Board of
Directors.
IN WITNESS WHEREOF, the undersigned corporation has caused this statement
to be executed in its name by its _____ President, attested by its _____
Secretary, this 24/th/ day of March, 1982.
(CORPORATE SEAL) NORTHWEST FINANCIAL CORPORATION
---------------------------------------
(Exact Corporate Name)
By /s/ David L. Houston
------------------------------------
Its President
<PAGE>
ATTEST:
Curtis H. Waddle
- ---------------------------
Its Secretary
STATE OF OKLAHOMA )
--------
) SS.
COUNTY OF WOODWARD )
--------
Before me, a Notary Public in and for said County and State, on this 24/th/
day of March, 1982, personally appeared David L. Houston to me known to be the
identical person who subscribed the name of the maker thereof to the foregoing
Statement, as its _____ President, and acknowledged to me that he executed the
same as his free and voluntary act and deed, and as the free and voluntary act
and deed of such corporation, for the uses and purposes therein set forth.
/s/ Judith A. Logsdon
-------------------------------
NOTARY PUBLIC
(NOTARIAL SEAL)
My Commission expires February 24, 1986
<PAGE>
FEE: $25.00
CHANGE
OF
REGISTERED AGENT
AND
LOCATION OF
REGISTERED OFFICE
OF
NORTHWEST FINANCIAL CORPORATION
AN OKLAHOMA CORPORATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
Northwest Financial Corporation, an Oklahoma corporation (the
"Corporation"), for the purpose of changing its registered agent dn registered
office pursuant to Section 1023 of the Oklahoma General Corporation Act, hereby
certifies:
1. The location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
-------------------------------------------------------------------------------
Street Address City County Zip Code
2. The name of the registered agent at such address upon whom process against
the Corporation may be served is:
David M. Shear
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this
---- ----
9/th/ day of May , 1995.
NORTHWEST FINANCIAL CORPORATION
/s/ Tony M. Shelby Tony M. Shelby
- --------------------------- ------------------------------
by Vice President (Please print name)
----
ATTEST:
/s/ David M. Shear David M. Shear
- --------------------------- ------------------------------
by Asst. Secretary (Please print name)
----
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 LINCOLN BLVD.
OKLAHOMA CITY, OKLAHOMA 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX DIVISION
ROBERT V. CULLISON, Vice-chairman REGISTRATION SECTION
DON KILPATRICK, Sec'y-member (405) 521-3161
FEI: 731131584
BOA 05/16/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK, 73105
RE: NORTHWEST FINANCIAL CORPORATION
QUALIFICATION DATE: 10/02/81
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1995 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.22
BY LAWS OF NORTHWEST FINANCIAL CORPORATION
ARTICLE I
OFFICES OF THE CORPORATION
1. The registered office of the corporation shall be located at 812 Main
Street, Woodward, Oklahoma. The location of the registered office may be changed
from time t6 time by the Board of Directors, provided that a certificate of such
change shall be filed with the Secretary of State of Oklahoma.
2. The corporation shall keep in its registered office the originals or
authenticated copies of all the books and records required to be kept therein by
the statutes of the State of Oklahoma.
3. The corporation may have such other business offices at other places
within the State of Oklahoma, as the Board of Directors may from time to time
appoint, and as the business of the corporation requires.
ARTICLE II
SHAREHOLDER MEETINGS
1. The place of holding the annual meeting of the shareholders shall be
the registered office of the corporation, or at such other place as shall be
determined from time to time by the Board of Directors.
2. The annual meeting of the shareholders of the corporation shall be
held on the third Tuesday in the month of July of each year, at 9:00 o'clock
a.m., or on such other date and at such other time as shall be determined from
time to time by the Board of Directors.
3. Special meetings of the shareholders for any purpose or purposes
whatsoever, which shall be stated in the call, may be called at any time by the
President, or the Board of Directors, or by one or more shareholders holding not
less than one-fourth of the voting power of the corporation, with notice as
provided herein, at such times and places as the President or the Board of
Directors, as the case may be, shall designate or if said call is by a
shareholder under the provisions hereof, then at the registered office of the
corporation.
4. The secretary shall, at least 10 days prior to each annual and each
special meeting of the shareholders called by the President or Board of
Directors, give each shareholder of the corporation a written notice of the
meeting, by mailing to each shareholder, as shown by the Stock Transfer Book of
the corporation
<PAGE>
at his or her last known address, notice of the time and place of such meeting.
Upon a request being made by a written notice to the President and Vice
President or the Secretary by any shareholder entitled herein to call such
special meeting, such officer shall give notice to the shareholder that such
meeting has been called for the purpose or purposes stated in such request, and
is to be held at a specified time, which time as fixed by such officers shall
not be less than 10 or more than 30 days after receipt of such request. If
notice of such meefing be not given to the shareholders by such officer within 7
days after receipt of such request, such person or persons making such request
may fix the time of the meeting and give notice thereof in the manner provided
by statute and these by-laws.
5. If the annual meeting of the shareholders be not held at the regular
time, the election of directors may be held at any meeting thereafter called
pursuant to these by-laws.
6. At any meeting of the shareholders, any shareholder having the right
to vote shall be entitled to vote in person or by proxy, which proxy shall
appoint an agent, be in writing, subscribed by the shareholder, must bear a date
not more than 11 months prior to the meeting and be filed with the Secretary at
or before the meeting.
7. The order of busincss of any shareholders' meeting shall be as
follows:
(a) Calling meeting to order;
(b) Proof of notice of meeting;
(c) Reading of minutes of last previous annual or special meeting;
(d) Report of officers;
(e) Report of committees;
(f) Election of directors;
(g) Miscellaneous or special business for which the meeting may have been
called.
8. The presence in person or by proxy of the holders of a majority of the
shares entitled to vote shall constitute a quorum for the transaction of
business. Each sharcholder shall be entitled to one vote for each share of stock
standing in his or her name on the books of the company, 10 days prior to such
meeting. A majority vote of the stock present and having a right to vote, shall
be necessary to elect the directors of the corporation.
9. Shareholders have the ultimate control of the corporation having power
to elect directors, to remove them and to pass upon the by-laws of the
corporation.
2
<PAGE>
ARTICLE III
THE BOARD OF DIRECTORS
1. The control of, and the policy determination function of the
corporation shall be vested in a Board of Directors composed of at least three
members, who need not be residents of the State of Oklahoma nor shareholders in
the corporation. The shareholders in any legally assembled shareholders' meeting
may determine by majority vote of those present the number of directors to be
elected for the ensuing period or year within the limiting provision of the
Articles of Incorporation of the corporation.
2. The Board of Directors may exercise all of the powers of the
corporation in the control of the corporation and in the policy determination
function on behalf of the corporation, and do all such lawful acts and things as
are not by statute or by the Articles of Incorporation, or these by-laws
directed, or required to be exercised or done by the shareholders.
3. Members of the initial Board of Directors shall be elected at the
shareholders organizational meeting and shall hold office until the first annual
meeting of the shareholders, and until their successors shall have been elected
and qualified. At the first annual meeting of the shareholders and at each
annual meeting thereafter, the shareholders shall elect directors to hold office
until the next succeeding annual meeting.
4. Vacancies in the Board of Directors may be filled by the affirmative
note of a majority of the remaining directors though less than a quorum of the
Board. A director elected to fill a vacancy shall be elected for the un-expired
term of his predecessor in office.
5. The Board of Directors shall meet immediately after the annual meeting
of the shareholders, at the place where such meeting of the shareholders has
been held for the purpose of organization, election of officcrs, and
consideration of any other business that may properly be brought before the
meeting. No notice of any kind to either old or new members of the Board for
such annual meeting shall be necessary.
ARTICLE IV
OFFICERS AND AGENTS
1. The officers of the corporation shall consist of a President, Vice
President, Secretary and Treasurer, and such other officers, assistant officers,
and agents as may be deemed necessary by the Board of Directors. Any two or more
offices may be held by the same person, except the offices of President and
Secretary. None of the officers, except the President, need be Directors.
3
<PAGE>
2. The officers shall be chosen annually by the Board of Directors at the
corporation's annual meeting, or as soon after such annual meeting as may
conveniently be possible. Each officer shall hold office until his successor is
chosen and qualified.
3. Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board of Directors whenever in its judgment the best
interests of the corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
4. Any vacancy in any office because of death, resignation, removal, or
any other cause shall be filled for the unexpired portion of the term in the
manner prescribed in the by-laws for election or appointment of such office.
5. The President, who shall be chosen from among the Directors, shall
preside at all meetings of shareholders and directors, and shall have active
executive management of the operations of the corporation, including the
establishment of salaries for the employees of the corporation, subject however,
to the control of the Board of Directors.
6. The Vice President shall perform all duties encumbent upon the
President during the absence or disability of the President, and shall perform
such other duties as the by-laws may require or the Board of Directors may
prescribe.
7. The Secretary shall keep or cause to be kept in books provided for the
purpose, the minutes of the meetings of the shareholders and of the Board of
Directors; shall see that all notices are duly given in accordance with these
by-laws and as required by law; shall be custodian of the records and of the
seal of the corporation and shall see that the seal is affixed to all documents,
is duly authorized in accordance with provisions of these by-laws; and, in
general, shall perform all duties incident to the office of secretary and such
other duties as may, from time to time be assigned to the secretary by the Board
of Directors or President.
8. The Treasurer shall keep correct and complete records of account,
showing accurately at all times the financial condition of the corporation. He
shall be the legal custodian of all monies, notes, securities and other
valuables which may from time to time, come into tho possession of the
corporation. He shall immediately deposit all funds of the corporation coming
into his hands in some reliable bank or other depository designated by the Board
of Directors, and shall keep such bank account in the name of the corporation.
He shall furnish at the meeting of the Board of Directors, or whenever
requested, a statement of the financial condition of the corporation, and shall
perform such other duties as these by-laws may requi.re of the Board of
Directors may
4
<PAGE>
prescribe. The Treasurer may be required to furnish bond in such amount as shall
be determined by the Board of Directors.
9. The salaries of the officers of the corporation shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact he is also a Director of the
corporation.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND EMPLOYEES
The corporation shall indemnify any director, officer, or employee, or
former director, officer, or employee of the corporation, or any person who may
have served at its request as director, officer, or employee of another
corporation in which it owns shares of stock or of which it is a creditor,
against expenses actually and necessarily incurred by him in connection with the
defense of any action, suit or proceeding in which he is made a party by reason
of being or having been such director, officer, or employee, except in relation
to matters as to which he shall be adjudged in such action, suit, or proceeding
to be liable for negligence or misconduct in the performance of duty. The
corporation may also reimburse to any director, officer, or employee the
reasonable costs of settlement of any such action, suit, or proceeding, if it
shall be found by a majority of a committee composed of the directors not
involved in the matter in controversy (whether or not a quorum) that it was to
the interests of the corporation that such settlement be made and that such
director, officer, or employee was not guilty of negligence or misconduct. Such
rights or indemnification and reimbursement shall not be deemed exclusive of any
other right to whichsuch director, officer, or employce may be entitled under
any by-law, agreement, vote of shareholders, or otherwise.
ARTICLE VI
STOCK CERTIFICATES
1. The certificates of stock of the corporation which are issued shall be
numbered and entered in the books of the corporation as they are issued,
exhibiting the holder's name and the number of shares, and shall be signed by
the President or Vice President, and attested by the Secretary.
2. Transfers of stock shall be made on the books of the corporation only
by the person or persons named in the certificate or by such person's attorney
lawfully constituted in writing, and upon surrender of the certificate therefor.
5
<PAGE>
3. The Board of Directors may close the transfer books of the corporation
at thcir discretion for a period not to exceed 15 days preceeding the day
appointed for the payment of dividends.
ARTICLE VII
PROFITS AND DIVIDENDS
1. Dividends may be declared by the Board of Directors from time to time,
in accordance with the Articles of Incorporation and the laws of the State of
Oklahoma.
2. Before payment of any dividends or distribution of profits, there may
be set aside out of the surplus or net profits of the corporation, such sum or
sums as the Directors from time to time in their absolute discretion think
proper as a reserve fund to meet contingencies or for repairing or maintaining
any property of the corporation and for such other purposes as the Directors
shall think conducive to the best interests of the corporation.
3. The Board of Directors may fix a time, not exceeding 30 days
preceding, the date of payment, as a record date for the determination of
shareholders entitled to dividends, and only registered shareholders on the date
so fixed shall be entitled to such dividends, notwithstanding, any transfer of
any shares on the books of the corporation after the record date.
ARTICLE VIII
FINANCES OF THE CORPORATION
1. Monies of the corporation shall be deposited in the name of the
corporation at such bank or banks or savings and loan association or
associations, as the Board of Directors shall designate but shall be drawn out
only by checks signed by a party authorized by the Board of Directors.
2. The books, records, and income tax returns of the corporation shall be
kept and filed on, and the corporation shall operate on a fiscal year basis,
that is from July lst of each year to and through June 30th of the following
year.
ARTICLE IX
NOTICES AND WAIVER THEREOF
Whenever under the provisions of these by-laws notice is required to be
given to any shareholder, director or officer, it shall not be construed to mean
personal service of notice but such notice may be given in writing, by mail, by
depositing the same in a post office or letter box of the United States,
enclosed in a properly addressed and stamped envelope, addressed to the
6
<PAGE>
shareholder, director or officer at his last known post office address as the
same appears from the books and records of the company. Such notice shall be
deerned to be given at the time when the same shall be thus mailed. Any
shareholder, director or officer may waive any notice required to be given under
these by-laws and may do so by written, telegraph, cable or radioed waiver.
Attendance of any shareholder, director of officer at any annual, regular or
special meeting shall be deemed a waiver of the notice of such meeting required
to be given under these by-laws.
ARTICLE X
REGISTERED AGENT
1. The corporation shall have and continue to maintain within the State
of Oklahoma, a "registered agent" on whom service may be had as provided by the
statutes of the State of Oklahoma for domestic corporations.
2. The directors of the corporation shall name such "registered agent"
and the officers of the corporation shall certify thereto, all as is provided by
the statutes of the State of Oklahoma.
ARTICLE XI
LIMITATION UPON CORPORATE BUSINESS EXPENSE
All payments made by the corporation to officers, directors and
stockholders of this corporation purportedly for interest, salary, rent, travel
expense or any other purportedly deductible expense to the corporation for
income tax purposes, shall be made on the implied understanding and contract
that in the event any such payment shall be disallowed as a corporate business
expense, in whole or in part, by any taxing authority, then to the extent of
such disallowance the recipient officer, director and/or stockholder, as the
case may be, shall make repayment to the corporation within 90 days after the
amount of such disallowed corporate expense shall have been finally determined.
The repayment due the corporation under this provision of the by-laws of the
corporation shall be the full amount of such disallowed corporate expense. It
shall be the duty of the Board of Directors to enforce repayment of each such
disallowed amount.
ARTICLE XII
AMENDMENTS
These by-laws may be repealed or amended or new by-laws may be adopted by
the affirmative vote of the holders of a majority of the stock issued and
outstanding and entitled to vote at any annual meeting, or any special meeting,
or any other meeting of the
7
<PAGE>
shareholders if notice of the proposed alteration or amendment be contained in
the notice of the meeting.
Adopted this 3rd day of October, 1981.
/s/ David L. Houston
-----------------------------------
David L. Houston
/s/ Curtis H. Waddle
-----------------------------------
Curtis H. Waddle
/s/ Tom Z. Wright
-----------------------------------
Tom Z. Wright
(Seal)
ATTEST:
/s/ Curtis H. Waddle
- ------------------------------
Curtis H. Waddle,
Secretary
8
<PAGE>
EXHIBIT 3.23
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
AND
ALL AMENDMENTS THERETO
OF
SLURRY EXPLOSIVE CORPORATION
In testimony whereof, I hereto set my hand and
cause to be affixed the Great Seal of the State of
Oklahoma, done at the City of Oklahoma City this
14/th/ day of November, A.D. 1997.
__________________________________________________
Secretary of State
By: ______________________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, The Certificate of Incorporation duly signed and verified of
SLURRY EXPLOSIVE CORPORATION has been filed in the office of the Secretary of
State as provided by the Laws of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City this 12th day of
October, A.D., 1988
/s/ Hannah D. Atkins
--------------------------------------------------
Secretary of State
By: /s/ Vickie L. Courtney
-----------------------------------------------
<PAGE>
CERTIFICATE OF INCORPORATION
OF OCT 12 1988
SLURRY EXPLOSIVE CORPORATION
----------------------------
To the Secretary of State
Of the State of Oklahoma:
The undersigned, in order to form a corporation pursuant to the provisions
of the Oklahoma General Corporation Act (the "Act"), certifies as follows:
Article 1: Name
---------------
The name of the Corporation is:
SLURRY EXPLOSIVE CORPORATION
Article 2: Registered Office and Agent
--------------------------------------
The address of the Corporation's registered office in the State of Oklahoma
is 16 South Pennsylvania, Oklahoma City, Oklahoma County, Oklahoma 73107, and
the name of its registered agent at that address is Larry McLane.
Article 3: Duration
-------------------
The Corporation shall have perpetual existence.
Article 4: Purpose
------------------
The Corporation's purpose shall consist of doing all things and performing
all acts permitted a general corporation under the Act.
Article 5: Authorized Capital
-----------------------------
The Corporation shall have the authority to issue 10,000 shares of voting
common stock, with a par value of $1.00 per share.
Article 6: Incorporator
-----------------------
The name and address of the incorporator is John C. Andrews, 500 W. Main,
Oklahoma City, Oklahoma 73102.
Article 7: Directors
--------------------
The Corporation shall have the number of directors as specified from time
to time pursuant to the provisions of the Corporation's bylaws.
<PAGE>
Article 8: Bylaws
-----------------
The Corporation's directors shall have the power and authority to adopt,
alter, repeal and amend the Corporation's bylaws.
Article 9: Compromise or Arrangement
------------------------------------
Whenever the Corporation proposes a compromise or arrangement between the
Corporation and its creditors, its shareholders, or any class of its creditors
or shareholders, any court of equitable jurisdiction within Oklahoma in a
summary way may order a meeting of the creditors, shareholders or class of
creditors or shareholders, as applicable, on the application of the Corporation,
any creditor or shareholder of the Corporation, any receiver or receivers
appointed for the Corporation pursuant to Section 1106 of the Act, any trustee
or trustees in dissolution of the Corporation, or any receiver or receivers
appointed for the Corporation pursuant to Section 1100 of the Act. If a majority
in number representing three-fourths in value of the creditors, shareholders, or
class of creditors or shareholders, as applicable, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of any
compromise or arrangement, the compromise or arrangement and the reorganization
(if sanctioned by the court) shall bind the Corporation and all of the
shareholders, creditors or class of creditors or shareholders of the
Corporation, as applicable.
Article 10: Appraisal Rights
----------------------------
The appraisal rights afforded in Section 1091 of the Act, subject to the
duties and limitations set forth in that section, shall attach to any proposed
amendment to this Certificate of Incorporation which attempts to impose,
directly or indirectly, personal liability for the debts of the Corporation on
any shareholder or shareholders.
Article 11: Liability
---------------------
The directors of the Corporation shall have limited personal liability to
the full extent permitted by the Act, as now in effect or later amended, or
otherwise permitted by the law. Specifically and without limiting the foregoing
provision, the directors of the Corporation shall have no personal liability to
the Corporation or its shareholders for monetary damages as a result of any
breach of fiduciary duty, except for (a) a breach of the director's duty of
loyalty to the Corporation or its shareholders, (b) an act or omission not in
good faith or which involves intentional misconduct or a knowing violation of
law, (c) a violation of Section 1053 of the Act, or (d) a transaction from which
the director derived an improper personal benefit.
2
<PAGE>
Article 12: Indemnification
---------------------------
The Corporation may indemnify any and all persons whom it shall have the
power to indemnify under the Act, to the full extent permitted by the Act, from
and against any and all of the expenses, liabilities and other items specified
by the Act, and the indemnification allowed by this Article 1.2 shall not
operate to exclude any other rights under the Bylaws of the Corporation, any
agreement, any vote of the shareholders or directors, or otherwise, both as to
any action in an official capacity and as to any action in another capacity
while holding office. The indemnification allowed by this Article 12 shall
continue as to a person who has ceased to serve as a director, officer, employee
or agent and shall inure to the benefit of the person's heirs, executors and
administrators.
Executed on this 12/th/ day of October, 1988.
/s/ John C. Andrews
-------------------------------------------------
JOHN C. ANDREWS
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
This instrument was acknowledged before me on this 12/th/ day of October,
1988, by John C. Andrews.
/s/ Nanette Morris
-------------------------------------------------
Notary Public
My Commission Expires:
10-2-91
(SEAL)
3
<PAGE>
FEE: $25.00
CHANGE
OF
REGISTERED AGENT
AND
LOCATION OF
REGISTERED OFFICE
OF
SLURRY EXPLOSIVE CORPORATION
AN OKLAHOMA CORPORATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
Slurry Explosive Corporation, an Oklahoma corporation (the "Corporation"),
for the purpose of changing its registered agent and registered office pursuant
to Section 1023 of the Oklahoma General Corporation Act, hereby certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
- ------------------------------------------------------------------
Street Address City County Zip Code
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this 26th day
of September, 1995.
SLURRY EXPLOSIVE CORPORATION
/s/ Tony M. Shelby Tony M. Shelby
- ------------------------------- ---------------------------------------
by Vice President (Please print name)
----
ATTEST:
/s/ David M. Shear David M. Shear
- ------------------------------- ---------------------------------------
by Asst. Secretary (Please print name)
----
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 LINCOLN BLVD.
OKLAHOMA CITY, OKLAHOMA 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX DIVISION
ROBERT V. CULLISON, Vice-chairman REGISTRATION SECTION
DON KILPATRICK, Sec'y-member (405) 521-3161
FEI: 731330903
BOA 10/19/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK. 73105
RE: SLURRY EXPLOSIVE CORPORATION
QUALIFICATION DATE: 10/12/88
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1996 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.24
BYLAWS
of
SLURRY EXPLOSIVE CORPORATION
Prepared By:
Andrews Davis Legg
Bixler Milsten & Murrah
500 West
Oklahoma City, Oklahoma 73102
<PAGE>
BYLAWS
OF
SLURRY EXPLOSIVE CORPORATION
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1: Definitions.................................................... 5
- ----------------------
1.01. Definitions................................................. 5
1.02. Offices..................................................... 5
Article 2: Offices........................................................ 5
- ------------------
2.01. Principal Office............................................ 5
2.02. Registered Office........................................... 5
2.03. Other Offices............................................... 5
Article 3: Meetings of Shareholders....................................... 6
- -----------------------------------
3.01. Annual Meetings............................................. 6
3.02. Special Meetings............................................ 6
3.03. Place of Meetings........................................... 6
3.04. Notice of Meetings.......................................... 6
3.05. Waiver of Notice............................................ 6
3.06. Adjournment of Meeting...................................... 7
3.07. Quorum...................................................... 7
3.08. Organization................................................ 7
3.09. Conduct of Business......................................... 7
3.10. List of Shareholders........................................ 7
3.11. Closing of Transfer Books
or Fixing of Record Date................................ 8
3.12. Voting of Shares............................................ 8
3.13. Judges...................................................... 9
3.14. Proxies..................................................... 9
3.15. Consent of Shareholders in Lieu of Meeting.................. 9
Article 4: Board of Directors............................................. 10
- -----------------------------
4.01. General Powers.............................................. 10
4.02. Number...................................................... 10
4.03. Election of Directors and Term of Office.................... 10
4.04. Resignations................................................ 10
4.05. Removal..................................................... 10
4.06. Vacancies................................................... 10
4.07. Chairman of the Board....................................... 10
4.08. Compensation................................................ 10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 5: Meetings of Directors......................................... 11
- --------------------------------
5.01. Regular Meetings........................................... 11
5.02. Place of Meetings.......................................... 11
5.03. Meetings by Telecommunications............................. 11
5.04. Special Meetings........................................... 11
5.05. Notice of Special Meetings................................. 11
5.06. Waiver by Presence......................................... 11
5.07. Quorum..................................................... 11
5.08. Conduct of Business........................................ 11
5.09. Action by Consent.......................................... 12
Article 6: Committees.................................................... 12
- ---------------------
6.01. Committees of the Board.................................... 12
6.02. Selection of Committee Numbers............................. 12
6.03. Conduct of Business........................................ 12
6.04. Authority.................................................. 12
6.05. Minutes.................................................... 13
Article 7: Officers...................................................... 13
- -------------------
7.01. Officers of the Corporation................................ 13
7.02. Election and Term.......................................... 13
7.03. Compensation of Officers................................... 13
7.04. Removal of Officers and Agents............................. 13
7.05. Resignation of Officers and Agents......................... 13
7.06. Bond....................................................... 13
7.07. President.................................................. 13
7.08. Vice Presidents............................................ 14
7.09. Secretary.................................................. 14
7.10. Assistant Secretaries...................................... 14
7.11. Treasurer.................................................. 14
7.12. Assistant Treasurers....................................... 14
7.13. Delegation of Authority.................................... 15
7.14. Action with Respect to Securities
of Other Corporations.................................. 15
7.15. Vacancies.................................................. 15
Article 8: Contracts, Loans, Drafts, Deposits and Accounts............... 15
- ----------------------------------------------------------
8.01. Contracts.................................................. 15
8.02. Loans...................................................... 15
8.03. Drafts..................................................... 15
8.04. Deposits................................................... 15
8.05. General and Special Bank Accounts.......................... 15
Article 9: Certificates for Shares and Their Transfer.................... 16
- -----------------------------------------------------
9.01. Certificates for Shares.................................... 16
9.02. Transfer of Shares......................................... 16
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.03. Lost, Stolen, Destroyed and Mutilated
Certificates......................................... 16
9.04. Regulations............................................... 17
9.05. Holder of Record.......................................... 17
9.06. Treasury Shares........................................... 17
Article 10: Indemnification............................................. 17
- ---------------------------
10.01. Authority of Corporation to Indemnify..................... 17
10.02. Insurance................................................. 17
Article 11: Notices..................................................... 18
- -------------------
11.01. General................................................... 18
11.02. Waiver of Notice.......................................... 18
Article 12: Miscellaneous............................................... 18
- -------------------------
12.01. Facsimile Signatures...................................... 18
12.02. Corporate Seal............................................ 18
12.03. Fiscal Year............................................... 18
Article 13: Amendments.................................................. 18
</TABLE>
iii
<PAGE>
BYLAWS
OF
SLURRY EXPLOSIVE CORPORATION
(An Oklahoma Corporation)
-----------------------------
Article 1: Definitions
----------------------
1.01. Definitions. Unless the context clearly requires otherwise, in
-----------
these Bylaws:
(a) "Board" means the board of directors of the Corporation.
(b) "Bylaws" means these bylaws as adopted by the Board and includes
amendments subsequently adopted by the Board or by the Shareholders.
(c) "Certificate of Incorporation" means the Certificate of
Incorporation of Slurry Explosive Corporation as filed with the Secretary of
State of the State of Oklahoma and includes all amendments thereto subsequently
filed.
(d) "Corporation" means Slurry Explosive Corporation.
(e) "Section" refers to sections of these Bylaws.
(f) "Shareholder" means shareholders of record of the Corporation.
1.02. Offices. The title of an office refers to the person or persons
-------
who at any given time perform the duties of that particular office for the
Corporation.
Article 2: Offices
------------------
2.01. Principal Office. The Corporation may locate its principal office
----------------
within or without the state of incorporation as the Board may determine.
2.02. Registered Office. The registered office of the Corporation
-----------------
required by law to be maintained in the state of incorporation may be, but need
not be, identical with the principal office of the Corporation. The Board may
change the address of the registered office from time to time.
2.03. Other Offices. The Corporation may have offices at such other
-------------
places, either within or without the state of incorporation, as the Board may
designate or as the business of the Corporation may require from time to time.
<PAGE>
Article 3: Meetings of Shareholders
-----------------------------------
3.01. Annual Meetings. The Shareholders of the Corporation shall
---------------
hold their annual meetings for the purpose of electing directors and for the
transaction of such other proper business as may come before such meetings at
such time, date and place as the Board shall determine by resolution.
3.02. Special Meetings. The Board or a Committee of the Board duly
----------------
designated and whose powers and authority include the power to call meetings may
call special meetings of the Shareholders of the Corporation at any time for any
purpose or purposes.
3.03. Place of Meetings. The Shareholders shall hold all meetings at
-----------------
such places, within or without the State of Oklahoma, as the Board or a
committee of the Board shall specify in the notice or waiver of notice for such
meetings.
3.04. Notice of Meetings. Except as otherwise required by law, the
------------------
Board or a committee of the Board shall give notice of each meeting of
Shareholders, whether annual or special, not less than 10 nor more than 60 days
before the date of the meeting. The Board or a committee of the Board shall
deliver a notice to each Shareholder entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his address as it appears on the records of the Corporation,
or by transmitting a notice thereof to him at such address by telegraph,
telecopy, cable or wireless. If mailed, notice is given on the date deposited in
the United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Corporation. An affidavit of the
Secretary or an Assistant Secretary or of the Transfer Agent of the Corporation
that he has given notice shall constitute, in the absence of fraud, prima facie
evidence of the facts stated therein.
Every notice of a meeting of the Shareholders shall state the place, date
and hour of the meeting and, in the case of a special meeting, also shall state
the purpose or purposes of the meeting. Furthermore, if the Corporation will
maintain the list at a place other than where the meeting will take place, every
notice of a meeting of the Shareholders shall specify where the Corporation will
maintain the list of Shareholders entitled to vote at the meeting.
3.05. Waiver of Notice. Whenever these Bylaws require written
----------------
notice, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall constitute the equivalent
of notice. Attendance of a person at any meeting shall constitute a waiver of
notice of such meeting, except when the person attends the meeting for the
express
2
<PAGE>
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. No written
waiver of notice need specify either the business to be transacted at, or the
purpose or purposes of any regular or special meeting of the Shareholders,
directors or members of a committee of the Board.
3.06. Adjournment of Meeting. When the Shareholders adjourn a
----------------------
meeting to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Shareholders may transact
any business which they may have transacted at the original meeting. If the
adjournment is for more than 30 days or, if after the adjournment, the Board or
a committee of the Board fixes a new record date for the adjourned meeting, the
Board or a committee of the Board shall give notice of the adjourned meeting to
each Shareholder of record entitled to vote at the meeting.
3.07. Quorum. Except as otherwise required by law, the holders of a
------
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes at any
meeting of the Shareholders. In the absence of a quorum at any meeting or any
adjournment thereof, the holders of a majority of the shares of stock entitled
to vote who are present, in person or by proxy, or, in the absence therefrom of
all the Shareholders, any officer entitled to preside at, or to act as secretary
of, such meeting may adjourn such meeting to another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Shareholders to all Shareholders entitled to vote thereat, stating
that those present shall constitute a quorum, then, except as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum and a
majority of the votes cast at such meeting shall determine all matters.
3.08. Organization. Such person as the Board may have designated or,
------------
in the absence of such a person, the highest ranking officer of the Corporation
who is present shall call to order any meeting of the Shareholders, determine
the presence of a quorum, and act as chairman of the meeting. In the absence of
the Secretary or an Assistant Secretary of the Corporation, the chairman shall
appoint the secretary of the meeting.
3.09. Conduct of Business. The chairman of any meeting of
-------------------
Shareholders shall determine the order of business and the procedure at the
meeting, including such regulations of the manner of voting and the conduct of
discussion as he deems in order.
3.10. List of Shareholders. At least 10 days before every meeting of
--------------------
Shareholders, the Secretary shall prepare a list of the Shareholders entitled to
vote at the meeting or any adjournment
3
<PAGE>
thereof, arranged in alphabetical order, showing the address of each Shareholder
and the number of shares registered in the name of each Shareholder. The
Corporation shall make the list available for examination by any Shareholder for
any purpose germane to the meeting, either at a place within the city where the
meeting will take place or at the place designated in the notice of the meeting.
The Secretary shall produce and keep the list at the meeting during the
entire duration of the meeting, and any Shareholder who is present may inspect
the list at the meeting. The list shall constitute presumptive proof of the
identity of the Shareholders entitled to vote at the meeting and the number of
shares each Shareholder holds.
A determination of Shareholders entitled to vote at any meeting of
Shareholders pursuant to this Section shall apply to any adjournment thereof.
3.11. Closing of Transfer Books or Fixing of Record Date. For the
--------------------------------------------------
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of any dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board or a committee of the Board
may provide that the Corporation shall close the stock transfer books for a
stated period not to exceed 60 days. if the Corporation closes the stock
transfer books for the purpose of determining Shareholders entitled to notice of
or to vote at a meeting of Shareholders, the Corporation shall close such books
a minimum of 10 days and a maximum of 60 days immediately preceding such
meeting.
In lieu of closing the stock transfer books, the Board or a committee of
the Board may fix in advance a date as the record date for any such
determination of Shareholders. However, the Board shall not fix such date, in
any case, more than 60 days prior to the date of the particular action.
If the Board or a committee of the Board does not close the stock transfer
books and does not fix a record date for the determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders, the date of the
mailing of notice or the date on which the Board adopts the resolution declaring
a dividend, as the case may be, shall be the record date for such determination
of Shareholders.
3.12. Voting of Shares. Each Shareholder shall have one vote for
----------------
every share of stock having voting rights registered in his name on the record
date for the meeting. The Corporation shall not have the right to vote treasury
stock of the Corporation, nor shall another corporation have the right to vote
its stock of the Corporation if the Corporation holds, directly or indirectly, a
majority of the shares entitled to vote in the election of
4
<PAGE>
directors of such other corporation. Persons holding stock of the Corporation in
a fiduciary capacity shall have the right to vote such stock. Persons who have
pledged their stock of the Corporation shall have the right to vote such stock
unless in the transfer on the books of the Corporation the pledgor expressly
empowered the pledgee to vote such stock. In that event, only the pledgee, or
his proxy, may represent such stock and vote thereon.
A plurality of the votes cast shall determine all elections and, except
when the law requires otherwise, a majority of the votes cast shall determine
all other matters.
The Shareholders may vote by voice vote on all matters. However, upon
demand by a Shareholder entitled to vote, or his proxy, the Shareholders shall
vote by ballot. In that event, each ballot shall state the name of the
Shareholder or proxy voting, the number of shares voted and such other
information as the Corporation may require under the procedure established for
the meeting.
3.13. Judges. At any meeting in which the Shareholders vote by
------
ballot, the chairman may appoint a judge or judges. Each judge shall subscribe
an oath to execute the duties of a judge at such meeting faithfully, with strict
impartiality, and according to the best of his ability. The judge or judges
shall decide the qualification of the voters and shall report the number of
shares represented at the meeting and entitled to vote on any question, shall
conduct and accept the votes, and, when the Shareholders have completed voting,
ascertain and report the number of shares voted respectively for and against the
question. The judge or judges shall prepare a subscribed, written report and
shall deliver the report to the Secretary of the Corporation. A judge need not
be a Shareholder of the Corporation, and any officer of the Corporation may be a
judge on any question other than a vote for or against a proposal in which he
has a material interest.
3.14. Proxies. A Shareholder may exercise any voting rights in
-------
person or by his proxy appointed by an instrument in writing, which he or his
authorized attorney-in-fact has subscribed and which the proxy has delivered to
the secretary of the meeting.
A proxy is not valid after the expiration of three years after the date of
its execution, unless the person executing it specifies thereon the length of
time for which it is to continue in force (which length may exceed three years)
or limits its use to a particular meeting.
The attendance at any meeting of a Shareholder who previously has given a
proxy shall not have the effect of revoking the same unless he notifies the
Secretary in writing prior to the voting of the proxy.
5
<PAGE>
3.15. Consent of Shareholders in Lieu of Meeting. The Shareholders
------------------------------------------
may take any action which they could take at any annual or special meeting
without a meeting, prior notice and a vote if the holders of outstanding stock
having not less than the minimum number of votes necessary to authorize or take
the action at a meeting at which all shares entitled to vote were present and
voted, sign a consent in writing, setting forth the action taken.
The Secretary or an Assistant Secretary shall give prompt notice of the
taking of any corporate action without a meeting by less than unanimous consent
to the Shareholders who have not consented in writing.
Article 4: Board of Directors
-----------------------------
4.01. General Powers. The Board shall manage the property, business and
--------------
affairs of the Corporation.
4.02. Number. The number of directors who shall constitute the Board
------
shall equal not less than one nor more than 15, as the Board may determine by
resolution from time to time.
4.03. Election of Directors and Term of Office. The Shareholders of
----------------------------------------
the Corporation shall elect the directors at the annual or adjourned annual
meeting (except as otherwise provided herein for the filling of vacancies). Each
director shall hold office until his death, resignation, retirement, removal, or
disqualification, or until his successor shall have been elected and qualified.
4.04. Resignations. Any director of the Corporation may resign at
------------
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any resignation shall take effect upon receipt or at the time
specified in the notice. Unless the notice specifies otherwise, the
effectiveness of the resignation shall not depend upon its acceptance.
4.05. Removal. Shareholders holding a majority of the outstanding
-------
shares entitled to vote at an election of directors may remove any director at
any time with or without cause.
4.06. Vacancies. A majority of the remaining directors, although
---------
less than a quorum, may fill any vacancy in the Board, whether because of death,
resignation, disqualification, an increase in the number of directors, or any
other cause. Each director so chosen shall hold office until his death.,
resignation, retirement, removal, or disqualification, or until his successor
shall have been elected and qualified.
4.07. Chairman of the Board. At the initial and annual meeting of
---------------------
the Board, the directors may elect from their number a Chairman of the Board of
Directors. The Chairman shall preside at all meetings of the Board and shall
perform such other duties as
6
<PAGE>
the Board may direct. The Board also may elect a vice Chairman and other
officers of the Board, with such powers and duties as the Board may designate
from time to time.
4.08. Compensation. The Board may compensate directors for their
------------
services and may provide for the payment of all expenses the directors incur by
attending meetings of the Board.
Article 5: Meetings of Directors
--------------------------------
5.01. Regular Meetings. The Board may hold regular meetings at such
----------------
places, dates and times as the Board shall establish by resolution. If any day
fixed for a meeting falls on a legal holiday, the Board shall hold the meeting
at the same place and time on the next succeeding business day. The Board need
not give notice of regular meetings.
5.02. Place of Meetings. The Board may hold any of its meetings in
-----------------
or out of the State of Oklahoma, at such places as the Board may designate, at
such places as the notice or waiver of notice of any such meeting may designate,
or at such places as the persons calling the meeting may designate.
5.03. Meetings by Telecommunications. The Board or any committee of
------------------------------
the Board may hold meetings by means of conference telephone or similar
telecommunications equipment that enable all persons participating in the
meeting to hear each other. Such participation shall constitute presence in
person at such meeting.
5.04. Special Meetings. The Chairman of the Board, the President, or
----------------
one-third of the directors thd1n in office may call a special meeting of the
Board. The person or persons authorized to call special meetings of the Board
may fix any place, either in or out of the State of Oklahoma as the place for
the meeting.
5.05. Notice of Special Meetings. The person or persons calling a
--------------------------
special meeting of the Board shall give written notice to each director of the
time, place, date and purpose of the meeting of not less than three business
days if by mail and not less than 24 hours if by telegraph or in person. A
director may waive notice of any special meeting, and any meeting shall
constitute a legal meeting without notice if all the directors are present or if
those not present sign either before or after the meeting a written waiver of
notice, a consent to such meeting, or an approval of the minutes of the meeting.
A notice or waiver of notice need not specify the purposes of the meeting or the
business which the Board will transact at the meeting.
5.06. Waiver by Presence. Except when expressly for the purpose of
------------------
objecting to the legality of a meeting, a director's presence at a meeting shall
constitute a waiver of notice of such meeting.
7
<PAGE>
5.07. Quorum. A majority of the directors then in office shall
------
constitute a quorum for all purposes at any meeting of the Board. In the absence
of a quorum, a majority of directors present at any meeting may adjourn the
meeting to another place, date or time without further notice.
5.08. Conduct of Business. The Board shall transact business in such
-------------------
order and manner as the Board may determine. Except as the law requires
otherwise, the Board shall determine all matters by the vote of a majority of
the directors present. The directors shall act as a Board, and the individual
directors shall have no power as such.
5.09. Action by Consent. The Board or a committee of the Board may
-----------------
take any required or permitted action without a meeting if all members of the
Board or committee sign a written consent and file the consent with the minutes
of the proceedings of the Board.
Article 6: Committees
---------------------
6.01. Committees of the Board. The Board may designate, by a vote of
-----------------------
a majority of the directors then in office, committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
6.02. Selection of Committee Numbers. The Board shall elect by a
------------------------------
vote of a majority of the directors then in office a director or directors to
serve as the member or members of a committee. By the same vote, the Board may
designate other directors as alternative members who may replace any absent or
disqualified member at any meeting of a committee. In the absence or
disqualification of any member of any committee and any alternate member in his
place, the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
appoint by unanimous vote another member of the Board to act at the meeting in
the place of the absent or disqualified member.
6.03. Conduct of Business. Each committee may determine the
-------------------
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as the law or lease Bylaws require otherwise. Each
committee shall make adequate provision for notice of all meetings to members. A
majority of the members shall constitute a quorum, unless the committee consists
of one or two members. In that event, one member shall constitute a quorum. A
majority vote of the members present shall determine all matters. A committee
may take action without a meeting if all the members of the committee consent in
writing and file the consent or consents with the Minutes of the proceedings of
the committee.
6.04. Authority. Any committee, to the extent the Board provides,
---------
shall have and may exercise all the powers and authority
8
<PAGE>
of the Board in the management of the business and affairs of the Corporation,
and may authorize the affixation of the Corporation's seal to all instruments
which may require or permit it. However, no committee shall have any power or
authority with regard to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the Shareholders the sale,
lease or exchange of all or substantially all of the Corporation's property,
recommending to the Shareholders a dissolution of the Corporation or a
revocation of a dissolution of the Corporation, or amending these Bylaws of the
Corporation. Unless a resolution of the Board expressly provides, no committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
6.05. Minutes. Each committee shall keep regular minutes of its
-------
proceedings and report the same to the Board when required.
Article 7: Officers
-------------------
7.01. Officers of the Corporation. The officers of the Corporation
---------------------------
shall consist of those which the Board may designate and elect from time to
time.
7.02. Election and Term. The Board shall elect the officers of the
-----------------
Corporation. Each officer shall hold office until his death, resignation,
retirement, removal or disqualification, or until his successor shall have been
elected and qualified.
7.03. Compensation of Officers. The Board shall fix the compensation
------------------------
of all officers of the Corporation. No officer shall serve the Corporation in
any other capacity and receive compensation, unless the Board authorizes the
additional compensation.
7.04. Removal of Officers and Agents. The Board may remove any
------------------------------
officer or agent it has elected or appointed at any time, with or without cause.
7.05. Resignation of Officers and Agents. Any officer or agent the
----------------------------------
Board has elected or appointed may resign at any time by giving written notice
to the Board, the Chairman of the Board, the President, or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified. Unless otherwise specified in the
notice, the Board need not accept the resignation to make it effective.
7.06. Bond. The Board may require by resolution any officer, agent,
----
or employee of the Corporation to give bond to the Corporation, with sufficient
sureties conditioned on the faithful performance of the duties of his respective
office or agency. The Board also may require by resolution any officer, agent or
employee
9
<PAGE>
to comply with such other conditions as the Board may require from time to time.
7.07. President. The President shall be the principal executive
---------
officer of the Corporation and, subject to the Board's control, shall supervise
and control all of the business and affairs of the Corporation. When present, he
shall sign (with or without the Secretary, an Assistant Secretary, or any other
officer or agent of the Corporation which the Board has authorized) deeds,
mortgages, bonds, contracts or other instruments which the Board has authorized
an officer or agent of the Corporation to execute. However, the-President shall
not sign any instrument which the law, these Bylaws, or the Board expressly
require some other officer or agent of the Corporation to sign and execute. In
general, the President shall perform all duties incident to the office of
President and such other duties as the Board may prescribe from time to time.
7.08. Vice Presidents. In the absence of the President or in the
---------------
event of his death, inability or refusal to act, the vice Presidents in the
order of their length of service as Vice Presidents, unless the Board determines
otherwise, shall perform the duties of the President. When acting as the
President, a vice President shall have all the powers and restrictions of the
Presidency. A Vice President shall perform such other duties as the President or
the Board may assign to him from time to time.
7.09. Secretary. The Secretary shall (a) keep the minutes of the
---------
meetings of the Shareholders and of the Board in one or more books for that
purpose, (b) give all notices which these Bylaws or the law requires, (c) serve
as custodian of the records and seal of the Corporation, (d) affix the seal of
the Corporation to all documents which the Board has authorized execution on
behalf of the Corporation under seal, (e) maintain a register of the address of
each Shareholder of the Corporation, (f) sign, with the President, a Vice
President, or any other officer or agent of the Corporation which the Board has
authorized, certificates for shares of the Corporation, (g) have charge of the
stock transfer books of the Corporation, and (h) perform all duties which the
President or the Board may assign to him from time to time.
7.10. Assistant Secretaries. In the absence of the Secretary or in
---------------------
the event of his death, inability or refusal to act, the Assistant Secretaries
in the order of their length of service as Assistant Secretary, unless the
Board determines otherwise, shall perform the duties of the Secretary. When
acting as the Secretary, an Assistant Secretary shall have the powers and
restrictions of the Secretary. An Assistant Secretary shall perform such other
duties as the President, Secretary or Board may assign from time to time.
7.11. Treasurer. The Treasurer shall (a) have responsibility for all
---------
funds and securities of the Corporation,
10
<PAGE>
(b) receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, (c) deposit all moneys in the name of the Corporation in
depositories which the Board selects, and (d) perform all of the duties which
the President or the Board may assign to him from time to time.
7.12. Assistant Treasurers. In the absence of the Treasurer or in
--------------------
the event of his death, inability or refusal to act, the Assistant Treasurers in
the order of their length of service as Assistant Treasurer, unless the Board
determines otherwise, shall perform the duties of the Treasurer. When acting as
the Treasurer, an Assistant Treasurer shall have the powers and restrictions of
the Treasurer. An Assistant Treasurer shall perform such other duties as the
Treasurer, the President, or the Board may assign to him from time to time.
7.13. Delegation of Authority. Notwithstanding any provision of
-----------------------
these Bylaws to the contrary, the Board may delegate the powers or duties of any
officer to any other officer or agent.
7.14. Action with Respect to Securities of Other Corporations.
-------------------------------------------------------
Unless the Board directs otherwise, the President shall have the power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of Shareholders of or with respect to any action of Shareholders of any
other corporation in which the Corporation holds securities. Furthermore, unless
the Board directs otherwise, the President shall exercise any and all rights and
powers which the Corporation possesses by reason of its ownership of securities
in another corporation.
7.15. Vacancies. The Board may fill any vacancy in any office
---------
because of death, resignation, removal, disqualification or any other cause in
the manner which these Bylaws prescribe for the regular appointment to such
office.
Article 8: Contracts, Loans, Drafts, Deposits and Accounts
----------------------------------------------------------
8.01. Contracts. The Board may authorize any officer or officers,
---------
agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. The Board may make such
authorization general or special.
8.02. Loans. Unless the Board has authorized such action, no officer
-----
or agent of the Corporation shall contract for a loan on behalf of the
Corporation or issue any evidence of indebtedness in the Corporation's name.
8.03. Drafts. The President, any Vice President, the Treasurer, any
------
Assistant Treasurer, and such other persons as the Board shall determine shall
issue all checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of or payable by the
Corporation.
11
<PAGE>
8.04. Deposits. The Treasurer shall deposit all funds of the
--------
Corporation not otherwise employed in such banks, trust companies, or other
depositories as the Board may select or as any officer, assistant, agent or
attorney of the Corporation to whom the Board has delegated such power may
select. For the purpose of deposit and collection for the account of the
Corporation, the President or the Treasurer (or any other officer, assistant,
agent or attorney of the Corporation whom the Board has authorized) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
payable to the order of the Corporation.
8.05. General and Special Bank Accounts. The Board may authorize the
---------------------------------
opening and keeping of general and special bank accounts with such banks, trust
companies, or other depositories as the Board may select or as any officer,
assistant, agent or attorney of the Corporation to whom the Board has delegated
such power may select. The Board may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the provisions of
these Bylaws, as it may deem expedient.
Article 9: Certificates for Shares and Their Transfer
-----------------------------------------------------
9.01. Certificates for Shares. Every owner of stock of the
-----------------------
Corporation shall have the right to receive a certificate or certificates,
certifying to the number and class of shares of the stock of the Corporation
which he owns. The Board shall determine the form of the certificates for the
shares of stock of the Corporation. The Secretary, transfer agent, or registrar
of the Corporation shall number the certificates representing shares of the
stock of the Corporation in the order in which the Corporation issues them. The
President or any vice President and the Secretary or any Assistant Secretary
shall sign the certificates in the name of the Corporation. Any or all
certificates may contain facsimile signatures. In case any officer, transfer
agent, or registrar who has signed a certificate, or whose facsimile signature
appears on a certificate, ceases to serve as such officer, transfer agent, or
registrar before the Corporation issues the certificate, the Corporation may
issue the certificate with the same effect as though the person who signed such
certificate, or whose facsimile signature appears on the certificate, was such
officer, transfer agent, or registrar at the date of issue. The Secretary,
transfer agent, or registrar of the Corporation shall keep a record in the stock
transfer books of the Corporation of the names of the persons, firms or
corporations owning the stock represented by the certificates, the number and
class of shares represented by the certificates and the dates-thereof and, in
the case of cancellation, the dates of cancellation. The Secretary, transfer
agent, or registrar of the Corporation shall cancel every certificate
surrendered to the Corporation for exchange or transfer. Except in the case of a
lost, destroyed or mutilated certificate, the Secretary, transfer agent, or
registrar of the Corporation shall not issue a new certificate in exchange for
an
12
<PAGE>
existing certificate until he has cancelled the existing certificate.
9.02. Transfer of Shares. The holder of record of shares of the
------------------
Corporation's stock, or his attorney-in-fact authorized by power of attorney
duly executed and filed with the Secretary, transfer agent or registrar of the
Corporation, may transfer his shares only on the stock transfer books of the
Corporation. Such person shall furnish to the Secretary, transfer agent, or
registrar of the Corporation proper evidence of his authority to make the
transfer and shall properly endorse and surrender for cancellation his existing
certificate or certificates for such shares. Whenever the holder of record of
shares of the Corporation's stock makes a transfer of shares for collateral
security, the Secretary, transfer agent, or registrar of the Corporation shall
state such fact in the entry of transfer if the transferor and the transferee
request.
9.03. Lost, Stolen, Destroyed and Mutilated Certificates. The Board
--------------------------------------------------
may direct the Secretary, transfer agent, or registrar of the Corporation to
issue a new certificate to any holder of record of shares of the Corporation's
stock claiming that he has lost such certificate, or that someone has stolen,
destroyed or mutilated such certificate, upon the receipt of an affidavit from
such holder to such fact. When authorizing the issue of a new certificate, the
Board, in its discretion, may require as a condition precedent to the issuance
that the owner of such certificate give the Corporation a bond of indemnity in
such form and amount as the Board may direct.
9.04. Regulations. The Board may make such rules and regulations,
-----------
not inconsistent with these Bylaws, as it deems expedient concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer agents, or one or more registrars, and may require
all certificates for stock to bear the signature or signatures of any of them.
9.05. Holder of Record. The Corporation may treat as absolute owners
----------------
of shares the person in whose name the shares stand of record as if that person
had full competency, capacity and authority to exercise all rights of ownership,
despite any knowledge or notice to the contrary or any description indicating a
representative, pledge or other fiduciary relation, or any reference to any
other instrument or to the rights of any other person appearing upon its record
or upon the share certificate. However, the Corporation shall treat any person
furnishing proof of his appointment as a fiduciary as if he were the holder of
record of the shares.
9.06. Treasury Shares. Treasury shares of the Corporation shall
---------------
consist of shares which the Corporation has issued and
13
<PAGE>
thereafter acquired but not cancelled. Treasury shares shall not carry voting or
dividend rights.
Article 10: Indemnification
---------------------------
10.01. Authority of Corporation to Indemnify. The Corporation shall
-------------------------------------
have complete and unfettered authority to indemnify its directors, officers, or
agents in a manner provided by the certificate of incorporation, these bylaws,
contract or resolution adopted by the Board of Directors in its sole discretion.
10.02. Insurance. Upon resolution passed by the Board, the
---------
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a shareholder, director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or as a member of any committee or similar body, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article 10.
Article 11: Notices
-------------------
11.01. General. Whenever these Bylaws require notice to any
-------
Shareholder, director, officer or agent, such notice does not mean personal
notice. A person may give effective notice under these Bylaws in every case by
depositing a writing in a post office or letter box in a postpaid, sealed
wrapper, or by dispatching a prepaid telegram addressed to such Shareholder,
director, officer or agent at his address on the books of the Corporation.
Unless these Bylaws expressly provide to the contrary, the time when the person
sends notice shall constitute the time of the giving of notice.
11.02. Waiver of Notice. Whenever the law or these Bylaws require
----------------
notice, the person entitled to said -notice may waive such notice in writing,
either before or after the time stated therein.
Article 12: Miscellaneous
-------------------------
12.01. Facsimile Signatures. In addition to the use of facsimile
--------------------
signatures which these Bylaws specifically authorize, the Corporation may use
such facsimile signatures of any officer or officers, agents or agent, of the
Corporation as the Board or a committee of the Board may authorize.
12.02. Corporate Seal. The Board may provide for a suitable seal
--------------
containing the name of the Corporation, of which the Secretary shall be in
charge. The Treasurer, any Assistant Secretary, or any Assistant Treasurer may
keep and use the seal or
14
<PAGE>
duplicates of the seal if and when the Board or a committee of the Board so
directs.
12.03. Fiscal Year. The Board shall have the authority to fix and change
-----------
the fiscal year of the Corporation.
Article 13: Amendments
----------------------
Subject to the provisions of the Certificate of Incorporation, the
Shareholders or the Board may amend or repeal these Bylaws at any meeting.
Adopted as of the 12th day of October, 1988, by the undersigned, being the
directors of the Corporation.
/s/ W.R. Manion
------------------------------------------
W.R. MANION
/s/ Paul S. Keeling
------------------------------------------
PAUL S. KEELING
15
<PAGE>
The undersigned hereby certifies that the foregoing constitutes a true and
correct copy of the Bylaws of the Corporation as adopted by the Board on the
12th day of October, 1988.
Executed as of this 12th day of October, 1988.
/s/ W.R. Manion
------------------------------------------
W.R. MANION
/s/ Paul S. Keeling
------------------------------------------
PAUL S. KEELING
[SEAL]
16
<PAGE>
EXHIBIT 3.25
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office, of which it purports to be a copy, and that the same is a full, true
and correct copy of:
ARTICLES OF INCORPORATION
AND ALL AMENDMENTS THERETO
OF
THE ENVIRONMENTAL GROUP, INC.
In testimony whereof, I have hereunto set my hand
and affixed the Great Seal of the State of
Oklahoma at the City of Oklahoma City this 14/th/,
day of November, 1997.
___________________________________
Secretary of State
By:________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
WHEREAS, the Certificate of Incorporation, executed and acknowledged by
THE ENVIRONMENTAL GROUP, INC.
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby issue this
certificate evidencing such filing.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 28/th/ day
of August, 1992.
________________________________________
Secretary of State
By:_____________________________________
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THE ENVIRONMENTAL GROUP, INC.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
1. Name. The name of the Corporation is The Environmental Group, Inc.
----
(hereinafter referred to as the "Corporation").
2. Registered Address and Registered Agent. The address of the
---------------------------------------
Corporation's registered office in the State of Oklahoma is 16 South
Pennsylvania, Post Office Box 754, Oklahoma City, Oklahoma 73102 and the
registered agent is Heidi Brown.
3. Purpose. The purpose for which the Corporation is formed is to engage
-------
in any part of the world in any capacity in any lawful act or activity for which
corporations may be organized under the Oklahoma General Corporation Act (the
"Act") and the Corporation will be authorized to exercise and enjoy all powers,
rights and privileges which corporations organized under the Act may have under
the laws of the State of Oklahoma as in force from time to time, including,
without limitation, all powers, rights and privileges necessary or convenient to
carry out all those acts and activities in which it may lawfully engage.
4. Capital Stock. The total number of shares of stock which the
-------------
Corporation will have the authority to issue is five thousand (5,000) shares,
each of the shares having a par value of Ten Cents ($.10) a share, thereby
resulting in the Corporation having total authorized capital stock in the amount
of Five Hundred Dollars ($500.00), all of which will be Common Stock (the
"Common Stock"). The shares of Common Stock which the Corporation is authorized
to issue may be issued, and treasury stock may be disposed of, for such
consideration and on such terms as the Board of Directors determines in its sole
discretion and as set forth in a duly adopted corporate resolution.
5. Incorporator. The name and mailing address of the incorporator is:
------------
Irwin H. Steinhorn
210 West Park Avenue, Suite 3000
Oklahoma City, Oklahoma 73102
6. Initial Director. The following will serve as the initial directors of
----------------
the Corporation until the first annual meeting of shareholders or until the
election of successors:
Jack E. Golsen 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73102
<PAGE>
Berry H. Golsen 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73102
Steven J. Golsen 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73102
David R. Goss 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73102
The number of Directors shall be as set forth in the Bylaws. The powers of the
incorporator are to terminate upon the filing of the Certificate of
Incorporation.
7. Powers of Directors. In furtherance and not in limitation of the
-------------------
powers conferred by statute, the Directors are expressly authorized:
A. To authorize and cause to be executed or granted mortgages, security
interests and liens upon the real and personal property of the Corporation.
B. To determine the use and disposition of any surplus and net profits of the
Corporation including the determination of the amount of working capital
required.
C. To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose, and to abolish any
such reserve in the manner in which it was created.
D. When and as authorized by the affirmative vote of the holders of a majority
of the stock having voting power, to sell, lease or exchange all or
substantially all of the property and assets of the Corporation, including
its goodwill and its corporate franchises, upon such terms and conditions
and for such consideration, which may consist in whole or in part of money
or property including shares of stock in, and/or other securities of, any
other corporation or corporations, as the Directors shall deem expedient
and for the best interests of the Corporation.
8. Internal Affairs. The following provisions for the regulation of the
----------------
internal affairs of the Corporation are hereby adopted:
A. The Bylaws for the governing of the Corporation may be adopted, amended,
altered, repealed or readopted by the Directors either at any regular or
special meeting of the Directors or by the written consent of all
Directors, but the
2
<PAGE>
powers of the Directors will at all times be subject to
the right of the shareholders to adopt, amend or repeal the Bylaws either
at any annual or special meeting of shareholders or by the written consent
of a majority of the shareholders, and the power of the Directors will not
extend to any amendment of the Bylaws respecting the number, qualifications
or term of office of the Directors.
B. The number of authorized shares of any class or classes of stock may, by
amendment to the Corporation's Certificate of Incorporation, be increased
or decreased, but not below the number of shares of such class or classes
then outstanding, by the affirmative vote of the holders of a majority of
the stock of the Corporation entitled to vote, irrespective of the
provisions of 18 Okla. Stat. (S)1077(B)(2).
C. The Corporation shall indemnify, and advance litigation expenses to its
officers, directors, employees and agents to the fullest extent permitted
by the Oklahoma General Corporation Act and all other laws of the State of
Oklahoma. No amendment to or repeal of this Paragraph C shall apply to or
have any effect on the liability or alleged liability of any officer,
director, employee or agent of this Corporation for or with respect to any
acts or omissions of such person occurring prior to the time of such
amendment or repeal. On the request of any person who believes he is
entitled to indemnification pursuant to the provisions of 18 Okla. Stat.
(S)1031(A) or (B), the Directors wi11 by vote at a special meeting,
immediately called for such purpose, to determine whether such person has
met the standards of conduct set forth in 18 Okla. Stat. (S)1031(A) or (B),
as amended, whichever is applicable, subject to the provisions of 18 Okla.
Stat. (S)1031(D)(1) and (2), as amended, and, if so, provide for such
indemnification.
D. Meetings of shareholders may be held within or without the State of
Oklahoma, as the Bylaws may provide. The books of the Corporation may be
kept (subject to applicable law) inside or outside the State of Oklahoma at
such place or places as may be designated from time to time by the
Directors or in the Bylaws of the Corporation. Elections of Directors need
not be by written ballot unless the Bylaws of the Corporation so provide.
E. To the fullest extent permitted by law, no contract or transaction between
the Corporation and one or more of the Corporation's Directors or officers,
or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the Corporation's
Directors or officers are directors or officers or have a financial
interest, shall be void or voidable solely for this reason, or solely
because the Corporation's Directors
3
<PAGE>
or officers are present at or participate in the meeting of the Board of
Directors or committee thereof which authorizes the contract or
transaction, or solely because the Corporation's Directors or officers or
their votes are counted for such purposes.
F. To the fullest extent that the Act permits the limitation or elimination of
the liability of Directors, no director shall be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director; provided that such provision shall not
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the corporation or its shareholder, or (b)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, or (c) under Section 1053 of
the Oklahoma General Corporation Act, or (d) for any transaction from which
the director derived an improper personal benefit. No amendment to or
repeal of this Paragraph F shall apply to or have any effect on the
liability or alleged liability of any director of this Corporation for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
9. Creditors. Whenever a compromise or arrangement is proposed between
---------
this Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof or on the
application of receiver or receivers appointed for this Corporation under the
provisions of Section 1106 of the Act or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 1100 of the Act, may order a meeting of the creditors
or class of creditors, and/or of the shareholders or class of shareholders of
this Corporation, as the case may be, to be summoned in such manner as the court
directs. If a majority in number representing three-fourths (3/4ths) in value of
the creditors or class of creditors, and/or of the shareholders or class of
shareholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the compromise or arrangement and the
reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, and/or on all
the shareholders or class of shareholders, of this Corporation, as the case may
be, and also on this Corporation.
THE UNDERSIGNED, being the incorporator for the purpose of forming a
corporation pursuant to the Act, does hereby make this Certificate, and this
acknowledgment, by hereby declaring and
4
<PAGE>
certifying that this is the act and deed of the undersigned and that the facts
herein stated are true, and accordingly have hereunto set my hand this 28th day
of August, 1992.
/s/ Irwin H. Steinhorn
----------------------------------
IRWIN H. STEINHORN, Incorporator
5
<PAGE>
EXHIBIT 3.26
BYLAWS
OF
THE ENVIRONMENTAL GROUP, INC.
(an Oklahoma corporation)
ARTICLE 1 - NAME
----------------
The name of the Corporation is The Environmental Group, Inc. (hereinafter
referred to as the "Corporation").
ARTICLE 2 - OFFICE
------------------
2.1 Principal Office. The principal office of the Corporation will be 16 South
----------------
Pennsylvania, Oklahoma City, Oklahoma 73102.
2.2 Other Offices. The Corporation may also have branch offices in such other
-------------
places as the Board of Directors (the "Board") in its discretion may from time
to time determine.
ARTICLE 3 - SHAREHOLDERS' MEETINGS
----------------------------------
3.1 Meeting Place. Meetings of the shareholders will be held at the principal
-------------
office of the Corporation or at such other place as is determined from time to
time by the Board and stated in the meeting notice.
3.2 Annual Meetings. An annual meeting of shareholders will be held on the
---------------
second Tuesday in April of each year; provided that any such meeting may be held
at any other time designated by the Board or by the majority of the shareholders
entitled to vote at such meeting. At such annual meetings, directors will be
elected, reports of affairs of the Corporation will be considered and any other
business may be transacted which is within the powers of the shareholders to
transact and which may be properly brought before the meeting.
3.3 Special Meetings. Special meetings of the shareholders may be called for
----------------
any purpose by the president (or, in his absence or disability, by a vice
president), by the Board, or by a notice signed by shareholders holding a
majority or more of the issued and outstanding voting shares of the Corporation.
Upon a request being made by written notice to the president or, in his absence
or disability, to a vice president, or to the secretary, by any person or
persons herein empowered to call a special meeting, if such officer is the
secretary, he will give notice to the shareholders or, if such officer is other
than the secretary, he will cause the secretary to give notice to the
shareholders that such meeting has been called for the purpose or purposes
stated in such request and is to be held at a specified time, which time will
not be less than ten (10) days or more than sixty (60) days after the receipt of
such request. If notice of such meeting is not given to the shareholders within
seven (7) days after the receipt of such request, such person or persons making
such request may fix the
<PAGE>
time of such special meeting and give notice thereof in the same manner as
hereinafter provided.
3.4 Notice of Meeting. Subject to the provisions of paragraph 3.11 hereof, a
-----------------
written notice of each meeting of the shareholders stating the date, hour and
place and in case of special meetings the purpose thereof, will be mailed by the
secretary of the Corporation, postage prepaid, to each shareholder entitled to
vote, at such address as appears on the books of the Corporation, at least ten
(10) days but not more than sixty (60) days before the date of each meeting.
3.5 Quorum. A majority of the issued and outstanding shares entitled to vote
------
(exclusive of treasury shares, if any) will constitute a quorum at meetings of
shareholders. When a quorum is present, a majority of the shares represented and
entitled to vote at the meeting will decide any question brought before such
meeting. In the absence of a quorum, those shareholders present may adjourn the
meeting from time to time until a quorum is obtained, but until a quorum is
obtained, no other business may be transacted.
3.6 Voting. At each meeting of shareholders, every shareholder will be entitled
------
to vote in person or by proxy and, unless modified by a cumulative voting
provision contained in the Corporation's Certificate of Incorporation, will have
one vote for each share standing registered in his name at the closing of the
transfer books for such meeting, or the record date fixed for such meeting by
the Board, as the case may be, or standing registered in his name at the time of
such meeting if neither a date for the closing of the transfer books nor a
record date for such meeting has been fixed by the Board. The voting at all
meetings of shareholders may be oral, but any qualified voter may demand a vote
by written ballot, whereupon such vote will be taken by written ballot stating
the name of the shareholder, the number of shares voted and, if such ballot be
cast by proxy, the name of such proxy.
3.7 Proxies. Any shareholder entitled to vote may vote by proxy. The
-------
appointment of a proxy will be in writing signed by the shareholder but will
require no other attestation. Each proxy statement will be filed with the
secretary of the Corporation at or before the meeting. In no case will a proxy
be appointed for a period of over seven (7) years. If any shareholder appoints
two (2) or more persons to act as proxies and if the instrument does not
otherwise provide, a majority of such persons present at the meeting (or if only
one is present, then that one) may exercise all of the powers conferred by such
instrument on all of the persons so appointed, and if such proxies are equally
divided as to the right and manner of voting in any particular case, the vote
will be divided among the proxies. Any person holding shares in a
representative or fiduciary capacity which he may represent in person may
represent the same by proxy and confer general or
2
<PAGE>
discretionary power on such proxy. The authority of a proxy not coupled with an
interest may be terminated at will. Unless otherwise provided in the
appointment, the proxy's authority will cease three (3) years after the
appointment. The termination of a proxy's authority by act of the shareholder
will, subject to the time limitations herein set forth, be ineffective until
written notice of the termination has been given to the secretary of the
Corporation. Unless otherwise provided therein, an appointment filed with the
secretary will have the effect of revoking all proxy appointments of prior date.
A proxy's authority will not be revoked by the death or incapacity of the
shareholder, unless before the vote is cast or the authority is exercised
written notice of such death or incapacity is given to the secretary of the
Corporation.
3.8 Officers of Shareholders' Meetings. The president, if present, will preside
----------------------------------
at all meetings of shareholders. In his absence, the next officer, in due order,
who may be present, will preside. The secretary of the Corporation will act as
secretary of all shareholders' meetings and will keep a true and correct record
of the proceedings of all meetings.
3.9 Order of Business. The order of business at the annual meeting, and so far
-----------------
as practicable at all other meetings of the shareholders, will be as follows:
(1) calling meeting to order; (2) calling of roll and checking proxies; (3)
proof of notice of meetings; (4) reading of any unapproved minutes; (5) reports
of officers; (6) reports of committees; (7) election of directors and
establishment of fees, if any, therefor; (8) unfinished business; (9) new
business; and (10) adjournment.
3.10 Approval of Action Taken. Any transactions of the shareholders at any
------------------------
meeting, regardless of how call was made or notice given, will be valid as
though transacted at a meeting duly held by regular call and notice if a quorum
is present and if before or after the meeting each of the shareholders entitled
to vote and not present in person or by proxy signs a written waiver of notice.
All such waivers of notice will be filed with the secretary and made a part of
the records of the meeting.
3.11 Consent to Action. Any action, which under any provision of the laws of the
-----------------
State of Oklahoma, the provisions of the Certificate of Incorporation or these
Bylaws might be taken at either an annual or special meeting of the
shareholders, may be taken without a meeting, prior notice or a vote if a
consent in writing, setting forth the action so taken, is made and signed by the
shareholders of outstanding stock having not less than the minimum number of
votes that would be necessary to take such action at a meeting at which all
shares entitled to vote were present and voted, and such consent will be filed
with the secretary and made a part of the corporate records. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
3
<PAGE>
consent shall be given to those shareholders who have not consented in writing.
ARTICLE 4 - DIRECTORS
---------------------
4.1 Authority. The Board will have charge of the property, interests, business,
---------
transactions and affairs of the Corporation with full power and authority to
manage, control and conduct the same. In addition to the powers and authorities
expressly conferred on the Board by these Bylaws, the Board may exercise all
powers and take such actions as are not by statute, the Certificate of
Incorporation or these Bylaws required to be exercised by the shareholders.
4.2 Number; Term of Office. The Board will consist of not less than one (1) nor
----------------------
more than five (5) directors. The shareholders at any annual meeting and at any
special meeting called for such purpose may determine the number of directors
which will constitute the Board, and the number so determined will remain fixed
until changed at a subsequent meeting. The directors, except for the initial
director(s) which may have been named in the Certificate of Incorporation of the
Corporation, will be selected at the annual shareholders meeting and will serve
for one (1) year or until a successor is elected and qualified (even though
necessitating a term in excess of one (1) year).
4.3 Qualification. A director need not be a shareholder of the Corporation.
-------------
4.4 Vacancies. Any vacancy occurring in the Board may be filled by a majority
---------
of the remaining directors or by a sole remaining director, and each person so
elected will serve as a director until removed or until a successor is elected
by the shareholders.
4.5 Removal. The entire Board or any director may be removed from office with
-------
or without cause by a vote of shareholders holding a majority of the outstanding
shares entitled to vote at any annual or special meeting of shareholders.
4.6 Declared Vacancies. The Board will declare vacant the office of a director
------------------
if the director is declared of unsound mind by an order of court, convicted of a
felony, fails to accept such office in writing within thirty (30) days after his
election or habitually fails to attend meetings of the Board.
4.7 Compensation of Directors. Directors will receive such fees for their
-------------------------
services as are determined from time to time by the Board, provided that nothing
herein contained will preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
4
<PAGE>
4.8 Regular Meetings. An annual meeting of the Board for the purpose of
----------------
electing officers of the Corporation and the transaction of any other business
coming before such meeting will be held each year immediately following the
adjournment of the annual shareholders' meeting, and no notice of such meeting
will be necessary. Other regular meetings of the Board may be held without
notice at such time as is from time to time determined by the Board.
4.9 Special Meetings. Special meetings of the Board may be held at any time on
----------------
the written call of the president or, if the president is absent or unable to
act, by any other officer in order of seniority. Such meetings may also be held
at any time without call or notice on the unanimous consent of the directors.
4.10 Notice of Meetings. The secretary of the Corporation will serve written
------------------
notice to each director of all regular or special meetings, except the annual
meeting immediately following the annual shareholders' meeting. Such notice will
be served either personally or by mail not less than seven (7) days before any
meeting, giving the time, place, and in case of special meetings, the purpose
thereof, and no business will be considered at any special meeting other than
the purpose stated in such notice. Any director may, in writing, either before
or after the meeting waive notice thereof, and without notice, any director by
attendance at any meeting will be deemed to have waived such notice.
4.11 Memorandum of Action. Any action which might be taken at any meeting of the
--------------------
Board or any committee thereof may be taken without a meeting if all members of
the Board or committee thereof consent to such action in writing, and such
written consent is filed with the minutes of the Board or the committee.
4.12 Quorum. At all meetings of the Board, a quorum will consist of a majority
------
of the directors. The acts of a majority of the directors present at a meeting
at which a quorum is present will be the acts of the Board. A minority of the
Board present at any regular or special meeting may, in the absence of a quorum,
adjourn to a later date, but may not transact any other business until a quorum
has been secured. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting
adjourned.
4.13 Telephonic Conferences. Directors may participate in a meeting of the Board
----------------------
by means of telephone conference or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this section will constitute presence in
person at such meeting.
4.14 Election of Officers. At the annual meeting of the Board, the Board will
--------------------
elect a president, a secretary, a treasurer and such
5
<PAGE>
vice presidents and additional officers of the Corporation as the Board, from
time to time, determines, to serve for the ensuing year or until the election of
their respective successors. The Board will fix the compensation of all officers
of the Corporation.
4.15 Order of Business. The order of business, at the annual meetings and so far
-----------------
as practical at all other meetings of the Board will be as follows: (1) calling
meeting to order; (2) proof of notice of meeting; (3) reading of any unapproved
minutes; (4) reports of officers and directors; (5) reports of committees; (6)
election of officers; (7) unfinished business; (8) new business; and (9)
adjournment.
4.16 Meeting Place. Meetings of the Board may be held at such place as is
-------------
determined by the Board and stated in the meeting notice.
ARTICLE 5 - EXECUTIVE COMMITTEE
-------------------------------
5.1 Election. The Board may elect an Executive Committee composed of one or
--------
more directors and such alternate members as the Board desires. In the absence
or disqualification of any committee member, the other member or members
present, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
5.2 Duties. The Executive Committee will have all of the powers of the Board in
------
the interim between meetings of the Board except as may be prohibited by the
Oklahoma General Corporation Act, more specifically 18 Okla. Stat. (S)1027
(1989). The Executive Committee will keep minutes of its proceedings which will
be reported to the directors at the next Board meeting.
5.3 Meetings. The Executive Committee will meet at such times as may be fixed
--------
by its chairman or on the call of the president. Notice of each meeting will be
given to each member of the Executive Committee in the manner provided for
notice of special meetings of the Board.
5.4 Quorum; Voting. A majority of the members of the Executive Committee will
--------------
constitute a quorum. The act of the majority of the members of the Executive
Committee present at a meeting at which a quorum is present will be the act of
the Executive Committee. At all meetings of the Executive Committee, each member
present will have one (1) vote which will be cast in person.
5.5 Waiver of Notice. Any actions taken at any meeting of the Executive
----------------
Committee will be as valid as though taken at a meeting duly held after regular
call and notice, with a quorum present, if either before or after the meeting,
each of the members of the Executive Committee not present signs a written
waiver of notice.
6
<PAGE>
5.6 Removal. The entire Executive Committee or any member thereof may be
-------
removed with or without cause by a vote of the Board.
5.7 Vacancies. The Board will fill all vacancies in the Executive Committee.
---------
5.8 Action Without Meeting. Any action which might be taken at a meeting of the
----------------------
Executive Committee may be taken without a meeting if a written consent thereof
is signed by all members of the Executive Committee and filed with the minutes
of the Executive Committee.
5.9 Telephonic Conferences. Members of the Executive Committee may participate
----------------------
in a meeting of the Executive Committee by means of telephone conference or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
section will constitute presence in person at such meeting.
ARTICLE 6 - COMMITTEES OF DIRECTORS
-----------------------------------
6.1 Designation. The Board may designate one or more committees (in addition to
-----------
the Executive Committee provided for in Article 5 hereof), to exercise the
powers of the Board and to perform such actions as the Board might determine
from time to time.
6.2 Procedural Rules. Each committee will be subject to the limitations set
----------------
forth in Article 5 hereof and limitations imposed by the Board in the
designation creating such committee, and such committee will comply with the
procedural rules applicable to the Executive Committee.
ARTICLE 7 - OFFICERS
--------------------
7.1 Enumeration; Election; Qualification. The officers of the Corporation shall
------------------------------------
be chosen by the Board and will be a president, one or more vice presidents,
secretary, treasurer, and such assistant secretaries and assistant treasurers as
the Board, in its discretion, determines. Two or more offices at the same time
may be held by the same person; provided, that no person will at the same time
hold the office of president and secretary.
7.2. Term of Office; Removal. The officers of the Corporation will hold office
-----------------------
until their successors are chosen and qualify. Any officer elected by the Board
may be removed at any time with or without cause by the Board.
7.3 Vacancies. If any office becomes vacant for any reason, the vacancy may be
---------
filled by the Board.
7.4 The President. The president will: (a) exercise the duties of supervision
-------------
and management of the business of the Corporation;
7
<PAGE>
(b) preside at all meetings of the shareholders and directors; (c) sign such
contracts and other instruments as may be required in the ordinary course of the
Corporation's business; (d) sign the minutes of all shareholders' and directors'
meetings over which the president presided; (e) execute notes, mortgages and
other contracts; (f) at the annual meeting of shareholders, submit a report of
the operations of the Corporation's affairs; (g) report to the Board from time
to time all matters coming to his attention which should be brought to the
attention of the Board; (h) be an ex officio member of all standing committees;
(i) have such usual powers of supervision and management as may pertain to the
office of the president; and (j) perform such other duties as may be properly
required by the Board.
7.5 Vice President(s). In the absence, failure or refusal of the president to
-----------------
act, the vice president will perform all duties which would otherwise be
performed by the president and shall perform such other duties and have such
other powers as the Board may from time to time prescribe.
7.6 Secretary; Assistant Secretary. The secretary will: (a) attend all
------------------------------
meetings of the Board and shareholders and record all votes and minutes of such
proceedings; (b) issue calls for meetings of shareholders and directors; (c)
notify all officers and directors of their election; (d) keep the stock transfer
books and other Corporation books and records; transfer stock certificates as
required by the transactions of the Corporation and its shareholders; (e) attest
the Corporation's execution of instruments when requested; (f) make such reports
to the Board as are requested; (g) prepare such reports as are required by the
laws of the jurisdictions in which the Corporation conducts business; (h)
perform such other duties as may be prescribed by the president and the Board;
(i) allow any director to inspect the books and records of the Corporation; (j)
attend to any correspondence requested; and (k) do such other duties as may be
incidental to the office or as may be properly assigned by the Board. The
assistant secretary or secretaries will perform the duties of the secretary in
the case of the secretary's absence or disability and such other duties as the
secretary, president, or the Board may determine.
7.7 Treasurer; Assistant Treasurer. The treasurer will: (a) have custody of all
------------------------------
money and securities of the Corporation; (b) keep regular books of account; (c)
disburse the funds of the Corporation in payment of the Corporation's debts as
requested by the president and the Board; (d) see that proper vouchers are.
taken for such disbursements; (e) render to the president and the Board, from
time to time, as requested an account of all such transactions and of the
financial condition of the Corporation; (f) perform all duties incident to the
office or which are properly requested by the president and the Board. The
assistant treasurer or treasurers will perform the duties of the treasurer in
the event of the treasurer's
8
<PAGE>
absence or disability and such other duties as the treasurer, president or the
Board may determine.
7.8 Delegation of Duties. In case of the absence or disability of any officer
--------------------
or for any other reason that the Board deems sufficient, the Board may delegate
the powers or duties of an officer to any other officer or to any director.
ARTICLE 8 - SHARE CERTIFICATES
------------------------------
8.1 Certificates. Each shareholder whose shares have been paid for in full will
------------
be entitled to a certificate or certificates evidencing the number of shares
standing on the books in the shareholder's name. Each certificate will be
numbered, bear the signatures of the president or vice president, and the
treasurer or an assistant treasurer or the secretary or an assistant secretary,
certify the number of shares represented by the certificate and be issued in
numerical order. A record of each certificate issued will be maintained by the
Corporation. Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if the person who signed
the certificate was such officer, transfer agent or registrar at the date of
issue.
8.2 Transfer. The secretary will transfer shares on the books of the
--------
Corporation on the surrender of the duly endorsed certificate or certificates
representing the transferred shares and evidence of compliance with any
agreement restricting transfer by which the shareholder is bound. Surrendered
certificates will be canceled and new certificates issued to the shareholder
entitled thereto.
8.3 Fixing Record Date. In order to determine the shareholders entitled to
------------------
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment of
shareholder's rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix a date, which date shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. In such case, only such shareholders of record
on the date so fixed will be entitled to such rights notwithstanding any
transfer of shares of the Corporation after such record date, and the
Corporation shall not be bound to recognize any equitable or other claim or
other interest in such shares on the part of any other person, whether or not
the Corporation shall have express or other notice thereof.
9
<PAGE>
8.4 Registered Shareholders. The Corporation will be entitled to treat the
-----------------------
shareholder of record as the absolute owner thereof and will not be bound to
recognize any other claim or interest in such shares on the part of any other
person whether or not the Corporation has notice thereof.
8.5 Lost Certificates. Any shareholder claiming a share certificate to be lost,
-----------------
stolen or destroyed will make an affidavit of such fact and advertise the same
in such manner as the Board may require, and the Board may in their discretion
require such shareholder to give the Corporation an indemnity bond in such sum
as the Board determines against any claim that might be made on account of the
loss of such certificate. A replacement certificate may be issued without
advertising and without requiring indemnification when, in the judgment of the
Board, it is proper to do so.
8.6 Inspection of Books. Except as required by law, the Board will determine,
-------------------
from time to time, the extent and conditions under which the accounts, books and
records of the Corporation will be open to inspection by the shareholders, and
the shareholders' right to inspect will be limited accordingly.
8.7 Treasury Shares. Treasury and other shares not at the time issued and
---------------
outstanding will not be voted at any meeting of the shareholders or counted in
calculating any voting majority.
ARTICLE 9 - FISCAL YEAR
-----------------------
The fiscal year of the Corporation will be determined by the Board.
ARTICLE 10 - EXECUTION OF INSTRUMENTS
-------------------------------------
10.1 Contracts. The Board may authorize any officer, or agent to execute and
---------
deliver on behalf of the Corporation any contract or other instrument, and such
authority may be general or may be confined to specific instances.
10.2 Checks; Drafts. All checks, drafts, notes, acceptances, other orders for
--------------
payment or evidence of indebtedness. issued by the Corporation will be signed by
such officers or agents and in such manner as is determined from time to time by
the Board.
10.3 Deposits; Bank Accounts. All funds of the Corporation will be deposited
-----------------------
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board may from time to time designate or
as may be designated by an officer of the Corporation to whom such power of
designation may from time to time be delegated by the Board. The Board may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as the Board
10
<PAGE>
deems expedient. Unless otherwise provided by the Board, endorsements for
deposit to the credit of the Corporation may be made by hand-stamped legend in
the name of the Corporation or by written endorsement of any officer without
countersignature.
10.4 Loans. No loans will be contracted on behalf of the Corporation unless
-----
authorized by the Board but, when so authorized, unless a particular officer or
agent is directed to negotiate the same, may be negotiated up to the amount so
authorized by the president, a vice president or the treasurer, and such
officers are hereby severally authorized to execute and deliver on behalf of the
Corporation notes or other evidences of indebtedness for the amount of such
loans and to give security for the payment of any and all indebtedness by
hypothecating any part or all of the real or personal property at any time owned
by the Corporation as approved by the Board.
10.5 Securities. Stock certificates, bonds or other securities at any time
----------
owned by the Corporation may be held on behalf of the Corporation or sold,
transferred or otherwise disposed of pursuant to authorization by the Board.
When so authorized the stock certificates, bonds or other securities may be
transferred by the signature of the president.
ARTICLE 11 - DIVIDENDS
----------------------
11.1 Declaration. Dividends on the stock of the Corporation may be declared by
-----------
the Board at any regular or special meeting and paid out of the Corporation's
surplus, as defined in and computed in accordance with the provisions of
Sections 1035 and 1079 of the Oklahoma General Corporation Act or if there is no
such surplus out of the Corporation's net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year except as limited by
Section 1049(A) of the Oklahoma General Corporation Act. Dividends may be paid
in cash, in property or in shares of the capital stock.
11.2 Reserve Fund. Before payment of any dividend, there may be set aside out
------------
of any funds of the Corporation available for dividends such sums as the Board
may from time to time, in its discretion, deem proper as a reserve fund to meet
contingencies of the Corporation or for such other purposes as the Board deems
conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE 12 - NOTICES
--------------------
12.1 Form of Notices. Whenever notice is required, the same will be given in
---------------
writing, by mail, by depositing the same in the United States mail addressed to
the person entitled to notice at the address on file with the Corporation, and
such notice will be deemed to be given at the time when it is mailed.
11
<PAGE>
12.2 Waiver of Notice. Any person may waive any notice required to be given
----------------
under these Bylaws by a written waiver signed by the person entitled to such
notice, whether before or after the time stated therein, and such waiver will be
deemed equivalent to the actual giving of such notice.
ARTICLE 13 - AMENDMENTS
-----------------------
These Bylaws may be amended, altered, changed or repealed by the vote of
the directors at any regular or special meeting if notice of the proposed
amendment is contained in the notice of the meeting.
ARTICLE 14 - INDEMNIFICATION
----------------------------
14.1 Third Party Actions. The Corporation will have the power to indemnify any
-------------------
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, will not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the conduct was unlawful.
14.2 Actions by Corporation. The Corporation will have the power to indemnify
----------------------
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in the Corporation's favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorney's fees
actually and reasonably incurred by such person in connection with the defense
or settlement of such action
12
<PAGE>
or suit if such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Corporation; except that no
indemnification will be made in respect of any claim, issue or matter as to
which such person is adjudged to be liable for negligence or misconduct in the
performance of a duty to the Corporation, unless and only to the extent that the
court in which such action or suit was brought determines upon application that,
despite adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court deems proper.
14.3 Right to Indemnification. To the extent that any present or former
------------------------
director, officer, employee or person who is or was serving at the request of
the Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, or any agent of the
Corporation or any person who is or was serving at the request of the
Corporation as an agent of another corporation, partnership, joint venture,
trust or other enterprise, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 14.1 or 14.2,
or in defense of any claim, issue or matter therein, such person will be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.
14.4 Authorization of Indemnification. Any indemnification under Sections 14.1
--------------------------------
or 14.2, unless ordered by a court, will be made by the Corporation only as
authorized in the specific case on a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in Sections 14.1 or
14.2. Such determination will be made by the Board by (a) a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such quorum is not obtainable or even if it is obtainable
and a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (c) by the shareholders.
14.5 Advance Indemnification. Expenses incurred by an officer or director in
-----------------------
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding on receipt of an undertaking by or on behalf of such director or
officer to repay such amount unless it is ultimately determined that such person
is entitled to be indemnified by the Corporation as authorized by the provisions
of this Article. Such expenses incurred by other employees and agents may be so
paid on such terms and conditions, if any, as the Board deems appropriate.
14.6 Nonexclusive Indemnification. The indemnification and advancement of
----------------------------
expenses provided by this Article 14 will not be
13
<PAGE>
deemed exclusive of any other rights to which those seeking indemnification
might be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office, and will
continue as to a person who has ceased to be a director, officer, employee or
agent and inure to the benefit of the heirs, executors and administrators of
such person.
14.7 Insurance. The Corporation will have the power to purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article 14.
14.8 Constituent Corporation. For the purposes of this Article, references to
-----------------------
"the Corporation" include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise will stand in
the same position under the provisions of this Article 14 with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
Dated this 25th day of September, 1992.
----
/s/ David Goss, Secretary
-------------------------------
David Goss, Secretary
14
<PAGE>
EXHIBIT 3.27
No. of Company 3061095
The Companies Acts 1985 to 1989
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM AND ARTICLES OF ASSOCIATION
THE ENVIRONMENTAL GROUP INTERNATIONAL LIMITED
(Incorporated the 19th day of May. 1995)
Jordan & Sons Limited
Company Formation and Information Specialists
Legal Stationers and Publishers
Branches throughout the United Kingdom
Telephone 0171-400 3333 Fax 0171-400 3366
<PAGE>
THE COMPANIES ACTS 1985 to 1989
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
THE ENVIRONMENTAL GROUP INTERNATIONAL LIMITED
1. The Company's name is "THE ENVIRONMENTAL GROUP INTERNATIONAL LIMITED".
2. The Company's registered office is to be situated In England and Wales.
3. The Company's objects are:
(a) (i) To provide persons or firms carrying on any profession, business,
trade or occupation with administrative, clerical. accounting, secretarial and
office services and all staff. promises, office furniture and equipment. office
cleaning, repairs and decorations, lighting, heating, telephone service, cars,
transport. books, periodicals, reports, photoprinting, general printing and
stationary and all such services as may from time to time be required for the
conduct and management of such profession. business. trade or occupation; and to
carry an all or any of the businesses of secretaries, registrars, nominee
shareholders, Investment holders, general managers, administrators, advisers,
accountants, book-keepers, agents, representatives, costing investigators,
negotiators, intermediaries, business and efficiency experts, estimators,
advertising managers, building society agents, insurance agents, estate agents
and property managers, valuers, printers, publishers, and stationers, providers
of office accommodation, and of all kinds of commercial intelligence and
services, hire purchase and general financiers, company promoters and
underwriters of capital issues, dealers in stocks and shares, tourist agents,
social and business organizers, and dealers and contractors in and makers,
importers and exporters of all kinds of goods and merchandise; and to institute,
enter into, carry on, assist and participate in financial, promoting, dealing
and other business works, contracts or operations of all kinds, to invest or
procure the investment in, and to deal and operate in and with rights,
securities, stocks, shares, debentures, bonds, articles and things of all kinds;
and to undertake secretarial work and to supply or land assistance or
accommodation to or do any act or thing for companies, professional or business
man or otherwise upon such terms as may be thought fit.
(ii) To carry an any other trade or business whatever which can in the
opinion of the Board of Directors be advantageously carried on in connection
with or ancillary to any of the businesses of the Company.
1
<PAGE>
(b) To purchase or by any other means acquire and take options over any
property whatever, and any rights or privileges of any kind ever or In respect
of any property.
(c) To apply for, register, purchase, or by other means acquire and
protect. prolong and renew, whether in the United Kingdom or elsewhere any
patents. patent rights, brevets d'invention, licences, secret processes, trade
marks, designs, protections and concessions and to disclaim, alter, modify, use
and turn to account and to manufacture under or grant licences or privileges in
respect of the same, and to expand money in experimenting upon, testing and
Improving any patents, inventions or rights which the Company may acquire or
propose to acquire.
(d) To acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, at company carrying an or proposing to
carry an any of the businesses which the Company is authorized to carry on and
as part of the consideration for such acquisition to undertake all or any of the
liabilities of such person, firm or company, at to acquire an interest in,
amalgamate with, or enter into partnership or into any arrangement for sharing
profits, at for co-operation, or for mutual assistance with any such person,
firm or company, or for subsidizing or otherwise assisting any such person. firm
at company, and to give or accept, by way of consideration for any of the acts
or things aforesaid or property acquired, any shares, debentures, debenture
stock or securities that may be agreed upon, and to hold and retain, or sell,
mortgage and deal with any shares, debentures, debenture stock or securities so
received.
(e) To Improve. manage, construct, repair, develop, exchange, let an lease
or otherwise, mortgage, charge, sell, dispose of, turn to account, grant
licences, options, rights and privileges in respect of, or otherwise deal with
all or any part of the property and rights of the Company.
(f) To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined and to hold or
otherwise deal with any Investments made.
(g) To lend and advance money or give credit on any terms and with or
without security to any person, firm or company (including without prejudice to
the generality of the foregoing any holding company, subsidiary or follow
subsidiary of, or any other company associated in any way with. the Company). to
enter into guarantees, contracts of indemnity and suretyships of all kinds, to
receive money on deposit or loan upon any terms. and to secure or guarantee In
any manner and upon any terms the payment of any sum of money or the performance
of any obligation by any person, firm or company (including without prejudice to
the generality of the foregoing any such holding company, subsidiary, follow
subsidiary or associated company as aforesaid).
2
<PAGE>
(h) To borrow and raise money in any manner and to secure the repayment of
any money borrowed, raised or owing by mortgage, charge, standard security, lien
or other security upon the whole or any part of the Company's property or assets
(whether present or future), including its uncalled capital, and also by a
similar mortgage, charge, standard security, lien of security to secure and
guarantee the performance by the Company of any obligation or liability it may
undertake or which may become binding an it.
(i) To draw, make, accept, endorse, discount, negotiate, execute and issue
cheques, bills of exchange, promissory notes, bills of lading, warrants,
debentures, and other negotiable or transferable instruments.
(j) To apply for, promote, and obtain any Act of Parliament, order, or
licence of the Department of Trade or other authority for enabling the Company
to carry any of its objects into effect, or for effecting any modification of
the Company's constitution, or for any other purpose which may seem calculated
directly or indirectly to promote the Company's interests, and to oppose any
proceedings or applications which may seem calculated directly or indirectly to
prejudice the Company's Interests.
(k) To enter into any arrangements with any government or authority
(supreme, municipal. local. or otherwise) that may seem conducive to the
attainment of the Company's objects or any of them, and to obtain from any such
government or authority any charters, decrees. rights, privileges or concessions
which the Company may think desirable and to carry out, exercise, and comply
with any such charters, decrees, rights, privileges, and concessions.
(l) To subscribe for, take, purchase, or otherwise acquire, hold, sell,
deal with and dispose of, place and underwrite shares, stocks, debentures,
debenture stocks, bonds, obligations or securities issued or guaranteed by any
other company constituted or carrying on business in any part of the world, and
debentures, debenture stocks, bonds, obligations or securities issued or
guaranteed by any government or authority, municipal, local or otherwise, in any
part of the world.
(m) To control, manage, finance. subsidise, co-ordinate or otherwise assist
any company or companies in which the Company has a direct or Indirect financial
interest. to provide secretarial, administrative, technical, commercial and
other services and facilities of all kinds for any such company or companies and
to make payments by way of subvention or otherwise and any other arrangements
which may seem desirable with respect to any business at operations of or
generally with respect to any such company or companies.
(n) To promote any other company for the purpose of acquiring
3
<PAGE>
the whole or any part of the business or property or undertaking or any of the
liabilities of the Company, or of undertaking any business or operations which
may appear likely to assist or benefit the Company or to enhance the value of
any property or business of the Company, and to place or guarantee the placing
of, underwrite, subscribe for, or otherwise acquire all or any part of the
shares or securities of any such company as aforesaid.
(o) To sell or otherwise dispose of the whole or any part of the business
or property of the Company, either together or in portions, for such
consideration as the Company may think fit, and in particular for shares,
debentures, or securities of any company purchasing the same.
(p) To act as agents or brokers and as trustees for any person, firm or
company, and to undertake and perform sub-contracts.
(q) To remunerate any person, firm or company rendering services to the
Company either by cash payment or by the allotment to him or them of shares or
other securities of the Company credited as paid up in full or in part or
otherwise as may be thought expedient.
(r) To distribute among the Members of the Company in kind any property of
the Company of whatever nature.
(s) To pay all or any expenses incurred in connection with the promotion,
formation and incorporation of the Company, or to contract with any person. firm
or company to pay the same, and to Pay commissions to brokers and others for
underwriting, placing, selling, or guaranteeing the subscription of any shares
or other securities of the Company.
(t) To support and subscribe to any charitable or public object and to
support and subscribe to any institution, society, or club which may be for the
benefit of the Company or its Directors or employees, or may be connected with
any town or place where the Company carries an business: to give or award
pensions, annuities, gratuities, and superannuation or other allowances or
benefits or charitable aid and generally to provide advantages. facilities and
services for any persons who are or have been Directors of, or who are or have
been employed by, or who are serving or have served the Company, or any company
which is a subsidiary of the Company or the holding company of the Company or a
fellow subsidiary of the Company or the predecessors in business of the Company
or of any such subsidiary, holding or fellow subsidiary company and to the
wives, widows, children and other relatives and dependants of such persons; to
make payments towards insurance including insurance for any Director. officer or
Auditor against any liability as is referred to in Section 310(1) of the Act;
and to set up, establish, support and maintain superannuation and other funds or
schemes
4
<PAGE>
(whether contributory or non-contributory) for the benefit of any of such
persons and of their wives, widows, children and other relatives and dependents;
and to set up, establish, support and maintain profit sharing or share purchase
schemes for the benefit of any of the employees of the Company or of any such
subsidiary, holding or follow subsidiary company and to land money to any such
employees or to trustees on their behalf to enable any such purchase schemes to
be established or maintained.
(u) Subject to and in accordance with a due compliance with the provisions
of Sections 155 to 158 (inclusive) of the Act (if and so far as such provisions
shall be applicable), to give. whether directly or indirectly, any kind of
financial assistance (as defined in Section 152(1)(a) of the Act) for any such
purpose as is specified in Section 151(1) and/or Section 151(2) of the Act.
(v) To procure the Company to be registered or recognized in any part of
the world.
(w) To do all or any of the things or matters aforesaid in any part of the
world and either as principals, agents, contractors at otherwise, and by or
through agents, brokers, sub-contractors or otherwise and either alone or in
conjunction with others.
(x) To do all such other things as may be deemed incidental or conducive to
the attainment of the Company's objects or any of them.
AND so that:
(1) None of the objects set forth in any sub-clause of this Clause
shall be restrictively construed but the widest Interpretation shall be given to
each such object, and none of such objects shall. except where the context
expressly so requires. be in any way limited at restricted by reference to or
inference from any other object or objects set forth in such sub-clause, or by
reference to or inference from the terms of any other sub-clause of this Clause.
or by reference to or Inference from the name of the Company.
(2) None of the sub-clauses of this Clause and none of the objects
therein specified shall be deemed subsidiary or ancillary to any of the objects
specified In any other such sub-clause, and the Company shall have as full a
power to exercise each and every one of the objects specified in each sub-clause
of this Clause as though each such sub-clause contained the objects of a
separate Company.
(3) The word "Company" in this Clause, except where used in reference
to the Company, shall be deemed to include any partnership or other body of
persons, whether incorporated or unincorporated and whether domiciled in the
United Kingdom at
5
<PAGE>
elsewhere.
(4) In this Clause the expression "the Act" means the Companies Act
1985, but so that any reference in this Clause to any provision of the Act shall
be deemed to include a reference to any statutory modification or re-enactment
of that provision for the time being in force.
4. The liability of the Members is limited.
5. The Company's share capital is (Pounds)1,000 divided into 1,000 shares
of (Pounds)l each.
WE, the subscribers to this Memorandum of Association, wish to be formed
into a Company pursuant to this Memorandum; and we agree to take the number of
shares shown opposite our respective names.
________________________________________________________________________________
Names and addresses of Subscribers Number of shares taken
by each Subscriber
________________________________________________________________________________
1. Instant Companies Limited One
1 Mitchell Lane
Bristol BS1 6BU
2. Swift Incorporations Limited One
1 Mitchell Lane
Bristol BS1 6BU
__________
Total shares taken Two
________________________________________________________________________________
Dated this 19th day of May, 1995
Witness to the above Signatures: Mark Anderson
1 Mitchell Lane
Bristol BS1 6BU
6
<PAGE>
THE COMPANIES ACTS 1985 to 1989
PRIVATE COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION OF
THE ENVIRONMENTAL GROUP INTERNATIONAL LIMITED
PRELIMINARY
1. (a) The Regulations contained In Table A In the Schedule to the Companies
(Tables A to F) Regulations 1985 (SI 1985 No. 805) as amended by the Companies
(Tables A to F) (Amendment) Regulations 1985 (SI 1985 No. 1052) (such Table
being hereinafter called "Table A") shall apply to the Company save in so far an
they are excluded or varied hereby and such Regulations (save as so excluded or
varied) and the Articles hereinafter contained shall be the regulations of the
Company.
(b) In these Articles the expression "the Act" means the Companies Act
1985, but so that any reference in these Articles to any provision of the Act
shall be doomed to include a reference to any statutory modification or re-
enactment of that provision for the time being in force.
ALLOTMENT OF SHARES
2. (a) Shares which are comprised in the authorized share capital with which
the Company is incorporated shall be under the control of the Directors who may
(subject to Section 80 of the Act and to paragraph (d) below) allot, grant
options over otherwise dispose of the same, to such persons, on such terms and
in such manner as they think fit.
(b) All shares which are not comprised In the authorized share capital
with which the Company is incorporated and which the Directors propose to issue
shall first be offered to the Members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company in
General Meeting shall by Special Resolution otherwise direct. The offer shall be
made by notice specifying the number of shares offered, and limiting a period
(not being loss than fourteen days) within which the offer. If not accepted,
will be doomed to be declined. After the expiration of that period, those shares
so deemed to be declined shall be offered in the proportion aforesaid to the
persons who have, within the said period, accepted all the shares offered to
them; such further offer shall be made in like terms in the same manner and
limited by a like period as the original offer. Any shares not accepted pursuant
to such offer or further offer as aforesaid or not capable of being offered as
aforesaid except by
7
<PAGE>
way of fractions and any shares released from the provisions of this Article by
any such Special Resolution as aforesaid shall be under the control of the
Directors, who may allot, grant options over or otherwise dispose of the same to
such persons, on such terms, and in such manner an they think fit, provided
that, in the case of shares not accepted as aforesaid, such shares shall not be
disposed of on terms which are more favourable to the subscribers therefor than
the terms an which they were offered to the Members. The foregoing provisions of
this paragraph (b) shall have effect subject to Section 80 of the Act.
(c) In accordance with Section 91(l) of the Act Sections 89(1) and 90(1) to
(6) (inclusive) of the Act shall not apply to the Company.
(d) The Directors are generally and unconditionally authorized for the
purposes of Section 80 of the Act, to exercise any power of the Company to allot
and grant rights to subscribe for or convert securities into shares of the
Company up to the amount of the authorized share capital with which the Company
is Incorporated at any time or times during the period of five years from the
date of Incorporation and the Directors may, after that period, allot any shares
or grant any such rights under this authority in pursuance of an offer or
agreement so to do made by the Company within that period. The authority hereby
given may at any time (subject to the said Section 80) be renewed, revoked or
varied by Ordinary Resolution of the Company in General Meeting.
SHARES
3. The lion conferred by Clause 8 in Table A shall attach also to fully paid-
up shares, and the Company shall also have a first and paramount lien on all
shares, whether fully paid or not, standing registered in the name of any person
indebted or under liability to the Company, whether he shall be the sole
registered holder thereof or shall be one of two or more joint holders, for all
moneys presently payable by him or his estate to the Company. Clause 8 in Table
A shall be modified accordingly.
4. The liability of any Member in default in respect of a call shall be
increased by the addition at the and of the first sentence of Clause 18 in Table
A of the words and all expenses that may have been incurred by the Company by
reason at such non-payment".
GENERAL MEETINGS AND RESOLUTIONS
5. (a) Every notice convening a General Meeting shall comply with the
provisions of Section 372(3) of the Act on to giving Information to Members in
regard to their right to appoint proxies and notices of and other communications
relating to any General Meeting which any Member is entitled to receive shall be
sent to the Directors and to the Auditors for the time being of the
8
<PAGE>
Company.
(b) No business shall be transacted at any General Meeting unless a quorum
is present. Subject to paragraph (c) below two persons entitled to vote upon the
business to be transacted, each being a Member or a proxy for a Member or a duly
authorized representative of a corporation, shall be a quorum.
(c) If and for so long as the Company has only one Member, that Member
present In person or by proxy or if that Member is a corporation by a duly
authorized representative shall be a quorum.
(d) If a quorum is not present within half an hour from the time appointed
for a General Meeting the General Meeting shall stand adjourned to the same day
in the next week at the same time and place or to such other day and at such
other time and place as the Directors may determine; and If at the adjourned
General Meeting a quorum Is not present within half an hour from the time
appointed therefor such adjourned General Meeting shall be dissolved.
(e) Clauses 40 and 41 In Table A shall not apply to the Company.
6. (a) If and for so long as the Company has only one Member and that Member
takes any decision which is required to be taken in General Meeting or by means
of a written resolution, that decision shall be as valid and effectual as if
agreed by the Company in General Meeting save that this paragraph shall not
apply to resolutions passed pursuant to sections 303 and 391 of the Act.
(b) Any decision taken by a sale Member pursuant to paragraph (a) above
shall be recorded in writing and delivered by that Member to the Company for
entry in the Company's Minute Book.
APPOINTMENT OF DIRECTORS
7. (a) Clause 64 In Table A shall not apply to the Company.
(b) The maximum number and minimum number respectively of the Directors
may be determined from time to time by Ordinary Resolution in General Meeting of
the Company. Subject to and In default of any such determination there shall be
no maximum number of Directors and the minimum number of Directors shall be one.
Whensoever the minimum number of Directors shall be one, a sole Director shall
have authority to exercise all the powers and discretions by Table A and by
these Articles expressed to be vested in the Directors generally, and Clause 89
In Table A shall be modified accordingly.
(c) The Directors shall not be required. to retire by rotation and Clauses
73 to 80 (inclusive) in Table A shall not
9
<PAGE>
apply to the Company.
(d) No person shall be appointed a Director at any General Meeting unless
either:
(i) he is recommended by the Directors; or
(ii) not less than fourteen not more than thirty-five clear days
before the date appointed for the General Meeting, notice signed by a Member
qualified to vote at the General Meeting has been given to the Company of the
intention to propose that person for appointment, together with notice signed by
that person of his willingness to be appointed.
(e) Subject to paragraph (d) above. the Company may by Ordinary Resolution
in General Meeting appoint any person who is willing to act to be a Director.
either to fill a vacancy or as an additional Director.
(f) The Directors may appoint a person who is willing to act to be a
Director. either to fill a vacancy or as an additional Director. provided that
the appointment does not cause the number of Directors to exceed any number
determined in accordance with paragraph (b) above as the maximum number of
Directors and for the time being in force.
(g) In any case where as the result of the death of a sole Member of the
Company the Company has no Members and no Directors the personal representatives
of such deceased member shall have the right by notice in writing to appoint a
person to be a Director of the Company and such appointment shall be as
affective as if made by the Company in General Meeting pursuant to paragraph (a)
of this Article.
BORROWING POWERS
8. The Directors may exercise all the powers of the Company to borrow money
without limit as to amount and upon such terms and in such manner as they think
fit, and subject (in the case of any security convertible into shares) to
Section 80 of the Act to grant any mortgage, charge or standard security over
its undertaking, property and uncalled capital, or any part thereof, and to
issue debentures, debenture stock, and other securities whether outright or as
security for any debt, liability or obligation of the Company or of any third
party.
ALTERNATE DIRECTORS
9. (a) An alternate Director shall not be entitled as such to receive any
remuneration from the Company, save that he may be paid by the Company such part
(if any) of the remuneration otherwise payable to his appointor as such
appointor may by notice in writing to the Company from time to time direct, and
the first sentence of
10
<PAGE>
Clause 66 in Table A shall be modified accordingly.
(b) A Director, or any such other person as is mentioned in Clause 65 in
Table A, may act as an alternate Director to represent more than one Director,
and an alternate Director shall be entitled at any meeting of the Directors at
of any committee of the Directors to one vote for every Director whom he
represents in addition to his own vote (if any) as a Director, but he shall
count as only one for the purpose of determining whether a quorum is present.
GRATUITIES AND PENSIONS
10. (a) The Directors may exercise the powers of the Company conferred by
Clause 3(t) of the Memorandum of Association of the Company and shall be
entitled to retain any benefits received by them or any of them by reason of the
exercise of any such powers.
(b) Clause 87 In Table A shall not apply to the Company.
PROCEEDINGS OF DIRECTORS
11. (a) A Director may vote, at any meeting of the Directors or of any
committee of the Directors, on any resolution, notwithstanding that It In any
way concerns or relates to a matter in which he has, directly or indirectly, any
kind of interest whatsoever. and If he shall vote an any such resolution as
aforesaid his vote shall be counted: and In relation to any such resolution as
aforesaid he shall (whether or not he shall vote an the same) be taken into
account In calculating the quorum present at the meeting.
(b) Clauses 94 to 97 (inclusive) in Table A shall not apply to the
Company.
THE SEAL
12. (a) If the Company has a seal it shall only be used with the authority of
the Directors or of a committee of Directors. The Directors may determine who
shall sign any instrument to which the seal is affixed and unless otherwise so
determined it shall be signed by a Director and by the Secretary at second
Director. The obligation under Clause 6 of Table A relating to the sealing of
share certificates shall apply only if too Company has a seal. Clause 101 of
Table A shall not apply to the Company.
(b) The Company may exercise the powers conferred by Section 39 of the Act
with regard to having an official seal for use abroad. and such powers shall be
vested in the Directors.
11
<PAGE>
INDEMNITY
13. (a) Every Director or other officer or Auditor of the Company shall be
indemnified out of the assets of the Company against all losses or liabilities
which he may sustain or incur in or about the execution of the duties of his
office or otherwise in relation thereto, including any liability Incurred by him
in defending any proceedings, whether civil or criminal, or in connection with
any application under Section 144 or Section 727 of the Act in which relief is
granted to him by the Court, and no Director or other officer shall be liable
for any loss, damage or misfortune which may happen to or be incurred by the
Company in the execution of the duties of his office or in relation thereto. But
this Article shall only have affect in so far an its provisions are not avoided
by Section 310 of the Act.
(b) The Directors shall have power to Purchase and maintain for any
Director, officer or Auditor of the Company insurance against any such liability
as is referred to in Section 310(1) of the Act.
(c) Clause 118 in Table A shall not apply to the Company.
TRANSFER OF SHARES
14. The Directors may, in their absolute discretion and without assigning any
reason therefor, decline to register the transfer of a share, whether or not it
is a fully paid share, and the first sentence of Clause 24 in Table A shall not
apply to the Company.
________________________________________________________________________________
Names and addresses of Subscribers
________________________________________________________________________________
1. Instant Companies Limited
1 Mitchell Lane
Bristol BS1 6BU
2. Swift Incorporations Limited
1 Mitchell Lane
Bristol BS1 6BU
________________________________________________________________________________
Dated this 19/th/ day of May, 1995
Witness to the above Signatures: Mark Anderson
1 Mitchell Lane
Bristol BS1 6BU
12
<PAGE>
The regulations of Table A to the Companies Act 1985 apply to the Company save
insofar as they are not excluded or varied by its Articles of Association.
Table A as prescribed by the Companies (Tables A to F) Regulations 1985 (S.I.
1985 No. 805), amended by the Companies (Table A to F) (Amendment) Regulations
1985 (S.I. 1985 No. 1052), is reprinted below.
TABLE A THE COMPANIES ACT 1985
Regulations for Management of a Company Limited by Shares
INTERPRETATION
1. In these regulations --
"the Act" means the Companies Act 1985 including any statutory modification
or re-enactment thereof for the time being in force.
"the Articles" means the articles of the company.
"clear days" in relation to the period of a notice means that period
excluding the day when the notice is given or deemed to be given and the
day for which it is given or on which it is to take effect.
"executed" includes any mode of execution.
"office" means the registered office of the company
"the holder" in relation to shares means the member whose name is entered
in the register of members as the holder of the shares
"the seal" means the common seal of the company.
"secretary" means the secretary of the company or any other person
appointed to perform the duties of the secretary of the company, including
a joint, assistant or deputy secretary.
"the United Kingdom" means Great Britain and Northern Ireland.
Unless the context otherwise requires, words or expressions contained in these
regulations bear the same meaning as in the Act but excluding any statutory
modification thereof not in force when these regulations become binding on the
company.
SHARE CAPITAL
2. Subject to the provisions of the Act and without prejudice to any
rights attached to any existing shares, any share
<PAGE>
may be issued with such rights or restrictions as the company may by ordinary
resolution determine.
3. Subject to the provisions of the Act, shares may be issued which are
to be redeemed or are to be liable to be redeemed at the option of the company
or the holder on such terms and in such manner as may be provided by the
articles.
4. The company may exercise the powers of paying commissions conferred by
the Act. Subject to the provisions of the Act, any such commission may be
satisfied by the payment of cash or by the allotment of fully or partly paid
shares or partly in one way and partly in the other.
5. Except as required by law, no person shall be recognized by the
company as holding any share upon any trust and (except as otherwise provided by
the articles or by law) the company shall not be bound by or recognize any
interest in any share except an absolute right to the entirety thereof in the
holder.
SHARE CERTIFICATES
6. Every member, upon becoming the holder of any shares, shall be
entitled without payment to one certificate for all the shares of each class
held by him (and, upon transferring a part of his holding of shares of any
class, to a certificate for the balance of such holding) or several certificates
each for one or more of his shares upon payment for every certificate after the
first of such reasonable sum as the directors may determine. Every certificate
shall be sealed with the seal and shall specify the number, class and
distinguishing number (if any) of the shares to which it relates and the amount
or respective amounts paid up thereon. The company shall not be bound to issue
more than one certificate for shares held jointly by several persons and
delivery of a certificate to one joint holder shall be a sufficient delivery to
all of them.
7. If a share certificate is defaced, worn-out, lost or destroyed, it may
be renewed on such terms (if any) as to evidence and indemnify and payment of
the expenses reasonably incurred by the company in investigating evidence as the
directors may determine but otherwise free of charge, and (in the case of
defacement or wearing-out) on delivery op of the old certificate.
LIEN
8. The company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys (whether presently payable or not)
payable at a fixed time or called in respect of that share. The directors may
at any time declare any share to be wholly or in part exempt from the provisions
of this
2
<PAGE>
regulation. The company's lien on a share shall extend to any amount payable in
respect of it.
9. The company may sell in such manner as the directors determine any
shares on which the company has a lien if a sum in respect of which the lien
exists is presently payable and is not paid within fourteen clear days after
notice has been given to the holder of the share or to the person entitled to it
in consequence of the death or bankruptcy of the holder, demanding payment and
stating that if the notice is not complied with the shares may be sold.
10. To give effect to a sale the directors may authorize some person to
execute an instrument of transfer of the shares sold to, or in accordance with
the directions of, the purchaser. The title of the transferee to the shares
shall not be affected by any irregularity in or invalidity of the proceedings in
reference to the sale.
11. The net proceeds of the sale, after payment of the costs, shall be
applied in payment of so much of the sum for which the lien exists as is
presently payable, and any residue shall (upon surrender to the company for
cancellation of the certificate for the shares sold and subject to a like lien
for any moneys not presently payable as existed upon the shares before the sale)
be paid to the person entitled to the shares at the date of the sale.
CALLS ON SHARES AND FORFEITURE
12. Subject to the terms of allotment, the directors may make calls upon
the members in respect of any moneys unpaid on their shares (whether in respect
of nominal value or premium) and each member shall (subject to receiving at
least fourteen clear days' notice specifying when and where payment is to be
made) pay to the company as required by the notice the amount called on his
shares. A call may be required to be paid by installments. A call may, before
receipt by the company of any sum due thereunder, be revoked in whole or part
and payment of a call may be postponed in whole or part. A person upon whom a
call is made shall remain liable for calls made upon his notwithstanding the
subsequent transfer of the shares in respect whereof the call was made.
13. A call shall be deemed to have been made at the time when the
resolution of the directors authorizing the call was passed.
14. The joint holder of a share shall be jointly and severally liable to
pay all calls in respect thereof.
15. If a call remains unpaid after it has become due and payable the
person from whom it is due and payable shall pay interest on the amount unpaid
from the day it became due and payable until it is paid at the rate fixed by the
terms of
3
<PAGE>
allotment of the share or in the notice of the call, or if no rate is fixed, at
the appropriate rate (as defined by the Act) but the directors may waive payment
of the interest wholly or in part.
16. An amount payable in respect of a share on allotment or at any fixed
date, whether in respect of nominal value or premium or as an installment of a
call, shall be deemed to be a call and if it is not paid the provisions of the
articles shall apply as if that amount had become due and payable by virtue of a
call.
17. Subject to the terms of allotment, the directors may make arrangements
on the issue of shares for a difference between the holders in the amounts and
times of payment of calls on their shares.
18. If a call remains unpaid after it has become due and payable the
directors may give to the person from whom it is due not less than fourteen
clear days' notice requiring payment of the amount unpaid together with any
interest which may have accrued. The notice shall name the place where payment
is to be made and shall state that if the notice is not complied with the shares
in respect of which the call was made will be liable to be forfeited.
19. If the notice is not complied with any share in respect of which it
was given may, before the payment required by the notice has been made, be
forfeited by a resolution of the directors and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture.
20. Subject to the provisions of the Act, a forfeited share may be sold,
re-allotted or otherwise disposed of on such terms and in such manner as the
directors determine either to the person who was before the forfeiture the
holder or to any other person and at any time before sale, re-allotment or other
disposition, the forfeiture may be cancelled on such terms as the directors
think fit. Where for the purposes of its disposal a forfeited share is to be
transferred to any person the directors may authorize some person to execute an
instrument of transfer of the share to that person.
21. A person any of whose shares have been forfeited shall cease to be a
member in respect of them and shall surrender to the company for cancellation
the certificate for the shares forfeited but shall remain liable to the company
for all moneys which at the date of forfeiture were presently payable by him to
the company in respect of those shares with interest at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at the appropriate rate (as defined in the Act) from the date of
forfeiture until payment but the directors may waive payment wholly or in part
or enforce payment without any
4
<PAGE>
allowance for the value of the shares at the time of forfeiture or for any
consideration received on their disposal.
22. A statutory declaration by a director of the secretary that a share
has been forfeited on a specified date shall be conclusive evidence of the facts
stated in it as against all persons claiming to be entitled to the share and the
declaration shall (subject to the execution of an instrument of transfer if
necessary) constitute a good title to the share and the person to whom the share
is disposed of shall not be bound to see to the application of the
consideration, if any, nor shall his title to the share be effected by any
irregularity in or invalidity of the proceedings in reference to the forfeiture
or disposal of the share.
TRANSFER OF SHARES
23. The instrument of transfer of a share may be in any usual form or in
any other form which the directors may approve and shall be executed by or on
behalf of the transferor and, unless the share is fully paid, by or on behalf of
the transferee.
24. The directors may refuse to register the transfer of a share which is
not fully paid to a person of whom they do not approve and they may refuse to
register the transfer of a share on which the company has a lien. They may also
refuse to register a transfer unless:
(a) it is lodged at the office or at such other place as the directors
may appoint and is accompanied by the certificate for the shares to which
it relates and such other evidence as the directors may reasonably require
to show the right of the transferor to make the transfer;
(b) it is in respect of only one class of shares; and
(c) it is in favor of not more than four transferees.
25. If the directors refuse to register a transfer of a share, they shall
within two months after the date on which the transfer was lodged with the
company send to the transferee notice of the refusal.
26. The registration of transfers of shares or of transfers of any class
of shares may be suspended at such times and for such periods (not exceeding
thirty days in any year) as the directors may determine.
27. No fee shall be charged for the registration of any instrument of
transfer or other document relating to or affecting the title to any share.
5
<PAGE>
28. The company shall be entitled to retain any instrument of transfer
which is registered, but any instrument of transfer which the directors refuse
to register shall be returned to the person lodging it when notice of the
refusal is given.
TRANSMISSION OF SHARES
29. If a member dies the survivor or survivors where he was a joint
holder, and his personal representatives where he was a sole holder or the only
survivor of joint holders, shall be the only persons recognized by the company
as having any title to his interest; but nothing herein contained shall release
the estate of a deceased member from any liability in respect of any share which
had been jointly held by him.
30. A person becoming entitled to a share in consequence of the death or
bankruptcy of a member may, upon such evidence being produced as the directors
may properly require, elect either to become the holder of the share or to have
some person nominated by him registered as the transferee. If he elects to
become the holder he shall give notice to the company to that effect. If he
elects to have another person registered he shall execute an instrument of
transfer of the share to that person. All the articles relating to the transfer
of shares shall apply to the notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member had not occurred.
31. A person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall have the rights to which he would be entitled if he
were the holder of the share, except that he shall not, before being registered
as the holder of the share, be entitled in respect of it to attend or vote at
any meeting of the company or at any separate meeting of the holders of any
class of shares in the company.
ALTERATION OF SHARE CAPITAL
32. The company may by ordinary resolution:
(a) increase its share capital by new shares of such amount as the
resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares
of larger amount to an its existing shares;
(c) subject to the provisions of the Act, subdivide its shares, or any
of them, into shares of smaller amount and the resolution may determine
that, as between the shares resulting from the subdivision, any of them may
have any preference or advantage as compared with the others; and
6
<PAGE>
(d) cancel shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by any person and
diminish the amount of its share capital by the amount of the shares so
cancelled.
33. Whenever as a result of a consolidation of shares any members would
become entitled to fractions of a share, the directors may, on behalf of those
members, sell the shares representing the fractions for the best price
reasonably obtainable to any person (including, subject to the provisions of the
Act, the company) and distribute the net proceeds of sale in due proportion
among those members, and the directors may authorize some person to execute an
instrument of transfer of the shares to, or in accordance with the direction of,
the purchaser. The transferee shall not be bound to see to the application of
the purchase money nor shall his title to the shares to the shares be affected
by any irregularity in or invalidity of the proceedings in reference to the
sale.
34. Subject to the provisions of the Act, the company may by special
resolution reduce its share capital, any capital redemption serve and any share
premium account in any way.
PURCHASE OF OWN SHARES
35. Subject to the provisions of the Act, the company may purchase its own
shares (including any redeemable shares) and, if it is a private company, make a
payment in respect of the redemption or purchase of its own shares otherwise
than out of distributable profits of the company or the proceeds of a fresh
issue of shares.
GENERAL MEETINGS
36. All general meetings other than annual general meetings shall be
called extraordinary general meetings.
37. The directors may call general meeting and, on the requisition of
members pursuant to the provisions of the Act, shall forthwith proceed to
convene an extraordinary general meeting for a date not later than eight weeks
after receipt of the requisition. If there are not within the United Kingdom
sufficient directors to call a general meeting, any director or any member of
the company may call a general meeting.
NOTICE OF GENERAL MEETINGS
38. An annual general meeting and an extraordinary general meeting called
for the passing of a special resolution or a resolution appointing a person as a
director shall be called by at least twenty-one clear days' notice. All other
extraordinary general meetings shall be called by at least fourteen clear days'
7
<PAGE>
notice but a general meeting may be called by shorter notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members
entitled to attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the
members having a right to attend and vote being a majority together holding
not less than ninety-five percent, in nominal value of the shares giving
that right
The notice shall specify the time and place of the meeting and the general
nature of the business to be transacted and, in the case of an annual general
meeting, shall specify the meeting as such.
Subject to the provisions of the articles and to any restrictions imposed
on any share, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member and to
the directors and auditors.
39. The accidental omission to give notice of a meeting to, or the non-
receipt of notice of a meeting by, any person entitled to receive notice shall
not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
40. No business shall be transacted at any meeting unless a quorum is
present. Two persons entitled to vote upon the business to be transacted, each
being a member or a proxy for a member or a duly authorized representative of a
corporation, shall be a quorum.
41. If such a quorum is not present within half an hour from the time
appointed for the meeting, or if during a meeting such a quorum ceases to be
present, the meeting shall stand adjourned to the same day in the next week at
the same time and place or to such time and place as the directors may
determine.
42. The chairman, if any of the board of directors or in his absence some
other director nominated by the directors shall preside as chairman of the
meeting, but if neither the chairman nor such other director (if any) be present
within fifteen minutes after the time appointed for holding the meeting and
willing to act, the directors present shall elect one of their number to be
chairman and, if there is only one director present and willing to act, he shall
be chairman.
43. If no director is willing to act as chairman, or if no director is
present within fifteen minutes after the time appointed for holding the meeting,
the members present and entitled to vote shall choose one of their number to be
chairman.
8
<PAGE>
44. A director shall, notwithstanding that he is not a member, be entitled
to attend and speak at any general meeting and at any separate meeting of the
holders of any class of shares in the company.
45. The chairman may, with the consent of a meeting at which a quorum is
present (and shall if so directed by the meeting), adjourn the meeting from time
to time and from place to place, but no business shall be transacted at an
adjourned meeting other than business which might properly have been transacted
at the meeting had the adjournment not taken place. When a meeting is adjourned
for fourteen days or more, at least seven clear days' notice shall be given
specifying the time and place of the adjourned meeting and the general nature of
the business to be transacted. Otherwise it shall not be necessary to give any
such notice.
46. A resolution put to the vote of a meeting shall be decided on a show
of hands unless before, or on the declaration of the result of, the show of
hands a poll is duly demanded. Subject to the provisions of the Act, a poll may
be demanded:
(a) by the chairman; or
(b) by at least two members having the right to vote at the meeting;
or
(c) by a member or members representing not less than one-tenth of
the total voting rights of all the members having the right to vote at the
meeting; or
(d) by a member or members holding shares conferring a right to vote
at the meeting being shares on which an aggregate sum has been paid up
equal to not less than one-tenth of the total sum paid up on all the shares
conferring that right;
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
47. Unless a poll is duly demanded a declaration by the chairman that a
resolution has been carried or carried unanimously, or by a particular majority,
or lost, or not earned by a particular majority and an entry to that effect in
the minutes of the meeting shall be conclusive evidence of the fact without
proof of the number of proportion of the votes recorded in favor of or against
the resolution.
48. The demand for a poll may, before the poll is taken, be withdrawn but
only with the consent of the chairman and a demand so withdrawn shall not be
taken to have invalidated the result of a show of hands declared before the
demand was made.
9
<PAGE>
49. A poll shall be taken as the chairman directs and he may appoint
scrutineers (who need not be members) and fix a time and place for declaring the
result of the poll. The result of the poll shall be deemed to be the resolution
of the meeting at which the poll was demanded.
50. In the case of an equality of votes, whether on a show of hands or on
a poll, the chairman shall be entitled to a casting vote in addition to any
other vote he may have.
51. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken either forthwith or at such time and place as the chairman
directs not being more than thirty days after the poll is demanded. The demand
for a poll shall not prevent the continuance of a meeting for the transaction of
any business other than the question on which the poll was demanded. If a poll
is demanded before the declaration of the result of a show of hands and the
demand is duly withdrawn, the meeting shall continue as if the demand had not
been made.
52. No notice need be given of a poll not taken forthwith if the time and
place at which it is to be taken are announced at the meeting at which it is
demanded. In any other case at least seven clear days' notice shall be given
specifying the time and place at which the poll is to be taken.
53. A resolution in writing executed by or on behalf of each member who
would have been entitled to vote upon it if it had been proposed at a general
meeting at which he was present shall be as effectual as if it had been passed
at a general meeting duly convened and held and may consist of several
instruments in the like form each executed by or on behalf of one or more
members.
VOTES OF MEMBERS
54. Subject to any rights or restrictions attached to any shares, on a
show of hands every member who (being an individual) is present in person or
(being a corporation) is present by a duly authorized representative, not being
himself a member entitled to vote, shall have one vote and on a poll every
member shall have one vote for every share of which he is the holder.
55. In the case of joint holders the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders; and seniority shall be determined by the order
in which the names of the holders stand in the register of members.
56. A member in respect of whom an order has been made by any court having
jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning
mental disorder may vote, whether
10
<PAGE>
on a show of hands or on a poll, by his receiver, curator bonis or other person
authorized in that behalf appointed by that court, and any such receiver,
curator bonis or other person may, on a poll, vote by proxy. Evidence to the
satisfaction of the directors of the authority of the person claiming to
exercise the right to vote shall be deposited at the office, or at such other
place as is specified in accordance with the articles for the deposit of
instruments of proxy, not less than 48 hours before the time appointed for
holding the meeting or adjourned meeting at which the right to vote is to be
exercised and in default the right to vote shall not be exercisable.
57. No member shall vote at any general meeting or at any separate meeting
of the holders of any class of shares in the company, either in person or by
proxy, in respect of any share held by him unless all moneys presently payable
by him in respect of that share have been paid.
58. No objection shall be raised to the qualification of any voter except
at the meeting or adjourned meeting at which the vote objected to is tendered,
and every vote not disallowed at the meeting shall be valid. Any objection made
in due time shall be referred to the chairman whose decision shall be final and
conclusive.
59. On a poll votes may be given either personally or by proxy. A member
may appoint more than one proxy to attend on the same occasion.
60. An instrument appointing a proxy shall be in writing, executed by or
on behalf of the appointor and shall be in the following form (or in a form as
near thereto as circumstances allow or in any other form which is usual or which
the directors may approve):
PLC/Limited
I/We, ______________, of ___________________ being a member/members of the
above-named company, hereby appoint ______________ of ________________, or
failing him, _____________ of _________________, as my/our proxy to vote in
my/our name(s) and on my/our behalf at the annual/extraordinary general meeting
of the company to be held on ____________, 19___, and at any adjournment
thereof. Signed on _____________, 19___.
61. Where it is desired to afford members an opportunity of instructing
the proxy how he shall act the instrument appointing a proxy shall be in the
following form (or in a form as near thereto as circumstances allow or in any
other form which is usual or which the directors may approve):
PLC/Limited
11
<PAGE>
I/We, ______________, of ___________________ being a member/members of the
above-named company, hereby appoint ______________ of ________________, or
failing him, _____________ of _________________, as my/our proxy to vote in
my/our name(s) and on my/our behalf at the annual/extraordinary general meeting
of the company to be held on ____________, 19___, and at any adjournment
thereof. This form is to be used in respect of the resolutions mentioned below
as follows:
Resolution No. 1 *for *against
Resolution No. 2 *for *against
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from
voting.
Signed this ____ day of __________, 19___.
62. The instrument appointing a proxy and any authority under which it is
executed or a copy of such authority certified notarially or in some other way
approved by the directors may:
(a) be deposited at the office or at such other place within the
United Kingdom as is specified in the notice convening the meeting or in
any instrument of proxy sent out by the company in relation tot he meeting
not less than 48 hours before the time for holding the meeting or adjourned
meeting at which the person named in the instrument proposes to vote, or
(b) in the case of a poll taken more than 48 hours after it is
demanded, be deposited as aforesaid after the poll has been demanded and
not less than 24 hours before the time appointed for the taking of the
poll; or
(c) where the poll is not taken forthwith but is taken not more than
48 hours after it was demanded, be delivered at the meeting at which the
poll was demanded to the chairman or to the secretary or to any director;
and an instrument of proxy which is not deposited or delivered in a manner so
permitted shall ve invalid.
63. A vote given or poll demanded by proxy or by the duly authorized
representative of a corporation shall be valid notwithstanding the previous
determination of the authority of the person voting or demanding a poll unless
notice of the determination was received by the company at the office or at such
other place at which the instrument of proxy was duly deposited before the
commencement of the meeting or adjourned meeting at which the vote is given or
the poll demanded or (in the case of a
12
<PAGE>
poll taken otherwise than on the same day as the meeting or adjourned meeting)
the time appointed for taking the poll.
NUMBER OF DIRECTORS
64. Unless otherwise determined by ordinary resolution, the number of
directors (other than alternate directors) shall not be subject to any minimum
but shall be not less than two.
ALTERNATE DIRECTORS
65. Any director (other than an alternate director) may appoint any other
director, or any other person approved by resolution of the directors and
willing to act, to be an alternate director and may remove from office an
alternate director so appointed by him.
66. An alternate director shall be entitled to receive notice of all
meetings of directors and of all meetings of committees of directors of which
his appointor is a member, to attend and vote at any such meeting at which the
director appointing him is not personally present, and generally to perform all
the functions of his appointor as a director in his absence but shall not be
entitled to receive any remuneration from the company for his services as an
alternate director. But it shall not be necessary to give notice of such a
meeting to an alternate director who is absent from the United Kingdom.
67. An alternate director shall cease to be an alternate director if his
appointor ceased to be a director; but if a director retires by agreement or
otherwise but is reappointed or deemed to have been reappointed at the meeting
at which he retires, any appointment of an alternate director made by him which
was in force immediately prior to his retirement shall continue after his
reappointment.
68. Any appointment or removal of an alternate director shall be by notice
to the company signed by the director making or revoking the appointment or in
any other manner approved by the directors.
69. Save as otherwise provided in the articles, an alternate director
shall be deemed for all purposes to be a director and shall alone be responsible
for his own acts and defaults and he shall not be deemed to be the agent of the
director appointing him.
POWER OF DIRECTORS
70. Subject to the provisions of the Act, the memorandum and the articles
and to any directions given by special resolution, the business of the company
shall be managed by the directors who may exercise all the powers of the
company. No alteration of the
13
<PAGE>
memorandum or articles and no such direction shall invalidate any prior acts of
the directors which would have been valid if that alteration had not been made
or that direction had not been given. The powers given by this regulation shall
not be limited by any special power given to the directors by the articles and a
meeting of directors at which a quorum is present may exercise all powers
unexercisable by the directors.
71. The directors may, by power of attorney or otherwise, appoint any
person to be the agent of the company for such purposes and on such conditions
as they determine, including authority for the agent to delegate all or any of
his powers.
DELEGATION OF DIRECTORS' POWERS
72. The directors may delegate any of their powers to any committee
consisting of one or more directors. They may also delegate to any managing
director or any director holding any other executive office such of their powers
as they consider desirable to be exercised by him. Any such delegation may be
made subject to any conditions the directors may impose, and either collaterally
with or to the exclusion of their own powers and may be revoked or altered.
Subject to any such conditions, the proceedings of a committee with two or more
members shall be governed by the articles regulating the proceedings of
directors so far as they are capable of applying.
APPOINTMENT AND RETIREMENT OF DIRECTORS
73. At the first annual general meeting all the directors shall retire
from office, and at every subsequent annual general meeting one-third of the
directors who are subject to retirement by rotation or, if their number is not
three or a multiple of three, the number nearest to one-third shall retire from
office; but, if there is only one director who is subject to retirement by
rotation, he shall retire.
74. Subject to the provisions of the Act, the directors to retire by
rotation shall be those who have been longest in office since their last
appointment or reappointment, but as between persons who became or were last
appointed directors on the same day those to retire shall (unless they otherwise
agree among themselves) be determined by lot.
75. If the company, at the meeting at which a director retires by
rotation, does not ___________________________________ been reappointed unless
at the meeting it is resolved not to fill the vacancy or unless a resolution for
any reappointment of the director is put to the meeting and lost.
14
<PAGE>
76. No person other than a director ____________________________ shall be
appointed a director at any general meeting unless:
(a) he is recommended by the directors; or
(b) not less than fourteen nor more than thirty-five clear days
before the date appointed for the meeting notice executed by a member
qualified to vote at the meeting has been given to the company of the
intention to propose that person for appointment or reappointment stating
the particulars which would, if her were so appointed or reappointed, be
required to be included in the company's register of directors together
with notice executed by that person of his willingness to be appointed or
reappointed.
77. Not less than seven nor more than twenty-eight clear days before the
date appointed for holding a general meeting notice shall be given to all who
are entitled to receive notice of the meeting of any person (other than a
director _______________________________ at the meeting) who is recommended by
the directors for appointment or reappointment as a director at the meeting
_____________________________ whom notice has been duly given to the company of
the intention to propose him at the meeting for appointment or reappointment as
a director. The notice shall give the particulars of that person which would,
if he were so appointed or reappointed, be required to be included in the
company's register of directors.
78. Subject as aforesaid, the company may by ordinary resolution appoint a
person who is waiting to act to be a director wither to fill a vacancy or as an
additional director and may also determine the rotation in which any additional
directors are to retire.
79. The directors may appoint a person who is willing to act to be a
director either to fill a vacancy or as an additional director, provided that
the appointment does not cause the number of directors to exceed any number
fixed by or in accordance with the articles as the maximum number of directors.
A director so appointed shall hold office only until the next following annual
general meeting and shall not be taken into account in determining the directors
who are to retire by rotation at the meeting. If not reappointed at such annual
general meeting, he shall vacate office at the conclusion thereof.
80. Subject as aforesaid, a director who retires at an annual general
meeting may, if willing to act, be reappointed. If he is not reappointed, he
shall retain office until the meeting appoints someone in his place, or if it
does not do so, until the end of the meeting.
15
<PAGE>
DISQUALIFICATION AND REMOVAL OF DIRECTORS
81. The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provision of the Act
or he becomes prohibited by law from being a director; or
(b) he becomes bankrupt or makes any arrangement or composition with
his creditors generally; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application
for admission for treatment under the Mental Health Act
_______________________________ application for admission under the
Mental Health (Scotland) act 1960; or
(ii) an order is made by a court having jurisdiction (whether in
the United Kingdom or elsewhere) on matters concerning mental disorder
for his detention or for the appointment of a receiver, curator bonis
or other person to exercise powers with respect to his property or
affairs; or
(d) he resigns his office by notice to the company; or
(e) he shall for more than six consecutive months have been absent
without permission of the directors from meetings of directors held during
that period and the directors resolve that his office be vacated.
REMUNERATION OF DIRECTORS
82. The directors shall be entitled to such remuneration as the company
may, by ordinary resolution determine and, unless the resolution provides
otherwise, the remuneration shall be deemed to accrue from day to day.
DIRECTORS' EXPENSES
83. The directors may be paid all traveling, hotel, and other expenses
properly incurred by them in connection with their attendance at meetings of
directors or committee of directors or general meetings or separate meetings of
the holders of any class of shares or of debentures of the company or otherwise
in connection with the discharge of their duties.
16
<PAGE>
DIRECTORS' APPOINTMENTS AND INTERESTS
84. Subject to the provisions of the Act, the directors may appoint one or
more of their number to the office of managing director or to any other
executive office under the company and may enter into an agreement or
arrangement with any director for his employment by the company or for the
provision by him of any services outside the scope of the ordinary duties of a
director. Any such appointment, agreement or arrangement may be made upon such
terms as the directors determine and they may remunerate any such director for
his services as they think fit. Any appointment of a director to an executive
office shall terminate if he ceases to be a director but without prejudice to
any claim to damages for breach of the contract of service between the director
and the company. A managing director and a director holding any other executive
office shall not be subject to retirement by rotation.
85. Subject to the provisions of the Act, and provided that he has
disclosed to the directors the nature and extent of any material interest of
his, a director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the company or in which the company is otherwise
interested;
(b) may be a director or other officer of, or employed by, or a party
to any transaction or arrangement with, or otherwise interested in, any
body corporate promoted by the company or in which the company is otherwise
interested; and
(c) shall not, by reason of his office, be accountable to the company
if any benefit which he derives from any such office or employment or from
any such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
86. For the purposes of regulation 85:
(a) a general notice given to the directors that a director is to be
regarded as having an interest of the nature and extent specified in the
notice in any transaction or arrangement in which a specified person or
class of persons interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it
is unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
17
<PAGE>
DIRECTORS' GRATUITIES AND PENSIONS
87. The directors may provide benefits, whether by the payment of
gratuities or pensions or by insurance or otherwise, for any director who has
held but no longer holds any executive office or employment with the company or
with any body corporate which is or has been a subsidiary of the company or
predeceaser in business of the company or of any such subsidiary, and for a
__________________________________________ who is or was dependent on him, and
may (as well before as after he ceases held such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
PROCEEDINGS OF DIRECTORS
88. Subject to the provisions of the articles, the directors may regulate
the proceedings as they think fit. A director may, and the secretary at the
request of a director shall, call a meeting of the directors. It shall not be
necessary to give notice of a meeting to a director who is absent from the
United Kingdom. Questions arising at a meeting shall be decided by a majority of
votes. In the case of an equality of votes, the chairman shall have a second or
casting vote. A director who is also an alternate director shall be entitled in
the absence of his appointor to a separate vote on behalf of his appointor in
addition to his ___ vote.
89. The quorum for the transaction of the business of the directors may be
fixed by the directors and unless so fixed at any other number shall be two
_____________________________ not present, be counted in the quorum.
90. The continuing directors or a sole continuing director may
notwithstanding any vacancies in their number, but, if the number of directors
is less than the number fixed as the quorum, the continuing directors or
director may act only for the purpose of filling vacancies or of calling a
general meeting.
91. The directors may appoint one of their number to be the chairman of
the board of directors and may at any time remove him from that office. Unless
he is unwilling to do so, the director so appointed shall preside at every
meeting of directors at which he is present. But if there is no director
holding that office, or if the director holding it is unwilling to preside or is
not present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
92. All acts done by a meeting of directors, or of a committee of
directors, or by a person acting as a director shall, notwithstanding that it be
afterwards discovered that there was a defect in the appointment of any director
or that any of them were
18
<PAGE>
disqualified from holding office, or had vacated office, or were not entitled to
vote, be as valid as if every such person had been duly appointed and was
qualified and had continued to be a director and had been entitled to vote.
93. A resolution in writing signed by all the directors entitled to
receive notice of a meeting of directors or of a committee of directors shall be
as valid and effectual as if it had been passed at a meeting of directors or (as
the case may be) a committee of directors duly convened and held and may consist
of several documents in the like form each signed by one or more directors; but
a resolution signed by an alternate director need not also be signed by his
appointor and, if it is signed by a director who has appointed an alternate
director, it need not be signed by the alternate director in that capacity.
94. Save as otherwise provided by the articles, a director shall not vote
at a meeting of directors or of a committee of directors on any resolution
concerning a matter in which he has, directly or indirectly, an interest or duty
which is material and which conflicts or may conflict with the interests of the
company unless his interest or duty arises only because the case falls within
one or more of the following paragraphs:
(a) the resolution relates to the giving to him of a guarantee,
security, or indemnity in respect of money lent to, or an obligation
incurred by him for the benefit of, the company or any of its subsidiaries;
(b) the resolution relates to the giving to a third party of a
guarantee, security, or indemnity in respect of an obligation of the
company or any of its subsidiaries for which the director has assumed
responsibility in whole or part and whether alone or jointly with others
under a guarantee or indemnity or by the giving of security;
(c) his interest arises by virtue of subscribing or agreeing to
subscribe for any shares, debentures or other securities of the company or
any of its subsidiaries, or by virtue of his being, or intending to become,
a participant in the underwriting or sub-underwriting of an offer of any
such shares, debentures, or other securities by the company or any of its
subsidiaries for subscription, purchase or exchange;
(d) the resolution relates in any way to a retirement benefits scheme
which has been approved, or is conditional upon approval, by the Board of
Inland Revenue for taxation purposes.
For the purposes of this regulation, an interest of a person who is, for
any purpose of the Act (excluding any statutory modification thereof not in
force when the regulation becomes
19
<PAGE>
binding on the company), connected with a director shall be treated as an
interest of the director and, in relation to an alternate director, an
interest of his appointor shall be treated as an interest of the alternate
director without prejudice to any interest which the alternate director has
otherwise.
95. A director shall not be counted in the quorum present at a meeting in
relation to a resolution on which he is not entitled to vote.
96. The company may by ordinary resolution suspend or relax to any extent,
either generally or in respect of any particular matter, any provision of the
articles prohibiting a director from voting at a meeting of directors or of a
committee of directors.
97. Where proposals are under consideration concerning the appointment of
two or more directors to offices or employments with the company or any body
corporate in which the company is interested the proposals may be divided and
considered in relation to each director separately and (provided he is not for
another reason precluded from voting) each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
98. If a question arises at a meeting of directors or of a committee of
directors as to the right of a director to vote, the question may, before the
conclusion of the meeting, be referred to the chairman of the meeting and his
ruling in relation to any director other than himself shall be final and
conclusive.
SECRETARY
99. Subject to the provisions of the Act, the secretary shall be appointed
by the directors for such term, at such remuneration and upon such conditions as
they may think fit; and any secretary so appointed may be removed by them.
MINUTES
100. The directors shall cause minutes to be made in books kept for the
purpose:
(a) of all appointments of officers made by the directors; and
(b) of all proceedings at meetings of the company, of the holders of
any __________, of shares in the company, and of the directors, and of
committees of directors, including the names of the directors present at
each such meeting.
20
<PAGE>
THE SEAL
101. The seal shall only be used by the authority of the directors or of a
committee of directors authorized by the directors. The directors may determine
who shall sign any instrument to which the seal is affixed and unless otherwise
so determined it shall be signed by a director and by the secretary or by a
second director.
DIVIDENDS
102. Subject to the provisions of the Act, the company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the directors.
103. Subject to the provisions of the Act, the directors may pay interim
dividends if it appears to them that they are justified by the profits of the
company available for distribution. If the share capital is divided into
different classes, the directors may pay interim dividends on shares which
confer deferred or non-preferred rights with regard to dividend as well as on
shares which confer preferential rights with regard to dividend, but no interim
dividend shall be paid on shares carrying deferred or non-preferred rights if,
at the time of payment, any preferential dividends is in arrears. The directors
may also pay at intervals settled by them any dividend payable at a fixed rate
if it appears to them that the profits available for distribution justify the
payment. Provided the directors act in good faith they shall not incur any
liability to the holders of shares conferring preferred rights for any loss they
may suffer by the lawful payment of an interim dividend on any shares having
deferred or non-preferred rights.
104. Except as otherwise provided by the rights attached to shares, all
dividends shall be declared and paid according to the amounts paid up on the
shares on which the dividend is paid. All dividends shall be apportioned and
paid proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
105. A general meeting declaring a dividend may, upon the recommendation of
the directors, direct that it shall be satisfied wholly or partly by the
distribution of assets and, where any difficulty arises in regard to the
distribution the directors may settle the same and in particular may issue
fractional certificates and fix the value for distribution of any assets and may
determine that cash shall be paid to any member upon the footing of the value
21
<PAGE>
so fixed in order to adjust the rights of members and may vest any assets in
trustees.
106. Any dividend or other moneys payable in respect of a share may be paid
by cheque sent by post to the registered address of the person entitled or, if
two or more persons are the holders of the share or are jointly entitled to it
by reason of the death or bankruptcy of the holder, to the registered address of
that one of those persons who is first named in the register of members or to
such person and to such address as the person or persons entitled may in writing
direct. Every cheque shall be made payable to the order of the person or
persons entitled or to such other person as the person or persons entitled may
in writing direct and payment of the cheque shall be a good discharge to the
company. Any joint holder or other person jointly entitled to a share as
aforesaid may give receipts for any dividend or other moneys payable in respect
of the share.
107. No dividend or other moneys payable in respect of a share shall bear
interest against the company unless otherwise provided by the rights attached to
the share.
108. Any dividend which has remained unclaimed for twelve years from the
date when it became due for payment shall, if the directors so resolve, be
forfeited and cease to remain owing by the company.
ACCOUNTS
109. No member shall (as such) have any right of inspecting any accounting
records or other book or document of the company except as conferred by statute
or authorized by the directors or by ordinary resolution of the company.
CAPITALIZATION OF PROFITS
110. The directors may with the authority of an ordinary resolution of the
company:
(a) subject as hereinafter provided, resolve to capitalize any
undivided profits of the company not required for paying any preferential
dividend (whether or not they are available for distribution) or any sum
standing to the credit of the company's share premium account or capital
redemption reserve;
(b) appropriate the sum resolved to be capitalized to the members who
would have been entitled to it if it were distributed by way of dividend
and in the same proportions and apply such sum on their behalf either in or
towards paying up the amounts, if any, for the time being unpaid on any
shares held by them respectively, or in paying up in full unissued
22
<PAGE>
shares or debentures of the company of a nominal amount equal to that sum,
and allot the shares or debentures credited as fully paid to those members,
or as they may direct, in those proportions, or partly in one way and
partly in the other; but the share premium account, the capital redemption
reserve, and any profits which are not available for distribution may, for
the purposes of this regulation, only be applied in paying up unissued
shares to be allotted to members credited as fully paid;
(c) make such provision by the issue of fractional certificates or by
payment in cash or otherwise as they determine in the case of shares or
debentures becoming distributable under this regulation in fractions; and
(d) authorize any person to enter on behalf of all the members
concerned into an agreement with the company providing for the allotment to
them respectively, credited as fully paid, of any shares or debentures to
which they are entitled upon such capitalization, any agreement made under
such authority being binding on all such members.
NOTICES
111. Any notice to be given to or by any person pursuant to the articles
shall be in writing except that a notice calling a meeting of the directors need
not be in writing.
112. The company may give any notice to a member either personally or by
sending it by post in a prepaid envelope addressed to the member at his
registered address or by leaving it at that address. In the case of joint
holders of a share, all notices shall be given to the joint holder whose name
stands first in the register of members in respect of the joint holding and
notice so given shall be sufficient notice to all the joint holders. A member
whose registered address is not within the United Kingdom and who gives to the
company an address within the United Kingdom at which notices may be given to
him shall be entitled to have notices given to him at that address, but
otherwise no such member shall be entitled to receive any notice from the
company.
113. A member present, either in person or by proxy, at any meeting of the
company or of the holders of any class of shares in the company shall be deemed
to have received notice of the meeting and, where requisite, of the purposes for
which it was called.
114. Every person who becomes entitled to a share shall be bound by any
notice in respect of that share which, before his name is entered in the
register of members, has been duly given to a person from whom he derives his
title.
23
<PAGE>
115. Proof that an envelope containing a notice was properly addressed,
prepaid and posted shall be conclusive evidence that the notice was given. A
notice shall be deemed to be given at the expiration of 48 hours after the
envelope containing it was posted.
116. A notice may be given by the company to the persons entitled to a
share in consequence of the death or bankruptcy of a member by sending or
delivering it, in any manner authorized by the articles for the giving of notice
to a member, addressed to them by name, or by the title of representatives of
the deceased, or trustee of the bankrupt or by any like description at the
address, if any, within the united Kingdom supplied for that purpose by the
persons claiming to be so entitled. Until such an address has been supplied, a
notice may be given in any manner in which it might have been given if the death
or bankruptcy had not occurred.
WINDING UP
117. If the company is wound up, the liquidator may, with the sanction of
an extraordinary resolution of the company and any other sanction required by
the Act, divide among the members in specie the whole or any part of the assets
of the company and may, for that purpose, value any assets and determine how the
division shall be carried out as between the members or different classes of
members. The liquidator may, with the like sanction, vest the whole or any part
of the assets in trustees upon such trusts for the benefit of the members as he
with the like sanction determines, but no member shall be compelled to accept
any assets upon which there is a liability.
INDEMNITY
118. Subject to the provisions of the Act but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the company shall be indemnified out of the assets of the
company against any liability incurred by him in defending any proceedings,
whether civil or criminal, in which judgment is given in his favour or in which
he is ______________ or in connection with any application in which relief is
granted to him by the court from liability for negligence, default, breach of
duty or breach of trust in relation to the affairs of the company.
24
<PAGE>
EXHIBIT 3.28
NATIONAL COMPANIES AND SECURITIES COMMISSION
COMPANIES FORM 27
Registered No.: 893109158 Sub-section 72(S)
Companies (Queensland) Code
CERTIFICATE OF INCORPORATION ON
CHANGE OF NAME OF COMPANY
This is to Certify
that
HURSTLOW PTY LIMITED which was on the TWENTY-SIXTH day of SEPTEMBER, 1989
incorporated under the Companies (Queensland) Code as a proprietary company, on
the TENTH day of JULY, 1990 changed its name to T.E.S. MINING SERVICES PTY. LTD.
and that the company is a proprietary company, and is a company limited by
shares.
Given under the seal of the National Companies and
Securities Commission of BRISBANE on this TENTH
day of JULY, 1990
__________________________________________________
<PAGE>
MACULROB
SERVICES PTY. LTD.
CERTIFICATE OF INCORPORATION
----------------------------
and
---
MEMORANDUM and ARTICLES OF ASSOCIATION
--------------------------------------
of
--
HURSTLOW PTY LIMITED
--------------------
<PAGE>
NATIONAL COMPANIES AND SECURITIES COMMISSION
COMPANIES FORM 17
Registered No.: 89310915F Sub-section 35(2)
Companies (Queensland) Code
CERTIFICATE OF INCORPORATION OF
PROPRIETARY COMPANY
This is to Certify
that
HURSTLOW PTY LIMITED is on the TWENTY-SIXTH day of SEPTEMBER, 1989 incorporated
as a proprietary company, being a company limited by shares.
Given under the seal of the National Companies and
Securities Commission at BRISBANE on this TWENTY-
SIXTH day of SEPTEMBER, 1989
__________________________________________________
<PAGE>
COMPANIES (QUEENSLAND) CODE
---------------------------
A Company Limited by Shares
MEMORANDUM OF ASSOCIATION
-------------------------
- of -
HURSTLOW PTY LIMITED
--------------------
NAME
----
1. The name of the company is HURSTLOW PTY LIMITED.
--------------------
2. The powers of the company are those contained in the Companies (Queensland)
Code and, subject thereto, the company has the rights, the powers and the
privileges of a natural person and, without limiting the generality of the
foregoing, has power -
(a) to issue and allot fully or partly paid shares in the company;
(b) to issue debentures of the company;
(c) to distribute any of the property of the company among the members, in kind
or otherwise;
(d) to give security by charging uncalled capital;
(e) to grant a floating charge on property of the company;
(f) to procure the company to be registered or recognized as a body corporate
in any place outside the State; and
(g) to do any other act that it is authorized to do by any other law.
3. The liability of the members is limited.
4. The share capital with which the company proposes to be registered in ONE
---
MILLION DOLLARS ($1,000,000.00) divided into one million (1,000,000) shares of
- ---------------
ONE DOLLAR ($1.00) each.
- ----------
5. The full names, address and occupations of the subscribers to this
Memorandum of Association and the number of shares they respectively agree to
take are as follows:
<PAGE>
<TABLE>
<CAPTION>
NO. OF SHARES
NAME ADDRESS OCCUPATION SUBSCRIBER
---- ------- ---------- AGREES TO TAKE
---------------
<S> <C> <C> <C>
Thomas William 99 Creek Street Accountant One (1)
Alexander Brisbane Ordinary Share
Charles Donald 99 Creek Street Clerk One (1)
Alexander Richard Brisbane Ordinary Share
</TABLE>
WHEREAS the subscribers hereto, are desirous of being formed into a company in
pursuance of this Memorandum of Association and we respectively agree to take
the number of shares in the capital of the company set out opposite our
respective names in the last preceding paragraph hereof.
Dated this 21/st/ day of September, 1989.
<TABLE>
<CAPTION>
SIGNATURE OF NUMBER OF SHARES SIGNATURE AND
SUBSCRIBER AGREES TO BE TAKEN ADDRESS OF WITNESS
------------ ------------------ -------------------
<S> <C> <C>
One (1) ordinary
/s/ Thomas William share /s/
- ------------------ -------------------
Alexander
- --------------------
One (1) ordinary 99 Creek Street
/s/ Charles Donald share Brisbane
- ------------------
Alexander Richard
- --------------------
(Witness to both
signatures)
</TABLE>
2
<PAGE>
COMPANIES (QUEENSLAND) CODE
---------------------------
A R T I C L E O F A S S O C I A T I 0 N
-----------------------------------------
- of -
HURSTLOW PTY LIMITED
--------------------
ADOPTION OF TABLE A
-------------------
1. The regulations contained in Table A in the Third Schedule to the Companies
(Queensland) Code (called "Table A") shall apply to the company save in so far
as they are excluded or varied hereby or are inconsistent herewith and in
addition thereto the following shall be the regulations of the company.
PROPRIETARY COMPANY
-------------------
2. The company shall be a proprietary company and accordingly the following
provisions shall have affect:
(a) The right to transfer shares in the company shall be restricted in the
manner hereinafter provided;
(b) The number of the members of the company (counting joint holders of shares
as one person and not counting any person in the employment of the company
or of its subsidiary or any person who while previously in the employment
of the company or of its subsidiary was and thereafter has continued to be
a member of the company) shall not at any time exceed fifty;
(c) The company shall not make any invitation to the public to subscribe for
and any offer to the public to accept subscriptions for any shares in or
debentures of the company;
(d) The company shall not make any invitation to the public to deposit money
with the company for fixed periods or payable at call whether bearing or
not bearing interest nor and any offer to the public to accept deposits of
money whether bearing or not bearing interest;
(e) The directors may at any time require any person whose name 13 entered in
the Register of Members or any proposed transferee or transferees to
furnish any information supported (if the directors so require) by a
statutory declaration which they may consider necessary for the purpose of
determining whether or not the company is or would be if any transfer or
transfers lodged for registration or proposed to be so lodged, an exempt
proprietary company within the meaning of sub-section (5) of Section 5 of
the Companies (Queensland) Code. This sub-clause shall be deemed to be a
condition attaching to the issue of every share by the company.
<PAGE>
If any such person as aforesaid, on being required by the directors to furnish
information as aforesaid, shall fail to comply with such requirement the
directors may (without prejudice to any other powers vested in them) refuse to
register any relevant transfer lodged for registration of any share in respect
of which their requirement is made.
SHARES
------
3. (a) The shares of the company shall be under the control of the directors
who may issue and allot them as one class or several classes and at such
time or times and in such manner in all respects as the directors shall
think fit. Any of the shares of the company for the time being unissued or
any new shares from time to time to be created may from time to time be
issued as fully paid up with any guarantee or any right or preference
whether in respect of dividends or of repayment of capital or both or any
other special privilege or advantage over any shares previously issued or
then about to be issued or at such premium or with such deferred rights as
compared with any shares previously issued or then about to be issued or
subject to any such conditions or provisions and without any special rights
or without the right of voting and generally on such terms as the directors
may from time to time determine. If at any time there are any preference
shares in the share capital of the company all shares other than preference
shares shall be called ordinary shares.
(b) If at any time the share capital of the company is divided into
different classes Of shares the rights attached to any class (unless
otherwise provided by the terms of issue of the shares of that class) may
whether or not the company is being wound up or not be varied with the
consent in writing of the holders of three fourths of the issued shares of
that Class or with the sanction of a special resolution passed at a
separate general meeting of the holders of the shares of the class.
(c) The share capital of the company is ONE MILLION DOLLARS
($1,000,000.00) divided into ONE MILLION (1,000,000) shares of ONE DOLLAR
($1.00) each and classified as:-
992,000 - ordinary shares ("Ordinary Shares")
1,000 - "A" class shares ("A Shares")
1,000 - "B" class shares ("B Shares")
1,000 - "C" class shares ("C Shares")
1,000 - "D" class shares ("D Shares")
1,000 - "E" class shares ("E Shares")
1,000 - "F" class shares ("F Shares")
1,000 - "G" class shares ("G Shares")
1,000 - "H" class shares ("H Shares")
2
<PAGE>
and shall be subject to the following rights, privileges conditions and
obligations:-
(i) The ordinary shares, the A shares and the B shares shall entitle the
holder or holders thereof to receive notice of meetings and shall confer
upon any holder thereof when present in person or by proxy or by attorney
at any general show of hands and upon a poll to cast one (1) vote for each
share held.
(ii) The C, D, E, F, G and H shares shall carry no voting rights
whatsoever.
(iii) Where at any time there shall be more than one class Of shares on
issue, any dividend or distribution of capitalized profits may be declared
by the company in general meeting, and as the Directors from time to time
recommend, and all dividends whether interim or otherwise may be paid, and
distribution of capitalized profits made on the shares of any one or more
class or classes of shares to the exclusion of the shares of any other
class or classes and if at any meeting dividends are declared or
distributions made on more than one class the dividend declared or
distribution made on the shares of any such class may be at a higher or
lower rate than or at the same rate as the dividend declared or
distribution made on the shares of the other or others of such classes
provided that the shares in each class shall inter se? participate pari
passu in any dividend declared or any distribution of capitalized profits
made in respect of that class.
(iv) Upon a reduction of capital or winding up of the company, the F, G
and H shares shall as regards return of capital rank pari passu inter se?
with all other shares in the capital of the company, but shall not carry
the right to any further participation in the surplus assets or profits.
SHARE CERTIFICATES
------------------
4. The following conditions shall apply to the issue of all shares by the
company:
(a) That in relation to the allotment of any share or shares no share
certificate need be completed and be ready for delivery until after the
expiration of one month from the receipt by the company from the particular
shareholder of a written request for a share certificate in respect of the
relevant shareholding.
3
<PAGE>
(b) That in relation to the transfer of any share or shares (whether there
previously has been a share certificate completed and delivered or not)
then notwithstanding the entry of the name of the transferee in the
Register of Members no share certificate need be completed and be ready for
delivery until after the expiration of one month from the receipt by the
company from the particular transferee (having been registered as a member)
of a written request for a share certificate in respect of the relevant
shareholding.
(c) That notwithstanding the conditions in paragraphs (a) and (b) hereof the
company shall not be bound to complete and deliver any share certificate
unless the particular shares are fully paid.
(d) That should any member whether the original allottee or the transferee of
any share or shares make written request as aforesaid then the company
shall complete and deliver the share certificate to which the particular
member is entitled within one month after the expiration of the month
hereinbefore referred to.
LIEN
----
5. The lien conferred by Regulation 8 of Table A shall attach to fully paid up
shares and to all shares registered in the name of any person indebted or under
liability to the company whether he shall be the sole registered holder thereof
or shall be one of two or more joint holders.
EVIDENCE
--------
6. On the trial or hearing of any action for the recovery of any money due for
any call it shall be sufficient to prove that the name of the member sued is
entered in the Register of Members of the company as the holder or one of the
holders of the shares in respect of which such debt accrued; that the resolution
making the call is duly recorded in the minute book; and that the notice of such
call was duly given to the member sued in pursuance of these presents and it
shall not be necessary to prove the appointment of the director who made such
call; nor any other matters whatsoever but the proof of the matters aforesaid
shall be conclusive evidence of the debt.
TRANSFER OF SHARES
------------------
7. (a) The directors may in their absolute and uncontrolled discretion
decline to register any proposed transfer of shares without assigning any
reason for such refusal and may also decline to register any transfer of
shares upon which the company has a lien. Regulation 21 of Table A shall be
modified accordingly.
4
<PAGE>
(b) A transfer of shares shall not be registered unless a proper
instrument of transfer has been delivered to the company. The instrument of
transfer of any shares shall be signed by both the transferror and the
transferee and the transferror shall be deemed to remain the holder of such
share until the name of the transferee is entered in the Register in
respect thereof. The directors may in any case dispense with production of
the relevant certificate or certificates.
(c) Either the transferror or the transferee may request the directors to
state in writing as to whether there is or are any existing share
certificate or certificates in respect of the shares referred to in the
transfer and if the directors state in the negative then the production of
any share certificate or certificates shall be dispensed with.
(d) The directors may in any case dispense with the production of any
share certificate or certificates in relation to any transfer on such terms
and conditions as they see fit.
INCREASE IN CAPITAL
-------------------
8. Regulation 38 of Table A shall not apply to this company. Article 3 hereof
shall apply to all shares whether forming part of the original capital or
additional or new capital.
GENERAL MEETING
---------------
9. A general meeting of the company shall be held in accordance with the
provisions of the Companies (Queensland) Code at such time and place as the
directors shall appoint. In default of a general meeting being so held a general
meeting may be convened by any two members in the same manner as nearly as
possible as that in which general meetings are to be convened by the directors.
10. The quorum for the transaction of business at any general meeting shall be
two members personally present and holding or representing by proxy not less
than one tenth of the share capital of the company for the. time being issued
and Regulation 42 of Table A shall be modified accordingly.
11. In paragraph (b) of Regulation 46 of Table A the words "two members" are
substituted for the words "three members".
12. In Regulation 55 of Table A the words "one hour" are substituted for the
words "forty-eight hours" and "twenty-four hours" where the said words
respectively occur.
5
<PAGE>
VOTES OF MEMBERS
----------------
13. On a show of hands every member present in person and entitled to vote
shall have one vote and on a poll every member so entitled shall have one vote
for each share of which he is the holder.
DIRECTORS
---------
14. The names of the first directors of the company shall be determined in
writing by the subscribers to the Memorandum of Association or the majority of
them.
15. Unless and until otherwise determined by ordinary resolution in general
meeting (and then subject to any such determination from time to time) the
number of directors shall be not less than two nor more than seven and the
directors from time to time shall not be subject to retirement by rotation but
shall continue to hold office until removed from office or until that office
becomes vacant as the case may be.
16. A director shall not be required to hold any shares in the company.
17. (a) A memorandum in writing signed by all the directors for the time
being in Australia and annexed or attached to the directors minute book
shall be as effective for all purposes as a resolution of the directors
passed at a meeting duly convened held and constituted.
(b) Regulation 70(2) of Table A is deleted.
18. The directors shall have power from time to time to determine by whom any
cheque bill of exchange promissory note deposit note or other obligation shall
be drawn made or accepted or endorsed on behalf of the company.
DISQUALIFICATION OF DIRECTORS
-----------------------------
19. The office of a director shall be vacated:
(a) If he becomes bankrupt or compound with his creditors;
(b) If he becomes of unsound mind;
(c) If he absents himself from meetings of directors for a period of six
consecutive months without special leave of absence from the other
directors;
(d) If he becomes prohibited from being a director by reason of any order made
under the Companies (Queensland) Code;
6
<PAGE>
(e) If he gives the company notice in writing that he resigns his office.
But any act done in good faith by a director whose office is vacated as
aforesaid shall be valid unless prior to the doing Of such act written notice
shall have been served upon the company or an entry shall have been made in the
directors' minute book stating that such director has ceased to be a director of
the company.
20. Regulation 65(f) of Table A 13 deleted.
21. Regulation 65(g) of Table A is deleted.
INTERESTED DIRECTORS
--------------------
22. No director shall be disqualified by his office from contracting with the
company either as vendor purchaser or otherwise nor shall any such contract or
any contract or arrangement entered into by or on behalf of the company in which
any director shall be in any way interested be avoided nor shall any director so
contracting or being so interested be liable to account to the company for any
profit realized by any such contract or arrangement by reason of such director
holding that office or of the fiduciary relation thereby established but it is
declared that the nature of his interest must be disclosed by him at a meeting
of the directors and the secretary shall record such declaration in the minutes
of the meeting. Such declaration shall be made at the meeting of the directors
at which the contract or arrangement is determined on if his interest then
exists or in any other case at the first meeting of directors after the
acquisition of his interest. A general notice that a director is a member of a
specified company or firm and is to be regarded as interested in any contract or
arrangement which may after the date of the notice be made with that company or
firm shall be deemed to be a sufficient declaration of interest in relation to
any contract or agreement so made.
23. Any director may as a director or shareholder vote in respect of any
contract or arrangement in which he is so interested as aforesaid and may affix
the common seal of the company to and execute any document on behalf of the
company in respect of any contract as aforesaid.
24. A director of this company may be or become a director officer employee or
member of any company promoted by this company or its holding company or in
which it may be interested as a vendor shareholder or otherwise and no such
director shall be accountable for any benefits received by him in any capacity.
25. Regulation 71 of Table A is deleted.
7
<PAGE>
MANAGING DIRECTOR
-----------------
26. The directors may from time to time appoint a managing director or manager
and may entrust to and confer upon such managing director or manager all or any
of the powers of the directors (excepting the power to make calls forfeit shares
borrow money or issue debentures) that they may think fit. But the exercise of
all powers by such managing director or manager shall be subject to such
regulations and restriction; as the directors may from time to time impose and
the said powers may at any time be withdrawn revoked or varied.
ALTERNATE DIRECTORS
-------------------
27. Each director shall have power to nominate any person whether a member or
not (but in the case of a nomination of a person other than a director provided
the nominee is approved for that purpose by a majority of the other directors)
to act as alternate director in his place during his absence from Queensland or
inability to act or attend as such director and at his discretion to remove such
alternate director and on such appointment being made the alternate director
shall (except as regards share qualification) be subject in all respects to the
terms and conditions existing with reference to the other directors and each
alternate director while acting in the place of a director shall exercise and
discharge all the duties and is entitled to and may exercise all the authorities
prerogatives privileges and powers of the director he represents. An alternate
director shall not require to hold any shares in the company.
Any instrument appointing an alternate director shall be delivered to and
retained by the company and shall as nearly as circumstances will admit be in
the form or to the effect following:
"I,
a director of
in pursuance of the Powers in that behalf contained in the Articles of
Association of the company hereby nominate
of to act as alternate director of the company in my
place and stead and to exercise and discharge all my duties and to exercise
all my authorities prerogatives privileges and powers as a director of the
company during my absence from Queensland (or my inability to act or attend
as a director as the case may be).
As witness my hand this day of 19 .
(Signature of Director)
(Witness to Signature)"
8
<PAGE>
If the director making any such appointment as aforesaid shall cease to be a
director the person appointed by him shall thereupon cease to have any power or
authority to act as an alternate director.
BORROWING POWERS
----------------
28. The directors may from time to time at their discretion raise borrow or
secure the payment of any sum or sum of money for the purpose of the company.
29. The directors may raise or secure the payment or repayment of such moneys
in such manner and Upon such terms and conditions in all respects as they think
fit and in particular by the issue of debentures or debenture stock of the
company charged upon all or any part- ;f the property of the company both
present and future including its uncalled capital for the time being.
30. Debentures debenture stock and other securities may be made assignable free
from any equities between the company and the person to whom the same may be
issued.
31. Any debentures debenture stock bonds or other securities may be issued at a
discount premium or otherwise and with any special privileges as to redemption
surrender drawings allotments of shares attending and voting at general meetings
of the company appointment of directors and otherwise.
32. The directors shall cause a proper register to be kept in accordance with
Section 209 of the Companies (Queensland) Code of all mortgages and charges
specifically affecting the property of the company and shall duly comply with
the requirements of the Companies (Queensland) Code in regard to the
registration of mortgages and charges therein specified or otherwise.
33. If any uncalled capital of the company is included in or charged by any
mortgage or other security the directors may by instrument under the company's
seal authorize the person in whose favour such mortgage or security is executed
or any other person in trust for him to make calls on the members in respect of
such uncalled capital or to control the making thereof with power to control or
veto transfers and to sue in the name of the company or otherwise for the
recovery of moneys becoming due in respect of calls so made and to give valid
receipts for such moneys and the power to delegate shall subsist during the
continuance of the mortgage or security notwithstanding any change of directors
and shall be assignable if expressed so to be.
DIVIDENDS
---------
34. The profits of the company available for distribution among the members
shall be distributed by way of dividend to shareholders
9
<PAGE>
or to the various classes Of shareholders in accordance with the terms of issue
of relevant shares or classes of shares as the case may be and in the absence of
any contrary provision in the said terms of issue of any of the said shares or
classes of shares the said profits shall be distributed by way of dividend to
shareholders in proportion to the amount paid up or credited as paid up for the
time being on their shares respectively. No amount paid on a share in advance of
calls shall while carrying interest be treated for the purpose of this article
as paid on the share.
35. If at any time the ordinary share capital of the company is divided into
shares of different Classes the company in general meeting may differentiate
between those classes as to rate of dividend payable and may exclude one or more
classes from participation in the dividend provided however that the holders of
shares of the same class shall participate pari passu in proportion to the
capital for the time being paid up or credited as paid up thereon in the
dividend declared to that class.
36. Any general meeting declaring a dividend may direct payment of such
dividend wholly or in part by the distribution of specific assets and in
particular of paid up shares debentures or debenture stock of the company or
paid up shares debentures or debenture stock of any other company or in any one
or more of such ways and the directors shall give effect to such resolution. Any
general meeting may in any year pass a resolution to the effect that it is
desirable to capitalize any sum being part of the undivided profits of the
company standing to the credit of the company's reserve fund and/or to the
credit of the profit and loss account and accordingly that such sum be
distributed as a bonus free of income tax or otherwise amongst the holders of
those shares who would be entitled to participate in that sum if it were being
distributed as a dividend in proportion to the shares held by them respectively
and that the directors be authorized to distribute amongst them unissued
ordinary shares in like proportion. When such resolution has been passed the
directors may allot and issue such unissued ordinary shares credited as fully
paid up to the holders of the said shares in satisfaction of the said bonus and
as nearly as may be in proportion to the said shares held by them respectively.
Where any difficulty arises in regard to the distribution they may settle the
same as they think expedient and in particular may issue fractional certificates
and may fix the value for distribution of such specific assets or any part
thereof and may determine that cash payments shall be made to any members upon
the footing of the value so fixed in order to adjust the rights of all parties
and may vest any such specific assets in trustees upon such trusts for the
persons entitled to the dividend as may seem expedient to the directors. Where
requisite a proper contract shall be filed in accordance with the Companies
(Queensland) Code for the time being and the directors may appoint any person to
sign such contract on behalf of the persons entitled to the dividend and such
appointments shall be effective.
10
<PAGE>
37. A member who has no registered address in Queensland and has not supplied
to the company an address within the State of Queensland for the giving of
notices to him shall not be entitled to receive any notices from the company.
INDEMNITY
---------
38. (a) No director manager secretary or other officer of the company acting
in good faith and within the scope of his duties or what he believes to be
the scope of his duties shall be liable for any loss damage or misfortune
which may occur whether the same be occasioned by any mistake error
oversight or omission on his part or not.
(b) Every director manager secretary or other officer of the company
shall be entitled to have reimbursed to him out of the funds of the company
all traveling, hotel and other expenses which he may from time to time
incur in consequence of his attendance at board meetings and otherwise in
the discharge or attempted discharge of his duties and be indemnified by
the company against all liabilities whatsoever which he may from time to
time take upon him elf as agent for the company or for its benefit or
intended benefit.
(c) Nothing herein contained shall be construed to lessen or abrogate any
indemnity or protection given or authorized to directors or officers of the
company by law.
WINDING UP
----------
39. In a winding up any part of the assets of the company including any shares
in or securities of any other company may with the sanction of an extraordinary
resolution of the company be divided among the members of the company in specie
or may be vested in trustees for the benefit of such members and the liquidation
of the company may be closed and the company dissolved but so that no member
shall be compelled to accept any shares whereon there is any liability.
INTERPRETATION
--------------
40. In these Articles the word "company" when applied otherwise than to this
company shall be deemed in so far as the context permits to include any
partnership or other body of persons whether corporate or unincorporate and
whether domiciled in Queensland or elsewhere and words importing the masculine
gender shall be deemed to include the feminine gender and vice versa.
We, the several persons whose names and addresses are subscribed hereunder,
being the subscribers to the Memorandum of Association of the company, hereby
agree to the foregoing Articles of Association.
11
<PAGE>
DATED this 21st day of September 1989.
- -----
SIGNATURE OF SUBSCRIBER SIGNATURE AND ADDRESS OF WITNESS
- ------------------------- --------------------------------
/s/ W. A. ___________________ /s/ ___________________
99 Creek Street
/s/ Charles Brisbane
(Witness to both signatures)
12
<PAGE>
EXHIBIT 3.29
DEPARTMENT OF JUSTICE
NEW ZEALAND
CERTIFICATE OF INCORPORATION
----------------------------
TOTAL ENERGY SYSTEMS (NZ) LIMITED
(DN/682396)
This is to certify that TOTAL ENERGY SYSTEMS (NZ) LIMITED was incorporated under
the Companies Act 1993 on the 15th day of June 1995
Neville Harris
Registrar of Companies
16 June 1995
<PAGE>
CONSTITUTION OF TOTAL ENERGY SYSTEMS (NZ) LIMITED
1 CONSTITUTION AND THE COMPANIES ACT
1.1 REGISTRATION
The company is registered under the Companies Act 1993 and is regulated
by the Act and this constitution.
1.2 DEFINITIONS
The defined words and expressions in clause 17 shall, where used in this
constitution, have the meaning given to them in clause 17.
2 ISSUE OF SHARES
2.1 BOARD MAY ISSUE SHARES
The board may with the unanimous approval of the shareholders issue
shares with preferred, deferred or other special rights or restrictions,
whether in regard to distributions, voting, return of capital or
otherwise.
2.2 OFFER TO SHAREHOLDERS
New shares must be offered to all shareholders in proportion to the
number of existing shares held by them. The offer must be made by written
notice to each shareholder stating:
(a) the number of shares to which that shareholder is entitled;
(b) the consideration for which the shares will be issued and the terms
on which they will be issued;
(c) the time (not being less than 14 days nor more than 28 days) within
which the offer, if not accepted, will be deemed to be declined;
(d) that any shareholder who wishes to acquire shares in excess of that
shareholder's entitlement must, when accepting the offer, state the
number of excess shares which that shareholder wishes to acquire;
(e) that any unclaimed shares will be used for satisfying the requests
for excess shares; and
(f) that if, thereafter, any shares remain unallocated, the board may
offer them to any person whom the board is prepared to register as a
shareholder provided that the consideration and terms of issue are
no more advantageous to that person than those offered to the
shareholders.
1
<PAGE>
3 PURCHASE BY COMPANY OF ITS SHARES
3.1 PURCHASE OF SHARES
The company may purchase or otherwise acquire shares issued by the
company.
3.2 OFFER TO PURCHASE SHARES
The company may make an offer to all shareholders or to one or more
shareholders to purchase or otherwise acquire shares issued by the
company.
4 TRANSFER OF SHARES
4.1.1 The board may not register a duly completed transfer of any share without
the unanimous consent of the shareholders.
4.1.2 Right to refuse registration of transfer
The board may refuse or delay the registration of a duly completed
transfer of any share if the board (subject only to its duty to act in
good faith) considers that:
(a) to effect the transfer would result in a breach of the law or this
constitution; or
(b) the shareholder has failed to pay to the company any amount due in
respect of that share; or
(c) the transferee is a person without legal capacity to contract; or
(d) the transfer has not been properly executed; or
(e) where a share certificate has been issued, the transfer is not
accompanied by the relevant share certificate, or by evidence as to
its loss or destruction and, if required, an indemnity in a form
required by the board; or
(f) it is not in the best interests of the company to register the
transfer.
4.2 PRE-EMPTIVE RIGHTS ON TRANSFERS
Except as provided in clauses 4.10 (transfer to relatives) and 4.11
(transfer approved by all shareholders) no shares may be sold or
transferred by any shareholder, liquidator, official assignee or personal
representative of any shareholder, unless and until, the rights of pre-
emption conferred in this constitution have been exhausted.
4.3 TRANSFER NOTICE
4.3.1 Except where the transfer is made pursuant to clauses 4.10 (transfer to
relatives) and 4.11 (transfer approved by all
2
<PAGE>
shareholders), the person proposing to sell or transfer any shares
("proposing transferor") must give notice in writing (a "transfer
notice") to the company that the proposing transferor desires to transfer
the shares. The transfer notice must specify the sum which the proposing
transferor considers to be the value of the shares and must (subject to
this clause) make the company the proposing transfer's agent for the sale
of the shares to any shareholder at the price specified or, at the option
of the purchasing shareholder (as defined in clause 4.4), at the fair
value to be fixed in accordance with clause 4.5.
4.3.2 If a transfer notice includes several shares it will not operate as if it
were a separate transfer notice in respect of each of the shares and the
proposing transferor will be under no obligation to sell or transfer part
only of the shares specified in the transfer notice. The transfer notice
is not revocable without the sanction of the board in writing, other than
as provided in clause 4.6. If no price is specified by-a proposing
transferor the proposing transferor will be deemed to want to sell or
transfer the shares at their fair value.
4.4 COMPANY FINDING BUYER
If the company, within 3 calendar months after being served with a
transfer notice, finds a shareholder or shareholders willing to purchase
all the shares ("purchasing shareholder") and gives notice of that to the
proposing transferor, the proposing transferor will, subject to clause
4.6 (right to revoke), be bound upon payment of the sum specified in the
transfer notice or, as the case may be, at the fair value determined
under clause 4.5 (subject to any lien which the company may have under
the constitution to make a deduction in respect of that lien), to
transfer the shares to the purchasing shareholder.
4.5 ARBITRATION OF FAIR VALUE
4.5.1 If any difference arises between a proposing transferor and a purchasing
shareholder as to the value of the shares, the fair value will be fixed
on the application of either party by the arbitration of a single
arbitrator. Such an application must be made within 3 months of the date
of the transfer notice. If the parties fail to agree on a single
arbitrator, then the matter will be determined by the arbitration of 2
arbitrators, one to be appointed by each party in dispute. The
arbitrators shall appoint an umpire before entering upon their reference.
4.5.2 Upon the fair value being so fixed the value specified in the transfer
notice will be deemed to have been the fair value given by this clause
4.5.
3
<PAGE>
4.5.3 The arbitration will be determined in accordance with the provisions
contained in the Arbitration Act 1908 or any statutory modification or
re-enactment of that Act for the time being in force. The costs of any
arbitration will be borne equally between the proposing transfer and the
purchasing shareholder.
4.6 RIGHT TO REVOKE
If the fair value fixed in accordance with clause 4.5 is less than the
sum specified by the proposing transferor in the proposing transferor's
transfer notice as the sum the proposing transferor considers to be the
value, the proposing transferor will be entitled at any time before the
expiration of 7 days after the date of receiving notice of the award
fixing the fair value, to revoke the transfer notice.
4.7 DEFAULT BY TRANSFEROR
4.7.1 If a proposing transferor, after becoming bound to transfer the shares
described in the transfer notice, defaults in transferring the shares,
any director may execute a transfer of the shares on behalf of the
proposing transferor, and the company may receive the purchase money and
cause the name of the purchasing shareholder to be entered in the
register as the holder of the shares.
4.7.2 The company will hold the purchase money (subject to any lien in favour
of the company in respect of the shares) in trust for the proposing
transferor. The receipt of the company for the purchase money will be a
good discharge to the purchasing shareholder.
4.8 COMPANY NOT FINDING BUYER
4.8.1 If the company does not, within 3 months after being served with a
transfer notice, find a shareholder or shareholders willing to purchase
all the shares and gives notice to the proposing transferor to that
effect, then the proposing transferor may, at any time within 3 calendar
months afterwards, sell and transfer the shares, or those not placed, to
any person.
4.8.2 The proposing transferor may not transfer all or any of the shares at a
price lower than the value specified in the transfer notice.
4.9 OFFER TO SHAREHOLDERS
The shares specified in a transfer notice received by the company must be
first offered to the holders of the same class of shares. If more than
one shareholder of that class wishes to accept the offer they will be
entitled to accept
4
<PAGE>
the shares offered in the same proportion as between themselves as their
existing holding in that _______________________________________________
offered to all other shareholders and if more than one shareholder wishes
to accept they will be entitled to accept the shares offered in the same
proportion as the shares held by them.
4.10 TRANSFERS TO RELATIVES
4.10.1 Shares may be transferred by a shareholder to any child, adopted child,
grandchild, or spouse of the shareholder or to a trustee or any trust
which is, in the opinion of the board, exclusively or principally for the
benefit of any of those persons, and shares standing in the name of the
trustees of the will of any deceased shareholder or of any such trustee
may be transferred upon any change of trustees to the trustees for the
time being of such will or trust, and the restrictions in clauses 4.2 to
4.9 do not apply to any transfer authorized by this clause.
4.10.2 In the case of a shareholder that is a company, shares may be transferred
to a wholly-owned subsidiary company, or by a wholly-owned subsidiary
company to a holding company and the restrictions in clauses 4.2 to 4.9
do not apply to any transfer authorized by this clause.
4.11 TRANSFER APPROVED BY ALL SHAREHOLDERS
Any share may be transferred by a shareholder to any person if the
transfer is approved in writing, by all shareholders. The restrictions in
clauses 4.2 to 4.9 do not apply to any transfer authorized by this
clause.
5 TRUSTS NOT RECOGNIZED
Except as required by law, no person will be recognized by the company as
holding any share upon trust and the company shall not be bound by or be
compelled in any way to recognize (even when having notice of it) any
equitable, contingent, future or partial interest in any share or any
interest in a fractional part except the absolute legal right to the
entirety of the share vested in the registered shareholder.
6 CALLS ON SHARES
6.1 BOARD MAY MAKE CALLS
6.1.1 The board may make calls for the payment of any amounts unpaid on shares
which are not payable at a fixed time or times by the terms of issue of
those shares. Each shareholder shall, subject to receiving at least 14
days' written notice specifying the time or times and place of
5
<PAGE>
payment, pay to the company at the time or times and place so specified
the amount called. A call may be revoked or postponed as the board may
determine.
6.1.2 Failure to give notice to a shareholder will not invalidate a call but
the call will not be payable by a shareholder until a notice has been
served on that shareholder.
6.1.3 The board may, in making any call, differentiate between the shareholders
as to the amount to be paid and the time of payment.
6.2 TIMING OF CALLS
A call may be made payable at the times and in the amounts which the
directors decide.
6.3 LIABILITY OF JOINT HOLDERS
Joint shareholders of a share are jointly and severally liable to pay all
calls in respect of the share.
6.4 INTEREST AND EXPENSES
If a sum called in respect of a share is not paid before or on the time
payment is due, the person from whom the sum is due shall pay:
(a) interest on that sum from the day payment was due to the day of
actual payment, at the rate which the board determines either at or
after the time of the call; and
(b) all expenses which the company may incur by reason of non-payment of
the sum called in respect of a share.
The board may waive payment of all or part of that interest or expense.
6.5 INSTALMENTS
Any sum which by the terms of issue of a share becomes payable on issue
or at any fixed time shall, for all purposes, be deemed to be a call duly
made and payable at the time at which by the terms of issue the same
becomes payable. In case of non-payment all the relevant provisions of
this constitution relating to payment of interest and expenses, or
otherwise shall apply as if the sum had become payable by virtue of a
call duly made and notified and the terms of issue shall be deemed to be
written notice specifying the time and place of payment.
6
<PAGE>
7 SUSPENSION OF RIGHT TO DIVIDENDS AND LIEN
7.1 NOTICE OF SUSPENSION OF RIGHT TO DIVIDENDS
If a shareholder fails to pay any call on the day appointed for payment,
the board may, at any time after that date, while any part of the call
remains unpaid, suspend payment of any distributions payable to the
shareholder until so much of the call as is unpaid together with any
interest which may have accrued and all expenses that may have been
incurred by the company by reason of the non-payment have been paid to
the company in full.
7.2 APPLICATION OF SUSPENDED DIVIDENDS
7.2.1 All distributions which would have been payable in respect of shares
which are subject to a suspension of the right to distributions must be
withheld and applied by the company to reduce the amount owing under the
call, including amounts owing under clause 7.3.
7.2.2 The amount owing under the call may include any interest which may have
accrued and all expenses which may have been incurred by the company by
reason of non-payment by the shareholder under the call.
7.3 LIFTING OF SUSPENSION OF RIGHT TO DIVIDENDS
When the total distributions withheld and applied under clause 7.2.1
equal the total amount owing under the call, including amounts owing
under clause 7.2.2, the suspension of the right to distributions will be
lifted, and all rights to be paid distributions on the shares will
resume.
7.4 LIEN
The company has a first and paramount lien upon every share registered in
the name of a shareholder (whether solely or jointly with others) and
upon the proceeds of sale of those shares, and upon any distributions
from. time to time payable in respect of the shares, for all money
(whether presently payable or not) payable in respect of shares held by
the shareholder and for all other money presently payable by the
shareholder to the company on any account whatever and also for such
amounts (if any) as the company may be called upon to pay under any
statute or regulation in respect of shares of a deceased or other
shareholder (whether the period for the payment, fulfilment or discharge
respectively has actually arrived or not).
7.5 SALE ON EXERCISE OF LIEN
7.5.1 If any sum remains unpaid in respect of which a lien on a share held by
the shareholder presently exists, the board may at any time thereafter
serve notice ("sale notice") on
7
<PAGE>
the shareholder requiring payment of that sum.
7.5.2 The sale notice shall name a day (not earlier than the expiration of 14
days from the date of service of the sale notice) on or before which the
payment required by the sale notice is to be made, and shall state that,
in the event of non-payment on or before the time appointed, the shares
in respect of which the sale notice was given will be liable to be sold
by the company including a sale to itself.
7.5.3 If the requirements of any sale notice are not complied with, any share
in respect of which the sale notice was given may be sold on whatever
terms and in whatever manner the board decides. At any time before sale
the sale may be cancelled on whatever terms the board decides. If any
share is sold the residue, if any, of the proceeds of the sale after
payment of all costs and expenses of the sale and all moneys owing in
respect of the share sold and interest thereon and costs and expenses of
any prior attempted sale in respect of that share shall be paid to the
shareholder whose share has been sold or to the shareholder's executors,
administrators or assigns.
7.5.4 A shareholder whose share has been sold pursuant to clause 7.5.3 shall
cease to be a shareholder in respect of that share, but shall,
nevertheless, remain liable to pay to the company all money which, at the
time of sale, was payable by the shareholder to the company in respect of
that share, but that liability shall cease if and when the company
receives payment in full of all the money in respect of that share.
7.5.5 A statutory declaration in writing made by a director declaring that a
share has been duly disposed of on a date stated in the declaration shall
be conclusive evidence of the facts stated in the declaration as against
all persons claiming to be entitled to that share.
7.5.6 The company may receive the consideration, if any, given for a share on
any sale of the share and may authorize any person to execute a transfer
of the share in favour of the person to whom the share is sold, and that
person shall be registered as a shareholder of the share and shall not be
bound to see to the application of the purchase money, if any, nor shall
that person's title to the share be affected by any irregularity or
invalidity in the proceedings in reference to the sale of the share.
8
<PAGE>
8 MANAGEMENT BY SHAREHOLDERS
8.1 SHAREHOLDER'S MANAGEMENT RESOLUTION IS BINDING
The shareholders may pass a resolution relating to or for the purpose of
managing or directing or supervising the management or supervision of the
business or affairs of the company. Any such resolution shall be a
resolution of the company and shall be binding on the board. 8.2
Resolution may not be binding The shareholders may pass a resolution
regarding the management of the company, expressed as a non-binding
resolution, and any such resolution, shall not be binding on the company
or the board. 8.3 Resolution of the company The board has the express
power to refer any matter arising out of the business or affairs of the
company to the shareholders and any resolution passed by the shareholders
at a general meeting directing, requiring or affirming a proposed course
of conduct shall be a resolution of the company and shall be binding on
the board.
9 MEETINGS OF SHAREHOLDERS
9.1 ANNUAL MEETING
9.1.1 The board must, in accordance with Section 120 of the Act (annual meeting
of shareholders), call an annual meeting of shareholders to be held:
(a) once in each calendar year other than in the calendar year of the
company's incorporation;
(b) not later than six months after the balance date of the company; and
(c) not later than fifteen months after the previous annual meeting or,
in respect of its first annual meeting, not later than eighteen
months after the company's date of incorporation.
9.1.2 The company must hold the annual meeting on the date on which it is
called to be held.
9.2 SPECIAL MEETINGS
A special meeting of shareholders entitled to vote on an issue:
(a) may be called at any time by the board or a person who is authorized
by this constitution to call the meeting; and
(b) must be called by the board on the written request of shareholders
holding shares carrying together
9
<PAGE>
not less than 5 percent of the voting rights entitled to be
exercised on the issue.
9.3 RESOLUTION IN LIEU OF MEETING
9.3.1 Subject to clause 9.3.2 a resolution in writing signed by not less than
75 percent of the shareholders who would be entitled to vote on that
resolution at a meeting of shareholders who together hold not less than
75 percent of the votes entitled to be cast on that resolution, is as
valid as if it had been passed at a meeting of those shareholders.
9.3.2 A resolution pursuant to Section 196(2) of the Act to not appoint an
auditor may be passed as provided in clause 9.3.1 provided that the
resolution must be unanimous and be signed by all the shareholders
entitled to vote on the resolution.
9.3.3 Within 5 working days of a resolution being passed under this clause the
company must send a copy of the resolution to every shareholder who did
not sign the resolution or on whose behalf the resolution was not signed.
9.4 PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
9.4.1 The provisions of the First Schedule to the Act shall apply to meetings
of shareholders, including the right of shareholders to cast a postal
vote.
10 APPOINTMENT AND REMOVAL OF DIRECTORS
10.1 NUMBER OF DIRECTORS
The number of directors may not be fewer than 1 nor more than 6.
10.2 FIRST DIRECTORS
The first directors are the persons named as the directors in the
application for the incorporation of the company, or if no persons are so
named the first directors are the directors first appointed under clause
10.3.
10.3 APPOINTMENT AND REMOVAL BY NOTICE
10.3.1 Subject to clauses 10.2 and 10.4 the directors are the persons appointed
from time to time as directors by a notice in writing signed by
shareholders holding the majority of the ordinary shares and who have not
been removed or resigned or disqualified from office under this
constitution.
10.3.2 A director may be removed from office at any time by a
10
<PAGE>
notice in writing signed by the shareholders holding the majority of the
ordinary shares.
10.3.3 A notice given under clauses 10.3.1 and 10.3.2 takes effect upon receipt
of it at the registered office of the company (including the receipt of a
facsimile copy) unless the notice specifies a later time at which the
notice will take effect. The notice may comprise one or more similar
documents separately signed by shareholders giving the notice.
10.3.4 A director holds office until his or her retirement, disqualification or
removal in accordance with this constitution.
10.4 APPOINTMENT AND REMOVAL OF DIRECTORS BY RESOLUTION
10.4.1 In addition to the appointment or removal of directors under clause 10.3
a director may be appointed or removed from office by an ordinary
resolution.
10.4.2 A resolution to appoint 2 or more directors may be voted on as one
resolution without each appointment being voted individually.
10.4.3 A notice of meeting at which the removal of a director will be considered
must state that the purpose of the meeting is the removal of the
director.
10.5 Disqualification and removal A person will be disqualified from holding
the office of director if he or she:
(a) is removed under clause 10.3 or clause 10.4; or
(b) resigns in writing; or
(c) becomes disqualified from being a director pursuant to Sections 151,
382 or 385 of the Act.
(d) dies;
(e) becomes a protected person under the Protection of Personal and
Property Rights Act 1988;
(f) is under 18 years of age;
(g) is an undischarged bankrupt;
(h) is prohibited by the Companies Act 1955 from being a director or
would be so prohibited but for the repeal of that Act.
11
<PAGE>
10.6 ALTERNATE DIRECTORS
10.6.1 Every director may by notice given in writing to the company, appoint any
person (including any other director) to act as an alternate director in
the director's place either generally or in respect of a specified
meeting or meetings during the director's absence or inability to act as
a director and at the director's discretion by notice in writing to the
company, to remove the director's alternate director. On any such
appointment being made the alternate director, may while acting in the
place of the director, represent, exercise and discharge all the powers,
rights, duties and privileges (but not including the right of acting as
chairperson and signing board resolutions) of the director appointing the
alternate director and is subject in all respects to the same terms and
provisions as that director except as regards remuneration and except as
regards the power to appoint an alternate director under this
constitution. For the purpose of establishing a quorum of the board an
alternate director is deemed to be the director appointing him or her.
10.6.2 The notice of appointment of an alternate director should include an
address for service of notice of meetings of directors. Failure to give
an address will not invalidate the appointment but notice of meetings of
the board need not be given to the alternate director until an address is
provided to the company.
11. INDEMNITY AND INSURANCE
11.1 INDEMNITY OF DIRECTORS AND EMPLOYEES
11.1.1 The board may cause the company to indemnify a director and former
director and former employee or employee of the company or a related
company for costs incurred by him or her in any proceeding:
(a) that relates to liability for any act or omission in his or her
capacity as a director or employee; and
(b) in which judgment is given in his or her favour or in which he or
she is acquitted, or which is discontinued.
11.1.2 The board may cause the company to indemnify a director or an employee or
former director or former employee of the company or a related company in
respect of:
(a) liability to any person other than the company or a related company
for any act or omission in his or her capacity as a director or
employee; or
12
<PAGE>
(b) costs incurred by the director or employee in defending or settling
any claim or proceeding relating to any liability under paragraph
11.1.1(a) above, provided that the liability is not criminal or (in
the case of a director) in respect of a breach of the duty specified
in Section 131 of the Act (duty to act in good faith and in the best
interests of the company) or (in the case of an employee) in respect
of a breach of any fiduciary duty owed to the company or a related
company.
11.1.3 The board must ensure that particulars of any indemnity given to, or
insurance effected for any director or employee of the company or related
company or any such former director or employee are forthwith entered in
the interests register.
11.2 INSURANCE OF DIRECTORS AND EMPLOYEES
11.2.1 The board may, subject to Section 162 of the Act, cause the company to
effect insurance for directors and former directors and for employees and
former employees of the company or a related company in respect of:
(a) liability not being criminal liability, for any act or omission in
his or her capacity as a director or employee; or
(b) costs incurred by that director or employee or former director or
employee in defending or settling any claim or proceeding relating
to any such liability; or
(c) costs incurred by a director or employee or former director or
employee in defending any criminal proceedings in which he or she is
acquitted.
11.2.2 The directors who vote in favour of authorizing the effecting of
insurance under clause 11.2.1 must sign a certificate stating that, in
their opinion, the cost of effecting the insurance is fair to the
company. .
12 POWERS AND D13TIES OF THE 130ARD
12.1 Powers of the board
12.1.1 Subject to clause 8 the business and affairs of the company must be
managed by or under the direction or supervision of the board.
12.1.2 Subject to clause 8 the board has, and may exercise, all the powers
necessary for managing, directing and
13
<PAGE>
supervising the management, business and affairs of the company except
to the extent that this constitution or the Act expressly require those
powers to be exercised by the shareholders or any other person.
12.2 DIRECTORS TO ACT IN GOOD FAITH
12.2.1 Subject to the subclauses, set out below in this clause 12.2 a director,
when exercising powers or performing duties, must act in good faith and
in what the director believes to be the best interests of the company.
12.2.2 If the company is a wholly-owned subsidiary a director may, when
exercising powers or performing duties as a director, act in a manner
which he or she believes is in the best interests of the company's
holding company even though it may not be in the best interests of the
company.
12.2.3 If the company is a subsidiary (but not a wholly-owned subsidiary) a
director may when exercising powers or performing duties as a director
with the prior agreement of the shareholders (other than its holding
company), act in a manner which he or she believes is in the best
interests of the company's holding company even though it may not be in
the best interests of the company.
12.2.4 If the company is incorporated to carry out a joint venture between its
shareholders the director may, when exercising powers or performing
duties as a director in connection with the carrying out of the joint
venture, act in a manner which he or she believes is in the best
interests of a shareholder or shareholders, even though it may not be in
the best interests of the company.
12.2.5 Nothing in this clause 12.2 limits the power of a director to make
provision for the benefit of employees of the company in connection with
the company ceasing to carry on the whole or part of its business.
12.3 GRATUITIES
12.3.1 Subject to Section 161 of the Act the board may procure the
establishment and maintenance of any non-contributory or contributory
pension, superannuation fund, or life assurance scheme, for the benefit
of, and the grant of donations, gratuities, pensions, allowances,
benefits or emoluments, to any persons (including directors and other
officers) who are, or have been at any time, in the employment or
service of the company, or of any company which is a subsidiary of the
company and the spouses, surviving spouses, families or dependants of
any of those
14
<PAGE>
persons.
12.3.2 The board may also procure the establishment and subsidy of, or
subscription and support to, any institutions, associations, clubs,
funds or trusts, calculated to be for the benefit of any of the persons
referred to in clause 12.3.1 or otherwise to advance the interests and
well-being of the company or of any subsidiary company referred in
clause 12.3.1 or of its shareholders and payments for or towards the
insurance of any of those persons, and subscriptions or guarantees of
money for charitable or benevolent objects, or for any exhibition, or
for any public, general or useful object.
12.3.3 The board may procure any of the matters referred to in clause 12.3.1
and in clause 12.3.2 be done by the company either alone or in
conjunction with any other company.
13 PROCEEDINGS OF THE BOARD
13.1 THIRD SCHEDULE TO APPLY
The provisions of the Third Schedule to the Act apply to meetings of the
board.
13.2 NOTICE TO DIRECTORS
It is not necessary to give notice of a meeting of the board to any
director for the time being absent from New Zealand but if a director is
resident outside New Zealand, or to the knowledge of the company is
temporarily absent from New Zealand and the director has appointed an
alternate director under this constitution, notice must (subject to
clause 1(3) of the Third Schedule to the Act and to clause 10.6.2 of
this constitution) be given to the alternate director.
14 DIVIDENDS
14.1 DIVIDENDS PROPORTIONATE TO PAID UP CAPITAL
Subject to the rights of persons, if any, entitled to shares with
special rights as to dividends, all dividends on shares not fully paid
up shall be authorized and paid in proportion to the amount paid to the
company in satisfaction of the liability of the shareholder to the
company in respect of the shares under the constitution or pursuant to
the terms of issue of the shares. No amount paid or credited as paid on
a share, in advance of calls, is to be treated for the purpose of this
clause 14.1 as paid on the share. All dividends are to be apportioned
and paid proportionately to the amounts paid or credited as paid on the
shares during any portion or portions of the
15
<PAGE>
period in respect of which the dividend is paid; but if any share is
issued on terms providing that it is to rank for dividend as from a
particular date, that share will rank for dividend accordingly.
14.2 DEDUCTIONS FROM DIVIDENDS
The board may deduct from any dividend payable to any shareholder all
sums of money, if any, presently payable by that member to the company
on account of calls, instalments, premiums or otherwise.
15 MANAGING DIRECTORS
15.1 APPOINTMENT AND DISMISSAL
15.1.1 The board may from time to time appoint one or more of their body to the
office of managing director or managing directors of the company either
for a fixed term or without any limitation as to the term.
15.1.2 Every managing director is liable to be dismissed or removed by a
resolution of the board. The board may enter into any agreement on
behalf of the company with any person who is or is about to become a
managing director with regard to the length and terms of the managing
director's employment, on the basis that the remedy of any such person
for any breach of the agreement will be in damages only and that the
managing director will not have a right or claim to continue in office
as managing director contrary to the will of the board.
15.2 TERMINATION OF EMPLOYMENT
A managing director is, subject to the terms of any contact, subject to
the same provisions as regards resignation, removal and disqualification
as the other directors and if the managing director ceases to hold the
office of director for any reason the managing director will immediately
cease to be a managing director.
16 NOTICES
16.1 SERVICE
A notice may be served by the company upon any director or shareholder
either personally or by posting it by fast post in a pre-paid envelope
or package addressed to such director or shareholder at such person's
last known address or by delivery to a document exchange or by facsimile
to the facsimile telephone number of such director or shareholder.
16.2 Time of service by facsixile A notice served by facsimile shall be
deemed to have been served on the day following
16
<PAGE>
completion of transmission of the notice.
16.3 TIME OF SERVICE BY POST
A notice sent by post or delivered to a document exchange shall be
deemed to have been served:
(a) in the case of a person whose last known address is in New Zealand,
at the expiration of 48 hours after the envelope or package
containing the same was duly posted or delivered in New Zealand;
and
(b) in the case of a person whose last known address is outside.New
Zealand, at the expiration of four days after the envelope or
package containing the same was duly posted by fast post in New
Zealand.
16.4 PROOF OF SERVICE
In proving service by post or delivery to a document exchange it shall
be sufficient to prove that the envelope or package containing the
notice was properly addressed and posted or delivered with all attached
postal or delivery charges paid. In proving service by facsimile, it
shall be sufficient to prove that the document was properly addressed
and sent by facsimile.
16.5 SERVICE ON JOINT HOLDERS
A notice may be given by the company to the joint holders of a share by
giving the notice to the joint holder first named in the register in
respect of the share.
17 DEFINITIONS
17.1 In this constitution the following words and expressions have the
meanings given to them in this clause:
"ACT" means the Companies Act 1993.
"ALTERNATE DIRECTOR" means a director appointed pursuant to clause
10.6.1.
"ANNUAL MEETING" means a meeting of shareholders held pursuant to clause
9.1.1.
"BOARD" means the directors numbering not less than the required quorum
acting as the board of directors of the company and where one director
is a quorum it means that director so acting alone.
"CALL" means a resolution of the board pursuant to clause 6.1.1
requiring shareholders to pay all or part of the unpaid amount of the
issue price of any shares and where
17
<PAGE>
the context requires means the obligation of a shareholder to meet the
amount due pursuant to such a resolution.
"COMPANY" means Total Energy Systems (NZ) Limited.
"CONSTITUTION" means this constitution of the company and all amendments
to it from time to time.
"DIRECTOR" means a person appointed and continuing in office for the
time being, in accordance with this constitution, as a director of the
company.
"DISTRIBUTION" means:
(a) the direct or indirect transfer of money or property, other than
shares, by the company to or for the benefit of a shareholder; and
(b) the incurring of a debt by the company to or for the benefit of a
shareholder,
in relation to shares held by that shareholder, and whether by means of
a purchase of property, the redemption or other acquisition of shares, a
distribution of indebtedness, or by some other means.
"DIVIDEND" means a distribution by the company other than a distribution
to which Section 59 (acquisition of company's own shares) or Section 76
(financial assistance in acquisition of company's shares) of the Act
applies.
"MANAGING DIRECTOR" means an employee of the company with the
responsibility for the management of the company (together with any
other employee) who is appointed by the board pursuant to clause 15.1.
"ORDINARY RESOLUTION" means a resolution of shareholders approved by a
simple majority of the votes of those shareholders entitled to vote and
voting on the question.
"SHARE" means a share issued by the company.
"SHAREHOLDER" means a person:
(a) registered in the share register as the owner of one or more
shares;
(b) until such time as his, her or its name is entered in the share
register, a person named as a shareholder in the application for
registration of the constitution of the company at the time of the
incorporation of the company; and
18
<PAGE>
(c) until the person's name is entered in the share register, a person
who is entitled to have that person's name entered in the register
under a registered amalgamation proposal as a shareholder in an
amalgamated company.
"SPECIAL MEETING" means any meeting (other than an annual meeting) of
shareholders entitled to vote on an issue, called at any time by the
board or by any other person who by this constitution is entitled to
call meetings of shareholders.
"SPECIAL RESOLUTION" means a resolution of shareholders approved by a
majority of 75 percent of the votes of those shareholders entitled to
vote and voting on the question.
17.2 Words importing the singular number only include the plural number and
vice versa.
17.3 A reference to a person includes any firm, company or other body
corporate.
17.4 Subject to the above, expressions contained in this constitution bear
the same meaning as in the Act, at the date on which this constitution
becomes binding on the company.
17.5 A reference to a clause means a clause of this constitution.
17.6 The clause headings and footnotes are included for the purposes of
convenience and do not affect the construction of this constitution.
This document comprising pages numbered from 1 to 18 is certified as the
constitution of Total Energy Systems (NZ) Limited by the Applicant Andrew John
Anderson.
DATED this 15/th day of June, 1995.
__________________________________
Signature of ________________
19
<PAGE>
SECURITY TRANSFER FORM
For completion instructions see over
Please use block letters
PART 1 MARKING STAMP
FULL NAME OF ISSUER OF SECURITIES:
TOTAL ENERGY SYSTEMS (NZ) LIMITED
- --------------------------------------------------------------------------------
FULL DESCRIPTION OF SECURITIES:
Ordinary shares
- --------------------------------------------------------------------------------
QUANTITY:
Words: ONE HUNDRED
-----------
Figures: 100
---
T.I.N.: __________________ (for stock exchange use only)
SELLER(S) FULL NAME, ADDRESS, DESCRIPTION OF REGISTERED HOLDER:
Christian Names Surname
--------------- -------
Mr Andrew John ANDERSON
----------------------------------------------------------------------
Mrs 55 Cannington Road
----------------------------------------------------------------------
Miss Dunedin
----------------------------------------------------------------------
SELLER(S); TRANSFEROR(S):
SIGN HERE: /s/ Andrew John
-----------------------------
_____________________________
INSERT DATE AND PLACE OF SIGNATURE:
DATE: 15/6/95 PLACE: Dunedin
STAMP OF SELLING AGE: _____________________ (Date Affixed)
I/We hereby transfer the Securities described above to the person(s) named below
or the persons named in the brokers, transfers relating to the Securities
described above.
<PAGE>
PART II - PARTICULARS OF BUYER
_________________:
Words: ONE DOLLAR
----------
Figures: $1.00
-----
BUYER(S)
FULL NAMES OF TRANSFEREE
SHOW MR, MRS, OR MISS
AND DESCRIPTION
Christian Names Surname
--------------- -------
TOTAL ENERGY SYSTEMS LIMITED
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
FULL POSTAL ADDRESS:
172 Edward Street, Brisbane, Australia
- --------------------------------------------------------------------------------
Postal Zone
I/We confirm that the Securities described above have been purchased in an
authorized transaction (as defined in the Securities Transfer Act 1977) and I/we
request that such entries be made in the register as are necessary to give
effect to this transfer.
STAMP OF BUYING AGE:____________________ (Date Affixed)
<PAGE>
REGISTER OF SHAREHOLDERS/MEMBERS
(Section 118, Companies Act, 1955)
Members Name: Total Energy Systems Ltd.
------------------------------------------------------------
172 Edward Street
------------------------------------------------------------
Brisbane, Australia
------------------------------------------------------------
_______________________:
ACQUIRED SHARES:
From: A.J. Anderson
---------------------------------------------
Number of
Shares Acquired: 100
---------------------------------------------
Numbered: From: __________________ To: _______________
TRANSFERRED SHARES:
To: _____________________________________________
Number of
Shares Acquired: _____________________________________________
Numbered: From: __________________ To: _______________
BALANCE OF SHARES HELD: 100
---------------------------------------------
AMOUNT OF PAID UP CAPITAL: _____________________________________________
CALLS ACCOUNT:
CALL
- ---------------------------------------------------------------------------
Date Number Payable
---- ------ -------
___________________________________________________________________________
NUMBER OF SHARES CALLED: __________________________________________________
CALL PER SHARE: ___________________________________________________________
PAYMENT: __________________________________________________________________
DATE PAID: ________________________________________________________________
<PAGE>
REGISTER OF SHAREHOLDERS/MEMBERS
(Section 118, Companies Act, 1955)
Members Name: Andrew John Anderson
------------------------------------------------------------
55 Cannington Road
------------------------------------------------------------
Dunedin
------------------------------------------------------------
_______________________:
ACQUIRED SHARES:
From: _____________________________________________
Number of
Shares Acquired: 100
---------------------------------------------
Numbered: From: ________________ To: _________________
TRANSFERRED SHARES:
To: Total Energy Systems Ltd.
---------------------------------------------
Number of
Shares Acquired: 100
---------------------------------------------
Numbered: From: __________________ To: _______________
BALANCE OF SHARES HELD: 100
---------------------------------------------
AMOUNT OF PAID UP CAPITAL: _____________________________________________
CALLS ACCOUNT:
CALL
- ---------------------------------------------------------------------------
Date Number Payable
---- ------ -------
___________________________________________________________________________
NUMBER OF SHARES CALLED: __________________________________________________
CALL PER SHARE: ___________________________________________________________
PAYMENT: __________________________________________________________________
DATE PAID: ________________________________________________________________
<PAGE>
REGISTER OF SECRETARIES
(Section 200, Companies Act, 1955)
FULL NAME:
________________________________________________________________________________
RESIDENTIAL ADDRESS:
________________________________________________________________________________
NATIONALITY:
________________________________________________________________________________
OCCUPATION AND OTHER DIRECTORATES:
________________________________________________________________________________
DATE OF APPOINTMENT:
________________________________________________________________________________
DATE OF RETIREMENT OR RESIGNATION:
________________________________________________________________________________
<PAGE>
REGISTER OF DIRECTORS
(Section 200, Companies Act, 1955)
FULL NAME:
Andrew John Anderson
- --------------------------------------------------------------------------------
RESIDENTIAL ADDRESS:
55 Cannington Road, Dunegin
- --------------------------------------------------------------------------------
NATIONALITY:
________________________________________________________________________________
OCCUPATION AND OTHER DIRECTORATES:
Solicitor
- --------------------------------------------------------------------------------
DATE OF APPOINTMENT:
15/6/95
- --------------------------------------------------------------------------------
DATE OF RETIREMENT OR RESIGNATION:
15/6/95
- --------------------------------------------------------------------------------
<PAGE>
FULL NAME:
????? Raymond Purcell
- --------------------------------------------------------------------------------
RESIDENTIAL ADDRESS:
172 Edward St., Brisbone, Australia
- --------------------------------------------------------------------------------
NATIONALITY:
________________________________________________________________________________
OCCUPATION AND OTHER DIRECTORATES:
________________________________________________________________________________
DATE OF APPOINTMENT:
15/6/95
- --------------------------------------------------------------------------------
DATE OF RETIREMENT OR RESIGNATION:
29/8/95
- --------------------------------------------------------------------------------
<PAGE>
FULL NAME:
James Harman
- --------------------------------------------------------------------------------
RESIDENTIAL ADDRESS:
21 Lester ????? Singleton 2330, Australia
- --------------------------------------------------------------------------------
NATIONALITY:
________________________________________________________________________________
OCCUPATION AND OTHER DIRECTORATES:
________________________________________________________________________________
DATE OF APPOINTMENT:
29/8/95
- --------------------------------------------------------------------------------
DATE OF RETIREMENT OR RESIGNATION:
________________________________________________________________________________
<PAGE>
EXHIBIT 3.30
AUSTRALIAN
SECURITIES
COMMISSION
STEPHEN T. GORDON
*** TO BE COLLECTED ***
CERTIFICATE OF THE REGISTRATION OF A COMPANY
Corporations Law Paragraph 1274(2)(b)
This is to certify that
TOTAL ENERGY SYSTEMS LIMITED
Australian Company Number 010 876 150
is taken to be registered as a company under the Corporations Law of Queensland.
The company is limited by shares.
The company is a public company.
The day of commencement of registration is the sixth day of December 1988.
Given under the seal of the
Australian Securities Commission
on this eighth day of December, 1994.
________________________________________
A delegate of the Australian
Securities Commission
<PAGE>
"Companies (Queensland) Code"
-----------------------------
A Company Limited by Shares
---------------------------
MEMORANDUM OF ASSOCIATION
-------------------------
of
TOTAL ENERGY SYSTEMS LIMITED
----------------------------
1. The name of the Company is TOTAL ENERGY SYSTEMS LIMITED.
2. The liability of the members is limited.
3. The share capital of the company is One Million Dollars ($1,000,000.00)
divided into One million (1,000,000) ordinary shares of One Dollar ($1.00) each.
We, the several persons whose names and addresses are subscribed are desirous of
being formed into a company pursuant to the Memorandum of Association and
respectively agree to take the number of shares in the capital of the company
set out opposite our respective names.
SUBSCRIBERS
- -----------
NUMBER OF
NAME, ADDRESS AND SHARES AGREED
OCCUPATION SIGNATURE TO BE TAKEN
DENISON RESOURCES LIMITED /s/ P. T. Collery 1 Share
3/rd/ Floor, Dalgety House
79 Eagle Street
BRISBANE
- --------
ROBERT ALASTAIR CAMERON /s/ R. A. Cameron 1 Share
13 Ashley Road
WEST CHERMSIDE
- --------------
Company Director
PETER THOMAS COLLERY /s/ P. T. Collery 1 Share
100 Temple Street
COORPAROO
- ---------
Chartered Accountant
MICHAEL RAYMOND PURCELL /s/ M. R. Purcell 1 Share
15/39 Stanton Road
MOSMAN
- ------
Company Director
<PAGE>
KEVIN JAMES HARMAN /s/ K. J. Harman 1 Share
Lester Close
Singleton Heights
SINGLETON
---------
Company Director
Dated at Brisbane this 30/th/ day of November, 1988.
Witness to all the above signatures:
/s/
-----------------------------------
Level 3
Dalgety House
79 Eagle Street
BRISBANE 4000
<PAGE>
ARTICLES OF ASSOCIATION
of
TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
adopted by special
resolution on 24 July, 1991
This is annexure of 61 pages marked "A" referred to in the Form 205 -
Notification of Resolution signed by me and dated 22/8/91.
-------
/s/ Martin Ross Norman
- -----------------------
MARTIN ROSS NORMAN
BLAKE DAWSON WALDROW
Solicitors
Level 39 Riverside Centre
123 Eagle Street
BRISBANE QLD 4000
AUSTRALIA
Tel: (61) (7) 834 0834
Fax: (61) (7) 832 2276
Ref: KSP/BHG
AUST3680-005
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. PRELIMINARY............................................. 1
1.1 Definitions........................................ 1
1.2 Interpretation..................................... 3
1.3 Headings and Parts of Speech....................... 4
1.4 Exclusion of Table A............................... 4
2. SHARES.................................................. 4
2.1 Control of Board................................... 4
2.2 Preference and Redeemable Preference Shares........ 5
2.3 Variation of Rights................................ 5
2.4 Certificates of Title.............................. 6
2.5 Certificate for Joint Holders...................... 6
2.6 Recognition of Trusts.............................. 6
2.7 A and B Class Shares............................... 6
2.8 Pro-Rata Issues.................................... 7
3. CALLS ON SHARES......................................... 7
3.1 Calls made by Board................................ 7
3.2 Terms of Call...................................... 7
3.3 Time of Call....................................... 7
3.4 Payment of Call.................................... 7
3.5 Joint Holders' Liability........................... 8
3.6 Differences in Terms of Issue...................... 8
3.7 Fixed Payments..................................... 8
3.8 Payment of Money Due............................... 8
3.9 Waiver of Interest or Expenses..................... 8
3.10 Proof of Call...................................... 8
3.11 Prepayment of Calls................................ 9
3.12 Remedies for Unpaid Call........................... 9
4. F0RFEITURE OF SHARES.................................... 9
4.1 Forfeiture Notice.................................. 9
4.2 Forfeiture......................................... 10
4.3 Forfeiture includes Unpaid Dividends............... 10
4.4 Notice of Forfeiture............................... 10
4.5 Forfeited Shares are Company property.............. 10
4.6 Cancellation of Forfeiture......................... 10
4.7 Surrender as Forfeiture............................ 10
4.8 Effect of Forfeiture............................... 11
4.9 Board May Waive.................................... 11
4.10 Evidence of Forfeiture............................. 11
4.11 Transfer of Forfeited Shares....................... 11
4.12 Application of Proceeds............................ 11
4.13 Title of Transferee................................ 11
5. LIEN.................................................... 12
5.1 Lien for Calls..................................... 12
5.2 Lien for Members' Debts............................ 12
5.3 Extent of Lien..................................... 12
5.4 Waiver by Board.................................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
5.5 Sale under Lien................................... 12
5.6 Lien on Company payments.......................... 13
6. ALTERATION OF CAPITAL................................... 13
6.1 Alteration of Capital............................. 13
6.2 Additional Rights................................. 14
6.3 Reduction of Capital.............................. 14
7. TRANSFER OF SHARES...................................... 14
7.1 Instrument of Transfer............................ 14
7.2 Proper Instrument................................. 14
7.3 Transferor remains Member......................... 15
7.4 Restriction on Transfer........................... 15
7.5 Retention of Instruments.......................... 15
7.6 Powers of Attorney................................ 15
8. TRANSMISSION OF SHARES.................................. 16
8.1 Transmission Generally............................ 16
8.2 Joint Holders' Transmission....................... 16
9. GENERAL MEETINGS........................................ 17
9.1 Annual General Meeting............................ 17
9.2 Convening of General Meeting...................... 17
9.3 Requisition of Meeting............................ 17
9.4 Notice of Meeting................................. 17
9.5 Omission to give Notice........................... 18
9.6 Mode of Meeting................................... 18
9.7 Adjournment of Meetings........................... 18
9.8 Business at Adjourned Meeting..................... 18
9.9 Notice of Adjourned Meeting....................... 18
9.10 Cancellation or Postponement of Keating........... 19
10. PROCEEDINGS AT GENERAL MEETINGS......................... 19
10.1 Representation of Members......................... 19
10.2 Quorum............................................ 19
10.3 Failure of Quorum................................. 19
10.4 Chairman.......................................... 20
10.5 Chairman Absent................................... 20
10.6 Responsibilities of Chairman...................... 20
10.7 Method of Voting.................................. 20
10.8 Demand for Poll................................... 20
10.9 No Poll on Chairman............................... 21
10.10 Effect on Demand for Poll......................... 21
10.11 Votes on Show of Hands............................ 21
10.12 Conduct of Poll................................... 21
10.13 Resolutions determined by Majority................ 22
10.14 No Casting Vote of Chairman....................... 22
10.15 Circular Resolutions.............................. 22
10.16 Several Documents Suffice......................... 22
11. ENTITLEMENTS TO ATTEND AND VOTE......................... 23
11.1 Entitlement to Notice and to Attend............... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
11.2 Entitlement to Vote................................ 23
11.3 Vote of Member of Unsound Mind..................... 23
11.4 Vote of Transmittee................................ 23
11.5 Joint Holders' Votes............................... 24
11.6 Appointment of Proxy............................... 24
11.7 Effect of the Appointment.......................... 24
11.8 Proxy must vote as directed........................ 24
11.9 Corporate Representatives.......................... 25
11.10 Deposit of Instruments............................. 25
11.11 Multiple Appointments.............................. 25
11.12 Presence of Member................................. 26
11.13 Ruling an Entitlements and Votes................... 26
12. DIRECTORS................................................ 26
12.1 Number of Directors................................ 26
12.2 Continuing Directors............................... 26
12.3 Appointment of Directors........................... 26
12.4 Removal of Directors............................... 27
12.5 Casual Vacancy..................................... 27
12.6 Qualification of Directors......................... 27
12.7 Vacation of Office................................. 27
12.8 Less than Minimum Number of Directors.............. 28
12.9 Additional Directors............................... 28
13. DIRECTORS' REMUNERATION.................................. 28
13.1 Remuneration of Non-Executive Directors............ 28
13.2 Additional Remuneration for Extra Services......... 28
13.3 Expenses of Directors.............................. 28
14. DIRECTORS' DUTIES AND INTERESTS.......................... 29
14.1 Definition of Extraneous Interest.................. 29
14.2 Scope of Directors' Duties......................... 29
14.3 Transactions Not Vitiated.......................... 30
14.4 No Liability for Extraneous Interest............... 30
14.5 Declaration of Interests........................... 30
14.6 Manner of Declarations............................. 30
14.7 Recording of Declarations.......................... 30
14.8 Director may hold Office of Company................ 30
14.9 Interested Director may Vote and be
counted in Quorum.................................. 31
14.10 Execution of instruments........................... 31
15. ALTERNATE DIRECTORS...................................... 31
15.1 Power to Appoint Alternate Director................ 31
15.2 Method of Appointment.............................. 31
15.3 Termination of Appointment......................... 31
15.4 Entitlements of Alternate Director................. 32
16. MANAGING DIRECTORS....................................... 32
16.1 Appointment of Managing Directors.................. 32
16.2 Termination of Appointment of Managing Director.... 32
16.3 Retirement and Removal of Managing Director........ 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
16.4 Remuneration of Managing Director.................. 33
16.5 Powers of Executive Director....................... 33
17. POWERS OF THE BOARD...................................... 33
17.1 Powers Generally................................... 33
17.2 Appointment of Attorney............................ 33
17.3 Power of Attorney Contents......................... 34
17.4 Disposal of Main Undertaking....................... 34
18. PROCEEDINGS OF THE BOARD................................. 34
18.1 Mode of Meeting.................................... 34
18.2 Quorum............................................. 34
18.3 Notice of Meeting.................................. 34
18.4 Place of Meeting................................... 35
18.5 Period of Notice................................... 35
18.6 Convening of Board Meeting......................... 35
18.7 Appointment of Chairman............................ 35
18.8 Chairman of Board Meetings......................... 35
18.9 Majority Decisions................................. 35
18.10 Votes of Directors................................. 36
18.11 Exercise of Powers by Board........................ 36
18.12 Delegation to Committee............................ 36
18.13 Committee Powers and Meetings...................... 36
18.14 Written Resolution of Directors.................... 37
18.15 Several Documents Suffice.......................... 37
18.16 Validity of Acts Of Directors...................... 38
19. SECRETARY................................................ 38
19.1 Appointment of Secretary........................... 38
20. COMPANY ADMINISTRATION................................... 38
20.1 Minutes to be Made................................. 38
20.2 Minutes to be entered.............................. 39
20.3 Signature of minutes............................... 39
20.4 Custody of Common Seal............................. 39
20.5 Use of Common Seal................................. 39
20.6 Mode of execution by Common Seal................... 39
20.7 Official Seal...................................... 39
20.8 Appointment to affix Official Seal................. 40
20.9 Effect of Official Seal............................ 40
20.10 Execution of Bills and Cheques..................... 40
20.11 Inspection of Records.............................. 40
21. ACCOUNTS AND AUDIT....................................... 40
21.1 Company to keep Accounts........................... 40
21.2 Presentation of Accounts........................... 40
21.3 Audit.............................................. 41
22. RESERVES AND CAPITALIZATION OF PROFITS................... 41
22.1 Reserves and Profits Carried Forward............... 41
22.2 Board may Capitalize profits....................... 41
22.3 Application of Capitalized Amount.................. 41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
23. DIVIDENDS.......................................... 42
23.1 Declaration of Final Dividend...................... 42
23.2 Interim Dividend................................... 42
23.3 Amount of Dividend................................. 42
23.4 Dividends in specie................................ 42
23.5 No Interest on Dividends........................... 43
23.6 Deductions from Dividends.......................... 43
23.7 Distributions Of Specific Assets................... 43
23.8 Mode of Payment of Dividends....................... 43
23.9 Joint Holders' Receipt............................. 43
23.10 Unclaimed Dividends................................ 43
23.11 Dividend a Debt.................................... 44
23.12 Interest on Capital................................ 44
24. NOTICES.................................................. 44
24.1 Service of Notices by Company...................... 44
24.2 Overseas Member's Address.......................... 44
24.3 Postal Notices to Overseas Members................. 44
24.4 Time of Service.................................... 45
24.5 Joint Holders' Notice.............................. 45
24.6 Persons Entitled on Succession..................... 45
24.7 Binding an Others.................................. 45
24.8 Notice of General Meetings......................... 45
24.9 Counting of Days................................... 46
24.10 Certificate of Director or Secretary............... 46
25. WINDING UP............................................... 46
25.1 Power of Board..................................... 46
25.2 Distribution if Insufficient Assets................ 46
25.3 Distribution of Surplus Assets..................... 46
25.4 Winding up Generally............................... 47
26. MISCELLANEOUS............................................ 47
26.1 Officers Indemnified............................... 47
26.2 General Authorization.............................. 47
26.3 Acts of Class of Members........................... 47
</TABLE>
SCHEDULES
Schedule 1 - Redeemable Preference Shares
Schedule 2 - Proxy Form
Schedule 3 - Appointment of Alternate Director
Schedule 4 - Pre-Emptive Rights
<PAGE>
ARTICLE OF ASSOCIATION
OF
TOTAL ENERGY SYSTEMS LIMITED
(a company limited by shares)
1. PRELIMINARY
1.1 Definitions
In these Articles unless the context otherwise requires:
"Alternate Director" means a person appointed as such under Article 15.2;
"Appointor" means in respect of an Alternate Director, the Director who
appoints that Alternate Director under Article 15.2;
"Auditor" means the auditor of the Company from time to time;
"Board" means the Directors acting collectively under these Articles;
"Business Day" means a day on which banking corporations in Queensland are
generally open for the conduct of normal banking business;
"Class" means a class of ordinary Shares;
"class A Member" means any Member holding an A Class Share;
"class B Member" means Austin International, Inc. of 25800 Science Park
Drive, Cleveland, Ohio, United States of America;
"Common Seal" means the common seal of the Company;
"Company" means the company named above whatever its name may be from time
to time;
"Director" means a director for the time being of the Company (including,
where appropriate, an Alternate Director);
"Executive Director" means any Managing Director and any other Director who
is an employee of the Company or any related body corporate of the Company;
"Extraneous Interest" has the meaning given by Article 14.1;
<PAGE>
"Law" means the Corporations Law as it applies to the Company from time to
time;
"Listed" means, in relation to a corporation, the corporation being and
remaining admitted to the official list of Australian Stock Exchange
Limited;
"Managing Director" means a person appointed as a managing director under
Article 16.1;
"Member" means a person whose name is entered in the Register as the holder
of a Share;
"Memorandum" means the memorandum of association of the Company;
"Money Due" means, in respect of a call payment of the amount of which is
not made on the day specified for its payment under Article 3.4, the Amount
of money payable in respect of that call plus, subject to Article 3.9:
(a) interest on that amount at the Prescribed Rate from that day until
payment is made; and
(b) all costs and expenses incurred by the Company as a consequence of
payment not being made on that day;
"Non-Executive Director" means any Director of the Company who is not an
Executive Director;
"Official Seal" means the duplicate common seal referred to in Article
20.7;
"Ordinary Resolution" means a resolution of a general meeting of members
other than a Special Resolution;
"Prescribed Rate" means in respect of each Article in which that term is'
used 154 per annum or any other rate prescribed by the Board from time to-
time in respect of that Article;
"Register" means the register of members kept pursuant to the Law;
"Remuneration," means any emolument but does not include any payment by way
of compensation for loss of office or in connection with the retirement of
a person from office;
"Secretary" means any person appointed to perform the duties of a secretary
of the Company;
"Share" means a share in the capital of the Company;
2
<PAGE>
"Special Resolution" means a resolution of a general meeting of Members
passed in accordance with section 253;
"Subscription Deed" means the subscription deed between the class B Member,
the Company and others dated 22 July, 1991; and
"Transaction" includes any contract, agreement, arrangement or dealing
(whether formal or informal and Whether in writing or oral).
1.2 Interpretation
In these Articles, unless the context otherwise requires:
(a) a reference to any legislation or legislative provision includes any
statutory modification or re-enactment of, or legislative provision
substituted for, and any statutory instrument issued under, that
legislation or legislative provision;
(b) the singular includes the plural and vice versa;
(c) a word denoting an individual or person includes a corporation, firm,
association, authority or government and vice versa;
(d) a word denoting any gender includes all genders;
(e) a reference to an Article or a Schedule is to an article of or
schedule to these Articles;
(f) a Schedule is part of these Articles;
(g) a reference to any agreement or document (including these Articles) is
to that agreement or document (and, where applicable, any of its
provisions) as amended, novated, supplemented or replaced from time to
time;
(h) an expression defined in, or given a meaning for the purposes of the
Law (except if defined in Article 1) has the same definition or
meaning in these Articles where it relates to the same matters as the
matters for which it is defined or given a meaning in the Law;
(i) a reference to a person is also to the legal personal representative
of that person;
(j) a reference to a matter being written includes that matter being in
any mode of representing or reproducing words, figures or symbols in
written form;
3
<PAGE>
(k) a reference to power is also a reference -to authority and discretion;
(l) a reference to a particular Part, Division, section, subsection,
paragraph or sub-paragraph is a reference to a Part, Division,
section, subsection, paragraph or subparagraph of the Law;
(m) a reference to a class of Members is a reference to the holders for
the time being of a Class of Shares, and a reference to a class of
Directors is a reference to the Directors for the time being appointed
by a particular class of Members;
(n) a reference to a class A Member is a reference to a member forming
part of the class of Members holding A Class Shares and a reference to
a class A Director is a reference to one of the class of Directors
appointed by the class of Members holding A Class Shares, and this
provision applies mutatis mutandis to references to Members and
Directors of classes other than class A; and
(o) a reference to a majority of Members includes a reference to one
Member holding more than one-half of the ordinary Shares in the
Company.
1.3 Headings and Parts of Speech
In these Articles:
(a) headings are for convenience of reference only and do not affect
interpretation; and
(b) where an expression is defined, another part of speech or grammatical
form of that expression has a corresponding meaning.
1.4 Exclusion of Table A
The regulations contained in Table A in Schedule 1 to the Law and in any
legislative predecessor to the Law do not apply to the Company (except to
the extent that they are contained in these Articles).
2. SHARES
2.1 Control of Board
Subject to Articles 2.7 and 2.8, all the unissued Shares are under the
control of the Board which may, on behalf of the Company, allot, issuer
grant options over or otherwise
4
<PAGE>
dispose of them to the persons, on the terms and conditions, with the
rights and privileges, and at the times that the Board determines.
2.2 Preference and Redeemable Preference Shares
The Company may issue any preference shares including (without limitation):
(a) preference shares that are, or at the option of the Company are to be,
liable to be redeemed; and
(b) preference shares including, without limitation, preference shares of
the kind described in Article 2.2(a) in accordance with the terms of
Schedule 1.
2.3 Variation of Rights
If at any time the issued Shares are divided into different classes, the
rights attached to any class of Shares (unless the terms of issue of that
class otherwise provide) may only be varied or abrogated with either:
(a) the consent in writing of the holders of 75% of the issued Shares of
that class; or
(b) the sanction of a Special Resolution passed at a separate meeting of
the holders of Shares of that class,
and, for the purposes of this Article 2.3, the following provisions apply:
(c) in relation to any separate meeting of the holders of Shares in a
class, the provisions of these Articles which relate to general
meetings apply as far as they are capable of application and changed
as necessary except that any holder of Shares of that class present in
person or by proxy, attorney or representative may demand a poll; and
(d) the rights attached to a class of Shares are not to be considered as
varied if further Shares of that class are issued on identical term
except if the terms of issue of that class of Shares otherwise
provide.
5
<PAGE>
2.4 Certificates of Title
Subject to Article 2.5 the Company must issue without charge certificates
of title to marketable securities of the Company in accordance with the
Law.
2.5 Certificate for Joint Holders
Where any marketable securities of the Company are held by two or more
persons, the Company is only required to issue the same number of
certificates as if those marketable securities were held by one person and
delivery of a certificate so issued to any of those persons is sufficient
delivery to all of them.
2.6 Recognition of Trusts
Except as required by law or otherwise required by these Articles, the
Company must treat the person whose name is entered in the Register in
respect of a Share as the absolute owner of that Share and as a
consequence, unless otherwise required by law, the Company is not bound to
recognize (whether or not it has notice):
(a) that a person holds any Share on trust; or
(b) any equitable, contingent, future or partial interest in, or unit of
any Share.
2.7 A and B Class Shares
(a) The capital of the Company is divided into 1,000,000 ordinary Shares
of ($1.00) each.
(b) Notwithstanding any other provision of these Articles and any terms of
issue of the Shares, all Shares on issue at the date of adoption of
these Articles will be re-classified as A Class Shares.
(c) On Completion of the Subscription Deed (as defined therein) 416,327 B
Class Shares will be allotted and issued to the class B Member.
(d) Notwithstanding any other provision of these Articles, all Shares
issued to or acquired by a class A Member after the date of adoption
of these Articles will be classified or re-classified (as the case may
be) as A Class Shares and all Shares issued to or acquired by the
class B Member after the date of adoption of these Articles will be
classified or re-classified (as the case may be) as B Class Shares.
6
<PAGE>
(e) Subject to these Articles and the terms of issue of the Shares, the A
Class Shares and the B Class Shares rank equally in all respects.
2.8 Pro-Rata Issues
The Board may not, without the consent in writing of a majority of Members
(being a majority of Members who hold more than one-half of the ordinary
Shares):
(a) issue any voting Shares not being A Class Shares or B Class Shares;
(b) issue ordinary Shares otherwise than to all Members in the same
proportions in which they hold ordinary Shares; or
(c) convert any preference Share or non-voting Share to an ordinary Share.
3. CALLS ON SHARES
3.1 Calls made by Board
The Board may, in accordance with the terms of issue of a Share, make calls
upon a Member in respect of any money unpaid. on the Share held by him
(whether in respect of the nominal value of the Share or by way of premium)
unless and to the extent that the terms of issue of the Share make that
money payable at fixed times.
3.2 Terms of Call
The Board may do either or both of the following:
(a) revoke or postpone any call; or
(b) make a call payable by instalments.
3.3 Time of Call
A Call is treated as having been made at the time the Board resolves to
make the call.
3.4 Payment of Call
A Member subject to a call must, upon receiving at least 14 days, notice
specifying the time and place of payment of the call, pay the amount the
subject of the call at that time and place.
7
<PAGE>
3.5 Joint Holders' Liability
The Joint holders of a Share are jointly and severally liable to pay all
calls made in respect of the Share.
3.6 Differences in Terms of Issue
The Board may, on the issue of Shares, differentiate between the holders of
those shares as to the amount of calls to be paid and the times of payment
in respect of those Shares.
3.7 Fixed Payments
If the terms of issue of a Share provide for any amount (whether in respect
of nominal value or by way of premium and including, without limitation,
any instalment) to be payable at a fixed time, that amount is payable at
that time as if a call had been duly made in respect of it under Articles
3.1 to 3.4 specifying that time as the time for payment of a call for that
amount and all the other provisions of these Articles in respect of calls
apply (mutatis mutandis) on that basis and "call" in these Articles is to
be interpreted accordingly.
3.8 Payment of Money Due
If an amount payable in respect of a call is not paid on or before the day
specified for its payment, the person from whom that amount is due must pay
the Money Due in respect of that call.
3.9 Waiver of Interest or Expenses
The Board may waive the payment of all or any part of the Money Due in
respect of a call which relates to interest costs and expenses.
3.10 Proof of Call
If on the trial or hearing of an action for the recovery of the money Due
for a call it is proved that:
(a) the resolution of the Board making the call is duly recorded in the
books of the Company;
(b) the Member sued is entered in the Register as a holder of the Share in
respect of which the call was made; and
(c) notice of the call was given to that Member in accordance with these
Articles,
8
<PAGE>
proof of those matters is sufficient and conclusive proof of the debt
without it being necessary to prove any other matter (including, without
limitation, the appointment of the Directors).
3.11 Prepayment of Calls
The Board may:
(a) accept from a Member a sum representing all or a part of any amount
unpaid in respect of a Share although no part of that amount is then
the subject of a call;
(b) authorize the payment by the Company of interest on any sum so
accepted, until that sum becomes payable at any rate not exceeding the
Prescribed Rate agreed between the Board and the Member; and
(c) except where otherwise agreed between the Member and the Company,
repay the sum or any part of it,
but that sum does not by its being paid and accepted, confer any right to
participate in profits and must not be considered in ascertaining the
amounts of dividend or surplus in winding up or distribution attributable
to that Share.
3.12 Remedies for Unpaid Call
In Addition to all other remedies of the Company, for as long as the amount
in respect of a call is due and payable and not paid, the Member, in
respect of any Share held by the Member, is not entitled to:
(a) receive any dividend; or
(b) be present at, be counted among the quorum for, or vote, whether in
person or by proxy, attorney or representative, at a general meeting
of the Company.
4. F0RFEITURE OF SHARES
4.1 Forfeiture Notice
If an amount payable in respect of a call is not paid on or before the day
specified for its payment, the Board may at any time until the amount
(including interest and expenses incurred by the Company by reason of the
non-payment) is paid, give the relevant Member a notice which:
(a) requires the Member to pay the Money Due;
9
<PAGE>
(b) specifies a date (which is at least 10 Business Days after the date of
the notice) by which and a place at which payment of the Money Due
must be made; and
(c) states that if payment is not made on or before the date and at the
place specified, the Share to which the call relates is liable to be
forfeited.
4.2 Forfeiture
If the requirements of a notice served under Article 4.1 are not satisfied,
the Share in respect of which the notice was given may, at any time before
the payment required by the notice has been made, be forfeited by a
resolution of the Board to that effect.
4.3 Forfeiture includes Unpaid Dividends
Forfeiture of a Share under Article 4.2 includes all dividends. declared in
respect of the forfeited Share and not actually paid before the forfeiture.
4.4 Notice of Forfeiture
Where a Share is forfeited under Article 4.2, the Company must promptly
give notice of the forfeiture to the Member holding the Share immediately
before the resolution of the Board for its forfeiture was passed, and the
forfeiture (together with its date) must be promptly entered in the
Register.
4.5 Forfeited Shares are Company property
A Share forfeited under Article 4.2 immediately becomes the property of the
Company and may be sold, re-allotted or otherwise disposed of by the Board
on the terms and conditions it determines.
4.6 Cancellation of Forfeiture
The forfeiture of a Share under Article 4.2 may be cancelled by the Board
on any terms and conditions it considers desirable at any time before the
Share in disposed of under Article 4.5.
4.7 Surrender as Forfeiture
Where the Board is entitled to forfeit a Share under Article 4.2, it may
accept the surrender of that Share on any terms and conditions it
determines and a Share so surrendered may be disposed of in the same way as
a Share forfeited under Article 4.2.
10
<PAGE>
4.8 Effect of Forfeiture
A person who held a Share which has been forfeited under Article 4.2 ceases
to be a Member in respect of the forfeited Share, but remains liable to pay
to the Company the Money Due and this liability only ceases if and when the
Company receives payment of all the Money Due.
4.9 Board May Waive
The Board may elect not to enforce payment in whole or in part, of amounts
owing to the Company under Article 4.8.
4.10 Evidence of Forfeiture
A written statement declaring that the person making the statement is a
Director or a Secretary and that a share in the Company was duly forfeited
on a date specified in the statement is prima facie evidence of the facts
set out in the statement as against all persons claiming to be entitled to
the Share and of the title of the Company to dispose of the Share.
4.11 Transfer of Forfeited Shares
The Company may receive the consideration (if any) given for a forfeited
Share on any sale or disposition of the Share and may execute a transfer of
the Share in favour of the person to whom the Share is sold, re-allotted or
otherwise disposed of.
4.12 Application of Proceeds
The net proceeds of any sale, re-allotment or disposal of a Share under
Article 4.5 or 4.7 (after discharge of any costs incurred) must be applied
in or towards payment or satisfaction of the amount liable to be paid under
Article 4.8 and any residue must be paid to the person liable referred to
in that Article or as that, person directs.
4.13 Title of Transferee
On execution of a transfer under Article 4.11, the title of the transferee
is not affected by any irregularity or invalidity relating to the
forfeiture, sale or disposal of the Share.
11
<PAGE>
5. LIEN
5.1 Lien for Calls
The Company has a first and paramount lien on each Share for all money
(whether presently payable or not) called or payable at a fixed time in
respect of that Share.
5.2 Lien for Members' Debts
The Company, has in addition to the lien described in Article 5.1, a first
and paramount lien on each Share registered in the name of a Member for all
money due and payable by the Member to the Company (including money payable
by reason of Article 5.6).
5.3 Extent of Lien
The lien described in Articles 5.1 and 5.2 on a share extends to all
dividends payable (if any) in respect of the Share.
5.4 Waiver by Board
The Board may, at any time, exempt a Share wholly or in part from the
provisions of Articles 5.1 and 5.2 on any terms and conditions it
determines.
5.5 Sale under Lien
Where:
(a) the Company has a lien on a Share;
(b) the sum in respect of which the lien exists is presently payable;
(c) the Company has given notice to the Member registered in respect of
the Share:
(i) requiring payment of the amount which is presently payable for
which the lien exists; and
(ii) specifying a date.(which is at least 10 Business Days after the
date of the notice) by which and a place at which payment of the
amount must be made; and
(d) the requirements of the notice given under paragraph (c) are not
fulfilled,
12
<PAGE>
the Company may sell the Share as if it had been forfeited under Article
4.2 and the provisions of Articles 4.5 to 4.13 apply as if the Member's
liability were the Money Due.
5.6 Lien on Company payments
Where at any time the law of any jurisdiction imposes or purports to impose
any immediate, future or possible liability on the Company, or empowers or
purports to empower any person to require the company to make any payment,
on account of a Member or referable to a Share held by that Member (whether
alone, or jointly) or a dividend declared in respect of a Share held by
that Member, the Company:
(a) is fully indemnified by that Member from that liability;
(b) may recover as a debt due from the Member the amount of that liability
together with interest at the Prescribed Rate from the date of payment
by the Company (if the payment is made) to the date of repayment by
the Member; and
(c) may refuse to register a transfer of any Share by that Member until
the amount of the Member's liability has been paid to the Company,
and nothing in this Article in any way prejudices or affects any right or
remedy which may have (including, without limitation, any right of set-off)
and, as between the Company and the Member, any such right or remedy is
enforceable by the Company.
6. ALTERATION OF CAPITAL
6.1 Alteration of Capital
The Company may from time to time by Ordinary Resolution do any or all of
the following:
(a) increase its share capital by the creation of new Shares of such
amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into Shares of
a larger amount than its existing Shares;
(c) sub-divide its Shares or any of them into Shares of smaller amount
than is fixed by the Memorandum but so that, in the sub-division, the
proportion between the amount paid and the amount (if any) unpaid on
each Share of a smaller amount is the same as was the case
13
<PAGE>
in respect of the Share from which the Share of a smaller amount is
derived; and
(d) cancel Shares that, at the date of passing the Ordinary Resolution to
that effect, have not been taken or agreed to be taken by any person
or that have been forfeited and reduce the amount of its share capital
by the amount of the Shares so cancelled.
6.2 Additional Rights
Where the Company passes an Ordinary Resolution under Article 6.1(b) or
Article 6.1(c), the Company may also by Special Resolution determine that,
as between the Shares resulting from the consolidation, division or
subdivision, one or more of those Shares has some preference or special
advantage as regards dividends, capital, voting or otherwise over or
compared with one or more others.
6.3 Reduction of Capital
The Company may by Special Resolution reduce its share capital, any capital
redemption reserve or any share premium account in any way.
7. TRANSFER OF SHARES
7.1 Instrument of Transfer
Subject to these Articles, a Member may transfer all or any of his Shares
by instrument in writing which is:
(a) a sufficient instrument of transfer of marketable securities under
section 1101;
(b) in any other usual or common form; or
(c) in any other form approved by the Board.
7.2 Proper Instrument
A transfer may only be registered by the Company where an instrument
satisfying Article 7.1 is delivered to the Company together with any fee
not exceeding $1.00 that the Board may require and the instrument:
(a) is duly stamped, if necessary;
(b) is executed by the transferor and (unless the Board otherwise
determines in a particular case relating only to fully paid Shares)
the transferee, except where
14
<PAGE>
execution by either transferor or transferee is by law not required or
deemed to be present;
(c) except where otherwise permitted by law, is accompanied by the
certificate for the Shares the subject of the transfer together with
such other evidence as the Board may require to prove the title of the
transferor or his right to transfer the Shares; and
(d) relates only to Shares of one class.
7.3 Transferor remains Member
The transferor of a Share remains the holder of that Share until the
transfer is registered and the name of the transferee is entered in the
Register in respect of that Share.
7.4 Restriction on Transfer
No Share may be transferred except as part of a transfer of any or all of a
Member's Shares in a Class in accordance with the procedure set out in
Schedule 4.
7.5 Retention of Instruments
On an instrument of transfer or a purported instrument of transfer being
delivered to the Company, property to and title in that instrument (but not
the Shares the subject of it) pass to the Company which is entitled as
against all persons to the possession of the instrument.
7.6 Powers of Attorney
Where a power of attorney granted by a Member is lodged with, or produced
or exhibited to, the Company and that power of attorney confers power on
the attorney to transfer any or all of the Member's Shares, the Company is
entitled to assume, as against the Member, that the power remains in full
force and effect and may be relied on by the company until the Company
receives express notice in writing at its registered office of either:
(a) the revocation of the power of attorney; or
(b) the death of the Member.
15
<PAGE>
8. TRANSMISSION OF SHARES
8.1 Transmission Generally
Except to the extent provided under Article 8.2, if a Member either dies or
becomes bankrupt:
(a) the only person which the Company may recognize as having any title to
or interest in a Share hold by that Member is the legal personal
representative or assignee of the Member's estate in bankruptcy;
(b) if that person produces the evidence required from time to time by the
Board, the person may elect to be, or to have a person nominated by
him, registered as the holder of the Share;
(c) if that person elects to be registered as the holder of the Share, he
must give to the Company a notice in writing signed by him stating
that election;
(d) if that person elects to have a person nominated by him registered as
the holder of the Share, he must indicate that election by executing
and giving to the Company an instrument of transfer of the Share to
that person;
(e) the provisions of these Articles concerning restrictions on the right
to transfer a Share (including Article 7.4 and Schedule 4) and the
registration of the transfer of the Share apply to a notice given
under Article 8.1(c) and an instrument given under Article 8.1(d) as
if the Member had not died or become bankrupt and that notice or
instrument were an instrument of transfer complying with Article 7.1
signed by the Member; and
(f) that person is entitled to the same dividends and other advantages and
rights as the Member would have been entitled to if the Member had not
died or become bankrupt.
8.2 Joint Holders' Transmission
If a Member who holds a Share jointly with another Member dies:
(a) the only person that the Company may recognize as having any title to
or interest in the Share is the surviving joint-holder;
(b) if the surviving joint-holder produces the evidence required from time
to time by the Board of the death of
16
<PAGE>
the Member, the Board must direct the Register to be altered
accordingly; and
(c) the surviving joint-holder is entitled to the same dividends and other
advantages and rights as the deceased Member would have been entitled
to if the deceased Member had not died.
9. GENERAL MEETINGS
9.1 Annual General Meeting
The Company must, in addition to any other general meeting held by it, hold
an annual general meeting as required by the Law.
9.2 Convening of General Meeting
The Board may convene a general meeting of the Company at any time.
9.3 Requisition of Meeting
The Members may requisition the holding of a general meeting as provided by
section 246 and sub-section 247(l) does not apply to the Company.
9.4 Notice of Meeting
A notice of a general meeting must specify:
(a) the place, day and hour of the meeting;
(b) the general nature of the business to be transacted, except that the
notice of an annual general meeting is not required to state that the
business to be transacted includes:
(i) the declaring of a dividend;
(ii) the consideration of the accounts and the reports of the
Directors and Auditors;
(iii) the election of Directors in place of those retiring; or
(iv) the appointment of and fixing of the remuneration of the
Auditor; and
(c) if a mode of meeting other than meeting in person is by reason of
Article 9.6 to apply to the meeting, that
17
<PAGE>
mode of meeting and any details required to enable a Member to attend
that meeting.
9.5 Omission to give Notice
The accidental omission to give notice of a general meeting to, or the non-
receipt of notice of a general meeting by, a person entitled to receive
that notice does not invalidate any resolution passed at that general
meeting.
9.6 Mode of Meeting
The Company may meet in person or, if so determined by the Board either
generally or in any specified case, by telephone, or other instantaneous
means of conferring for the despatch of business (or by any combination of
those means) which allows each Member (or Member's representative, proxy or
attorney) to hear and be heard by each other person at the meeting, and a
person entitled to be present at the meeting who can so hear and be heard
is present at that meeting.
9.7 Adjournment of Meetings
The chairman of a general meeting at which a quorum is presents:
(a) may with the consent of the meeting by Ordinary Resolution; and
(b) must, if so directed by the meeting by Ordinary Resolution,
adjourn the meeting from time to time and from place to place.
9.8 Business at Adjourned Meeting
The only business which may be transacted at an adjourned general meeting
is business which was left unfinished from the general meeting which was
adjourned.
9.9 Notice of Adjourned Meeting
No notice need be given of an adjourned general meeting (or of the business
to be transacted at it) except if a general meeting is adjourned for more
than 21 days, in which case, notice of the adjourned meeting must be given
as if it were notice of the original meeting.
18
<PAGE>
9.10 Cancellation or Postponement of Keating
Where notice of a general meeting has been given, the Board may by notice
given to all persons entitled to be given notice of the general meeting,
postpone or cancel the general meeting.
10. PROCEEDINGS AT GENERAL MEETINGS
10.1 Representation of Members
A Member may attend a general meeting at which he is entitled to be
present in any of the following ways (if applicable to the Member):
(a) in person;
(b) by proxy;
(c) by attorney; or
(d) in the case of a Member which is a body corporater by a
representative appointed under sub-section 249(3).
10.2 Quorum
No business may be transacted at any general meeting unless a quorum of
at least two persons is present:
(a) at least one of whom is or represents under Articles 10.1(b), (c)
or (d) a class A Member; and
(b) at least one of whom is or represents under Articles 10.1(b), (c)
or (d) the class B Member.
10.3 Failure of Quorum
If a quorum is not present within 15 minutes from the time Appointed for
a general meeting:
(a) where the meeting was convened upon the requisition of Members
under Article 9.3 - the meeting is dissolved; or
(b) in any other case:
(i) the meeting stands adjourned to the day, time and place that
the Board may determine or, if no determination is made by
the Board, to the same day in the next week at the same time
and place; and
19
<PAGE>
(ii) if at the adjourned meeting a quorum is not present within
half an hour from the time appointed for the meeting, the
meeting is dissolved.
10.4 Chairman
If the Board has elected a chairman of its meetings, that person may be
the chairman of any general meeting.
10.5 Chairman Absent
Where a general meeting is held and:
(a) a chairman has not been elected by the Board; or
(b) that person is not present within 15 minutes after the time
appointed for the holding of the meeting or being present, is
unwilling or unable to act,
the Members present must elect one of their number to be chairman of
the meeting.
10.6 Responsibilities of Chairman
The irman of a general meeting is responsible for the general conduct of
the meeting and to ascertain the sense of the meeting concerning the
business transacted at it and for these purposes may, without limitation:
(a) make rulings;
(b) in addition to other powers to adjourn, adjourn the meeting without
the concurrence of the meeting if he determines it is desirable for
the orderly conduct of the meeting; and
(c) determine conclusively any dispute concerning the admission,
validity or rejection of a vote.
10.7 Method of Voting
Every resolution put to a vote at a general meeting must be determined by
a show of hands unless a poll is properly demanded either before or on
declaration of the result of the show of hands.
10.8 Demand for Poll
A demand for a poll under Article 10.7, may be made by:
(a)the chairman of the general meeting;
20
<PAGE>
(b) any three or more Members present;
(c) any number of Members who are together entitled to not less than 5%
of the total voting rights of all Members having the right to vote
at the meeting; or
(d) any number of Members present representing Shares which confer a
right to vote at the meeting and on which an aggregate sum has been
paid up which is not less than 5% of the total sum paid up on all
Shares conferring that right.
10.9 No Poll on Chairman
A demand for a poll may not made in respect of the election by the
general meeting of the chairman of the meeting.
10.10 Effect on Demand for Poll
The demand for a poll does not prevent the continuance of a general
meeting for the transaction of any business except in respect of the
resolution for which the poll is demand.
10.11 Votes on Show of Hands
Where a resolution is determined by show of hands:
(a) a declaration by the chairman of the general meeting that the
resolution has been carried, carried unanimously, carried without
dissent, carried by a particular majority or lost is conclusive
evidence of the fact so declared without proof of the number or
proportion of votes cast for or against that resolution; and
(b) an entry in the book containing. the minutes of that general meeting
recording that declaration is conclusive evidence of the fact that
the declaration was made as so recorded.
10.12 Conduct of Poll
If a poll is properly demanded for a resolution:
(a) if the resolution is for the adjournment of the general meeting, the
poll must be taken immediately in the manner that the chairman of the
meeting determines and declares to the meeting;
(b) in all other cases, the poll must be taken at the time and place and
in the manner that the chairman of the general meeting determines and
declares to the meeting;
21
<PAGE>
(c) the result of the poll, as disclosed by the chairman of the general
meeting at which the result is declared, is a resolution of the
general meeting at which the poll is demanded; and
(d) an entry in the book containing the minutes of the general meeting
at which the result is declared recording that declaration is
conclusive evidence of the fact that the declaration was made as so
recorded.
10.13 Resolutions determined by Majority
Both on a show of hands and on a poll, an Ordinary Resolution is passed
if the proportion that the number of votes in favour of that resolution
bears to the total number of votes cast on the resolution is greater than
one-half.
10.14 No Casting Vote of Chairman
Under no circumstances does the chairman of a general meeting have a
casting vote.
10.15 Circular Resolutions
A resolution in writing signed by each Member for the time being entitled
to receive notice of and attend and vote at general meetings or by that
Member's duly appointed attorney (or if it is a corporation by its duly
authorized representative) is as valid and effective as if that
resolution had been passed at a general meeting of the Company and takes
effect (unless the law otherwise permits or requires) as an Ordinary
Resolution.
10.16 Several Documents Suffice
For the purposes of Article 10.15, two or more documents in identical
terms, each signed by one or more Members (or such Members' attorneys or
representatives, as the case may be) are to be treated as one document
provided that:
(a) each document is delivered to the registered office of the Company
or a legible copy of it is received there by facsimile
transmission; and
(b) where more than one Member, representative or attorney signs the
document the date of execution of the document by each Member,
attorney or representative is set out,
and the date of the resolution is the last date of execution of any of
those documents by a Member or its attorney or representative.
22
<PAGE>
11. ENTITLEMENTS TO ATTEND AND VOTE
11.1 Entitlement to Notice and to Attend
Subject to these Articles and any terms of issue of any Share, each Member
and each Director is entitled to notice of each general meeting and to be
present and to speak at that general meeting.
11.2 Entitlement to Vote
Subject to these Articles and any terms of issue of a Shares:
(a) on a show of hands each person present at the meeting who is a
Member or the proxy, representative or attorney of a Member, has one
vote; and
(b) on a poll, each Member present in person or by proxy, representative
or attorney, has one vote for each Share held by that Member,
except that a Member is not entitled to vote at a general meeting unless
all calls and other sums presently due and payable by that Member in
respect of Shares in the Company have been paid provided that nothing in
this Article will inhibit or restrict the right of the class B Member to
exercise its voting rights attaching to its Shares at all times prior to
the date upon which its Shares become fully paid (including any premium
thereon) in accordance with the provisions of the Subscription Dead.
11.3 Vote of Member of Unsound Mind
If a Member is of unsound mind or is a person whose person or estate is
liable to be dealt with in any way under a law relating to mental health,
the Member's committee or trustee or other person who properly has the
management of 9e Member's estate may exercise any rights of the member in
relation to a general meeting as if the committee, trustee or other person
were the Member.
11.4 Vote of Transmittee
A person entitled to transmission of a Share under Article 8.1 who, at
least 48 hours before the time notified for a general meeting (or an
adjourned meeting), satisfies the Board of his right to that Share, may
vote at that general meeting in respect of that Share as if the person
were the registered holder of the Share.
23
<PAGE>
11.5 Joint Holders' Votes
Where a Share is held by more than one person (including, for the purposes
of this Article, the several legal personal representatives of a dead
Member):
(a) each of those persons may tender a vote in respect of the Share
either in person or by proxy, representative or attorney, as if the
person were the sole holder of the Share; but
(b) if two or more of those persons tender a vote on any resolution, the
only vote which is to be counted in respect of that Share is the vote
tendered by the most senior of those persons (seniority being
conclusively ascertained by the order of names in respect of that
Share in the Register).
11.6 Appointment of Proxy
A Member may appoint a proxy (who need not be a Member) to attend, speak
and vote at a general meeting in his place only by an instrument of proxy
in the form of Schedule 2 (or in a form which is as similar to it as the
circumstances permit) or in any other form that the Board may from time to
time prescribe or accept which is executed:
(a) in the case of a Member who is a natural person, under the hand of
the Members, or of the attorney appointed in writing by the member;
or
(b) in the case of a Member which is a body corporate, either under its
common seal or under the hand of an attorney appointed in writing by
the Member.
11.7 Effect of the Appointment
An instrument of proxy which is valid and effective except that no
appointee is specified in respect of any of the Shares of the relevant
Member is to be treated as validly appointing the chairman of the general
meeting to which it elates in respect of all of the Shares of that
Member.
11.8 Proxy must vote as directed
Where a Member in a valid instrument of proxy directs the appointee to
vote in a specified way in respect of a particular item of business at the
relevant general meeting:
(a) the appointee must cast a vote on that item of business; and
24
<PAGE>
(b) the appointee must, on a poll, cast all votes which he has by reason
of the instrument of proxy in. accordance with that direction.
11.9 Corporate Representatives
Where a body corporate authorizes a person to act as its representative at
any general meeting of the Company under sub-section 249(3), that
appointment is only effective where a certificate under sub-section
249(6), or other evidence satisfactory to the Company is deposited with
the Company in accordance with Article 11.10.
11.10 Deposit of Instruments
Any appointment of a proxy, attorney or representative is effective in
respect of a particular general meeting if, and only if, the following
instruments are actually received (which includes receipt of a copy of
those instruments by legible facsimile transmission) by the Company at its
registered office (or another place notified by the Board) at least 24
hours (or any shorter time that the Board determines) before the time
notified for that meeting:
(a) in the case of a proxy, the instrument of proxy and, if it is
executed by an attorney, the relevant power of attorney or an office
copy or notarially certified copy of the power of attorney;
(b) in the case of an attorney, the power of attorney or an office copy
or notarially certified copy of the power of attorney; and
(c) in the case of a representative the certificate under sub-section
249(6), or other evidence satisfactory to the Company.
11.11 Multiple Appointments
Where the Company has received an instrument of proxy in respect of a
Share from a Member the appointment made by that instrument is and remains
valid and effective, except that where the Company subsequently receives:
(a) a power of attorney or office copy or notarially certified copy of a
power of attorney entitling the attorney to attend and vote at the
meeting, the appointment is revoked;
(b) intimation in writing either of the revocation of the appointment
under the instrument of proxy or of the death of the Member, the
appointment in revoked; or
25
<PAGE>
(c) another instrument of proxy from the Member in respect of that Share,
the instrument of proxy bearing the later date (or if the instruments
bear the same date, the instrument later received by the Company) is
an intimation in writing of the revocation of the appointment under
the other instrument.
11.12 Presence of Member
If a Member is present at a general meeting in either of the ways
specified in Articles 10.1(a) or 10.1(d), and a person appointed by that
Member as proxy or attorney is also present at that meeting, that person
is not entitled to exercise the rights conferred by the instrument of
proxy or power of attorney while the Member is present.
11.13 Ruling an Entitlements and Votes
An objection may be raised with the chairman of a general meeting as to
the qualification of a purported voter or the admission or rejection of a
vote by any person present and entitled (or claiming to be entitled) to
vote but that objection may be made only at the general meeting or
adjourned meeting at which the purported voter wishes to vote or the vote
objected to is given or tendered and, in relation to that objection:
(a) the decision of the chairman is final and conclusive; and
(b) a vote not disallowed as a result is valid and effective for all
purposes.
12. DIRECTORS
12.1 Number of Directors
Subject to Article 12.9, the number of the Directors (excluding Alternate
Directors) must be not more than four unless otherwise determined by the
Company by Ordinary Resolution.
12.2 Continuing Directors
The Directors holding office at the date of adoption of these Articles
continue in office subject to these Articles.
12.3 Appointment of Directors
Each class A Member has the right by notice in writing to the Company to
appoint one Director. The class B Member has the right by notice in
writing to the Company to appoint two
26
<PAGE>
Directors, one of whom may be appointed as a Managing Director. Any
appointment will take effect at and from the time when the notice or
notices is lodged at the registered office of the Company or tabled at a
meeting of the Directors.
12.4 Removal of Directors
Each Member has the right to remove any Director appointed by it in the
same way as the Director can be appointed under Article 12.3. Any removal
will take effect at and from the time when the notice is lodged at the
registered office of the Company or tabled at a meeting of the Directors.
12.5 Casual Vacancy
If at any time a casual vacancy appears on the Board the Member who
appointed the Director whose office is vacated will be entitled to appoint
a replacement Director in the same way as a Director can be appointed
under Article 12.3.
12.6 Qualification of Directors
A Director need not be a Member.
12.7 Vacation of Office
The office of a Director automatically becomes vacant if the Director:
(a) becomes an insolvent under administration;
(b) is not permitted by the Law (or an order made under the Law) to be a
Director;
(c) becomes of unsound mind or a person whose person or estate is liable
to be dealt with in any way under a law relating to mental health;
(d) is removed as a Director under the Law or these Articles;
(e) either by himself or by an Alternate Director appointed by him fails
to attend Board meetings for a continuous period of six months
without leave of absence from the Board; or
(f) resigns by notice in writing to the Company.
27
<PAGE>
12.8 Less than Minimum Number of Directors
Where the office of a Director becomes vacant, the continuing Directors
may continue to act except where the number of Directors falls below
three, in which case the continuing Directors may act only:
(a)to convene a general meeting; or
(b)in emergencies.
12.9 Additional Directors
The Company may, by Ordinary Resolution, increase or reduce the number of
Directors specified in Article 12.1.
13. DIRECTORS' REMUNERATION
13.1 Remuneration of Non-Executive Directors
The Remuneration of the Non-Executive Director:
(a) may not in any year exceed in aggregate the amount last fixed for
them by Ordinary Resolution;
(b) is to be allocated to those Directors as determined by the Board
(including those Directors), or, if there is no such determination in
any year, equally between them; and
(c) accrues from day to day,
but, if the Company is Listed, may not be calculated as a commission or a
percentage of profits or operating revenue.
13.2 Additional Remuneration for Extra Services
If a Director, having been requested to do so by the Board, either
performs extra services or makes any special exertions for the Company
(including,. without limitation, going or residing abroad), the Company
may remunerate that Director by the payment of a fixed sum determined by
the Board and that Remuneration may be either in addition to or in
substitution for any Remuneration to which that Director may be entitled
under Article 13.1.
13.3 Expenses of Directors
The Company must pay a Director (in addition to any other Remuneration)
all reasonable traveling, hotel and other expenses incurred by the
Director:
28
<PAGE>
(a)in attending meetings of the Board or a committee of the Board;
(b)on the business of the Company; or
(c)In carrying out that Director's duties as a Director.
14. DIRECTORS' DUTIES AND INTERESTS
14.1 Definition of Extraneous Interest
"Extraneous Interest" in relation to a Director means an interest being or
arising out of:
(a) any office, place or profit or employment held by the Director in or
in respect of the Company (other than as Auditor) or a related
corporation of the Company;
(b) any office, place of profit, or employment held by the Director in or
in respect of, or any membership of or relationship of creditor to,
any other corporation or partnership whether or not the Company has
any interest in, or dealings or potential dealings with, that other
corporation or partnership;
(c) any Transaction to which the Director is a party or is in any other
way, whether as principal, agent or otherwise, interested, and to
which the Company is a party or in which the Company is in any other
way interested; or
(d) without limitation, any other interest of the Director or duty of the
Director to a third party which Interest or duty conflicts or may
possibly conflict with the Directors' duties to the Company.
14.2 Scope of Directors' Duties
Subject to Article 17.4, a Director may, without breaching his duty to the
Company:
(a) have any Extraneous Interest; and
(b) any office, place of profit or employment, or be a member or creditor
of any corporation or partnership, which in any case does or could
give rise to an Extraneous Interest in the Director.
29
<PAGE>
14.3 Transactions Not Vitiated
No Transaction in which the Company is interested is vitiated or avoided
merely because a Director has an Extraneous Interest in or in relation to
that Transaction.
14.4 No Liability for Extraneous Interest
No Director nor any other person is, merely by reason of a Director having
an Extraneous Interest, liable to account for any profit or benefit
received by the Director or any other person, or to hold any property on
any trust for the Company or to compensate the Company for any loss
suffered by it.
14.5 Declaration of Interests
A Director need not declare any interest (including, without limitation,
any Extraneous Interest) unless required to do so by the Law.
14.6 Manner of Declarations
A Director may make a declaration required by the Law either orally or in
writing and is treated as having made a declaration where the existence,
nature, character and extent of the interest appears on the face of a
document tabled before the Board.
14.7 Recording of Declarations
The terms of each declaration made in accordance with the Law must be
recorded in the minutes of the meeting of the Board at which it was made.
14.8 Director may hold Office of Company
A Director may be appointed by the Company:
(a) to hold any office or place of profit of the Company (except that of
Auditor) on terms determined by the Board but not so that the
Remuneration payable to any Director who is an employee of the
Company or a related corporation of the Company includes a commission
on or percentage of operating revenue; or
(b) alone or by a firm of which the Director is a member, to act in any
professional capacity and the Director or that firm may be
remunerated for so acting as if the Director were not a Director.
30
<PAGE>
14.9 Interested Director may Vote and be counted in Quorum
A Director may be counted in a quorum and may vote at Board meetings
notwithstanding that he has any Extraneous interest or any interest
required to be declared by the Law or otherwise.
14.10 Execution of instruments
A Director may, notwithstanding any Extraneous Interest or other interest
and regardless of whether that Extraneous Interest or other interest has
been declared as required by the Law, participate in the execution of any
instrument by or on behalf of the Company and whether by signing or by
affixing or witnessing the affixing of a seal or otherwise.
15. ALTERNATE DIRECTORS
15.1 Power to Appoint Alternate Director
A Director (but not an Alternate Director) may from time to time in
accordance with the procedures set out in Article 15.2 appoint any person
eligible to be a Director to be the Alternate Director of the Appointor
whether for a specified period or until the appointment is revoked.
15.2 Method of Appointment
An Alternate Director is appointed as such where:
(a) the Appointor gives notice in writing (including, without
limitation, by telex or facsimile transmission) to the Company in
the form of Schedule 3 or in any other form as the Board may from
time to time prescribe or accept; and
(b) the Board (excluding the Appointor from voting) approves the person
specified to be the Alternate Director of the Appointor.
15.3 Termination of Appointment
The Appointor at any time and regardless of whether the appointment is
for a specified period may revoke the appointment of a person as his
Alternate Director by notice in writing (including, without limitation,
by telex or facsimile transmission) to the Company to that effect and the
appointment is automatically revoked if the Appointor ceases to be a
Director.
31
<PAGE>
15.4 Entitlements of Alternate Director
An Alternate Director by reason of being appointed as such:
(a) is not entitled to receive notice of meetings of the Board unless his
Appointor has by notice in writing (including, without limitation, by
telex or facsimile transmission) to the Company required it to do so;
(b) if the Appointor is not present at a meeting of the Board, may attend
and vote at that meeting in place of the Appointor;
(c) if also a Director, may vote both as a Director and as an Alternate
Director;
(d) is an officer of the Company and not an agent of the Appointor, and,
as such, is subject to all the duties and has all the powers and
rights of the Appointor as a Director; and
(e) may not be remunerated except out of the Remuneration which would
otherwise be available to be paid to the Appointor and, in respect of
that Remuneration, the Alternate Director's only rights (if any) are
against the Appointor and not the Company.
16. MANAGING DIRECTORS
16.1 Appointment of Managing Directors
Subject to Articles 12.1 and 12.3, the class B Member may from time to
time appoint a person to be a Managing Director either for a fixed term or
without fixing a term and on such terms and conditions as it determines.
16.2 Termination of Appointment of Managing Director
The appointment of a Managing Director terminates if:
(a) the Managing Director ceases for any reason to be a Director; or
(b) the Board revokes the appointment (which it is hereby empowered to
do)
16.3 Retirement and Removal of Managing Director
A Managing Director's office automatically becomes vacant on the same
occasions as a Director's office becomes vacant.
32
<PAGE>
16.4 Remuneration of Managing Director
The Board may fix the Remuneration of each Executive Director and that
Remuneration may comprise any or all of:
(a)salary;
(b) commission on profits or dividends; or
(c) participation in profits,
but if the Company is Listed, it must not include a commission on or a
percentage of operating revenue.
16.5 Powers of Executive Director
The Board may, by unanimous resolution from time to time and upon any
terms and conditions and subject to any restrictions that it considers
appropriate:
(a) confer on an Executive Director any or all of the powers of the Board
(which powers may be conferred so an to be concurrent with, but not
to the exclusion of, the powers of the Board); and
(b) withdraw or alter any of those powers conferred on an Executive
Director under Article 16.5(a).
17. POWERS OF THE BOARD
17.1 Powers Generally
Except as otherwise required by the Law or any other applicable law or
another provision of these Articles:
(a) the business of the Company is to be managed by the Board; and
(b) the Board may exercise each and every right, power or capacity of the
Company,
to the exclusion of the Company in general meeting and the Members.
17.2 Appointment of Attorney
The Board may by unanimous resolution appoint any person to be an attorney
of the Company by power of attorney for the purposes, with the powers,
(being powers, vested in or exercisable by the Board), for the period and
subject to he conditions determined by it.
33
<PAGE>
17.3 Power of Attorney Contents
A power of attorney under Article 17.2 may, without limitation:
(a) contain any provisions for the protection and convenience of persons
dealing with the attorney as the Board determines; and
(b) authorize the attorney to delegate any or all of the powers vested in
him by it.
17.4 Disposal of Main Undertaking
The Board must not:
(a) sell or dispose of or agree to sell or dispose of the main
undertaking of the Company; or
(b) in connection with any sale or disposal of the main undertaking of
the Company, pay to any Director or his associate a commission or
fee,
unless the sale, disposal, commission or fee is first approved by an
ordinary Resolution.
18. PROCEEDINGS OF THE BOARD
18.1 Mode of Meeting
The Board may meet in person or by telephone or other instantaneous means
of conferring for the despatch of business (or by any combination of those
means) which allows each person present to hear and be heard by each other
person present, and adjourn and otherwise regulate its meetings as it
determines.
18.2 Quorum
The quorum of Directors to be present (including, without limitation,
present by telephone or other instantaneous means of conferring for the
despatch of business) at a meeting of the Board necessary for the
transaction of business at the meeting is two, one of whom must, upon the
allotment and issue of the B Class Shares to the class B Member pursuant
to the Subscription Deed, be a Director appointed by the class B Member.
18.3 Notice of Meeting
Notice of each meeting of the Board:
34
<PAGE>
(a) must be given to each Director and each Alternate Director in respect
of whom the Appointor has given notice to the Company requiring
notice to be given to that Alternate Director; and
(b) may be given by telephone or facsimile message,
but the non-receipt of any notice of a Board meeting by a Director does
not affect the validity of the convening of the meeting.
18.4 Place of Meeting
Where a meeting of the Board is held solely or partly by telephone or
other instantaneous means of conferring the meeting is to be treated as
held at the place at which at least one of the Directors present at the
meeting is physically located as is agreed by those Directors present at
the meeting.
18.5 Period of Notice
The Board may determine the period of notice (unless waived by a majority
of the directors to whom notice of a particular meeting is sent) for each
meeting of the Board which, until otherwise determined, is 24 hours.
18.6 Convening of Board Meeting
A Director may at any time, and the Secretary must on request from a
Director, convene a meeting of the Board.
18.7 Appointment of Chairman
The Board may elect one of the Directors to be chairman for such period as
it determines.
18.8 Chairman of Board Meetings
Where a meeting of the Board is held and a chairman has not been appointed
under Article 18.7 or the chairman is not present within 15 minutes of the
time appointed for the holding of the meeting or is unwilling to act, the
Directors present at the meeting may choose one of their number to be
chairman of that meeting.
18.9 Majority Decisions
Every question arising and resolution dealt with at a meeting of the Board
is to be decided by A majority of votes of the Directors present and
voting on the question or resolution.
35
<PAGE>
18.10 Votes of Directors
Subject to these Articles:
(a) on every question or resolution at a meeting of the Board, each
Director present at that meeting has that number of votes equal to
the number of voting shares in the Company held by the Member that
appointed the Director;
(b) if a Director is an Alternate Director entitled to be present and to
vote at the meeting, the Director has that number of votes equal to
the number of voting shares in the Company held by the Member that
appointed the Appointor in respect of which the Director is present;
and
(c) under no circumstances does the chairman have a casting vote.
18.11 Exercise of Powers by Board
Except where it has been conferred exclusively under Article 16.5 or
delegated exclusively to a committee of the Board under Article 18.12,
power of the Board in exercisable only:
(a) by resolution at a meeting of the Board at which a quorum is present;
or
(b) by a resolution of the Directors under Article 18.14.
18.12 Delegation to Committee
The Board may by unanimous resolution delegate any of its powers to a
committee consisting of not less than one Director and which may also
include any other persons determined by the Board.
18.13 Committee Powers and Meetings
Where a committee is appointed by the Board under Article 18.12:
(a) that committee must exercise the powers delegated to it under Article
18.12 in accordance with any directions of the Board;
(b) a power so delegated when exercised by the committee in accordance
with Article 18.13(a) is treated as exercised by the Board;
36
<PAGE>
(c) the members of the committee may elect a chairman from among the
members;
(d) where a meeting of a committee is hold and:
(i) a chairman has not been elected in accordance with paragraph (c)
of this Article; or
(ii) the chairman so elected is not present at the meeting within 15
minutes of the time appointed for the holding of the meeting or
is unwilling to act,
the members of the committee present at the meeting may choose one of
their number to be chairman of the meeting;
(e) the committee may meet in person or by telephone or other
instantaneous means of conferring for the despatch of business (or by
any combination of those means) and adjourn and otherwise regulate
its meetings as it may determine; and
(f) the committee meetings are otherwise governed by the provisions of
these Articles which regulate the meetings and procedures of the
Board to the greatest extent practicable.
18.14 Written Resolution of Directors
If all the Directors entitled to receive notice of a meeting of the Board
and to vote on a resolution sign a document to the effect that they are in
favour of the resolution (the terms of which are set out in the document),
a resolution in those terms is for all purposes to be treated as having
been passed at a duly convened meeting of the Board held on the date and
at the time when the last Director signed the document.
18.15 Several Documents Suffice
For the purpose of Article 18.14:
(a) two or more separate documents in identical terms, each of which is
signed by one or more Directors, are treated as one document;
(b) the signature by an Alternate Director of a document is not required
if the Appointor of that Alternate Director has signed the document;
and
37
<PAGE>
(c) the signature by the Appointor of an Alternate Director of a document
is not required if that Alternate Director has signed the document.
18.16 Validity of Acts Of Directors
Each act performed, resolution passed, or thing done, by, or with the
participation of, a person acting as a Director or member of a committee
in respect of whom it is later discovered there was some defect in
appointment to, or continuation in, office of that person or that the
person so appointed was disqualified or not entitled to perform, vote on
or do the act, resolution or thing, is as valid and effective as if that
Director or member of committee had been validly appointed, had validly
continued in office, or had not been disqualified and was entitled so to
perform vote or do as the case may be.
19. SECRETARY
19.1 Appointment of Secretary
The Board may:
(a) appoint any person to be a Secretary of the Company;
(b) determine the term of appointment, powers, duties and remuneration of
that person as a Secretary;
(c) vary any determination so made; and
(d) terminate or suspend any appointment of a person as Secretary.
20. COMPANY ADMINISTRATION
20.1 Minutes to be Made
The Board must cause minutes to be made of:
(a) the names of the Directors present at each Board meeting;
(b) the names of the committee members present at each meeting of a
committee appointed under Article 18.12;
(c) the proceedings and resolutions of each general meeting;
(d) the proceedings and resolutions of each Board meeting; and
38
<PAGE>
(e) the proceedings and resolutions of each meeting of a Committee
appointed under Article 18.12.
20.2 Minutes to be entered
The Board must cause all minutes made under Article 20.1 to be entered in
the relevant minute book of the Company.
20.3 Signature of minutes
The minutes of a meeting made under Article 20.1, if appearing on their
face to be signed by the chairman of the meeting or the chairman of the
next succeeding meeting of the relevant body, are sufficient but not
conclusive evidence without proof of any further facts of the matters
stated in them.
20.4 Custody of Common Seal
The Board must provide for the safe custody of the Common Seal.
20.5 Use of Common Seal
The Common Seal may only be used with the authority of either:
(a) the Board; or
(b) a committee appointed under Article 18.12 empowered to authorize the
use of the Common Seal.
20.6 Mode of execution by Common Seal
An instrument is validly executed under the Common Seal where the
Directors have by resolution authorized the execution of the instrument
under the Common seal and the Common Seal is affixed to the instrument in
the presence of at least one Director and another person who is either a
Secretary or a person appointed by the Board for the purpose and each of
those persons signs the instrument to attest the affixing of the Common
Seal.
20.7 Official Seal
The Company may have, for use in any place out of the State or Territory
where the Common Seal is kept, a duplicate common seal known as the
Official Seal for that place whose impression must be identical to that of
the Common Seal but with the name of the place where it is to be used
added.
39
<PAGE>
20.8 Appointment to affix Official Seal
The Company may by instrument under the Common Seal authorize any person
either generally or in specified circumstances to affix the Official Seal
for a particular place in that place to any instrument to which the
Company is a party and determine any manner required for the affixing by
that person of that Official Seal in that place.
20.9 Effect of Official Seal
Where an Official Seal is affixed to an instrument in the place to which
it relates by a person authorized and in the circumstances authorized for
that person under Article 20.8 in the manner described in Article 20.8 (if
any), that instrument is to be treated for all purposes as having been
validly issued under the Common Seal.
20.10 Execution of Bills and Cheques
All cheques, bills of exchange and other negotiable instruments, all
orders for payment and all receipts for money paid to the Company, may
only be signed for and on behalf of the Company in the manner (which may
include the use of facsimile signatures) determined, and by the persons
appointed for the purpose, by the Board from time to time.
20.11 Inspection of Records
The Board may determine whether and to what extent, at what times and
places and under what conditions, the accounting records. and other
documents of the Company or any of them will be open to the inspection of
Members other than Directors, and a member other than a Director does not
have the right to inspect any document of the Company except as provided
by law or authorized by the Board.
21. ACCOUNTS AND AUDIT
21.1 Company to keep Accounts
The Board must cause the Company to keep the accounting records and
prepare the financial statements required by the Law.
21.2 Presentation of Accounts
The Board must cause the accounts of the Company to be sent to Members and
laid before general meetings as required by the Law.
40
<PAGE>
21.3 Audit
The Board must cause the accounts of the Company to be audited as required
by the Law.
22. RESERVES AND CAPITALIZATION OF PROFITS
22.1 Reserves and Profits Carried Forward
The Board may:
(a) before or in addition to declaring any dividends, set aside out of
the profits of the Company any sum as reserves to be applied, at the
Board's discretion, for any purpose for which the profits of the
Company may be applied;
(b) before the application of any reserve or reserves set aside under
Article 22.1(a), use in the business of the Company or invest such
reserves as the Board determines; and
(c) carry forward so much of the profits as it considers ought not to be
distributed as dividends without transferring those profits to a
reserve.
22.2 Board may Capitalize profits
The Board may capitalize any amount being all or part of an amount
standing to the credit of any reserve account the profit and loss account
or otherwise available for distribution to Members.
22.3 Application of Capitalized Amount
Any amount capitalized under Article 22.2 may be applied by the Board for
the benefit of Members who receive such as capital and in the proportions
to which those Members would have been entitled on a distribution of that
sum by way of dividend:
(a) in paying up unissued shares to be issued to Members as fully paid;
(b) in paying up any amounts unpaid on shares held by Members; or
(c) in any combination of those ways,
and in this regard the Board may do all things necessary to adjust the
rights of Members among themselves including:
41
<PAGE>
(d) issuing fractional certificates or making cash payments in cases
where Shares or debentures become issuable in fractions; and
(e) authorizing any person to make, on behalf of all or any of the
Members entitled to any further Shares or debentures on the
capitalization, an agreement with the Company providing for the issue
to them, credited as fully paid up, of any such further Shares or
debentures or for the payment up by the Company on their behalf of
the amounts or any part of the amounts remaining unpaid on their
existing Shares by the application of their respective proportions of
the sum resolved to be capitalized, and any such agreement is
effective and binding on all the Members concerned.
23. DIVIDENDS
23.1 Declaration of Final Dividend
Subject to the Law and subject to the rights of any persons entitled to
Shares with special rights to dividend, the Board may declare and
authorize the payment of any final dividend it thinks fit.
23.2 Interim Dividend
The Board may authorize the payment by the Company to the Members of such
interim dividends as appear to the Board to be justified by the profits of
the Company.
23.3 Amount of Dividend
Subject to Article 23.4 and any; contrary special rights attaching to, or
the terms of issue of, any particular Share, where the Board declares a
final dividend under Article 23.1 or an interim dividend under Article
23.2, the Board must also determine which of the issued Shares are to
participate in the distribution (the "Participating Shares") and the
extent of the participation of each Participating Share so that the
distribution may be to holders of some and not all of the issued Shares
and the extent of participation of the Participating Shares may differ as
between each other.
23.4 Dividends in specie
A dividend, including an interim dividend, may be declared in terms of
cash or any other property, and in either case may be paid or in
accordance with Article 23.7.
42
<PAGE>
23.5 No Interest on Dividends
Interest is not payable by the Company in respect of any dividend.
23.6 Deductions from Dividends
The Board may deduct from any dividend payable to a Member any money
presently payable by him to the Company on account of calls or otherwise
in relation to Shares .
23.7 Distributions Of Specific Assets
The Board may, when declaring any dividend direct that payment of the
dividend be wholly or partly satisfied by the distribution of specific
assets (including paid up shares in, or debentures of, any other
corporation) and in this regard the Board may:
(a) fix the value of any specific asset so distributed;
(b) make cash payments to any Members on the basis of any value so fixed
so as to adjust the rights of Members inter se; and
(c) vest any specific asset or assets in trustees.
23.8 Mode of Payment of Dividends
Any dividend, interest or other money payable in cash in respect of Shares
may be paid by cheque sent through the post directed to:
(a) the address of the holder as shown in the Register, or in the case of
joint holders, to the address shown in the Register as the address of
the joint holder first named in the Register; or
(b) to such other address as the holder or joint holders in writing
directs or direct.
23.9 Joint Holders' Receipt
Any one of 2 or more joint holders may give an effective receipt for any
dividends, interest or other money payable in respect of the Shares held
by them as joint holders.
23.10 Unclaimed Dividends
All dividends declared but unclaimed may be invested by the Board as it
sees fit for the benefit of the Company until claimed or until required by
law to be dealt with otherwise.
43
<PAGE>
23.11 Dividend a Debt
A dividend, including an interim dividend: becomes a debt of the Company:
(a) where a date is fixed for payment, on and from that date; and
(b) in any other case, on and from the date on which it is declared.
23.12 Interest on Capital
The Company may pay interest on share capital as permitted by section 202.
24. NOTICES
24.1 Service of Notices by Company
A notice is properly given by the Company to a person if:
(a) it is served on him personally;
(b) a letter containing the notice is prepaid and posted to the person at
an address (if any) supplied by him to the Company for service of
notices or, (where the person is a Member), shown in the Register;
(c) it is sent to the person by telex or facsimile transmission at a
number which corresponds with the address referred to in Article
24.1(b) or which is supplied by him to the Company for service of
notices on him; or
(d) it is received by the person.
24.2 Overseas Member's Address
A Member whose address as shown in the Register is not within Australia
may give notice to the Company specifying an address within Australia
which is to be treated for the purposes of Article 24.1 as the address of
that Member shown in the Register.
24.3 Postal Notices to Overseas Members
Where the Company proposes to send a notice to a Member by pro-paid post
and the notice is to be sent outside Australia, the notice must be sent by
airmail.
44
<PAGE>
24.4 Time of Service
A notice is deemed to be served on a person by the Company:
(a) where sent by post within Australia in accordance with Article
24.1(b), on the second Business Day after the day on which it is
posted;
(b) where sent by telex or facsimile transmission in accordance with
Article 24.1(c), in the case of a notice sent by facsimile, on the
day of despatch of that facsimile; and in the case of a notice sent
by telex, on the day on which that person's answer back is received;
or
(c) in any other case, when it is actually received by the person.
24.5 Joint Holders' Notice
A notice may be given by the Company' to the joint holders of a Share by
giving the notice to the joint holder first named in the Register in
respect of the Share.
24.6 Persons Entitled on Succession
A notice may be given by the Company to a person entitled to a Share in
consequence of the death or bankruptcy of a Member by:
(a) where that person has in writing given an address or telex or
facsimile number in the State for the service of notices on him, by
any of the methods mentioned in Article 24.1; or
(b) in any other case, in any manner which notice may have been given had
the death or bankruptcy not occurred.
24.7 Binding an Others
Any person entitled to a Share (whether by transfer, operation of law or
otherwise) is to be treated as having duly received every notice in
respect of that Share which was duly given to the person from whom that
person derives that entitlement before the person entitled is entered in
the Register as the holder of the Share.
24.8 Notice of General Meetings
Notice of every general meeting must be given to:
(a) every Member;
45
<PAGE>
(b) every person entitled to a share in consequence of the death or
bankruptcy of a Member who, but for his death or bankruptcy, would be
entitled to receive notice of the meeting; and
(c) the Auditor for the time being of the Company,
but no other person is entitled to receive notices of. general meetings.
24.9 Counting of Days
Where a specified period (including, without limitation, a particular
number of days) is required to elapse or expire from or after the giving
of a notice before an action may be taken neither the day on which the
notice is given nor the day on which the action is to be taken may be
counted in reckoning the period.
24.10 Certificate of Director or Secretary
If a Director or Secretary signs a certificate that a notice was given in
the manner set out in the certificate, that certificate is conclusive
evidence of the accuracy of the matters set out in it.
25. WINDING UP
25.1 Power of Board
The Board may authorize the presentation of a petition for the winding up
of the Company by the Court.
25.2 Distribution if Insufficient Assets
Subject to the terms of issue of a Share, if the Company is wound up and
the assets available for distribution among the members (in that capacity)
are insufficient to repay all the paid up capital, those assets will be
distributed so that, to the greatest possible extent, the amount
distributed to a Member in respect of each Share is proportional to the
amount paid up (or which at the commencement of the winding up ought to
have been paid up) on that Share compared with the total paid up capital
of the Company.
25.3 Distribution of Surplus Assets
Subject to the terms of issue of a Share, if the Company is wound up and
after distribution of assets to repay paid up capital there remain assets
available for distribution to the Members (in that capacity), those assets
will be distributed so that, to the greatest possible extent, the
46
<PAGE>
amount distributed to a Member in respect of each Share is proportional to
the amount paid up (or which at the commencement of the winding up ought
to have been paid up) on that Share compared with the total paid up
capital of the Company.
25.4 Winding up Generally
If the Company is wound up, the liquidator may, with the sanction of a
Special Resolution:
(a) divide among the Members in kind the whole or any part of the
property of the Company and may for that purpose set such value as he
considers fair upon any property to be so divided and may determine
how the division is to be carried out as between the Members or
different classes of Members; and
(b) vast the whole or any part of such property in trustees upon such
trusts for the benefit of the contributories as the liquidator thinks
fit,
but so that no Member is compelled to accept any shares or other
securities in respect of which. there is any liability.
26. MISCELLANEOUS
26.1 Officers Indemnified
Every officer, Auditor or agent of the Company is indemnified by the
Company for all liabilities incurred by him in his capacity as, or by
reason of his holding the position of, officer, Auditor or agent as the
case may be to the extent permitted by law, and such indemnity extends to
any liability incurred by him in defending any proceedings, whether civil
or criminal, in which judgment is given in his favour or in which he is
acquitted or in connection with any application in relation to any such in
which relief is granted to him by the Court under the Law.
26.2 General Authorization
Where the law authorizes or permits a company to do any thing if so
authorized by its articles of association, the Company is authorized by
this Article to do that thing.
26.3 Acts of Class of Members
Any act or thing which may, pursuant to these Articles, be done by a class
of Members may be done:
47
<PAGE>
(a) where a Member holds in excess of one half of the Shares of the
relevant Class, by that Member; or
(b) in any other case, by Members of that class who hold, in aggregate,
more than one half of the Shares of that Class.
48
<PAGE>
SCHEDULE 1
----------
PREFERENCE SHARES
-----------------
(1) In this Schedule, unless the context otherwise requires:
"Dividend Date" means, in relation to a Preference Share, a date specified
in the Issue Resolution on which a dividend in respect of that Preference
Share is payable;
"Dividend Rate" means, in relation to a Preference Share, the terms
specified in the Issue Resolution for the calculation of the amount of
dividend to be paid in respect of that Preference Share on any Dividend
Date, which calculation may be wholly or partly established by reference to
an algebraic formula;
"Franked Dividend" has the meaning ascribed to it in section 160APA of the
Tax Act;
"Issue Resolution" means the resolution specified in Clause (3);
"Preference Share" means a Share issued under Article 2.2.(b);
"Redeemable Preference Shares" means a Preference Share which is specified
in the Issue Resolution as being, or being at the option of the Company to
be, liable to be redeemed;
"Redemption Amount" means, in relation to a Redeemable Preference Share,
the amount specified to be paid on redemption of the Redeemable Preference
Share;
"Redemption Date" means, in relation to a Redeemable Preference Share, the
date specified in the Issue Resolution for the redemption of that
Preference Share; and
"Tax Act" means the Income Tax Assessment Act 1936 (Commonwealth).
(2) Each Preference Share confers upon its holder:
(a) the right in winding up to payment in cash of the capital (including
any premium) then paid up on its and any arrears of dividend in
respect thereof in priority to any other class of Shares;
(b) the right in priority to any payment of dividend to any other class of
Shares to a cumulative preferential dividend payable on each Dividend
Date in relation to
49
<PAGE>
that Preference Share calculated in accordance with the Dividend Rate
in relation to that Preference Share; and
(c) no right to participate beyond the extent elsewhere specified in
Clause (2) in surplus assets or prof its of the Company, whether in
winding up or otherwise.
(3) The Board may only allot a Preference Share where by resolution it
specifies the Dividend Date, the Dividend Rate, and whether the Preference
Share is or is not, or at the option of the Company is to be, liable to be
redeemed, and, if the Preference Share is a Redeemable Preference Share,
the Redemption Amount and Redemption Date for that Redeemable Preference
Share and any other terms and conditions to apply to that Preference Share.
(4) The Issue Resolution in establishing the Dividend Rate for a Preference
Share may specify that the dividend is to be one of:
(a) fixed;
(b) variable depending upon any variation of the respective values of any
factors in an algebraic formula specified in the Issue Resolution;
(c) variable depending upon such other factors, as the Board may specify
in the Issue Resolution,
and may also specify that the dividend is to be a Franked Dividend or not a
Franked Dividend.
(5) Where the Issue Resolution specifies that the Dividend to be paid in
respect of the Preference Share is to be a Franked Dividend the Issue
Resolution may also specify:
(a) the extent to which such Dividend is to be franked; and
(b) the consequences of any Dividend paid not being so franked, which may
include a provision for an increase in the amount of the Dividend to
such an extent or by reference to such factors as may be specified in
the Issue Resolution .
(6) Subject to the Law, the Company must redeem a Redeemable Preference Share
on issue:
(a) on the specified date where the Company, not less than 21 days prior
to that date, has given a notice to the holder of that Redeemable
Preference Share stating that the Redeemable Preference Share will be
so redeemed on the specified date; and
50
<PAGE>
(b) in any event, on the Redemption Date
but no Redeemable Preference Share may be redeemed and no notice of
redemption may be given prior to the second anniversary of the date upon
which that Redeemable Preference Share.
(7) The certificate issued by the Company in relation to any Preference Share,
must specify in relation to that Preference Share:
(a) the date of issue of the Preference Share;
(b) the Dividend Rate and Dividend Dates and in relation to that
Preference Share;
(c) whether the Preference Share is a Redeemable Preference Share;
(d) if the Preference Share is a Redeemable Preference Share, the
Redemption Amount and Redemption Date in relation to that Redeemable
Preference Share; and
(e) any other matter the Board considers desirable.
(8) Each Preference Share confers upon its holder the same rights as the
holders of ordinary shares to receive notices, reports, accounts and
balance sheets of the Company and to attend general meetings but does not
confer upon its holder the right to vote at any general meeting of the
Company unless either:
(a) at the date of the notice convening the meeting any dividend payable
in respect of the Preference Share is in arrears; or
(b) the business of the meeting includes the consideration of the
resolution for increasing or reducing the capital of the Company or
for altering the Articles or for winding up the Company or any
resolution directly or indirectly affecting any of the special rights
or privileges attached to the Preference Shares,
in which case the holder of that Preference Share is entitled to one vote
in respect of that Preference Share on any such resolution.
(9) On redemption of a Redeemable Preference Share, the Company after the
holder has surrendered to the Company the certificate in respect of that
Redeemable Preference Share, must pay to the holder the Redemption Amount
in cash, by
51
<PAGE>
cheque or in any other form that the holder agrees to in writing.
52
<PAGE>
SCHEDULE 2
----------
TOTAL ENERGY SYSTEM LIMITED
---------------------------
PROXY FORM
----------
I/We............................................................................
of..............................................................................
being a member/members of Total Energy Systems Limited hereby
appoint.........................................................................
of..............................................................................
(or failing him/her) the chairman of the meeting as my/our proxy to vote for
me/us and on my/our behalf at the Annual/Extraordinary General Meeting of the
Company to be hold on [ ] at [ ] a.m./p.m. and at any meeting
held subsequent and pursuant to an adjournment of that meeting.
DATED: ____________________
SIGNED: ___________________
53
<PAGE>
SCHEDULE 3
----------
FORM OF APPOINTMENT OF ALTERNATE DIRECTOR
-----------------------------------------
I, the undersigned, being a Director of Total Energy Systems Limited in exercise
of the power given to me by the Articles of Association of that company, hereby
appoint [ insert name ] of [ insert address ] to act as
Alternate Director for me. This appointment takes effect *immediately/*on [
insert date ] and extends until *[ insert date ]/*revoked by me.
DATED: ___________________
SIGNED:___________________
54
<PAGE>
SCHEDULE 4
----------
PRE-EMPTIVE RIGHTS
------------------
1. Interpretation
In this Schedule, unless the context otherwise requires:
"Acceptance Notice" means a notice given in accordance with Clause 7(b);
"Acceptor" means a Non Seller who has given an Acceptance Notice;
"Clause" means a clause of this Schedule;
"Fair Value" means the price per share of the Sale Shares determined in
accordance with Clause 5;
"Non Seller" means a Member apart from the Vendor;
"Proposed Transferee" means the person to whom the Vendor proposes to
transfer the Sale Shares;
"Sale Shares" means all the Shares owned by the Vendor of the Class
proposed to be transferred to the Proposed Transferee;
"Transfer Notice" means a notice complying with Clause 3;
"Vendor" has the-meaning given by Clause 2.
2. Sale Shares
Subject to Article 7.4. a Member who proposes to transfer his Sale Shares
(the "Vendor") must give a Transfer Notice to the Company addressed to the
Directors in accordance with Clause 3.
3. Transfer Notice
A Transfer Notice must specify:
(a) the name and address of the Proposed Transferee;
(b) the number and Class of the Sale Shares; and
(c) the price and other terms and conditions upon which it is proposed the
Sale Shares be transferred.
4. Determination of Fair Value
55
<PAGE>
Upon receipt of the Transfer Notice the Board must:
(a) determine the Fair Value in accordance with Clause 5; and
(b) notify the Vendor thereof.
5. Fair Value
The "Fair Value" is the price per Share of the Sale Shares:
(a) as agreed between the Vendor and the Board;
or, in default of agreement within 14 days,
(b) as the Auditor or, failing him, the accountants of the Company, acting
as an expert and not an arbitrator, determines to be the proper and
appropriate value of the Sale Shares.
6. Withdrawal of Transfer Notice
The Vendor may, within 14 days of being notified of the Fair Value, by
notice in writing to the Board, withdraw the Transfer Notice, but the
Transfer Notice may not otherwise be withdrawn.
7. Notice to Non Sellers
Upon determination of the Fair Value, the Board must give a notice to each
Non Seller:
(a) specifying;
(i) the number and Class of Sale Shares;
(ii) the Fair Value; and
(iii) the terms and conditions (apart from the price) upon which the
Vendor has proposed to transfer the Sale Shares, as specified
in the Transfer Notice; and
(b) notifying the Non Seller that he may, within 30 days (provided that
the Transfer Notice is not withdrawn in the meantime), by notice in
writing to the Board (the "Acceptance Notice") bind itself to purchase
all or any part of the Sale Shares PROVIDED THAT if more than one Non
Seller delivers an Acceptance Notice to the Board and the aggregate of
the number of Shares specified in the Acceptance Notices exceeds the
total number of Sale Shares, each Acceptor will only be entitled to
purchase
56
<PAGE>
from the vendor and the Vendor will only be obliged to sell to each
Acceptor that part of the Sale Shares that is proportionate to the
Acceptor's current shareholding in the Company.
8. Acceptance by Acceptor
(a) Subject to Clause 8(b), upon delivery to the Board of an Acceptance
Notice by or on behalf of an Acceptor, the Acceptor is bound to
purchase from the Vendor and the Vendor is bound to sell to the
Acceptor the Sale Shares for the Fair Value per Share and otherwise on
the terms and conditions, so far as they are applicable, specified in
Clause 3(c).
(b) If the aggregate of the number of Shares specified in the Acceptance
Notices exceeds the total number of Sale Shares, the Acceptor is only
entitled and bound to purchase from the Vendor and the vendor is only
bound to sell to the Acceptor that number of Sale Shares proportionate
to the Acceptor's current shareholding in the Company.
9. Sale to Proposed Transferee
If upon the expiry of the 30 day period referred to in Clause 7(b), all or
any part of the Sale Shares are not the subject of an Acceptance Notice,
the Vendor may at any time within 90 days thereafter transfer to the
Proposed Transferee that part of the Sale Shares not the subject of an
Acceptance Notice at a price per Share not less than the Fair Value and
otherwise on the terms and conditions specified in Clause 3(c).
10. Terms of Sales
Where pursuant to this Schedule a Member becomes bound to sell Shares to
another Member or Members, subject to the contrary agreement of all
Members, the sale must be completed within 30 days after delivery of the
Acceptance Notice to the Board.
11. Default
If any Member defaults in an obligation to transfer Shares to another
Member pursuant to this Schedule, the Board (or any Director appointed for
the purpose by the Board) may act as the agent and attorney of the
defaulting Member and may do all acts, and execute all instruments on
behalf of the defaulting Member necessary to effect the transfer of the
Shares.
57
<PAGE>
Lodging party or agent name CARTER NEWELL
----------------------------------------------------
Address 123 Eagle St Level 35
-------------------------------------------------------------------
Brisbane postcode 4001
-------------------------------------------------------------------
Telephone (07) 835 3500
-------------------------------------------------------------------
Facsimile (07) 831 8080
-------------------------------------------------------------------
DX number 231 suburb/city Brisbane
-------------------------------------------------------------------
________________________________________________________________________________
Australian Securities Commission Form 205
Notification of Corporations Law
Resolution 168(1), 171(2), 173(2),
256(1), 491(2)
________________________________________________________________________________
Company name TOTAL ENERGY SYSTEMS LIMITED
-------------------------------------------------------------------
A.C.N. 010 876 150
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
Subject(s) of the resolution Details of the resolution
<S> <C>
Note Changes listed below date of general meeting
require a special (d/m/y) 20/8/93
-------
resolutions.
382(1) change of company [_]A place of meeting _____________
name
168(1) change from public [_]B office, floor, building
company to name 3/rd/ Floor
------------------------
proprietary company
168(2) change from [_]C street number & name
proprietary company 172 Edward St.
------------------------------
to public company
167(1) change from company [_]D suburb/city Brisbane
------------------
limited by guarantee
to company limited by state QLD postcode 4000
--- ----
both shares and
guarantee
167(1) change from company [_]E the resolution has been
limited by shares to [X] passed
company limited by [_] agreed to
both shares and
guarantee
167(1) change from no- [_]F type of resolution
liability company to [X] special
company limited by [_] ordinary
shares
</TABLE>
<PAGE>
<TABLE>
<S> <C>
167(1) change from limited [_]G copy of the resolution is
company to unlimited set out
company [_] below
[X] in the annexure
marked (A) of (2) pages
--- ---
167(1) change from unlimited [_]H The text of the resolution
company to limited must be set out in clearly
company legible type.
172 alteration or [_]J
omission of objects
176(1) alteration to [X]K
Articles of
Association
1(1) voluntary winding up [_]L
by members
491(1) voluntary winding up [_]M
by creditors
205(10) acquisition of shares [_]N
alteration to
memorandum
195 reduction of capital [_]S
193 increase of capital [X]T
193 consolidation/convers [_]W
ion/subdivision/cance
llation of shares
</TABLE>
________________________________________________________________________________
SIGNATURE
This form must be signed by a director, secretary or principal executive officer
(PEO) or, in the case of a resolution for winding up, by the liquidator.
print name Stephen T. Gordon Capacity Secretary
------------------------ ------------------
sign here /s/ Stephen T. Gordon Date 20/8/93
------------------------- ----------------------
<PAGE>
RESOLUTION
----------
RESOLVED that the Memorandum and Articles of Association of TOTAL ENERGY SYSTEMS
- -------- --------------------
LIMITED be altered as follows:
- -------
MEMORANDUM
. CLAUSE 3
The words and figures ONE MILLION DOLLARS ($1,000,000.00) wherever it
-------------------
appears in this clause shall be altered to TEN MILLION DOLLARS
-------------------
($10,000,000.00).
ARTICLES
. DEFINITIONS
- the definition of subscription deed shall be deleted.
- a new definition of "LSB Industries Inc." shall be inserted as
follows:
"LSB Industries Inc." means LSB Industries Inc., a company duly
incorporated according to the laws of Delaware, USA having its
registered office at 16 South Pennsylvania, Oklahoma City,
Oklahoma USA.
. CLAUSE 2.1
This clause shall be deleted and replaced with the following:
"The shares of the company shall be under the complete control of the
directors who may issue or otherwise dispose of the shares to such
persons who as the Directors may think fit unless there are existing
contracts to the contrary."
. CLAUSE 2.7
Sub-clauses (a) to (d) of this clause shall be deleted and a new clause (a)
inserted as follows:
"(a) The capital of the company is divided into "A" class shares and
"B" class shares."
Sub-paragraph (e) shall be renumbered (b).
. CLAUSE 2.8
This clause shall be deleted.
. CLAUSE 12.1
<PAGE>
The wording "four" in line 2 of this clause shall be replaced with the word
"ten".
. CLAUSE 12.3
The first two sentences of this clause shall be deleted and replaced with
the following:
"LSB Industries Inc. or any person nominated by it in writing for the
purpose, shall have the right to appoint the directors of the
company."
. CLAUSE 12.4
The first sentence of this clause shall be deleted and replaced with the
following:
"LSB Industries Inc. or any person nominated by it for that purpose
shall have the right to remove any director of the company."
. CLAUSE 18.2
The word "two" in line 5 of this clause shall be deleted and replaced with
the word "five". The material appearing after this word shall then be
deleted and replaced with:
"Resolutions of directors shall only be passed where a resolution has
been agreed to by at least four directors."
. CLAUSE 18.5
The current heading to clause 18.15 shall be replaced with "FURTHER
PARTICULARS OF DOCUMENTS".
A new paragraph (d) shall be added to clause 18.15 as follows:
"(d) Facsimile documents and signatures are acceptable."
<PAGE>
This is Annexure "A" to two pages referred to in Form 205 - Notification of
Resolutions.
/s/ Stephen T. Gordon
- ----------------------------------------
/s/ Stephen T. Gordon
- ----------------------------------------
Secretary
Date: 20/8/93
<PAGE>
EXHIBIT 3.31
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF TRANSCRIPT
I, the undersigned Secretary of State of the State of Oklahoma, do hereby
certify that the annexed transcript has been compared with the record on file in
my office of which it purports to be a copy, and that the same is a full, true
and correct copy of:
CERTIFICATE OF INCORPORATION
AND
ALL AMENDMENTS THERETO
OF
UNIVERSAL TECH CORPORATION
In testimony whereof, I have hereto set my hand and
caused to be affixed the Great Seal of the State of
Oklahoma, done at the City of Oklahoma City this
14/th/, day of November, A.D. 1997.
_____________________________________________
Secretary of State
By:_____________________________________________
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall Come, Greetings:
WHEREAS, The Certificate of Incorporation, duly signed and verified of
UNIVERSAL TECH CORPORATION
- --------------------------------------------------------------------------------
have been filed in the office of the Secretary of State as provided by the Laws
of the State of Oklahoma.
NOW, THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law, do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City this 31/st/ day of
May, A.D. 1990.
_____________________________________________
Secretary of State
By:__________________________________________
<PAGE>
CERTIFICATE OF INCORPORATION
OF
UNIVERSAL TECH CORPORATION
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
FIRST: Name. The name of this corporation is Universal Tech Corporation
----
(hereafter this "Corporation").
SECOND: Registered Office. The name and address of the registered agent of
-----------------
this Corporation in the State of Oklahoma and the address of the registered
office of this Corporation in the State of Oklahoma, which is the same as the
address of its registered agent, are:
Mock, Schwabe, Waldo, Elder,
Reeves & Bryant,
A Professional Corporation
Fifteenth Floor
One Leadership Square
211 North Robinson
Oklahoma City, OK 73102
THIRD: Term. The term of this Corporation shall be perpetual.
----
FOURTH: Purpose. The purpose of this Corporation is to engage in any lawful
-------
act or activity for which corporations may be organized under the Oklahoma
General Corporation Act.
FIFTH: Capital Stock. This Corporation is authorized to issue only one (1)
-------------
class of shares of capital stock, to be designated "Common Stock." The total
number of shares of Common Stock which this Corporation shall have authority to
allot and the par value of each share of Common Stock are as follows:
<TABLE>
<CAPTION>
Total Number Par Value Total Authorized
Of Shares Of Each Share Common Stock
------------ ------------- ----------------
<S> <C> <C>
10,000 $1.00 $10,000
</TABLE>
SIXTH: Incorporator. The name and address of the incorporator are as
------------
follows:
<PAGE>
Name Mailing Address
---- ---------------
Steven P. Cole Mock, Schwabe, Waldo, Elder,
Reeves & Bryant,
A Professional Corporation
Fifteenth Floor
One Leadership Square
211 North Robinson
Oklahoma City, OK 73102
SEVENTH: Sole Director. The name and mailing address of the person who is
-------------
to serve as sole director until the first annual meeting of the shareholders or
until his successors are elected and qualify are as follows:
Name Mailing Address
---- ---------------
Neil Edward Gehrig 2201 Canyon Creek Plaza
Richardson, Texas 75080
EIGHTH: Management of Corporation. The following constitute provisions for
-------------------------
the regulation of internal affairs of this Corporation:
(a) Bylaws. The Bylaws for the governing of this Corporation may be
------
adopted, amended, altered, repealed, or readopted by the Board of Directors
at any stated or special meeting of such board, but the powers of such
directors in this regard shall at all times be subject to the rights of the
shareholders to alter or repeal such Bylaws at any annual meeting of
shareholders, and the power of the Board of Directors shall not extend to
any amendment of the Bylaws respecting the number, qualifications,
classifications, or term of office of the members of the Board of
Directors.
(b) Number of Directors. The number of directors of this Corporation
-------------------
shall be such as from time to time shall be fixed by, or in the manner
provided in, the Bylaws. Election of directors need not be by ballot unless
the Bylaws so provide.
NINTH: Creditors Arrangements. Whenever a compromise or arrangement is
----------------------
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its shareholders or any class of them, any court of
equitable jurisdiction within the State of Oklahoma, on the application in a
summary way of this Corporation or of any creditor or shareholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 1106 of the Oklahoma General Corporation Act or
on the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 1100 of the
Oklahoma General Corporation Act, may order a meeting of the
2
<PAGE>
creditors or class of creditors, and/or of the shareholders or class of
shareholders of this Corporation, as the case may be, to be summoned in such
manner as the such court directs. If a majority in number representing three-
fourths (3/4) in value of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the compromise
or arrangement and the reorganization, if sanctioned by the court to which the
application has been made, shall be binding on all the creditors or class of
creditors, and/or on all the shareholders or class of shareholders, of this
Corporation, as the case may be, and also on this Corporation.
TENTH: Director's Liability; Indemnification.
-------------------------------------
(a) To the maximum extent permitted by the Oklahoma General
Corporation Act as it exists on the date hereof or as it may hereafter be
amended, no director of this Corporation shall be liable to this
Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director. No amendment to or repeal of this Article
TENTH shall apply to or have any effect on the liability or alleged
liability of any director of this Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or
repeal.
(b) This Corporation may agree, in its Bylaws, by contract or in any
other manner, to indemnify and protect any director, officer, employee or
agent of this Corporation, or any person who serves at the request of this
Corporation as a director, officer, employee, agent, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan or other entity or enterprise, to the maximum extent permitted by the
Oklahoma General Corporation Act as it exists on the date hereof or as it
may hereafter be amended.
ELEVENTH: Amendment. This Corporation reserves the right at any time and
---------
from time to time to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and other provisions authorized by the laws
of the State of Oklahoma at the time in force may be added or inserted in this
Certificate of Incorporation, in the manner now or hereafter prescribed by law;
and all rights, preferences and privileges of whatsoever nature conferred upon
shareholders, directors or any other persons by and pursuant to this Certificate
of Incorporation in its present form or as hereafter amended are granted subject
to the right reserved in this Section ELEVENTH.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove
named, for the purpose of forming a Corporation under
3
<PAGE>
the laws of the State of Oklahoma, does certify that the facts herein stated are
true, and accordingly, has hereunto set his hand this 31st day of May, 1990.
/s/ Steven P. Cole
--------------------------------------------
Steven P. Cole
4
<PAGE>
FEE $25.00
CHANGE
OF
REGISTERED AGENT
AND
LOCATION OF
REGISTERED OFFICE
OF
UNIVERSAL TECH CORPORATION
AN OKLAHOMA CORPORATION
TO: THE OKLAHOMA SECRETARY OF STATE
101 State Capitol
Oklahoma City, OK 73105
Universal Tech Corporation, an Oklahoma corporation (the "Corporation"),
for the purpose of changing its registered agent and registered office pursuant
to Section 1023 of the Oklahoma General Corporation Act, hereby certifies:
1. That the location of the registered office of the Corporation is:
16 South Pennsylvania Avenue Oklahoma City Oklahoma 73107
---------------------------------------------------------------------------
Street Name City County Zip Code
2. That the name of the registered agent at such address upon whom process
against the Corporation may be served is:
David M. Shear
---------------------------------------------------------------------------
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by its Vice President and attested by its Asst. Secretary, this 26/th/
---- -----
day of September, 1995.
UNIVERSAL TECH CORPORATION
/s/ Tony M. Shelby Tony M. Shelby
- ----------------------------- ----------------------------------------
by Vice President (Please print name)
ATTEST:
/s/ David M. Shear David M. Shear
- ----------------------------- ----------------------------------------
by Asst. Secretary (Please print name)
<PAGE>
OKLAHOMA TAX COMMISSION
STATE OF OKLAHOMA
2501 Lincoln Blvd.
Oklahoma City, Oklahoma 73194
ROBERT E. ANDERSON, Chairman BUSINESS TAX
ROBERT V. CULLISON, Vice-Chairman DIVISION
DON KILPATRICK, Sec'y-Member REGISTRATION SECTION
(405) 521-3161
FEI: 731364261
BOA 10/19/95
SECRETARY OF STATE
ROOM 101, STATE CAPITOL BUILDING
OKLAHOMA CITY, OK. 73105
RE: UNIVERSAL TECH CORPORATION
QUALIFICATION DATE: 05/31/90
DEAR SECRETARY:
THIS IS TO CERTIFY THAT THE FILES OF THIS OFFICE SHOW THE REFERENCED CORPORATION
HAS FILED A FRANCHISE TAX RETURN FOR THE FISCAL YEAR ENDING JUNE 30, 1996 AND
HAS PAID THE FRANCHISE TAX AS SHOWN BY SAID RETURN.
NO CERTIFICATION IS MADE AS TO ANY CORPORATE FRANCHISE TAXES WHICH MAY BE DUE
BUT NOT YET ASSESSED, NOR WHICH HAVE BEEN ASSESSED AND PROTESTED.
THIS LETTER MAY NOT THEREFORE BE ACCEPTED FOR PURPOSES OF DISSOLUTION OR
WITHDRAWAL.
SINCERELY,
OKLAHOMA TAX COMMISSION
BUSINESS TAX DIVISION
REGISTRATION SECTION
<PAGE>
EXHIBIT 3.32
BYLAWS
OF
UNIVERSAL TECH CORPORATION
(an Oklahoma corporation)
<PAGE>
TABLE OF CONTENTS
TO
BYLAWS
OF
UNIVERSAL TECH CORPORATION
(an Oklahoma corporation)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES...................................................... 1
Section 1.1 Principal Office..................................... 1
Section 1.2 Other Offices........................................ 1
ARTICLE II - MEETINGS OF SHAREHOLDERS.................................... 1
Section 2.1 Annual Meetings...................................... 1
Section 2.2 Special Meetings..................................... 1
Section 2.3 Place of Meetings.................................... 2
Section 2.4 Notice of Meetings................................... 2
Section 2.5 Voting List.......................................... 2
Section 2.6 Quorum and Required Vote;
Adjourned Meetings.............................. 2
Section 2.7 Voting............................................... 3
Section 2.8 Proxies.............................................. 3
Section 2.9 Order of Business.................................... 4
Section 2.10 Action Without Meeting............................... 4
Section 2.11 Inspectors of Election............................... 5
ARTICLE III - BOARD OF DIRECTORS......................................... 5
Section 3.1 Powers............................................... 5
Section 3.2 Number, Election and Term of Office.................. 6
Section 3.3 Vacancies............................................ 6
Section 3.4 Resignations......................................... 7
Section 3.5 Removal.............................................. 7
Section 3.6 Annual Meetings...................................... 7
Section 3.7 Regular Meetings..................................... 7
Section 3.8 Special Meetings..................................... 7
Section 3.9 Place of Meetings.................................... 7
Section 3.10 Quorum and Required Vote; Adjourned
Meetings........................................ 7
Section 3.11 Compensation......................................... 8
Section 3.12 Action without Meeting............................... 8
Section 3.13 Telephonic Meetings.................................. 8
ARTICLE IV - EXECUTIVE COMMITTEE......................................... 8
Section 4.1 Election............................................. 8
Section 4.2 Duties............................................... 8
Section 4.3 Meetings............................................. 9
Section 4.4 Quorum and Voting.................................... 9
Section 4.5 Waiver of Notice..................................... 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.6 Removal.............................................. 9
Section 4.7 Vacancies............................................ 9
Section 4.8 Action Without Meeting; Telephonic
Meeting......................................... 9
ARTICLE V - COMMITTEES OF DIRECTORS...................................... 9
Section 5.1 Designation.......................................... 9
Section 5.2 Procedural Rules..................................... 10
ARTICLE VI - OFFICERS.................................................... 10
Section 6.1 Officers............................................. 10
Section 6.2 Election............................................. 10
Section 6.3 Subordinate Officers................................. 10
Section 6.4 Removal.............................................. 10
Section 6.5 Resignation.......................................... 10
Section 6.6 Vacancies............................................ 11
Section 6.7 Chairman of the Board................................ 11
Section 6.8 Vice Chairman of the Board........................... 11
Section 6.9 President............................................ 11
Section 6.10 Executive Vice-President............................. 12
Section 6.11 Vice-President....................................... 12
Section 6.12 Secretary............................................ 12
Section 6.13 Assistant Secretaries................................ 13
Section 6.14 Treasurer............................................ 13
Section 6.15 Assistant Treasurers................................. 14
Section 6.16 Delegation of Duties................................. 14
ARTICLE VII - SHARES OF STOCK............................................ 14
Section 7.1 Certificates of Stock................................ 14
Section 7.2 Record of Shareholders............................... 15
Section 7.3 Transfer Agents and Registrars....................... 15
Section 7.4 Transfer of Shares................................... 15
Section 7.5 Shareholders Record Date and
Closing Stock Books............................. 15
Section 7.6 Registered Shareholders.............................. 16
Section 7.7 Lost Certificates.................................... 16
Section 7.8 Treasury Shares...................................... 16
Section 7.9 Fractional Shares.................................... 16
ARTICLE VIII - EXECUTION OF INSTRUMENTS.................................. 16
Section 8.1 Contracts............................................ 16
Section 8.2 Checks and Drafts.................................... 16
Section 8.3 Deposits; Bank Accounts.............................. 17
Section 8.4 Loans................................................ 17
Section 8.5 Sale or Transfer of Securities Held
by the Corporation.............................. 17
Section 8.6 Execution of Proxies................................. 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IX - INDEMNIFICATION............................................. 18
Section 9.1 Indemnification: Actions Other Than
by the Corporation.............................. 18
Section 9.2 Indemnification: Actions by the
Corporation..................................... 18
Section 9.3 Right to Indemnification............................. 19
Section 9.4 Authorization of Indemnification..................... 19
Section 9.5 Advance Indemnification.............................. 19
Section 9.6 Non-Exclusive Indemnification........................ 19
Section 9.7 Insurance............................................ 19
Section 9.8 Constituent Corporation.............................. 20
Section 9.9 Definitions.......................................... 20
ARTICLE X - GENERAL PROVISIONS........................................... 20
Section 10.1 Fiscal Year.......................................... 20
Section 10.2 Seal................................................. 20
Section 10.3 Dividends............................................ 21
Section 10.4 Notice............................................... 21
Section 10.5 Waiver of Notice..................................... 21
Section 10.6 Conflicts of Interest................................ 21
Section 10.7 Loans to officers or Employees....................... 22
Section 10.8 Amendment............................................ 22
</TABLE>
<PAGE>
BYLAWS
OF
UNIVERSAL TECH CORPORATION
(an Oklahoma corporation)
ARTICLE I
OFFICES
-------
Section 1.1 Principal Office. The present location of the principal office
----------------
for the transaction of the business of the Corporation is 518 North Indiana,
Oklahoma City, Oklahoma 73106. The Board of Directors may change such principal-
office from time to time.
Section 1.2 Other Offices. The Corporation may have other offices at such
-------------
places, within or without the State of Oklahoma, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 2.1 Annual Meetings. The annual meetings of shareholders shall be
---------------
held on the third Tuesday of the fourth month following the close of the fiscal
year; provided that if such day falls on a legal holiday, then any such annual
meeting of shareholders shall be held at the same time and place on the next day
thereafter which is a business day. Any such annual meeting may be held at any
other time which may be designated in a resolution adopted by the Board of
Directors or by the written consent of shareholders holding a majority of the
issued and outstanding voting shares of the Corporation. At the annual meeting,
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other proper business may be transacted.
Section 2.2 Special Meetings. Special meetings of the shareholders for any
----------------
purpose or purposes may be called at any time by: (a) the President; (b)
resolution adopted by the Board of Directors; or (c) one or more shareholders
holding not less than one-fourth (1/4) of the issued and outstanding voting
shares of the Corporation. Notice of such special meetings shall be given in the
same manner as for annual meetings of shareholders. Notices of any special
meeting shall state, in addition to the time, date and place of such meeting,
the purpose or purposes of the meeting. Business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice.
Upon request being made by written notice to the President, or in his absence or
disability to any vice-President, or in the absence of a Vice-President, to the
Secretary, by any person or persons herein empowered to call a special meeting,
if such officer is the
<PAGE>
Secretary, he shall give notice to the shareholders, or if such officer is other
than the Secretary, he shall cause the Secretary, to give notice to the
shareholders that such meeting has been called for the purpose or purposes
stated in such request and is to be held at a specified time, which time as
fixed by such officer shall not be less than ten (10) days nor more than sixty
(60) days after the receipt of such request. If notice of such meeting be not
given to the shareholders within seven (7) days after the receipt of such
request, such person or persons making such request may fix the time of such
special meeting and give notice thereof in the same manner as herein provided
for notice of special meetings of shareholders.
Section 2.3 Place of Meetings. All meetings of shareholders shall be held
-----------------
either at the principal office of the Corporation or at any other place within
or without the State of Oklahoma as may be designated either by the Board of
Directors or by the written consent of the shareholders entitled to vote at such
meeting holding at least a majority of such shares given either before or after
the meeting and filed with the Secretary of the Corporation.
Section 2.4 Notice of Meetings. Written notice of the time, date and place
------------------
of each annual meeting of the shareholders shall be given to each shareholder as
described in Section 10.4 not less than ten (10) nor more than sixty (60) days
before each annual meeting.
Section 2.5 Voting List. The Secretary shall prepare, at least forty-eight
-----------
(48) hours prior to each meeting of the shareholders, an alphabetical list of
all shareholders entitled to vote at such meeting, with the number of shares
entitled to be voted by each shareholder set forth opposite their respective
names. The Secretary shall produce the share ledger or a duplicate thereof,
together with such list and shall keep it open either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held during the business hours of at least one (1) full day immediately
preceding the convening thereof and until the close of such meeting, and it
shall be subject to inspection at any time during such period by any shareholder
or person representing shares. However, the Secretary shall not be required to
prepare and produce a list of shareholders in any case where the share ledger
reasonably shows in alphabetical order by classes of shares all persons entitled
to represent shares at such meeting with the number of shares entitled to be
voted by each shareholder.
Section 2.6 Quorum and Required Vote; Adjourned Meetings. The holders of
--------------------------------------------
a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the shareholders for the transaction of business, except as
otherwise
2
<PAGE>
provided by statute or the Certificate of Incorporation of the corporation. When
a quorum is present at any meeting, a majority of the shares represented thereat
and entitled to vote thereat shall decide any question brought before such
meeting. The shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the holders of a majority of the shares
entitled to vote thereat, present in person or by proxy, but in the absence of a
quorum no other business may be transacted at such meeting. it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement at the
meeting at which such adjournment is taken, except that if any shareholders'
meeting, either annual or special, is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 2.7 Voting. At each meeting of shareholders each shareholder
------
entitled to vote shall vote in person or by proxy and he shall have one vote for
each share standing registered in his name at the closing of the transfer books
for such meeting, or the record date fixed for such meeting by the Board of
Directorst as the case may be, or standing registered in his name at the time of
such meeting if neither a date for the closing of the transfer books nor a
record date for such meeting has been fixed by the Board of Directors. The
voting at all meetings of shareholders may be viva voce but any qualified voter
may demand a share vote by written ballot, whereupon such share vote shall be
taken by written ballot each of which shall state the name of the shareholder
voting and the number of shares voted by him, and if such ballot be cast by
proxy, it shall also state the name of such proxy.
Section 2.8 Proxies. Any shareholder entitled to vote or execute consents
-------
shall have the right to do so either in person or by one or more agents
authorized by proxy. The appointment of a proxy shall be in writing and signed
by the shareholder but shall require no other attestation and shall be filed
with the Secretary of the Corporation at or prior to the meeting. If any
shareholder appoints two or more persons to act as proxies and if the instrument
does not otherwise provide, then a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such instrument upon all of the persons
so appointed; and if such proxies be equally divided as to the right and manner
of voting in any particular case, the vote shall be divided among the proxies.
Any person holding shares in a representative or fiduciary capacity which he may
represent in person may represent the same by proxy and confer general or
discretionary power upon such a proxy. The authority of a proxy if not coupled
with an
3
<PAGE>
interest may be terminated at will, unless otherwise provided in the
appointment, the proxy's authority shall cease three (3) years after the
appointment. The termination of a proxy's authority by act of the shareholder
shall, subject to the time limitation herein set forth, be ineffective until
written notice of the termination has been given to the Secretary of the
Corporation. Unless otherwise provided therein, an appointment filed with the
Secretary shall have the effect of revoking all proxy appointments of prior
date. A proxy's authority shall not be revoked by the death or incapacity of the
maker unless bef ore the vote is cast or the authority is exercised written
notice of such death or incapacity is given to the Corporation.
Section 2.9 Order of Business. The order of business at the annual
-----------------
meeting, and so far as practicable at all other meetings of the shareholders,
shall be as follows:
(a) Calling meeting to order;
(b) Calling of roll and checking proxies;
(c) Proof of notice of meeting;
(d) Reading of any unapproved minutes;
(e) Reports of officers;
(f) Reports of committees;
(g) Election of directors;
(h) Unfinished business;
(i) New business; and
(j) Adjournment.
Section 2.10 Action Without Meeting. Any action which, under any provisions
----------------------
of the laws of the State of Oklahoma or under the provisions of the Certificate
of Incorporation or under these Bylaws may be taken at a meeting of the
shareholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take action at a meeting at which all shares entitled to vote
thereon were present and voted. Such consent shall be filed with the Secretary
of the corporation and made a part of the corporate records. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who have not consented in
writing.
4
<PAGE>
Section 2.11 Inspectors of Election. In advance of any meeting of
----------------------
shareholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or any adjournment thereof. If Inspectors of Election be not so
appointed, the Chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails or refuses to act, the vacancy may be filled
by appointment by the Board of Directors in advance of the meeting, or at the
meeting by the Chairman. An inspector need not be a shareholder of the
Corporation, but no person who is a candidate for office of the Corporation
shall act as an inspector. The duties of such inspectors shall include:
determining the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The inspectors of the election shall
perform their duties impartially in good faith, to the best of their ability,
and as expeditiously as is practical. If there be three inspectors, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act, or certificate of all.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 3.1 Powers. All corporate powers, except those which are conferred
------
upon or reserved to the shareholders by the Certificate of Incorporation, these
Bylaws and the laws of the State of Oklahoma, shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
and conducted by, the Board of Directors. Without prejudice to such general
power, but subject to the same limitations, the Board of Directors shall have
the following powers:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with applicable law, with the Certificate of Incorporation or
these Bylaws and fix their compensation and to confer upon any officer of
the Corporation the power to appoint, remove and suspend subordinate
officers and agents;
5
<PAGE>
(b) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time, as it may determine advisable;
(c) To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be in accordance with applicable
law and to declare dividends from time to time in accordance with
applicable law;
(d) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor;
(e) To adopt such insurance, retirement and other benefits plans for
directors, officers and agents of the Corporation and its subsidiaries as
it may determine advisable; and
(f) To adopt regulations, not inconsistent with these Bylaws, for the
management of the Corporation's business and affairs.
Section 3.2 Number, Election and Term of Office. The Board of Directors of
-----------------------------------
the Corporation shall consist of one or more members. The shareholders at any
meeting shall determine the number which shall constitute the Board of Directors
and the number so determined shall remain fixed until changed at a subsequent
meeting of the shareholders. The directors shall be elected at each annual
meeting of the shareholders; however, if any such annual meeting is not held or
the directors are not elected thereat, the directors may be elected at any
meeting of shareholders held for that purpose. Each director shall hold office
until his successor is elected or until his earlier resignation or removal. A
director need not be a shareholder of the Corporation.
Section 3.3 Vacancies. Vacancies in the Board of Directors may be filled
---------
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and each director so elected shall hold office until
his successor is elected at an annual or a special meeting of the shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in
case of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting. The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
6
<PAGE>
Section 3.4 Resignations. Upon the resignation of a director, a majority
------------
of the remaining directors or the sole remaining director shall have the power
to elect a successor to take office when the resignation is to become effective.
Section 3.5 Removal. The entire Board of Directors or any individual
-------
director may be removed from office, with or without cause, by the vote of
shareholders holding a majority of the issued and outstanding shares entitled to
Vote at any annual or special meeting of shareholders. New directors to fill
vacancies created by removal may be elected at the same meeting of shareholders.
Section 3.6 Annual Meetings. An annual meeting of the Board of Directors
---------------
for the purpose of election of officers of the Corporation and the transaction
of any other business coming before such meeting shall be held each year
immediately following the adjournment of the annual meeting of the shareholders
and no notice of such meeting to the elected directors shall be necessary in
order to legally constitute the meeting, provided a majority of the Board shall
be present. If a majority of the Board shall not be present, then such annual
meeting may be held at such time as shall be fixed by the consent, in writing,
of all of the directors. other meetings of the Board may be held as shall from
time to time be determined by the Board provided notice of the time, date and
place of any such meeting is given to each director not less than two (2) days
before such meeting.
Section 3.7 Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. No notice of such regular meeting shall be required.
Section 3.8 Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes may be called at any time by the President or the
Secretary or by any two directors by notice of the time, date and place thereof
given to each director not less than two (2) days before such meeting. No
business shall be considered at any special meeting other than the purposes
mentioned in the notice given to each director of the meeting, except with the
consent of all directors.
Section 3.9 Place of Meetings. Meetings of the Board of Directors shall
-----------------
be held at any place within or without the State of Oklahoma which has been
designated from time to time by resolution adopted by the Board or by written
consent of all members of the Board. In the absence of such designation,
meetings shall be held at the principal office of the Corporation.
Section 3.10 Quorum and Required Vote; Adjourned Meetings. A majority of
--------------------------------------------
the directors shall constitute a quorum for the transaction of business at any
meeting of the directors, and the
7
<PAGE>
acts of a majority of the directors present at a meeting at which a quorum is
present shall be the acts of the Board of Directors except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws and except to adjourn as hereinafter provided. A quorum of the
directors may adjourn any meeting of the directors to meet again at a stated day
and hour; provided that in the absence of a quorum a majority of the directors
present at any meeting of the directors, either regular or special, may adjourn
to a later date but may not transact any business until a quorum has been
secured. At any adjourned meeting at which a required number of directors shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified. Notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.
Section 3.11 Compensation. Directors and members of committees may receive
------------
such compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed by resolution adopted by the Board of Directors.
Section 3.12 Action without Meeting. Any action required or permitted to
----------------------
be taken at a meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing. Such written Action by
unanimous consent shall have the same effect as action taken at a meeting of the
Board of Directors and shall be filed with the Secretary of the corporation and
made a part of the minute of proceeding of the Board of Directors.
Section 3.13 Telephonic Meetings. Members of the Board of Directors may
-------------------
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE IV
EXECUTIVE COMMITTEE
-------------------
Section 4.1 Election. The Board of Directors may if it deems necessary,
--------
acting by resolution adopted by a majority of the number of directors, elect
from their own members an Executive Committee composed of two or more voting
members.
Section 4.2 Duties. The Executive Committee shall have and exercise all
------
of the authority of the Board of Directors in the management of the Corporation
in the interval between meetings of the Board of Directors, subject to the
control and direction of the Board of Directors, except to the extent, if any,
such authority shall be limited by the resolution appointing the Executive
8
<PAGE>
Committee and except the power to declare dividends and to adopt, amend or
repeal these Bylaws and where action of the Board of Directors is required by
law. It shall keep regular minutes of its proceedings which shall be reported to
the directors at their next meeting.
Section 4.3 Meetings. The Executive Committee shall meet at such times as
--------
may be fixed by the Committee or on the call of the President. Notice of the
time and place of the meeting shall be given to each member of the Committee in
the manner provided for the giving of notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors or
in such other manner as the Executive Committee by resolution may prescribe.
Section 4.4 Quorum and Voting. A majority of the members of the Executive
-----------------
Committee shall constitute a quorum for the transaction of business. The acts of
the majority of the members of the Executive Committee present at a meeting at
which a quorum is present shall be the acts of the Executive Committee. At all
meetings of the Executive Committee, each member present shall have one (1) vote
which shall be cast by him in person.
Section 4.5 Waiver of Notice. Any actions taken or approved at any meeting
----------------
of the Executive Committee, however called and noticed or wherever held, shall
be as valid as though had at a meeting duly held after regular call and notice,
if a quorum be present and if, either before or after the meeting, each of the
members not present signs a written waiver of notice or a consent to holding
such meeting or an approval of the minutes thereof.
Section 4.6 Removal. The entire Executive Committee or any individual
-------
member thereof may be removed from the Committee with or without cause by a vote
of a majority of the directors.
Section 4.7 Vacancies. The Board of Directors shall fill all vacancies
---------
in the Executive Committee which may occur from time to time.
Section 4.8 Action Without Meeting; Telephonic Meeting. Action may be
------------------------------------------
taken by the Executive Committee in the manner allowed by the Board of Directors
pursuant to Sections 3.12 and 3.13 of Article III.
ARTICLE V
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation. The Board of Directors may, by resolution passed
-----------
by a majority of the directors, designate one or more committees, in addition to
the Executive Committee authorized in Article IV hereof, each committee to
consist of two or more of
9
<PAGE>
the directors of the Corporation, which to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except where
action of the Board of Directors is required by law, and may authorize the seal
of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 5.2 Procedural Rules. Each committee shall comply with the same
----------------
procedural rules set forth in Section 4.3 through 4.8, both inclusive, of
Article IV that are applicable to the Executive Committee.
ARTICLE VI
OFFICERS
--------
Section 6.1 Officers. The officers of the Corporation shall be a
--------
President, a Secretary and a Treasurer. The Corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board, an Executive
Vice-President, one or more Vice-Presidents, one or more Assistant Secretaries,
one or more Assistant Treasurers, and such other officers as may be appointed in
accordance with Section 6.3. One person may hold two or more offices; provided
that no person shall at the same time hold the offices of President and
Secretary.
Section 6.2 Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with Section 6.3 or Section 6.5,
shall be elected annually by the Board of Directors, and each shall hold his
office until he shall resign or shall be removed or otherwise disqualified to
serve, or his successor shall be elected and qualified.
Section 6.3 Subordinate Officers. The Board of Directors may appoint, and
--------------------
may empower the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these Bylaws or as the
Board of Directors may from time to time determine.
Section 6.4 Removal. Any officer may be removed, either with or without
-------
cause, by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the B6ard of Directors.
Section 6.5 Resignation. Any officer may resign at any time by giving
-----------
written notice to the Board of Directors, or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such
10
<PAGE>
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 6.6 Vacancies. A vacancy in any office because of death, removal,
---------
resignation, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to such office.
Section 6.7 Chairman of the Board. The Chairman of the Board, if any,
---------------------
shall, if present, preside at all meetings of the Board of Directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by these Bylaws.
Section 6.8 Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if any, shall perform such duties as the Board of Directors shall prescribe. In
the absence or disability of the Chairman of the Board, the Vice Chairman shall
perform the duties and exercise the powers of the Chairman of the Board.
Section 6.9 President. The President shall be the Chief Executive Officer
---------
of the Corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business, finances and
affairs of the Corporation and all other powers normally held and exercised by
the person serving as President of a corporation. The President shall:
(a) Preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, at all meetings of the Board of Directors;
(b) Sign or countersign, as may be necessary, all such bills, notes,
checks, contracts and other instruments as may pertain to the ordinary
course of the business of the Corporation;
(c) Execute deeds, bonds, mortgages, and contracts required to be
executed under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation;
(d) Have the power to appoint all employees and agents of the
Corporation whose appointment is not otherwise provided for and to fix the
compensation thereof subject to the provisions of these Bylaws and subject
to the approval of the Board of Directors and to remove or suspend any
employee or agent who shall not have been appointed by the Board of
Directors and to suspend for cause, pending final
11
<PAGE>
action by the body which shall have appointed him, any officer other than
an elected officer, or any employee or agent who shall have been appointed
by the Board of Directors;
(e) Present a complete report of the business of the Corporation for
the preceding fiscal year at the annual meeting of the shareholders and
report to the Board of Directors from time to time all matters coming to
his attention which materially affect the business of the Corporation; and
(f) Serve as a member of the Board of Directors and an ex-officio
member of all standing committees, including the Executive Committee, if
any; and possess such usual powers and duties of supervision and management
as may pertain to the office of the President and such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
Section 6.10 Executive Vice-President. The Executive Vice-President, if
------------------------
any, shall be the executive officer of the Corporation next in authority to the
Chairman of the Board and the President, both of whom he shall assist in the
management of the business of the Corporation and the implementation of orders
and resolutions of the Board of Directors. In the absence of the Chairman of the
Board and the President, he shall preside at all meetings of the shareholders
and of the directors, and shall exercise all other powers and perform all other
duties of the Chairman of the Board and the President; and he shall perform such
other duties as the Board of Directors may from time to time prescribe. He shall
have all authority conferred upon a Vice President by these Bylaws.
Section 6.11 Vice-President. In the absence or disability of the President,
--------------
the Vice-Presidents, if any, in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice-President designated by the Board of
Directors, shall perform all the duties of the President and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice-Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or these Bylaws.
Section 6.12 Secretary. The Secretary shall:
---------
(a) Attend all meetings of the Board of Directors and the
shareholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose and shall, when requested, perform like
duties for all committees of the Board of Directors;
12
<PAGE>
(b) Duly give or cause to be given all notices in accordance with
these Bylaws or as required by law;
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its
seal is duly authorized;
(d) Sign, with the President or Vice-President, all deeds, bonds,
mortgages, contracts and other instruments when so ordered;
(e) Keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder;
(f) Have general charge of the stock transfer books of the
Corporation; and
(g) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.13 Assistant Secretaries. In the absence of the Secretary or in
---------------------
the event of his death, inability or refusal to act, the Assistant Secretaries
in the order of their length of service as Assistant Secretary, unless otherwise
determined by the Board of Directors, shall perform the duties of the Secretary,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Secretary. They shall perform such duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 6.14 Treasurer. The Treasurer shall:
---------
(a) Keep and maintain adequate and correct accounts of the properties
and business transactions of the Corporation;
(b) Have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such depositories as shall be
designated by the Board of Directors;
(c) Sign or countersign, as may be necessary, all such bills, notes,
checks and other instrulnents relating to the fiscal affairs of the
Corporation in the ordinary course of the business of the Corporation;
13
<PAGE>
(d) Prepare, or cause to be prepared, a true statement of the
Corporation's assets and liabilities as of the close of each fiscal year
and a true statement of the results of the operations of the Corporation
for the fiscal year then ended, all in reasonable detail; and
(e) In general, perform all duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 6.15 Assistant Treasurers. In the absence of the Treasurer or in
--------------------
the event of his death, inability or refusal to act, the Assistant Treasurers,
in the order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of, and be subject to, all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them be the Treasurer, by the President, or by the Board of
Directors.
Section 6.16 Delegation of Duties. In case of the absence or disability
--------------------
of any officer of the corporation or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may, by a vote of a
majority of the whole Board, delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer or to any director.
ARTICLE VII
SHARES OF STOCK
---------------
Section 7.1 Certificates of Stock. A certificate or certificates for
---------------------
shares of the capital stock of the Corporation shall be issued to each
shareholder when any such shares are fully paid, showing the number of the
shares of the Corporation standing on the books in his name. The form of such
certificate shall be determined by the Board of Directors. All such certificates
shall be signed by the President or a Vice-President and the Secretary or an
Assistant Secretary, or be authenticated by facsimiles of the signatures of the
President and Secretary or by a facsimile of the signature of the President and
the written signature of the Secretary or an Assistant Secretary. Every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk. Even though an officer who signed, or whose
facsimile signature has been written, printed or stamped on, a certificate for
shares shall have ceased by death, resignation or otherwise to be an officer of
the corporation before such certificate is delivered by the Corporation, such
certificate shall be as valid as though signed by a duly elected, qualified and
authorized officer, if it be countersigned by a transfer agent or transfer
clerk. Such certificates shall also be numbered and sealed with the seal of the
Corporation.
14
<PAGE>
Section 7.2 Record of Shareholders. There shall be kept at the registered
----------------------
office of the Corporation in the State of Oklahoma a record containing the names
and addresses of all shareholders of the Corporation, arranged in alphabetical
order, the number and class of shares held by each and the dates when they
respectively became the owners of record thereof; provided that the foregoing
shall not be required if the Corporation shall keep at its registered office a
statement containing the name and post office address, including street number,
if any, of the custodian of such record. Duplicate lists may be kept in such
other state or states as may, from time to time, be determined by the Board of
Directors.
Section 7.3 Transfer Agents and Registrars. The Board of Directors may, in
------------------------------
its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
Section 7.4 Transfer of Shares. Transfers of stock of the Corporation
------------------
shall be made on the books of the Corporation only upon authorization by the
registered holder thereof or by his attorney lawfully constituted in writing and
on surrender and cancellation of a certificate or certificates for a like number
of shares of the same class properly endorsed or accompanied by a duly executed
stock transfer power and payment of all taxes thereon, with such proof of
authenticity of the signatures as the Corporation or its transfer agents may
reasonably require.
Section 7.5 Shareholders Record Date and Closing Stock Books. The Board
------------------------------------------------
of Directors may fix, in advance, a time as a record date for the determination
of the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting not more than sixty (60) days prior to the
date of the meeting or action nor less than ten (10) days prior to the date of
the meeting or action. The Board of Directors may also fix, in advance, a time
as a record date for the determination of shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion, or
exchange of shares or for the purpose of any other lawful action which shall be
not more than sixty (60) days prior to the date of the event for the purpose of
which it is fixed. When a record date is so fixed, only shareholders of record
on that date are entitled to notice of and to vote at the meeting or to receive
a dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the record date. In lieu of fixing a record date, the Board of
Directors may close the books of the Corporation
15
<PAGE>
against any transfer of shares for a stated period but not to exceed in any case
the maximum periods set forth above.
Section 7.6 Registered Shareholders. The Corporation shall be entitled
-----------------------
to recognize the holder of record of any share or shares of stock as the
exclusive owner thereof for all purposes, and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
Section 7.7 Lost Certificates. No new certificate for shares shall be
-----------------
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time; provided that if any certificate for shares is lost, stolen,
mutilated or destroyed, the Board of Directors may authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions, including
indemnification of the Corporation reasonably satisfactory to it, as the Board
of Directors shall determine.
Section 7.8 Treasury Shares. Treasury shares, or other shares not at the
---------------
time issued and outstanding, shall not, directly or indirectly, be voted at any
meeting of the shareholders, or counted in calculating the actual voting power
of shareholders at any given time. Treasury shares shall not have dividend
rights.
Section 7.9 Fractional Shares. Certificates of fractional shares of stock
-----------------
may be issued at the discretion of the Board of Directors. The registered
ownership of any fractional share represented by such certificate or
certificates shall entitle the holder thereof to receive dividends, participate
in the corporate assets in the event of liquidation of the Corporation and to
exercise voting rights in person or by proxy.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
------------------------
Section 8.1 Contracts. The Board of Directors or any committee thereunto
---------
authorized may authorize any officer or officers, agent or agents, to enter into
any contract or to execute and deliver in the name and on behalf of the
Corporation any contract or other instrument, except certificates representing
shares of stock of the Corporation, and such authority may be general or may be
confined to specific instances.
Section 8.2 Checks and Drafts. All checks, drafts or other orders for the
-----------------
payment of money, notes, acceptances or other evidences of indebtedness issued
by or in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined from time to time by resolution of the Board of Directors.
16
<PAGE>
Section 8.3 Deposits; Bank Accounts. All funds of the Corporation not
-----------------------
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board of
Directors may from time to time designate or as may be designated by an officer
or officers of the Corporation to whom such power of designation may from time
to time be delegated by the Board of Directors. The Board of Directors may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
Unless otherwise provided by resolution of the Board of Directors, endorsements
for deposit to the credit of the Corporation in any of its duly authorized
depositories may be made by hand-stamped legend in the name of the Corporation
or by written endorsement by any officer without countersignature.
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so authorized,
unless a particular officer or agent is directed to negotiate the same, may be
negotiated, up to the amount so authorized, by the President or a Vice-President
or the Treasurer; and such officers are hereby severally authorized to execute
and deliver in the name and on behalf of the Corporation notes or other
evidences of indebtedness countersigned by the President or a Vice-President for
the amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring any
part or all of the property of the Corporation, real or personal, at any time
owned by the Corporation.
Section 8.5 Sale or Transfer of Securities Held by the Corporation. Stock
------------------------------------------------------
certificates, bonds or other securities at any time owned by the Corporation may
be held on behalf of the Corporation or sold, transferred or otherwise disposed
of pursuant to authorization by the Board of Directors, or of any committee
thereunto duly authorized, and when so authorized to be sold, transferred or
otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice-President and the Treasurer or an
Assistant Treasurer or the secretary or an Assistant Secretary.
Section 8.6 Execution of Proxies. The President, or, in the absence or
--------------------
disability of the President, a Vice-President, may authorize from time to time
the signature and issuance of proxies to vote upon shares of stock of other
corporations standing in the name of the Corporation or authorize the execution
of consents to action taken or to be taken by such other corporation. All such
proxies and consents shall be signed in the name of the Corporation by the
President or a Vice-President and by the Secretary or an Assistant Secretary.
17
<PAGE>
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 Indemnification: Actions Other Than by the Corporation. The
------------------------------------------------------
Corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner in which he reasonably believed to be in or not opposed to the best
interests of the. Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 9.2 Indemnification: Actions by the Corporation. The Corporation
-------------------------------------------
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
18
<PAGE>
Section 9.3 Right to Indemnification. To the extent that any present or
------------------------
former director, officer or employee or any person who is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, or any agent
of the Corporation or any person who is or was serving at the request of the
Corporation as an agent of another corporation, partnership, joint venture,
trust or other enterprise, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2 of
this Article IX, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
Section 9.4 Authorization of Indemnification. Any indemnification under
--------------------------------
Sections 9.1 and 9.2 of this Article IX, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 9.1 and 9.2 of this Article IX. Such determination
shall be made: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding;
or (b) if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion; or (c) by the shareholders.
Section 9.5 Advance Indemnification. Expenses incurred by a director,
-----------------------
officer, employee or agent in defending a civil or criminal action, suit or
proceeding as authorized by the Board of Directors in the specific case may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 9.6 Non-Exclusive Indemnification. The indemnification provided
-----------------------------
by this Article IX shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, contract,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9.7 Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or
19
<PAGE>
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising our of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
Section 9.8 Constituent Corporation. For the purposes of this Article IX,
-----------------------
references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation, including any constituent of a
constituent, absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 9.9 Definitions. For purposes of this Article IX, references to
-----------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest in the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board of Directors.
Section 10.2 Seal. The corporate seal of the Corporation shall be circular
----
in form and shall contain the name of the Corporation, the word "OKLAHOMA" and
such other words or information as shall be determined by the Board of
Directors. The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or otherwise reproduced.
20
<PAGE>
Section 10.3 Dividends. The Board of Directors may, out of funds legally
---------
available therefor, from time to time at any regular or special meeting,
declare, and the Corporation may pay, dividends on its outstanding shares of
capital stock as and when it deems expedient. Such dividends may be made in
cash, property or shares of the capital stock or other securities of the
Corporation.
Section 10.4 Notice. Whenever any notice is required or permitted to be
------
given under the provisions of any law, the Certificate of Incorporation or these
Bylaws, it shall not be construed to require personal notice unless expressly so
stated, but such notice may be given by depositing the same in the United States
mail, postage prepaid, addressed to the person entitled thereto at his address
as it appears on the records of the Corporation, and such notice shall be deemed
to have been given on the day of such mailing. Notice shall be deemed to have
been duly given on the date of service if served personally or by telex,
telecopier, cable, telegram or similar communication. Shareholders not entitled
to vote shall not be entitled to receive notice of any meetings except as
otherwise provided by statute.
Section 10.5 Waiver of Notice. Whenever any notice whatever is required
----------------
to be given under the provisions of any law or of the Certificate of
Incorporation or of these Bylaws, a written waiver thereof, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the shareholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation.
Section 10.6 Conflicts of Interest. Except as may be otherwise provided
---------------------
by the laws of the State of Oklahoma or the Certificate of Incorporation, no
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are accounted for such purpose; if: (a) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or such committee, and the
Board of Directors or Executive Committee in good faith authorizes the contract
or
21
<PAGE>
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or (b)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (c) the contract or transaction is f air as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors, or a committee which authorizes the contract
or transaction.
Section 10.7 Loans to officers or Employees. The Corporation may lend money
------------------------------
to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the Corporation. The loan, guaranty or other assistance may
be with or without interest, and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing contained in this section shall be
construed to deny, limit or restrict the powers of guaranty or warranty of any
Corporation at common law or under any statute.
Section 10.8 Amendment. These Bylaws may be amended, altered, changed or
---------
repealed at any annual or special meeting of the shareholders, provided notice
of the proposed amendment, alteration, change or repeal is contained in the
notice of such meeting, by the affirmative vote of a majority of the shares
issued and outstanding, and entitled to vote thereat. These Bylaws also may be
amended, altered, changed or repealed at any annual or special meeting of the
Board of Directors, provided notice of the proposed amendment, alteration,
change or repeal is contained in the notice of such meeting, by the affirmative
vote of the members of the Board of Directors. Notwithstanding the preceding
sentence, the fact that such power to amend, alter, change or repeal has been
conferred upon the Board of Directors shall not divest the shareholders of the
power, nor limit their power to amend, alter, change or repeal these Bylaws.
22
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
I hereby certify that:
1. I am the duly elected and acting Assistant Secretary of Universal Tech
Corporation, an Oklahoma corporation (the "Corporation").
2. The foregoing Bylaws comprising twenty-three (23) pages constitute the
Bylaws of the Corporation as duly adopted by Consent to Action Without a Meeting
of the Board of Directors effective May 31, 1990.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Corporation as of the 5/th/ day of June, 1990.
/s/ Billy B. Joiner
-----------------------------
Billy B. Joiner,
Assistant Secretary
(SEAL)
23
<PAGE>
FIRST AMENDMENT
TO BYLAWS OF
UNIVERSAL TECH CORPORATION
--------------------------
The following amendment to the Bylaws of Universal Tech Corporation, an
Oklahoma corporation, was approved and adopted by the Board of Directors of
Universal Tech Corporation by unanimous written consent, on November 28, 1997.
1. Section 8.4 of Article VIII of the Bylaws of Universal Tech Corporation
is hereby amended to read as follows:
Section 8.4 Loans. No loans shall be contracted on behalf of the
-----
Corporation unless authorized by the Board of Directors, but when so
authorized, unless a particular officer or agent is directed to negotiate
the same, may be negotiated, up to the amount so authorized, by the
President or a Vice President or the Treasurer; and such officers are
hereby severally authorized to execute and deliver, in the name and on
behalf of the Corporation, notes or other evidences of indebtedness for the
amount of such loans and to give security for the payment of any and all
loans, advances and indebtedness by hypothecating, pledging or transferring
any part or all of the property of the Corporation, real or personal, at
any time owned by the Corporation.
The Bylaws of Universal Tech Corporation, as amended and modified by this
First Amendment to Bylaws of Universal Tech Corporation, set forth the entire
Bylaws of Universal Tech Corporation. The amendment to the Bylaws of Universal
Tech Corporation, as combined in this First Amendment to the Bylaws of Universal
Tech Corporation, is effective as of the 28th day of November, 1997, the date
that such amendment was approved by the Board of Directors of Universal Tech
Corporation.
UNIVERSAL TECH CORPORATION
/s/ James L. Wewers
______________________________
James L. Wewers,
Vice President
/s/ David M. Shear
______________________________
[S E A L] David M. Shear,
Assistant Secretary
<PAGE>
Exhibit 5.1
[LETTERHEAD OF CONNER & WINTERS APPEARS HERE]
CONNER & WINTERS
A PROFESSIONAL CORPORATION
LAWYERS
ONE LEADERSHIP SQUARE
211 NORTH ROBINSON, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73102-7101
January 21, 1998
ClimaChem, Inc.
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Re: ClimaChem, Inc.; 10 3/4% Senior Notes Due 2007; Form S-4 Registration
Statement; Our File No. 7539.2
----------------------------------------------------------------------
Ladies and Gentlemen:
We are special counsel to ClimaChem, Inc., an Oklahoma corporation (the
"Company"), and the Guarantors named in the Registration Statement, all of whom
are subsidiaries of the Company (the "Guarantors," and together with the
Company, the "Issuers"), and have acted as such in connection with the filing of
a Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). The Registration
Statement covers up to $105,000,000 in aggregate principal amount of ClimaChem's
10 3/4% Series B Senior Notes due 2007 (the "New Notes") offered in exchange for
up to $105,000,000 in aggregate principal amount of outstanding 10 3/4% Senior
Notes due 2007 originally issued and sold in reliance upon an exemption from
registration under the Securities Act (the "Old Notes"). The Old Notes are, and
the New Notes will be, unconditionally guaranteed (the "Guarantees") by the
Guarantors. The Old Notes were issued under, and the New Notes will be issued
under, the Indenture, dated November 26, 1997 (the "Indenture"), among the
Issuers and Bank One, NA, as trustee. The exchange will be made pursuant to an
exchange offer (the "Exchange Offer") contemplated by the Registration
Statement. Capitalized terms used, but not otherwise defined, herein shall have
the meanings assigned to them in the Registration Statement.
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of the following:
<PAGE>
ClimaChem, Inc.
January 22, 1998
Page 2
(a) Indenture;
(b) New Notes;
(c) Guarantees to be issued by the Guarantors;
(d) (i) Certificate of Good Standing of the Company, an Oklahoma
corporation ("Company's Certificate"); (ii) Certificate of Good
Standing of APR Corporation, an Oklahoma corporation ("APR"); (iii)
Certificate of Good Standing of CHP Corporation, an Oklahoma
corporation ("CHP"); (iv) Certificate of Good Standing of Climate
Master, Inc., a Delaware corporation ("CM"); (v) Certificate of Good
Standing of DSN Corporation, an Oklahoma corporation ("DSN"); (vi)
Certificate of Good Standing of El Dorado Chemical Company, an
Oklahoma corporation ("EDC"); (vii) Certificate of Good Standing of
International Environmental Corporation, an Oklahoma corporation
("IEC"); (viii) Certificate of Good Standing of KOAX Corp., an
Oklahoma corporation ("KOAX"); (ix) Certificate of Good Standing of
LSB Chemical Corp., an Oklahoma corporation ("LSBC"); (x) Certificate
of Good Standing of Northwest Financial Corporation, an Oklahoma
corporation ("NFC"); (xi) Certificate of Good Standing of Slurry
Explosive Corporation, an Oklahoma corporation ("Slurry"); (xii)
Certificate of Good Standing of The Environmental Group, Inc., an
Oklahoma corporation ("TEG"); and (xiii) Certificate of Good Standing
of Universal Tech Corporation, an Oklahoma corporation ("UT"), each
issued by the Secretary of State of Oklahoma on November 12 or 14,
1997, except the Certificate of Good Standing of CM was issued by the
Secretary of State of Delaware on November 18, 1997;
(e) (i) Certificate of Incorporation of each of the Company, APR, CHP, CM,
DSN, EDC, IEC, KOAX, LSBC, NFC, Slurry, TEG, and UT, each certified by
the Secretary of State of Oklahoma on November 14, 1997, except the
Certificate of Incorporation of CM was certified by the Secretary of
State of Delaware on November 18, 1997;
(f) Bylaws, as amended, of each of the Company, APR, CHP, CMI, DSN, EDC,
IEC, KOAX, LSB, LSBC, NFC, Slurry, TEG and UT;
(g) Unanimous Written Consent of the Board of Directors of the Company,
dated November 21, 1997, relating to the Indenture and the Notes;
(h) Unanimous Written Consent by each Board of Directors of the following
entities, each dated November 21, 1997, relating to the Indenture and
the Guarantees: APR, CHP, CMI, CM, DSN, EDC, IEC, KOAX, LSBC, NFC,
Slurry, TEG, and UT; and
<PAGE>
ClimaChem, Inc.
January 22, 1998
Page 3
(i) Minute Books of the Company and the Guarantors other than Climate
Mate, Inc., a Province of Ontario, Canada corporation ("CMI"), The
Environmental Group International Limited, a United Kingdom
corporation ("TEGI"), Total Energy Systems Limited, an Australian
corporation ("TES"), T.E.S. Mining Services Pty. Ltd., an Australian
corporation ("TES Mining"), and Total Energy Systems (NZ) Limited, a
New Zealand corporation ("TES (NZ)") (CMI, TEGI, TES, TES Mining, and
TES (NZ) are collectively referred to as the "Foreign Guarantors").
The documents and instruments listed above in (a) through (i) are referred
to herein as the "Documents."
We have examined the originals or copies, certified or otherwise identified
to our satisfaction, of all such records of the Company and the Guarantors, as
we have deemed necessary or appropriate. We have also examined certificates of
public officials, including certificates not identified above, certificates of
officers or representatives of the Company and the Guarantors, and such other
documents, certificates and corporate or other records as we have deemed
necessary or appropriate as a basis for the opinion set forth herein.
In connection with this opinion, we have relied upon, among other things,
(a) the opinion issued by Corrs Chambers Westgarth, Australian counsel, dated
January 16, 1998, relating to TES, TES Mining and TES (NZ); (b) the opinion of
Clyde & Co., United Kingdom counsel, dated January 21, 1998, relating to TEGI;
and (d) the opinion issued by McLean & Kerr dated January 21, 1998, relating to
CMI (collectively, the "Opinions of Foreign Counsel"). Based upon the Opinions
of Foreign Counsel, we have assumed for the purposes of this opinion that each
of the Foreign Guarantors is duly incorporated, validly existing and in good
standing under the laws of each Foreign Guarantor's respective jurisdiction of
incorporation and that the Foreign Guarantors have duly authorized the
execution, delivery, and performance of the Indenture and Guarantees under the
laws of each Foreign Guarantors' respective jurisdiction of incorporation.
In our examination we have assumed, without the duty to investigate, the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. We have also
assumed the due authorization, execution and delivery of all documents referred
to herein by all parties thereto other than the Company and the Guarantors. As
to certain facts material to this opinion, we have relied upon certificates,
statements and representations of officers and other representatives of the
Company and the Guarantors.
As to the validity and enforceability of the Indenture, the New Notes, and
the Guarantees, we have assumed that to the extent that the opinion expressed
herein relates to matters governed by the laws, rules and
<PAGE>
ClimaChem, Inc.
January 22, 1998
Page 4
regulations of the State of New York, that the applicable laws, rules and
regulations of the State of New York are the same as the applicable laws, rules
and regulations of the State of Oklahoma. We have further assumed that the
Indenture as it relates to the Foreign Guarantors and the Guarantees issued by
the Foreign Guarantors and the transactions contemplated thereunder do not
conflict with, or constitute a default under (a) any law, rule or regulation of
Australia, New Zealand, Canada or the United Kingdom to which the Foreign
Guarantors or any of their properties may be subject; (b) any judicial or
regulatory order or decree of any governmental authority of Australia, New
Zealand, Canada or the United Kingdom applicable to the Foreign Guarantors; or
(c) any consent, approval, license, authorization or validation of, or filing,
recording, or registration with any governmental authority of Australia, New
Zealand, Canada or the United Kingdom applicable to the Foreign Guarantors.
Based solely on our review of the foregoing Documents, and in reliance
thereon and on the Opinions of Foreign Counsel, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
following opinion:
1. Each of the Company and the Guarantors (other than the Foreign
Guarantors) is a corporation duly incorporated and validly existing in good
standing under the laws of its respective jurisdiction of incorporation.
2. The execution and delivery of the Indenture has been duly authorized
by the Company and the Guarantors (other than the Foreign Guarantors), and the
Indenture constitutes a legal, valid and binding obligation of the Issuers,
enforceable against the Issuers in accordance with the terms thereof.
3. The New Notes have been duly authorized and, when duly executed by the
proper officers of the Company, duly authenticated by the Trustee and issued by
the Company in accordance with the terms of the Indenture and the Exchange
Offer, will constitute legal, valid and binding obligations of the Company, will
be entitled to the benefits of the Indenture and will be enforceable against
the Company in accordance with their terms.
4. The Guarantees (other than those executed by the Foreign Guarantors)
have been duly authorized and, when the New Notes have been duly executed and
authenticated, and the Guarantees have been duly executed in accordance with the
terms of the Indenture, and the New Notes have been delivered to the holders as
described in the Prospectus, the Guarantees will constitute legal, valid and
binding obligations of the Guarantors, will be entitled to the benefits of the
Indenture, and will be enforceable against the Guarantors in accordance with
their terms.
Based on the provisions of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, applicable judicial authority and
current administrative rulings and practice, all as of the date of this letter,
and all of which may change at any time, we are of the opinion that, as stated
in the section titled "Certain Federal Income Tax Consequences" contained
<PAGE>
ClimaChem, Inc.
January 22, 1998
Page 5
in the Registration Statement, the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes, and there will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer.
We have expressed the foregoing opinions subject to the following
exceptions, qualifications and limitations:
1. The opinions expressed herein are limited to the laws of the State of
Oklahoma, the General Corporation Law of the State of Delaware, and
the applicable federal laws of the United States of the type typically
applicable to transactions contemplated by the Exchange Offer, and we
do not express any opinion with respect to the laws of any other
country, state or jurisdiction. We call your attention to the fact
that we are members of the Bar of the State of Oklahoma, and are not
members of the Bar of Delaware.
2. This opinion is limited to the matters stated herein, and no opinion
is implied or may be inferred beyond the matters expressly stated.
3. Although we express no opinion as to such, with respect to the
Documents' choice of law provision applicable to the construction of
contracts, Oklahoma follows the Restatement (Second) Conflict of Laws
(S)(S) 187 and 188. See Dean Witter Reynolds, Inc. v. Shear, 796 P.2d
296 (Okla. 1990). Section 187(2)(b) of such Restatement provides in
pertinent part that:
[t]he law of the state chosen by the parties
... will be applied, even if the particular
issue is one which the parties could not have
resolved by an explicit provision ..., unless
------
... application of the law of the chosen
----------------------------------------
state would be contrary to a fundamental
----------------------------------------
policy of a state which has a materially
----------------------------------------
greater interest than the chosen state in the
---------------------------------------------
determination of the particular issue and
-----------------------------------------
which, under the rule of (S) 188, would be
------------------------------------------
the state of the applicable law in the
--------------------------------------
absence of an effective choice of law by the
--------------------------------------------
parties. (Emphasis added).
-------
4. Provisions of the Documents which purport to indemnify any party
against or release any party from, liability for any acts are
unenforceable to the extent such acts are determined to be unlawful,
negligent, reckless, or constitute willful misconduct.
<PAGE>
ClimaChem, Inc.
January 22, 1998
Page 6
5. Those provisions of the Documents purporting to exculpate any party
from any violation of usury laws by the ipso facto reduction of
interest in excess of the maximum rate, and/or the application of such
excess interest to principal or return thereof to the Company are
unenforceable based on Oklahoma Preferred Finance & Loan Corporation
v. Morrow, 497 P.2d 221 (1972).
6. The enforceability and effectiveness of the provisions of the
Indenture, the New Notes and the Guarantees are limited by, and
subject to (a) applicable bankruptcy, fraudulent conveyance or
fraudulent transfer laws, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally now or
hereafter in effect; or (b) applicable laws or principles of equity
which may effect the exercise of certain rights and remedies and which
may restrict the enforcement of certain remedies or the availability
of certain equitable remedies.
7. As to enforceability of that portion of the Documents that provide if
any provisions of the Documents are determined to be illegal, invalid
or unenforceable, the remaining provisions remain in full force and
effect where any such provision is an essential part of the Documents,
and the parties would not have entered into the documents absent that
provision.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations ad administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the Registration Statement and the
Prospectus covering the Notes constituting a part thereof under the caption
"Legal Matters."
Very truly yours,
CONNER & WINTERS
A Professional Corporation
/s/ Conner & Winters, P.C.
IHS/MHB/plh
<PAGE>
Exhibit 5.2
CORRS
CHAMBERS
WESTGARTH
LAWYERS
16 January 1998 Contact:
Bruce Adkins (07) 3228 9435
ClimaChem, Inc.
16 South Pennsylvania Partner:
Oklahoma City, John Kelly
OKLAHOMA 73107
UNITED STATES OF AMERICA Our reference
PC5417615
Dear Ladies and Gentlemen:
1. Introduction
We are the lawyers for Total Energy Systems Limited ACN 010 876 150 (TES),
Total Energy Systems (NZ) Ltd. (DN/682396) (TES (NZ)), and T.E.S. Mining
Services Pty. Ltd. ACN 010 975 676 (TES Mining) in connection with TES, TES
(NZ), and TES Mining executing the documents described below (the
Transaction Documents).
The Transaction Documents are:
(a) Indenture, dated 26 November 1997 ("Indenture"), between ClimaChem,
Inc. (ClimaChem), Bank One, NA as the Trustee, and TES, TES (NZ), TES
Mining, The Environmental Group, Inc., International Environmental
Corporation, Climate Master, Inc., CHP Corporation, KOAX Corp., APR
Corporation, Climate Mate, Inc., The Environmental Group International
Limited, LSB Chemical Corp., El Dorado Chemical Company, Slurry
Explosive Corporation, Universal Tech Corporation, Northwest Financial
Corporation, and DSN Corporation (hereinafter collectively referred to
as "the Guarantors").
(b) Registration Rights Agreement, dated 26 November 1997, between
Wasserstein Perella Securities, Inc. ("Initial Purchaser"), ClimaChem
and the Guarantors ("Registration Rights Agreement").
(c) Guarantees of ClimaChem's 10 3/4% Senior Notes, Series B, due 2007
issued by TES, TES (NZ), and TES Mining (hereinafter collectively
referred to as "the Guarantees").
(d) Registration Statement on Form S-4 ("Registration Statement").
<PAGE>
Page 2
16 January 1998
ClimaChem, Inc.
2. Definitions
In this opinion:
"Relevant Jurisdictions" means the State of Queensland, the Commonwealth of
Australia and New Zealand.
3. Documents
In connection with this opinion we have examined the following documents
and instruments:
(a) The Indenture;
(b) The Registration Rights Agreement;
(c) The Guarantees;
(d) A copy of the certificate of incorporation and the memorandum and
articles of association of TES;
(e) An extract of a memorandum of unanimous resolutions of the directors
of TES in relation to the execution and delivery of the Transaction
Documents;
(f) A copy of the certificate of incorporation and the constitution of TES
(NZ);
(g) An extract of a memorandum of unanimous resolutions of the directors
of TES (NZ) in relation to the execution and delivery of the
Transaction Documents;
(h) A copy of the certificate of incorporation and the memorandum and
articles of association of TES Mining;
(i) An extract of a memorandum of unanimous resolutions of the directors
of TES Mining in relation to the execution and delivery of the
Transaction Documents;
(j) The annexed letter of advice from Bell Gully Buddle Weir dated 16
January 1998;
(k) Such other documents and instruments as we considered necessary.
<PAGE>
Page 3
16 January 1998
ClimaChem, Inc.
4. Assumptions
For purposes of this opinion we have assumed (without making any
investigation):
(a) The authenticity of all seals and signatures;
(b) The completeness and the conformity to the originals of all copies of
the documents and instruments submitted to us;
(c) That TES, TES (NZ), and TES Mining do not give the Guarantees or enter
into any of the Transaction Documents in any trust capacity;
(d) That the copies of the documents and instruments referred to in
subparagraphs (d), (e), (f), (g), (h), and (i) of paragraph 3 of this
opinion are true and correct copies of the original documents and
instruments of which they purport to be copies or extracts;
(e) That all facts stated in the documents referred to in subparagraphs
(d), (e), (f), (g), (h), and (i) of paragraph 3 of this opinion are,
and continue to be, correct, and no relevant matter has been withheld
from us, whether deliberately or inadvertently (and we have no reason
to believe that this is not the case);
(f) That all acts of internal management relating to the entry into, and
execution of, the Transaction Documents by TES, TES (NZ), and TES
Mining have been duly performed and, without limitation, that:
(i) the resolutions of the directors referred to in paragraphs 3(e),
3(g) and 3(i) were properly passed and documented;
(ii) all directors who consented to and made such resolutions were
entitled to do so;
(iii) all provisions relating to the declaration of the directors'
interests or the power of interested directors to vote
and/or resolve on relevant issues were duly observed;
(iv) any resolutions or special resolutions of the companies in
general meeting which were required (if any) were properly passed
and documented.
<PAGE>
Page 4
16 January 1998
ClimaChem, Inc.
(g) That commercial benefit will accrue to TES, TES (NZ), and TES Mining
from executing the Transaction Documents and undertaking the
obligations on their parts under the Transaction Documents;
(h) That in connection with the entry into and the performance of their
obligations under the Transaction Documents, the respective directors
and secretaries of TES, TES (NZ), and TES Mining have properly
performed their duties to TES, TES (NZ), and TES Mining;
(i) That none of TES, TES (NZ), and TES Mining are conducting, nor will
they seek to conduct, any relevant transactions or any associated
activities in a manner or for a purpose not evident on the face of the
Transaction Documents which might render the Transaction Documents or
any of them or any relevant transactions or associated activities
illegal, void, voidable or unenforceable;
(j) That in so far as any obligation of TES, TES (NZ) or TES Mining under
the Transaction Documents is to be performed outside the Relevant
Jurisdictions, its performance will not be illegal or ineffective by
virtue of the law of the place of performance;
(k) That neither the Commissioner of Taxation of the Commonwealth of
Australia nor the Commissioner of Taxes of New Zealand respectively
have given, and will not give, a direction under Section 218 or
Section 255 of the Income Tax Assessment Act of 1936 (Commonwealth of
Australia) or Section 74 of the Sales Tax Assessment Act (No. 1) 1992
or an equivalent provision of the New Zealand tax laws requiring TES,
TES (NZ) or TES Mining respectively to deduct from sums payable by
them under any of the Transaction Documents to the Initial Purchaser
or any other party in accordance with the terms of any of the
Transaction Documents an amount of Australian tax or New Zealand tax
as the case may be payable by the payee;
(l) That TES, TES (NZ) and TES Mining were each solvent (within the
meaning of Section 95A of the Corporations Law or within the meaning
of Section 4 of the Companies Act 1993 (New Zealand) respectively) at
the time which each entered into the Transaction Documents and each
will not become insolvent (within the meaning of the relevant
provision) because of, or because of matters including, entering into
the Transaction Documents or any of them;
(m) That a person who appears, from notices or returns lodged under
Section 242 or 335 of the Corporations Law to be a director or a
secretary of TES or TES Mining has been
<PAGE>
Page 5
16 January 1998
ClimaChem, Inc.
duly appointed and has authority to exercise the powers and perform
the duties customarily exercised or performed by a director or by a
secretary, as the case may be, of a company carrying on a business of
the kind carried on by TES or TES Mining respectively;
(n) That a person who appears, from notices or returns lodged under
Section 12, 159 or 208 of the Companies Act 1993 (New Zealand) to be a
director of TES (NZ) has been duly appointed and has authority to
exercise the powers and perform the duties customarily exercised or
performed by a director or by a secretary, as the case may be, of a
company carrying on a business of the kind carried on by TES (NZ);
(o) All representations and warranties made in the Transaction Documents
in favour of, or for the benefit of, TES, TES (NZ) or TES Mining by
any other party to the Transaction Documents, are true and correct.
We do not have actual knowledge of any thing which would render any of
these assumptions wholly or partly incorrect.
5. Qualifications
This opinion is subject to the following qualifications:
(a) This opinion relates solely to matters governed by, and should be
interpreted in accordance with, the laws of the Relevant Jurisdictions
as in force and as interpreted at 9:00 a.m. on the date of this
opinion in respect of the laws of Queensland or the Commonwealth of
Australia or as in force and as interpreted at 9:00 a.m. (New Zealand
time) on the date of the annexed letter of advice in respect of the
laws of New Zealand, and we have no obligation to inform you of any
change in the relevant law occurring after the date of this opinion or
the date of the annexed letter of advice as the case may be;
(b) We express no opinion as to any laws other than the laws of Queensland
and the Commonwealth of Australia and in respect of the laws of New
Zealand we rely on the annexed letter of advice from Bell Gully Buddle
Weir;
(c) Enforcement of any of the Transaction Documents is subject to:
(i) applicable laws from time to time in effect relating to
bankruptcy, liquidation, administration, receivership,
composition, compromise, arrangement, insolvency,
<PAGE>
Page 6
16 January 1998
ClimaChem, Inc.
reorganization, moratorium, court schemes and refusals to
enforce payments in the nature of, or relating to, penalties or
forfeitures;
(ii) other laws of general application affecting the enforcement of
creditors' rights and remedies; and
(iii) statutes imposing limitation periods within which suits,
actions or proceedings can be brought;
(d) Claims against TES, TES (NZ), and TES Mining may become statute barred
and any provision in any of the Transaction Documents negating any
defences of set off or counterclaim may not be effective in all
circumstances;
(e) Equitable remedies (including, without limitation, injunctions and
orders for specific performance) are discretionary and may not be
awarded by the courts;
(f) Where under any of the Transaction Documents any of TES, TES (NZ), and
TES Mining is required to make any payments on demand, courts may
require that such be given a reasonable time after demand is made to
comply with the demand before the payee will be permitted to realise
or enforce any security for a failure to satisfy the demand;
(g) Any or all of the Transaction Documents may be unenforceable, invalid,
void or at the action of TES, TES (NZ) or TES Mining voidable, if a
commercial benefit does not accrue to TES, TES (NZ) or TES Mining
respectively from executing the Transaction Documents and undertaking
the obligations thereunder;
(h) We express no opinion as to whether the representations and warranties
made, or given to be made, or given by TES, TES (NZ) and TES Mining in
any of the Transaction Documents are correct, except insofar as (and
to the extent that) any such representation or warranty relates to a
matter which is the subject of this opinion (in which case our opinion
on those matters is given in the terms set out in this opinion);
(i) A court may set aside a contract against a party on the application of
another party if that party entered into that contract as a result of
fraud, duress or unconscionable conduct on the part of the first
mentioned party;
(j) We have relied on searches conducted at the offices of the Australian
Securities Commission on 14 January 1998
<PAGE>
Page 7
16 January 1998
ClimaChem, Inc.
in respect of TES and TES Mining, but we note and rely on the fact
that the records of the Australian Securities Commission available for
public search may not be complete or up to date;
(k) We express no opinion as to:
(i) whether a judgment would be entered in a court in the Relevant
Jurisdictions for an amount other than one expressed in
Australian or New Zealand currencies respectively, although
decisions of English courts allowing judgments in a foreign
currency have been followed in Australian and New Zealand courts;
(ii) as to the date upon which a conversion from foreign currency
would be made for the purposes of enforcement of any judgment;
(l) A provision that a calculation, determination or certificate will be
conclusive and binding or conclusive evidence will not apply to a
calculation, determination or certificate which is fraudulent,
manifestly inaccurate on its face or determined on an arbitrary basis
and will not necessarily prevent a court from inquiring into the
merits of any claim in relation to any such calculation, determination
or certificate;
(m) We express no opinion on any provision in any of the Transaction
Documents requiring written amendments and waivers insofar as it
suggests that oral or other modifications, amendments or waivers could
not be effectively agreed upon or granted by or between the parties or
by a duly authorised agent;
(n) An obligation to pay an amount may be unenforceable if the amount is
held to constitute a penalty and the obligation of TES, TES (NZ) or
TES Mining under any of the Transaction Documents to pay interest on
overdue amounts at a rate higher than the rate applying before the
amount fell due may be held to constitute a penalty if it is not a
genuine pre-estimate of the damage;
(o) Court proceedings may be stayed in the subject of the proceedings is
concurrently before another court;
(p) An indemnity for legal costs or against liability for breach of any
law may be unenforceable;
(q) A court will not give effect to a choice of laws to govern any of the
Transaction Documents or to a
<PAGE>
Page 8
16 January 1998
ClimaChem, Inc.
submission to the jurisdiction of certain courts if to do so would be
contrary to public policy in the Relevant Jurisdiction (but we are not
aware of any reason why that would be so in relation to any of the
Transaction Documents);
(r) Section 243H of the Corporations Law prohibits a public company and a
child entity of a public company from giving financial benefit to a
related party of that public company except as permitted by Divisions
4 or 5 of Part 3.2A of the Corporations Law, and we express no opinion
in relation to the application of that section;
(s) To the extent that any of the Transaction Documents requires TES, TES
(NZ) or TES Mining to offer, allot or issue corporate securities to
third parties, TES, TES (NZ) or TES Mining cannot do so unless and
until it complies with the requirements of the Corporations Law or the
Companies Act 1993 (New Zealand) respectively relating to the offer,
issue or allotment of corporate securities.
(t) In order to be validly executed none of the Transaction Documents must
take effect as a deed.
(u) We express no opinion as to whether the respective obligations
undertaken by TES, TES (NZ) and TES Mining pursuant to the Transaction
Documents may cause a default in any of the obligations to any party
to whom TES, TES (NZ) or TES Mining has granted a charge over its
assets.
6. Opinion
Based upon the assumptions and subject to the qualifications set out above,
we are of the opinion that:
(a) TES has been duly incorporated under the laws of its place of
incorporation and is validly registered and existing under the
Corporations Law;
(b) TES has power to enter into and to perform its obligations under each
of the Transaction Documents and has taken all necessary corporate and
other action to authorise the execution, delivery and performance, in
accordance with its terms of each of the Transaction Documents,
including, without limitation, the Guarantees.
(c) TES Mining has been duly incorporated under the laws of its place of
incorporation and is validly registered and existing under the
Corporations Law;
<PAGE>
Page 9
16 January 1998
ClimaChem, Inc.
(d) TES Mining has power to enter into and to perform its obligations
under each of the Transaction Documents and has taken all necessary
corporate and other action to authorise the execution, delivery and
performance, in accordance with its terms of each of the Transaction
Documents, including, without limitation, the Guarantees.
Based upon the assumptions and subject to the qualifications set out above
and in reliance upon the matters set out in the annexed letter of advice
from Bell Gully Buddle Weir, we are of the opinion that:
(a) TES (NZ) has been duly incorporated under the laws of its place of
incorporation and is validly registered and existing under the laws of
New Zealand;
(b) TES (NZ) has power to enter into and to perform its obligations under
each of the Transaction Documents and has taken all necessary
corporate and other action to authorise the execution, delivery and
performance, in accordance with its terms of each of the Transaction
Documents, including, without limitation, the Guarantees.
We consent to the reference to our firm under the heading "Legal Matters" and to
the filing of this opinion as an exhibit to the Registration Statement and
Prospectus included thereon. In addition, this opinion may be relied on by
Conner & Winters, A Professional Corporation.
Yours faithfully,
CORRS CHAMBERS WESTGARTH
/s/ B. L. Adkins
John Kelly
Partner
<PAGE>
BELL GULLY BUDDLE WEIR Telephone 64 4 473 7777
171 Featherston Street Facsimile 64 4 473 5642
P. O. Box 1291
Wellington, New Zealand
BELL/GULLY Barristers and Solicitors
To Matthew Beland
Of Corrs Chambers Westgarth
City Brisbane
Country Australia
Fax 61-7-3276 8444
From C M A O'Brian/C R Martin
Fax 64-4-473-3845
Telephone 64-4-473-7777
Email
Date 16 January 1998
Matter No. COR75018012 Pages 8
TOTAL ENERGY SYSTEMS (NZ) LIMITED
We refer to your facsimile of 15 January 1998.
We have reviewed the certificate of incorporation of Total Energy Systems (NZ)
Limited ("TES(NZ)") and the constitution of TES(NZ). We set out below our advice
in response to the questions contained in your facsimile of 15 January 1998.
Your instructions
You asked us the following:
. has TES(NZ) been duly incorporated under the laws of New Zealand and is it
validly registered and existing under those laws?
. does TES(NZ) have the power to enter into financial accommodations and to
give securities, including guarantees, for a debt, liability or obligation
of any other person?
. are there any relevant restrictions on the powers of TES(NZ) or
restrictions in respect of the exercise of the powers referred to in the
paragraph above?
. who may exercise, on behalf of TES(NZ), the powers referred to above and
what action must be taken to authorise the execution, delivery and
performance of the necessary documentation?
<PAGE>
16 January, 1998
Page 2
Our advice
We address these questions in turn below.
Incorporation
We understand that you spoke with Jacky Bruce of our office yesterday on this
matter. We confirm that TES(NZ) has been duly incorporated under the laws of
New Zealand and is validly registered and existing under the laws of New
Zealand.
Power to enter into financial accommodation
TES(NZ) has the capacity and powers set out in section 16 of the Companies Act
1983 (the "Companies Act"). That section provides that, subject to the
Companies Act and any other Act, and the general law, a company has, both within
and outside New Zealand:
. the full capacity to carry on or undertake any business or activity, do any
act, or enter into any transaction; and
. for the purposes of the paragraph above, full rights, powers and
privileges.
Section 16(2) provides that a company's constitution may contain a provision
relating to capacity and powers only if the provision restricts the capacity or
powers of the company. The constitution of TES(NZ) does not contain any
restriction on the power of TES(NZ) to enter into financial accommodations or to
give securities, including guarantees, for a debt, liability or obligation of
any other person ("financial transactions").
We therefore confirm that TES(NZ) has the power to enter into financial
transactions.
Restrictions on power of TES(NZ)
As stated above, we confirm that neither the constitution of TES(NZ) or the
Companies Act imposes relevant restrictions on the powers of TES(NZ) or
restrictions in respect of the power to enter into financial transactions.
Exercise of TES(NZ)'s powers
<PAGE>
16 January 1998
Page 3
Clause 12.1.1 of the constitution of TES(NZ) states that the business and
affairs of the company must be managed by or under the direction or supervision
of the board.
Clause 12.1.2 provides that the board has, and may exercise, all the powers
necessary for managing, directing and supervising the management, business and
affairs of the company except to the extent that TES(NZ)'s constitution or the
Companies Act expressly requires those powers to be exercised by the
shareholders or any other person. Those clauses substantially repeat sections
128(1) and 128(2) of the Companies Act.
Clauses 12.1.1 and 12.1.2 are both expressly stated to be subject to clause 8 of
the Constitution of TES(NZ). Clause 8.1 allows the shareholders of TES(NZ) to
pass a resolution binding on the board relating to or for the purpose of
managing or directing or supervising the management or supervision of the
business or affairs of the company.
Subject to clause 8, therefore, the board of TES(NZ) may exercise the company's
powers to enter into financial transactions.
Accordingly, the authorization of the execution, delivery and performance of the
necessary documentation is a matter for the board of TES(NZ).
Clause 13.1 of the constitution of TES(NZ) adopts the provisions of the Third
Schedule to the Companies Act, which deals with proceedings of the board of a
company. Clause 5(3) of the Third Schedule provides that a resolution of the
board is passed if it is agreed to by all directors present without descent or
if a majority of the votes cast on it are in favour of it.
The methods by which TES(NZ) may enter into a contract are set out in section
180 of the Companies Act. An obligation which, if entered into by a natural
person, would, by law, be required to be deed, may be entered into on behalf of
the company in writing signed under the name of the company by:
. two or more directors of the company; or
. if there is only one director, by that director whose signature must be
witnessed;
. an attorney.
<PAGE>
16 January 1998
Page 4
It appears from our summary internet search of the Companies Office database
that TES(NZ) has only one director.
Other matters
There are a number of issues raised by the Companies Act that may be relevant to
the transaction and of which you should be aware. We describe each of these
briefly below. We cannot, of course, advise whether these will be relevant to
this transaction. The matters discussed below are questions of fact which, if
they apply, have legal consequences. If you consider that any of these matters
may be relevant, we will provide you with appropriate advice at that stage.
Major transactions
The Companies Act states that a company must not enter into a major transaction
unless it is approved by special resolution or is contingent on that approval.
A major transaction means, in general terms:
. the acquisition or disposal of assets the value of which is more than half
the value of the company's assets before the acquisition or disposition; or
. a transaction that has or is likely to have the effect of the company
acquiring rights or interests or incurring obligations or liability the
value of which is more than half the value of the company's assets before
the transaction.
A floating charge is excluded from the second limb of the definition of major
transaction given above.
A special resolution is a resolution passed by a majority of 75 percent of the
shareholders, unless the company's constitution provides for a higher majority.
TES(NZ)'s constitution specifies a special resolution as requiring 75 percent of
the votes of those shareholders entitled to vote and voting on the question.
Financial assistance
Financial assistance is, in broad terms, some form of assistance given by a
company to a third party to purchase shares in the company. Financial
assistance includes a loan, a guarantee and the provision of security. The
financial assistance may be direct or indirect and may be for the purpose of, or
merely in connection with, the purchase of a share in the company.
<PAGE>
16 January 1998
Page 5
The Companies Act permits financial assistance in three circumstances:
. with the consent of all shareholders; or
. where the assistance does not exceed 5 percent of the shareholders' funds
of the company; or
. without the shareholders' consent, subject to other controls.
Depending on which of these three forms of permitted financial assistance is
relevant, the Companies Act requires the board to resolve and certify certain
matters and set out the grounds for the board's conclusion. In addition, the
Companies Act requires the company to satisfy a solvency test. To satisfy the
solvency test
. a company must be able to pay its debts as they become due in the ordinary
course of business; and
. the value of the company's assets must be greater than the value of its
liabilities, including contingent liability.
Directors interested in a transaction of the company
Section 140 of the Companies Act requires a director of a company, on becoming
aware that he or she is "interested" in a transaction to enter in the interests
register of the company and, if the company has more than one director, disclose
to the board of the company:
. if the monetary value of the director's interest is able to be quantified,
the nature and monetary value of that interest; or
. if the monetary value of the director's interest cannot be quantified, the
nature and extent of that interest.
Section 139 of the Companies Act defines the term "interested". A director of a
company is interested in a transaction to which the company is a party if, and
only if, the director:
. is a party to, or will or may derive a material financial benefit from, the
transaction; or
. has a material financial interest in another party to the transaction; or
<PAGE>
16 January 1998
Page 6
. is a director, officer, or trustee of another party to, or person who will
or may derive a material financial benefit from, the transaction, not being
a party or person that is a holding company, wholly owned subsidiary of the
company or a wholly owned subsidiary of a holding company of which the
company is also a wholly owned subsidiary; or
. is the parent, child, or spouse of another party to, or person who will or
may derive material financial benefit from, the transaction; or
. is otherwise directly or indirectly materially interested in the
transaction.
A transaction entered into by the company in which a director of the company is
interested may be avoided by the company at any time within three months after
the transaction is disclosed to all the shareholders. However, a transaction
cannot be avoided if the company receives fair value under it.
An interested director to a transaction may nevertheless perform any act as a
director in relation to the transaction as if he or she were not interested in
the transaction.
Liquidation "claw-back"
You should also be aware of the "claw-back" provision of Part XVI (Liquidation)
of the Companies Act and, in particular, the sections relating to transactions
having a preferential effect and transactions at an under value.
Section 292 broadly provides that a "transaction" made by a company otherwise
than in ordinary course of business at a time when that company is unable to pay
its due debts is voidable against the company's liquidator if:
. it is entered into within two years before commencement of liquidation; and
. the transaction enabled another person to receive more towards satisfaction
of a debt than the person would have received or would have been likely to
receive in the company's liquidation.
If the transaction was made within six months before the commencement or
liquidation, the person opposing the application to satisfy the transaction must
prove that the company was able to pay
<PAGE>
16 January 1998
Page 7
its due debts when the transaction was made and that the transaction was
undertaken in the ordinary course of business.
In broad terms, section 297 allows the liquidator to recover from another party
to a transaction the amount by which the value of the consideration or benefit
provided by the company exceeded the consideration or benefit received by the
company. A liquidator may challenge a transaction under this section where:
. a transaction was entered into by a company within one year before the
commencement of the liquidation;
. the value of the consideration or benefit received by the company was less
than the value of the consideration provided by the company;
. the company became unable to pay its due debts as a result of the
transaction; and
. when the transaction was entered into, the other party to the transaction
knew or ought to have known that the company would become unable to pay its
due debts as a result of the transaction.
A transaction includes the giving of a guarantee by a company.
Copies of sections 292 and 297 are attached to this facsimile for your
information.
The ability of a liquidator to challenge transactions having a preferential
effect or transactions at an under value cannot, of course, be set aside at the
time that the transaction is entered into by means of a shareholders or
directors resolution or otherwise.
<PAGE>
16 January 1998
Page 8
Please contact us if you require any further information about the issue
discussed in this facsimile.
Yours faithfully,
/s/ David Martin
Solicitor
<PAGE>
VOIDABLE TRANSACTIONS
SECTION 292 TRANSACTIONS HAVING PREFERENTIAL EFFECT
292(1) [Definition] In this Section, "transaction," relation to a company,
means -
1. A conveyance or transfer of property by the company;
2. The giving of a security or charge over the property of the company;
3. The incurring of an obligation by the company;
4. The acceptance by the company of execution under a judicial
proceeding;
5. The payment of money by the company, including the payment of money
under a judgment or order of a court.
292(2) [Voidable transaction] A transaction by a company is voidable on
the application of the liquidation if the transaction -
(a) Was made -
. At a time when the company was unable to pay its due debts;
and
(ii) Within the specified period; and
. Enabled another person to receive more towards satisfaction of a
debt than the person would otherwise have received or be likely
to have received in the liquidation -
unless the transaction took place in the ordinary course of business.
292(3) ["Ordinary course of business"] For the purposes of this
section, in determining whether a transaction took place in the ordinary course
of business, no account is to be taken of any intent or purpose on the part of
the company -
. To enable another person to receive more towards
satisfaction of a debt than the person would otherwise
receive or be likely to receive in the liquidation; or
. To reduce or cancel the liability, whether in whole or in
part, of another person in respect of a debt incurred by the
company; or
<PAGE>
. To contribute towards the satisfaction of the liability,
whether in whole or in part, of another person in respect of
a debt incurred by the company -
unless that other person knew that that was the intent or purpose of the
company.
292(5) ["Specified period"] For the purposes of subsection (2)(a)(ii)
of this section, "specified period" means -
(a) The period of 2 years before the commencement of the
liquidation; and
(b) In the case of a company that was put into liquidation by
the Court, the period of 2 years before the making of the
application to the Court together with the period commencing
on the date of the making of that application and ending on
the date on which the order was made.
292(6) ["Restricted period"] For the purposes of subsection (3) of this
section, "restricted period" means -
(a) The period of 6 months before the commencement of the
liquidation; and
(b) In the case of a company that was put into liquidation by
the Court, the period of 6 months before the making of the
application to the Court together with the period commencing
on the date of the making of that application and ending on
the date on which the order of the Court was made.
RECOVERY IN OTHER CASES
SECTION 297 TRANSACTIONS AT UNDERVALUE
297(1) [Liquidator's power to recover] Where -
(a) A transaction was entered into by a company within the
specified period; and
(b) The value of the consideration or benefit received by the
company was less than the value of the consideration
provided by the
2
<PAGE>
company, or the company received no consideration or
benefit; and
(c) When the transaction was entered into, the company -
(i) Was unable to pay its due debts; or
(ii) Was engaged, or about to engage, in business for which
its financial resources were unreasonably small; or
(iii) Incurred an obligation knowing that the company would
not be able to perform the obligation when required to
do so; and
(d) When the transaction was entered into, the other party to
the transaction knew or ought to have known the matter
referred to in subparagraph (i) or subparagraph (ii) or
subparagraph (iii), as the case may be, of paragraph (c) of
this subsection, -
the liquidator may recover from any other party to the transaction any
amount by which the value of the consideration or benefit provided by the
company exceeded the value of the consideration or benefit received by the
company.
297(2) [Further power] Where -
. A transaction was entered into by a company within the
specified period; and
. The value of the consideration or benefit received by the
company was less than the value of the consideration
provided by the company, or the company received no
consideration or benefit; and
. The company became unable to pay its due debts as a result
of the transaction; and
. When the transaction was entered into, the other party to
the transaction knew or ought to have known that the company
would become unable to pay its due debts as a result of the
transaction, -
the liquidator may recover from any other party to the transaction any
amount by which the value of the consideration or
3
<PAGE>
benefit provided by the company exceeded the value of the consideration or
benefit received by the company.
297(3) [Definitions] For the purposes of this section, -
. "Transaction" includes the giving of a guarantee by a
company;
. "Specified period" means -
. The period of a year before the commencement of the
liquidation; and
. In the case of a company that was put into liquidation
by the Court, the period of a year before the making of
the application to the Court together with the period
commencing on the date of the making of that
application and ending on the date on which the order
of the Court was made.
4
<PAGE>
[LETTERHEAD OF BELLGULLY]
________________________________________________________________________________
To Matthew Boland From C M A O'Brian/D R Martin
Of Dorra Chambers Westgarth Fax 64-4-473 3845
City Brisbane Telephone 64-4-473 7777
Country Australia Email david martin@bellgully
Fax 61-7-3228-8444 .com
________________________________________________________________________________
Date 23 January 1998
Matter No COR 75018 012 Pages 1
________________________________________________________________________________
TOTAL ENERGY SYSTEM (NZ) LIMITED ("TES(N2)")
We refer to your facsimile of 22 January 1998 regarding the appointment of
directors in Total Energy Systems (NZ) Limited ("TES(NZ)").
In our facsimile to you of 16 January 1998, we advised that an internet search
of the Companies Office Database recorded Kevin James Herman as the only
director to TES(NZ).
Further to our facsimile, we have since received from you faxed copies of
executed directors' consents for James Leon Wewars, William Robert Manion and
Paul Harris Rydund. These consents are in the form required by the Companies Act
1993 and have been executed in accordance with clause 10 of TES(NZ)'s
constitution. We also received the shareholder's resolutions approving the
appointment of each of the directors.
Accordingly, on the basis of the information we have been given by you, it
appears that TES(NZ) has four directors. Although the contest mention above have
not yet been filed with the New Zealand Companies Office, this does not affect
the validity of the appointments.
Please contact either myself or Chris O'Brian if you wish to discuss this matter
further.
Yours faithfully
/s/ David Martin
Solicitor
<PAGE>
EXHIBIT 5.3
McLEAN & KERR
BARRISTERS & SOLICITORS
Suite 2600
130 Adelaide Street West Telephone: (527) 364-5371
Toronto, Canada M5H 3P5 FAX (416) 306-8577
January 21, 1998
ClimaChem, Inc.
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Re: Climate Mate, Inc.
------------------
Dear Sir:
We are special counsel to Climate Mate, Inc., a corporation organized under
the laws of the Province of Ontario, Canada (the "Company"). We have been
requested to render certain opinions in connection with the authorization,
execution and delivery of the Indenture (as defined below) and the Guarantee (as
defined below). We have been advised of and rely on the following information:
1. that the Company is a wholly owned subsidiary of ClimaChem, Inc.
("ClimaChem");
2. ClimaChem has issued $105,000,000 in aggregate principal amount of its 10
3/4% Senior Notes, due 2007 (the "Old Notes"), and has agreed to offer to
exchange (the "Exchange Offer") the Old Notes for up to $105,000,000 in
aggregate principal amount of ClimaChem's 10 3/4% Senior Notes, Series B,
due 2007 (the "New Notes"), pursuant to the terms of a Registration Rights
Agreement, dated November 26, 1997, between ClimaChem, the Company, the
other listed guarantors, and Wasserstein Perella Securities, Inc.;
3. the Company has guaranteed the Old Notes, and has agreed to guarantee the
New Notes, pursuant to the terms of the Indenture (as defined below) under
which the Old Notes were issued and the New Notes will be issued; and
<PAGE>
ClimaChem, Inc.
January 21, 1998
Page 2
4. the Exchange Offer is to be undertaken by means of a Registration Statement
on Form S-4 ("Registration Statement") to be filed with the Securities and
Exchange Commission.
In connection with this opinion, we have examined the following documents
and instruments:
1. photostatic copy of Indenture dated as of November 26, 1997 (the
"Indenture"), between ClimaChem, as issuer, BankOne, NA, as trustee,
and the following as Guarantors, the Company, Total Energy Systems
Limited, T.E.S. Mining Services Pty, Ltd., Total Energy Systems (NZ)
Ltd., The Environmental Group, Inc., International Environmental
Corporation, Climate Master, Inc., CHP Corporation, KOAX Corp., APR
Corporation, The Environmental Group International Limited, LSB
Chemical Corp., El Dorado Chemical Company, Slurry Explosive
Corporation, Universal Tech Corporation, Northwest Financial
Corporation, and DSN Corporation and any future newly created,
acquired or designated subsidiary of ClimaChem;
2. photostatic copy of Guarantee by the Company of ClimaChem's 10 3/4% of
Senior Notes, Series B, due 2007 (the "Guarantee");
3. photostatic copy of the Certificate of Incorporation of the Company
effective August 16, 1991 and Bylaw No. 1 of the Company dated August
16, 1991;
4. Written Resolutions of the Directors of the Company dated the 21/st/
day of November, 1997 in connection with, inter alia, Form S-4
Registration Statement;
5. Written Resolutions of the Directors of the Company dated the 21/st/
day of November 1997 in connection with, inter alia, ClimaChem Senior
Notes due 2007, which resolutions provide for, inter alia, the
authorization, execution and delivery of the Indenture and the
Guarantee; and
6. Certificate of Status of the Company dated January 21, 1998.
Our opinions with respect to the matters referred to below are subject to
the following qualifications and reservations:
<PAGE>
ClimaChem, Inc.
January 21, 1998
Page 3
1. we have assumed the genuineness of all signatures and the authenticity
of all documents submitted to us as originals and the conformity with
the originals of all documents submitted to us as copies thereof;
2. our opinions set forth below are confined to the laws of the Province
of Ontario and the laws of Canada applicable therein, and
3. the Company is referred to incorrectly with a "," before the word,
"Inc."
Based upon and relying on the foregoing, we are of the opinion that:
1. the Company is incorporated and existing under the laws of the
Province of Ontario, Canada;
2. the Company has the corporate power to enter into, and perform its
obligations under, the Indenture and the Guarantee; and
3. the Company has taken all necessary corporate action of the Company to
authorize the execution, delivery and performance of the Indenture
and, when issued, the Guarantee.
The opinions expressed herein are limited to the laws of the Province of
Ontario, Canada. We express no opinion as to any other laws or the laws of any
other jurisdiction.
This opinion may be relied upon by ClimaChem, Inc. and counsel to
ClimaChem, Inc. in Oklahoma, Conner & Winters, A Professional Corporation. It
may not be relied upon by any other person or for any other purpose, nor may it
be quoted in whole or in part or otherwise referred to, without our prior
written consent. We specifically consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement and the Prospectus
included therein and to the filing of this opinion as to authorization,
execution and delivery of the Indenture and the Guarantee as an exhibit to the
Registration Statement.
Very truly yours,
/s/ McLEAN & KERR
McLEAN & KERR
BARRISTERS & SOLICITORS
<PAGE>
EXHIBIT 5.4
CLYDE & CO. 51 Eastchcap,
An International London EC3M 1JP
Law Firm Telephone: 01 1-623 1244
Telex: 884886 Clyde G.
Facsimile: 0171-623-5427
DX: 1071 London/City.
London
Guildford
Cardiff
Hong Kong
Singapore
Durai
Paris
Associate office:
St. Petersburg -
Musin & Parness
Our ref. Your ref. Date:
CBH/9504784 16 January 1998
Dear Sirs:
Registration on Form S-4; Our File No. 7539.2
We have acted as English legal advisers to The Environmental Group International
Limited, a company incorporated under the laws of England ("the Company"), and a
wholly owned subsidiary of ClimaChem, Inc. ClimaChem has issued US$105,000,000
in aggregate principal amount of its 10 3/4% Senior Notes, due 2007 ("the Old
Notes"), and has agreed to offer to exchange ("the Exchange Offer") the Old
Notes for up to US$105,000,000 in aggregate principal amount of ClimaChem's 10
3/4% Senior Notes, Series B, due 2007 ("the New Notes"), pursuant to the terms
of a Registration Rights Agreement dated 26 November 1997 between ClimaChem, the
Company, the other listed guarantors and Wasserstein Perella Securities, Inc.
The Company has guaranteed the Old Notes and has agreed to guarantee the New
Notes, pursuant to the terms of the Indenture (as defined) under which the Old
Notes were issued and the New Notes will be issued. The Exchange Offer is to be
undertaken by means of a Registration on Form S-4 ("Registration Statement") to
be filed with the Securities and Exchange Commission and the prospectus
contained therein (the "Prospectus").
In connection with this opinion, we have examined the following documents and
instruments:
<PAGE>
16 January 1998
Page 2
1. Copy of Indenture, dated 26 November 1997 ("the Indenture") between
ClimaChem, BankOne, NA, as trustee, and the Company, Total Energy Systems
Limited, T.E.S. Mining Services Pty. Ltd., Total Energy Systems (NZ) Ltd.,
the Environmental Group, Inc., International Environmental Corporation,
Climate Master, Inc., Climate Mate, Inc., CHP Corporation, KOAX
Corporation, APR Corporation, LSB Chemical Corp., El Dorado Chemical
Company, Slurry Explosive Corporation, Universal Tech Corporation,
Northwest Financial Corporation and DSN Corporation (collectively "the
Guarantors").
2. Copy of Guarantee by the Company of ClimaChem's 10 3/4% of Senior Notes,
Series B, due 2007 ("the Guarantee").
3. Original Certificate of Incorporation and copies of Memorandum and Articles
of Association.
4. Unanimous written consent of the directors of the Company relating to the
execution and delivery of the Indenture and the Guarantee.
5. Such other documents and instruments as we have considered necessary.
Based upon the foregoing, and on the assumption of the copies' conformity to the
original documents, and of the accuracy and completeness of information (as of
today's date) disclosed by a Companies House search and by the Central Registry
of Winding-up Petitions and that the Information has not since been materially
altered or added to, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing under
the laws of England.
2. The Company has the power to enter into and perform its obligations
under the Indenture and the Guarantee and has taken all necessary
corporate and other action to authorise the execution, delivery and
performance of the Indenture and, when issued, the Guarantee.
The opinions expressed herein are limited to English law. We have not made any
investigations of, and do not express any opinion as to any other laws or the
laws of any other jurisdiction.
<PAGE>
16 January 1998
Page 3
We consent to the reference to our firm under the heading "Legal Matters" and to
the filing of this opinion as an exhibit to the Registration Statement and
Prospectus included therein. This opinion, given for the benefit of ClimaChem,
Inc., may be relied on by Conner & Winters, a Professional Corporation but by no
other person.
Yours sincerely,
/s/ Clyde & Co.
Clyde & Co.
<PAGE>
EXHIBIT 10.1
Promissory Note
Oklahoma City, Oklahoma
$10,000,000 November 26, 1997
For Value Received, the undersigned LSB Industries, Inc. (the "Borrower")
promises to pay to the order of ClimaChem, Inc. (the "Lender") at the Lender's
office at 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma, the principal
sum of Ten Million Dollars in a single installment on December 1, 2007.
The Borrower promises to pay interest on the balance of principal remaining
from time to time unpaid hereon at the rates and times set forth in this Note.
Section 1. Interest.
Section 1.1. Interest Rates. (a) Subject to all of the terms and
conditions of this Section 1, the principal indebtedness evidenced by this Note
shall bear interest a rate per annum of 10 3/4%; provided that if the Borrower
shall fail to pay when due the outstanding principal indebtedness then due
hereunder (whether by lapse of time, acceleration or otherwise), such principal
indebtedness shall bear interest, whether before or after judgment, until
payment in full thereof at the rate per annum of 10 3/4% Interest shall be due
and payable on June 1 and December 1, commencing June 1, 1998.
Section 1.2. Computation of Interest. All interest on this Note shall
be computed on the basis of a year of 360 days comprised of twelve thirty day
months.
Section 2. Payments; Prepayments.
Section 2.1. Place and Application of Payments. All payments of
principal, interest and all other amounts payable hereunder shall be paid to the
Lender at its principal office in Oklahoma City, Oklahoma. All such payments
shall be made in lawful money of the United States of America, in immediately
available funds at the place of payment, without setoff or counterclaim. Unless
the Borrower otherwise directs, principal payments made prior to any Event of
Default hereunder, shall be applied, first, to interest and second, to the
payment of principal. No amount paid or prepaid on this Note may be borrowed
again.
Section 2.2. Voluntary Prepayments. The Borrower shall have the option
of prepaying without premium or penalty and in whole or in part any portion of
this Note, such prepayment to be made by the payment of the principal amount to
be prepaid and accrued and unpaid interest thereon to the date of prepayment.
<PAGE>
Section 2.3. Mandatory Repayment. Except as provided below, the
Borrower will not, and will not permit any of its subsidiaries (other than
Lender and its subsidiaries) to, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of its assets for cash, and including
any sale or other transfer of outstanding equity interests of any subsidiary of
the Borrower (other than Lender and its subsidiaries) for cash, whether by the
Borrower or a subsidiary (other than Lender and its subsidiaries), in a single
transaction or through a series of related transactions (any of the foregoing,
an "Asset Sale"), unless within 30 days after the receipt of Net Cash Proceeds
(as defined below) of such Asset Sale, 50% of such Net Cash Proceeds are applied
to the prepayment of the Notes without premium or penalty, plus accrued and
unpaid interest on the principal amount paid to the date of prepayment.
Notwithstanding the foregoing provisions of the prior paragraph, the
provisions of the prior paragraph shall not apply to the following:
(i) the conveyance, sale, transfer, assignment or other
disposition of inventory acquired and held for resale in the ordinary course of
business;
(ii) the conveyance, sale, transfer, assignment or other
disposition of accounts receivable;
(iii) the sale or disposition of damaged, worn out or other
obsolete property;
(iv) the conveyance, sale, transfer, assignment or other
disposition of assets to the Borrower or any of its subsidiaries (other than the
Lender and its subsidiaries);
(v) the conveyance, sale, transfer, assignment or other
disposition of assets having a value of $500,000 or less in a single transaction
or a series of related transactions.
"Net Cash Proceeds" means the aggregate amount of cash received
by the Borrower and its subsidiaries (other than the Lender and its
subsidiaries) in respect of an Asset Sale, less (i) the sum of all payments,
fees, commissions and expenses (including, without limitation, the fees and
expenses of legal counsel and investment banking fees and expenses) incurred in
connection with such Asset Sale, (ii) the amount (estimated reasonably and in
good faith by the Borrower) of income, franchise, sales and other applicable
taxes required to be paid by the Borrower or any of its respective subsidiaries
(other than the Lender and its subsidiaries) in connection with such Asset Sale,
(iii) the amount of cash resulting from an Asset Sale in a foreign jurisdiction
that is prohibited by law from being transferred to the United States or
exchanged for U.S. dollars and (iv) the amount
2
<PAGE>
used to prepay other senior indebtedness of the Borrower or a subsidiary which
requires such prepayment in accordance with its terms.
Section 3. Events of Default and Remedies.
Section 3.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder: (a) non-payment when due of any
principal of or interest on this Note and the continuance of any such failure
for 30 days; (b) the institution by or against the Borrower of any bankruptcy or
similar proceeding for the relief of debtors or the appointment of any receiver
for any such party or any of his/her property and such act remains unstayed for
a period of 90 consecutive days; and (c) the making of the Borrower of an
assignment for the benefit of creditors.
Section 3.2. Acceleration. When any Event of Default has occurred and
is continuing, the Lender may, by notice to the Borrower, declare the principal
of and interest on this Note to be due and payable and upon such declaration
this Note, including both principal and interest, and all other amounts due
under this Note shall be and become immediately due and payable without further
demand, presentment, protest or notice of any kind. Also in any such event, the
Lender shall have the right to exercise any other action, right, power or remedy
permitted by law.
Section 4. Miscellaneous.
Section 4.1. No Waiver of Rights. No delay or failure on the part of
the Lender or on the part of the holder or holders of this Note in the exercise
of any power or right shall operate as a waiver thereof or as an acquiescence in
any Event of Default, nor shall any single or partial exercise of any power or
right preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies hereunder of the Lender and of
the holder or holders of this Note are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.
Section 4.2. Amendments. No amendment, modification or waiver of any
provision of this Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender, provided, however, that the Lender may not take any such action
and such action shall not be effective without the consent of a majority
aggregate principal amount of the Lender's 10 3/4% Senior Notes due 2007 then
outstanding.
Section 4.3. Holidays. If any payment hereunder becomes due and
payable on a day which is not a business day, the due date of such payment shall
be extended to the next succeeding business
3
<PAGE>
day on which date such payment shall be due and payable. In the case of any
payment of principal falling due on a day which is not business day, interest on
such principal amount shall not continue to accrue during such extension.
Section 4.4. Notices. All notices and communications provided for
herein shall be in writing, except as otherwise specifically provided for
hereinabove, and shall be deemed to have been given or made when served
personally or when deposited in the United States mail addressed if to the
Borrower at 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107, or if
to the Lender at 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107, or
at such other address as shall be designated by any party thereto in a written
notice given to each party pursuant to this Section 4.4.
Section 4.5. Severability of Provisions. Any provision of this Note
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition on enforceability
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 4.6 Binding Nature; Governing Law; Waivers. This Note shall
be binding upon the Borrower and upon its successors and assigns, and shall
inure to the benefit of the Lender and the benefit of its successors and
assigns, including any subsequent holder of this Note. THIS NOTE SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
OKLAHOMA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. The Borrower hereby
waives presentment for payment and demand.
Borrower:
LSB Industries, Inc.
By: /s/ Jack E. Golsen
-------------------------------------
Jack E. Golsen
Its: Chairman of the Board, Chief
Executive Officer and President
4
<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
BANKAMERICA BUSINESS CREDIT, INC.
AS LENDER
AND
CLIMATE MASTER, INC.,
INTERNATIONAL ENVIRONMENTAL CORPORATION,
EL DORADO CHEMICAL COMPANY,
AND
SLURRY EXPLOSIVE CORPORATION,
JOINTLY AND SEVERALLY AS BORROWERS
DATED: NOVEMBER 21, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION
<S> <C>
Table of Contents.................................................... -i-
Preamble............................................................. 1
1. DEFINITIONS..................................................... 2
1.1 As used herein:................................................. 2
Account......................................................... 2
Account Debtor.................................................. 2
Affiliate....................................................... 2
Acquisition..................................................... 2
Availability.................................................... 2
Availability Reductions......................................... 3
Bank............................................................ 3
Bond Debt....................................................... 3
Bond Indenture.................................................. 3
Business Day.................................................... 3
Capital Expenditures............................................ 4
Capital Lease................................................... 4
CCI............................................................. 4
CCI Adjusted Tangible Assets.................................... 4
CCI Adjusted Tangible Net Worth................................. 4
CCI Borrower Subsidiaries....................................... 4
CCI Consolidated Borrowing Group................................ 4
CCI Consolidated Group.......................................... 4
CCI Guarantor Subsidiaries...................................... 4
CCI Guaranty.................................................... 4
Closing Date.................................................... 5
Code............................................................ 5
Collateral...................................................... 5
Debt............................................................ 5
Distribution.................................................... 5
Dollars......................................................... 5
EDC............................................................. 5
Eligible Accounts............................................... 5
Eligible Inventory.............................................. 8
Environmental Compliance Reserve................................ 8
Environmental Laws.............................................. 9
Equipment....................................................... 9
ERISA........................................................... 9
Eurocurrency Liabilities........................................ 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Eurodollar Business Day......................................... 9
Eurodollar Base Rate............................................ 9
Eurodollar Interest Payment Date................................ 9
Eurodollar Interest Rate Determination Date..................... 9
Eurodollar Margin............................................... 10
Eurodollar Rate................................................. 10
Eurodollar Rate Loan............................................ 10
Eurodollar Rate Reserve Percentage.............................. 10
Event........................................................... 10
Event of Default................................................ 10
Financial Statements............................................ 10
Fiscal Quarter.................................................. 10
Fiscal Year..................................................... 10
GAAP............................................................ 10
Gross Availability Reductions................................... 11
Gross LSB Accounts Availability................................. 11
Guaranty........................................................ 11
Intercompany Accounts........................................... 11
Interest Period................................................. 11
Inventory....................................................... 11
IRS............................................................. 11
Latest Forecasts................................................ 11
Letter of Credit................................................ 11
Letter of Credit Agreement...................................... 11
Letter of Credit Fee............................................ 12
Lien............................................................ 12
Loan Documents.................................................. 12
LSB............................................................. 12
LSB Adjusted Tangible Assets.................................... 12
LSB Adjusted Tangible Net Worth................................. 12
LSB Borrower Subsidiaries....................................... 12
LSB Borrowing Group............................................. 12
LSB Consolidated Borrowing Group................................ 12
LSB Consolidated Group.......................................... 13
LSB Guarantor Subsidiaries...................................... 13
LSB-Related Loan Agreements..................................... 13
Maximum Borrowing Commitment.................................... 13
Maximum Inventory Advance Amount................................ 13
Maximum Revolving Credit Line................................... 13
Multi-employer Plan............................................. 13
Obligations..................................................... 13
Offering Memorandum............................................. 14
Original Loan Agreements........................................ 14
Participating Lender............................................ 14
Patent and Trademark Assignments................................ 14
Payment Account................................................. 14
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
PBGC............................................................ 14
Pension Plan.................................................... 14
Permitted Debt.................................................. 14
Permitted Liens................................................. 15
Person.......................................................... 15
Plan............................................................ 15
Proceeds........................................................ 16
Property........................................................ 16
Proprietary Rights.............................................. 16
Public Authority................................................ 16
Real Property................................................... 16
Receivables..................................................... 16
Reference Rate.................................................. 17
Reference Rate Loan............................................. 17
Reference Rate Margin........................................... 17
Related Company................................................. 17
Reportable Event................................................ 17
Restricted Investment........................................... 17
Reversions...................................................... 18
Revolving Loans................................................. 18
SBL Debt........................................................ 18
Security Interest............................................... 18
Subordinated Debt............................................... 18
Subsidiary" or "Subsidiaries.................................... 18
Swap Transaction Fee............................................ 18
Swap Transaction Reserves....................................... 18
Swap Transactions............................................... 18
Termination Date................................................ 18
Termination Event............................................... 18
UCC............................................................. 19
1.2 Accounting Terms..................................................... 19
1.3 Other Terms..................................................... 19
1.4 Exhibits........................................................ 19
2. LOANS AND LETTERS OF CREDIT.......................................... 19
2.1 Revolving Loans................................................. 19
2.2 Availability Determination...................................... 20
2.3 Letters of Credit............................................... 20
2.4 Swap Transactions............................................... 20
3. INTEREST AND OTHER CHARGES........................................... 21
3.1 Interest........................................................ 21
3.2 Eurodollar Borrowings: Conversion or Continuation............... 22
3.3 Special Provisions Governing Eurodollar Rate Loans.............. 23
3.4 Maximum Interest Rate........................................... 27
3.5 Capital Adequacy................................................ 28
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
3.6 Unused Line Fee................................................. 28
4. PAYMENTS AND PREPAYMENTS............................................. 29
4.1 Revolving Loans................................................. 29
4.2 Place and Form of Payments: Extension of Time................... 29
4.3 Apportionment, Application and Reversal of Payments............. 29
4.4 INDEMNITY FOR RETURNED PAYMENTS................................. 29
5. LENDER'S BOOKS AND RECORDS: MONTHLY STATEMENTS...................... 30
6. COLLATERAL........................................................... 30
6.1 Grant of Security Interest...................................... 30
6.2 Perfection and Protection of Security Interest.................. 31
6.3 Location of Collateral.......................................... 31
6.4 Title to, Liens on, and Sale and Use of Collateral.............. 32
6.5 Appraisals...................................................... 32
6.6 Access and Examination.......................................... 32
6.7 Insurance....................................................... 32
6.8 Collateral Reporting............................................ 33
6.9 Accounts........................................................ 34
6.10 Collection of Accounts.......................................... 35
6.11 Inventory....................................................... 35
6.12 Documents and Instruments....................................... 36
6.13 Right to Cure................................................... 36
6.14 Power of Attorney............................................... 36
6.15 Lender's Rights, Duties, and Liabilities........................ 36
6.16 Release of Collateral and Borrower.............................. 37
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.................... 37
7.1 Books and Records............................................... 37
7.2 Financial Information........................................... 37
7.3 Notices to Lender............................................... 39
8. GENERAL WARRANTIES AND REPRESENTATIONS............................... 40
8.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents.......................................... 40
8.2 Validity and Priority of Security Interest...................... 41
8.3 Organization and Qualification.................................. 41
8.4 Corporate Name; Prior Transactions.............................. 41
8.5 Subsidiaries and Affiliates..................................... 41
8.6 Financial Statements and Projections............................ 41
8.7 Capitalization.................................................. 42
8.8 Solvency........................................................ 42
8.9 Title to Property............................................... 42
8.10 Real Property; Leases........................................... 42
8.11 Proprietary Rights.............................................. 42
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
8.12 Trade Names and Terms of Sale.................................. 43
8.13 Litigation..................................................... 43
8.14 Labor Disputes................................................. 43
8.15 Environmental Laws............................................. 43
8.16 No Violation of Law............................................ 44
8.17 No Default..................................................... 44
8.18 Plans.......................................................... 44
8.19 Taxes.......................................................... 45
8.20 Use of Proceeds................................................ 45
8.21 Private Offerings.............................................. 45
8.22 Broker's Fees.................................................. 46
8.23 No Material Adverse Change..................................... 46
8.24 Debt........................................................... 46
9. AFFIRMATIVE AND NEGATIVE COVENANTS................................... 46
9.1 Taxes and Other Obligations..................................... 46
9.2 Corporate Existence and Good Standing........................... 46
9.3 Maintenance of Property and Insurance........................... 46
9.4 Environmental Laws.............................................. 47
9.5 Mergers, Consolidations, Acquisitions, or Sales................. 47
9.6 Guaranties...................................................... 47
9.7 Debt............................................................ 47
9.8 Prepayment...................................................... 47
9.9 Transactions with Affiliates.................................... 47
9.10 Plans and Compensation......................................... 48
9.11 Business Conducted............................................. 48
9.12 Liens.......................................................... 48
9.13 New Subsidiaries............................................... 48
9.14 Distributions and Restricted Investments....................... 48
9.15 Capital Expenditures........................................... 49
9.16 CCI Adjusted Tangible Net Worth................................ 49
9.17 Debt Ratio..................................................... 49
9.18 Further Assurances............................................. 50
10. CLOSING; CONDITIONS TO CLOSING....................................... 50
10.1 Representations and Warranties; Covenants; Events.............. 50
10.2 Delivery of Documents.......................................... 50
10.3 Required Approvals............................................. 50
10.4 No Material Adverse Change..................................... 50
10.5 Proceedings.................................................... 50
10.6 Legal Opinions................................................. 51
10.7 September 30, 1997 Quarterly Financial Statements.............. 51
10.8 CCI Bond Offering.............................................. 51
10.9 Conditions Precedent to Each Loan.............................. 51
11. DEFAULT; REMEDIES.................................................... 51
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
11.1 Events of Default.............................................. 51
11.2 Remedies....................................................... 53
12. TERM AND TERMINATION................................................. 55
13. MISCELLANEOUS........................................................ 55
13.1 Cumulative Remedies; No Prior Recourse to Collateral........... 55
13.2 No Implied Waivers............................................. 55
13.3 Severability................................................... 56
13.4 Governing Law.................................................. 56
13.5 Consent to Jurisdiction and Venue; Service of Process.......... 56
13.6 Survival of Representations and Warranties..................... 56
13.7 Indemnification................................................ 56
13.8 Other Security and Guaranties.................................. 57
13.9 Fees and Expenses.............................................. 57
13.10 Notices....................................................... 58
13.11 Waiver of Notices............................................. 59
13.12 Binding Effect; Assignment; Disclosure........................ 59
13.13 Modification.................................................. 60
13.14 Counterparts.................................................. 60
13.15 Captions...................................................... 60
13.16 Right of Set-Off.............................................. 60
13.17 Participating Lender's Security Interests..................... 60
13.18 WAIVER OF JURY TRIAL.......................................... 60
13.19 AMENDMENT AND RESTATEMENT..................................... 61
13.20 CROSS-COLLATERALIZATION AND CROSS-GUARANTIES.................. 61
</TABLE>
vi
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement") is
dated November 21, 1997, and is entered into by and between BANKAMERICA BUSINESS
CREDIT, INC., a Delaware corporation, with offices at 55 North Lake Avenue,
Suite 900, Pasadena, California 91101 (the "Lender"), and CLIMATE MASTER, INC.,
a Delaware corporation, ("Climate Master"), INTERNATIONAL ENVIRONMENTAL
CORPORATION, an Oklahoma corporation ("IEC"), EL DORADO CHEMICAL COMPANY, an
Oklahoma Corporation ("EDC"), and SLURRY EXPLOSIVE CORPORATION, an Oklahoma
Corporation ("Slurry"), each with offices at 16 South Pennsylvania, P. O. Box
754, Oklahoma City, Oklahoma 73107 (jointly and severally referred to as the
"Borrower").
W I T N E S S E T H
WHEREAS, Lender and each Borrower have entered into certain Loan and
Security Agreements dated December 12, 1994, each as amended by (i) that certain
First Amendment to Loan and Security Agreement dated as of August 17, 1995, (ii)
that certain Second Amendment to Loan and Security Agreement dated as of
December 1, 1995, (iii) that certain Third Amendment to Loan and Security
Agreement dated as of April 1, 1996, (iv) that certain Fourth Amendment to Loan
and Security Agreement dated as of July 1, 1996, (v) that certain Fifth
Amendment to Loan and Security Agreement dated as of November 18, 1996, (vi)
that certain Sixth Amendment to Loan and Security Agreement dated as of February
13, 1997, (vii) that certain Seventh Amendment to Loan and Security Agreement
dated as of April 11, 1997, (viii) that certain Eighth Amendment to Loan and
Security Agreement dated as of May 19, 1997, (ix) that certain Ninth Amendment
to Loan and Security Agreement dated as of June 30, 1997, (x) that certain Tenth
Amendment to Loan and Security Agreement dated as of September 10, 1997, and
(xi) that certain Eleventh Amendment to Loan and Security Agreement dated as of
October 23, 1997 (as so amended, collectively referred to as the "Original Loan
Agreements");
WHEREAS, of even date herewith, Lender has entered into three (3) related
amended and restated loan transactions (i) with LSB Industries, Inc., a Delaware
corporation ("LSB") which controls, either directly or indirectly, one hundred
percent (100%) of the stock of each Borrower, (ii) L&S Bearing Co., an Oklahoma
corporation ("L&S"), a subsidiary of LSB, and (iii) Summit Machine Tool
Manufacturing Corp., an Oklahoma corporation ("Summit"), a subsidiary of LSB
(LSB, along with L&S and Summit, are referred to as the "LSB Borrower
Subsidiaries"); and
WHEREAS, of even date herewith, ClimaChem, Inc. ("CCI"), an Oklahoma
corporation and a direct or indirect wholly-owned Subsidiary of LSB, has become,
directly or indirectly, the owner and holder of 100% of the stock of Climate
Master, IEC and EDC; and EDC is the owner and holder of 100% of the stock of
Slurry; and
WHEREAS, CCI has issued a bond offering for its 10-year bonds and has
issued Notes in the aggregate amount of not more than $125,000,000 pursuant to
an Indenture dated as of November 26, 1997 (the "Bond Indenture"); and
1
<PAGE>
WHEREAS, the Bond Indenture contains certain restrictions with respect to
debt for borrowed money, including, but not limited to, the Obligations under
this Agreement; and
WHEREAS, Borrower, the LSB Borrower Subsidiaries, and Lender have agreed to
amend the Original Loan Agreements and all of the other existing loan agreements
between Lender, Borrower, and the LSB Borrower Subsidiaries so that (i) CCI,
Climate Master, IEC, EDC and Slurry and the other Subsidiaries will not be
liable, directly or indirectly, for the liabilities of the LSB Borrowing Group
(as defined herein), and (ii) a default under any LSB-Related Loan Agreement
other than this Agreement will not result in an Event of Default under this
Agreement;
WHEREAS, the aggregate amount of all revolving loans and letters of credit
to be made by Lender to the Borrower and the LSB Borrowing Group will not exceed
Sixty-Five Million and No/100 Dollars ($65,000,000) in the aggregate at any time
outstanding;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, each Borrower and the Lender hereby
agree as follows:
1. DEFINITIONS.
-----------
1.1 As used herein:
"Account" means the 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 the Borrower on an
--------------
Account.
"Affiliate" means: a Person who, directly or indirectly, controls,
---------
is controlled by or is under common control with LSB and including the LSB
Consolidated Group. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of the Person in question.
"Applicable Interest Rate" has the meaning given to such term in
------------------------
Section 3.1(a).
--------------
"Acquisition" means the investment in or purchase of a corporation,
-----------
association, business, entity, partnership or limited liability company by
Borrower by means of the purchase of stock, assets, memberships,
partnership interests or otherwise.
"Availability" means at any time the lesser of:
------------
A. The Maximum Revolving Credit Line, or
--
B. The sum of:
2
<PAGE>
(1) eighty-five percent (85%) of the value of Eligible Accounts
("Accounts Availability"), plus
(2) the lesser of (a) the Maximum Inventory Advance Amount or
(b) sixty percent (60%) of the value of Eligible Inventory;
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 any Borrower's
account;
(iii) reserves for accrued interest on the Revolving Loans which
is past due;
(iv) the Environmental Compliance Reserve (Note: There is no
Environmental Compliance Reserve as of the Closing Date);
(v) the Swap Transaction Reserves; and
(vi) all other reasonable reserves which the Lender in its
reasonable discretion deems necessary or desirable to maintain with
respect to any Borrower's account, including, without limitation, any
amounts which the Lender could reasonably be obligated to pay within a
six-month period for the account of such Borrower.
"Bank" means Bank of America National Trust and Savings Association.
----
"Bond Debt" means Debt owed by any member of the CCI Consolidated
---------
Group on Senior Notes due 2007 (the "Notes") in the principal amount not to
exceed $125,000,000 issued pursuant to the Bond Indenture.
"Bond Indenture" means that certain Indenture dated as of November
--------------
26, 1997 by and among CCI and other members of the CCI Consolidated Group
and Bank One, NA relating to the Bond Debt.
"Borrower" means individually each of the CCI Borrower Subsidiaries
--------
and, collectively, all of the CCI Borrower Subsidiaries.
"Business Day" means any day that is not a Saturday, Sunday, or day
------------
on which banks in Los Angeles, California are required or permitted to
close.
3
<PAGE>
"Capital Expenditures" means all costs incurred, whether payable in
--------------------
the Fiscal Year incurred or thereafter, (including financing costs required
to be capitalized under GAAP) for purchases made during a Fiscal Year for
any fixed asset or improvement, or replacement, substitution, or addition
thereto, which has a useful life of more than one year, including, without
limitation, those costs arising in connection with the direct or indirect
acquisition of such assets by way of increased product or service charges
or offset items or in connection with Capital Leases.
"Capital Lease" means any lease of Property that, in accordance with
-------------
GAAP, should be reflected as a liability on a Person's balance sheet.
"CCI" means ClimaChem, Inc., an Oklahoma corporation, and a wholly-
---
owned Subsidiary of LSB.
"CCI Adjusted Tangible Assets" means all of the assets of the CCI
----------------------------
Consolidated Group, on a consolidated basis, except: (a) goodwill; (b)
unamortized debt discount and expense; (c) assets constituting Intercompany
Accounts (other than loans made or dividends paid to LSB); (d) fixed assets
to the extent of any write-up in the book value thereof resulting from a
revaluation effective after the Closing Date; and (e) any intangibles, as
determined in accordance with GAAP.
"CCI Adjusted Tangible Net Worth" means, at any date: (a) the book
-------------------------------
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with GAAP)
at which the CCI Adjusted Tangible Assets would be shown on a consolidated
balance sheet of the CCI Consolidated Group at such date prepared in
accordance with GAAP less (b) the amount at which the CCI Consolidated
----
Group's liabilities, including all deferred tax liabilities, would be shown
on such balance sheet prepared in accordance with GAAP.
"CCI Borrower Subsidiaries" means Climate Master, Inc., International
-------------------------
Environmental Corporation, El Dorado Chemical Company, and Slurry Explosive
Corporation.
"CCI Consolidated Borrowing Group" means the CCI Borrower
--------------------------------
Subsidiaries and the CCI Guarantor Subsidiaries.
"CCI Consolidated Group" means CCI and all of its Subsidiaries,
----------------------
including the CCI Borrower Subsidiaries and the CCI Guarantor Subsidiaries.
"CCI Guarantor Subsidiaries" means Climate Mate, Inc., LSB Chemical
--------------------------
Corp., Universal Tech Corporation, The Environmental Group, Inc.,CHP
Corporation, Koax Corp. and APR Corporation.
"CCI Guaranty" means the Continuing Guaranty executed by CCI in favor
------------
of Lender dated as of the Closing Date, as modified or renewed from time to
time.
4
<PAGE>
"Climate Master" means Climate Master, Inc., an Oklahoma corporation
--------------
and a CCI Borrower Subsidiary.
"Closing Date" means the date of this Agreement, being the date first
------------
above written.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" has the meaning given to such term in Section 6.1.
---------- -----------
"Debt" means all liabilities, obligations and indebtedness of any
----
Borrower to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired
or owing, as would be shown on the balance sheet of such Borrower prepared
in accordance with GAAP.
"Distribution" means, in respect of any corporation: (a) the payment
------------
or making of any dividend or other distribution of Property in respect of
capital stock of such corporation, other than distributions in capital
stock; and (b) the redemption or other acquisition of any capital stock of
such corporation
"Dollars" and "$" means lawful money of the United States of America.
------- -
"EDC" means El Dorado Chemical Company, an Oklahoma corporation and a
---
CCI Borrower Subsidiary.
"Eligible Accounts" means all Accounts of any Borrower which are not
-----------------
ineligible. Accounts shall be ineligible as the basis for Revolving Loans
based on the following criteria. Eligible Accounts shall not include any
Account:
(i) where such Account is "Past Due". For the purposes of this
provision, "Past Due" means: (a) where the Account has terms of
payment of less than ninety-one (91) days from the invoice date, the
payment thereof is more than 90 days past due; and (b) where the
Account has terms of payment of ninety-one to three hundred sixty (91
to 360) days from the invoice date, the payment thereof is more than
30 days past due; notwithstanding the foregoing all advances to
Borrower and the LSB Borrowing Group with respect to "eligible
accounts" under the LSB-Related Loan Agreements that have terms of
payment of more than one hundred eighty (180) days (the "180-Day
Accounts") shall not exceed in the aggregate at any time the lesser of
(i) $1,500,000 or (ii) five percent (5%) of the Gross LSB Accounts
--
Availability (without taking into account the 180-Day Accounts);
(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
5
<PAGE>
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 Borrower's completion 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 (provided, however,
that claims under or relating to any warranty issues or claims by an
Account Debtor as a result of any Borrower purchasing products or
supplies or having received services from such Account Debtor shall
not render an Account ineligible;
(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
6
<PAGE>
such Foreign Accounts are not secured or payable by letters of credit
or bank guaranties reasonably acceptable to Lender up to an amount not
to exceed at any one time more than five percent (5%) of the Gross LSB
Accounts Availability (without taking into account such Foreign
Accounts);
(viii) which is owed by an Account Debtor which is an Affiliate;
(ix) which is owed by the government of the United States of
America, or any department, agency, or other instrumentality thereof,
unless the Federal Assignment of Claims Act of 1940, as amended, or
any other steps necessary to perfect the Lender's Security Interest
therein, have been complied with to the Lender's reasonable
satisfaction with respect to such Account;
(x) which is owed by any state or municipality, or any
department, agency, or other instrumentality thereof, and as to which
the Lender's Security Interest therein is not or cannot be perfected;
(xi) which arises out of a sale to an Account Debtor on a bill
and hold, guaranteed sale, sale or return, sale on approval,
consignment, or other repurchase or return basis;
(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 (except
where the Account Debtor has agreed in writing to accept billings for
such goods, with a copy of such writing being provided to Lender, then
such Account shall be an Eligible Account if it otherwise qualifies)
or the services giving rise to such Account have not been performed by
the Borrower and accepted by the Account Debtor; or
(xiv) if Lender believes in its reasonable credit judgment that
the prospect of collection of such Account is impaired; or
(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; or
(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
7
<PAGE>
(xvii) with respect to which the Account Debtor is located in
any state requiring the filing of a Business Activities Report or
similar document in order to permit the Borrower to seek judicial
enforcement in such state of payment of such Account, unless Borrower
has qualified to do business in such state, or has filed a Notice of
Business Activities Report or equivalent report with the applicable
state office for the then current year.
"Eligible Inventory" means Inventory of any Borrower valued at the
------------------
lower of cost or market on a "first in-first out" ("FIFO") basis that
constitutes (i) raw materials including raw materials stored or held by the
Borrower in the work-in-progress area and Inventory classified as
components ("Component Inventory") (provided, however, that only 50% of the
Component Inventory of EDC and Slurry may be Eligible Inventory), and (ii)
first quality finished goods and that (a) is not obsolete or
unmerchantable, (b) upon which Lender has a first priority perfected
Security Interest, and (c) 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), or Inventory delivered to Borrower on consignment shall
constitute Eligible Inventory. In addition, with respect to EDC and Slurry
only, no Olin acid Inventory or Inventory consisting of Ireco exchange
---- --
items shall be 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 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 the Borrower within 180 days in order to correct any
violation by the Borrower or the Borrower's operations or Property of
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 Borrower's business
and facilities (whether or not owned by it). Such laws and regulations
include but are not limited to the Resource Conservation and Recovery Act,
42 U.S.C. (S) 6901 et seq., as amended; the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., as
amended: the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., as
amended; the Clean Water Act, 33 U.S.C. (S) 466 et seq., as amended; the
Clean Air Act, 42 U.S.C. (S) 7401 et seq., as amended; state and
8
<PAGE>
federal superlien and environmental cleanup programs; and U.S. Department
of Transportation regulations.
"Equipment" means all of each 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 leased by the Borrower and all of the Borrower's rights
and interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith,
and all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto wherever any of
the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Business Day" means any Business Day in which commercial
-----------------------
banks are open for international business (including dealings in dollar
deposits) in London, England and Los Angeles, California.
"Eurodollar Base Rate" means, for any Interest Period, an interest
--------------------
rate determined by the Lender to be the rate per annum at which deposits in
Dollars are offered to Bank in the London interbank market at 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest
Period for delivery on the first day of such Interest Period in an amount
substantially equal to the Eurodollar Rate Loans requested for such
Interest Period and for a period equal to such Interest Period.
"Eurodollar Interest Payment Date" means the first day of each month
--------------------------------
during any Interest Period and the last day of such Interest Period.
"Eurodollar Interest Rate Determination Date" means each date of
-------------------------------------------
calculating the Eurodollar Rate for purposes of determining the interest
rate with respect to an Interest Period. The Eurodollar Interest Rate
Determination Date for any Eurodollar Rate Loan shall be the second
Business Day prior to the first day of the related Interest Period for such
Eurodollar Rate Loan.
"Eurodollar Margin" has the meaning specified in Section 3.1(a)(ii).
----------------- ------------------
"Eurodollar Rate" means, for any Interest Period, a per annum
---------------
interest rate (rounded upward to the next 1/1000th of 1.0%) equal to the
quotient of (a) the Eurodollar Base Rate for such Interest Period, divided
-------
by (b) one hundred percent (100%) minus the Eurodollar Rate Reserve
-- -----
Percentage for such Interest Period.
9
<PAGE>
"Eurodollar Rate Loan" means a Revolving Loan during any period in
--------------------
which it bears interest at the rate provided in Section 3.1(a)(ii), as such
------------------
amount may be adjusted pursuant to Section 3.1(b).
--------------
"Eurodollar Rate Reserve Percentage" for any Interest Period means
----------------------------------
the reserve percentage applicable during such Interest Period (or if more
than one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for Bank with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities having a term equal to such Interest
Period.
"Event" means any event or condition which, with notice, the passage
-----
of time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
"Event of Default" has the meaning given to such term in Section
---------------- -------
11.1.
"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, CCI, any Borrower or LSB to the Lender
under this Agreement.
"Fiscal Quarter" means any three-month period ending March 31, June
--------------
30, September 30 or December 31.
"Fiscal Year" means LSB's fiscal year for financial accounting
-----------
purposes. The current Fiscal Year of LSB will end on December 31, 1997.
"GAAP" means at any particular time generally accepted accounting
----
principles as in effect at such time.
"Gross Availability Reductions" means the sum of all "Availability
-----------------------------
Reductions" under the LSB-Related Loan Agreements.
"Gross LSB Accounts Availability" means the sum of the amounts
-------------------------------
calculated as "Accounts Availability" as such term is defined in and as
calculated under all of the LSB-Related Loan Agreements.
"Guaranty" by any Person means all obligations of such Person which
--------
in any manner directly or indirectly guarantee the payment or performance
of any indebtedness or other obligation of any other Person (the
"guaranteed obligations"), or assure or in effect assure the holder of the
guaranteed obligations against the loss in respect thereof, including,
without limitation, any such obligations incurred through an agreement, (a)
to purchase the
10
<PAGE>
guaranteed obligations or any Property constituting security therefor or
(b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance
sheet condition.
"Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to the Borrower from, which are due from the
Borrower to, or which otherwise arise from any transaction by the Borrower
with, any Affiliate.
"Interest Period" means, with respect to each Eurodollar Rate Loan,
---------------
the 90-day interest period applicable to such Eurodollar Rate Loan as
determined pursuant to Section 3.3(b).
--------------
"Inventory" means all of each Borrower's now owned and hereafter
---------
acquired inventory, wherever located, to be held for sale or lease, all raw
materials, work-in-process, finished goods, returned and repossessed goods,
and materials and supplies of any kind, nature or description which are or
might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such inventory, and all documents of
title or other documents representing them.
"IEC" means International Environmental Corporation, an Oklahoma
---
corporation and a CCI Borrower Subsidiary.
"IRS" means the Internal Revenue Service or any successor agency.
---
"Latest Forecasts" means, (a) on the Closing Date and thereafter
----------------
until the Lender receives new forecasts pursuant to Section 8.6, the
-----------
forecasts of the Borrower's monthly financial condition, results of
operations, and cash flows through the year ending December 31, 1997
attached hereto as Exhibit G-2; and (b) thereafter, the forecasts most
-----------
recently received by the Lender pursuant to Section 7.2.
-----------
"Letter of Credit" has the meaning specified in Section 2.3.
---------------- -----------
"Letter of Credit Agreement" has the meaning specified in Section
-------------------------- -------
2.3.
"Letter of Credit Fee" means the commissions charged under the Letter
--------------------
of Credit Agreement on the outstanding amount of each Letter of Credit.
"Lien" means: any interest in Property securing an obligation owed
----
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute, or contract, and
including without limitation, a security interest, charge, claim, or lien
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, agreement, or conditional sale, or a
lease, consignment or bailment for security purposes.
"Loan Documents" means all documents executed by CCI and/or any of
--------------
the CCI Borrower Subsidiaries or the CCI Guarantor Subsidiaries, including
this Agreement, the
11
<PAGE>
Letter of Credit Agreement, the Patent and Trademark Assignments, the CCI
Guaranty, the Guaranties executed by the CCI Guarantor Subsidiaries, 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.
---
"LSB Adjusted Tangible Assets" means all of the assets of the LSB
----------------------------
Consolidated Group, on a consolidated basis, except: (a) goodwill; (b)
unamortized debt discount and expense; (c) assets constituting Intercompany
Accounts; (d) fixed assets to the extent of any write-up in the book value
thereof resulting from a revaluation effective after the Closing Date; and
(e) any intangibles, as determined in accordance with GAAP.
"LSB Adjusted Tangible Net Worth" means, at any date: (a) the book
-------------------------------
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves as determined in accordance with GAAP)
at which the LSB Adjusted Tangible Assets would be shown on a consolidated
balance sheet of the LSB Consolidated Group at such date prepared in
accordance with GAAP less (b) (i) the amount at which the LSB Consolidated
----
Group's liabilities would be shown on such balance sheet prepared in
accordance with GAAP, and (ii) LSB's redeemable preferred stock which is
valued at $146,000 as of the Closing Date.
"LSB Borrower Subsidiaries" means LSB, L&S Bearing Co. and Summit
-------------------------
Machine Tool Manufacturing Corp.
"LSB Borrowing Group" means the LSB Borrower Subsidiaries and the LSB
-------------------
Guarantor Subsidiaries.
"LSB Consolidated Borrowing Group" means the LSB Borrowing Group and
--------------------------------
the CCI Consolidated Borrowing Group.
"LSB Consolidated Group" means LSB and all of its Subsidiaries,
----------------------
including, but not limited to, the LSB Consolidated Borrowing Group.
"LSB Guarantor Subsidiaries" means International Bearings, Inc., LSB
--------------------------
Extrusion Co., Rotex Corporation, Tribonetics Corporation, Morey Machinery
Manufacturing Corporation, and L&S Automotive Products Co.
"LSB-Related Loan Agreements" means all of the following loan
---------------------------
agreements: (i) this Agreement; (ii) the Amended and Restated Loan and
Security Agreement dated of even date herewith between Lender and LSB;
(iii) the Amended and Restated Loan and Security Agreement dated of even
date herewith between Lender and L&S Bearing Co.; and (iv) the Amended and
Restated Loan and Security Agreement dated of even date herewith between
Lender and Summit Machine Tool Manufacturing Corp.
12
<PAGE>
"Maximum Borrowing Commitment" means Sixty-Five Million Dollars
----------------------------
($65,000,000).
"Maximum Inventory Advance Amount" means, $32,500,000 less all then
--------------------------------
outstanding revolving loans, advances, and outstanding letters of credit
based on the "Eligible Inventory" (as defined in each of the LSB-Related
Loan Agreements) of the LSB Consolidated Borrowing Group under the LSB-
Related Loan Agreements.
"Maximum Revolving Credit Line" means Sixty-Five Million Dollars
-----------------------------
($65,000,000) less the Gross Availability Reductions.
"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 any
Borrower to 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 to Bank by Lender
in connection with the Swap Transactions or otherwise for the benefit of
the Borrower), whether direct or indirect (including, without limitation,
those acquired by assignment from others), 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 Borrower or
either of them, hereunder or under another Loan Document, or under any
other agreement or instrument with Lender relating to the SWAP
Transactions. "Obligations" includes, without limitation, (a) all debts,
-----------
liabilities, and obligations now or hereafter owing from any 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 owing from any Borrower to the Lender arising from or related to
the Swap Transactions.
"Offering Memorandum" means that certain Offering Memorandum dated
-------------------
November 21, 1997, as amended or supplemented, issued by CCI describing CCI
and the CCI Consolidated Group, the Bond Debt, and the Bond Indenture.
"Original Loan Agreements" has the meaning set forth in the recital
------------------------
clauses of this Agreement.
"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.
13
<PAGE>
"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 issued or assumed
by any Borrower in connection with an Acquisition permitted under Section
-------
9.14 hereof; (v) Debt resulting from a judgment having been rendered
----
against the Borrower that is being appealed by the Borrower in good faith
and in a timely manner, for which an adequate reserve has been recorded on
Borrower's books, and which is not fully covered by insurance; (vi)
Subordinated Debt; (vii) Debt resulting from the refinancing of any other
Permitted Debt as long as (a) such Debt does not exceed the amount of the
refinanced Debt, and (b) such Debt does not result in payment acceleration
of the refinanced Debt; (viii) Debt resulting from trade payables and other
obligations arising in the ordinary course of business; (ix) other Debt not
otherwise permitted by this definition in an amount not to exceed
$5,000,000 at any one time; (x) Debt of any Borrower (a) to CCI, or (b) to
any of the CCI Borrower Subsidiaries, or (c) to the CCI Guarantor
Subsidiaries, or (d) to an Affiliate in accordance with Section 9.9 hereof,
-----------
or (e) to any other Subsidiary of CCI that is not a Borrower or a CCI
Guarantor Subsidiary, provided however that the aggregate amount of Debt
outstanding to all such other Subsidiaries under (e) shall at no time
exceed $200,000 in the aggregate; (xi) the Bond Debt; and (xii) the SBL
Debt. Notwithstanding the foregoing, Permitted Debt described in
subsection (ix) of this definition, when combined with Permitted Debt
allowed under subsection (ix) of the definition of Permitted Debt under all
of the other LSB-Related Loan Agreements, shall not exceed $5,000,000 at
any one time.
"Permitted Liens" means: (a) Liens for taxes not yet payable or Liens
---------------
for taxes being contested in good faith and by proper proceedings
diligently pursued, provided that a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor on the
applicable Financial Statements, and further provided that, with respect to
the Collateral, a stay of enforcement of any such Lien is in effect; (b)
Liens in favor of the Lender; (c) reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and
other similar title exceptions or encumbrances affecting the Real Property;
(d) Liens or deposits under workmen's compensation, unemployment insurance,
social security and other similar laws, (e) Liens relating to obligations
with respect to surety, appeal bonds, performance bonds, bids, tenders and
other obligations of a like
14
<PAGE>
nature, (f) Liens existing as of the Closing Date and granted after the
date hereof in connection with Borrower's 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 a
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; (k) Liens not to exceed
$1,000,000 at any one time in amounts secured, which are junior in priority
to the Security Interest and which arise or are placed inadvertently
against Borrower's assets and are removed within ten (10) days from receipt
of notice by the Borrower of such Lien; and (l) Liens reflected on Exhibit
-------
A hereto.
-
"Person" means any individual, sole proprietorship, partnership,
------
joint venture, trust, unincorporated organization, association,
corporation, Public Authority, or any other entity.
"Plan" means, individually and collectively, all Pension Plans, all
----
additional employee benefit plans as defined in Section 3(3) of ERISA, and
all other plans, programs, agreements, arrangements, and methods of
contribution or compensation providing any material remuneration or
benefits, other than the cash payment of wages or salary, to any current or
former employee(s) of the Borrower.
"Proceeds" means all products and proceeds of any Collateral, and all
--------
proceeds of such proceeds and products, including, without limitation, all
cash and credit balances, all payments under any indemnity, warranty, or
guaranty payable with respect to any Collateral, all proceeds of fire or
other insurance, and all money and other Property obtained as a result of
any claims against third parties or any legal action or proceeding with
respect to Collateral.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of each Borrower's now owned and
------------------
hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, trade names, trade styles, patent and trademark
applications and licenses and rights thereunder, including without
limitation those patents, trademarks and copyrights set forth on Exhibit B
---------
hereto, and all other rights under any of the foregoing, all extensions,
renewals, reissues, divisions, continuations, and continuations-in-part of
any of the foregoing, and all rights to sue for past, present, and future
infringement of any of the foregoing; inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports,
manuals, and operating standards, goodwill, customer and other lists in
whatever form maintained, and trade secret rights, copyright rights, right
in works of authorship, and contract rights relating to computer software
programs, in whatever form created or maintained.
15
<PAGE>
"Public Authority" means the government of any country or sovereign
----------------
state, or of any state, province, municipality, or other political
subdivision thereof, or any department, agency, public corporation or other
instrumentality of any of the foregoing.
"Real Property" means all of each Borrower's rights, title, and
-------------
interest in real property now owned or hereafter acquired by Borrower,
including, without limitation, the real property more particularly
described in Exhibit H attached hereto, including all rights and easements
---------
in connection therewith and all buildings and improvements now or hereafter
constructed thereon.
"Receivables" means all of each Borrower's now owned or hereafter
-----------
arising or acquired: Accounts (whether or not earned by performance),
including Accounts owed to the Borrower by any of its Subsidiaries or
Affiliates (but excluding Accounts arising solely from the sale of
Equipment, Real Property or other fixed assets), together with all
interest, late charges, penalties, collection fees, and other sums which
shall be due and payable in connection with any Account; proceeds of any
letters of credit naming the Borrower as beneficiary except such letters of
credit naming Borrower as "beneficiary" as are issued solely in connection
with the sale by Borrower of Equipment, Real Property or other fixed
assets; contract rights, chattel paper, instruments, documents, general
intangibles (including, without limitation, choses in action, causes of
action, tax refunds, tax refund claims, Reversions and other amounts
payable to the Borrower from or with respect to any Plan, rights and claims
against shippers and carriers, rights to indemnification and business
interruption insurance), and all forms of obligations owing to Borrower
(including, without limitation, obligations owing to the Borrower by its
Subsidiaries and Affiliates); guarantees and other security for any of the
foregoing; and rights of stoppage in transit, replevin, and reclamation;
and other rights or remedies of an unpaid vendor, lienor, or secured party.
"Reference Rate" means the per annum rate of interest publicly
--------------
announced from time to time by the Bank at its San Francisco, California
main office as its reference rate. It is a rate set by Bank based upon
various factors including Bank's costs and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing
some loans; however, Bank may price loans at, above or below the Reference
Rate. Any change in the Reference Rate shall take effect on the day
specified in the public announcement of such change.
"Reference Rate Loan" means a Revolving Loan during any period in
-------------------
which it bears interest at the rate provided in Section 3.1(a)(i).
-----------------
"Reference Rate Margin" has the meaning specified in Section
--------------------- -------
3.1(a)(i).
---------
"Related Company" means any member of any controlled group of
---------------
corporations including, or under common control with, Borrower (as defined
in Section 414(b) or (c) of the Code or Section 4001(a)(14) of ERISA).
"Reportable Event" means, with respect to a Pension Plan, a
----------------
reportable event described in Section 4043 of ERISA or the regulations
thereunder, a withdrawal from a Plan
16
<PAGE>
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 the
---------------------
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.
--------------- -----------
"SBL Debt" means the $3 Million Dollar loan made by SBL Corporation
--------
to LSB and/or the other subsidiaries of LSB during the month of October,
1997.
"Security Interest" means collectively the Liens granted by Borrower
-----------------
to the Lender in the Collateral pursuant to this Agreement or the other
Loan Documents.
"Slurry" means Slurry Explosive Corporation, an Oklahoma corporation
------
and a CCI Borrower Subsidiary.
"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 CCI owns, directly or indirectly, more
than 50% of the voting stock.
"Swap Transaction Fee" has the meaning specified in Section 2.4.
-------------------- -----------
"Swap Transaction Reserves" means all reserves which the Lender from
-------------------------
time to time establishes for amounts that are liabilities owed by EDC to
the Bank and for which Lender has agreed to indemnify the Bank. As of the
Closing Date, the amount of the Swap Transaction Reserves is $1,850,000.
17
<PAGE>
"Swap Transactions" means interest rate swaps, treasury locks, and
-----------------
all other forward rate agreements entered into by the Bank for the account
of or otherwise for the benefit of EDC.
"Termination Date" has the meaning specified in Article 12.
---------------- ----------
"Termination Event" means: (a) a Reportable Event (other than a
-----------------
Reportable Event described in Section 4043 of ERISA which is not subject to
the provision for 30-day notice to the PBGC under applicable regulations);
or (b) the withdrawal of the Borrower or any Related Company from a Pension
Plan during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA with respect to such Pension Plan; or (c)
the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041
of ERISA; or (d) the institution of proceedings by the PBGC to terminate or
have a trustee appointed to administer a Pension Plan; or (e) any other
event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan, or (f) the partial or complete withdrawal of
Borrower or any Related Company from a Multi-employer Plan, or (g) the
withdrawal of Borrower from any state workers' compensation system.
"UCC" means the Uniform Commercial Code (or any successor statute) of
---
the State of Oklahoma or of any other state the laws of which are required
by Section 9-103 thereof to be applied in connection with the issue of
-------------
perfection of security interests.
1.2 Accounting Terms. Any accounting term used in this Agreement
----------------
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
-----------
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
---- -----
pronoun shall also include the other genders.
1.4 Exhibits. All references in this Agreement to Exhibits are,
--------
unless otherwise specified, references to exhibits attached hereto, and all such
exhibits are hereby deemed incorporated herein by this reference.
2. LOANS AND LETTERS OF CREDIT.
---------------------------
2.1 Revolving Loans. The Lender shall, subject to the terms and
---------------
conditions set forth in this Agreement, and upon any Borrower's request from
time to time, make revolving loans (the "Revolving Loans") to such 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
18
<PAGE>
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. Each Borrower may request Revolving Loans either
orally or in writing, provided, however, that each such request with respect to
Reference Rate Loans shall be made no later than 1:00 p.m. (Los Angeles,
California time). Each oral request for a Revolving Loan shall be conclusively
presumed to be made by a person authorized by the 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.
2.2 Availability Determination. Availability of each Borrower 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 such
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 hereinafter
defined, and upon any Borrower's request from time to time, cause merchandise
letters of credit (the "Merchandise L/C's") or standby letters of credit (the
"Standby L/C's") to be issued for the 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
and the other LSB-Related Loan Agreements, would exceed Eleven Million and
No/100 Dollars ($11,000,000); or (b) the maximum face amount of the requested
Letter of Credit, and all commissions, fees, and charges due from Borrower to
Lender in connection with the opening thereof, would cause the Availability to
be exceeded at such time. In addition, with respect to any Merchandise L/C, the
requested term of such Letter of Credit may not exceed 180 days, and no
Merchandise L/C may by its terms be scheduled to be outstanding on the
Termination Date. Standby L/C's may have terms that extend beyond the
Termination Date but, upon termination of this Agreement, all Letters of Credit
must be either terminated with the consent of the beneficiary thereof, replaced
with a letter of credit provided by a financial institution acceptable to
Lender, collateralized by cash or cash equivalent, or otherwise satisfied in a
manner acceptable to Lender. The Letters of Credit shall be governed by a
Letter of Credit Financing Agreement - Supplement to 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
19
<PAGE>
Lender pursuant to or in connection with the Letters of Credit and the Letter of
Credit Agreement will be charged to the Borrower's loan account as Revolving
Loans.
2.4 Swap Transactions. EDC may request and the Lender may, in its
-----------------
sole and absolute discretion, arrange for EDC to obtain Swap Transactions from
the Bank in amounts to be agreed to between EDC and Bank. EDC agrees to
indemnify and hold the Lender harmless from any and all obligations now or
hereafter owing by the Lender to the Bank arising from or related to such Swap
Transactions pursuant to the indemnity referred to in clause (c) below. EDC
agrees to pay the Bank all amounts owing to the Bank pursuant to the Swap
Transactions. In the event EDC shall not have paid to the Bank such amounts,
the Lender shall pay the Bank and such amounts when paid by the Lender shall
constitute a Revolving Loan of EDC which shall be deemed to have been requested
by EDC. EDC acknowledges and agrees that the obtaining of Swap Transactions
from the Bank (a) is in the sole and absolute discretion of the Bank, (b) is
subject to all rules and regulations of the Bank, and (c) is due to the Bank
relying on the indemnity of the Lender to the Bank with respect to the
obligations of EDC to the Bank in connection with the Swap Transactions. EDC
agrees to pay Lender a Swap Transaction Fee equal to one percent (1%) per annum
times the amount of all outstanding Swap Transactions.
3. INTEREST AND OTHER CHARGES
--------------------------
3.1 Interest.
--------
(a) Interest Rates. All amounts charged as Revolving Loans shall bear
--------------
interest on the unpaid principal amount thereof from the date made until paid in
full in cash at the Applicable Interest Rate as described in Sections 3.1(a)(i)
------------------
and (ii) but not to exceed the maximum rate permitted by applicable law. Subject
- --------
to the provisions of Section 3.2, any of the Revolving Loans may be converted
-----------
into, or continued as, Reference Rate Loans or Eurodollar Rate Loans in the
manner provided in Section 3.2. If at any time Revolving Loans are outstanding
------------
with respect to which notice has not been delivered to Lender in accordance with
the terms of this Agreement specifying the basis for determining the interest
rate applicable thereto, then those Revolving Loans shall be Reference Rate
Loans and shall bear interest at a rate determined by reference to the Reference
Rate until notice to the contrary has been given to the Lender and such notice
has become effective. Except as other wise provided herein, the amounts charged
as Revolving Loans shall bear interest at the following rates (the "Applicable
Interest Rate"):
(i) For all amounts charged as Revolving Loans other than Eurodollar
Rate Loans, including all Revolving Loans which are Reference Rate Loans,
then at a fluctuating per annum rate equal to one and one-half percent
(1.50%) per annum (the "Reference Rate Margin") plus the Reference Rate;
and
(ii) If the Revolving Loans are Eurodollar Rate Loans, then at a per
annum rate equal to three and seven-eighths percent (3.875%) per annum (the
"Eurodollar Margin") plus the Eurodollar Rate determined for the applicable
Interest Period.
Notwithstanding the foregoing, if, during any month, the sum of the average
"Availability" (as defined in each of the LSB-Related Loan Agreements) of
the LSB Consolidated
20
<PAGE>
Borrowing Group under all of the LSB-Related Loan Agreements is less than
$6,300,000, then, during the following month, the Reference Rate Margin
will be increased to two percent (2%) and the Eurodollar Margin will be
increased to four and three-eighths percent (4.375%).
In addition, if the LSB Adjusted Tangible Net Worth equals or exceeds
$72,500,000, as reflected on LSB's most current quarterly Financial
Statements, provided no Event of Default has occurred and is continuing,
then for so long as the LSB Adjusted Tangible Net Worth is at least
$72,500,000, the Reference Rate Margin will be reduced to one percent (1%)
and the Eurodollar Margin will be reduced to three and three-eighths
percent (3.375%), and the reduction will be effective as of the first day
of the month following receipt by Lender of the applicable quarterly
Financial Statements.
Finally, if the LSB Adjusted Tangible Net Worth equals or exceeds
$84,000,000, as reflected on LSB's most current quarterly Financial
Statements, provided no Event of Default has occurred and is continuing,
then for so long as the LSB Adjusted Tangible Net Worth is at least
$84,000,000, the Reference Rate Margin will be reduced to one-half of one
percent (.50%) and the Eurodollar Margin will be reduced to two and seven-
eighths percent (2.875%), and the reduction will be effective as of the
first day of the month following receipt by Lender of the applicable
quarterly Financial Statements.
Each change in the Reference Rate shall be reflected in the interest rate
described in (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of three hundred sixty (360)
days and actual days elapsed. Except as otherwise provided herein, (1) interest
accrued on each Eurodollar Rate Loan shall be payable in arrears on each
Eurodollar Interest Payment Date applicable to such Eurodollar Rate Loan, and
(2) interest accrued on the Reference Rate Loans will be payable in arrears on
the first day of each month hereafter.
(b) Default Rate. If any Event of Default occurs, then, while any
------------
such Event of Default is continuing, all Loans shall bear interest at an
increased rate of interest equal to the Applicable Interest Rate thereto plus
----
two percent (2.0%) per annum, and the Letter of Credit Fee and the Swap
Transaction Fee shall each be increased to three percent (3%) per annum.
3.2 Eurodollar Borrowings: Conversion or Continuation.
-------------------------------------------------
(a) Subject to the provisions of Section 3.3, each Borrower shall
-----------
have the option: (i) to request the Lender to make a Revolving Loan as a
Eurodollar Rate Loan; (ii) to convert all or any part of the outstanding
Revolving Loans from Reference Rate Loans to Eurodollar Rate Loans, (iii) to
convert all or any part of the outstanding Revolving Loans from Eurodollar Rate
Loans to Reference Rate Loans on the expiration of the Interest Period
applicable thereto; (iv) upon the expiration of any Interest Period applicable
to any outstanding Eurodollar Rate Loan, to continue all or any portion of such
Eurodollar Rate Loan as a Eurodollar Rate Loan; provided, however, that no
-------- -------
outstanding Loans may be converted into or continued as, Eurodollar Rate Loans
when any Event or Event of Default has occurred and is continuing.
21
<PAGE>
(b) Whenever the Borrower elects to borrow, convert into or continue
Eurodollar Rate Loans under this Section 3.2, the Borrower shall notify the
-----------
Lender in writing or telephonically no later than 11:00 a.m. (Los Angeles,
California time) two (2) Business Days in advance of the requested
borrowing/conversion/continuation date. The Borrower shall specify (1) the
borrowing/conversion/continuation date (which shall be a Business Day), (2) the
amount and type of the Revolving Loans to be borrowed/converted/continued, and
(3) the nature of the requested borrowing/ conversion/continuation. In the event
that the Borrower should fail to timely notify the Lender to continue to convert
any existing Eurodollar Rate Loan, such Loan shall, on the last day of the
Interest Period with respect to such Revolving Loan, convert to a Reference Rate
Loan.
(c) The officer of the Borrower authorized by the Borrower to request
Revolving Loans on behalf of the Borrower shall also be authorized to request a
conversion/continuation on behalf of the Borrower. The Lender shall be entitled
to rely on such officer's authority until the Lender is notified to the contrary
in writing. The Lender shall have no duty to verify the authenticity of the
signature appearing on any written notification or request and, with respect to
an oral notification or request, the Lender shall have no duty to verify the
identity of any individual representing himself as one of the officers
authorized to make such notification or request on behalf of the Borrower. The
Lender shall incur no liability to the Borrower in acting upon any telephonic
notice or request referred to in this Section 3.2, which the Lender believes in
-----------
good faith to have been given by an officer authorized to do so on behalf of the
Borrower, or for otherwise acting in good faith under this Section 3.2 and, upon
-----------
lending/conversion/continuation by the Lender in accordance with this Agreement
pursuant to any such telephonic notice, the Borrower shall have effected the
borrowing/conversion/continuation of the applicable Loans hereunder.
(d) Any written or telephonic notice of conversion to, or borrowing
or continuation of, Revolving Loans made pursuant to this Section 3.2 shall be
-----------
irrevocable and the Borrower shall be bound to borrow, convert or continue in
accordance therewith.
3.3 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provisions to the contrary contained in this
Agreement, the following provisions shall govern with respect to Eurodollar Rate
Loans as to the matters covered:
(a) Amount of Eurodollar Rate Loans. Each election of, continuation
-------------------------------
of, or conversion to a Eurodollar Rate Loan, shall be in a minimum amount of
Five Million Dollars ($5,000,000) and in integral multiples of One Million
Dollars ($1,000,000) in excess of that amount.
(b) Determination of Interest Period. The Interest Period for each
--------------------------------
Eurodollar Rate Loan shall be for a three (3) month period. The determination
of Interest Periods shall be subject to the following provisions:
(i) In the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day which
is not a Business Day, the Interest Period shall be extended to expire on
the next succeeding Business
22
<PAGE>
Day; provided, however, that if the next succeeding Business Day occurs in
-------- -------
the following calendar month, then such Interest Period shall expire on the
immediately preceding Business Day.
(iii) The Borrower may not select an Interest Period for any
Eurodollar Rate Loan, which Interest Period expires later than the
Termination Date.
(iv) There shall be not more than two (2) Interest Periods in
effect at any one time, and no more than two (2) Interest Periods may begin
during any calendar month.
(v) If an Interest Period starts on a date for which no
numerical correspondent exists in the month in which such Interest Period
ends, such Interest Period will end on the last Business Day of such month.
(c) Determination of Interest Rate. As soon as practicable after
------------------------------
11:00 a.m. (Los Angeles, California time) on the Eurodollar Interest Rate
Determination Date, the Lender shall determine (which determination shall,
absent manifest error, be presumptively correct) the Interest Rate for the
Eurodollar Rate Loans for which an Interest Rate is then being determined and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to the Borrower.
(d) Substituted Rate of Borrowing. In the event that on any
-----------------------------
Eurodollar Interest Rate Determination Date the Lender shall have determined
(which determination shall, absent manifest error, be presumptively correct and
binding upon all parties) that:
(i) by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market or affecting the
position of Bank or Lender in such market, adequate and fair means do not
exist for ascertaining the applicable interest rates by reference to which
the Eurodollar Rate then being determined is to be fixed; or
(ii) by reason of (1) any change after the date of this
Agreement in any applicable law or governmental rule, regulation or order
(or any interpretation thereof and including the introduction of any new
law or governmental rule, regulation or order) or (2) any other
circumstances affecting Bank or Lender or the interbank Eurodollar market
or the position of Bank or Lender in such market (such as, for example, but
not limited to, official reserve requirements required by Regulation D of
the Board of Governors of the Federal Reserve System to the extent not
given effect in the Eurodollar Rate), the Eurodollar Rate shall not
represent the effective pricing to Lender for Dollar deposits of comparable
amounts for the relevant period;
then, and in any such event, the right of the Borrower to request application of
the Eurodollar Rate to some or all of the Loans shall be suspended until the
Lender shall notify the Borrower that the circumstances causing such suspension
no longer exist, and such Loans shall be Reference Rate Loans.
(e) Illegality. In the event that on any date Lender shall have
----------
reasonably determined (which determination shall, absent manifest error, be
final and conclusive and binding
23
<PAGE>
upon all parties) that the making of, conversion into, or the continuation of,
Lender's Eurodollar Rate Loans has become unlawful as the result of compliance
by Lender or Bank in good faith with any law, governmental rule, regulation or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, Lender shall
promptly give notice (by telephone confirmed in writing) to the Borrower of such
determination. In such case and except as provided in Section 3.3(f), the
--------------
obligation of Lender to make or maintain any Eurodollar Rate Loans during any
such period shall be terminated at the earlier of the termination of the
Interest Period then in effect or when required by law, and the Borrower shall,
no later than the earlier of the termination of the Interest Period in effect at
the time any such determination pursuant to this Section 3.3(e) is made, or when
--------------
required by law, repay the Eurodollar Rate Loans, together with all interest
accrued thereon.
(f) Options of the Borrower. In lieu of prepaying the Eurodollar Rate
-----------------------
Loans as required by Section 3.3(e), the Borrower may exercise either of the
following options:
(i) Upon written notice to the Lender, the Borrower may release
Lender from its obligations to make or maintain Loans as Eurodollar Rate
Loans and in such event, the Borrower shall, at the end of the then current
Interest Period (or at such earlier time as prepayment is otherwise
required), convert all of the Eurodollar Rate Loans into Reference Rate
Loans in the manner contemplated by Section 3.2, but without satisfying the
-----------
advance notice requirements therein; or
(ii) The Borrower may, by giving notice (by telephone confirmed
immediately by telecopy) to Lender require Lender to continue to maintain
its outstanding Reference Rate Loans as Reference Rate Loans, but without
satisfying the advance notice requirements set forth in such Section 3.2.
-----------
(g) Compensation. In addition to such amounts as are required to be
------------
paid by the Borrower pursuant to the other Sections of this Article 3, the
Borrower agrees to compensate the Lender for all expenses and liabilities,
including, without limitation, any loss or expense incurred by Lender by reason
of the liquidation or reemployment of deposits or other funds acquired by Lender
to fund or maintain the Lender's Eurodollar Rate Loans to the Borrower, which
Lender sustains (i) if due to the fault of the Borrower a funding of any
Eurodollar Rate Loans does not occur on a date specified therefor by Borrower in
a telephonic or written request for borrowing or conversion/continuation, or a
successive Interest Period does not commence after notice therefor is given
pursuant to Section 3.2, (ii) if any voluntary or mandatory prepayment of any
-----------
Eurodollar Rate Loans occurs for any reason on a date which is not the last
scheduled day of an Interest Period, or (iii) as a consequence of any other
--
failure by the Borrower to repay Eurodollar Rate Loans when required by the
terms of this Agreement.
(h) Quotation of Eurodollar Rate. Anything herein to the contrary
----------------------------
notwithstanding, if on any Eurodollar Interest Rate Determination Date no
Eurodollar Rate is available by reason of the failure of Bank to be offered
quotations in accordance with the definition of "Eurodollar Base Rate," the
Lender shall give the Borrower prompt notice thereof and (i) any Eurodollar Rate
Loan requested to be made at the Eurodollar Rate to be determined on any
Eurodollar Interest Rate Determination Date shall be made as a Reference Rate
Loan, and (ii) any
24
<PAGE>
notice given by the Borrower to convert any Loans into or to continue any Loans
as Eurodollar Rate Loans at the Eurodollar Rate to be determined on any such
Eurodollar Interest Rate Determination Date shall be ineffective.
(i) Eurodollar Rate Taxes. The Borrower agrees that it will pay,
---------------------
prior to the date on which penalties attach thereto, all present and future
income, stamp and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or from the Lender on or in respect of the
Borrower's Loans from the Lender solely as a result of the interest rate being
determined by reference to the Eurodollar Rate and/or the provisions of this
Agreement relating to the Eurodollar Rate and/or the recording, registration,
notarization or other formalization of any of the foregoing and/or any payments
of principal, interest or other amounts made on or in respect of the Loans from
the Lender when the interest rate is determined by reference to the Eurodollar
Rate (all such taxes, levies, cost and charges being herein collectively called
"Eurodollar Rate Taxes"); provided, however, that Eurodollar Rate Taxes shall
--------------------- -------- -------
not include taxes imposed on or measured by the overall net income of the Lender
by the United States of America or any political subdivision or taxing authority
thereof or therein, or taxes on or measured by the overall net income by any
foreign branch or subsidiary of the Lender by any foreign country or subdivision
thereof in which that branch or subsidiary is doing business. Promptly after
the date on which payment of any such Eurodollar Rate Tax is due pursuant to
applicable law, the Borrower will, at the request of the Lender, furnish to the
Lender evidence, in form and substance satisfactory to the Lender, that the
Borrower has met its obligation under this Section 3.3(i), an addition, the
--------------
Borrower will indemnify the Lender against, and reimburse Lender on demand for,
any Eurodollar Rate Taxes for which the Lender is or may be liable by reason of
the making or maintenance of any Eurodollar Rate Loans hereunder, as determined
by the Lender in its discretion exercised in good faith and pursuant to
standards of commercial reasonableness. The Lender shall provide Borrower with
appropriate receipts for any payments or reimbursements made by Borrower
pursuant to this Section 3.3(i).
--------------
(j) Booking of Eurodollar Rate Loans. The Lender may make, carry or
--------------------------------
transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch
offices or the office of any of its Affiliates.
(k) Increased Costs. If, due to either (i) the introduction of or any
---------------
change (other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Public Authority (whether or
not having the force of law), there shall be any increase in the cost to the
Lender of agreeing to make or making, funding or maintaining Eurodollar Rate
Loans, then the Borrower agrees that it shall, from time to time, upon demand by
the Lender in writing to the Borrower, within sixty (60) days from the date of
such increased cost, pay to the Lender additional amounts sufficient to
compensate the Lender for such increased cost relating to the outstanding
Eurodollar Rate Loans made to the Borrower. A certificate as to the amount of
such increased cost and the method of determination thereof, submitted to the
Borrower by the Lender, shall be rebuttably presumptive evidence of the
correctness of such amount. Notwithstanding the above, the Lender shall promptly
advise Borrower of any increased costs covered by this paragraph (k) of which
Lender is aware that have been made or which are proposed to be made which may
require the Borrower to be required to pay the increased cost
25
<PAGE>
under this paragraph (k) prior to or at the time that Borrower requests
additional Eurodollar Rate Loans.
3.4 Maximum Interest Rate.
---------------------
(a) Notwithstanding the foregoing provisions of Sections 3.1 through
--------------------
3.3 regarding the rates of interest applicable to the Loans, if at any time the
- ---
amount of such interest computed on the basis of the Applicable Interest Rate
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter, after taking into account, to the extent required by
applicable law, any and all fees, payments, charges and calculations provided
for in this Agreement or in any other agreement between Borrower and Lender (the
"Maximum Legal Rate"), the interest payable under this Agreement shall be
------------------
computed upon the basis of the Maximum Legal Rate, but any subsequent reduction
in the Reference Rate or the Eurodollar Rate shall not reduce such interest
thereafter payable hereunder below the amount computed on the basis of the
Maximum Legal Rate until the aggregate amount of such interest accrued and
payable under this Agreement equals the total amount of interest which would
have accrued if such interest had been at all times computed solely on the basis
of the Applicable Interest Rate.
(b) No agreements, conditions, provisions or stipulations contained
in this Agreement or any other instrument, document or agreement between the
Borrower and the Lender or default of the 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 the 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 the Borrower be
obligated to pay interest exceeding such Maximum Legal Rate and all agreements,
conditions or stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel the 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"), the 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. The 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, the Borrower covenants that (i) the credit or return of any Excess
shall constitute the acceptance by the 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.
26
<PAGE>
(c) The provisions of Section 3.4 shall be deemed to be incorporated
-----------
into every document or communication relating to the Obligations which sets
forth or prescribes any account, right or claim or alleged account, right or
claim of the Lender with respect to the Borrower (or any other obligor in
respect of Obligations), whether or not any provision of Section 3.4 is referred
-----------
to therein. All such documents and communications and all figures set forth
therein shall, for the sole purpose of computing the extent of the liabilities
and obligations of the Borrower (or other obligor) asserted by the Lender
thereunder, be automatically recomputed by any Borrower or obligor, and by any
court considering the same, to give effect to the adjustments or credits
required by Section 3.4.
-----------
(d) If the applicable state or federal law is amended in the future
to allow a greater rate of interest to be charged under this Agreement or any
other Loan Documents than is presently allowed by applicable state or federal
law, then the limitation of interest under Section 3.4 shall be increased to the
-----------
maximum rate of interest allowed by applicable state or federal law as amended,
which increase shall be effective hereunder on the effective date of such
amendment, and all interest charges owing to the Lender by reason thereof shall
be payable upon demand.
3.5 Capital Adequacy. If as a result of any regulatory change
----------------
directly or indirectly affecting Lender or any of Lender's affiliated companies
there shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made to 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 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 3.5 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 3.4. The certificate
-----------
requesting compensation under this Section 3.5 shall identify the regulatory
-----------
change which has occurred, the requirements which have been imposed, modified or
deemed applicable, the amount of such additional cost or reduction in the amount
receivable and the way in which such amount has been calculated.
3.6 Unused Line Fee. For every month during the term of this
---------------
Agreement, the Borrower shall pay the Lender a fee (the "Unused Line Fee") in an
---------------
amount equal to one-half of one percent (.50%) per annum, multiplied by the
-------------
amount by which (a) the Maximum Borrowing Commitment exceeds (b) the average
closing daily unpaid balance of all revolving loans and all issued but undrawn
letters of credit under all of the LSB-Related Loan Agreements during such
month, with the unpaid balance calculated for this purpose by applying payments
immediately upon receipt. Such a fee, if any, shall be calculated on the basis
of a year of three hundred sixty (360) days and actual days elapsed, and shall
be payable to the Lender on the first day of each month prior to
27
<PAGE>
the termination of this Agreement commencing January 1, 1998 and on the
termination of this Agreement, with respect to the prior month or portion
thereof.
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 the Borrower hereby irrevocably waives the right to
direct the application of any payment or proceeds; provided, however, unless so
-------- -------
directed by the Borrower, the Lender shall not apply any such payments which it
receives to any Eurodollar Rate Loan, except: (a) on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loan; or (b) in the
event, and only to the extent, that there are not outstanding Reference Rate
Loans. Following an Event of Default that is continuing, the Lender shall have
the continuing and exclusive right to apply and reverse and reapply any and all
such proceeds and payments to any portion of the Obligations subject to the
terms of this Section 4.3 and the Borrower's right to direct prepayments of
-----------
Eurodollar Rate Loans.
4.4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY PAYMENT
-------------------------------
OF, OR PROCEEDS APPLIED TO THE PAYMENT OF, ALL OR ANY PART OF THE OBLIGATIONS,
THE LENDER IS FOR ANY REASON REQUIRED TO SURRENDER SUCH PAYMENT OR PROCEEDS TO
ANY PERSON, BECAUSE SUCH PAYMENT OR PROCEEDS IS INVALIDATED, DECLARED
FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A PREFERENCE, OR A
DIVERSION OF TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE OBLIGATIONS OR
PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE AND THIS
AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT OR PROCEEDS HAD NOT
BEEN RECEIVED BY THE LENDER AND THE 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
28
<PAGE>
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, each Borrower hereby grants to
the Lender a continuing security interest in, lien on, and assignment of: (i)
all Receivables, Inventory, Proprietary Rights, and Proceeds, wherever located
and whether now existing or hereafter arising or acquired; (ii) all moneys,
securities and other property and the Proceeds thereof, now or hereafter held or
received by, or in transit to, the Lender from or for the Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, including,
without limitation, all of the Borrower's deposit accounts, credits and balances
with the Lender and all claims of the Borrower against the Lender at any time
existing; (iii) all of Borrower's deposit accounts containing Collateral with
any financial institutions with which Borrower maintains deposits; and (iv) all
books, records, ledger cards, data processing records, computer software and
other property and general intangibles at any time evidencing or relating to the
Receivables, Inventory, Proprietary Rights, Proceeds, and other property
referred to above (all of the foregoing, together with all other property in
which Lender may at any time be granted a Lien, being herein collectively
referred to as the "Collateral"). The Lender shall have all of the rights of a
----------
secured party with respect to the Collateral under the UCC and other applicable
laws.
(b) All Obligations shall constitute a single loan secured by all of
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
29
<PAGE>
manner, all without affecting the Obligations or the Lender's right to take any
other action with respect to any other Collateral.
6.2 Perfection and Protection of Security Interest. Each Borrower
----------------------------------------------
shall, at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and enforce 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, placing notations on the
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 the
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 the Borrower's signature,
one or more financing statements disclosing the Security Interest. The 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 Borrower's agents or processors, then the 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 the 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, execute and
deliver 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.
6.3 Location of Collateral. Each Borrower represents and warrants to
----------------------
the Lender that: (a) Exhibit D hereto is a correct and complete List of the
---------
Borrower's chief executive office, the location of its books and records, 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 the Borrower and sets forth the names of the
owners and lessors of, and, to the best of the Borrower's knowledge, the holders
of any mortgages on such facilities and locations. Except for Inventory that is
consigned by a Borrower to a customer or warehouse, the Borrower agrees that it
will not maintain any Collateral at any location other than those listed on
Exhibit D, and it will not
- ---------
30
<PAGE>
otherwise change or add to any of such locations, unless it gives the Lender at
least thirty (30) days prior written notice and executes such financing
statements and other documents that the Lender requests in connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral. Each
--------------------------------------------------
Borrower represents and warrants to the Lender that: (a) all Collateral is and
will continue to be owned by the Borrower free and clear of all Liens
whatsoever, except for the Security Interest and other Permitted Liens; (b) the
Security Interest will not be subject to any prior Lien except the Permitted
Liens; (c) the Borrower will use, store, and maintain the Collateral with all
reasonable care and will use the Collateral for lawful purposes only; and (d)
the Borrower will not, without the Lender's prior written approval, sell, or
dispose of or permit the sale or disposition of any Collateral, except for (i)
sales of Inventory in the ordinary course of business, and (ii) as otherwise
provided or allowed by this Agreement or any of the other Loan Documents. The
inclusion of Proceeds in the Collateral shall not be deemed the Lender's consent
to any sale or other disposition of the Collateral except as expressly permitted
herein.
6.5 Appraisals. Following the occurrence of an Event of Default that
----------
is continuing, each Borrower shall, at the request of the Lender, provide the
Lender, at the Borrower's expense, with appraisals or updates thereof of any or
all of the Collateral from an appraiser satisfactory to the Lender.
6.6 Access and Examination. The Lender may at all reasonable times
----------------------
have access to, examine, audit, make extracts from and inspect the Borrower's
records, files, and books of account and 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.
6.7 Insurance. The Borrower shall insure the Collateral and its
---------
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. The
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
31
<PAGE>
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 of 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 of each month, monthly
Inventory reports by category and by location; (e) no later than twenty (20)
days after the last day of each month, monthly reconciliations of the detailed
Inventory reports to the general ledger and to the financial statements provided
to Lender under Section 7.2(c); (f) upon request, copies of invoices, credit
--------------
memos, shipping and delivery documents, purchase orders; (g) such other reports
as to the Collateral as the Lender shall request from time to time; and (h)
certificates of an officer of the Borrower certifying as to the foregoing. If
any of the Borrower's records or reports of the Collateral are prepared by an
accounting service or other agent, the Borrower hereby authorizes such service
or agent to deliver such records, reports, and related documents to the Lender.
6.9 Accounts. (a) Each 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 the
Borrower's 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,
32
<PAGE>
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 of the Borrower
described in each invoice will have been performed, except where the Account
Debtor has previously agreed in writing to accept billings for such goods.
(b) The Borrower shall not re-date any invoice or sale or make sales
on extended dating beyond that customary in the Borrower's business 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 the Borrower becomes aware of any matter adversely
affecting any Account in an amount in excess of $100,000, including information
regarding the Account Debtor's creditworthiness, the Borrower will promptly so
advise the Lender.
(c) The Borrower shall not accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Eligible Account without the Lender's written consent. If the
Lender consents to the acceptance of any such instrument, it shall be considered
as evidence of the Account and not payment thereof and the Borrower will upon
Lender's request, promptly deliver such instrument to the Lender appropriately
endorsed. Regardless of the form of presentment, demand, notice of dishonor,
protest, and notice of protest with respect thereto, the Borrower will remain
liable thereon until such instrument is paid in full.
(d) The Borrower shall notify the Lender promptly of all disputes
and claims with an Account Debtor relating to an Eligible Account that exceeds
$100,000 and when no Event of Default exists hereunder, may settle or adjust
them at no expense to the Lender, but no discount, credit or allowance in excess
of $100,000 shall be granted to any Account Debtor without the Lender's consent,
except for discounts, credits and allowances made or given in the ordinary
course of the Borrower's business. 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, the 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
33
<PAGE>
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,
the 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, the 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. Each Borrower represents and warrants to the
---------
Lender that all of the Inventory is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of the Borrower's business, and is and will be fit for such purposes. The
Borrower will keep the Inventory in good and marketable condition, at its own
expense. The 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, on a first-in, first-out basis, or
market value). The Borrower will not, without the Lender's written consent,
sell any Inventory on a bill and hold basis (except as provided in subsection
(xiii) of the definition of Eligible Accounts set forth in this Agreement),
guaranteed sale, sale and return, sale on approval, consignment, or other
repurchase or return basis.
6.12 Documents and Instruments. Each Borrower represents and warrants
-------------------------
to the Lender that: (a) all Documents and Instruments describing, evidencing, or
constituting Collateral, and all signatures and endorsements thereon, are and
will be complete, 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 the 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
34
<PAGE>
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. Each Borrower appoints the Lender and the
-----------------
Lender's designees as the Borrower's attorney, with power: (a) to endorse the
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Lender's possession; (b) to sign the
Borrower's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records and on verifications of Accounts to Account Debtors; (c) to notify the
post office authorities, when an Event of Default exists, to change the address
for delivery of the Borrower's mail to an address designated by the Lender and
to receive, open and dispose of all mail addressed to the Borrower; (d) to send
requests for verification of Accounts to Account Debtors; and (e) to do all
things necessary to carry out this Agreement. The Borrower ratifies and approves
all acts of such attorney. Neither the Lender nor the attorney will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable until this
Agreement has been terminated and the Obligations have been fully satisfied.
6.15 Lender's Rights, Duties, and Liabilities. Each Borrower assumes
----------------------------------------
all responsibility and liability arising from or relating to the use, sale or
other disposition of the Collateral. Neither the Lender nor any of its officers,
directors, employees, and agents shall be liable or responsible in any way for
the safekeeping of any of the Collateral, or for any act or failure to act with
respect to the Collateral, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act of default by any warehouseman,
carrier, forwarding agency or, other person whomsoever, all of which shall be at
the Borrower's sole risk. The Obligations shall not be affected by any failure
of the Lender to take any steps to perfect the Security Interest or to collect
or realize upon the Collateral, nor shall loss of or damage to the Collateral
release the Borrower from any of the Obligations. After the occurrence of an
Event of Default that has not been cured or otherwise waived by Lender, the
Lender may (but shall not be required to), without notice to or consent from the
Borrower, sue upon or otherwise collect, extend the time for payment of, modify
or amend the terms of, compromise or settle for cash or credit, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take other action with respect to the Collateral, any security therefor, any
agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of the Borrower for the
Obligations.
6.16 Release of Collateral and Borrower. Upon payment in full of
----------------------------------
all Obligations, Lender shall immediately release its Security Interest in and
to all of the Collateral.
35
<PAGE>
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
-------------------------------------------------
7.1 Books and Records. Each Borrower shall maintain, at all times,
-----------------
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP. The
Borrower shall, by means of appropriate entries, reflect in such accounts and in
all Financial Statements proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of Property and bad debts,
all in accordance with GAAP. The Borrower shall maintain at all times books and
records pertaining to the Collateral in such detail, form, and scope as the
Lender shall reasonably require, including without limitation records of: (a)
all payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
7.2 Financial Information. Each Borrower shall promptly furnish to
---------------------
the Lender all such financial information as the Lender shall reasonably
request, and notify its auditors and accountants that the Lender is authorized
to obtain such information directly from them. Without limiting the foregoing,
Borrower, CCI, or LSB 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
Consolidated Group for such Fiscal Year, and the accompanying notes thereto,
setting forth in each case in comparative form figures for the previous Fiscal
Year, all in reasonable detail, fairly presenting the financial position and the
results of operations of the LSB Consolidated Group as at the date thereof and
for the Fiscal Year then ended, and prepared in accordance with GAAP. The
audited statements shall be examined in accordance with generally accepted
auditing standards by, and accompanied by a report thereon unqualified as to
scope of, independent certified public accountants selected by LSB and
reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than forty-five
(45) days after the close of each Fiscal Quarter other than the fourth quarter
of a Fiscal Year, unaudited consolidated and consolidating balance sheets of the
CCI Consolidated 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 CCI Consolidated 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 CCI Consolidated 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 CCI, 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
CCI and the CCI Consolidated Group as at the end of such month, and consolidated
and consolidating unaudited statements of income and expenses for CCI and the
CCI Consolidated Group for such month and for the period from the
36
<PAGE>
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 CCI
- ------
and the CCI Consolidated 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 CCI, 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 CCI and LSB (i) setting forth in reasonable detail the calculations
required to establish that CCI and the CCI Consolidated Group were in compliance
with the covenants set forth in Sections 9.16 and 9.17 hereof as of the end of
------------- ----
the Fiscal Year and most recent Fiscal Quarter covered in such Financial
Statements; and, (ii) stating that, except as explained in reasonable detail in
such certificate, (A) nothing has come to the attention of such officer that
would lead such officer to believe that all of the representations, warranties
and covenants of the 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 of income and expense, and statements
of cash flow for CCI and the CCI Consolidated Group 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.
37
<PAGE>
7.3 Notices to Lender. The 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 CCI
becomes aware of any change which CCI 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 CCI
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 CCI
becomes aware of any violation of any law, statute, regulation, or ordinance of
a Public Authority applicable to Borrower, which, in the opinion of such
officer, would materially and adversely affect the Collateral, the repayment of
the Obligations, the Lender's rights under the Loan Documents, or the Borrower's
Property, business, operations, or condition (financial or otherwise).
(g) Within five Business Days after a responsible officer of CCI
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 CCI
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).
38
<PAGE>
(i) Thirty (30) days prior to any Borrower changing its name. Each
notice given under this Section 7.3 shall describe the subject matter thereof in
-----------
reasonable detail and shall set forth the action that the Borrower has taken or
proposes to take with respect thereto.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
--------------------------------------
Each Borrower continuously warrants and represents to the Lender, at
all times during the term of this Agreement and until all Obligations have been
satisfied, that, except as hereafter disclosed to and accepted by the Lender in
writing in the exercise of its reasonable discretion:
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 10.11 hereof. This Agreement
------------- -----
and the other Loan Documents have been duly executed and delivered by the
Borrower and constitute the legal, valid and binding obligation of the Borrower,
enforceable against it in accordance with its terms without defense, setoff, or
counterclaim. The Borrower's execution, delivery, and performance of this
Agreement and the other Loan Documents do not and will not conflict with, or
constitute a violation or breach of, or constitute a default under, or result in
the creation or imposition of any Lien upon the Property of the Borrower (except
as contemplated by this Agreement and the other Loan Documents) by reason of the
terms of (a) any material mortgage, lease, agreement, or instrument to which the
Borrower is a party or which is binding upon it, (b) any 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. Each Borrower is duly
------------------------------
incorporated and organized and validly existing in good standing under the laws
of the States of Oklahoma and Delaware; (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.
39
<PAGE>
8.4 Corporate Name; Prior Transactions. The Borrower has not, during
----------------------------------
the past five years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its Property
out of the ordinary course of business, except as set forth on Exhibit E.
---------
8.5 Subsidiaries and Affiliates. Exhibit F is a correct and complete
--------------------------- ---------
list of the name and relationship to the Borrower of each and all of the
Borrower's Subsidiaries and other Affiliates, which list may be amended by
Borrower from time to time as LSB adds new or additional Subsidiaries or
Affiliates. Each Subsidiary is (a) duly incorporated and organized and validly
existing in good standing under the laws of its state of incorporation set forth
on Exhibit F and (b) qualified to do business as a foreign corporation and in
---------
good standing in the states set forth opposite its name on Exhibit F, which are
---------
the only states in which such qualification is necessary in order for it to own
or lease its Property and conduct its business, except where the failure to so
qualify would not have a material adverse effect on the CCI Consolidated
Borrowing Group taken as a whole.
8.6 Financial Statements and Projections.
------------------------------------
(a) LSB has delivered to the Lender the audited consolidated balance
sheet and related statements of income, retained earnings, statements of cash
flows, and changes in stockholders' equity for LSB, as of December 31, 1996 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 September 30, 1997 and for the nine months and three
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.
8.7 Capitalization. LSB's authorized capital stock consists of (i)
--------------
75,000,000 shares of Common Stock, par value $.10 per share; (ii) 250,000 shares
of Preferred Stock, par value $100 per share; and (iii) 5,000,000 shares of
Class C Preferred Stock, no par value. Climate Master's authorized capital
stock consists of 1,000 shares of Common Stock, par value $1.00 per share.
IEC's authorized capital stock consists of 300 shares of Common Stock, par value
$10.00 per share. EDC's authorized capital stock consists of 1,000 shares of
Common Stock, par value $1.00 per share. Slurry's authorized capital stock
consists of 1,000 shares of Common Stock, par value $1.00 per share.
8.8 Solvency. Each Borrower is solvent prior to and after giving
--------
effect to the making of the Revolving Loans, and after taking into account
Intercompany Accounts. If at any time any Borrower should become insolvent, LSB
shall have a period of up to ten (10) Business Days
40
<PAGE>
after LSB learns of such Borrower's insolvency within which to recapitalize such
Borrower in order to restore such Borrower to a solvent state.
8.9 Title to Property. Except for Permitted Liens, and except for
-----------------
Property which the Borrower leases, the Borrower has, to its knowledge, good and
marketable title in fee simple to the real property listed in Exhibit H and
---------
good, indefeasible, and merchantable title to all of its other Property free of
all Liens except Permitted Liens.
8.10 Real Property; Leases. Exhibit H hereto is a correct and
--------------------- ---------
complete list of all real property owned by the Borrower, and all leases and
subleases of real property by the Borrower as lessee or sublessee where
Collateral is located. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect and no
material default by any party to any such lease or sublease exists.
8.11 Proprietary Rights. Exhibit B hereto is a correct and complete
------------------ ---------
list of all of the Proprietary Rights owned by Borrower. None of the Proprietary
Rights is subject to any licensing agreement or similar arrangement except as
set forth on Exhibit B. To the Borrower's knowledge, none of the Proprietary
---------
Rights infringes on or conflicts with any other Person's Property. The
Proprietary Rights described on Exhibit B constitute all of the Property of such
---------
type necessary to the current and anticipated future conduct of the Borrower's
business.
8.12 Trade Names and Terms of Sale. All trade names or styles under
-----------------------------
which the Borrower will sell Inventory or create Accounts, or to which
instruments in Payment of Accounts may be made payable, are listed on Exhibit I
---------
hereto. The terms of sale on which such sales of Inventory will be made are set
forth on Exhibit I.
---------
8.13 Litigation. Except as set forth on Exhibit J or as described in
---------- ---------
the reports filed by LSB prior to the Closing Date with the Securities and
Exchange Commission or in the Offering Memorandum, there is no pending or, to
the Borrower's knowledge, threatened suit, proceeding, or counterclaim by any
Person, or investigation by any Public Authority, or any basis for any of the
foregoing, which would have a material adverse effect on the CCI Consolidated
Group, taken as a whole, or (ii) involve damages or a claim for damages in
excess of $1,000,000 and not fully covered by insurance.
8.14 Labor Disputes. Except as set forth on Exhibit K or as described
-------------- ---------
in reports filed by LSB prior to the Closing Date 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
CCI Consolidated Group, taken as a whole.
8.15 Environmental Laws. Except as disclosed on Exhibit M hereto or
------------------
as described in reports filed by LSB prior to the Closing Date with the
Securities and Exchange
41
<PAGE>
Commission or in the Offering Memorandum, and as hereafter disclosed by any
Borrower to Lender in writing, and to each 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 CCI Consolidated Group, taken as a whole;
(b) No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any 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 CCI Consolidated Group, taken as a
whole;
(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 CCI Consolidated Group, taken as a whole.
(f) No written notification of a release of Hazardous Substance has
been filed by or on behalf of the Borrower or in relation to any Property now
owned, operated or leased by the Borrower or previously owned, operated or
leased by the Borrower at the time such property was so owned, operated or
leased. No such Property is listed or proposed for listing on the National
Priority List promulgated pursuant to CERCLA, or on any similar state list of
sites requiring investigation or clean up.
(g) There are no environmental Liens on any material properties
owned or leased by the Borrower and no governmental actions have been taken or
are in process or pending which could subject any of such Properties to such
Liens.
(h) The Borrower shall promptly forward a copy to Lender of any
environmental written inspections, investigations or studies prepared by or to
be prepared by the Borrower relating to Properties now owned, operated or leased
by the Borrower; provided, however, that Borrower
42
<PAGE>
makes no representation or warranty with respect to environmental inspections,
investigations, studies, audits, tests, reviews or other analyses conducted by
or on behalf of Lender.
8.16 No Violation of Law. Except as disclosed in Exhibit J or in
------------------- ---------
reports filed by LSB prior to the Closing Date with the Securities and Exchange
Commission or the Offering Memorandum, to the Borrower's knowledge, the Borrower
is not in violation of any law, statute, regulation, ordinance, judgment, order,
or decree applicable to it which violation would have a material adverse effect
on the CCI Consolidated Group, taken as a whole.
8.17 No Default. The Borrower is not in default with respect to any
----------
note, loan agreement, mortgage, lease, or other agreement to which the Borrower
is a party or bound, where the amount owed by Borrower under such note, loan
agreement, mortgage, lease, or other agreement exceeds $750,000.
8.18 Plans. Each Plan has been maintained at all times in
-----
compliance, in all material respects, with its provisions and applicable law,
including, without limitation, compliance with the applicable provisions of
ERISA and the Code. All Pension Plans are listed on Exhibit L, and those, if
---------
any, which are a Multi-employer Plan are designated as such, and a copy of each
such Pension Plan which has been requested in writing by Lender has been
furnished to Lender. Except as set forth on Exhibit L, no Pension Plan has
---------
incurred any accumulated funding deficiency, as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code, whether or not waived, which would have a
material adverse effect on the CCI Consolidated Borrowing Group, taken as a
whole. Except as set forth on Exhibit L, each Pension Plan, which is intended to
---------
be a qualified Pension Plan under Section 401(a) of the Code, as currently in
effect has received a favorable determination letter from the Internal Revenue
Service finding that the current form of the Plan is qualified under Section
401(a) of the Code and the trust related thereto is exempt from federal income
tax under Section 501(a) of the Code. The Borrower has not incurred any
liability to the PBGC other than the payment of premiums, and there are no
premium payments which have become due, are unpaid, and the non-payment of which
would have a material adverse effect on the CCI Consolidated Group. 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 CCI Consolidated Group, taken as a
whole. The Borrower or LSB has established reserves on its books to provide for
the benefits earned and other liabilities accrued under each such Plan in
amounts sufficient to substantially provide for such benefits and liabilities
which have not been funded through the trust, if any, established for such Plan.
8.19 Taxes. Each Borrower has filed all tax returns and other reports
-----
which it was required by law to file on or prior to the date hereof and has paid
all taxes, assessments, fees, and other governmental charges, and penalties and
interest, if any, against it or its Property, income, or franchise, that are due
and payable, except such Taxes which are being contested in good faith and for
which appropriate reserves have been established in connection therewith, or for
which an extension as to the date of filing has been authorized.
8.20 Use of Proceeds. None of the transactions contemplated in this
---------------
Agreement (including, without limitation, the use of certain proceeds from such
loans) will violate or result in
43
<PAGE>
the violation of Section 7 of the Securities Exchange Act of 1934, as amended,
or any regulations issued pursuant thereto, including, without limitation,
Regulations G, 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 G. 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.
8.21 Private Offerings. Borrower has not, directly or indirectly,
-----------------
offered the Revolving Loans for sale to, or solicited offers to buy part thereof
from, or otherwise approached or negotiated with respect thereto with, any
prospective purchaser other than Lender. Borrower hereby agrees that neither it
nor anyone acting on its behalf has offered or will offer the Revolving Loan or
any part thereof or any similar securities for issue or sale to or solicit any
offer to acquire any of the same from anyone so as to bring the issuance thereof
within the provisions of Section 5 of the Securities Act of 1933, as amended.
8.22 Broker's Fees. Borrower represents and warrants to Lender that,
-------------
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission as a result of acts by the
Borrower and Borrower agrees to indemnify and hold Lender harmless against any
and all such claims if such claim is due to the acts of the Borrower.
8.23 No Material Adverse Change. Except as disclosed in the Offering
--------------------------
Memorandum or in the written materials delivered to Lender at a meeting held
with Borrower on October 7, 1997, no material adverse change has occurred in the
Property, business, operations, or conditions (financial or otherwise) of the
CCI Consolidated Group, taken as a whole, since the date of the most recent
Financial Statements delivered to the Lender.
8.24 Debt. After giving effect to the making of each Revolving Loan,
----
the Borrower has no Debt except Permitted Debt.
9. AFFIRMATIVE AND NEGATIVE COVENANTS. Each Borrower covenants that, so
----------------------------------
long as any of the Obligations remain outstanding or this Agreement is in
effect:
9.1 Taxes and Other Obligations. The Borrower, no later than ten
---------------------------
days after such payments become due, shall: (a) file when due (including
extensions) all tax returns and other reports which it is required to file, pay
when due all taxes, fees, assessments and other governmental charges against it
or upon its Property, income, and franchises, make all required withholding and
other tax deposits, and establish adequate reserves for the payment of all such
items, and shall provide to the Lender, upon request, satisfactory evidence of
its timely compliance with the foregoing; and (b) pay all Debt owed by it within
normal business terms and consistent with past practices; provided, however,
-------- -------
that the Borrower need not pay any tax, fee, assessment, governmental charge, or
Debt, or perform or discharge any other obligation, that it is contesting in
good faith by appropriate proceedings diligently pursued.
9.2 Corporate Existence and Good Standing. The Borrower shall
-------------------------------------
maintain its corporate existence and its qualification and good standing in all
states necessary to conduct its
44
<PAGE>
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 8.15, the Borrower will use
------------
all reasonable efforts to conduct its business in substantial compliance with
all Environmental Laws applicable to it, including, without limitation, those
relating to the Borrower's 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 the Borrower is not the survivor, or transfer, sell, assign, lease, or
otherwise dispose of all or substantially all of its Property, or wind up,
liquidate or dissolve, or agree to do any of the foregoing, except (i) sales of
Inventory in the ordinary course of its business, or (ii) after thirty (30) days
prior written notice to Lender, mergers or consolidations of any Borrower into
any other Borrower or the sale of all or substantially all of the assets of any
Borrower to any other Borrower.
9.6 Guaranties. The Borrower shall not make, issue, or become liable
----------
on any secured Guaranty, except Guaranties in favor of the Lender and
endorsements of instruments for deposit.
9.7 Debt. The Borrower shall not incur or maintain any Debt other
----
than Permitted Debt.
45
<PAGE>
9.8 Prepayment. The Borrower shall not voluntarily prepay any Debt,
----------
except the Obligations in accordance with the terms of this Agreement or
pursuant to Section 10.8 hereof.
------------
9.9 Transactions with Affiliates. Except (a) as set forth below, or
----------------------------
(b) as set forth in Section 9.14 hereof, or (c) transactions described in the
------------
"Certain Relationships and Related Transactions" section of the Offering
Memorandum, or (d) as otherwise provided in this Agreement, the Borrower shall
not sell, transfer, distribute, or pay any money or Property to any Affiliate,
or lend or advance money or Property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness,
or any Property, of any Affiliate, or become liable on any secured Guaranty of
the indebtedness, dividends, or other obligations of any Affiliate, except
nothing contained herein shall limit or restrict the Borrower from (i)
performing any agreements entered into with an Affiliate prior to the date
hereof, or (ii) engaging in other transactions with Affiliates in the normal
course of business, in amounts and upon terms disclosed to the Lender, and which
are no less favorable to the Borrower than would be obtainable in a comparable
arm's length transaction with a third party who is not an Affiliate. Subject to
applicable law, the CCI Borrower Subsidiaries, CCI and the CCI Guarantor
Subsidiaries may borrow any amounts from each other and repay such amounts on
terms agreed to between them without any limitations.
9.10 Plans and Compensation. The Borrower shall not take any action,
----------------------
or shall fail to take any action, that will cause or be reasonably expected to
cause any representation or warranty contained in Section 8.18 (other than the
------------
listing of Pension Plans on Exhibit L), if made on and again as of any date on
---------
or after the date of this Agreement, to not be true and, without limitation and
without excusing such violation, if such a prohibited action or inaction occurs
or fails to occur, Borrower shall notify Lender in writing of the nature of the
resulting consequences or expected consequences, and a description of the action
Borrower or any Subsidiary 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 Business Conducted. The Borrower shall not engage, directly or
------------------
indirectly, in any line of business which materially differs from the business
in which the Borrower is engaged on the Closing Date.
9.12 Liens. The Borrower shall not create, incur, assume, or permit to
-----
exist any Lien on any Property now owned or hereafter acquired by any of them,
except Permitted Liens.
9.13 New Subsidiaries. The Borrower shall not, directly or indirectly,
----------------
organize or acquire any new subsidiary which would have an interest in the
Collateral.
9.14 Distributions and Restricted Investments. 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: (i) Borrower may
make and receive Distributions and Restricted Investments to and from CCI, the
other CCI Borrower Subsidiaries, the CCI Guarantor Subsidiaries, and all other
members of the LSB Consolidated Borrowing Group; (ii) in addition to (i) above,
each Borrower may make Restricted Investments to any subsidiary of LSB other
than to CCI and the members of the LSB Consolidated Borrowing Group, provided,
however, that (other than Restricted Investments permitted under section (i)
above to CCI and the members of the LSB Consolidated
46
<PAGE>
Borrowing Group) the sum of all such Restricted Investments from each such
Borrower and all other members of the LSB Consolidated Borrowing Group shall not
exceed $200,000 in the aggregate per annum; (iii) each Borrower may make
Restricted Investments in Affiliates outstanding as of the date hereof; and (iv)
each Borrower may make other Restricted Investments constituting Acquisitions
not otherwise permitted above in this Section as long as such Restricted
Investments when aggregated with all other Restricted Investments for the same
Acquisition from all members of the LSB Borrowing Group do not exceed $2,000,000
in cash investments and issued and/or assumed interest-bearing debt per
Acquisition and $10,000,000 in cash investments and issued and/or assumed
interest-bearing debt in the aggregate for all such Acquisitions per annum;
provided, however, that interest-bearing debt of the acquired company which
Lender in its sole and absolute discretion agrees to refinance as a working
capital facility shall not be included in the $2,000,000 and the $10,000,000
limitations; and further provided that nothing in this subsection (iv) shall be
construed to imply Lender's willingness in advance to provide any such
refinancing, and (v) CCI may make the Distributions described on Schedule 10.8.
-------------
Notwithstanding any provision to the contrary contained herein, the Account
currently owing to EDC by its Affiliate, TES, may be converted to preferred
stock to be owned and controlled by EDC.
9.15 Capital Expenditures. Borrower shall not make or incur any
--------------------
Capital Expenditure if, after giving effect thereto, the aggregate amount of all
Capital Expenditures by the CCI Borrower Subsidiaries during the Fiscal Year
ending December 31, 1997 and during each Fiscal Year ending thereafter would
exceed $6,000,000.
9.16 CCI Adjusted Tangible Net Worth. The CCI Adjusted Tangible
-------------------------------
Net Worth will not be less than the following amounts at the end of each of the
Fiscal Quarters during the following Fiscal Years:
<TABLE>
<CAPTION>
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal Year Ending
December 31, 1997 $21,000,000
Fiscal Year Ending
December 31, 1998 $23,500,000 $27,000,000 $27,500,000 $27,400,000
Fiscal Year Ending
December 31, 1999 $29,000,000 $33,200,000 $36,500,000 $45,300,000
Fiscal Year Ending
December 31, 2000 $49,200,000 $55,400,000 $60,500,000 $65,500,000
Each Fiscal Quarter during each Fiscal Year ending thereafter: $65,500,000
</TABLE>
47
<PAGE>
9.17 Debt Ratio. The ratio of Debt of the CCI Consolidated Group to
----------
the CCI Adjusted Tangible Net Worth will not be greater than the following
ratios at the end of each of the Fiscal Quarters during the following Fiscal
Years :
<TABLE>
<CAPTION>
Fiscal Quarters in the
Following Fiscal Years 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal Year Ending
December 31, 1997 7.9:1
Fiscal Year Ending
December 31, 1998 7.58:1 6.33:1 6.17:1 6.10:1
Fiscal Year Ending
December 31, 1999 6.30:1 5.40:1 4.70:1 3.80:1
Fiscal Year Ending
December 31, 2000 3.50:1 3.00:1 2.70:1 2.50:1
Each Fiscal Quarter during each Fiscal Year ending thereafter: 2.50:1
</TABLE>
9.18 Further Assurances. Each 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. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated to
------------------------------
make any Loans or issue any Letters of Credit at the Closing unless the
following conditions precedent have been satisfied as reasonably determined by
the Lender:
10.1 Representations and Warranties; Covenants; Events. Each
-------------------------------------------------
Borrower's representations and warranties contained in this Agreement and the
other Loan Documents shall be correct and complete as of the Closing Date; each
Borrower shall have performed and complied with all covenants, agreements, and
conditions contained herein and in the other Loan Documents which are required
to have been performed or complied with on or before the Closing Date; and there
shall exist no Event of Default on the Closing Date.
10.2 Delivery of Documents. Each Borrower shall have delivered, or
---------------------
cause to be delivered, to the Lender the documents listed on Exhibit N hereto
---------
and such other documents, instruments and agreements as the Lender shall request
in connection herewith, duly executed by all parties thereto other than the
Lender, and in form and substance satisfactory to the Lender and its counsel.
10.3 Required Approvals. The Lender shall have received certified
------------------
copies of all consents or approvals of any Public Authority or other Person
which the Lender reasonably determines is required in connection with the
transactions contemplated by this Agreement.
48
<PAGE>
10.4 No Material Adverse Change. There shall have occurred no material
--------------------------
adverse change in the Borrower's, LSB's, and the Subsidiaries' business or
financial condition or in the Collateral taken as a whole, since September 30,
1997, except as disclosed to Lender in the written materials delivered to Lender
at a meeting held with Borrower on October 7, 1997, and the Lender shall have
received a certificate of Borrower's and LSB's chief executive officer to such
effect.
10.5 Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement, and all documents contemplated in
connection herewith, shall be satisfactory in form and substance to the Lender
and its counsel.
10.6 Legal Opinions. The Lender shall have received from counsel to
--------------
the Borrower such legal opinions as the Lender may reasonably require with
respect to the Loan Documents.
10.7 September 30, 1997 Quarterly Financial Statements. The Lender
-------------------------------------------------
shall have received LSB's and the Subsidiaries' consolidated September 30, 1997,
unaudited quarterly financial statements.
10.8 CCI Bond Offering. CCI will have raised at least $100,000,000 in
-----------------
Bond Debt, less commissions and discounts, part of the proceeds of which will
have been used to repay all Debt owed to John Hancock, with the remaining
proceeds to be distributed as set forth on Schedule 10.8 hereof.
-------------
10.9 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 after the Closing and after the initial Revolving Loans on the Closing
Date are made, shall be subject to the further conditions precedent that on the
date of any such extension of credit, the following statements shall be true,
and the acceptance by the 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:
49
<PAGE>
(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 any Borrower or CCI in
this Agreement, or in any of the other Loan Documents, or, in any Financial
Statement, or any certificate furnished by any Borrower or CCI 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 by Borrower or CCI shall occur in the observance or
performance of any of the covenants and agreements contained in this Agreement,
or in any of the other Loan Documents, or if any such agreement or document
shall terminate (other than in accordance with its terms or the terms hereof or
with the written consent of the Lender) or become void or unenforceable without
the written consent of the Lender other than as a direct result of any conduct
solely on the part of the Lender;
(d) any default by Borrower or CCI 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 CCI and the CCI
Borrower Subsidiaries, taken as a whole, and such default continues for thirty
(30) days after such breach first occurs; provided, however, that such grace
period shall not apply, and an Event of Default shall exist, promptly upon such
breach, if such breach may not, in Lender's reasonable determination, be cured
by Borrower during such thirty (30) day grace period;
(e) any default by any Borrower in any payment of principal of or
interest on any indebtedness (other than the Obligations) for borrowed money
where the then outstanding amount exceeds $500,000 beyond any period of grace
provided with respect thereto or in the performance of any other agreement, term
or condition contained in any agreement under which any such obligation is
created if (i) the effect of such default is to cause or permit the holder or
holders of such obligation to cause, such obligation to become due prior to its
stated maturity, and (ii) the effect of such default would have a material
adverse effect on the Borrower.
(f) any Borrower or CCI shall make a general assignment for benefit
of creditors; or any proceeding shall be instituted by any Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or seeking entry of an order for relief or
the appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property or any Borrower shall take any corporate
action to authorize any of the actions set forth above in this Subsection
----------
11.1(f).
- -------
(g) an involuntary petition shall be filed or an action or proceeding
otherwise commenced against any Borrower or CCI seeking reorganization,
arrangement or readjustment of such 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;
50
<PAGE>
(h) a receiver, assignee, liquidator, trustee or similar officer for
any Borrower or CCI or for all or substantially all of its Property shall be
appointed involuntarily;
(i) any Borrower or CCI shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in furtherance
thereof, except if one Borrower merges or consolidates with another Borrower;
(j) the CCI Guaranty or any Guaranty executed by any of the CCI
Guarantor Subsidiaries shall be terminated, revoked or declared void or invalid
other than by an action undertaken by Lender;
(k) one or more final judgments for the payment of money aggregating
in excess of $1,000,000 (not covered by insurance) shall be rendered against any
of the CCI Borrower Subsidiaries or CCI, and such other entity 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 CCI Consolidated Group take as a whole; or (ii) is material in amount and is
not adequately covered by insurance;
(m) CCI ceases to control each Borrower (the term control having the
meaning given to it in the definition of Affiliate herein);
(n) any event or condition shall occur, or exist with respect to a
Plan that would, in the Lender's reasonable judgment, subject the Borrower 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 CCI
Consolidated Group taken as a whole;
(o) there occurs after the date hereof an Ownership Change (as
defined below) in LSB. For purposes of this Agreement, an "Ownership Change" in
LSB is deemed to have occurred if any Person (except Jack E. Golsen, members of
his Immediate Family [as defined below] and any entity controlled by Jack E.
Golsen or members of his Immediate Family), together with such Person's
affiliates and associates, is or becomes the beneficial owner, directly or
indirectly, of more than fifty percent (50%) of the outstanding Common Stock of
LSB. The term "Immediate Family" of any Person means the spouse, siblings,
children, mothers and mothers-in-law, fathers and fathers-in-law, sons and
daughters-in-law, daughters and sons-in-law, nieces, nephews, brothers and
sisters-in-law, sisters and brothers -in-law; and
(p) any "event of default" (as such term is defined in the Bond
Indenture) occurs under the Bond Indenture or any of the Notes issued in
connection therewith.
11.2 Remedies.
--------
51
<PAGE>
(a) If an Event of Default exists, the Lender may, without notice to
or demand on the 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 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, the 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, the 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. The 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,
the 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.
52
<PAGE>
(c) If an Event of Default occurs and is continuing, the 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.
(d) If the Lender terminates this Agreement upon an Event of Default
that has not been cured or otherwise waived to Lender's satisfaction, the
Borrower shall pay the Lender, immediately upon termination, an early
termination penalty equal to the early termination fee that would have been
payable under Article 12 if this Agreement had been terminated on that date
----------
pursuant to the Borrower's election.
12. TERM AND TERMINATION. The term of this Agreement shall extend until
--------------------
December 31, 2000 (the "Termination Date"). This Agreement shall automatically
be renewed thereafter for successive terms of thirteen (13) months each, unless
this Agreement is terminated as provided below. The Lender and the Borrower
shall each have the right to terminate this Agreement, without premium or
penalty, at the end of the initial term or at the end of any renewal term by
giving the other written notice not less than sixty (60) days prior to the end
of such term by registered or certified mail. The Borrower may also terminate
this Agreement at any time during its initial term or any renewal periods if:
(a) it gives the Lender sixty (60) days prior written notice of termination by
registered or certified mail; (b) it pays and performs all Obligations on or
prior to the effective date of termination; and (c) except as otherwise provided
herein, it pays the Lender, on or prior to the effective date of termination,
one percent (1%) of the average daily balance of the Revolving Loans and Letters
of Credit outstanding under this Agreement for the preceding one hundred eighty
day (180) day period (or from the Closing Date up to and including the date of
termination if less than one hundred eighty (180) days from the Closing Date) if
such termination is made on or prior to the Termination Date. The Lender may
also terminate this Agreement without notice upon an Event of Default that has
not been cured or otherwise waived to Lender's satisfaction. Upon the effective
date of termination of this Agreement for any reason whatsoever, all Obligations
shall become immediately due and payable. Notwithstanding the termination of
this Agreement, until all Obligations are paid and performed in full, the Lender
shall retain all its rights and remedies hereunder (including, without
limitation, in all then existing and after-arising Collateral).
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
53
<PAGE>
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.
-----------------------------------------------------
The Borrower agrees that, in addition to any other courts that may
have jurisdiction under applicable laws, any action or proceeding to enforce or
arising out of this Agreement or any of the other Loan Documents may be
commenced in the appropriate court of the State of Oklahoma for Oklahoma County,
or in the United States District Court for the Western District of Oklahoma, and
each Borrower consents and submits in advance to such jurisdiction and agrees
that venue will be proper in such courts on any such matter. Borrower hereby
waives personal service of process and agrees that a summons and complaint
commencing an action or proceeding in any such court shall be properly served
and shall confer personal jurisdiction if served by registered or certified mail
to the Borrower. Should the Borrower fail to appear or answer any summons,
complaint, process or papers so served within thirty (30) days after the mailing
or other service thereof, it shall be deemed in default and an order or judgment
may be entered against it as demanded or prayed for in such summons, complaint,
process or papers. The choice of forum set forth in this section shall not be
deemed to preclude the enforcement of any judgment obtained in such forum, or
the taking of any action under this Agreement to enforce the same, in any
appropriate jurisdiction.
13.6 Survival of Representations and Warranties. All of the
------------------------------------------
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. EACH BORROWER HEREBY INDEMNIFIES, DEFENDS AND
---------------
HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL ARISING
OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR
54
<PAGE>
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, 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 the 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-
55
<PAGE>
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 the Borrower was obligated to pay or take under the Loan Documents but
failed to pay or take; (f) the expenses of $500 per Lender's auditor per audit
day plus actual costs of appraisals, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and meals, for
inspections of the Collateral and the Borrower's operations by the Lender's
agents up to three times per year and whenever an Event of Default exists; (g)
costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining Payment Accounts and lock
boxes; (h) all amounts that the 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.
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: BankAmerica Business Credit, Inc.
55 North Lake Avenue, Suite 900
Pasadena, California 91101
Attn: Ms. Joyce White
Executive Vice President, West Division Manager
with a copy to: Bank of America - Business Credit Legal Dept.
10124 Old Grove Road
San Diego, California 92131
Attn: Thomas G. Montgomery, Esq.
Assistant General Counsel
and with a copy to: Jenkens & Gilchrist, A Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75201
Attn: Linda D. Sartin, Esq.
56
<PAGE>
If to the Borrower: ClimaChem, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attn: Mr. Jack E. Golsen
President
and with a copy to: Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102-7101
Attn: Irwin H. Steinhorn, Esq.
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
13.11 Waiver of Notices. Unless otherwise expressly provided herein,
-----------------
the Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate and notice of
acceleration, as well as any and all other notices to which it might otherwise
be entitled. No notice to or demand on the Borrower which the Lender may elect
to give shall entitle the Borrower to any further notice or demand in the same,
similar or other circumstances.
13.12 Binding Effect; Assignment; Disclosure. The provisions of this
--------------------------------------
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto: provided,
however, that no interest herein may be assigned by the 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. The 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 THE 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 THE BORROWER
AND A DULY AUTHORIZED OFFICER OF THE LENDER.
57
<PAGE>
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, the Borrower hereby grants to such Participating Lender,
and the Lender and such Participating Lender shall have and are hereby given, a
continuing lien on and security interest in any money, securities and other
property of the Borrower in the custody or possession of the Participating
Lender, including, the right of set-off, to the extent of the Participating
Lender's participation in the Obligations, and such Participating Lender shall
be deemed to have the, same right of set-off, to the extent of the Participating
Lender's participation in the Obligations under this Agreement, as it would have
if it were a direct lender.
13.18 WAIVER OF JURY TRIAL. LENDER AND EACH BORROWER ACKNOWLEDGE AND
--------------------
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER 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.
58
<PAGE>
13.19 AMENDMENT AND RESTATEMENT. THIS AGREEMENT AMENDS, EXTENDS AND
-------------------------
RESTATES IN ITS ENTIRETY THE ORIGINAL LOAN AGREEMENTS. 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 ORIGINAL LOAN AGREEMENTS. EACH BORROWER REPRESENTS AND WARRANTS THAT AS
OF THE CLOSING DATE THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE ORIGINAL LOAN AGREEMENTS OR ANY OTHER
LOAN DOCUMENTS. EACH BORROWER WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES
OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE CLOSING DATE.
13.20 CROSS-COLLATERALIZATION AND CROSS-GUARANTIES. EACH BORROWER
--------------------------------------------
UNDER THIS AGREEMENT HEREBY IRREVOCABLY, ABSOLUTELY, AND UNCONDITIONALLY
GUARANTEES THE FULL AND PROMPT PAYMENT TO LENDER WHEN DUE, WHETHER BY
ACCELERATION OR OTHERWISE, OF ANY AND ALL OBLIGATIONS OF EACH OTHER BORROWER
UNDER THIS AGREEMENT, WHETHER SUCH OBLIGATIONS EXIST NOW OR ARE HEREAFTER
INCURRED. IN ADDITION ALL INDEBTEDNESS, OBLIGATIONS, AND LIABILITIES OWING AND
WHICH MAY HEREAFTER BE OWING TO LENDER UNDER THIS AGREEMENT, BY ANY OF THE CCI
BORROWER SUBSIDIARIES, JOINTLY AND SEVERALLY OR BY ANY INDIVIDUAL MEMBER OF THE
CCI BORROWER SUBSIDIARIES UNDER THIS AGREEMENT, SHALL BE SECURED BY ALL OF THE
COLLATERAL FROM TIME TO TIME GRANTED TO LENDER PURSUANT TO THIS AGREEMENT OR ANY
OTHER DOCUMENT OR INSTRUMENT EXECUTED AND/OR DELIVERED IN CONNECTION HEREWITH,
AND LENDER MAY HOLD AND APPLY AND REAPPLY ALL MONEY, PROPERTY AND OTHER SUCH
COLLATERAL AT ANY TIME RECEIVED BY LENDER IN PAYMENT OF ANY INDEBTEDNESS,
OBLIGATIONS OR LIABILITIES OF THE CCI BORROWER SUBSIDIARIES OR ANY MEMBER
THEREOF UNDER THIS AGREEMENT OR UNDER ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED
AND/OR DELIVERED IN CONNECT HEREWITH.
59
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER":
CLIMATE MASTER, INC.
By:___________________________________________
David R. Goss
Vice President
INTERNATIONAL ENVIRONMENTAL CORPORATION
By:___________________________________________
David R. Goss
Vice President
EL DORADO CHEMICAL COMPANY
By:___________________________________________
Name: David R. Goss
Title: Vice President
SLURRY EXPLOSIVE CORPORATION
By:___________________________________________
David R. Goss
Vice President
60
<PAGE>
"LENDER":
BANKAMERICA BUSINESS CREDIT, INC.
By:___________________________________________
Daniel J. Ujfalusy
Senior Vice President
61
<PAGE>
EXHIBITS TO LOAN AGREEMENT
--------------------------
EXHIBIT A - Permitted Liens
EXHIBIT B - Proprietary Rights
EXHIBIT C - Guarantor Subsidiaries
EXHIBIT D - List of Borrower's Locations
EXHIBIT E - Corporate History
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 N - Closing Documents
EXHIBIT O - Letter of Credit Financing Agreement - Supplement to
Amended and Restated Loan and Security Agreement
EXHIBIT P - Notice of Borrowing
Schedule 10.9 Distribution of Bond Proceeds
62
<PAGE>
EXHIBIT 10.3
CONTINUING GUARANTY
-------------------
This Continuing Guaranty (herein referred to as the "Guaranty") is executed
as of the 21st day of November, 1997, by CLIMACHEM, INC., a Delaware
corporation, whose place of business is 16 South Pennsylvania, Oklahoma City,
Oklahoma 73107 (herein referred to as the "Guarantor"), in order to induce
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, with an office at 55
South Lake Avenue, Suite 900, Pasadena, California 91101 (herein referred to as
"Secured Party" or "Lender"), to continue to provide financial accommodations to
(i) El Dorado Chemical Company, an Oklahoma corporation ("EDC"), with offices at
P.0. Box 231, El Dorado, Arizona 71730, (ii) Slurry Explosive Corporation, an
Oklahoma corporation ("Slurry"), with offices at 5700 N. Portland, Oklahoma
City, Oklahoma 73112, (iii) Climate Master, Inc., a Delaware corporation
("CMI"), with offices at 7300 S.W. 44th, Oklahoma City, Oklahoma 73125, and (iv)
International Environmental Corporation, an Oklahoma corporation ("IEC"), with
offices at 5000 West I-40, Oklahoma City, Oklahoma 73128 (EDC, Slurry, CMI, and
IEC are herein individually and collectively referred to as "Debtor").
WITNESSETH:
WHEREAS, Debtor and Lender, concurrently with the execution and delivery of
this Guaranty, have entered into that certain Amended and Restated Loan and
Security Agreement (herein referred to as the "Loan Agreement") dated of even
date herewith, by and among EDC, Slurry, CMI, IEC and Lender;
WHEREAS, Guarantor will directly and indirectly benefit from the loans
evidenced and governed by the Loan Agreement and the other transactions
evidenced by and contemplated in the Loan Documents described therein;
WHEREAS, Lender has requested this Guaranty as a condition to its execution
and delivery of the Loan Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. Definitions. Unless otherwise defined in this Guaranty, all defined
-----------
terms used in this Guaranty shall have the meanings ascribed to such terms in
the Loan Agreement.
2. Guaranty of Payment.
-------------------
(a) Guarantor and any debtor-in-possession or trustee in bankruptcy which
succeeds to the interest of Guarantor hereby unconditionally guarantees the full
and prompt payment to Secured Party when due and after any applicable grace
periods, whether by acceleration or otherwise, of any and all Indebtedness (as
hereinafter defined) of Debtor to Secured Party.
<PAGE>
(b) As used in this Guaranty, "Indebtedness" shall mean any and all
indebtedness of Debtor to Secured Party under the Loan Agreement, and all
extensions, renewals and replacements thereof, including, without limitation,
all unpaid accrued interest thereon and all costs and expenses payable as
therein provided: (i) whether now existing or hereafter incurred; (ii) whether
direct, indirect, primary, absolute, secondary, contingent, secured, unsecured,
matured or unmatured; (iii) whether such indebtedness is from time to time
reduced and thereafter increased, or entirely extinguished and thereafter
reincurred; and (iv) whether or not such indebtedness is evidenced by a
negotiable or nonnegotiable instrument or any other writing; and (v) whether
such indebtedness is contracted by Debtor alone or jointly or severally with
another or others. Notwithstanding that Debtor may not be obligated to Secured
Party for interest and/or attorneys' fees and expenses on, or in connection
with, the Indebtedness from and after the Petition Date (as hereinafter defined)
as a result of the provisions of the federal bankruptcy law or otherwise,
Indebtedness for which Guarantor shall be obligated under this Guaranty shall
include interest accruing on the Indebtedness at the highest rate provided for
in the Loan Agreement from and after the date on which Debtor files for
protection under the federal bankruptcy laws or from and after the date on which
an involuntary proceeding is filed against Debtor under the federal bankruptcy
laws (herein collectively referred to as the "Petition Date") and all reasonable
attorneys' fees and expenses incurred by the Secured Party from and after the
Petition Date in connection with the Indebtedness.
(c) Guarantor acknowledges that valuable consideration supports this
Guaranty, including, without limitation, any commitment to lend, extension of
credit or other financial accommodation, whether heretofore or hereafter made by
Secured Party to Debtor; any extension, renewal or replacement of any
Indebtedness; any forbearance with respect to any Indebtedness or otherwise; any
cancellation of an existing guaranty; or any other valuable consideration.
3. Secured Party's Costs and Expense. Guarantor agrees to pay on demand
---------------------------------
all costs and expenses of every kind incurred by Secured Party: (a) in enforcing
this Guaranty; (b) in collecting any Indebtedness from Debtor or Guarantor after
the occurrence of an Event of Default that is continuing; (c) in realizing upon
or protecting any collateral for this Guaranty or for payment of any
Indebtedness; and (d) for any other purpose related to the Indebtedness or this
Guaranty. "Costs and expenses" as used in the preceding sentence shall include,
without limitation, reasonable attorneys' fees incurred by Secured Party in
retaining counsel for advice, suit, appeal, any insolvency or other proceedings
under the Federal Bankruptcy Code or otherwise, or for any purpose specified in
the preceding sentence.
2
<PAGE>
4. Nature of Guaranty: Continuing, Absolute and Unconditional.
----------------------------------------------------------
(a) This Guaranty is and is intended to be a continuing guaranty of
payment of the Indebtedness (irrespective of the aggregate amount thereof)
independent of and in addition to any other guaranty, endorsement, collateral or
other agreement held by Secured Party therefor or with respect thereto, whether
or not furnished by Guarantor.
(b) This Guaranty is absolute and unconditional and shall not be changed
or affected by any representation, oral agreement, act or thing whatsoever,
except as herein provided. This Guaranty is intended by Guarantor to be the
final, complete and exclusive expression of the agreement between Guarantor and
Secured Party relating to this Guaranty. No modification or amendment of any
provision of this Guaranty shall be effective unless in writing and signed by a
duly authorized officer of Secured Party, and then shall be effective in the
specific instance and for the specific purpose given.
5. Certain Rights and Obligations.
------------------------------
(a) Guarantor authorizes Secured Party, without notice, demand or any
reservation of rights against Guarantor and without affecting Guarantor's
obligations hereunder, from time to time: (i) to renew, extend, increase,
accelerate (pursuant to the terms of the Loan Agreement) or otherwise change the
time for payment of, the terms of, or the interest on, the Indebtedness or any
part thereof; (ii) to accept from any person or entity and hold collateral for
the payment of the Indebtedness or any part thereof, and to exchange, enforce or
refrain from enforcing, or release, such collateral or any part thereof; (iii)
to accept and hold any indorsement or guaranty of payment of the Indebtedness or
any part thereof, and to discharge, release or substitute any such obligation of
any such indorser or guarantor, or any person or entity who has given any
security interest in any collateral as security for the payment of the
Indebtedness or any part thereof, or any other person or entity in any way
obligated to pay the Indebtedness or any part thereof, and to enforce or refrain
from enforcing, or compromise or modify, the terms of any obligation of any such
indorser, guarantor, person or entity; (iv) to dispose of any and all collateral
securing the Indebtedness in any manner as Secured Party, in its sole
discretion, may deem appropriate, and to direct the order or manner of such
disposition and the enforcement of any and all endorsements and guaranties
relating to the Indebtedness or any part thereof as Secured Party, in its sole
discretion, may determine; and (v) to determine the manner, amount and time of
application of payments and credits, if any, to be made on all or any part of
any component or components of the Indebtedness (whether principal, interest,
costs and expenses, or otherwise).
3
<PAGE>
(b) If any default shall be made in the payment of any Indebtedness after
such is due and after expiration of applicable grace periods, Guarantor hereby
agrees to pay the same in full: (i) without deduction by reason of any setoff,
defense or counterclaim of Debtor; (ii) without requiring protest or notice of
nonpayment or notice of default to Guarantor, to Debtor or to any other person;
(iii) without demand for payment or proof of such demand; (iv) without requiring
Secured Party to resort first to Debtor (this being a guaranty of payment and
not of collection) or to any other guaranty or any collateral which the Secured
Party may hold; (v) without requiring notice of acceptance hereof or assent
hereto by Secured Party; and (vi) without requiring notice that any Indebtedness
has been incurred or of the reliance by the Secured Party upon this Guaranty;
all of which Guarantor hereby waives.
(c) Guarantor's obligation hereunder shall not be affected by any of the
following, all of which Guarantor hereby waives: (i) any failure to perfect or
continue the perfection of any security interest in or other lien on any
collateral securing payment of any Indebtedness or Guarantor's obligations
hereunder; (ii) the invalidity, unenforceability, propriety or manner of
enforcement of, or loss or change in priority of, any such security interest or
other lien; (iii) any failure to protect, preserve or insure any such
collateral; (iv) failure of Guarantor to receive notice of any intended
disposition of such collateral; (v) any defense arising by reason of the
cessation from any cause whatsoever of liability of the Debtor including,
without limitation, any failure, negligence or omission by Secured Party in
enforcing its claims against the Debtor or any person liable for all or any part
of the Indebtedness; (vi) any release, settlement or compromise of any
obligation of Debtor; (vii) the invalidity or unenforceability of any of the
Indebtedness, or (viii) it is especially and expressly agreed that if the
indebtedness of said Debtor now or at any time hereafter exceeds the amount
permitted by law, or if any Debtor's obligation to pay interest, attorneys'
fees, costs or expenses or any other sums ceases to exist by operation of law,
or if said Debtor is not liable because the act of creating the obligation is
ultra vires, or the officers creating same acted without authority, and for
- ----- -----
these reasons the indebtedness to Secured Party which Guarantor agrees to pay
cannot be enforced against the Debtor, such fact shall in no manner affect
Guarantor's liability hereunder, notwithstanding the fact that said Debtor is
not liable for such indebtedness, but Guarantor shall be liable hereunder to the
same extent as Guarantor would have been if the indebtedness of the said Debtor
had been fully enforceable against said Debtor.
6. Other Parties; Joint and Several Liability.
------------------------------------------
(a) If more than one party executes this Guaranty, or if other separately
executed guaranties of the Indebtedness presently, or in the future, exist,
Secured Party shall have the right to discharge or release one or more of the
undersigned from any
4
<PAGE>
obligation hereunder, in whole or in part, without in any way releasing,
impairing or affecting its right against the other or others of the undersigned.
The failure of any other person to sign this Guaranty shall not release or
affect the obligations or liability of any of the undersigned.
(b) If more than one party executes this Guaranty, the obligations of the
undersigned hereunder shall be joint and several, and the term "Guarantor" shall
include each as well as all of them.
7. Guaranty of Performance. Guarantor also guarantees the full, prompt
-----------------------
and unconditional performance of all obligations and agreements of every kind
owed or hereafter to be owed by Debtor to Secured Party under the Loan
Agreement.
8. RESERVED.
--------
9. Termination. This Guaranty shall remain in full force and effect as to
-----------
the Guarantor until Secured Party shall actually receive from such Guarantor
written notice of its discontinuance, or notice of the death or judicial
declaration of incompetency of such Guarantor; provided, however, this Guaranty
shall remain in full force and effect thereafter until all Indebtedness
outstanding or contracted or committed for (whether or not outstanding) before
the receipt of such notice by Secured Party, and any extensions, renewals or
replacements thereof (whether made before or after receipt of such notice),
together with interest accruing thereon after such notice, shall be finally and
irrevocably paid in full. Discontinuance of this Guaranty as to one Guarantor
shall not operate as a discontinuance hereof as to any other Guarantor. Payment
of all of the Indebtedness from time to time shall not operate as a
discontinuance of this Guaranty, unless notice of discontinuance as above
provided has theretofore actually been received by Secured Party. If after
receipt of any payment of all or any part of the Indebtedness, Secured Party is
for any reason compelled to surrender such payment to any person or entity,
because such payment is determined to be void or voidable as a preference,
impermissible setoff, or a diversion of trust funds, or for any reason, this
Guaranty shall continue in full force notwithstanding any contrary action which
may have been taken by Secured Party in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Secured Party's rights
under this Guaranty and shall be deemed to have been conditioned upon such
payment having become final and irrevocable.
10. Representations and Warranties. Guarantor represents and warrants to
------------------------------
Secured Party as follows:
(a) Guarantor has the corporate power and authority to execute, deliver
and perform its obligations under this Guaranty, and this Guaranty constitutes
the legal, valid and binding
5
<PAGE>
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as limited by bankruptcy, insolvency, fraudulent conveyance or
other laws of general application relating to the enforcement of creditor's
rights.
(b) The execution, delivery, and performance by Guarantor of this Guaranty
will not conflict with, result in a breach of, or constitute a default under, or
result in the imposition of any lien upon any assets of Guarantor pursuant to
the provisions of, any material indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or other instrument or agreement to which
Guarantor or its properties is bound.
(c) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party is
necessary for the execution, delivery or performance by Guarantor of this
Guaranty or the validity or enforceability thereof, except as may be required
under the Uniform Commercial Code and applicable state law to perfect Lender's
rights in and to the Collateral.
(d) Guarantor and Debtor are members of an affiliated and integrated group
of corporations and are engaged in related businesses and supporting lines of
business; Guarantor has received and will receive a direct and indirect material
benefit from the transactions evidenced by and contemplated in the Loan
Agreement and the other Loan Documents; this Guaranty is given by Guarantor in
furtherance of the direct and indirect business interests and corporate purposes
of Guarantor, and is necessary to the conduct, promotion and attainment of the
businesses of Debtor and Guarantor; and the value of the consideration received
and to be received by Guarantor is reasonably worth at least as much as the
liability and obligation of Guarantor hereunder;
(e) Guarantor is familiar with, and has independently received books and
records regarding, the financial condition of Debtor and is familiar with the
value of any and all collateral (if any) intended to secure the Indebtedness;
however, Guarantor is not relying on such financial condition or any such
collateral (if any) as an inducement to enter into this Guaranty;
(f) Guarantor has not been induced to enter into this Guaranty on the
basis of a contemplation, belief, understanding or agreement that any Person
other than Guarantor will be liable to pay the Indebtedness; and
(g) Neither Lender nor any other Person has made any representation,
warranty or statement to, or promise, covenant or agreement with, Guarantor in
order to induce Guarantor to execute this Guaranty.
6
<PAGE>
11. Covenants. Guarantor covenants and agrees that, as long as the
---------
Indebtedness or any part thereof is outstanding or Secured Party has any
commitment to Debtor:
(a) Guarantor will furnish promptly to Secured Party written notice of the
occurrence of any default under this Guaranty;
(b) Guarantor will furnish promptly to Secured Party such additional
information concerning Guarantor as Secured Party may request;
(c) Guarantor will obtain at any time and from time to time all
authorizations, licenses, consents or approvals as shall now or hereafter be
necessary or desirable under all applicable laws or regulations or otherwise in
connection with the execution, delivery and performance of this Guaranty and
will promptly furnish copies thereof to Secured Party; and
(d) Guarantor will not use any of the Revolving Loans to make any
Distributions or Restricted Investments to any of its Affiliates or Subsidiaries
except as allowed under Section 9.14 of the Loan Agreement.
12. Right of Setoff. During the existence of an Event of Default the
---------------
Guarantor grants to Lender a right of setoff upon any and all monies, securities
or other property of Guarantor, and the proceeds therefrom, now or hereafter
held or received by or in transit to Lender from or for the account of
Guarantor, whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and all deposits (general or special) and credits
of Guarantor, and any and all claims of Guarantor against Lender at any time
existing. The right of setoff granted pursuant to this Paragraph shall be
cumulative of and in addition to Lender's common law right of setoff.
13. Miscellaneous.
-------------
(a) "Debtor" and "Guarantor" as used in this Guaranty shall include: (i)
in the case of a partnership Debtor or Guarantor, any new partnership which
shall have been created by reason of the admission of any new partner or
partners therein or by reason of the dissolution of the existing partnership by
voluntary agreement or the death, resignation or other withdrawal of any
partner; and (ii) in the case of a corporate Debtor, any other corporation into
or with which Debtor shall have been merged, consolidated, reorganized or
absorbed.
(b) Without limiting any other right of Secured Party, whenever Secured
Party has the right to declare any Indebtedness to be immediately due and
payable (whether or not it has so declared) under the terms of the Loan
Agreement, Secured Party at its sole election may set off against the
Indebtedness any and all monies
7
<PAGE>
then owed to Guarantor by Secured Party in any capacity, and Secured Party shall
be deemed to have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on Secured Party's
records subsequent thereto.
(c) Guarantor's obligation hereunder is to pay the Indebtedness in full
when due after expiration of the applicable grace periods according to its
terms, and shall not be affected by any extension of time for payment by the
Debtor resulting from any proceeding under the Federal Bankruptcy Code or any
similar law.
(d) No course of dealing between Debtor or Guarantor and Secured Party and
no act, delay or omission by Secured Party in exercising any right or remedy
hereunder or with respect to the Indebtedness shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. Secured Party may remedy any default by Debtor under any
agreement with Debtor or with respect to the Indebtedness in any reasonable
manner without waiving the default remedied and without waiving any other prior
or subsequent default by Debtor. All rights and remedies of Secured Party
hereunder are cumulative.
(e) Secured Party and Guarantor as used herein shall include the
successors or assigns of those parties. The rights and benefits of Secured Party
hereunder shall, if Secured Party so directs, inure to any party acquiring any
interest in the Indebtedness or any part thereof. If any right of Secured Party
hereunder is construed to be a power of attorney, such power of attorney shall
not be affected by the subsequent disability or incompetence of Guarantor.
(f) Captions of the paragraphs of this Guaranty are solely for the
convenience of Secured Party and Guarantor, and are not an aid in the
interpretation of this Guaranty.
(g) GUARANTOR AGREES THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING
OUT OF THIS GUARANTY MAY BE COMMENCED IN THE DISTRICT COURT LOCATED IN OKLAHOMA
COUNTY, OKLAHOMA, OR IN THE DISTRICT COURT OF THE UNITED STATES LOCATED IN THE
WESTERN DISTRICT OF OKLAHOMA, IN WHICH SECURED PARTY HAS AN OFFICE, AND
GUARANTOR 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 MAIL TO
GUARANTOR, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF OKLAHOMA OR THE
UNITED STATES.
(h) If any provision of this Guaranty is unenforceable in whole or in part
for any reason, the remaining provisions shall continue to be effective.
Furthermore, in lieu of such illegal,
8
<PAGE>
invalid or unenforceable provision there shall be added automatically as a part
of this Guaranty a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
No provision herein or in any other Loan Document evidencing the Indebtedness
shall require the payment or permit the collection of interest in excess of the
maximum permitted by applicable law.
(i) Guarantor agrees that Secured Party has no obligation to preserve
rights to the collateral against prior parties or to marshal any collateral for
the benefit of Guarantor or any other third party.
(j) PAYMENTS OF ALL SUMS OF MONEY AND THE PERFORMANCE OF ALL OF THE
COVENANTS AND AGREEMENTS HEREUNDER SHALL BE PAYABLE AND DUE AT THE OFFICE OF
SECURED PARTY IN PASADENA, CALIFORNIA. THIS GUARANTY AND THE TRANSACTION
EVIDENCED HEREBY SHALL BE CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF
OKLAHOMA.
(k) THIS WRITTEN AGREEMENT REPRESENTS THE FINAL GUARANTY BETWEEN THE
PARTIES 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.
(l) GUARANTOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT GUARANTOR OR SECURED PARTY
MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH
THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. GUARANTOR
REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF SECURED PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY WILL NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. GUARANTOR
ACKNOWLEDGES THAT SECURED PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SUBSECTION 14(l).
(m) ALL NOTICES, REQUESTS AND OTHER COMMUNICATIONS TO GUARANTOR OR SECURED
PARTY HEREUNDER SHALL BE GIVEN IN WRITING (INCLUDING BANK WIRE, TELEX OR SIMILAR
WRITING) AND SHALL BE GIVEN AT THE ADDRESSES PROVIDED IN, AND SHALL BE EFFECTIVE
IN ACCORDANCE WITH THE PROVISIONS OF, THE LOAN AGREEMENT.
GUARANTOR:
CLIMACHEM, INC.
By /s/ David R. Goss
--------------------------
David R. Goss
Vice President
9
<PAGE>
EXHIBIT 10.4
SERVICES AGREEMENT
------------------
THIS SERVICES AGREEMENT ("Agreement") is made this 21st day of November,
1997, by and between LSB INDUSTRIES, INC., a Delaware corporation ("LSB"), and
CLIMACHEM, INC., an Oklahoma corporation ("ClimaChem").
W I T N E S S E T H:
-------------------
WHEREAS, LSB owns 100% of the issued and outstanding shares of capital
stock of ClimaChem, and ClimaChem owns, directly or through one or more
intermediaries, 100% of the issued and outstanding capital stock of the entities
listed on Schedule 1 attached hereto (collectively, the "ClimaChem
Subsidiaries").
WHEREAS, LSB has historically provided to its subsidiaries various
administrative services and has permitted employees of its subsidiaries to
participate in certain employee benefit plans and programs sponsored and
administered by LSB; and
WHEREAS, ClimaChem and the ClimaChem Subsidiaries do not have the
capability to economically undertake certain administrative services, and LSB is
willing to provide such services to ClimaChem and the ClimaChem Subsidiaries
subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Services. Subject to the terms of this Agreement, LSB will provide the
--------
following services to ClimaChem and the ClimaChem Subsidiaries (the "Services"):
1.1 Financial and Accounting Services. LSB will keep and maintain the
---------------------------------
financial books and records pertaining to ClimaChem and the operations
conducted by all of the ClimaChem Subsidiaries. LSB will perform
accounting services with respect to such books and records, including,
without limitation, journal entry coding and input, maintenance of
ledgers and reconciliation of account balances. LSB will (a) provide
to ClimaChem monthly financial statements, (b) prepare and provide to
ClimaChem other reports and analysis as may be necessary, (c) assist
ClimaChem's auditors, and (d) have the books and records of ClimaChem
and the ClimaChem Subsidiaries, on a consolidated basis, audited by
outside independent auditors of LSB at such time and upon such terms
as LSB deems necessary or appropriate.
1.2 Order Entry. LSB will assist ClimaChem in establishing and
-----------
maintaining ClimaChem and the ClimaChem Subsidiaries' order entry
system. As reasonably requested by ClimaChem, LSB will compile the
order entry data and
<PAGE>
provide to ClimaChem certain reports regarding ClimaChem's and the
ClimaChem Subsidiaries' customer orders. ClimaChem will, and will
cause the ClimaChem Subsidiaries to, provide LSB with the information
and other documents reasonably requested by LSB for use in the entry
of such customer orders.
1.3 Billings. Invoices to be issued by ClimaChem for all sales by
--------
ClimaChem and the ClimaChem Subsidiaries will be generated by LSB's
data processing and computer groups. All reports and data output
(including a copy of each invoice for the account of ClimaChem)
generated by LSB pursuant to this paragraph will be available to
ClimaChem in Oklahoma City. LSB will send copies of such reports and
data output to such place as ClimaChem may reasonably request in
writing. ClimaChem will, and will cause the ClimaChem Subsidiaries to,
provide LSB with all invoices and other necessary documents, in a form
usable by LSB's data processing and computer groups, for use by LSB in
billing ClimaChem's and the ClimaChem Subsidiaries' sales.
1.4 Credit Services. LSB's credit department will (a) use reasonable
---------------
efforts to assist in the collection of ClimaChem's and the ClimaChem
Subsidiaries' receivables, (b) receive ClimaChem's and the ClimaChem
Subsidiaries' receivables and deposit such proceeds to the account of
ClimaChem, and (c) make recommendations to ClimaChem with respect to
approval or denial of requests for credit. LSB will not have any
liability in connection with the failure to collect in full any
receivable of ClimaChem and/or the ClimaChem Subsidiaries.
1.5 Payable Services. LSB will keep and maintain the books and records
----------------
for ClimaChem and the ClimaChem Subsidiaries in connection with their
payables. Upon approval of each invoice received by ClimaChem and the
ClimaChem Subsidiaries, such will be forwarded to LSB. Upon receipt of
such invoice, LSB will prepare checks in payment of approved invoices.
ClimaChem will, and will cause the ClimaChem Subsidiaries to, maintain
sufficient funds in its accounts or have sufficient availability in
their revolving credit facilities to pay approved invoices. ClimaChem
will, and will cause the ClimaChem Subsidiaries to, designate to its
bank the employees of LSB who will have authority to sign, on behalf
of ClimaChem and the ClimaChem Subsidiaries, ClimaChem and ClimaChem
Subsidiaries, whichever is applicable, checks in payment of approved
invoices. The payment of all
- 2 -
<PAGE>
ClimaChem's and the ClimaChem Subsidiaries' payables and invoices will
be the sole and exclusive responsibility of ClimaChem and the
ClimaChem Subsidiaries, whichever is applicable, and LSB will not be
responsible or liable in connection with the failure to pay such
invoices or to promptly pay such invoices. Neither LSB nor any LSB
employee who signs a check on behalf of ClimaChem or the ClimaChem
Subsidiaries for payment of an invoice or other evidence of
indebtedness payable by ClimaChem or the ClimaChem Subsidiaries will
have any liability in the payment of ClimaChem's or the ClimaChem
Subsidiaries' invoices.
1.6 Insurance. LSB's insurance department will (a) make recommendations
---------
to ClimaChem with respect to risk management matters and ClimaChem's
and the ClimaChem Subsidiaries' insurance needs and (b) assist
ClimaChem in obtaining appropriate insurance. ClimaChem and the
ClimaChem Subsidiaries will be solely responsible and liable for
obtaining such insurance and paying premiums on such insurance.
1.7 Legal Services. LSB will provide advice and assistance with respect
--------------
to ClimaChem's and the ClimaChem Subsidiaries legal matters.
1.8 Human Resources. LSB will (a) assist ClimaChem and the ClimaChem
---------------
Subsidiaries in hiring accounting and financial personnel and (b)
provide assistance in the preparation of, and recordkeeping for,
ClimaChem's and the ClimaChem Subsidiaries' payroll requirements.
ClimaChem or the ClimaChem Subsidiaries will be liable for the payment
of all salaries and other compensation of such personnel.
1.9 Advertising and Marketing. LSB will provide to ClimaChem and the
-------------------------
ClimaChem Subsidiaries such marketing, advertising, and promotional
services as may be agreed by LSB and ClimaChem from time to time.
1.10 International. LSB will assist ClimaChem and the ClimaChem
-------------
Subsidiaries in any of their international activities as may be agreed
to by LSB and ClimaChem from time to time.
2. Space Allocation. ClimaChem acknowledges that LSB must devote a
----------------
significant portion of its office facilities (the "LSB Premises"), including its
principal offices and financial accounting offices, to the performance of this
Agreement. ClimaChem agrees that the market lease value of the Premises and
- 3 -
<PAGE>
the costs of acquiring, maintaining, and improving the LSB Premises will be
allocated between LSB and ClimaChem based on the proportionate usage of the LSB
Premises by LSB and ClimaChem. LSB will have the sole discretion and authority
to determine the proportionate usage of the LSB Premises by LSB and ClimaChem.
The value of ClimaChem's proportionate share of the LSB Premises and costs
incurred by LSB in connection with the LSB Premises will constitute a cost
incurred by LSB in performing the Services for purposes of paragraph 4 of this
Agreement.
3. Employee Benefits. From and after the date of this Agreement, LSB will
-----------------
permit the employees of ClimaChem and the ClimaChem Subsidiaries (the "ClimaChem
Employees") to continue to participate in the employee benefit plans, including
stock option plans, sponsored by LSB (collectively, the "LSB Plans") on the
same basis as such employees participated immediately prior to the date of this
Agreement. Notwithstanding the foregoing, nothing contained in this Agreement
will prohibit LSB from modifying or terminating the LSB Plans so long as (a)
such modification or termination will apply to all participants in the LSB Plans
or (b) with respect to any modification or termination that does not apply to
all participants in the LSB Plans, ClimaChem consents to such modification or
termination, which consent will not be unreasonably withheld. The contributions
of the ClimaChem Employees to any LSB Plan and the costs associated with
participation by ClimaChem Employees in the LSB Plans will be accounted for
separately from contributions of, and costs associate with, participation by
persons who are not ClimaChem Employees. The costs associated with
participation by the ClimaChem Employees in the LSB Plans will constitute costs
incurred by LSB in performing the Services for purposes of paragraph 4 of this
Agreement.
4. Payment for Services. ClimaChem shall pay to LSB an amount equal to all
--------------------
direct and indirect costs and expenses, including third party charges, incurred
by LSB in performing the Services under this Agreement until the date that this
Agreement is terminated pursuant to paragraph 5 of this Agreement. LSB's costs
and expenses shall include, without limitation, (a) the value of all time
expended, directly or indirectly, on behalf of ClimaChem or the ClimaChem
Subsidiaries by LSB employees, other than the President or Chief Financial
Officer of LSB (who services are to be compensated under that certain Management
Agreement, dated the November 21, 1997, between the parties hereto), including
salaries, wages and fringe benefits paid by LSB; (b) all amounts paid by LSB on
behalf of ClimaChem and the ClimaChem Subsidiaries to the employees of ClimaChem
and the ClimaChem Subsidiaries; (c) the cost of supplies and materials, and the
value of equipment, utilized by LSB for, and on behalf of, ClimaChem and the
ClimaChem Subsidiaries; (d) all payables and obligations incurred by, or
- 4 -
<PAGE>
relating to, the operations and businesses of ClimaChem and the ClimaChem
Subsidiaries paid, or advanced, or incurred by LSB; (e) charges and fees billed
by other parties and entities in connection with assisting LSB to perform the
Services; (f) reasonable travel, lodging, and meal expenses in connection with
LSB performing the Services; (g) all costs incurred pursuant to paragraphs 2 and
3 of this Agreement; and (h) all other reasonable costs and expenses incurred by
LSB in connection with performing the Services. LSB will invoice ClimaChem each
month during the term of this Agreement for the cost and expenses incurred
during the prior month. Each invoice will be due and payable by ClimaChem to LSB
on or before the 15/th/ day of the month following the date of such invoice.
Upon ClimaChem's request, ClimaChem will have the right to review the
documentation supporting LSB's invoices to ClimaChem.
5. Term. This Agreement is effective as of the date of this Agreement and
----
will continue for a period of ten years, unless sooner terminated pursuant to
the terms of this paragraph 5. Notwithstanding the foregoing, LSB may terminate
this Agreement on 30 days' written notice to ClimaChem if ClimaChem defaults
under any of the terms or provisions of this Agreement or if LSB sells 50% or
more of the issued and outstanding stock of ClimaChem or sells, transfers or
disposes of all, or substantially all, of the assets of ClimaChem.
6. Performance of Services.
-----------------------
6.1 Degree of Care. LSB shall perform the Services with the reasonable
--------------
degree of care, skill and prudence customarily exercised by it in
respect of its own business, operations and affairs.
6.2 Certain Limitations. Each party acknowledges that the Services will
-------------------
be provided only with respect to the businesses of ClimaChem and the
ClimaChem Subsidiaries as such businesses exist as of the date of this
Agreement or as otherwise mutually agreed by the parties. LSB will not
be obligated to provide Services for the benefit of entities other
than ClimaChem and the ClimaChem Subsidiaries.
6.3 Certain Information. ClimaChem will, and will cause the ClimaChem
-------------------
Subsidiaries to, provide any information needed by LSB to perform the
Services pursuant to this Agreement. If the failure to provide such
information renders the performance of any requested Service
impossible or unreasonably difficult, LSB may, upon reasonable notice
to ClimaChem, refuse to provide such Service.
- 5 -
<PAGE>
7. Assignment of Duties. LSB may, without the consent of, or notice to,
--------------------
ClimaChem, retain any affiliate of LSB to perform all or any part of the
Services. LSB may retain non-affiliates of LSB to perform the Services unless
ClimaChem objects in writing to LSB. Notwithstanding the foregoing, LSB may
retain, without notice to ClimaChem and without ClimaChem having the right to
object, such other parties or entities that are not affiliates of LSB to perform
the Services in the event of exigent circumstances. The determination of an
"exigent circumstance" will be in the sole and absolute discretion of LSB. The
fees and charges of each individual or entity retained by LSB pursuant to this
paragraph 7 will constitute a cost incurred by LSB in performing the Services
for purposes of paragraph 4 of this Agreement.
8. Limitations on Liability and Indemnification. The following provisions
--------------------------------------------
will survive any termination of this Agreement:
8.1 Limitations on Liability. Neither party will have any liability under
------------------------
this Agreement (including any liability for its own negligence) for
damages, losses or expenses suffered by the other party or its
subsidiaries as a result of the performance or nonperformance of such
party's obligations hereunder, unless such damages, losses or expenses
are caused by, or arise out of, the willful misconduct of such party
or the breach by such party of its obligations hereunder and such
breach continues uncured for 30 days after the occurrence of such
breach. In no event will either party have any liability to the other
party for indirect, incidental or consequential damages that such
other party or its subsidiaries or any third party may incur or
experience on account of the performance or nonperformance of such
party's obligations hereunder.
8.2 Indemnification. Subject to the limitations on liability set forth in
---------------
the last sentence of paragraph 81, each party will indemnify, defend
and hold harmless the other party and its directors, officers,
employees, agents and representatives from and against all claims,
liabilities, damages, losses and expenses (including reasonable
attorneys' fees and expenses) caused by, or arising out of, the
willful misconduct of such indemnifying party in the performance or
nonperformance of its obligations hereunder or the breach by such
indemnifying party of any of the express provisions of this Agreement.
9. Assistance. ClimaChem agrees to assist, and cause the ClimaChem
----------
Subsidiaries to assist, LSB in performing its Services
- 6 -
<PAGE>
hereunder in any manner which LSB deems necessary and further agrees to furnish
LSB in a timely manner with any documentation which LSB deems necessary to aid
in performing its Services under this Agreement.
10. Assignment. This Agreement may be assigned by LSB, without the consent of
----------
ClimaChem, to any of the following: (a) any party or entity affiliated with, or
an affiliate of, LSB; (b) any party or entity with whom LSB and/or its parent
company may merge or consolidate or to whom LSB may sell all, or substantially
all, of its assets, and (c) any party or entity LSB may retain to perform the
Services.
11. Entire Agreement. This Agreement contains and expresses the entire
----------------
agreement of the parties, and no other representations or conditions may be
relied upon except as set out herein.
12. Modification. This Agreement may only be modified by the agreement of the
------------
parties hereto, in writing, and executed by both of the parties hereto.
13. Governing Law. This Agreement will be governed by, and interpreted in
-------------
accordance with, the laws of the State of Oklahoma.
14. Partial Invalidity and Captions. If any clause or provision of this
-------------------------------
Agreement is illegal, invalid, or unenforceable, then, in such event, it is the
intention of the parties hereto the remainder of this Agreement will not be
affected thereby, and it is also the intention of the parties to this Agreement
that, in lieu of each clause or provision of this Agreement that is illegal or
invalid or unenforceable, there be added as a part of this Agreement a clause or
provision as similar in the terms to such illegal, invalid or unenforceable
clause or provision as may be possible and be legal and valid and enforceable.
The captions of each paragraph hereof are entered as a matter of convenience
only and will not be considered to be of any effect in the construction of the
provision or provisions of this Agreement.
15. Notice. All notices in this Agreement provided to be given by either party
------
hereto to the other will be deemed to have been given, when made in writing and
deposited in the United States mail, certified and postage prepaid, addressed as
follows:
If to LSB: LSB Industries, Inc.
16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: Chief Financial Officer
- 7 -
<PAGE>
with a copy to: Office of the General Counsel
LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
If to ClimaChem ClimaChem, Inc.
or to the ClimaChem 16 South Pennsylvania
Subsidiaries: Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: President
The address to which any notice, demand or other writing may be given, made, or
sent to either party may be changed by written notice given by such party as
above provided.
16. Waiver. No waiver by either party with respect to any breach or default or
------
of any right or remedy and no course of dealing, will be deemed to constitute a
continuing waiver or any other breach or default of any other right or remedy,
unless such waiver is expressed in writing signed by the party to be bound.
Furthermore, the failure of a party to exercise any right will not be deemed a
waiver of such future right or rights.
IN WITNESS WHEREOF, the parties to the foregoing Agreement have hereunto
set their hands the day and year first above written.
LSB INDUSTRIES, INC.
By______________________________
Jim D. Jones
Vice President and Controller
CLIMACHEM, INC.
By______________________________
David R. Goss
Vice President
- 8 -
<PAGE>
EXHIBIT 10.5
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT ("Agreement") made this 21st day of November,
1997, between LSB INDUSTRIES, INC., an Oklahoma corporation ("LSB"), and
CLIMACHEM, INC., an Oklahoma corporation ("ClimaChem").
W I T N E S S E T H:
-------------------
WHEREAS, LSB owns 100% of the issued and outstanding shares of capital
stock of ClimaChem, and ClimaChem owns, directly or through one or more
intermediaries, 100% of all of the issued and outstanding shares of capital
stock of the wholly owned subsidiaries of ClimaChem listed on Schedule 1
attached hereto (the "ClimaChem Subsidiaries");
WHEREAS, LSB has historically provided to its subsidiaries various
management services and has participated in the management of the ClimaChem
Subsidiaries;
WHEREAS, ClimaChem desires that LSB provide management services to
ClimaChem and the ClimaChem Subsidiaries subject to the terms and conditions set
forth herein; and
WHEREAS, LSB desires to provide management services to ClimaChem and the
ClimaChem Subsidiaries subject to the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Management Services. Subject to the terms of this Agreement, LSB will
-------------------
provide to ClimaChem and the ClimaChem Subsidiaries, on a nonexclusive basis,
managerial oversight and guidance concerning the broad policies, strategic
decisions and operations of ClimaChem and the ClimaChem Subsidiaries and the
rendering of such further managerial assistance as deemed reasonably necessary
by LSB ("Management Services") which is not covered by the Services Agreement
(as defined below).
2. Managerial Personnel. To provide the Management Services described in
--------------------
Section 1 hereof, LSB shall provide the services of its officers, directors,
employees and agents that are not covered by the Services Agreement for the
performance of such Management Services described herein.
3. Services Agreement. Notwithstanding anything herein to the contrary, this
------------------
Agreement shall not limit or restrict the terms and provisions of that certain
Services Agreement ("Services
<PAGE>
Agreement"), dated November 21, 1997, entered into by and between LSB and
ClimaChem.
4. Nonexclusivity. LSB agrees that it shall, for the term of this Agreement,
--------------
devote as much time, attention, energy and resources to the business of
ClimaChem and the ClimaChem Subsidiaries as shall be reasonably necessary to
perform its designated duties as described herein. However, it is acknowledged
and understood by the parties hereto that LSB has been and is engaged in
activities other than providing of management services for ClimaChem and the
ClimaChem Subsidiaries hereunder, some of which activities may be in competition
("Competing Activities") with the activities of ClimaChem and/or any of the
ClimaChem Subsidiaries. Further, it is acknowledged and understood by the
parties hereto that LSB intends to continue to engage in such Competing
Activities and may, from time to time, choose to engage in additional activities
which may be in direct or indirect competition with the activities of ClimaChem
and nothing contained herein shall prohibit LSB from engaging in such Competing
Activities.
5. Payment for Management Services. The Company is to pay to LSB a Management
-------------------------------
Fee each calendar year during the term of this Agreement in an amount not to
exceed $1,800,000, subject to adjustment pursuant to Section 5.6 hereof ("Annual
Management Fee Cap"), with such Annual Management Fee payable on a quarterly
basis as follows:
5.1 First Quarter Management Fee. If at the end of the first quarter of
----------------------------
such calendar year (March 31), ClimaChem has a Consolidated EBITDA (as defined
below) for the three- month period ended March 31 of such year of $6,500,000 or
more, ClimaChem shall pay LSB the first quarter management fee ("First Quarter
Management Fee") equal to the lesser of (i) $450,000 ("First Quarter Management
Fee Cap") or (ii) an amount equal to the difference between the amount of the
Consolidated EBITDA (as defined below) for ClimaChem for the first three month
period ended March 31 of such year and $6,500,000.
5.2 Second Quarter Management Fee. If at the end of the second quarter of
-----------------------------
such calendar year (June 30), ClimaChem has a Consolidated EBITDA for the six
months ended June 30 of such year of $13,000,000 or more, ClimaChem shall pay
LSB the second quarter management fee ("Second Quarter Management Fee") equal to
the lesser of (i) $900,000 ("Second Quarter Management Fee Cap") less the amount
paid to LSB, if any, by ClimaChem as the First Quarter Management Fee during
such year or (ii) an amount equal to the
- 2 -
<PAGE>
difference between the amount of the Consolidated EBITDA of ClimaChem for the
six months ended June 30 of such year and $13,000,000.
5.3 Third Quarter Management Fee. If at the end of the third quarter of
----------------------------
such calendar year (September 30), ClimaChem has a Consolidated EBITDA for the
nine months ended September 30 of such year of $19,500,000 or more, ClimaChem
shall pay LSB the third quarter management fee ("Third Quarter Management Fee")
equal to the lesser of (i) $1,350,000 ("Third Quarter Management Fee Cap") less
the amount paid to LSB, if any, by ClimaChem as the First Quarter Management Fee
and Second Quarter Management Fee during such year or (ii) an amount equal to
the difference between the amount of the Consolidated EBITDA of ClimaChem for
the nine months ended September 30 of such year and $19,500,000.
5.4 Fourth Quarter Management Fee. If at the end of such calendar year,
-----------------------------
ClimaChem has a Consolidated EBITDA for the year ended December 31 of
$26,000,000 or more, ClimaChem shall pay LSB the fourth quarter management fee
("Fourth Quarter Management Fee") equal to the lesser of (i) $1,800,000 ("Fourth
Quarter Management Fee Cap") less the amount paid to LSB, if any, by ClimaChem
as the First Quarter Management Fee, Second Quarter Management Fee and Third
Quarter Management Fee during such year or (ii) an amount equal to the
difference between the amount of the Consolidated EBITDA of ClimaChem for the
twelve months ended December 31 of such year and $26,000,000.
5.5 Management Fee Refund. If ClimaChem's Consolidated EBITDA for the
---------------------
twelve-month period ended December 31 is less than the sum of $26,000,000, then,
within 90 days after December 31 of the year in question, LSB shall reimburse
ClimaChem an amount equal to the amount of the First Quarter Management Fee,
Second Quarter Management Fee, and Third Quarter Management Fee, if any, paid to
LSB by ClimaChem during the year in question. If ClimaChem's Consolidated
EBITDA for the twelve-month period ended December 31 in question equals or
exceeds $26,000,000 but is less than $26,000,000 plus the amount, if any, paid
by ClimaChem to LSB as the First Quarter Management Fee, Second Quarter
Management Fee and Third Quarter Management Fee during such twelve-month period
ended December 31, then, within 90 days after December 31 of such year, LSB
shall reimburse ClimaChem the difference between $26,000,000 plus the amount, if
any, paid by ClimaChem to LSB as the First Quarter Management Fee, Second
Quarter Management Fee, and Third Quarter Management Fee during such twelve-
month period in question and the amount of ClimaChem's Consolidated EBITDA for
such twelve-month period ended December 31.
- 3 -
<PAGE>
5.6 Management Fee Adjustment. Effective the first day of each calendar
-------------------------
year, the Annual Management Fee Cap, the First Quarter Management Fee Cap,
Second Quarter Management Fee Cap, Third Quarter Management Fee Cap, and Fourth
Quarter Management Fee Cap (collectively, Management Fee Caps") shall be
increased so that the amount of the Management Fee Caps, as adjusted, as
applicable, bears the same ratio to the amount of the Management Fee Caps, as
applicable, on the first day of the immediately preceding calendar year (or to
the initial Management Fee Caps, as applicable, in the case of the first
adjustment) as the Official Consumer Price Index published by the Bureau of
Labor Statistics, United States Department of Labor (1982-1984=100) for All
Urban Consumers, ("CPI"), in effect on the first day of the calendar year in
which the adjustment is made bears to the CPI on the first day of the calendar
year immediately preceding, except that no reductions to the Management Fee Caps
will be made pursuant to this Section 5.6 or any other section hereof.
5.7 Person. For the purposes of this Section 5 "Person" shall be defined
------
as any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
5.8 Consolidated Net Income. For the purposes of this Agreement
-----------------------
"Consolidated Net Income" shall be defined as with respect to ClimaChem for any
period, the net income (or loss) of ClimaChem and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with generally accepted
accounting principles ("GAAP")) for such period, adjusted to exclude (only to
the extent included in computing such net income (or loss) and without
duplication): (a) all gains (but not losses) which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any capital stock),
(b) the net income, if positive, of any Person other than a wholly owned
Consolidated Subsidiary, in which ClimaChem or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to ClimaChem or a wholly owned
Consolidated Subsidiary of ClimaChem during such period, but in any case not in
excess of ClimaChem's pro rata share of such Person's net income for such
period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction by ClimaChem for any period prior to the date of such
acquisition, (d) the net income, if positive, of any of ClimaChem's
- 4 -
<PAGE>
Consolidated Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary.
5.9 Indebtedness. For purposes of this Agreement, "Indebtedness" of any
------------
Person is defined as, without duplication, (a) all liabilities and obligations,
contingent or otherwise, of such Person, (i) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) representing the balance deferred and unpaid of
the purchase price of any property or services, except trade payables incurred
in the ordinary course of its business, (iv) evidenced by bankers' acceptances
or similar instruments issued or accepted by banks, (v) relating to any
"Capitalized Lease Obligation," which for purposes herein means any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of the lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of the lessee, or (vi) evidenced by a letter
of credit or a reimbursement obligation of such Person with respect to any
letter of credit; (b) all net obligations of such Person under Interest Swap and
Hedging Obligations, as defined in Section 5.11, hereof; (c) all liabilities and
obligations of others of the kind described in the preceding clause (a) or (b)
that such Person has guaranteed or that is otherwise its legal liability or
which are secured by any assets or property of such Person; and (d) any and all
deferrals, renewals, extensions, refinancing and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a), (b) or (c), or this
clause (d), whether or not between or among the same parties; and (e) all
Disqualified Capital Stock, as defined in Section 5.13, of such Person (measured
at the greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends). For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value to be
determined in good
- 5 -
<PAGE>
faith by the board of directors of the issuer (or managing general partner of
the issuer) of such Disqualified Capital Stock.
5.10 Consolidated Fixed Charges. For purposes of this Agreement,
--------------------------
"Consolidated Fixed Charges," shall be defined as the aggregate amount (without
duplication and determined in each case in accordance with GAAP) of (a) interest
expensed or capitalized, paid, accrued, or scheduled to be paid or accrued
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations, as defined in Section 5.9) of ClimaChem and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees with respect to bankers' acceptances and
letters of credit financings and currency and Interest Swap and Hedging
Obligations, in each case to the extent attributable to such period, and (b) the
amount of dividends accrued or payable (or guaranteed) by ClimaChem or any of
its Consolidated Subsidiaries in respect of preferred stock (other than by
subsidiaries of ClimaChem to ClimaChem or ClimaChem's wholly owned
subsidiaries). For purposes of this definition, interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP.
5.11 Interest Swap and Hedging Obligation. For purposes of this
------------------------------------
Agreement, "Interest Swap and Hedging Obligation" of any Person is defined as,
any obligation of any Person pursuant to any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
exchange agreement, currency exchange agreement or any other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency values, including, without limitation, any arrangement whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a fixed or floating rate of
interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or floating rate of interest on the
same notional amount.
5.12 Consolidated EBITDA. For purposes of this Agreement, "Consolidated
-------------------
EBITDA" shall be defined with respect to ClimaChem, for any period, the
Consolidated Net Income of ClimaChem for such period adjusted to add thereto (to
the extent deducted in determining Consolidated Net Income), without
duplication, the sum
- 6 -
<PAGE>
of (i) consolidated income tax expense, (ii) consolidated depreciation and
amortization expense, provided that consolidated depreciation and amortization
of a Subsidiary that is a less than wholly owned Subsidiary shall only be added
to the extent of the equity interest of the Company in such Subsidiary, (iii)
other non-cash charges of the Company and its subsidiaries reducing Consolidated
Net Income for such period, (iv) Consolidated Fixed Charges as calculated in
Section 5.10, hereof, and (v) any premium, penalty or prepayment fee paid by
ClimaChem or any of its Consolidated Subsidiaries to prepay indebtedness as
described under "Use of Proceeds" in the Company's Offering Memorandum, dated
November 21, 1997, with respect to the Company's senior notes due 2007.
5.13 Disqualified Capital Stock. For purposes of this Agreement,
--------------------------
"Disqualified Capital Stock" of any Person is defined as, (a) except as set
forth in (b), with respect to any Person, any equity interest of such Person
that, by its terms or by the terms of any security into which it is convertible,
exercisable or exchangeable, is, or upon the happening of an event or the
passage of time would be, required to be redeemed or repurchased (including at
the option of the holder thereof) by such Person or any of its subsidiaries, in
whole or in part, on or prior to __________, 2007 and (b) with respect to any
subsidiary of such Person (including with respect to any subsidiary of
ClimaChem), any equity interest other than any common equity with no preference,
privileges, or redemption or repayment provisions.
5.14 Consolidated Subsidiaries. For purposes of this Agreement, a
-------------------------
"Consolidated Subsidiary" of ClimaChem is defined as each subsidiary of
ClimaChem (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of ClimaChem in accordance with GAAP.
6. Term. This Agreement is effective as of the date of this Agreement and
----
will continue for a period of ten years, unless sooner terminated pursuant to
the terms of this Section 6. Notwithstanding the foregoing, LSB may terminate
this Agreement on 30 days' prior written notice to ClimaChem if ClimaChem
defaults under any of the terms or provisions of this Agreement, and such
default is not cured to the reasonable satisfaction of LSB prior to the
expiration of such 30-day period, or if LSB sells 50% or more of the issued and
outstanding shares of the voting capital stock of ClimaChem or sells, transfers
or disposes of all, or substantially all, of the assets of ClimaChem. The
provisions of Sections 5, 7, and 8 hereof shall survive the termination of this
Agreement.
- 7 -
<PAGE>
7. Limitations on Liability and Indemnification. The following provisions
--------------------------------------------
will survive any termination of this Agreement:
7.1 Limitations on Liability. Except as otherwise provided in Section 8
------------------------
hereof, neither party will have any liability under this Agreement
(including any liability for its own negligence) for damages, losses
or expenses suffered by the other party or its subsidiaries as a
result of the performance or nonperformance of such party's
obligations hereunder, unless such damages, losses or expenses are
caused by, or arise out of, the willful misconduct of such party or
the breach by such party of its obligations hereunder and such breach
continues uncured for 30 days after the occurrence of such breach. In
no event will either party have any liability to the other party for
indirect, incidental or consequential damages that such other party or
its subsidiaries or any third party may incur or experience on account
of the performance or nonperformance of such party's obligations
hereunder.
7.2 Indemnification. Subject to the limitations on liability set forth in
---------------
the last sentence of paragraph 7.1, each party will indemnify, defend
and hold harmless the other party and its directors, officers,
employees, agents and representatives from and against all claims,
liabilities, damages, losses and expenses (including reasonable
attorneys' fees and expenses) caused by, or arising out of, the
willful misconduct of such indemnifying party in the performance or
nonperformance of its obligations hereunder or the breach by such
indemnifying party of any of the express provisions of this Agreement
and such breach remains uncured for 30 days after the occurrence of
such breach. Nothing contained in this Section 7.2 shall limit
ClimaChem's liability under Section 8 hereof.
8. Indemnification. ClimaChem agrees to indemnify and hold LSB, its officers,
---------------
directors, employees, agents and affiliates harmless from and against any and
all losses, claims, obligations, liabilities, penalties, causes of action,
damages, costs and expenses (including, without limitation, costs of defense,
settlement and reasonable attorneys' fees and expenses) which any or all of them
may hereafter be alleged to be liable for, suffer, incur, be responsible for, or
pay out, arising out of (i) the manner, conduct, timing, sufficiency, adequacy,
or any other aspect of the Management Services provided by LSB or at LSB's
direction by any of its officers, directors, employees, agents and affiliates
- 8 -
<PAGE>
for, and on behalf of, ClimaChem or the ClimaChem Subsidiaries under this
Agreement, other than occurring from willful misconduct of LSB or (ii) the
failure or delay by LSB or any other person or entity to perform any of the
Management Services or any of LSB's obligations hereunder, other than occurring
from the willful misconduct of LSB.
9. Assistance. ClimaChem agrees to assist LSB in performing its Management
----------
Services hereunder in any manner which LSB deems necessary and further agrees to
furnish LSB in a timely manner with any documentation which LSB deems necessary
to aid in performing its Management Services to ClimaChem hereunder.
10. Assignment. This Agreement may be assigned by LSB, without the consent of
----------
ClimaChem, to any of the following: (a) any party or entity affiliated with, or
an affiliate of, LSB; (b) any party or entity with whom LSB and/or its parent
company may merge or consolidate or to whom LSB may sell all, or substantially
all, of its assets.
11. Entire Agreement. This Agreement contains and expresses the entire
----------------
agreement of the parties, and no other representations or conditions may be
relied upon except as set out herein.
12. Modification. This Agreement may only be modified by the agreement of the
------------
parties hereto, in writing, and executed by both of the parties hereto.
13. Governing Law. This Agreement will be governed by, and interpreted in
-------------
accordance with, the laws of the State of Oklahoma.
14. Partial Invalidity and Captions. If any clause or provision of this
-------------------------------
Agreement is illegal, invalid, or unenforceable, then, in such event, it is the
intention of the parties hereto the remainder of this Agreement will not be
affected thereby, and it is also the intention of the parties to this Agreement
that, in lieu of each clause or provision of this Agreement that is illegal or
invalid or unenforceable, there be added as a part of this Agreement a clause or
provision as similar in the terms to such illegal, invalid or unenforceable
clause or provision as may be possible and be legal and valid and enforceable.
The captions of each paragraph hereof are entered as a matter of convenience
only and will not be considered to be of any effect in the construction of the
provision or provisions of this Agreement.
15. Notice. All notices in this Agreement provided to be given by either party
------
hereto to the other will be deemed to have been given,
- 9 -
<PAGE>
when made in writing and deposited in the United States mail, certified and
postage prepaid, addressed as follows:
If to LSB: LSB Industries, Inc.
16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: Chief Financial
Officer
with copy to: Office of the General Counsel
LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
If to ClimaChem ClimaChem, Inc.
or to the ClimaChem 16 South Pennsylvania
Subidiaries: Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: President
The address to which any notice, demand or other writing may be given, made, or
sent to either party may be changed by written notice given by such party as
above provided.
16. Waiver. No waiver by either party with respect to any breach or default or
------
of any right or remedy and no course of dealing, will be deemed to constitute a
continuing waiver or any other breach or default of any other right or remedy,
unless such waiver is expressed in writing signed by the party to be bound.
Furthermore, the failure of a party to exercise any right will not be deemed a
waiver of such future right or rights.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties to the foregoing Agreement have hereunto
set their hands the day and year first above written.
LSB INDUSTRIES, INC.
By_________________________
Jim D. Jones
Vice President and Controller
CLIMACHEM, INC.
By______________________________
David R. Goss
Vice President
- 11 -
<PAGE>
EXHIBIT 10.6
TAX SHARING AGREEMENT
---------------------
THIS TAX SHARING AGREEMENT ("Agreement") is entered into this 21st day of
November, 1997, between LSB INDUSTRIES, INC., a Delaware corporation ("LSB"),
and CLIMACHEM, INC., an Oklahoma corporation ("ClimaChem").
W I T N E S S E T H:
-------------------
WHEREAS, LSB owns 100% of the issued and outstanding shares of capital
stock of ClimaChem, and ClimaChem owns, directly or through intermediaries, 100%
of the issued and outstanding shares of capital stock of the entities listed on
Schedule 1 attached hereto (the "ClimaChem Subsidiaries");
WHEREAS, LSB, ClimaChem, and the ClimaChem Subsidiaries are members of the
affiliated group of corporations of which LSB is the common parent
(collectively, the "LSB Consolidated Group") within the meaning of (S) 1504(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, ClimaChem and the ClimaChem Subsidiaries (collectively, the
"ClimaChem Group") would be members of an affiliated group of corporations of
which ClimaChem would be the common parent within the meaning of (S) 1504(a) of
the Code if ClimaChem were not a subsidiary of LSB; and
WHEREAS, it is the intent and desire of the parties hereto that a method be
established for determining the rights and obligations among the LSB
Consolidated Group, the ClimaChem Group, and the members of the LSB Consolidated
Group which are not members of the ClimaChem Group (the "LSB Group") as to tax
liabilities, refunds and related administrative matters.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Filing of Tax Returns. The tax returns of LSB and the ClimaChem Group will
---------------------
be filed as follows:
1.1 Consolidated Federal Returns. LSB will have exclusive authority to
----------------------------
file consolidated federal income tax returns pursuant to (S) 1502 of
the Code on behalf of the LSB Consolidated Group which includes, but
is not limited to, the ClimaChem Group ("Consolidated Federal
Returns").
1.2 Composite Returns. LSB, or a member of the LSB Group designated by
-----------------
LSB, will have exclusive authority to file each state, local or
foreign income tax return or other tax return required to be filed by
any member of the ClimaChem Group which computes taxes payable to a
taxing jurisdiction in respect of the income, operations or assets of
two or more corporations (including at least
<PAGE>
one member of the ClimaChem Group and one member of the LSB Group)
based on combined or consolidated reporting or apportionment of
business income under the unitary business concept ("Composite
Return").
1.3 All Other Returns. Except as otherwise provided in paragraphs 11 and
-----------------
12 of this Agreement, LSB, or a member of the LSB Group designated by
LSB, will have exclusive authority to file all income tax or franchise
tax returns with respect to the income, operations or assets of the
LSB Consolidated Group or any member thereof, including, but not
limited to, the ClimaChem Group and any member of such group.
1.4 Tax Information. To facilitate the preparation and filing of
---------------
Consolidated Federal Returns, Corporate Returns and other returns,
ClimaChem will, on a timely basis, provide LSB with all information
reasonably required by LSB with respect to the income, operations and
assets of each member of the ClimaChem Group.
2. Tax Controversies.
-----------------
2.1 Tax Returns. LSB or its designee will have exclusive authority to
-----------
represent each member of the LSB Consolidated Group, including, but
not limited to, members of the ClimaChem Group, before any
governmental agency or any court regarding tax matters related to any
Consolidated Federal Return, Composite Return or any other tax return
including, but not limited to, (a) the exclusive control of any
response to any examination by any taxing authority, and (b) the
exclusive control over any contest of any issue therein through a
Final Determination (as defined below), including, but not limited to,
whether, and in what form, to conduct such contest and whether, and on
what basis, to settle such contest. For purposes of this paragraph 2,
the term "Final Determination" means with respect to any issue or item
for any period, (a) in the context of federal income taxes, (i) a
final, nonappealable decision by a court of competent jurisdiction,
(ii) the expiration of the time for assessment of taxes or filing a
claim for refund or, if a refund claim has been timely filed, the
expiration of the time for instituting suit in respect of such refund
claim, if no further adjustment to the items of income, gain,
deduction, loss, or credit for such period may thereafter be made,
(iii) the execution of a closing agreement under (S) 7121 of the Code,
(iv) the acceptance by the IRS or its counsel of a tender pursuant to
an
-2-
<PAGE>
offer in compromise pursuant to (S) 7122 of the Code, (v) the
execution of a Form 870A, or (vi) any other final and irrevocable
determination of taxes for any period, and (b) in the context of other
taxes, any comparable, final, nonappealable, and irrevocable
determination of taxes for such period.
2.2 Notification of Controversy. LSB or its designee will timely notify
---------------------------
ClimaChem of any correspondence and tax controversies with any taxing
authority relating to items of any member of the ClimaChem Group and
will promptly provide ClimaChem with copies of all such correspondence
upon the request of ClimaChem. Subject to LSB's exclusive authority as
provided herein, ClimaChem will have the right exercisable on a timely
basis to consult with LSB with respect to the handling of any such
correspondence or controversies. LSB or its designee will permit
ClimaChem or its representative to attend any hearing or other
proceedings relating to such controversies to the extent that the
subject of such hearings or proceeding relates to a member of the
ClimaChem Group.
3. Tax Sharing.
-----------
3.1 ClimaChem Payment Obligation. ClimaChem shall pay to LSB the dollar
----------------------------
value of any federal, state or local income tax liability (including,
without limitation, deficiencies, interest and penalties) relating to
the ClimaChem Group and its respective businesses and operations with
respect to any taxes of the ClimaChem Group for any taxable year or
period ending on or prior to December 31, 2007. Such tax liability of
the ClimaChem Group will be calculated as if the ClimaChem Group was a
separate consolidated tax group and not part of the LSB Consolidated
Group (the resulting amount is referred to as the "ClimaChem Stand-
Alone Tax Liability").
3.2 Payments by ClimaChem of ClimaChem Stand-Alone Tax Liability. The
------------------------------------------------------------
ClimaChem Stand-Alone Tax Liability will be paid to LSB pursuant to
this paragraph 3.2. On or before each March 31, June 30, September 30,
and December 31 of each year, LSB will make a good faith estimate of
the ClimaChem Stand-Alone Tax Liability for the current tax quarter
(the amount of each such estimate is the "Tax Estimate"), and will
promptly provide ClimaChem with a summary of the calculation of the
Tax Estimate (the "Tax Notice"). Notwithstanding any objection by
ClimaChem to
-3-
<PAGE>
the calculation of the Tax Estimate, within 15 days after the date of
the Tax Notice, ClimaChem will pay to LSB the Tax Estimate for the
period set forth in the Tax Notice (the "Quarterly Payment"). LSB will
adjust the amount of the Tax Estimate as may be necessary from time to
time during the tax year, and ClimaChem agrees that the one or more
Quarterly Payments will be increased or decreased, as appropriate, to
account for the adjustments, if any, in the amount of the Tax
Estimate. If the sum of all Quarterly Payments during a tax year is
less than the ClimaChem Stand-Alone Tax Liability for such year, as
determined by LSB, then ClimaChem will, within 15 days after receipt
of notice by LSB, pay to LSB, the amount equal to the deficiency. If
the amount of all Quarterly Payments during a tax year is greater than
the ClimaChem Stand-Alone Tax Liability for such year, as determined
by LSB, then LSB will, within 15 days of the determination of the
ClimaChem Stand-Alone Tax Liability, pay to ClimaChem the amount of
such excess.
3.3 Objection to Calculations. The calculations made by LSB for each tax
-------------------------
year pursuant to this paragraph 3 will be conclusive as to ClimaChem,
unless written objection is received by LSB within 30 days after the
end of such tax year. If written objection is timely made by
ClimaChem, and the parties are unable to agree upon the correct
calculations, the disputed issue will be submitted to Ernst & Young,
L.P. or other accounting firm of recognized national standing selected
by LSB in its reasonable discretion, whose determination will be
final. All costs and expenses relating to the accounting firm's
determination will be paid by ClimaChem. In the event the parties
agree to a different determination or the accounting firm's review
results in a different calculation, appropriate payments will be made
in the amount of payment.
3.4 Earnings and Profits Allocation. The parties understand that the
-------------------------------
method of allocation of federal income tax liabilities used for the
determination of earnings and profits for federal income tax purposes
under governing law may differ from the methods prescribed herein for
sharing of economic burdens of such taxes. To the extent permitted by
governing law and not otherwise inconsistent with the best interests
of LSB, LSB agrees to make an election or take any other action
permitted under governing law which would cause such method of
allocation to resemble as closely as practical the method of sharing
the economic burdens of such tax hereunder.
-4-
<PAGE>
4. Administrative Matters.
----------------------
4.1 General. The provisions of this Agreement will be administered by
-------
LSB. Except as otherwise expressly governed by the terms of this
Agreement, LSB or its designee may use any reasonable method in making
any computations or allocations hereunder.
4.2 Power of Attorney. In order to carry out the purposes and intent of
-----------------
this Agreement, ClimaChem hereby grants, and agrees that it will cause
each member of the ClimaChem Group to grant, to LSB and to appropriate
officers of LSB a power of attorney to undertake in the name of the
appropriate member of the ClimaChem Group any action contemplated
herein, including, without limitation, the filing of returns and
claims for refund, making of elections, handling of controversies, and
receipt of funds. To the extent that such power of attorney is not
recognized or respected, ClimaChem agrees to take, and to cause each
member of the ClimaChem Group to take, such further actions, including
grants to LSB of additional powers of attorney or execution of returns
or other documents as may be reasonably requested by LSB to carry out
the provisions of this Agreement.
4.3 Payments. Amounts owed by either party hereto in respect of tax
--------
refunds or credits received by such party to which the other party is
entitled hereunder will be paid by the party receiving the refund to
the other party within five days after the receipt or credit of such
refund, and amounts owed by either party hereto in respect of tax
increases will be paid by such party to the other party within 30 days
after the Final Determination with respect thereto. If not timely
paid, any amounts payable hereunder will bear interest from the date
due at one percent in excess of the Prime Rate as published in The
Wall Street Journal from time to time.
4.4 Records. LSB and ClimaChem agree that all records, including, but not
-------
limited to, returns, supporting schedules, workpapers, correspondence
and other documents within the possession of either, and relating to
the tax liabilities or refunds of either, will be retained by each for
as long as they may be material to the determination of such
liabilities or refunds and will be made reasonably available to either
party upon request.
-5-
<PAGE>
4.5 Return Preparation and Defense.
------------------------------
4.5.1 In General. Each party hereto agrees that it will cooperate
----------
with the other, and its representatives, in a prompt and timely
manner, in connection with (a) the preparation and filing of,
and (b) any administrative or judicial proceeding involving,
any Consolidated Federal Return, Composite Return or other tax
return filed, or required to be filed, by LSB, ClimaChem or
members of their respective Groups. Such cooperation will
include, but not be limited to, the making available to the
other party, during normal business hours, of all books,
records (including, but not limited to, workpapers and
schedules), information, officers, and employees (without
substantial interruption of employment) reasonably requested
and necessary or useful in connection with any tax filing,
inquiry, audit, investigation, dispute, litigation, or other
matter.
4.5.2 Consistency. In filing any Consolidated Federal Return or
-----------
Composite Return, LSB will make all computations of taxable
amounts and tax on a basis consistent with the computations of
such amounts in prior tax returns for the respective taxing
jurisdictions except to the extent otherwise required by the
laws, rules, or regulations of the respective taxing
jurisdictions or other applicable authority or as a result of a
change in factual circumstances. In determining how to treat
any matter for which there is no precedent in prior returns or
controlling legal authority, LSB will, in good faith, take into
account the reasonable interests of ClimaChem after due
consultation with ClimaChem.
5. Miscellaneous.
-------------
5.1 Term. This Agreement is effective as to the taxable years (or
----
portions thereof) commencing after December 31, 1996, and will
continue for a period of ten years or at such time as ClimaChem is no
longer included in LSB's consolidated federal tax return or state
consolidated,
-6-
<PAGE>
combined or unitary tax returns, if earlier, unless sooner terminated
pursuant to the terms of this paragraph 5. Notwithstanding the
foregoing, LSB may terminate this Agreement on 60 days' written notice
to ClimaChem if ClimaChem defaults under any of the terms or
provisions of this Agreement or if LSB sells all, or substantially
all, of the issued and outstanding stock of ClimaChem. Unless
otherwise agreed in writing by the parties, this Agreement will remain
in force and be binding so long as the statutory period for
assessments or refunds under applicable law remains unexpired for any
taxable period as to which either party may have a claim against the
other under this Agreement.
5.2 Expenses. ClimaChem will reimburse or pay to LSB ClimaChem's
--------
allocable share of all expenses (including professional fees) incurred
by LSB or its designee in connection with the preparation or audit of
Consolidated Federal Returns, Composite Returns, or other returns or
contests or controversies related to such returns. The allocation of
such expenses between LSB and ClimaChem will be made to LSB in its
sole discretion.
5.3 Successors and Assigns. This Agreement will bind and inure to the
----------------------
benefit of the respective successors and assigns of the parties
hereof, but no assignment will relieve any party of its obligations
hereunder without the written consent of the other parties.
5.4 Notices. All notices and other communications hereunder will be in
-------
writing and will be delivered by hand or mailed by registered or
certified mail (return-receipt requested) to the parties at the
following addresses (or at such other addresses for a party as will be
specified by like notice) and will be deemed given on the date on
which such notice is received:
-7-
<PAGE>
To LSB or any member LSB Industries, Inc.
of the LSB Group: 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: Chief Financial
Officer
To ClimaChem or any member ClimaChem, Inc.
of the ClimaChem Group: 16 South Pennsylvania
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: President
5.5 Governing Law. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of Oklahoma, without giving
effect to the principles of conflicts of laws. The parties consent to
the jurisdiction of any court in Oklahoma County, Oklahoma, with
subject matter jurisdiction for any action arising out of matters
related to this Agreement, and waive the right to commence any action
arising out of matters related to this Agreement in any court outside
Oklahoma County, Oklahoma.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated.
LSB INDUSTRIES, INC.,
a Delaware corporation
By_____________________________
Jim D. Jones
Vice President and Controller
CLIMACHEM, INC.,
an Oklahoma corporation
By_____________________________
David R. Goss
Vice President
-8-
<PAGE>
EXHIBIT 10.13
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
This First Amendment to Loan and Security Agreement ("First Amendment") is
made as of June 1 , 1995 by and between THE CIT GROUP/EQUIPMENT FINANCING, INC.
("Lender") and DSN CORPORATION ("Borrower").
WHEREAS, Lender and Borrower entered into a Loan and Security Agreement
dated as of October 31, 1994 ("Loan Agreement") pursuant to which Lender made
certain loans to Borrower upon the terms and conditions set forth in the Loan
Agreement and the related Loan Documents;
WHEREAS, Lender has agreed to increase the amount of the loans under the
Loan Agreement; and
WHEREAS, Lender and Borrower have agreed to certain other modifications and
amendments to the Loan Agreement as set forth in this First Amendment.
NOW, THEREFORE, in consideration of the terms and conditions herein, and of
any loans or other credit facilities heretofore, now or hereafter made to or for
the benefit of Borrower by Lender, the parties hereto agree to the following
amendments. and modifications to the Loan Agreement:
1. Definitions. The term "Note" shall be amended to mean that certain
-----------
Amended and Restated Promissory Note which evidences the Loan, substantially in
the form attached hereto as Exhibit "A".
2. The Loan. Section 2.1 of the Loan Agreement shall be amended to
--------
increase the amount Lender is willing to lend to a sum not to exceed the
principal amount of sixteen million, five hundred thousand dollars ($16,500,000)
(the "Loan"), the proceeds of which are to be disbursed by Lender exclusively
for the payment of the costs and expenses incurred in connection with the
construction and testing of the DSN Plant and the costs and expenses incurred in
connection with the preparation, negotiation, recordation, title insurance and
filing requirements pursuant to the Loan Documents.
3. Disbursement Methods. Pursuant to Section 2.2 of the Loan Agreement,
--------------------
Lender has disbursed the initial $12,750,000 of the Loan proceeds. Pursuant to
the terms hereof, Lender has agreed to advance an additional $3,750,000 in two
disbursements. Concurrent with the execution of this First Amendment, Lender
will make the first disbursement of $1,875,000. The second (and final)
disbursement of the remaining $1,875,000 will be made upon Borrower's successful
completion and demonstration of the DSN Plant reliability test (the "Test")
defined herein as: (1) Strong Nitrate Acid ("SNA") product quality meeting grade
specifications pursuant to the offtake Agreement dated January 1, 1994 with
Monsanto Company ("product specifications"); (2) SNA product throughput
<PAGE>
meeting the product specifications; and (3) reliability demonstrated by the DSN
Plant operating for the earlier of, a period of thirty (30) consecutive calendar
days at the rate of 275 tons per day of SNA meeting the product specifications,
or 8,250 tons of SNA meeting the product specifications. The Test may be
interrupted for any reason ("Incident") and receive full credit for production
prior to the Incident provided that the 275 tons per day volume indicated above
at product specification is produced in 30 consecutive days.
Upon completion of the Test, Borrower shall issue a "Final Completion
Certificate" to Lender and Lender's consultant, Brown and Root, Inc. Upon
receipt of the Final Completion Certificate, Brown & Root, Inc. shall issue to
Lender an "Independent Consultant Completion Certificate" in form and substance
satisfactory to Lender confirming completion of the Test. Failure of Borrower to
complete such Test and Brown & Root, Inc. issuing its acceptable "Independent
Consultant Completion Certificate" to Lender by July 31, 1995 shall, unless
otherwise agreed by Lender, terminate any requirement of Lender to make such
second disbursement.
Except as may otherwise be expressly modified by this First Amendment, the
remaining terms and conditions of Section 2.2 of the Loan Agreement remain in
effect.
4. Repayment of the Loan. Section 2.3 of the Loan Agreement shall be
---------------------
amended to reflect the modifications in the repayment provisions of the Note as
follows:
(a) Lender has advanced the full above-referenced $12,750,000 of Loan
proceeds to Borrower. Concurrent with the execution of this First
Amendment, Lender shall advance the first additional disbursement of
$1,875,000, resulting in a then aggregate principal advance of
$14,625,000. Principal and precomputed interest thereon shall be
payable in 84 equal consecutive monthly installments. For purposes of
amortization and payment of the principal and precomputed interest
under the Note, the Term Out Period shall be deemed to commence June
1, 1995 with the first installment payment in the amount of
$234,279.80 being due on July 1, 1995 and thereafter payable in
eighty-three (83) equal consecutive monthly payments. Provided,
however, that at such time as the second disbursement of $1,875,000 is
made by Lender, the second disbursement will be added to the then
outstanding principal balance of the Note and the then remaining
installments during the remaining Term Out Period shall be
recalculated to provide for equal consecutive monthly installments of
the then aggregate unpaid principal balance and precomputed interest
thereon for the remainder of the Term Out Period.
2
<PAGE>
(b) The principal balance outstanding under the Note, and all accrued and
unpaid interest and charges not sooner paid when due under the Note,
and all other Obligations of Borrower owing under any and all of the
Loan Documents shall be due and payable in full on the last day of the
Term Out Period (June 1, 2002) unless due and payable earlier as
provided in the Loan Documents.
(c) In the event the DSN Plant shall not be fully operational, and the
requirements for the DSN Plant Completion Date shall not have been
completed by October 15, 1995, the principal balance outstanding under
the Note and all accrued and unpaid interest and charges not sooner
paid when due under the Note, and all other Obligations of Borrower
owing under any and all of the Loan Documents shall at the option of
Lender, be fully due and payable on October 15, 1995.
5. Conditions Subsequent to Lending. Within thirty (30) days of the date
--------------------------------
of the execution of this First Amendment:
(a) Borrower shall provide Lender with Amendments to the term and fee
under the Consulting Agreement and the term and rents under DSN Plant
Equipment Lease, the Ground Lease and the Ground Sublease in such
amounts and for such terms as may be acceptable to Lender, in its sole
discretion.
(b) UCC follow-up searches shall be obtained reflecting Lender's first
priority lien in the personal property Collateral.
(c) Lender shall have received an executed Modification to the Leasehold
Mortgage in form and priority as may be acceptable to Lender, in its
sole discretion, and such Modification to Leasehold Mortgage shall
have been recorded and any recording fees and any Arkansas intangible
recording tax shall have been paid in full. Lender shall also have
received an ALTA lender's endorsement to its policy of title
insurance, in form, amount with such priority and endorsements as
Lender may reasonably require.
(d) Borrower shall have paid to Lender in full all fees and expenses.
6. Representations and Warranties. Borrower represents and warrants as
------------------------------
follows:
(a) Each of the representations and warranties contained in the Loan
Agreement is hereby reaffirmed as of the date hereof, each as if set
forth herein;
3
<PAGE>
(b) The execution, delivery and performance of this First Amendment are
within Borrower's powers, have been duly authorized by all necessary
action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on
Borrower;
(c) This First Amendment is a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms;
and
(d) No event has occurred and is continuing or would result from this
First Amendment which constitutes a Default under the Loan Agreement,
as amended and modified hereby.
7. Miscellaneous. This First Amendment shall be part of the Loan
-------------
Agreement, the terms of which are incorporated herein, and the breach of any
representation, warranty or covenant contained herein or the failure to observe
or comply with any term or agreement contained herein, shall constitute a
Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement, the Loan Documents and
at applicable law. Borrower agrees to pay all costs, expenses and attorneys'
fees incurred by Lender in connection with the negotiation and preparation of
this First Amendment and any other documents in connection herewith including
all search, recording and title insurance expenses and in carrying out or
enforcing the terms of this First Amendment. Except as expressly provided
herein, Lender is not waiving any rights under the Loan Agreement or any other
Loan Document and, except as expressly provided herein or as previously modified
in a writing signed by Lender, all of the terms, covenants, and conditions of
the. Loan Agreement remain unmodified and in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the same meaning as set
forth in the Loan Agreement. This First Amendment may be executed in
counterparts, which counterparts, when so executed and delivered, shall together
constitute but one original.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to be effective as of the first date above written.
"Borrower" "Lender"
DSN CORPORATION THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ B. H. Golsen By: _______________________________
------------------------
Its: VP Its: ______________________________
------------------------
4
<PAGE>
The undersigned Guarantors acknowledge and consent to the foregoing First
Amendment, confirm that such additional loans by Lender are part of the
Obligations guaranteed by each of the undersigned's Guaranty, and further
confirm that each such Guaranty is in full force and effect.
LSB INDUSTRIES, INC., a Delaware corporation
By: /s/ David R. Goss
------------------------------
Title: Vice President
----------------------------
LSB CHEMICAL CORP., an Oklahoma corporation
By: /s/ David R. Goss
-------------------------------
Title: Vice President
----------------------------
5
<PAGE>
EXHIBIT 10.15
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
(Mixed Acid North Carolina Plant)
This First Amendment to Loan & Security Agreement ("First Amendment") is
dated as of November 15, 1995, and is made and entered into by and between DSN
Corporation, an Oklahoma corporation ("Borrower) and The CIT Group/Equipment
Financing, Inc., a New York corporation ("Lender").
RECITALS
--------
This First Amendment is made with reference to the following facts:
A. Borrower and Lender entered into a certain Loan Security Agreement
dated as of April 5, 1995 ("Loan Agreement") pursuant to which Lender made
available to Borrower a credit facility to finance the acquisition and
construction of the Mixed Acid Plant located at the Koch Sulphur Products
Company plant facilities in Wilmington, North Carolina. Terms used herein and
not otherwise defined shall have the meaning specified for such terms in the
Loan Agreement.
B. Construction delays were subsequently encountered with respect to the
construction and completion of the Mixed Acid Plant resulting in extensions
relating to the final funding under the Loan Agreement.
C. Borrower also informed Lender that it was in violation of the tangible
net worth covenant provided in Section 6.10 of the Loan Agreement, and Borrower
requested a waiver of such default and amendment to Section 6.10 resetting the
tangible net worth tests. Lender has agreed to such covenant modifications.
D. Lender and Borrower have agreed to certain other modifications and
amendments to the Loan Agreement as set forth in this First Amendment.
NOW THEREFORE, in consideration of the terms and conditions herein and of
any loans or other credit facilities heretofore, now or hereafter made to or for
the benefit of Borrower by Lender, the parties hereto agree to the following
amendments and modifications to the Loan Agreement:
1. Definitions. The term "Note" shall be amended to mean that certain
-----------
Amended and Restated Promissory Note which evidences the Loan, substantially in
the form attached hereto as Exhibit "A".
2. Certification re Mixed Acid Plant Completion. Borrower and EDC hereby
--------------------------------------------
certify to Lender that (i) the Mixed Acid Plant has been fully constructed and
completed substantially in accordance with the Plans and Specifications and is
in operation;
<PAGE>
(ii) the Mixed Acid Plant as completed, complies with applicable zoning,
building and land use laws; (iii) direct connection has been made to all roads,
railtrack, pipelines, supply lines, water, gas, sewer, telephone and electrical
facilities necessary for the operation and use of the Mixed Acid Plant; (iv) the
Mixed Acid Plant Equipment Lease and the Consulting Agreement are in full force
and effect; (v) a valid certificate of final completion has been delivered to
and accepted by Koch Sulphur Products Company (a copy of which is delivered
herewith); (vi) all inspections by applicable governmental entities necessary to
permit the start-up of the Mixed Acid Plant have been completed and all
necessary certificates of approvals for occupation and operation of the Mixed
Acid Plant have been obtained; and (vii) the period for filing the mechanics'
and materialmen's liens has expired without any material liens having been filed
or reported or lien waivers have been obtained from contractors which performed
work or material except for the welding repair work at the Mixed Acid Plant .
3. Tangible Net Worth. Lender has consented to the waiver of LSB's
------------------
violation of the tangible net worth covenant provided in Section 6.10 of the
Loan Agreement for the quarter ended at September 30, 1995. Section 6.10 of the
Loan Agreement is amended in its entirety to read as follows:
"Section 6.10 Tangible Net Worth". LSB shall maintain at all times, on
-------------------------------
a consolidated basis, a minimum tangible net worth of $75,000,000 after
subtracting treasury stock and $85,000,000 before subtracting treasury
stock as at December 31, 1995 and March 31, 1996, $76,000,000 after
subtracting treasury stock and $86,000,000 before subtracting treasury
stock as at June 30, 1996, $77,000,000 after subtracting treasury stock and
$87,000,000 before subtracting treasury stock as at September 30, 1996 and
$78,000,0000 after subtracting treasury stock and $88,000,000 before
subtracting treasury stock as at December 31, 1996. Thereafter, LSB shall
maintain a minimum tangible net worth of not less than $85,000,000 after
subtracting treasury stock. The term tangible net worth is defined as total
stockholders' equity, after deducting any treasury stock, less all assets
----
that are considered intangible assets under GAAP (including but not limited
to goodwill, patents, trademarks, certain deferred charges (as approved by
Lender) and customer lists).
LSB shall also maintain, on a consolidated basis, a leverage position
(defined as total liabilities divided by tangible net worth, after
deducting treasury stock) of 2.25:1 as at December 31, 1995, and at all
times thereafter."
2
<PAGE>
4. Administrative Fee. Borrower shall pay to Lender, concurrently with
------------------
the execution of this First Amendment a $2,500 administrative fee in connection
with the tangible net worth waiver and modifications.
5. Disbursement. Pursuant to Borrower's Request for Advance, Lender shall
------------
make the final disbursement of the Loan and Borrower shall execute the Amended
and Restated Promissory Note.
6. Conditions Subsequent to Lending. Within thirty days of the date of
--------------------------------
the execution of this First Amendment:
(a) Borrower shall provide Lender with amendments to the term and fee
under the Consulting Agreement and the term and rents under the Mixed Acid
Plant Equipment Lease in such amounts and for such terms as may be
acceptable to Lender, and its sole discretion;
(b) UCC follow-up searches shall be obtained reflecting Lender's
first priority lien in the personal property Collateral; and
(c) Borrower shall pay to Lender in full all fees and expenses.
7. Representations and Warranties. Borrower represents and warrants as
------------------------------
follows:
(a) Each of the representations and warranties contained in the Loan
Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(b) The execution, delivery and performance of this First Amendment
are within Borrower's powers, have been duly authorized by all necessary
action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrower;
(c) This First Amendment is a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms; and
(d) No event has occurred and is continuing or would result from this
First Amendment which constitutes a Default under the Loan Agreement, as
amended and modified hereby.
8. Miscellaneous. This First Amendment shall be part of the Loan
-------------
Agreement, the terms of which are incorporated herein, and the breach of any
representation, warranty or covenant contained herein or the failure to observe
or comply with any term or agreement contained herein, shall constitute a
Default under the Loan Agreement and Lender shall be entitled to exercise
3
<PAGE>
all rights and remedies it may have under the Loan Agreement, the Loan Documents
and at applicable law. Borrower agrees to pay all costs, expenses and attorneys'
fees incurred by Lender in connection with the negotiation and preparation of
this First Amendment and any other documents in connection herewith including
all search, recording and title insurance expenses and in carrying out or
enforcing the terms of this First Amendment. Except as expressly provided
herein, Lender is not waiving any rights under the Loan Agreement or any other
Loan Document and, except as expressly provided herein or as previously modified
in a writing signed by Lender, all of the terms, covenants, and conditions of
the Loan Agreement remain unmodified and in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the same meaning as set
forth in the Loan Agreement. This First Amendment may be executed in
counterparts, which counterparts, when so executed and delivered, shall together
constitute but one original.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to be effective as of the first date above written.
"Borrower" "Lender"
DSN CORPORATION, THE CIT GROUP/EQUIPMENT
an Oklahoma corporation FINANCING INC.,
a New York corporation
By: /s/ James L. Wewers By: ______________________________
------------------------
Its: V.P. Its: _____________________________
------------------------
"LSB"
LSB INDUSTRIES, INC.
a Delaware corporation,
Agreed as to Section 2 only.
By: /s/ B. H. Golsen
------------------------
Its: Vice-Chairman
------------------------
4
<PAGE>
The undersigned Guarantors acknowledge and consent to the foregoing First
Amendment, confirm that such additional loans by Lender are part of the
Obligations guaranteed by each of the undersigned's Guaranty, and further
confirm that each such Guaranty is in full force and effect.
LSB INDUSTRIES, INC.,
a Delaware corporation
By: /s/ B. H. Golsen
-------------------------------
Its: Vice-Chairman
-------------------------------
LSB CHEMICAL CORP.,
an Oklahoma corporation
By: /s/ B. H. Golsen
-------------------------------
Its: Vice-President
-------------------------------
5
<PAGE>
EXHIBIT 10.16
LOAN AND SECURITY AGREEMENT
(RAIL TANK CARS)
Dated November 15, 1995
between
DSN CORPORATION,
as Borrower
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Lender
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS............................................ 1
-----------
ARTICLE 2. THE LOAN............................................... 8
- ---------- --------
Section 2.1 The Loan..................................... 8
--------
Section 2.2 Disbursement................................. 8
------------
Section 2.3 Repayment of the Loan........................ 8
---------------------
Section 2.4 Interest Charges............................. 9
----------------
Section 2.5 Late Charge Rate............................. 9
----------------
Section 2.6 Maximum Interest............................. 9
----------------
Section 2.7 Expenses..................................... 10
--------
Section 2.8 Prepayment................................... 10
----------
Section 2.9 Mandatory Prepayment/Event of Loss........... 10
----------------------------------
Section 2.10 Conditions of Lending........................ 11
---------------------
Section 2.11 Place and Form of Payments................... 13
--------------------------
ARTICLE 3. SECURITY FOR THE OBLIGATIONS........................... 13
- ---------- ----------------------------
Section 3.1 Grant of Security Interest................... 13
--------------------------
Section 3.2 Continuing Obligation........................ 14
---------------------
ARTICLE 4. ADMINISTRATION OF THE COLLATERAL....................... 15
- ---------- --------------------------------
Section 4.1 The Equipment................................ 15
-------------
Section 4.2 No Lender Liability.......................... 15
-------------------
Section 4.3 Use of Equipment; Identification............. 16
--------------------------------
ARTICLE 5. REPRESENTATIONS AND WARRANTIES......................... 16
- ---------- ------------------------------
Section 5.1 Organization and Qualification............... 16
------------------------------
Section 5.2 Concerning the Loan Documents................ 16
-----------------------------
Section 5.3 Guaranties................................... 17
----------
Section 5.4 Equipment.................................... 17
---------
Section 5.5 Title to the Equipment....................... 17
----------------------
Section 5.6 Financial Condition.......................... 17
-------------------
Section 5.7 Litigation................................... 18
----------
Section 5.8 Disclosure................................... 18
----------
Section 5.9 Tax Returns and Payments..................... 18
------------------------
Section 5.10 Compliance with Other Instruments............ 18
---------------------------------
Section 5.11 Pension Plans................................ 19
-------------
Section 5.12 Labor Relations.............................. 19
---------------
Section 5.13 Environmental Laws........................... 19
------------------
Section 5.14 Trade Names.................................. 20
-----------
Section 5.15 Subsidiaries................................. 20
------------
Section 5.16 Loans and Affiliate Payments................. 20
----------------------------
Section 5.17 Permits...................................... 20
-------
Section 5.18 Broker's or Transaction Fees................. 20
----------------------------
Section 5.19 Taxpayer ID No. and Chief
-------------------------
Executive Office............................. 20
----------------
Section 5.20 No Default................................... 21
----------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6. AFFIRMATIVE COVENANTS................................. 21
- ---------- ---------------------
Section 6.1 Financial and Other Information............. 21
-------------------------------
Section 6.2 Access...................................... 24
------
Section 6.3 Taxes....................................... 24
-----
Section 6.4 Maintenance of Properties: Insurance........ 24
------------------------------------
Section 6.5 Business.................................... 26
--------
Section 6.6 Compliance.................................. 26
----------
Section 6.7 Litigation.................................. 26
----------
Section 6.8 Environmental Laws.......................... 26
------------------
Section 6.9 Notices..................................... 27
-------
Section 6.10 Tangible Net Worth.......................... 27
------------------
Section 6.11 Change of Ownership......................... 27
-------------------
Section 6.12 Use of Proceeds............................. 27
---------------
Section 6.13 Books....................................... 28
-----
ARTICLE 7. NEGATIVE COVENANTS.................................... 28
- ---------- ------------------
Section 7.1 Corporate Structure......................... 28
-------------------
Section 7.2 Dividends, Distributions, Redemptions....... 28
-------------------------------------
Section 7.3 Loans, Investments, Affiliate Payments,
---------------------------------------
Salaries.................................... 28
--------
Section 7.4 Change in Business, Structure or Business
-----------------------------------------
Location.................................... 28
--------
Section 7.5 Guaranties.................................. 28
----------
Section 7.6 Sale of Property............................ 28
----------------
Section 7.7 Prepayment.................................. 29
----------
Section 7.8 Liens....................................... 29
-----
Section 7.9 Pension Plans............................... 29
-------------
Section 7.10 Borrower's Name............................. 29
---------------
Section 7.11 Changes to Railcar Documents................ 29
----------------------------
Section 7.12 Other Debts................................. 29
-----------
Section 7.13 Transactions with Affiliates................ 30
----------------------------
ARTICLE 8. DEFAULT............................................... 30
- ---------- -------
Section 8.1 Events of Default........................... 30
-----------------
Section 8.2 Rights Upon Default......................... 32
-------------------
ARTICLE 9. MISCELLANEOUS......................................... 34
- ---------- -------------
Section 9.1 Survival.................................... 34
--------
Section 9.2 Waiver of Notices........................... 34
-----------------
Section 9.3 Assignment.................................. 34
----------
Section 9.4 Complete Agreement Modification............. 34
-------------------------------
Section 9.5 Applicable Law.............................. 35
--------------
Section 9.6 Indemnification............................. 35
---------------
Section 9.7 Stamp or other Tax.......................... 36
-------------------
Section 9.8 Captions.................................... 36
--------
Section 9.9 Notices..................................... 36
-------
Section 9.10 No Waiver, Lender Performance............... 37
-----------------------------
Section 9.11 Evidence of Obligations; Admissibility of
-----------------------------------------
Lender's Books and Records.................. 37
--------------------------
Section 9.12 No Liability for Brokers.................... 37
------------------------
Section 9.13 Further Assurances.......................... 37
------------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 9.14 Counterparts................................ 38
------------
Section 9.15 Notice of Breach by Lender.................. 38
--------------------------
Section 9.16 Time........................................ 38
----
Section 9.17 Exhibits.................................... 38
--------
Section 9.18 Authorization to Date, Complete Blanks and
------------------------------------------
Correct Errors.............................. 38
--------------
Section 9.19 No Oral Agreements; Entire Agreement........ 38
------------------------------------
Section 9.20 Venue and Jurisdiction...................... 39
----------------------
Section 9.21 Waiver of Trial by Jury..................... 39
-----------------------
</TABLE>
-iv-
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
(Rail Tank Cars)
This LOAN AND SECURITY AGREEMENT (the "Agreement"), dated _______________,
1995, is made and entered into by and between DSN CORPORATION, an Oklahoma
corporation ("Borrower"), and THE CIT GROUP/EQUIPMENT FINANCING, INC., a New
York corporation ("Lender").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and of any loans or other credit facilities now or hereafter
made to Borrower by Lender, the parties hereto covenant and agree as follows:
ARTICLE 1.
----------
DEFINITIONS
-----------
The following capitalized terms have the following meanings when used in
this Agreement:
"Affiliate" means any of LSB, EDC, LSBC, Prime Financial Corp., Total
---------
Energy Systems, Ltd., Slurry Explosive Corporation, Universal Tech Corporation,
LSB Holdings, Inc., and any other Person controlling or controlled by or under
common control with LSB Industries, Inc. or any of their Subsidiaries,
successors or assigns.
"Business Day" means any day which is not a Saturday, Sunday or day on
------------
which banks in New York are closed.
"Casualty Prepayment Percentage" shall mean, on the date of the required
------------------------------
prepayment of a Note pursuant to Section 2.9 of this Agreement, the product
obtained by multiplying 10% by a fraction, the numerator of which shall be the
number of Installment Payment Dates with respect to the Note remaining after
such date of prepayment (including the Installment Payment Date, if any, on
which such prepayment is made) and the denominator of which shall be the total
number of Installment Payment Dates with respect to such Note.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Cost" shall mean, with respect to each Unit of Equipment, the
----
manufacturer's or supplier's invoiced purchase price therefor (after giving
effect to any discount or other reduction) payable by Borrower, which amount
shall be set forth in Exhibit "B" pertaining to such Unit of Equipment.
"Collateral" means: (i) all personal property referred to in Section 3.1;
---------- ---
and (ii) all other property and interests in property, real or personal, now
owned or leased or hereafter acquired or leased, which is hereafter pledged or
assigned to Lender as collateral security for payment of any of the Obligations.
<PAGE>
"Default" means any Event of Default or event which, with notice or passage
-------
of time or both, would constitute an Event of Default.
"Disclosure Schedule" means the disclosure schedule annexed to this
-------------------
Agreement as Exhibit "A".
-
"DSN Plant Loan" means that certain loan in the original principal amount
--------------
of $12,750,000, as subsequently amended to $16,500,000, made by Lender to
Borrower pursuant to the DSN Plant Loan Documents.
"DSN Plant Loan Documents" means that certain Loan and Security Agreement
------------------------
(DSN Plant) dated October 31, 1994, as amended, executed between Lender and
Borrower, and all other loan documents described therein, relating to a loan by
Lender to Borrower to finance the acquisition and construction of strong nitric
acid plant in Arkansas.
"EDC" means El Dorado Chemical Company, an Oklahoma corporation.
---
"Environmental Laws" means all federal, state and local laws, rules,
------------------
regulations, ordinances, programs, permits, guidance, orders and consent decrees
relating to hazardous substances, discharges, releases or disposals of
pollutants, solid waste or hazardous materials, or any other environmental
matters applicable to Borrower's business or assets. Such laws and regulations
include the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
------
as amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S) 9601 et seq., as amended; the Toxic Substances Control Act,
------
15 U.S.C. (S) 2602 et seq., as amended; the Clean Water Act, 33 U.S.C. (S) 466
------
et seq., as amended; the Clean Air Act, 42 U.S.C. (S) 7401 et seq., as amended;
- ------ ------
state and federal superlien and environmental cleanup programs; and U.S.
Department of Transportation regulations. The terms "hazardous substance" and
"release" shall have the meanings specified in the Federal Comprehensive
Environmental Responsibility Cleanup and Liability Act of 1980, as the
definition of such terms may be subsequently modified, supplemented or amended
("CERCLA") and the terms "solid waste" and "disposal" shall have the meanings
specified in the Federal Resource Conservation and Recovery Act of 1976, as the
definition of such terms may be subsequently modified, supplemented or amended
("RCRA"); provided, however, that in the event either CERCLA or RCRA is amended
so as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and provided,
further, however, that to the extent a parcel of real property is situated in a
state or other jurisdiction in which the applicable laws may establish a meaning
for "hazardous substance," "release," "solid waste," or "disposal" which is
broader than that specified in either CERCLA or RCRA, such broader meaning shall
apply.
2
<PAGE>
"Equipment" means the ten (10) rail tank cars purchased by Borrower from
---------
Trinity Industries, Inc. and more particularly described in Exhibit "B" hereto
-
including all substitutions, attachments, accessions or accessories relating
thereto and all manuals, drawings, instructions, records, warranties and rights
with respect thereto, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Event of Default" means any event so described in Section 8.1.
---------------- ---
"Event of Loss" shall mean, with respect to any Unit of the Equipment, the
-------------
actual or constructive loss of such Unit due to theft, destruction, damage
beyond repair, or damage from any reason whatsoever to an extent which makes the
repair uneconomical or rendition thereof unfit for normal use; or the
condemnation, confiscation or seizure of, or requisition of title to, or use of
such Unit, by any governmental authority or any other Person, whether or not
acting under color of governmental authority.
"Fair Market Value" means the price that a knowledgeable buyer would be
-----------------
willing to pay a knowledgeable seller, neither being under any duress to buy or
sell and both having reasonable knowledge of relevant facts, for the machinery
and equipment in place and in operation, taking advantage of all leasehold and
site improvements designed to facilitate its operation, with the seller
accurately and completely representing the existing condition and operability of
the machinery and equipment to the buyer. Consideration is given to each asset's
contribution to the operating facility, or the contribution of all the assets as
a whole, whichever appropriately addresses production capabilities of the plant.
It is assumed that all specially designed and built machinery and equipment will
continue to be utilized in the manner for which it was originally intended.
"Financial Statement" means any financial statement given to Lender
-------------------
pursuant to Section 6.1.
---
"Fiscal Year" means, as to any Person, such Person's fiscal year for
-----------
financial accounting purposes. Borrower's current Fiscal Year ends on December
31, 1995.
"Funding Date" means the date on which any Loan advance is made.
------------
"GAAP" means, as of any date of determination, generally accepted
----
accounting principles consistently applied during each interval and from
interval to interval.
3
<PAGE>
"Guarantor" means any Person who has executed a Guaranty in favor of Lender
---------
with respect to the Obligations, including LSB and LSBC.
"Guaranty" means each continuing guaranty executed and delivered by LSB,
--------
LSBC and any other Guarantor in form and substance acceptable to Lender
guarantying the Obligations.
"Hazardous Substance" means any substance, material or waste (including
-------------------
petroleum and petroleum products) which is or becomes designated, classified or
regulated as being "toxic" or "hazardous" or a "pollutant," or which is or
becomes similarly designated, classified or regulated, under any Environmental
Laws.
"ICC" means the Interstate Commerce Commission and any agency or
---
instrumentality of the United States government succeeding to its functions.
"Indebtedness" means, as to any Person, (a) all indebtedness of such Person
------------
for borrowed money, (b) that portion of the obligations of such Person under
capital leases which is properly recorded as a liability on a balance sheet of
that Person prepared in accordance with GAAP, (c) any obligation of such Person
that is evidenced by a promissory note or other instrument representing an
extension of credit to such Person, whether or not for borrowed money, or any
obligation of such Person for the deferred purchase price of property or
services (other than trade or other accounts payable in the ordinary course of
----------
business in accordance with terms customary to DSN or its Affiliates), (d) any
obligation of such Person that is secured by a Lien on assets of such Person,
whether or not that Person has assumed such obligation or whether or not such
obligation is non-recourse to the credit of such Person, but only to the extent
of the fair market value of the assets so subject to the Lien, (e) obligations
of such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (f) obligations of such
Person for unreimbursed draws under letters of credit issued for the account of
such Person.
"Installment Payment Date" shall mean, with respect to a Note, each date on
------------------------
which a regular installment of principal and interest is due on such Note.
"Late Charge Rate" shall mean a rate per annum, equal to the higher of 3%
----------------
over the applicable interest rate set forth in Section 2.4 or 18%, but not to
---
exceed the highest rate permitted by applicable law.
"Lien" means any mortgage, deed of trust, pledge, deed to secure debt,
----
hypothecation, assignment, encumbrance, lien (statutory or other), security
interest or other security agreement, including any conditional sale or other
title retention
4
<PAGE>
agreement. "Lien" includes reservations, exceptions, easements, leases and other
restrictions and encumbrances affecting real property. For purposes hereof a
Person shall be deemed to own property acquired or held pursuant to a
conditional sale or similar security arrangement.
"Loan" shall have the meaning assigned in Section 2.1.
---- ---
"Loan Documents" means, collectively:
--------------
a. this Agreement
b. the Note
c. the Railcar Lease
d. the Consulting Agreement
e. the Assignment of the Railcar Lease and Consulting Agreement
f. the Acknowledgment and Consent to Assignment of the Railcar Lease
and Consulting Agreement
g. sufficient UCC-1 Financing Statements
h. opinion of ICC counsel and filings sufficient for ICC priority
and perfection
i. the Reaffirmation of the Guaranty (LSB)
j. the Reaffirmation of the Guaranty (LSBC)
k. the Consent to Encumbrance
and any other opinions, resolutions, certificates, documents or agreements of
any nature or type heretofore or hereafter executed or delivered by Borrower,
Affiliates or Guarantors to Lender pursuant to this Agreement or any Loan
Document in each case either as originally executed or as the same may from time
to time be supplemented, modified, amended, restated or extended.
"LSB" means LSB Industries, Inc., a Delaware corporation.
---
"LSBC" means LSB Chemical Corp., an Oklahoma corporation.
----
"Mixed Acid Plant Loan" means that certain loan in the original principal
---------------------
amount of $1,075,200.00, made or to be made by Lender to Borrower pursuant to
Mixed Acid Plant Loan Documents.
"Mixed Acid Plant Loan Documents" means that certain Loan and Security
-------------------------------
Agreement (Mixed Acid North Carolina Plant) dated as of April 5, 1995 between
Lender and Borrower, and all other "loan documents" described therein, relating
to a loan by Lender to Borrower to construct a mixed acid plant.
"Note" means a promissory note which evidences each Loan advance,
----
substantially in the form of Exhibit "C".
-
"Obligations" means and includes the aggregate of the unpaid principal
-----------
balance of the Loan and all accrued interest thereon, and all other loans,
indebtedness, debts, liabilities, obligations,
5
<PAGE>
interest, fees, premiums, guarantees, amounts, indemnities, reimbursements,
covenants and duties owing by Borrower to Lender under any one or more of the
Loan Documents, of every kind and description (whether or not evidenced by any
note or other instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising. "Obligations" include: (i) all interest, fees, charges or
other costs and payments that Borrower is required to pay to Lender under or as
a result of the Loan Documents or by law and (ii) all costs and expenses
described in Section 2.7 or otherwise required to be paid by Borrower to Lender
---
pursuant to any Loan Document.
"Pension Plan" means any pension plan as defined in Section 3(2) of ERISA
------------
which is a multi employer plan or a single employer plan as defined in Section
4001 of ERISA and subject to Title IV of ERISA and which is: (i) a plan
maintained by Borrower, or any Subsidiary or any Related Company; (ii) a plan to
which Borrower, or any Subsidiary or any Related Company contributes or is
required to contribute; (iii) a plan to which Borrower, or any Subsidiary or any
Related Company was required to make contributions at any time during the five
calendar years preceding the date of this Agreement; or (iv) any other plan with
respect to which Borrower, or any Subsidiary or any Related Company has incurred
or may incur. liability, including contingent liability, under Title IV of
ERISA, either to such plan or to the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (i) Liens for taxes not yet payable or being
---------------
contested in good faith and by appropriate proceedings diligently pursued,
provided that the reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; (ii) Liens in favor of Lender;
and (iii) Liens described on the Disclosure Schedule in Exhibit "A" as such
-
Disclosure Schedule is in effect on the date hereof.
"Person" means any individual, trust, firm, partnership, corporation or any
------
other form of public, private or governmental entity or authority.
"Proceeds" means all products and proceeds (as defined in the UCC) of any
--------
Collateral, and all proceeds of any such proceeds, including all awards for
taking by eminent domain, all proceeds of fire or other insurance, all proceeds
obtained as a result of any legal action or proceeding with respect to any
Collateral and all leases, chattel paper, accounts, cash and noncash proceeds of
any of the Collateral.
"Railcar Lease" means that railcar lease dated to be effective as of
-------------
_____________, 1995 between Borrower as lessor and EDC as lessee with respect to
the railcar Units relating thereto.
6
<PAGE>
"Related Company" means any member of any controlled group of corporations
---------------
(as defined in the Code) of which Borrower is a party, or any trade or business
(whether or not incorporated) which together with Borrower would be treated as a
single employer under Section 4001 of ERISA.
"Reportable Event" shall have the meaning assigned to that term in Title IV
----------------
of ERISA, including a reportable event described in Section 4043 of ERISA or the
regulations thereunder, a withdrawal from a Plan described in Section 4063 of
ERISA, or a creation of operations described in Section 4062(e) of ERISA.
"Security Interest" collectively means the Liens created for the benefit of
-----------------
Lender pursuant to the Loan Documents.
"Subsidiary" means any present or future corporation of which more than 50%
----------
of the outstanding stock having by its terms the ordinary voting power to elect
a majority of the board of directors, managers or trustees of such corporation
is at the time, directly or indirectly through one or more intermediaries, owned
or controlled by Borrower and/or one or more of its Subsidiaries, irrespective
of whether or not, at the time, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency. If at any time, and only for so long as, Borrower has no
Subsidiaries, provisions of this Agreement which refer to Subsidiaries shall be
of no force and effect insofar a they pertain to Subsidiaries although they
shall remain in full force and effect as to all other Persons in question.
"Treasury Rate" means the rate per annum equal to the yield to maturity for
-------------
the U.S. Treasury Security having a remaining term to maturity closest to five
(5) years as at (and shall be fixed as of) the close of business on the third
Business Day prior to the first day of each Funding Date, as such yield to
maturity is reported on page 5 ("U.S. Treasury and Money Markets") of the
information ordinarily provided by Telerate Systems Incorporated (provided that
if Telerate Systems Incorporated ceases to report such information, then such
information shall be taken from any publicly available source of similar data
designated by Lender).
"UCC" means the Uniform Commercial Code (or any successor statute) as from
---
time to time in effect in any applicable jurisdiction.
"Unit" means one or more of the railcars identified collectively as
----
Equipment and as may be described in Exhibit "B" hereof.
-
7
<PAGE>
ARTICLE 2.
----------
THE LOAN
--------
Section 2.1 The Loan. On the basis of the covenants, agreements and
--------
representations; of Borrower contained herein and subject to the terms and
conditions hereinafter set forth, Lender agrees to lend to Borrower and Borrower
agrees to borrow from Lender a sum not to exceed the aggregate principal amount
of One Million One Hundred Sixty-Nine Thousand, Eight Hundred Dollars
($1,169,800.00) (collectively, the "Loan"), the proceeds of which are to be
disbursed by Lender exclusively for the payment in full of the approved costs
and expenses incurred in connection with the construction and the purchase of
the Equipment.
Section 2.2 Disbursement.
------------
(a) The proceeds of each Loan disbursed under this Agreement shall be
evidenced by a Note and shall be secured by Borrower's interest in the Railcar
Lease and the other Collateral and all such proceeds shall be disbursed, as
aforesaid, directly to and to reimburse Trinity Industries, Inc. for the full
purchase price for such Units.
(b) Limitations on Disbursements. Disbursement of the Loan proceeds shall
be made in two (2) fundings. The first disbursement shall be in the amount of
$_____________ and shall be made upon the delivery and acceptance of not less
than the first five Units. The second disbursement of the Loan proceeds shall
be made by Lender upon the final delivery and acceptance of all ten Units, or
less if approved by Lender in its sole discretion. In addition to compliance
with the conditions of lending provided in section 2.10 hereof, Borrower shall,
in connection with each disbursement, execute a pay proceeds letter in form and
substance acceptable to Lender directing payment of such loan proceeds directly
to Trinity Industries, Inc. and such other persons as may be acceptable to
Lender. Borrower shall also deliver to Lender prior to each funding, such
invoices, statements, vouchers and other sale documents and proof of ownership
by Borrower in connection with each Unit as may be acceptable to Lender.
Notwithstanding a partial funding of the Units by the first funding, Lender's
lien shall be a first priority lien in all of the Units at any time delivered to
Borrower.
Section 2.3 Repayment of the Loan. Borrower promises to repay the Loan
---------------------
as follows:
(a) The Loan shall be evidenced by the Notes. Each Note shall be dated
concurrently with each disbursement and shall be payable in eighty-four (84)
consecutive equal monthly installments of principal and interest from the date
thereof at the rate provided in Section 2.4 below, commencing the first day of
the month following each disbursement of the Loan proceeds.
8
<PAGE>
(b) In the event the second disbursement of the Loan proceeds is not
disbursed by October 15, 1995, any obligation of Lender to make any further Loan
disbursements shall, at Lender's option, terminate.
(c) Borrower's obligation to pay all amounts payable hereunder is absolute
and unconditional and shall not be affected by any circumstance of any character
whatsoever, including (i) any setoff, counterclaim, recoupment, defense,
abatement or reduction or any right which Borrower may have against Under, the
manufacturer or supplier of any of the Equipment or anyone else for any reason
whatsoever; (ii) the invalidity, enforceability or disaffirmance of this
Agreement or any other Loan Document related hereto; or (iii) the prohibition of
or interference with the use or possession by Borrower or any other authorized
Person of all or any part of the Equipment, for any reason whatsoever.
Section 2.4 Interest Charges. The outstanding principal balance of each
----------------
Note shall bear interest at a rate per annum equal to the Treasury Rate plus two
point seven percent (2.7%) as fixed at the time of such disbursement. In each
instance, interest shall be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
Section 2.5 Late Charge Rate. In the event Borrower fails to pay any
----------------
amount hereunder when due under any Note, the amount on all Notes shall bear
charges thereon calculated at the Late Charge Rate. At any time when any Event
of Default has occurred, irrespective of any cure periods, and continues for
over ten (10) days, Borrower will pay interest on the Loan at the Late Charge
Rate.
Section 2.6 Maximum Interest. In no event shall the interest charged
----------------
with respect to the Obligations exceed the maximum amount permitted under
applicable law. Notwithstanding anything to the contrary herein or elsewhere, if
at any time the rate of interest called for hereunder or under the Notes or
other Loan Document (the "Stated Rate") exceeds the highest rate of interest
permissible under any applicable law (the "Maximum Lawful Rate"), then for so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable shall be equal to the Maximum Lawful Rate; provided, however, that if at
-----------------
any time thereafter the Stated Rate is less than the Maximum Lawful Rate,
Borrower shall, to the extent permitted by law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received by Lender is
equal to the total interest which Lender would have received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and until
the Stated Rate again exceeds the Maximum Lawful Rate, in which event this
provision shall again apply.
9
<PAGE>
Section 2.7 Expenses. Borrower agrees to pay on demand all reasonable
--------
out of pocket costs and expenses (including reasonable legal, appraisal,
accounting, auditing and similar fees) incurred at any time, before or after the
Obligations are paid in full, in connection with (i) the enforcement, attempted
enforcement, amendment or termination of this Agreement or any of the other Loan
Documents, the performance of any of Borrower's duties under this Agreement and
the other Loan Documents or any exercise by Lender of its rights and remedies
under this Agreement or any other of the Loan Documents, including in connection
with a reorganization or bankruptcy reorganization of Borrower or any Affiliate;
(ii) the filing or recordation of all documents or instruments relating to the
Collateral; (iii) realizing upon or protecting any Collateral and enforcing and
collecting any Obligations or guaranty thereof; and (iv) any Default or Event of
Default. Borrower also agrees to reimburse Lender, upon demand, for its legal
fees for outside counsel plus any appraisal fees, recording and search fees and
----
related expenses, including travel and other out of pocket expenses of Lender's
agents and its counsel, incurred by it in connection with the preparation,
negotiation, execution, closing and delivery of the Loan Documents.
Section 2.8 Prepayment. Provided no Default has occurred and is
----------
continuing, Borrower may prepay a Note in whole, but not in part, on the first
day of any month, upon at least thirty (30) Business Days' prior written notice
to Lender. Such prepayment of a Note shall be accompanied by the payment of all
principal, all accrued but unpaid interest on such Note to the date of
prepayment and all outstanding and unpaid costs, fees and expenses. In addition,
the prepayment of such Note shall be made with a prepayment fee in an amount
equal to the greater of (a) two percent (2.0%) of the outstanding principal
-------
balance of such Note, or (b) the excess, if any, of (i) the present value of the
principal and interest payments which would have been payable during, the
remainder of the term in the absence of the prepayment, using a discount rate
equal to one percent (1.0%) plus the yield to maturity, as of the Third Business
----
Day prior to the date on which the prepayment is made, on U.S. Treasury
Securities having a remaining term to maturity closest to the remaining average
life of such Note, as such yield to maturity is reported on page 5. ("U.S.
Treasury and Money Markets") of the information ordinarily provided by Telerate
Systems Incorporated, over (ii) the principal amount being prepaid. Prepayment
of a Note shall not release the Collateral as security for the remaining
outstanding Obligations.
Section 2.9 Mandatory Prepayment/Event of Loss. In the event that any
----------------------------------
Unit of the Equipment shall suffer an Event of Loss, Debtor shall make a
prepayment on the Note which reflects the indebtedness relating to the
disbursement for that particular Unit, within 30 days after the occurrence of
such Event of Loss, in an amount determined (i) by multiplying (a) the unpaid
principal amount of such Note by (b) a fraction the numerator of which shall
10
<PAGE>
be the Cost of the Unit which suffered the Event of Loss and the denominator of
which shall be the original principal amount of such Note (the amount obtained
by multiplying (i)(a) and (i)(b) hereof shall be herein referred to as the
"Prepaid Principal Amount") (ii) by adding interest accrued, with respect to the
Prepaid Principal Amount, to the date of such prepayment and (iii) by adding an
amount equal to (a) the applicable Casualty Prepayment Percentage multiplied by
(b) the Prepaid Principal Amount.
Section 2.10 Conditions of Lending. The obligation of Lender to make any
---------------------
advance hereunder is subject to the prior satisfaction (or waiver in writing and
signed by Lender in its sole discretion) of each of the following conditions
precedent:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by Borrower and the Guarantors in the Loan Documents and any
certificate, document or financial or other written statement furnished at
any time under or in connection herewith shall be true and correct in all
material respects on and as of the date given and on and as of the date of
the funding of any Loan advance as if made on and as of such date and
otherwise in exactly the same language.
(b) Compliance. Borrower shall have complied and shall then be in
----------
compliance with all the terms, covenants and conditions of the Loan
Documents.
(c) No Default. No Default shall have occurred and be continuing.
----------
(d) No Material Adverse Change. No material adverse change shall have
--------------------------
occur-red with respect to the business, financial condition or operations
of Borrower since the financial statement of LSB dated December 31, 1994
and Lender shall have received a certificate from the Chief Executive
Officer of Borrower to that effect; and no material adverse change shall
have occurred with respect to the business, financial condition or
operations of EDC or any Guarantor, as may be determined by Lender in the
exercise of its reasonable discretion.
(e) Delivery of Documents. Each of the Loan Documents shall have been
---------------------
executed and delivered to Lender in form and substance satisfactory to
Lender and shall be in full force and effect.
(f) No Change In Law. No change in state or federal law shall have
----------------
been enacted or proposed which would make the Loan unlawful to Lender.
(g) Opinions of Counsel. Prior to the initial advance, Lender shall
-------------------
have received an opinion of legal counsel for
11
<PAGE>
Borrower, LSB, LSBC and EDC, in form and substance satisfactory to Lender
and its counsel, which opinion will include, among other things, opinions
affirming Borrower's authority to enter into this Agreement, the perfection
and priority of the Security Interest, LSB's and LSBC's authority to enter
into the Guaranties and EDC's authority to enter into the Railcar Lease and
the enforceability of the Loan Documents and an opinion of ICC counsel
relating to the perfection and priority of Lender's Lien in the Equipment.
(h) UCC Searches. Lender shall have received UCC searches reflecting
------------
Lender's first priority lien in the Collateral.
(i) Loan Fee and Expenses. Borrower shall pay all Lender's costs and
---------------------
expenses hereunder, including the expenses referenced in Section 2.7
hereof.
(j) Certificate of Good Standing and Tax Clearances. Lender shall have
-----------------------------------------------
received certified copies indicating Borrower and EDC are in good standing
under the laws of their state of incorporation and qualified to do business
in the states where they do business and such tax clearance certificates as
may be required by Lender.
(k) Proceedings. All proceedings and actions shall have been taken in
-----------
connection with the transactions contemplated by this Agreement, and all
documents contemplated in connection herewith shall be satisfactory in form
and substance to Lender and its counsel.
(l) Evidence of Insurance. Lender shall receive evidence of all
---------------------
insurance required by the terms of this Agreement and the Loan Documents.
(m) Termination of Liens. Lender shall have received duly executed UCC
--------------------
termination statements and other instruments in form and substance
satisfactory to Lender, as shall be necessary to terminate and satisfy any
Liens on the Collateral except for Permitted Liens.
(n) Certificate of Incumbency of Borrower. Prior to initial advance,
-------------------------------------
Lender shall have received a certificate of incumbency of Borrower signed
by Borrower's Secretary or Assistant Secretary, which certificate shall
certify the names of the officers of Borrower authorized to execute any
Loan Documents and any other related documents on behalf of Borrower,
together with the signatures of such officers, and Lender may conclusively
rely on such certificate until receipt of a further certificate of the
Secretary or Assistant Secretary of Borrower canceling or amending the
prior
12
<PAGE>
certificate and submitting the signatures of the officers named in
such further certificate.
(o) Resolutions of Borrower. Prior to initial advance, Lender shall
-----------------------
have received a certified copy of all corporate proceedings of Borrower
evidencing that all action required to be taken in connection with the
authorization, execution, delivery, and performance of this Agreement, the
other Loan Documents, and the transactions contemplated hereby and thereby,
has been duly taken.
(p) Other Required Documentation. Borrower shall have executed and/or
----------------------------
delivered such other documents, instruments, agreements or items as Lender
may reasonably require.
Section 2.11 Place and Form of Payments. Unless Lender otherwise directs
--------------------------
in writing, all payments and prepayments permitted or required by any Loan
Document shall be made in immediately available funds and not later than the
time necessary for good funds to be credited on the same day received at
Lender's account in accordance with the instructions annexed hereto as Rider
-----
2.11 or to such other location as Lender shall hereafter designate to Borrower
- ----
in writing. Whenever any payment is stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees.
ARTICLE 3.
----------
SECURITY FOR THE OBLIGATIONS
----------------------------
Section 3.1 Grant of Security Interest. As collateral security for the
--------------------------
prompt and due payment and performance of the Obligations including all
indebtedness and obligations of Borrower to Lender under the Loan Documents, the
DSN Plant Loan Documents and the Mixed Acid Plant Loan Documents, Borrower
hereby assigns to Lender and grants to Lender a continuing first priority lien
on and security interest in all of Borrower's right, title and interest in and
to, but none of its obligations or liabilities respecting, the following
property, present or future, tangible or intangible, now owned or existing or
hereafter acquired or arising:
(a) All right, title and interest of Borrower in and to the Equipment
including each of the Units described in Exhibit "B" hereto, including all
-
additions, alterations or modifications thereto or replacements of any part
thereof, whether made, performed or acquired and all other items of
tangible personal property of any kind acquired by Borrower in connection
with the acquisition of the Equipment, in each case whether now owned by
Borrower or hereafter acquired, together with all logs, manuals and data
and inspection, maintenance and modifications, and overhaul records (and
all rights and
13
<PAGE>
interests therein that Borrower may have) relating to the
Equipment whether maintained pursuant to applicable law or otherwise;
(b) the Railcar Lease and the Consulting Agreement including, without
limitation, all amounts of rent thereunder, insurance proceeds, sale
proceeds, requisition, indemnity and other payments of any kind for or with
respect to the Equipment or otherwise and all rights of Borrower as lessor
to exercise any election or option or to make any decision or determination
or to give any notice, consent or waiver or approval under or in respect of
the Railcar Lease or to accept any surrender of any Units or any part
thereof, as well as all rights, powers and remedies on the part of Borrower
as lessor, whether arising under the Railcar Lease or by statute or at law
or in equity or otherwise, arising out of an Event of Default;
(c) all tolls, rents, issues, profits, products, insurance proceeds,
revenues and other income of the property subject or required to be the
subject to the Len of this Agreement;
(d) all documents, instruments, rentals and other riots to payment
relating to the Equipment, the Railcar Lease and the Consulting Agreement
and all other agreements, contracts, chattel paper, contract rights, rights
to payment, general intangibles and insurance policies and surety bonds
relating thereto and all proceeds of the foregoing; and
(e) any and all Proceeds in the products of the foregoing, including
all monies, rentals, accounts, general intangibles, deposit accounts,
documents, instruments, chattel paper, goods, insurance proceeds, and any
other tangible or intangible property received with respect to any of the
foregoing, including any sale or other disposition thereof.
Section 3.2 Continuing Obligation. Except with respect to those
---------------------
Permitted Liens and those liens which by law are accorded a first priority,
Borrower shall take all action necessary to grant Lender a valid first priority
lien on and security interest in all Collateral on the first Funding Date, and
to maintain at all times the validity, enforceability, perfection and first
priority of the Security Interest. Until the Obligations are fully paid and
satisfied, Borrower will at all times do, make, execute, deliver, record,
register or file all such financing statements, fixture filings, deeds of trust,
mortgages, assignments, certificates, charges, instruments, acts, pledges,
assignments and transfers (or cause the same to be done) and will deliver to
Lender such
14
<PAGE>
instruments constituting or evidencing the Collateral, as Lender may request, to
assure, continue or establish the validity, enforceability, perfection and first
priority (except for Permitted Liens) of the Security Interest. To the extent
permitted by applicable law, Borrower hereby authorizes Lender to: (i) sign
Borrower's name and on behalf of such Borrower to execute and file mortgages,
deeds of trust, financing statements, and notices of lien necessary to protect
or perfect the security interest granted herein in any or all of the Collateral
and (ii) file a carbon, photocopy or other reproduction of this Agreement or any
of the other Loan Documents as a financing statement in each case which Lender,
in its discretion, deems necessary or desirable to perfect or maintain the
perfection of the Security Interest.
ARTICLE 4.
----------
ADMINISTRATION OF THE COLLATERAL
--------------------------------
Section 4.1 The Equipment. Borrower, at its own cost and expense, will
-------------
keep, or cause EDC to keep, the Equipment in good operating condition and
repair, except for normal wear and tear, and will not waste or destroy, or allow
EDC to waste or destroy, such Equipment, or any part thereof, or be negligent in
the care and use thereof and will make all necessary replacements thereof and
repairs thereto. Borrower shall promptly inform Lender of any material additions
to such Equipment and of any material loss, damage, or destruction of such
Equipment. Borrower win not permit any Equipment to become a fixture to any real
property or an accession to any other personal property, unless Lender has a
first priority perfected Security Interest in such real or personal property or
has been provided with such waivers or consents as Lender may reasonably
require. Borrower shall, promptly upon Lender's request, deliver to Lender any
and all evidence of ownership of such Equipment.
Section 4.2 No Lender Liability. Lender shall have no duty of care with
-------------------
respect to any Collateral unless and until it takes the same into its own
possession or control. Lender shall be deemed to have satisfied its duty of due
care with respect to Collateral in its custody and control if it accords to such
Collateral treatment substantially equal to the treatment Lender accords its own
property, or if Lender takes such action with respect to the Collateral as
Borrower requests in writing, but no failure to comply with any such request nor
any omission to do any such act requested by Borrower shall be presumptively
deemed, from that failure or omission, an absence of reasonable care. Lender
shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof, unless caused by Lender's gross negligence
or willful misconduct. Lender does not, by anything contained herein or in any
other Loan Document or otherwise, assume any obligation of Borrower under
Railcar Lease or any other contract or agreement assigned to Lender or in which
15
<PAGE>
Under is granted a security interest, and Lender shall not be responsible in any
way for the performance by Borrower of any of the terms and conditions thereof.
Section 4.3 Use of Equipment; Identification.
--------------------------------
(a) Borrower shall use the Equipment in a careful and proper manner,
will comply with and conform to all governmental laws, rules and
regulations relating thereto including all ICC rules and regulations, and
win cause the Equipment to be operated properly or in substantial
accordance with the manufacturer's or supplier's instructions or manuals
and only by competent and duly qualified personnel.
(b) Borrower shall not move any of the Equipment from the continental
United States without the prior written consent of Lender.
(c) Upon Under's written request and at Borrower's sole expense,
Borrower shall attach to each item of Equipment a notice satisfactory to
Lender disclosing Lender's security interest in such item of Equipment.
ARTICLE 5.
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Loan,
Borrower represents and warrants to Lender as set forth below. The
representations and warranties of Borrower contained in this Article 5 and
otherwise herein and in any other Loan Document shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Lender and shall survive the execution and delivery of this Agreement and the
other Loan Documents and the making of the Loan.
Section 5.1 Organization and Qualification. Borrower is duly
------------------------------
incorporated and organized and is validly, existing as a corporation in good
standing under the laws of the State of Oklahoma, with all power (corporate or
otherwise) to own, lease and operate the Equipment and its other properties and
assets and to carry on its business in the manner in which such business is now
conducted. Borrower is duly licensed and qualified to do business and is in good
standing in every state where failure to be so licensed or qualified and in good
standing would have a material adverse effect on its business, properties or
assets.
Section 5.2 Concerning the Loan Documents. Borrower has the power to
-----------------------------
authorize, execute and deliver the Loan Documents to which Borrower is a party,
to incur and perform its Obligations hereunder and thereunder, and, as
applicable, to grant the Security Interest. Borrower has duly taken all
necessary corporate action to authorize the execution, delivery and performance
of such Loan
16
<PAGE>
Documents, and no consent, approval or authorization of, or declaration or
filing with, any governmental or other public body, or any other Person
(including without limitation any stockholders, trustees or holders of
Indebtedness of Borrower), is required in connection with such authorization,
execution, delivery and performance by Borrower or the consummation of the
transactions contemplated hereby or thereby. Such Loan Documents have been duly
authorized, executed and delivered by or on behalf of Borrower, and constitute
the legal, valid and binding Obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms.
Section 5.3 Guaranties. Each Guarantor has the power to authorize,
----------
execute and deliver its Guaranty and to incur and perform its obligations under
its Guaranty. Each Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of its Guaranty, and no
consent approval or authorization of, or declaration or filing with, any
governmental or other public body, or any other Person (including without
limitation any stockholders, trustees or holders of Indebtedness of such
Guarantor), is required in connection with such authorization, execution,
delivery and performance by such Guarantor. Each Guarantor's Guaranty has been
duly authorized, executed and delivered by or on behalf of such Guarantor, and
constitutes the legal valid and binding obligations of such Guarantor and is
enforceable against such Guarantor in accordance with its terms.
Section 5.4 Equipment. All Equipment is in good operating order and
---------
condition and repair, except for ordinary wear and tear, is used or useful in
the business of Borrower and is readily moveable without harm or damage. The
invoices previously delivered to Lender by Borrower respecting the Equipment are
genuine, true and accurate, and the descriptions of the Equipment set forth in
the Disclosure Schedule are true, complete and accurate.
Section 5.5 Title to the Equipment. Except for the Security Interest and
----------------------
Permitted Liens and subject to the right of quiet enjoyment under the Railcar
Lease, Borrower has good, and merchantable title to the Equipment and other
Collateral, and such Equipment or any other Collateral is not nor will be
subject to any Lien. The provisions of the Loan Documents create legal, valid
and enforceable security interests in and liens on all of the Equipment and
other Collateral, and the Loan Documents and such UCC and ICC filings create a
perfected and continuing first priority security interest upon the Equipment,
and are enforceable against Borrower and all third parties.
Section 5.6 Financial Condition. Borrower has furnished to Lender LSB's
-------------------
consolidated and consolidating financial statements as of December 31, 1994,
accompanied by the report of LSB's independent certified public accountants,
which statements present
17
<PAGE>
fairly in all material respects the consolidated and consolidating financial
position of LSB and its consolidated Affiliates as of the date thereof. Such
financial statements have been prepared in accordance with GAAP. From the date
of such financial statements to the date of the execution of this Agreement,
there has not been any material adverse change from the financial condition
reflected in such financial statements or in Borrower's business or condition
since the date thereof. As of the date hereof, Borrower has no direct or
contingent material liabilities which are not provided for or reflected in such
financial statements.
Section 5.7 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or EDC as it may affect the Loan, Equipment or Railcar Lease
or the DSN Plant Loan or the Mixed Acid Plant Loan, nor to the knowledge of
Borrower is there any basis therefor on the date of this Agreement.
Section 5.8 Disclosure. No representation or warranty made by Borrower
----------
hereunder and no written information, exhibit, report, document or certificate
furnished by or on behalf of Borrower or any Affiliate to Lender in connection
with this Agreement, contained or will contain, as of its date or as of any
---
Funding Date, any material misstatement of fact or omits, as of its date, to
state a material fact or any fact necessary to make the statements contained
therein not misleading. There is no fact known to Borrower that materially
adversely affects or that, insofar as Borrower can now reasonably foresee, may
materially adversely affect, the condition, financial or otherwise, operations,
properties or prospects of Borrower and Affiliates, or the ability of Borrower
to carry out its Obligations under any Loan Document.
Section 5.9 Tax Returns and Payments. Borrower has filed all federal,
------------------------
state and local tax returns and other reports which it was required by law to
file on or prior to the date hereof and has paid all taxes, assessments, fees
and other governmental charges and penalties and interest, if any, payable
against it or its property, income or franchise, that are due and payable, and
Borrower does not have any knowledge of any actual or proposed deficiency or
additional assessment in connection therewith. The charges, accruals and
reserves on the books of Borrower in respect of federal, state and local taxes
for all open years, and for the current fiscal year, make adequate provision for
all unpaid tax liabilities for such periods.
Section 5.10 Compliance with Other Instruments. Neither Borrower nor EDC
---------------------------------
is in violation of any material term or provision of its certificate of
incorporation or by-laws, or of any material mortgage, indenture, contracts
agreement, instrument, or other undertaking to which Borrower or EDC is a party
or which purports to be binding on Borrower or EDC, or any of the assets of
Borrower
18
<PAGE>
or EDC or, except as disclosed to Lender pursuant to Section 5.13 hereof, of any
judgment, decree, order or any material statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of this Agreement and
the other Loan Documents do not and will not violate or otherwise conflict with
any such term or provision or result in the creation of any security interest,
lien, charge or encumbrance upon any of the Collateral, except the Security
Interest.
Section 5.11 Pension Plans. Borrower has not participated in any
-------------
"prohibited transactions", as defined in Section 4975 of the Internal Revenue
Code, that could subject Borrower to any tax or penalty imposed by said Section
4975 (other than prohibited transactions that have been "corrected", as defined
in said Section 4975). Since the effective date of the Employee Retirement
Income Security Act of 1974, as from time to time amended ("ERISA"), Borrower
has not incurred any "accumulated funding deficiency", as such term is defined
in Section 302 of ERISA (other than any accumulated funding deficiency that has
been "corrected", as defined in Section 4971(c)(2) of the Internal Revenue Code.
Section 5.12 Labor Relations. To the best knowledge of Borrower after due
---------------
inquiry, Borrower and EDC are in material compliance with the Fair Labor
Standards Act. To the best knowledge of Borrower after due inquiry, neither
Borrower nor EDC is engaged in any unfair labor practice. To the best knowledge
of Borrower after due inquiry, there are: (i) no unfair labor practice
complaints pending or, to the bet knowledge of Borrower, threatened against
Borrower of EDC and no grievance or arbitration proceedings arising out of or
under collective bargaining agreements are so pending or, to the best knowledge
of Borrower, threatened; (ii) no strikes, work stoppages or controversies
pending or threatened between Borrower or EDC and any of their employees (other
than employee grievances arising in the ordinary course of business); and (iii)
no union representation questions exist with respect to the employees of
Borrower or EDC and no union organizing activities taking place which would have
a material adverse effect on the financial condition, results of operations or
business of Borrower or EDC;
Section 5.13 Environmental Laws. Except as disclosed by Borrower to
------------------
Lender ("Environmental Disclosure Documents"), to the best knowledge of Borrower
after due inquiry, as of the date hereof (a) the operations of Borrower or EDC
(with respect to the Mixed Acid Plan, the DSN Plan or the Equipment) comply in
all material respects with all applicable Environmental Laws; (b) none of the
operations of Borrower or EDC (with respect to the Mixed Acid Plant, the DSN
Plant or the Equipment) is subject to any judicial or administrative proceeding
alleging the violation of any Environmental Laws; (c) none of the operations of
Borrower or EDC (with respect to the Mixed Acid Plant, the DSN Plant or the
Equipment) is the subject of federal or state investigation
19
<PAGE>
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Substance into the environment; (d) neither Borrower nor EDC (with
respect to the Mixed Acid Plant, the DSN Plant or the Equipment) has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a Hazardous Substance or reporting a spill or release of
a Hazardous Substance into the environment; and (e) neither Borrower nor EDC
(with respect to the Mixed Acid Plant, the DSN Plant or the Equipment) has any
known material contingent liability in connection with any release of any
Hazardous Substance into the environment. The materiality standard used in this
Section shall be exceeded if the facts giving rise to a breach or breaches of
the representations or warranties contained herein might result in liability in
excess of $250,000 in the aggregate.
Section 5.14 Trade Names. Other than as disclosed on the Disclosure
-----------
Schedule, Borrower, during the past five years, has not used any corporate name
other than its present corporate name (which is set forth in the introductory
paragraph of this Agreement) and has not been known by or used any fictitious,
trade or "doing business" name.
Section 5.15 Subsidiaries. The Disclosure Schedule contains a correct and
------------
complete list of the name and relationship to Borrower of each and all of
Borrower's Subsidiaries, if any, and the location of the chief executive office
of each Subsidiary.
Section 5.16 Loans and Affiliate Payments. The Disclosure Schedule fully
----------------------------
and completely sets forth all notes and Indebtedness together with the amount
and schedule of any material payments owed by Borrower to officers, directors,
stockholders and Affiliates of Borrower.
Section 5.17 Permits. Licenses. Borrower possesses all material permits,
-------
franchises, contracts and licenses required and owns or has the right to use all
trademarks, trade names, patents and fictitious name rights necessary to enable
it to conduct the business in which it is engaged without conflict with the
rights of others.
Section 5.18 Broker's or Transaction Fees. Borrower has no obligation to
----------------------------
any Person for any finder's, broker's or investment banker's fee in connection
with the transactions contemplated hereby.
Section 5.19 Taxpayer ID No. and Chief Executive Office. Borrower's
------------------------------------------
taxpayer identification number is 731456545. Borrower's chief executive office
is located at 16 South Pennsylvania Avenue, Oklahoma City, OK 73107, and
Borrower's principal place of business is located in Oklahoma City.
20
<PAGE>
Section 5.20 No Default. No Default has occurred under this Agreement.
----------
ARTICLE 6.
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, so long as all or any portion of the
Obligations remain unpaid or unsatisfied, it will, at its own cost and expense:
Section 6.1 Financial and Other Information. Promptly furnish to Lender
-------------------------------
or its agents all such financial or other information as Lender shall reasonably
request, and, at the request of Lender, notify its auditors and accountants that
Under is authorized to obtain such information directly from them. Without
limitation of the foregoing, Borrower will furnish to Lender in such detail as
Lender shall request:
(a) Not later than 120 days after the close of each Fiscal Year of
Borrower, unaudited balance sheets of Borrower as at the end of such Fiscal
Year and related unaudited statements of income, expense and retained
earnings and statements of cash flow of Borrower for such year, setting
forth in each case in comparative form figures for the previous Fiscal
Year, all in reasonable detail, fairly presenting in all material respects
the financial position of Borrower and the results of operations of
Borrower for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be accompanied by a certificate of the chief
financial officer or chief accounting officer of Borrower.
(b) Not later than 90 days after the close of each fiscal quarter of
Borrower, unaudited balance sheets of Borrower as at the end of such
period, and unaudited statements of income and expense from the beginning
of the Fiscal year to the end of each such period, for Borrower, all in
reasonable detail, fairly presenting in all material respects the financial
position and results of operations of Borrower, in each case, prepared in
accordance with GAAP and consistent with the audited financial statements
required pursuant to Section 6.1(e). Such statements shall be accompanied
by a certificate of the chief financial officer or accounting officer of
Borrower stating that, based upon such examination or investigation as such
officer shall have deemed necessary to enable him to render an informed
opinion in respect thereof, to the best of his knowledge and belief the
financial statements are materially correct and no Default exists under
this Agreement and is continuing except for those, if any, described in
such certificate in reasonable detail.
21
<PAGE>
(c) Not later than 120 days after the close of each Fiscal Year of
EDC, audited consolidated and unaudited consolidating balance sheets of EDC
and its consolidated Subsidiaries as at the end of such Fiscal Year and
related audited consolidated and unaudited consolidating audited statements
of income, expense and retained earnings and statements of cash flow of EDC
and its consolidated Subsidiaries for such year, all in reasonable detail,
fairly presenting in all material respects the financial position of EDC
and its consolidated Subsidiaries and the results of operations of EDC and
its consolidated Subsidiaries for the Fiscal Year then ended, and prepared
in accordance with GAAP. Such statements required hereunder shall be
examined and accompanied by a report of independent certified public
accountants which shall not contain any qualifications or exceptions as to
scope.
(d) Not later than 90 days after the close of each fiscal quarter of
EDC, unaudited consolidated and consolidating balance sheets of EDC and its
consolidated Subsidiaries as at the end of such period, and consolidated
and consolidating statements of income and expense from the beginning of
the Fiscal Year to the end of each such period, for EDC and its
consolidated Subsidiaries, all in reasonable detail, fairly presenting in
all material respects the consolidated and consolidating financial position
and results of operations of EDC and its consolidated Subsidiaries, in each
case, prepared in accordance with GAAP and consistent with the audited
financial statements required pursuant to Section 6.1(c) above, and
------
certified to be materially correct by the chief financial officer or the
chief accounting officer of EDC.
(e) Not later than 120 days after the close of each Fiscal Year of
LSB, LSB's 10K Report filed with the Securities and Exchange Commission,
the audited consolidated and unaudited consolidating balance sheets of LSB
and its consolidated Affiliates as at the end of such Fiscal Year and
related audited consolidated and unaudited consolidating statements of
income, expense and retained earnings and audited statements of cash flow
of LSB and its consolidated Affiliates for such year, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the financial position of LSB and its
consolidated Affiliates and the results of operations of LSB and its
consolidated Affiliates for the Fiscal Year then ended, and prepared in
accordance with GAAP. Such statements required hereunder shall be examined
and accompanied by a report of independent certified public accountants
which shall not contain any qualifications as to scope; and such report
shall also be accompanied by a certificate of such accountants stating that
in the course of
22
<PAGE>
performing their examination such accountants did not become aware of the
existence of any default under this Agreement, except for those, if any,
described in such certificate in reasonable detail. In addition, the chief
financial officer or accounting officer of LSB shall provide a certificate
which shall also include a statement by such officer that no breach,
default or event of default has occurred and is continuing under any
document to which LSB or any consolidated Affiliate is a party that
evidences any Indebtedness of LSB or any such Affiliate which exceeds,
individually or together with any related Indebtedness, $5,000,000, or if
any such breach, default or event of default has occurred, explaining the
nature of such breach, default or event of default and the status thereof.
Such certificate shall also include a statement from such officer that LSB
is in compliance with all covenants contained in this Agreement relating to
the financial condition of LSB, and such statement shall be accompanied by
the calculations of such financial covenants.
(f) Not later than 90 days after the close of each fiscal quarter of
LSB, LSB's 10Q Report filed with the Securities and Exchange Commission and
the unaudited consolidated balance sheets of LSB and its consolidated
Affiliates as at the end of such period, and unaudited consolidated
statements of income and expense from the beginning of the Fiscal year to
the end of each such period, for LSB and its consolidated Affiliates, all
in reasonable detail, fairly presenting in all material respects the
consolidated financial position and results of operations of LSB and
Affiliates, in each case, prepared in accordance with GAAP and consistent
with the audited financial statements required pursuant to Section 6.1(e)
------
above. Such statements shall be accompanied by a certificate of the chief
financial officer or the chief accounting officer of LSB stating that,
based upon such examination or investigation as such officer shall have
deemed necessary to enable him to render an informed opinion in respect
thereof, to the best of his knowledge and belief, such financial statements
are materially correct and no Default under this Agreement exists and is
continuing except for those, if any, described in such certificate in
reasonable detail. Such certificate shall also include a statement from
such officer that LSB is in compliance with all financial covenants
contained in this Agreement relating to the financial condition of LSB, and
such statement shall be accompanied by the actual calculations of such
financial covenants.
(g) Promptly after Borrower or any Affiliate receives the same,
copies of management letters provided to Borrower by its independent
certified public accountants;
23
<PAGE>
(h) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Borrower, or LSB or EDC
sends to its shareholders or holders of its Indebtedness, and copies of any
and all periodic special reports, as well as registration statements, filed
by Borrower, LSB or EDC with the Securities and Exchange Commission or
similar State authority;
(i) Deliver to Lender within 30 days of the end of each quarter, a
compliance certificate signed by Borrower's Chief Financial Officer or the
Chief Accounting Officer certifying that Borrower is in compliance with all
of the terms and conditions of the Agreement and that no Default exists.
(j) Such additional information as Lender may from time to time
reasonably request regarding the financial and business affairs of Borrower
or any Subsidiary or Guarantor and which are kept in the ordinary course of
business.
Section 6.2 Access. At all reasonably times, and from time to time,
------
permit Lender or its agents to inspect the Collateral and to audit, examine and
make extracts from or copies of any of its books, ledgers, reports,
correspondence and other records.
Section 6.3 Taxes. Promptly pay and discharge all taxes, assessments and
-----
other governmental charges prior to the date on which same are past due,
establish adequate reserves for the payment of such taxes, assessments and other
governmental charges, make all required withholding and other tax deposits, and,
upon request, provide Lender with receipts or other proof that any or all of
such taxes, assessments or governmental charges have been paid in a timely
fashion; provided, however, that nothing contained herein shall require the
payment of any tax, assessment or other governmental charge so long as its
validity is being contested in good faith and by appropriate proceedings
diligently conducted.
Section 6.4 Maintenance of Properties: Insurance.
------------------------------------
(a) Borrower shall, at Borrower's sole cost and expense, defend all
Collateral against the claims or demands of all other parties; keep the
Collateral in good operating condition and repair and in compliance with
all laws (except normal wear and tear); and Borrower and EDC shall insure
all Equipment, including insurance relating to the leasing of the Units, in
coverage, form and amount satisfactory to Lender with a carrier reasonably
acceptable at all times to Lender with no greater deductible amount than
$250,000 per occurrence. Insurance on the Equipment shall be in an amount
equal to the greater of the full replacement value of each Unit thereof, or
100% of the outstanding balance of the Loan. Borrower and EDC shall also
maintain (i) all risk insurance covering 100% of the replacement cost of
each Unit of the Equipment in the
24
<PAGE>
event of fire, lightning, windstorm, earthquake, vandalism, malicious
mischief and all other risks normally covered by "all risk" policies; (ii)
product liability insurance in an amount customary for the businesses
conducted by Borrower and EDC; and (iii) general public liability insurance
in an amount satisfactory to Lender, but in no event less than Fifteen
Million Dollars ($15,000,000) per occurrence, for bodily injury and
property damage. Borrower and EDC shall also maintain workers' compensation
insurance in accordance with Borrower's and EDC's usual practices. Each
insurance policy shall be endorsed in favor of Lender as additional loss
payee in form and substance satisfactory to under, and provide that any
proceeds payable thereunder will be paid to Borrower and Lender as their
interest may appear. Each policy shall provide that if such insurance is
cancelled for any reason whatsoever, or if any substantial change is made
in the coverage which affects Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall
not be effective as to Lender until 30 days after receipt by Lender of
written notice from the carrier thereof. Borrower hereby directs all
insurers under such policies to pay all proceeds with respect to losses of
Collateral to Lender. With respect to occurrences giving rise to insurance
proceeds paid with respect to losses, Lender shall, so long as no uncured
Default exists, release such proceeds to Borrower after receipt of evidence
of satisfactory repair, replacement or reconstruction of the assets subject
to such casualty. All such insurance policies shall provide that they are
primary, without any right of contribution from any other insurance carried
by he Lender; that such insurers waive any rights of set-off, recoupment,
counterclaims, deduction or subrogation against under; and that all losses
are payable notwithstanding any act or negligence of Borrower or any other
Person, any breach of violation by Borrower or any other Person of any
warranty, declaration, condition or other provision contained in any such
policy or any foreclosure, notice of sale or other proceeding in respect of
the Units, or any change in title to or ownership of any of the Units.
(b) On each policy anniversary, Borrower shall furnish Lender with a
certification of all insurance required by this Section 6.4. Such
---
certification shall be in the form of Exhibit "D" hereto and shall identify
---
the insurers, underwriters, the type of insurance, the insurance limits and
the policy term, and shall specifically list the special provisions
enumerated for such insurance required by this Section 6.4.
---
Upon request, Borrower will furnish Lender with copies of all
insurance policies, binders, cover notes and other evidence of such
insurance.
25
<PAGE>
(c) Borrower shall at its sole expense, and shall cause EDC, to (i)
keep and maintain the Units in good repair and operating condition in
conformance with the manufacturer's recommended normal maintenance
practices; the Interchange Rules of the Association of American Railroads
("AAR"); the Federal Railroad Administration safety requirements, and any
other manufacturer or governmental recommendations, guidelines or
regulations, as the same may be amended from time to time.
Section 6.5 Business. Take all necessary steps to preserve its corporate
--------
existence and its right to conduct business in all state in which the nature of
its business or the ownership of it property requires such qualification.
Section 6.6 Compliance. Use reasonable efforts to comply in all material
----------
respects with all applicable laws and duly observe all valid requirements of all
applicable governmental authorities, including all statutes, rules and
regulations relating to public and employee health and safety and social
security and withholding taxes. Borrower may contest or dispute any taxes,
assessments or impositions in good faith, so long as such contest or dispute
does not result in the creation or incurring of any liens against Lender's
Collateral and Borrower maintains adequate reserves as required under GAAP for
the satisfaction of the disputed tax, assessment or imposition.
Section 6.7 Litigation. Except as disclosed in the Environmental
----------
Disclosure Documents referred to in Section 5.13, promptly notify Lender in
----
writing of any action, suit, proceeding, or counterclaim against, or of any
investigation of, Borrower or any of the Collateral, if. (i) the outcome of such
litigation, proceeding, counterclaim, or investigation would materially and
adversely affect the Collateral or the finances or operations of Borrower or
EDC; or (ii) such litigation, proceeding, counterclaim, or investigation
questions the validity of this Agreement or any other Loan Document or any
action taken or to be taken pursuant thereto.- Borrower shall furnish to Lender
such information regarding any such litigation, proceeding, counterclaim, or
investigation as Lender shall. request.
Section 6.8 Environmental Laws.
------------------
(a) Except as disclosed in the Environmental Disclosure Documents
referred to in Section 5.13, give written notice to Lender immediately upon
----
receipt of any notice that (i) the operations of Borrower or EDC with
respect to the Equipment are not in material compliance with requirements
of applicable Environmental Laws; (ii) Borrower or EDC with respect to the
Equipment is subject to federal or state investigation evaluating whether
any remedial action is needed to respond to the release of any Hazardous
Substance into the environment
26
<PAGE>
which would have a material adverse effect on Borrower; or (iii) any
properties or assets of Borrower or EDC with respect to the Equipment are
subject to an Environmental Lien. As used herein, "Environmental Lien"
means a lien in favor of any governmental entity for (A) any liability
under any Environmental Laws, or (B) damages arising from or costs incurred
by such governmental entity in response to a release of a Hazardous
Substance into the environment.
(b) Except as disclosed in the Environmental Disclosure Documents
referred to in Section 5.13, without limiting the generality of any of
----
Borrower's other covenants and agreements, the operations of Borrower or
EDC with respect to the Equipment shall at all times comply in all material
respects with all applicable Environmental Laws. The materiality standard
used in this Section 6.8, shall be exceeded if the facts giving rise to a
---
breach or breaches of the covenant herein is likely to result in liability
in excess of $125,000 in the aggregate.
Section 6.9 Notices. Promptly notify Lender in writing of any Default or
-------
of any default by any party under Railcar Lease, the Consulting Agreement, or as
required by Sections 6.7 and 6.8 of this Agreement. The failure of Borrower to
--- ---
promptly give Lender such notice of any Default of which it is aware, shall, at
Lender's option, eliminate any cure period for such Default.
Section 6.10 Tangible Net Worth. LSB shall maintain at all times, on a
------------------
consolidated basis, a minimum tangible net worth of $80,000,000 after
subtracting treasury stock and $91,421,000 before subtracting treasury stock
from the date hereof to December 31, 1995 and $92,800,000 at all times
thereafter. Notwithstanding the foregoing, the tangible net worth after
subtracting treasury stock shall not be less than $83,000,000 at December 31,
1995 and $85,000,000 at December 31, 1996 and thereafter. The term tangible net
worth is defined as total stockholders' equity, after deducting any treasury
stock, less all assets that are considered intangible assets under GAAP
----
(including but not limited to goodwill, patents, trademarks, certain deferred
charges (as approved by Lender) and customer lists).
Section 6.11 Change of Ownership. LSB shall at all times hold not less
-------------------
than one hundred percent (100%) of each class of stock of LSBC and, at all
times, LSBC shall hold, directly or indirectly, one hundred percent (100%) of
each class of stock of Borrower.
Section 6.12 Use of Proceeds. Use the proceeds of the Loan for Equipment
---------------
costs, fees and expenses in accordance with Article 2 hereof.
27
<PAGE>
Section 6.13 Books. Keep proper books of record and account in which
-----
full, true and correct entries in accordance with GAAP will be made of all
dealings or transactions in relation to its business and activities.
ARTICLE 7.
----------
NEGATIVE COVENANTS
------------------
So long as all or any portion of the Obligations remains unpaid, Borrower
covenants and agrees that, without Lender's prior written consent, which consent
will not be unreasonably withheld, Borrower shall not:
Section 7.1 Corporate Structure. Merge, reorganize or consolidate with
-------------------
or acquire any Person or make any investment in the securities of any Person.
Section 7.2 Dividends, Distributions, Redemptions. Declare or pay any
-------------------------------------
dividends or other distributions upon any stock or make any distribution of
Borrower's property or assets or redeem, retire, purchase or otherwise acquire,
directly or indirectly, Borrower's stock.
Section 7.3 Loans, Investments, Affiliate Payments, Salaries. Make any
------------------------------------------------
loans or other advances of money (other than compensation) to any Person; make
any payments to any officers, directors, stockholders or Affiliates on any
existing loans except as set forth on the Disclosure Schedule or pursuant to the
Administrative Services Agreement between Borrower and LSB, or payments to LSB
for Borrower's pro rata share of taxes with respect to Borrower's business, or
permit the annual compensation and all other direct and indirect remuneration to
its officers to increase more than fifteen percent (15%) per year.
Section 7.4 Change in Business, Structure or Business Location. Make any
--------------------------------------------------
material change in the capital structure or any of Borrower's business
objectives, purposes and operations; engage, directly or indirectly, in any
business other than ownership of the Mixed Acid Plant, the Equipment acquired
with the Loan, the DSN Plant financed by the DSN Plant Loan, and all items
related thereto; or change the location of its chief executive office without
thirty days' prior written notice to Lender.
Section 7.5 Guaranties. Borrower shall not guaranty or otherwise, in any
----------
way, become liable with respect to the Indebtedness or liabilities of any
Person.
Section 7.6 Sale of Property. Offer to sell, convey, assign, transfer,
----------------
exchange, lease (except pursuant to the Railcar Lease, or to the extent
permitted in the Mixed Acid Plant Loan Documents or the DSN Plant Loan Documents
or the Rail Car Loan Documents) or otherwise dispose of any Collateral, or, on
an annual
28
<PAGE>
basis, any other real or personal property having a value in excess of $25,000,
except sales of supplies, equipment and inventory in the ordinary course of
Borrower's business and trade-ins on new purchases, provided that Lender shall
have a first priority perfected lien on any new purchases of property.
Section 7.7 Prepayment. Borrower shall not prepay any Indebtedness,
----------
except the Obligations in accordance with this Agreement.
Section 7.8 Liens. Create, incur, assume or suffer to exist any Lien
-----
upon any Collateral except Liens in favor of Lender and Permitted Liens and the
Railcar Lease and the Consulting Agreement.
Section 7.9 Pension Plans. To the knowledge of Borrower, with respect to
-------------
all Pension Plans: (a) incur any liability to the Pension Benefit Guaranty
Corporation; (b) participate in any prohibited transaction involving any of such
plans or any trust created thereunder which would subject Borrower to a tax or
penalty on prohibited transactions imposed under Code Section 4975 or ERISA; (c)
fail to make any contribution which it is obligated to pay under the terms of
such plan; (d) allow or suffer to exist any occurrence of a Reportable Event, or
any other event or condition which presents a risk of termination by the Pension
Benefit Guaranty Corporation of any such plan; or (e) incur any withdrawal
liability with respect to any multiemployer Pension Plan which is not fully
bonded.
Section 7.10 Borrower's Name. Change Borrower's corporate name or use any
---------------
trade name or style unless Borrower shall first give Lender thirty days prior
written notice of the change in question.
Section 7.11 Changes to Railcar Documents. Make any alterations,
----------------------------
amendments or modifications of any provisions of (a) the Railcar Lease, (b) the
Consulting Agreement or (c) the Administrative Services Agreement dated
September 19, 1994 between LSB and Borrower.
Section 7.12 Other Debts. Except for Permitted liens, Borrower shall not
-----------
have outstanding or incur any direct or contingent Indebtedness (other than
those to Lender) or lease obligations or to become liable for the Indebtedness
of others without Lender's written consent. This does not prohibit (subject to
other restrictions herein):
(a) Acquiring goods, supplies, services or merchandise on normal
trade credit, or payroll obligations or obligations under the
Administrative Services Agreement between LSB and Borrower;
29
<PAGE>
(b) Endorsing negotiable instruments received in the usual course of
business;
(c) Debts, lines of credit and leases in existence on the date of
this Agreement and disclosed to Lender on the Disclosure Schedule; or
(d) Taxes and lawsuits.
Section 7.13 Transactions with Affiliates. Not to enter transactions with
----------------------------
any Affiliate on terms less favorable than those available to Borrower from
persons or entitles not affiliated with Borrower except:
(a) taxes on consolidated tax returns;
(b) the Railcar Lease;
(c) the Consulting Agreement; and
(d) the Administrative Services Agreement.
None of the agreements in this Section 7.13(b) through (d) may be amended
or modified with Lender's prior written consent.
ARTICLE 8.
----------
DEFAULT
-------
Section 8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events for any reason whatsoever shall constitute an Event of Default:
(a) Any failure to pay any of the Obligations when due;
(b) Any representation or warranty made by Borrower in any Loan
Document or in any Financial Statement or other certificate furnished by
Borrower or any Affiliate at any time to Lender shall prove to be untrue in
any material respect as of the date on which made;
(c) Except with respect to cure periods as otherwise set forth herein
or therein, default shall occur in the observance or performance of any of
the other covenants and agreements contained in any Loan Document and
Borrower has not cured such default within ten (10) days of Borrower's
receipt of written notice identifying such failure, or if any such
agreement, instrument or document shall terminate or become void or
unenforceable without the written consent of Lender and Borrower refuses to
execute valid and enforceable substitute documents;
30
<PAGE>
(d) Any Event of Default under the DSN Plant Loan Documents, the
Mixed Acid Plant Loan Documents and Borrower has not cured such Event of
Default within any cure period provided therein;
(e) Any default by Borrower under any material agreement or
instrument with any third party (other than an agreement or instrument
evidencing the lending of money) if such default continues for thirty (30)
days after such breach first occurs;
(f) Any default by Borrower in any payment on any indebtedness or
obligation owed to any trade creditor in excess of $100,000 in the
aggregate beyond any period of grace provided with respect thereto and
Borrower is not contesting same in good faith and diligently;
(g) Any uncured default beyond any applicable grace period by LSB or
any of its Subsidiaries under any agreement or instrument evidencing any
loan, extension of credit or other Indebtedness of LSB or any of its
Subsidiaries in an amount equal to or greater than $5,000,000;
(h) Any material part of the Collateral shall be nationalized,
expropriated, condemned, seized or otherwise appropriated, or custody or
control of such Collateral or of Borrower shall be assumed by any public
authority or any court of competent jurisdiction at the instance of any
public authority;
(i) One or more judgments for the payment of money aggregating an
excess of $1,000,000 (if not adequately covered by insurance) shall be
rendered against Borrower or EDC and there is a failure to pay or to bond
and stay enforcement of such judgment and commence appropriate proceedings
to appeal such judgment within the applicable appeal period or, after such
appeal is filed, Borrower or EDC fails to diligently prosecute such appeal
or such appeal is denied;
(j) Borrower, EDC or any Guarantor shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization,
arrangement or for any other relief under the Federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action or proceeding; (ii) apply for or acquiesce in
the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for it or for all or a substantial
part of its property; (iii) make an assignment for the benefit of
creditors; or (iv) admit in writing that is unable generally to pay its
debts as they become due;
31
<PAGE>
(k) An involuntary petition shall be filed or an action or proceeding
otherwise commenced seeking reorganization, arrangement or readjustment of
Borrower's EDC's or any Guarantor's debt or for any other relief under the
Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing; or a
receiver, assignee, liquidator, sequestrator, custodian, trustee or similar
officer for Borrower or EDC or any Affiliate or any Guarantor or for all or
a substantial part of their property shall be appointed involuntarily; or a
warrant of attachment, execution or similar process shall be issued against
any substantial part of the property of Borrower, EDC or any Guarantor; and
any of the foregoing remain undismissed or undischarged for a period of 60
days;
(l) Borrower, EDC or any Guarantor shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof without Lender's prior written
consent;
(m) The Security Interest shall cease to be a valid and perfected
first priority security interest in any material portion of the Collateral
then in existence and Borrower refuses to or cannot promptly cure any
deficiency and restore Lender's valid and first perfected priority security
interest;
(n) A material default or termination shall occur in the Consulting
Agreement or the Railcar Lease; or
(o) any Guarantor revokes or terminates any guaranty relating to the
Obligations or defaults under the terms of any such guaranty.
Section 8.2 Rights Upon Default. Upon the occurrence and during the
-------------------
continuance of any Event of Default:
(a) Lender may declare all the Obligations not otherwise due to be
forthwith due and payable, (provided that, in the case of the occurrence of
any Event of Default described in Sections 8.1(j) or (k), all the
------ ---
Obligations shall forthwith become due and payable without such
declaration) whereupon the unpaid amount of the Obligations (including any
applicable prepayment fee) shall become immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
(b) Notwithstanding the foregoing in Section 8.2(a) but subject to
the provisions of Section 9.10, the effect of an event described in Section
8.1(a) as an occurrence of an Event of Default shall be after Lender gives
notice of such payment
32
<PAGE>
Default to Borrower and Borrower shall not have paid such amount within
three (3) days of such Notice. The effect as an Event of Default of any
other event described in Section 8.1 may be waived by Lender in writing.
(c) In addition to all other rights provided herein or at law, Lender
shall have all of the rights and remedies of a secured party under the UCC
and all of the rights and remedies granted under each of the Loan
Documents. At any time when an Event of Default has occurred and is
continuing, Lender may enter any premises where the Collateral is located,
take physical possession of the Collateral or any part thereof, and
maintain such possession on Borrower' premises or remove any or all of the
Collateral to such other place or places as Lender desires in its sole
discretion. If Lender exercises its right to take possession of any
Collateral upon the occurrence and during the continuance of any Event of
Default, Borrower, upon Lender's demand, will assemble the Collateral and
at Lender's option, make it available to Lender at Borrower' premises at
which it is located or deliver it to such place or places as Lender
directs. Borrower hereby waives to the full extent permitted by law all
rights to notice and hearing prior to Lender's exercise of its rights to
take possession of the Collateral without judicial process or to replevy,
claim and deliver, attach or levy upon the Collateral ex parte. Lender
-- -----
shall not be under any obligation to marshall any assets in favor of
Borrower or any other party or against or in payment of any or all of the
Obligations.
(d) Lender may sell, lease or otherwise dispose of and deliver any or
all of the Collateral at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as Lender, in its sole
discretion, deems advisable, all in accordance with the applicable
provisions of the UCC including the standard of commercial reasonableness.
(e) The requirement of reasonable notice with respect to a
disposition of the Collateral shall be met if such notice is mailed both by
regular and certified mail, postage prepaid to Borrower at the address as
set forth herein at least ten days before the time of the event of which
notice is being given. Subject to the provisions of any applicable Loan
Document or law governing the enforcement of liens or security interests,
Lender may be the purchaser at any public sale, and to the extent permitted
by applicable law, at any private sale, free from any right of redemption,
which Borrower also waives.
(f) The Proceeds of any sale of any of the Collateral shall be
applied first to all costs and expenses of sale, including attorneys' fees,
and second to the payment (in whatever order Lender elects) of all of the
Obligations. Lender will return any excess Proceeds to Borrower, subject to
33
<PAGE>
the claims of any other parties with an interest in the Collateral or the
Proceeds, and Borrower shall remain liable to Under for any deficiency. If
any Collateral is sold or leased by Lender upon credit or for future
payment or delivery, Lender shall not be liable for the failure of the
purchaser to pay for such Collateral, and in such event Lender may resell
or re-lease the same.
(g) Lender may exercise any other right or remedy it may have at law
or in equity with respect to the Obligations or the subject matter of this
Agreement. The rights and remedies provided for herein are cumulative and
not exclusive of any other of such rights and remedies or any other rights
or remedies provided by law.
ARTICLE 9.
----------
MISCELLANEOUS
-------------
Section 9.1 Survival. All agreements, representations and warranties
--------
contained in this Agreement or made in writing by or on behalf of Borrower in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement, notwithstanding any investigation at any time
made by Lender.
Section 9.2 Waiver of Notices. No notice to or demand on Borrower which
-----------------
Lender is not required hereunder or by law to give but nevertheless may elect to
give shall entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances.
Section 9.3 Assignment. The provisions of this Agreement shall be
----------
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto; provided, however, that no interest herein may be
assigned by Borrower without the prior written consent of Lender. The rights and
benefits of Lender hereunder shall, if Lender so agrees, inure to any party
acquiring any interest in the Obligations or any part thereof. In the event of
any such assignment by Lender, Borrower agrees that such assignment by Lender
shall be free from any set-off, counterclaim defense or other claim that any
such Borrower may have against such assignee, without waiving any claim such
Borrower may have against Lender. The terms "Lender" and "Borrower" as used
herein shall include the respective successors and assigns of such parties.
Section 9.4 Complete Agreement Modification. This Agreement is intended
-------------------------------
by Borrower and Lender to be the final, complete and exclusive expression of the
agreement between them and supersedes all prior agreements and understandings
regarding the Loan. No modification, rescission, waiver, release or amendment of
any provision of this Agreement shall be made, except by a written agreement
signed by Borrower and a duly authorized officer of Lender.
34
<PAGE>
Section 9.5 Applicable Law. This Agreement and the Loan Documents
--------------
(except to the extent, if any, expressly provided to the contrary in any Loan
Document) shall be governed by, construed, applied and enforced in accordance
with the laws of the State of New York.
Section 9.6 Indemnification.
---------------
(a) If after receipt of any payment of all or any part of the
Obligations, Lender is for any reason compelled to surrender such payment
to any person or entity, because such payment is determined to be void or
voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, Borrower's Obligations under the Notes
shall continue in full force and Borrower shall indemnify and hold Lender
harmless for, the amount of such payment surrendered. The provisions of
this Section shall be and remain effective notwithstanding any contrary
action which may have been taken by Lender in reliance upon such payment,
and any such contrary action so taken shall be without prejudice to
Lender's rights under this Section and shall be deemed to have been
conditioned upon such payment having become final and irrevocable. The
provisions of this Section shall survive the termination of this Agreement.
(b) Borrower hereby indemnifies and holds Lender, and its directors,
officers, agents, employees and counsel, harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind (except claims brought by Borrower against Lender for
breach of this Agreement of the Loan Documents) including without
limitation, court costs and attorneys' fees imposed on or incurred by or
asserted against any of them, whether direct, indirect or consequential
arising out of or by reason of any litigation, investigations, claims, or
proceedings whether based on any federal, state or local laws or other
statutes or regulations commenced or threatened, which arise out of or are
in any way based upon the negotiation, preparation, execution, delivery,
enforcement, performance or administration of this Agreement or any other
Loan Document, or any undertaking or proceeding relating to any of the
transactions contemplated hereby or by any act, omission to act, event or
transaction related or attended thereto, except this indemnification shall
not apply to any losses, liabilities, damages, injuries, costs, expenses
and claims caused by the gross negligence or willful misconduct of Lender.
(c) Borrower hereby indemnifies Lender and agrees to hold Lender
harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation,
35
<PAGE>
court costs and attorneys' fees) which at any time or from time to time may
be paid, incurred or suffered by, or asserted against Lender for, with
respect to, or as a direct result of the violation by Borrower of the
Environmental Laws or any laws or regulations relating to Hazardous
Substance, treatment, storage, disposal, generation and transportation,
air, water and noise pollution, soil or ground or water contamination, the
handling, storage or release into the environment of Hazardous Substance,
or with respect to, or as a direct or indirect result of the presence on or
under, or the escape, seepage, leakage, spillage, discharge, emission or
release from, properties utilized by Borrower or EDC in the conduct of
their respective business into or upon any land, the atmosphere, or any
watercourse, body of water or wetland, of any Hazardous Substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental
Laws).
(d) Without limiting any of the foregoing, if, by reason of any suit
or proceeding of any kind, nature or description against Borrower, which,
in Lender's sole discretion makes it advisable for Lender to seek counsel
for protection and preservation of its Lens, security or assets or to
defend its own interest, such reasonable expenses and counsel fees shall be
allowed to Lender. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement. All of the foregoing
costs and expenses shall be part of the Obligations and secured by the
Collateral.
Section 9.7 Stamp or other Tax. Should any stamp, excise, sales, use or
------------------
other tax, including mortgage, conveyance, deed, intangible or recording taxes
become payable in respect of this Agreement, or any other Loan Document, any
Obligations, or any Collateral, or any modification hereof or thereof, Borrower
shall pay the same (including interest and penalties, if any) and shall hold
Lender harmless with respect thereto, except for income taxes of Lender as a
result thereof.
Section 9.8 Captions. The captions of the various sections of this
--------
Agreement have been inserted only for purposes of convenience; such captions are
not a part of this Agreement and shall not be deemed in any manner to modify,
explain, enlarge or restrict any provision hereof.
Section 9.9 Notices. All notices or other communications which are
-------
required or permitted hereunder to be given to any party shall be in writing and
shall be deemed sufficiently delivered if delivered personally or by registered
or certified mail, return receipt requested, or by nationally recognized
overnight delivery service, to the address set forth below or to such other
address as each party may designate for itself by like notice. Such notice or
communication shall be deemed to have been given on the date
36
<PAGE>
delivered; or if refused, on the date refused; or if marked, on the date of
actual receipt of such mailing as evidenced by the return receipt.
If to Lender: The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attn: Senior Vice President, Credit
If to Borrower: DSN Corporation
16 South Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Attn: President
Any such notice, demand, or request shall be deemed given upon receipt, refusal
of delivery or return for failure to be called for.
Section 9.10 No Waiver, Lender Performance. No course of dealing between
-----------------------------
Borrower and Lender and no delay or omission by Lender in exercising any right
or remedy hereunder or under any other Loan Document or with respect to any
Obligations shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. All rights and
remedies of Lender hereunder or under any other Loan Document shall be
cumulative. Upon the failure of Borrower to perform any of its duties under this
Agreement Lender may, but shall not be obligated to, perform any or all such
duties and Borrower will upon demand reimburse Lender for all reasonable costs,
fees and expenses incurred in connection therewith.
Section 9.11 Evidence of Obligations; Admissibility of Lender's Books and
------------------------------------------------------------
Records. Borrower agrees that Lender's books and records showing the Obligations
- -------
shall be admissible in any action or proceeding arising herefrom.
Section 9.12 No Liability for Brokers. Borrower covenant and agree that
------------------------
Lender shall have no liability for, and Borrower hereby indemnifies and holds
Lender harmless against, any brokerage fee or finder's fee or other commission,
or claim therefor, arising in connection with the transactions contemplated by
this Agreement.
Section 9.13 Further Assurances. Borrower shall, at its expense, do,
------------------
execute and delivery such further acts and documents as Lender from time to time
reasonably requires for the assuring and confirming to Lender of the rights
created or intended to be created hereunder, or for carrying out the intention
or facilitating the performance of the terms of any Loan Document or for
assuring the validity, perfection, priority or enforceability of any Lien under
any Loan Document.
37
<PAGE>
Section 9.14 Counterparts. This Agreement and the other Loan Documents
------------
may be executed by the parties hereto and thereto in any number of separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 9.15 Notice of Breach by Lender. Borrower agrees to give Lender
--------------------------
notice of any action or inaction by Lender or any agent or attorney of Lender in
connection with this agreement, any other Loan Document, or the Obligations of
Borrower under this Agreement or any other Loan Document that may be actionable
against Lender or any agent or attorney of Lender or a defense to payment of any
Obligations of Borrower under this Agreement or any other Loan Document, for any
reason, including commission of a tort or violation of any contractual duty or
duty implied by law. Borrower agrees, to the fullest extent that it may lawfully
do so, that unless such notice is given promptly (and in any event within
fifteen (15) days after Borrower has knowledge, or with the exercise of
reasonable diligence could have had knowledge, of any such action or inaction),
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom to the extent that Lender could have
mitigated such claim or defense after receipt of such notice.
Section 9.16 Time. Time is of the essence.
----
Section 9.17 Exhibits. Exhibits and "D" attached hereto are incorporated
--------
herein by this reference.
Section 9.18 Authorization to Date, Complete Blanks and Correct Errors.
---------------------------------------------------------
Borrower hereby irrevocably authorizes Lender and Lender's agents,
representatives and employees to date, complete any blank spaces contained in,
and to correct any errors appearing in, this Agreement, the other Loan Documents
or in any other document relating hereto or thereto.
Section 9.19 No Oral Agreements; Entire Agreement. ORAL AGREEMENTS OR
------------------------------------
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, WHICH AGREEMENT AND OTHER LOAN
DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN
BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO
MODIFY THEM. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER
HEREOF. THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT WAS DRAFTED WITH THE JOINT
PARTICIPATION OF THE RESPECTIVE PARTIES
38
<PAGE>
THERETO AND SHALL BE CONSTRUED NEITHER AGAINST NOR IN FAVOR OF ANY PARTY, BUT
RATHER IN ACCORDANCE WITH THE FAIR MEANING THEREOF.
Section 9.20 Venue and Jurisdiction. THIS AGREEMENT AND ANY OTHER LOAN
----------------------
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK BORROWER HEREBY IRREVOCABLY
CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
IN ANY WAY IN CONNECTION WITH THIS AGREEMENT MAY BE INSTITUTED OR BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES
DISTRICT COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER MAY ELECT, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS
AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL
PROCEEDINGS IN SUCH COURTS. BORROWER IRREVOCABLE CONSENTS TO SERVICE OF ANY
SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED STATES AIR MAIL,
POSTAGE PREPAID, TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 9.9 HEREOF,
SUCH METHOD OF SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE
SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING. NOTHING IN THIS
AGREEMENT SHALL AFFECT THE RIGHT TO SERVICE OF PROCESS OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF LENDER TO BRING ACTIONS, SUITS OR
PROCEEDINGS IN THE COURTS OF ANY OTHER JURISDICTION. BORROWER FURTHER AGREES
THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL ACTION, SUIT OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, WITHIN OR
OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR
EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF LIABILITY.
Section 9.21 Waiver of Trial by Jury. THE PARTIES TO THIS AGREEMENT
-----------------------
ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT
OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS AGREEMENT AGREE AND STIPULATE
THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH
TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED
PROVISION OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
39
<PAGE>
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"Borrower" "Lender"
DSN CORPORATION, an Oklahoma THE CIT GROUP/EQUIPMENT
corporation FINANCING, INC., a New York
corporation
By /s/ James L. Wewers By____________________________
------------------------ ______________________________
James L. Wewers V.P.
- ---------------------------
[Printed Name & Title] [Printed Name & Title]
Agreed as to Article 6:
LSB INDUSTRIES, INC.,
a Delaware corporation
By /s/ Tony M. Shelby
----------------------
Tony M. Shelby
- -------------------------
[Printed Name & Title]
40
<PAGE>
EXHIBIT "A"
-----------
Disclosure Schedule
-------------------
41
<PAGE>
EXHIBIT "B"
-----------
Model/Mfgr. Description Serial Number Cost
- ---------- ----------- ------------- ----
42
<PAGE>
EXHIBIT "C"
-----------
Promissory Note
---------------
43
<PAGE>
EXHIBIT "D"
-----------
Certificate Insurance
---------------------
44
<PAGE>
Rider 2.11
----------
Payment Funding Instructions
----------------------------
45
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT
--------------------------------------------
(Rail Tank Cars)
----------------
This First Amendment to Loan & Security Agreement ("First Amendment") is
dated as of November 15, 1995 and is made and entered into by and between DSN
Corporation, an Oklahoma corporation ("Borrower") and The CIT Group/Equipment
Financing, Inc., a New York corporation ("Lender").
RECITALS
--------
This First Amendment is made with reference to the following facts:
A. Borrower and Lender entered into a certain Loan and Security Agreement
dated as of September 25, 1995 ("Loan Agreement") pursuant to which Lender made
available to Borrower a credit facility to finance the acquisition of ten
railcars; from Trinity Industries, Inc. 'Me terms used herein and not otherwise
defined shall have the meaning specified for such terms in the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, disbursements in
connection with the purchase of the railcars were to be made in two fundings. On
September 25, 1995, Lender made the first funding in the amount of $584,900.00
in connection with Borrower's acquisition of the first five railcars.
C. Borrower has now taken possession of four of the remaining five
railcars. Borrower is informed that the remaining fifth railcar has been shipped
by Trinity but its whereabouts, at this time, is unknown.
NOW THEREFORE, in consideration of the terms and conditions herein and of
the Loans heretofore, now or hereafter made to or for the benefit of Borrower by
Lender, the parties hereto agree to the following amendments and modifications
to the Loan Agreement:
1. Funding and Acceptance. Borrower represents that it has inspected and
----------------------
accepted the four remaining railcars, copies of which invoices are attached
hereto, and pursuant to its Request for Advance and Pay Proceeds Letter, Lender
shall disburse the amount of $467,920.00 pursuant to Section 2.2 of the Loan
Agreement. DSN acknowledges and agrees that CIT is not obligated to fund the sum
required for the final railcar and that at such time as its delivery and
acceptance by DSN, any funding will be in CITs sole discretion.
2. Tangible Net Worth Amendment. Section 6.10 of the Loan Agreement shall
----------------------------
be amended to read as follows:
"Section 6.10 Tangible Net Worth". LSB shall maintain at all times, on
--------------------------------
a consolidated basis, a minimum tangible net worth of $75,000,000
after
<PAGE>
subtracting treasury stock and $85,000,000 before subtracting treasury
stock as at December 31, 1995 and March 31, 1996, $76,000,000 after
subtracting treasury stock and $86,000,000 before subtracting treasury
stock as at June 30, 1996, $77,000,000 after subtracting treasury
stock and $87,000,000 before subtracting treasury stock as at
September 30, 1996 and $78,000,0000 after subtracting treasury stock
and $88,000,000 before subtracting treasury stock as at December 31,
1996. Thereafter, LSB shall maintain a minimum tangible net worth of
not less than $85,000,000 after subtracting treasury stock. The term
tangible net worth is defined as total stockholders' equity, after
deducting any treasury stock, less all assets that are considered
----
intangible assets under GAAP (including but not limited to goodwill,
patents, trademarks, certain deferred charges (as approved by Lender)
and customer lists).
LSB shall also maintain, on a consolidated basis, a leverage position
(defined as total liabilities divided by tangible net worth, after
deducting treasury stock) of 2.25:1 as at December 31, 1995 and at all
times thereafter."
3. Conditions Subsequent. Borrower further agrees that within ten (10)
---------------------
days of the execution of this letter that it will provide CIT with amendments to
the Railcar Lease Agreement and such amendments to the Consulting Agreement as
may be acceptable to CIT, in its sole discretion.
4. Representations and Warranties. Borrower represents and warrants as
------------------------------
follows:
(a) Each of the representations and warranties contained in the Loan
Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(b) The execution, delivery and performance of this First Amendment
are within Borrower's powers, have been duly authorized by all necessary action,
have received all necessary approvals, if any, and do not contravene any law or
any contractual restrictions binding on Borrower;
(c) This First Amendment is a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms; and
(d) No event has occurred and is continuing or would result from this
First Amendment which constitutes a Default under the Loan Agreement, as amended
and modified hereby.
2
<PAGE>
5. Miscellaneous. This First Amendment shall be part of the Loan
-------------
Agreement, the terms of which are incorporated herein, and the breach of any
representation, warranty or covenant contained herein or the failure to observe
or comply with any term or agreement contained herein, shall constitute a
Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement, the Loan Documents and
at applicable law. Borrower agrees to pay all costs, expenses and attorneys'
fees incurred by Lender in connection with the negotiation and preparation of
this First Amendment and any other documents in connection herewith including
all search, recording and title insurance expenses and in carrying out or
enforcing the terms of this First Amendment. Except as expressly provided
herein, Lender is not waiving any rights under the Loan Agreement or any other
Loan Document and, except as expressly provided herein or as previously modified
in a writing signed by Lender, all of the terms, covenants, and conditions of
the Loan Agreement remain unmodified and in full force and effect. Capitalized
terms used herein and not otherwise defined shall have the same meaning as set
forth in the Loan Agreement. This First Amendment may be executed in
counterparts, which counterparts, when so executed and delivered, shall together
constitute but one original.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to be effective as of the first date above written.
"Borrower" "Lender"
DSN CORPORATION, THE CIT GROUP/EQUIPMENT
an Oklahoma corporation FINANCING INC.,
a New York corporation
By: /s/James L. Wewers By:_______________________________
------------------------------
Its: Vice President Its:______________________________
------------------------------
"LSB"
LSB INDUSTRIES, INC.,
a Delaware corporation,
Agreed as to Section 2 only
By: /s/ Barry H. Golsen
------------------------------
Its: Vice Chairman
------------------------------
3
<PAGE>
The undersigned Guarantors acknowledge and consent to the foregoing First
Amendment, confirm that such additional loans by Lender are part of the
Obligations guaranteed by each of the undersigned's Guaranty, and further
confirm that each such Guaranty is in full force and effect.
LSB INDUSTRIES., INC,
a Delaware corporation
By: /s/ Barry H. Golsen
------------------------------
Its: Vice Chairman
------------------------------
LSB CHEMICAL CORP,
an Oklahoma corporation
By: /s/ Barry H. Golsen
------------------------------
Its: Vice President
------------------------------
4
<PAGE>
EXHIBIT 10.19
AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------
This Amendment to Loan and Security Agreement ("Amendment") is made as of
November 21, 1997, by and between THE CIT GROUP/EQUIPMENT FINANCING, INC.
("Lender") and DSN CORPORATION ("Borrower").
WHEREAS, Lender and Borrower entered into a Loan and Security Agreement
dated as of October 31, 1994, as amended, a Loan and Security Agreement dated as
of April 5, 1995, as amended, and a Loan and Security Agreement dated as of
November 15, 1995, as amended (collectively, "Loan Agreements") pursuant to
which Lender made certain loans and advances (collectively, "Loans") to Borrower
upon the terms and conditions set forth in the Loan Agreements and the related
Loan Documents; and
WHEREAS, LSB Industries, Inc. ("LSB") is in the process of completing a
$100,00,000 Rule 144A Offering ("Offering") by ClimaChem, Inc. ("ClimaChem"), a
newly formed Subsidiary of LSB; and
WHEREAS, in connection with the Offering, LSB will transfer to ClimaChem,
prior to the Offering, various wholly-owned subsidiaries of LSB, including
Borrower; and
WHEREAS, LSB has requested Lender to release LSB from its Guaranty
concurrent with the delivery by ClimaChem of its Guaranty; and
WHEREAS, in connection therewith, Lender and Borrower have also agreed to
certain other modifications and amendments to the Loan Agreements and Loan
Documents as set forth in this Amendment.
NOW, THEREFORE, in consideration of the terms and conditions herein, and of
any loans or other credit facilities heretofore, now or hereafter made to or for
the benefit of Borrower by Lender, the parties hereto agree to the following
amendments and modifications to each of the Loan Agreements:
1. Tangible Net Worth. Section 6.10 of each of the Loan Agreements is
------------------
amended and restated in its entirety to read as follows:
"Tangible Net Worth. ClimaChem shall maintain at all times, on a
------------------
consolidated basis, a minimum Adjusted Tangible Net Worth and shall not
exceed a Debt to Worth Ratio as provided in Exhibit "A" attached hereto.
Such financial covenant shall be measured as of the dates provided in
Exhibit "A". The term "Tangible Net Worth" is defined as total stockholder
equity after deducting any treasury stock plus deferred income tax
liability less all assets that are considered intangible assets under
----
GAAP."
<PAGE>
2. Amendments to Definitions. The following defined terms are amended as
-------------------------
follows:
(a) The term "Affiliate" is amended to add ClimaChem.
(b) The term "Guarantor" is amended to delete LSB as a Guarantor and
to add ClimaChem as a Guarantor.
(c) The term "Guaranty" is amended to delete LSB and to add
ClimaChem.
3. Dividends, etc. Section 7.2 of each of the Loan Agreements is, as of
---------------
the date hereof, amended to read as follows:
"Dividends, Distributions, Redemptions. Declare or pay any dividends
-------------------------------------
or other distributions upon any stock or make any distribution of
Borrower's property or assets or redeem, retire, purchase or otherwise
acquire, directly or indirectly, Borrower's stock; provided, however, that
Borrower may, provided no Event of Default shall exist that is containing
or exist as a result of such payment, pay in any fiscal year, an aggregate
of dividends and distributions in an amount not to exceed fifty percent
(50%) of Borrower's annual net income. The term "net income" is defined as
the sum of Borrower's income remaining after expenses (including income
taxes) as determined by GAAP."
4. Guaranties. Section 7.5 of each of the Loan Agreements is, as of the
----------
date hereof, amended to read as follows:
"Guaranties. Borrower shall not guaranty or otherwise, in any way, become
----------
liable with respect to the Indebtedness or liabilities of any Person
provided, however, that Borrower may guaranty ClimaChem's obligations in
connection with the Offering, on a joint and several basis with the
following ClimaChem Subsidiaries: The Environmental Group, Inc.,
International Environmental Corporation, Climate Master, Inc., CHP Corp.,
KOAX Corp., APR Corporation, Climate Mate, Inc., The Environmental Group
International Limited, LSB Chemical Corp., El Dorado Chemical Company,
Slurry Explosive Corporation, Total Energy Systems, Ltd., Total Energy
Systems (NZ) Ltd., T.E.S. Mining Services Pty. Ltd. and Northwest Financial
Corporation."
5. Ownership. Section 6.11 of each of the Loan Agreements is, as of the
---------
date hereof, amended to read as follows:
"Change of Ownership. LSB shall, at all times, hold not less than ninety-
-------------------
five percent (95%) of each class of stock of ClimaChem and, at all times,
ClimaChem shall hold not less than one hundred percent (100%) of each class
of stock of LSBC
2
<PAGE>
and, at all times, LSB shall hold not less than one hundred percent (100%)
of each class of stock of Borrower."
6. Financial and Other Information. Subsections (e), (f) and (h) of
-------------------------------
Section 6.1 of each of the Loan Agreements are, as of the date hereof, is
amended to read as follows:
"(e) Not later than 120 days after the close of each Fiscal Year of
LSB and of ClimaChem, LSB's and ClimaChem's 10K Report filed with the
Securities and Exchange Commission, the audited consolidated and unaudited
consolidating balance sheets of LSB and of ClimaChem and their consolidated
Affiliates as at the end of such Fiscal Year and related audited
consolidated and unaudited consolidating statements of income, expense and
retained earnings and audited statements of cash flow of LSB and of
ClimaChem and their consolidated Affiliates for such year, setting forth in
each case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the financial position of LSB and of
ClimaChem and their consolidated Affiliates and the results of operations
of LSB and of ClimaChem and their consolidated Affiliates for the Fiscal
Year then ended, and prepared in accordance with GAAP. Such statements
required hereunder shall be examined and accompanied by a report of
independent certified public accountants which shall not contain any
qualifications as to scope; and such report shall also be accompanied by a
certificate of such accountants stating that in the course of performing
their examination such accountants did not become aware of the existence of
any default under this Agreement, except for those, if any, described in
such certificate in reasonable detail. In addition, the chief financial
officer or accounting officer of LSB and of ClimaChem shall provide a
certificate which shall also include a statement by such officer that no
breach, default or event of default has occurred and is continuing under
any document to which LSB or ClimaChem or any consolidated Affiliate is a
party that evidences any Indebtedness of LSB or ClimaChem or any such
Affiliate which exceeds, individually or together with any related
Indebtedness, $5,000,000, or if any such breach, default or event of
default and the status thereof. Such certificate shall also include a
statement from such officer that LSB or ClimaChem, as applicable, is in
compliance with all covenants contained in this Agreement relating to the
financial condition of LSB or ClimaChem, as applicable, and such statement
shall be accompanied by the calculations of such financial covenants.
(f) Not later than 90 days after the close of each fiscal quarter of
LSB and of ClimaChem, LSB's and ClimaChem's 10Q Report filed with the
Securities and Exchange Commission and the unaudited consolidated balance
sheets of LSB and of
3
<PAGE>
ClimaChem and each of their consolidated Affiliates as at the end of such
period, and unaudited consolidated statements of income and expense from
the beginning of the fiscal year to the end of each such period, for LSB
and for ClimaChem and each of their consolidated Affiliates, all in
reasonable detail, fairly presenting in all material respects the
consolidated financial position and results of operations of LSB and of
ClimaChem and each of their Affiliates, in each case, prepared in
accordance with GAAP and consistent with the audited financial statements
required pursuant to Section 6.1(a) above. Such statements shall be
accompanied by a certificate of the chief financial officer or the chief
accounting officer of LSB and of ClimaChem stating that, based upon such
examination or investigation as such officer shall have deemed necessary to
enable him to render an informed opinion in respect thereof, to the best of
his knowledge and belief, such financial statements are materially correct
and no Default under this Agreement exists and is continuing except for
those, if any, described in such certificate in reasonable detail. Such
certificate shall also include a statement from such officer that LSB or
ClimaChem, as applicable, is in compliance with all financial covenants
contained in this Agreement relating to the financial condition of LSB or
ClimaChem, as applicable, and such statement shall be accompanied by the
actual calculations of such financial covenants.
(g) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which the Borrower, or LSB or
ClimaChem or EDC sends to its shareholders or holders of its Indebtedness,
and copies of any and all periodic special reports, as well as registration
statements, filed by the Borrower, LSB or EDC with the Securities and
Exchange Commission or similar State authority."
7. Termination and Substitution of Guaranties. Concurrent with the
------------------------------------------
execution and effectiveness of this Amendment, the LSB Guaranty will be
terminated and ClimaChem shall deliver to render its Guaranty.
8. Events of Default. Subsection 8.1(b) of the Events of Default as
-----------------
provided in each of the Loan Agreement is, as of the date hereof, amended and
restated in its entirety to read as follows:
"(h) Any uncured default beyond any applicable grace period by ClimaChem
---
or any of its Subsidiaries under any agreement or instrument evidencing any
loan, extension of credit or other indebtedness of ClimaChem or any of its
Subsidiaries in an amount equal to or greater than $5,000,000;"
4
<PAGE>
9. Representations and Warranties. Borrower represents and warrants as
------------------------------
follows:
(a) Each of the representations and warranties contained in each of
the Loan Agreements is hereby reaffirmed as of the date hereof, each as if
set forth herein;
(b) The execution, delivery and performance of this Amendment are
within Borrower's powers, have been duly authorized by all necessary
action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrower;
(c) This Amendment is a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms; and
(d) No event has occurred and is continuing or would result from this
Amendment which constitutes a Default or Event of Default under the Loan
Agreements, as amended and modified hereby.
10. Further Assurances. Borrower shall, at its expense, do, execute and
------------------
deliver to Lender such further acts and documents as the Lender shall, from time
to time, require for assuring and confirming to Lender the rights created or
intended to be created in connection with this Amendment or for carrying out the
intention or facilitating the performance of the terms of any Loan Document or
for assuring the validity, perfection, priority or enforceability of any Lien
under any Loan Document.
11. Miscellaneous. This Amendment shall be part of each of the Loan
-------------
Agreements, the terms of which are incorporated herein, and the breach of any
representation, warranty or covenant contained herein or the failure to observe
or comply with any term or agreement contained herein, shall constitute an Event
of Default under each of the Loan Agreements and Lender shall be entitled to
exercise all rights and remedies it may have under the Loan Agreements and
applicable law. Borrower agrees to pay all costs, expenses and attorneys' fees
incurred by Lender in connection with the negotiation and preparation of this
Amendment and any other documents in connection herewith and in carrying out or
enforcing the terms of this Amendment. Lender is not waiving any rights under
any of the Loan Agreements and, except as expressly provided herein or as
previously modified in a writing signed by Lender, all of the terms, covenants,
and conditions of each of the Loan Agreements remain unmodified and in full
force and effect. Capitalized terms used herein and not otherwise defined shall
have the same meaning as set forth in the Loan Agreements. This Amendment may
be executed in counterparts, which counterparts, when so executed and delivered,
shall together constitute but one original.
5
<PAGE>
12. Effective Date. This Amendment shall be effective upon execution by
--------------
the parties hereto, delivery of the ClimaChem Guaranty and the final closing of
the Offering.
IN WITNESS WHEREOF, the parties hereto have executed this ________
Amendment to be effective as of the first date above written.
"Borrower" "Lender"
DSN CORPORATION THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ David R. Goss By: /s/ Anthony
--------------------------- -------------------------------
Its: Vice President Its: Vice President
-------------------------- ------------------------------
In order to induce CIT to execute the above Amendment, the undersigned
hereby represents, warrants and agrees that the undersigned has reviewed and
approved the Amendment and agrees that nothing contained therein shall diminish,
alter, amend or otherwise affect the undersigned's obligations under its
Guaranty dated as of October 31, 1994 ("Guaranty"). The undersigned further
confirms that such Guaranty shall continue in full force and affect and agrees
that it continues to be liable under such Guaranty in accordance with the tenor
and effect thereof. The undersigned consents to the transactions contemplated
in connection with the Amendment. The undersigned further confirms that it has
no defense, counterclaim or offset right whatsoever with respect to its
obligations under the Guaranty.
LSB CHEMICAL CORP.
an Oklahoma corporation
By: /s/ David R. Goss
-------------------------------
Its: Vice President
------------------------------
6
<PAGE>
ClimaChem, Inc.
Calculation of Financial Covenants
<TABLE>
<CAPTION>
12/97 3/98 6/98
<S> <C> <C> <C>
Tangible Net Worth
- ------------------
Consolidated total assets 179,982 194,000 190,000
Less:
Goodwill (2,997) (2,911) (2,825)
Patents & Licenses (1,367) (1,298) (1,225)
Deferred loan costs:
New debt offering (4,000) (3,900) (3,800)
BankAmerica (100) (92) (84)
CIT (190) (180) (170)
-------- -------- --------
Adjustable tangible assets 171,328 185,621 181,895
Less consolidated total
liabilities (140,309) (152,000) (144,000)
-------- -------- --------
Tangible Net Worth 31,019 33,621 37,896
======== ======== ========
Adjusted Tangible Net Worth 31,000 32,000 34,000
======== ======== ========
Debt to Worth Ratio
- -------------------
Total consolidated
liabilities 140,308 152,000 144,000
======== ======== ========
Adjusted Tangible Net Worth 31,000 32,000 34,000
======== ======== ========
Debt to Worth Ratio 4,528 4,750 4,235
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
9/98 12/98 12/99
<S> <C> <C> <C>
Tangible Net Worth
- ------------------
Consolidated total assets 189,000 185,085 193,194
Less:
Goodwill (2,739) (2,583) (2,309)
Patents & Licenses (1,154) (1,083) (799)
Deferred loan costs:
New debt offering (3,700) (3,600) (3,200)
BankAmerica (78) (68) (35)
CIT (160) (150) (110)
-------- -------- --------
Adjustable tangible assets 181,171 177,541 186,740
Less consolidated total
liabilities (142,000) (183,753) (135,006)
-------- -------- --------
Tangible Net Worth 39,171 38,788 51,734
======== ======== ========
Adjusted Tangible net Worth 35,000 34,600 45,000
======== ======== ========
Debt to Worth Ratio
- -------------------
Total consolidated
liabilities 142,000 138,753 135,008
======== ======== ========
Adjusted Tangible Net Worth 35,000 34,600 45,000
======== ======== ========
Debt to Worth Ratio 4,057 4,010 3,000
======== ======== ========
</TABLE>
The covenant as calculated based on operations does not consider any cash
dividends to LSB as permitted by the Senior Notes to be issued by ClimaChem.
Under the Senior Notes ClimaChem will be permitted to dividend up to 50% of its
annual net income (absent a default, etc.). ClimaChem's projected Net Income
for 1998 and 1999 is $7.7 million and $11.8 million, respectively. The
suggested covenant assumes LSB will receive the full dividend it is entitled to.
<PAGE>
EXHIBIT 10.20
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty"), dated as of November 21, 1997, is
made by CLIMACHEM, INC., an Oklahoma corporation ("Guarantor"), in favor of CIT
GROUP/EQUIPMENT FINANCING, INC., a New York corporation ("CIT").
A. Guarantor hereby requests CIT to enter into an amendment of the loans
owing by DSN Corporation ("Debtor") to CIT and the termination of the existing
guaranty of LSB Industries, Inc.
B. It is in the direct interest of, and benefit to, Guarantor, because
of the intercorporate or business relations between Guarantor and Debtor, to
guarantee the payment and performance of all of Debtor's Obligations (as defined
below) to CIT, and Guarantor will derive substantial economic benefits from the
relationship between CIT and Debtor.
C. CIT's willingness to make the loan modifications and terminate LSB's
guaranty is conditional upon, among other things, Guarantor's execution and
delivery of this Guaranty to CIT.
In consideration of the foregoing facts and for other valuable
consideration, Guarantor hereby agrees as follows:
1. Guaranty.
--------
1.1 Guarantor, hereby unconditionally and irrevocably guarantees to
CIT and its successor, transferees and assigns (a) the prompt and complete
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations and indebtedness of Debtor to CIT ("Obligations"), now
existing or hereafter incurred, arising out of or in connection with any loan
agreements, promissory notes or other documents or agreements between Debtor and
CIT, and (b) the due and punctual performance and observance, strictly in
accordance with the terms of any such loan agreements or promissory notes by
Debtor, of each of the material terms, conditions, covenants agreements and
indemnities of Debtor thereunder, and if for any reason whatsoever Debtor shall
fail to do so, Guarantor shall promptly perform and observe the same. Guarantor
further agrees to pay any and all out-of-pocket costs and expenses, including
reasonable attorney's fees, which may be paid or incurred by CIT in collecting
from Debtor or Guarantor any or all of the Obligations and/or in enforcing any
rights hereunder.
1.2 The obligations of Guarantor under this Guaranty shall be
continuing, absolute and unconditional under any and all circumstances and shall
be paid or performed by Guarantor regardless of (a) the validity, legality or
enforceability of any loan agreement or promissory note by Debtor in favor of
CIT, any of the Obligations or any collateral security or other guaranty
therefor at any time or from time to time held by CIT; (b) any
<PAGE>
defense, offset or counterclaim which may at time be available to, or asserted
by, Debtor or Guarantor against CIT; or (c) any other event or circumstance
which may constitute, or might be construed to constitute, an equitable or legal
discharge or a surety or a guarantor, it being the purpose and intent of
Guarantor that this Guaranty and Guarantor's obligations hereunder shall remain
in full force and effect and be binding upon Guarantor and its successors until
the Obligations and any obligations of Guarantor under this Guaranty shall have
been satisfied by final payment in full.
1.3 Guarantor hereby consents, without the necessity of any
reservation of rights against Guarantor and without notices to or assent by
Guarantor that (a) any demand for payment of any of the Obligations made by CIT
may be rescinded by CIT and any of the Obligations continued; (b) the
Obligations, or the liability of any party upon or for any part thereof, or any
collateral security documents or guaranty therefor, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated, settled,
compromised, subordinated, waived, surrendered or released by CIT; (c) any loan
agreement or any promissory note by Debtor in favor of CIT, any collateral,
security documents or other guaranties or documents in connection therewith may
be amended, modified, supplemented or terminated, in whole or in part, as CIT
may deem advisable from time to time; and (d) any collateral securing the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released, Guarantor remaining bound hereunder notwithstanding the occurrence of
any of the foregoing. CIT shall not have any duty to protect, secure, perfect or
insure any collateral securing the payment of the Obligations. This is a
guaranty of payment and performance, and not merely of collection. Guarantor
waives any requirement that CIT make any demand, commence suit or exercise any
other right or remedy under any loan agreement by Debtor in favor of CIT prior
to enforcing its rights against Guarantor hereunder. Guarantor waives diligence,
presentment, protest, demand for payment and/or notice of default or non-payment
to or upon Debtor or Guarantor with respect to the Obligations. Guarantor waives
any right to require CIT to marshall assets in favor of Debtor, Guarantor or any
other person. When making any demand hereunder against Guarantor, CIT may, but
shall be under no obligation to, make a similar demand on any other guarantor,
and any failure by CIT to make any such demand or to collect any payments from
any such other guarantor or any release of such other guarantor shall not
relieve Guarantor of its obligations and liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of CIT against Guarantor. For the purpose hereof "demand" shall include the
commencement and continuance of any legal proceedings.
1.4 Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by CIT upon this Guaranty or
2
<PAGE>
acceptance of this Guaranty. The amendments and modifications to the Debtor's
loan documents and the termination of the LSB Industries' Guaranty shall
conclusively be deemed to have been contracted for or incurred in reliance upon
this Guaranty, and all dealings among Debtor and Guarantor and CIT shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guaranty.
1.5 Guarantor hereby waives any duty on the part of CIT (should any
such duty exist) to disclose to Guarantor any matter, fact or thing related to
the business, operations or condition (financial or otherwise) of Debtor or its
affiliates or subsidiaries or their properties, whether now or hereafter known
by CIT.
1.6 This Guaranty shall continue to be effective, or be reinstated,
as the case may be, if at any time, payment, or any part thereof, of any of the
Obligations is rescinded or must otherwise be restored or returned by CIT upon
the insolvency, bankruptcy or reorganization or Debtor; or otherwise, all as
though such payment had not been made.
2. No Subrogation. Guarantor expressly waives any and all rights of
--------------
subrogation, reimbursement, indemnity, exoneration, contribution and any other
claim which it may now or hereafter have against Debtor or any other person
directly or contingently liable for the Obligations, or against or with respect
to Debtor's property (including, without limitation, the collateral), arising
from the existence or performance of this Guaranty.
3. Representations and Warranties. Guarantor hereby represents and
------------------------------
warrants that, as of the date of this Guaranty (unless the context otherwise
provides), (a) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the State of its incorporation set forth in
the introductory paragraph hereof; (b) Guarantor has full power, authority and
legal rights to execute, deliver and perform this Guaranty and Guarantor has
taken all necessary corporate action to authorize such execution, delivery and
performance; (c) this Guaranty has been duly authorized, executed and delivered
by Guarantor and constitutes a legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms; (d) no consent of any person, and no
consent, license, approval or authorization of, or registration or filing with,
any governmental authority, bureau or agency is required in connection with the
execution, delivery, performance and payment under, this Guaranty; (e) the
execution, delivery, performance and payment of this Guaranty does not and will
not contravene any applicable law, regulation, order or decree, the certificate
of incorporation or by-laws of Guarantor or any provisions of any indenture,
mortgage, or other material contract agreement to which Guarantor, is a party or
by which any
3
<PAGE>
of the same or any of their respective assets may be bound; (f) there is no
action, suit, investigation or proceeding by or before any court, arbitrator,
administrative agency or other governmental authority pending or threatened
against or affecting Guarantor; (g) all financial information of Guarantor
heretofore furnished CIT is true and correct; and (h) Guarantor is not in
default under any indenture, mortgage, contract or other agreement to which it
is a party or by which Guarantor or any of its assets may be bound, except for
any such default which would not materially affect Guarantor's ability to
perform its obligations under this Guaranty or any such indenture, mortgage,
contract or other agreement.
4. No Changes in Guarantor. Guarantor covenants and agrees that from and
-----------------------
after the date hereof and so long as any of the Obligations remain outstanding,
it will not (a) enter into any transaction of merger unless it is the surviving
corporation and after giving effect to such merger or consolidation its tangible
net worth equals or exceeds that which existed prior to such merger or
consolidation; (b) liquidate or dissolve, or (c) sell or otherwise dispose of
all or any substantial part of its assets.
5. Additional Covenants of Guarantor. Guarantor covenants and agrees that
---------------------------------
from and after the date hereof and so long as any of the Obligations remain
outstanding, it will: (a) promptly give written notice to CIT of the occurrence
of any default or event of default hereunder; (b) promptly provide CIT with
copies of all SEC filings affecting Guarantor; (c) (i) duly observe and conform
to all requirements of any governmental authorities relating to the conduct of
its business or to its properties or assets, (ii) maintain its existence as a
legal entity and obtain and keep in full force and effect all material rights,
licenses and permits which are necessary to the proper conduct of its business,
and (iii) obtain or cause to be obtained as promptly as possible any
governmental, administrative or agency approval and make any filing or
registration therewith which at the time shall be required with respect to the
performance of its obligations under this Guaranty; (d) permit CIT or its
authorized representative at any reasonable time or times following the
occurrence and during the continuation of an event of default hereunder to
inspect its books and records; (e) keep proper books of record and account in
which in which full, true and correct entries in accordance with generally
accepted accounting principles will be made of all dealings or transactions in
relation to its business and activities; and (f) furnish to CIT all financial
statements required under the loan documents between Debtor and CIT, including
the Amendment referenced above.
6. Notices. All notices, requests and demands to or upon Guarantor or CIT
-------
shall be deemed duly given or made when sent, if given by telecopier, when
delivered, if given by personal delivery or overnight commercial carrier, or the
third calendar day after
4
<PAGE>
deposit in the United States mail, certified mail, return receipt requested, and
addressed.
if to Guarantor: CLIMACHEM, INC.
16 South Pennsylvania
Oklahoma City, Oklahoma 73101
ATTENTION: President
Telecopier No. (405) 235-5067
with a copy to: David Shear, Esquire
Legal Department
LSB Industries, Inc.
16 South Pennsylvania
Oklahoma City, Oklahoma 73101
if to CIT: The CIT Group/Equipment Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039
ATTENTION: Senior Vice President - Credit
Telecopier No. (973) 740-5005
or in either case, to such other address or telecopier number as may be
hereafter designated in writing by either of them to the other.
7. No Waiver; Cumulative Remedies. A waiver by CIT of any right or remedy
------------------------------
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which CIT would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of CIT any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
8. Miscellaneous.
-------------
8.1 None of the terms or provisions of this Guaranty may be amended,
waived, altered, modified or terminated except by an instrument in writing
signed by the party against which enforcement of such amendment, waiver,
alteration, modification or termination is sought. This writing contains the
complete, final and exclusive statement of the terms of the agreement between
Guarantor and CIT relating to this guaranty. No course of prior dealings between
the parties, no usage of the trade, and no parol or extrinsic evidence of any
nature, shall be used or be relevant to supplement or explain or modify any term
used in this Guaranty.
5
<PAGE>
This Guaranty and all obligations of Guarantor hereunder shall be binding upon
the successors and assigns of Guarantor, and shall, together with the rights and
remedies of CIT hereunder, insure to the benefit of CIT and its successors and
assigns. The invalidity, illegality or unenforceability or any provision of this
Guaranty shall not affect the validity, legality or enforceability of any other
provision of this Guaranty.
8.2 GUARANTOR AND CIT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL
ADDITIONAL EXPENSES AND DELAYS NOT OCCASIONED BY NONJURY TRIALS. GUARANTOR AND
CIT AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL
JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS
A SPECIFICALLY NEGOTIATED PROVISION OF THIS GUARANTY, GUARANTOR AND CIT HEREBY
EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OR ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS GUARANTY, OR THE TRANSACTIONS RELATED HERETO,
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND GUARANTOR AND CIT HEREBY AGREE AND CONSENT THAT GUARANTOR
OR CIT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAVIER OF THEIR
RIGHT TO TRIAL BY JURY.
8.3 THIS GUARANTY SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
8.4 GUARANTOR HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH THIS
GUARANTY MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, IN
THE COUNTY OF NEW YORK, OR THE UNITED STATES DISTRICT COURTS FOR THE SOUTHERN
DISTRICT OF NEW YORK, AS CIT MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS
GUARANTY, GUARANTOR HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. GUARANTOR
IRREVOCABLY CONSENTS TO SERVICE OF ANY SUMMONS AND/OR LEGAL PROCESS BY
REGISTERED OR CERTIFIED UNITED STATES AIR MAIL, POSTAGE PREPAID, TO GUARANTOR AT
THE ADDRESS SET FORTH IN SECTION 6 HEREOF, SUCH METHOD OF SERVICE TO CONSTITUTE,
IN EVERY RESPECT, SUFFICIENT AND EFFECTIVE SERVICE OF PROCESS IN ANY SUCH LEGAL
ACTION OR PROCEEDING. NOTHING IN THIS GUARANTY SHALL AFFECT THE RIGHT TO SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF CIT TO
BRING ACTIONS, SUITS OR PROCEEDINGS IN THE COURTS OF ANY OTHER JURISDICTION.
GUARANTOR FURTHER AGREES THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT ON THE
JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH
6
<PAGE>
SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF THE LIABILITY.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed and delivered by its duly authorized officer as of the day and year
first above written.
Guarantor:
CLIMACHEM, INC.
By:_______________________________
Title:____________________________
7
<PAGE>
EXHIBIT 10.21
COMPANY NOTE
------------
$2,000,000 Oklahoma City, Oklahoma
FOR VALUE RECEIVED, Climate Master, Inc. (the "Maker"), promises to pay to
the order of the Oklahoma County Finance Authority, an Oklahoma public trust
(the "Authority"), or any subsequent holder or. holders of this Note (the
Authority and any subsequent holder or holders are hereinafter referred to as
the "Holder"), at the offices of the Authority, or at such other place as may be
designated in writing by the Holder, the principal sum of Two Million Dollars
($2,000,000), or so much thereof as shall be disbursed, together with interest
thereon at the rate hereinafter specified, payable as set forth herein.
As used herein, the following terms shall have the meanings indicated:
Note Rate shall mean a variable rate of interest per annum equal to the
---------
variable rate of interest per annum, payable by The Oklahoma Industrial Finance
Authority a body corporate and politic, and an instrumentality, agency and
department of the State of Oklahoma, on its $10,000,000 Taxable General
Obligation industrial Finance Bonds, Series P (the "Series P Bonds"), (3%) with
a minimum interest rate of ten percent (10%). From and after the date hereof
until August 1, 1989, interest shall accrue at an initial interest rate of 12.9%
adjustable as herein provided. The Note Rate and the amount of Maker's required
payments hereunder shall be adjusted (upward or downward) on August 1, 1989, and
on the first (1st) day of every third (3rd) month thereafter (referred to herein
after as the "Payment Adjustment Date"); provided, however, that in no event
shall the Note Rate or the interest cost on this Note exceed any statutory
limitation, [currently fourteen percent (14%)]. Prior to any change in the Note
Rate, the Maker and the Authority shall be mailed notice in writing by the
Holder by first class mail at the addresses then on file at the offices of the
Holder at least one (1) day prior to the end of the then effective Note Rate
period, but any failure in respect of such mailing will not affect the validity
of such notice of Note Rate change, nor shall the Holder be liable or
responsible for any such failure of mailing and/or the failure of the Maker or
the Authority to receive such notice, absent gross negligence or fraud. Such
notice shall specify the effective dates of the new Note Rate and the amount of
interest due and payable on the succeeding payment dates during the ensuing
designated period. Further, such Note Rate shall prevail until written notice to
the contrary has been mailed by the Holder to the Maker and the Authority or
until final maturity of this Note.
Loan Agreement shall mean the Project Loan Agreement dated as of July 1,
--------------
1989 by and between the Authority and the Maker relating to the disbursement of
the loan evidenced by this Note. At the option of the Holder, a default under
the Project Loan Agreement shall constitute a default under this Note.
<PAGE>
Commencing on the lst day of September, 1989, and on the 1st day of each
calendar month thereafter, interest shall be paid on the unpaid principal
balance of this Note based upon the amount actually funded.
Commencing on the 1st day of September, 1989, and continuing on the lst day
of each calendar month thereafter, principal shall be paid in fifty-six (56)
consecutive equal monthly installments.
The last monthly payment of principal and interest, due on May 1, 1994,
will be in the then remaining balance of principal and interest. Each of the
foregoing payments of interest and principal shall be applied first to the
payment of any unpaid interest hereunder at the Note Rate, and the balance, if
any, shall be applied to the principal sum.
Subject to the provisions of the Loan Agreement, the right is reserved to
prepay this Note, in whole or in part, provided that the prepayment is made on a
regularly scheduled principal and interest installment payment date. Any full or
partial prepayment shall apply to (i) costs and expenses of the Holder in
effecting the prepayment; (ii) interest to accrue to the repayment date thereof
and not previously paid; (iii) the principal amount of this Note.
Holder will provide Maker with notice and thirty (30) days' opportunity to
cure any non-monetary default and fifteen (15) days' opportunity to cure any
monetary default. While any default exists hereunder all sums herein promised to
be paid shall bear interest at the rate equal to fourteen percent (14%) per
annum, but not more than the Maximum Rate, (as defined below), provided, that
any default interest so required to be paid when added to all other interest
paid to date under this Note, shall not result in this Company Note bearing an
interest rate in excess of the Maximum Rate. Such default interest shall accrue
from the date of default to the date on which such default is cured to the
satisfaction of the Holder. All past due sums will be paid at the time of and as
a condition precedent to the curing of any default hereunder. During the
existence of any such default, the Holder may apply payments received on any
amount due hereunder or under the terms of any instrument now or hereafter
evidencing or securing any such indebtedness as the Holder may determine.
Subject to the maximum interest rate permitted to be paid by public trusts
pursuant to Title 60 Oklahoma Statutes 1981, Section 176(e), (the "Maximum
Rate"), the Holder may collect a late charge equal to four cents (.04) on each
dollar of each payment which is not paid within ten (10) days from the due date
thereof, for the, purposes of covering the extra expenses involved in handling
delinquent installments. This late charge provision shall not be applicable in
the event the Holder, at its option, elects to
2
<PAGE>
receive interest at the increased rate as previously provided in the event of
default.
Payment of this Note is secured by a Mortgage with Power of Sale of
Tenant's Interest in Lease (the "Mortgage") a Security Agreement and other
security instruments covering property located in Oklahoma County, Oklahoma, and
this Note is to be construed according to the laws of the State of Oklahoma.
Upon an Event of Default as defined in the Project Loan Agreement, in any
of the terms or conditions of this Note, the Project Loan Agreement, Mortgage,
Security Agreement, or any other instrument securing payment of this Note, at
the option of the Holder, the entire indebtedness hereby evidenced shall in
accordance with the terms of the Project Loan Agreement related hereto, become
due, payable and collectible then or thereafter as the Holder may elect,
regardless of the date of maturity hereof. Notice of the exercise of such option
is hereby expressly waived.
The Maker agrees that if, and as often as, this Note is placed in the hands
of an attorney for collection or to defend or enforce any of the Holder's rights
hereunder, the Maker will pay to the Holder its reasonable attorney's fees,
together with all court cost, and other expenses paid by such Holder.
It is the intent of the Holder and the Maker to conform strictly to the
usury laws of the State of Oklahoma, and any interest on the principal sum
hereof in excess of that allowed by such usury laws shall be subject to
reduction to the maximum amount of interest allowed under such laws. If any
interest in excess of the maximum amount of interest allowable by such usury
laws is inadvertently paid to the Holder, at any time, any such excess interest
shall be refunded by the Holder to the party or parties entitled to the same
after receiving notice of payments of such excess interest.
The Maker and the endorsers, sureties, guarantors, and all other persons
who may become liable for all or any part of this obligation severally waive
presentment for payment, protest and notice of nonpayment. Such parties consent
to any extension of time of payment hereof, whether one or more, any renewal
hereof, whether one or more, and any release of any party liable for payment of
this obligation. Any such extension, renewal or release may be made without
notice to any such party and without discharging such party's liability
hereunder.
The records of the Holder shall be prima facie evidence of the amount owing
on this Note.
3
<PAGE>
IN WITNESS WHEREOF, the Maker has executed this instrument as of this 14th
day of July, 1989.
CLIMATE MASTER, INC.
By: /s/ Tony M. Shelby
------------------
Vice President
----
ATTEST:
/s/ James J. Gray
- -----------------
Ass't Secretary
- -----
(SEAL)
ENDORSEMENT
-----------
Pay without recourse to the order of The Oklahoma Industrial Finance
Authority.
July 14, 1989.
OKLAHOMA COUNTY FINANCE AUTHORITY,
An Oklahoma Public Trust
By: /s/ Vincent P. Cotter
---------------------
Chairman
4
<PAGE>
TRUSTEES' DISCLAIMER
--------------------
This instrument is endorsed by the Trustees or officers of both of the
Oklahoma County Finance Authority in their capacities as such Trustees or
officers. By the acceptance of this instrument, any holder or holders hereof
agree that no trustee or officer of the Authority shall be personally liable for
the payment of any claim or the performance of any obligation hereunder and that
the holder will seek recourse only against the original maker, its guarantors,
successors and assigns, and any collateral pledged or mortgaged to secure the
indebtedness evidenced by this Note. Reference is made to the Trust Indenture of
the Authority, dated May 9, 1983, a copy of which has been filed in the office
of the County Clerk, Oklahoma County, State of Oklahoma, and the office of the
Secretary of State, State of Oklahoma.
5
<PAGE>
EXHIBIT 10.22
EXTENSION OF MATURITY
ON COMPANY NOTE
---------------
WHEREAS, Climate Master, Inc. is the "Maker" of that certain "Company Note"
dated July 14, 1989, in the principal sum of $2,000,000.00 payable to the order
of the Oklahoma County Finance Authority, a public trust, or any subsequent
holder;
WHEREAS, the Oklahoma Industrial Finance Authority (the "OIFA") is the
holder of said Company Note by endorsement of the Oklahoma County Finance
Authority; and
WHEREAS, said Company Note is secured by that certain Mortgage of Tenant's
Interest in Lease, dated July 1, 1989, filed in the Office of the County Clerk
for Oklahoma County and recorded in book 5933, at page 1805; that certain
Security Agreement dated July 1, 1989; Guaranty of LSB Industries, Inc.; and
that certain Project Loan Agreement dated July 1, 1989.
NOW THEREFORE, for value received these parties hereby agree to extend the
date of maturity of said Company Note to August 1, 2004, while keeping all other
terms and conditions the same as originally stated. Further, the Maker
acknowledges that the Project Loan Agreement, Mortgage of Tenant's Interest in
Lease, Security Agreement, Guaranty, and all other loan documents executed as
part of this loan shall remain in full force and effect until this loan is
repaid.
Dated this 7/th/ day of February, 1997.
CLIMATE MASTER, INC.
By: /s/ Barry H. Golsen
--------------------------------
Exec. Vice President
OKLAHOMA INDUSTRIAL FINANCE
AUTHORITY
By: /s/ Stephen J. Blake
--------------------------------
Senior Vice President
Consent of Guarantor:
LSB INDUSTRIES, INC.
By: ______________________________
Sr. Vice President
<PAGE>
EXHIBIT 10.23
MORTGAGE OF TENANT'S INTEREST IN LEASE
--------------------------------------
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
----------------------------------------------------------------------
ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT
----------------------------------------------------------------------
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER
--------------------------------------------------------------------------
THIS MORTGAGE.
-------------
THIS MORTGAGE is made as of this lst day of July, 1989, by CLIMATE MASTER,
INC., a Delaware corporation (herein called the "Mortgagor") to THE OKLAHOMA
COUNTY FINANCE AUTHORITY, an Oklahoma public trust (herein called the
"Mortgagee").
W I T N E S S E T H:
-------------------
WHEREAS, Mortgagee has agreed, subject to certain terms and conditions, to
make a loan (the "Loan") to mortgagor in the amount of Two Million and No/100
Dollars ($2,000,000.00); and
WHEREAS, the Loan is secured by a Security Agreement covering certain
equipment of Mortgagor located on the real property described on Exhibit A
attached hereto and made a part hereof (the "Land"); and
WHEREAS, Mortgagor and West Point Company, an Oklahoma corporation ("West
Point"), have entered into a certain Lease Agreement dated November 12, 1987,
whereby West Point leased the Land to Mortgagor, as said Lease Agreement is
amended by that certain First Amendment to Lease Agreement dated February 19,
1988, and that certain Second Amendment to Lease Agreement dated December 7,
1988 (the "Lease"); and
WHEREAS, as a condition of the Loan, the Mortgagee has required the
Mortgagor to mortgage its tenant's interest in the Lease to Mortgagee.
NOW, THEREFORE, for value received, and for the purpose of securing payment
of all sums now or at any time hereafter due to the Mortgagee under the terms of
the Mortgagor's note to Mortgagee of even date herewith in the amount of
$2,000,000 (the "Note") having a maturity of May 1, 1994, as secured by a
certain Security Agreement made by the Mortgagor to the Mortgagee, and
performance and discharge of each obligation, covenant and agreement of the
Mortgagor contained herein or in the Security Agreement, the Note or the Project
Loan Agreement between Mortgagor and Mortgagee in connection with the Loan, the
Mortgagor hereby mortgages to the Mortgagee, its successors and assigns, all of
the Mortgagor's right, title and interest in and under the Lease, together with
any extensions, amendments or renewals thereof, upon the following terms.
Borrower hereby grants to and confers on Lender the power to sell the Lease
in the manner provided under the Oklahoma Power of Sale Mortgage Foreclosure
Act, 46 O.S. (S)(S)40-48 both inclusive, as
<PAGE>
the same may be amended from time to time or other statutory authority (the
"Act").
1. So long as there shall exist no default by the Mortgagor in the
payment of any indebtedness secured hereby or in the performance of any
obligation of the Mortgagor herein or in the Security Agreement, the Project
Loan Agreement or any other instrument securing said indebtedness, the Mortgagor
shall have the right to exercise all of the tenant's rights under the Lease
except those set forth in paragraph 4 of this Mortgage.
2. Upon the payment in full of all indebtedness secured hereby, this
Mortgage shall become and be void and of no effect.
3. The Mortgagor will: fulfill or perform each and every condition and
covenant of the Lease to be fulfilled or performed by tenant; give prompt notice
to the Mortgagee of any notice of default by the Mortgagor under the Lease
received by the Mortgagor together with a complete copy of any such notice;
enforce, short of termination of the Lease, the performance or observance of
each and every covenant and condition of the Lease by the landlord to be
performed or observed; not modify or in any way alter the terms of the Lease;
not terminate the term of the Lease nor surrender the premises unless required
to do so by the terms of the Lease; and not waive or release the landlord from
any obligation or condition by the landlord to be performed.
4. The rights mortgaged hereunder include all the Mortgagor's right and
power to modify the Lease, to terminate the term, to surrender the premises, or
to waive or release the landlord from the performance or observance by the
landlord of any obligation or condition thereof.
5. At the Mortgagor's sole cost and expense, the Mortgagor will appear in
and defend any action growing out of or in any manner connected with the Lease
or the obligations or liabilities of the landlord, tenant or any guarantor
thereunder.
6. Should the Mortgagor fail to make any payment or to do any act as
herein provided, then the Mortgagee, without obligation so to do and without
notice to or demand on the Mortgagor and without releasing the Mortgagor from
any obligation herein, may make or do the same, including specifically, without
limiting its general powers, appearing in and defending any action purporting to
affect the security hereof or the rights or powers of the Mortgagee and
performing any obligation of the tenant contained in the Lease, and in
exercising any such powers paying necessary costs and expenses, employing
counsel and incurring and paying reasonable attorney's fees; and the Mortgagor
will pay immediately upon demand all sums expended by the Mortgagee under the
authority hereof, together with interest thereon at the then applicable interest
rate
2
<PAGE>
of the Note, and the same shall be added to the indebtedness and shall be
secured hereby and by the Security Agreement.
7. The whole of said indebtedness shall become due at the option of the
Mortgagee, after any attempt by the Mortgagor to exercise any of the rights
described in Paragraph 4 hereof or after any default. by the Mortgagor
hereunder.
8. After any attempt by the Mortgagor to exercise any of the rights
described in Paragraph 4 hereof or after any default by the Mortgagor in the
payment of said indebtedness or in the performance of any obligation of the
Mortgagor herein or in the Security Agreement or any other instrument securing
the indebtedness, the Mortgagee shall have alternate remedies as follows:
(a) Power of Sale. The Mortgagee may elect to use the nonjudicial
-------------
Power of Sale which is conferred under the terms of this Mortgage. Such
Power of Sale shall be exercised by giving the Mortgagor Notice of Intent
to Foreclose by Power of Sale and setting forth among other things, the
nature of the breach(es) or default(s) and the action required to effect a
cure thereof and the time period within which such cure may be effected,
all in compliance with the Act. If no cure is effected within the statutory
time limits, the Mortgagee may accelerate the indebtedness without further
notice and may then proceed, in the manner and subject to the conditions of
the above referenced statutes to send to the Mortgagor and other necessary
parties a Notice of Sale and to sell and convey the Property in accordance
with the Act. The sale shall be made at one or more sales, as an entirety
or in parcels, upon such notice, at such time and places, subject to all
conditions and with the proceeds thereof to be applied as provided in the
Act. No action of the Mortgagee based upon the provisions contained herein
or contained in the Act, including, without limitation, the giving of the
Notice of Intent to Foreclose by Power of Sale or the Notice of Sale, shall
constitute an election of remedies which would preclude the Mortgagee from
pursuing judicial foreclosure before or at any time after commencement of
the power of sale foreclosure procedure.
(b) Judicial Foreclosure. Whether or not proceedings have commenced
--------------------
by the exercise of the power of sale above given, assuming the breach(es)
or default(s) are uncured and continuing, then the Mortgagee, in lieu of
proceeding with the power of sale, may at its option declare the whole
amount of the indebtedness secured by this Mortgage remaining unpaid,
immediately due and payable without notice, and proceed by suit or suits in
equity or at law to foreclose this Mortgage. Appraisement of the Lease is
hereby waived or not waived at the option of the Mortgagee, such option to
be exercised at or prior to the time judgment is rendered in such judicial
3
<PAGE>
foreclosure. The Lease may be sold as one parcel or in such parcels as the
Mortgagee may elect unless otherwise provided by law.
9. The Mortgagor warrants that it has not executed any prior assignment
or mortgage of any of its rights under the Lease, that Mortgagor has not done
anything which might prevent the Mortgagee from or limit the Mortgagee in
operating under any of the provisions hereof; so far as the Mortgagor knows,
there is no present default by the tenant or landlord under the Lease and the
Lease is in full force and effect.
10. The Mortgagee shall not be obligated to perform or discharge any
obligation under the Lease, or under or by reason of this Mortgage, and the
Mortgagor hereby agrees to indemnify the Mortgagee against and hold it harmless
from any and all liability, loss or damage which it may or might incur under the
Lease, or under or by reason of this mortgage and of and from any and all claims
and demands whatsoever which may be asserted against it by reason of any alleged
obligation or undertaking on its part to perform or discharge any of the terms
of the Lease; should the Mortgagee incur any such liability, loss, or damage
under the Lease or under or by reason of this Mortgage, or in defense against
any such claims or demands, the amount thereof, including costs, expenses, and
reasonable attorney's fees, together with interest thereon at the then
applicable rate of the Note, shall be secured hereby and by the Security
Agreement, and the Mortgagor shall reimburse the Mortgagee therefor immediately
upon demand.
11. This Mortgage shall inure to the benefit of the successors and assigns
of the Mortgagee and shall bind the Mortgagor's successors and assigns. It is
specifically agreed that Mortgagee may assign this mortgage to any subsequent
holder of the Note.
12. All notices, demands or documents which are required or prescribed to
be given or served hereunder shall be in writing and shall be deemed given when
sent by registered or certified mail addressed to: Mortgagor at 16 South
Pennsylvania, Oklahoma City, Oklahoma 73107, Attention: Larry McLane, and
Mortgagee at 520 Colcord Drive, Oklahoma City, Oklahoma 73102, and such
addresses may be changed from time to time by either party by serving notice as
above provided.
IN WITNESS WHEREOF, the Mortgagor has duly executed this Assignment the day
and year first above written.
CLIMATE MASTER, INC.,
a Delaware corporation
By: /s/ Tony M. Shelby
---------------------------
Vice President
--------------
4
<PAGE>
ATTEST:
/s/ James J. Gray
- ----------------------
Ass't Secretary
- ---------------
(SEAL)
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 13/th/ day of July,
1989, by Tony M. Shelby, President of CLIMATE MASTER,INC., a Delaware
corporation, on behalf of the corporation.
/s/ Jan R. Bridge
-----------------------------
Notary Public
My Commission Expires:
2-13-90
- -------
(SEAL)
5
<PAGE>
EXHIBIT 10.24
PROJECT LOAN AGREEMENT
----------------------
THIS PROJECT LOAN AGREEMENT (the "Agreement") is dated as of the 1st day of
July, 1989, by and between CLIMATE MASTER, INC., a Delaware corporation (the
"Company"), and the OKLAHOMA COUNTY FINANCE AUTHORITY, an Oklahoma public trust
(the "Authority").
RECITALS
--------
WHEREAS, the Authority, created by and existing under a Trust Indenture,
dated May 9, 1983, (the "Trust Indenture"), is a duly established public trust
with Oklahoma County, State of Oklahoma as its beneficiary and is a duly
constituted agency of the State of Oklahoma for public purposes, pursuant to the
provisions of Title 60, Oklahoma Statutes 1981, Sections 176-180.3, inclusive,
as amended (the "Act"); and
WHEREAS, the purposes of the Authority are, in part, to promote the
development of industry within Oklahoma County, State of Oklahoma, to institute,
furnish and provide services and facilities for the conservation and
implementation of the public welfare and the protection and promotion of the
public health to Oklahoma County, its agencies, subdivisions and inhabitants and
to provide funds for the cost of financing, acquiring, constructing, installing,
remodeling, and equipping facilities to provide for and accomplish the foregoing
purposes; and
WHEREAS, the Trust Indenture provides that the Trustees of the Authority
are empowered to enter into, make and perform contracts of every lawful kind to
accomplish its purposes, including, without limitation, to draw, make, accept,
endorse, execute and issue promissory notes, bonds, obligations and other
evidences of indebtedness secured and unsecured; and
WHEREAS, the Company desires to acquire certain heavy stationary equipment
for use in manufacturing facilities (the "Improvements") located on certain real
property described on Exhibit "A" attached hereto (the "Property") (the
Improvements and the Company's leasehold interest in the Property are sometimes
hereinafter collectively referred to as the "Project"); and
WHEREAS, the Company has requested a loan from the Authority in the
aggregate principal amount of $2,000,000 (the "Loan") in order to finance the
Project and the costs' related to such financing; and
WHEREAS, the Authority has determined that financing the Project is within
the powers granted to it by the Act and its Trust Indenture; and
WHEREAS, the Authority intends to issue its Industrial Revenue Note,
Climate Master, Inc. Project (the "Local Note"), in the aggregate principal
amount of $2,000,000, to be purchased by The
<PAGE>
Oklahoma Industrial Finance Authority, Oklahoma City, Oklahoma (the "Purchaser")
in a private placement transaction in accordance with the terms of a Loan
Agreement dated as of July 1, 1989 by and between the Authority and the
Purchaser, and the Authority intends to use the proceeds thereof to fund a loan
to the Company under this Agreement; and
WHEREAS, this Agreement, the Company Note (as hereinafter defined), the
Mortgage (as hereinafter defined), the Security Agreement (as hereinafter
defined), the Financing Statement (as hereinafter defined), the Guaranty (as
hereinafter defined), and all other instruments evidencing and securing the
Company's indebtedness to the Authority are to be pledged and assigned to the
Purchaser as security for payment of the Local Note.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and the Authority agree as follows:
1. LENDING AGREEMENT. Subject to the terms and conditions hereinafter set
-----------------
forth, the Authority will lend to the Company, and the Company will borrow from
the Authority, the sum of $2,000,000 to be used by the Company to finance the
acquisition of the Project, the payment of costs and expenses incident to the
issuance of the Local Note and other costs approved in writing by the Authority.
2. COMPANY NOTE. The Loan shall be evidenced by a Promissory Note in the
------------
principal amount of $2,000,000 (the "Company Note"), which shall be in the form
of Exhibit "B" attached hereto. The Company agrees to make principal and
interest payments under the Company Note directly to the Purchaser at its
address set forth in Section 11.2 herein, or at such other address as the
Purchaser may in writing so direct. If at maturity of the Note, the Company's
leasehold interest in the Property has been extended for a period equal to or
greater than five (5) years from the date of maturity of the Note, and the
Company shall not have been in default under this Loan Agreement or the Note,
then the outstanding balance of the Note shall be renewed for an additional
twenty-eight (28) month period, at the interest rate set forth in the Note, with
payments ammortized over a fifteen (15) year period. Provided that (i) in no
event shall the term of the financing evidenced by this Loan Agreement exceed
seven (7) years, and (ii) the loan shall at all times conform to the
requirements of Title 74 Oklahoma Statutes, (S)869.
3. COLLATERAL SECURITY. The performance of all covenants and conditions
-------------------
contained in this Agreement and in the other documents executed or delivered as
a part of this transaction and the payment of the Note shall be secured by the
following:
3.1 Mortgage with Power of Sale of Tenant's Interest in Lease and
-------------------------------------------------------------
Security Agreement. The Company shall grant the Authority
- ------------------
2
<PAGE>
a mortgage lien covering the Company's leasehold interest in the Property, and a
security interest covering the improvements, which mortgage lien and security
interest are to be evidenced by a Mortgage with Power of Sale of Tenant's
Interest in Lease (the "Mortgage") in the form of Exhibit "C" attached hereto, a
Security Agreement (the "Security Agreement"), in the form of Exhibit "D"
attached hereto, and by a financing statement (the "Financing Statement") in the
form of Exhibit "E" attached hereto.
3.2 Guaranty. To induce the issuance of the Local Note by the
--------
Authority and the purchase thereof by the Purchaser, the Company shall provide
to the Authority, for assignment to the Purchaser, a guaranty of the Company
Note, in the form of Exhibit "F" attached hereto (hereinafter referred to as the
"Guaranty"), which shall have been executed by LSB Industries, Inc., a Delaware
corporation (hereinafter referred to as the "Guarantor").
4. COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company represents and
----------------------------------------
warrants as follows:
4.1 Inducement to the Company. The issuance of the Local Note by the
-------------------------
Authority will enable the Company to undertake the Project and has induced the
Company to undertake to commence, complete, maintain and operate the Project.
4.2 Litigation. There is no action, suit, proceeding or investigation
----------
pending or, to the knowledge of the Company, threatened against the Company or
the Guarantor which, if adversely determined, would materially adversely affect
the Company, the Guarantor or the Project, or materially impair the ability of
the Company or the Guarantor to carry on their businesses substantially as now
conducted or result in any substantial liability not adequately covered by
insurance.
4.3 No Default. The execution, delivery and performance of this
----------
Agreement, the Note, the Mortgage, the Security Agreement, the Financing
Statement and the Guaranty will not conflict with nor constitute a violation or
breach of any of the provisions, terms or conditions of, or default by the
Company or the Guarantor under, any judgment, decree, order, statute, rule or
regulation applicable to the Company or the Guarantor, or any indenture,
mortgage, loan agreement or other similar contract or instrument to which the
Company or the Guarantor are a party or by which they or the Project is bound or
affected and the Company has obtained all necessary approvals, consents,
authorizations or other orders from governmental bonds or bodies required in
connection with the delivery thereof.
4.4 Ownership. The Company has a leasehold interest in the Property
---------
and title to the heavy stationary equipment constituting the Project, free from
all liens and encumbrances,
3
<PAGE>
except those items of record which have been approved in writing by the
Authority and disclosed as Permitted Exceptions in Exhibit "B" to the Mortgage.
4.5 Availability of Utility Services. All utility services necessary
--------------------------------
for the Company and the development, maintenance and use of the Project are
available at the boundaries of the Property, including water supply, storm and
sanitary sewer facilities, electric and gas utilities, and telephone services.
4.6 Financial Statements. The financial statements, where required,
--------------------
of the Company and the Guarantor heretofore delivered to the Authority are true
and correct in all material respects, have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial condition reflected therein without material adverse change since
the dates thereof.
4.7 Full Disclosure. To the Company's knowledge, neither this
---------------
Agreement, nor any statements or documents referred to herein or delivered by
the Company or the Guarantor pursuant hereto, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
herein or therein not misleading.
4.8 Survival of Representations and Warranties. All covenants,
------------------------------------------
representations and warranties made in this Section 4 shall survive the making
of the loan hereunder and the delivery of the Note and other loan instruments
described herein until complete repayment of the Note and all other indebtedness
of the Company to the Authority under the terms of this Agreement.
5. CONDITIONS PRECEDENT TO LOAN. At or prior to the initial advance under
----------------------------
the Note, the Company shall deliver or cause to be delivered to the Authority
the following items, all of which are to be in form and substance satisfactory
to the Authority, and, where necessary, duly executed and acknowledged:
5.1 Closing Documents. This Agreement, the Note, the Mortgage, the
-----------------
Security Agreement, the Financing Statement and the Guaranty shall be duly
authorized, executed and delivered to the Authority at closing.
5.2 Mortgagee Title Insurance. An ALTA standard mortgagee's title
-------------------------
policy in the face amount of $2,000,000 shall be issued in favor of the
Authority or its assignee, by a title insurance company acceptable to the
Authority and the Purchaser, and shall show that the Mortgage constitutes a
valid first lien on the Company's leasehold interest in the Property, subject
only to those matters waived in writing by the Authority. The title policy shall
include neither an exception based upon mechanics' and materialmen's liens, nor
any exceptions based on discrepancies,
4
<PAGE>
conflicts in boundary lines, shortage in area, encroachments or other facts
which would be disclosed by a proper survey.
5.3 UCC Search. The Authority shall have received a UCC search
----------
current as of the date of closing, certified by the Oklahoma County Clerk,
showing no security agreements or encumbrances against the Project other than
those to be discharged at closing.
5.4 Insurance. The Company will deposit and maintain with the
---------
Authority throughout the term of the loan certificates of insurance, premiums
prepaid, with insurance companies satisfactory to the Authority, in such amounts
and against such risks as shall be reasonably required by the Authority,
including, but not limited to, the following:
5.4.1 Insurance against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, vandalism, malicious mischief, riot attending a
strike, civil commotion, aircraft, vehicles, smoke and other risks from
time to time included under "extended coverage" policies, in an amount
equal to the lesser of 100% of the outstanding balance of the Note or the
full replacement cost of the Improvements which policy shall not include a
co-insurance clause with a higher percentage than 90%, but shall include a
stipulated value endorsement showing compliance with any co-insurance
clause included in the policy;
5.4.2 Appropriate workmen's compensation or other insurance against
liability arising from claims of workmen in respect of and during the
period of any work on or about the Project; and
5.4.3 Public liability and property damage insurance applicable to the
Project in amounts approved from time to time by the Authority, which
insurance shall provide coverage to the Authority and parties designated by
the Authority as additional insureds.
5.4.4 Business interruption insurance against any abatement of Note
payments resulting from fire or other casualty insurable by a standard fire
and extended coverage insurance policy, with such Note payment insurance
payable to the Authority as its interest may appear.
All insurance policies required in this Section 5.3 or in the Mortgage shall
name the Authority and parties designated by the Authority as loss payees, as
their respective interests may appear.
5.5 Zoning and Use. The Company shall furnish, as applicable,
--------------
satisfactory evidence that the use of the Project
5
<PAGE>
conforms with applicable zoning and use regulations and restrictions.
5.6 Survey. The Company shall furnish the Authority with a survey of
------
the Project prepared by a registered land surveyor approved by the Authority,
which survey shall delineate the property lines, locate improvements, if any,
including water, gas, electric and sewer lines, easements affecting the Project,
identified by book and page where recorded, adjoining streets and showing other
physical matters affecting the title and use of the Project. The survey shall
contain a certificate satisfactory to the Authority and shall otherwise fully
comply with the Authority's requirements.
5.7 Affidavit of Costs. The Company shall submit to the Authority an
------------------
Affidavit of Costs certified to by the Company and in form and substance
satisfactory to the Authority and the Purchaser, verifying that the Loan does
not exceed 66-2/3% of the cost of establishing the Project.
5.8 Existence and Authority. The Company shall provide the Authority
-----------------------
such certificates and resolutions of the Company and the Guarantor as may be
reasonably requested by the Authority.
5.9 Recording of Security Documents. All actions shall have been
-------------------------------
taken as are necessary or appropriate for the Purchaser, as assignee of the
Authority, to acquire and perfect a first, prior and perfected security interest
and mortgage lien in the Project.
5.10 Opinion of Borrower's Counsel. The Authority shall have received
-----------------------------
a favorable opinion or opinions from counsel for the Company and counsel for the
Guarantor covering this Agreement and all documents executed and delivered
pursuant hereto, which shall cover such matters required by the Authority and be
in form and substance satisfactory to the Authority in all respects.
5.11 Fee Owner Agreement. The Authority shall have received the
-------------------
written consent and agreement of West Point Company, Inc. ("West Point"), fee
owner of the Property, in the form set forth at the end of the Mortgage.
5.12 Further Fee Owner Consent. The Authority shall have received the
-------------------------
written consent of West Point, which consent shall be in form and substance
satisfactory to the Authority, to the effect that, if and as long as the
Purchaser shall hold a mortgage lien on the Company's leasehold interest in the
Property, West Point shall not take any action to evict or otherwise disturb any
tenant in possession of the leasehold estate.
5.13 Term of Lease. The Authority shall have received evidence
-------------
satisfactory to the Authority that the Company's leasehold interest in the
Property is for a term of seven (7) years.
6
<PAGE>
5.14 Appraisal. The Authority shall have received a present value
---------
appraisal, completed by an appraiser approved by the Authority, indicating a
value of the Improvements of not less than $3,000,000.00.
5.15 Photographs. The Authority shall have received photographs of the
-----------
Project, both interior and exterior, properly certified as to the date and
property address, together with a sufficient number of street scenes, showing
that the improvements to the Property have been substantially completed in all
respects.
5.16 Certificate of Occupancy. The Authority shall have received a
------------------------
Certificate or Certificates of Occupancy issued by the City of Oklahoma City or
Oklahoma County evidencing satisfactory proof that the completed improvements
are in compliance with any and all applicable laws, regulations and zoning
requirements.
6. COVENANTS, CONDITIONS AND RESTRICTIONS. Until payment in full of the
--------------------------------------
Note and performance of all obligations owing to the Authority under this
Agreement and the instruments executed pursuant hereto, unless the Authority
shall otherwise consent in writing, the Company covenants and agrees as follows:
6.1 Performance of Obligations. The Company will promptly and
--------------------------
punctually perform all of its obligations hereunder and under all other
instruments executed or delivered pursuant hereto and under the terms of any
other contract or agreement entered into by the Company in connection with the
completion of the Project; provided that the Company shall have the right to
contest in good faith any bona fide dispute under the terms of a contract or
agreement entered into by the Company in connection with the acquisition or
operation of the Project.
6.2 Information. The Company will promptly furnish to the Authority
-----------
all requested information concerning the Project and the financial status of the
Company and the Guarantor.
6.3 Litigation. The Company will promptly furnish to the Authority
----------
written notice of any material litigation in which the Company or the Guarantor
is involved and litigation affecting the Project; provided that the Company
shall not be obligated to notify the Authority of litigation in which the
Company or the Guarantor is involved and which is wholly covered by insurance
maintained by or for such Company or Guarantor.
6.4 Creation of Liens; Additional Financing. The Company shall not
---------------------------------------
create, assume or suffer to exist any mortgage, pledge, lien, charge or
encumbrance on the Project which might take precedence over the liens of the
Mortgage and the Security Agreement, other than those Permitted Incumbrances
detailed on Exhibit "B" of the Mortgage. Further, the Company shall not
undertake additional financing on the Property without full
7
<PAGE>
disclosure to the Authority and prior consent of the Authority, which consent
will not unreasonably be withheld.
6.5 Transfer of Property. The Company shall not sell, transfer or
--------------------
convey all or any portion of the Project, without the prior written consent of
the Authority, which consent shall not be unreasonably withheld. Should the
Company sell, transfer or convey all or any portion of its interest in the
Project without such consent, the Authority may declare all sums secured thereby
immediately due and payable.
6.6 Use of Loan Proceeds. The Company shall not use, or permit the
--------------------
Guarantor, any stockholder of the Company, any related person, association or
entity to use, any funds advanced to the Company under this Agreement to (i)
defray living expenses, (ii) anticipate profit, (iii) defray any other item not
directly connected with the completion costs of the Improvements and payable to
unrelated third parties, or (iv) pay any cost other than an "approved cost", as
described in Section 7 of this Agreement.
6.7 Payment of Taxes. All taxes, assessments and governmental charges
----------------
or levies imposed on the Project, including, but not limited to, all ad valorem
taxes on the Project, will be paid by the Company prior to the date on which
penalties attach thereto; provided that the Company shall have the right to
contest in good faith a bona fide dispute regarding any such taxes, assessments
or governmental charges.
6.8 Books and Records. The Company will keep and maintain accurate
-----------------
books and records of account of the Company and of the Project which will be
kept in accordance with generally accepted accounting principles and practices,
consistently applied, and will be available for the Authority's inspection upon
reasonable request. The Company shall provide the Authority with annual,
operating statements of the Company, and audited annual operating statements of
the Guarantor, all in reasonable detail, within one hundred twenty days after
the end of each fiscal year.
6.9 Authority's Access. The Company will at all times, and as often
------------------
as the Authority may request, during normal business hours, permit any officer,
employee or authorized representative of the Authority to enter upon the
Property, inspect the Project, examine the current plans and specifications,
examine and make copies of, or take extracts from, the Company's books of
account, records and other papers relating to the Project, and to be advised of
the business and financial affairs of the Company and the Guarantor by
appropriate representatives of the Company or the Guarantor.
6.10 Use of the Project. The Company shall use the Project as a
------------------
manufacturing facility and shall not permit the facility to be used for any
other purpose without the prior written
8
<PAGE>
consent of the Authority, which consent shall not be unreasonably withheld.
7. ADMINISTRATION OF LOAN. This Agreement will be assigned by the
----------------------
Authority to the Purchaser under a Loan Agreement and Local Note Purchase
Agreement and the Purchaser will be authorized and directed to disburse to the
Company, on behalf of the Authority, the principal amount of the Note. Provided,
however, there shall be presented to the Authority such documentation as the
Authority may request to evidence that the principal sum disbursed under the
Note is for the payment of the following approved costs:
(i) The fees and expenses of counsel to the Authority, fees and
expenses of the Company's counsel, and fees and expenses of bond counsel;
(ii) Premiums and all other expenses incident to title
insurance;
(iii) Survey and abstracting costs;
(iv) Recording and filing fees;
(v) Other fees and expenses related to the issuance of the
Local Note; and
(vi) Retirement of the existing financing on the Project.
The Authority shall, on the date the requested advance is to be made, or as soon
thereafter as all conditions precedent to such advance have been satisfactorily
met, including the written approval of the Purchaser, make such advance directly
into the Authority's Project Acquisition Fund with the Liberty National Bank and
Trust Company, Oklahoma City, Oklahoma (the "Local Bank"). Advances under the
Note may, at the option of the Authority, be recorded on such Note and/or by
deposits to the foregoing account, and such records shall be prima facie
evidence of all advances made under the Note. The Authority shall, at the
direction of the Purchaser, retain funds in its Project Acquisition Fund in
amounts to be obtained by Purchaser, pending release of mechanics' and
materialman's liens, pursuant to the title insurance requirement of Section 5.2
herein.
8. DEFAULT. The following shall constitute events of default (the "Events
-------
of Default") hereunder and under each of the instruments executed pursuant to
this Agreement:
8.1 Nonpayment of Note. Default in payment when due of the principal
------------------
of or interest on the Note, and such failure continues uncured for a period of
fifteen (15) days after the date such payment becomes due.
9
<PAGE>
8.2 Other Nonpayment. Default in payment when due of any other amount
----------------
payable to the Authority under the terms of this Agreement, or any instrument
executed pursuant to this Agreement, and such failure continues for a period of
fifteen (15) days after the date such payment becomes due.
8.3 Breach of Covenants. Default by the Company or the Guarantor in
-------------------
the performance or observance of any covenant contained in this Agreement, any
instrument executed pursuant to this Agreement or under the terms of any other
instrument delivered to the Authority in connection with this Agreement, and
such failure continues for thirty (30) days after written notice thereof by the
Authority.
8.4 Representations and Warranties. Any representation, statement,
------------------------------
certificate, schedule or report made or furnished to the Authority by or on
behalf of the Company or the Guarantor with respect to the matters arid
transactions covered by this Agreement proves to be false or erroneous in any
material respect at the time of the making thereof or any warranty ceases to be
complied with in any material respect, and the Company fails to take or cause to
be taken corrective measures satisfactory to the Authority within thirty (30)
days after written notice by the Authority.
8.5 Bankruptcy. The institution of any bankruptcy, reorganization,
----------
liquidation or receivership proceedings by or against the Company or the
Guarantor and the pendency of such proceedings for a period of sixty (60) days.
8.6 Governmental Requirements. The issuance of any final order,
-------------------------
decree or judgment pursuant to any judicial or administrative proceeding
declaring that the Project, or the operation or use thereof, is in violation of
any law, ordinance, rule or regulation of any agency, department, commission,
board, bureau or instrumentality of the County of Oklahoma, State of Oklahoma,
or United States; provided that the Company shall have the right to diligently
pursue in good faith any bona fide appeal which is available from any such
order, decree or judgment, and thereafter the company is granted ninety (90)
days from the issuance of any official order, decree or judgment, to comply
therewith.
9. REMEDIES. Upon the occurrence of an Event of Default, the Authority
--------
may, at its option:
9.1. Acceleration of Indebtedness. Without demand or notice, declare
----------------------------
all indebtedness evidenced by the Note and all other indebtedness owing from the
Company to the Authority to be immediately due and payable, whereupon the same
shall become forthwith due and payable.
10
<PAGE>
9.2. Other Remedies. Proceed to selectively and successfully enforce
--------------
the Authority's rights and remedies under this Agreement or any other instrument
or document securing or executed in connection with the Loan, or under
applicable law, including without limitation: (i) terminating the Authority's
obligations and the Company's rights under this Agreement, (ii) commencing one
or more actions against the Company or the Guarantor and reducing the claims of
the Authority against the Company and the Guarantor to judgment, (iii)
foreclosure or other enforcement of the Authority's security interest in the
Project, or any portion thereof, or other enforcement of the Authority's rights
and remedies in respect of and to recover upon the Project, through judicial
action or otherwise, and (iv) payment or discharge of any claim or lien, prior
or subordinate, in respect of or affecting the Project.
9.3. Application of Payments. During the continuance of any Event of
-----------------------
Default all payments received in respect of the Loan, whether from the Company,
recoveries upon any portion of the Project or otherwise, may be applied to any
liabilities, obligation or indebtedness owing from the Company selected by the
Authority in its sole and exclusive discretion.
9.4. Sale or Disposition. Sell or otherwise dispose of the personal
--------------------
property constituting a portion of the Project at a private or public sale, in
bulk or in parcels, and, where permitted by law, without having such property
present at the place of sale. Unless such property is perishable or it appears
that the value of such property will decline speedily or such property is a type
customarily sold on a recognized market, or unless the Company and the Guarantor
have signed a statement (after the occurrence of an Event of Default) renouncing
or modifying the Company's or the Guarantor's right to notice, the Authority
will give the Company and the Guarantor reasonable notice of the time and place
of any public sale or other disposition thereof or the time after which any
private sale or other disposition thereof is made. The requirements of
reasonable notice shall be met if such notices are given to the Company and the
Guarantor at least ten (10) days prior to the time of any such sale or
disposition. The Authority may buy such property at any public sale and, as to
property of a type customarily sold in a recognized market or which is the
subject of widely distributed standard price quotations, the Authority may buy
at a private sale.
9.5. Collections. Exercise any and all rights and remedies of the
------------
Authority, the Company or the Guarantor relating to the Project, and the right,
either in the Authority's own name or in the name of the Company or the
Guarantor, to take such legal or other proceedings as the Company or any
Guarantor might have taken except for this Agreement and documents executed
pursuant to this Agreement.
11
<PAGE>
10. AUTHORITY'S OBLIGATION LIMITED. Nothing in this Agreement is intended
------------------------------
to require or obligate nor shall anything herein be interpreted to require or
obligate the Authority to make any payment or advance from any of its funds or
property, other than the funds derived from the issuance of the Local Note and
monies derived in connection with the Project and pursuant to the Note in this
Agreement.
11. GENERAL PROVISIONS. It is further agreed as follows:
------------------
11.1 Expenses of Loan. The Company agrees to pay all fees, expenses
----------------
and charges in respect to the Loan, including, without limiting the generality
thereof, the following:
11.1.1 the Authority's administration fee of one-eighth (1/8)
of one percent (1%) of the unpaid loan balance annually, payable in arrears
to the Authority, plus the Company's pro rata share of the Authority's
annual audit costs based upon the amount the Company's unpaid loan balance
bears to the total unpaid loan balance of the Authority;
11.1.2 the reasonable fees and charges of the Authority for any
extraordinary services performed and expenses incurred by them in
connection with the administration of the Loan;
11.1.3 the reasonable fees and expenses of counsel employed by
the Authority, in connection with the documentation and closing of the Loan
and any litigation arising out of or relating to this transaction and the
issuance of the Local Note;
11.1.4 title insurance premiums and all expenses incident to
title insurance;
11.1.5 survey costs;
11.1.6 recording and filing fees;
11.1.7 fees and expenses of any architect, engineer or agent
employed by the Authority to inspect the Project or submit reports to the
Authority concerning the Project; and
11.1.8 other reasonable fees and expenses involved in the
closing of the Loan and the reasonable fees and expenses payable by the
Authority which are incident to the enforcement or defense of this
Agreement or any instrument executed pursuant hereto.
11.2 Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if delivered personally or sent
by registered or certified mail,
12
<PAGE>
postage prepaid, return receipt requested and addressed as listed below or to
such other address as the party concerned may substitute by written notice to
the other. All notices shall be deemed received within three days (excluding
Saturdays, Sundays and holidays recognized by national banking associations)
after being mailed:
To the Company: Climate Master, Inc.
Post Office Box 25608
Oklahoma City, Oklahoma 73125
Attention: _________________
To the Authority: Oklahoma County Finance Authority
520 Colcord Drive
Oklahoma City, Oklahoma 73102
Attention: Jim Work
To the Guarantor: LSB Industries, Inc.
Post Office Box 754
Oklahoma City, Oklahoma 73101
Attention: Tony M. Shelby
With Copies to: Andrews Davis Legg Bixler Milsten & Price
500 West Main, Suite 500
Oklahoma City, Oklahoma 73102
The Oklahoma Industrial Finance Authority
Two Broadway Executive Park
205 N.W. 63rd Street, Suite 260
Oklahoma City, Oklahoma 73116
11.3 Amendment and Waiver. This Agreement may not be amended or
--------------------
modified in any way, except by an instrument in writing executed by both parties
hereto; provided, however, the Authority may, in writing: (i) extend the time
for performance of any of the obligations of the Company; (ii) waive any default
by the Company; and (iii) waive the satisfaction of any condition that is
precedent to the performance of the Authority's obligations under this
Agreement. In the event of a waiver of an Event of Default by the Authority,
such specific Event of Default shall be deemed to have been cured and not
continuing, but no such waiver shall extend to any subsequent or other default
or impair any consequence of such subsequent or other default.
11.4 Non-Waiver; Cumulative Remedies. No failure on the part of the
-------------------------------
Authority to exercise and no delay in exercising any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Authority of any right hereunder preclude any other or further right of exercise
thereof. The remedies herein provided are cumulative and not alternative.
13
<PAGE>
11.5 Assignment. Neither this Agreement, nor the Loan proceeds
----------
hereunder shall be assignable by the Company without the prior written consent
of the Authority. The rights and benefits under this Agreement may be assigned
by the Authority, and the Authority intends to assign its rights and benefits
under this Agreement to the Purchaser.
11.6 Applicable Law. This Agreement and the documents issued and
--------------
executed hereunder shall be deemed to be a contract made under the laws of the
State of Oklahoma and shall be construed in accordance with such laws. Nothing
in this Agreement shall be construed to constitute the Authority as a joint
venture with the Company or the Guarantor or to constitute a partnership among
the parties.
11.7 Descriptive Headings. The descriptive headings of the sections
--------------------
of this Agreement are for convenience only and shall not be used in the
construction of the terms hereof.
11.8 Integrated Agreement. This Agreement constitutes the entire
--------------------
agreement between the parties hereto, and there are no agreements,
understandings, warranties or representations between the parties regarding
financing of the Project, other than those set forth herein.
11.9 Time of Essence. Time is of the essence in this Agreement.
---------------
11.10 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
11.11 Third Party Beneficiary. Nothing in this Agreement, express or
-----------------------
implied, is intended to confer upon any person, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.12 Severability. In the event any one or more of the provisions
------------
contained in this Agreement or any documents executed in connection with or
pursuant to this Agreement shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect and in any jurisdiction, (i) such invalidity,
illegality or unenforceability shall not affect any other provision thereof,
(ii) the remaining provisions shall remain in full force and effect, (iii) such
invalid, illegal or unenforceable provision shall not be affected in any other
jurisdiction, and (iv) there shall be added to the affected document such
provisions or amendments as may be prescribed by the court holding such
provisions to be invalid, illegal or unenforceable.
14
<PAGE>
11.13 Indemnification. The Company agrees to indemnify and hold
---------------
harmless the Authority and any member, officer, official or employee of the
Authority, against any and all losses, claims, damages, liabilities, or expenses
whatsoever caused by any untrue statement or misleading statement of a material
fact contained in any of the statements or materials delivered to the Authority
in connection with the issuance and sale of the Local Note or caused by any
omission or alleged omission from any of the statements or materials delivered
to the Authority in connection with said issuance, of any material fact
necessary, in order to make the statement made therein, in light of the
circumstances in which it was made, not misleading. The Company further agrees
to indemnify and hold harmless the Authority and any member, officer, official
or employee of the Authority against any loss sustained as a result of
construction, operation or maintenance of the Project.
11.14 Right to Defend. The Authority shall have the right, but not
---------------
the obligation, at the Company's expense, to commence, to appear in or to defend
any action or proceeding purporting to affect the rights or duties of the
parties hereunder and in connection therewith pay all necessary expenses,
including fees of counsel, if the Company fails to so commence, appear in or
defend any such action or proceeding with counsel satisfactory to the Authority,
except in a suit by the Company against the Authority, in which case the
prevailing party shall be entitled to such fees and expenses as a part of any
judgment obtained.
12. TRUSTEES' DISCLAIMER. This instrument is executed by the Trustees or
--------------------
officers, or both, of the Oklahoma County Finance Authority in their capacities
as such Trustees or officers. By the execution hereof all parties agree that,
for the payment of any claim or the performance of any obligations hereunder,
resort to the Authority shall be limited solely to the assets described in
Section 10 hereof and no Trustee or officer of the Authority shall be personally
liable therefor. Reference is made to the Trust Indenture of the Authority, a
copy of which has been recorded in the office of the Oklahoma County Clerk and
the Secretary of State, State of Oklahoma.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
CLIMATE MASTER, INC.
By: /s/ Tony M. Shelby
-----------------------------
Vice President
----
COMPANY
15
<PAGE>
ATTEST:
/s/ James J. Gray
- -----------------
Ass't Secretary
- -----
(SEAL)
OKLAHOMA COUNTY FINANCE AUTHORITY,
An Oklahoma Public Trust
By: /s/ Vincent P. Cotter
----------------------------
Chairman
AUTHORITY
ATTEST:
/s/ J. Jim Gordon
- -----------------
Secretary
(SEAL)
LSB INDUSTRIES, INC.
By: /s/ Tony M. Shelby
----------------------------
Vice President
-----
GUARANTOR
ATTEST:
/s/ James J. Gray
- -----------------
Ass't Secretary
- -----
(SEAL)
16
<PAGE>
EXHIBIT 10.25
TOYOTA FINANCE AUSTRALIA LIMITED
A C N 002 435 181
Registered Office: Level 11, 55 Lavender Street,
Milsons Point, N.S.W.
The Hirer and Dealer each hereby declare that before the Hirer signed this offer
he received from the Dealer a duly completed written statement under Section
3(1) of the Hire-Purchase Act 1959 and the summary of the Hirer's financial
obligations shown in the statement does not differ from that shown hereunder.
(Signature of Dealer) /s/ Signature of Hirer /s/
___________________ _________________
TO: TOYOTA FINANCE AUSTRALIA LIMITED (herein referred to as "you").
FROM: The person(s) and/or company named below as HIRER (also herein referred to
as "I" and "me") offers to hire from you the goods described in the Schedule at
the rent stated therein on the Terms and Conditions set out below and on the
back hereof.
HIRER
NAME: Total Energy Systems Ltd.
------------------------------------------------------
ADDRESS: 3/RD/ Floor, 172 Edward, Brisbane 4000
----------------------------------------------------
TRADING AS:
_________________________________________________
SCHEDULE
Description of Goods:
New Secondhand *Hirer to initial if secondhand.
Make: Toyota Model 4 Runner
Body: RN6 Auto/Man NVIC No. _________
Reg. No. 9AC 164 Colour White
Engine No. 3VZ0738775 Opt. Equip.________________
Description of Goods Traded-In to Dealer
Make: _______________ Model ____________________
Reg. No._____________ Engine No.________________
Value of Goods Traded-In__________ $_______________
<PAGE>
Less Amount owing to _________________ $_______________
Net Trade-In Allowance $_________________
Rent installments payable during the hiring which is deemed to commence on the
date on which this offer is dated.
Section 1 48 payments of $918.91 each followed by ____ payments of $ - each
payable monthly commencing 15 11 94.
Section 2 _____ quarterly payments of $ - each
_____ half-yearly payments of $ - each
_____ yearly payments of $ - each
commencing ___/___/19__.
OR One Payment of $ - on ___/___/19___
One Payment of $ - on ___/___/19___
One Payment of $ - on ___/___/19___
Cash Price $38,760.00
Less Deposit
Money $3,876.00
From Dealer's
Trade-In Allowance $__________ 3,876.00
----------
Residue $34,884.00
Add Stamp Duty
Maintenance
Freight
Vehicle Registration Fees
Agreement Registration Fees 12.00
----------
Sub-Total (a) $34,896.00
Add Insurance
(Comprehensive) $ -
---------
(Consumer Credit) $ -
---------
(Mechanical
Breakdown) $ - -
--------- ----------
Sub-Total (b) $34,896.00
Add Terms Charges 8,971.68
----------
Total Rent $43,867.68
----------
Add Deposit As Above $3,876.00
----------
-2-
<PAGE>
TOTAL AMOUNT PAYABLE $47,743.68
I AGREE to be bound by the provisions of this offer including those overleaf.
INDIVIDUAL
SIGNED by ________________________
(Name)
in the presence of _________________ _______________________
Signature
____________________________________
Witness Signature
PARTNERSHIP/FIRM
SIGNED BY 1. _____________________ 1. ________________________
Partner's Signature
2. _______________________________
3. _______________________________ 2. _______________________
(Partners' Names) Partner's Signature
trading as _______________________ 3. ________________________
in the presence of _______________ Partner's Signature
COMPANY
THE COMMON SEAL OF Total Energy Systems Ltd.
------------------------
Company Name ACN 010 876 150
was hereunto duly affixed by the authority of the Board of Directors in the
presence of _________________.
/s/ /s/
_______________________________ _________________________________
Director Director
MEMORANDUM OF ACCEPTANCE
The Owner hereby accepts this offer this 21/st/ day of November, 1994 FOR AND ON
BEHALF OF TOYOTA FINANCE AUSTRALIA LIMITED.
/s/
_____________________________________
Authorised Officer
-3-
<PAGE>
TERMS AND CONDITIONS by which I the hirer by my signature agree to be bound.
1. You may accept my offer by completing the Memorandum of Acceptance.
Acceptance shall be binding without notice to me and shall be entirely at your
discretion. No prior act including your acquisition of the Goods (in or over
which I warrant have no present proprietary or contractual right) the delivery
of the goods or any payment shall amount to an acceptance or oblige you to hire
or dispose of the Goods to me. You may supply me with a copy of this agreement
upon your acceptance by putting such copy in the post addressed to me at my
address shown on the face hereof.
2. I agree to pay to you (a) in consideration of the option in clause 11 the
deposit stated in the Schedule the money portion to be paid to you or to the
Dealer with instructions to account to you therefor; the balance (if any) (shown
in the Schedule as "From Dealer's Trade-In Allowance") to be provided by my
instructing the Dealer to account to you for the same out of any such allowance
made by the Dealer to me; (b) until the hiring is determined the rent stated in
the Schedule.
3. I agree: (a) To Keep the goods in good order and repair (but I shall be
prohibited from creating any lien or pledging your credit and I shall notify any
potential repairer of this prohibition). (b) To indemnify you against loss which
shall be the Total Rent stated in the Schedule less (i) rent instalments paid;
(ii) statutory rebates as at the time of my meeting this indemnity and (iii) the
value (if any) of the salvage arising from the total or substantial destruction
or loss (including lwdful forfeiture) of the Goods. (c) To insure the goods and
during the hiring to keep them insured with an approved insurer (in accordance
with Section 20 of the Act) under enforceable policies not subject to any non-
disclosure misrepresentation or breach of warranty in your name as owner to the
extent of your interest and in my name as hirer for the full insurable value
against fire, accident and theft and such other risks as you may require such
policies to be in the form and containing such terms and conditions and
exceptions you would require if you were arranging the insurance and to pay all
premiums on the due date and to produce proof of payment within 7 days of such
date. I understand that you will account to insurers on my behalf for any
amount shown as Insurance in the Schedule but it shall be my sole responsibility
to ensure that insurance is arranged in compliance with this sub-clause and that
the correct premium is paid. (d) That you shall be entitled to receive all
refunds or rebates of premiums (except any "no claim" or similar rebate), and
all money payable to me or us by the insurer under the relevant policy or by any
other person in respect of damage to or loss of the Goods and I appoint you my
attorney to recover and/or compromise in my and/or our respective names any
claim for loss or damage under the policy or otherwise to give effectual
releases and receipts for the same. (e) That you are irrevocable authorised
-4-
<PAGE>
(subject to the Act) to apply any moneys you receive at any time for my credit
from any source or which you owe me in or towards satisfaction of any sum then
payable by me to you and subject to such application you shall hold such moneys
as security for any sum which I will or may owe you hereunder. You shall apply
any money held by you as security but which were paid to you (i) in respect of
damage to the Goods other than as referred to in Clause 3(b); (ii) as
instalments of hire (whether or not paid in advance); or (iii) for some
specified purpose - which you do not apply or have not applied in satisfaction
of some other sum payable by me to you in or towards repair of the Goods,
instalments of hire as they accrue and such specified purpose respectively. No
money which you hold as security under this sub-clause shall relieve me of my
obligation to pay any such payable to you except to the extent that the previous
sentence applies and moneys are available thereunder. (f) Not to do or permit
anything which may prejudice any insurance hereunder. (g) To disclose the
whereabouts of the Goods and produce the same for inspection or test on request.
(h) Not without your written consent to part with personal possession or control
of the Goods or alter them or any identifying number or mark nor to remove them
out of Western Australia; (i) To notify you immediately in writing of any change
of my address or damage to or destruction of the goods or if I lose personal
possession or control of them. (j) To comply with my legal obligations relating
to the Goods, their possession or use. (k) That any accessories, replacement or
other goods now or hereafter supplied with or for or attached to the Goods shall
become a part thereof. (l) That it is my obligation to obtain delivery of the
Goods. (m) To pay to you on demand any moneys you see fit to pay to make good
any default by me hereunder. (n) No cheque promissory note or other remittance
received by you shall be regarded as payment until cleared in your favour and
until then despite negotiation shall be collateral and shall not prejudice your
rights or powers. (o) Time shall be of the essence of all of any obligations
hereunder. (p) To ensure that the Goods are used serviced and kept with a
standard of care such that no person or property will be injured or damaged
(whether or not you are in breach of any obligation to me. (q) To indemnify you
against any stamp duty payable in respect of this agreement to the extent of the
amount shown in the Schedule.
4. I further agree: (a) Not save in accordance with Section 9 of the Act to
sell, dispose of or encumber the Goods or any interest therein or purport or
agree to do so. (b) To make all payments free of exchange and duties; that
payments are at my risk until received at an address then approved by you. (c)
To pay interest at the simple rate of eight per centum per annum on the daily
balance of any moneys payable hereunder which are from time to time overdue. (d)
To pay the reasonable costs incurred by you of and incidental to repossession or
attempted repossession of the Goods or the service of any lawful notice for
demand or possession of them. (e) That you shall not be responsible for any
property left or alleged by me to have been left in repossessed or returned
Goods and any
-5-
<PAGE>
such property unless collected by me within one month of your handling or
posting to me at my address last known to you of your intention to sell may be
sold by you after such period of one month and the net proceeds credited to my
account. (f) That you may enter any premises where you believe the goods are
located or which are occupied by me to inspect and/or test the Goods or serve
any notice or demand in relation to them. (g) Upon your becoming entitled to
immediate possession of the goods under Clause 6 to deliver up the same to you
at your head office in Western Australia forthwith upon service upon me of any
notice or demand by you for possession of the same. (h) Your rights hereunder
may only be waived in writing and no such written waiver shall affect your
rights in respect of any recurring or continuing breach.
5. I may at any time terminate the hiring by returning the Goods in accordance
with Section 12 of the Act.
6. If (a) I have been or am hereafter taken into custody (whether convicted or
not); (b) I make default in any payment or am in breach of any other provisions
hereunder; (c) Any cheque given by me as or part of the deposit is dishonoured
or any goods traded in by me to the Dealer are found not to be my absolute
unencumbered property (except for any amount owing thereon under a security or
hire-purchase agreement as disclosed in the Schedule or in the Loan Application
in respect of this offer); (d) Execution or distress is levied against me or my
goods; (e) The Goods consist of or include a motor vehicle and my license to
drive the same is suspended, withdrawn or cancelled; (f) The hirer being a
corporation a petition or resolution for winding up is presented or proposed or
a receiver of any of its property is appointed or (g) if I have made any false
or misleading statement in or relating to this offer - Then and in any such
event and subject to the provisions of Section 13 of the Act you shall be
entitled to proceed to obtain possession of the Goods and make retake possession
thereof and upon such repossession the hiring shall terminate (subject to any
rights the Act confers upon me to resume the hiring) and unless I so resume the
hiring you may recover from me as liquidated damages the amount by which the
moneys paid by me or on my behalf by way of deposit and rent instalments
together with the value of the Goods at the time of possession ascertained by
Section 15(2)(b) of the Act is less than the net amount payable as defined by
Section 15(2)(a) of the Act.
7. A certificate signed by your Manager or a person exercising his functions
stating the amount owing by me hereunder as at any date or dates set out in such
certificate or as to any other act, matter or thing arising hereunder as at any
date or dates set out in such certificate shall in all Courts and at all times
be prima facie evidence of such facts.
8. If the goods are secondhand, and it is so stated in the Schedule, all
conditions and warranties as to quality and all
-6-
<PAGE>
conditions and warranties as to fitness and suitability are to the maximum
extent that the law allows expressly negatived. So far as the law permits all
other conditions and warranties which might be implied are also negatived and
excluded. Nothing contained in this instrument shall be construed as an express
condition or warranty on your part.
9. In the event that any agreement arising out of this offer constitutes a
supply of goods to a consumer as defined in the Trade Practices Act 1974 or the
Fair Trading Act 1987, nothing contained herein excludes, restricts or modifies
any condition, warranty, right or remedy which pursuant to the Trade Practices
Act of 1974 applies to this agreement or is conferred on the Hirer provided that
to the extent that either Act permits the Owner to limit its liability for a
breach of a condition or warranty so implied then the Owner's liability for such
breach, including any consequential loss which the Hirer may sustain or incur,
shall be limited to any one or more of the following at the option of the Owner:
(a) replacement of such goods or the supply of equivalent goods or payment of
the costs of replacing such goods or acquiring equivalent goods; (b) the repair
of such goods or payment of the costs of having such goods repaired.
10. I acknowledge that: (a) the Dealer through whom this offer is submitted is
not your agent for any purpose and (b) this offer embodies all the terms and
conditions of any Hire-Purchase Agreement between us in respect of the Goods
hereby hired.
11. I may exercise an option to become the owner of the Goods by paying the
total rent and fulfilling my other obligations hereunder or by compliance with
Section 11 of the Act. Until then I shall only be a bailee and have no property
in the Goods.
12. Your rights may be exercised by your nominees and assigns; if there is more
than one hirer they shall be bound jointly and severally; the Act means the
Hire-Purchase Act, 1959. I authorise you to disclose to nay person who may
enquire my credit information about me.
13. Any agreement arising herefrom shall be governed by the law of the State of
Western Australia (to the extent, if any, affected by the Trade Practices Act,
1974) and any provisions herein contained prohibited by or void under such law
(as so affected) shall be ineffective to the extent of such prohibition or as so
void without invalidating the remaining provisions hereof, and this agreement
shall be construed so that it shall operate in all respects to the maximum
extent it validly can do so.
14. I understand you will account to the insurer for any amount included in the
Total Amount Payable for Insurance; you are entitled to receive the proceeds of
any such insurance and I appoint you my attorney to recover and/or compromise in
my/our
-7-
<PAGE>
names any claim under such policy and to give effectual releases and receipts
for payments. You do not warrant that any proposal by me for such insurance
will be accepted.
-8-
<PAGE>
EXHIBIT 10.26
SANWA AUSTRALIA FINANCE LIMITED
ACN 008 492 582
LEASE AGREEMENT
INCLUDING COLLATERAL SECURITY AND GUARANTEE AND INDEMNITY
Particulars
1. Name and Address of Financier
SANWA AUSTRALIA FINANCE LIMITED ACN 008 492 582 of
1 EAGLE STREET, BRISBANE QLD 4000
2. Name and Addresses of Lessee (insert full name and if the Lessee is a
corporation) its ACN or ARBN, address and facsimile number)
TOTAL ENERGY SYSTEMS LIMITED (ACN 010 876 150)
LEVEL 9
371 QUEEN STREET
BRISBANE QLD 4000
3. Name and Addresses of all Guarantors who have given or are to
give a guarantee and indemnity to the Financier in respect of
the obligations of the Lessee under this Lease (interest full
names and (if any Guarantor is a corporation) its ACN or ARBN,
addresses and facsimile members).
4. Description of Equipment
One (1) only Nissan DX 4 X 4 Utility
ENGINE NUMBER: TD7504687
CHASSIS NUMBER: JN1CGUD21AQ439231
REGISTRATION NUMBER: 812-DOQ
5. Location of Equipment: BRISBANE
6. Periodic of Lease: 36 months commencing on 25th, October, 1996.
7. Residual Value on Termination of Lease: $10,806.30
8. The rate for the purpose of clause 7(2) is 5.75% per annum.
9. Applicable Law: The law of the state or territory to apply is QUEENSLAND.
<PAGE>
10. ________ Instruments:
______ entire rent payable by the Lessee to the Financier under this Lease
payable immediately, but it the rent installments set out below are paid to the
Financial on the due dates, the Financier will not exercise the rights in
respect of non-payment nor require interest to be paid. The rent installments
which the Financier will accept are as follows:
<TABLE>
<CAPTION>
Number of Rent Amount of Rent Stamp Duty Total Rent Payment Commencing On To and Including
Installments Installment Installment Frequency
<S> <C> <C> <C> <C> <C>
1st 36 $894,000 $3.84 $897.84 Monthly 25/09/99
Then
Then
Then
Then
Then
</TABLE>
<PAGE>
INTRODUCTION
A. The Lessee has asked the Financier to lease the Equipment to the Lessee.
B. The Financier has agreed to lease the Equipment to the Lessee on the terms
of this Lease.
IT IS AGREED
1. Lease. The financier agrees to lease to the Lessee and the Lessee
agrees to lease from the Financier the Equipment for the period stated in the
Particulars on the terms set out in this lease at an entire rent equal to the
total of the instalments specified in the particulars. If, however, the Lessee
properly observes all of the terms of this lease and pays, on account of the
entire rent, the monthly instalments specified in the Particulars the, subject
to clauses 6 and 7, the Financier will not demand or seek to enforce payment of
the entire rent or any balance of the rent otherwise than by those instruments.
2. Rent and Delivery.
(1) The Lessee agrees:
(a) to pay the rent on the due dates in accordance with this
Lease together with any stamp duty payable; and
(b) that it is the Lessee's obligation to ascertain the date of
and to obtain delivery of the Equipment.
(2) The Financier is not liable for, and nor is the Lease affected
by, any delay in delivery or refusal to deliver except a delay or refusal caused
by the willful or unreasonable refusal by the Financier to pay the supplier for
the Equipment or permit the Equipment to be delivered.
3. When Lease Binding.
(1) This Lease is not binding upon the Financier, and the letting
does not commence, until this Lease has been signed by the Financier's
Authorized Officer. This provision is not affected by any prepayment of money by
the Lessee or the delivery of the Equipment to the lessee. Pending signing of
this Lease by an Authorized Officer, delivery is provisional only.
(2) If delivery of the Equipment to the Lessee is provisional, the
Lessee's obligations as to insurance, care and use of the Equipment and
otherwise (except as to payment of rent) under this Lease binds the Lessee from
the time the Lessee executes this Lease. In that case, the Lessee is a tenant at
will of the Equipment at a daily rent equal to the amount obtained by dividing
the amount of the first rent installment specified in this Particulars by the
number of days in the first rent period. If
<PAGE>
this Lease is ultimately signed on the Financier's behalf, all rent paid will be
applied by the Financier in reduction of the rent specified in the Particulars.
(3) The singing of this Lease by an Authorized Officer constitutes,
without notice of signing to the Lessee, and acceptance creating a contract
governed by the law of the state or the __________ specified in Item 9 of this
Particular.
4. Lessee's Undertakings. The Lessee agrees:
(1) Repair Equipment: at the Lessee's expense (both as to materials
and labor), to place and keep the Equipment in good order and repair so that it
is in first class condition for equipment of its description;
(2) Use of Equipment: to use or permit the use of the Equipment only
by property qualified and, where applicable, licensed persons and in accordance
with the maker's instructions;
(3) not to alter Equipment: not to alter or make any addition to the
Equipment without the Financier's prior written consent, and not to alter any
identifying number or mark on the Equipment;
(4) to retain under personal control: to keep the Equipment under
the Lessee's personal control, and not to attempt or purport to sell, dispose of
or encumber it or any interest in it;
(5) not to assign: not to assign its interest or rights under this
Lease;
(6) notify change of address: to give written notice to the Financier
immediately the Lessee's Address changes or the place where the Equipment is
usually kept changes;
(7) keep in the state: to keep the Equipment in this state or
territory in which the Lessee's Address as at the date of the execution of this
Lease is located or any other state or territory approved in writing by the
Financier;
(8) inspection and delivery of Equipment: to produce the Equipment
for inspection as required by the Financier and, at the expiration of this Lease
or upon its sooner determination or the Financier becoming entitled to
possession of the Equipment to the Financier at the Financier's Address, or any
other place directed in writing by the Financier, in good order and repair in
accordance with the terms of this Lease, together with all tools or
4
<PAGE>
accessories supplied with the Equipment or forming part of the Equipment;
(9) to indemnity against loss: to indemnify the Fiancier against any
loss of (including lawful confiscation) or damage to or destruction of the
Equipment irrespective of how the loss or damage is caused;
(10) Insurance:
(a) to keep the Equipment insured during the currency of this
Lease against fire, accident and theft and for any other risks required by the
Financier and the Lessee for an amount equal to the full insurable value; and
(b) to deliver to the Fiancier all relevant policies of
insurance, to pay all premiums payable on the policies, and not to do or permit
or suffer to be done anything which might or could prejudice any insurance
effected in respect of the Equipment or permit any insurer to decline a claim;
(11) to register the interests (if applicable): to do everything
(including, executing documents), and the Lessee irrevocably authorizes the
Financier to do everything (including executing documents) on the Lessee's
behalf, required by the Financier in order to register the Financier's interest
in the Equipment under any applicable law and;
(a) to promptly pay all fees and charges in relation to
registration;
(b) to comply with all acts, regulations and by-laws relating to
the registration or licensing of the Equipment or relating in any other manner
to the Equipment or its use; and
(c) upon demand, to produce to the Financier receipts for all
payments;
(12) resister motor vehicle (if applicable): if the Equipment is a
motor vehicle, at the Lessee's expense, to register the Equipment under all laws
and ordinances relating to motor vehicles and keep the Equipment registered in
the Lessee's name as owner and the Financier's name (where permitted by the law
or ordinance) as proprietor;
(13) to notify loss or damage: to notify the Financier in writing
immediately following any loss of, or damage to, the Equipment;
5
<PAGE>
(14) not to pledge Financier's credit: not to pledge the Financier's
credit or involve it in liability, nor to create any lien over the Equipment for
repairs or otherwise;
(15) accessories part of Equipment: that any accessories, replacements
or other chattels which are supplied with or for, or are attached to, the
Equipment are part of the Equipment;
(16) Financier may enter premises: that the Financier may enter any
remises where the Financier believes the Equipment is located for the purpose of
inspecting or testing it or retaking possession of the Equipment under clause
10(1) or any other provision of this Lease;
(17) not to affix Equipment: not to attach, affix, or secure the
Equipment to any land or premises unless its use so requires and then only with
the Financier's prior written consent. The Financier may refuse or give its
consent upon any conditions it wishes; and
(18) where Equipment and Financier entitled to remove: if the
Equipment is affixed, attached or secured to land or premises:
(a) the Equipment is not a fixture and the Financier may enter
and remove it in accordance with the terms of this Lease; and
(b) if a person other than the Lessee holds a registered estate
or any interest in the land or premises, the Lessee must obtain from that person
a written acknowledgment that the Equipment is not a fixture, and written
consent to the entry and removal of the Equipment at any time by, and without
any liability to, the Financier, and the Lessee must pay, on demand, all costs
incurred by the Financier in obtaining this written acknowledgment and consent.
5. Payments. The Lessee agrees:
(1) to make payments: to make all payment to the Financier at the
Financier's Address and any payments otherwise made in constitute the person
receiving the payments as the Lessee' agent;
(2) pay interest on overdue amounts: where any amount (including
rent) payable under this Lease becomes more than 7 days overdue, to pay on
demand to the Financier interest on the overdue account, computed on daily
rests, commencing on the day upon which the amount first fell due for payment
compounded monthly and
6
<PAGE>
calculated at a rte per centum per annum equal to the rate of interest applied
by the Financier to this Lease;
(3) to repay money expanded by Financier: to pay or repay to the
Financier, on demand, any money which the Financier pays to make good any
failure by the Lessee to comply with any obligation under this Lease or any
other obligation incurred by the Lessee in respect of the Equipment, including
releasing any lien claimed (whether justifiably or not) over the Equipment;
(4) to pay money in respect of premises: to pay all rent and mortgage
payments on the premises in which the Equipment is housed;
(5) to indemnify Financier against claims: to pay all rent and
mortgage payments on the premises in which the Equipment is housed;
(6) authorization of Financier: that the Financier is irrevocably
authorized to:
(a) in it absolute discretion, appropriate any insurance or
other money received by the Financier in respect o floss of or damage to the
Equipment towards any money payable by the Lessee to the Financier or towards
the repair of the Equipment and to appropriate any money paid by the Lessee
under this Lease to any debt or liability of the Lessee under this Lease; and
(b) use the Lessee's name and act on behalf in exercising any
rights or instituting, carrying on and enforcing any legal proceedings which the
Financier thanks desirable to protect the Financier's rights in the Equipment or
to revoke or compromise any claim for loss or damage under any insurance policy
and give effectual releases and receipts.
6 Default and Breaches. The following are Events of Default:
(1) refusal to take delivery: if, after the Financier's Authorized
Officer signs this Lease, the Lessee refuses to obtain or take delivery of the
Equipment or fails to do so within a reasonable time (of which the Financier is
the sole judge) after delivery is available;
(2) false statements, etc.: if the Financier ascertains that the
Lessee or any Guarantor has made a false statement or representation or warranty
to the Financier or that the Lessee or any Guarantor has been or is convicted of
an indictable offense or sentenced to imprisonment.
7
<PAGE>
(3) act of bankruptcy: if the Lessee or any Guarantor commits an act
of bankruptcy or (being a corporation) has a winding up petition presented
against it or a resolution for its winding up passed or proposed or it has a
receiver or receiver and manager appointed in relation to it or in relation to
any part of its assets or income or it otherwise becomes subject to any form of
insolvency administration;
(4) execution or winding up: if execution or distress are issued or
levied against the Lessee or any Guarantor or the chattels or land of the Lessee
or any Guarantor or if, where the Lessee or any Guarantor is a corporation, an
act or event referred to in sections 461(a) to 461(i) (both inclusive) of the
Corporations Law happens in relation to the Lessee or Guarantor or the Lessee or
any Guarantor is dissolved;
(5) cancellation of insurance: if any insurance proposal made by the
Lessee in respect of the Equipment is declined, or any insurance cover obtained
on the Equipment is canceled;
(6) breach of undertakings: if the Lessee commits a beach of clause 4
of this Lease;
(7) breach of provisions: if the Lessee commits a breach of the
provisions of this Lease (other than clause 2(1)(a) or clause 4 of this Lease)
and fails to remedy the breach after 30 days' notice of the breach by the
Financier;
(8) breach of Related Agreement: if the Lessee commits any breach of
any Related Agreement which is deemed to be a breach of this Lease by virtue of
clause 29(1) of this Lease;
(9) endangering of Equipment: if the Lessee does, causes, permits or
suffers anything which is likely to endanger the safety, condition or safe
keeping of the Equipment; or
(10) material adverse change: if there is any material adverse change
in assets, financial position or business of the Lessee or any Guarantor which,
the reasonable opinion of the Financier, might affect the ability of the Lessee
or the Guarantor to comply with its obligations to the Financier.
7. Repudiation, Termination and Minimum Payment.
(1) The Lessee agrees that:
(a) time is of the essence of the Lessee' obligations to the
Financier under this Lease;
8
<PAGE>
(b) failure by the Lessee to pay rent, or any other amounts
payable under this Lease, within 14 days of the due date, may be treated by the
Financier as a repudiation of this Lease by the Lessee and the Financier is
entitled to accept the repudiation of and terminate this Lease; and
(c) the occurrence of an Event of Default under this Lease may
be treated by the Financier as a repudiation by the Lessee of this Lease and the
Financier is entitled (at its option) to accept the repudiation and terminate
this Lease.
(2) If the Financier terminates this Lease under clause 7(1)(b) or
clause 7(c) the Financier is entitled to the payment as liquidated loss of
bargain damages of the "Minimum Payment" being the aggregate of:
(a) the present day value at the date of termination
(ascertained by applying the Discount Rate specified in the Particulars, or if
there is no rate specified then the rate of 12% per annum) of the Residual Value
of the Equipment specified in the Particulars and of all the rent that would
otherwise have been payable had this Lease not terminated and which, at the date
of termination, had not fallen due for payment; and
(b) the amount of any rent or the money then overdue under this
Lease (including, without limitation, money payable under this clause 7(2)) and
any interest payable on it.
8. Loss or Destruction of Equipment and Financier's Loss
(1) If there is a total or substantial loss or destruction of the
Equipment, the Financier may, by written notice to the Lessee, terminate this
Lese and, when the Financier is paid its loss ("Financier's Loss"), the Lessee
is no longer liable for the rent instalments then unpaid. The Financier's Loss
is the greater of:
(a) the Minimum Payment; and
(b) the value of the Equipment, immediately prior to the loss or
destruction.
(2) The Lessee must, within 7 days of notice of termination, pay to
the Financier the measure of the Financier's Loss, provided the Financier will
give credit for any insurance money or proceeds of salvage received by it, if
and when received, but only to the extent of the measure of the Financier's
Loss.
9. Financier May Dispose of Equipment. Where the Equipment comes into
the possession of the Financier consequent upon expiration of this Lease,
expiration of any extension of this
9
<PAGE>
Lease, or upon early termination of this Lease (other than under clause 8), the
Financier may dispose of the Equipment in any manner it considers reasonable.
10. Effect of Failure to Return Equipment.
(1) If, upon the early termination of this Lease (other than under
clause 8) or upon the expiration of this Lease or any extension of this Lease,
the Equipment is not returned, then the Financier may retake possession of the
Equipment.
(2) If, upon the expiration of this Lease or any extension of this
Lease, the Equipment is not received within 7 days of the giving of notice by
the Financier requiring the return of the Equipment, the Lessee must pay to the
Financier, upon demand, the Residual Value of the Equipment and al other money
payable under this Lease, including any sums payable under clause 10(3).
(3) If the Lessee fails to deliver up the Equipment to the Financier
on the expiration or termination of this Lease, the Lessee must pay to the
Financier, by way of liquidated damages for detention, a daily sum equal to the
amount obtained by dividing the amount of the last rent instalment specified in
this Lease by the number of days in the last rent period specified in this
Lease.
11. Disposal of Equipment by Financier on Expiration or Termination.
(1) If the Equipment is returned to the Financier by the Lessee upon
expiration of this Lease or any extension of this Lease or on termination, the
Financier will dispose of the Equipment as soon as is reasonably practicable and
will, in good faith, endeavor to obtain the best wholesale price reasonably
obtainable for it in its then condition.
(2) Where the Equipment is sold under clause (11)(1); and
(a) the Lessee has paid the discounted Residual Value or
Residual Value of the Equipment and has paid all other amounts payable under
this lease, the Financier will pay to the Lessee the proceeds of sale of the
Equipment; or
(b) the Lessee has not paid either the discounted Residual Value
of the Equipment but has paid all other amounts under this Lease, the Financier
will pay to the Lessee the amount by which the proceeds of sale exceed the
discounted Residual Value or Residual Value, but if the discounted Residual
Value or Residual Value exceeds the proceeds of sale of the Equipment, the
Lessee must pay to the Financier the amount of the excess.
10
<PAGE>
(3) If the Equipment has not been sold moving the Equipment from, the
land or premises on or in which the Equipment is situated;
(2) making good any injury caused to any land or premises or to the
property of any person by any entry or removal;
(3) storing, insuring, registering and repairing the Equipment and
attempting to sell the Equipment; and
(4) taking any action to protect the Financier's title to the
Equipment even if the action ultimately proves to have been unnecessary.
14. Renewal. If the Lessee continues in possession of the Equipment after
expiration or termination of this Lease with the Financier's written consent,
the Lessee must, until the return of the Equipment, pay to the Financier, a
daily rent equal to the amount obtained by dividing the amount of the last
rent instalment specified in this Lease by the number of days in the last rent
period specified in this Lease, and must carry out and abide by the terms of
this Lease as far as applicable.
15. Effect of Certificates.
(1) A certificate by an Authorized Officer stating the amount
outstanding as at the date set out in the certificate, the measure of the
Financier's Loss, the Minimum Payment, the date of delivery of the Equipment to
the Lessee or that an Event of Default has occurred is primary evidence of the
facts set out in the certificate.
(2) A certificate by an Authorized Officer stating that, as at the
date set out in the certificate, there have been a total or substantial loss or
destruction of the Equipment is conclusive evidence of the fact unless the
Lessee establishes that the certificate was given in bad faith.
16. Tenure. Nothing in this Lease confers on the Lessee any right,
property or interest in or to the Equipment and the Lessee is a bailee only of
the Equipment.
17. Defective Equipment. The Lessee's obligation to pay rent and to
comply with the terms of this Lease continue to the extent permitted by law
despite the occurrence of any defect in, or total or partial breakdown of, the
Equipment or any damage to the Equipment.
18. Lessee's Warranties and Acknowledgments.
11
<PAGE>
(1) The Lessee warrants that the Lessee thoroughly examined the
Equipment before this Lease was entered into and the Lessee is satisfied as to
the condition, quality and suitability of the Equipment for the Lessee's
purposes and that the Equipment is or will be when delivered, in accordance with
the description of the Equipment contained in the Particulars and is of a
design, size, capacity, type and manufacture selected by the Lessee.
(2) If the Lessee has, either expressly or by implication, made known
to the Financier or to the person by whom any antecedent negotiations were
conducted, any particular purpose for which the Equipment is being leased, the
Lessee acknowledges that the Lesse4e has not relied, nor would have been
responsible for the Lessee to have relied on the skill or judgment of the
Financier when deciding whether the Equipment was reasonably fit for that
purpose.
19. Exclusion of Implied Terms.
(1) Except as is provided in this Lease, in Part V of the Trade
Practices Act 1974 (Commonwealth) or by the provisions implying terms,
conditions and warranties which cannot be excluded or modified of any other
legislation applicable to the transaction evidenced by this Lease, all expressed
and implied terms, conditions and warranties which otherwise might apply to or
arise out of this Lease are negative and excluded to the extent lawfully
permitted but not otherwise and all those implied terms, conditions and
warranties that are excluded by this clause 9(1) have no legal force, effect or
operation as between the parties to this Lease.
(2) If the Equipment or services which are the subject of this Lease
are of a kind not ordinarily acquired for personal, domestic or household use or
consumption, it is an express term of this Lease that any liability of the
Financier for a breach of any condition or warranty implied by the provisions of
Part V of the Trade Practices Act 1974 of the provisions implying terms,
conditions and warranties which cannot be executed or modified of any other
legislation applicable to the transaction evidenced by this Lease are, to the
extent permitted, limited to:
(a) in the case of the Equipment, the replacement of the
Equipment or the supply of equivalent equipment, the repair of the Equipment,
the payment of the cost of replacing the Equipment or of acquiring or hiring
equivalent equipment or the payment of the cost of having the Equipment
repaired; and
(b) in the case of services, the supply of the services against
or the payment of the cost of having the services, the supplied again, whichever
is determined by the Financier to be appropriate in the circumstances;
12
<PAGE>
provided that:
(i) this provision does not apply to the implied undertakings
referred to in section 69 of the Trade Practices Act 1974 and to any implied
condition of similar import referred to in any other legislation applicable to
the transaction evidenced by this Lease; and
(ii) the Financier may not be able to rely upon this if it is not
fair or reasonable for it to do as is provided for in sections 68A(2) and 68A(3)
of the Trade Practices Act 1974 and/or the provisions of any other legislation
applicable to the transaction evidenced by this Lease.
(3) Where the Financier is not liable for breaches of conditions
implied by section 70, 71 or 72 of the Trade Practices Act 1974 by virtue of
section 73 (if applicable) of that Act, the Lessee (being a "consumer" as
defined in the Act) may have recourse payment against another corporation
subject to the requirements of Section 73 (the Lessee should refer) being met.
20. No Option to Purchase. As an inducement to the Financier to accept
this offer to lease the Equipment or the services, the Lessee confirms and
warrants that no option to purchase the Equipment has been conferred or implied
on the Lessee and there is no option or agreement, either expressed or implied,
in the Lessee's favor for the sale of the Equipment to the Lessee on expiry of
this Lease or at any other time.
21. No Representation by Financier. The Lessee acknowledges that neither
the Financier, nor any person having the authority to act on its behalf, has
given or made any representations or promises regarding the Lessee's rights or
position in respect to any law relating to taxation or regarding the disposal of
the Equipment at the expiration of this Lease or otherwise except as is
contained in this Lease and it is agreed that the Financier is not responsible
for any representation, promise or statement made in relation to these or any
other matters by any person who has initiated, negotiated or introduced the
transaction evidenced by this Lease.
22. Introduction by Broker. Where the Lessee has been introduce to the
Financier by a broker, agent, dealer or other person, the Lessee:
(1) by its execution of this Lease, consents to the payment of
commission by the Financier to the broker, agent, dealer or other person on the
Lessee' behalf.
(2) acknowledges that any broker or dealer is not the agent of or in
any way related to the Financier and the Financier
13
<PAGE>
is not responsible for any claims or demands made by any broker or dealer
against the Lessee for commissions which are undisclosed in this Lease; and
(3) any warranties, statements and representations or any agreements
made or given by any broker or dealer in relation to this Lease are not
warranties, statements, representations or agreements made or given by the
Financier.
23. Stamp Duty Installments. If any stamp duty installments have been
calculated on the basis of the Financier's estimate of the total stamp duty
payable on this Lease and agrees, but without affecting its obligations to the
Financier under clause 5(8) to pay to Financier the rent installments, but if
the Financier has been mistaken in is estimate of the stamp duty payable on this
Lease, the Lessee must pay to the Financier the amount assessed on this Lease
and agrees that the obligations of the Lessee set out in clause 5(8) apply to
that amount.
24. Financial Statements. The Lessee must:
(1) if requested, deliver to the Financier, within 120 days of the
close of each financial year of the Lessee and at all other times required by
the Financier, true and correct copies of all financial statements, accounts and
reports of the Lessee for the financial year; and
(2) deliver or procure the deliver to the Financier, on reasonable
demand, of all other information showing the financial position of the Lessee
(any Related Corporation of the Lessee and any Guarantor) as the Financier
reasonably requires.
25. Collateral Securities and Power of Attorneys. As security for the
payment or repayment of all money owing to the Financier by the Lessee under
this Lease, all the right, title, estate and interest which the Lessee has in
any freehold or leasehold property is charged to the Financier with payment of
all money owing under this Lease. The Lessee agrees, immediately upon request by
Financier, to execute in favor of the Financier a mortgage or any other
encumbrance required by the Financier, on terms required by the Financier, and
any other documents requested by the Financier to perfect its security
(including, but not limited to, a constant caveat over the property). For the
purpose of this clause 25, Lessee irrevocably and for valuable consideration
appoints the Financier and each Authorized Officer and its substitute or its
substitutes severally the attorney of the Lessee to execute on the Lessee's
behalf, any mortgage, encumbrance, caveat and any other documents the attorney
considers necessary as being ancillary to those, and to do anything the
Financier considers necessary or desirable to perfect its security.
14
<PAGE>
26. Representations and Warranties.
(1) The Lessee represents and warrants to the Financier that at the
date of commencement of this Lease and on all dates on which rent is payable.
(a) All financial statements, information and other data
furnished by the Lessee or any Guarantor to the Financier, or any agent, broker
or dealer introducing the transaction evidenced by this Lease, are complete and
correct, and there are no other material facts or considerations the omission of
which would render any information misleading, and have been prepared in
accordance with generally accepted accounting principals and practices and
accurately and fairly represent the current financial condition of the Lessee;
and
(b) Where the Lessee is a corporation:
(i) the Lessee is properly formed and is validly existing
as a corporation under the laws of its place of incorporation;
(ii) it has power to enter into this Lease and has taken all
necessary corporate and statutory action and obtained all approvals to authorize
the entering into of this Lease;
(iii) in entering into this Lease, the Lessee is not
violating any of the provisions of its constituent documents or any of the
provisions of the Corporations Law nor any agreement or other instrument in
which it is a party; and
(iv) the person signing this Lease on the Lessee's behalf
and any officer of the Lessee, it has been properly authorized by a resolution
of the board of directors of the Lessee to execute this Lease on the Lessee's
behalf.
(2) The representations and warranties to clause 26(1) will be deemed
to be made and repeated by the Lease on each day with the Lessee retains
possession of the Equipment.
27. Delivery of Guarantee and Indemnity. Where the Financier specifies
that a guarantee and indemnity in respect of the obligations of the Lessee to
the Financier under this Lease must be given the guarantee and indemnity must be
delivered to the Financier simultaneously with delivery of this Lease properly
executed by the Lessee. If the guarantee and indemnity is not delivered, the
Lessee is in fundamental breach of its obligations to the Financier under this
Lease and the Financier is entitled (at is option) to treat the breach as
repudiation by the Lessee of this Lease. It is agreed that execution by the
Financier of this Lease does not constitute a waiver of its rights under this
clause 27.
15
<PAGE>
28. Lessee's Invitation to Financier.
(1) The Lessee agrees that every lease agreement, loan agreement or
funding arrangement and any other financial or credit agreement or arrangement
("Related Agreements") entered into between the Lessee and the Financier and/or
any Related Corporation of the Financier are collateral to each other and that:
(a) any breach of the terms and conditions of any of the Release
Agreements constitutes default under every other Related Agreement; and
(b) the rights and remedies of the Fiancier or of any Related
Corporation of the Financier under each of the Related Agreements are not
prejudiced by any indulgence the Financier grants to the Lessee or any other
person in the Financier's absolute discretion.
(2) The Lessee agrees that any surplus arising from dealing in or
under any of the Related Agreements is subject to a right of set-off against the
other to satisfy any loss, shortfall, costs or expenses which is suffered by the
Financier or any Related Corporation of the Financier under any of the other
Related Agreements.
30. Agency and Maintenance. The Lessee acknowledges that the
Financier may have entered into this Lease as agent for some other person and
the Lessee agrees that the Lessee is not entitled to make any objection to that
(irrespective of whether the agency is disclosed or otherwise) or to the fact
that the other person has or acquires property in the Equipment. If any
maintenance charges are included in the rent payable by the Lessee, the Lessee
acknowledges that:
(1) these changes have been included in the rent at the request
of the Lessee as a result of a direction by the Lessee;
(2) the Lessee has given that direction; and
(3) where the Financier is acting as the agent of another person
in respect of the leasing of the Equipment:
(a) the agency does not extend to any obligations
undertaken by the Financier in respect of the maintenance of the Equipment and,
if the Financier has taken on maintenance obligations, the Financier carries out
those obligations in its own capacity and not in its capacity as agent for the
other person;
(b) _____ person is in no way responsible for the
maintenance of the Equipment;
16
<PAGE>
(c) failure of performance or breach on the part of the
Financier, or any other person providing the maintenance services, in no way
affects, excuses or releases the Lessee from payment of any rent payable under
this Lease or otherwise affects the performance by the Lessee of the Lessee'
obligations under this Lease; and
(d) any failure on the part of the Lessee to pay the rent
in ful constitutes a breach of an essential term of this Lease.
31. Trust Provisions.
(1) The following provisions of this clause 31 apply if the Lessee is
trustee of a Trust.
(2) The Lessee acknowledges that this Lease is binding on the Lessee
personally and in the Lessee's capacity as trustee of the Trust and that the
Financier's right of recourse is not limited to the Lessee personally but
extends to the assets of the Trust.
(3) The Lessee must cause any successor of the Lessee as trustee of
the Trust or any person who becomes a trustee of the Trust jointly with the
Lessee to execute all documents required by the Financier to ensure that this
Lease is binding on the successor.
(4) Upon demand by the Financier, the Lessee must exercise its rights
of indemnity in relation to the Trust Fund and the Lessee's rights against the
beneficiaries to cause payment of all money owed by the Lessee to the Financier
or otherwise hold those rights for the Financier.
(5) The Lessee warrants that:
(a) the Lessee is the sole trustee of the Trust and no action
has been taken to remove or replace the Lessee;
(b) full particulars of the terms of the Trust have been
disclosed to the Financier prior to the execution of this Lease;
(c) the copies of the Trust Deed and any other documents
relating to the Trust and, if applicable, the memorandum and articles of
association of the Lessee delivered to the Financier before the Lessee executed
this Lease are true copies of those documents as in force at the date of this
Lease;
(d) the Lessee has power under the Trust Deed to execute and
perform its obligations under this Lease and all necessary action has been taken
to authorize the execution and
17
<PAGE>
performance of this Lease under the Trust Deed and, if applicable, under the
memorandum and articles of association of the Lessee;
(e) the Lease is executed and all transactions contemplated
under this Lease are entered into as part of the due and proper administration
of the Trust and are for the benefit of the beneficiaries;
(f) the Lessee has a right to be fully indemnified out of the
Trust Fund and no action has been taken which might prejudice or limit that
right or indemnity;
(g) the Lessee is not in default under the Trust Deed;
(h) the Lessee has complied with all fiduciary obligations
directly or indirectly imposed on the Lessee; and
(i) each of the warranties contained in this clause 31(5) will
remain true as long as this Lease remains in force.
(6) For the purposes of this clause 31:
(a) "Trust" means any trust of which the Lessee is trustee,
whether the existence of the trust is disclosed to the Financier or not;
(b) "Trust Deed" means any document relating to the
constitution, creation or formation of the Trust; and
(c) "Trust Fund" means the trust fund comprising the property
held by the Lessee as trustee under the Trust Deed.
32. Miscellaneous Provisions.
(1) Prior Conditions: This Lease contains all of the terms and
arrangements made between the parties in respect of the Equipment and any matter
relating to the Equipment which is to be contractually binding upon the
Financier and the Lessee and all terms and arrangements (if any) made or
referred to prior to the execution of this Lease by or on behalf of the
Financier and not contained in this Lease are of no effect.
(2) Financier Can Assign: The Financier is, without prior notice to
the Lessee, entitled to assign its interest in this Lease and the Equipment to
any other person and, in particular but without limiting its rights in any
respect, to any Related Corporation of the Financier, and assignment does not
abrogate, prejudice, limit or affect the obligations of the Lessee under this
Lease. The Financier is entitled to disclose to any potential
18
<PAGE>
assignee any information about the Lessee it considers appropriate or necessary.
(3) Authority to Compete: The Lessee irrevocably authorizes the
Financier to complete or amend the description of the Equipment in the
Particulars where the description is incomplete or inaccurate and, if this Lease
is incomplete, insert pertinent and correct details and in all other respects
complete all necessary formalities to render this Lease effective, including
inserting dates where these have not been completed.
(4) Severability. If anything in this Lease is unenforceable, illegal
or void then it is severed and the rest of this Lease remains in force.
(5) Preservation of Rights, Etc.: The rights, powers and remedies
conferred by this Lease on the Financier are in addition to and not exclusive of
any other rights (whether as to damages or otherwise), powers and remedies
available at law.
(6) No Taxation Representations: The Financier makes no
representations or warranty that the payment of any rent or other money payable
by the Lessee under this Lease is an allowable deduction (within the meaning of
the Income Tax Assessment Act 1936) (including any payment of the Residual
Value, any rent installment or any other payment of a capital or other nature)
may not be an allowable deduction.
(7) Security Interest Legal: Without prejudice to the Financier
retaining title in or to the Equipment, to the extent that the Financier is
deemed to have a security interest in the Equipment, the Financier and the
Lessee agree that the interest is a legal interest.
(8) Business Purpose: The Lessee warrants that the Equipment is
leased and will be used solely for business purposes.
33. Notices.
(1) Any notice or other document to be given to the Lessee or any
demand to be made upon the Lessee by or on behalf of the Financier is validly
given or made if it is in writing signed by an Authorized Officer and either:
(a) delivered personally; (b) sent by prepaid mail; or (c) sent by facsimile; to
(d) the Lessee's Address; (e) the Lessee's facsimile number as shown in item 2
of the Particulars or any new facsimile number notified by Lessee to the
Financier in writing; or (f) in the case of a corporate Lessee, its registered
office.
(2) Any communication sent by facsimile will be deemed to have been
received by the Lessee when transmitted to the Lessee,
19
<PAGE>
but if the delivery or receipt is on a day which is not a business day or is
after 6 p.m. (Lessee's time) it is deemed to be duly given on the succeeding
business day.
GUARANTEE AND INDEMNITY
34. Consideration. This Guarantee is given in consideration of the
Financier, at the request of the Guarantor (which request is evidenced by the
signing of this Guarantee by the Guarantor), agreeing to enter into or entering
into the Lease with the Lessee, agreeing not to exercise its rights in respect
of any default of repudiation of the Lease or giving any other valuable
consideration to the Guarantor.
35. Guarantor. The Guarantor guarantees to the Fiancier performance of
and payment to the Financier in respect of, the Guaranteed Obligations.
36. Guaranteed Obligations. The Guaranteed Obligations are all money and
obligations now or at any time in the future falling within any of the
following categories:
(1) all money which is or becomes payable by or recoverable from the
Lessee under the Lease;
(2) in respect of which the Lessee is now or at any time indebted or
liable, or contingently indebted or liable, to the Financier under the Lease;
(3) due and prompt observance and performance of all covenants,
obligations, terms and conditions on the part of the Lessee to be performed or
observed under or in connection with the Lease0; and
(4) payment of all money and damages which are or may become payable
by or recoverable from the Lessee in connection with or in consequence of any
breach or repudiation of any of the obligations of the Lessee under or in
connection with the Lease.
37. Indemnity. The Guarantor, as a separate and additional liability,
indemnities as the Financier against any loss the Financier suffers by reason
of:
(1) the liability of the Lessee to pay or fulfill the Guaranteed
Obligations to the Financier being unenforceable in whole or in part as a result
of any lack of capacity, power of authority or any improper exercise of power or
authority on the part of the Lessee;
(2) the Lessee becoming insolvent, including the amount of any
interest which is void or voidable against any person, and
20
<PAGE>
the amount of any interest which does not accrue from the date of insolvency or
is not recoverable by reason of the insolvency and which would otherwise have
been recoverable from the Guarantor under this Guarantee; or
(3) the Guaranteed Obligations or any of them not being recoverable
from the Lessee and not being recoverable from the Guarantor under the guarantee
in clause 35 by reason of any other fact or circumstance, whether the
transactions or any of them relating to the Guaranteed Obligations have been
void, voidable or illegal or have been subsequently avoided and whether or not
any of the matters or facts relating to those transactions have been or ought to
have been within the knowledge of the Financier;
and the Guarantor as principal debtor, agrees to pay a sum equal to the amount
of such loss to the Financier on demand in writing.
38. Interest.
(1) The Guarantor must, on demand by the Financier, pay interest on
all sums payable by the Guarantor which are due and payable and remain unpaid.
(2) Interest under clause 38(1) accrues from day to day from the due
date for payment to the date of accrual payment, before or after judgment, at
the same rate of interest as is required to be paid under the Lease.
39. Continuing Guarantee. This Guarantee is a continuing guarantee and
indemnity for the whole of the Guaranteed Obligations and is not wholly or
partially discharged (even if all of the Guaranteed Obligations that are
presently owing are paid or fulfilled) as long as any of the Guaranteed
Obligations are owing, payable or unfulfilled, are contingently owing or payable
or may, in the Financier's opinion, become owing or payable.
40. Preservation of Guarantor's Liability. The Guarantor's liability is
not prejudiced or affects by any of the following matters:
(1) any other guarantee or any security, specialty or instrument,
negotiable or otherwise, which the Financier holds in respect of the Guaranteed
Obligations or any judgment obtained by the Financier;
(2) any release, variation, exchange, renewal or modification made or
any other dealing by the Financier with any security, specialty, instrument,
negotiable or otherwise, or judgment recovered, held or enforceable by the
Financier in respect of the Guaranteed Obligations whether it is held or
enforceable by the Financier in respect of the Guaranteed Obligations whether it
21
<PAGE>
is held or enforceable against the Lessee or Guarantor or any other persons or
any refusal or omission by the Financier to complete, enforce or assign any such
judgment, specialty, instrument, negotiable or otherwise, or other security;
(3) any arrangement with or release of the Lessee or any other
guarantor or person by the Financier whether the consent of the Guarantor to any
of these things has been obtained or notice of them given to the Guarantor or
not;
(4) any omission or delay on the part of the Financier;
(5) the fact that any of the Guaranteed obligations or any part of
the Guaranteed Obligations is unenforceable or that the Lessee or any other
person purported to be primarily liable to pay any money to the Financier in
respect of the Guaranteed Obligations is discharged from its respective
obligations to make payment for any other reason than that payment has been
made;
(7) the death, lunacy, incapacity or bankruptcy of any individual
Guarantor or the winding up of any corporate Guarantor;
(8) the fact that the Lessee enters into any transaction with or
incurs obligations to the Financier without the consent of, or notice to, the
Guarantor;
(9) any change in the membership of any partnership or firm of which
the Lessee is a member or the death, insolvency, liquidation or bankruptcy of
the Lessee;
(10) the Financier's assent to any composition, arrangement or scheme
in respect of the Lessee or its affairs or the acceptance by the Financier of
any dividend or sum of money thereunder;
(11) any person giving any guarantee to the Financier or any person
which ought to become a Guarantor failing to do so;
(12) the Financier's assignment of its interest in the Lease to any
other person without the consent of the Guarantor or the assignment by the
Financier of the benefit of this Guarantee to any party to whom the whole or in
part of the Lease is transferred or assigned (whether at the same or different
time); or
(13) the failure by the Financier to take security or that any
security taken by the Financier may be unenforceable.
41. Independent Obligations. This Guarantee is independent of and in
addition to any other guarantee or security held now or at any time by the
Financier for all or any of the Guaranteed Obligations and the Guarantor will
not in any way or at any time
22
<PAGE>
claim the benefit of or seek or require the transfer of any such guarantee or
security or any party thereof.
42. Assignment by Financier Not to Affect. This Guarantee will continue
to be binding notwithstanding that the principal indebtedness is assigned or
transferred to another person or the benefit of this Guarantee, is assigned
either at the time of or subsequent to the first mentioned assignment or
transfer.
43. Wavier by Guarantor. The Guarantor agrees to waive the Guarantor's
rights as surety whether legal, equitable, statutory or otherwise which may at
any time be inconsistent with the provisions of this Guarantee or in any way
restrict the Financier's rights, remedies or recourse.
44. Certificate Prima Facie Evidence. A certificate signed by an
Authorized Officer for the time being as to any sum payable to the Fianncier
pursuant to this Guarantee as at the date set out in the certificate will, in
all courts and at all time, be prima facie evidence of the facts in the
certificate.
45. Where Lessee Indebted to Guarantor.
(1) Until the Financier has received 100* in the dollar in respect of
the Guaranteed Obligations, the Guarantor agrees:
(a) in the event of any Administration in insolvency of the affairs
of the Lessee not, without the prior written consent of the Financier, to lodge
any proof of debt or similar claim in respect of any debt or liability by the
Lessee to the Guarantor on any account whatsoever nor to enforce any security
held by the Guarantor in respect of the Lessee but to hold in trust for the
Financieer any such debt or liability and any rights of proof or other rights or
benefits in respect thereof and any such security;
(b) if requested by the Financier, to lodge a proof of debt or
similar claim in any such administration and enforce any such security as
aforesaid and to execute and do all such documents and thins as the Financier
requires at any time to enable the Financier to have and receive the benefit of
or arising from any such proof, claim or security; and
(c) not, at any time, to claim the benefit of or seek or require the
transfer of any guarantee or security which is, at any time, held by the
Financier in respect of the Guaranteed Obligations.
(2) Valuable consideration and by way of security, the Guarantor
irrevocable appoints __________ (with power to appoint a substitute or
substitutes) his attorney to execute (under seal or
23
<PAGE>
otherwise), deliver and do all such document and things (including the signing
and lodging of proofs of debt) which the Financier at any time and from time to
time thinks requisite or desirable for giving effect to the provision of clause
45(1)(a) or 45(1)(b).
46. Reinstatement of Guarantor's Liability. If any payment made to the
Financier by or on behalf of the Lessee or Guarantor is subsquently avoided by
any statutory provision or otherwise, such payment shall be deemed not to have
discharged the Guarantor's liability under this Guarantee and in such event the
Financier and the Guarantor will be restored to the position in which each would
have been and be entitled to exercise all the rights which each would have had
if such payment had not been made.
47. Payment on Demand. All sums payable by the Guarantor under this
Guarantee are payable immediately upon demand by the Financier on the Guarantor
without the necessity of the Financier first making demand on the Lessee.
48. Reimbursement of Financier. The Guarantor must pay to the Financier
all sums of money received by the Financier for credit of any account of the
Lessee and for which the Financier is, in any Administration in insolvency of
the Lessee, obliged to account to any liquidator, trustee in bankruptcy,
insolvency administrator or other person or may in its discretion so account.
49. Duties and Costs. The Guarantor agrees to pay to the Financier all
Duties and Costs.
50. Use as Cross-guarantee.
(1) This Guarantee takes effect as a cross-guarantee when the persons
included in the definition of "Lessee" are the same as some or all of the
persons included in the definition of "Guarantor".
(2) When this Guarantee takes effect as a cross-guarantee, it is to
be construed as a separate guarantee and indemnity in relation to each person
included in the definition of "Lessee" as if that person were: (a) the only
person included in the definition of "Lessee"; and (b) excluded from the
definition of "Guarantor".
51. ________________ of Guarantees.
(1) This Guarantee and all other guarantees or indemnities given to
the Financier in respect of the obligations of the Lessee under the Lease are to
be read together as if they were one an the same instrument.
24
<PAGE>
(2) The obligations of the Guarantor are joint and individual with
every other person who give a guarantee or indemnity to the Financier in respect
of the obligations of the Lessee to the Financier under the Lease.
52. Non-liability of Other Persons. The Guarantor's liability under this
Guaranty is not affected by:
(1) the fact that any other person who was intended to execute this
Guarantee or otherwise to become a co-surety for payment of the Guaranteed
Obligations or any of them has not done so or has not done so effectively; or
(2) the discharge under any principle of law or equity of any person
who is a co-surety for payment of the Guaranteed Obligations.
53. Other Securities and Obligations of Guarantor. The Financier's rights
under this Guarantee are additional to, do not merge with and are not affected
by:
(1) any other securities held by the Financier from the Lessee, the
Guarantor or any co-surety; or
(2) any other obligation of the Guarantor to the Financier;
despite any rule of law or equity to the contrary.
54. Moratorium Provisions. No present or future moratorium, financial
emergency or similar legislation or regulation applies to this Guarantee except
to the extent that its exclusion is prohibited or rendered ineffective by law.
55. Severability. If anything in this Guaranty is unenforceable, illegal
or void then it is severed and the rest of this Guarantee remains in force.
56. Trust Provisions.
(1) The following provisions of this clause 56 apply if the Guarantor
is trustee of a Trust.
(2) The Guarantor acknowledges that this Guarantee is binding on the
Guarantor personally and in the Guarantor's capacity as trustee of the Trust and
that the Financier's right of recourse is not limited to the Guarantor
personally but extends to the assets of the Trust.
(3) The Guarantor must cause any successor of the Guarantor as
trustee of the Trust or any person who becomes a
25
<PAGE>
trustee of the Trust jointly with the Guarantor to execute all documents
required by the Financier to ensure that this Guarantor is binding on the
successor.
(4) Upon demand by the Financier, the Guarantor must exercise its
rights of indemnity in relation to the Trust Fund and the Guarantor's rights
against the beneficiaries to cause payment of all money owed by the Guarantor to
the Financier or otherwise hold those rights for the Financier.
(5) The Guarantor warrants that:
(a) the Guarantor is the sole trustee of the Trust and no action
has been taken to remove or replace the Guarantor;
(b) full particulars of the terms of the Trust have been
disclosed to the Financier prior to the execution of this Guarantee;
(c) the copies of the Trust Deed and any other documents
relating to the Trust and, if applicable, the memorandum and articles of
association of the Guarantor delivered to the Financier before the Guarantor
executed this Guarantee are true copes of those documents as in force at the
date of this Guarantee;
(d) the Guarantor has power under the Trust Deed to execute and
perform its obligations under this Guarantee and all necessary action has been
taken to authorize the execution and performance of this Guarantee under the
Trust Deed, and, if applicable, under the memorandum and articles of association
of the Guarantor;
(e) this Guarantee is executed and all transactions contemplated
under this Guarantee are or will be entered into a part of the due and proper
administration of the Trust and are or will for the benefit of the
beneficiaries.
(f) the Guarantor has a right to be fully indemnified out of the
Trust Fund and no action has been taken which might prejudice or limit that
right of indemnity;
(g) the Guarantor is not in default under the Trust Deed;
(h) the Guarantor has complied with all fiduciary obligations
directly or indirectly imposed on the Guarantor; and
(i) each of the warranties contained in this clause 56(5) will
remain true as long as this Guarantee remains in force.
(6) For the purposes of this clause 56:
26
<PAGE>
(a) "Trust" means any trust of which the Guarantor is trustee,
whether the existence of the Trust is disclosed to the Financier or not;
(b) "Trust Deed" means any document relating to the
constitution, creation or formation of the Trust; and
(c) "Trust Fund" means the trust fund comprising the property
held by the Guarantor as trustee under the Trust Deed.
57. Agency and Maintenance. The Guarantor acknowledges that:
(1) the Financier may have taken this Guarantee as agent for some
other person and that the Guarantor is not entitled to make any objection to
that (irrespective of whether the agency is disclosed or otherwise); and
(2) the other person is not responsible for any maintenance services
provided by the Financier or any other person.
58. Notices.
(1) Any notice or other document to be given to the Guarantor or any
demand to be made upon the Guarantor by or one behalf of the Financier is
validly given or made if it is in writing signed by an Authorized Officer and
either: (a) deliver personally; (b) sent by prepaid mail; or (c) sent by
facsimile; to (d) the Guarantor's Address as shown in Item 3 of the Particulars
or any new facsimile number notified by the Guarantor to the Financier in
writing; or (f) in the case of a corporate Guarantor, its registered office.
(2) Any communication sent by facsimile will be deemed to have been
received by the Lessee when transmitted to the Lessee, but if the delivery or
receipt is on a day which is not a business day or is after 6 p.m. (Lessee's
time) it is deemed to be duly given on the succeeding business day.
59. Guarantor's Acknowledgment.
(1) The Guarantor acknowledges that:
(a) the Financier is or may be prevented by the provisions of
the Privacy Act and from its duty of confidentiality to the Lessee to disclose
information on the Lessee's financial position and the Guarantor must therefore
satisfy himself in this regard;
(b) it is a fundamental condition of the Financier's entering
into the Lease that the Guarantor give this
27
<PAGE>
Guarantee by way of security for the Lessee's obligations to the Financier; and
(c) this Guarantee can and may be called upon by the Financier
if the Lessee defaults in its obligations to the Financier.
(2) The Guarantor understands that the obligations undertaken in
executing this Guarantee comprise both a guarantee and an indemnity and the
Guarantor's obligations as indemnifier will continue even if the Financier is
not able, for any reason whatsoever, to enforce the obligations of the Lessee
under the Lease.
(3) The Guarantor has made independent enquiries of the Lessee's
present financial position and has not relied on any representation by any
officer of the Financier or person purporting to represent the Financier in
connection with the Lessee's present or anticipated future financial position.
(4) The Guarantor has executed this Guarantee freely and
voluntarily and (after having received independent legal and financial advice)
with full understanding of the legal and financial consequences (or the true
purport and effect thereof) and the Guarantor's obligations to the Financier
thereunder.
(5) The Guarantor has read this Guarantee and has had it
explained to the Guarantor's satisfaction. The Guarantor has not relied on
anything told to the Guarantor by the Financier or the Lessee as to its effect.
2. Definitions and Interpretation.
(1) In the Lease and the Guarantee set out in this document unless
the context otherwise requires:
(a) "Administration in Insolvency" in relation to the affairs of
the Lessee includes bankruptcy, assignment for the benefit of or composition or
arrangement with the creditors of the Lessee, liquidation, administration under
any law relating to mental health and administration of the estate of the Lessee
where the estate is not solvent;
(b) "Authorized Officer" means any manager, branch manager,
secretary or solicitor from time to time of the Financier and any other person
appointed as an authorized officer by the Financier;
(c) "Discount Rate" means the rate specified in Item 8 of the
Particulars;
28
<PAGE>
(d) "Duties and Costs" include all the Financier's legal costs
of and incidental to the preparation, execution, stamping and enforcement of the
Guarantee and also all expenses or amounts the Financier pays or is liable to
pay under or in connection with any legislation relating to stamp duty and
arising out of the Guarantee or any transaction between the Financier and the
Lessee and/or the Guarantor;
(e) "Equipment" means the chattel or chattels specified in Item
4 of the Particulars;
(f) "Event of Default" means any of the events of default
referred to in clause 6 or any other event which a provision of the Lease
specifies is to be treated as an Event of Default;
(g) "Financier" means Sanwa Australia Finance Limited;
(h) "Financier's Address" means the address of the Financier
specified in Item 1 of the Particulars or such other place as the Financier by
notice to the Lessee appoints;
(i) "Financier's Loss" has the meaning given to that expression
in clause 8;
(j) "Guarantee" means the guarantee and indemnity set out in
clause 8;
(k) "Guarantor" means the guarantors specified in Item 3 of the
Particulars and any other person who at any time gives to the Financier a
guarantee or a guarantee and indemnity in respect of the obligations of the
Lessee under the Lease;
(l) "Lease" means the lease agreement set out in clauses 1 to
33; 60 and 61 and including the Introduction and the Particulars;
(m) "Lessee" means the person or persons or any one or more of
them named as lessee in Item 2 of the Particulars;
(n) "Lessee's Address" means the address of the Lessee specified
in Item 2 of the Particulars or such other place as notified by the Lessee to
the Financier from time to time;
(o) "Minimum Payment" has the meaning given to that expression
in clause 7(2);
(p) "Particulars" means the particulars set out at the
commencement of the Lease;
29
<PAGE>
(q) "Related Agreement" has the meaning give to that expression
in clause 29(1);
(r) "Related Corporation" has the meaning give to the related
body corporate in the Corporate Law; and
(s) "Residual Value" means the amount specified in Item 7 of the
Particulars.
(2) In the Lease and the Guarantee unless the context otherwise
requires: (a) a month means a calendar month; (b) business day means a day upon
which trading banks as defined in the Banking Act are open for business in the
state or territory in which the Financier's Address is situated; (c) any statute
or statutory provision includes its consolidation, re-enactment and substitution
and the regulation, by-laws and orders from the time being in force under it;
(d) a person includes a corporation, partnership, incorporated association, body
corporate and unincorporated body, instrumentality of the Crown and any
statutory, public or local authority; (e) corporation, related body corporate or
a subsidiary has the meaning given to it in the Corporations Law; (f) bankruptcy
includes any assignment and arrangement of property and composition of debts
under the bankruptcy laws and (in the case of the corporation) the placing of
the corporation in receivership or under any form of administration in
insolvency and a winding up; (g) death includes the winding up or dissolution of
a corporation; and (h) anything and any amount is a reference to the whole or
any part of such thing or amount.
(3) References to: (a) a group of persons is a reference to any one
or more of such group, (b) writing on cognate expressions include all means of
reproducing words in a tangible and permanently visible form; (c) any document
or agreement (including the Lease and/or the Guarantee) includes a reference to
such document or agreement as amended, novated, supplemented or replaced from
time to time; (d) a clause; a schedule or an annexure are to be construed as
reference to a clause of and a schedule and an annexure to the Lease and the
Guarantee and clause includes subclause, paragraph and the like; and (e) to a
person include that person's executors, administrators, successors and (where
permitted) assigns.
(4) Words importing: (a) the singular include the plural and vice
versa; and (b) any gender include all other genders.
(5) Headings are inserted for guidance only and do not affect the
content of any clauses.
30
<PAGE>
(6) No rule of construction applies to the disadvantaged of a party
because that party was responsible for the preparation of the document.
(7) When used in the Lease or Guarantee, the expressions "includes,"
"including," "such as" and similar expressions are not intended to be words of
or to imply limitation.
(8) If there is more than one Lessee, they are bound jointly and
individually and every reference to the Lessee applies to each and every Lessee.
(9) If there is more than one Lessee, they are bound jointly and
individually and every reference to the Guarantor applies to each and every
Guarantor.
61. Applicable Law. The law applicable to the Lease and the Guarantee is
the law of the state or territory specified in Item 9 of the Particulars.
31
<PAGE>
GUARANTORS - IMPORTANT INSTRUCTIONS TO BE READ BEFORE SIGNING
1. THE GUARANTEE AND INDEMNITY IS A VERY IMPORTANT DOCUMENT AND YOU
SHOULD READ IT CAREFULLY TO ENSURE THAT YOU CLEARLY UNDERSTAND YOUR
OBLIGATIONS UNDER IT.
2. SANWA AUSTRALIA FINANCE LIMITED BELIEVES THAT YOU SHOULD SEEK LEGAL
ADVISE AS TO THE EFFECT OF THE GUARANTEE AND INDEMNITY AND URGES YOU
TO DO THIS. IF ANY PART OF THE GUARANTEE AND INDEMNITY IS NOT
UNDERSTOOD, DO NOT SIGN IT UNTIL YOU FIRST SEE YOUR OWN SOLICITOR AND
HAVE HIM OR HER EXPLAIN IT TO YOU.
3. IF YOU HAVE ANY DOUBTS AS TO YOUR FINANCIAL ABILITY TO COMPLY WITH THE
OBLIGATIONS IMPOSED BY THE GUARANTEE AND INDEMNITY YOU SHOULD CONFER
WITH YOUR ACCOUNTANT OR FINANCIAL ADVISER.
4. PRIOR TO SIGNING THE GUARANTEE AND INDEMNITY, YOU SHOULD BE FULLY
AWARE OF THE FINANCIAL POSITION OF THE LESSEE. THIS IS BECAUSE YOU ARE
LIABLE TO PAY THE AMOUNT WHICH THE LESSEE OWES TO SANWA AUSTRALIA
FINANCE LIMITED. IF YOU HAVE ANY DOUBTS IN RELATION TO THE LESSEE'S
FINANCIAL POSITION, YOU SHOULD SEEK ADVICE FROM YOUR OWN SOLICITORS,
ACCOUNTANT OR FINANCIAL ADVISER.
EXECUTED by the Guarantor on _____________________, 19___.
The common seal of the Guarantor ) Signed by the Guarantors) )
was affixed by authority of a ) )
resolution of the board of ) )
directors in the presence of ) )
)
)
)
)
The common seal of the Guarantor ) )
was affixed by authority of a ) )
resolution of the board of ) )
directors in the presence of ) )
)
)
)
The common seal of the Guarantor ) )
was affixed by authority of a ) )
resolution of the board of ) )
directors in the presence of ) in the presence of )
)
Witness )
32
<PAGE>
The Financier and the Lessee, having agreed to the terms and conditions set out
in this Agreement execute this Agreement.
EXECUTED by the Lessee on ___________________, 19___
The common seal of the Lessee ) Signed by the Lessee )
was affixed by authority of a ) )
resolution of the board of ) )
directors in the presence of ) )
)
TOTAL ENERGY SYSTEMS LIMITED )
010 876 150 )
)
)
)
in the presence of )
)
Witness )
OFFICE USE ONLY: SANWA AUSTRALIA FINANCE LIMITED accepts the above offer to
lease on _____________________, 199__ by its Authorized Officer:
33
<PAGE>
NORTHERN CITY FINANCE
28 BALACAVA STREET
P.O. BOX 7062
WOOLLOONGABBA, EAST BRISBANE
QLD, 4102
TELEPHONE: (07) 3391-3933
FACSIMILE: (07) 3391-4402
06-Nov-96
Mr. Rodgers
Total Energy Systems Pty Ltd.
Level 9,371 Queen Street
Brisbane
QLD 4000
Dear Mr. Rodgers
We would like to take this opportunity of thanking you for allowing us to
assist you with your finance requirements. Listed below are details of this
transaction, for your records.
Borrower: Total Energy Systems Pty Ltd. A.C.N.
010 876 150
Finance Company: Sanwa
Consultant: Jeff Graham
Type of Loan: Lease
Commencement of Date: October 1996
Amount Financed: $36,021.00
Term/Payment: 36 x $897.84
Method of Payment: Coupon Book
Residual Value: $10,806.30
Security: (U) Nissan DX 4 x 4 Utility Rego No.
812 DOQ
Finishing Date: October 1999
Should we be able to assist you in the future, do not hesitate to contact
the undersigned.
Wayne Milner Joe Graham
DIRECTOR DIRECTOR
34
<PAGE>
SANWA AUSTRALIA FINANCE LIMITED
ACN 008 492 582
LEASE AGREEMENT
INCLUDING COLLATERAL SECURITY AND GUARANTEE AND INDEMNITY
Particulars
1. Name and Address of Financier
SANWA AUSTRALIA FINANCE LIMITED ACN 008 492 582 of
1 EAGLE STREET, BRISBANE QLD 4000
2. Name and Addresses of Lessee (insert full name and if the Lessee is a
corporation) its ACN or ARBN, address and facsimile number)
TOTAL ENERGY SYSTEMS LIMITED (ACN 010 876 150)
LEVEL 9
371 QUEEN STREET
BRISBANE QLD 4000
3. Name and Addresses of all Guarantors who have given or are to give a
guarantee and indemnity to the Financier in respect of the obligations of
the Lessee under this Lease (interest full names and (if any Guarantor is a
corporation) its ACN or ARBN, addresses and facsimile members).
4. Description of Equipment
One (1) only Nissan Patrol RX Wagon
REGISTRATION NO: 9KA303
ENGINE NO: RD28450987
VIN: JN1WYGY60A0560894
5. Location of Equipment: CANNINGTON
6. Periodic of Lease: 36 months commencing on 24th, December, 1996.
7. Residual Value on Termination of Lease: $15,810.00
8. The rate for the purpose of clause 7(2) is 5.50% per annum.
9. Applicable Law: The law of the state or territory to apply is QUEENSLAND.
10. ________ Instruments:
35
<PAGE>
______ entire rent payable by the Lessee to the Financier under this Lease
payable immediately, but it the rent installments set out below are paid to the
Financial on the due dates, the Financier will not exercise the rights in
respect of non-payment nor require interest to be paid. The rent installments
which the Financier will accept are as follows:
<TABLE>
<CAPTION>
Number of Rent Amount of Rent Stamp Duty Total Rent Payment Commencing On To and Including
Installments Installment Installment Frequency
<S> <C> <C> <C> <C> <C> <C>
1st 36 $879.26 $16.35 $895.61 Monthly 24/12/96 24/11/99
Then
Then
Then
Then
Then
</TABLE>
36
<PAGE>
EXHIBIT 10.27
GE Capital (NZ) Limited
Lease Agreement
Table of Contents
Page Number Agreement
- ----------- ---------
1-3 Memorandum of Initial Disclosure
4-20 Master Lease Agreement Number NZ0824
21-24 Guarantee
25 Supplement
26 Repayment Schedule of Supplement
27 Certificate of Acceptance
<PAGE>
ADDENDUM TO THE INITIAL SUPPLEMENT
MEMORANDUM OF INITIAL DISCLOSURE UNDER
CREDITS CONTRACTS ACT 1981
<TABLE>
<CAPTION>
1. Name and address of GE Capital (NZ) Limited
Creditor: Level 2
11 Akepiro Street, Mt Eden,
Auckland, New Zealand
2. Amount of Credit
Cash price Amount GST
---------- ------ ---
<S> <C> <C>
Charges (not comprised in the $63,568.89 $7,946.11
total cost of credit)
(a) Freight $ --
(b) Installation $ --
(c) Statutory Fees $ --
(d) Insurance $ --
(e) Other Charges $ --
(specify) ---------- ---------
Sub-totals $63,568.89 $7,946.11
Plus GST $ 7,946.11
----------
Cash price $71,515.00
==========
Less
----
Deposit/Trade In $ --
----------
Amount Financed
(Amount of Credit) $71,515.00
==========
3. Total cost of Credit:
(a) Finance Charge
for [36] months $14,386.83
(b) Transaction Fees $ --
(c) Other charges
(specify) $ --
----------
Total Finance Charges
(Total Cost of Credit $14,386.83
==========
4. Finance Rate:
(which has been rounded to 12.43%
nearest 1/4%)
5. Payments Required:
(a) Amount of each payment: Thirty Six (36) payments of
$2,003.00 (including GST of
$220.73).
(b) The number and frequency 36 installments payable
of payments: monthly in advance.
</TABLE>
2
<PAGE>
(c) The dates when the ___ day of every month
payments are to be made commencing from _________
[or a statement that 1995.
enables the debtor to
determine those dates]:
(d) The places where payments Citibank NA NZ branch in
were to be made. the account held by GE
Capital (NZ) Limited.
6. Other terms of the contract.
All terms of the contract not disclosed in items 1 to 5 inclusive above are
contained in Master Lease Agreement No. NZ0824 dated ______________ 1995,
------ -
the Deed of Guarantee and in Supplement No. NZ0824S1, copies of which are
--------
annexed to this Disclosure Memorandum.
7. Cash price of Equipment: $71,515.00(including GST)
8. Statement of Rights:
The Credit Contracts Act 1981 gives you a right for a short time after the
terms of this contact have been disclosed to you.
(a) To cancel the contract (but you cannot do this if you have taken
possession of the goods, or if you bought them at an auction); or
(b) To cancel the credit and pay the cash price for the goods.
HOW TO CANCEL
If you want to cancel this contract, or cancel the credit and pay only the cash
price for the goods, you must give written notice to the person who sold or
leased you the goods that you want to cancel. If you intend to keep the goods
and just repay the credit you must pay the cash price to the person who sold or
leased you the goods within 15 working days after the day you give notice.
Saturdays, Sundays, and national public holidays are not counted as working
days.
TIME LIMITS FOR CANCELLATION
If the disclosure documents are handed to you directly you must give notice that
you intend to cancel within three working days after you receive the documents.
3
<PAGE>
If the documents are mailed to you, you must give the notice within seven
working days after they were posted.
WHAT YOU MAY HAVE TO PAY IF YOU CANCEL
If you cancel the contract the person who sold or leased you the goods can
charge you:
(a) The amount of any legal fees or other expenses that he has had to pay (such
as surveys, credit reports, etc);
(b) Charges for any incidental services he has provided (such as inspections,
alterations, etc).
If you only cancel the credit and decide to pay the cash price for the goods,
you can be charged, in addition (a) and (b) above:
(c) Interest for the period from the day you receive the goods until the
day you pay the cash price.
IF THERE IS A DISPUTE REGARDING YOUR RIGHTS UNDER THE CREDIT CONTRACTS ACT
1981, OR IF YOU THINK THAT THE SELLER/LESSOR IS BEING UNREASONABLE IN ANY
WAY, YOU SHOULD SEE A SOLICITOR IMMEDIATELY.
9. Acknowledgement.
The Customer acknowledges:
(a) it has received and holds a copy of the Master Lease Agreement No.
NZ0824, referred to in item 6 above;
------
(b) it has received a copy of Supplement No. NZ0824S1 referred to in item
--------
6 above; and
(c) it received a copy of the Deed of Guarantee; and
(d) it received a copy of this Disclosure Memorandum on the date set out
below.
DATED 1995
THE COMMON SEAL of )
Total Energy Systems (N.Z.) Limited )
was fixed by authority of the )
Board of Directors on the ___ day of )
____________ 1995 in the presence of: )
/s/ K. J. Harman
________________________________ ---------------------------
Director/Secretary Director
4
<PAGE>
GE Capital (NZ) Limited
Master Lease Agreement
NOTES: 1. This Master Lease Agreement can only be used:
(a) If the Customer is:
(i) a company which has a paid up capital of at least
NZ$1,000,000 or is a member of a group of Companies in which
one member of the group has a paid up capital of at least
NZ$1,000,000; or
(ii) the Government, a Government agency or a local authority; or
(b) Where the equipment to be leased and/or licensed has a cash price
of more than NZ$250,000.
(Ref. Credit Contracts Act 1981 (NZ))
2. This Lease will be a specified lease for the purposes of the
---------
Income Tax Act 1976 (NZ).
5
<PAGE>
Agreement Number: NZ0824
THIS AGREEMENT is made on 1995
BETWEEN:
1) GE CAPITAL (NZ) LIMITED a company incorporated in New Zealand and having
its registered office at Level 2, 11 Akepiro Street, Mt Eden, Auckland, New
Zealand of the one part ("GE Capital"); and
2) THE PARTY OR PARTIES name and described in the Schedule hereto, of the
other part ("Customer").
PART 1: PRELIMINARY
1.1 Definitions
In this Agreement, unless the context otherwise requires:
"ACCEPTANCE DATE" means in relation to any Equipment, the date that the
Supplement for that Equipment is accepted by GE Capital;
"CUSTOMER" means the party or parties described in the Schedule to this
Agreement as the Customer (and where more than one, each and all of them)
and, in the case of an individual, his executors and administrators and, in
the case of a company, its successors;
"DISCOUNT RATE" means the rate per centum per annum. equal to the gross
internal rate of return applied by GE Capital in calculating the Periodic
Payments payable for the lease and/or licence of any Equipment less four
per centum (4%) per annum;
"EQUIPMENT" means the equipment specified in all Supplements hereto and any
part thereof leased or licenced under this Agreement.
"EXPIRY DATE" means in relation to any Equipment, the last day of the
Payment Period of the Supplement in which that Equipment is specified or
such other later date as GE Capital agrees to in writing;
"GE CAPITAL" means GE Capital (NZ) Limited and its successors and assigns.
"GST" means goods and services tax imposed pursuant to the Goods and
Services Tax Act 1985 or any tax imposed in substitution therefor;
6
<PAGE>
"INSTALLATION SITE" means the location/installation site of any Equipment
as specified by the Customer in a Supplement;
"OFFICER" means a duly authorised representative of GE Capital;
"PAYMENT PERIOD" means the period during which the Customer shall make
Periodic Payments as set out in Clause 2.4 hereof;
"PERIODIC PAYMENT" means the payments referred to in a Supplement;
"RESIDUAL VALUE" means, in relation to any Equipment specified in a
Supplement, the amount specified as the residual value of that Equipment;
"SUPPLEMENT" means a supplement to this Agreement which refers to this
Agreement and which has been signed by the Customer and accepted by GE
Capital;
1.2 FORMATION OF AGREEMENT
This Agreement and any Supplement shall not bind GE Capital unless and
until it has been accepted and signed on behalf of GE Capital by an Officer
of GE Capital. The signing of this Agreement and of any Supplement on
behalf of GE Capital shall of itself and without notice thereof to the
Customer constitute an acceptance creating a contract between GE Capital
and the Customer. GE Capital shall return to the Customer in the case of
this Agreement, an acknowledgement of this Agreement and in the case of any
Supplement, an acknowledgement copy of such Supplement signed by an Officer
of GE Capital.
1.3 TERM OF AGREEMENT
This Agreement shall be effective and bind the Customer from the date on
which it is signed on behalf of GE Capital and shall continue, unless
sooner terminated in accordance with this Agreement, in full force and
effect until all the Customer's obligations hereunder and under any
Supplement are fulfilled.
1.4 SUPPLEMENTS
This Agreement shall be read in conjunction with any Supplement, which
shall be construed as an integral part of this Agreement. The Customer
agrees that a Supplement shall be effective and bind the Customer from the
date on which it is accepted by GE Capital and that the Customer shall be
obliged
7
<PAGE>
to take delivery of ind take on lease and/or take on licence the Equipment
specified in the Supplement and observe and perform its obligations
contained herein with respect to that Equipment as from the date of such
acceptance including, without limiting the generality of the foregoing, its
obligation to insure the Equipment from the date the Equipment is delivered
to the Customer.
1.5 NON-REPLACEMENT OR ADDITION OF EQUIPMENT
The Equipment specified in a Supplement shall not be replaced by any other
goods and no other goods shall be added to the Equipment so specified
whether the goods are of a class the same as or of a class different to the
said Equipment leased in that Supplement.
PART II: DELIVERY AND METHOD OF PAYMENT
2.1 LEASE
In accordance with the terms and conditions of this Agreement, GE Capital
agrees, at the Customer's request from time to time, to acquire Equipment
as specified in a Supplement and to lease that Equipment to the Customer.
2.2 COMMENCEMENT OF LEASE
The lease of any Equipment specified in a Supplement shall commence
immediately on the date of the delivery of those goods to the Customer and
shall continue until the last day of the Payment Period of that Supplement.
2.3 DELIVERY
(a) The Customer shall arrange for delivery of the Equipment specified in
a Supplement to the Customer's installation Site and ensure that that
Equipment is installed (where required) and made ready for operation
in accordance with the manufacturer's specifications (where required),
all at no cost to GE Capital.
(b) The Customer agrees that GE Capital shall have no responsibility to
the Customer for or arising out of any delay in delivery of any
Equipment The Customer and not GE Capital shall bear the risk of
damage to the Equipment incurred in the course of delivery.
(c) GE Capital does not at any time make any representation or warranty
that the premises in which or where the Equipment is to be
located/installed are in a condition
8
<PAGE>
suitable for the delivery, installation or operation of the Equipment.
2.4 PERIODIC PAYMENTS
(a) A Supplement shall specify a payment period (hereinafter called the
"Payment Period") which shall commence on the first day of the month
following the last Acceptance Date to occur with respect to the
Equipment specified in that Supplement and shall continue for the
number of complete calendar months specified in that Supplement.
(b) The Customer shall pay to GE Capital the Periodic Payments specified
in a Supplement in advance as follows:
(i) the first Periodic Payment shall be paid on the first day of the
Payment Period; and
(ii) the remaining Periodic Payments shall be paid on the first day of
each and every month (or such other periodic period as may be
specified in that Supplement) during the Payment Period of that
Supplement.
(c) The Periodic Payments specified in a Supplement shall be paid in New
Zealand dollars to GE Capital at its address specified above or at
such other place as GE Capital may direct. Until GE Capital directs
otherwise in writing, all Periodic Payments shall be by direct debit
on the Customers bank account and the Customer will upon request by GE
Capital sign all necessary authorities and other documents to permit
payment by direct debit .
(d) The Periodic Payments payable in respect of Equipment supplied under
Supplements from time to time shall be calculated by reference to GE
Capital's costs of funds current at the time of acceptance by GE
Capital of such Supplements.
(e) The Customer shall pay any other moneys payable under this Agreement
directly to GE Capital.
2.5 OVERDUE MONEYS
If any Periodic Payment or other moneys payable hereunder remain unpaid for
more than fourteen (14) days after the due date for payment thereof, the
Customer shall pay interest on those moneys calculated on a daily basis at
the rate of twenty per cent (20%) per annum from and after such due date
until payment of such moneys in full to GE Capital. The Customer
acknowledges that such interest is a genuine pre-estimate of
9
<PAGE>
the cost of GE Capital funding such overdue moneys and is not a penalty.
PART III: GENERAL TERMS AND CONDITIONS
3.1 USER OF EQUIPMENT
The Customer agrees that the Equipment shall be used in a proper and
skillful manner by properly trained and competent persons in compliance
with the manufacturer's requirements, recommendations and instruction
manuals and with all laws, rules and regulations of the jurisdiction
wherein the Equipment is located from time to time. The Customer shall pay
all costs, expenses, fees and charges incurred in connection with the use
and operation of the Equipment including but not limited to supplies,
fittings and accessories.
3.2 CONTROL OF EQUIPMENT
The Customer shall at all times retain possession and control of the
Equipment and shall not, without the prior written consent of GE Capital
sell, assign, pledge, sublease, mortgage, charge, let or hire, part with
possession of or otherwise dispose of or deal with the Equipment or any
part thereof, or remove any item of Equipment (excluding motor vehicles)
from the Installation Site, and the Customer shall not agree, attempt,
offer or purport to do any such things.
If the Equipment is a motor vehicle the Customer shall not remove such
vehicle from New Zealand.
3.3 REGISTRATION AND INSURANCE OF MOTOR VEHICLES OR PRESCRIBED GOODS
(a) If the Equipment is a motor vehicle, the Customer shall have and keep
at its own cost the same duly registered at all times as required by
any relevant law in the name of the Customer as if it were the owner
and have and keep the same insured against third party risk to the
extent required by law by a policy insuring to the benefit of both
parties hereto.
(b) If the Equipment consists of goods to which a register of security
interest or encumbrances applies the interests of GE Capital shall be
registered in the appropriate register as owner of the Equipment.
(c) If the Equipment consists of goods GE Capital's title to which may be
defeated by a subsequent bona fide purchaser of the goods for value
without notice of GE Capital's interest, the Customer shall ensure
that the goods are
10
<PAGE>
sufficiently identified, marked and displayed so as to put third
parties on notice of the ownership of GE Capital in the goods. GE
Capital may it any time affix such identifying plates or marks on or
to the goods and will at all reasonable times be given access to the
goods for such purposes. The Customer shall indemnify GE Capital to
the fall value of the Equipment should GE Capital's interest and title
to the Equipment be lost through the Customer's breach of this
provision.
3.4 MAINTENANCE AND REPAIRS
(a) The Customer agrees that the Equipment shall be maintained in a proper
and skillful manner by properly trained and competent person in
compliance with the manufacturer's requirements, recommendations and
instruction manuals and with all laws, rules and regulations of the
jurisdiction wherein the Equipment is located from time to time. The
Customer shall pay all costs, expenses, fees and charges incurred in
connection with maintenance of the Equipment.
(b) The Customer shall keep the Equipment in proper and secure premises
and shall at all times, at its own expense, keep the Equipment in
proper working order and in as good condition and repair as when
delivered (reasonable wear and tear excepted) and shall, if the
Equipment shall be or become in any way out of order or in need of
repair, have the same repaired by skilled and competent persons.
(c) The Customer shall permit GE Capital to enter upon the premises
whereon the Equipment may or is supposed to be during the normal
business hours of the Customer provided reasonable notice (except in
an emergency where no notice shall be required) is first given to the
Customer for the purpose of inspecting and testing the condition
thereof or examining the state of repair thereof and GE Capital may
serve upon the Customer a notice in writing of any defect for the
repair or replacement of which the Customer may be responsible
hereunder requiring the Customer within a reasonable time to repair or
replace the same. The Customer shall at all times comply with the
reasonable requirements of GE Capital as to the repair, renewal or
replacement of the Equipment or otherwise. In the event of the
Customer failing to carry out the requirements of GE Capital it shall
be lawful but not obligatory for GE Capital to enter upon such
premises with workmen and others and all necessary materials for the
purposes of carrying out such requirements. The Customer shall
reimburse GE Capital on demand for all
11
<PAGE>
costs reasonably incurred by GE Capital pursuant to this Clause.
(d) The Customer shall notify GE Capital in writing immediately if any
defect or fault occurs in the Equipment or if any repair becomes
necessary for the satisfactory working of the Equipment.
3.5 TAXES, STAMP DUTY AND COSTS
The Customer agrees to pay and indemnify GE Capital against any and all
taxes, costs, fees, duties (including GST and stamp duty, if any, except
where the payment of such stamp duty by the Customer is prohibited by law)
or levies now or hereafter imposed or paid or payable by GE Capital or
payable by the Customer in respect of this Agreement, any of the matters
contained herein, the Equipment, any Supplement, Periodic Payments or the
receipt by GE Capital of any moneys hereunder, together with any penalties
or fines in respect of late payment or non-payment thereof and the Customer
shall also pay all other costs, expenses and outgoings (including legal
costs on a solicitor and client basis) incurred by GE Capital in relation
to this Agreement or in the exercise or attempted exercise of any rights or
powers conferred on GE Capital hereunder or by the general law.
3.6 RISK
(a) The Customer shall bear all risk of loss of, damage to or destruction
of the Equipment from the date of delivery to the Customer's premises
until the Equipment is returned to GE Capital whether or not the
Equipment is covered by insurance.
(b) The Customer assumes all risks and liability for the Equipment and for
the use, operation, maintenance, repair and storage thereof (including
but not limited to loss of profits, loss of revenue, consequential
damage, inconvenience or loss of use for any period of time) and for
injuries to or deaths of persons and damage to property however
arising from or incidental to such use, operation maintenance, repair
or storage whether such injuries to or deaths of persons be of agents
or employees of the Customer or of third parties or such damage to
property be of the Customer or of third parties.
3.7 INSURANCE
(a) The Customer shall at its own cost and in the name of GE Capital and
the Customer for their respective rights and
12
<PAGE>
interests keep the Equipment insured for an amount not less than the
full insurable value thereof with a reputable insurance company in New
Zealand in such form and subject to such conditions and covering all
such risks as GE Capital may from time to time require and, in the
absence of any nomination, against loss or damage occasioned by fire,
accident, theft, windstorm, malicious act, storm, tempest, explosion,
rain, water, flood, earthquake and lightning. In addition the Customer
shall at its own cost take out and maintain insurance against public
risk liability and other risks which a reasonably prudent business
person would insure against. The Customer shall deliver such
insurances to GE Capital upon demand and shall duly and punctually pay
all premiums necessary for effecting and keeping such insurances in
force and shall furnish to GE Capital upon demand such certificates or
other satisfactory evidence of the maintenance of the insurances
required hereunder.
(b) The Customer shall keep the Equipment insured from the date it is
delivered to the Customer until the same is returned to GE Capital in
accordance with this Agreement.
(c) The Customer shall not do or permit or suffer any act, matter or thing
whereby such insurances may be prejudicially affected or invalidated.
(d) GE Capital shall be entitled to receive all moneys payable under the
insurances referred to in Clause 3.7(a) hereof and all moneys which
may be payable by any other person in respect of damage to or loss of
the Equipment and the Customer hereby appoints GE Capital its attorney
to recover and/or compromise in its and their names any claim for loss
or damage under those insurances or otherwise and to give effectual
releases and receipts for the same and hereby irrevocably authorises
GE Capital to appropriate any insurance or other moneys received at
its option towards repair and/or restoration of the Equipment or
towards any moneys due or payable by the Customer hereunder or on any
other account whatsoever.
(e) The Customer shall notify GE Capital in writing within twenty four
(24) hours immediately following any loss or damage to the Equipment
howsoever caused or after the occurrence of any event which could or
might lead to a claim under any insurance affected in respect of the
Equipment.
(f) In the event of any total or substantial loss or destruction of any
Equipment, GE Capital may by notice in writing to the Customer
terminate this Agreement with respect to that Equipment and the
Customer shall within
13
<PAGE>
seven (7) days of such notice of termination pay to GE Capital an
amount equal to whichever is the greater of:
(i) an amount equal to the amount specified as Liquidated Damages
pursuant to Clause 3.16 as if such loss or destruction of that
Equipment were a breach of an essential term of this Agreement;
or
(ii) the value of the Equipment immediately prior to such loss or
destruction, such value being certified by a dealer or licenced
valuer in similar or like goods to that Equipment as selected by
GE Capital;
PROVIDED THAT GE Capital shall give credit to the Customer for any
insurance moneys or proceeds of salvage received by it if and when received
but only to the extent of the aforesaid amount.
3.8 INDEMNITIES
(a) The Customer hereby indemnifies GE Capital, its representatives and
authorised sub-contractors and any assignee of GE Capital from and
against any and all losses, damages injuries, claims, liabilities,
demands and expenses, including reasonable legal fees and expenses and
claims for loss of profits and/or economic damage, of any nature
arising out of the installation servicing, maintenance, removal, use,
repair, condition, storage or operation of the Equipment or any part
thereof.
(b) The Customer hereby indemnifies GE Capital, its representatives and
authorised sub-contractors and any assignee of GE Capital from and
against all losses, damages, claims, penalties, liabilities and
expenses of any nature caused by, to, or in respect of the Equipment
including (without limitation):
(i) loss by seizure under distress for rent, execution or other legal
process;
(ii) loss, destruction or damage to the Equipment by fire, accident or
any other cause whatsoever, and
(iii) any claims arising out of the use, operation or keeping of the
Equipment
(c) The indemnities referred to herein shall continue in full force and
effect notwithstanding the termination of this
14
<PAGE>
Agreement or any Supplement with respect to any Equipment.
3.9 OWNERSHIP
The Equipment is, and shall at all times be and remain, the property of GE
Capital or a related company of GE Capital. The Customer shall have no
right, title and interest therein or thereto except as expressly set forth
herein.
3.10 AFFIXATION TO REALTY
Except to the extent necessary to enable the proper use of the Equipment,
the Customer shall not cause or permit the Equipment to be affixed to any
real property or improvements thereon and it is expressly agreed that the
Equipment is, and shall at all times be and remain, personal property
notwithstanding that the Equipment or any part thereof may now be or
hereafter become, in any manner, affixed or attached to real property or
any improvements thereon and it shall not thereby become or be deemed to
become a fixture but shall be removable by GE Capital in accordance with
this Agreement notwithstanding such affixation.
3.11 ACKNOWLEDGEMENT OF GE CAPITAL'S INTEREST
The Customer shall not install, use or place the Equipment or cause or
suffer it to be installed, used or placed, upon any premises held or
occupied by it as lessee, under-lessee or licensee or which are the subject
of any mortgage or charge unless the Customer shall first deliver to GE
Capital an acknowledgement in writing signed by the owner of the premises
and/or the mortgagee or chargee, as the case may be, that the Equipment is
and shall remain the property of GE Capital and shall not be or become
landlord's fixtures or a part of the land or subject to any such mortgage
or charge notwithstanding that the Equipment may be affixed to the land in
any manner whatsoever and that GE Capital may at any time enter on the
premises and detach and remove such of the Equipment as shall be on the
premises.
3.12 LIENS OVER EQUIPMENT
The Customer shall not suffer any encumbrance, charge or lien of any kind
to arise or remain on the Equipment arising or resulting from any act of
the Customer except:
(a) a repairees lien in which event the Customer shall take the necessary
steps to have it removed or satisfied forthwith provided however that
if GE Capital so determines it may remove or satisfy the lien at its
cost
15
<PAGE>
and the Customer shall indemnify GE Capital therefore; and
(b) such lien or charge as may apply to the Equipment in favour of the
Crown in respect of unpaid rates, taxes or duties of any kind
whatsoever in which event the Customer shall forthwith pay the same so
that the Equipment will be free of any lien or charge.
3.13 ASSIGNMENT AND SUB-CONTRACTORS
The Customer shall not, without the prior written consent of GE Capital,
assign this Agreement or any of its rights hereunder. GE Capital may assign
this Agreement or any of its rights hereunder and may sell, assign, pledge,
mortgage, charge or otherwise dispose of or deal with the Equipment or any
part thereof or its interest therein or any part thereof GE Capital may, in
its absolute discretion, sub-contract any of its obligations under this
Agreement.
3.14 DEFAULT
In the event that:
-----------------
(i) the Customer defaults in the payment of any Periodic Payment or other
sum payable hereunder; or
(ii) the Customer defaults in the observance or performance of any of the
terms of clause 3.1, 3.7 or 3.18; or
(iii) the Customer defaults in the observance or performance of any other
term or condition herein and such default is not remedied within 30
days after notice thereof to the Customer by GE Capital; or
(iv) an order is made, a petition or summons is filed or a resolution is
passed for the winding up of the Customer other than for the purposes
of reconstruction or amalgamation; or
(v) the Customer ceases or threatens to cease to carry on its business or
to dispose of the whole or a substantial part of its undertaking or
the Customer is unable to pay its debts; or
(vi) a receiver and/or manager or official manager or provisional
liquidator is appointed, or an encumbrancer takes possession of the
whole or a substantial part of the undertaking or assets of the
Customer, or proceedings are taken against the Customer and no defense
is entered; or
16
<PAGE>
(vii) any distress, execution, sequestration or other process is levied
against the property of the Customer and the amount of the judgment is
not paid out or discharged within seven days; or
(viii) the Customer convenes a meeting or enters or proposes to enter into
any arrangement or composition with its creditors; or
(ix) the Customer becomes insolvent or commits any act of bankruptcy,
(x) without the prior written consent of GE Capital, effective control of
the Customer is altered to any material extent from that subsisting at
the date of this agreement For the purposes of this clause "effective
control of the Customer means:-
(a) control of the composition of the Board of Directors of the
Customer; or
(b) control of more than half of the voting power of the Customer; or
(c) control of more than half of the issued capital of the Customer
excluding any part of it which carries no right to participate
beyond a specified amount in the distribution of either profit or
capital.
(xi) where the Customer is a partnership, there is, without the prior
written consent of GE Capital any change in the composition of the
partnership except where such change arises as a result of death or
disability of a partner;
THEN in any such event GE Capital, without prejudice to any other right or
remedy of GE Capital herein contained or implied or at general law:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Customer of the applicable
covenants and terms of this Agreement or to recover damages for the
breach thereof, and/or
(b) by notice in writing to the Customer, terminate this Agreement with
respect to all or any part of the Equipment leased hereunder,
whereupon all the interest of the Customer in such Equipment
(hereinafter referred to as "Relevant Equipment") shall cease (but the
Customer shall remain liable as hereinafter provided) and in such
event the Customer shall forthwith return the Relevant Equipment to GE
Capital at such place nominated by GE
17
<PAGE>
Capital and in default thereof GE Capital may at any time retake
possession of the Relevant Equipment and the Customer hereby
authorises GE Capital to enter upon any premises where the Relevant
Equipment may be located and take possession of the same and the
Customer hereby waives and releases GE Capital from any liability for
any damage occasioned by the repossession of the same.
3.15 RIGHTS OF TERMINATION
Without prejudice to any other rights and remedies of GE Capital hereunder
or at general law, in the event of the termination of this Agreement
pursuant to Clause 3.14(b), GE Capital may:
(i) retain all Periodic Payments and other monies heretofore paid by the
Customer; and
(ii) re-lease all or any part of the Relevant Equipment for such
consideration and upon such terms as GE Capital thinks fit, or, at its
absolute discretion, sell all or any part of that Equipment at public
or private sale upon such terms as GE Capital thinks fit.
3.16 LIQUIDATED DAMAGES
Where GE Capital terminates this Agreement with respect to any Equipment
under Clause 3.14(b) or by virtue of its rights and remedies at general
law, then, in addition to and without prejudice to any other rights or
remedies of GE Capital herein contained or implied or at general law, the
Customer shall pay to GE Capital forthwith upon such termination as and by
way of Liquidated Damages an amount equal to the aggregate of:
(a) all Periodic Payments and other monies due and payable but unpaid
under any of the terms hereof and payable with respect to the Relevant
Equipment as at the date of termination; and
(b) the total unpaid Periodic Payments which would have been payable over
the balance of the Payment Period (as specified in the Supplement
applicable to the Relevant Equipment) had this Agreement not been
terminated with respect to the Relevant Equipment brought to a present
value as at the date of termination by applying the Discount Rate to
each such Periodic Payment over the period by which the date for
payment thereof is by virtue of this Clause brought forward, together
with an amount equal to any stamp duty payable in respect of such
rebated total; and
18
<PAGE>
(c) the costs and expenses, if any, incurred by GE Capital in repossessing
the Relevant Equipment and in entering upon and removing that
Equipment from the premises whereon they or any part of them are and
in making good any injury caused to the said premises or to the
property of any person by such entry and of repairs reasonably
necessary to bring the Relevant Equipment to a saleable condition and
in storing, registering and insuring the Relevant Equipment; and
(d) the Residual Value of the Relevant Equipment as stated in the Relevant
Supplement brought to a present value as at the date of termination by
applying the Discount Rate to the amount of the Residual Value over
the period by which the date for payment thereof is by virtue of this
clause brought forward, together with an amount of any stamp duty
payable in respect thereof;
LESS an amount equal to:
(i) where the Equipment has come into the possession of GE Capital and has
been sold by GE Capital, the gross proceeds of sale actually received
by GE Capital less GST (if applicable) and all costs and expenses of
and incidental to such sale; or
(ii) where the Equipment has come into the possession of GE Capital and has
been re-leased by GE Capital, the gross payments (brought forward as
stated below), to be received on any re-lease which will fall due for
payment in the period (the "relevant period") between the date of
termination of this Agreement and the date on which the Relevant
Supplement would have expired had it not been terminated, less all
GST, and costs and expenses of and incidental to such re-lease, as the
case may be. In this clause the gross payments to be received shall be
brought to a present value as at the date of termination by applying
the Discount Rate to each such payment over the relevant period.
3.17 OTHER TERMINATION PROVISIONS
(a) GE Capital may ship the Relevant Equipment to any location it desires
in order to effect a re-lease or sale.
(b) In addition to the foregoing, GE Capital shall be entitled to recover
from the Customer any and all damages which GE Capital shall sustain
by reason of any breach by the Customer of any of the covenants and
terms of this Agreement, together with a reasonable sum for legal fees
19
<PAGE>
(including fees on a solicitor and client basis) and such expenses as
shall be expended or incurred in the seizure, lease or sale of the
Equipment.
(c) Without limiting clause (b) above the Customer agrees to pay or
reimburse GE Capital on demand for the costs, charges and expenses of
GE Capital in connection with the contemplated or actual enforcement,
or preservation of any rights under this Agreement (including, without
limitation, any legal fees on a full indemnity basis or solicitor and
own client basis, whichever is the higher).
(d) The Customer hereby authorises GE Capital to enter any premises
occupied by the Customer during ordinary business hours for the
purpose of exercising its rights under Clauses 3.15, 3.16 and 3.17.
(e) The rights and remedies herein provided in favour of GE Capital in the
event of default shall not be deemed to be exclusive, but shall be
cumulative and shall be in addition to all other remedies available to
GE Capital at law, in equity or in bankruptcy.
(f) GE Capital may from time to time, and on such conditions as it thinks
fit, waive its rights arising under Clauses 3.14, 3.15, 3.16 and 3.17
or otherwise, but no such waiver shall affect its rights under those
Clauses or otherwise in respect of any further continuing or recurring
default, breach or event and the taking of possession of the Relevant
Equipment by GE Capital shall not constitute a waiver of any claim of
GE Capital for Liquidated Damages.
(g) The amount to be deducted under Clause 3.16(i) or (ii) shall not
exceed the total of the amount referred to in Clause 3.16(a)-(d)
inclusive.
(h) If the Relevant Equipment is not returned to or recovered by GE
Capital within fourteen (14) days of the date upon which GE Capital is
entitled to repossess the Relevant Equipment, no credit shall be given
under Clause 3.16 until that Equipment comes into the actual
possession of GE Capital provided that GE Capital shall be under no
obligation to take steps to recover possession of that Equipment.
(i) The Customer acknowledges that the amount referred to in Clause 3.16
as Liquidated Damages has been assessed as a reasonable pre-estimate
for loss of profit and other costs and losses incurred by GE Capital
as a result of an early termination of this Agreement with respect to
the
20
<PAGE>
Relevant Equipment and the establishment costs associated with this
Agreement.
(j) Notwithstanding any termination of this Agreement (for breach of an
essential term or otherwise) or the repudiation of this Agreement by
the Customer and the acceptance thereof by GE Capital, the provisions
of Clauses 3.14, 3.15, 3.16 and 3.17 shall continue as remedies
available to be exercised by GE Capital. This Clause shall not limit
the generality of any other Clause which would otherwise survive the
termination of this Agreement.
3.18 SURRENDER
(a) Upon the Expiry Date in respect of any Equipment, the Customer shall
at its own cost deliver that Equipment to a place designated in
writing by GE Capital and surrender possession of that Equipment to GE
Capital. GE Capital shall designate the place at which the Equipment
is to be delivered a reasonable time prior to the Expiry Date.
(b) Upon the receipt of the Equipment by GE Capital following the Expiry
Date applicable to that Equipment or upon receipt by GE Capital of any
Equipment (except in the case of termination pursuant to Clause
3.14(b) hereof) upon the prior termination for any reason (including
voluntary return of that Equipment with the consent of GE Capital) of
the Customer's right to possession of that Equipment, GE Capital shall
either:
(i) dispose of that Equipment either in whole or in part at public
auction or by private auction or treaty or by all or any of such
modes of sale and subject to any condition which in the interests
of such disposal GE Capital may think fit;
(ii) obtain a valuation of the Equipment as described in Clause
3.18(d).
(c) If the net proceeds of such a disposal (after allowing for all costs
and expenses relating to the receipt by GE Capital of the Equipment
and its disposal, including storage and after deducting any GST) is
less than the Residual Value for that Equipment (as stated in the
Relevant Supplement) or an amount determined in accordance with Clause
3.16, whichever is the greater," the Customer shall forthwith upon
demand by GE Capital pay to GE Capital by way of capital indemnity the
amount of any such deficiency (which monies are in addition to
21
<PAGE>
any other moneys or damages payable to GE Capital by the Customer).
(d) If GE Capital is unable to effect a disposal of the Equipment at what
it considers to be a reasonable price within two (2) months of the
date of the same being received into the possession of GE Capital, GE
Capital shall obtain a valuation of the Equipment by an independent
valuer selected by GE Capital and the provisions of Clause 3.18(c)
shall apply as if the Equipment had been sold at the date of the
valuation for a cash price equal to the amount of the valuation less
the expenses incidental to the receipt valuation and storage in the
meantime. Such a valuation may be made at any time. If it is not
possible to value the Equipment, the valuer may value goods of a
similar description and such value shall be taken as the value of the
Equipment.
(e) Nothing herein or in any Supplement shall be construed as giving the
customer any right or option to purchase the Equipment for the
Residual Value or the current market value or any other value
whatsoever.
3.19 LIMITATION OF WARRANTIES & LIABILITY
(a) The Customer acknowledges that in deciding to take a lease of the
Equipment and in entering into this Agreement and any Supplement the
Customer has not relied in any way on GE Capital's skill or judgement
and that the Customer has satisfied himself as to the condition and
suitability of Equipment and its fitness for the Customer's purposes.
The Customer acknowledges that the Customer prior to the execution
hereof examined the Equipment and satisfied himself as to compliance
with the description herein as well as its condition, suitability and
fitness.
(b) To the extent permitted by law, all warranties, representations,
promises, conditions or statements regarding any Equipment or services
to be supplied or performed hereunder, either express or implied,
including, without limiting the generality of the foregoing,
warranties, representations, promises, conditions or statements as to
the suitability or fitness of any Equipment or services for any
particular application, other than those expressly referred to herein,
are hereby expressly excluded.
(c) To the extent permitted by law, GE Capital shall under no
circumstances be liable in any way whatsoever to the Customer nor
shall the Customer have any remedy, in
22
<PAGE>
respect of any claim (whether contractual, tortious, statutory or
otherwise) for any form of damages, losses, costs, injury or harm
sustained or incurred by the Customer in consequence of or resulting
directly or indirectly out of the supply, performance or use of any
Equipment or any other goods or services supplied hereunder or by any
third party or out of any breach, default, fault or negligence of GE
Capital in or in connection with this Agreement or otherwise.
(d) Without limiting the generality of Clause 3.19(c) hereof, but subject
to Clause 3.19(a) hereof, the Customer agrees that GE Capital shall
not be liable in respect of any claim of the Customer (whether
contractual, tortious, statutory, or otherwise) for any special,
incidental, indirect, or consequential damages or for any loss of
profits, revenue or data even if GE Capital should have been advised
of the possibility of such potential loss or damage. The Customer is
solely responsible for the protection and backup of all data and
software used in conjunction with the Equipment.
(e) The terms and conditions in this Agreement that exclude or limit GE
Capital's liability shall apply only to the extent permitted by law.
If there are provisions contained in any statutes in force in New
Zealand from time to time which impose obligations upon GE Capital
which cannot be excluded, restricted or modified or cannot be
excluded, restricted or modified except to a limited extent, then this
Agreement shall be read and construed subject to any such statutory
provisions. If any such statutory provisions apply, then to the extent
to which GE Capital is entitled to do so, its liability under those
statutory provisions shall be limited at its option to:
(i) in the case of the supply of goods:
(1) the replacement of the goods or the supply of equivalent
goods; or
(2) the payment of the cost of replacing the goods or of
acquiring equivalent goods; or
(3) the payment of the cost of having the goods repaired; or
(4) the repair of the goods; or
(5) the refunding to the Customer of the price or fees paid in
respect of the goods giving rise to the liability; and
23
<PAGE>
(ii) in the case of services:
(1) the supplying of the services again;
(2) the payment of the cost of having the services performed
again; or
(3) the refunding to the Customer of any sums paid in respect of
such services.
3.20 DELAYS
GE Capital shall make every effort to perform its obligations to the
Customer on time, but shall not be liable for the consequences of any
delays in performance caused by any event beyond its reasonable control,
including acts of God, war, fire, flood, strike or labour disputes, riot or
civil commotion, sabotage or any act or omission of the Customer or of a
third party.
3.21 LEGAL NOTICE
Unless otherwise provided in this Agreement, any notice required or
permitted to be given hereunder to the parties hereto will be deemed to
have been duly given if in writing and delivered in person or sent by
telegram or telex or mailed by first-class, registered or certified mail,
postage prepaid and addressed to the Customer, or GE Capital, as the case
may be, at its address set forth herein.
3.22 CERTIFICATE
A statement in writing signed by an Officer of GE Capital of an amount due
or owing hereunder as at the date mentioned in such statement and/or as to
any other matter or thing concerning or touching the subject matter of this
Agreement (including the Discount Rate) shall, in the absence of manifest
error, be conclusive evidence that such amount is due or owing hereunder
and/or of all such matters or things as are therein set forth.
3.23 WAIVER
(a) No time, indulgence or waiver of its rights under this Agreement
granted or purported to be granted by GE Capital shall prejudice or
effect GE Capital's interest or rights hereunder or constitute a
waiver or release of any breach hereof by the Customer unless made
expressly by notice in writing from GE Capital to the Customer and
then only in respect of the specific breach referred to.
24
<PAGE>
(b) Any failure by GE Capital to insist upon strict performance of any of
the terms and conditions of this Agreement or any delay by GE Capital
in exercising any of its rights and remedies shall not constitute a
waiver or variation of such terms and conditions or a waiver of any
default or the remedy therefore.
3.24 SEVERABILITY
If any of the provisions of this Agreement are or shall become
unenforceable, void, voidable or illegal then any such term or provision
shall be of no force or effect whatsoever and shall be severed and be
deemed to have formed no part hereof ab initio and the other provisions of
this Agreement shall continue in full force and effect.
3.25 BLANK SPACES
The Customer herein irrevocably authorises GE Capital to complete any blank
spaces appearing in this Agreement or in any Supplement.
3.26 ALTERATIONS
Subject to the obligations of the Customer under Clause 3.4, the Customer
shall not make or permit to be made any alterations to the Equipment or
affix or install or permit to be affixed or installed any accessories,
equipment or device thereon or thereto without the prior written consent of
GE Capital and all parts, accessories, equipment or devices which are
affixed to or installed upon or in the Equipment shall be deemed to be part
of the whole and be the property of GE Capital and subject to all the terms
and conditions of this Agreement.
3.27 THE RIGHTS OF GE CAPITAL
If the Customer fails to carry out any of the provisions of this Agreement,
GE Capital may without prejudice to any of its other rights or remedies do
all things and pay all money necessary to make good such default to the
satisfaction of GE Capital and any monies so paid shall be reimbursed to GE
Capital upon demand. The Customer acknowledges that GE Capital is at
liberty to pay any broker or dealer or any other person who may have
introduced the Customer to GE Capital or whom otherwise may have been
concerned in arranging this Agreement a commission or otherwise confer a
benefit upon such person in respect of any such referral or arrangements.
3.28 RECURRING WARRANTY AS TO BUSINESS PURPOSE
25
<PAGE>
The Customer shall, each and every time it signs a Supplement, be deemed to
represent and warrant to GE Capital that the Equipment specified in that
Supplement to be leased hereunder is to be used (or are reasonably expected
to be used) by the Customer for the purposes of the business carried on by
it (or by it and another person or persons) and that the greater part ((S)f
the amounts payable in relation to that Equipment is or will be (or is
reasonably expected to be) a loss or outgoing necessarily incurred in
carrying on the business.
3.29 MISCELLANEOUS
(a) The Customer acknowledges that it has read this Agreement (including
the terms and conditions set out on each page hereof), understands it
and agrees to be bound by it and further agrees that it is the
complete and exclusive statement of the Agreement between the parties
which supercedes all proposals, oral or written, and all other
representations, communications and prior agreements between the
parties relating to the subject matter of this Agreement.
(b) GE Capital may, upon 30 days' prior written notice, modify the terms
and conditions of this Agreement provided that such modifications
shall only be applicable to Supplements accepted by GE Capital
following the 30 day period but otherwise, except for the foregoing,
the terms of this Agreement may not be amended, modified or rescinded
except by a written instrument signed by all parties; provided that
any such instrument shall only be binding upon GE Capital when signed,
on its behalf by an Officer of GE Capital.
(c) The terms and conditions contained in this Agreement shall prevail
notwithstanding any variance with the terms and conditions of any
order or other documentation submitted by the Customer.
(d) This Agreement shall be construed in accordance with and be governed
by the laws in force in New Zealand and the parties hereby submit to
the non-exclusive jurisdiction of the New Zealand Courts.
(e) Subject to the Customer's observing and performing all its covenants
and obligations hereunder, GE Capital shall ensure that Customer's
quiet possession of the Equipment leased hereunder is not disturbed by
GE Capital or any person claiming through or under GE Capital.
(f) Clause headings are for ease of reference only and shall not affect
the construction of this Agreement.
26
<PAGE>
(g) When two or more parties are named in the Schedule to this Agreement
as the Customer, all covenants, agreements, conditions and obligations
contained herein shall bind those parties and any two or greater
number of them jointly and each of them severally.
(h) Any gender shall include every other gender and the singular shall
include the plural and vice versa.
3.30 AUTHORISED OFFICERS
The undersigned persons are authorised to sign Supplements, Certificates of
Acceptance and other notices or consents under this Agreement on behalf of
the Customer.
NAME POSITION SPECIMEN SIGNATURE
K. J. Harman Director /s/ K. J. Harman
-------------------------
/s/ /s/
------------------- ____________ -------------------------
27
<PAGE>
Executed as an agreement.
THE COMMON SEAL of )
Total Energy Systems (N.Z.) Limited )
was fixed by authority of the )
Board of Directors on the ___ day of )
__________ 1995 in the presence of: )
/s/ K. J. Harman
_______________________________ ---------------------------------------
Director/Secretary Director
ACCEPTED for and behalf of GE Capital (NZ) Limited by its duly authorised
Officer on the ___ day of ____________ 1995.
________________________________________
Authorised Officer
SCHEDULE
NAME OF THE CUSTOMER: TOTAL ENERGY SYSTEMS (N.Z.) LIMITED
ADDRESS OR REGISTERED OFFICE: C/- ERNST & YOUNG
HEALTH BOARD HOUSE, 229 MORAY PLACE
DUNEDIN, NEW ZEALAND
28
<PAGE>
GUARANTEE
THIS GUARANTEE is made on the date set out in Item 1 of the Schedule
BETWEEN
(1) GE CAPITAL (NZ) LIMITED a company incorporated in New Zealand and having
its registered office at Level 2, 11 Akepiro Street, Mt Eden, Auckland
(2) THE PARTY OR PARTIES named and described in Item 2 of the Schedule
(individually and collectively called "the Guarantor"), of the other part.
WHEREAS:
GE Capital has, at the request of the Guarantor (which request is testified by
the execution hereof by the Guarantor), agreed to enter into with the party or
parties named and described in Item 3 of the Schedule (individually and
collectively called the "Customer") the Master Finance Lease, Master Operating
Lease and/or Master Lease Agreement referred to in Item 4 of the Schedule (the
"Agreement") in consideration of the Guarantor entering into this Guarantee.
NOW THIS GUARANTEE WITNESSES as follows:
1. In this Guarantee:
(a) "Agreement" means the Agreement as it may be amended, varied,
consolidated or replaced from time to time;
(b) references to the Guarantor and the Customer shall include their
respective executors and administrators and, in the case of a company,
their respective successors;
(c) references to GE Capital shall include its successors and assigns;
(d) references to winding up or bankruptcy shall include, in the case of a
natural person, bankruptcy, assignment of the person's estate for the
benefit of his creditors or making a deed of arrangement or a
composition in satisfaction of his debts and, in the case of a
company, winding up, liquidation, dissolution and placing of the
company under official management or receivership and/or management;
and
29
<PAGE>
(e) words importing the singular number or plural number shall include the
plural number and the singular number respectively, words importing
any gender shall include every gender and the word "person" shall
include a company and an association of persons.
2. The Guarantor hereby unconditionally guarantees to GE Capital:
(a) the due and punctual payment by the Customer of all moneys now or
hereafter to become owing or payable (whether presently or in the
future or contingently or actually) to GE Capital under the Agreement;
and
(b) the due and punctual observance and performance by the Customer of all
its other liabilities and obligations (whether present or future or
contingent or actual) to GE Capital under the Agreement;
to the intent that should the Customer default in the payment of any such
moneys or in the observance or performance of any such liabilities or
obligations, the Guarantor shall pay such moneys to GE Capital immediately
on demand and indemnify GE Capital against all losses and costs which may
be incurred by GE Capital by reason of any such default (all of which
moneys, liabilities and obligations specified in this Clause 2 are
hereinafter referred to as the Customer's Obligations").
3. This Guarantee is a continuing guarantee and shall be irrevocable and
remain in effect until the whole of the Customer's Obligations have been
paid or satisfied.
4. Where two or more persons are guarantors hereunder, the obligations on the
part of the Guarantor hereunder shall bind those persons and every two or
greater number of them jointly and each of them severally and GE Capital
may at any time proceed against either or both or any or all of those
persons.
5. The Guarantor's Obligations hereunder shall be principal obligations and GE
Capital shall be entitled to demand payment hereunder from the Guarantor
without being required to first proceed against the Customer or enforce any
security it may hold with respect to the Customer's Obligations.
6. The Guarantor's obligations hereunder shall not be effected or prejudiced
by:
(a) any release or variation of the Agreement or the replacement of the
Agreement with any new Agreement or instrument; or
30
<PAGE>
(b) any time, credit or other indulgence given or agreed to be given by GE
Capital to the Customer in respect of its obligations under the
Agreement; or
(c) any other guarantee or security which GE Capital may now or hereafter
hold in respect of the Customer's Obligations or any release or
variation thereof or by reason of any other person becoming or not
becoming a Guarantor of the Customer's Obligations; or
(d) the death, mental incapacity, winding up or bankruptcy of the Customer
or any Guarantor; or
(e) any other act, matter or omission which, but for its provision, might
or would operate to discharge, effect or otherwise prejudice the
Guarantor's liability hereunder.
7. The Guarantor shall not claim the benefit of any security now or hereafter
held by GE Capital for the Customer's Obligations until the whole of the
Customer's Obligations have been paid or satisfied.
8. Upon the winding up or bankruptcy of the Customer, until GE Capital has
received 100 cents in the dollar in respect of the Customer's Obligations:
(a) the Guarantor shall not, without the prior written consent of GE
Capital, lodge any proof of debt in respect of any debt or liability
owed by the Customer to the Guarantor on any account whatsoever or
enforce any security held by the Guarantor from the Customer but shall
hold in trust for GE Capital any such debt, rights of proof and
security;
(b) if requested by GE Capital, the Guarantor shall lodge a proof of debt
in respect of any such debt and enforce any such security and execute
and do all such documents and things as GE Capital may require to
enable GE Capital to receive the benefit of or arising from any such
proof or security; and
(c) the Guarantor hereby irrevocably appoints GE Capital its attorney to
execute and deliver and do such documents and things which GE Capital
may think desirable for giving effect to this Clause.
9. GE Capital may release or otherwise deal with any security now or hereafter
held by GE Capital for any of the Customer's Obligations and/or the
Guarantor's obligations hereunder without releasing or prejudicing the
liability of the Guarantor under this Guarantee and the Guarantor shall not
hold GE Capital responsible for any loss or damage howsoever
31
<PAGE>
suffered by the Guarantor as a result of any such release or dealing.
10. This Guarantee shall continue to be effective or shall be reinstated, as
the case may be, if at any time payment of any moneys payable under the
Agreement or under this Guarantee are avoided or must be repaid or
restored, either in whole or in part, by GE Capital to the Customer or to
the Guarantor (or any official manager, trustee in bankruptcy or
liquidator) by reason of preference or for any other reason whatsoever and
the liability of the Guarantor hereunder shall extend to all such moneys
and such payment shall be deemed not to have discharged the Customer's
Obligations or the Guarantor's Obligations hereunder and GE Capital shall
have the same rights against the Guarantor as if that payment had not been
made.
11. The Guarantor agrees that a certificate signed by or on behalf of GE
Capital stating that the amount or the amounts due to GE Capital by the
Customer and/or the Guarantor hereunder on any account whatsoever shall, in
the absence of manifest error, be conclusive evidence of the facts stated
therein.
12. Any notice required or permitted to be given hereunder to the parties
hereto shall be deemed to have been given if in writing and delivered in
person or sent by telegram or telex or mailed by first-class, registered or
certified mail, postage pre-paid and addressed to the Guarantor or GE
Capital, as the case may be, at their respective addresses set forth
herein.
13. No failure or delay of GE Capital to exercise any of its rights hereunder,
or to insist on strict compliance by the Guarantor of any of its
obligations hereunder, shall constitute a waiver or variation of the rights
of GE Capital to demand exact compliance with the terms hereof.
14. The Guarantor hereby waives in favour of GE Capital all rights as surety so
far as necessary to give effect to anything contained in this Guarantee.
15. GE Capital may at any time during the currency of this Guarantee assign the
benefit of this Guarantee and its rights hereunder. The Guarantor shall not
assign or novate its rights or obligations hereunder without the prior
written consent of GE Capital.
16. This Guarantee shall be construed in accordance with and be governed by the
laws in force in New Zealand and the Guarantor hereby submits to the non-
exclusive jurisdiction of the New Zealand Courts.
32
<PAGE>
Executed as a deed:
THE COMMON SEAL of )
Total Energy Systems Limited )
(A.C.N. 010 876 150) )
was fixed by authority of the )
Board of Directors on the ___ day of )
__________ 1995 in the presence of: )
/s/ K. J. Harman
_____________________________ ----------------------------
Secretary Director
SIGNED by the said )
)
in the presence of: )
) ____________________________
_____________________________ ) Signature of
Signature of Witness
_____________________________
Name of Witness
_____________________________
Address
SCHEDULE
ITEM 1 Date of Guarantee:
ITEM 2 Name of Guarantor: Total Energy Systems Limited
(A.C.N. 010 876 150)
Address or Registered 3rd Floor, 172 Edward Street
Office of Guarantor: BRISBANE, QUEENSLAND
AUSTRALIA 4000
ITEM 3 Name of Customer Total Energy Systems (N.Z.)
Limited
Address or Registered C/- Ernst & Young
Office of Customer: Health Board House
229 Moray Place
DUNEDIN, NEW ZEALAND
ITEM 4 Master Lease Agreement between the above-named. Customer and GE
Capital dated the ___ day of _________ 1995.
33
<PAGE>
GE Capital (NZ) Limited
S u p p l e m e n t
-------------------
________________________________________________________________________________
NZ0824S1 PREPARED 05/10/1995
This Supplement shall be read in conjunction with and subject to the Master
Lease Agreement
Number: NZ0824 DATED 1995
________________________________________________________________________________
Customer Total Energy Systems (N.Z.) Limited
Name: C/- Ernst & Young
Address: Health Board House, 229 Moray Place
DUNEDIN, NEW ZEALAND
________________________________________________________________________________
EQUIPMENT DESCRIPTION
________________________________________________________________________________
Location: 30 Gordon Road
PALMERSTON, OTAGO
NEW ZEALAND
Invoice #2073 Cooke Howlison Toyota
- ------------- ---------------------
One (1) only, 1988 Toyota Hilux Dual Cab 4WD,
Diesel, including: Tonnean Cover.
Chassis No: LN65-0057644
----------- ------------
Engine No: 2L-1442959
---------- ----------
Colour: White
------- -----
Rego No: N08350
-------- ------
Invoice #2074 Cooke Howlison Toyota
- ------------- ---------------------
One (1) only, 1994 Toyota 4 Runner DLX, Diesel,
including: Turbo Kit, Chains & Ski Rack.
Chassis No: JT711LN0208003687
----------- -----------------
Engine No: 3L-3596922
---------- ----------
Colour: GREY
------- ----
Rego No: TN3080
-------- ------
34
<PAGE>
. PERIOD OF LEASE AGREEMENT THIRTY SIX (36) MONTHS
. LEASE INSTALMENTS:
36 periodic payments of $2,033.00 [including GST of $220.73] payable
-- --------- -------
monthly in advance.
. RESIDUAL VALUE:
It is agreed that the total periodic payments are based on an appraisal
value of $12,714.00 at the termination of the lease.
----------
. INSTALLATION SITE:
The equipment listed on the supplement will be located/installed at: 30
GORDON ROAD, PALMERSTON, OTAGO, NEW ZEALAND.
Duly executed for and on behalf of: TOTAL ENERGY SYSTEMS (N.Z.) LIMITED
--------------------------------------------
By its duly authorised officer: /s/ K. J. Harman
-----------------------------------------------
Please print name: K. J. Harman Title: Director
------------ ---------------------------------------
Date: 10/10/95
---------
ACCEPTED for and on behalf of GE Capital (NZ) Limited by its duly authorised
Officer on the ___ day of ____________ 1995
____________________________________________
Authorised Officer
GE Capital (NZ) Limited a company incorporated in New Zealand and having its
registered office GE Technical Services, Level 2, 11 Akepiro Street, Mt Eden,
Auckland, New Zealand.
35
<PAGE>
GE CAPITAL (NZ) LIMITED
CERTIFICATE OF ACCEPTANCE
________________________________________________________________________________
I/We refer to Master Lease Agreement No: NZ0824 dated _______,
------
between us, and to Supplement NZ0824S1 prepared and dated 05/10/95.
--------
________________________________________________________________________________
I/We hereby confirm and certify to you that:
(i) I/We have received the equipment and acknowledge that it is the equipment
described in the supplement.
(ii) The equipment is complete and so far as I/We can practically ascertain
the equipment is in good working order.
(iii) All safety regulations in relation to the equipment have been complied
with.
(iv) The payment dates for the equipment are the day of every
Month/Quarter/Half Year/Year, commencing ___________ 1995,
Duly executed for
and on behalf of: Total Energy Systems (N.Z.) Limited
------------------------------------------------
C/- Ernst & Young
------------------------------------------------
Health Board House, 229 Moray Place
------------------------------------------------
DUNEDIN, NEW ZEALAND
------------------------------------------------
By its duly
authorised officer:/s/ K. J. Harman Date: 10/10/95
---------------------------- --------
Please print name: K. J. Harman
-------------------------
Title: Director
------------------
36
<PAGE>
EXHIBIT 10.28
MASTER LEASE AGREEMENT
THIS AGREEMENT made on the date specified in Part 1 of the Second Schedule
hereto BETWEEN KE FINANCIAL CORPORATION LIMITED of the address set forth in Part
2 of the Second Schedule hereto of the first part AND the part or parties
specified in Part 3 of the Second Schedule hereto of the second part AND the
party or parties if any specified in Part 4 of the Second Schedule of the third
part.
NOW THIS AGREEMENT WITNESSES AS FOLLOWS:
1. INTERPRETATION
1.1 The following terms where used herein and in the Second Schedule hereto
shall unless the context otherwise requires the following meanings:
(a) "Agreements" means each and every lease agreement entered into
pursuant to the terms hereof and any extensions, variations or
renewals thereof (and whether or not such extensions, variations or
renewals were made with the consent or knowledge of the Guarantor).
(b) "Applicable Terms and Conditions" for any Agreement shall mean,
subject to clause 8 hereof, the terms and conditions set out in the
document being the First Schedule hereto.
(c) "Authorised Signatories" means the person or persons from time to time
authorised to make offers on behalf of the Lessee as referred to in
clause 6 hereof.
(d) "common payment date" means any date from time to time agree upon by
KE and the Lessee for the payment of rental installments under lease
agreements entered into pursuant to the terms hereof.
(e) "first installment of rent" shall mean for each lease entered into
pursuant to he terms hereof:
(i) If KE and the Lessee have not agreed upon any common payment
date, rent for one (1) payment period as referred to in the
Schedule of Leased Equipment for that lease; or
(ii) If KE and the Lessee have agreed upon a common payment date, rent
from the commencement date of that lease until the next common
payment date and (unless otherwise agreed by KE) for one (1)
payment period thereafter.
(f) "goods" means goods from time to time leased or offered for lease
hereunder.
(g) "Guarantor" means the party or parties specified in Part 4 of the
Second Schedule hereto together with any other party which may from
time to time guarantee due performance by the Lessee hereunder or
under any Agreement and if there is more than one party who is a
Guarantor within the meaning of this clause then
<PAGE>
Guarantor shall mean all of such parties jointly and each of them
severally.
(h) "KE" shall mean the KE Financial Corporation Limited, its successors
and assigns.
(i) "Lessee" shall mean the party or parties described in Part 3 of the
Second Schedule hereto their successor and permitted assigns.
(j) "relevant Lessee" shall where there is more than one party described
in the Second Schedule hereto as Lessee mean for each offer made
hereunder such of the Lessees as shall have executed the Schedule of
Leased Equipment as Lessee.
(k) "Schedule of Leased Equipment" means a Schedule substantially in the
form annexed hereto and marked "B" or such other form as the KE may
from time to time approve.
1.2 Every reference to person shall include a corporation and vice versa.
1.3 Words importing the singular and plural number shall include the plural and
singular respectively.
1.4 Words importing one gender shall include very other gender.
1.5 The interpretation of any covenant, clause or word mentioned herein shall
not be restricted by reference to any other covenant, clause or word or by
the relative position of that covenant clause or word to any other covenant
clause or word.
1.6 Every covenant by which more persons than one covenant or agree shall bind
such persons and every two or more jointly and each of them severally.
1.7 Every reference in these presents to any statute or act or ordinance shall
be construed as including every statute act or ordinance amending or
consolidating the same or in substitution therefor.
1.8 Headings have been included for ease of reference only and shall not
restrict or affect the interpretation or any provision herein contained.
2. OFFERS BY LESSEE
2.1 The Lessee may from time to time offer to lease goods from KE as herein
provided.
2
<PAGE>
2.2 If there are more than one Lessee shown in the Second Schedule hereto then
offers may be made hereunder by any one or more of such Lessees.
2.3 Every offer to lease goods shall be made by the relevant Lessee signing and
submitting to KE a Schedule of Leased Equipment for such goods together
with a cheque for the first installment of rent and a properly completed
supplier's invoice for such goods. For the purposes of this clause a
properly completed supplier's invoice shall unless KE other agrees:
(i) Be addressed to KE.
(ii) Specify the name of the supplier of the goods.
(iii) Set out a full description of the goods including registration
numbers, engine numbers, serial numbers and other such information
as KE may require to identify the goods.
(iv) Specify whether the goods are new or second hand.
(v) Specify the total purchase price payable in respect of such goods.
(vi) Specify such other information as KE may require.
2.4 The submission of a Schedule of Leased Equipment shall constitute an offer
by the relevant Lessee to lease the goods described therein from KE on the
Applicable Terms and Conditions and the terms and conditions set out in the
Schedule of Leased Equipment.
2.5 The Schedule of Leased Equipment may be by separate document or may be
endorsed on the relevant supplier's invoice.
2.6 Any omission from or misdescription in any document or material purporting
to be a Schedule of Leased Equipment or in any other information required
to be submitted in connection therewith or any failure to otherwise
strictly comply with the procedures herein provided shall not prevent
delivery of the Schedule of Leased Equipment constituting an offer within
the meaning of this clause as if the full and correct particulars had been
set out therein and full and correct procedures had been followed.
2.7 Any offer to lease goods made by a relevant Lessee may be revoked by the
relevant Lessee at any time prior to acceptance by KE but only by notice in
writing delivered by the relevant Lessee to KE at its address shown in Part
2 of the Second Schedule hereto. Such offer shall only be revoked upon
actual receipt by KE of such notice.
3
<PAGE>
3. ADDITIONAL INFORMATION
3.1 Before accepting any offer made by the Lessee hereunder KE may require the
relevant Lessee to provide to it such additional information or such
additional documentation as it may in its absolute discretion determine.
4. CONSIDERATION AND ACCEPTANCE OF OFFERS
4.1 KE agrees that it shall consider each offer made to it pursuant to the
terms hereto provided always that KE may in its absolute discretion reject
any offer made hereunder or accept any offer on such terms and subject to
such conditions as it in its absolute discretion shall determine.
4.2 Any offer made hereunder shall be accepted by KE forwarding to the supplier
referred to in the relevant suppliers invoice the purchase price payable in
respect of the goods as specified in such invoice. On the date KE forwards
such moneys an Agreement shall be deemed to be entered into between KE and
the relevant Lessee in relation to such goods. The commencement date for
such Agreement shall unless otherwise agreed in writing be the date upon
which KE forwards such money.
5. LESSEE'S ACKNOWLEDGMENTS
5.1 The Lessee acknowledges that the details as set out in each Schedule of
Leased Equipment submitted by it to KE shall be conclusive and binding on
the relevant Lessee and the relevant Lessee shall be estopped from
disputing the same or any details endorsed thereon.
5.2 The relevant Lessee shall at all times duly and punctually comply in all
respects with the terms, conditions and provisions of the obligations of
the lessee under each Agreement entered into pursuant to the terms hereof
and under each and every other equipment lease agreement hire purchase
agreement or other contract or agreement whatsoever (whether relating to
provision of financial accommodation or otherwise) between the relevant
Lessee and KE PROVIDED THAT:
(a) Nothing in this clause shall constitute a guarantee or indemnity by
any Lessee in relation to Agreements other than those in respect of
which that Lessee or those Lessees are relevant Lessees to the intent
that in relation to each Agreement entered into pursuant to the terms
of this agreement any Lessee not being a relevant Lessee shall not be
liable as Lessee thereunder;
4
<PAGE>
(b) Nothing in this agreement shall prejudice abrogate or effect any
guarantee or indemnity which any of the Lessees may have granted to KE
(whether hereunder or otherwise) in respect of the Agreements or any
of them in respect of which it is not a relevant Lessee;
(c) If under any of the Agreements entered into pursuant to the terms
hereof the relevant Lessee shall breach an essential term or condition
thereof or there shall occur a repudiation of such Agreement then
there shall be deemed to be a repudiation of every other Agreement.
(d) If under any of the Agreements entered into pursuant to the terms
hereof there shall occur an event of default entitling KE to terminate
such Agreement then there shall be deemed to have occurred an event
entitling KE to terminate every other Agreement.
This provision shall apply to all Agreements whether or not the Lessee
thereunder is the relevant Lessee under the first-mentioned Agreement.
6. EXECUTION
6.1 The Lessee hereby authorises any one of the person or persons named in Part
5 of the Second Schedule hereto (or such other person or persons as it may
from time to time by notice signed under its common seal nominate) to make
on its behalf offers to lease goods from KE pursuant to the terms hereof.
6.2 The Lessee acknowledges that any Agreement entered into pursuant to any
offer made by any Authorised Signatory shall be valid and binding on the
relevant Lessee as if such offer had been properly executed by the relevant
Lessee under its common seal.
6.3 The Lessee may by notice in writing executed under its common seal and
delivered to KE revoke the authority in respect of any one or more of such
persons provided that such notice or revocation shall not be effective
until actual receipt by KE.
6.4 The Lessee may by notice in writing executed under its common seal and
delivered to KE nominate such other person or persons as it may from time
to time think appropriate as additional parties authorised to execute
offers to lease goods pursuant to the terms hereof.
6.5 Where there is more than one party specified as Lessee in the Second
Schedule hereto each such Lessee may separately nominate persons to make
offers on its behalf. In such event the powers in Clause 6.3 and Clause 6.4
may be separately exercised by each Lessee in respect of persons nominated
or to be nominated by such Lessee.
5
<PAGE>
7. NOTICE
7.1 Any notice given or required to be given by the Lessee shall be given in
writing and shall be served or sent by registered mail to KE at its address
specified in Part 2 of the Second Schedule hereto or such other address as
KE may from time to time in writing notify. Such notice shall be deemed to
be served on KE only upon the date that it is actually received by KE.
7.2 Any notice to be given by KE hereunder may be signed on behalf of KE by any
Director secretary or Manager of KE. Such notice may be served by
forwarding the same to the party to be served by prepaid post and if posted
shall for all purposes be deemed to have been received on the day following
posting.
8. RELEVANT LEASE AGREEMENT AND SUBSTITUTION OF TERMS
8.1 Subject as hereinafter provided the Applicable Terms and Conditions shall
mean the terms and conditions set out in the First Schedule hereto.
8.2 KE may from time to time notify the Lessee if it wishes to change the
Applicable Terms and Conditions. Any such changes shall unless both the
Lessee and KE agree in writing not apply to Agreements which have been
entered into prior to the date of acceptance of such change as hereafter
provided.
8.3 The Lessee may accept any such substitution or variation to the Applicable
Terms and Conditions. Any such acceptance shall be by the Lessee signing
Amended Applicable Terms and Conditions or otherwise giving notice of its
acceptance of such substitution or variation. Any such acceptance shall be
signed by the Lessee or by any Authorised Signatory.
8.4 On and from the date the Lessee accepts such substitution or variation the
Applicable Terms and Conditions shall be deemed to be varied to the intent
that any offer made by the Lessee hereunder which has not been accepted at
the date of such variation and all offers made thereafter shall be deemed
to be made upon the Applicable Terms and Conditions varied as hereinbefore
provided and a reference to the Applicable Terms and Conditions shall mean
the Applicable Terms and Conditions as to varied or substituted.
9. TERMINATION
9.1 This agreement may be terminated by any one or the Lessees on behalf of all
Lessees.
6
<PAGE>
9.2 This agreement may be terminated by any one of the Lessees so as to
determine its obligations as Lessee hereunder without determining the
obligations of any other Lessee hereunder.
9.3 This agreement may be terminated by KE in respect of the obligations of all
Lessees hereunder or in respect of the obligations of any one or more
thereof.
9.4 Any termination shall be by written notice signed by the party giving the
same and served on the relevant party. Such notice may be signed by an
Authorised Signatory. Where this agreement is determined in respect of some
only of the Lessees nothing herein will impose any obligation to give
notice of such termination on any other of the Lessees.
9.5 Any termination hereunder shall operate only as to the obligations of the
parties hereunder in relation to future offers to enter into lease
agreements hereunder. Any such termination shall not effect the rights or
liabilities of the parties in respect of any Agreements entered into
pursuant to the terms hereof prior to receipt of such notice.
9.6 On giving or receiving any notice of termination hereunder KE may notify
such supplier or suppliers as KE may in its absolute discretion deem
necessary of the fact that this agreement has been terminated.
10. GUARANTEE & INDEMNITY
10.1 The Guarantor hereby guarantees to KE:
(a) The due and punctual payment by the Lessee to KE of all moneys owing
or which may become owing to KE by the Lessee on any account
whatsoever pursuant to this Master Lease Agreement or any of the
Agreements including but without limiting the generality of the
foregoing:
(i) Any rent payments;
(ii) Any moneys payable to KE as a repayment of any moneys outlaid
by KE arising from any failure by the Lessee to pay the same;
(iii) Any moneys arising out of any indemnity contained in any of the
Agreements;
(iv) Any interest which might be chargeable by KE;
(v) Any other costs or expenses which KE might incur which are
recoverable pursuant to the terms of the Agreements;
(vi) Any amounts of rental which might become payable pursuant to
any holding over by the Lessees upon the expiration of any of
the Agreements;
(vii) Any moneys which might become payable by the Lessees on any
termination of this Master Lease Agreement or any of the
Agreements whether such
7
<PAGE>
termination be by effluxion of time or from the default by the
Lessee or otherwise;
(viii) Any moneys which become payable pursuant to the terms of any of
the Agreements arising from the failure by the Lessee to return
the equipment leased pursuant to the Agreements;
(ix) All moneys advanced by KE to the Lessee under any of the
Agreements;
to the extent that such the Lessee make default in the due and
punctual payment of any of the said moneys then the Guarantor shall
immediately pay the same to KE without the need for KE to give any
notice of such failure or make any demand for such moneys.
(b) The due observance and performance by the Lessee of all of its
obligations to KE whenever made or incurred to the intent that should
the Lessee make default in the performance or observance of any of its
obligations under this Master Lease Agreement or any of the Agreements
then the Guarantor shall immediately pay to KE without the need for KE
to give any notice of such default or make any demand all loss and
damage which KE may suffer or sustain as a result thereof whenever and
as often as such default shall occur.
10.2 As a separate and independent obligation the Guarantor hereby indemnifies
and agrees to keep indemnified KE against any loss KE may suffer or sustain
by reason of the non-payment by the Lessee of any monies due under this
Master Lease Agreement or the Agreements or by reason of the failure by the
Lessee to perform all or any of its obligations under this Master Lease
Agreement or the Agreements.
10.3 The guarantees and indemnities contained in the previous sub-clauses shall
be continuing guarantees and indemnities and shall remain in full force and
effect respectively for as long and shall arise as often as any moneys
shall be or become owing by the Lessee to KE pursuant to this Master Lease
Agreement or any of the Agreements or any determination thereof.
10.4 The Guarantor covenants with KE that the guarantees and indemnities
contained in this Master Lease Agreement shall not in any way be determined
discharged abrogated affected prejudiced or impaired by reason of any of
the following:
(a) Any variation or variations whether with or without the consent or
knowledge of the Guarantor and whenever made of any of the provisions
of any of the Agreements or of this Master Lease Agreement;
(b) Any breach or breaches whether wilful or otherwise of any of the
obligations of the Lessee contained in any of the
8
<PAGE>
Agreements or in this Master Lease Agreement and whenever committed
with or without the consent or knowledge of the Guarantor or KE;
(c) The granting by KE at any time of any time credit forebearance or
other indulgence or concession whatever whether under this Master
Lease Agreement or any of the Agreements or otherwise or by any
neglect omission or delay be KE or by any compromise abandonment
waiver release variation redemption or compounding by KE of any of its
rights whether under this Master Lease Agreement any of the Agreements
or otherwise or by the Guarantor being unaware of any default omission
breach of or neglect on the part of the Lessee or by the holding of
any security by KE;
(d) The winding up or the appointment of a Receiver of the Lessee or of
the Guarantor (in the case of a company) or the death or bankruptcy of
any Guarantor or the Lessee (in the case of a person);
(e) The fact that all or any part of the money owed to KE by the Lessee
may not be or may cease to be recoverable from the Lessee or from any
other person liable in respect thereof for any other reason than that
the same has been fully paid and satisfied;
(f) Any payment whether by the Lessee or any other person which would
reduce or operate in satisfaction or partial satisfaction of the
Guarantor's liability hereunder to the extent of such payment where
such payment is void or avoided for any reason (irrespective of when
such avoidance operates) to the intent that such liability may be
enforced to the full amount thereof as it exists prior to such payment
as if such payment had never been made;
(g) The transfer or assignment of the benefit of these presents to any
person or corporation;
(h) The Lessee being under any legal disability or incapacity or by any
assignment for the benefit of its creditors or by any other dealing
matter or thing which but for this provision could or might operate to
abrogate affect or prejudice this guarantee and indemnity;
(i) Any assignment by the Lessee of any of its rights under any of the
Agreements or under this Master Lease Agreement;
(k) The fact that the guarantee is not executed by all parties named
herein as Guarantor;
(l) The release by KE of any party named herein as Lessee;
(m) The release by KE of any of the parties named herein as Guarantor, or
of any other co-guarantor;
(n) Any other fact circumstance or thing whatsoever which but for this
provision might determine discharge or impair these guarantees and
indemnities.
10.5 The Guarantor shall obtain for itself on its own responsibility and at its
own expense its own information on
9
<PAGE>
all matters affecting his Master Lease Agreement and each and every of the
Agreements or any other liability whatsoever of the Lessee or any
variations thereof or the fulfilment or breach by the Lessee of any of its
obligations.
10.6 KE shall not be under any obligation to the Guarantor to have communicated
to or at any time hereafter to communicate to the Guarantor any such
matters referred to in the two preceding sub-clauses or any facts relating
to such matters (whether within the knowledge of KE its agents or employees
or not) nor shall KE be deemed to have made or now or hereafter to make any
representation to the Guarantor in respect of any such matters or facts.
10.7 Without limiting the generality of the preceding sub-clauses KE shall not
be under any obligation to notify the Guarantor that it has received any
offer pursuant to this Master Lease Agreement or that it has entered into
any Agreement pursuant to the terms of this Master Lease Agreement. This
guarantee and indemnity shall subject to sub-clauses 10.12 and 10.14 hereof
extend to and include all Agreements entered into pursuant to the terms of
this Master Lease Agreement.
10.8 The guarantee and indemnity contained in these presents shall be a
principal obligation and shall not be treated ancillary or collateral to
any other obligation howsoever created or arising to the intent that this
guarantee and indemnity shall be fully enforceable without taking any steps
whatsoever against the Lessee or otherwise unless the same shall have been
satisfied according to the terms hereof and notwithstanding that all or any
one or more of the obligations of the Lessee shall be or be declared to be
in whole or in part unenforceable whether by reason or any statute
(including any statute of limitation) or for any other reason.
10.9 This guarantee and indemnity is independent of and in addition to any other
guarantee or indemnity or security held by or which may hereafter be held
by KE and the Guarantor will not in any way or at any time claim or seek
the benefit of or require the transfer of any such guarantee or security or
any part thereof or be entitled to recover from the Lessee any sum paid to
KE hereunder unless and until all moneys owed by the Lessee to KE pursuant
to this Master Lease Agreement and all of the Agreements have been fully
paid and satisfied nor shall the Guarantor either directly or indirectly
claim or receive the benefit of any dividend or payment out of the
Agreements have been fully paid and satisfied nor shall the Guarantor
either directly or indirectly claim or receive the benefit of any dividend
or payment out of the assets of the Lessee or any other person who may be
liable under any security negotiable or otherwise now or hereafter held by
KE as security for the payment of moneys by the Lessee and in the event of
the Lessee
10
<PAGE>
being made bankrupt wound up or making any arrangement or composition in
satisfaction of its debts the Guarantor shall not prove or claim in the
assets of the Lessee in competition with KE with respect to the obligations
hereby guaranteed so as to diminish any dividend or payment which but for
such proof KE would be entities to receive out of such assets and the
receipt of any dividend or other payment which KE may receive out of such
assets shall not breach or affect the right of KE to recover from the
Guarantor the moneys hereby guaranteed to the full amount thereof.
10.10 A certificate signed by or on behalf of KE by a duly authorised
officer stating the amount owing by the Guarantor under each Agreement
shall in the absence of manifest error be conclusive evidence that the
amount so stated is the amount due by the Guarantor under the
guarantee and indemnity herein contained in respect of such Agreement.
10.11 A certificate signed by or on behalf of a duly authorised officer of
KE stating that any equipment lease agreement entered into between KE
and any of the Lessees is an Agreement for the purposes of this Deed
and was entered into pursuant to the terms of this Master Lease
Agreement shall be conclusive evidence of such fact notwithstanding
that the Lessees and/or KE shall have failed to comply with all or any
of the terms of this Master Lease Agreement.
10.12 The Guarantor may at any time by written notice to KE terminate the
guarantee and indemnity contained but only as to Agreements accepted
or entered into by KE after the date of actual receipt by KE of such
notice of termination. Any such termination shall not in any way
affect the rights or obligations of the Guarantor hereunder in respect
of any of the Agreements entered into on or prior to the date of
receipt by KE of such notice.
10.13 Any notice or demand to be given to the Guarantor may be in writing
and may be served by forwarding the same by pre-paid post to the
Guarantor at the first Guarantor's address shown in Part 4 of the
Second Schedule hereto and if posted shall for all purposes be deemed
to have been received on the day following the date of posting
thereof.
10.14 This clause shall operate and be construed as a separate guarantee and
indemnity in respect of each of the Agreements. This clause shall take
effect as a Cross-Guarantee and Cross-Indemnity where there are two or
more persons included in the definition of "Lessee" and such
11
<PAGE>
persons or some of them are included in the definition of Guarantor.
When this Deed takes effect as a Cross-Guarantee and Cross-Indemnity
it shall be construed mutatis mutandis as a separate guarantee and
indemnity upon the terms and conditions hereof in relation to the
obligation of the relevant Lessee under the Agreement from every party
named as Guarantor hereunder other than the relevant Lessee.
10.15 Where any of the Agreements is one to which Section 114 of the Goods
Act of 1958 of Victoria applies this Guarantee shall be limited so
that notwithstanding any provision hereof the liability of the
Guarantor does not include liability in respect of that Agreement in
excess of the amount which the Lessee is liable by reason of breach of
that Agreement and the reasonable costs of and incidental to the
enforcement of this Guarantee.
10.16 In the event that any Guarantor enters into this Guarantee in the
capacity of trustee of any trust or trusts (hereinafter referred to as
the "Trust") such Guarantor hereby acknowledge that it is empowered
under the terms of the Trust to enter into and to execute this
Guarantee and that the Guarantees herein provided for are for the
benefit of the Trust and that all necessary consents and preconditions
required by any applicable trust deed have before execution hereof by
the Guarantor been given made or done as the case may be and that:
(a) the Guarantor not only enters into the Guarantees herein provided in
its capacity as Trustee of the Trust but also in its own right to the
intent that such Guarantor shall be personally liable for the
performance and observance of such agreements undertakings and
provisions in addition to its liability as trustee of the Trust and
(b) such Guarantor has full complete and unfettered authority and power to
enter into this Guarantee pursuant to the terms of the Trust
comprising the Trust including the power to enter into all provisions
herein expressed or implied and which are to be observed or performed
by the Guarantor and that the entering into of this Guarantee is in
the due and proper administration of the Trust and for the benefit of
the beneficiaries of the Trust.
FIRST SCHEDULE
TERMS AND CONDITIONS
These terms and conditions shall be deemed to be included in all offers made by
the Lessee to enter into Agreements as referred to in clause 2 of the Master
Lease Agreement to which these terms and conditions are a Schedule.
12
<PAGE>
1. INTERPRETATION
In these terms and conditions unless the context otherwise requires:
(a) Terms used herein shall unless the context requires have the meaning given
to them in the Master Lease Agreement.
(b) words importing:
(i) the singular number shall include the plural and vice versa;
(ii) one gender shall include any gender;
(c) if for any Agreement there is more than one Lessee named in the Schedule as
Lessee then the liability of each shall be joint and several;
(d) the following terms shall have the following meanings:
"Account" means such bank account as the Lessor may from time to time
notify to the Lessee.
"Business Day" means any day on which trading banks are open for business
in Sydney.
"Commencement Date" means, in relation to each Agreement, the commencement
date determined as provided for in the Master Lease Agreement.
"Equipment" means the goods set out in the Schedule, all accessories and
fittings thereto, all goods acquired in place or addition thereto and all
log books maintenance records and other records in relation thereto.
"Event of Default" means any of the events specified in Clause 13.
"Event of Loss" means, with respect to the Equipment, the actual or
constructive loss of the Equipment or the loss of the use, due to theft,
destruction, damage beyond repair of the Equipment or the rendering of the
Equipment permanently unfit for normal use from any reason whatsoever, or
the condemnation, confiscation or seizure of, or requisition of title to
the Equipment.
"Lessee" means for each Agreement the relevant Lessee determined as
referred to in the Master Lease Agreement.
"Lessor" means KE Financial Corporation Limited or for each Agreement its
successors or assigns.
"Location" means the location of the Equipment as set out in the Schedule
relating to that Equipment.
"Master Lease Agreement" means the Master Lease Agreement to which these
terms and conditions are a Schedule.
"Rebate Rate" means a rate certified by the Lessor as being two (2) per
cent below the normal interest rate applied by the Lessor in calculating
the rent instalments payable in respect of this Agreement.
"Rent" means all rental moneys owing or payable or to become owing or
payable by the Lessee to the Lessor under this Agreement.
"Rent Payment Date" means with respect to this Agreement the date on which
the Rent falls due for payment during the Term
13
<PAGE>
as specified in the Schedule or otherwise determined according to the
Master Lease Agreement.
"Residual Value" means in relation to the Equipment the residual value
specified in the Schedule relating to that Equipment.
"Schedule" means the Schedule of Lease Equipment in respect of the
Equipment.
"Stipulated Loss" on any date, with respect to the Equipment, means the
amount determined hereunder as if that date was the date of termination by
reason of repudiation of this Agreement in respect of that Equipment.
"Supplier" means in respect of the Equipment the person who transferred
property in the Equipment to the Lessor and any other person who supplied
or constructed all or any part of the Equipment.
"Term" means in relation to each Agreement the lease term specified in the
Schedule relating to that Agreement; and
"Value of the Equipment" means an amount determined at the option of the
Lessor as either:
(i) the net proceeds of a sale which takes place not later than three (3)
months from the date of repossession expiration or termination of this
Agreement (whichever is the latest) at either a public auction of the
Equipment with or without reserve or by a private sale at a price not
less than the highest bona fide offer submitted or private sale to or
through a dealer in goods of a similar description; or
(ii) the amount certified pursuant to a bona fide valuation to be the
wholesale value of the Equipment as at a date not later than four (4)
months after repossession expiration or termination of the Agreement
whichever is the latest by a dealer in goods of a similar description
or a licensed or other competent valuer selected by the Lessor;
2. LEASE
Subject to this Agreement the Lessee agrees to lease the Equipment from the
Commence date for the Term at an entire rent being the Total Rent Payable during
the Term as specified in the Schedule.
3. RENT AND OTHER MONEYS
(a) The Lessee shall pay into the Account free of set-off and all withholdings
instalments of Rent in relation to the Equipment of the amount set out in
the Schedule on each Rent Payment Date and the Lessee's obligation to pay
such Rent instalments is absolute and unconditional under any and all
circumstances whatsoever.
(b) The Lessee shall pay into the Account free of set-off and all withholdings
all other moneys payable by it on any account whatsoever under this
Agreement and the Lessee's obligation to
14
<PAGE>
pay such moneys is absolute and unconditional under any and all
circumstances whatsoever.
4. DELIVERY AND INSTALLATION
The Lessee shall:
(a) obtain delivery of the Equipment directly from the Supplier; and
(b) (unless otherwise agreed in writing with the Lessor) pay all delivery and
installation charges.
The Lessor shall not be responsible or liable for any delay or any loss or
damage incurred in the delivery and installation of the Equipment.
5. TITLE
The Lessee:
(a) acknowledges that from the Commencement Date the Equipment will be and
shall remain the sole property of the Lessor and the Lessee shall be a
bailee of the Equipment only subject to this Agreement;
(b) shall take and allow the Lessor to take all such steps (at the Lessee's
expense) as may be necessary to safeguard and protect the title and rights
of the Lessor in the Equipment and in particular the Lessee shall attach to
the Equipment a notice to the effect that the Equipment is the property of
the Lessor;
(c) shall not affix the Equipment to realty without the prior written consent
of the Lessor;
(d) shall upon becoming bound to return the Equipment to the Lessor obtain and
deliver to the Lessor (at the Lessee's cost) all documents required by law
on any transfer of the registration of the Equipment and any other
documents necessary to have the Equipment registered and insured in the
name of the Lessor or of any other person nominated by the Lessor as owner;
and
(e) shall duly and punctually pay all registration fees, rates, taxes, charges
and impositions payable in respect of the Equipment whether assessed on the
Lessor or the Lessee.
6. QUIET ENJOYMENT
So long as no Event of Default shall have occurred and be subsisting or the
Lessor is not otherwise entitled to terminate this Agreement the Lessee may
possess the Equipment during the Term without interruption from the Lessor or
any other person lawfully claiming for or under the Lessor.
7. USE, MAINTENANCE AND REPLACEMENT
The Lessee shall:
(a) use the Equipment for the purpose for which it is designed and in
accordance with any manufacturers instructions and shall use only qualified
personnel to operate the Equipment;
15
<PAGE>
(b) register, operate and maintain the Equipment in a proper and workmanlike
manner and in accordance with all applicable laws, rules and regulations;
(c) Keep the Equipment in the Lessee's possession and control at the Location
or such other place as the Lessor may in writing approve PROVIDED THAT
where the Equipment is mobile then it may be used within the
State/Territory in which the Location is situated but shall not be used
outside that State or Territory except with the written permission of the
Lessor. Where the Equipment is used outside that State or Territory whether
with or without the permission of the Lessor the Lessee shall indemnify the
Lessor against any additional Stamp Duty arising from such use;
(d) at its own cost, maintain and keep the Equipment in good and substantial
repair and on termination of this Agreement return the Equipment to the
Lessor in such repair;
(e) at its own cost, make such replacements, alterations and additions to the
Equipment as are necessary to enable it to comply with this Clause and any
such replacement, any major alteration or addition shall be deemed to be
part of the Equipment and property of the Lessor;
(f) obtain the Lessor's written approval before undertaking replacements,
alterations or additions to the Equipment; and
(g) not make or authorise any replacement, alteration or addition to the
Equipment which impairs the intended function or use of the Equipment or
reduces the fair market value of the Equipment.
(h) promptly inform the Lessor of the location of the Equipment whenever
requested by the Lessor.
(i) Not create any lien over the Equipment and notify any repairers of such
prohibition.
8. ASSIGNMENTS AND MORTGAGES
The Lessee shall not without the prior written consent of the Lessor sell,
transfer, assign, create any interest, in sub-let, part with possession of or
otherwise dispose of or encumber all or part of the Equipment or its interest
thereon either absolutely or by way of security or agree, offer, attempt or
purport to do any such thing. The Lessor may assign mortgage encumber charge
deal in any way whatsoever with its interest in the Equipment or under this
Agreement.
9. INSURANCES
The Lessee shall:
(a) at its own cost, effect and maintain current in the names of the Lessor and
the Lessee at all times during the currency of this Agreement and any
renewal or holding over such insurances in respect of the Equipment as the
Lessor may require including, without limitation:
(i) third party property damage and injury insurance for such amount as
the Lessor may from time to time approve; and
16
<PAGE>
(ii) fire, accident and theft insurances for a minimum amount equal on any
date to the full replacement, reinstatement or Stipulated Loss value
of the Equipment, whichever is greater with such reputable insurers as
may be approved by the Lessor;
(b) ensure that every insurance policy taken out in respect of the Equipment
provides that:
(i) any notice given to the Lessee is copied to the Lessor;
(ii) the Lessor is named as loss payee in every policy providing for
payment to the insured party;
(iii) the Lessor is given 30 days prior notice of any cancellation or
alteration of the policy; and
(iv) the Lessor's interest is not subject to being defeated or avoided by
reason of non-disclosure, misrepresentation, breach of warranty or
otherwise;
(c) deliver to the Lessor upon request certificates of currency for the
insurances and evidence of the due payment of premiums;
(d) as required under any policy promptly notify the relevant insurer and the
Lessor of the occurrence of any event giving rise to a claim under any
policy in respect of the Equipment and any cancellation or alteration of
any such policy; and
(e) when requested by the Lessor promptly file and prosecute claims under the
policies in accordance with such policies.
(f) not do or suffer to occur anything which could or might prejudice any
insurance or any claim thereunder.
10. LOSS AND DAMAGE
(a) All risk of loss, theft, damage or destruction to the Equipment or any part
thereof, however incurred or occasioned, shall be borne by the Lessee and
the Lessee shall promptly give the Lessor written notice thereof and,
unless such occurrence constitutes an Event of Loss pursuant to paragraph
(b) of this Clause, shall promptly cause the affected part or parts of the
Equipment to be replaced or restored to the condition and repair required
to be maintained by Clause 7 hereof.
(b) If an Event of Loss with respect to the Equipment shall occur, the Lessee
shall pay to the Lessor within 30 days of the said Event of Loss an amount
calculated in accordance with Clauses 16 and 17 hereof as if the date of
loss or destruction was the date of termination by reason of repudiation of
the Agreement in respect of the Equipment.
(c) Any payment received at any time by the Lessor or Lessee from any insurer
with respect to loss or damage to the Equipment shall be applied as
follows:
(i) if such payments are received with respect to any Event of Loss they
shall be paid to the Lessor, but to the extent received by the
Lessor, they shall reduce or discharge, as the case may be, the
Lessee's
17
<PAGE>
obligation to pay the amount due to the Lessor under (b) above with
respect to such Event of Loss; or
(ii) if such payments are received with respect to any loss of or damage
to the Equipment other than an Event of Loss such payments shall
unless an Event of Default shall have occurred and be continuing, be
paid over to the Lessor who shall pay them to the Lessee to
reimburse the Lessee for its payment of the costs and expenses
incurred by the Lessee in replacing or restoring pursuant to (a)
above the part or parts of the Equipment which suffered such loss or
damage. PROVIDED ALWAYS that the Lessor shall not be obliged to make
such payment to the Lessee until such time as the Lessor is
satisfied that all such repairs have been properly effected and that
all costs incurred in relation to such repairs have been paid and
all liens arising therefrom have been released.
11. ASSUMPTION OF RISK AND GENERAL INDEMNITIES
The Lessee:
(a) agrees to assume the entire risk of the operation of the Equipment and,
without limitation:
(i) agrees to use and maintain the Equipment at the risk of the Lessee;
and
(ii) releases to the full extent permitted by law the Lessor from all
liabilities, expenses, claims and demands in respect of any personal
or property damage caused directly or indirectly by the Equipment or
its use or maintenance; and
(b) agrees to pay and to indemnify and hold the Lessor harmless from and
against:
(i) all costs and expenses of installing, operating and maintaining the
Equipment; and
(ii) all liabilities, expenses claims and demands which may at any time
be incurred by the Lessor or made or claimed by any person against
the Lessor directly or indirectly in any manner whatsoever in
connection with the Equipment or this Lease including, without
limitation, those relating to:
(A) the use or operation of the Equipment; or
(B) any failure by the Lessee to observe or comply with any one
or more of its obligations expressed in or implied by this
Agreement;
(c) acknowledges that the instalments of Rent and the Residual Value specified
in the Schedule have been calculated on the _____ of certain tax
assumptions including, without limitation, the rate of company tax payable
by the Lessor, the availability to the Lessor of deductions for
depreciation and assumptions in relation to the tax treatment of the
receipt by the Lessor of instalments of Rent and the Residual Value; and
18
<PAGE>
(d) agrees to pay and to indemnify the Lessor on demand, by way of additional
payments of Rent, and to hold the Lessor harmless from and against the
consequence of any amendment, replacement or alteration in interpretation
or application of any laws, rules or regulations which result in any of the
assumptions referred to in paragraph (c) proving to be incorrect for any
reason whatsoever whether before or after the expiry or termination of the
Agreement and the assumption of risk, acknowledgment and indemnities
contained in this Clause shall survive the expiry or termination of the
Agreement.
12. ESSENTIAL TERMS
(a) The Lessee acknowledges that the following are essential terms of this
Agreement going to the root of this Agreement:
(i) that the Lessee shall pay to the Lessor within 14 days after advice
from the Lessor all moneys from time to time payable by the Lessee
to the Lessor under this Agreement;
(ii) that no event shall occur which shall constitute a repudiation of
any other Agreement entered into pursuant to the Master Lease
Agreement (and whether or not the Lessee is a Lessee under that
Agreement).
(iii) the obligations of the Lessee in Clause 5(b), (c) and (e), 7(f),
7(g), 8, 9; and
(iv) if the Lessee fails to comply with any of its obligations under this
Agreement other than a payment obligation or an obligation referred
to in sub-paragraph (ii) and (iii), the Lessee shall comply with
that obligation or remedy that failure to the Lessor's satisfaction
within 14 days of notice from the Lessor requiring it to comply with
that obligation or remedy that failure.
(v) Any Event of Default other than that referred to in clause 13(a)
shall occur and continue for a period of fourteen (14) days.
(b) Any breach of any of the essential terms referred to above shall constitute
a repudiation of this Agreement by the Lessee entitling the Lessor to
accept such repudiation and by notice in writing to terminate this
Agreement and the Lessee's right to possession of the Equipment.
13. EVENTS OF DEFAULT
If any of the following events occur:
(a) the Lessee breaches any essential term of this Agreement;
(b) notice is given to the Lessor that any insurance policy required under
Clause 9 is to be cancelled or materially adversely modified and a fresh
policy or insurance which ensures compliance with Clause 9 is not taken out
prior to the expiry of such notice;
(c) any representation or warranty made by the Lessee in this Agreement proves
to have been untrue in any respect when made;
19
<PAGE>
(d) any mortgage, charge or other encumbrance created or assumed by the Lessee
over any of its assets is enforced;
(e) any present or future indebtedness of the Lessee for financial
accommodation, borrowed or raised or under any lease or hiring arrangement
becomes due and payable or capable of being declared due and payable prior
to the stated date of maturity of such indebtedness due to a default or is
not paid when due and payable or within any period of grace or if any
indemnity in respect of any guarantee of indebtedness of the Lessee is not
met when due and called upon;
(f) a liquidator, official manager, trustee, receiver, receiver and manager or
similar officer is appointed in respect of any of the assets of the Lessee;
(g) a distress, attachment or other execution is levied or enforced upon or
against any assets of the Lessee;
(h) any steps or proceedings are taken to have the Lessee wound up or declared
bankrupt;
(i) there is any change in the operations, business, assets (financial or
otherwise) management, ownership or control of the Lessee or any other
event or circumstance occurs or comes into existence which in the opinion
of the Lessor would have a material adverse affect on the ability or
willingness of the Lessee to perform its obligations under this Agreement;
or
(j) any of the foregoing occurs with respect to any party which has given
security or a guarantee to the Lessor in respect of the Lessee's
obligations under this Agreement,
THEN at any time thereafter the Lessor may (but without prejudice to its
ability to exercise any other rights and powers under this Agreement) at
its option:
(i) proceed to enforce the performance of the applicable provisions of
this Agreement or to recover damages for a breach; or
(ii) by notice in writing to the Lessee to terminate this Agreement and
the Lessee's right to possession of the Equipment.
14. RETURN AND REPOSSESSION OF EQUIPMENT
Upon the expiry or sooner termination of the lease granted under this Agreement
or of any renewal or extension of such lease the Lessee shall at its own expense
returned the Equipment to the Lessor. If the Lessee fails to return the
Equipment the Lessor may, directly or by its agent, take possession of the
Equipment and for that purpose the Lessor directly or by its servants or agents
and with the authority of and as agents of the Lessee may enter upon any land or
premises where the Equipment is or is reasonably suspected of being.
15. RESIDUAL VALUE
20
<PAGE>
If upon the termination or expiration of the Lease the Lessee returns the
Equipment to the Lessor in accordance herewith or the Equipment is otherwise in
the possession of the Lessor, the Lessee shall pay to the Lessor on demand the
amount if any by which the Residual Value exceeds the Value of the Equipment.
If the Value of the Equipment exceeds the Residual Value, the surplus shall be
applied in reduction or satisfaction of any indebtedness of the Lessee to the
Lessor under this Agreement but the Lessee shall have no claim to or interest in
any further surplus.
16. FAILURE TO RETURN EQUIPMENT ON EXPIRATION OR TERMINATION
If upon the termination or expiration of the Lease the Lessee fails to return
the Equipment to the Lessor in accordance herewith and the Lessor has not then
otherwise regained possession thereof, the Lessee shall pay to the Lessor on
demand by way of liquidated or ascertained damages the Residual Value of the
Equipment. If the Lessor subsequently obtains possession of the Equipment the
Lessor shall apply the sum representing the Value of the Equipment in reduction
or satisfaction of the Lessee's indebtedness under this Lease. Any payment by
the Lessee under his or the preceding clause shall be in addition to all other
amounts payable hereunder and shall be to indemnify the Lessor against a capital
loss it would otherwise suffer. Notwithstanding the terms of clause 15 or
otherwise under this clause, where this Lease is terminated prior to the
expiration of the term set out in the Schedule, the Residual Value shall be the
present value at the date of termination of the originally stated Residual
Value, such present value being calculated by discounting the originally stated
Residual Value on a monthly basis at the Rebate Rate over the period in whole
months by which the date of termination is brought forward pursuant to this
clause.
17. PAYMENTS ON EARLY TERMINATION
Upon termination of this Lease (whether pursuant to clause 12 hereof, clause 13
hereof or otherwise) prior to the expiration of the Term the Lessee shall in
addition to any amounts payable under clauses 15 and 16 hereof and in order to
indemnify the Lessor for the loss sustained in respect of rent installments not
then accrued, pay to the Lessor on demand a liquidated debt equal to the sum of
the present values at the date of such termination of each of the installments
of rent not then accrued but which would thereafter have accrued if this
Agreement had not been terminated prior to the expiry of the term. Such present
value shall be ascertained by discounting each such installment of rent on a
monthly basis at the Rebate Rate over the period in whole months by which the
date for payment of each installment is brought forward by virtue of this
clause.
21
<PAGE>
18. HOLDING OVER
If the Lessee continues in possession of the Equipment after the expiration of
the Term or the termination of this Agreement:
(a) without the Lessor's consent -- the Lessee shall pay to the Lessor by way
of liquidated damages for detention a daily sum equal to the amount
obtained by dividing the amount of the last installment of Rent specified
in the Schedule by the number of days in the last rental period; or
(b) with the Lessor's written consent -- the Lessee shall until the return of
the goods pay to the Lessor a daily rental equal to the amount obtained by
dividing the amount of the last installment of Rent specified in the
Schedule by the number of days in the last rental period,
and in either case the Lessee shall carry out and abide by the terms of this
Agreement as far as applicable.
19. SUPPLIER'S WARRANTIES
To the extent possible and permissible the Lessor hereby assigns to the
Lessee during the term of this Agreement, so long as no Event of Default is
subsisting, the benefit of all claims and rights including warranties in respect
of the Equipment which the Lessor may have against any Supplier or any sub-
contractor of any Supplier and the Lessee shall, at its own cost, assert and
enforce all such claims and rights.
The Lessee shall indemnify and keep the Lessor indemnified from and hold
the Lessor harmless against all loss, cost and damage suffered or incurred by
the Lessor arising out of the Lessee exercising its powers and performing its
obligations under this Clause.
20. EXCLUSION OF WARRANTIES
(a) The Lessee acknowledges and agrees to the full extent permitted by law
that:
(i) in deciding to enter into this Agreement the Lessee has not relied in
any way on the Lessor's skill or judgment or on any statements,
representations or warranties made by the Lessor;
(ii) the Lessee will itself prior to any Equipment becoming subject to
this Agreement have selected and examined it and satisfied itself as
to its compliance with its description as well as its condition,
suitability and fitness for the Lessee's purpose and the validity of
any manufacturer's warranties or guarantees and in every other
necessary respect whatsoever;
22
<PAGE>
(iii) the Equipment as delivered is accepted by the Lessee with all faults
and defects (if any) and delivery as herein provided is conclusive
evidence that the Equipment is in good and substantial working order
and condition and constitutes the Equipment the subject of this
Lease; and
(iv) the Lessor is a financier only and gives no condition, warranty or
undertaking and makes and has made no representation in relation to
the condition, suitability, capacity, quality, design, fitness,
safety of or title to the Equipment; and
(v) any provisions which may be implied in this Agreement under any law
shall not be implied in this Agreement except insofar as such
provisions are not capable of being excluded under any such law and
any liability of the Lessor in respect of any such non-excludable
provision is limited to the full extent permitted by law.
(b) Notwithstanding clause 20(a), if the Lessee is a consumer, it shall have
the benefit of the conditions and warranties implied by the Trade Practices
Act 1974 as amended ("the Act") and nothing in this Lease is intended to
exclude, restrict or modify any statutory obligation of the Lessor if that
cannot lawfully be effected. Subject to the foregoing should the Lessor be
liable for a breach of a condition or warranty implied by Division 2 of
Part V of the Act (not being a condition or warranty implied by Section 69
of the Act) the liability of the Lessor for such breach including any
consequential loss which the Lessee may sustain shall, subject to Section
68A(2) of the Act, be limited to one of the following as determined by the
Lessor:
(i) the replacement of the Equipment or the supply of equivalent
Equipment; or
(ii) the payment of the cost of replacing the Equipment or of acquiring
equivalent Equipment.
References to specific provisions of and circumstances arising under the
Act are intended to include references to equivalent or similar provisions
of and circumstances arising under any State or Territory enactment.
(c) Subject to any legislation to the contrary, the Lessee acknowledges and
agrees that:
(i) the Lessor shall not be liable to the Lessor for any liability claim
loss damage or expense of any kind or nature (including any
consequential loss) caused directly or indirectly by the Equipment or
any inadequacy thereof for any purpose or any defect therein or by
the use or condition thereof;
(ii) the Lessor shall be under no liability with respect to any statements
regarding the Lessee's rights or position with respect to any law
relating to taxation or any other matter;
23
<PAGE>
(iii) this Lease and the Lessee's obligations hereunder shall be unaffected
by any loss or damage whatsoever to or breakdown or defect in the
Equipment; and
(iv) the Lessor is not liable under nor are there any conditions or terms
nor any representations specifications or promises of any kind or
description other than those expressly contained herein.
21. UNDERTAKINGS
The Lessee undertakes to the Lessor that:
(a) It will during the term of this Agreement and any extension thereof furnish
to the Lessor:
(i) within 120 days of the close of each financial year of the Lessee,
copies of the balance sheet and profit and loss accounts of the
Lessee. Such accounts shall, if so required by the Lessor, be audited
by a registered company auditor approved by the Lessor.
(ii) at such other times as the Lessor may reasonably require, true and
correct copies of all financial statements, accounts and reports of
the Lessee for such financial year; and
(iii) on demand, such other information showing the financial position of
the Lessee (its related companies and any guarantor or surety) as the
Lessor may reasonably require; and
(b) (where the Lessee is a corporation) it will comply with all the
requirements of the Companies legislation applicable to it.
22. REPRESENTATIONS AND WARRANTIES
The Lessee represents and warrants for the benefit of the Lessor that:
(a) (INCORPORATION): (Where the Lessee is a corporation) it is duly
incorporated and existing under the laws of its place of incorporation, has
the power to own its property and carry on business as now being conducted
and is duly registered and authorized to do business in any place in which
the Equipment will be located;
(b) (POWER): it has the full power and authority (corporate and other) to enter
into and perform this Agreement and all action on its part necessary for
the authorization, execution and performance of this Agreement has been
duly taken;
(c) (AGREEMENT BINDING): this Agreement has been duly executed and delivered by
the Lessee and is a legal, valid and binding obligation of the Lessee
enforceable against it in accordance with its terms;
(d) (NO DEFAULT UNDER OTHER AGREEMENTS): the execution, delivery and
performance of this Agreement does not contravene the
24
<PAGE>
provisions of any law, rule or regulation applicable to the Lessee or
contravene the provisions of or constitute a default under any agreement to
which it is party or which is binding on it or its assets or result in the
creation of any security interest under any such agreement;
(e) (LITIGATION): there is no litigation, tax claim, proceeding or dispute
pending or to its knowledge threatened against or affecting the Lessee or
its property the adverse determination of which might materially adversely
affect its financial condition or impair its ability to perform this
Agreement;
(f) (FINANCIAL STATEMENTS): the Lessee's financial statements furnished to the
Lessor have been prepared in accordance with generally accepted Australian
accounting principles and practices consistently applied and fairly
represent the financial condition of the Lessee as at the date to which
they relate and the results of the Lessee's operations for the accounting
period ended on such date and there has been no material adverse change in
its financial condition or operations since such date; and
(g) (NEGOTIATIONS): every statement made and all information given by it in
relation to the transaction effected by this Agreement is true and correct.
23. STAMP DUTY AND OTHER TAXES
The Lessee shall promptly pay to the Lessor all stamp duty, financial
institutions duty and any other duties, taxes or imposts including fines or
penalties for late payment payable now and in the future in respect of this
Agreement or the Rent or other monies payable under or pursuant to this
Agreement or in consequence of the expiration or termination of this Agreement.
Such payment shall be made a sand when required by the Lessor and in relation to
installments of Rent shall until further notice shall be paid in the amounts set
out in the Schedule on the due date for payment of Rent specified in the
Schedule.
24. NOTICES
(a) The Lessee agrees that all notices required or desired to be given to
either party pursuant to this Agreement shall without prejudice to any
other method of giving the same be in writing and posted by prepaid post to
that party at its address shown in this Agreement or such other address as
that party may notify to the other party and the day following such posting
shall be deemed the day of giving such notice. Proof of such posting shall
be proof of sufficient service on the Lessee.
(b) Any notice required to be given by the Lessor may be signed by a Director,
Secretary or Manager of the Lessor.
25
<PAGE>
25. TRUSTS
In the event that the Lessee enters into this Lease in the capacity of a trustee
of any trust or trusts (hereinafter referred to as "the Trust") the Lessee
hereby agrees that it is empowered under the terms of the Trust to enter into
and execute this Lease and that all necessary consents and preconditions
required by any applicable trust deed before execution hereof by the Lessee have
been given made or done prior to or at the time of execution hereof (as the case
may be) and that:-
(a) the Lessee not only enters into all agreements, undertakings and provisions
herein expressed or implied in its capacity as trustee of the Trust but
shall also enter into the same in its own right and shall be personally
liable for the performance and observance of such agreements, undertakings
and provisions; and
(b) the Lessee has full, complete, valid and unfettered authority and power to
enter into this Agreement pursuant to the terms of the trusts comprising
the Trust including the power to enter into all provisions herein expressed
or implied and which are to be observed and performed by the Lessee and
that the entering into this Agreement by the Lessee is in the due and
proper administration of the Trust and for the benefit of the beneficiaries
of the Trust.
Without limiting the provisions of this clause, any breach of trust by the
Lessee shall constitute a breach of an essential term or condition of this Lease
entitling the Lessor to exercise all rights and remedies which the Lessor is
entitled to exercise upon the occurrence of a breach of any essential term or
condition of this Agreement.
26. COMMISSIONS
The Lessee acknowledges that lessees may from time to time be introduced to the
Lessor by a broker, agent, dealer or other person and in such circumstances the
Lessor may pay a commission, fee or other remuneration to such broker, agent,
dealer or other person. If this Agreement resulted from any introduction, the
Lessee consents to any such payment to any such person and acknowledges that in
calculating the monies payable by the Lessee hereunder the Lessor may have taken
into account any such payment.
27. GENERAL
(a) (ENTRY): Notwithstanding the provisions of Clause 6 the Lessor shall have
the right at any time without prior notice to enter upon any premises where
the Equipment is believed to be to
26
<PAGE>
inspect, observe and/or test its use and to exercise any of its other
rights arising under this Agreement.
(b) (REMEDY): Whenever the Lessee has failed to do anything which it has agreed
to do under this Agreement then the Lessor may (but is not obliged) without
prejudice to any other rights or powers arising from such failure do such
thing by itself or by other but at the expense of the Lessee as if it were
the Lessee. Any costs incurred by the Lessor in so doing shall be payable
forthwith by the Lessee.
(c) (WHOLE AGREEMENT): The provisions contained in the Master Lease Agreement
these Terms and Conditions and the Schedule cover and comprise the whole of
the agreement between the parties to this Agreement with respect to the
leasing of the Equipment.
(d) (NO WAIVER): No failure to exercise and no delay in exercising on the part
of the Lessor any right or remedy under this Agreement shall operate as a
waiver nor shall nay single or partial exercise of any right or remedy
preclude any other or further exercise of that right or remedy.
(e) (REMEDIES CUMULATIVE):The rights and remedies provided in this Agreement
are cumulative and not exclusive of any rights and remedies provided by law
or any other such right or remedy.
(f) (COSTS AND EXPENSES): The Lessee shall upon demand pay to the lessor all
costs, expenses, duties or fees of or incidental to the preparation,
execution to enforcement of this Agreement or the exercise or attempted
exercise of any right or power of the Lessor under this Agreement
including, without limitation, legal costs on a solicitor-client basis.
(g) (OVERDUE INTEREST): Notwithstanding any grace period the Lessee agrees to
pay interest on any moneys from time to time due an unpaid by the Lessee
under this Agreement at the rate per annum certified by the Lessor as being
2% per annum above the relevant interest rate applied by the Lessor in
calculating the Rent installments, from the date when such moneys fall due
for payment (or in the case of moneys due by way of reimbursement for sums
expended from the date of expenditure if earlier) until they are paid or
satisfied (both before and, as a separate independent obligation, after any
judgment).
(h) (SEVERANCE): Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall as to such jurisdiction be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or effecting the
validity or enforceability of such provision in any other jurisdiction.
(i) (GOVERNING LAW): This Agreement shall be governed by and construed in
accordance with the laws of the State or Territory in which this Agreement
is executed by the Lessor
27
<PAGE>
and the Lessor and Lessee submit to the non-exclusive jurisdiction of the
Courts of such State or Territory.
(j) (CERTIFICATE): A certificate by a manager or the secretary of the Lessor
stating the Lessor's Cost of any item, any amount payable under this
Agreement, the applicable Rebate Rate and the applicable interest rate for
the purpose of calculating the Rebate Rate or the default interest rate for
the purpose of Clause 27(g) shall in the absence of manifest error be
conclusive and binding on the parties to this Agreement.
(k) (ATTORNEYS): Each attorney (if any) executing this Agreement respectively
states that he has at the time of executing this Agreement no notice of the
revocation of the power of attorney under the authority of which he
executes this Agreement.
(l) (SPECIAL CONDITIONS): See Annexure A (if any).
28
<PAGE>
THIS PAGE
HAS BEEN
LEFT BLANK
INTENTIONALLY
29
<PAGE>
SECOND SCHEDULE
PART 1 - DATE
Date:
PART 2 - LESSOR
KE FINANCIAL CORPORATION LIMITED (A.C.N. 002 888 048) Level 5, 9 Castlereagh
Street, Sydney, N.S.W. 2000 Facsimile (02) 231 4660 Telephone (02) 221 7011
PART 3 - LESSEE
LESSEE: Total Energy Systems Limited LESSEE:
ADDRESS: Level 3, 172 Edward Street ADDRESS:
Brisbane QLD 4000
LESSEE: LESSEE:
ADDRESS: ADDRESS:
PART 4 - GUARANTOR
GUARANTOR: GUARANTOR:
ADDRESS: ADDRESS:
GUARANTOR: GUARANTOR:
ADDRESS: ADDRESS:
GUARANTOR: GUARANTOR:
ADDRESS: ADDRESS:
GUARANTOR: GUARANTOR:
ADDRESS: ADDRESS:
30
<PAGE>
PART 5 - AUTHORISED SIGNATORIES
AUTHORISED SIGNATORIES PURSUANT TO CLAUSE 6
NAME: SPECIMEN SIGNATURE 1.x
-------------------
TITLE:
NAME: SPECIMEN SIGNATURE 2.x
-------------------
TITLE:
NAME: SPECIMEN SIGNATURE 3.x
-------------------
TITLE:
IN WITNESS WHEREOF the parties hereto have hereunto set their hands on the _____
day of __________, 199_____.
EXECUTION BY THE LESSEE
IF LESSEE IS A PERSON
(Note: If partnership or business name each partner or proprietor has to sign)
Signed by the Lessee
in the presence of:
________________________ _________________________
Witness Lessee
Signed by the Lessee
in the presence of:
________________________ _________________________
Witness Lessee
IF LESSEE IS A COMPANY
THE COMMON SEAL of Total Energy Systems Limited )
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________
Director
________________________________
Secretary
31
<PAGE>
THE COMMON SEAL of )
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________
Director
_________________________________
Secretary
THE COMMON SEAL of )
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________
Director
_________________________________
Secretary
THE COMMON SEAL of )
was hereunto affixed in accordance with its )
Articles of Association in the presence of: )
Director
_________________________________
Secretary
EXECUTION BY LESSOR
Signed for and on behalf of
KE FINANCIAL CORPORATION LIMITED
by its duly authorised officer _________________________________
EXECUTION BY THE GUARANTOR
IF GUARANTOR IS AN INDIVIDUAL
Signed by the Guarantor
in the presence of:
_________________________________ _________________________________
Witness Guarantor
Signed by the Guarantor
in the presence of:
_________________________________ _________________________________
Witness Guarantor
32
<PAGE>
Signed by the Guarantor
in the presence of:
_________________________________ _________________________________
Witness Guarantor
Signed by the Guarantor
in the presence of:
_________________________________ _________________________________
Witness Guarantor
IF GUARANTOR IS A COMPANY
THE COMMON SEAL of )
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________________
Director
_________________________________
Secretary
THE COMMON SEAL of )
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________________
Director
_________________________________
Secretary
THE COMMON SEAL of )
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________________
Director
_________________________________
Secretary
THE COMMON SEAL of )
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________________
Director
_________________________________
Secretary
THE COMMON SEAL of )
33
<PAGE>
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: ) _____________________
Director
_________________________________
Secretary
THE COMMON SEAL of )
)
was hereunto affixed in accordance with its )
Articles of Association in the presence of: )_____________________
Director
_________________________________
Secretary
KE FINANCIAL CORPORATION LIMITED
ANNEXURE A
LEASE SCHEDULE No.
This Lease Schedule forms part of the Master Lease Agreement ("the Agreement")
dated __________ between KE Financial Corporation Limited of Level 5, 9
Castlereagh Street, Sydney ("the Lessor") and _______________ of
____________________ ("the Lessee"). All terms and conditions of the Agreement
are incorporated by reference in this Lease Schedule to the same extent as if
fully set out in this Schedule.
SPECIAL CONDITIONS
This is the Annexure marked "A" referred to in the Master Lease Agreement dated
_______________________________
_______________________________
34
<PAGE>
EXHIBIT 10.29
LAND LEASE
This LAND LEASE (the "Lease") is made and entered into as of March 1, 1995
(the "Commencement Date"), by and between DSN CORPORATION, an Oklahoma
corporation with headquarters at 16 South Pennsylvania, Oklahoma City, OK 73107
("DSN") and KOCH SULFUR PRODUCTS COMPANY, a Kansas corporation with headquarters
at 4111 East 37th Street North, Wichita, Kansas 67220 ("Koch").
RECITALS:
DSN desires to lease from Koch certain real property, as hereinafter
described, which is located adjacent to Koch's sulfuric acid manufacturing
facility, Wilmington, NC for the sole purpose of constructing a terminal and
plant which will receive, store and ship concentrated nitric acid ("CNA") and
purposes directly related thereto and which will process said CNA with oleum
and/or sulfuric acid into mixed nitrating acid ("Mixed Acid") for distribution
and storage, and purposes directly related thereto. Said plant and terminal
being herein referred to as the "Plant." This recital shall be a part of this
Lease and is incorporated therein by reference.
NOW THEREFORE, the Recitals considered and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. LEASED PREMISES.
----------------
1.1. Demise. Subject to and in consideration of the rents, terms,
------
covenants, and conditions of this Lease, Koch hereby leases, demises, and lets
to DSN, and DSN hereby rents and leases from Koch, along with all appurtenances
thereunto appertaining, the following:
approximately 10,000 square feet of unimproved real estate near Wilmington,
in New Hanover County, North Carolina, generally described as the "Koch
Sulfur Products Company Sulfuric Acid Plant" located adjacent to State
Highway 421 North, Wilmington, NC (the "Koch Facility"), said leased
portion being described and depicted on the diagram attached hereto as
Exhibit "A" and incorporated herein by reference; together with all rights
of ingress and egress for and from said land as depicted or described on
said Exhibit "A" and any reasonable easements reasonably necessary and
proper to supply utility services to the leased premises. Said real estate
is herein referred to as the "Leased Premises".
1.2. Commons Areas. The roads, parking lots, truck scales and rail tracks
-------------
located on the Koch Facility, and marked as "Commons Areas" on Exhibit "A" shall
be designated as Commons Areas and DSN shall have access and use thereof. The
expenses for the usual and ordinary maintenance of the rail tracks shall be pro
rata
<PAGE>
apportioned between Koch and DSN based upon the number of railcars moving over
them. All other Commons Areas shall be maintained by Koch at Koch's expense;
provided that if Koch ceases operations of the Koch Facility, Koch shall be
obligated to maintain only that portion of the Commons Areas sufficient to
permit ingress and egress to the Leased Premises. The Commons Areas shall be
used by DSN solely to conduct its business on and about the Leased Premises.
1.3. Habendum/Quiet Enjoyment. DSN shall have and hold the Leased
------------------------
Premises together with all rights, privileges and appurtenances thereunto
attaching or in anywise belonging, unto DSN for the term set forth in this Lease
and subject to the rents, terms, covenants, provisions, and conditions of this
Lease. So long as DSN is not in material, uncured default under this Lease, DSN
shall and may peaceably and quietly have, hold and enjoy the Leased Premises and
rights for the term set forth herein, subject to the covenants and conditions
contained in this Lease.
1.4. Warranty of Title. Subject to the provision of Section 1.5 hereto,
-----------------
Koch hereby warrants and represents to DSN that Koch is the owner of good and
indefeasible fee title to the Leased Premises, and has all requisite right,
power and authority to enter into this Lease upon the terms and conditions
herein set forth.
1.5. Exceptions. This Lease is made and accepted subject to the following
----------
reservations, exceptions, and other matters:
(a) All matters shown of public records and are enforceable against the
Leased Premises, but no such matter shall limit Koch's warranties, covenants and
agreements contained in Sections 1.1 through 1.4, inclusive; and
(b) Except as otherwise provided for in Article 10 hereof, all matters
visible and apparent.
2. TERM.
----
2.1. Initial Term. This Lease shall be and continue in force and effect
------------
for a term of ten (10) years and six (6) months (the "Initial Term") effective
on the Commencement Date written above, unless sooner terminated or canceled in
accordance with the provisions hereof.
2.2. Extension Options. Provided DSN is not in material, uncured default
-----------------
in the performance of its covenants and agreements under this Lease, and upon
DSN providing written notice of its intention to renew this Lease at least one
(1) year prior to the expiration of the Initial Term, upon expiration of the
Initial Term, this Lease shall renew for one additional five (5) year term (the
"Secondary Term").
2
<PAGE>
Thereafter, if the Lease has been extended for the Secondary Term and
provided DSN is not in material, uncured default in the performance of its
covenants and agreements under this Lease, and if DSN desires to extend the Term
of this Lease for an additional (5) year term (the "Third Tenn"), DSN shall
provide written notice to Koch of its desire to do so at least one (1) year
prior to the expiration of the Secondary Term. Within thirty (30) days after
said notice, Koch shall respond as to whether it desires to extend the Lease for
a Third Term. However, this Lease shall not be extended for a Third Term or for
any terms thereafter unless mutually agreed by the parties. Likewise, any
extensions for a fourth or additional terms shall only be upon mutual agreement
of the parties pursuant to the procedure set forth for the Third Term.
2.3. Early Termination. Subject to the provisions of Section 1.2 and 1.3
-----------------
of the Operating and Throughput Agreement between the parties, if said Operating
and Throughput Agreement by and between the parties is terminated,
(a) DSN shall have the right during the term hereof, but not sooner than
five (5) years after the Commencement Date, to terminate this Lease on the first
day of any calendar month by the delivery to Koch of at least six (6) months
prior written notice thereof; and
(b) In the event DSN terminates the Operating and Throughput Agreement
and if Koch exercises its option (b)(ii) pursuant to Section 1.3 of the
Operating and Throughput Agreement, Koch may terminate this Lease upon the
purchase of the assets and improvements located on the Leased Premises.
3. RENTAL.
------
3.1. Rental.
------
(a) For so long as that certain "Operating and Throughput Agreement" by
and between the parties, which has the same Commencement Date as this Lease and
which affects the use and operation of the Leased Premises, is in effect, and
DSN is not in material, uncured default in the performance of its covenants and
agreements under this Lease or the Operating and Throughput Agreement, as rental
for the use and occupancy of the Leased Premises during the term of this Lease,
DSN shall pay to Koch the sum of Ten Dollars ($10.00) per year, which amount
shall be payable, in advance and in whole to Koch at Koch's address stated
above.
(b) In the event the Operating and Throughput Agreement is terminated and
this Lease is not terminated or canceled, as rental for the use and occupancy of
the Leased Premises during the term of this Lease, DSN shall pay to Koch the sum
of Five Thousand Dollars ($5,000.00) per month, which amount shall be payable,
in advance
3
<PAGE>
and in whole to Koch at Koch's address stated above.
3.2. Holdover Rental. Should DSN remain in possession of the Leased
---------------
Premises, or any part thereof, after the termination of this Lease or after the
final term thereof as to the Leased Premises, DSN shall, at the option of Koch,
become a tenant of the Leased Premises from month-to-month, at a rental rate of
$5,000 per month, and subject to all of the other terms, covenants, and
conditions of this Lease. Any holdover term shall not be deemed to extend the
term of this Lease except on a month-to-month basis. Extensions of the term of
this lease shall only be pursuant to the terms of Section 2.2 hereof.
4. TAXES. Except as otherwise herein provided, Koch shall pay to the
-----
appropriate governmental entity before delinquency all taxes, assessments, and
other governmental charges levied or assessed against the personal property of
the Leased Premises. DSN shall reimburse Koch for DSN's portion of such taxes
("DSN's Portion") attributable to any buildings, improvements, fixtures, trade
fixtures or equipment on or associated with the Leased Premises on a pro rata
basis. Within thirty (30) days after receipt from Koch of a copy of said tax
invoices, DSN shall pay to Koch, DSN's Portion of the amount of taxes shown
thereon. If said invoices cover real or personal property not included within
the Leased Premises, such as the pipeline from Koch's Facility to the Plant,
Koch and DSN agree to cooperate during said thirty (30) day period in
establishing an equitable basis for determining DSN's Portion thereof. Koch and
DSN shall also each have the right to request the various taxing authorities to
tax the personal property located on the Leased Premises separately from all
other property. Upon termination or expiration of the Lease, DSN's obligation to
pay DSN's Portion of said taxes during the final year of the term shall survive
such termination or expiration, and an appropriate payment shall be made to Koch
upon subsequent presentation to DSN of tax invoices for such year.
5. USE OF LEASED PREMISES.
----------------------
5.1. Use. The Leased Premises are to be used and occupied by DSN solely
---
for purposes reasonably related to construction and operation of the Plant,
including without limitation, distribution therefrom, and the terminalling and
throughput of CNA and for no other purpose without the express written consent
of Koch. DSN may design, construct and/or install oleum and/or sulfuric acid
storage tanks on the Leased Premises solely for the purpose of using such oleum
and/or sulfuric acid for the production of Mixed Acid at the Plant and storage
and distribution thereof and for no other purpose without Koch's written
consent.
5.2. DSN's Conduct. DSN shall conduct its business in and about the
-------------
Leased Premises and Commons Areas in a business like manner. DSN shall not
allow any activity by employees, licensees
4
<PAGE>
or invitees to gain access to Koch's manufacturing process, or to delay, block,
interrupt, occupy or hinder Koch's adjacent businesses; provided that failure to
do so on DSN's part shall not be cause for cancellation or termination of this
Lease, but in such an event Koch shall have all of its other rights and remedies
available to it. DSN agrees to comply with Koch's reasonable rules of ingress
and egress that Koch has or may promulgate with regards to roadways, Commons
Areas and non-leased areas so long as such rules do not interfere with the
operation of the Plant or Terminal. DSN and Koch recognize and agree that access
to the Leased Premises, Commons Areas and non-leased areas shall be limited and
controlled by regulations and rules propagated by Koch to minimize the risk of
injury to persons and property and to maximize the parties' confidentiality.
5.3. Compliance with Laws. DSN shall, at DSN's sole cost and expense,
--------------------
comply with a statutes, ordinances, and administrative orders, rules and
regulations (i) promulgated by all federal, state, county, municipal and other
governmental or quasi-governmental bodies and agencies having jurisdiction,
which (ii) relate to the business of DSN on the Leased Premises or DSN's use, or
occupancy of the Leased Premises.
6. CONDITIONS OF LEASED PREMISES.
-----------------------------
6.1. Acceptance. Except as otherwise provided for in Article 10 hereof,
----------
DSN has inspected and is familiar with all of the Leased Premises and accepts
the same in their present condition as of the Commencement Date.
6.2. Maintenance. DSN, by itself or through its Lessee, EDC, shall
-----------
regularly maintain in good condition, at DSN's expense, DSN's facilities and the
buildings, fixtures and improvements situated on or at the Leased Premises from
time to time. DSN, or EDC on its behalf may request Koch to perform such
maintenance, with mutual approval. DSN will reimburse Koch for all expenses
related thereto.
6.3. Improvements and Alterations. DSN shall have no right to make
----------------------------
alterations, improvements, expansions or other changes on or to the Leased
Premises without Koch's expressed written consent and any alterations,
improvements, expansions or other changes made with Koch's consent shall be done
in a good and workmanlike manner at DSN's sole expense and risk and with, and in
compliance with, all needed permits and applicable law, rules and regulations.
DSN may leave the foundations, footings and pads in place.
6.4. Ownership. Any fixture, improvement, expansion, equipment change or
---------
addition or other alteration on the Leased Premises installed or permitted
during the term of this Lease shall be the property of DSN.
5
<PAGE>
6.5. Surrender. Within 90 days after termination or expiration of this
---------
Lease, DSN shall peaceably surrender possession of the Leased Premises to Koch
in a condition and repair similar to the condition on the Commencement Date.
Subject to Section 1.3 of the Operating and Throughput Agreement, within 90 days
after termination of this Lease, unless waived by Koch, DSN shall remove all
DSN's property and equipment from the Leased Premises in a workmanlike manner,
including, without limitation, all tanks, piping, trade fixtures, equipment,
shelves and furniture installed in, or located at, the Leased Premises. Any
property which Koch has agreed may remain on the Leased Premises at the time of
surrender shall be conveyed to Koch, at Koch's election, for One Dollar ($1.00).
7. EMINENT DOMAIN. In the event of the taking of any portion of the
--------------
Leased Premises by eminent domain, all proceeds awarded as a result of such
taking shall be apportioned between Koch and DSN in proportion to the value of
each party's property taken. DSN shall thereafter have the option of
terminating this Lease upon written notice thereof to Koch, but not option
1.3(b)(ii) under the Operating and Throughput Agreement by and between Koch and
EDC.
8. INSURANCE.
---------
8.1. Insurance. DSN shall deliver to Koch original certificates of
---------
insurance covered by the following described policies, issued by an insurer
licensed to do business in North Carolina. Said policies or certificates to
state that the insurance coverage shall not be terminated, reduced, canceled, or
otherwise impaired without thirty (30) days' prior written notice to Koch, in
coverages and amounts:
(a) Worker's Compensation coverage, with employer's liability limits as
required by applicable law;
(b) Commercial General Liability coverage, with combined single limits
for bodily injury and property damage of $5,000,000 per occurrence and the
aggregate, including a contractual liability insuring the indemnities set forth
herein;
(c) Automobile Liability coverage, with combined single limits for bodily
injury and property damage of $5,000,000 per occurrence;
(d) in the event Railroad Protective Insurance is not afforded under sub-
section (b) above, Railroad Protective Liability Insurance, naming the CSX
Railroad as the insured with a limit for bodily injury and property damage
liability of $2,000,000 per occurrence and $6,000,000 in the aggregate; and
(e) Excess Liability coverage in an amount equal to the
6
<PAGE>
limits required under subsections (b), (c) and (d) above.
8.2. Additional Insured and Waiver of Subrogation. The foregoing
--------------------------------------------
insurance coverages shall be primary and non-contributing with respect to any
other insurance or self-insurance which may be maintained by Koch or its parent
company. The policies (except Workers' Compensation) shall be endorsed to name
Koch, its employees and affiliated companies as additional insured and all
policies shall provide for a waiver of subrogation to all rights, claims,
demands and causes of action arising out of or in connection with this Lease.
9. DEFAULT.
-------
9.1. Events of Default. The occurrence of one or more of the following
-----------------
events shall constitute a default under this Lease:
(a) the failure of DSN to pay Koch any rent or any other monetary charge
due from DSN hereunder within fifteen (15) days after written notice thereof by
Koch to DSN;
(b) the failure of DSN to comply with or to observe any other term,
covenant or condition of this Lease performable by and obligatory upon DSN
within thirty (30) days after written notice thereof by Koch to DSN, unless such
default cannot reasonably be cured within said thirty (30) day period and DSN
has commenced the curing thereof within said time period and thereafter
prosecutes the same diligently to completion, without interruption;
(c) except as otherwise provided for in this Section 9.1 hereof, the
assignment of this Lease or subleasing of the Leased Premises by DSN without
Koch's prior written approval;
(d) the taking of DSN's leasehold estate created hereby by execution or
other process at law, except pursuant to a leasehold mortgage or similar
security agreement with The CIT Group or other lenders approved in writing by
Koch, which shall specifically be subject to the limitations set forth in
Section 11.10 hereof;
(e) the judicial declaration of DSN as bankrupt or insolvent according to
law, or an assignment of a substantial part of DSN's property for the benefit of
creditors;
(f) the appointment of a receiver, guardian, conservator, trustee in
involuntary bankruptcy, or similar officer by a court of competent jurisdiction
to take charge of a substantial part of DSN's property;
(g) the filing of a petition for involuntary or voluntary reorganization
or arrangement of DSN pursuant to any provision of the Bankruptcy Code without
subsequent dismissal thereof within sixty (60) days; or
7
<PAGE>
(h) any permanent abandonment of Leased Premises by DSN without canceling
this Lease.
9.2. Koch's Remedies in the Event of Default.
---------------------------------------
(a) Upon the occurrence of any event of default by DSN under this Lease
that is not excused hereunder, Koch shall have the options of:
(i) terminating this Lease by written notice thereof to DSN;
(ii) curing the default of DSN; and/or
(iii) pursuing any other remedies to which Koch may be entitled, at law or
in equity.
(b) If Koch elects to terminate this Lease upon written notice thereof to
DSN, this Lease shall be ended, and all of DSN's rights hereunder, except as
otherwise provided for in Article 10 hereof, shall be forfeited and lapsed, as
fully as if this Lease had expired by lapse of time upon the scheduled
expiration date of the term. In such event, DSN shall be required to promptly
vacate the Leased Premises, and Koch shall at once have all the rights of re-
entry upon the Leased Premises, without becoming liable for damages or being
guilty of trespass. Upon such termination, the following sums shall be
recoverable by Koch from DSN:
(i) the cost of repairing the Leased Premises to the condition as
received from Koch hereunder,
(ii) all accrued, unpaid sums, including but not limited to rent with
interest thereon at the rate of 18% per year or the maximum
applicable rate permitted by law whichever is less;
(iii) Koch's cost of recovering possession of the Leased Premises,
including reasonable attorneys' fees; and
(iv) pursuing any other remedies to which Koch may be entitled, at law or
in equity.
(c) If Koch elects to cure the default of DSN, other than a default by
DSN in the payment of any rental provided for herein, all sums expended by Koch
to effect such cure, plus interest from the date or dates of any such
expenditure at the rate of 18% per year or the maximum applicable rate permitted
by law, whichever is less, shall be due and payable within ten (10) days after
notice thereof by Koch to DSN, and the failure of DSN promptly to pay such sums
shall enable Koch to exercise all of its other remedies under this Lease.
10. ENVIRONMENTAL INDEMNITIES.
-------------------------
10.1. Koch's Indemnity. In addition to any indemnities set forth in any
----------------
other agreements between Koch and any affiliates of
8
<PAGE>
DSN (such as EDC), Koch agrees to indemnify, defend and hold DSN, its parent,
subsidiary and affiliate companies, and their respective officers, directors,
employees and agents, successors and assigns (the "DSN Indemnitees") harmless
from and against --all penalties, claims, orders, judgments, expenses, fines,
remedies (including, but not limited to, damages), costs (including but not
limited to reasonable attorney's fees and litigation costs), liabilities and
losses ("herein Losses") directly or indirectly caused by, or arising directly
or indirectly from, or directly or indirectly related to, any actual or alleged
pollution, release, contamination, discharge, dumping, or any other actual or
alleged environmental violation or harm or threat of whatever type or nature
(including but not limited to, any violation of laws or for the violation of any
federal, state or local statutes or regulations currently enacted or made
effective after the date hereof and which are intended to be, or are being,
applied for protecting or preserving the environment) (herein "Environmental
Claims") now on, in or under or emanating from, or occurring or coming on, in or
under or emanating from, the Leased Premises or any part thereof prior to the
Commencement Date of this Lease; provided, that, Koch shall have no obligation
to indemnify or defend the DSN Indemnitees from Losses for Environmental Claims
caused by any DSN Indemnitees or an Environmental Claim for which DSN must
indemnify and hold the Koch Indemnitees harmless under Sections 10.2 hereof
10.2. DSN's Indemnity. In addition to any indemnities set forth in any
---------------
other agreements between Koch and any affiliates of DSN (such as EDC), DSN
agrees to indemnify, defend and hold Koch, its parent, subsidiary and affiliate
companies, and their respective officers, directors, employees and agents,
successors and assigns (the "Koch Indemnitees") harmless from and against all
Losses imposed upon or incurred by any of the Koch Indemnitees directly or
indirectly caused by, or arising directly or indirectly from, or directly or
indirectly related to, an Environmental Claim occurring on, coming on, in or
under or emanating from the Leased Premises during the term of this Lease;
provided that, DSN shall have no obligation to indemnify or defend the Koch
Indemnitees from Losses for Environmental Claims caused by any Koch Indemnitees
or an Environmental Claim for which Koch must indemnify and hold the DSN
Indemnitees harmless under Section 10.1 hereof or under the Operating and
Throughput Agreement by and between Koch and EDC.
10.3. Limitation. The indemnifications provided for by Article 10 shall
----------
constitute the exclusive remedy of either party with respect to claims for any
Environmental Claim, whether any claims or causes of action asserted with
respect to any such matters are brought in contract, tort, strict liability,
statute or any other legal theory or combinations of theories whatsoever.
10.4. Indemnity Notice and Defense. Any party or parties seeking
----------------------------
indemnification under this Lease (collectively, the
9
<PAGE>
"Indemnitees") shall, on each occasion that indemnification is sought, give
prompt written notice for such indemnification, of any claim, suit or demand
which the Indemnitees believes will give rise to indemnification to it hereunder
(the person to whom such notice of claim is given is referred to herein as the
"Indemnitor"). Except as hereinafter provided, the Indemnitor shall be obligated
to defend and to direct the defense against any such claim, suit or demand, in
its name or in the name of the Indemnitees at the Indemnitor's expense and with
counsel of the Indemnitor's own choosing and the right to settle or compromise
any such claim, suit or demand; provided, however, that the Indemnitor will not,
without the Indemnitees's written consent, settle or compromise any claim or
consent to any entry of judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnitees of a
release from all liability in respect of such claim. The Indemnitees shall, at
the Indemnitor's expense, cooperate in the defense of any such claim, suit or
demand. If the Indemnitor, within a reasonable time after notice of a claim,
fails to defend the Indemnitees, the Indemnitees shall be entitled to undertake
the defense, compromise or settlement of such claim at the expense of and for
the account and risk of the Indemnitor, utilizing counsel of the Indemnitees's
own choosing.
11. MISCELLANEOUS.
-------------
11.1. Notice. All notices provided for in this Lease and any other notice,
------
demand or communication which either party may wish to send to the other shall
be at such party's address as set forth below as follows: (i) personally
delivered, including delivery by a nationally recognized courier service, in
which case they shall be deemed delivered on the date of delivery to said
offices; (H) sent by registered or certified United States mA first-class
postage prepaid, return receipt requested, in which case notice shall be deemed
delivered on the date shown on the receipt unless delivery is refused or delayed
by the addressee, in which event notice shall be deemed delivered on the date of
deposit in the United States mail; or (iii) sent by facsimile, provided the
sender of such facsimile has evidence that the facsimile was received by the
addressee's facsimile machine, in which case notice shall be deemed delivered on
the date of receipt by the addressee's facsimile machine. Any address or name
specified below may be changed by a notice given in accordance with the
provisions of this Section.
To Koch: Koch Sulfur Products Company
-------
4111 E. 37th Street North
Wichita, Kansas 67220
Attn.: President
Telecopier Number: (316) 832-4967
To DSN: DSN Corporation
------
16 South Pennsylvania
10
<PAGE>
Oklahoma City, Oklahoma 73 107
Attn.: President
Telecopier Number: (405) 235-5067
Copy to: DSN Corporation
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Attn.: David M. Shear
Telecopier Number: (405) 236-1209
11.2. Liens. DSN will not create or permit to be created by any act or
-----
omission of DSN, its agents or employees, any lien (including, but not limited
to, the liens of mechanics, laborers, artisans or materialmen for work or
materials alleged to be done or furnished in connection with the Leased
Premises), encumbrance or other charge upon the Leased Premises or any part
thereof, upon Koch's interest therein, or upon DSN's interest except to the
extent Hen rights arise as a matter of law and are discharged by DSN in the
ordinary course of DSN's business without any foreclosure thereon occurring.
The foregoing notwithstanding, subject to the limitations set forth in Section
11.10 hereof, Koch hereby consents to a grant of a leasehold mortgage or similar
security interest in the leasehold estate by DSN to The CIT Group or other
lenders to DSN approved in writing by Koch.
11.3. Memorandum of Rights. Upon request of DSN, the parties shall
--------------------
execute, and DSN shall have the right to record in real estate records, a
memorandum of DSN`s rights under and with respect to this Lease.
11.4. Applicable Law/Interpretation. This Lease and the rights and
-----------------------------
obligations of the parties hereto shall be interpreted, construed, and enforced
according to the laws of the state of North Carolina. This Lease has been
negotiated and prepared at the mutual request, direction and construction of the
parties, at arms length, with the advice and participation of counsel for each
party, and will be interpreted in accordance with its terms without favor to
either party. The captions are solely for the convenience of the parties and
shall not be considered or given any effect in construing any part thereof.
11.5. Arbitration. (a) Any controversy or claim, whether based on
-----------
contract, tort, strict liability, indemnification, statute, or other legal
theory or combination of theories whatsoever (including but not limited to any
claim of fraud or misrepresentation), arising out of or related to this Lease,
or any subsequent agreement between the parties, shall be resolved by
arbitration pursuant to this Section and the then-current Commercial Rules of,
and under the supervision of, the American Arbitration Association ("AAA") at
AAA's Dallas, TX offices before a panel of three (3) arbitrators having
experience and expertise in such matters, recommended by, and appointed pursuant
to the rules
11
<PAGE>
of, the AAA and mutually agreed upon by the parties; provided, however, nothing
herein shall prevent either party from seeking or obtaining interim injunctive
relief from any court having jurisdiction in order to preserve the status quo
pending conclusion of an arbitration proceeding.
(b) It is agreed that prompt handling and disposition of any dispute is
important to the Parties and the arbitrators are hereby instructed to assume
adequate managerial initiative and control over discovery and other aspects of
the arbitration proceeding, to schedule prompt and expedited discovery,
participate in key depositions and otherwise initiate, manage and control
discovery and provide for substantially continuous work, whereby expediting the
proceeding as much as they deem reasonable, but in all events to effect a final
award within 365 days of filing and within 20 days of the close of evidence.
(c) The arbitrators' decision and award shall be final and binding and
may be entered in any court having jurisdiction thereof The Arbitrators shall
not have the power to award punitive or exemplary damages, or any damages
excluded by, or in excess of any damage limitations expressed in, this Lease or
any subsequent agreement between the parties.
(d) Each party shall bear its own attorney's fees and associated expenses
and the arbitration and other costs and expenses of the arbitration shall be
borne as provided by the rules of AAA.
(e) Neither a party, witness, or the arbitrators may disclose the
contents or results of any arbitration hereunder without prior written consent
of all parties, unless and then only to the extent required to enforce or
challenge the award, as required by law, or as necessary for financial and tax
reports and audits.
11.6. Effect of Termination or Cancellation. Any cancellation or
-------------------------------------
termination hereof shall not terminate or cancel any rights, claims, actions,
indemnities, or remedies of either party hereto to the extent the same have
arisen or relate to events or occurrences, prior to termination or cancellation
hereof.
11.7. Waiver. Failure by Koch or DSN to complain of any action or non-
------
action on the part of the other party hereto, or to declare any default by the
other party hereto immediately upon the occurrence thereof, shall not be deemed
to be a waiver by Koch or DSN of their respective rights hereunder. Koch or DSN
may make any such complaint, declare any such default, and take such action as
may be authorized by this Lease at any time, and from time to time. Further, no
waiver at any time of any of the terms, provisions, or conditions hereof by Koch
or DSN shall be construed as a waiver of any of the other provisions hereof, and
a waiver at any time of any
12
<PAGE>
of the provisions hereof shall not be construed as a waiver at any subsequent
time of the same provision. The subsequent approval by Koch to or of any action
by DSN requiring Koch's consent or approval shall not be deemed to waive or
render unnecessary Koch's consent or approval to or of any subsequent similar
act by DSN.
11.8. Severability and Enforceability. In the event that any one or more
-------------------------------
of the provisions contained herein, or any application thereof, shall be
invalid, illegal or unenforceable in any respect --
(a) the validity, legality and enforceability of the remaining portions
of this Lease, or any other application thereof, shall not in any way be
affected or impaired thereby; and
(b) the parties hereto agree that if any provisions, terms or conditions
of this Lease are found to be illegal, unlawful or unenforceable, then the
parties agree to amend this Lease to the extent required to make any invalid
restriction valid and enforceable; provided, that any such amendment shall be
approximate as possible to the original provisions deemed invalid.
11.9. Relationship. Nothing in this Lease shall be construed to create a
------------
relationship between Koch and DSN other than lessor and lessee, and nothing
herein shall be construed as creating a relationship as partners, agency or
joint venturers or a fiduciary relationship between Koch and DSN.
11.10. Assignment: Subletting/Entire Agreement. This Lease shall be
---------------------------------------
binding and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Except for a sublease from DSN to EDC and
except for liens and assignments referenced in Section 11.2 hereof, DSN may not,
without the prior written consent of Koch, assign or sublet this Lease or any
right or options hereunder, which consent shall not be unreasonably withheld;
provided, however, any assignment of rights hereunder by The CIT Group or other
lenders of DSN to any other party except DSN or EDC shall specifically not be
made without Koch's written consent, which consent shall also not be
unreasonably withheld. All rights under this Lease shall bind and inure to the
benefit of Koch, and Koch's successors and assigns, and DSN, and DSN's
successors and assigns. This Lease contains the entire agreement between the
parties regarding the lease of the Leased Premises. No prior promises,
agreements or warranties, written or oral with respect thereto shall be of any
force or effect unless contained herein. This Lease may not be altered, amended
or extended, except by an instrument in writing signed by both Koch and DSN, and
expressly referring to this Lease.
11.11. Priority of Operating Agreement. Koch and EDC, the sublessee under
-------------------------------
this Lease, have entered into a certain Operating and Throughput Agreement with
the same date as this Lease (the
13
<PAGE>
"Operating Agreement"). Notwithstanding any language in this Lease or any other
agreement between Koch and DSN or Koch and EDC, the covenants, agreements,
terms, provisions and conditions of the Operating Agreement shall prevail and
control over any inconsistency or conflict in provisions of any such other
documents.
11.12 Material/Materiality. With respect to rights, claims and remedies
--------------------
of the parties, it shall not be necessary for a party to prove materiality
compared to the rental amounts hereunder. Without limitation on either party's
rights, either party shall be entitled to prove that where the term "material"
or "materiality" is used herein, it is understood in the context of the
circumstances of the assets, operations, marketing, and products that are
particularly affected by the condition, event, circumstance, occurrence, or the
like which is question.
IN WITNESS WHEREOF, the parties hereto, by and through their duly
authorized officers, have executed this Lease in duplicate as of the day and
year first above written.
KOCH SULFUR PRODUCTS COMPANY DSN CORPORATION
SIGNATURE:/s/ Myron J. Schuckman SIGNATURE:/s/ Barry H. Golsen
---------------------- -------------------
PRINTED NAME: Myron J. Schuckman
TITLE: President PRINTED NAME: Barry H. Golsen
----------------
TITLE: Vice President
-----------------------
The undersigned El Dorado Chemical Company, an Oklahoma corporation, which
DSN has represented will be a sublessee, and which Koch has agreed may be a
sublessee, under this Lease executes this Lease to acknowledge its terms,
provisions and conditions and to agree to be bound hereby to the extent
applicable to EDC.
ELDORADO CHEMICAL COMPANY
/s/ James L. Wewers
-----------------------------------------
SIGNATURE
James L. Wewers
-----------------------------------------
PRINTED NAME
President
-----------------------------------------
TITLE
14
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
Before me, a Notary Public, on this 22nd day of March, 1995, personally
appeared Barry H. Golsen, known to me to be the identical person who executed
the within and foregoing instrument and acknowledged to me that he/she executed
the same as his/her free and voluntary act and deed for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I have hereunto set my official signature affixing my
notorial seal the day and year first above written.
/s/ Yvonne M. Hildenberger
- --------------------------
Notary Public
My Commission Expires: 9/9/96
(Seal)
STATE OF OKLAHOMA )
) ss.
COUNTY OF CLEVELAND )
Before me, a Notary Public, on this 22nd day of March, 1995, personally
appeared James L. Wewers, known to me to be the identical person who executed
---------------
the within and foregoing instrument and acknowledged to me that he/she executed
the same as his/her free and voluntary act and deed for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I have hereunto set my official signature affixing my
notorial seal the day and year first above written.
/s/ Yvonne M. Hildenberger
- --------------------------
Notary Public
My Commission Expires: 9/9/96
(Seal)
15
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SEDGWICK )
Before me, a Notary Public, on this 23RD day of March, 1995, personally
appeared Myron Schuckman, known to me to be the identical person who executed
the within and foregoing instrument and acknowledged to me that he/she executed
the same as his/her free and voluntary act and deed for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I have hereunto set my official signature affixing my
notorial seal the day and year first above written.
/s/ Nancy J. Smith
- ------------------
Notary Public
My Commission Expires: March 1, 1999
(Seal)
16
<PAGE>
ATTACHMENT "B" Page 3 of 3.
4311
3/1/95
LEASE AREA FOR
ELDORADO CHEMICAL COMPANY
ON KOCH SULFUR PRODUCTS COMPANY
BEGINNING at a point on Koch Sulfur Product Company's 44.1-acre tract
located on U.S. Highway 421 in New Hanover County, North Carolina, said
Beginning point located from the Southwestern corner of said 44.1-acre tract in
the eastern line of U.S. Highway 421 by the following courses: *North 68 degrees
43 minutes 18 seconds east 277.24 feet and *south 88 degrees 44 minutes 47
seconds east 1046.32 feet with the southern line of said 44.1 acres and *north 5
degrees 28 minutes 49 seconds east 64.56 feet with a tie line; running thence
from said Beginning north 5 degrees 28 minutes 49 seconds east 48.38 feet to a
point on the southern rail of a railroad spur tract; thence along said rail as
it curves eastward 185.15 feet to a point that is located north 81 degrees 59
minutes 12 seconds east 183.34 feet from the previous point; thence south 5
degrees 58 minutes 06 seconds west 20.65 feet; thence north 86 degrees 21
minutes 37 seconds west 34.03 feet to a point; thence south 5 degrees 58 minutes
06 seconds west 69.42 feet to a point; thence north 84 degrees 31 minutes 11
seconds west 143.50 feet to the Point of BEGINNING, containing 11,382 square
feet in area.
CENTURY/von Oesen
Consulting Engineers
Wilmington, North Carolina
17
<PAGE>
EXHIBIT 10.30
PROMISSORY NOTE
$587,180.00 OKLAHOMA CITY OKLAHOMA JUNE 2, 1997
- --------------------------------------------------------------------------------
(Principal) (City) (State)
AFTER DATE, FOR VALUE RECEIVED, THE UNDERSIGNED, JOINTLY AND SEVERALLY, IF
MORE THAN ONE ("maker") PROMISE(S) TO PAY TO THE ORDER OF
ORIX CREDIT ALLIANCE, INC.
- --------------------------------------------------------------------------------
(Name of Seller / Mortgagee / Lessor)
at any office of Orix Credit Alliance, Inc. or such other place as the Holder
hereof may from time to time in writing appoint, the sum of FIVE HUNDRED EIGHTY
-------------------
SEVEN THOUSAND ONE HUNDRED EIGHTY AND 00/100 DOLLARS ($587,180.00) ("Principal")
- -------------------------------------------- -----------
plus interest from date hereof on the Principal as reduced from time to time at
a rate equal to ten percent (10.0%) per annum. Both Principal and interest
--- ----
shall be paid in 48 consecutive monthly installments, as follows:
--
47 installment(s), each in the amount of $14,893.00
-- ----------
then a final installment in an amount equal to the then unpaid Principal and all
accrued and unpaid interest and any and all other charges set forth herein. Said
consecutive monthly installments shall commence on the 6/th/ day of July, 1997,
and continue on the same date of each month thereafter. All monies received when
collected shall be applied first to late charges, and reasonable attorneys' fees
(if applicable), then to accrued interest on any unpaid amount and any balance
of the monies received and collected shall then be applied to reduce the
Principal then outstanding.
In addition, the undersigned agrees to pay interest after maturity of each
installment on the maturity of this Promissory Note or upon acceleration of the
indebtedness evidenced hereby, at a rate of interest equal to 1% per cay, until
this Promissory Note is paid in full. If any installment required hereunder
shall not be paid when due or upon default under any agreement with Holder
hereof to which the undersigned is a party, then all remaining unpaid
installments provided for herein shall at once become due and payable at the
option of the Holder hereof, without notice or demand together with a reasonable
sum as attorney's fees. If any interest rate provided for herein shall be found
to exceed the maximum permitted by applicable law, such rate shall be reduced to
such maximum. THE MAKER AND ANY GUARANTOR OR ENDORSER OF THIS PROMISSORY NOT
HEREBY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, NOTICE OF PROTEST AND
NOTICE OF DISHONOR HEREOF, AND FURTHER HEREBY WAIVE ALL BENEFIT OF VALUATION,
APPRAISEMENT AND EXEMPTION LAWS AND DO HEREBY DESIGNATE AND APPOINT EDWIN M.
BAUM ESQ., AND C-A CREDIT CORP., BOTH OF NEW YORK, OR EITHER OF THEM, AS EACH OF
SAID PARTIES TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT FOR EACH OF SAID PARTIES
AND IN EACH OF SAID PARTIES NAME, PLACE AND STEAD TO ACCEPT SERVICE OF ANY
PROCESS WITHIN THE STATE OF NEW YORK, HOLDER AGREEING TO NOTIFY EACH OF SAID
PARTIES, AT THE LAST ADDRESS KNOWN TO HOLDER FOR EACH, BY CERTIFIED MAIL, WITHIN
THREE DAYS OF SUCH SERVICE HAVING BEEN
<PAGE>
EFFECTED. EACH OF SAID PARTIES AGREE TO THE EXCLUSIVE VENUE AND JURISDICTION OF
ANY COURT IN THE STATE AND COUNTY OF NEW YORK REGARDING ANY MATTER ARISING
HEREUNDER WITH THE SOLE EXCEPTIONS THAT AN ACTION TO RECOVER POSSESSION OF ANY
ASSETS OF THE MAKER OR ANY GUARANTOR OR ENDORSER, HOWEVER DENOMINATED, MAY, IN
THE SOLE DISCRETION OF HOLDER, BE BROUGHT IN A STATE OR FEDERAL COURT HAVING
JURISDICTION OVER SUCH ASSETS, AND THAT JUDGMENTS MAY BE CONFESSED, ENTERED, OR
ENFORCED IN ANY JURISDICTION WHERE THE MAKER OR ANY GUARANTOR OR ENDORSER OR
SUCH ASSETS MAY BE LOCATED. THE MAKER AND ANY GUARANTOR OR ENDORSER FURTHER
WAIVE ANY RIGHT THEY, OR ANY OF THEM, MAY HAVE TO TRANSFER OR CHANGE THE VENUE
OF ANY LITIGATION BROUGHT IN ACCORDANCE HEREWITH. The Maker and any Guarantor or
Endorser further agree that the validity, enforceability and effectiveness of
each provision hereof and the obligations, rights and remedies of each of them
in any way relating to or arising under this Promissory Note shall be governed
and construed in accordance with the laws of the State of New York (excluding
its choice of law rules). The Holder may extend the time of payment of this
Promissory Note, postpone the enforcement hereof, grant any other indulgence and
add or release any party primarily or secondarily liable hereon without
affecting or diminishing the Holder's right of recourse against the Maker or any
Guarantor or Endorser of this Promissory Note, which right is hereby expressly
reserved. At any time or from time to time, the maker has the right to prepay
all or any part of its indebtedness due hereunder. Such prepayment shall include
the principal amount of this Promissory Note so prepaid plus interest accrued
thereon to the date of payment.
Co-Maker ________________________ INTERNATIONAL ENVIRONMENTAL
CORPORATION (SEAL)
/s/ By /s/
- --------------------------------- -----------------------------------
(Witness for Maker and Co-Maker) (Authorized Signature)
PN(95).PKD-FXD VER 4.07
2
<PAGE>
ENDORSEMENT
Pay to the Order of
ORIX CREDIT ALLIANCE, INC.
The undersigned do each (jointly and severally) unconditionally guarantee
the prompt payment of the within note at maturity or any time thereafter, or on
default prior thereto, hereby waiving presentment for payment, demand, protest,
notice of protest, notice of dishonor and notice of every kind or nature, and
accepting all its provisions and authorizing the Holder, without notice to us or
either or all of us, to substitute debtors, and/or grant one or more extensions
in whole or in part, and/or to receive security or additional security for the
payment hereof and/or to surrender, release or substitute any such security. THE
UNDERSIGNED DO HEREBY DESIGNATE AND APPOINT EDWIN M. BAUM ESQ., AND C-A CREDIT
CORP., BOTH OF NEW YORK, OR EITHER OF THEM, AS EACH OF SAID PARTIES TRUE AND
LAWFUL ATTORNEY-IN-FACT AND AGENT FOR EACH OF SAID PARTIES AND IN EACH OF SAID
PARTIES NAME, PLACE AND STEAD TO ACCEPT SERVICE OF ANY PROCESS WITHIN THE STATE
OF NEW YORK, HOLDER AGREEING TO NOTIFY EACH OF SAID PARTIES, AT THE LAST ADDRESS
KNOWN TO HOLDER FOR EACH OF SAID PARTIES, BY CERTIFIED MAIL, WITHIN THREE DAYS
OF SUCH SERVICE HAVING BEEN EFFECTED. EACH OF THE PARTIES HEREIN AGREE TO THE
EXCLUSIVE VENUE AND JURISDICTION OF ANY COURT IN THE STATE AND COUNTY OF NEW
YORK REGARDING ANY MATTER ARISING HEREUNDER AND FURTHER AGREE THAT THE VALIDITY,
ENFORCEABILITY AND EFFECTIVENESS OF EACH PROVISION HEREOF AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE UNDERSIGNED IN ANY WAY RELATING TO OR ARISING UNDER
THIS NOTE OR THE ENDORSEMENT HEREUNDER SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (EXCLUDING ITS CHOICE OF LAW
RULES) AND FURTHER WAIVE ANY RIGHT THEY, OR ANY OF THEM, MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT IN ACCORDANCE HEREWITH.
If any installment of this note, or the interest, is not paid when due,
then the amount remaining unpaid hereon shall, without notice or demand, become
immediately due and payable, at the option of the Holder, and may be recovered
in any suit brought by the Holder of this note against any one or more or all of
us, at the option of said Holder, whether such suit has been commenced against
the Maker or not, and in any such suit the Maker may be joined with one or more
or all of us, at the option of the Holder.
The Holder of this note shall not be required to look to any security given
or held for the payment of this note, but may proceed against us, or either or
all of us, immediately upon a default in payment, or otherwise. Any execution
may be immediately levied upon any real or personal property of the undersigned,
all right of the undersigned to have personal property last taken and sold under
such execution being hereby expressly waived.
3
<PAGE>
_________________________________
(Endorser)
_________________________________
(Endorser)
_________________________________
(Endorser)
_________________________________
(Endorser)
_________________________________
(Seller/Mortgagee/Lessor)
By _____________________________
(Title)
4
<PAGE>
EXHIBIT 10.31
SECURITY AGREEMENT-MORTGAGE ON GOODS AND CHATTELS
THIS MORTGAGE made this 18/th/ day of April, 1997 by and between
INTERNATIONAL ENVIRONMENTAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Mortgagor)
5000 I-40 West OKLAHOMA CITY OKLAHOMA 73128
- --------------------------------------------------------------------------------
(Address of Mortgagor)
"Mortgagor", and ORIX CREDIT ALLIANCE, INC., 400 N. SAM HOUSTON PKWY EAST, SUITE
---------------------------------------------------------------
700, HOUSTON, TEXAS 77060 "Mortgagee";
- -------------------------
[If Mortgagee named above is not ORIX Credit Alliance, Inc., Mortgagor
acknowledges notice of the intended assignment hereof to ORIX Credit Alliance,
Inc. (said assignee hereinafter called "Mortgagee") and upon such assignment,
Mortgagor agrees not to assert against Mortgagee any defense, set-off,
recoupment, claim or counterclaim which Mortgagor may have against the Mortgagee
named above and any assignee hereof prior to Mortgagee, whether arising
hereunder or otherwise.]
WITNESSETH:
1. To secure the prompt payment, with interest therein, performance and
fulfillment of any and all Mortgage Obligations (as hereinafter defined) of
Mortgagor to Mortgagee, which is hereby confessed and acknowledged, Mortgagor
hereby grants, assigns, transfers, bargains, conveys, confirms, pledges,
mortgages and grants to Mortgagee a security interest in all and singular, the
goods, chattels and property described in the annexed Schedule A and any and all
documents, instruments, chattel paper, goods, machinery, contract rights,
equipment, fixtures, and insurance in which Mortgagor now or hereafter has any
right or interest [A] (all of the foregoing, together with all accessions,
attachments, replacements, substitutions and accessories thereto now or
hereafter belonging to Mortgagor, wherever located, and all proceeds, and any
distribution thereof and any insurance thereon, products and rents therefrom
collectively called "Collateral"), to have and to hold the same unto Mortgagee
forever; provided, however, that if Mortgagor shall fully, timely and faithfully
pay, perform and fulfill the Mortgage Obligations, time being of the essence
hereof, then this Mortgage shall be void, but otherwise shall remain in full
force and effect. Mortgagor grants Mortgagee a security interest in the
Collateral to secure the Mortgage Obligations.
2. The term "Mortgage Obligations" as used herein shall mean and include
any and all loans, advances, payments, extensions of credit, endorsements,
guaranties, benefits and financial accommodations heretofore and/or hereafter
made, granted or extended by Mortgagee or which Mortgagee has or will become
<PAGE>
obligated to make, grant or extend to or for the account of Mortgagor, and any
and all interest, obligations, liabilities, indebtedness, charges and expenses
heretofore and/or hereafter chargeable against Mortgagor by Mortgagee or owing
by Mortgagor to Mortgagee or upon which Mortgagor may be and/or has become
liable as endorser or guarantor, and any and all renewals or extensions of any
of the foregoing [B] given to or received by Mortgagee directly by Mortgagee
directly from Mortgagor and the prompt performance and fulfillment by Mortgagor
of all of the terms, conditions, promises, covenants, provisions and warranties
contained in this Mortgage and in the note secured hereby.
3. Mortgagor covenants and warrants to Mortgagee and agrees that the
Collateral described in the annexed Schedule A is in the possession of Mortgagor
at its principal place of business (which is Mortgagor's address shown above),
unless a different location is specifically shown on Schedule A for any one or
more items, that all of the Mortgage Obligations are acknowledged and declared
to be secured by this Mortgage and that Mortgagor will fully and faithfully pay,
perform and fulfill all of the Mortgage Obligations, with late charges thereon
from and after maturity of any unpaid installment of the Mortgage Obligations,
whether by acceleration or otherwise, at the rate of 1% per day until the
Mortgage Obligations are collected by the Mortgagee in full. Any interest rate,
fee or charge ("rate") charged or to be charged or provided for in any way
hereunder or under any document, note or instrument given in connection with any
of the Mortgage Obligations shall not in any event or contingency exceed any
maximum permitted by applicable law and any such rate shall be deemed hereby
amended accordingly. Any sums collected with respect to any rate in excess of
any maximum shall be applied to reduce the principal sum owing under the
Mortgage Obligations. Mortgagor further covenants and agrees with and warrants
to Mortgagee that:
(a) Mortgagor is the lawful owner of the Collateral and represents and
warrants to Mortgagee that Mortgagor has paid all applicable sales, use or other
taxes due in connection with the sale, purchase, ownership, possession or use of
the Collateral and shall indemnify Mortgagee from and against any loss, cost or
expense, including penalties, interest and other charges of any kind in
connection with or arising from [C] purchase, ownership, possession or use of
the Collateral, and has the sole right and lawful authority to make this
Mortgage; the Collateral and every part thereof is free and clear of all liens
and encumbrances of every kind, nature and description (except any held by
Mortgagee); and Mortgagor will warrant and defend the Collateral against all
claims and demands of all persons and will not permit any circumstances to exist
under which the Mortgagee may lose its lien on the Collateral.
(b) Mortgagor will keep the Collateral free and clear of all attachments,
levies, taxes, liens and encumbrances of every kind;
2
<PAGE>
Mortgagor, at its own cost and expense, will maintain and keep the Collateral in
good repair, [D] will not waste nor abuse nor destroy the same or any part
thereof and will not be negligent in the care and use thereof; and Mortgagor
will not sell, assign, mortgage, lease, pledge or otherwise dispose of the
Collateral without the prior written consent of Mortgagee. Mortgagee is hereby
authorized to file one or more financing statements and/or a reproduction hereof
as a financing statement. Mortgagor hereby irrevocably appoints Mortgagee as the
true and lawful Attorney-in-Fact of Mortgagor, coupled with an interest, with
full power in Mortgagor's name, place and stead to execute financing statements
on Mortgagor's behalf and to do any and all other acts on Mortgagor's behalf
necessary or helpful to perfect Mortgagee's security interest in the Collateral
pursuant to the Uniform Commercial Code or other applicable law.
(c) Mortgagor will insure the Collateral in the name of the Mortgagee
against loss or damage by fire and extended coverage perils, theft, burglary,
pilferage, collision and also, where requested by Mortgagee, against other
hazards, with companies, in amounts and under policies (each containing a
standard breach of warranty clause) acceptable to Mortgagee, the proceeds to be
payable to Mortgagee [E] and all premiums thereon shall be paid by Mortgagor and
[F] delivered to Mortgagee. Mortgagee shall have the right, but not the
obligation, to provide insurance for its interest and charge Mortgagee
Mortgagor's cost for such insurance. Mortgagor hereby irrevocably appoints
Mortgagee as Mortgagor's Attorney-in-Fact to make claim for, receive payment of
and execute and endorse all documents, checks or drafts received in payment for
any loss or damage under any of said insurance policies and to execute any
documents or statements referred to herein.
(d) Mortgagor will not remove the Collateral from within the 48 contiguous
States of the United States or its present locations without the prior written
consent of Mortgagee nor change its present business locations without at least
thirty days prior written notice to Mortgagee and at all times will allow
Mortgagee or its representatives free access to and right of inspection of the
Collateral, which shall remain personalty and not become a part of any realty,
and nothing shall prevent Mortgagee from removing same or so much thereof as
Mortgagee, in its sole discretion may determine, from any premises to which it
may be attached and/or upon which it may be located upon breach of this
Mortgage; Mortgagor agreeing to deliver to Mortgagee appropriate waivers,
satisfactory to Mortgagee, of owners and of mortgagees of any such premises.
(e) Mortgagor shall comply (so far as may be necessary to protect the
Collateral and the lien of this Mortgage thereon) with all of the terms and
conditions of leases covering the premises wherein the Collateral may be located
and with any orders, ordinances, laws or statutes of any city, state or other
entity
3
<PAGE>
having jurisdiction over the premises or the conduct of business thereon, and,
where requested by Mortgagee, will correct any defects or execute any written
instruments and do any other acts necessary to more fully effectuate the
purposes and provisions of this instrument.
(f) Mortgagor will indemnify and save Mortgagee harmless from all losses,
costs, damages, liabilities or expenses, including reasonable attorneys' fees,
that Mortgagee may sustain or incur to obtain or enforce payment, performance or
fulfillment of any of the Mortgage Obligations or in the enforcement or
foreclosure of this Mortgage or in the prosecution or defense of any action or
proceeding either against Mortgagor or against Mortgagee concerning any matter
growing out of or connected with this Mortgage and/or any of the Mortgage
Obligations and/or any of the Collateral.[G]
(g) If Mortgagor is a corporation, the execution of this Mortgage has been
duly consented to and authorized by its Board of Directors. Mortgagor agrees to
deliver to Mortgagee evidence thereof satisfactory to Mortgagee immediately upon
request.
4. This Mortgage may be assigned along with any and all Mortgage
Obligations, without notice to Mortgagor, and upon such assignment Mortgagor
agrees not to assert against any assignee hereof any defense, set-off,
recoupment, claim, counterclaim or cross-claim which Mortgagor may have against
Mortgagee, whether arising hereunder or otherwise, and such assignee shall be
entitled to at least the same rights as Mortgagee. MORTGAGOR AND MORTGAGEE
HEREBY DESIGNATE AND APPOINT EDWIN M. BAUM, ESQ. AND C-A CREDIT CORP., BOTH OF
NEW YORK, OR EITHER OF THEM AS THEIR TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT
FOR THEM AND IN THEIR NAME, PLACE AND STEAD TO ACCEPT SERVICE OF ANY PROCESS
WITHIN THE STATE OF NEW YORK, THE PARTY SERVING SUCH PROCESS AGREEING TO NOTIFY
THE OTHER PARTY(IES) AT THEIR ADDRESS AS SHOWN, OR THEIR LAST KNOWN ADDRESS, BY
CERTIFIED MAIL, WITHIN THREE (3) DAYS OF SUCH SERVICE HAVING BEEN EFFECTED.
MORTGAGOR AND MORTGAGEE HEREOF AGREE TO THE EXCLUSIVE VENUE AND JURISDICTION OF
ANY COURT IN THE STATE AND COUNTY OF NEW YORK FOR ALL ACTIONS, PROCEEDINGS,
CLAIMS, COUNTERCLAIMS OR CROSSCLAIMS ARISING DIRECTLY OR INDIRECTLY IN
CONNECTION WITH, OUT OF, OR IN ANY WAY RELATED TO THIS MORTGAGE, WITH THE SOLE
EXCEPTIONS THAT AN ACTION TO RECOVER POSSESSION OF ALL OR PART OF THE COLLATERAL
OR ANY OTHER ASSETS, AND THAT JUDGMENTS MAY BE CONFESSED, ENTERED, OR ENFORCED
IN ANY JURISDICTION WHERE THE MORTGAGOR OR THE COLLATERAL AND/OR ANY OTHER
ASSETS OF THE MORTGAGOR MAY BE LOCATED. MORTGAGOR AND MORTGAGEE EACH WAIVE ANY
RIGHT THEY OR ANY OF THEM MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT IN ACCORDANCE HEREWITH. At Mortgagee's request Mortgagor will
furnish current financial statements satisfactory to Mortgagee in form,
preparation and content.
4
<PAGE>
5. If Mortgagor shall default in the prompt payment, performance or
fulfillment of any of the Mortgage Obligations,[H] or if Mortgagor shall cease
doing business, or become insolvent, or make an assignment for the benefit of
creditors, or if proceedings under any Bankruptcy Act or for the appointment of
a receiver, trustee, liquidator or custodian for Mortgagor or any of Mortgagor's
property shall be commenced by or against Mortgagor, or if Mortgagor shall fail
to punctually and faithfully fulfill, observe or perform any of the terms,
conditions, promises, covenants, provisions and warranties contained in this
Mortgage [I] or if any of the warranties, covenants or representations made to
Mortgagee be or become untrue or incorrect in any adverse respect, or if
Mortgagee at any time deems the security afforded by this Mortgage unsafe,
inadequate or at any risk, then in any such event the indebtedness under all
Mortgage Obligations shall at once, at the option of Mortgagee, and to the
extent permitted by applicable law, become immediately due and payable without
notice to Mortgagor, and in such event it shall be lawful for Mortgagee to take
possession of the Collateral, at any time, wherever it may be, and to enter any
premises, with or without process of law, and search for, take possession of,
remove, or keep and store the Collateral on said premises until sold, without
liability for trespass nor charge for storage, and to sell the Collateral or any
part thereof and all of Mortgagor's equity of redemption therein at public or
private sale, for cash or on credit, and on such terms as Mortgagee may in its
sole discretion elect, in such county and at such places as Mortgagee may elect
and without having the Collateral at the place of sale; Mortgagee may bid or
become the purchaser at any such sale and Mortgagor waives any and all rights of
redemption from any such sale. Any public sale will be deemed commercially
reasonable if notice thereof shall be mailed to Mortgagor at least 10 days
before such sale and advertised in at least one newspaper of general circulation
in the area of the sale at least twice prior to the date of sale and if upon
terms of 25% cash down with the balance payable within 24 hours; and any private
sale shall be deemed commercially reasonable if notice thereof shall be mailed
to Mortgagor at least 14 days before the sale date stated therein and credit
given for the full price stated, less reasonable attorneys' fees. In light of
Mortgagor's obligations to maintain the Collateral, Mortgagee shall not be
required to refurbish, repair or otherwise incur any expenses in preparing
Collateral for sale but may sell its interest therein on an "as-is", "where-is"
basis. The proceeds of any public sale shall be applied first to pay all costs,
expenses and charges for pursuing searching, taking, removing, keeping,
advertising and selling the Collateral, including reasonable attorneys' fees and
second to the payment of any of the Mortgage Obligations returning the overplus,
if any, to Mortgagor, who shall remain liable to Mortgagee for any deficiency
plus late charges thereon as provided above. Mortgagor expressly waives any
right to notice or hearing in any action to recover possession of any or all of
the Collateral. In any action in the nature of replevin or sequestration,
Mortgagor agrees that
5
<PAGE>
if it contests such action it will post a bond written by a national insurance
company authorized to execute such bonds in the jurisdiction of such
proceedings, such bond to be no less than the value of the subject matter of
such replevin or the unpaid balance then owing to Mortgagee, whichever is less.
Any notices relating hereto shall be in writing and effective when delivered in
person to an officer of the party to whom addressed or mailed by certified mail
to such party at its address specified herein or at such other address as may
hereafter be specified by like notice by either party to the other. Reasonable
notification hereunder shall be any notification given or sent at least five (5)
days prior to the event for which such notification is sent. MORTGAGOR AND
MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL
RIGHT TO A TRIAL BY JURY OF ANY AND ALL CLAIMS, DEFENSES, COUNTERCLAIMS,
CROSSCLAIMS AND SET-OFF OR RECOUPMENT CLAIMS ARISING DIRECTLY OR INDIRECTLY
BETWEEN OR AMONG THEM AND/OR INVOLVING ANY PERSON OR ENTITY CLAIMING ANY RIGHTS
ACQUIRED BY, THROUGH OR UNDER ANY PARTY AND FURTHER WAIVES ANY AND ALL RIGHT TO
CLAIM OR RECOVER ANY PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
6. If, after default by Mortgagor under the Mortgage Obligations,
Mortgagee fails to demand full payment, performance or fulfillment or otherwise
proceed, such failure shall not be deemed a waiver of the right of Mortgagee
subsequently to make demand for immediate payment, performance and fulfillment
of the Mortgage Obligations, or to take immediate possession of the Collateral,
or to foreclose this Mortgage at any time or to proceed otherwise; and the
acceptance by Mortgagee of any payment subsequent to such default shall not be
deemed a waiver of any of Mortgagee's rights. No delay or failure on the part of
Mortgagee in exercising any right, privilege, remedy or option hereunder shall
operate as a waiver of such or of any other right, privilege, remedy or option,
and no waiver whatever shall be valid unless in writing, signed by an officer of
Mortgagee and then only to the extent therein set forth. This Mortgage cannot be
changed or terminated orally. Mortgagee shall have the right to enforce any one
or more remedies available to it successively, alternately or concurrently. Only
a writing, signed by an officer of Mortgagee [J] shall be effective, but only to
the extent therein specifically set forth, to change, modify or terminate any
Mortgage Obligation, this Mortgage or any other agreement between Mortgagor and
Mortgagee.
7. All of the rights, remedies, options, privileges and elections given
to the original Mortgagee hereunder shall enure to the benefit of Mortgagee, any
transferee or holder of this Mortgage, and their respective successors and
assigns; and all the terms conditions, promises, covenants, provisions and
warranties of this Mortgage shall enure to the benefit of and shall bind the
representatives, successors and assigns of the respective parties. Any and all
security interests granted to Mortgagee shall attach to
6
<PAGE>
any and all proceeds and products. Each person signing this Mortgage warrants
full authority to sign for the party named.
8. Some of the Collateral may be in the hands of Mortgagor under one or
more security agreements which are or may be held by Mortgagee and with respect
to such Collateral, this Mortgage is only of any equity that Mortgagor may now
or in the future have in such Collateral and Mortgagee by accepting this
Mortgage shall not in any manner be considered as having waived any security
interest arising independently of this Mortgage nor shall this Mortgage be
construed as adversely affecting any rights of Mortgage under any other security
agreement nor as a waiver of any of the terms and provisions of any other
security agreement, guaranty or endorsement, all of which shall remain and
continue in full force and effect.
9. Intending that each and every provision of this Mortgage be fully
effective and enforceable according to its terms, the parties agree that the
validity, enforceability and effectiveness of each provision hereof and the
obligations, rights and remedies of the Mortgagor and Mortgagee in any way
related to or arising under this Mortgage or under one or more Mortgage
obligation shall be governed by and construed in accordance with the laws of the
State of New York (excluding its choice of law rules), if any one or more
provisions hereof are in conflict with any statute or law and thus not valid or
enforceable, then each such provision shall be deemed null and void but only to
the extent of such conflict and without invalidating or affecting the remaining
provisions hereof. This contract shall be binding upon the heirs,
administrators, legal representatives and successors of the Mortgagor.
10. MORTGAGOR DOES HEREBY WAIVE, FOREGO AND AGREE NOT TO ASSERT ANY AND
ALL RIGHTS, CLAIMS AND DEFENSES, IF ANY, UNDER THE FEDERAL FAIR CREDIT REPORTING
ACT AND/OR UNDER ANY COMPARABLE STATE LAWS THAT MAY INURE TO THE BENEFIT OF
MORTGAGOR IN CONNECTION WITH THIS MORTGAGE. MORTGAGOR HEREBY RATIFIES AND
APPROVES THE OBTAINING BY MORTGAGEE OF ANY CREDIT REPORT RELATING TO MORTGAGOR
AND HEREBY AGREES THAT MORTGAGEE MAY HEREAFTER OBTAIN SUCH CREDIT REPORTS AS
MORTGAGEE IN ITS SOLE DISCRETION MAY DETERMINE.
11. This is subject to the additional terms and conditions in the Addendum
dated _____________.
IN WITNESS WHEREOF, Mortgagor has caused these presents to be duly
executed, the day and year first above written.
INTERNATIONAL ENVIRONMENTAL CORPORATION (Seal)
- --------------------------------------------------------------------------------
ATTEST/WITNESS: (Mortgagor)
/s/ By /s/
- -------------------------- ---------------------------------------------
(Secretary/Witness) (Title)
7
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF CLEVELAND )
David R. Goss being duly sworn, deposes and says:
-------------
1. He is the Vice President of International Environmental Corporation
-------------- ---------------------------------------
(hereinafter called "Mortgagor") descried in and which executed the foregoing
Mortgage.
2. Mortgagor is the sole owner and in possession of the goods, chattels
and property mentioned and described in the foregoing Mortgage. Said goods,
chattels and property are free of all liens and encumbrances of any kind, nature
and description (except for any held by the Mortgagee referred to below), and
Mortgagor has the sole right and lawful authority to mortgage the same.
3. Mortgagor is solvent and justly indebted to the mortgagee named in the
foregoing Mortgage (hereinafter called "Mortgagee") in the amount of the
aggregate sum of the Mortgage Obligations outstanding on the date hereof, and
there are no claims, off-sets or defenses against same.
4. There are no judgments against Mortgagor, and no attachment or
execution is now outstanding against any of Mortgagor's property, no receiver of
Mortgagor has ever been appointed or applied for. There are no proceedings in
bankruptcy pending affecting Mortgagor, nor have there ever been any such
proceedings affecting Mortgagor, and no assignment for the benefit of creditors
has been made by Mortgagor.
5. Deponent makes this affidavit realizing that Mortgagee is being
inducted thereby to extend credit to and/or accept Mortgagor as a credit risk in
reliance upon the truth of the statements contained herein, and this affidavit
is made to induce Mortgagee to do so.
Sworn to before me this 18/th/ day of April, 1997.
/s/ Yvonne M. Quinnett /s/ David R. Goss
- ----------------------------- ------------------------------------------
NOTARY PUBLIC (Signature)
(Notary Seal) My Commission Expires September 9, 2000
--------------------------------------
State of Oklahoma, County of Cleveland, SS:
-------- ---------
I, Yvonne M. Quinnett, a Notary Public duly qualified in and for said
------------------
County and state, do hereby certify that on this 18/th/ day
8
<PAGE>
of April, 1997 in (Place) Oklahoma City, Oklahoma County, before me personally
-----------------------
appeared David R. Goss to me personally well known to be the identical person
--------
who signed the within and foregoing instrument of writing in his own proper
handwriting and well known to me to be and who acknowledged himself to be the
Vice President of International Environmental Corporation who, being by me first
- -------------- ---------------------------------------
duly sworn, did say that he is such officer of the aforesaid corporation, named
in the within, foregoing and annexed instrument of writing; and being authorized
so to do, executed said foregoing instrument; that he was duly authorized to
execute said instrument for and in the name of said corporation and make this
acknowledgment; that he knows the contents of said instrument; that he resides
at 16 S. Pennsylvania, Oklahoma City, Oklahoma that he knows the seal of said
-------------------------------------------
corporation; that the seal affixed to said instrument is the corporate seal of
said corporation; that the said instrument was signed, sealed and delivered on
behalf of said corporation by authority of its Board of Directors, and said
affiant acknowledged that he executed said instrument as his free, true and
lawful act and deed and the free, true, lawful and corporate act and deed of
said corporation, in pursuance of said authority by him in his said capacity and
by said corporation voluntarily executed for the uses, purposes and
consideration therein mentioned and contained, by signing the name of the
corporation by himself as such officer.
Given and witness my hand and official seal the day and year in this
certificate first above written.
(Notarial Seal) /s/ Yvonne M. Quinnett
--------------------------------------------
NOTARY PUBLIC
My Commission Expires September 9, 2000
9
<PAGE>
Addendum to Security Agreement-Mortgage on Goods and Chattels dated 4/18/97
between International Environmental Corporation as Mortgagor and ORIX Credit
Alliance, Inc. as Mortgagee
________________________________________________________________________________
[A] relating to such property described on Exhibit "A"
[B] arising in connection with a note dated 6/2/97 in the amount of
$587,180.00, including any extensions, modifications, or consolidations
thereof,
[C] Mortgagor's
[D] reasonable wear and tear excepted
[E] as it's interest may appear
[F] a certificate reflecting such coverage shall be
[G] Except those actions or proceedings arising from Mortgagee's negligence or
misconduct.
[H] and fails to cure the same within fifteen (15) days after receiving notice
of such default from Mortgagee,
[I] within fifteen (15) days after receiving notice of such failure from
Mortgagee
[J] and Mortgagor
________________________________________________________________________________
Acknowledged by:
International Environmental Corporation
By: /s/ David R. Goss
------------------
<PAGE>
SCHEDULE "A"
This schedule is attached to and becomes part of Security Agreement, Conditional
Sale Contract, Lease, or _______________ dated April 18, 1997 between the
undersigned.
<TABLE>
<CAPTION>
DESCRIPTION OF PROPERTY
(Indicate Whether
QUANTITY "NEW" or "USED") Year or Model Serial No.
<S> <C> <C> <C>
(1) CINCINNATI LASER CENTER CL-707 5X10 050042
WITH 20005M REASONATOR
WITH PROGRAMMABLE SUPER
PULSE, CINCINNATI CUSTOM
32-BIT CNC LASER CONTROL,
HI-RESOLUTION SVGA 14"
COLOR CRT MONITOR, 200 MB
PART PROG MEMORY, STANDARD
5.0" F.L. BREAKAWAY NON-
CONTACT HEAD, 5.0" SPARE
LENS, ENHANCED OPTICS
PACKAGE, FUME BLOWER, BALL
TRANSFER LOAD TABLE,
COMPRESSED AIR DRYER, CD-
ROM DRIVE, AND INTERNAL
MODEM.
TOGETHER WITH ALL
ATTACHMENTS AND
ACCESSORIES.
</TABLE>
This schedule is hereby verified correct and undersigned Mortgagor(s), Buyer(s),
or Lessee(s) acknowledges receipt of a copy this 18/th/ day of April, 1997.
Mortgagee/Seller/Lessor: Mortgagor/Buyer/Lessee:
ORIX CREDIT ALLIANCE, INC. INTERNATIONAL ENVIRONMENTAL
CORPORATION
By:_____________________________ By: /s/ David R. Goss
---------------------------------
<PAGE>
EXHIBIT 10.32
LEASE AGREEMENT
---------------
This Lease Agreement made and executed on March 7 , 1988, but and between
NORTHWEST FINANCIAL CORPORATION, a federally organized savings and loan
association (hereinafter referred to as "Landlord"), and INTERNATIONAL
ENVIRONMENTAL CORPORATION, an Oklahoma Corporation (hereinafter referred to as
"Tenant").
The parties to this Lease Agreement agree as follows:
1. Agreement to Lease. Landlord hereby demises and leases to Tenant, and
------------------
Tenant hereby hires and takes from Landlord, the premises and the buildings and
improvements located thereon and the appurtenances thereto (including, without
limitation, adequate ways of ingress and egress directly between the building on
the premises and public roads, and the parking area for automobiles) situated in
the City of Oklahoma City, County of Oklahoma, Oklahoma, described in Exhibit
"A" of this Lease Agreement and which is incorporated herein by this reference
(hereinafter referred to as the "Leased Premises").
2. Term. The term of the Lease Agreement shall be for a period of twelve
----
(12) years from the date of this Lease Agreement and ending on March 6 , 2000,
unless this Lease Agreement is sooner terminated pursuant to the terms of this
Lease Agreement or the term hereof is extended pursuant to the terms of this
Lease Agreement.
3. Delivery of the Leased Premises. Notwithstanding any other provision
-------------------------------
hereof, Landlord covenants that actual possession of the Leased Premises shall
be delivered to Tenant as of the date of this Lease Agreement, free and clear of
all tenancies or other
<PAGE>
claims, rights or, interests of occupancy, use, or any other inconsistent or
adverse claims, rights or interests.
4. Rent During Term. Subject to the terms of this Lease Agreement, Tenant
----------------
agrees to pay the Landlord rent for the Leased Premises, as follows:
(a) For the first year of this Lease Agreement, the annual rental to
be paid by Tenant to Landlord shall be $447,319 ("Base Rent"), payable in twelve
--------
equal monthly installments of $37,276.58 each, with each monthly installment
----------
payable on or before the 15th day of each month during the first year of this
Lease Agreement. For the purposes of this Lease Agreement, "first year of this
Lease Agreement" shall mean the twelve month period beginning on the date of
this Lease Agreement and ending March 6 , 1988.
(b) Within fifteen (15) days after the beginning of each year during
the term hereof after the first year of this Lease Agreement - the amount of the
annual rental to be paid by Tenant to the Landlord for such year shall be
calculated and determined, as follows ("Adjusted Annual Rental"): The Base Rent
less the amount or amounts received during the preceding year just ended by the
Landlord of all income, revenues or payments due to or as a result of or from
the oil and gas working interests listed in Exhibit B attached hereto and which
is incorporated herein by reference ("Oil and Gas Revenues"). Within ten (10)
days after the beginning of each year during the term hereof after the first
year of this Lease Agreement, the Landlord shall advise the Tenant of the amount
of
2
<PAGE>
the oil and Gas Revenues received by the Landlord during the preceding year just
ended and shall advise the Tenant of the Adjusted Annual Rental, if any, based
on the above calculation for such year. The Tenant shall pay to the Landlord the
Adjusted Annual Rental for such year in twelve (12) equal monthly installments
during said year, with each monthly installment payable on or before the 15th
day of each month during such year. If in calculating the Annual Adjusted Rental
for a particular year the oil and Gas Revenues for the preceding year just ended
is equal to or greater than the Base Rental, then no rental shall be payable to
the Landlord by the Tenant hereunder during such year, and the amount by which
such oil and Gas Revenues exceeds the Base Rent shall be carried forward and
added to the amount of Oil and Gas Revenues in calculating the Annual Adjusted
Rental for the next subsequent year. For the purposes of this Lease Agreement, a
"year" means a twelve month period beginning on March 7 and ending on March 6.
5. Covenant of Peaceful Possession. Landlord covenants and warrants that
-------------------------------
if Tenant shall discharge the obligations set forth in this Lease Agreement to
be performed by Tenant, Tenant shall peaceably have, hold and enjoy the quiet
and undisturbed possession of the Leased Premises, together with all the
appurtenances thereto, without hindrance, ejection, disturbance or molestation
by Landlord or any person or entity claiming through or under Landlord, or
otherwise, and free of any inconsistent or adverse claim, right or interest.
3
<PAGE>
6. Assignment and Sublease by Tenant. The Tenant may sublet the Leased
---------------------------------
Premises or any portion thereof covered by this Lease Agreement and may assign
this Lease Agreement. If Tenant does so sublet the Leased Premises or assign
this Lease Agreement, Tenant shall remain liable as guarantor hereunder in
connection with the obligations that the Tenant is to perform under this Lease
Agreement.
7. Use of Premises. Tenant may use the Leased Premises for the purpose of
---------------
operating a manufacturing operation, distribution center and/or for offices, or
any other related business (landlord hereby warranting that such uses are lawful
and permissible), and Tenant agrees not to use or knowingly permit the Premises
to be used for any unlawful purposes.
8. Condition or Premises. Tenant has examined the Leased Premises and
---------------------
accepts the Leased Premises in its existing condition. Upon termination of this
Lease Agreement pursuant to the terms hereof, Tenant shall repair any material
damage to the interior of the buildings and improvements on the Leased Premises
caused by Tenant's breach of this Lease Agreement, ordinary wear and tear and
damages due to structural elements excepted; provided, further, that if the
Landlord is obligated to make repairs to the Leased Premises under the terms of
this Lease Agreement but fails to make such repairs, Tenant shall not be
obligated to make such repairs upon termination of this Lease Agreement (it
being understood that this proviso on Landlord's repair obligation shall in no
event be deemed to be in substitution for, or in limitation,
4
<PAGE>
modification or derogation of, any of the Landlord's repair obligations under
this Lease Agreement.
9. Option to Terminate Lease. In addition to any other rights to
-------------------------
terminate this Lease Agreement provided for under any other Section of this
Lease Agreement, Tenant may, at its sole option, terminate this Lease Agreement
during the term hereof or any renewal or extension period only upon compliance
with the following conditions:
(a) Tenant shall give Landlord twelve (12) months written Notice of
Termination ("Notice of Termination").
(b) In addition to the termination fee provided for in subparagraph
(c) of this Section 9, Tenant shall pay rent at the rental amounts set forth in
Section 4 during the twelve (12) month period subsequent to the date of the
Notice of Termination and shall remain in compliance with all other terms and
conditions of the Lease Agreement.
(c) Tenant shall have vacated and removed any and all equipment,
furniture, machinery, movable trade fixtures and other personal property owned
by Tenant from the Leased Premises by the end of the twelve (12) month period
subsequent to the date of the Notice of Termination.
(d) Within thirty days of the date that the Landlord receives the
written Notice of Termination, Tenant shall pay to the Landlord a termination
fee in the following amount:
(i) If the Notice of Termination is issued by the Tenant to the
Landlord during the first year of this Lease
5
<PAGE>
Agreement, the amount of $447,319 which is equal to the rental payments for
a period of twelve (12) months at the rental set forth in Section 4(a)
hereof.
(ii) If the Notice of Termination is issued by the Tenant to the
Landlord after the first year of this Lease Agreement, an amount equal to
the Adjusted Annual Rental in effect on the date of the Notice of
Termination.
The termination fee and other conditions stated in this Section 9 shall not
apply to a termination under any other Section of this Lease Agreement.
10. Improvements and Alterations by Tenant. Tenant shall have the right to
--------------------------------------
make, at its own expense, all necessary or desirable improvements on, or
alterations to, the Leased Premises, provided that such improvements and
alterations are done in safe and workmanlike manner. All erections,, alterations
and additions which are affixed as appurtenances to the realty of the Leased
Premises (except furniture, equipment, machinery, movable trade fixtures and
other personal property of Tenant) shall be the property of Landlord and,
subject to any further alterations, shall remain upon, and be surrendered with,
the Leased Premises, as part thereof at the termination of this Lease Agreement
without compensation to Tenant.
11. Maintenance and Repairs.
-----------------------
(a) During the term of this Lease Agreement, Tenant shall maintain
and keep in good repair the interior of the buildings and the parking area,
sidewalks and roads located on the
6
<PAGE>
Leased Premises, ordinary wear and tear and damages due to structural elements
excepted.
(b) During the term of this Lease Agreement, the Landlord shall
maintain and keep in good repair the exterior and structural elements of the
buildings located on the Leased Premises (including, but not limited to, the
roof and exterior walls) and structural elements to the parking areas, sidewalks
and roads located on the Leased Premises.
(c) Failure to Make Repairs. If either party hereto fails to make any
-----------------------
of the repairs or provide the maintenance on the Leased Premises required of it
under this Section 11, within a reasonable period of time after written notice
has been delivered to such party from the other party hereto to make such
repairs or provide such maintenance, the other party hereto may, at its option
but shall not be obligated to, make such repairs for the account of the party
that is responsible and obligated to make such repairs under this Section 11.
The party that was obligated to make such repairs and provide such maintenance
under this Section 11 shall immediately reimburse the other party hereto for all
costs and expenses incurred by such party in connection with making such repairs
and providing such maintenance.
12. Signs. Tenant shall have the right to place signs or other advertising
-----
devices, electrical or non-electrical, either parallel to the buildings on the
Leased Premises, or at any angle to them, at or on either the front, back, roof
or sides of such buildings; provided, however, the same is in compliance with
all
7
<PAGE>
applicable law.
13. Utilities. Tenant shall pay for all water, gas, light, power,
---------
telephone service and all other utilities supplied to the Leased Premises.
14. Compliance with Law. The Tenant agrees to observe and comply with all
-------------------
laws, ordinances, rules and regulations of the Federal, State, County and
Municipal authorities applicable to the manner of conducting the business to be
conducted by the Tenant on the Leased Premises. The Landlord shall observe and
comply with all such laws, ordinances, rules and regulations applicable to the
Leased Premises. The Tenant agrees not to do anything on the Leased Premises, or
keep anything therein, contrary to the terms of this Lease Agreement, or
prohibited by the regulations of the Fire Department.
15. Entry by Landlord. During the term of this Lease Agreement, Tenant
-----------------
shall permit Landlord and its agents to enter upon the Leased Premises at
reasonable times during business hours for the exhibiting or inspecting of the
Leased Premises.
16. Continued Possession of Tenant. In the event that the Tenant shall
------------------------------
remain in the Leased Premises after the expiration of this Lease Agreement,
without having executed a new written lease with the Landlord, the Landlord may,
at its option, elect:
(a) to treat the Tenant as one which has not removed at the end of
its term, and thereupon be entitled to all the remedies against the Tenant
provided by law in that situation; or
(b) to construe such holding over as tenancy from month
8
<PAGE>
to month, subject to all the terms and conditions of this Lease Agreement except
as to duration hereof, and in that event the Tenant shall pay monthly rent at
the rate provided herein as effective during the last month of the term hereof.
17. General Liability Insurance. Tenant shall obtain and maintain
---------------------------
throughout the term of this Lease Agreement, at Tenant's expense, general
liability insurance in connection with the Leased Premises written by an
insurance company of recognized responsibility. The coverage of such general
liability insurance as it relates to the Leased Premises shall be for at least
One Million Dollars ($1,000,000) on account of injuries per occurrence. Such
general liability insurance policy as it relates to the Leased Premises shall
contain a provision requiring the insurer to give written notice of cancellation
to Landlord at least ten (10) days prior to cancellation. Such general liability
insurance as it relates to the Leased Premises shall name Landlord as an
additional insured as its respective interest may appear. Tenant shall supply to
Landlord upon the execution of this Lease Agreement a certificate of insurance
issued by the insurance carrier of Tenant showing that such insurance is in full
force and effect.
Notwithstanding the above, Tenant may, at its option, self insure the
general liability in connection with the Leased Premises in lieu of obtaining
general liability insurance on the Leased Premises from an insurance company. In
the event that the Tenant does self-insure such general liability in connection
with the Leased Premises (i) Tenant shall have no obligation to obtain
9
<PAGE>
general liability insurance written by an insurance company during the period
that Tenant does self-insure such general liability and (ii) Tenant shall
indemnify the Landlord against, and hold Landlord harmless from, and all claims,
demands, actions, proceedings or liabilities incurred or to be incurred by the
Landlord as a result of an occurrence (as defined below) on the Leased Premises
that occurs during the period that the Tenant is self-insuring such general
liability on the Leased Premises and that results in bodily injury or property
damage to a third party not a party hereto. For the purposes of this Section 17,
"occurrence" means an accident which results in bodily injury or property
damage. If the Tenant does decide to self-insure the general liability in
connection with the Leased Premises, the Tenant agrees to give the Landlord
written notice of its decision no less than ten (10) days prior to the time that
Tenant will begin to self-insure such general liability.
18. Fire and Extended Property Damage.
---------------------------------
(a) Subject to the terms hereof, during the term of this Lease
Agreement, the Tenant will keep insured any and all buildings and improvements
upon the Leased Premises against all loss or damage by fire, windstorm and
extended coverage, which said insurance will be maintained in an amount not less
than the full replacement value thereof. All of such policies of insurance
relating to the buildings and improvements on the Leased Premises shall name the
Tenant and Landlord as the insureds and shall fully protect both the Landlord
and the Tenant as their respective interests may appear. In the event of damage
to or destruction of
10
<PAGE>
the said buildings or improvements an the Leased Premises by fire, windstorm, or
other casualty for which insurance shall be payable and as often as such
insurance money shall have been paid to the Landlord and the Tenant for damages
to or destruction of the buildings and improvements on the Leased Premises, said
sums so paid shall be deposited in a joint account of the Landlord and the
Tenant in a bank or savings and loan satisfactory to the Tenant ("joint
account"), and such funds in the joint account shall be made available to the
Tenant for the construction or repair, as the case may be, of any buildings or
improvements located on the Leased Premises damaged or destroyed by fire,
windstorm, or other casualty, and shall be paid out by the Landlord and the
Tenant from said joint account from time to time on the estimate of the Tenant,
certifying that the amount of such estimate is being applied to the payment of
the reconstruction or repair. Tenant shall have no obligation to make such
repairs to or restoration of such damaged buildings and improvements located on
the Leased Premises the cost of which exceeds that portion of the insurance
proceeds made available to Tenant to make such repairs or restore such damaged
buildings and improvements on the Leased Premises.
(b) The foregoing notwithstanding, in the event the insurance
proceeds are the sum of $100,000 or less, then such proceeds shall be paid
directly to the Tenant without the necessity of creating the joint account, and
Tenant shall use such funds to make the replacements or repairs to the damaged
buildings and improvements on the Leased Premises.
11
<PAGE>
(c) Any excess of money received from insurance remaining in the
joint account after the reconstruction or repair of such damaged buildings or
improvements on the Leased Premises shall, if the Tenant is not in default under
this Lease Agreement, be paid to Tenant. If the Tenant has not begun to restore
or repair the damaged buildings and improvements located on the Leased Premises
using the proceeds in the joint account for such repairs or restoration within a
period of 120 days from the date of receipt of such casualty, or such extended
period of time as agreed to in writing by both the Tenant and the Landlord, the
Tenant may, at its option, terminate this Lease Agreement and in the event of
such termination by Tenant the proceeds in the joint account shall be paid to
Landlord.
(d) If any mortgagee holding a mortgage on the Leased Premises
elects, in accordance with the terms of such mortgage, to require that all or
any part of the proceeds of such insurance paid as a result of damages to the
buildings and improvements located on the Leased Premises be paid to or retained
by the mortgagee, then such payment shall be made, but in such event, the
Landlord shall pay into the joint account referred to in subparagraph (a) of
this Section 18 that amount of the insurance proceeds paid to or retained by
mortgagee. In the event that such mortgagee elects such insurance proceeds be
paid to it in accordance with the terms of such mortgage and the Landlord fails
or refuses, for any reason whatsoever, to pay into such joint account that
amount of such insurance proceeds paid to or retained by the mortgagee within 30
12
<PAGE>
days from the date of notification from the mortgagee of the mortgagee's
election to retain or have paid to it such insurance proceeds, in whole or in
part, the Tenant may, at its option, terminate this Lease Agreement.
(e) The policies of insurance required to be maintained by the Tenant
pursuant to this Section 18 may be carried by the Tenant under blanket policies
maintained by the Tenant. Such policies may provide for such deductible amounts
as are customarily provided for in insurance maintained by the Tenant with
respect to similar properties owned or leased by it. The policy of insurance
required to be maintained by the Tenant shall bear a standard first mortgagee
endorsement in favor of any holder of a mortgage created prior to the date of
this Lease Agreement. Within ten (10) days after commencement of this Lease
Agreement, Tenant shall deliver to the Landlord certificates of the insurers
evidencing all of the insurance which is required under this Section 18.
(f) Notwithstanding the above provisions of this Section 18, Tenant
may, at its option, self-insure the buildings and improvements on the Leased
Premises against damage or destruction by fire, windstorm and extended coverage
in lieu of obtaining insurance from an insurance company covering such buildings
and improvements on the Leased Premises against damage or destruction by fire,
windstorm and extended coverage. In the event that the Tenant does self-insure
such buildings and improvements on the Leased premises against damage or
destruction by fire, windstorm and extended coverage in lieu of obtaining
insurance from
13
<PAGE>
an insurance company covering such damage or destruction, notwithstanding
anything herein to the contrary, (i) Tenant shall have no obligation to obtain
such insurance from an insurance company covering the buildings and improvements
on the Leased Premises against damage or destruction by fire, windstorm and
extended coverage during the period that the Tenant is self-insuring such damage
or destruction, and (ii) in the event of damage to or destruction of any of the
buildings or improvements on the Leased Premises during the period that the
Tenant is self insuring such buildings and improvements and such damage or
destruction is due to a fire, windstorm or other casualty that would be
insurable under a standard fire, windstorm and extended coverage property
insurance policy in effect at the time of such damage or destruction, such
damage or destruction shall be repaired by, and at the expense of, the Tenant in
substantially the condition such damaged or destroyed building or improvement
was in immediately prior to such damage or destruction and the Tenant shall
begin such repair or restoration work as soon as possible after the date of such
casualty. If the Tenant does decide to self-insure the buildings and
improvements on the Leased Premises against damage or destruction by fire,
windstorm and extended coverage, the Tenant agrees to give the landlord written
notice of its decision no less than ten (10) days prior to the time the Tenant
will begin such self-insurance.
19. Waiver of Subrogation. Each party hereto waives any and every claim
---------------------
that arises or may arise in its favor and against the
14
<PAGE>
other party hereto for any and all loss of, or damage to, any of the buildings,
improvements and/or its property located within or upon, or constituting a part
of, the Leased Premises to the extent such loss or damage is covered by fire and
extended coverage insurance. Said mutual waivers shall be in addition to, and
not in limitation or derogation of, any other waiver or release contained in
this Lease Agreement with respect to any loss of, or damage to buildings or
improvements located on the Leased Premises and/or property of the parties
hereto, inasmuch as the above mutual waivers will preclude the assignment of any
aforesaid claim by way of subrogation (or otherwise) to an insurance company (or
any other person), each party hereto hereby agreeing immediately to give to each
insurance company which has issued to it policies of fire and extended coverage
insurance, written notice of the terms of said mutual waivers, and to have said
insurance policies property endorsed, if necessary, to prevent the invalidation
of said insurance coverages by reason of said waivers.
20. Condemnation.
------------
(a) Complete Condemnation. If, after the execution and prior to the
---------------------
termination of this Lease Agreement, the whole of the Leased Premises shall be
taken under the power of eminent domain by any public or private authority, then
this Lease Agreement and the term hereof shall cease and terminate as of the
date of such taking, with the right of Tenant, at its election, to continue to
occupy the Leased Premises, subject to the terms of this Lease Agreement, for
all or such part, as Tenant may determine, of the
15
<PAGE>
period between the date of such taking and the date when possession of the
Leased Premises shall be taken by the taking authority, and any unearned rent or
other charges, if any, paid in advance, shall be refunded to Tenant. If
required, Tenant shall procure from the applicable governmental authority, at
Tenant's expense, all necessary consents and authorizations to continue to
occupy the Leased Premises from and after the date of such taking.
(b) Partial Condemnation. If, after the execution and prior to the
--------------------
termination hereof, any public or private authority shall, under the power of
eminent domain, make a taking:
(i) Resulting in the reduction of the ground floor area of the
building on the Leased Premises by 20% or more, or
(ii) Resulting in the reduction of the parking area on the Leased
Premises by 20% or more, then Tenant may, at its election, terminate this Lease
Agreement by giving Landlord notice of the exercise of its election within 60
days of the date of notice to Tenant of such taking (or purchase). In the event
of termination by Tenant under this Section, this Lease Agreement shall cease
and terminate as of the last day of the calendar month in which such notice of
exercise of its election to terminate has been given, and any unearned rent or
other charges, if any, paid in advance, shall be refunded to Tenant.
(c) Rent Adjustment. In the event that Tenant, having such right,
---------------
shall not elect to terminate as aforesaid, then this Lease Agreement and the
term hereof shall continue in full force and effect, and Landlord shall, at its
expense, forthwith restore
16
<PAGE>
what may remain of the Leased Premises, including any and all improvements made
theretofore, the parking areas and the Leased Premises, to substantially the
same condition they were in prior to such taking and a just proportion of the
rent provided in Section 4 hereof, and any other charges payable by Tenant
hereunder, according to the nature and extent of the injury to the Leased
Premises and Tenant's business shall be suspended or abated until what may
remain of the Leased Premises and the parking areas, shall be restored as
aforesaid, and thereafter a just proportion of the rent and any such other
charges according to the nature and extent of the taking and resulting injury to
the Leased Premises and Tenant's business shall be permanently abated for the
balance of the term of this Lease Agreement. In computing the amount of
proportionate rent reduction as herein provided, due consideration shall be
given to the value of the portion of the area so taken in condemnation with
relation to the remaining area insofar as the use thereof for Tenant's business
is concerned, and to the effect of such taking on Tenant's business, and the
amount of parking area and the value of what remains insofar as the use thereof
for Tenant's business is concerned.
(d) Condemnation Award. All compensation awarded or paid for losses
------------------
or damages to the Leased Premises or losses or damages to the Landlord for loss
of its leasehold interest upon such a total or partial taking of the Leased
Premises under the power of eminent domain shall belong to and be the property
of the Landlord; provided however, that nothing contained herein shall be
construed
17
<PAGE>
to preclude Tenant from (i) prosecuting and filing, and the Tenant shall be
entitled to prosecute and file, a claim directly against the condemning
authority in such condemnation proceedings for loss of or damage to Tenant's
business or suffered by Tenant due to loss of its leasehold interest,
depreciation to, damage to, or cost of removal of, or for value of stock, trade
fixtures, furniture and other personal property belonging to Tenant, as a result
of the partial or complete taking of the Leased Premises, and (ii) collecting
and retaining any damages awarded Tenant in connection therewith.
21. Destruction of Premises.
-----------------------
(a) Restoration of Damaged Premises. In the event any of the buildings
-------------------------------
or improvements located on the Leased Premises are damaged or destroyed or
rendered partially untenantable by fire or other casualty, the Tenant shall as
soon as possible repair (but only from and to the extent of the insurance
proceeds released to Tenant from the joint account pursuant to Section 18(a)
hereof, except as otherwise specifically provided in Section 18(f) hereof) the
damaged or destroyed buildings and/or improvements located on the Leased
Premises to as nearly as possible the condition in which they were in
immediately prior to the happening of such casualty. Tenant shall have no
obligation to make any repairs to or restoration of the damaged buildings and
improvements on the Leased Premises the cost of which exceeds that portion of
such insurance proceeds made available to Tenant from such joint account to make
such repairs or restore such damaged buildings and improvements on
18
<PAGE>
the Leased Premises, except as otherwise specifically provided in Section 18(f)
hereof.
(b) Rent Abatement. During the period from the date of such casualty
--------------
until the buildings and improvements located on the Leased Premises are
repaired and restored, the rent payable by Tenant hereunder shall be abated
proportionately according to the floor area of the buildings and improvements
located on the Leased Premises which is usable by the Tenant after such
casualty. Such abatement shall continue for the period commencing with such
damage or destruction and ending with the completion of the work or repair. In
the event that this Lease Agreement is terminated due to exercise of the
Termination Option pursuant to paragraph (c) of this Section 21, the rent shall
be completely abated from the date of the casualty.
(c) Termination Option. Notwithstanding anything herein to the
------------------
contrary, in the event that (i) 25% or more of the Leased Premises, or (ii) 25%
or more of the buildings of which they are a part, are damaged or destroyed or
rendered untenantable by fire or other casualty, Tenant may, at its option,
terminate this Lease Agreement effective as of the date of such casualty, by
giving to the Landlord 120 days after the happening of such casualty written
notice of such termination; except that the termination option to terminate this
Lease Agreement under this Section 21(c) shall not be applicable if on the date
of such damage or destruction by fire or other casualty, the Tenant is self-
insuring such damage or destruction in lieu of obtaining insurance from an
insurance
19
<PAGE>
company under and pursuant to Section 18(f) hereof.
22. Options to Renew and Extend. If this Lease Agreement is in full force
---------------------------
and effect, Tenant shall have the right and option to extend the term of this
Lease Agreement for the Leased Premises at the end of the initial twelve (12)
year term for an extended period of ten (10) years commencing on the day
following the expiration of the initial term, provided Tenant shall notify
Landlord in writing not less than ninety (90) days prior to the expiration of
the initial term that Tenant desires such renewal and extension, and such
extension and renewal shall be upon the same terms, provisions, covenants,
conditions and rental as contained in this Lease Agreement, except as to the
duration of the term.
23. Place of Payment of Rent. Rent shall be payable in the lawful tender
------------------------
of the United States of America to Landlord by payment to the order of New
Northwest Federal Savings & Loan Association,________________ or at such other
place as may be designated by Landlord by written notice to Tenant.
24. Manner of Giving Notice. All notices or demand shall be given in
-----------------------
writing. They shall be served either personally or by registered or certified
mail, postage prepaid and return receipt requested. If a notice is served
personally, it shall be considered given at the time of service. If the notice
is served by mail in the manner provided above, it shall be considered given
when mailed. Notices shall be addressed as appears below for the respective
party; provided that, if either party gives notices of a change of name or
address, notices to the giver of that notice
20
<PAGE>
shall thereafter be given as demanded in that notice.
Landlord Tenant
-------- ------
New Northwest Federal International Environmental
Savings & Loan Association Corporation
2519 Williams Avenue 5000 Interstate 40 West
Woodward, Oklahoma 73802 Oklahoma City, Oklahoma 73128
Attn: President Attn: President
25. Default by Tenant. In the event (i) of the non-payment of said rent,
-----------------
or any installment thereof by the Tenant, at the times and in the manner
provided herein, and if the same shall remain in default for a period of thirty
(30) days after Tenant has received written notice from Landlord of such
default, or (ii) Tenant shall breach any of its other material obligations
hereunder, and the same shall remain in breach for a period of sixty (60) days
after Tenant has received written notice from Landlord of such breach (or, in
the case of a breach which cannot reasonably be cured within such sixty (60)
days, Tenant shall not have commenced the cure within such sixty (60) day
period, and thereafter continued to prosecute the cure to completion), the
Landlord, at its option, shall have the right to declare this Lease Agreement in
default and may re-enter the Leased Premises as the agent of the Tenant, without
being liable for any prosecution or damages therefore, and may relet the Leased
Premises as the agent of the Tenant, and receive the rent therefore, upon such
terms as shall be reasonably satisfactory to the Landlord, and all rights of the
Tenant to repossess the Leased Premises under this Lease Agreement shall be
forfeited. Such re-entry by the Landlord under and pursuant to the terms of this
Section 25 shall not operate to release the Tenant
21
<PAGE>
from any rent to be paid or covenants to be performed hereunder during the full
term of this Lease Agreement. For the purpose of reletting, the Landlord shall
be authorized to make such repairs as may be necessary to place the same in
substantially the order and condition that such was in as of the date of this
Lease Agreement, ordinary wear and tear and structural damage excepted. The
Tenant shall be liable to the Landlord for the reasonable cost of such repairs
or alterations, except for such cost for repairs and alterations which Tenant is
not, or Landlord is required to make pursuant to the terms of this Lease
Agreement, or which are made to prepare the Leased Premises for uses different
from those of Tenant hereunder. if the sum realized or to be realized from the
reletting is insufficient to satisfy the monthly or term rent provided in this
Lease Agreement, the Landlord, at its option, may require the Tenant to pay such
deficiency month by month, or may hold the Tenant in advance for the entire
deficiency to be realized during the term of the reletting. Landlord shall
exercise diligent efforts to mitigate any such costs or damages.
26. Attorney's Fees. In the event of any litigation regarding this Lease
---------------
Agreement, the losing party shall pay to the prevailing party reasonable
attorneys' fees.
27. Real Property Taxes on Leased Premises. The Tenant shall pay the
--------------------------------------
annual real property taxes assessed or charged against the Leased Premises for
any period included within the term of this Lease Agreement. Except in the event
such real estate taxes are being contested as provided below, if Tenant fails or
defaults in
22
<PAGE>
paying. such real estate taxes on the Leased Premises by the date that such real
estate taxes are due and payable, then the Landlord may, at its option but shall
not be obligated to, make such payment for the Tenant, and the Tenant shall
immediately reimburse the Landlord for such real estate taxes. The Tenant shall
have the right to contest and review by legal proceedings the real estate taxes,
assessed or charged upon or against the Leased Premises.
28. Rights-of-Way. Landlord guarantees that at all times Tenant shall have
-------------
the continuous right to use any rights-of-way which are in use on the date of
execution of this Lease Agreement, leading to and from any rear, front or side
entrances of the Leased Premises, and the right to use any right-of-way or
alley-way, either on or adjoining the Leased Premises, the use of which Landlord
has a right to grant to Tenant or which Landlord owns or controls. Such rights,
right-of-way and ways shall be deemed to be appurtenances and a part of the
Leased Premises leased hereunder.
29. Gender and Number. As used in this Lease Agreement, the masculine,
-----------------
feminine, or neuter gender, and the singular or plural number, shall each be
deemed to include the others whenever the context so indicates.
30. Mechanic's Lien.
---------------
(a) Liens of Tenant. If because of any act or omission of Tenant, any
---------------
mechanic's lien or other liens shall be filed against any portion of the Leased
Premises, Tenant shall, at its own cost and expense, cause the same to be
discharged or record or bonded within 90 days after written notice from Landlord
to Tenant
23
<PAGE>
of the filing thereof unless Tenant shall contest the validity of such liens in
accordance with Section 30(c) hereof. If Tenant shall fail to cause such lien to
be discharged of record or bonded faith in the aforesaid 90-day period (unless
Tenant shall contest the validity of such lien as aforesaid) or satisfy such
lien within 30 days after any judgment in favor of such lien holder from which
no further appeal might be taken, then Landlord shall have the right to cause
the same to be discharged. All amounts paid by Landlord to cause such lien to be
discharged shall constitute additional rent payable to Landlord.
(b) Liens of Landlord. If, because of any act or omission of Landlord,
-----------------
any lien shall be filed against the Leased Premises, Landlord shall, at its own
expense, cause the same to be discharged of record or bonded within 90 days
after written notice from Tenant to Landlord of the filing thereof. If Landlord
shall fail to cause such lien to be discharged or bonded within the aforesaid
90-day period, or if prior to the expiration of such 90 day period Tenant's
quiet enjoyment of the Leased Premises shall be affected or threatened as a.
result thereof, Tenant shall have the right to cause the same to be discharged.
All amounts paid by Tenant may be deducted from subsequent installments of the
rent payable hereunder.
(c) Contested Proceedings. Tenant and Landlord may contest by
---------------------
appropriate proceedings, the amount, validity, or application of any lien,
provided that (i) such proceedings shall suspend the collection thereof, (b) no
part of the Leased Premises
24
<PAGE>
or of any rent would be subject to loss, sale, or forfeiture before
determination of any contest, (iii) Tenant or Landlord would not be subject to
any criminal liability for failure to pay, and (iv) such proceedings shall not
affect the payment of rent hereunder or prevent Tenant from using the Leased
Premises for its intended purposes.
31. Headings. The title and headings of any Article, Section or Paragraph
--------
contained in this Lease Agreement are for reference and convenience only, and
the words contained in such title or heading shall in no way be held to explain,
modify, amplify or aid in the interpretation, construction or meaning of the
provisions of this instrument.
32. No Oral Chances. This Lease Agreement may not be changed or modified
---------------
orally but only by an agreement in writing signed by the party against whom such
change or modification is sought to be enforced.
33. Indemnity. Tenant shall indemnify Landlord against, and hold Landlord
---------
harmless from, any and all claims, actions, proceedings, expenses (including,
but not limited to, reasonable attorneys' fees), damages and liabilities,
incurred or to be incurred by Landlord as a result of Tenant's breach of any of
its obligations and responsibilities under this Lease Agreement.
Landlord shall indemnify Tenant against, and hold Tenant harmless from, any
and all claims, actions, proceedings, expenses (including, but not limited to,
reasonable attorneys' fees), damages and liabilities, incurred or to be incurred
by Tenant as a
25
<PAGE>
result of Landlord's breach of any of its obligations and responsibilities under
this Lease Agreement.
34. Assignment by Landlord. Landlord may assign this Lease Agreement to a
----------------------
third party; provided however, that if Landlord assigns this Lease Agreement,
Landlord shall remain liable as a guarantor hereunder in connection with the
obligations that the Landlord is to perform under this Lease Agreement.
35. Governing Law. This Lease Agreement shall be governed by, and
-------------
interpreted in accordance with, the law of the State of Oklahoma.
36. Force Majeure. If the performance by either party hereto of any of its
-------------
obligations, covenants, agreements or conditions contained in this Lease
Agreement shall be in any way prevented, interrupted or hindered by force
majeure, which shall mean acts of God or State, strikes, lockout, storms, fire,
material or labor restrictions, legislation or restriction of any government,
flood or other causes not reasonably within the control of said party, then such
performance shall be excused and suspended during the force majeure period, but
only to the extent of such prevention, interruption or hindrance; provided,
however, that if any such event or condition of force majeure restricts the
ability of Tenant to conduct its business in the Leased Premises substantially
in the same manner and to the same extent as theretofore for a period of 120
days, Tenant shall have the right to terminate this Lease Agreement upon thirty
(30) days' written notice to the Landlord.
26
<PAGE>
37. Filing. This Lease Agreement shall be in recordable form and shall be
------
filed, upon, the execution hereof, at the expense of Tenant, in the real estate
records in the County of Oklahoma, State of Oklahoma. In lieu thereof, the
parties will, simultaneously with the execution of this Lease Agreement, execute
counterparts of an instrument, in recordable form, which when completed will
constitute a short form or memorandum of this Lease Agreement. The short form or
memorandum of this Lease Agreement will include, but not limited to, a metes and
bounds description of the Leased Premises, commencement date and term thereof,
Tenant's renewal option, and such other terms and provisions satisfactory to
both parties hereto. The short form lease or memorandum of this Lease Agreement
will be filed at the expense of the Tenant, in the real estate records in the
County of Oklahoma, State of Oklahoma, where the Leased Premises is located. The
Tenant shall provide, at its
IN WITNESS WHEREOF, the parties hereto have caused their corporate seals to
be hereunto affixed, and this instrument to be signed by their duly authorized
officers the day and year first above written.
LANDLORD
NORTHWEST FINANCIAL CORPORATION
ATTEST:
/s/ Jody Martin By: /s/ David L. Houston
- ---------------------- -----------------------------
Assistant Secretary President
(SEAL)
27
<PAGE>
TENANT
ROTEX CORPORATION
ATTEST:
/s/ By: /s/ Tony M. Shelby
- ---------------------- -----------------------------
Assistant Secretary Vice President
(SEAL)
28
<PAGE>
STATE OF OKLAHOMA )
--------
) SS
COUNTY OF OKLAHOMA )
--------
On this 7th day of March, 1988, before me came David L. Houston, to me
known, who by me duly sworn, did depose and say that he resides at Woodward,
Oklahoma, that he is the President of Northwest Financial Corp., the corporation
described in, and which executed the foregoing instrument; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation, and that he signed his name thereto
by like order.
___________________________________
SUBSCRIBED AND SWORN TO before me this 7th day of March, 1988.
/s/ Debra S. Ford
-----------------------------------
Notary Public
My Commission Expires:
5-28-89
- ----------------------
(SEAL)
STATE OF OKLAHOMA )
) SS
COUNTY OF OKLAHOMA )
On this 7th day of March, 1988, before me came Tony M. Shelby, to me known,
who by me duly sworn, did depose and say that he resides at Oklahoma
--------
City, Oklahoma, that he is the Vice President of Rotex Corporation, the
- -------------- -------------- -----------------
corporation described in, and which executed the foregoing instrument; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation, and that he signed his
name thereto by like order.
___________________________________
SUBSCRIBED AND SWORN TO before me this 7th day of March, 1988.
/s/ Debra S. Ford
-----------------------------------
Notary Public
My Commission Expires:
5-28-89
- ----------------------
(SEAL)
29
<PAGE>
EXHIBIT A
All real property, including any and all improvements, appurtenances and fixures
located thereon, listed below:
5000 S.W. 7
Oklahoma City, OK
Legal Description
-----------------
A part of the West one-half of the west Quarter of the Northeast Quarter of
Section Three, Township Eleven North, Range Four West of the I.M. (W/2 SW/4
NE/4 S3-TllN-R4W) Oklahoma City, Oklahoma County, Oklahoma, according to
the U.S. Government survey thereof, More particularly described as follows,
BEGINNING at the Northeast corner of said W/2 SW/4 NE/4, Thence South 0 15'
44" East along the East line of said W/2 SW/4 NE/4, a distance of 391.64
feet to a point on the South right-of-way line of Interstate Highway 40 for
the point or place of beginning; Thence North 89 57' 46" West along said
South right-of-way line, a distance of 159.24 feet; Thence Westerly along a
curve to the left having a radius of 3009.42 feet along the said South
right-of-way line, a distance of 492.33 feet; Thence South 80 39' 50" West
along said South right-of-way line, a distance of 9.88 feet, to the West
line of said NE/4; Thence South 0 19' 43" East along the said West line, a
distance of 135.95 feet, to a point that is 751.17 feet North of the
Southwest corner of said NE/4; Thence South 89 53' 17" East, a distance of
340 feet; Thence South 0 19' 43" East, a distance of 290.17 feet, to a
point that is 461 feet North of the South line of said NE/4; Thence South
89 53' 15" East, a distance of 318.85 feet, to a point in the East line of
said W/2 SW/4 NE/4; Thence North 0 15' 44" West along the said East line, a
distance of 468.77 feet; To the point or place of beginning.
A leasehold estate to that property Oklahoma City, OK described as follows:
Beginning at the Southwest corner of the Southwest Quarter of the Southwest
Quarter of the Northeast Quarter of Section Three, Township Eleven North,
Range Four West of the Indian Meridian (SW/corner SW/4 SW/4 NE/4 S3-TllN-
R4W), Oklahoma City, Oklahoma County, Oklahoma, Thence North along the West
line of the SW/4 SW/4 NE/4 of said Section 3, a distance of 461.00 feet to
a point; Thence Easterly and parallel to the South line of the SW/4 SW/4
NE/4 of said Section 3, a distance of 658.85 feet to a point; Thence
Southerly along the East line of the SW/4 SW/4 NE/4 of said Section 3;
Thence Westerly and along the South line of the SW/4 SW/4 NE/4 of said
Section 3, a distance of 658.32 feet; To the point or place of
<PAGE>
beginning.
AND
The West Half of the West Half of the Northeast Quarter of Section Three,
Township Eleven North, Range Four West of the Indian Meridian (W/2 W/2 NE/4
S3-TllH-R4W), Oklahoma County, Oklahoma, more particularly described as
follows: BEGINNING at a point an the West line of the W/2 W/2 NE/4 and
461.00 feet North of the SW/corner of said NE/4; Thence East and parallel
to the South line of said W/2 W/2 NE/4 for a distance of 340.00 feet;
Thence North on and parallel to the West line of said NE/4 for a distance
of 290.17 feet; Thence West and parallel to the South line of said NE/4, a
distance of 340 feet to a point on the West line of said NE/4; Thence South
on the West line of said NE/4 for a distance of 290.17 feet; To the point
or place of beginning.
<PAGE>
EXHIBIT 10.33
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS FIRST AMENDMENT TO LEASE AGREEMENT is made and entered into as of (but
not necessarily on) the 17th day of August, 1995, by and between Prime Financial
corporation, an Oklahoma corporation ("Landlord"), and International
Environmental Corporation, an Oklahoma corporation ("Tenant"), with reference to
the following:
(a) Landlord and Tenant have previously entered into a certain Lease
Agreement, dated as of March 7, 1988 (the "Lease"), under the terms of which
Tenant leases from Landlord certain Leased Premises (as defined in the Lease).
(b) By means of this instrument, Landlord and Tenant will amend the Lease,
as hereinafter set forth.
NOW, THEREFORE, in consideration of the execution of this instrument by
both parties, in consideration of the mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
covenant and agree as follows:
1. Paragraph 2. of the Lease is hereby deleted in its entirety, and the
following new paragraph 2. is substituted therefor:
2. Term. The term of the Lease Agreement shall be for a period of
----
fourteen (14) years and six (6) months from the date of this Lease Agreement and
ending on September 7, 2002, unless this Lease Agreement is sooner terminated
pursuant to the terms of this Lease Agreement or the term hereof is extended
pursuant to the terms of this Lease Agreement.
2. Paragraph 4.(a) of the Lease is hereby deleted in its entirety, and
the following new paragraph 4.(a) is substituted therefor:
4.(a) For the first year of this Lease Agreement, the annual
rental to be paid by Tenant to Landlord ("Base Rent") shall be $447,319.00,
payable in twelve equal monthly installments of $37,276.58, with each monthly
installment payable on or before the 15th day of each month during the first
year of this Lease Agreement. For the purposes of this Lease Agreement, "first
year of this Lease Agreement" shall mean the twelve month period beginning on
the date of this Lease Agreement and ending March 6, 1989. Beginning on the 1st
day of September, 1995 the Base Rent to be paid by Tenant to Landlord shall be
$475,000.00, payable in twelve equal monthly installments of $39,583.33, with
each monthly installment payable on or before the 15th day of each month during
the term of this Lease Agreement. In the event the term of this Lease Agreement
shall commence or end during a year (as defined
<PAGE>
herein), the Base Rent for any fractional year shall be prorated by months.
3. Paragraph 9. of the Lease regarding Tenant's right to terminate the
Lease is hereby deleted in its entirety.
4. Paragraph 20.(b) of the Lease regarding Tenants right to terminate the
Lease upon a partial condemnation of the Leased Premises is hereby deleted in
its entirety.
5. Paragraph 20.(c) of the Lease is hereby deleted in its entirety, and
the following new paragraph 20.(c) is substituted therefor:
20.(c) Rent Adjustment. In the event that a part of the Leased
---------------
Premises shall be taken under the power of eminent domain by any public or
private authority, then Landlord shall, at its expense, forthwith restore what
may remain of the Leased Premises, including any and all improvements made
theretofore, the parking areas and the Leased Premises, to substantially the
same condition they were in prior to such taking and a just proportion of the
rent provided in Section 4 hereof, and any other charges payable by Tenant
hereunder, according to the nature and extent of the injury to the Leased
Premises and Tenant's business shall be suspended or abated until what may
remain of the Leased Premises and the parking areas, shall be restored as
aforesaid, and thereafter a just proportion of the rent and any such other
charges according to the nature and extent of the taking and resulting injury to
the Leased Premises and Tenant's business shall be permanently abated for the
balance of the term of this Lease Agreement. In computing the amount of
proportionate rent reduction as herein provided, due consideration shall be
given to the value of the portion of the area so taken in condemnation with
relation to the remaining area insofar as the use thereof for Tenant's business
is concerned, and to the effect of such taking on Tenant's business, and the
amount of parking area and the value of what remains insofar as the use thereof
for Tenant's business is concerned. So long as the loan from MetLife Capital
Financing Corporation ("MetLife") to Landlord which is secured by the Leased
Premises remains outstanding, any rent reduction pursuant to this Section 20.(c)
must be approved by MetLife.
6. Paragraph 23. of the Lease is hereby deleted in its entirety, and the
following new paragraph 23. is substituted therefor:
23. Place of Payment of Rent. Rent shall be payable in the lawful
------------------------
tender of the United States of America to Landlord by payment to the order of
Prime Financial Corporation, 16 South Pennsylvania, Oklahoma City, Oklahoma
73107 or at such other place as may be designated by Landlord by written notice
to Tenant.
2
<PAGE>
7. Paragraph 36. of the Lease is hereby deleted in its entirety, and the
following new paragraph 36. is substituted therefor:
36. Force Majeure. If the performance by either party hereto of any
-------------
of its obligations, covenants, agreements or conditions contained in this Lease
Agreement shall be in any way prevented, interrupted or hindered by force
majeure, which shall mean acts of God or State, strikes, lockout, storms, fire,
material or labor restrictions, legislation or restriction of any government,
flood or other causes not reasonably within the control of said party, then such
performance shall be excused and suspended during the force majeure period, but
only to the extent of such prevention, interruption or hindrance.
8. Paragraph 34. of the Lease is hereby deleted in its entirety, and the
following new paragraph 34. is substituted therefor:
34. Assignment by Landlord. Landlord may assign this Lease Agreement
----------------------
to a third party; provided however, that if Landlord assigns this Lease
Agreement, Landlord shall remain liable as a guarantor hereunder in connection
with the obligations that the Landlord is to perform under this Lease Agreement.
Such guaranty shall not be applicable to Landlord's Lender, MetLife, its
successors or assigns in the event MetLife assumes title to the Leased Premises.
9. Paragraph 18.(c) of the Lease is hereby deleted in its entirety, and
the following new paragraph 18.(c) is substituted therefor:
18.(c) Any excess of money received from insurance remaining in the
joint account after the reconstruction or repair of such damaged buildings or
improvements on the Leased Premises shall, if the Tenant is not in default under
this Lease Agreement, be paid to Tenant.
10. Paragraph 18.(d) of the Lease is hereby deleted in its entirety, and
the following new paragraph 18.(d) is substituted therefor:
18.(d) If any mortgagee holding a mortgage on the Leased Premises
elects, in accordance with the terms of such mortgage, to require that all or
any part of the proceeds of such insurance paid as a result of damages to the
buildings and improvements located on the Leased Premises be paid to or retained
by the mortgagee, then such payment shall be made, but in such event, the
Landlord shall pay into the joint account referred to in subparagraph (a) of
this Section 18 that amount of the insurance proceeds paid to or retained by
mortgagee. The provisions of such mortgage regarding the payment of insurance
proceeds arising from
3
<PAGE>
a fire or other casualty shall govern over the terms of this Lease Agreement so
long as mortgagee's loan to Landlord remains outstanding.
11. Paragraph 21.(c) of the Lease regarding Tenant's right to terminate
the Lease upon damage or destruction to the Leased Premises is hereby deleted in
its entirety.
12. As amended by this instrument, all of the covenants, agreements,
terms, provisions and conditions of the Lease continue in full force and effect,
and the Tenant ratifies and confirms all covenants, agreements, terms,
provisions and conditions of the Lease, as amended by this instrument.
13. This instrument shall be binding upon and shall inure to the benefit
of the parties hereto and their respective, permitted successors and assigns.
14. The Lease, as amended by this instrument, contains and constitutes the
entire agreement between Landlord and Tenant and supersedes all prior agreements
and understandings between Landlord and Tenant relating to the subject matter of
the Lease and this instrument. There are not agreements, understandings,
restrictions, warranties, representations or inducements between the parties to
this instrument relating to the subject matter of the Lease or this instrument
other than those set forth in the Lease and this instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment
to Lease Agreement in multiple original counterparts effective as of the date
set forth above.
"Landlord": PRIME FINANCIAL CORPORATION,
An Oklahoma corporation
By: /s/ Tony M. Shelby
------------------------------------
Printed Name: Tony M. Shelby
--------------
Vice President
----
"Tenant": INTERNATIONAL ENVIRONMENTAL CORPORATION
An Oklahoma corporation
By: /s/ Barry H. Golsen
------------------------------------
Printed Name: Barry H. Golsen
---------------
Chairman
--------
4
<PAGE>
STATE OF OKLAHOMA )
) ss.
COUNTY OF Cleveland )
---------
This instrument was acknowledged before me on August 17, 1995, by Tony M.
-------
Shelby as Vice-President of Prime Financial Corporation, an Oklahoma
- ------ ----
corporation.
/s/ Carol Ann Oden
---------------------------------------
Notary Public
My Commission Expires:
2-25-99
(SEAL)
STATE OF OKLAHOMA )
) ss.
COUNTY OF Cleveland )
---------
This instrument was acknowledged before me on August 17, 1995, by Barry H.
--------
Golsen as Chairman of International Environmental Corporation, an Oklahoma
- ------ --------
corporation.
/s/ Carol Ann Oden
---------------------------------------
Notary Public
My Commission Expires:
2-25-99
(SEAL)
5
<PAGE>
EXHIBIT 10.34
ASSIGNMENT
----------
THIS ASSIGNMENT is made and entered into as of the 17th day of August,
1995, by and between Northwest Financial Corporation, an Oklahoma corporation,
("Assignor"), and Prime Financial Corporation, an Oklahoma corporation
("Assignee").
WHEREAS, Assignor is party to a certain Lease Agreement dated March 7,
1998 (the Lease"), whereby Assignor leases certain real property and the
improvements located thereon to International Enviromental corporation, an
Oklahoma corporation, more particularly described on Exhibit "A", attached
hereto and incorporated herein by this reference (the "Poperty"); and
WHEREAS, the Lease does not restrict the ability of Assignor to assign the
Lease and all rights and obligations thereunder; and
WHEREAS, Assignee deems it in the best interest to acquire and Assignor
deems it in its best interest to assign the Lease.
NOW, THEREFORE, in consideration of Ten and no/100 Dollars ($10.00)' and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Assignement. Assignor hereby grants and assigns to Assignee all of
-----------
Assignor's right, title and interest in and to the Lease.
2. Representation and Warranties. Assignor hereby represents and warrants that
-----------------------------
Assignor has not previously assigned, transferred, sold or encumbered any
right, title or interest in or to the Lease. Assignor hereby agrees to
execute all documents and perform all acts which may be desirable or
necessary to carry this Assignement to full effect.
3. Acceptance of Assignment. Assignee hereby accepts the assignment of all of
------------------------
Assignor's right, title and interest in and to the Lease and agrees to
assume the obligations of Assignor under the Lease.
4. Applicable Law. This Assignment and interpretation and enforcement thereof
--------------
shall be governed by the laws of the State of Oklahoma.
5. Binding Effect. This Assignement shall be binding upon, inure to the
--------------
benefit of, and be enforceable by, Assignee and its respective heirs,
assigns and successors.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be
duly executed under seal the day and year first above written.
("Assignor") NORTHWEST FINANCIAL CORPORATION
By: /s/ Barry H. Golsen
------------------------------
Title: Chairman
--------
ATTEST:
/s/
- -------------------------------------
Asst. Secretary
- -----
[SEAL]
("Assignee") PRIME FINANCIAL CORPORATION
By: /s/ Tony M. Shelby
------------------------------
Title: Vice President
--------------
ATTEST:
/s/
- -------------------------------------
Secretary
[SEAL]
<PAGE>
EXHIBIT 10.35
MetLife Capital Loan and Security Agreement
THIS LOAN AND SECURITY AGREEMENT entered into as of the 14th day of March, 1995,
by and between MetLife Capital Corporation, a Delaware corporation, whose
address is C-97550, 10900 NE 4/th/ Street, Suite 500, Bellevue, Washington 98009
("Lender") and International Environmental Corporation, a ______________, whose
address is 16 S. Pennsylvania, Oklahoma City, OK 73107 ("Borrower").
WHEREAS, Lender has agreed to make a commercial loan or loans to Borrower;
and
WHEREAS, as a condition to making the loans, and in order to secure the
repayment thereof, Lender has required Borrower to execute and deliver to Lender
this Loan and Security Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
accuracy of which are hereby acknowledged, Borrower and Lender agree as follows:
1. Creation of Security Interest. As security for the due and punctual
-----------------------------
payment of any and all of the present and future obligations of the Borrower to
Lender, whether direct or contingent or joint or several, Borrower hereby
conveys, assigns and grants to Lender a continuing security interest in all of
Borrower's rights, title and interests in and to the equipment described in the
Supplemental Security Agreement from time to time ("Equipment") including all
present and future additions, attachments and accessories thereto, except
accounts and inventory, all substitutions therefor and replacements thereof and
all proceeds thereof, including all proceeds of insurance (such Equipment and
property hereinafter called "Collateral").
2. The Loans. (a) Subject to the terms and conditions of this Loan and
---------
Security Agreement, Lender agrees to make a loan or loans to Borrower in
principal amount stated in the loan commitment letter issued by Lender to
Borrower (each such loan or loans shall be referred to as "the Loan Amount").
(b) The Loan Amount shall be repaid by Borrower as a term loan or term
loans ("Term Loan"). The Term Loan shall be evidenced by a promissory
note or notes in the form attached hereto as Exhibit "A" ("Term
Note"0. The payment provisions of each Term Note shall be stated
therein.
(c) If requested by Borrower, and in accordance with the terms and
conditions of Section 3 hereof, Lender shall make interim fundings to
Borrower of a Term Loan as partial advances of the Loan Amount
("Interim Loans"). The Interim Loans shall either be for the payment
of the acquisition cost of any items of Equipment delivered and
commitment to Borrower prior to the expiration date of
<PAGE>
Lender's loan commitment to Borrower ("Commitment Expiration Date") or
to fund progress payments to the vendor or manufacturer of the
Equipment. If the making of progress payments was agreed to by Lender
in its commitment or approval to make the loan or loans to Borrower.
The Interim Loans shall be evidenced by promissory notes in the form
attached hereto as Exhibit "B" ("Interim Note"). Interest on all
Interim Loans shall be payable as provided therein. The principal
amount due under the Interim Loans shall be due as provided in the
Interim Notes, at which time, provided no Event of Default hereunder
has occurred and is continuing or event which with the passing of time
or giving of notice or both would become an Event of Default hereunder
has occurred and is continuing, Lender shall consolidate all Interim
Loans and convert them to a Term Loan evidenced by a Term Note or
Notes. Whether or not a Term Loan is evidenced by one or more Term
Notes shall be as agreed between Lender and Borrower, or in the
absence of such an agreement, as decided by Lender, in the exercise of
its reasonable business judgment.
(d) In the event that the amount loaned pursuant to the Interim Loans is
less than the Loan Amount, subject to Borrower's compliance with the
terms and conditions of this Loan and Security Agreement (including
the satisfaction of the conditions of the borrowing set forth in
Section 7 of this Loan and Security Agreement, including but not
limited to providing Lender with a description of the items of
Equipment), Lender shall disburse to Borrower the balance of the Loan
Amount on the same date that the Interim Loans are converted into a
term loan.
3. Method For Borrowing On Interim Loan. Borrower shall give Lender at
------------------------------------
least five (5) business days written notice of a request for the disbursement of
an Interim Loan ("Request"), specifying the date on which the Interim Loan is to
be disbursed. Such Request shall be in the form attached hereto as Exhibit "C."
Such Request shall be accompanied by an original copy of the invoice or invoices
to be paid from the Interim Loan. Such Request shall constitute a
representation and warranty by the Borrower that (i) as of the date of the
Request no Event of Default or event which with the passing of time or the
giving of notice or both would constitute an Event of Default hereunder has
occurred and is continuing and (ii) in the event items of Equipment have been
delivered to the Borrower, Borrower has unconditionally accepted the Equipment
from the vendor thereof. Subject to the conditions of this Loan and Security
Agreement, Lender shall disburse the Interim Loan to the invoicing party, or if
Borrower shall have paid the amount of such invoice,
-2-
<PAGE>
Lender shall reimburse Borrower, upon receipt of proof of payment from Borrower.
4. Cross-Collateral/Cross Default. All Collateral shall secure the
------------------------------
payment and performance of all of Borrower's liabilities and obligations to
Lender hereunder and under any of the loan documents relating hereto including,
but not limited to, all Interim Notes and all Term Notes (the Loan and Security
Agreement, the Interim Notes, the Term Notes, the Supplemental Security
Agreement(s) and all other loan documents may be referred to herein collectively
as the "Loan Documents"). Lender's security interest in the Collateral shall
not be terminated until and unless all of Borrower's obligations to Lender under
any of the Loan Documents are fully paid and performed. The occurrence of an
Event of Default hereunder and an Event of Default hereunder shall be deemed to
be an event of default under any other of the Loan Documents
5. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants as follows:
(a) Power and Authorization. Borrower has the full power and (corporate)
authority to execute, deliver and perform Borrower's obligations under
the Loan Documents. The execution and delivery of the Loan Documents
have been authorized by all requisite corporate (or partnership)
action on the part of Borrower. The execution, delivery and
performance of the Loan Documents have not constituted and will not
constitute a breach, default or violation of or under Borrower's
articles of incorporation, by-laws (partnership agreement), or any
other agreement, indenture, contact, lease, law, order, decree,
judgment, or injunction to which Borrower is a party or may be bound
and have not resulted and will not result in the creation of any lien
upon the Equipment pursuant to any agreement, indenture, lease,
contract or other instrument to which Borrower is a party, except the
lien created by this Loan and Security Agreement.
(b) Existence. If Borrower is a corporation, Borrower (i) is duly
incorporated, validly existing and in good standing under the laws of
its state of incorporation, (ii) has all corporate powers and all
governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, and (iii) is duly qualified
to transact business as a foreign corporation in each jurisdiction
where the Equipment will be located and in the jurisdiction where its
principal place of business is located. If Borrower is a partnership,
Borrower (i) has been duly formed as a (limited or general)
partnership under the laws of the state of its organization, (ii) is
comprised of the general partner(s)
-3-
<PAGE>
listed on the Schedule of Partners attached to this Loan and Security
Agreement, and (iii) is in good standing under the laws of the state
of its formation.
(c) Binding Effect. This Loan and Security Agreement constitutes the
valid and binding agreement of the Borrower; the Interim Notes and the
Term Note, when executed and delivered, will constitute the valid and
binding obligations of the Borrower; and the Loan Documents are
enforceable in accordance with the terms except as (i) the
enforceability thereof may be limited by the bankruptcy laws, and (ii)
rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(d) Litigation. Other than as disclosed in SEC filings, there is no
action, suit or proceeding pending against, or to the knowledge of the
Borrower, threatened against or affecting the Borrower, before any
court or arbitrator or any governmental body, agency or official which
has not been previously disclosed to the Lender in writing and in
which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, financial condition or
results of operations of the Borrower or which would in any manner
draw into question the validity of any of the Loan Documents.
(e) Filing of Tax Returns. The Borrower has filed all tax returns
required to have been filed and has paid all taxes shown to be due and
payable on such returns, including interest and penalties, and all
other taxes which are payable by it, to the extent the same have
become due and payable. The Borrower knows of no proposed tax
assessment against it and all tax liabilities of the Borrower are
adequately provided for.
(f) Title. The Borrower has or shall have at the time it executes the
Term Note good and indefeasible title to the collateral free and clear
of all liens other than the Lender's lien.
(g) Compliance with Law. The business and operations of the Borrower have
been and are being conducted in accordance with all applicable laws,
rules and regulations, other than violations which could not (either
individually or collectively) have a material adverse effect on the
financial condition or operations of the Borrower.
(h) Full Disclosure. All documents, records, instruments, certificates,
statements (including, but not by way of
-4-
<PAGE>
limitation, financial statements of Borrower) and information provided
to Lender by Borrower in connection with this Loan and Security
Agreement are true and accurate in all material respects and do not
contain any untrue statement, or fail to contain any statement of a
material fact necessary to make the statements contained herein or
therein not misleading. There is no fact known to the Borrower that
Borrower has not disclosed in writing which could materially and
reasonably adversely affect the financial condition or operations of
Borrower.
(i) Security Interest. The security interest granted to Lender hereunder
is a valid, first priority security interest in the Collateral and has
been or promptly after the execution of the Supplemental Security
Agreement describing the Collateral will be, perfected in accordance
with the requirements of all states in which any item of the
Collateral is located.
(j) Personal Property. Under the laws of the state(s) in which the
Collateral is to be located, the Collateral is deemed to consist
solely of personal property.
(k) Pollution and Environmental Control. Borrower has obtained all
permits, licenses and other authorizations which are required under,
and is in material compliance with, all federal, state, and local laws
and regulations relating to pollution, reclamation, or protection of
the environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into air, water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes. Borrower shall
maintain all such permits, licenses, and authorizations current.
6. Covenants. Borrower hereby agrees and covenants as follows:
---------
(a) Payment. Borrower shall pay the indebtedness secured hereby as
provided herein and in the Interim Notes and Term Notes.
(b) Location of Collateral. Borrower will keep the Collateral located at
the location or locations stated on the Supplemental Security
Agreements, provided, however, that Borrower may change the location
of the collateral with Lender's prior written consent.
-5-
<PAGE>
(c) No Liens. Except for the security interest granted hereby or under
any other agreement under which Lender is the secured party, whether
as mortgagees, beneficiary or otherwise. Borrower shall keep the
Collateral free and clear of any security interest, lien or
encumbrance of any kind and Borrower shall not sell, assign (by
operation of law or otherwise) exchange or otherwise dispose of any of
the Collateral.
(d) Insurance. Borrower shall procure and continuously maintain and pay
for (a) all risk physical damage and property insurance covering loss
or damage to the equipment for not less than the full replacement
value thereof naming Lender as loss payee and (b) bodily injury and
property damage combined single limit liability insurance, all in such
amounts and against such risks and hazards as are reasonably required
by Lender, with insurance companies and pursuant to contracts or
policies and with deductibles satisfactory to Lender. All contracts
and policies shall include provisions for the protection of Lender
notwithstanding any act or neglect of or breach or default by
Borrower, shall provide for payment of insurance proceeds to Lender,
shall provide that they may not be modified, terminated or canceled
unless Lender is given at least thirty (30) days' advance written
notice thereof, and shall provide that the coverage is "primary
coverage" for the protection of Borrower or Lender notwithstanding any
other coverage carried by Lender protecting against similar risks.
Borrower shall promptly notify any appropriate insurer and Lender of
each and every occurrence, which may become the basis of a claim or
cause of action against the insured and provide Lender with all data
pertinent to such occurrence. Borrower shall furnish Lender with
certificates of such insurance or copies of policies upon request and
shall furnish Lender with renewal certificates not less than thirty
days prior to the renewal date. Proceeds of all insurance are payable
first to Lender to the extent of its interest.
(e) Financing Statements. At the request of Lender, Borrower will join
Lender in executing one or more financing statements pursuant to the
Uniform Commercial Code and other documents deemed necessary by Lender
under applicable law to record or perfect its security interest in the
Collateral, including continuation statements, in form satisfactory to
Lender and will pay the cost of filing the same in all public offices
wherever filing is deemed by the Lender to be necessary or desirable.
Borrower hereby authorizes Lender, in such jurisdictions where such
action is authorized by law, to effect any
-6-
<PAGE>
such recordation or filing of financing statements or other documents
without Borrower's signature thereto.
(f) Change of Name or Address. Borrower will immediately notify Lender in
writing of any change in its place of business or the adoption or
change of any trade name or fictitious business name, and will upon
request of Lender, execute any additional financing statements or
other similar documents necessary to perfect or maintain its security
interest.
(g) Use of Equipment, Maintenance. Borrower will cause the Equipment to
be used in a careful and proper manner, will comply with and conform
to all governmental laws, rules and regulation relating thereto, and
will cause the Equipment to be operated in accordance with the
manufacturer's or supplier's instructions or manuals and only by
competent and duly qualified personnel. Borrower will cause the
Equipment to be kept and maintained in good repair, condition and
working order and will furnish all parts, replacements, mechanisms,
devices and servicing required therefor so that the value, condition
and operating efficiency thereof will at all times be maintained and
preserved, normal wear and tear excepted. All such repairs, parts,
mechanisms, devices and replacements shall immediately, without
further act, become part of the Equipment and subject to the security
interest created by this Loan and Security Agreement. Borrower will
not make any improvement, change, addition or alteration to the
Equipment if such improvement, change, addition or alteration will
impair the originally intended function or use of the Equipment or
impair the value of the Equipment as it existed immediately prior to
such improvement, change, addition or alteration. Any part added to
the Equipment in connection with any improvement, change or alteration
shall immediately, without further act, become part of the Equipment
and subject to the security interest created by this Loan and Security
Agreement.
(h) Inspection. Lender may at any reasonable time or times inspect the
Equipment and may at any reasonable time or times inspect the books
and records of Borrower.
(i) Taxes. Borrower shall promptly pay, when due, all charges, fees,
assessments and taxes (excluding all taxes measured by Lender's
income) which may now or hereafter be imposed upon the ownership,
leasing, possession, sale or use of the Collateral.
-7-
<PAGE>
(j) Performance by Lender. If Borrower fails to perform any agreement or
obligation contained herein, Lender may itself perform, or cause the
performance of such agreement or obligation. Borrower will pay or
reimburse Lender, on demand, for any and all fees, including
reasonable attorneys' fees, costs and expenses of whatever kind or
nature incurred by Lender in connection with (i) the creation,
preservation and protection of Lender's security interest in the
Collateral, including, without limitation, all fees and taxes in
connection with the recording or filing of instruments and documents
in public offices, (ii) payments or discharge of any taxes or liens
upon or in respect of the Collateral, (iii) premiums for insurance
with respect to the Equipment, and (iv) this Loan and Security
Agreement and with protecting, maintaining or preserving the
Collateral and Lender's interests therein, whether through judicial
proceedings or otherwise, or in connection with defending or
prosecuting any actions, suits or proceedings arising out of or
related to the Loan and Security Agreement and the Loan Documents or
in connection with any debt restructuring, loan workout negotiations
or bankruptcy, or insolvency case or proceedings. All such amounts
shall constitute obligations of Borrower secured by the Collateral in
the event that Borrower fails to perform any of its agreements
contained herein, Borrower will, on demand, reimburse Lender for all
such expenditures, together with interest thereon from the date of
such expenditure until fully reimbursed at the rate of two percent
(2%) per month on the outstanding balance of such expenditures or the
highest rate permitted by law, whichever is less.
(k) Power of Attorney. Borrower hereby irrevocably appoints Lender
Borrower's attorney-in-fact, with full authority in the place and
stead of Borrower and in the name of Borrower or otherwise, from time
to time in the Lender's discretion, to take any action and to execute
any instrument which Lender may deem necessary or advisable to
accomplish the purposes of this Loan and Security Agreement,
including, without limitation: (i) to obtain, compromise and adjust
insurance required to be paid to Lender; (ii) to ask, demand, collect,
sue for, recover, receive, and give acquittance and receipts for
moneys due and to become due under or in respect of any of the
Collateral not to include accounts or inventory; (iii) to receive,
endorse, and collect any drafts or other instruments, documents, and
chattel paper in connection with clause (i) or (ii) above; and (iv) to
file any claims or take any action or institute any proceedings which
Lender may deem necessary or desirable for the
-8-
<PAGE>
collection of any of the Collateral or otherwise to enforce the rights
of Lender with respect to any of the Collateral.
(l) No Duties. The powers conferred on Lender hereunder are solely to
protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers except as required by law.
(m) Financial Data. Borrower will furnish to Lender and will cause any
guarantor of Borrower's obligations to furnish to Lender on request
(i) annual balance sheet and profit and loss statements prepared in
accordance with generally accepted accounting principles and practices
consistently applied and, if Lender so requires, accompanied by the
annual audit report of an independent certified public accountant
reasonably acceptable to Lender, and (ii) all other financial
information and reports that Lender may from time to time reasonably
request, including, if Lender so requires, income tax returns of
Borrower and any guarantor of Borrower's obligations hereunder.
7. Conditions of Borrowing. Lender shall not be obligated to make any
-----------------------
loan hereunder unless:
(a) The Interim Notes or Term Notes evidencing such loan shall have been
duly executed and delivered to Lender;
(b) Borrower shall have executed and delivered to Lender the Supplemental
Security Agreement describing the Collateral and stating, except with
respect to progress payment fundings, the location thereof;
(c) Except with respect to progress fundings, Lender shall have received
evidence (as described in Section 6d hereof) that insurance has been
obtained in accordance with the provisions of this Loan and Security
Agreement;
(d) Lender shall have received any and all third party consents, waivers
or releases deemed necessary or desirable by it in connection with the
loan and the Collateral being financed, including, without limitation,
Uniform Commercial Code lien releases and the consent and waiver, in
form and substance satisfactory to Lender, of each and every realty
owner, landlord and mortgagee holding an interest in or encumbrance on
the real property where any of the Collateral is to be located;
(e) All filings, recordings and other actions deemed necessary or
desirable by Lender in order to establish, protect, preserve and
perfect its security interest in
-9-
<PAGE>
the Collateral being financed by such loan as a valid perfected first
priority security interest shall have been duly effected, including,
without limitation, the filing of financing statements and the
recordation of landlord (owners) and/or mortgagee waivers or
disclaimers, all in form and substance satisfactory to Lender, and all
fees, taxes and other charges relating to such filings and recordings
shall have been paid by Borrower;
(f) The representations and warranties contained in this Loan and Security
Agreement shall be true and correct in all respects on and as of the
date of the making of any loan hereunder with the same effect as if
made on and as of such date;
(g) In the sole judgment of Lender, there shall have been no material
adverse change in the financial condition, business or operations of
Borrower from the earliest date of any financial statement, credit
report, business report or similar document submitted to Lender for
its review;
(h) All Loan documents shall be satisfactory to Lender's attorneys; and
(i) Lender shall have received, in form and substance satisfactory to
Lender, such other documents as Lender shall require, including, but
not limited to a Request, proof of payment, vendor invoices and
certificates of authority and incumbency.
8. Default. The occurrence of any of the following events, following the
-------
giving of any required notice and/or the expiration of any applicable period of
grace, shall constitute an event of default ("Event of Default") hereunder:
(a) Borrower's default in payment of any installment of the principal of
or interest on any Interim Note or Term Note when and after the same
shall become due and payable, whether at the due date thereof or by
acceleration or otherwise, which default shall continue unremedied for
ten (10) days; or after written notice thereof.
(b) The failure by Borrower to make payment of any other amount payable
hereunder or under any Interim Note or Term Note, and the continuance
of such failure for more than ten (10) days after written notice
thereof by Borrower to Lender; or
-10-
<PAGE>
(c) The failure by Borrower to perform or observe any covenant, condition,
obligation or agreement to be performed or observed by it hereunder,
which failure shall continue unremedied for thirty (30) days after
written notice thereof by Lender to Borrower; or
(d) The occurrence of a default described in Section 4 hereof or after ten
(10) days written notice; or
(e) Any warranty, representation or statement made or furnished with
respect to the Borrower or the Collateral to Lender by or on behalf of
Borrower, in connection with this Loan and Security Agreement, or the
indebtedness secured hereby, shall prove to have been false in any
adverse, material respect when made or furnished; or
(f) Borrower shall become insolvent or bankrupt or make an assignment for
the benefit of creditors or consent to the appointment of a trustee or
receiver; or a trustee or a receiver shall be appointed for Borrower
or for a substantial part of its property without its consent and
shall not be dismissed for a period of sixty (60) days; or bankruptcy,
reorganization, liquidation, insolvency or dissolution proceedings
shall be instituted by or against Borrower and, if instituted against
Borrower, shall be consented to or be pending and not dismissed for a
period of sixty (60) days; or any execution or writ of process shall
be issued under any action or proceeding against Borrower in such
capacity whereby any of the Collateral may be taken or restrained;
Borrower shall cease doing business as a going concern; or, without
the prior written consent of Lender, Borrower shall sell, transfer or
dispose of all or substantially all of its assets or property; or
(g) The liquidation, merger, consolidation, reorganization, conversion to
an "S" status or dissolution, if Borrower is a corporation or
partnership, of Borrower, if in Lender's reasonable opinion, such act
shall materially and adversely affect Borrower's ability to perform
under any of the Loan Documents; or
(h) Any item of Collateral is seized or levied on under legal or
governmental process or for any reason Lender deems itself insecure.
Lender shall be entitled to deem itself insecure when some event
occurs, fails to occur or is threatened which significantly impairs
the prospects that any of Borrower's obligations to Lender will be
paid when due, which significantly impairs the value of the Collateral
to Lender or which significantly affects the financial or business
condition of Borrower.
-11-
<PAGE>
The occurrence of an Event of Default shall terminate any
commitment or obligation by Lender to make any of the loans
contemplated by this Loan and Security Agreement.
9. Remedies Upon Default. Upon the occurrence of an Event of Default
---------------------
hereunder, Lender may, at its option, do any one or more of the following:
(a) Declare all obligations of Borrower to Lender to be immediately due
and payable, whereupon all unpaid principal of and interest on said
indebtedness and other amounts declared due and payable shall be and
become immediately due and payable;
(b) Take possession of all or any of the Collateral and exclude therefrom
Borrower and all others claiming under Borrower, and thereafter hold,
store, use, operate, manage, maintain and control, make repairs,
replacements, alterations, additions and improvements to and exercise
all rights and powers of Borrower in respect to the Collateral or any
part thereof. In the event Lender demands, or attempts to take
possession of the Collateral in the exercise of any rights under this
Loan and Security Agreement, Borrower promises and agrees to promptly
turn over and deliver complete possession thereof to Lender;
(c) Require Borrower to assemble the Collateral, or any portion thereof,
at a place designated by Lender and reasonably convenient to both
parties, and promptly to deliver such Collateral to Lender, or an
agent or representative designated by it;
(d) Sell, lease or otherwise dispose of the Collateral at public or
private sale, without having the Collateral at the place of sale, and
upon terms and in such manner as Lender may determine (and Lender may
be a purchaser at any sale); and
(e) Exercise any remedies of a secured party under the Uniform Commercial
Code as adopted in the state where the Collateral is located or any
other applicable law.
Except as to portions of the Collateral which are perishable or
threaten to decline speedily in value or are of a type customarily
sold on a recognized market, Lender shall give Borrower at least ten
(10) days prior written notice of the time and place of any public or
private sale of the Collateral or other intended disposition thereof
to be made. Such notice may be
-12-
<PAGE>
mailed to Borrower at the address set forth in the first paragraph of
this Loan and Security Agreement. Borrower hereby specifically agrees
(to the extent that applicable law and public policy allows it to
effectively do so) that any 0public or private sale held in accordance
with the terms of this Loan and Security Agreement shall, for the
purpose of the Uniform Commercial Code as adopted in the state where
the Collateral is located and for all other purposes, be deemed to
have been conducted in a commercially reasonable manner and in good
faith.
The proceeds of any sale under Section 9(d) shall be applied as
follows:
(i) To the repayment of the costs and expenses of retaking,
holding and preparing for the sale and the selling of the
Collateral (including legal expenses and attorneys' fees)
and the discharge of all assessments, encumbrances, charges
or liens, if any, on the Collateral prior to the lien hereof
(except any taxes, assessments, encumbrances, charges or
liens subject to which such sale shall have been made);
(ii) To the payment of the whole amount then due and unpaid of
the indebtedness of Borrower to Lender;
(iii) To the payment of other amounts then secured hereunder; and
(iv) The surplus, if any shall be paid to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
Lender shall have the right to enforce one or more remedies
hereunder, successively or concurrently, and such action shall not
operate to estop or prevent Lender from pursuing any further remedy
which it may have, and any repossession or retaking or sale of the
Collateral pursuant to the terms hereof shall not operate to release
Borrower until full payment of any deficiency has been made in cash.
10. Limitation on Interest. It is the intent of the parties to this Loan
----------------------
and Security Agreement to contract in strict compliance with applicable usury
laws from time to time in effect. In furtherance thereof, the parties stipulate
and agree that none of the terms and provision contained in the Loan Documents
shall ever be construed to create a contract to pay for the use,
-13-
<PAGE>
forbearance or detention of money at a rate in excess of the maximum interest
rate permitted to be charged by applicable law from time to time in effect.
11. Personal Property Taxes. No item of Equipment will be attached or
-----------------------
affixed to realty or any building without Lender's prior knowledge and written
consent and waiver of the landlord and the mortgagee, if any, of the real
property. If so requested by Lender, Borrower will affix tags supplied by
Lender, reflecting the Lender's security interest in the Equipment.
12. Loss and Damage. Borrower shall bear the risk of damage, loss, theft,
---------------
or destruction, partial or complete of the Equipment, whether or not such loss
or damage is covered by insurance, except that while Borrower is not in default,
Lender agrees to apply toward payment of obligations of Borrower insurance
proceeds payable to Lender by reason of such damage, loss, theft, or
destruction. In the event of any damage, loss, theft or destruction, partial or
complete, of any item of Equipment, Borrower shall promptly notify Lender in
writing and at the option of Lender (a) repair or restore the Equipment in good
condition and working order, or (b) replace the Equipment with similar equipment
in good repair, condition and working order, or (c) pay Lender, in cash, an
amount equal to the unamortized equipment cost for the item or if the Equipment
was not purchased with the loan proceeds, the pro rata portion of the
outstanding principal balance due under the Interim Note or Term Note, as the
case may be, and all other amounts relating to that item of Equipment then due
and owing hereunder, and upon payment of that amount, Lender's lien shall be
terminated with respect to that item of Equipment only, and Lender will release
its interest in that item of Equipment.
13. Assignment. Borrower may not assign or transfer any rights under this
----------
Loan and Security Agreement or to the Collateral without Lender's prior written
consent.
14. Indemnification. Borrower shall indemnify and hold harmless Lender
---------------
from and against any and all claims, losses, liabilities, causes of action,
costs and expenses (including the fees of Lender's attorneys) ("Claims") in any
way relating to or arising out of this Loan and Security Agreement, the other
Loan Documents or the Collateral, except for any Claims resulting solely and
directly from Lender's gross negligence or willful misconduct.
15. Notices. Whenever Borrower or Lender shall desire to give or serve
-------
any notice, demand, request or other communication shall be in writing and shall
be effective only if the same is physically delivered or is by certified mail,
postage prepaid, return receipt requested, or by overnight courier, postage
prepaid, mailed to the parties at the addresses set forth in the first paragraph
of this Loan and Security Agreement, with a copy to
-14-
<PAGE>
Lender's Vice President of Credit. Any party hereto may change its address for
such notices by delivering or mailing to the other parties hereby, as aforesaid,
a notice of such change.
16. No Waiver by Lender. By exercising or failing to exercise any of its
-------------------
rights, options or elections hereunder, Lender shall not be deemed to have
waived any breach or default on the part of Borrower or to have released
Borrower from any of the obligations secured hereby, unless such waiver or
release is in writing and is signed by Lender. In addition, the waiver by
Lender of any breach hereof for default in payment of an indebtedness secured
hereby shall not be deemed to constitute a waiver of any succeeding breach or
default.
17. Further Agreements. From time to time, Borrower will execute such
------------------
further instruments as Lender may reasonably require, in order to protect,
preserve, and maintain the security interest granted hereby.
18. Binding upon Successors. All agreements, covenants, conditions and
-----------------------
provisions of this Loan and Security Agreement shall apply to and bind the
successors and assigns of all parties hereto.
19. Governing Laws. This Loan and Security Agreement shall be governed by
--------------
the laws of the State of Washington.
20. Amendment. This Loan and Security Agreement can be modified or
---------
rescinded only by a writing expressly referring to this Loan and Security
Agreement, signed by both of the parties hereto.
21. Invalidity of Provisions. Every provision of this Loan and Security
------------------------
Agreement is intended to be severable. In the event that any term or provision
hereof is declared by a court to be illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the balance of the
terms and provisions hereof, which terms and provisions shall remain binding and
enforceable, then to the extent possible all of the other provisions shall
nonetheless remain in full force and effect.
-15-
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have duly executed this Loan and
Security Agreement the day and year first above written.
Lender: Borrower: International Environmental
Corporation
_____________________ ----------------------------
By:__________________ By: /s/ Tony M. Shelby
----------------------------------
(Print Name):________ (Print Name:)_________________________
Title: Vice President Title: V. P.
-------------- -------------------------------
Social Security Number: _____________
(If Borrower is an individual)
Federal tax identification number:
73-0754306
_________________
-16-
<PAGE>
ADDENDUM NO. ONE
Addendum No. One to that certain Loan and Security Agreement dated March 14,
1995, by and between MetLife Capital Corporation ("Lender") and International
Environmental Corporation ("Borrower").
WITNESSETH
WHEREAS, the parties desire to enter into the Loan and Security Agreement
provided that this Addendum No. One is executed contemporaneously therewith:
NOW THEREFORE, it is agreed as follows:
FINANCIAL COVENANTS: Unless otherwise agreed in writing to MetLife,
Borrower covenants and agrees that until payment in full of the loan obligation
the following financial covenants shall hold true:
1) BORROWER shall maintain Total Stockholder's Equity, as stated in
Borrower's annual audited financial statements, of not less than $25.0
million.
2) Total Stockholder's Equity of Borrower shall at all times exceed
"Advances to Affiliates."
3) At any time during the term of this transaction, all Financial Covenants
may be waived in exchange for the corporate guaranty of LSB Industries,
Inc.
IN WITNESS WHEREOF, parties have executed this Addendum No. One this 14/th/ day
of March, 1995.
LENDER: BORROWER:
MetLife Capital Corporation International Environmental
Corporation
By: /s/ By: /s/ Tony M. Shelby
----------------------- ------------------------
Its: V.P. Its: V.P.
----------------------- ------------------------
-1-
<PAGE>
SUPPLEMENTAL SECURITY AGREEMENT NO. ONE
This Supplemental Security Agreement is executed by International Environmental
Corporation ("Borrower") pursuant to the terms of a Loan and Security Agreement
dated March 14, 1995, between Borrower and MetLife Capital Corporation
("Lender"). All capitalized terms used herein that are not otherwise defined
herein shall have the respective meanings given to such terms in the Loan and
Security Agreement.
In order to provide security for the payment and performance of Borrower's
obligations under the Loan Documents, Borrower has granted to Lender a first
priority security interest in the Collateral. In addition to said grant,
Borrower intends by this Supplemental Security Agreement to grant to Lender a
first priority security interest in the items of Equipment identified herein.
1. To further secure the payment and performance of all of Borrower's
obligations to lender under the Loan Documents, Borrower hereby grants to Lender
a first priority security interest in the items of Collateral described below,
including all present and future additions, attachments and accessories thereto,
all substitutions therefor and replacements thereof and all proceeds thereof,
including all proceeds of insurance:
Cost or
Appraised
Qty. Model/Mfr. Description Serial No. Value
Used Manufacturing $1,500,000.00
Equipment
2. Borrower hereby (a) affirms that the representations and warranties set
forth in Section 5 of the Loan and Security Agreement are true and correct
as of the date hereof; (b) represents and warrants that Lender has a first
priority security interest in the Collateral; and (c) represents and
warrants that the above described equipment will be maintained at the
following location(s):
3. The Loan Amount for loans to be made pursuant to this Supplemental Security
Agreement is $1,500,000.00.
4. The Commitment expiration Date for loans to be made pursuant to this
Supplemental Security Agreement is March 30, 1995.
5. The amount of liability insurance required to be maintained by Borrower
pursuant to Section 6(d) of the Loan and Security Agreement is
$1,000,000.00.
-1-
<PAGE>
6. All of the terms and provisions of the Loan and Security Agreement are
hereby incorporated in and made a part of this Supplemental Security
Agreement to the same extent as if fully set forth herein.
In witness whereof, Borrower has executed and delivered this Supplemental
Security Agreement this 14/th/ day of March, 1995.
Borrower: International Environmental
Corporation
By: /s/ Tony M. Shelby
---------------------------
(Print Name):________________________
Title: V.P.
---------------------------
-2-
<PAGE>
EXHIBIT 10.36
LEASE AGREEMENT
AMPLICON FINANCIAL
ORDER NO. _____
LESSEE: International Environmental Corporation
STREET: 5000 I 40 West
CITY: Oklahoma City
STATE: Oklahoma
COUNTY: Oklahoma
ZIP: 73128
NAME AND
TITLE: Steve J. Golsen / Chief Executive Officer
TERMS AND CONDITIONS OF LEASE
1. LEASED PROPERTY: Subject to the following terms and conditions,
Amplicon Inc., ("Lessor") hereby leases to and/or grants to Lessee the right to
use certain Hardware and Software as described on the attached Lease Schedule(s)
annexed hereto and made a part hereof (hereafter "Leased Property"). Lessee
agrees to hire and take and agrees to accept the right to use that certain
Leased Property, and such other Leased Property described on supplemental
Schedule(s) that the parties from time to time may annex to this Lease.
2. TERM: This Lease, with respect to any Schedule, shall become
effective upon acceptance by Lessor and the term for any Schedule(s) shall
commence on the day that the Manufacturer/Vendor/Licensor certifies that the
Leased Property has been delivered 10 and is usable by Lessee ("Commencement
Date"). Lessee agrees that its remedies, should it find fault with any of the
Leased Property, shall be and are solely against the
Manufacturer/Vendor/Licensor. This Lease shall give Lessee the right to use the
Hardware at the location(s) and Software on the serial number specific Central
Processing Unit ("CPU"), or replacement CPU, or site specific location,
delineated on the Schedule(s). The initial base term of the Lease, with respect
to any Schedule(s), shall be as indicated on the respective Schedule(s) and
shall be calculated from the first day of the calendar quarter following the
Commencement Date ("Initial Base Lease Term"). A calendar quarter means a three-
month period commencing on January 1, April 1, July 1, or October 1, of any
calendar year. The Initial Base Lease Term shall be extended for an additional
one-year period at the rate delineated on the respective Schedule(s) unless
Lessee provides to Lessor written notice of Lessee's election not to extend the
Initial Base Lease Term at least one hundred eighty (180) days prior to its
expiration. Notwithstanding the provisions of Section 20 below, such written
notice may be delivered to Lessor by hand or by mail and shall not be effective
unless it is actually received by Lessor 21 least one hundred eighty (180) days
prior to expiration of the Initial Base
<PAGE>
Lease Term. At the expiration of the Initial Base Lease Tenn (or, if extended,
at the expiration of the extended Term), Lessee shall do one of the following:
(A) purchase all of the Leased Property for a mutually agreeable purchase price;
(B) extend the Schedule(s) for a period of one (1) additional year at the rate
delineated on the respective Schedule(s); or (C) enter into a new lease with
Lessor to lease property which replaces the Leased Property and which has a cost
greater than or equal to the original cost of the Leased Property. With respect
to options (A) and (C); Lessor and Lessee shall each have absolute discretion
regarding their agreement or lack of agreement to the terms of either such
arrangement. If the parties have not agreed to either option (A) or option (C)
by the expiration of the initial or extended Base Lease Term, then option (B)
shall prevail. At the end of the extension provided by option (B), this Lease
shall continue subject to termination by either Lessor or Lessee at the end of
any calendar month, provided at least one hundred twenty (120) days' prior
written notice of such termination is delivered to the other party. Each
Schedule shall be deemed to incorporate therein these specific terms and
conditions and shall have an independent Initial Base Lease Term and extension
period(s).
3. RENTALS: The quarterly rent payable shall be the amount shown on each
Schedule(s). Lessee shall pay to Lessor the quarterly rent, in advance, for each
quarter of any part thereof that this Lease. with respect to said Schedule(s),
is in effect. The first such payment shall be made on the first day of the
calendar quarter following the Commencement Date. A pro-rata portion of the
quarterly rental charges based on a daily rental of one-ninetieth (1/90th) of
the quarterly rental calculated from the Commencement Date to the end of the
calendar quarter, shall be due and payable at the Commencement Date.
Installments of rent which are not paid within ten (10) days of their due date
shall bear interest at a "Delinquency Rate" equal to five percent (5%) of each
installment of rent. For delinquent installments of rent which remain unpaid at
the end of each month, interest shall continue to accrue and compound at a
delinquency rate equal to five percent (5%) of the cumulative unpaid balance.
All rent shall be paid at the place of business of Lessor shown above or such
other place as Lessor may designate by written notice to Lessee. Except as
otherwise provided in this Lease, Lessee's obligation to pay rent shall be
absolute and unconditional under all circumstances, notwithstanding: (i) any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor for any reason whatsoever, (ii) any defect in the tide, right to
use, condition, operation, fitness for use, damage or destruction of or to the
Leased Property or any interruptions or cessations in use or possession thereof
for any reason whatsoever, (iii) any insolvency, bankruptcy, reorganization or
similar proceedings instituted by or against Lessee. Unless otherwise delineated
on the Lease Schedule, any Deposit shall be returned to Lessee if Lessor does
not accept the transaction.
2
<PAGE>
Otherwise, upon acceptance by Lessor, any Deposit shall be treated as a
transaction fee to be retained by Lessor and is not to be applied to rental or
other payments due and owing under the Lease. Lessee hereby waives, to the
extent permitted by applicable law, any and all right which it may now, or at
any time hereafter, have to cancel, terminate, or surrender this. lease except
in accordance with the express terms hereof.
4. ADDITIONS AND MODIFICATIONS: Without the prior consent of Lessor,
which consent shall be conditioned upon delivery of documentation of a form and
substance required by Lessor, Lessee shall make no addition, modification,
alteration or attachment with respect to any of the Leased Property. All
additions, modifications, alterations and attachments placed upon the Leased
Property shall become part of the Leased Property and shall be the property of
Lessor. If not purchased, leased or financed by Lessor, Lessee shall, upon
written consent of Lessor and at Lessee's sole expense, have the Hardware
Manufacturer remove said items and restore the hardware to its original
condition. Software, as described on any Schedule(s); shall also include all
updates, revisions, new versions, enhancements, modifications, derivative works,
maintenance fixes, translations, adaptations, and copies of the foregoing or of
the original version of the Software, and references to the Software shall also
be interpreted as references to any portion or pans thereof. Lessor, at its sole
option, may provide financing for any Additions and Modifications to Leased
Property required by Lessee during the Lease term subject to the then prevailing
interest rates and the Lessee's credit standing. Lessee shall not move the
Leased Property from the location set forth in the Schedule(s) without Lessor's
prior written approval and then only to another location within the continental
United States and upon such terms and conditions as Lessor may then stipulate.
5. NO WARRANTIES: LESSOR NOT BEING THE MANUFACTURER, DEVELOPER,
PUBLISHER, DISTRIBUTOR, OR LICENSOR OF THE LEASED PROPERTY, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, QUALITY, DESIGN,
CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR PERFORMANCE OF THE LEASED
PROPERTY OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING AGREED THAT THE
LEASED PROPERTY IS LEASED "AS IS" AND THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND
LESSEE ARE TO BE BORNE BY LESSEE AT ITS SOLE RISK AND EXPENSE. LESSEE REPRESENTS
THAT ALL OF THE LEASED PROPERTY ARE OF A SUE, DESIGN, AND CAPACITY SELECTED BY
IT, AND THAT IT IS SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSES.
THIS PROVISION SHALL SURVIVE TERMINATION OF THE RESPECTIVE LEASE TERM AND OF
THIS LEASE. LESSOR, AT ITS SOLE OPTION, MAY SUPPLY ITEMS OF
3
<PAGE>
LEASED PROPERTY, EITHER NEW OR USED, THAT MEET THE SPECIFICATION OF ITEMS OF
LEASED PROPERTY DELINEATED ON THE SCHEDULE(S).
6. USE, OPERATION AND MAINTENANCE: Lessee, at its expense will provide a
suitable place for the installation, operation and maintenance of all Leased
Property with all such facilities fully complying with the installation and
operational specifications outlined in pertinent
Manufacturer's/Vendor's/Licensor's manuals. Lessee, without expense to Lessor,
will enter into and keep in force during the entire term of this Lease the best
standard Manufacturer's/Vendor's/Licensor's Maintenance Agreement in form and
substance approved by Lessor which will cause
Manufacturer(s)/Vendor(s)/Licensor(s) to make all the necessary repairs,
adjustments, and replacements in accordance with such Agreement and entitle
Lessee (through Lessor, if necessary) to obtain enhancements, updates, and
changes available under the License or Maintenance Agreement. Lessee will
provide full free access to the Leased Property for maintenance purposes. Lessee
shall not do anything, or fad to do anything, to impair the
Manufacturer's/Vendor's/Licensor's warranty with respect to any Leased Property
such as (but not limited to) using a version of software, other than the version
specified by the License to be used, making unauthorized modifications of the
Leased Property, failing to follow Manufacturer's/Vendor's/Licensor's operations
or maintenance instructions, or abusing, misusing or allowing negligent acts to
be caused by Lessee or those to whom Lessee gives access to the Leased Property.
Lessee will comply with all laws, rules, regulations or orders of any
governmental agency with respect to the Leased Property or to the use,
operation, maintenance or storage thereof.
7. RISK OF LOSS: During the period the Leased Property is in transit or
in the possession of Lessee, Lessee shall assume all responsibility for loss or
damage and shall hold Lessor harmless against the same. In the event that,
during the term of the Lease or until the Leased Property shall have been
returned, if any of the Leased Property shall be confiscated, taken,
requisitioned. lost, stolen. destroyed or irreparably damaged for any cause
whatsoever (such occurrences hereinafter called "Casualty Occurrences"), Lessee
shall immediately and fully inform Lessor. In the case of Software, the erasure,
inoperability or other incapacity of the Software triggered by a preprogrammed
termination or limiting design or routine embedded in the Software shall also be
deemed a "Casualty Occurrence". Following a Casualty Occurrence, on the next
succeeding rent payment date, Lessee shall pay to Lessor, in addition to all
past due rentals and other amounts then late and outstanding, an amount equal to
the Casualty Value as determined by the attached Casualty Schedule as of the
date of the Casualty Occurrence. Upon the making of such payment by Lessee, the
rental for such Schedule(s) shall cease to accrue as of the date of such payment
and the term of the Lease as to such Schedule(s) shall
4
<PAGE>
terminate. Insurance proceeds received by Lessor as the result of a Casualty
Occurrence with respect to any Schedule(s) shall be applied in reduction of
Lessee's obligation to pay the Casualty Value. The Casualty Value as of any rent
payment date (or as of any other date on which Casualty Value is payable) shall
be an amount equal to that percentage of the Purchase Price or License Fee as is
set forth in the Casualty Schedule attached hereto, opposite the number of such
rent payment date or such other date. Except as hereinabove in this paragraph
provided, Lessee shall not be released from its obligations hereunder in the
event of, and shall bear the risk of, any Casualty Occurrence to any of the
Leased Property. The Purchase Price or License Fee of any Leased Property shall
be the invoice price/fee therefor, including any applicable sales, use or other
taxes then payable, and normal delivery charges.
8. INDEMNITY AND INSURANCE: Lessor shall have no responsibility or
liability to Lessee, its successors or assigns, or to any other person, with
respect to any or all liabilities, and Lessee hereby assumes liability for, and
hereby agrees, at its own cost and expense, to indemnify, protect, defend, save
and keep harmless Lessor, its agents, employees, officers, directors, successors
and assigns, from and against, any and all liabilities, obligations, losses,
damages, injuries, claims (including without limitation, claims based upon
strict liability); demands, penalties, actions, costs and expenses, including
legal expenses, of every kind or nature arising out of the use, condition
(including but not limited to, latent and other defects, whether or not
discoverable by Lessee or Lessor), operation, ownership, selection, delivery,
leasing or return of any item of Leased Property (including without limitation,
any claim for patent, trademark or copyright infringement), regardless of where,
how and by whom operated, or any failure on the part of Lessee to perform or
comply with any conditions of this Lease or for any interruption of service,
loss of business or consequent damages. The indemnities and assumptions of
liabilities and obligations herein provided for shall continue in full force and
effect notwithstanding the expiration or other termination of this Lease.
Lessee, at its expense shall procure and maintain in full force and effect at
all times that this Lease is in force and effect such public liability
(including, without limitation, contractual liability insurance), property
damage liability, fire with extended coverage, theft, and other insurance in
such form and amounts and with such companies as shall be satisfactory to
Lessor. Lessor shall be named as an additional insured and loss payee on all
policies which shall provide that no cancellation thereof shall be effective
without thirty (30) days prior written notice to Lessor and shall not be
invalidated as to Lessor by any act, omission or neglect of Lessee.
5
<PAGE>
THIS LEASE CAN ONLY BE MODIFIED BY WRITTEN ADDENDUM DULY SIGNED BY PERSONS
AUTHORIZED TO SIGN AGREEMENTS ON BEHALF OF LESSEE AND BY A DULY AUTHORIZED
OFFICER OF AMPLICON, INC.
LESSEE ________________________ LESSOR ________________________
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
THIS LEASE IS SUBJECT TO APPROVAL AND ACCEPTANCE BY AMPLICON, INC.'S FINANCE
COMMITTEE.
BY EXECUTION HEREOF, THE SIGNER HEREBY CERTIFIES THAT HE HAS READ THIS LEASE,
INCLUDING THE REVERSE SIDE HEREOF, AND THAT HE IS DULY AUTHORIZED TO EXECUTE
THIS LEASE ON BEHALF OF LESSEE. UNTIL THIS DOCUMENT (OR AN IDENTICAL COUNTERPART
THEREOF) HAS BEEN SIGNED BY A DULY AUTHORIZED OFFICER OF AMPLICON, INC. IT SHALL
CONSTITUTE AN OFFER BY LESSEE TO ENTER INTO THIS LEASE AGREEMENT ON THE TERMS
STATED HEREIN WITH LESSOR.
OFFER ACCEPTANCE
LESSEE International Environmental AMPLICON, INC.
------------------------------
Corporation
------------------------------
By/Title Vice President By ____________________
------------------------------
Name Tony Shelby Date __________________
----------------------------------
Date 4-3-96
----------------------------------
9. _____________________________ _________________________________
________________________________________________________________________________
________________________________________________ authorized), possession or use
of the Leased Property, excepting only those based on Lessor's income, and shall
keep the Leased Property free and clear of all levies, liens or encumbrances
arising therefrom. ALL REQUIRED PERSONAL PROPERTY TAX RETURNS RELATING TO THE
LEASED PROPERTY SHALL BE FILED BY LESSEE UNLESS OTHERWISE PROVIDED IN WRITING.
Lessor skull not be responsible for contesting any valuation of or tax imposed
on the Leased Property, but may do so strictly as in accommodation to Lessee and
shall not be liable or accountable to Lessee therefor.
10. OWNERSHIP: Title to any Hardware shall at all times remain in Lessor.
To the extent that any Software License allows tide to Software to pass to
Licensee, such title shall vest and
6
<PAGE>
remain in Lessor. To she extent that such vesting requires a specific written
conveyance, Lessee hereby conveys to Lessor any tide it has or may hereafter
acquire in the Software and relinquishes any subsequent claim of title in the
Software, including any rights to purchase the Software and/or to retain rights
to use the same beyond this Lease. If any provision of this paragraph requires
for its effectiveness Licensor's prior written consent because the License
limits transfers. encumbrance, or assignment of the Software, then Lessee shall
assist Lessor, if so requested, In obtaining such consent. Lessee will at all
times protect and defend, at its own cost and expense, the tide and/or License
rights of Lessor from And against all claims, liens and legal processes and keep
all Leased Property free and clear from all such claims, liens and processes.
The Leased Property is and shall remain personal property of Lessor. Upon the
expiration or termination of this Lease with respect to a particular
Schedule(s), the Lessee at its expense shall return said items of Leased
Property unencumbered to Lessor at such place within the continental limits of
the United States as Lessor shall designate.
11. EFFECTS OF TERMINATION OR EXPIRATION OF LEASE TERM: Immediately upon
expiration or termination of each and every Lease Term as defined under this
Lease, Lessee shall discontinue its use of the Leased Property. In the case of
Software, Lessee shall destroy all intangible items constituting such Software,
and shall deliver to Lessor all tangible items constituting such Software. At
Lessor's request, Lessee shall also certify in a form acceptable to Lessor that:
(i) all such tangible Software has been delivered; (ii) that all intangible
records thereof have been destroyed; (iii) that Lessee has not retained such
Software in any form; (iv) that Lessee will not use such Software after
termination, and (v) that Lessee grants Lessor the right (which shall survive
termination) to inspect all of Lessee's locations to insure compliance with the
provisions of this paragraph. TERMINATION OF ANY LEASE TERM (FOR WHATEVER CAUSE)
SHALL NOT ABSOLVE USER FROM PAYMENT OF ACCRUED PERIODIC PAYMENTS OR FROM
COMPLIANCE WITH THE USE AND DISCLOSURE RESTRICTIONS OF THIS LEASE, OR FROM ITS
OBLIGATIONS TO INDEMNIFY LESSOR. All representations and warranties contained in
this Lease, or in any document or certificate delivered pursuant hereto or in
connection herewith, shall survive the expiration or other termination of the
respective Lease Term and of this Lease,
12. PERFORMANCE OF LESSEE'S OBLIGATIONS BY LESSOR: If Lessee fails to
perform any of its obligations under this Lease, Lessor may, at its option,
perform the same for the account of Lessee without thereby waiving Lessee's
default and any amount paid, expense (including reasonable attorney's fees),
penalty or other liability incurred by Lessor in such performance shall be
payable by Lessee to Lessor upon demand, with Interest thereon at the
delinquency rate set forth in Paragraph 3, above.
7
<PAGE>
13. RIGHT OF INSPECTION: In addition to its rights of entry and
inspection stated elsewhere in this Lease, Lessor may from time to time during
reasonable business hours enter upon any premises where any of the Leased
Property may be located for the purpose of confirming the existence, condition,
and proper maintenance of the Leased Property.
14. DEFAULT: An Event of Default shall occur if: (a) Lessee fails to pay
within ten (10) days after the due date, any installment of rent; (b) Lessee
fads to perform or observe any covenant, condition, or obligation to be
performed or observed by it under this Lease, and such failure continues uncured
for fifteen (15) days after written notice thereof to Lessee by Lessor; (c)
Lessee ceases doing business as a going concern. makes an assignment for the
benefit of creditors, admits in writing its insolvency, files a voluntary
petition in bankruptcy, I!, adjudicated bankrupt or insolvent, files a petition
seeking for Itself any reorganization, liquidation, dissolution, or similar
arrangement under any present or future statute; law, regulation, or files an
answer admitting die material allegations of a petition filed against it in any
such proceeding, consents to or acquiesces in the appointment of a trustee,
receiver, or liquidator of it or of all or a substantial pan of its assets, or
if its principals take any action looking to its dissolution or liquidation; (d)
within sixty (60) days after the commencement of proceedings against Lessee
seeking reorganization, liquidation, dissolution, or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or if within sixty (60) days after the appointment without
Lessee's consent or acquiescence of any trustee, receiver, or liquidator of it
or of all or any substantial pan of its assets, such appointment shaft not be
vacated, or (e) Lessee attempts to remove, transfer, sell, sublicense, encumber,
part with possession. or sublet the Leased Property; or W Lessee attempts to
assign or transfer this Lease or its interest hereunder without Lessor's express
prior written consent, or Lessee's credit worthiness materially deteriorates as
judged solely by Lessor, whether through sale, assignment, buyout, bankruptcy or
change of ownership of any type, form or manner, or undergoes a Change-in-
Control. A Change-In-Control shall be deemed an assignment for purposes of this
section. A Change-In-Control means a transaction or a series of related
transactions which, after giving effect thereto, causes the holders of ownership
interests in the Lessee prior to such transaction or transactions to
beneficially own less than 75% of Lessee after such transaction or transactions
have been consummated.
15. REMEDIES: If an event of default shall occur, Lessor may exercise at
its sole option, but not specifically limited thereto, anyone or more of the
following remedies: (a) terminate this Lease and Lessee's rights hereunder, (b)
proceed, by appropriate court action to enforce performance by Lessee of the
applicable covenants
8
<PAGE>
of this Lease or to recover damages for the breach thereof, (c) by notice in
writing to Lessee, recover all amounts due on or before the date Lessor declared
this Leak to be in default, plus, as liquidated damages for loss of a bargain
and not as a penalty, accelerate, and declare to be immediately due and payable,
all rentals and other sums payable hereunder, without any presentment, demand,
protest or further notice (all of which hereby are expressly waived by Lessee),
whereupon the same shall be and become immediately due and payable, and (d)
personally, or by its agents, take immediate possession of the Leased Property,
or any part thereof, from Lessee and for such purpose, enter upon Lessee's
premises where any of the Leased Property is located with or without notice or
process of law and free from ad claims by Lessee. In the case of Software, it is
acknowledged and agreed that the unauthorized use, disclosure, or transfer of
the Software could cause Lessor incalculable, irreparable, and serious harm.
Therefore, if Lessee is found to be using (in whatever manner) any portion of
the Software after the applicable Lease Term, or after an event of default
hereunder, or if Licensor terminates a License or Lessee's right to use the
Software thereunder for an alleged breach of the License's use, disclosure, or
transfer restrictions, then liquidated damages shall be payable immediately to
Lessor in an amount three (3) times the license fee(s) paid to the Licensor with
respect to the Software being used. The exercise of any of the foregoing
remedies by Lessor shall not constitute a termination of this Lease unless
Lessor so notifies Lessee in writing. In the event Lessor repossesses the
Hardware, Lessor may lease the Hardware or sell the Hardware, in such manner,
and at such times and upon such terms as Lesser may determine. In the event that
Lessor leases the Hardware, any rentals received by Lessor for the remaining
lease term (as defined in this Lease) shall be applied to the payment of: (i)
all costs and expenses (including reasonable attorney's fees) incurred by
Lessor, and (ii) the rentals for the remainder of the term and all other sums
then remaining unpaid under the Lease. The remaining balance of such rentals, if
any, shall be applied to reimburse Lessee for any sums previously paid by Lessee
as liquidated damages. Ali rentals received by Lessor for the period commencing
after the remaining Lease Term shall be retained by Lessor. Lessee shall remain
liable to Lessor to the extent that the aggregate amount of die sum referred to
in clauses (i) and (ii) above shall exceed the aggregate rentals received by
Lessor under such leases for the respective remaining lease term applicable to
the Hardware covered by such leases. In the event that Lessor shall sell the
Hardware, the proceeds thereof shall be applied to the sum of (i) all costs and
expenses (including reasonable attorney's fees) incurred by Lessor in disposing
of such Hardware, (ii) the rentals accrued under this Lease, but unpaid up to
the time of such disposition, (iii) any and all other sums (other than rentals)
then owing to Lessor by Lessee hereunder. and (iv) the Casualty Value of such
Hardware determined as of the date of such disposition in accordance with the
Casualty Schedule, attached hereto. The remaining balance of such proceeds, if
any,
9
<PAGE>
shall be applied first to reimburse Lessee for any sums previously paid by
Lessee as liquidated damages, and any remaining amounts shall be retained by
Lessor. Lessee shall remain liable to Lessor to the extent that the aggregate
amount of the sums referred to in clauses (i) through (iv) above shall exceed
the aggregate proceeds received by Lessor in connection with the disposition of
the Leased Property. Lessor's remedies, as discussed in this Lease, shall not be
deemed exclusive. Waiver of any defaults or breach of this Lease shall not be
construed as a waiver of subsequent or continuing defaults or breaches.
16. QUIET ENJOYMENT: The Lessor convenants that if, and so long as, the
Lessee keeps and perform each and every convenant, condition and agreement to be
performed or observed by it hereunder, the Lessee shall quietly enjoy the Leased
Property hereunder without hindrance or molestation by the Lessor or any other
person lawfully claiming the same.
17. ATTORNEY`S FEES AND VENUE OF LITIGATION: If any party to this Lease
brings any action to enforce any of the terms of this Lease or to recover for a
breach of this Lease, then the prevailing party shall be entitled to recover all
attorneys' fees and costs of suit from the other party. The Lessee agrees that
all litigation arising out of this Lease or any breach thereof shall be filed
and conducted in the California Superior Court for the County of Orange, unless
the Lessor or its Assignee selects an alternative venue of litigation.
18. TRANSPORTATION; INSTALLATION/DEINSTALLATION: All transportation,
rigging and drayage charges on delivery or redelivery of the Leased Property to
and from Lessee shall be paid by Lessee. All installation and deinstallation
charges including packing materials and any fees and charges for maintenance
certification or recertification by the Manufacturer/Vendor/ Licensor shall be
paid by Lessee.
19. FURTHER ASSURANCES; OFFER AND ACCEPTANCE: LESSEE'S FINANCIAL
INFORMATION: Lessee's signing of this document shall constitute an offer to
Lessor to enter into the Lease. In consideration of Lessor's time and effort in
reviewing and acting on the offer, Lessee agrees that its offer shall be
irrevocable for a period of twenty (20) business days after the date it is
submitted to Lessor. Lessor's signing of this Lease shall constitute acceptance
of Lessee's offer to enter into the Lease. Upon acceptance by Lessor, Lessee
shall execute and deliver such instruments and assurances as Lessor deems
necessary or desirable for confirmation, assignment and assurance of performance
by Lessee of its obligation hereunder or for perfection of this Lease, including
but not limited to the filing of this Lease or the filing of Uniform Commercial
Code Financing Statements (which Lessee agrees may be executed by Lessor on
Lessee's behalf). Lessee
10
<PAGE>
further authorizes Lessor to insert in each Lease Schedule and in other
appropriate documentation the serial number(s) and other identifying data of the
Leased Property, and to insert applicable lease dates and assignment dates as
necessary to complete such supplemental documentation. Lessee shall also provide
Lessor with all credit information reasonably requested by Lessor, including but
not limited to comparative audited financial statements for the most current
year and interim reporting period. Lessee's failure to provide such information
to Lessor shall be an event of default under Section 14 of this Lease. Lessor
shall have the right at its sole discretion for any reason whatsoever for a
reasonable period of time as solely determined by Lessor, after such financial
information has been submitted to Lessor, to terminate this Lease by giving
written notice of such termination to Lessee. In the event of such termination,
all obligations of Lessor set forth herein shall be cancelled, otherwise, Lessor
shall confirm its acceptance in writing to Lessee.
20. NOTICES: Unless otherwise specifically provided herein, all notices
to Lessor shall be delivered in person to an officer of the Lessor, or shall be
sent certified mail return receipt requested to Lessor at its address shown
above or at any later address last known to the sender; all notices to Lessee
shall be in writing and shall be delivered by mail at its address shown herein
or at any later address last known to the sender.
21. AGREEMENTS: This is the complete agreement by and between the parties
hereto. NO ORAL OR WRITTEN AGREEMENT, GUARANTY, PROMISE, CONDITION,
REPRESENTATION, OR WARRANTY SHALL BE BINDING UNLESS MADE A PART OF THIS LEASE BY
DULY EXECUTED ADDENDUM. All agreements, representations and warranties contained
in this Lease, or in any document or certificate delivered pursuant hereto or in
connection herewith, shall survive the expiration or other termination of this
Lease. Any provision of this Lease which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, Lessee hereby waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect. THIS
LEASE SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF CALIFORNIA. Time is of the essence of this Lease.
22. ASSIGNMENT: WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, LESSEE SHALL
NOT ASSIGN THIS LEASE OR ITS INTEREST HEREUNDER IN ANY FORM OR MANNER INCLUDING,
BUT NOT LIMITED TO, AN ASSIGNMENT DUE TO
11
<PAGE>
A SALE, MERGER, LIQUIDATION, SUB-LEASE, LEVERAGED BUYOUT, CHANGE OF OWNERSHIP OR
CHANGE-IN-CONTROL. THE LESSEE MAY SELL AND ASSIGN ITS RIGHT, TITLE, INTEREST, OR
ANY OTHER RIGHTS IT MAY HAVE AS AN OWNER AND LESSOR OF THE LEASED PROPERTY TO AN
ASSIGNEE ("ASSIGNEE"). LESSEE HEREBY CONSENTS TO SUCH ASSIGNMENT AND FURTHER
AGREES AS FOLLOWS: (1) THAT ASSIGNEE DOES NOT ASSUME ANY OF THE OBLIGATIONS OF
LESSOR HEREUNDER; (2) TO PAY ALL MONIES UNDER THE LEASE DIRECTLY TO ASSIGNEE
UNCONDITIONALLY WITHOUT OFFSET AND LESSEE FURTHER AGREES THAT SUCH MONIES SHALL
BE PAYABLE NOTWITHSTANDING ANY DEFENSE OR COUNTERCLAIM WHATSOEVER, WHETHER BY
REASON OF BREACH OF THE LEASE, THE EXERCISE OF ANY RIGHT HEREUNDER, OR
OTHERWISE, WHICH IT MAY OR MIGHT NOW OR HEREAFTER HAVE AS AGAINST THE LESSOR
(THE LESSEE RESERVING ITS RIGHT TO HAVE RECOURSE DIRECTLY AGAINST LESSOR ON
ACCOUNT OF ANY SUCH DEFENSE OR COUNTERCLAIM); AND (3) THAT SUBJECT TO AND
WITHOUT IMPAIRMENT OF THE LESSEE'S LEASEHOLD RIGHTS IN AND TO THE LEASED
PROPERTY COVERED HEREUNDER, LESSEE SHALL HOLD SAID LEASED PROPERTY AND THE
POSSESSION THEREOF FOR THE ASSIGNEE TO THE EXTENT OF THE ASSIGNEE'S RIGHTS
THEREIN.
12
<PAGE>
AMPLICON FINANCIAL LEASE SCHEDULE 01
ANNEXED TO AND MADE A PART
OF THE LEASE AGREEMENT
ORDER NO. OL-09083 DATED
4-26-96 BETWEEN AMPLICON,
INC., LESSOR, AND LESSEE
INDICATED HEREIN.
LESSEE LOCATION OF LEASED PROPERTY
INTERNATIONAL ENVIRONMENTAL SAME
CORPORATION
STREET STREET
5000 1-40 WEST
CITY STATE COUNTY ZIP CITY STATE COUNTY ZIP
OKLAHOMA CITY, OK, OKLAHOMA, 73128
ATTENTION ATTENTION
STEVE J. GOLSEN
TITLE PHONE NO. TITLE PHONE NO.
CHIEF EXECUTIVE (405)745-6000 X216
OFFICER
ITEM QUANTITY DESCRIPTION RENT
LEASED PROPERTY MORE FULLY
DESCRIBED ON EXHIBIT "A"
ATTACHED HERETO AND MADE A
PART HEREOF.
LEASED PROPERTY COST TO BE:
$930,000.00 10% (INCLUDES
$50,000.00 IN SOFT COSTS)
LEASE RATE FACTOR (I.R.F.):
0.018354
INSTALLATION PERIOD: APRIL,
1996 THROUGH SEPTEMBER, 1996
LESSEE AGREES TO PROVIDE A
CORPORATE GUARANTEE FROM LSB
INDUSTRIES, INC. IN A FORM
ACCEPTABLE TO AMPLICON, INC.
<PAGE>
ITEM QUANTITY DESCRIPTION RENT
THE MONTHLY LEASE RATE
FACTOR MAY BE ADJUSTED
(.000045) FOR EVERY 10 BASIS
POINT ADJUSTMENT IN THE
CORRESPONDING AVERAGE YIELD
OF EQUALLY MATURING U.S.
TREASURY NOTES. THE FINAL
LEASE RATE FACTOR FOR LEASE
SCHEDULE NO. 01 SHALL BE
FIXED AT THE COMMENCEMENT
DATE AND SHALL REMAIN
CONSTANT THROUGHOUT THE BASE
LEASE TERM OF THE LEASE
SCHEDULE. THE INITIAL INDEX
RATE SHALL BE (5.74).
This Schedule is issued pursuant to the Lease Agreement Order No. OL-09083. All
--------
of the terms and conditions of the Lease Agreement are hereby incorporated
herein and made a part hereof as if such terms and conditions were set forth in
this Schedule as a separate lease with independent Initial Base Lease Term and
written addenda. By their execution and delivery of this Schedule, the parties
hereby reaffirm all of the terms and conditions of the Lease Agreement.
Lessee hereunder has indicated that the Leased Property may be delivered in
several installments over a ____ to ____-day period and, as such, Lessee has
requested and Lessor has agreed to provide a billing arrangement to accommodate
Lessee's desired deliveries. Lessor shall bill Lessee each quarter a daily
rental charge based on one-ninetieth (1/90th) of the applicable net quarterly
rental for each Item of installed Leased Property, plus applicable sales/use
taxes, if any. Lessor shall provide this billing accommodation to Lessee until
the final Item of Leased Property is delivered and installed. The date by which
the final Item of Leased Property is delivered and installed shall serve as the
Commencement Date for this Lease Schedule as defined in Section 2. TERM and
Section 3. RENTALS.
INITIAL $ 17,069.00 QUARTERLY
BASE TERM DEPOSIT/TRANSACTION FEE OF $___________ RENT
IN QUARTERS TO BE RETURNED IN FULL IF AMPLICON DOES
NOT ACCEPT THE TRANSACTION. $51,207.00
TWENTY (20) BILLED QUARTERLY.
2
<PAGE>
LESSEE: INTERNATIONAL ENVIRONMENTAL CORPORATION
----------------------------------------------------
BY: /s/ Tony M. Shelby, VP
----------------------------------------------------
TITLE: TONY M. SHELBY, VICE PRESIDENT
----------------------------------------------------
DATE: 4/3/96
----------------------------------------------------
ACCEPTED BY: AMPLICON, INC.
BY: _____________________________________________________
TITLE: MICHAEL L. MCCLENDON, VICE PRESIDENT
-----------------------------------------------------
DATE: _____________________________________________________
3
<PAGE>
EXHIBIT "A" (SCHEDULE NO. 01 TO LEASE AGREEMENT ORDER NO. OL-09083) TO LEASE
--
SCHEDULE WHEREIN
INTERNATIONAL ENVIRONMENTAL CORPORATION IS THE LESSEE; AND AMPLICON INC. IS THE
- ----------------------------------------
LESSOR
LESSEE ADDRESS: 5000 1-40 WEST, OKLAHOMA CITY, OK 73128
LEASED PROPERTY LOCATION: SAME
QTY DESCRIPTION
- --- -----------
VENDOR: INTEGRATED FABRICATION TECHNOLOGIES, INC.
(03) RAS 74 SERIES SERVO-HYDRAULIC FOLDING SYSTEMS
VENDOR: GUILFOYLE ASSOCIATES
(02) PULLMAX OPTIMA 110 10 CNC HYDRAULIC PRESS BRAKES
PLUS ALL REPLACEMENT PARTS, SUBSTITUTIONS, ADDITIONS, ATTACHMENTS,
MODIFICATIONS, UPDATES, UPGRADES, REVISIONS, NEW VERSIONS, ENHANCEMENTS,
ACCESSORIES AND THE PROCEEDS THEREOF.
LESSEE: LESSOR:
INTERNATIONAL ENVIRONMENTAL
CORPORATION AMPLICON, INC.
- ------------------------------------- ------------------------------------
BY: /s/ Tony M. Shelby BY: ____________________________
----------------------------
NAME: TONY M. SHELBY NAME: MICHAEL L. MCCLENDON
---------------------------- ----------------------------
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT
---------------------------- ----------------------------
DATE: 5-7-96 DATE: ____________________________
----------------------------
<PAGE>
ADDENDUM "A"
TO
LEASE AGREEMENT ORDER NO. OL-09083
--------
WITH RESPECT TO LEASE SCHEDULE NO. 01
--
This Addendum is supplemental to and made a part of this Lease Agreement No. OL-
--
09083, dated 4/26/96 (the "Lease"), Lease Schedule No. 01, dated May 7, 1996 and
- ----- ------- -----------
other related documents under the Lease and Schedule (together forming the
"Agreement"). The parties to the Agreement include INTERNATIONAL ENVIRONMENTAL
---------------------------
CORPORATION ("Lessee") and AMPLICON, INC. ("Lessor").
- -----------
Capitalized terms used In this Addendum without definition shall have the
meanings set forth in the Lease, unless the context hereof specifically requires
otherwise. This Addendum is to be construed as supplemental to, and a part of,
the Lease.
Lessee and Lessor acknowledge and agree that the Lease is hereby amended with
respect to Lease Schedule No. 01, as follows:
SECTION 2 TERM:
Option (A) shall be modified to the limited extent as follows:
--------------------------------------------------------------
In line twelve, delete the phrase: "(A) purchase all of the Leased Property
for a mutually agreeable purchase price;" and replace it with: "(A)
purchase all of the Leased Property for a mutually agreeable purchase price
of ten percent (10%) of Lessor's original cost of the Leased Property, plus
applicable sales tax;".
In line seventeen (17), delete "one hundred twenty (120) days" and replace
with: "ninety (90)".
SECTION 3. RENTALS:
In line five (5) and seven (7), delete "five percent (5%)" and replace
with: "two percent (2%)".
In all other respects, the terms and conditions of the Agreement, as originally
written, shall remain in full force and effect. The Agreement, as amended
herein, sets forth the entire and final understanding between the parties with
respect hereto. The terms of this Addendum have been negotiated and jointly
drafted by Lessor and Lessee and, therefore, the language of the Addendum shall
not be construed in favor or against either party. The undersigned represent
that they have the authority to enter into this Agreement, and that the same
shall be legally binding and enforceable on the respective principals.
<PAGE>
IN WITNESS WHEREOF the parties hereto, by their authorized signatories, have
executed this Addendum at the date set forth below their respective signatures.
LESSEE: INTERNATIONAL ENVIRONMENTAL CORPORATION
---------------------------------------------
BY: /s/ Tony M. Shelby
---------------------------------------------
NAME: TONY M. SHELBY
---------------------------------------------
TITLE: VICE PRESIDENT
---------------------------------------------
DATE: 4/3/96
---------------------------------------------
LESSOR: AMPLICON, INC.
---------------------------------------------
BY: _____________________________________________
NAME: MICHAEL L. MCCLENDON
---------------------------------------------
TITLE: VICE PRESIDENT
---------------------------------------------
DATE: _____________________________________________
2
<PAGE>
AMPLICON FINANCIAL
May 3, 1996
INTERNATIONAL ENVIRONMENTAL CORPORATION
5000 1-40 WEST
OKLAHOMA CITY, OK 73128
[RE:] REQUEST FOR PAYMENT TO VENDOR(S) IN ADVANCE OF LEASE COMMENCEMENT
Ladies/Gentlemen:
Reference is made to that Lease Agreement No. OL-09083 dated 4/26/96 by and
-------- -------
between INTERNATIONAL ENVIRONMENTAL CORPORATION as Lessee, and Amplicon, Inc.,
---------------------------------------
as Lessor, (the "Lease") and to Lease Schedule No. 01 and all related subsidiary
--
documents under the Lease (collectively, the "Agreement"). Notwithstanding
anything to the contrary contained therein, and to the limited extent hereof,
this Letter Agreement amends and supersedes the Agreement and is hereby
incorporated by reference herein.
Amplicon, Inc. (Lessor) has received a request from INTERNATIONAL ENVIRONMENTAL
---------------------------
CORPORATION (Lessee) to advance funds to vendor(s) prior to Lessee's acceptance
- -----------
of all items of Leased Property under the Agreement and as required to make
progress payments to such vendors. As adequate and valuable consideration for
Lessor advancing funds to vendor(s) on behalf of Lessee prior to Lessee's
acceptance of all of the subject Leased Property (hereinafter referred to as the
"Installation Period"), Lessee agrees to make the following terms and conditions
mutually binding under the Agreement:
Lessee will pay to Lessor a daily pro-rata rental fee from the date each
item of Leased property is delivered and installed through the
"Commencement Date". The Commencement Date as further defined in Section 2.
TERM of the Lease, shall be the date that the final item of Leased Property
is installed and accepted by Lessee. If Lessor has advanced funds on items
of Leased Property not yet delivered and accepted, the daily pro-rata
rental fee will be calculated from the date of Lessors disbursement. The
daily pro-rata rental fee will be calculated as follows: (0.018354 X (the
--------
cost of each item of installed Leased Property + amount of progress
payments and deposits made)/30). This rental fee will be billed monthly.
Lessor will not be required to fund on any items of Leased Property not
installed and accepted by Lessee on or before 7/10/96 (the "Funding Cut-Off
-------
Date"). If all of the Leased Property to be included in the above-
<PAGE>
referenced Agreement is not accepted by the Lessee on or before the Funding
Cut-Off Date, Lessor may, at its sole option, pursue one of the following
alternatives: (a) Lessor may commence the Lease (using the Funding Cut-Off
Date as the Commencement Date) based on the portion of the Leased Property
which has been delivered and accepted by Lessee and paid for by Lessor as
of the Funding Cut-Off Date, and demand that Lessee pay to Lessor an amount
equal to that which Lessor has paid to vendor(s) on behalf of Lessee for
items of Leased Property not yet installed and accepted, plus all pro-rata
rental fees, taxes, late fees, and other charges which are due and owing;
(b) Lessor may, at its sole and absolute discretion, extend the allowed
Installation Period and establish a new Funding Cut-Off Date; or (c) Lessor
may demand that Lessee pay to Lessor a total amount equal to that which
Lessor has paid to vendor(s) on behalf of Lessee, plus all pro-rata rental
fees, taxes, late fees, and other charges which are due and owing under the
terms of the above-referenced Agreement. Should such a demand be made by
Lessor, Lessee hereby unconditionally agrees to reimburse said funds to
Lessor in full within ten business days of said demand, and Lessor, upon
receipt of such payment in full, shall release Lessee from further payment
obligations under the Lease. Lessee shall provide Lessor with updated
financial information throughout the Installation Period as periodically
requested by Lessor. Lessor shall reserve the right to terminate the
Installation Period at any time in the event Lessor determines, at Lessor's
sole discretion, that there has been a material adverse change in Lessee's
financial condition, at which time Lessor would then have the right to
elect either (a), (b) or (c) above. Irrespective of this Letter Agreement,
all other terms and conditions including, without limitation, all payment
obligations by Lessee under the Agreement shall remain absolute and
unconditional without regard in any manner whatsoever to the pro-rata
rental obligations and/or pro-rata rental period set forth herein. The
acceptance by Lessee of all items of Leased Property is not a pre-condition
to Lessee's performance of any of its obligations under the Agreement,
including all rental and other payment obligations.
The Agreement is hereby duly amended to incorporate the foregoing revisions.
Please acknowledge your acceptance of the same by your authorized signature
below and return the original of this Letter Agreement to Amplicon, Inc. within
five days of the date hereof, retaining the enclosed copy for your records.
2
<PAGE>
THIS LETTER AGREEMENT IS CONTINGENT UPON THE APPROVAL OF THE AMPLICON, INC.
FINANCE COMMITTEE.
LESSEE: LESSOR:
INTERNATIONAL
ENVIRONMENTAL CORPORATION AMPLICON, INC.
- ----------------------------------- ----------------------------------------
BY: /s/ Tony M. Shelby BY: ___________________________________
----------------------------
NAME: TONY M. SHELBY NAME: MICHAEL L. MCCLENDON
---------------------------- ----------------------------------
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT
---------------------------- ---------------------------------
DATE: 5-7-96 DATE: _________________________________
-----------------------------
3
<PAGE>
CASUALTY SCHEDULE ATTACHED TO AND MADE A PART OF LEASE SCHEDULE(S) NO. 01 WHICH
--
IS/ARE PART OF LEASE AGREEMENT ORDER NO. OL-09083 DATED 4/26/96 BY AND BETWEEN
-------- -------
INTERNATIONAL ENVIRONMENTAL CORPORATION AS LESSEE, AND AMPLICON, INC., AS
- --------------------------------------- --------------
LESSOR.
<TABLE>
<CAPTION>
% OF
QUARTER PURCHASE PRICE
------- --------------
<S> <C>
1 115
2 114
3 111
4 106
5 103
6 100
7 97
8 94
9 91
10 88
11 85
12 82
13 79
14 76
15 73
16 70
17 67
18 64
19 61
20 58
21 and
thereafter 55
</TABLE>
4
<PAGE>
LESSEE: LESSOR:
INTERNATIONAL
ENVIRONMENTAL CORPORATION AMPLICON, INC.
- --------------------------------------- -----------------------------------
BY: /s/ Tony M. Shelby BY: ______________________________
--------------------------------
NAME: TONY M. SHELBY NAME: MICHAEL L. MCCLENDON
-------------------------------- ------------------------------
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT
-------------------------------- -----------------------------
DATE: 5-7-96 DATE: _____________________________
---------------------------------
5
<PAGE>
AMPLICON FINANCIAL
5 Hutton Centre Drive
Suite 500
Santa Ana, California 92707
(714)751-7551
(800)755-5055
Facsimile(714)751-7557
December 20,1996
INTERNATIONAL ENVIRONMENTAL CORPORATION
5000 1-40 West
Oklahoma City, OK 73128
Ladies and Gentlemen:
Reference is made to that Lease Agreement Order No. OL-09083, dated 04/26/96, by
-------- --------
and between International Environmental Corporation, as Lessee, and Amplicon,
---------------------------------------
Inc., as Lessor (the "Lease"), and to Lease Schedule O1 and all related
--
subsidiary documents under the Lease (the "Agreement"). Notwithstanding anything
to the contrary contained therein, and to the limited extent hereof, this Letter
Agreement amends and supersedes the said Agreement and is hereby incorporated by
reference therein.
Capitalized terms used in this Letter Agreement without definition shall have
the meanings set forth in the Lease, unless the context hereof otherwise
specifically requires. This Letter Agreement is to be construed as supplemental
to, and part of, the Lease.
Due to an increase in the Leased Property cost from $930.000.00 to $960.258.04
----------- -----------
and due to an increase in 5 year Treasury Notes from 5.74% to 5.92%, Lessor and
----- -----
Lessee hereby agree to the following changes:
<TABLE>
<CAPTION>
LEASE SCHEDULE 01 AS STATED AS REVISED
----------------- --------- ----------
<S> <C> <C>
QUARTERLY RENT $51,207.00 $53,107.00
DELIVERY ORDER AS STATED AS REVISED
-------------- --------- ----------
QUARTERLY RENT $51,207.00 $53,107.00
</TABLE>
In all other respects, the terms and conditions of the Agreement, as originally
written, shall remain in full force and effect. The Agreement, as amended
herein, sets forth the entire and final understanding between the parties with
respect hereto. The terms of this Letter Agreement have been negotiated and
jointly drafted by Lessor and Lessee and, therefore, the language of the Letter
Agreement shall not be construed in favor or against either party.
<PAGE>
The undersigned represent that they have the authority to enter into this
Agreement, and that the same shall be legally binding and enforceable on the
respective principals. Please acknowledge your acceptance of same by your
authorized signature below and return the original of this Letter Agreement to
Amplicon, Inc. within five (5) days from the date hereof.
ACKNOWLEDGED AND ACCEPTED ON THIS Very truly yours,
31 DAY OF December , 1996 AMPLICON, INC.
---- ---------- --
International Environmental
Corporation
- --------------------------------------
BY: /s/ David R. Goss ___________________________________
--------------------------------
J. Kevin Adkins
NAME: David R. Goss Assistant Vice President
---------------------------------
TITLE: Vice President
--------------------------------
2
<PAGE>
EXHIBIT 10.37
U.S. AMADA, LTD. AGREEMENT NUMBER 49653
U.S. AMADA, LTD.
7025 Firestone Blvd. FILE NUMBER
Buena Park, CA 90621
EQUIPMENT PURCHASE AND SECURITY AGREEMENT
Buyer (described in Item 1.A. below) agrees to purchase from U.S. AMADA, LTD.
("Seller") and Seller agrees to sell to Buyer for business purposes only the
equipment and other personal property described in Item 3, below ("Property"),
on the terms and conditions set forth in this Agreement, including without
limitation the terms and conditions set forth on the reverse hereof.
TYPE OR PRINT ONLY
ITEM 1. BUYER
A. DESCRIPTION OF BUYER:
BUYER'S FULL NAME: CLIMATEMASTER, INC.
-----------------------------------------
BUYER IS A: Corporation
------------------------------------------------
U.S. AMADA CUSTOMER NUMBER: 021784
---------------------------------
STREET ADDRESS OF BUYER'S CHIEF EXECUTIVE OFFICER:
7300 S.W. 44/th/ Street, Oklahoma City, OK 73179
-------------------------------------------------------------
TELEPHONE: (405) 745-6000
-------------------------------------------------
B. INSTALLATION SITE:
STREET ADDRESS: Same
--------------------------------------------
U.S. AMADA CUSTOMER NUMBER CONTACT: Steve Golsen
------------------------
C. BILLING INFORMATION
BILLING ADDRESS: Same
-------------------------------------------
D. FOR SELLERS REFERENCE ONLY:
REGION NO.: 71
------------
DIVISION NO.: 005
-----------
SALESMAN NO.: 790
----------
SALESMAN NAME: Richard Bishop
--------------
ITEM 2. PAYMENT TERMS
A. MONTHLY INSTALLMENT (Total No. of Payments 60)
--
INTEREST RATE: 8.5% A.P.R.
-----------
OTHER: Factor Rate 02052
-----------------
B. AMOUNT OF EACH MONTHLY INSTALLMENT: 9,291.46
--------
INSERT CERTIFICATE NO. HERE: 500 684
-------
<PAGE>
C. If this Agreement is for an installment sale, Buyer shall make each
installment payment to: AMADA LEASING CORPORATION, P.O. BOX 60557,
Terminal Annex, Los Angeles, California 90060
ITEM 3. DESCRIPTION OF PROPERTY
MACHINE MODEL NO.: PEGA 357 (NEW)
--------------
MACHINE DESCRIPTION: ONE (1) AMADA PUNCHING CELL
---------------------------
TOOLING, ATTACHMENTS, OPTIONS AND OTHER CASH
ADDITIONS (INCLUDING SPECIFICATIONS) QTY PRICE
----------------------------------------- --- -----
AS6410 HS AUTO STORAGE UNIT 1 NC
UL 410 UNLOADER 1 NC
TURBO CONVEYOR 1 NC
ITEM 4. PRICE
CASH PURCHASE PRICE FOR MACHINE 566,000.00
TOTAL CASH PURCHASE PRICE 566,000.00
SUBTOTAL 566,000.00
LESS CASH DOWNPAYMENT (113,200.00)
SUBTOTAL (CASH BALANCE) 452,800.00
TIME PRICE DEFERRAL 104,687.36
TIME BALANCE 557,487.36
Buyer agrees to the terms and conditions set forth in Exhibit A which shall
supercede anything herein to the contrary. BY ITS EXECUTION BELOW, BUYER
ACKNOWLEDGES THAT BUYER HAS READ AND UNDERSTANDS THE TERMS AND CONDITIONS ON THE
REVERSE SIDE OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE WARRANTY
DISCLAIMERS AND LIMITATION OF LIABILITY SET FORTH IN SECTION A.10, AND THE
ARBITRATION AND COURT JURISDICTION PROVISIONS SET FORTH IN SECTIONS D.4 AND D.5,
RESPECTIVELY, AND UNDERSTANDS THAT THE AGREEMENT CREATES IN FAVOR OF SELLER A
SECURITY INTEREST IN THE PROPERTY.
If Buyer has elected to purchase the Property on an installment payment basis,
Buyer acknowledges that Seller has offered both a cash purchase price and an
installment payment purchase price to Buyer and that Buyer has made its election
based on a comparison of these prices. Buyer authorizes Seller to complete any
blank, including without limitation the date of first payment in Item 2.C, and
correct any typographical or other error on the facing page of this Agreement
after execution of this Agreement by Buyer.
This Agreement shall not be binding upon Seller until executed by a duly
authorized officer or manager of Seller in Buena Park, California. NO
REPRESENTATION OR WARRANTY RELATING TO THE
<PAGE>
TRANSACTION CONTEMPLATED BY THIS AGREEMENT IS BINDING ON OR ENFORCEABLE AGAINST
SELLER UNLESS SET FORTH IN THIS AGREEMENT.
/s/ Barry H. Golsen Title: President Date:__________
- ------------------------------- ---------
<PAGE>
EXHIBIT A
1. Price and Price Adjustments. The cash purchase price of the Property is FOB
---------------------------
point of shipment from within the United States as designated by Seller, and is
firm for thirty (30) days after the date of execution of this Agreement by
Seller. After such period Seller may, in its discretion, adjust the purchase
price of any unshipped Property to reflect cost increases and changes in market
conditions. Seller will give Buyer written notice of any such price adjustments.
Unless within seven (7) days after receiving such notice Buyer gives Seller
written notice of any objections to any such price adjustments, Buyer will be
deemed to have waived all such objections.
2. Taxes. The cash purchase price of the Property is exclusive of any and all
-----
excise, sales, use or other taxes levied by any federal, state, county,
municipal or other governmental authorities all of which are for the account of
Buyer. Seller is authorized to make payment of any such taxes directly to the
taxing authority, and Buyer will reimburse Seller therefor. Such reimbursement
will be made on demand unless otherwise expressly agreed in writing. If Buyer
claims an exemption from such taxes, Buyer must provide evidence of such
exemption reasonably acceptable to Seller upon Seller's request.
3. Freight Charges. Freight charges for shipment of the Property to Buyer,
---------------
including taxes on freight charges, if any, are for the account of Buyer and
will be billed freight collect. Freight charges for tooling and accessories will
be separately invoiced to Buyer and are payable net 30 days from the date of
invoice unless otherwise agreed in writing.
4. Shipping Instructions. Seller will arrange for shipment and routing of the
---------------------
Property in accordance with the instructions (if any) set forth on the first
page hereof provided, however, if such instructions are unclear, incomplete or
impractical of implementation, or if no shipping instructions are set forth on
the first page hereof, Seller may, and is hereby authorized by Buyer to, arrange
for shipment and routing of the Property as Seller deems appropriate in its
exercise of due care and prudent judgment. In no event will Seller be liable for
any failure of the carrier to follow shipping instructions of either Buyer or
Seller. Charges will be billed freight collect.
5. Shipment. Seller may ship the Property in partial shipments. Seller will
--------
use reasonable commercial efforts to deliver the Property by the requested
delivery date set forth on the first page hereof, but will have no liability to
Buyer for late shipments. Monthly installments will not, however, commence until
all Property has been received by Buyer.
6. Title, Risk of Loss and Insurance. Title to and all risk of loss of or
---------------------------------
damage to the Property will pass from Seller to Buyer at
<PAGE>
the shipping point. Unless otherwise expressly agreed in writing, the cost of
insurance on the Property while in transit will be borne by Buyer. Seller shall
arrange for such insurance sufficient to cover all costs and amounts of and
associated with the Property.
7. Rigging. All costs of unloading the Property from the carrier upon arrival
-------
at the shipping destination and moving the Property to the installation site are
for the account of Buyer. Seller has no liability for and Buyer assumes all risk
of damage to or loss of the Property occurring in connection with such unloading
and moving, provided, however, that Seller shall be liable for damage or loss of
-------- -------
the Property occurring during the shipping, loading, or installation of the
Property caused by any defect in or structural failure of the Property.
8. Installation. Buyer will, at its expense, take all necessary steps to
------------
prepare the installation site for the installation of the Property. The cost of
installation is included in the purchase price of the Property. Installation
includes set up, start up and initial adjustment of operating performance.
Seller has the right to delegate installation to Amada Engineering and Service,
Inc. ("AESI"). Seller has no responsibility or liability for any failure of any
of the Property to meet any applicable codes or standards established by any
private organization or any federal, state, county, municipal or other
governmental authority; provided, however, that in the event of any such failure
to meet such codes or standards Seller or its delegate will, at the request of
Buyer, make such modifications to any of the Property as may be necessary to
bring such Property into compliance with any such codes or standards, unless
Seller in good faith determines that the cost to Seller of making any such
modifications is expected to exceed ten percent (10%) of the purchase price of
the Property or that the time required to effect such compliance including the
completion of any necessary inspections and the obtaining of any necessary
permits or approval(s) is expected to exceed one hundred eighty (180) days in
which case this will be considered a force majeure and resolved pursuant to
Section 11 of this Agreement. However, if Buyer so requests, Seller may, but
shall not be obligated to, proceed with such modifications at the sole expense
of Buyer, payment for which shall be made by Buyer in advance of Seller's
performance.
9. Warranty and Limitation of Liability. (a) Except as may otherwise be set
------------------------------------
forth in a written warranty of the Property executed by Seller, Seller makes no
warranty, express or implied, written or oral, and hereby expressly disclaims
all such warranties, including without limitation any warranties or
merchantability of fitness for a particular use or purpose. In no event shall
Seller be liable for any incidental, special or consequential damages (including
without limitation lost profits), and in no event shall Sellers liability exceed
the stated purchase price of the Property.
2
<PAGE>
(b) Notwithstanding anything in this section 9 or in this Exhibit A
seemingly to the contrary, Seller warrants the proper operation of the Property
for two years from the date of completed installation. During such two year
period, the Seller will repair Property and pay for all costs of each repair
including but not limited to freight, parts and labor.
10. Force Majeure. In the event that Seller or Buyer, or any of their suppliers
-------------
or delegates is unable to carry out their obligations hereunder due to acts of
God or of the public enemy, war, insurrection, riots, strikes, lockouts, labor
disputes, fires, floods, earthquakes, natural disasters, unavoidable casualty,
freight embargoes, shortages of labor or material, changes in governmental
policy, laws or regulations (including but not limited to money exchange or
transfer restrictions, impositions of quotas or limitations of shipments), or
any other cause or causes beyond control of Seller or its suppliers or
delegates, whether or not specified above, Seller and Buyer may extend the time
of performance of its obligations to such extent as may be necessary to enable
Seller and Buyer and their suppliers and delegates to complete performance with
the exercise of reasonable diligence after the cause or causes of delay have
been removed. In the event any such delay continues for a period of more than
six (6) months, either party may terminate its obligations hereunder by so
notifying the other party in writing.
11. Termination. Upon the occurrence of an Event of Default, (as defined in
-----------
Section B.6) after providing Buyer with written notice of such Event of Default
and a ten (10) business day opportunity to cure such default (Notice to Cure),
Seller will, in addition to the other rights set forth in this Agreement, have
the right to terminate this Agreement as to any unshipped Property with thirty
(30) day written notice of termination to Buyer.
12. Late Charges. Any payment of Buyer not received by the ninth (9th) day
------------
following the date due will be subject to a one time late charge of five percent
(5%) of the amount due as liquidated damages.
13. Prepayment. Buyer shall have the right to prepay all or any part of
----------
principal and interest that may be owing with respect to the Property at any
time without penalty of any kind.
14. Indemnification. Buyer will defend, indemnify and hold Seller harmless from
---------------
and against any and all claims, liabilities, damages, costs and expenses
(including reasonable attorneys' fees) arising out of or in connection with any
use of the Property by Buyer (except where such claim is at least in part caused
by Seller's negligence or intentional act) or any breach of this Agreement by
Buyer.
3
<PAGE>
B. Security Interest
---------------------
1. Grant of Security Interest. To secure payment of the purchase price of the
--------------------------
Property, Buyer hereby grants to Seller a security interest in the Property, and
in all accessions thereto and replacements or modifications thereof, as well as
all proceeds (including insurance proceeds) of the foregoing. The security
interest granted hereby constitutes a purchase money security interest under the
California Uniform commercial Code. In addition, the security interest granted
hereby shall secure the full and faithful performance by Buyer of all of Buyer's
obligations under this Agreement. Notwithstanding the foregoing, the provisions
of this Part B do not apply with respect to COD sales of Property for which
payment is actually received by Seller from Buyer prior to or at the time of
delivery of the Property to Buyer's facility.
2. Information Regarding Buyer. Buyer represents and warrants to Seller that
---------------------------
all of the information regarding Buyer set forth on the facing page of this
Agreement is true and correct.
3. Certain Covenants of Buyer. For so long as any amounts are owed by Buyer to
--------------------------
Seller under this Agreement, Buyer (a) shall use the Property in compliance with
all applicable laws, regulations and ordinances; (b) shall maintain the Property
in good condition and repair, reasonable wear and tear excepted; (c) shall pay
when due all taxes, charges and impositions on the Property or the ownership,
use, disposition or sale of same; (d) shall keep the Property free of all liens,
charges, claims, security interests and encumbrances of any third party; (e)
shall permit Seller to inspect the Property, and inspect and make extracts of
all of Buyer's books and records relating thereto, during normal business hours;
(f) shall promptly notify Seller of the occurrence of any events which
materially and adversely affect the value of the Property as collateral; (g)
shall promptly furnish to Seller upon request current financial statement of
Buyer; and, (h) shall not, without the prior written consent of Seller, sell,
assign, exchange, lease, tend, license the use of, pledge, encumber, grant a
security interest in or dispose of the Property or Buyer's, rights therein, or
use or operate the Property in a manner other than as intended by the
manufacturer, or in violation of any insurance policy covering the Property, or
remove or obliterate any marking affixed by Seller to the Property to give
notice of Seller's security interest therein or any identifying insignia, serial
number or lettering on the Property, or permit the Property to become so affixed
to realty as to become a fixture.
4. Insurance. Buyer shall keep the Property insured against all risk of loss
---------
or damage from every cause whatsoever for which insurance is commercially
available, in a coverage amount not less than the total cash purchase price of
the Property, under policies providing that loss shall be payable to Seller and
requiring the insurer to give Seller not less than thirty (30) days prior
written
4
<PAGE>
notice of the effective date of any alterations or cancellations of any
such policy. All such insurance policies shall otherwise be in form and
substance and with companies satisfactory to Seller. Buyer shall deliver such
insurance policies to Seller, or shall furnish to Seller such other evidence of
insurance as Seller may from time to time request. The proceeds of such
insurance shall be applied, at the option of Seller and Buyer, to (a)
replacement, restoration or repair of any Property which is lost, stolen,
damaged or destroyed, or (b) payment of the obligations of Buyer hereunder.
Buyer hereby irrevocably appoints Seller as Buyer's attorney-in fact, which
appointment is coupled with an interest, to make claims for, receive payment of,
and execute and endorse all documents, checks, or drafts received in payment of
any loss or damage under any such policy of insurance. If Buyer fails to procure
or maintain such insurance Seller shall have the right, but shall not be
obligated, to obtain and maintain such insurance and Buyer shall reimburse
Seller for the cost thereof.
5. Covenants Regarding Location of Property. Buyer will not remove any of the
----------------------------------------
Property from the location at which installed or otherwise change the location
of any of the Property without the prior written convent of Seller in each
instance which consent will not be unreasonably withheld.
6. Default. The occurrence of any of the following shall constitute an Event
-------
of Default: (a) any material failure by Buyer in the payment, when due or
payable, of the purchase price of the Property or any installment thereof or
interest thereon; (b) any material breach by Buyer of any representation,
warranty, covenant or agreement (other than as to payment) set forth in this
Agreement or any other agreement between Buyer and Seller or arising by
operation of law or otherwise, which breach is not cured by the tenth (10th) day
following Notice to Cure; (c) the issuance or entry of any judgment, injunction
or attachment against of affecting the Property; (d) the giving of any notice of
bulk sale or intended bulk sale by Buyer, if such sale affects or includes the
Property; (e) the appointment of a receiver or committee of creditors or
liquidating agents, the offering of a composition or extension to creditors, the
making of an assignment for the benefit of creditors or the commencement of any
proceeding, suit or action or reorganization, dissolution, or liquidation under
any bankruptcy or other laws relating to the relief of debtors, to the extent
that any of the foregoing is by, for, on behalf of or with respect to Buyer; (f)
the insolvency of Buyer, the suspension, termination or liquidation of Buyer's
usual business or the business failure of Buyers; (g) the termination or
discharge of any guaranty executed in favor of Seller with respect to any of the
obligations secured hereby; or (h) any material change in the condition or
affairs (financial or otherwise) of Buyer which in the good faith determination
of Seller impairs Seller's security or increases its risk.
5
<PAGE>
7. Remedies on Default. Upon the occurrence of an Event of Default, or at any
-------------------
time thereafter if such Event of Default shall be continuing past any applicable
Notice of Cure or notice periods, in addition to any other rights or remedies
Seller may have, Seller shall have any or all of the following rights and
remedies: (a) Seller shall have all of the rights and remedies of a secured
party; (b) Seller may, at its option, accelerate and declare all of the
indebtedness secured hereby to be immediately due and payable; (c) Seller shall
have the right to take immediate and exclusive possession of any and all of the
Property, wherever located, without interference from Buyer and for this purpose
Seller may, with or without judicial process and with or without prior notice,
enter peacefully upon the premises where such Property may be situated and
remove the Property from such location for disposition or proceed to liquidate
or otherwise dispose of the Property from such location; (d) Seller may require
Buyer, at Buyer's expense, to assemble the Property and make it available to
Seller at any mutually convenient location reasonably selected by Seller; (e)
Seller may, in its sole discretion, at any time and from time to time, but only
after Seller has given Buyer at least ten (10) days prior written notice of its
intention to dispose of the Property, which is hereby agreed to be reasonable
notice, lease any of the Property on such terms and in such manner as Seller may
consider appropriate, or sell, resell, transfer, assign, dispose of and deliver
any or all of the Property, in one or more parcels, at the same or different
times, and all right, title and interest therein, at public or private sale for
cash, upon credit or for future delivery and at such price or prices as Seller
may determine; (f) in connection with any disposition of Property, whether
pursuant to judicial or nonjudicial foreclosure, Seller or any of its affiliates
may bid for and purchase any or all of the Property, and by such purchase
acquire all right, title and interest therein; (g) Seller may, for itself and
for and on behalf of Buyer, make and deliver to any purchaser of any of the
Property a good and sufficient bill of sale or other evidence of transfer of all
right, title and interest in and to such Property to such purchaser; and, (h)
Seller may in its own name or in the name of and on behalf of Buyer, take any
and all actions required to cure any such Event of Default, and all sums
expended by Seller in effecting such cure shall be secured hereby.
8. Application of Proceeds. The net proceeds realized upon any liquidation or
-----------------------
disposition of the Property after deduction for the expenses of retaking,
holding, preparing for sale or lease, selling, leasing and the like, and the
reasonable attorneys' fees and legal expenses and costs incurred by Seller in
enforcing or exercising any of its rights or remedies under this Agreement,
shall be applied in satisfaction of the obligations of Buyer secured under this
Agreement in such order as may be deemed appropriate by Seller. Any surplus of
such proceeds shall be paid to the person or persons legally entitled thereto,
and the Buyer
6
<PAGE>
shall be liable to Seller for and shall immediately pay to Seller the amount of
any deficiency.
9. Financing Statements. Fixture Filings and Further Assurances. Buyer hereby
--------------------
authorizes Seller to execute and file financing statements and fixture filings
at any time with respect to any of the Property, in each case without Buyer's
signature to the extent permitted by law. At Seller's request, Buyer shall
execute one or more financing statements, fixture filings, continuation
statement or other filings pursuant to the Uniform Commercial Code in form
satisfactory to Seller. Buyer shall take any and all steps required by Seller to
maintain perfection of the security interest granted hereunder, or to fully
assure to Seller its rights under this Agreement.
C. Assignment
--------------
1. Assignment to ALC. Unless otherwise agreed by the parties in writing.
-----------------
Seller may at any time assign this Agreement and its rights hereunder, in whole
or in part, to ALC. Buyer hereby waives any right to assert against ALC any
claims, defenses or offsets which Buyer may have against Seller, and Buyer
hereby expressly agrees not to assert any such claims, defenses or offsets
against ALC.
2. Assignment by Buyer. Buyer may not assign, delegate or transfer any of its
-------------------
rights, duties or claims under this Agreement to any unaffiliated third party
without the prior written consent of Seller.
D. Miscellaneous
-----------------
1. No Accord and Satisfaction. Unless otherwise agreed to in writing, no
--------------------------
payment by Buyer to Seller of any lesser amount than that due to Seller
hereunder shall be deemed to be other than a payment on account, and no
endorsement or statement on any check or other medium of payment or in any
letter or other writing accompanying any payment shall be deemed an accord and
satisfaction. Seller may accept any such payment without prejudice to its rights
to recover any remaining balance or to pursue any other remedy provided in this
Agreement or by applicable law.
2. Notices. All notices, demands or consents required or permitted to be
-------
given under this Agreement shall be in writing and shall be deemed effective
upon delivery if delivered personally with a signed receipt or by certified
mail, return receipt requested, addressed to the appropriate address set forth
herein or to such other address as shall be given by either party to the other
in writing.
7
<PAGE>
3. Waiver, Amendment or Modification. No waiver, amendment or modification of
---------------------------------
any provision hereof or of any right or remedy hereunder shall be effective
unless in writing and signed by the party to be bound. No failure by Seller or
Buyer to exercise, and no delay by Seller or Buyer in exercising, any right,
power or remedy granted hereunder shall operate as a waiver of any such right,
power or remedy. A waiver of any right or remedy by Seller or Buyer on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion. All rights and remedies of Seller or Buyer are separate and
cumulative and the exercise of any right or remedy shall not limit or prejudice
the exercise of any other right or remedy.
4. Arbitration. Upon any disagreement or dispute between the parties, Seller
-----------
and Buyer will attempt to resolve same in good faith and with due diligence.
Except as provided in Section D.5 below, all disputes and controversies relating
to the interpretation, construction, performances, or breach of this Agreement
shall be settled by arbitration pursuant to the rules and regulations of the
American Arbitration Association, such arbitration to be held at the Los Angeles
office of the American Arbitration Association. Either party requesting
arbitration under this Agreement shall make a demand on the other party by
registered or certified mail with a copy to the American Arbitration
Association.
5. Court Jurisdiction. Notwithstanding Section D.4 immediately above, each
------------------
party shall be entitled to invoke the jurisdiction of the courts of the state in
which the Property is located, or in which Buyer does business, for the
exclusive and limited purpose of obtaining such provisional remedies as may be
authorized by law (e.g. Section 362 or any successor statute thereto). Further,
in the event of any claim against Seller for which Seller may be entitled to
indemnity against any third party, Seller may, within thirty (30) days of
notification of arbitration elect to prosecute or defend Such action in any
court of proper jurisdiction, so as to avoid a multiplicity of proceedings with
possible inconsistent results. Any such election shall be binding upon Buyer and
shall be deemed to deprive the American Arbitration Association of jurisdiction
to proceed with arbitration of said dispute. Upon notification of Buyer's
election not to arbitrate said dispute. Buyer's sole recourse shall be the
filing of an action in the court designated by Seller to the jurisdiction and
venue of which all parties consent. Judgment on any award in arbitration may be
entered in any court having jurisdiction thereof.
6. Attorney's Fees. In the event any arbitration or judicial section or
---------------
proceeding in initiated with respect to any matters relating to this Agreement
or in the event either party seeks relief from the automatic stay of 11 U.S.C.
Section 362 (or any successor statute thereto), then the party in whose favor
any arbitration award shall be given or any relief shall be granted or
8
<PAGE>
judgment shall be entered shall be entitled to recover from the other party all
costs and expenses (including reasonable attorneys' fees) incurred in such
action or proceeding and any appeal therefrom.
7. Severability. In the event any provision or portion of any provision of
------------
this Agreement shall be held by a court of competent jurisdiction to be
unenforceable or invalid, the remaining provisions or portions thereof shall
remain in full force and effect.
8. Entire Agreement. Notwithstanding any purchase order submitted by Buyer
----------------
whether referenced on the facing page hereof or attached hereto, this Agreement
constitutes the entire agreement between Buyer and Seller pertaining to the
subject matter hereof. Any and all written or oral Agreements or understandings
heretofore existing between the parties pertaining to the subject matter hereof
are expressly superseded and cancelled by this Agreement.
9. Time is of the Essence. Except as to the provisions of this Agreement
----------------------
relating to shipping dates and shipping delays, time is of the essence with
respect to each of the terms, conditions, provisions and covenants of this
Agreement.
10. Binding Effects. Subject to Part C of this Agreement, this Agreement shall
---------------
be binding upon and shall inure to the benefit of the parties and their legal
representatives, successors and assigns.
11. Headings. Headings contained in this Agreement are for the purposes of
--------
convenience only and are not part of this agreement.
U.S. AMADA, LTD. CLIMATE MASTER, INC.
BY:________________________ BY: Barry H. Golsen
--------------------------
NAME: NAME: Barry H. Golsen
Title:_____________________ Title: President
-----------------------
Date:______________________ Date: 2/1/94
------------------------
9
<PAGE>
U.S. AMADA, LTD. AGREEMENT NUMBER _________
U.S. AMADA, LTD.
7025 Firestone Blvd.
Buena Park, CA 90621 FILE NUMBER:
EQUIPMENT PURCHASE AND SECURITY AGREEMENT
(SUPPLEMENTAL DOCUMENTS)
AUTHORIZATION TO EXECUTE EQUIPMENT PURCHASE AND SECURITY AGREEMENT, AND RELATED
INSTRUMENTS AND DOCUMENTS, AND TO FINANCE PURCHASE OF EQUIPMENT.
BUYER'S NAME Climate Master, Inc.
--------------------
U.S. AMADA CUSTOMER NUMBER ___________________________
1. IF BUYER IS A CORPORATION COMPLETE THE FOLLOWING:
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned certifies that he or she is the duly elected and acting
Secretary of Buyer, that Buyer is a corporation duly organized and validly
existing under the laws of the state of its incorporation, and that either at a
duly held meeting of the Board of Directors of Buyer at which a quorum was
present or, if permitted under the laws of the state of its incorporation, by
the Unanimous Written consent of the Board of Directors of Buyer, the following
resolution was unanimously adopted and remains unmodified and in full force and
effect as of the date set forth below, and is not in conflict with any other
resolution, by-law, or the articles of incorporation of Buyer:
"WHEREAS, the Board of Directors of this corporation deems it to be in the
best interests of this corporation and its shareholders that this
corporation purchase certain equipment and other property ("Property") from
U.S. AMADA, LTD. ("Seller") pursuant to an Equipment Purchase and Security
Agreement ("Agreement") and other agreements and instruments, and any
amendments thereto, as may be required by Seller;
"NOW, THEREFORE, BE IT RESOLVED, that the President, any Vice President,
the Secretary or the Treasurer of this corporation, acting singly, be and
hereby is authorized and directed to execute and deliver on behalf of this
corporation the Agreement and such other agreements and instruments, and
any amendments thereto, in form and substance as Seller may require and as
such officer shall approve, his or her execution of the Agreement and such
other agreements and instruments, and any amendments thereto, to be
conclusive proof of approval thereof by him or her, the Board of Directors,
and this corporation."
I FURTHER CERTIFY that the following is the name of the President of Buyer
now holding the respective office, and that the
<PAGE>
signature set forth opposite the name of the President is his/her true and
genuine signature.
PRESIDENT: Barry H. Golsen SIGNED: /s/ Barry H. Golsen
------------------ -----------------------
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of this corporation
and the above resolution was adopted as of this 1st day of February, 1994, in
the City of Oklahoma City, State of Oklahoma.
(SEAL)
/s/___________________________
SECRETARY OF BUYER
2. IF BUYER IS A PARTNERSHIP COMPLETE THE FOLLOWING:
CERTIFICATE OF PARTNERSHIP
To induce U.S. AMADA, LTD. ("Seller") to enter into an Equipment Purchase
and Security Agreement ("Agreement") with this partnership ("Buyer") for the
purchase of certain equipment and other property from Seller, the undersigned
general partners of Buyer jointly and severally hereby represent, warrant and
agree that (i) Buyer is a partnership duly organized and validly existing under
the laws of the state of its organization and (ii) any general partner, acting
singly, has been and is duly authorized and directed by all necessary and proper
partnership action to execute and deliver to Seller the Agreement and any other
agreement or instrument, and any amendments thereto, in form and substance as
such signing partner shall approve and as he or she may deem necessary or
desirable to effect the purpose and intent hereof, his or her execution of the
Agreement and such other agreements and instruments, and any amendments thereto,
to be conclusive proof of approval thereof by him or her and Buyer.
The authority referred to herein has been conferred retroactively and any
act authorized hereunder performed prior to the date hereof is approve and
ratified.
DATE _____________, 19_.
GENERAL PARTNERS HOME ADDRESSES
1. SIGNATURE_________________________ __________________________
NAME:_____________________________ __________________________
2. SIGNATURE_________________________ __________________________
NAME:_____________________________ __________________________
3. SIGNATURE_________________________ __________________________
NAME:_____________________________ __________________________
<PAGE>
EXHIBIT 10.38
LEVEL 7
BANK OF NEW ZEALAND CENTRAL PLAZA ONE
345 QUEEN STREET
A.R.B.N. 000 000 288 BRISBANE QLD 4000
Brisbane Branch DX 246
TELEPHONE (07) 3221 1222
19th December 1996 TELEX AA 123240
FAX (07) 3221 9271
The Directors
Total Energy Systems Ltd POSTAL ADDRESS
Level 9, 371 Queen Street, GPO BOX 1447
BRISBANE QLD 4000 BRISBANE QLD 4001
AUSTRALIA
Dear Sirs,
We refer to your current facility with the Bank of New Zealand A.R.B.N. 000 000
288 (the "Bank"), the terms and conditions of which are contained in the Bank's
Letter of Offer dated 16th July 1996 (the "Facility Letter").
We are pleased to advise that the Bank has approved your request for an increase
and continuation of the facility on amended terms and conditions. Upon your
acceptance of this offer and on completion of all conditions precedent to the
satisfaction of the Bank. the following terms and conditions shall replace in
its entirety the terms and conditions contained in the Facility Letter.
1. BORROWER: Total Energy Systems Ltd
A.C.N. 010 876 150
2. FACILITY TYPE/
AMOUNT: Overdraft / Commercial Bill / Acceptance /
Discount Import Letter of Credit Bills of Lading
Surrendered Trade Bills Discounted Cheque
Encashment Letter of Credit / Bank Guarantee /
Forward Exchange cover Facility mix (the
"Facility") up to an aggregate of $8,500,000 (the
"Facility Limit") (an increase of $1,500,000)
3. PURPOSE: Continuation and increase of $1,500,000 in
existing Facility.
4. INTEREST RATE: OVERDRAFT OPTION.
-----------------
Bank of New Zealand Corporate Base Lending Rate
plus a margin of 0.5% per annum.
Bank of New Zealand Corporate Base Lending Rate is
currently 10.0% per annum but is subject to change
from time to time in line with market trends.
Whilst the Borrower is not notified of changes
made to the said Base
<PAGE>
Rate, there is regular publication of same made
nationwide in the press.
Interest will be calculated daily on the
outstanding balance of the Account upon which the
Facility is drawn and will be charged to such
Account monthly in arrears until the outstanding
balance of such Account has been repaid in full.
For so long as moneys payable by the Borrower
under any Facility remain unpaid after the due
date, the Borrower will pay interest upon such
moneys from the date such moneys become due and
payable up to and including the day of payment.
Such interest will be calculated at the rate of
4.0 per centum per annum plus the Bank's Corporate
Base Lending Rate.
If the aggregate usage under the Facility exceeds
the Facility Limit, then the interest rate
applicable to that amount which exceeds the
Facility Limit shall be the aggregate of the Bank
of New Zealand Corporate Base Lending Rate and
4.0% per annum and shall be charged against any
account or accounts upon which the overdraft
option operates.
REFINANCING USAGE UNDER IMPORT LETTER OF CREDIT /
------------------------------------------------
TRADE BILLS DISCOUNTED / BILLS OF LADING
----------------------------------------
SURRENDERED OPTION
------------------
Drafts and Letters of Credit will be refinanced by
the Bank at the Bank's Market Rate on the date
that refinancing is requested, plus a margin of
1.5% per annum.
"Bank's Market Rate" means on any day the rate is
quoted, usually with notice to the Borrower, at or
about 10.30a.m (Sydney Time) on that day as its
Market Rate for the tenor of the refinancing.
5. FEES: Borrower shall pay to the Bank an Unused Limit Fee
calculated monthly in arrears at the rate of 0.25%
per annum on any unused portion of the Facility.
OVERDRAFT OPTION
----------------
The Bank's standard scale of account fees from
time to time including an overdraft service
2
<PAGE>
fee will be charged to the account upon which the
Facility is utilised monthly in arrears.
COMMERCIAL BILL / ACCEPTANCE / DISCOUNT OPTION
----------------------------------------------
Discount Fee - Commercial Bills will be discounted by
the Bank at the Bank's Yield Rate on the date of
acceptance or discount of Commercial Bills.
"Bank's Yield Rate" means on any day the rate quoted,
usually with notice to the Borrower, at or about
10.30am (Sydney Time) on that day as its Yield Rate for
the tenor of the Commercial Bills.
Acceptance Fee - The Borrower shall pay to the Bank an
Acceptance Fee on the aggregate face value amount of
all Commercial Bills drawn at the rate of 1.75% per
annum. The Acceptance/Endorsement Fee shall be
calculated on a basis of a year of 365 days, be paid in
advance for the term of the Commercial Bills and
charged to or on account of the Borrower on or about
the date of acceptance/endorsement of the Commercial
Bills.
BANK GUARANTEE OPTION
---------------------
The Bank's standard Bank Guarantee Fee from time to
time will apply. Currently, the Bank Guarantee Fee is
1.0% per annum on the face value of Bank Guarantees
issued by the Bank or $100.00 (One Hundred Dollars)
whichever is the greater sum. The Bank Guarantee fee
will be charged six monthly in advance to or on account
of the Borrower. An Establishment Fee of 0.5% of the
face value of Bank Guarantees will be charged upon
issuance.
CHEQUE ENCASHMENT LETTER OF CREDIT OPTION
-----------------------------------------
The Bank's standard Letter of Credit Fee will be waived
if the Cheque Encashment facility is established at a
branch of the National Australia Bank.
IMPORT LETTER OF CREDIT/TRADE BILLS DISCOUNTED/BILLS OF
-------------------------------------------------------
LADING SURRENDERED OPTION.
-------------------------
The Bank's standard Letter of Credit Establishment Fee
from time to time will apply. Currently the Letter of
Credit Establishment Fee is charged at the rate of
0.375% of the face value thereof with a
3
<PAGE>
minimum fee of $100 being applicable. Cable Costs and
Stamp Duty are also applicable, and the current rates
are $25 for Cable Costs and 15c for Stamp Duty.
The Bank's standard Letter of Credit Negotiation Fee
from time to time will apply. Currently the Letter of
Credit Negotiation Fee is charged at the rate of 0.25%
of the face value thereof with a minimum fee of $50
being applicable. Cable Costs are also applicable, and
the current rate is $10.
The Bank's standard Letter of Credit Amendment Fee from
time to time will apply. Currently the Letter of Credit
Amendment Fee is charged at the rate of $25 per
amendment. Any increase in the amount of the Letter of
Credit will be charged at 0.375% of the face value
thereof, no minimum. Cable Costs are also applicable,
and the current rate is $20.
The Bank's standard Sight Import Collection Fees from
time to time will apply. Currently the Sight Import
Collection Fee is charged at the rate of 0.25% of the
face value thereof with a minimum fee of $40 being
applicable. Cable Costs are also applicable, and the
current rate is $20.
The Bank's standard Term Import Collection Fees from
time to time will apply. Currently the Term Import
Collection Fee is charged at the rate of 0.25% of the
face value thereof with a minimum fee of $50 being
applicable. Cable Costs are also applicable, and the
current rate is $25.
FORWARD EXCHANGE OPTION
-----------------------
The Bank's standard Forward Exchange Contract Fees from
time to time will apply. Currently the establishment
Fee is $30, the Amendement fee is $30, and the
Cancellation Fee is $20.
6. TERMINATION OF
OVERDRAFT: OVERDRAFT OPTION
----------------
The Bank may at any time terminate the Overdraft
Facility by notice in writing to the Borrower (a
"Termination"), but such
4
<PAGE>
Termination shall not prejudice the Bank's right of
payment or repayment hereunder.
Upon Termination, the debit balance of the Overdraft
account shall be immediately due and payable to the
Bank on demand.
7. TERMS &
REDUCTIONS: The Facility Limit is to reduce, on the following
basis:
a) a reduction of $500,000 to the amount of
$8.000,000 on or before 28th February 1997.
then
b) a further reduction of $1,000,000 to the amount of
$7,000,000 on or before 31st March 1997.
Facility is made available subject to satisfactory
periodic review by the Bank.
The next periodic review by the Bank is due on 31st
March 1997. Following the review any agreement for
continuation of the Facility shall be at the Bank's
absolute discretion and on terms and conditions
satisfactory to the Bank.
8. SECURITY: The following securities previously given to the Bank
shall continue to secure, inter alia. all obligations
of the Borrower to the Bank including in respect of the
Facility:
a) First registered Mortgage Debenture over the
assets, rights, and undertakings of T.E.S. Mining
Services Pty Ltd
b) Unlimited Guarantee and Indemnity given by T.E.S.
Mining Services Pty Ltd.
c) First registered Mortgage Debenture over the
assets, rights, and undertaking of the Borrower.
d) Unlimited Guarantee and Indemnity given by LSB
Industries Inc..
e) First registered Mortgage Debenture over the
assets, rights, and undertakings of Total Energy
Systems (NZ) Ltd.
5
<PAGE>
f) Unlimited Guarantee and Indemnity given by Total
Energy Systems (NZ) Ltd.
9. CONDITIONS
PRECEDENT: It is a conditions precedent to any utilisation of the
Facility or in respect of any continuation or increase
hereby granted that the Bank has received the following
in form and substance acceptable to it:
a) An original All-Risk Insurance Policy for the full
replacement value of all stock-in-trade,
machinery. equipment, furniture and effects
charged to the Bank pursuant to Security described
in Clause 8 (a), (c),& (e) hereof with interest of
the Bank and mortgagee noted and with an Insurer
satisfactory to the Bank.
b) The acknowledgement and consent of LSB Industries
Inc., Total Energy Systems (NZ) Ltd, and T.E.S.
Mining Services Pty Ltd as guarantor(s) and/or
surety(ies) in respect of the Facilities and the
within terms and conditions is to be endorsed on
the duplicate copy of this Letter of Offer
immediately following acceptance by the Borrower.
10. OPERATING
COVENANTS: a) The maximum exposure under the Forward Exchange
Cover (FEC) Facility Option is USD2,000,000.
b) The Borrower is not to engage in any further
borrowings, excluding leasing transactions in the
normal course of business, without the Bank's
prior consent, with such consent not to be
unreasonably withheld. Leasing transactions
include finance leases and hire purchase
agreements.
c) Drawings under the Facility are not to exceed the
aggregate of:
- 70% of the following trade debtors aged less
than 60 days:
. Mt Isa Mines
. BHP
. Robe River
. Leighton Contractors
Hammersley Iron
6
<PAGE>
Eltin Contracting Ltd
Henry Walker Iron Ore Pty Ltd, and
- 50% of the abovementioned trade debtors aged
between 60-90 days; and
- 50% of all other trade debtors aged less than
90 days; and
- 50% of inventory not subject to reservation
of title or "Romalpa" agreements and
excluding inventory aged greater than 150
days.
Drawings under the FEC Facility Option are
assessed as being 10 per cent of the face
value of the underlying Forward Contracts,
ie. Contracts totalling USD$2mil equates to
facility drawings of USD$0.2mil.
d) Interest Cover not to reduce below 2.0 times. To
be monitored on a half yearly basis. Interest
cover is defined as: Net profit before interest
and tax expense divided by interest expense.
Interest Expense includes interest charges in
respect of financial leases.
e) Gearing not to exceed 1.4 times To be monitored on
a monthly basis. Gearing is defined as:
Total liabilities divided by tangible net worth.
Total Liabilities are defined as the aggregate of
all current and non-current liabilities less all
shareholders loans, outstanding royalty payments
owed to Slurry Explosives Corporation and Trade
Creditor Payments aged over 90 days owed to LSB
Industries, Inc. Group subsidiaries.
Tangible Net Worth is defined as shareholders
funds plus all shareholders loans, outstanding
royalty payments owed to Slurry Explosives
Corporation and Trade Creditor Payments aged over
90 days owed to LSB Industries, Inc. Group
subsidiaries, but excludes any asset revaluation
reserves and all intangible items including
goodwill, future income tax benefits, tradenames,
patents, licences, etc.
7
<PAGE>
f) A total of $3,500,000 in shareholders loans
provided by LSB Industries Inc. are to be
subordinated to the Bank's Facility.
g) A material event of default that is continuing by
LSB Industries Inc. or any of its subsidiaries,
when taken as a whole group, in respect of any
their obligations shall constitute an event of
default in respect of the Facility.
Material is defined as an event that the Bank
considers will have a significant bearing on the
ability of the group to continue trading as a
going concern.
Continuing is defined as an event that is not
remedied within a 3 month period.
h) There is to be no change in the ownership of the
Borrower without the Bank's prior written consent.
11. REPORTING
REQUIREMENTS: a) Annual Audited Financial Statements of the
Borrower to be provided to the Bank within 90 days
of balance date.
b) Monthly Profit & Loss and Balance Sheet accounts
of the Borrower are to be provided to the Bank
within 30 days.
c) The following is to be certified on a monthly
basis (within 15 days) by an officer of the
Borrower:
- Full Aged Debtors Listing;
- Full Aged Creditors Listing;
- Statement certifying as to level and form of
inventory not subject to retention of title
clauses.
d) Annual Profit & Loss/Balance Sheet/Cash Flow
Budgets to be provided to the Bank by 31st January
each year.
e) Audited Annual and Unaudited quarterly financial
statements of LSB Industries, Inc. to be provided
within 90 days.
f) Quarterly certificate given by a director of the
Borrower confirming that all statutory payments
have been accounted for
8
<PAGE>
is to be provided to the Bank within 15 days of
each quarters end.
12. TRUST: a) The Borrower has advised that it is not a trustee
of any trust fund or settlement.
b) The Borrower has advised that the guarantors are
not trustees of any trust or hold any property
subject to or impressed by any trust.
13. COSTS: The Borrower will upon demand reimburse the Bank, or
upon the Bank's direction, all reasonable expenses
incurred by the Bank in connection with the
preparation, execution, valuation, delivery and
stamping of this Facility.
Such expenses shall also include all proper out-of-
pocket expenses and proper overheads; of the Bank
relating directly to the Facility after the occurrence
of any default by the Borrower including proper fees
and expenses of solicitors, accountants, valuers and
other professional consultants.
Where the Borrower maintains a current account with the
Bank, the Bank on acceptance of this Letter of Offer by
the Borrower, is expressly authorised to debit any such
account with all or any of the aforesaid costs and
expenses with or without advice of any such drawing
given to the Borrower.
14. RESERVE
REQUIREMENTS: The Bank reserves the right to renegotiate the Facility
in the event of any change occurring in the controls
imposed by the Federal Government/Reserve Bank on the
Australian Banking System such as to materially affect
the pricing of the Facility.
15. STANDARD
TERMS AND
CONDITIONS: By the Borrower's acceptance of this Offer, the
Borrower will be deemed to have acknowledged and agreed
that the Bank's Terms and Conditions of Accounts, a
copy of which is attached hereto, are incorporated as
terms and conditions applicable to this Offer. Any
inconsistent terms and conditions in this
9
<PAGE>
offer shall prevail over the Banks Standard Terms and
Conditions of Accounts.
16. ACCEPTANCE: This offer remains open for acceptance for a period of
14 days after the date of this letter or any such
further as the Bank may agree.
This offer may only be accepted by the Borrower by
delivery to the Bank of all of the following:
i) The attached copy of this Letter of Offer with the
form of acceptance annexed thereto duly executed
by the Borrower.
Where the Borrower is a corporation, its common
seal should be affixed in accordance with its
Articles of Association, and the affixation of the
common seal should be further witnessed by an
independent Justice of the Peace.
ii) The form of Acknowledgment and Confirmation
annexed to the attached copy of this Letter of
Offer duly executed by each of the named
Guarantors or Sureties. Where the Guarantors or
Surety is a corporation, its common seal should be
affixed in accordance with its Articles of
Association, and the affixation of the common seal
should be further witnessed by a independent
Justice of the Peace.
17. COUNTERPARTS: This Letter of Offer may consist of a number of
counterparts and the counterparts taken together
constitute one and the same instrument.
We are pleased to have been able to assist you with your requirements and should
there be any aspect you wish to discuss, please do not hesitate to contact Donna
Kennedy or Gregory Carter.
Yours faithfully
/s/ G. F. Carter /s/ E. J. Marchant
- ------------------------------- -----------------------------------
Senior Manager State Manager
Business Banking Queensland
10
<PAGE>
ACCEPTANCE
----------
We acknowledge receipt of your letter dated 19th December 1996 of which this is
a copy and hereby accept the terms and conditions contained therein.
The Borrower acknowledges that the Borrower has agreed to pay or reimburse the
Bank on demand for all legal, valuation and other costs and out-of-pocket
expenses incurred or to be incurred by the Bank in connection with the security
whether or not the Facility is drawn down or utilised by the Borrower.
Dated this 31st day of December, 1996.
GIVEN under the Common Seal )
of Total Energy Systems Ltd )
by the authority of a )
resolution of the Board of ) /s/ K. J. Harman
------------------------------
Directors previously given ) Director
and in the presence of )
K. J. Harman a Director )
and of R. A. Rodgers ) /s/ R. A. Rodgers
------------------------------
the Secretary and in the ) Secretary
presence of: )
/s/ E. Thomas J. P.
- ----------------------------
A Justice of the Peace
- ----------------------------
11
<PAGE>
ACKNOWLEDGMENT AND CONFIRMATION BY GUARANTOR OR SURETY
------------------------------------------------------
By our execution hereunder we each separately acknowledge and confirm to the
Bank that we have read and understood the terms and conditions set out in the
Letter of Offer given by the Bank on 19th December 1996 to Total Energy Systems
Ltd (the "Borrowee) and confirm that my/our respective unlimited obligations as
Guarantor/Surety (either alone or jointly with others as the case may be) under
the Guarantee/Security which we have previously given to the Bank for the
obligations of the Borrower to the Bank (and which we acknowledge has not been
revoked or otherwise discharged) are continuing.
Dated this 31st day of December, 1996.
GIVEN under the Common Seal )
of Total Energy Systems (NZ) )
Ltd by the authority of a )
resolution of the Board of ) /s/ K. J. Harman
-----------------------------
Directors previously given ) Director
and in the presence of )
K. J. Harman a Director )
and of N/A ) /s/ N/A
-----------------------------
the Secretary and in the ) Secretary
presence of: )
/s/ E. Thomas J. P.
- ------------------------------
A Justice of the Peace
- ------------------------------
GIVEN under the Common Seal )
of LSB Industries Inc. )
by the authority of a )
resolution of the Board of ) /s/ Tony M. Shelby, V.P.
-----------------------------
Directors previously given ) Director
and in the presence of )
a Director )
and of ) /s/ David M. Shear
-----------------------------
the Secretary and in the ) Secretary
presence of: )
A Justice of the Peace
- ----------------------
12
<PAGE>
GIVEN under the Common Seal )
Of T.E.S. Mining Services Pty )
Ltd by the authority of a )
resolution of the Board of ) /s/ K. J. Harman
--------------------------
Directors previously given ) Director
and in the presence of )
K. J. Harman a Director )
- ------------
and of R. A. Rodgers ) /s/ R. A. Rodgers
------------- ---------------------------
the Secretary and in the ) Secretary
presence of: )
/s/ E. Thomas J. P.
- ---------------------------
A Justice of the Peace
- ----------------------
13
<PAGE>
EXHIBIT 10.39
Bank of New Zealand
A.R.B.N. 000 000 288
Brisbane Branch LEVEL 7
CENTRAL PLAZA ONE
245 QUEEN STREET
BRISBANE QLD 4000
DX 246
TELEPHONE (07) 231 1222
TELEFAX AA 123240
FAX (07) 221 9271
POSTAL ADDRESS
CPO BOS 1447
BRISBANE QLD 4001
AUSTRALIA
11th April 1997
The Directors
Total Energy Systems Ltd.
Level 9, 371 Queen Street
Brisbane, Qld 4000
Dear Sirs,
RE: Overdraft/Commercial Bill/Acceptance/Discount/Import Letter of Credit/Bills
of Lading Surrendered/Trade Bills Discounted/Cheque Encashment Letter of
Credit/Bank Guarantee/Forward Exchange cover Facility mix (the "Facility")
up to an aggregate of $8,500,000 (the "Facility Limit")
We refer to the Facility made available by Bank of New Zealand (the "Bank") to
Total Energy Systems Ltd. (the "Borrower") the terms and conditions of which are
contained in the agreement formed by the Borrower's acceptance of the Bank's
letter of offer dated 19th December 1996 ("Facility Agreement").
We confirm that the Bank has approved at the Borrower's request a variation of
the terms and reduction of the Facility as contained in the Facility Agreement.
Accordingly, the Bank is now pleased to offer to vary the current terms and
conditions of the Facility on the terms and conditions set out below
("Variation"). These terms and conditions of the Facility and the Variation
will take effect from that date. In all other respects, the terms and
conditions of the Facility remains unaltered.
TERMS AND CONDITIONS:
- --------------------
Clause 7 of the Facility Agreement under the marginal heading "Terms and
Reductions" is hereby deleted in its entirety and replaced by the following:
<PAGE>
7. TERMS &
REDUCTIONS: The Facility Limit is to reduce by $1,500,000 to the
amount of $7,000,000 on or before 30th April 1997. All
indebtedness under the Facility is to be reduced
accordingly.
Facility is made available subject to satisfactory
periodic review by the Bank.
The next periodic review by the Bank is due on 25th
April 1997. Following the review any agreement for
continuation of the Facility shall be at the Bank's
absolute discretion and on terms and conditions
satisfactory to the Bank.
ACCEPTANCE
- ----------
(a) This offer to vary the Facility remains open for acceptance in the manner
set out below for a period of 14 days after the date of this letter or any
such further period as the Bank may agree.
(b) This offer may only be accepted by the Borrower by delivering to the Bank
all of the following:
(i) The attached copy of this letter with the "Acceptance of Facility"
form annexed hereto duly executed by the Borrower. Where the Borrower
is a corporation, its common seal should be affixed in accordance with
its Articles of Association, and the affixation of the common seal
should be further witnessed by an independent Justice of the Peace.
(ii) The form of Acknowledgment and Confirmation annexed to the attached
copy of this Letter of Offer duly executed by each of the named
Guarantors or Sureties. Where the Guarantors or Surety is a
corporation, its common seal should be affixed in accordance with its
Articles of Association, and the affixation of the common seal should
be further witnessed by a independent Justice of the Peace.
COUNTERPARTS
- ------------
This Letter of Offer may consist of a number of counterparts and the
counterparts taken together constitute one and the same instrument.
G.F. Carter L.E. Redsell
Senior Manager Assistant Manager
Business Banking Business Banking
2
<PAGE>
ACCEPTANCE OF FACILITY
----------------------
The offer by the Bank of New Zealand ("Bank") to vary and continue the current
Facility for Total Energy Systems Ltd. (the "Borrower") is hereby accepted by
the Borrower on the terms and conditions set out in the Facility Letter of the
Bank dated 11th April 1997 ("Variation Letter") to the Borrower and the Borrower
agrees and acknowledges that:
the Borrower is and continues to be bound by and agrees to observe the
terms and conditions of the Facility which are contained in the Bank's
letter of offer to the Borrower dated 19th December 1996 ("Offer
Letter") together with the Bank's relevant Standard Terms and
Conditions for the Facility annexed thereto subject only to the
Amendments to those documents in the Variation Letter;
the Borrower was not induced to accept the Bank's offer of a variation
to the Facility by any representation made by the Bank or any other
third party other than those representations contained in the
Variation Letter; and
the Borrower is giving the acknowledgments, affirmations and
statements in this form of Acceptance of Facility in the knowledge
that the Bank will rely upon them in order to continue making the
Facility available to the Borrower.
Dated this 15th day of April, 1997.
GIVEN under the Common Seal )
of Total Energy Systems Ltd. )
by the authority of a ) _________________________________
resolution of the Board of ) Director
Directors previously given )
and in the presence of )
K.J. Harman, a Director ) _________________________________
and of R. A. Rodgers ) Secretary
the Secretary and in the )
presence of: )
E. Thomas J. P. )
A Justice of the Peace
- ----------------------
3
<PAGE>
ACKNOWLEDGMENT AND CONFIRMATION BY GUARANTOR
--------------------------------------------
By our execution hereunder we each separately acknowledge and confirm to the
Bank of New Zealand ("Bank") that we have read and understood the terms and
conditions set out in the letter of offer of the Bank dated 11th April 1997 to
Total Energy Systems Ltd. (the "Borrower") in respect of the variation of the
Facility which the Bank has offered to the Borrower on the amended terms set out
in the letter of offer.
We also acknowledge and confirm that our respective unlimited obligations as
Guarantor/Surety (either alone or jointly with others as the case may be) under
the Guarantee/Security which we have previously given to the Bank for the
obligations of the Borrower to the Bank (and which we acknowledge has not been
revoked or otherwise discharged) are continuing.
We have given this form of acknowledgment and confirmation to the Bank in the
knowledge that the Bank will rely upon it in order to continue making credit and
financial accommodation available to the Borrower.
DATED THIS 16TH DAY OF APRIL 1997
GIVEN under the Common Seal )
of Total Energy Systems (NZ) )
by the authority of a ) ___________________________
resolution of the Board of ) Director
Directors previously given )
and in the presence of )
K.J. Harman, a Director ) ___________________________
and in the presence ) Secretary
of E. Thomas J. P. )
A Justice of the Peace
- ----------------------
GIVEN under the Common Seal )
of LSB Industries Inc. )
by the authority of a ) ___________________________
resolution of the Board of ) Director
Directors previously given )
and in the presence of )
Tony M. Shelby, a Director ) ___________________________
and of David M. Shear ) Secretary
the Secretary and in the )
presence of: )
Yvonne M. Quinney )
4
<PAGE>
Notary Public
- -------------
GIVEN under the Common Seal )
of T.E.S. Mining Services Pty Ltd. )
by the authority of a ) ___________________________
resolution of the Board of ) Director
Directors previously given )
and in the presence of )
K.J. Harman, a Director ) ___________________________
and of R. A. Rodgers ) Secretary
the Secretary and in the )
presence of: )
E. Thomas J. P. )
A Justice of the Peace
- ----------------------
5
<PAGE>
EXHIBIT 10.40
Bank of New Zealand
Brisbane Branch Level 7
Central Plaza One
345 Queen Street
Brisbane Qld 4000
DX 246
Telephone (07) 3234 5633
Telex AA123240
Fax (07) 3234 5644
Postal Address
GPO Box 1447
Brisbane, Qld 4001
Australia
24 October 1997
The Directors
Total Energy Systems Ltd.
Level 9
371 Queen Street
BRISBANE, Q 4000
Dear Sirs
We refer to our Letter of Offer dated 19 December 1996 in which the bank
increased "TES" facilities $1,500,000 to $8,500,000.
Clause 7 of that letter required reductions in the facility of $500,000 by 23
February 1997, and $1,000,000 by 31 March 1997.
Following requests by management of TES, the bank agreed to extend the
$8,500,000 facility limit pending approval of a further increase in facilities.
Yours faithfully
/s/ Greg Carter
Greg Carter
Senior Manager
Business Banking
<PAGE>
Exhibit 10.41
Bank of New Zealand
A.R.B.N. 000 000 288
[This Security must be registered with the Australian Securities Commission
within 45 days of its date.]
DEBENTURE CHARGE
Name of Customer: TOTAL ENERGY SYSTEMS LIMITED ACN 010 876 150
---------------------------------------------
Date:___________________________________________________________
<PAGE>
THIS DEED made the _____ day of ______________ 19______
BETWEEN The Person(s) described in Item 1 of the Schedule (hereinafter
referred to as the "Customer") of the one part
AND BANK OF NEW ZEALAND (A.R.B.N. 000 000 288) (hereinafter referred to as
the "Bank") of the other part
WITNESSES that for valuable consideration received, the Customer COVENANTS AND
AGREES with the Bank and it is HEREBY DECLARED as follows:
1. INTERPRETATION
(1) Definitions
The Customer agrees that in this Security, unless the context Otherwise
requires:
"ASC LAW" has the same meaning as it has in the Corporations Act of the
State or Territory named in Item 4 of the Schedule or, if there is no State
or Territory so named, has the same meaning as it has in the Corporations
Act of New South Wales;
"ATTACHMENT NOTICE" means a notice pursuant to Section 255 or Section 218
of the Income Tax Assessment Act 1936 (Cth.) or any analogous process
pursuant to a similar provision of any other law (whether Federal, State,
of a Territory or of a foreign country or any of its, political
subdivisions) in respect of unpaid taxes or other statutory charges payable
by or levied on or assessed or assessable against the Customer or any
property or assets of the Customer;
"BANK" includes its successors, transferees and assigns;
"BANKING DAY" means in relation to any payment, a day on which the Bank is
open for business in the place where payment is required to be made;
"CORPORATIONS LAW" has the same meaning as it has in the Corporations Act
of the State or Territory named in Item 4 of the Schedule or, if there is
no State or Territory so named. has the same meaning as it has in the Act
of New South Wales;
"CUSTOMER" when only one person is named as the Customer includes the
Customer its successors and assigns and when two or more persons are named
as the Customer it includes each of those persons severally and any two or
more of them jointly and each of their respective successors. and assigns
and a reference to the Customer includes a reference to any one or more of
the persons named as the Customer;
<PAGE>
"INTELLECTUAL PROPERTY" means all copyrights, patents, designs and
inventions and fees, royalties and other rights of every kind deriving from
copyright. patents, designs and inventions now or at any time in the future
belonging to the Customer;
"LAW" means common law equity statute law and subordinate legislation;
"LEASE" (whether as a noun or verb) includes licence or license;
"MONTH" means calendar month;
"MONEYS SECURED" has the meaning ascribed to that expression by Clause 2(3)
as that meaning may be extended by Clause 26(7);
"MORTGAGED PROPERTY" means all the undertaking, property, rights and assets
for the time being and from time to time charged in favour of the Bank by
this Security or intended so to be and references to the "Mortgaged
Property' include a reference to any part or parts thereof;
"OFFICER OF THE BANK" means and includes every Bank employee whose title
includes the word"Manager" and every Bank employee who is occupying an
office the title of which includes the word"Manager";
"PERMITTED PRIOR CHARGE" means a mortgage, charge, pledge, lien or other
security created or permitted to subsist with the prior written consent of
the Bank and in accordance with and subject to such conditions as the Bank
may attach to such consent, including any referred to in Item 2 of the
Schedule;
"RECEIVER" includes a receiver and manager;
"SECURITY" includes a guarantee and an indemnity;
"SECURITY INSTRUMENTS" includes bills of exchange promissory notes drafts
cheques bills of lading warrants stock warrants bond warrants storage
warrants contracts contracts of purchase contracts of sale certificates
certificates of title title deeds leases licences stock shares scrip stock
certificates scrip for shares certificates for shares wheat certificates
notes debentures debenture stock inscribed stock bonds options and rights
to acquire any thereof receipts railway receipts transmission receipts term
and call deposit receipts liens bills of sale mortgages delivery orders
assignments life policies marine policies policies of insurance in respect
of
2
<PAGE>
buildings erections plant machinery stock in trade or other property
savings certificates grants letters of credit and all deeds documents
instruments writings and evidence of ownership of or interest in or
security over real or personal property;
"SUBSIDIARY" has the same meaning as in the Corporations Law;
"SURETY" includes:
(a) any person (other than the customer) who is liable whether alone or
jointly, or jointly and severally for payment to the Bank of the
Moneys Secured or any part thereof; and
(b) except in Clause 3(t)(ii) where there is more than one Customer each
other of the Customers and in respect of the obligations given by any
two or more (but not all) of the Customers each other of the
Customers;
"THIS SECURITY" includes the Schedule;
"TORRENS STATUTE" means such of the Transfer of Land Act 1958 (Vic), the
Real Property Act 1900 (NSW), the Real Property Act 1861 (Qld), the Real
Property Act 1886 (SA), the Transfer of Land Act 1893 (WA) or the
equivalent enactment in any other State or Territory which is applicable in
the jurisdiction of the place named in Item 4 of the Schedule;
"TRUST" means the trust (if any) established by the documents described in
Item 5 of the Schedule in respect of which the Customer acts as trustee and
includes each trust (whether or not described in this Security) as trustee
of which the Customer gives this Security;
"TRUST DEED" means the documents pursuant to which each Trust was
established, and includes, in each case, all variations and supplements to
those documents made now or (with the prior written consent of the Bank)
made in the future;
"TRUST FUND" means each trust fund comprised of the assets, property and
revenues held or to be held by the Customer as trustee of the Trust;
words importing persons include bodies corporate;
words importing the singular include the plural and vice-versa and words
importing gender include every other gender;
references to any statute, code or order, ordinance, regulation, rule or
by-law made under or pursuant thereto
3
<PAGE>
includes all amendments or consolidations of or substitutions for any
thereof from time to time.
(2) HEADINGS
The Clause headings and margin notes shall not affect the interpretation of
this Security.
(3) CUSTOMER
The Customer agrees that where the "Customer" comprises two or more
persons, the obligations undertaken under this Security by the Customer
shall be deemed to be undertaken by such persons jointly and also severally
and the act or default of any one of them shall be deemed to be the act or
default of both or all of them.
2. MONEYS SECURED
(1) PAYMENT ON DEMAND
(Payment of "Moneys Secured")
Subject to any agreement in writing between the Customer and the Bank to
the contrary, the Customer will pay to the Bank on demand in writing made
by or on behalf of the Bank the whole or such part as is specified in the
demand of:
(a) all moneys which now are or at any time in the future may be or become
due owing or payable to the Bank in any manner or on any account or by
reason of any transaction or circumstance whatsoever by the Customer
whether alone or jointly or jointly and severally with any other
person and in whatever name, firm or style and whether as principal or
surety or as trustee of a trust(the "Customer in any capacity"),
(b) all moneys which the Bank (whether requested so to do or not) has
already advanced or paid or is liable to pay or may in the future
(whether requested so to do or not) advance or pay or become liable to
pay to or for or on account of or on behalf of the Customer in any
capacity,
(c) the amount of all liabilities whether actual contingent or prospective
and whether direct or indirect now existing or in the future incurred
by the Customer in any capacity to or in favour of the Bank and
whether arising on or in respect of any instrument transaction or
circumstance or in contract or tort or otherwise, including, without
limitation, the amount of any orders, drafts, cheques, promissory
notes, bills of exchange and other instruments or engagements (whether
negotiable or
4
<PAGE>
not) in respect of which the Customer in any capacity is or may become
liable in any manner or on any account or by reason of any transaction
or circumstance whatsoever and which have been or may in the future be
drawn accepted endorsed discounted or paid by the Bank or which are or
may as a result of any circumstance or transaction entered into by the
Bank with or for or on behalf of or at the express or implied request
of the Customer in any capacity be held or owned by the Bank whether
as a holder in due course or otherwise and whether such orders,
drafts, cheques, promissory notes, bills of exchange and other
instruments or engagements have matured or not,
(d) all moneys which now are or at any time in the future may be or become
due, owing or payable by or on behalf of the Customer in any capacity
to or in relation to any transaction with or through the Bank for any
government taxes, charges, duties and imposts (even if of a wholly
novel character including without limitation, all stamp duties, credit
business duties, loan instruments duties, financial institutions
duties, bank account debit tax, penalties and interest) and for
discounts, postages, commissions, charges, exchanges, re-exchanges,
fees and expenses according to the usage and course of business of the
Bank from time to time,
(e) the amount of any taxes. duties. imposts, costs. charges. expenses and
liabilities of any kind or description now or in the future incurred
by the Bank-
(i) about the negotiation. preparation. execution. registration.
perfection. stamping, construction or enforceability of this
Security or any document (whether or not under seal and whether
of further assurance or otherwise) which may be executed by or on
behalf of the Customer in any capacity or the Bank or any other
person in pursuance of any of the provisions contained in this
Security,
(ii) under or in respect of this Security or any such document or any
transaction evidenced or secured thereby,
(iii) in the exercise or enforcement or attempted exercise or
enforcement of any right power or remedy, under this Security or
any such document or transaction or which the Bank has or is
entitled to for any reason against the Customer in any capacity
or in respect of the Mortgaged Property,
including (without [imitation) the amount of any taxes, duties, imposts,
costs. charges, expenses and liabilities not
5
<PAGE>
otherwise mentioned in this paragraph which are incurred by the Bank in
respect of the Mortgaged Property and the amount of any costs charges and
disbursements for legal advice and assistance to the Bank as between
solicitor and own client on a full indemnity basis,
(f) all moneys and amounts mentioned in other provisions of this Security
as being added to or as forming part of the Moneys Secured or which
the Bank is now or in the future becomes entitled to debit and charge
to any account of the Customer in any capacity whether pursuant to
this Security or by reason of any transaction or circumstance or under
any security or document now or in the future held by the Bank from or
relating to the Customer in any capacity,
(g) all and every part of any moneys and amounts (whether or not failing
under a preceding paragraph but without limiting the generality
thereof) -
(i) which are presently owing and payable or are owing but not
presently payable or are owing upon a contingency or remain
unpaid to the Bank (whether as original obligee or as assignee,
transferee or in any other capacity) by the Customer in any
capacity, or
(ii) which may be or become owing to the Bank (whether as original
obligee or as assignee, transferee or in any other capacity) or
for which the Bank (whether as original obligee or as assignee,
transferee or in any other capacity) may be or become liable, in
each case, by reason wholly or partly of past events or by reason
of anything done or omitted to be done by the Bank (whether as
original obligee or as assignee, transferee or in any other
capacity) or by the Customer in any capacity, or
(iii) which may reasonably foreseeably become owing to the Bank
(whether as original obligee or as assignee, transferee or in any
other capacity) on any account or by reason of any transaction or
circumstance or in any manner whatsoever by reason of the
relation of banker and customer or by operation of law or equity
or otherwise by reason of anything done by the Customer in any
capacity or done by or through the Bank (whether as original
obligee or as assignee, transferee or in any other capacity) with
the consent or at the express or implied request of the Customer
in any capacity.
6
<PAGE>
(h) interest on so much of the moneys and amounts mentioned in the
preceding paragraphs (including interest and compound interest,
whether turned into or added to principal or not) as shall for the
time being or from time to time be owing or payable or remain unpaid
at the rate(s) and otherwise in accordance with any related agreement
in writing or to the extent that there is no such agreement, at the
rate(s) from time to time determined (or redetermined) by the Bank
with reference to all or any part of such moneys and amounts without
any requirement to give notice to the Customer in any capacity or any
other person and without (unless the Bank otherwise in writing agrees)
allowing credit for any credit balance in any account or accounts of
the Customer whether alone or jointly with any other person with the
Bank and otherwise on the following terms and conditions:
(i) without prejudice to the Bank's right to demand or enforce
payment of any of the Moneys Secured interest shall accrue from
day to day, shall be computed from the day or respective days of
the first to occur of such moneys and amounts being advanced or
paid or becoming owing, and shall be payable at the end of such
period(s) ending at the end of such day(s) as the Bank from time
to time determines (or redetermines) but, if demanded earlier,
shall be payable on demand,
(ii) overdue interest and interest upon which interest has become
payable shall itself bear interest at the rate(s) and on the
terms and conditions of this paragraph, may be debited against
the Customer in any capacity at the option of the Bank and
without any requirement to give notice, and shall not be or be
deemed for any reason to have become turned into or added to
principal except as and from the time when the Bank, in its
entire discretion and by express entry to that effect in its
books, turns such interest into and adds it to principal, and
(iii) the Bank may continue to debit and add interest and compound
interest to principal and the provisions herein contained as to
the moneys and amounts (including interest and compound interest)
on which interest is payable shall continue to apply until all
the Moneys Secured (including interest and compound interest)
have been paid in full notwithstanding that as between the Bank
and the Customer in any capacity or any other person the
relationship of banker and customer may have ceased or the death,
bankruptcy, official management, winding up or going into
receivership or
7
<PAGE>
receivership and management or other legal disability of the
Customer in any capacity or any other person or any composition
or compromise entered into or assented to by the Bank with or in
respect of the Customer in any capacity or any other person or
any judgment obtained against the Customer in any capacity or any
other person and notwithstanding any other matter or thing
whatsoever,
BUT does not include any amount of income tax on any interest or any amount
in respect Of income tax mentioned in Section 261 Of tile Income Tax
Assessment Act 1936 (Cth.) included in or added to interest payable by the
Customer under this Security.
(2) CUSTOMER IN ANY CAPACITY
(Extended meaning of Customer in any capacity)
Each reference in this Clause 2 to the Customer In any capacity includes
(where the context permits)
(a) a reference to each other person whose indebtedness to the Bank is
intended to be secured by this Security whether alone or jointly or
jointly and severally with any other person, and
(b) a reference to the Customer in any of the capacities mentioned in
Clause 2(1)(a).
(3) MONEYS SECURED
(Definition of "Moneys Secured")
This Security extends and applies to and in relation to each and every item
of the moneys and amounts referred to in this Clause and all such moneys
and amounts (whether in the nature of principal, interest. compound
interest, reimbursement, damages or otherwise) are intended to be secured
by this Security and are referred to as the "Moneys Secured" in this
Security.
(4) MERGER
(Payment of interest if merger in judgment)
If the liability of the Customer in any capacity to pay the Bank any of the
Moneys Secured becomes merged in a judgment or order the Customer will pay
the Bank on demand interest on the amount for the time being owing under
the judgment or order at the rate and in the manner provided in Clause 2(l)
for the payment of interest on the Moneys Secured.
8
<PAGE>
(5) COMPROMISE
(Money deemed to be unpaid notwithstanding compromise)
In interpreting this Security money shall be deemed to remain unpaid
notwithstanding any compromise, compounding or release made or assented to
by the Bank with or in respect of the Customer in any capacity or any other
person until the Bank has received the full amount to which it would have
been entitled if it had not entered into such compromise, compounding or
release but the amount of moneys deemed to have remained unpaid shall not
include such sums as the Bank has actually received in respect thereof.
(6) CERTIFICATE
(Certificate by Bank officer to be conclusive evidence)
For the purposes of this Security and to the full extent permitted by law,
a certificate signed by any officer of the Bank stating any one or more of
the following:
(a) the amount of the Moneys Secured or any part thereof;
(b) that such amount falls within the description or any part of the
description of the Moneys Secured;
(c) that such amount is due, owing or payable to the Bank by the Customer
in any capacity or any other person whose indebtedness to the Bank is
intended to be secured by this Security;
(d) that the Bank is entitled to payment thereof on demand;
shall be conclusive evidence (or, to the extent that is not permitted by
law, shall be prima facie evidence) of the truth of its contents and shall
be binding on the Customer.
3. ACCELERATION
(Events causing acceleration of payment of Moneys Secured)
Notwithstanding any agreement (except an agreement in writing to the
contrary which specifically refers to this Clause or a clause having the
effect of this Clause) or course of dealing for the time being subsisting
between the Customer and the Bank or any indulgence or delay or previous
waiver of its right to demand payment of the Moneys Secured, the Moneys
Secured become immediately payable on demand and this Security becomes
immediately enforceable if any one or more of the following events occurs:
(a) (PAYMENT DEFAULT): if the Customer fails to pay any of the Moneys
Secured when due;
9
<PAGE>
(b) (OTHER DEFAULT): if the Customer fails duty and punctually to perform
and observe any other covenant, condition or obligation binding on the
Customer expressed or implied in this Security or any agreement,
instrument or security which is collateral or ancillary to or
connected with this Security or to which this Security is collateral
and (if capable of remedy) such failure is not remedied within
fourteen (14) days of the Bank giving notice to the Customer requiring
its remedy;
(c) (ENFORCEMENT OF SECURITIES): if an encumbrancer takes possession of or
a Receiver is appointed to or a warrant of distress or execution is
levied or enforced against the whole or any part of the undertaking,
property or assets of the Customer (including the Mortgaged Property);
(d) (INDEBTEDNESS DEFAULT): if any indebtedness of the Customer becomes
due and payable prior to its stated maturity or is not paid upon its
maturity;
(e) (COMPROMISE): if a compromise or arrangement is proposed between the
Customer and the creditors or any class of creditors of the Customer
or between the Customer, the creditors or any class of creditors of
the Customer and any wholly owned subsidiaries of the Customer and the
creditors or any class of creditors of those subsidiaries or if an
application is made to a court for an order summoning a meeting of the
creditors of any class of creditors of the Customer or a meeting of
the creditors of the Customer and of any of the wholly owned
subsidiaries of the Customer or of such class or classes of those
creditors;
(f) (CORPORATE INSOLVENCY): if in relation to the Customer-
(i) an event happens whereby the Customer is, or if it were a company
incorporated under the Corporation Law, would be, deemed pursuant
to the Corporations Law to be unable to pay its debts;
(ii) (except for the purposes of a reconstruction or amalgamation
while solvent on terms approved by the Bank) an application or
order is made or a resolution is passed, or a meeting is convened
to consider a resolution, for the winding up, or a notice is
published for the dissolution without winding up, of the
Customer;
(iii) (except for the purposes of a reconstruction or amalgamation
while solvent on terms approved by the
10
<PAGE>
Bank) a liquidator (including a provisional liquidator) is
appointed to the Customer or the Customer is wound up (whether
voluntarily or compulsorily) or is placed under official
management or a meeting of the Customer's creditors is convened
for the purpose of placing the Customer under official
management;
(iv) (except for the purposes of a reconstruction or amalgamation
while solvent on terms approved by the Bank) a proposal is made
by the Customer for a reorganisation, moratorium or other
administration involving the creditors or any class of the
creditors of the Customer or a scheme of arrangement or
composition with or assignment for the benefit of persons
including the creditors or any class of the creditors of the
Customer is entered into or resolved to be entered into;
(v) an investigation is commenced or made into any part of the
affairs of the Customer pursuant to the ASC Law;
(vi) without the prior written consent of the Bank the Customer
reduces or attempts to reduce its share capital or passes a
special resolution determining that any portion of its share
capital which has not been already called up is not capable of
being called up except in the event, and for the purposes of a
winding-up or to buy back any of its ordinary shares;
(vii) the Customer, without the prior written consent of the Bank.
makes or attempts to make any alteration in the provisions of
its memorandum or articles of association which might, in the
opinion of the Bank, detrimentally affect this Security;
(g) (MISREPRESENTATION): if any information furnished to the Bank by or on
behalf of the Customer in connection with this Security or the
Customer or any Surety or any transaction in respect of which any
moneys or amounts forming part of the Moneys Secured (whether prior to
or after the execution hereof) are or become owing by the Customer to
the Bank is found to be false or misleading, or if any covenant,
representation warranty contained in Clause 31 or in any collateral or
ancillary document or any document entered into in connection with
this Security proves to be untrue or incorrect in any material
respect;
11
<PAGE>
(h) (SUB-DIVISION): If the Customer subdivides any parcel of any land
comprised in the Mortgaged Property or, if any land comprised in the
Mortgaged Property consists of more than one parcel, calls for an
apportionment of the Moneys Secured;
(i) (MATERIAL CHANGE): if in the opinion of the Bank, there is a material
adverse change in the business, assets or financial position of the
Customer which, in the opinion of the Bank, may affect the ability or
willingness of the Customer duly and punctually to perform and observe
any covenant, condition or obligation binding on the Customer
expressed or implied in this Security or any agreement, instrument or
security which is collateral to this Security or to which this
Security is collateral;
(j) (CHANGE IN CONTROL): where the Customer is a proprietary company
within the meaning of the Corporations Law if without the prior
written consent of the Bank any share in the issued share capital of
the Customer that carries rights to vote at a general meeting of the
shareholders of the Customer is allotted or transferred to any person,
whether or not that person is a shareholder in the Customer prior to
the allotment or transfer or any rights attaching to any shares in the
issued share capital of the Customer, are varied, altered, enhanced or
abrogated;
(k) (CHANGE OF MANAGEMENT OR CONTROL): if there occurs a transfer, sale or
other disposition of the assets of the Customer to any person (whether
acting alone or in concert with other persons), or if any agreement or
understanding is entered into or obligation assumed by any person in
relation to the appointment of directors of the Customer such as to
directly or indirectly transfer the effective management or control of
the Customer;
(l) (CESSATION OF BUSINESS): if the Customer stops payment generally or
without the prior written consent of the Bank shall cease or threaten
to cease to carry on its business or where the Customer has been
admitted to the Official List of any Stock Exchange, if the Customer
ceases to be so admitted or if shares or other securities of the
Customer which have been granted Official Quotation are suspended from
trade on the Stock Exchange or otherwise cease to be tradeable
(otherwise than by books closing), for a period exceeding 24 hours;
(m) (BUILDING WORKS): if 41 the opinion of the Bank any of the Moneys
Secured are applied for any purpose other than the purpose for which
they were advanced by the Bank or
12
<PAGE>
any works for which they were advanced are not carried out and
performed in a manner satisfactory to the Bank or are not carried out
or performed with due expedition;
(n) (ATTACHMENT NOTICE): if the Customer or the Bank receives notice that
a decision or threat has been made to issue, or any step is taken to
serve, an Attachment Notice on any person or an Attachment Notice is
served on any person;
(o) (LOSS OF AUTHORISATIONS): if any of the authorisations, reports or
evaluations described in Clause 31(2)(b) has not been granted or
ceases to be in full force and effect or is such that or is modified
in a manner which, in the opinion of the Bank, may materially and
adversely affect the business, assets or financial position of the
Customer or the ability or willingness of the Customer duly and
punctually to perform and observe its obligations expressed or implied
under this Security;
(p) (FINANCIAL ASSISTANCE FOR ACQUISITION OF OWN SHARES): if the Customer
breaches section 205 of the Corporations Law, or without the Bank's
prior written consent, does any act or thing pursuant to Section
205(10) of the Corporations Law;
(q) (TRANSACTION DOCUMENT VOID OR VOIDABLE): if this Security or any
agreement, instrument or security which is collateral to this Security
or to which this Security is collateral (any 'Transaction Document")
or any provision of any Transaction Document ceases for any reason to
be in full force and effect or becomes void, voidable or
unenforceable, any law suspends, varies, terminates or excuses
performance by the Customer of any of its obligations under any such
document or purports to do any of the same, if it becomes impossible
or unlawful for the Customer to perform any of its obligations under
any Transaction Document or for the Bank to exercise all or any of its
rights. powers and remedies under any Transaction Document or if the
Customer or any person on its behalf alleges that any Transaction
Document has been affected as described in this paragraph;
(r) (DEFAULT BY SUBSIDIARY): if there occurs in relation to any of the
Customer's subsidiaries any of the events described in paragraphs (a)
to (q) (both inclusive) of this Clause construed as if references to
the "Customer" were each a reference to the subsidiary; or
13
<PAGE>
(s) (TRUSTEE): where the Customer executes this Security as trustee of the
Trust:
(i) if without the Bank's prior written consent the Customer ceases
to be sole trustee of the Trust;
(ii) if without the Bank's prior written consent any part of the
capital of the Trust Fund is distributed in any way;
(iii) if any representation or warranty in Clause 27(3) proves to be
untrue or incorrect in any material respect;
(iv) if an application or order is made in any Court for:
(A) removal of the Customer as trustee of the Trust;
(B) accounts to be taken in respect of the Trust; or
(C) any property of the Trust to be brought into Court or
administered by the Court or under its control;
(v) if any notice is given or meeting is summoned or proposal is put
forward for the removal of the Customer as trustee of the
Mortgaged Property or for the appointment of any other person as
trustee jointly with the Customer;
(vi) if without the prior written consent of the Bank, any alteration
is made to the Trust Deed or, through the exercise of any power
under the Trust Deed, to the constitution of the Trust Fund which
might in the opinion of the Bank detrimentally affect its
security under this Security, and
(vii) if in the case of a unit trust (other than a public unit trust),
any unit is issued, transferred, redeemed, encumbered or
otherwise dealt with, without the Bank's prior written consent;
(t) (DEFAULT BY SURETY):
(i) if there occurs in relation to any Surety any of the events
described in paragraphs (a) to (s) (both inclusive) of this
Clause construed as if
14
<PAGE>
references to the "Customer" were each a reference to the Surety;
(ii) where any Surety is a natural person if the Surety dies or
commits an act of bankruptcy within the meaning of the Bankruptcy
Act 1966 (Cth.); or
(u) (ANALOGOUS EVENTS): anything analogous to or having the same effect as
any of the events specified above happens under the law of any
applicable jurisdiction.
4. FIXED AND FLOATING CHARGE
(Fixed, floating charge over undertaking, property, rights and assets)
(1) GRANT OF CHARGE
The Customer hereby (and to the intent that the security so constituted
shall be a continuing security in favour of the Bank) charges with the due
and punctual payment of the Moneys Secured as beneficial owner, the whole
of its undertaking and all and singular its property, rights and assets
whatsoever and wheresoever situate both present and future including,
without limitation, the goodwill of its business and its uncalled and
called but unpaid capital from time to time (including any premium and
whether called by its directors or by a Receiver, official manager
liquidator) and where the Customer gives this Security as trustee of the
Trust, the Customer hereby (and to the intent) also charges with the due
and punctual payment of the Moneys Secured as trustee of the Trust and so a
rank in priority to the interest of the beneficiaries of the Trust all and
singular the property, rights and assets of the Trust whatsoever and
wheresoever situate both present and future including, without limitation,
the goodwill of the business comprised therein, and any proceeds from the
issue of units in the Trust, if the Trust is a unit trust, which are due
and payable but remain unpaid, the proceeds of sale of any units in the
Trust, if the Trust is a unit trust, which have been forfeited and the
right of the Customer to receive any such proceeds together with the right
to be indemnified out of the property, assets and revenues comprising the
Trust Fund in all cases and on all occasions where the Customer as such
trustee is entitled to be so indemnified.
(2) EXTENT OF FIXED CHARGE
The charge so created is -
(a) a Fixed charge as regards:
15
<PAGE>
(i) all estates and other interests in freehold or leasehold land
and other immovable property (except where the Customer is by
law prohibited from charging or incompetent to charge the same
by way of a fixed charge) and all buildings, fences and other
erections, trade and other fixtures, fixed plant and machine
from time to time on any such freehold or leasehold land and
other immovable property;
(ii) all book and other debts and monetary claims, together with the
full benefit of all related guaranteed securities and
indemnities and all liens, reservations of title, rights of
tracing and other rights enabling the Customer to enforce any
such debts or claims;
(iii) all stocks, shares, debentures (including notes), loan capital,
rights to subscribe for, convert other securities into or
otherwise acquire any stocks, shares, debentures and loan
capital of any other body corporate or any foreign, Federal,
State, Territorial or local government or any government
instrumentality, together with all dividends, interest and other
income and all other rights of whatsoever kind deriving from or
incidental to any of them;
(iv) all goodwill and uncalled capital (including any premium);
(v) all Intellectual Property;
(vi) all plant and machinery (excluding plant and machinery for the
time being forming part of the Customer's stock in trade or work
in progress), and
(vii) all chattels hired, leased or rented by the Customer to any
other person together in each case with the benefit of the
related hiring, leasing or rental contract and any guarantee.
indemnity or other security for the performance of the
obligations of any person under or in respect of such contract;
and
(b) a floating charge as regards all other Mortgaged Property.
(3) CRYSTALLISATION BY NOTICE
(Fixing of floating charge on notice)
16
<PAGE>
The Bank may by notice in writing to the Company convert the floating
charge so created into a fixed charge affecting all or any part of the
property and assets which for the time being are the subject of the
floating charge.
(4) CRYSTALLISATION OF FLOATING CHARGE
(Fixing of floating charge upon certain events)
As well as becoming a fixed charge by operation of law -
(a) the floating charge so created becomes a fixed charge if an event
specified in Clause 3(e) or 3(f)(i), (ii),(iii),(iv), (v) or (vi), or
3(l) or 3(s)(i), (ii),(iii) or (iv) occurs in relation to the
Customer; and
(b) the floating charge so created becomes a fixed charge with respect to
the property and assets affected if an event specified in Clause 3(b)
(which arises as a result of a breach or threatened breach by the
Customer of Clause 6(1)(a), 6(1)(c) or 6(1)(e)) occurs or an event
specified in Clause 3(c) or 3(n) occurs.
(5) JEOPARDY POWER
(Bank entitled to possession if seizure or distress)
If at any time it shall appear to the Bank chat any part of the Mortgaged
Property shall be in danger of seizure, distress, diligence or other legal
process, or that the Bank's security there over shall for any other reason
be in jeopardy, the Bank shall be entitled without notice to the Customer
to take possession of and hold the same or to appoint a Receiver thereof.
(6) DECRYSTALLISATION
(Fixed charge to operate as floating charge on notification by Bank)
Where pursuant to Clause 4(3), 4(4) or 4(5) the floating charge conferred
by this Security has become or would be fixed with respect to the whole or
any of the Mortgaged Property (the "Relevant Assets")
(a) the Bank may notify the Customer in writing that the Bank no longer
requires this Security to operate as a fixed charge with respect to
the whole or any of the Relevant Assets specified on the Bank's notice
with effect on and from the effective date specified in the Bank's
notice,
(b) on and from the effective date specified in the Bank's notice -
17
<PAGE>
(i) the Customer shall be at liberty to deal with the Relevant Assets
specified in the Bank's notice which were acquired by the
Customer prior to the effective date as if those Relevant Assets
had continued to be charged by way of floating charge under this
Security,
(ii) the floating charge conferred by this Security shall continue to
operate as a floating charge with respect to the Relevant Assets
specified in the Bank's notice which are acquired on or after the
effective date, and
(iii) in the absence of notice to the contrary, any person dealing with
the Customer in relation to the Relevant Assets shall be entitled
to rely on the Banks notice as conclusive evidence that the
Relevant Assets are charged by way of floating charge, or are to
be treated as if they are charged by way of floating charge,
under this Security on and from the effective date.
(7) FURTHER ASSURANCE OF RELEVANT ASSETS
(Floating charge of Relevant Assets)
The Customer hereby, and by way of further assurance, charges all and
singular the Relevant Assets with the due and punctual payment of the
Moneys Secured by way of floating charge on the same terms and subject to
the same conditions as the floating charge conferred by Clause 4(1) and
4(2) including, without limitation, the terms and conditions contained in
Clause 4(3), 4(4) and (5) to the intent that those provisions and Clause
4(6) and 4(7) shall operate from time to Lime in relation to any Mortgaged
Property which is subject to or which is to be treated as if it is subject
to. a floating charge under this Security. If Clause 4(3), 4(4) or 4(5) has
the effect of converting the floating charge created by this Clause 4(7) to
a fixed charge in relation to any Relevant Asset, the effect of Clause 4(6)
shall also then be revoked in relation to that Relevant Asset with effect
from the date of such conversion.
(8) ADDITIONAL RIGHT OF FURTHER ASSURANCE
(Specific further assurance)
Clause 4(7) does not prejudice any rights of the Bank under Clause 5 to
require the Customer to better or further assure the Mortgaged Property to
the Bank.
5. FURTHER ASSURANCE
(1) GENERAL
18
<PAGE>
(Bank may request Customer to execute further documents for better assuring
Mortgaged Property)
The Customer, and every person claiming under or in trust for the Customer,
will from time to time, whensoever requested by the Bank and at the
Customer's cost, execute in favour of the Bank, or as the Bank may direct,
such further or other legal assignments, transfers, mortgages, legal or
other charges or securities, deeds arid documents as in each such case the
Bank shall stipulate over the Mortgaged Property for the purpose of more
effectively providing security to the Bank for the payment or discharge of
the Moneys Secured.
(2) PROVISIONS IN FURTHER ASSURANCE
(Form of further assurance determined by Bank)
Without prejudice to the generality of Clause 5(1), the assignments,
transfers. mortgages, legal or other charges, or securities, deeds and
documents to which that Clause refers shall be in such form as shall be
prepared on behalf of the Bank and may contain provisions such as are
contained in this Security or provisions to the like effect and such other
provisions of whatsoever kind (including without limitation powers of sale
and covenants to pay principal and interest) as the Bank may consider
requisite for the improvement, perfection or registration of the security
constituted by this Security or for better assuring the Mortgaged Property
to the Bank.
(3) ADDITIONAL OBLIGATIONS
(Implied covenants continue)
The obligations of the Customer under this Clause 5 shall be in addition to
and not in substitution for the covenants for further assurance deemed to
be included in this Security by law.
(4) DEPOSIT OF DEEDS
(Bank to retain title deeds)
Subject to the requirements of any person for the time being entitled to a
Permitted Prior Charge, the Customer will (upon the execution of this
Security, or upon becoming possessed of any of [hem at any time in the
future) deposit with the Bank and the Bank will be entitled to retain
during the subsistence of this Security as further security for the payment
of the Moneys Secured all deeds and other documents constituting or
evidencing the title to the Mortgaged Property (including without prejudice
to the generality of the foregoing any leases granted by the Customer or
pertaining to the Mortgaged Property if requested by the Bank).
19
<PAGE>
(5) AFFIXATION AND ENDORSEMENT
(Customer to affix items to or endorse documents)
The Customer shall, whenever requested by the Bank and at the Customer's
cost, affix to such items of the Mortgaged Property or endorse or cause to
be endorsed (a such documents as are referred to in this Clause 5 as the
document stipulates, labels, signs or memoranda in such form as the Bank
requires referring or drawing attention to Security.
6. RESTRICTIONS ON OTHER SECURITIES AND DISPOSALS
(1) RESTRICTION
(Negative covenants relating to charges on and certain disposals of the
Mortgaged Property)
The Customer agrees that at no time during the subsistence of the security
constituted by this Security with Customer, otherwise than in favour of the
Bank, or with the prior written consent of the Bank and in accord with and
subject to any conditions which the Bank may attach to its consent -
(a) (SECURITY INTERESTS): create, grant extend or permit or suffer to
arise or subsist any mortgage, charge, or fixed security, floating
charge, pledge, hypothecation or lien (other than a lien arising
solely by operation of law) or other encumbrance or security interest
or liability of any kind on or over the Mortgaged Property whether
ranking or purporting to rank in point of security in priority to,
equally with, or after the security constituted by this Security or
enter into an agreement to do so; or
(b) (SALE AND OTHER DEALINGS): sell, convey transfer, assign, lease, tend
or otherwise deal with or part possession or dispose of, whether by
means of one or a number of transactions related or not and whether
one time or over a period of time, the whole or any part of the
Customer's undertaking or (save in the normal course of trading) of
its property, rights or assets, or enter into an agreement (otherwise
than an agreement conditional upon the consent or agreement of the
Bank being obtained) to do so; or
(c) (MONETARY CLAIMS): factor or discount or otherwise deal with, dispose
of. compromise or make or suffer set-off in respect of any of its book
debts, monetary claims or revenues otherwise than by getting them in
paying them to such banking account (if any) as is nominated or
approved
20
<PAGE>
by the Bank (which approval not be unreasonably withheld) or enter into an
agreement to do so; or
(d) (TRUST OF SALES PROCEEDS): agree to account to or hold upon trust for
any person the proceeds of sale (including cash, book debts, other
monetary claims and negotiable and similar instruments) arising out of
or in connection with any goods sold by the Customer and (whether or
not in the ordinary course of business) with the express or implied
authority of the owner of such goods; or
(e) (SALE AND LEASE-BACK): convey, transfer, assign, deliver or otherwise
deal with, part with possession or distribution of any part of the
Mortgaged Property the subject of the floating charge under this
Security with the intention or for the purpose of retaining or
accepting delivery of possession of such property under or pursuant to
an agreement or arrangement to purchase the same or any lease or
hiring agreement or arrangement (whether or not containing an option
for the Customer to purchase) in respect of such property or enter
into an agreement to do so; or
(f) (SECURITY DEPOSITS): deposit moneys with any person if such moneys are
not repayable unless the Customer pays or discharges any other
indebtedness or performs or observes any other obligation due to or
made such person or any other person or where such person requires or
could for the time being claim or assert set-off or counterclaim or
enter into an agreement to do so; or
(g) (TITLE RETENTION): enter into any transaction under which either (1)
title to goods supplied to the Customer reserved to the supplier
thereof or any other person until payment is made for such goods or
any other goods or services, or (ii) the proceeds of sale by the
Customer of any goods are held in trust for the supplier of an
ingredient or component thereof or any other person in contravention
of the conditions and limitations (if from time to time specified by
the Bank in relation to such transactions or enter into an agreement
to do so.
(h) (OTHER ACTIONS): do or suffer anything else to be done in derogation
of the security constituted by this Security.
(2) POWERS OF RECEIVER
(Restrictions do not affect Receiver)
The prohibitions set out in Clause 6(1) shall not be construed as limiting
any powers exercisable by any Receiver appointed
21
<PAGE>
by the Bank under this Security who is an agent of the Customer.
7. INSURANCE
(1) TAKING OUT AND MAINTAINING INSURANCE
(Customer agrees to insure Mortgaged Property and to comply with insurance
policies)
The Customer agrees that the Customer will at all times during the
subsistence of the security constituted by Security comply with all
covenants, undertakings and conditions as to the insurance of the Mortgaged
Property imposed by the terms of any Permitted Prior Charge affecting the
Mortgaged Property or by the terms of any lease or agreement for lease
under which the Customer's estate or interest in the Mortgaged Property is
derived and as far as not prohibited by any such terms, the Customer will:-
(a) (INSURE): cause the Mortgaged Property (including, the rent and
profits, if any, thereof) to be insured and to be kept insured in an
insurance office or with underwriters approved by the Bank and, if
through an insurance broker, through an insurance broker approved by
the Bank (which approvals shall not be unreasonably withheld) against
loss or damage by fire, storm, tempest, malicious damage, against
public liability risk or against all such other risks whatsoever as
the Bank may from time to time stipulate, (in an amount satisfactory
to the Bank in each case) with the interest of the Bank as mortgagee
noted by endorsement on the policy of insurance, or if the Bank so
directs, in the joint names of the Customer and the Bank (the
"Insurance");
(b) (PAY PREMIUMS): duly and punctually pay all premium and other moneys
payable in connection with the Insurance and promptly upon request by
the Bank produce to the Bank receipts or other evidence of their
payment;
(c) (NO OTHER INSURANCE): not take out any further or other insurance in
relation to the Mortgaged Property in the Customer's name alone or do
or suffer to be done anything which may prejudice any of the Insurance
or render it void or voidable or which may permit an insurer to
decline a claim;
(d) (INSURED EVENTS): notify the Bank in writing forthwith upon the
happening of any event which entitles a claim to be made under any of
the Insurance; and
22
<PAGE>
(e) (DEPOSIT OF POLICIES): deposit with the Bank as further security for
the Moneys Secured all policies, certificates of insurance and other
contracts of insurance relating to the Mortgaged Property (whether or
not such insurance relates to other property of the Customer) or, if
the Bank agrees in writing for them not to be so deposited, produce
the same to the Bank for inspection.
(2) BANK'S RIGHTS
(Bank may renew insurance if Customer defaults)
If the Customer defaults in complying with Clause 7(1) or fails to provide
the Bank forthwith upon request with evidence satisfactory to the Bank of
compliance with Clause 7(1) it shall be lawful, but not obligatory, for the
Bank to effect or renew the Insurance either in its own name or in its name
and that of the Customer jointly or in the same of the Customer with an
endorsement of the Bank's interest and any moneys expended by the Bank in
so effecting or renewing the Insurance shall be reimbursed by the Customer
to the Bank on demand and shall be added to and form part of the Moneys
Secured.
(3) CLAIMS
(Insurance moneys to be held in trust for Bank)
All claims and moneys received or receivable under any Insurance or any
insurance of the Mortgaged Property taken out by the Customer in
contravention of this Clause shall (subject to the rights and claims of any
person entitled to the benefit of a Permitted Prior Charge or any lessor of
any part of the Mortgaged Property) be held by the person receiving such
moneys in trust for the Bank and shall be applied in repaying or reducing
the Moneys Secured or, if the Bank so requires, in repairing, replacing,
restoring or rebuilding the property damaged or destroyed and to pay the
surplus (if any) to the Customer.
(4) POWER TO COMPROMISE CLAIMS
(Bank may compromise claims)
In the event of damage or loss the Bank shall alone have full power to
settle or compromise any claim against any insurer under any insurance
covering the Mortgaged Property whether or not such insurance also covers
other property.
8. GENERAL UNDERTAKINGS
(Customer undertakes to preserve business and Mortgaged Property)
23
<PAGE>
The Customer agrees that the Customer will at all times during the
subsistence of the security constituted by this Security:-
(a) (BUSINESS): carry on and maintain the present character of its
business in a proper and efficient manner and cause each of its
subsidiaries to do the same;
(b) (MORTGAGED PROPERTY): maintain and protect the Mortgaged Property and
put into and keep in good and substantial repair and in good working
order and condition the Mortgaged Property and all buildings fences
and other erections, and improvements, trade and other fixtures and
the plant and machinery at any time existing upon or forming part of
any land comprised in the Mortgaged Property ("Improvements") and not
at any time (except in the ordinary course of repair, maintenance or
improvement) demolish, pull down, remove, dismantle, injure, alter or
add to any of them or by any means lessen or suffer to be lessened the
value of the Mortgaged Property without the prior consent in writing
of the Bank;
(c) (REPAIR): amend every defect in the repair, working order and
condition of the Mortgaged Property and any Improvements forthwith on
being required so to do by the Bank;
(d) (ENTRY BY BANK): permit the Bank its agents, servants, employees,
contractors, consultants and workmen at all times to enter into and
upon the Mortgaged Property to view and examine the state of repair
order and condition of the Mortgaged Property and the Improvements and
do or perform any act, matter or thing which ought to have been done
or performed by the Customer under this Security or to make good any
default of the Customer under this Mortgage, and to inspect and take
copies of or extracts from all books of account, vouchers and other
documents (including those kept in computer records or other
electronic forms of data storage) relating in any way to the business
transactions of the Customer, all at the cost of the Customer (without
the Bank being or being deemed to be a mortgagee in possession by
virtue of any such entry) and any moseys expended for all or any of
such purposes shall form part of the Moneys Secured;
(c) (REMOVAL): if requested by the Bank at any time, remove any structure
which encroaches on any land in the Mortgaged Property,
24
<PAGE>
(f) (LEASED PROPERTY): duly and punctually pay all rent and perform and
observe the covenants and other contained in any lease or agreement
for lease under which any of the Mortgaged Property may be without
prejudice to the generality of the foregoing take no step whatsoever
whereby any such agreement may be forfeited, surrendered or terminated
or omit to do anything if such omission may such forfeiture, surrender
or termination and give notice to the Bank forthwith upon the
happening of an as a result of which the lease or agreement may be or
become liable to be forfeited, surrendered or terminated.
(g) (PERMITTED PRIOR CHARGE): perform and observe all covenants and
obligations, binding on the Customer any Permitted Prior Charge or any
other encumbrance and all restrictive and other covenants and
stipulations for the time being affecting any of the Mortgaged
Property or its use or enjoyment;
(h) (RENT AND TAXES): duly and punctually pay all rents, rates, taxes,
duties, charges, outgoings and assessments of every description (even
of a wholly novel character) now or in the future charged or
chargeable or payable to the Customer or upon or in respect of the
Mortgaged Property or upon its use or upon the owner or occ in respect
of the Mortgaged Property and cause each of its subsidiaries to do the
same in relation to itself, its undertaking, property, rights and
assets;
(i) (COMPLIANCE WITH STATUTES): (unless the Bank requires the Customer to
make or join with the Bank in such objections, appeals or
representations as the Bank may consider expedient, in which case the
Customer shall at the cost of the Customer make or join with the Bank
in making those objections appear representations) comply with and
procure that all tenants, employees, agents, contractors or sub-
contractor of the Customer comply with all statutes, regulations,
ordinances and by-laws and the requirements of relevant authority or
order binding on each of them or where non-compliance may impose a
charge or liability on the Mortgaged Property or prejudicially affect
this Security or render this Security or the Mortgaged Property liable
to forfeiture (including without limitation, giving all notices and
effecting any registration required by law in relation to the Customer
or the ownership of any land comprised in the Mortgaged Property, and
obtaining all consents and approvals required in relation to any
construction on, or use of the Mortgaged Property, and complying with
all building and fire regulations) and deliver or produce to the Bank
forthwith upon receipt any notice or order or proposal of
25
<PAGE>
any relevant authority relating to the ownership, use or conditions of
the Mortgaged Property;
(j) (AMOUNTS): keep proper accounting and financial statements in such
manner and form as may be lawfully required or permitted and therein
make true and complete entries of all dealings and transactions of and
in relation to its business and that of each of its subsidiaries and
procure that the same are at all reasonable times available for
inspection by the Bank, its employees, professional advisers and
agents and provide the Bank, its employees. professional advisers and
agents with all such information respecting the Customer's or any of
subsidiaries business and affairs as the Bank from time to time
requires.
(k) (AUDIT): at least once in each year or more often if so required by
the Bank cause the accounting records and financial statements of the
Customer and its subsidiaries to be duty audited by an auditor
approved by the Bank (such approval not to be unreasonably withheld)
and immediately in the future provide the Bank a Copy of the balance
sheet and trading and profit and loss account of the Customer and each
of its subsidiaries duly certified by such auditor and the report of
such auditor;
(l) (TITLE RETENTION): provide the Bank on request with information in
writing as to the number of, and the amount involved in, transactions
under which either (i) title to goods supplied to the Customer is
reserved to the supplier thereof or any other person until payment is
made for such goods or any other goods or services, or (ii) the
proceeds of sale by the Customer of any goods are held in trust for
the supplier of any ingredient or component thereof or any other
person;
(m) (COPIES OF ACCOUNTS): furnish to the Bank copies of all reports,
accounts and notices and circulars issued by it to its members as and
when issued;
(n) (CALLS): not without the prior written consent of the Bank call up or
receive in advance of calls any of the uncalled capital (or premium)
hereby charged or apply the same to any purpose other than in or
towards payment of the Moneys Secured;
(o) (RECEIPTS): produce to the Bank forthwith upon demand the receipts for
all payments referred to in this clause;
26
<PAGE>
(p) (ACCELERATION EVENTS): do all thing necessary to ensure that no event
referred to in Clause 3 occurs and notify the Bank in writing
forthwith upon becoming aware of the occurrence of any such event;
(q) (PRIORITY AGREEMENT): if the Customer creates or grants a mortgage,
charge or encumbrance over the Mortgaged Property after the date of
this Security ("the Subsequent Security") forthwith upon execution or
creation of the Subsequent Security and in any event:
(i) before any request is made to the Bank to produce the relevant
instrument of title for registration of the Subsequent Security;
and
(ii) before any moneys are secured actually or contingently by the
Subsequent Security;
procure the holder of the Subsequent Security to enter into a priority
agreement with the Bank so as to preserve and confirm the Bank's
position as mortgagee ranking in priority to the holder of the
Subsequent Security for an amount and on terms satisfactory to the
Bank;
(r) (INFORMATION): give to the Bank such oral or written information as
the Bank requires with respect to the Mortgaged Property and all
matters relating to (he business or affairs of the Customer; and
(s) (RESTRICTED TRANSACTIONS): if the Customer is a proprietary company -
(i) not make any loan to any member or officer (whether present or
future) of the Customer or any body corporate which is a related
body corporate of the Customer within the meaning of the
Corporations Law or to any spouse, issue, brother, sister or
ancestor of any such member or officer Without the prior written
consent of the Bank;
(ii) include or cause to be included as a term of all loans (whether
present or future) made to the Customer by any member or officer
(whether present or future) of the Customer or any body corporate
which is a related body corporate of the Customer within the
meaning of the Corporations Law or by any spouse, issue, brother,
sister or ancestor of any such member or officer a provision that
for so long as the Moneys Secured remain unpaid no part of such
loan nor any interest thereon shall be repaid without the written
consent of the Bank;
27
<PAGE>
(iii) not declare or pay any dividend without the prior written consent
of the Bank; and
(iv) not pay or provide any salary or benefit to any member or officer
(whether present or future) of the Customer or of any body
corporate which is a related body corporate of the Customer
within the meaning of the Corporations Law or to any spouse,
issue, brother, sister or ancestor of such member or officer in
excess of the amount paid for the financial year of the Customer
immediately prior to the date of this Security without the prior
written consent of the Bank or except as required by law.
9. BANK'S RIGHT TO REMEDY DEFAULT
(Bank entitled to remedy Customer's default)
(1) REMEDIAL ACTION
If at any time the Customer fails, or is believe by the Bank to have
failed, to perform or observe any of the covenants or conditions contained
in this Security, it shall be lawful, but not obligatory, for the Bank (but
without prejudice to any other rights, power or remedy of the Bank) to do
ad things and pay all moneys necessary or expedient in the opinion of the
Bank to make good such failure to the satisfaction of the Bank and all
moneys so paid (with any costs, charges and expenses so incurred) shall be
deemed to have been properly expended and shall form part of the Moneys
Secured.
(2) NOT MORTGAGEE IN POSSESSION
No exercise by the Bank of its powers under this Clause shall render the
Bank, or make the Bank liable to account as a mortgagee in possession.
10. BANK'S RIGHTS ON DEFAULT
(1) CLAUSE 3 EVENTS
(Bank's rights on occurrence of Clause 3 events)
Subject to Clause 10(2), if an event described in Clause 3 occurs the Bank
may thereupon or at any time after such occurrence (in addition to any
other rights, powers and remedies conferred on a mortgagee by law) do all
or any of the following things without giving any or further notice or
demand to the Customer-
(a) (POSSESSION): enter upon and take possession of the Mortgaged Property
and manage and use the Mortgaged Property and enter into receipt of
the rents and profits of the Mortgaged Property (with power to demand
and
28
<PAGE>
recover the same by action or otherwise and give effectual receipts
therefor) and cam on at the risk of the Customer any business or
pursuit for the time being or usually carried out on or comprised in
the Mortgaged Property with all the powers of an absolute owner;
(b) (LEASE): whether in or out of such possession and receipt, lease or
otherwise permit the use of the Mortgaged Property by third persons
(whether alone or with others and with or without the Bank) in the
manner and with the powers described in this Security;
(c) (SALE): whether in or out of such possession and receipt, sell the
Mortgaged Property and exercise all other powers conferred upon a
mortgagee by law;
(d) (RECEIVER): whether in or out of such possession and receipt and
whether or not the Bank is entitled to appoint a Receiver under any
statute, by writing appoint any person or persons (including any
employee of the Bank if so permitted by law) to be a Receiver of the
Mortgaged Property with all the powers and on the terms and conditions
described in this Security; and
(e) (AGENT): appoint and employ one or more agents to act jointly or
severally on behalf of the Bank in the exercise of any right, Power or
remedy conferred on the Bank by any law or this Security.
(2) NO DEMAND OR NOTICE
(Requirement for demand waived)
Before the Bank exercises a right, power or remedy conferred by Clause
10(1) or on a mortgagee by law, the Bank shall give any notice or demand
and allow any time to elapse which the Bank is required by law to give or
allow, but to the extent that any notice, demand or lapse of time which is
otherwise applicable by law is capable of being waived or negatived by
agreement, it is waived and negatived and, to the extent that any period of
time which is required to be allowed by law is not capable of being so
waived or negatived, but is capable of being a being fixed as a lesser
period, that period is fixed as the longer of whichever is permitted to be
fixed of the minimum period required by law.
(3) NOT ACCOUNTABLE AS MORTGAGEE IN POSSESSION
(Bank not accountable as mortgagee in possession)
The Bank shall not by reason of entry into possession of the Mortgaged
Property be liable to account as in possession or
29
<PAGE>
for anything except actual receipts or be liable for any loss upon
realization or for any omission for which a mortgagee in possession might
be liable.
(4) WITHDRAWAL
(Bank may withdraw from possession after entry)
The Bank and any Receiver appointed under this Security may at any time, in
the Bank's or the Receiver's discretion, withdraw from possession after
entry or appointment, re-enter and withdraw as often as the Bank or
Receiver deems expedient.
11. POWER OF SALE
(1) METHOD OF SALE
(Power to sell and ancillary powers)
Without derogation from the powers referred to in the previous clause and
merely by way of example and thereto, upon the power of sale becoming
exercisable by the Bank, the Bank may forthwith or at any time or from time
to time in the future -
(a) (SALE): sell all or any part or parts of the Mortgaged Property by
public auction, public tender or private or partly by any such mode of
sale (and unless prohibited by law with power on a sale by auction to
of the property offered for sale) and for cash or on terms and upon
such terms and conditions as thinks fit and either separately as a
whole or in lots (granting and securing such easements as the Bank
fit) or together with any other real or personal property which for
the time being may be mortgage or otherwise held by the Bank from the
Customer (whether of the same tenure or otherwise) with apportion the
purchase money and expenses of sale between the Mortgaged Property and
the other in any manner which the Bank thinks fit and on any sale any,
time may be allowed for the payment of the or any part or parts of the
purchase money either with or without taking security for the payment
of the purchase money and with or without interest and if with
interest then at any rate or rates nominated Bank;
(b) (MAKE PROPERTY MORE SALEABLE): apply for and obtain an amendment of
the title to or to any Mortgaged Property and do or cause to be done
any other act deed or thing in the opinion of the Bank or desirable
for perfecting the title of the Customer thereto or for making the
Mortgaged Property more saleable or for enabling any land comprised in
the Mortgaged Property to be sold in subdivided or lots, including but
not limited to, causing to be made surveys, obtaining town planning,
30
<PAGE>
building permits consents and approvals, acquiring rights of
carriageway, drainage, sewerage and other easements to any adjacent
lands, creating over such land rights of carriageway, drainage,
sewerage and other easements laying out and constructing such roads,
drains, sewers and other services, and constructing improvements to
such land, all as are in the opinion of the Bank necessary or
desirable;
(c) (SURRENDER OF TITLE): surrender to the Crown all or any part or parts
of the Mortgaged Property and with the Crown or with any person all or
any part of the Mortgaged Property for other property of any either
with or without giving or receiving any money or other consideration
for the purpose of equal exchange and any property so acquired shall
thereupon be held by the Bank on account of the Customer as further
security (or the Moneys Secured and the power of sale and all other
rights powers or remedies by any law conferred on the Bank shall apply
to and be capable of being enforced in respect of that property.
(d) (FIXTURES): sever fixtures belonging to the Customer and sell them
under the power of sale herein conferred apart from the Mortgaged
Property.
(2) PROTECTIVE PROVISIONS
(Power of sale exercisable despite neglect or waiver)
The Bank's powers of sale may be exercised notwithstanding any previous
neglect or waiver of any right to prior sale and no demand or notice of
sale made or given under this Security shall be deemed to be waived because
prior negotiations or payment of interest or payment on account of the
Moneys Secured by the Customer subsequent to such demand or notice and such
demand or notice shall remain in full force and effect notwithstanding
negotiations or payment until expressly waived in writing by the Bank.
(3) PURCHASE MONEYS
(Bank accountable only for moneys actually received)
The Bank shall be accountable for or chargeable with so much only of the
purchase money as it actually receives upon a sale and only from the time
of such receipt notwithstanding that it may have transferred the Mortgaged
Property to the purchaser and taken a mortgage from the purchaser to secure
so much of the purchase money as may not have been then actually paid or
that the Bank may have sold the Mortgaged Property to a purchaser on terms
without transferring it to the purchaser and notwithstanding a sale the
Customer shall remain liable
31
<PAGE>
for the Moneys Secured beyond the amount of moneys actually received by the
Bank.
12. POWER TO LEASE
(Mortgaged Property May be leased on terms determined by Bank)
Upon the Bank becoming entitled to exercise its powers to lease the
Mortgaged Property the Bank may lease or otherwise permit the use of the
Mortgaged Property by third parties (whether alone or with others and with
or without the Bank) for such term and on such terms and conditions as the
Bank thinks fit and either taking or not taking any fine or premium and
either at a pecuniary rent or in consideration of the tenant paving or
delivering to the Bank a share or proportion of the returns or profits
derived by the tenant from the use of the leased premises and either with
or without the option to the lessee at during the currency or at the
termination of any such lease of purchasing the leased premises or any part
thereof or of renewing any such lease and either for the purpose of
occupation building agriculture grazing mining or for any other purpose and
under and subject to such terms and conditions in all respects as the Bank
thinks fit and if with an option of purchase at such price and upon such
terms and conditions as the Bank thinks fit with power to the Bank to
compromise with and make concessions to tenants and vary and accept
surrenders of leases upon such terms and conditions as the Bank thinks fit
and to determine any tenancy now existing or which may in the future be
created and to eject any person from the Mortgaged Property and to
institute and carry on any proceedings for that purpose.
13. RECEIVER
(1) APPOINTMENT AND REMOVAL
(Bank may appoint or remove one or more Receivers)
The Bank may appoint one or more persons to be a Receiver or Receivers of
the whole or any part of the Mortgaged Property or of the income thereof or
both and may:
(a) remove any Receiver previously appointed hereunder; and
(b) appoint another person or persons as Receiver or Receivers, either in
place of a Receiver so removed or who has otherwise ceased to act or
to act jointly with a Receiver previously appointed.
If at any time and by virtue of any such appointment any two or more
persons shall hold office as Receiver of the same part or parts of the
Mortgaged Property or the income thereof or both, each person shall be
entitled (unless the contrary shall
32
<PAGE>
be stated in the deed or other instrument appointing them) to exercise all
the powers and discretions by this Security or by statute conferred on a
Receiver individually and to the exclusion of the other or others of them.
(2) WRITING REQUIRED
(Appointment in writing)
Every such appointment or removal of a Receiver, and every delegation or
revocation by the Bank in the exercise of any right to delegate its powers
or to revoke any such delegation herein contained shall be made either by
deed or by instrument in writing under the hand of any officer of the Bank
or any person authorized in writing in that behalf by any officer of the
Bank.
(3) POWERS OF RECEIVER
(General powers)
Every Receiver for the time being holding office by virtue of such an
appointment shall (subject to any limitations or restrictions expressed in
the deed or other instrument appointing him but notwithstanding any
bankruptcy, winding-up, official management or dissolution of the Customer)
have in relation to the assets and income in respect of which he is
appointed power in the name and on behalf and at the cost of the Customer
to do or omit to do anything which the Customer himself could do or have
done as an absolute owner and irrespective of any such bankruptcy, winding-
up, official management or dissolution and, without prejudice to the
generality of the foregoing:
(a) all the powers conferred by law on mortgagors but without the
restrictions hereby imposed on the Customer;
(b) (with the consent of the Bank) all the powers conferred bylaw on
mortgagees in possession as such powers are hereby varied and extended
and applicable to the Bank in accordance with the provisions hereof,
and
(c) all the powers conferred by law on Receivers appointed under any
statute.
(Specific powers)
In addition and without prejudice to the generality of the foregoing the
Bank and every such Receiver shall (notwithstanding any bankruptcy,
winding-up, or official management or dissolution of the Customer) have the
Power to do all the following things, namely:-
33
<PAGE>
(i) (TO TAKE POSSESSION): to take possession of, collect and get in
the Mortgaged Property and for that purpose to make, or to
require the directors of the Customer to make, calls upon the
holders of the Customer's share capital (including in relation to
any premium) in respect of any such capital of the Customer which
remains uncalled and to enforce payment of calls so made and any
previous unpaid calls by taking proceedings in the name of the
Customer or his own name;
(ii) (TO MANAGE): to carry on and manage, or concur in the carrying on
and management of, the whole or any part of the Customer's
business including the power where the Customer has one or more
subsidiaries of supervising, controlling and financing such
subsidiary or subsidiaries (inclusive of bodies corporate as are
referred to in sub-paragraph (v) below) and its or their business
or businesses and the conduct thereof:
(iii) (TO IMPROVE): to alter, rehabilitate, improve, develop, complete,
construct, modify, refurbish or any of the Mortgaged Property
including without limitation the power to complete or undertake
or in the completion or undertaking, with or without
modification, of any project in which the Customer was concerned
or interested prior to his appointment, being a project for the
alteration, improvement, development, completion, construction,
modification, rehabilitation, refurbishment or repair of
Mortgaged Property;
(iv) (TO SELL OR LEASE): to sell, or concur in selling, leasing or
otherwise disposing of the whole or any pa the Mortgaged Property
without, so far as it is possible to so provide, the need to
observe the restrictions imposed by law and upon such terms and
conditions as he shall think fit;
(v) (SHARES): to promote, or otherwise acquire, the share capital of
any body corporate with a view (if the Customer itself shall be a
body corporate) to such first-mentioned body becoming a
subsidiary of the Customer and purchasing, leasing or otherwise
acquiring an interest in the whole or any part of the Mortgaged
Property or carrying on any business in succession to the
Customer or any subsidiary Customer;
34
<PAGE>
(vi) (CONVEYANCE): to carry any sale, lease or other disposal of any
land or buildings and other property assets into effect by
conveying, transferring, assigning or leasing in the name of the
Customer and for that purpose to enter into covenants and other
contractual obligations in the name of and so as the Customer;
(vii) (FIXTURES): to sever fixtures belonging to the Customer and sell
them apart from any other part of Mortgaged Property,
(viii) (LEGAL ACTION): to take or defend any such proceedings as he
shall think fit in the name of the Customer or otherwise,
including proceedings for the compulsory winding-up of the
Customer;
(ix) (COMPROMISE): to enter into or make any such agreement,
arrangement or compromise as he shall think fit and carry out and
enforce specific performance or otherwise obtain the benefit of
all contracts entered into or held by the Customer or entered
into in exercise of the powers hereby conferred:
(x) (INSURANCE): to insure any such assets or liabilities as he shall
think fit or as the Bank shall direct and to renew any
insurances;
(xi) (EMPLOYEES AND AGENTS): to appoint and employ such managers,
officers and workmen and engage such professional advisers as he
shall think fit including without prejudice to the generality of
the foregoing power to employ his partners and firm;
(xii) (RENT REVIEW): to operate any rent review clause in respect of
any property in respect of which he was appointed or any part
thereof and to apply for any new or extended tenancy;
(xiii) (TO BORROW): to raise or borrow money from the Bank or any other
person to rank for payment in prior to the security constituted
by this Security and with or without a mortgage or charge on the
Mortgaged Property or any part of it;
(xiv) (PERFORM COVENANTS): to do all things necessary to perform or
observe any of the covenants on the part of the Customer herein
contained;
35
<PAGE>
(xv) (INCIDENTAL POWER): to do all such other things as may seem to
him to be incidental or conducive to other power vested in him in
the realization of the security hereby constituted; or
(xvi) (DELEGATION): to delegate to any person for such time(s) as the
Bank shall approve any of the power conferred on him.
(4) CONSIDERATION ON SALE
(Receiver may accept various forms of consideration)
In making any sale or other disposal in the exercise of their respective
powers (including a disposal to any such body corporate as is mentioned in
this clause) a Receiver or the Bank may accept, as and by way of
consideration for such sale or other disposal, cash, shares, loan capital
or other obligations, including without limitation consideration
fluctuating according to or dependent upon profit or turnover and
consideration the amount of which is to determined by a third party.
(5) PAYMENT BY INSTALMENTS
(Consideration on sale may be by installments)
Any consideration for a sale or other disposal by a Receiver or the Bank
may be receivable in a lump sum or in installments, and upon receipt by the
Receiver or the Bank shall by virtue of such receipt be and become
chargeable with the payment of the Moneys Secured.
(6) PERSONAL LIABILITY OF RECEIVER
(Contracts may limit liability)
Any contract for any sale or other disposal by the Receiver or the Bank may
contain conditions excluding or restricting the personal liability of the
Receiver or the Bank to the full extent permitted by law.
(7) INVOLUNTARY LOSS
(Receiver not answerable for losses)
A Receiver shall not be answerable or accountable for any involuntary loss
happening in or about the exercise or attempted exercise of the powers
hereby conferred or for any more money than shall actually come to his
hands or for the negligence, default or dishonesty of any officer, servant,
agent or auctioneer.
(8) AGENT OF CUSTOMER
36
<PAGE>
(Receiver is Customer's agent)
Every Receiver so appointed shall be deemed at all times and for all
purposes to be the agent of the Customer and the Customer shall be solely
responsible for his acts and defaults and for the payment of his
remuneration. The appointment of a Receiver shall not render or deem the
Bank liable as a mortgagee in possession.
(9) REMUNERATION OF RECEIVER
(No maximum rate)
Every Receiver so appointed shall be entitled to remuneration for his
services at a rate to be fixed by agreement between him and the Bank (or,
failing such agreement, to be Fixed by the Bank) appropriate to the work
and responsibilities involved upon the basis of charging from time to time
adopted in accordance with his current practice or the current practice of
his firm and, to the extent that it is lawful so to provide, without being
limited to any maximum rate specified by law.
(10) ADVANCES
(Bank may advance moneys to Receiver)
The Bank may at the request of a Receiver advance to the Receiver such
moneys as the Bank thinks fit and all moneys so advanced shall be deemed
moneys advanced on account of the Customer and form part of the Moneys
Secured.
(11) REIMBURSEMENT
(Costs of receivership and enforcement are Moneys Secured)
All moneys and amounts paid or for which the Receiver or the Bank becomes
liable in the exercise of any of the powers conferred on each of them under
this Security or at law shall be reimbursed by the Customer on demand and
shall form part of the Moneys Secured.
(12) MONEYS PAID TO BANK
(Only moneys paid to Bank satisfy Moneys Secured)
Only moneys actually paid by any such Receiver to the Bank in satisfaction
or discharge of the Moneys Secured shall be capable of being applied by the
Bank in satisfaction thereof.
(13) BANK'S RIGHTS
(Bank may exercise Receivers powers)
Notwithstanding that a Receiver may or may not have been appointed it shall
be lawful for the Bank at any time after
37
<PAGE>
the Bank shall have become entitled to appoint a Receiver and without
giving any notice to exercise all or any of the powers authorities and
discretions which may be conferred on a Receiver under this Security.
14. APPLICATION OF MONEYS
(Order of application of moneys received under Security)
All moneys received by the Bank or a Receiver under or by virtue of this
Security shall be applied (subject to the claims of any secured and
unsecured creditors ranking in priority to this Security) in the following
order-
FIRST in or towards payment of all costs charges and expenses of and
incidental to the appointment remuneration and removal of any
Receiver and the exercise (including the attempted exercise) by
the Bank or a Receiver of all or any of the powers conferred by
this Security or by law;
SECONDLY in or towards payment of the Moneys Secured in such order or
manner as the Bank in its absolute discretion sees fit;
THIRDLY in or towards payment of moneys owing under or in respect of
subsequent mortgages and charges in the order of their respective
priorities; and
FOURTHLY in payment of any surplus to the Customer or other person
entitled to the Mortgaged Property;
and any such surplus does not carry interest and shall be deemed to have
been duly paid and the Bank shall have no further liability in respect of
such surplus if it is paid to the credit of a suspense or impersonal
account or an account in the name of the Customer or other person entitled
thereto in the books of the Bank whether specially opened for the Purpose
or otherwise and in applying any moneys in or towards payment of any of the
Moneys Secured the Customer shall be credited only with so much moneys
available for that purpose as has actually been received by the Bank and
with effect from but excluding the date of receipt.
15. POWER OF ATTORNEY
(1) JOINT AND SEVERAL ATTORNEYS
The Customer appoints tile following, namely -
(a) the Bank,
38
<PAGE>
(b) each officer of the Bank,
(c) each and every person to whom the Bank shall from time to time have
delegated the exercise of the power of attorney conferred by this
Clause, and
(d) any Receiver appointed under this Security and for the time being
holding office as such jointly and severally to be the attorney or
attorneys of the Customer and in the Customer's name and otherwise on
Customer's behalf and as the Customer's act and deed to sign, seal,
execute, deliver, perfect and do all other instruments (including
transfers and other instruments pursuant to the Torrens Statute), acts
and things that may be required (or which the Bank or any Receiver
appointed under this Security shall consider required for carrying out
any obligation imposed on the Customer by or pursuant to this Security
(including, without limitation, the obligations imposed on the
Customer pursuant to Clause 5), for executing, certifying as correct
or amending any documents to enable their registration, enforcing
settling, compromising and discharging any claim against any insurer
in the name of the Customer or the Bank or both and whether or not the
insurance covers other property as well as the Mortgaged Property, for
conveying or transferring any legal or other title or interest in land
and carrying any sale, lease or other dealing by the Bank or such
Receiver into effect getting in the Mortgaged Property, for
instituting proceedings with or defending any legal proceeding
(including arbitration) on behalf of the Customer in connection with
this Security or the Mortgaged Property and for executing and
appealing from judgments, and generally for enabling the Bank and the
Receiver to exercise the respective powers conferred on them by this
Security or by law.
(2) BANK'S POWERS
(Delegation not to preclude Bank's powers)
The Bank shall have full power to delegate the power conferred on it by
this Clause, but no such delegation by Bank to any person shall preclude
the subsequent exercise of such power by the Bank itself or any subsequent
delegation thereof by the Bank to any other person and the Bank may revoke
any such delegation at any time.
(3) RATIFICATION BY CUSTOMER
(Customer to ratify acts of attorneys)
The Customer shall ratify and confirm all transactions entered into by the
Bank, any officer of the Bank, any delegate of the
39
<PAGE>
Bank or such Receiver in the exercise or purported exercise of the Bank's
or such officer of the Bank or such delegate's or such Receiver's
respective powers and all transactions entered into, documents executed
things done by the Bank or such officer of the Bank or such delegate or
such Receiver by virtue of the power of attorney given by this Clause.
(4) IRREVOCABILITY
(Power of attorney irrevocable)
The power of attorney hereby granted is as regards the Bank. each officer
of the Bank, its delegates and any Receiver (and as the Customer hereby
acknowledges) granted irrevocably and for value as part of the constituted
by this Security to secure the proprietary interest of and the performance
of obligations owed to Bank.
16. PROTECTION OF PURCHASERS
(Purchasers not bound to inquire)
No purchaser, or other person dealing with the Bank or its delegate or any
Receiver appointed hereunder shall bound to see or inquire whether the
right of the Bank or such Receiver to exercise any of its or his powers has
or has become exercisable or be concerned with any notice to the contrary
or be concerned to see whether delegation by the Bank shall have lapsed
for any reason or been revoked and need not enquire as to the application
of any moneys paid to the Bank, any officer of the Bank, its delegate or a
Receiver and the receipt of the Bank, officer of the Bank, its delegate or
a Receiver is a good discharge on behalf of the Customer.
17. EFFECTIVENESS OF SECURITY
(1) OTHER SECURITY
(Not affected by nor to affect other security)
This Security is in addition to and does not prejudice, nor is it
prejudiced by, any other security which the Bank at any time hold for any
of the Moneys Secured, and no other security held by the Bank over the
whole or any of the Mortgaged Property is extinguished, postponed,
lessened or otherwise prejudicially affected by this Security or merges in
this Security.
(2) CONTINUITY
(Obligations remain in force notwithstanding discharge of Mortgaged
Property)
40
<PAGE>
This security shall remain in full force and effect as a continuing
security until discharged by the Bank. The Customer is not entitled to a
discharge of this Security at a time when there are, or it is reasonably
foreseeable that there are likely to be any moneys or amounts which fall
within the description of the Moneys Secured. The Bank may at any time in
its absolute discretion discharge the whole or any part of the Mortgaged
Property from the operation of this Security but such discharge shall not
relieve the Customer from the obligation to pay any moneys or amounts which
fall with the description of the Moneys Secured which may be outstanding at
the time of such discharge or in the future.
(3) BILLS AND OTHER SECURITY
(Not to affect bills or other securities)
Nothing contained in this Security or in any other security or Security
Instruments now or in the future held or taken by the Bank as security for
the payment of the Moneys Secured or any of them is intended to or shall
operate so as to, prejudice or affect any Security Instrument, bill, note,
mortgage, pledge, charge or other security of any kind whatsoever which the
Bank may have for the Moneys Secured or any of them or any right, remedy or
privilege of the Bank under any of them.
(4) BANKRUPTCY OR INSOLVENCY CLAIMS
(Void or voidable payments not to discharge liability of Customer)
Notwithstanding any discharge or partial discharge by the Bank of this
Security, if in relation to any payment made to the Bank of any sum of
money by or on behalf or on account of the Customer a claim is made by any
person under or by virtue of any law relating to bankruptcy or the
protection of creditors to the effect that the payment is void or voidable
and that claim is upheld by a court or is conceded or compromised by the
Bank in its unfettered discretion and without notice to the Customer then -
(a) (NO DISCHARGE): that payment (or such part of that payment as is
payable under the claim as so upheld. conceded or compromised) shall
be deemed not to have discharged a liability of the Customer under
this Security for its payment, and as between the Customer and the
Bank the payment to the Bank shall be deemed never to have been made;
(b) (RESTORATION OF SECURITY): where such a claim is upheld. conceded or
compromised the Customer shall, if required by the Bank, restore to
the Bank any security held by it from the Customer immediately prior
to such discharge or
41
<PAGE>
partial discharge and in addition to the other moneys recoverable by
the Bank under this Security the Customer shall be liable to pay to
the Bank on demand all costs and expenses whatsoever (including legal
costs and expenses as between solicitor and own client) incurred by
the Bank in or in connection with any negotiations or proceedings
relating to any such claim; and
(c) (AUTHORITY TO DEBIT ACCOUNT): the Bank may debit any account of the
Customer in the books of the Bank or any account of which the Customer
may be one of the proprietors with any sum which the Bank in its
opinion may be or become liable to pay as a consequence of any such
payment being void or voidable or any claim, being conceded or
compromised and the amount of any such debit shall be binding on the
Customer and shall form part of the Moneys Secured.
(5) CONTINGENT LIABILITIES
(Payment of maximum amount of contingent liability to trustee)
Where this Security purports to make an amount payable on demand or refers
to payment to the Bank of moneys which include an amount and in either case
that amount represents a contingent or prospective liability or any other
liability that cannot be quantified or may not become payable -
(a) (SELECTION OF TRUSTEE): the Customer (with the prior written consent
of the Bank), the Bank or a Receiver (as the case may be) may select a
trustee approved by the Bank;
(b) (CONSENT): the Bank shall not unreasonably refrain from giving its
consent to selecting or from approving a proposed trustee selected by
the Customer or a Receiver;
(c) (PAYMENT TO TRUSTEE): the Customer, the Bank or the Receiver (as the
case may be) may pay to the trustee a fund equal to the maximum amount
of the contingent, prospective, unquantifiable or uncertain liability
that is reasonably foreseeable at the time of payment;
(d) (DISCHARGE): subject to Clause 17(4) and to Clause 17(5)(c), payment
to the trustee operates as a complete discharge to the Customer in
respect of that liability, and
(e) (SATISFACTION OF LIABILITY): the trustee shall hold the fund on trust
to satisfy the liability from time to time out of the fund and to pay
the balance (if any) when the
42
<PAGE>
liability has ceased or been satisfied in the same manner as is
provided in Clause 14.
18. REMEDIES, TIME OR INDULGENCE
(1) CUMULATIVE RIGHTS
(Additional to other rights)
The rights, powers and remedies provided by this Security to the Bank are
cumulative and are not, nor are they to be construed as, exclusive of any
rights, powers and remedies provided by law.
(2) FAILURE TO EXERCISE RIGHTS
(No waiver)
No failure of the Bank to exercise, or delay by the Bank in exercising, any
of the rights (including, but not limited to the right to make demand),
powers, discretions and remedies provided by this Security or by law
(collectively the "Bank's Rights") shall operate as a waiver of any of
them, nor shall any single or partial waiver of any of the Bank's Rights
preclude any further or other exercise of that one of the Bank's Rights
concerned or the exercise of any of the Bank's Rights.
(3) WAIVER IN WRITING
(Writing required for waivers)
Any waiver or consent by the Bank under this Security is effective only if
in writing signed by the Bank or an of the Bank and then only to the
extent expressly stated in such writing.
(4) NOTICE OF THIS SECURITY NOT REQUIRED
(Bank not bound to notify others of Security)
It shall not be incumbent on the Bank to give notice of this Security to
any person nor to exercise any power or authority contained or implied in
this Security or vested in the Bank under this Security or by law nor shall
Bank be answerable or accountable for any loss occasioned by its omission
or delay so to do or for any loss happening in or about or occasioned by
the exercise or execution or a partial or attempted exercise or execution
of any power or right or authority or any trust connected therewith nor for
any other involuntary loss howsoever the same may be incurred (and whether
through negligence or otherwise).
19. ACCOUNTS
43
<PAGE>
(1) NEW ACCOUNT
(Opening up a new account on subsequent charge)
If the Bank at any time receives notice of any subsequent mortgage,
assignment, charge or other interest affecting the whole or any part of the
Mortgaged Property, the Bank shall be entitled to open a new account or
account for the Customer in its books and if the Bank does not in fact do
so then (unless the Bank gives express written notification to the Customer
that it has not done so) as from the time when the Bank received such
notice all payments made by the Customer to the Bank shall (in the absence
of any express appropriation to the contrary by the Customer to have
treated as having been credited to such new account of the Customer and not
as having been applied in reduction of the Moneys Secured outstanding at
the time of receipt of such notice by the Bank.
(2) SUSPENSE ACCOUNT
(Moneys may be credited to suspense account)
All moneys received, recovered or realized by the Bank under or pursuant to
this Security (including the provision of any conversion of currency) may
be credited, at the discretion of the Bank to any suspense or impersonal
account and may be held in such account for so long as the Bank thinks fit
(with interest accruing thereon at such rate as the Bank considers fit)
pending their application at such time or times as the Bank may decide in
the discharge of Moneys Secured or any of them.
(3) COMBINING ACCOUNTS
(Bank may combine accounts)
If the Customer has two or more accounts with the Bank, the Bank may at any
time without notice to any person combine any such two or more accounts of
the Customer with the Bank.
(4) SET-OFF
(Bank has right of set-off)
The Bank may set off or transfer any sum standing to the credit of any one
or more accounts with the Bank of the Customer or any person liable jointly
with the Customer in or towards satisfaction of any of the Liabilities of
the Customer to the Bank on any other account or in any other respect.
(5) BANK'S RIOTS
(Bank's rights are exercisable notwithstanding previous dealings or this
Security)
44
<PAGE>
The Bank's rights under this Clause shall exist and be exercisable whether
or not the Bank has agreed to permit a set-off for the purpose of
calculation of interest between any two or more accounts and
notwithstanding any course of dealing between the Customer and the Bank and
notwithstanding anything in this Security or that the Money Secured may be
or may be expressed to be advanced on any specified account or on two or
more accounts or that the accounts are with different branches of the Bank
of that any one account or more stand in credit.
(6) BANK MAY TREAT COMBINED ACCOUNTS AS ONE
(Bank may decline to honour outstanding instruments)
Upon a combination of accounts the Bank may decline to pay any cheque or
other order or instrument, make advances or meet any obligations to for or
for the accommodation of or on behalf of the Customer as if the combine
accounts had at all times been conducted as a single account.
(7) LIABILITIES
(All types of liabilities covered)
The liabilities referred to in this Clause may be actual, contingent,
prospective, primary, collateral, several or joint liabilities, and the
accounts, sums, and liabilities referred to in this Clause may be
denominated in any one or more currencies.
20. CURRENCY CONVERSION AND EXCHANGE RISK
(1) CURRENCY CONVERSION
(Bank may convert any sum into another currency)
Where it is accessary pursuant to this Security or where in the Bank's
opinion it is necessary or desirable for any purpose connected with or
arising out of this Security to convert a sum of money expressed in one
currency ("First Currency") into a sum expressed in another currency
("Second Currency") the rate of conversion to be used will be the rate at
which the Bank would have been able to purchase the Second Currency with
the First Currency on the date of conversion for value the same day in the
market for foreign currency in Sydney including any premium.
(2) EXCHANGE RISK
(Customer indemnifies Bank against exchange risk)
If any sum due from the Customer under this Security or any order or
judgment given or made in relation to this Security has to be converted
from one currency ("First Currency") into another currency ("Second
Currency") for the purposes of:
45
<PAGE>
(a) making or Ming a claim or proof against the Customer;
(b) obtaining an order or judgment in any court or other tribunal; or
(c) enforcing any order or judgment given or made in relation to this
Security;
the Customer shall, indemnify and hold harmless the Bank from and against
any loss suffered as a result of any discrepancy between:
(d) the rate of exchange used for such purpose to convert the sum from the
First Currency into the Second Currency, and
(e) the rate of exchange determined in accordance with Clause 20(1) of
this Security to convert the sum from the First Currency into the
Second Currency on the date of receipt of a sum paid to it in
satisfaction, in whole or in part, of any such order, judgment, claim
or proof.
(3) INDEPENDENT OBLIGATION
(Indemnity given is independent obligation)
The indemnity in Clause 20(2) of this Security constitutes a separate and
independent obligation of the Customer, applies irrespective of any time,
waiver or other indulgence granted by the Bank, and survives the
termination of this Security.
(4) EXTENT OF ANY DISCHARGE
(No discharge except to extent of currency purchased)
The purported payment of any Moneys Secured in a currency other than the
currency in which those Moneys Secured are agreed to be due and payable
shall not discharge such Moneys Secured except to the extent of the amount
of the currency agreed to be due and payable which the Bank actually
receives as a result of the purchase of the currency agreed to be due and
payable with the amount of the currency received by the Bank.
21. NOTICES
(1) SIGNATURE OF NOTICES
(Officer of Bank or solicitor may sign)
Any notice, certificate or demand which the Bank desires or is required to
give to or make upon the Customer for any purpose in connection with this
Security may be signed for and on behalf of the Bank by any officer of the
Bank or by any solicitor for the time being acting for the Bank, whose
46
<PAGE>
signature may be handwritten or printed or otherwise reproduced by
mechanical means.
(2) SERVICE
(Additional methods of service)
In addition to the sufficient methods of service provided for by statute
any notice, certificate or demand by the Bank shall be deemed to be duly
given to or made upon the Customer if:-
(a) left for the Customer, or sent by prepaid post or by telex, lettergram
(telegram) or facsimile transmission to the Customer, at:
(i) its address set forth herein;
(ii) the Customers registered office or any one of its principal
places of business in any State or Territory of the Commonwealth
of Australia or elsewhere; or
(iii) any premises owned or occupied by the Customer,
(b) delivered personally to any officer of the Customer or
(c) advertised in the government gazette of the state, country or place in
which this Security is executed by the Customer.
(3) VALIDITY OF SERVICE
(Due service)
Any such method of service shall be valid, effectual and sufficient
notwithstanding that:-
(a) at the date of service the Customer may be insolvent, or should be in
receivership or liquidation or provisional liquidation), whether
voluntary or compulsory, or under official management;
(b) The Customer shall not receive or read such notice, certificate or
demand; or
(c) where such notice, certificate or demand is sent by post or lettergram
(telegram) it is returned to Bank through the post office unclaimed;
and notwithstanding any other matter or event whatsoever.
(4) DEEMED RECEIPT
(When received)
47
<PAGE>
Any such notice, certificate or demand shall be deemed to have been
received by the Customer:-
(a) if left or delivered personally, on the same day;
(b) if sent by post, on the second business day (in the place to which it
is addressed) after the date of posting
(c) if sent by telex, upon receipt of the Customer's answerback code;
(d) if sent by lettergram (telegram), on the next business day (in the
place to which it is addressed) after dispatch
(e) if sent by facsimile transmission, upon despatch: and
(f) if advertised, on the date of publication of the relevant gazette.
(5) CERTIFICATES
(Certification of service)
A certificate signed by an officer of the Bank or by any solicitor for the
time being acting for the Bank as to time and manner of giving or making
such notice, certificate or demand shall be conclusive evidence thereof.
(6) DEEMED SERVICE
(Where two or more persons as the Customer)
Where more than one person is named as the Customer, any demand,
certificate or notice served on one of them (or deemed to have been so
served) shall be regarded as effectively served on the other or others of
them.
22. DEALINGS WITH PRIOR MORTGAGEES
(1) PRIOR MORTGAGES
(Sale may be subject to or discharged from prior mortgages)
Any sale by the Bank or a Receiver appointed hereunder may be made either
subject to or discharged from any prior mortgage or other security and the
Bank or such Receiver may settle and pass the accounts of any person in the
prior mortgage or other security may for the time being be vested.
(2) CUSTOMER BOUND BY SETTLED ACCOUNTS
Any account so settled and passed shall as between the Bank (or, as the
case may be, the Receiver) on the one hand and the
48
<PAGE>
Customer on the other hand be deemed to be properly settled and passed and
shall be binding on the Customer accordingly.
(3) REDEMPTION OF PRIOR MORTGAGES
(Bank may redeem or pay out prior mortgage)
If any person or persons entitled to the benefit of any prior mortgage or
other security ranking in point of security in priority to this Security
shall call in the moneys thereby secured or shall take any step to enforce
the same the Bank may thereupon, by agreement or in exercise of its
statutory power, either redeem such mortgage or other security or make
payment of such moneys and take a transfer of the benefit thereof, and the
money so expended by the Bank (including all costs of and incidental to any
such transaction) shall be reimbursed by the Customer to Bank on demand and
shall (but only if the Bank shall so elect in a case where the Bank has
taken such a transfer so secured hereby and be added to and form part of
the Moneys Secured. The Customer will upon the written request of the Bank
made at any time execute in favour of the Bank and at the cost of the
Customer all such deeds or other documents as the Bank may require in order
to have any mortgage or security transferred to the Bank pursuant to this
Clause 22(3) registered or for more perfectly assuring or securing the
property secured thereby in favour of the Bank. The Customer authorises the
Bank to complete any mortgage or security transferred to the Bank pursuant
to this Clause 22(3) by filling in blanks and correcting mistakes in order
to make it conform to the contractual intention of the parties or to supply
immaterial deficiencies, and in particular, to insert details of any dates
or amounts left blank when the Customer executed it and to certify as
correct for the purpose of registration in respect of any registering
authority.
23. PROVISIONS SEVERABLE
(Power to sever)
Each of the provisions contained in this Security shall be severable and
distinct from one another and if at any time any one or more such
provisions is or becomes invalid, illegal or unenforceable, the validity,
legality and enforceability of each of the remaining provisions of this
Security shall not in any way be affected, prejudiced or impaired thereby.
24. THE BANK'S DISCRETIONS
(1) NO OBLIGATION TO EXERCISE RIGHTS
(Bank under no obligation to exercise rights)
Any power, remedy, right or privilege which may be exercised or any
determination which may be made hereunder by the Bank
49
<PAGE>
may be exercised or made or declined to be exercised or made in the
absolute and unfettered discretion of the Bank. The Bank shall not be under
any obligation to do so or to give reasons therefor and the Bank is not
liable or accountable for any loss occasioned by or arising out of or in
connection with its omission to exercise any power right or authority or to
make any determination or any delay in exercising any power right or
authority or making any determination or the exercise or partial exercise
of any power, right or authority or the performance of any trust connected
therewith.
(2) OTHER SECURITY
(Bank not under obligation to resort to other security)
The Bank is not under any obligation to resort to any other security or
guarantee it may hold for the Moneys Secured or any part thereof in
priority to this Security or any other security and, subject to the
mandatory requirements of any applicable law, the Customer may not require
the Bank to marshall or consolidate this Security with any other security
or any other security with this Security.
(3) NEGOTIABLE INSTRUMENTS
(Bank may make demand notwithstanding bills are outstanding)
The Bank may make demand under this Security notwithstanding the currency
of a negotiable instrument and any demand made under this Security may
include the amount of any bills of exchange, promissory notes or other
negotiable instruments in respect of which the Customer may be liable to
the Bank notwithstanding that those instruments may not then have matured.
(4) MEETINGS OF CUSTOMER
(Officer of Bank may attend meetings)
The Bank, through any officer of the Bank, may attend all meetings of the
directors of the Customer and all general meetings of the Customer and may
speak at those meetings, if the officer of the Bank thinks fit and, if
required by the Bank, the Customer will procure its articles of association
to be amended to give effect to this Clause.
25. ASSIGNMENT
(1) BANK'S RIGHT OF ASSIGNMENT
(Bank may assign Security)
The Bank shall have a full and unfettered right to assign the whole or any
part of the benefit of this Security free of any equity, set-off or
counterclaim and the expression the "Bank"
50
<PAGE>
wherever used in this Security shall be deemed to include the assignees and
other successors, whether immediate or derivative, of the Bank, who shall
be entitled to enforce and proceed upon this Security in the same manner as
if named as the Bank under this Security.
(2) BANK'S RIGHT TO GIVE INFORMATION
(Bank may inform assignee)
The Bank shall be entitled to impart any information concerning the
Customer to any such assignee or other successor or proposed assignee or
successor as well as to any body corporate which is a related body
corporate of the Bank within the meaning of the Corporations Law (or which
would be so related if it applied to determine the question).
26. CUSTOMER AS SURETY
The following provisions of this Clause apply where the liability of the
Customer to the Bank is that of surety for the obligations of another
person or persons (each a "Principal Debtor"):
(1) LIABILITY OF CUSTOMER
(Liability of Customer not to be affected by variation in principal
liability)
The liability of the Customer hereunder shall not be impaired, released,
discharged or otherwise affected by any act, event or omission which might
otherwise have that effect at law or in equity including without limiting
the generality of the foregoing, any one or more of the following -
(a) (VARIATION OF FACILITY): any determination, variation or increase by
the Bank of any credit or facilities to any Principal Debtor; or
(b) (GRANT OF TIME): the grant by the Bank to any Principal Debtor or any
other person of any time, credit, indulgence or concession; or
(c) (DEALINGS WITH SECURITIES): any dealing with, or exchange, renewal,
variation, release, or modification, abstention from perfecting or
enforcing any securities or rights which the Bank may now or hereafter
acquire with respect of the Moneys Secured; or
(d) (RENEWAL OF BILLS): the renewal by the Bank of any bills, promissory
notes or other negotiable instruments or Security Instruments: or
51
<PAGE>
(e) (DEALINGS WITH OTHER SECURITIES): any compounding, compromise.
discharge. release, abandonment, variation, relinquishment, renewal or
transfer in whole or part of, or other dealing with this Security or
Security Instruments or of the indebtedness or liabilities of any
Principal Debtor or other person or guarantor to the Bank or by any
neglect or omission of the Bank to enforce any of its rights against
any of them; or
(f) (ABSTINENCE FROM CLAIM): the Bank's abstaining from proving or
maintaining any right or proof or from enforcing payment of any
dividend or composition; or
(g) (FAILURE TO OBTAIN OTHER SECURITY): the Bank's obtaining or failure to
obtain any other guarantee (whether contemporaneously with this
Security or otherwise) or the failure or refusal of any person to
provide other security, or
(h) (APPLICATION OF ADVANCES): the Bank's agreeing with any Principal
Debtor at any time as to the applicability if any advances or other
accommodation; or
(i) (DEATH OR BANKRUPTCY): the death, incapacity, official management,
liquidation, receivership, bankruptcy, or insolvency of any Principal
Debtor any guarantor, co-surety or any other person; or
(j) (COMPOSITION): the Bank becoming a party to or bound by any compromise
or assignment of property or arrangement or composition of debts or
scheme of reconstruction by or relating to any Principal Debtor in any
capacity, any guarantor, co-surety or any other person; or
(k) (DEFECTIVE SECURITY): any security held or taken at any time by the
Bank being void. defective or inform; or
(l) (LOSS OF SECURITY): any property the subject of a security being
forfeited, extinguished, surrendered, or determined.
(2) SEVERAL CUSTOMERS
(Discharge of one Customer not to affect liability of others)
Where two or more persons are named in this Security as the Customer no
release, discharge, composition or arrangement between the Bank and any one
or more of those persons shall release or discharge, or prejudice, or
otherwise affect, the Bank's right and remedies hereunder against any other
of those persons.
52
<PAGE>
(3) CUSTOMER'S CLAIMS
(Customer not to make claims unless Moneys Secured paid in full)
Until the Moneys Secured have been paid or discharged in full and the Bank
is satisfied that it will not be under liability to repay any of them on
the ground of preference or otherwise and notwithstanding any payment of
money recoverable from the Customer under this Security or any purported
release or cancellation of this Security the Customer will not by virtue of
such payment or by any other means or on any other ground, except with the
prior written consent of the Bank or as provided below -
(a) claim any set-off or assert any counterclaim against any Principal
Debtor in relation to any liability of Customer to that Principal
Debtor, or
(b) make or enforce any claim or right against any Principal Debtor or
prove in competition with the Bank, in respect of any payment
hereunder made by the Customer or otherwise; or
(c) be entitled to claim or have the benefit of, any set-off, counterclaim
or proof against, or dividend, compos or payment by, any Principal
Debtor or any Principal Debtor's estate; or
(d) be entitled to claim or otherwise obtain the benefit of any security
or guarantee or indemnity at any time by the Bank for or in respect of
any of the Moneys Secured or be entitled to assert against the Bank
any of subrogation in respect of any moneys paid to the Bank; or
(e) claim or enforce any right of contribution against any co-surety.
(4) BANKRUPTCY OR WINDING-UP OF PRINCIPAL DEBTOR
(Customer to exercise rights if required by Bank)
If the Customer shall have any right of proof in the bankruptcy or winding-
up of any Principal Debtor which will not derive from a payment made
hereunder, the Customer shall (except where the Bank otherwise requires)
exercise that right and shall (except as aforesaid) claim any related right
of contribution from any co-surety.
(5) PAYMENT IN GROSS
(All payments received by the Bank deemed to be payments in gross)
53
<PAGE>
All moneys from time to time received by the Bank in reduction of the
indebtedness of any Principal Debtor to Bank or from any co-surety shall be
regarded as payment in gross without any right on the part of the Customer
stand in place of the Bank in respect of or to claim the benefit of any
moneys so received as against any Principal Debtor until the whole of the
indebtedness of that Principal Debtor has been paid or satisfied and so
that in the event of the Customer going into liquidation, official
management or bankruptcy, the Bank shall be entitled to prove the total
indebtedness of that Principal Debtor in relation to the Moneys Secured
(including for all moneys which the Customer has paid hereunder) and to
retain and carry to a suspense account and appropriate at the discretion of
the Bank any amounts received until the Bank has been paid one hundred
cents in the dollar in respect of the Moneys Secured.
(6) MONEYS RECEIVED BY CUSTOMER
(Moneys or property received by Customer to be held in trust for Bank)
If while the Customer shall remain under any liability to the Bank under
this Security any moneys or other property or assets shad be received by
the Customer in consequence of anything done with the consent of the Bank
or in pursuance of any of the other provisions of this Clause or in breach
of any such provisions, such moneys, other property or assets shall be held
upon trust to pay or transfer the same to the Bank to the extent of such
liability.
(7) REFERENCE TO DEBTOR
(Extension of "Moneys Secured")
Each reference to the Customer in paragraphs 2(1)(a), (b), (c), (d), (c),
(f) and (g) and in Clause 3, shall also be read as a reference to each
Principal Debtor.
27. CUSTOMER AS TRUSTEE
(Certain provisions to apply if Customer is trustee)
(1) APPLICABILITY
The following provisions of this clause apply if the Customer gives this
Security as trustee of the Trust.
(2) UNDERTAKINGS BY CUSTOMER
The Customer:
54
<PAGE>
(a) (BINDING SECURITY): acknowledges and agrees that this Security is
binding on it personally and in its capacity as trustee of the Trust,
(b) (SUCCESSOR TRUSTEE): shall cause any successor of the Customer as
trustee of the Trust to execute such documents as the Bank may require
to ensure that this Security is binding on such successor, and
(c) (RIGHT OF INDEMNITY): upon the floating charge created by this
Security becoming a fixed charge and on demand by the Bank, shad
exercise its rights of indemnity in relation to the Trust Fund and its
rights against the beneficiaries to cause payment of the Moneys
Secured to the Bank or otherwise hold such rights for the Bank.
(3) REPRESENTATIONS AND WARRANTIES
The Customer represents and warrants in respect of each Trust that:
(a) (SOLE TRUSTEE): the Customer is the sole trustee of the Trust and no
action has been taken to remove or replace it;
(b) (PARTICULARS): full particulars of the terms of the Trust have been
disclosed to the Bank prior to the execution of this Security;
(c) (TRUST DOCUMENTS): the copies of the Trust Deed constituting the Trust
and any other documents relating to the Trust and the Memorandum and
Articles of Association of the Customer delivered to the Bank before
the Customer executed this Security are true copies of those documents
as in force at the date of this Security;
(d) (POWER): the Customer has power under the Trust Deed to execute and
perform its obligation under this Security, and all necessary action
has been taken to authorises the execution and performance of this
Security under the Trust Deed and the Memorandum and Articles of the
Customer;
(e) (BENEFIT): this Security is executed and all transactions secured by
this Security are or will be entered into as part of the due and
proper administration of the Trust and are or will be for the benefit
of the beneficiaries;
55
<PAGE>
(f) (RIGHT OF INDEMNITY): the Customer has a right to be fully indemnified
out of the Trust Fund and no action has been taken to restrict or
limit that right;
(g) (DEFAULT): the Customer is not in default under the Trust Deed; and
(h) (VESTING DATE): no vesting date for the Trust Fund has been
determined,
and further warrants that each of the above warranties will remain true as
long as this Security remains in force.
(4) BENEFICIARIES' CLAIMS
The Banks rights under this Security shall rank in priority to the claims
of beneficiaries to the Trust Fund.
(5) DISTRIBUTION OF INCOME
(Distribution of income allowed)
Nothing in this clause shall prevent the Customer from distributing the
income (but not the capital) of the Trust Fund in accordance with the Trust
Deed until the Bank by written notice directs the Customer not to make such
distributions or until this Security becomes immediately enforceable,
whichever occurs first.
(6) NEGATIVE COVENANTS
Except with the prior written consent of the Bank:
(a) the Trust Deed shad not be altered;
(b) the Customer shall not retire as trustee of the Trust. nor shall any
new or additional trustee be appointed; and
(c) the Customer shall not default in its duties as trustee of the Trust.
(7) SUCCESSORS
In this Security references to the Customer include the Customer's
successors as trustee of the Trust.
28. PARTNERSHIP
(Security not to be affected by changes in partnership)
Where this Security is given in respect of the indebtedness of a
partnership this Security shall continue to notwithstanding
56
<PAGE>
any changes which may from time to time take place in the constitution of
the part notwithstanding that the partnership ceases to carry on business,
and shall continue to bind the notwithstanding that the Customer is not a
member of the partnership or having once been a partnership the Customer is
no longer a member thereof.
29. RESUMPTION
(1) CLAIM FOR COMPENSATION
(Bank entitled to claim compensation)
If the Mortgaged Property or any part thereof is or is proposed to be
resumed or acquired by the government or public authority or the use to
which the Mortgaged Property or any part thereof may lawfully be put is or
to be altered the Customer shall notify the Bank forthwith and, if
requested by the Bank, shall at the expense claim or join with the Bank in
making claim for all or any moneys which may become payable purchase money
or compensation or otherwise in respect of the Mortgaged Property and in
making app consent or permission to use the Mortgaged Property for such
purposes as the Bank may think appropriate.
(2) COMPROMISE OR SETTLEMENT
(Bank to approve compromise or settlement)
The Customer shall not without the consent and approval in writing of the
Bank compromise agree or the purchase money or compensation or any
proportion thereof payable in respect of any such acquisition or execute
any releases therefor notwithstanding anything in any statute under which
any purchase money or compensation may be payable.
(3) COMPENSATION RECEIVED
(Customer to hold compensation in trust for Bank)
If the Customer receives any purchase moneys or compensation as a result of
any exercise by any government or any public authority of any power under
any law or by reason of or as a result of some right to receive or purchase
moneys having arisen, then such moneys shall be held by the Customer on
trust for the application in or towards payment of the Moneys Secured and
shall be paid to the Bank forthwith upon.
30. MORATORIUM
(Moratorium laws do not apply)
Any existing or future moratorium legislation or regulations shall have no
application to this Security or to the Secured and such legislation and
regulations, are hereby expressly
57
<PAGE>
excluded from applying to this Security Moneys Secured to the full extent
permitted by law.
31. COVENANT FOR TITLE AND OTHER REPRESENTATIONS AND WARRANTIES
(1) GOOD TITLE
The Customer covenants that it has good right, title and authority to
charge the Mortgaged Property in the contemplated by this Security free of
any encumbrance except any Permitted Prior Charge.
(2) REPRESENTATIONS AND WARRANTIES
The Customer represents and warrants that:
(a) (POWER): the Customer has power to enter into and observe its
obligations under this Security,
(b) (AUTHORISATIONS): the Customer has the reports and evaluations and has
in full force and effect and authorisations necessary to enter into
this Security, observe obligations under it, allow it to be enforce
enable the Customer to carry on any undertaking or activity
contemplated by any purpose agreed by to be the purpose for which the
Moneys Secured are provided.
(c) (ENFORCEABILITY): the Customer's obligations under this Security are
valid, binding and are enforceable it in accordance with its terms;
(d) (CONSTITUENT DOCUMENTS): this Security and the transactions under it
do not contravene the Customer constituent documents or any law,
regulation or official directive or any of the obligations or
undertaking which the Customer or any assets of the Customer are bound
or cause a limitation on the Customer's or the powers of its directors
to be exceeded;
(c) (DISCLOSURE): the Customer has fully disclosed in writing to the Bank
all facts relating to the Customer, this Security, the Mortgaged
Property and anything in connection with them which are material to
the assessment of the nature and amount of the risk undertaken by the
Bank in providing any of the Moneys Secured or accepting this Security
as security for doing so or which are material to establishing the
form of any notifications to be lodged in any official register in
connection with this Security or the Mortgage Property;
58
<PAGE>
(f) (EVENTS OF DEFAULT): no event mentioned in Clause 3 has occurred which
continues to be unremedied; and
(g) (MATERIAL DEFAULT): to the best of the knowledge information and
belief of the Customer, the Customer is not in material default under
any material agreement binding on the Customer and no action, suit,
proceedings, litigation or administrative proceeding before any court,
board or arbitration or administrative body is presently in course or
pending or threatened which would have a material adverse effect on
the business, assets or financial condition of the Customer or which
brings into question the validity of this Security or the Bank's right
to recover any of the Moneys Secured,
and the Customer covenants that each of these representations and
warranties is true and correct at the date of execution by the Customer of
this Security
32. BANKING DAYS
(Payments to be on Banking Days)
When any day specified in this Security or in any notice or demand made
under or in relation to this Security for the payment of any moneys or the
performance of any act is not a Banking Day the payment shall be made or
the act performed on the Banking Day next preceding that day.
33. PAYMENTS FREE OF DEDUCTION
(All payments to be free of deductions or to be grossed up)
(1) NO DEDUCTIONS
All payments to be made under this Security shall be made free and clear of
and without deduction for taxes, levies, imposts, duties, charges, fees or
withholdings of any nature whatsoever now or hereafter imposed by any
governmental, fiscal or other authority.
(2) GROSS-UP
If the Customer shall at any time be compelled by law to deduct or withhold
any amount from any payment to be made under this Security the Customer
will concurrently pay to the Bank such additional amounts as will result in
payment to the Bank of the full amount which would have been received if
such deduction or withholding had not been made. If due to any statutory
provision the Customer is not obliged to pay such additional amounts, the
Customer shall not be obliged to pay them under this Security but the Bank
may then demand payment
59
<PAGE>
of the Moneys Secured as if such non-payment were an event mentioned in
Clause 3.
34. LAW AND JURISDICTION
(See Schedule for law and jurisdiction)
This Security shall be governed by and construed in accordance with the
laws of the place named in Item 4 of the Schedule and the Customer hereby
irrevocably submits to the non-exclusive jurisdiction of the courts of that
place.
35. PRIORITY AMOUNT
(Maximum prospective liability specified in Schedule)
For the purpose only of Fixing priorities in accordance with Section 282 of
the Corporations Law between this Security and any other charge given by
the Customer and without affecting any obligation of the Customer under
this Security, the prospective liabilities secured by this Security
include, without limitation, the prospective liabilities identified in
paragraph (1) of Item 3 of the Schedule and the maximum prospective
liability secured by this Security is the amount specified in paragraph (2)
of Item 3 of the Schedule.
36. SUSPENSION OF CHARGE
(1) SUSPENSION
(Suspension because of conditional prohibition by law)
If, without any consent, approval, notification or condition or other
required action being obtained, made, satisfied or carried out, a law
prohibits any property or asset of the Customer from being charged or
provides that if such property or asset is charged, this Security is void,
voidable or unenforceable:
(a) this Security shall not operate to charge any such property or asset
of the Customer in each such case unless and until the consent,
approval, notification or condition or other required action has been
obtained, made, satisfied or carried out with respect to the property
or asset concerned; and
(b) the Customer will diligently make all applications, pay all costs and
expenses and do all things necessary to obtain or have made, satisfied
or carried out any consent, approval, notification, condition or other
action referred to in the preceding paragraph (a).
(2) PROHIBITED CHARGES
(Suspension because of absolute prohibition by law)
60
<PAGE>
Subject to sub-Clause 36(1), this Security shall not operate to charge any
property or asset of the Customer absolutely prohibited by law from being
charged in the manner contemplated by this Security or which, by this
Security, would cause this Security to be absolutely void, voidable or
unenforceable.
(3) CERTAIN CLAUSES TO APPLY
(Certain Clauses to apply to property not charged)
Notwithstanding sub-Clause 36(1) and (2), any reference in Clauses 3, 6, 7,
3, 29 and 31 of this Secured Mortgaged Property shall include any property
or asset which is not, or which is not for the time being, a result of this
Clause 36.
(4) NO PREJUDICE TO SECURITY
(Operation of Security not to be prejudiced)
Nothing in this Clause 36 shall prejudice the operation of this Security on
any property or asset of the Customer otherwise referred to in sub-Clause
36(1) or (2).
37. COUNTERPARTS
(Counterparts constitute one instrument)
This security may consist of a number of counterparts and such counterparts
taken together constitute one same instrument.
61
<PAGE>
SCHEDULE
Item 1: Name and Address of Customer:
TOTAL ENERGY SYSTEMS LIMITED ACN 010 876 150 a company duly
incorporated according to law having its registered office at 3rd
Floor, Invicta House, 172 Edward Street, Brisbane Qld
Item 2: Permitted Prior Charges:
Nil
Item 3: (1) (Clause (35) - prospective liabilities)
The prospective liabilities secured by this deed include, without
limitation:
Omnibus Facility comprising a mix of Overdraft/Commercial Bill
Acceptance/Discount/Import Letter of Credit/Bills of Lading
Surrendered/Trade Bills Discounted/Cheque Encashment Letter of
Credit/Forward Exchange Cover Facilities under Facility Letter dated
30 January 1995.
(2) (Clause (35) - maximum prospective liability)
Maximum prospective liability is $10,00,000 (together with interest,
fees and expenses thereon or in connection therewith)
Item 4: Governing Law:
Queensland
Item 5: Trust Details:
(Complete only if this Security is given by the Customer as Trustee of
a Trust.)
Name of Trust: None disclosed
Description (including dates and parties) of all documents
establishing the Trust:
Description (including date and parties) of all amendments to the
documents establishing the Trust:
62
<PAGE>
EXHIBIT 10.42
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
NEW SOUTH WALES
between
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
and
TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
<PAGE>
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
MASTER
COMMERCIAL HIRE PURCHASE AGREEMENT
NEW SOUTH WALES
NOTE: This Master Commercial Hire Purchase Agreement can only be used:
1.) in New South Wales: AND
2.) if the Customer is a corporation OR, if the Customer is a natural person,
where the Equipment to be hired and/or licensed has a cash price of more
than $20,000: AND
3.) if the Equipment to be hired and/or licensed includes a commercial vehicle
or farm machinery, the cash price in respect of such Equipment is less than
$20,000.
Our ref: nswchp.doc
<PAGE>
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
Agreement
Number: CE0712
THIS AGREEMENT is made
BETWEEN:
GE CAPITAL AUSTRALIA LIMITED (A.C.N. 008 562 534), a company incorporated
in the Australian Capital Territory and having its principal office at 88
Walker Street, North Sydney in the State of New South Wales, of the one
part ("GE Capital")
AND:
THE PARTY OR PARTIES named and described in the Schedule hereto, of the
other part ("Customer").
PART 1 - PRELIMINARY
1.1 Definitions
In this Agreement unless the context otherwise requires:
"Acceptance Date" means, in relation to any Equipment, the date that the
Supplement for that Equipment is accepted by GE Capital;
"Customer" means the party or parties described in the Schedule to this
Agreement as the Customer (and where more than one reference to "Customer"
is a reference to them jointly, each of them severally, and to any two or
more of them jointly) and, in the case of an individual, his executors and
administrators and, in the case of a company, its successors;
"Discount Rate" means the rate per centum per annum equal to the gross
internal rate of return applied by GE Capital in calculating the Periodic
Payments payable for the hire and/or licence of any Equipment less four per
centum (4%);
"Equipment" means the goods specified in any Supplement(s) to this
Agreement;
"Expiry Date" means, in relation to any Equipment, the last day of the
Payment Period of the Supplement in which that Equipment is specified or
such other later date as GE Capital agrees to in writing;
"GE Capital" means GE Capital Australia Limited and its successors and
assigns.
2
<PAGE>
"Installation Site" means the installation site of any Equipment as
specified by the Customer in a Supplement;
"Officer" means a duly authorized representative of GE Capital;
"Payment Period" means the period during which the Customer shall make
Periodic Payments as set out in Clause 2.4 hereof;
"Periodic Payments" means the payments referred to in a Supplement.
"Supplement" means a supplement to this Agreement which refers to this
agreement and which has been signed by the Customer and accepted by GE
Capital;
"Supply Agreement" means the agreement for the supply of Equipment between
the Customer and the original supplier.
1.2 Formation of Agreement
This Agreement and any Supplement shall not bind GE Capital unless and
until it has been accepted and signed on behalf of GE Capital by an Officer
of GE Capital at its Head Office in Sydney. The signing of this Agreement
and of any Supplement on behalf of GE Capital shall of itself and without
notice thereof to the Customer constitute an acceptance creating a contract
between GE Capital and the Customer. Such acceptance shall be evidenced by
the return to the Customer in the case of this Agreement of an
acknowledgment copy of this Agreement and in the case of any Supplement, an
acknowledgment copy of such Supplement, signed by an Officer of GE Capital.
1.3 Term of Agreement
This Agreement shall be effective and bind the Customer from the date from
which it is signed on behalf of GE Capital and shall continue, unless
sooner terminated in accordance with this Agreement, in full force and
effect until all the Customer's obligations hereunder and under any
Supplement are fulfilled.
1.4 Supplements
This Agreement shall be read in conjunction with any Supplement, which
shall be construed as an integral part of this Agreement. The Customer
agrees that a Supplement shall be effective and bind the Customer from the
date on which it is accepted by GE Capital and that the Customer shall be
obliged to take delivery of and take on hire and/or take on licence the
Equipment specified in the Supplement and observe and perform its
obligations contained herein with respect to that
3
<PAGE>
Equipment as from the date of such acceptance including, without limiting
the generality of the foregoing, its obligations to insure the Equipment
from the date that Equipment is delivered to the Customer.
PART II - DELIVERY AND METHOD OF PAYMENT
2.1 Hire
In accordance with the terms and conditions of this Agreement, GE Capital
agrees, at the Customer's request from time to time, to acquire Equipment
as specified in a Supplement and to hire that Equipment to the Customer.
2.2 Commencement of Hire
The hire of any Equipment specified in a Supplement shall commence
immediately on the date of the delivery of that Equipment to the Customer
and shall continue, subject to Clause 2.6, until the last day of the
Payment Period of that Supplement.
2.3 Delivery
(a) The Customer shall arrange for delivery of the Equipment specified in
a Supplement to the Customer's Installation Site and ensure that the
Equipment is installed and made ready for operation in accordance with
the manufacturer's specifications, all at no cost to GE Capital.
(b) The Customer agrees that GE Capital shall have no responsibility to
the Customer for or arising out of any delay in delivery of any
Equipment. The Customer and not GE Capital shall bear the risk of
damage to the Equipment incurred in the course of delivery.
(c) GE Capital does not at any time make any representation or warranty
that the premises in which the Equipment is to be installed are in a
condition suitable for the delivery, installation or operation of the
Equipment.
2.4 Periodic Payments
(a) A Supplement shall specify a payment period (hereinafter called the
"Payment Period") which shall commence on the first day of the month
following the last Acceptance Date to occur with respect to the
Equipment specified in that Supplement and shall continue for the
number of complete calendar months specified in that Supplement.
(b) The Customer shall pay to GE Capital the Periodic Payments specified
in a Supplement in advance as follows:
4
<PAGE>
(i) the first Periodic Payments shall be paid on the first day of the
Payment Period; and
(ii) the remaining Periodic Payments shall be paid on the first day of
each and every month (or such other periodic period as may be
specified in that Supplement) during the Payment Period of that
Supplement.
(c) The Periodic Payments specified in a Supplement shall be paid in
Australian dollars to GE Capital at its address specified above or at
such other place as GE Capital may direct.
(d) The Periodic Payments payable in respect of Equipment supplied under
Supplements from time to time shall be calculated by reference to GE
Capital's costs of funds current at the time of acceptance by GE
Capital of such Supplement.
(e) The Customer shall pay any other moneys payable under this Agreement
directly to GE Capital.
2.5 Overdue Moneys
If any Periodic Payment or other moneys payable hereunder remain unpaid for
more than ten (10) days after the due date for payment thereof, the
Customer shall pay interest on those moneys calculated on a daily basis at
the rate equal to the aggregate of the 90 Days Bank Bill Swap Reference
Rate as published in the Australian Financial Review on the date on which
the Overdue Moneys first become payable and 4% per annum from and after
such due date until payment of such moneys in full to GE Capital. The
Customer acknowledges that such interest is a genuine pre-estimate of GE
Capital's cost of funding such overdue moneys and is not a penalty.
2.6 Option to Purchase Equipment
If the Customer is not in breach of any term of this Agreement and no event
of default as specified in Clause 3.15 has occurred that it is continuing,
the Customer may, at any time during or upon the last day of the Payment
Period of a Supplement, elect to purchase, subject to clause 3.9, the
Equipment specified in that Supplement by:
(a) giving fourteen (14) days prior written notice to GE Capital; and
(b) where the Customer elects to purchase that Equipment during the
Payment Period of that Supplement - paying to GE Capital an amount
equal to the total Periodic Payments
5
<PAGE>
payable over the balance of the Payment Period of that Supplement
brought to a present value as at the date upon which the next
following Periodic Payment is due to be paid after the expiration of
the fourteen (14) day period referred to in paragraph (a) hereof ("the
Exercise Date") by applying the Discount rate to each such Periodic
Payment over the period by which the date for payment thereof is by
virtue of this Clause brought forward together with an amount equal to
any stamp duty payable in respect of such rebated total; and
(c) paying to GE Capital the amount of any other moneys due, owing or
payable to GE Capital by the Customer under this Agreement and upon
receipt by GE Capital of all such moneys on or before the Exercise
Date, GE Capital shall sell that Equipment to the Customer on the
Exercise Date PROVIDED THAT unless and until the Customer makes such
election, GE Capital shall retain full title and property to and in
that Equipment and the Customer shall be bailee of the Equipment only
to use the same subject to the terms and conditions contained herein.
The Customer expressly agrees and acknowledges that the option to
purchase contained in this Clause shall not extend or apply to any
Software whatsoever.
PART III GENERAL TERMS AND CONDITIONS
3.1 Use of Equipment
The Customer agrees that the Equipment shall be used in a proper and
skillful manner by properly trained and competent persons in compliance
with the manufacturer's requirements, recommendations and instruction
manuals and with all laws, rules and regulations of the jurisdiction
wherein the Equipment is located from time to time. The Customer shall pay
all costs, expenses, fees and charges incurred in connection with the use
and operation of the Equipment including but not limited to supplies,
fittings and accessories.
3.2 Control of Equipment
The Customer shall at all times retain possession and control of the
Equipment and shall not, without the prior written consent of GE Capital,
sell, assign, pledge, lease, mortgage, charge, let or hire, part with
possession of or otherwise dispose of or deal with the Equipment or any pan
thereof or its interest therein or any part thereof, or remove any item of
Equipment from the Installation Site and the Customer shall not agree,
attempt, offer or purport to do any such things.
6
<PAGE>
3.3 Registration and Insurance of Motor Vehicles or Prescribed Goods
(a) if the Equipment is a motor vehicle, the Customer shall have and keep
at its own cost the same duly registered at all times as required by
any relevant law in the name of the Customer as if it were the owner
and have and keep the same insured against third party risk to the
extent required by law by a policy insuring to the benefit of both
parties hereto.
(b) if the Equipment consists of goods to which a register of security
interest or encumbrances applies in the relevant State of Territory,
the interests of GE Capital shall be registered in the appropriate
register as owner of the Equipment.
(c) if the Equipment consists of goods GE Capital's title to which may be
defeated by a subsequent bona fide purchaser of the goods for value
without notice of GE Capital's interest, the Customer shall ensure
that the goods are sufficiently identified, marked and displayed so as
to put third parties on notice of the ownership of GE Capital in the
goods. GE Capital may at anytime affix such identifying plates or
marks on or to the goods and will at all reasonable times be given
access to the goods for such purposes. The Customer shall indemnify GE
Capital to the full value of the Equipment should GE Capital's
interest and title to the Equipment be lost through the Customer's
breach of this provision.
3.4 Maintenance and Repairs
(a) The Customer agrees that the Equipment shall be maintained in a proper
and skillful manner by properly trained and competent persons in
compliance with the manufacturer's requirements, recommendations and
instruction manuals and with all laws, rules and regulations of the
jurisdiction wherein the Equipment is located from time to time. The
Customer shall pay all costs, expenses, fees and charges incurred in
connection with maintenance of the Equipment.
(b) The Customer shall keep the Equipment in proper and secure premises
and shall at all times, at its own expense, keep the Equipment in
proper working order and in as good condition and repair as when
delivered (reasonable wear and tear expected) and shall, if the
Equipment shall be or become in any way out of order or in need of
repair, have the same repaired by skilled and competent persons.
7
<PAGE>
(c) The Customer shall permit GE Capital to enter upon the premises
whereon the Equipment may or is supposed to be during the normal
business hours of the Customer provided reasonable notice (except in
an emergency where no notice shall be required) it is first given to
the Customer for the purpose of inspecting and testing the condition
thereof or examining the state of repair thereof and GE Capital may
serve upon the Customer a notice in writing of any defect or damage
for the repair or replacement of which the Customer may be responsible
hereunder requiring the Customer within a reasonable time to repair or
replace the same. The Customer shall at all times comply with the
reasonable requirements of GE Capital as to the repair, renewal or
replacement of any Equipment in respect of which the Customer is
liable. In the event of the Customer failing to carry out the
requirements of GE Capital it shall be lawful but not obligatory for
GE Capital to enter upon such premises with workmen and others and all
necessary materials for the purposes of carrying out such
requirements. The Customer shall reimburse GE Capital on demand for
all costs reasonably incurred by GE Capital pursuant to this Clause.
(d) The Customer shall notify GE Capital in writing immediately if any
defect or fault (except those of a trivial nature) occurs in the
Equipment or if any repairs (except those of a trivial nature) become
necessary for the satisfactory working of the Equipment.
3.5 Taxes, Stamp Duty and Costs
The Customer agrees to pay and indemnify GE Capital against any and all
taxes, costs, fees, duties (Including stamp duty, if any, except where the
payment of such stamp duty by the Customer is prohibited by law) or levies
now or hereafter imposed or paid or payable by GE Capital or payable by the
Customer, in respect of this Agreement, any of the matters contained
herein, the Equipment, any Supplement, Periodic Payments or the receipt by
GE Capital of any moneys hereunder, together with any penalties or fines in
respect of late payment or non-payment thereof and the Customer shall also
pay all other costs, expenses and outgoings (including legal costs on a
solicitor and client basis) incurred by GE Capital in relation to this
Agreement or in the exercise or attempted exercise of any rights or powers
conferred on GE Capital hereunder or by the general law.
3.6 Risk
(a) The Customer shall bear all risk of loss of, damage to or destruction
of the Equipment from date of delivery to the Customer's premises
until the Equipment is returned to GE
8
<PAGE>
Capital whether or not the Equipment is covered by insurance.
(b) The Customer assumes all risks and liability for the Equipment and for
the use, operation, maintenance, repair and storage thereof (including
but not limited to loss of profits, loss of revenue, consequential
damage, inconvenience or loss of use for any period of time) and for
injuries to or deaths of persons and damage to property however
arising from or incidental to such use, operation, maintenance, repair
or storage whether such injuries to or deaths of persons be of agents
or employees of the Customer or of third parties or such damage to
property be of the Customer or of third parties.
3.7 Insurance
(a) The Customer shall at its own cost and in the name of GE Capital and
the Customer for their respective rights and interests keep the
Equipment insured for an amount not less than the full insurable value
thereof with some reputable insurance company in Australia in such
form and subject to such conditions and covering all such risks as GE
Capital may from time to time require, and, in the absence of any
nomination, against loss or damage occassioned by fire, accident
theft, windstorm, malicious act, storm, tempest, explosion, rain,
water, flood, earthquake and lightning. In addition, the Customer
shall at its own cost take out and maintain insurances against public
risk liability and other risks which a reasonably prudent
businessperson would insure against. The Customer shall deliver such
insurances to GE Capital upon demand and shall duly and punctually pay
all premiums necessary for effecting and keeping such insurances in
force and shall furnish to GE Capital upon demand such certificates or
other satisfactory evidence of the maintenance of the insurances
required hereunder.
(b) The Customer shall keep the Equipment insured from the date it is
delivered to the Customer until the same is returned to GE Capital in
accordance with this Agreement.
(c) The Customer shall not do or permit or suffer any act, matter or thing
whereby. such insurances may be prejudicially affected or invalidated.
(d) GE Capital shall be entitled to receive all moneys payable under the
insurances referred to in Clause 3.7(a) hereof and all moneys which
may be payable by and any other person in respect of damage to or loss
of the
9
<PAGE>
Equipment and the Customer hereby appoints GE Capital its attorney to
recover and/or compromise in its and their names any claim for loss or
damaize under those insurances or otherwise and to give effectual
releases and receipts for the same and hereby irrevocably authorises
GE Capital to appropriate any insurance or other moneys received by it
as its option towards repair and/or restoration of the Equipment or
towards any moneys due or payable by the Customer hereunder or on any
other account whatsoever.
(e) The Customer shall notify GE Capital in writing within twenty four
(24) hours immediately following any loss or damage to the Equipment
howsoever caused or after the occurence of any event which could or
might lead to a claim under any insurance effected in respect of the
Equipment.
(f) In the event of any total or substantial loss or destruction of any
Equipment, GE Capital may by notice in writing to the Customer
terminate this Agreement with respect to that Equipment and the
Customer shall within seven (7) days of such notice of termination pay
to GE Capital an amount equal to whichever is the greater of:
(i) an amount equal to the amount specified as liquidated damages
pursuant to Clause 3.17 as if such loss or destruction of that
Equipment were a breach of an essential term of this Agreement;
or
(ii) the value of the Equipment immediately prior to such loss or
destruction, such value being certified by a dealer or licensed
valuer in similar or like goods to that Equipment as selected by
GE Capital.
PROVIDED TRAT GE Capital shall give credit to the Customer for any
insurance moneys or proceeds of salvage received by it if and when
received but only to the extent of the aforesaid amount.
3.8 Indemnities
(a) The Customer shall indemnify GE Capital, its representatives and
authorized sub-contractors and any assignee of GE Capital from and
against any and all losses, damages, injuries, claims, liabilities,
demands and expenses, including reasonable legal fees and expenses and
claims for loss of profits and/or economic damage, of any nature
arising out of the installation, maintenance, removal, use, repair,
condition, storage or operation of the Equipment or any part thereof.
10
<PAGE>
(b) The Customer shall indemnify GE Capital, its representatives and
authorized sub-contractors and any assignee of GE Capital from and
against all losses, damages, claims, penalties, liabilities and
expenses of any nature caused by, to, or in respect of the Equipment
including (without limitation):
(i) loss by seizure under distress for rent, execution or other
legal process; and
(ii) loss, destruction or damage to the Equipment by fire, accident
or any other cause whatsoever; and
(iii) any claims arising out of the use, operation or keeping of the
Equipment
(c) The indemnities referred to herein shall continue in full force and
effect notwithstanding the termination of this Agreement or any
Supplement with respect to any Equipment.
3.9 Ownership
(a) Subject to Clause 2.6, the Equipment is, and shall at all times be and
remain, the property of GE Capital or a related company of GE Capital.
The Customer shall have no right, title and interest therein or
thereto except as expressly set forth herein.
(b) Notwithstanding anything herein contained:
(i) the Customer agrees and acknowledges that any operating or
application software comprised in any of the Equipment (and all
upgrades thereto) (together "Software") is licensed to the
Customer under the terms of a software license provided by the
supplier or proprietor thereof and GE Capital shall have no
obligations in respect thereof; and
(ii) the Customer shall have no right, title or interest in and to
such Software save as expressly provided in the license.
3.10 Affixation to Realty
Except to the extent necessary to enable the proper use of the Equipment,
the Customer shall not cause or permit the Equipment to be affixed to any
real property or improvements thereon and it is expressly agreed that the
Equipment is, and shall at all times be and remain, personal property
notwithstanding that the Equipment or any part thereof may now be or
hereafter become, in any manner, affixed or attached to
11
<PAGE>
real property or any improvements thereon and it shall not thereby become
or be deemed to become a fixture but shall be removable by GE Capital in
accordance with this Agreement notwithstanding such affixation.
3.11 Acknowledgment of GE Capital's Interest
The Customer shall not install, use or place the Equipment or cause or
suffer it to be installed, used or placed, upon any premises held or
occupied by it as lessee, under-lessee or licensee or which are the subject
of any mortgage or charge unless the Customer shall first deliver to GE
Capital an acknowledgement in writing signed by the owner of the premises
and/or the mortgagee or chargee, as the case may be, that the Equipment is
and shall remain the property of GE Capital and shall not be or become
landlord's fixtures or a part of the land or subject to any such mortgage
or charge notwithstanding that the Equipment may be affixed to the land in
any manner whatsoever and that GE Capital may at any time enter on the
premises and detach and remove such of the Equipment as shall be on the
premises.
3.12 Liens over Equipment
The Customer shall not suffer any encumbrance, charge or lien of any kind
to arise or remain on the Equipment arising or resulting from any act of
the Customer except:
(a) a repairer's lien in which event the Customer shall take the necessary
steps to have it removed or satisfied forthwith provided however that
if GE Capital so determines it may remove or satisfy the lien at its
cost and the Customer shall indemnify GE Capital therefore; and
(b) such lien or charge as may arise by law in respect of unpaid rates,
taxes, fees or duties of any kind whatsoever in which event the
Customer shall forthwith pay the same so that the Equipment will be
free of any lien or charge.
3.13 Assignment and Sub-Contractors
The Customer shall not, without the prior written consent of GE Capital,
assign this Agreement or any of its rights hereunder. GE Capital may assign
this Agreement or any of its rights hereunder and may sell, assign, pledge,
mortgage, charge or otherwise dispose of or deal with the Equipment or any
part thereof or its interest therein or any part thereof GE Capital may, in
its absolute discretion, sub-contract any of its obligations under this
Agreement.
12
<PAGE>
3.14 Essential Terms
The Customer and GE Capital expressly agree and declare that the Customer's
covenants and obligations contained or implied in:
(a) Clause 2.4 to pay the Periodic Payments specified in any Supplement in
the amounts and at the times specified in that Supplement and to pay
the same punctually;
(b) Clause 3.1 as to the use of the Equipment;
(c) Clause 3.7 to insure the Equipment; and
(d) Clause 3.19 to surrender the Equipment and pay the moneys referred to
therein punctually are essential terms of this Agreement and that the
breach, non-observance or non-performance of any one or more of such
covenants or obligations shall be deemed to be a breach of an
essential term of this Agreement by the Customer PROVIDED THAT the
presence of this Clause in this Agreement shall not mean or be
construed as meaning that there are no other essential terms in this
Agreement.
3.15 Default
In the event that:
(i) the Customer defaults in the payment of any Periodic Payment or other
sum payable hereunder; or
(ii) the Customer defaults in the observance or performance of any of the
other essential terms referred to in Clause 3.14 hereof, or
(iii) the Customer defaults in the observance or performance of any other
term of condition herein and such default is not remedied within
thirty (30) days after notice thereof to the Customer by GE Capital;
or
(iv) an order is made, a petition or summons is filled or a resolution is
passed for the winding up of the Customer other than for the purposes
of reconstruction or amalgamation; or
(v) the Customer ceases or threatens to cease to carry on its business or
to dispose of the whole or a substantial part of its undertaking or
the Customer is unable to pay its debts; or
(vi) a receiver and/or manager or official manager or provisional
liquidator is appointed, or an
13
<PAGE>
encumbrancer takes possession of the whole or a substantial part of
the undertaking or assets of the Customer. or proceedings are taken
against the Customer and no defence is entered; or
(vii) any distress, execution, sequestration or other process is levied
against the property of the Customer and the amount of the judgment
is not paid out or discharged within seven (7) days; or
(viii) the Customer convenes a meeting or enters or proposes to enter into
an arrangement or composition with its creditors; or
(ix) the Customer becomes insolvent or conunits any act of bankruptcy; or
(x) without the prior written consent of GE Capital, whose consent will
not be unreasonably withheld, effective control of the Customer is
altered to any material extent from that subsisting at the date of
this agreement. For the purposes of this clause effective control"
of the Customer means:
(a) control of the composition of the Board of Directors of the
Customer; or
(b) control of more than half of the voting power of the Customer;
or
(c) control of more than half of the issued capital of the Customer
excluding any part of it which carries no right to participate
beyond a specified amount in the distribution of either profit
or capital.
(xi) where the Customer is a partnership, there is, without the prior
written eonsent of GE Capital any change in the composition of the
partnership except where such change arises as a result of death or
disability of a partner.
THEN in any such event GE Capital, without prejudice to any other right or
remedy of GE Capital herein contained or implied or at general law
(including the rights of GE Capital under Clause 3.17 when the event is
also a breach of an essential term of this Agreement), may at its option:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Customer of the applicable
covenants and terms of this
14
<PAGE>
Agreement or to recover damages for the breach thereof, and/or
(b) by notice in writing to the Customer, terminate this Agreement with
respect to all or any part of the Equipment hired and/or licensed
hereunder, whereupon all the interest of the Customer in such
Equipment (hereinafter referred to as "Relevant Equipment") shall
cease (but the Customer shall remain liable hereinafter provided)
and in such event the Customer shall forthwith return the Relevant
Equipment to GE Capital at such place nominated by GE Capital and in
default thereof GE Capital may at any time retake possession of the
Relevant Equipment and the Customer hereby authorises GE Capital to
enter upon any premises where the Relevant Equipment may be located
and take possession of the same and the Customer hereby waives and
releases GE Capital from any liability for any damage occasioned by
the repossession of the same.
3.16 Rights of Termination
Without prejudice to any other rights and remedies of GE Capital hereunder
or at general law, in the event of the termination of this Agreement
pursuant to Clause 3.15(b), GE Capital may:
(i) retain all Periodic Payments and other moneys heretofore paid by the
Customer; and
(ii) re-hire, re-licence or lease or rent all or any part of the Relevant
Equipment for such consideration upon such terms as GE Capital
thinks fit, or, at its absolute discretion, sell all or any part of
the Equipment at public or private sale upon terms as GE Capital
thinks fit.
3.17 Liquidated Damages
Where the Customer breaches or fails to observe or perform an essential
term of this Agreement and GE Capital terminates this Agreement with
respect to any Equipment under Clause 3.15(b) or by virtue of its rights
and remedies at general law, then in addition to and without prejudice to
any other right or remedy of GE Capital herein contained or implied or at
general law, the Customer shall pay to GE Capital forthwith upon such
termination as and by way of liquidated damages an amount equal to the
aggregate of:
(a) all Periodic Payments and other moneys due and payable but unpaid
under any of the terms hereof and payable
15
<PAGE>
with respect to the Relevant Equipment as at the date of
termination; and
(b) the total unpaid Periodic Payments which would have been payable
over the balance of the Payment Period (as specified in the
Supplement applicable to the Relevant Equipment) had this Agreement
not been terminated with respect to the Relevant Equipment brought
to a present value as at the date of termination by applying the
Discount Rate to each such Periodic Payment over the period by which
the date for payment thereof is by virtue of this Clause brought
forward together with an amount equal to any stamp duty payable in
respect of such rebated total; and
(c) the costs and expenses, if any, incurred by GE Capital in
repossessing the Relevant Equipment and in entering upon and
removing that Equipment from the premises whereon they or any part
of them are and in making good any injury caused in the said
premises or to the property of any person by such entry and of
repairs reasonably necessary to bring the Relevant Equipment to a
saleable condition and in storing, registering and insuring the
Relevant Equipment; and LESS AN AMOUNT EQUAL TO:
(i) where the Equipment has come into the possession of GE Capital
and has been sold by GE Capital, the gross proceeds of sale
actually received by GE Capital less all costs and expenses of
and incidental to such sale; or (ii) where the Equipment has
come into the possession of GE Capital and has been re-hired,
re-licensed, leased or rented by GE Capital, the gross
payments to be received on any re-hire, re-licence, lease or
rental which will fall due for payment in the period between
the date of termination of this Agreement and the date on
which the relevant Supplement would have expired had it not
been terminated, less all costs and expenses of and incidental
to such re-hire, re-licence, lease or rental, as the case may
be.
3.18 Other Terminations Provisions
(a) GE Capital may ship the Relevant Equipment to any location it
desires in order to effect a re-hire, re-licence, leasing, renting
or sale.
(b) In addition to the foregoing, GE Capital shall be entitled to
recover from the Customer any and all damages which GE Capital shall
sustain by reason of any
16
<PAGE>
breach by the Customer of any of the covenants and terms of this
Agreement, together with a reasonable sum for legal fees (including
fees on a solicitor and client basis) and such expenses as shall be
expended or incurred in the seizure, hire, lease, licence, rental or
sale of the Equipment.
(c) Without limiting Clause (b) above the Customer. agrees to pay or
reimburse GE Capital on demand for the costs, charges and expenses
of GE Capital in connection with the contemplated or actual
enforcement. or preservation of any rights under this Agreement
(including, without limitation, any legal fees on a full indemnity
basis or solicitor and own client basis, whichever is the higher).
(d) The Customer hereby authorizes GE Capital to enter any premises
occupied by the Customer during ordinary business hours for the
purpose of exercising its rights under Clauses 3.16, 3.17 and 3.18.
(e) The rights and remedies herein provided in favor of GE Capital in
the event of default shall not be deemed to be exclusive, but shall
be cumulative and shall be in addition to all other remedies
available to GE Capital at law, in equity or in bankruptcy.
(f) GE Capital may from time to time, and on such conditions as it
thinks fit, waive its rights arising under Clauses 3.15, 3.16, 3.17
and 3.18 or otherwise, but no such waiver shall affect its rights
under those Clauses or otherwise in respect of any further
continuing or recurring default, breach or event and the taking of
possession of the Relevant Equipment by GE Capital shall not
constitute a waiver of any claim of GE Capital for liquidated
Damages.
(g) The amount to be deducted under Clause 3.17(i) and (ii) shall not
exceed the total of the amount referred to in Clause 3.17(a) to (c)
inclusive.
(h) If the Relevant Equipment is not returned to or recovered by GE
Capital within fourteen (14) days of the date upon which GE Capital
is entitled to repossess the Relevant Equipment, no credit shall be
given under Clause 3.17 until that equipment comes into the actual
possession of GE Capital provided that GE Capital shall be under no
obligation to take steps to recover possession of that Equipment.
(i) The Customer acknowledges that the amount referred to in Clause 3.17
as Liquidated Damages has been assessed
17
<PAGE>
as a reasonable pre-estimate for loss of profit and other costs and
losses incurred by GE Capital as a result of an early termination of
this Agreement with respect to the Relevant Equipment and the
establishment costs associated with this Agreement.
(j) Notwithstanding any termination of this Agreement (for breach of an
essential term or otherwise) or the repudiation of this Agreement by
the Customer and the acceptance thereof by GE Capital, the
provisions of Clauses 3.15, 3.16, 3.17 and 3.18 shall continue as
remedies available to be exercised by GE Capital. This Clause shall
not limit the generality of any other Clause which would otherwise
survive the termination of this Agreement.
3.19 Surrender
(a) Upon the Expiry Date of any Equipment- the Customer shall, if it has
not elected to purchase that Equipment under Clause 2.6, at its own
cost assemble that Equipment at a place designated in writing by GE
Capital and surrender possession of that Equipment to GE Capital.
(b) If the Customer fails to so surrender possession of any Equipment in
accordance with Clauses 3.19(a), GE Capital may repossess the same
and for this purpose may exercise the rights and powers referred to
in Clauses 3.15(b), 3.18(b), (c), (d) and (e).
3.20 Limitation of Warranties and Liability
(a) The Customer acknowledges that in deciding to hire the Equipment and
in entering into this Agreement and any Supplement the Customer has
not relied in any way on GE Capital's skill or judgement and that
the Customer has satisfied himself as to the condition and
suitability of Equipment and its fitness for the Customer's
purposes. The Customer acknowledges that the Customer prior to the
execution hereof examined the Equipment and satisfied himself as to
compliance with the description herein as well as its condition,
suitability and fitness.
(b) To the extent permitted by law, all warranties, representations.
promises, conditions or statements regarding any Equipment or
services to be supplied or performed hereunder, either express or
implied, including, without limiting the generality of the
foregoing, warranties, representations, promises, conditions or
statements as to the suitability or
18
<PAGE>
fitness of any Equipment or services for any particular application,
other than those expressly referred to herein, are hereby expressly
excluded.
(c) To the extent permitted by law, GE Capital shall under no
circumstances be liable in any way whatsoever to the Customer nor
shall the Customer have any remedy, in respect of any claim (whether
contractual, tortious, statutory or otherwise) for any form of
damages, losses, costs, injury or harm sustained or incurred by the
Customer in consequence of or resulting directly or indirectly out
of the supply, performance or use of any Equipment or in any other
goods or services supplied hereunder or by any third party or out of
any breach, default, fault or negligence of GE Capital in or in
connection with this Agreement or otherwise.
(d) Without limiting the generality of Clause 3.20(b) hereof, but
subject to Clause 3.20(d) hereof, the Customer agrees that GE
Capital shall not be liable in respect of any claim of the Customer
(whether contractual, tortious, statutory, or otherwise) for any
special, incidental, indirect, or consequential damages or for any
loss of profits, revenue or data even if GE Capital should have been
advised of the possibility of such potential loss or damage. The
Customer is solely responsible for the protection and backup of all
data and software used in conjunction with the Equipment.
(e) The terms and conditions in this Agreement that exclude or limit GE
Capital liability shall apply only to the extent permitted by law.
Provisions of ihe Trade Practices Act, 1974 (as amended) ana other
statutes from time to time in force in Australia may apply
warranties or conditions or impose obligations upon GE Capiial which
cannot be excluded, restricted or modified or cannot be excluded,
restricted or modified except to a limited extent. This Agreement
shall be read and construed subject to any such statutory
provisions. If any such statutory provisions apply, then to the
extent to which GE Capital is entitled to do so, its liability under
those statutory provisions shall be limited at its option to:
(A) in the case of the supply of goods:
(i) the replacement of the goods or the supply of equivalent
goods; or
(ii) the payment of the cost of replacing the goods or of
acquiring equivalent goods; or
19
<PAGE>
(iii) the payment of the cost of having the goods repaired; or
(iv) the repair of the goods; or
(v) the reftinding to the Customer of the price or fees paid
in respect of the goods giving arise to the liability;
and
(B) in the case of services:
(i) the supplying of the services again;
(ii) the payment of the cost of having the services performed
again: or
(iii) the refunding to the Customer of any sums paid in
respect of such services.
3.21 Delays
GE Capital shall make every effort to perform its obligations to the
Customer on time, but shall not be liable for the consequences of any
delays in performance caused by any event beyond its reasonable control,
including acts of God, war, fire, flood, strike or labour dispute, riot or
civil commotion, sabotage or any act of omission of the Customer or of a
third party.
3.22 Legal Notice
Unless otherwise provided in this Agreement any notice required or
permitted to be given hereunder to the parties hereto will be deemed to
have been duly given if in writing and delivered in person or sent by
telegram or telex or mailed by first-class, registered or certified mail,
postage prepaid and addressed to the Customer, or GE Capital, as the case
may be, at its address set forth herein.
3.23 Certificate
A statement in writing signed by an Officer of GE Capital of an amount due
or owing hereunder as at the date mentioned in such statement and/or as to
any other matter or thing concerning or touching the subject matter of
this Agreement (including the Discount Rate) shall, in the absence of
manifest error, be conclusive evidence that such amount is due or owing
hereunder and/or of all such matters or things as are therein set forth.
20
<PAGE>
3.24 Waiver
(a) No time, indulgence or waiver of its rights under this Agreement
granted or purported to be granted by GE Capital shall prejudice or
effect GE Capital's interest or rights hereunder or constitute a
waiver or release of any breach hereof by the Customer unless made
expressly by notice in writing from GE Capital to the Customer and
then only in respect to the specific breach referred to.
(b) Any failure by GE Capital to insist upon strict performance of any
of the terms and conditions of this Agreement or any delay by GE
Capital in exercising any of its rights and remedies shall not
constitute a waiver or variation of such terms and conditions or a
waiver of any default of the remedy therefore.
3.25 Severability
If any of the provisions of this Agreement are or shall become
unenforceable, void, voidable or illegal then any such term or provision
shall be of no force or effect whatsoever and shall be severed and be
deemed to have formed no part hereof ab initio and the other provisions of
this Agreement shall continue in full force and effect.
3.26 Blank Spaces
The Customer herein irrevocably authorises GE Capital to complete any
blank spaces appearing in this Agreement or in any Supplement.
3.27 Alterations
Subject to the obligations of the Customer under Clause 3.4, the Customer
shall not make or permit to be made any alterations to the Equipment or
affix or install or permit to be affixed or installed any accessories,
equipment or device thereon or thereto without the prior written consent
of GE Capital and all parts, accessories, equipment or devices which are
affixed to or installed upon or in the Equipment shall be deemed to be
part of the whole and be the property of GE Capital and subject to all of
the terms and conditions of this Agreement.
3.28 The Rights of GE Capital
If the Customer fails to carry out any of the provisions of this
Agreement. GE Capital may without prejudice to any of its other rights or
remedies do all things and pay all money necessary to make good such
default to the satisfaction of GE
21
<PAGE>
Capital and any moneys so paid shall be reimbursed to GE Capital upon
demand. The Customer acknowledges that GE Capital is at liberty to pay any
broker or dealer or any other person who may have introduced the Customer
to GE Capital or whom otherwise may have been concerned in arranging this
Agreement a commission or otherwise confer a benefit upon such person in
respect of any such referral or arrangements.
3.29 Miscellaneous
(a) The Customer acknowledges that it has read this Agreement (including
the terms and conditions set out on each page thereof), understands
it and agrees to be bound by it and further agrees that it is the
complete and exclusive statement of the Agreement between the
parties which supercedes all proposals, oral or written, and all
other representations, communications and prior agreements between
the parties relating to the subject matter of this Agreement.
(b) GE Capital may, upon 30 days' prior written notice, modify the terms
and conditions of this Agreement provided that such modifications
shall only be applicable to Supplements accepted by GE Capital
following the 30 day period but otherwise, except for the foregoing,
the terms of this Agreement may not be amended, modified or
rescinded except by a written instrument signed by all parties,
provided that any such instrument shall only be binding upon GE
Capital when signed on its behalf by an Officer of GE Capital at its
Head Office.
(c) The terms and conditions contained in this Agreement shall prevail
notwithstanding any variance with the terms and conditions of any
order or other documentation submitted by the Customer.
(d) This Agreement shall be construed in accordance with and be governed
by the laws in force in State of New South Wales and the parties
hereby submit to the non-exclusive jurisdiction of the Courts of
that State.
(e) Subject to the Customer's observing and performing all its covenants
and obligations hereunder, GE Capital shall ensure that Customer's
quiet possession of the Equipment hired and/or licensed hereunder is
not disturbed by GE Capital or any person claiming through or under
GE Capital.
(f) Clause headings are for ease of reference only and shall not affect
the construction of this Agreement.
22
<PAGE>
(g) When two or more parties are named in the Schedule to this Agreement
as the Customer, all covenants, agreements, conditions and
obligations contained herein shall bind those parties and any two or
greater number of them jointly and each of them severally.
(h) Any gender shall include every other gender and the singular shall
include the plural and vice versa.
IN WITNESS WHEREOF the parties to this Agreement have hereunto set their hands
and seals on the respective dates indicated below:
THE COMMON SEAL of )
TOTAL ENERGY SYSTEMS LIMITED )
(A.C.N. 010 876 150) )
was hereunto affixed on the )
14/th/ day of November 1994 by )
- ------ --------
the authority of a resolution )
of the Board of Directors in )
the presence of: ) /s/
---------------------
Director
/s/
- --------------------------
Director/Secretary
ACCEPTED for and behalf of GE Capital Australia Limited by its duly authorized
Officer on the 21/st/ day of November 1994.
------ --------
/s/
-----------------------------------
Authorized Officer
SCHEDULE
Name Of The Customer: TOTAL ENERGY SYSTEMS LIMITED
----------------------------
(A.C.N. 010 876 150)
--------------------
Address Or Registered Office: 3/rd/ Floor, 172 Edward Street
------------------------------
State Or Territory Of Incorporation: Brisbane QLD 4000
-----------------
23
<PAGE>
GE CAPITAL AUSTRALIA
LIMITED
SUPPLEMENT
CE0712S1 PREPARED 28 10 94
----------
THIS SUPPLEMENT SHALL BE READ IN CONJUNCTION WITH AND SUBJECT TO THE MASTER
OPERATING LEASE / MASTER LEASE / MASTER COMMERCIAL HIRE PURCHASE AGREEMENT NO.:
CE0712 DATED 24/11/94
- ------ --------
CUSTOMER: Total Energy Systems Limited (A.C.N. 010 876 150)
3/rd/ Floor
NAME: 172 Edward Street
ADDRESS: BRISBANE QLD 40000
EQUIPMENT
Location: SINGLETON NSW
Invoice Total Energy Systems Limited
- ------- ----------------------------
One (1) only new, Volvo Prime mover Cab Chassis
Model No.: FL108X4
--------- -------
Engine No.: TD102FL/261782
---------- --------------
Chassis No.:
-----------
SR1700 Gear Box
Flame Proof Exhaust
Air conditioning
BGT20TR Suspension
390 litre fuel tank
11m(3) Stainless steel transit mixer barrel
with Stainless steel main frame
Stainless steel emulsion storage tanks
Stainless steel belly and discharger augers
Hydraulic tanks, Hoses, valves and fittings
Mono Pumps
Hose reel with drive and rotary joints
Electronic control assembly, software
and load management system
Regd. No. TIL-452
. PERIOD OF COMMERCIAL HIRE PURCHASE AGREEMENT SIXTY MONTHS
-----
. COMMERCIAL HIRE PURCHASE INSTALLMENTS: 60 periodic payments of $9,869.00
-- ---------
payable monthly in advance, followed by one payment of $23,402.00 at the end of
---------------------------------------------------
the sixtieth month.
- ------------------
. INSTALLATION SITE: The equipment listed on this supplement will be located /
installed at: Singleton NSW
-------------
<PAGE>
Duly executed for and on behalf of: Total Energy Systems Limited (A.C.N. 010
----------------------------------------
876 150)
- --------
By its duly authorized officer: /s/ Stephen T. Gordon
----------------------
Please print name: Stephen T. Gordon
-----------------
Title: Director - Financial Controller
-------------------------------
Date: 14/11/94
--------
ACCEPTED for and on behalf of GE Capital Australia Limited by its duly
authorized Officer on the 21/st/ day of November, 1994.
------ -------- --
/s/
-------------------------------
Authorized Officer
GE Capital Australia Limited (A.C.N. 008 562 534), a company incorporated in the
Australian Capital Territory and having its registered office at 88 Walker
Street, North Sydney in the State of New South Wales.
<PAGE>
GE CAPITAL AUSTRALIA
LIMITED
SUPPLEMENT
CE0712S1 PREPARED 28 10 94
----------
THIS SUPPLEMENT SHALL BE READ IN CONJUNCTION WITH AND SUBJECT TO MASTER
COMMERCIAL HIRE PURCHASE AGREEMENT NO.: CE0712 DATED 24/11/94
------ --------
CUSTOMER: Total Energy Systems Limited (A.C.N. 010 876 150)
3/rd/ Floor
NAME: 172 Edward Street
ADDRESS: BRISBANE QLD 40000
EQUIPMENT
Location: SINGLETON NSW
Invoice Total Energy Systems Limited
- ------- ----------------------------
One (1) only new, Volvo Prime mover Cab Chassis
Model No.: FL108X4
--------- -------
Engine No.: TD102FL\1637603\264955
---------- ----------------------
Chassis No.: YV5F2CCG9RD562329
----------- -----------------
SR1700 Gear Box
Flame Proof Exhaust
Air conditioning
BGT20TR Suspension
390 litre fuel tank
. PERIOD OF COMMERCIAL HIRE PURCHASE AGREEMENT SIXTY MONTHS
-----
. COMMERCIAL HIRE PURCHASE INSTALLMENTS: 60 periodic payments of $3,654.00
-- ---------
payable monthly in advance, followed by one payment of $8,665.00 at the end of
--------------------------------------------------
the sixtieth month.
- ------------------
. INSTALLATION SITE: The equipment listed on this supplement will be located /
installed at: Singleton NSW
-------------
Duly executed for and on behalf of: Total Energy Systems Limited (A.C.N. 010
----------------------------------------
876 150)
- --------
By its duly authorized officer: /s/ Stephen T. Gordon
------------------------------
Please print name: Stephen T. Gordon
-----------------
Title: Director - Financial Controller
-------------------------------
Date: 14/11/94
--------
<PAGE>
ACCEPTED for and on behalf of GE Capital Australia Limited by its duly
authorized Officer on the 21/st/ day of November, 1994.
------ -------- --
/s/
------------------------------
Authorized Officer
GE Capital Australia Limited (A.C.N. 008 562 534), a company incorporated in the
Australian Capital Territory and having its registered office at 88 Walker
Street, North Sydney in the State of New South Wales.
<PAGE>
GE CAPITAL AUSTRALIA
LIMITED
SUPPLEMENT
CE0712S3 PREPARED 01 11 94
----------
THIS SUPPLEMENT SHALL BE READ IN CONJUNCTION WITH AND SUBJECT TO MASTER
COMMERCIAL HIRE PURCHASE AGREEMENT NO.: CE0712 DATED 24/11/94
------ --------
CUSTOMER: Total Energy Systems Limited (A.C.N. 010 876 150)
3/rd/ Floor
NAME: 172 Edward Street
ADDRESS: BRISBANE QLD 40000
EQUIPMENT
Location: Total Energy Systems Limited
Broke Road
MOUNT THORLEY NSW 2330
Invoice #EQ002353 Clarklift WA Pty Ltd
- ----------------- --------------------
One (1) only new 1994 Sanderson Model 725C 4/Wheel Drive
Teleporter Truck.
Serial Number: MDK 0444
Engine Number: AA 504 20U 226747X
<PAGE>
EXHIBIT 10.43
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
WESTERN AUSTRALIA
BETWEEN
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
AND
TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
<PAGE>
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
Agreement
Number: CE0714
THIS AGREEMENT is made
BETWEEN: GE CAPITAL AUSTRALIA LIMITED (A.C.N. 008 562 534), a company
incorporated in the Australian Capital Territory and having its
principal office at 88 Walker Street, North Sydney in the State of New
South Wales, of the one part ("GE Capital")
AND THE PARTY OR PARTIES named and described in the Schedule hereto, of
the other part ("Customer").
PART 1 - PRELIMINARY
1.1 DEFINITIONS
In this Agreement unless the context otherwise requires:
"ACCEPTANCE DATE" means, in relation to any Equipment, the date that the
Supplement for that Equipment is accepted by GE Capital;
"CUSTOMER" means the party or parties described in the Schedule to this
Agreement as the Customer (and where more than one reference to "Customer"
is a reference to them jointly, each of them severally, and to any two or
more of them jointly) and, in the case of an individual, his executors and
administrators and, in the case of a company, its successors;
"EQUIPMENT" means the goods specified in Supplements to this Agreement;
"EXPIRY DATE" means, in relation to any Equipment, the last day of the
Payment Period of the Supplement in which that Equipment is specified or
such other later date as GE Capital agrees to in writing;
"GE CAPITAL" means GE Capital Australia Limited and its successors and
assigns.
"INSTALLATION SITE" means the installation site of any Equipment as
specified by the Customer in a Supplement;
"OFFICER" means a duly authorized representative of GE
2
<PAGE>
Capital;
"PAYMENT PERIOD" means the period during which the Customer shall make
Periodic Payments as set out in Clause 2.4 hereof;
"PERIODIC PAYMENTS" means the instalments referred to in a Supplement.
"SUPPLEMENT" means a supplement to this Agreement which refers to this
agreement and which has been signed by the Customer and accepted by GE
Capital.
1.2 FORMATION OF AGREEMENT
This Agreement and any Supplement shall not bind GE Capital unless and
until it has been accepted and signed on behalf of GE Capital by an Officer
of GE Capital at its Head Office in Sydney. The signing of this Agreement
and of any Supplement on behalf of GE Capital shall of itself and without
notice thereof to the Customer constitute an acceptance creating a contract
between GE Capital and the Customer. Such acceptance shall be evidenced by
the return to the Customer in the case of this Agreement of an
acknowledgment copy of this Agreement and in the case of any Supplement, an
acknowledgment copy of such Supplement, signed by an Officer of GE Capital.
1.3 TERM OF AGREEMENT
This Agreement shall be effective and bind the Customer from the date from
which it is signed on behalf of GE Capital and shall continue, unless
sooner terminated in accordance with this Agreement, in full force and
effect until all the Customer's obligations hereunder and under any
Supplement are fulfilled.
1.4 SUPPLEMENTS
This Agreement shall be read in conjunction with any Supplement, which
shall be construed as an integral part of this Agreement. The Customer
agrees that a Supplement shall be effective and bind the Customer from the
date on which it is accepted by GE Capital and that the Customer shall be
obliged to take delivery of and take on hire the Equipment specified in the
Supplement and observe and perform its obligations contained herein with
respect to that Equipment as from the date of such acceptance including,
without limiting the generality of the foregoing, its obligations to insure
the Equipment from the date that Equipment is delivered to the Customer.
3
<PAGE>
PART II - DELIVERY AND METHOD OF PAYMENT
2.1 HIRE
In accordance with the terms and conditions of this Agreement, GE Capital
agrees, at the Customer's request from time to time, to acquire that
Equipment specified in a Supplement and to hire that Equipment to the
Customer.
2.2 COMMENCEMENT OF HIRE
The hire of any Equipment specified in a Supplement shall commence
immediately on the date of the delivery of that Equipment to the Customer
and shall continue, subject to Clause 2.6, and subject to the Customer
exercising its rights under any applicable laws until the last day of the
Payment Period of that Supplement.
2.3 DELIVERY
(a) The Customer shall arrange for delivery of the Equipment specified in
a Supplement to the Customer's Installation Site and ensure that the
Equipment is installed and made ready for operation in accordance with
the manufacturer's specifications, all at no cost to GE Capital.
(b) The Customer agrees that to the extent permitted by law GE Capital
shall have no responsibility to the Customer for or arising out of any
delay in delivery of any Equipment. The Customer and not GE Capital
shall to the extent permitted by law bear the risk of damage to the
Equipment incurred in the course of delivery.
(c) GE Capital does not at any time make any representation or warranty
that the premises in which the Equipment is to be installed are in a
condition suitable for the delivery, installation or operation of the
Equipment.
2.4 PERIODIC PAYMENTS
(a) A Supplement shall specify a payment period ("Payment Period") which
shall commence on the first day of the month following the last
Acceptance Date to occur with respect to the Equipment specified in
that Supplement and shall continue for the number of complete calendar
months specified in that Supplement.
(b) The Customer shall pay to GE Capital the Periodic Payments specified
in a Supplement in advance as follows:
(i) the first Periodic Payments shall be paid on the first day of the
Payment Period; and
4
<PAGE>
(ii) the remaining Periodic Payments shall be paid on the first day of
each and every month (or such other periodic period as may be
specified in that Supplement) during the Payment Period of that
Supplement.
(c) The Periodic Payments specified in a Supplement shall be paid in
Australian dollars to GE Capital at its address specified above or at
such other place as GE Capital may direct.
(d) The Periodic Payments payable in respect of Equipment supplied under
Supplements from time to time shall be calculated by reference to GE
Capital's costs of funds current at the time of acceptance by GE
Capital of such Supplement.
(e) The Customer shall pay any other moneys payable under this Agreement
directly to GE Capital.
2.5 OVERDUE MONEYS
If any Periodic Payment or other moneys payable hereunder remain unpaid for
more than ten (10) days after the due date for payment thereof, the
Customer shall pay interest on those moneys calculated on a daily basis at
the rate equal to the aggregate of the 90 Days Bank Bill Swap Reference
Rate as published in the Australian Financial Review on the date on which
the Overdue Moneys first become payable and 4% per annum from and after
such due date until payment of such moneys in fall to GE Capital. The
Customer acknowledges that such interest is a genuine pre-estimate of GE
Capital's cost of funding such overdue moneys and is not a penalty.
2.6 OPTION TO PURCHASE EQUIPMENT
If the Customer is not in breach of any term of this Agreement and no event
of default as specified in Clause 3.15 has occurred that it is continuing,
the Customer may, at any time elect to purchase the Equipment specified in
that Supplement by:
(a) giving fourteen (14) days prior written notice to GE Capital; and
(b) where the Customer elects to purchase that Equipment during the
Payment Period of that Supplement - paying to GE Capital an amount
equal to the Net Balance Due.
Upon receipt by GE Capital of all such moneys on or before the Exercise
Date, GE Capital shall sell that Equipment to the
5
<PAGE>
Customer on the Exercise Date PROVIDED THAT unless and until the Customer
makes such election, GE Capital shall retain full title and property to and
in that Equipment and the Customer shall be bailee of the Equipment only to
use the same subject to the terms and conditions contained herein.
For the purposes of this Agreement the Net Balance Due shall be the balance
originally payable under the Agreement less any amounts (other than the
deposit) paid or provided, whether by cash or other consideration, by or on
behalf of the Customer under the Agreement and less -
(a) The statutory rebate for terms charges;
(b) If the Customer requires any contract for insurance to be cancelled,
the statutory rebate for insurance, and
(c) If the Customer requires any contract for maintenance to be cancelled,
the statutory rebate for maintenance.
PART III GENERAL TERMS AND CONDITIONS
3.1 USE OF EQUIPMENT
The Customer agrees that the Equipment shall be used in a proper and
skillful manner by properly trained and competent persons in compliance
with the manufacturer's requirements, recommendations and instruction
manuals and with all laws, rules and regulations of the jurisdiction
wherein the Equipment is located from time to time. The Customer shall pay
all costs, expenses, fees and charges incurred in connection with the use
and operation of the Equipment including but not limited to supplies,
fittings and accessories.
3.2 CONTROL OF EQUIPMENT
The Customer shall at all times retain possession and control of the
Equipment and shall not to the extent permitted by law, without the prior
written consent of GE Capital, sell, assign, pledge, lease. mortgage,
charge, let or hire, part with possession of or otherwise dispose of or
deal with the Equipment or any part thereof or its interest therein or any
part thereof, or remove any item of Equipment from the Installation Site
and the Customer shall not agree, attempt, offer or purport to do any such
things.
6
<PAGE>
3.3 REGISTRATION AND INSURANCE OF MOTOR VEHICLES OR PRESCRIBED GOODS
(a) If the Equipment is a motor vehicle, the Customer shall have and keep
at its own cost the same duly registered at all times as required by
any relevant law in the name of the Customer as if it were the owner
and have and keep the same insured against third party risk to the
extent required by law by a policy insuring to the benefit of both
parties hereto.
(b) If the Equipment consists of goods to which a register of security
interest or encumbrances applies in the relevant State of Territory,
the interests of GE Capital shall be registered in the appropriate
register as owner of the Equipment.
(c) If the Equipment consists of goods GE Capital's title to which may be
defeated by a subsequent bona fide purchaser of the goods for value
without notice of GE Capital's interest, the Customer shall ensure
that the goods are sufficiently identified, marked and displayed so as
to put third parties on notice of the ownership of GE Capital in the
goods. GE Capital may at anytime affix such identifying plates or
marks on or to the goods and will at all reasonable times be given
access to the goods for such purposes. The Customer shall indemnify GE
Capital to the full value of the Equipment should GE Capital's
interest and title to the Equipment be lost through the Customer's
breach of this provision.
3.4 MAINTENANCE AND REPAIRS
(a) The Customer agrees that the Equipment shall be maintained in a proper
and skillful manner by properly trained and competent persons in
compliance with the manufacturer's requirements, recommendations and
instruction manuals and with all laws, rules and regulations of the
jurisdiction wherein the Equipment is located from time to time. The
Customer shall pay all costs, expenses, fees and charges incurred in
connection with maintenance of the Equipment.
(b) The Customer shall keep the Equipment in proper and secure premises
and shall at all times, at its own expense, keep the Equipment in
proper working order and in as good condition and repair as when
delivered (reasonable wear and tear expected) and shall, if the
Equipment shall be or become in any way out of order or in need of
repair, have the same repaired by skilled and competent persons.
7
<PAGE>
(c) The Customer shall permit GE Capital subject to any restriction in any
law to enter upon the premises whereon the Equipment may or is
supposed to be during the normal business hours of the Customer
provided reasonable notice (except in an emergency where no notice
shall be required) it is first given to the Customer for the purpose
of inspecting and testing the condition thereof or examining the state
of repair thereof and GE Capital may serve upon the Customer a notice
in writing of any defect or damage for the repair or replacement of
which the Customer may be responsible hereunder requiring the Customer
within a reasonable time to repair or replace the same. The Customer
shall to the extent permitted by law at all times comply with the
reasonable requirements of GE Capital as to the repair, renewal or
replacement of any Equipment in respect of which the Customer is
liable. In the event of the Customer failing to carry out the
requirements of GE Capital it shall be lawful but not obligatory for
GE Capital to enter upon such premises with workmen and others and all
necessary materials for the purposes of carrying out such
requirements. The Customer shall reimburse GE Capital on demand for
all costs reasonably incurred by GE Capital pursuant to this Clause.
(d) The Customer shall notify GE Capital in writing immediately if any
defect or fault (except those of a trivial nature) occurs in the
Equipment or if any repairs (except those of a trivial nature) become
necessary for the satisfactory working of the Equipment.
3.5 TAXES, STAMP DUTY AND COSTS
The Customer agrees to pay and indemnify GE Capital to the extent permitted
by law against any and all taxes, costs, fees, duties (including stamp
duty, if any, except where the payment of such stamp duty by the Customer
is prohibited by law) or levies now or hereafter imposed or paid or payable
by GE Capital or payable by the Customer, in respect of this Agreement, any
of the matters contained herein, the Equipment, any Supplement, Periodic
Payments or the receipt by GE Capital of any moneys hereunder, together
with any penalties or fines in respect of late payment or non-payment
thereof and the Customer shall also pay all other costs, expenses and
outgoings (including legal costs on a solicitor and client basis) incurred
by GE Capital in relation to this Agreement or in the exercise or attempted
exercise of any rights or powers conferred on GE Capital hereunder or by
the general law.
8
<PAGE>
3.6 RISK
(a) The Customer shall bear all risk of loss of, damage to or destruction
of the Equipment from date of delivery to the Customer's premises
until the Equipment is returned to GE Capital whether or not the
Equipment is covered by insurance.
(b) The Customer assumes to the extent permitted by law all risks and
liability for the Equipment and for the use, operation, maintenance,
repair and storage thereof (including but not limited to loss of
profits, loss of revenue, consequential damage, inconvenience or loss
of use for any period of time) and for injuries to or deaths of
persons and damage to property however arising from or incidental to
such use, operation, maintenance, repair or storage whether such
injuries to or deaths of persons be of agents or employees of the
Customer or of third parties or such damage to property be of the
Customer or of third parties.
3.7 INSURANCE
(a) The Customer shall at its own cost and in the name of GE Capital and
the Customer for their respective rights and interests keep the
Equipment insured for an amount not less than the full insurable value
thereof with some reputable insurance company in Australia in such
form and subject to such conditions and covering all such risks as GE
Capital may from time to time require, and, in the absence of any
nomination, against loss or damage occasioned by fire, accident,
theft, windstorm, malicious act- storm, tempest, explosion, rain,
water, flood, earthquake and lightning. In addition, the Customer
shall at its own cost take out and maintain insurances against public
risk liability and other risks which a reasonably prudent
businessperson would insure against. The Customer shall deliver such
insurances to GE Capital upon demand and shall duly and punctually pay
all premiums necessary for effecting and keeping such insurances in
force and shall furnish to GE Capital upon demand such certificates or
other satisfactory evidence of the maintenance of the insurances
required hereunder.
(b) The Customer shall keep the Equipment insured from the date it is
delivered to the Customer until the same is returned to GE Capital in
accordance with this Agreement.
(c) The Customer shall not do or permit or suffer any act, matter or thing
whereby such insurances may be prejudicially affected or invalidated.
9
<PAGE>
(d) GE Capital shall be entitled to receive all moneys payable under the
insurances referred to in Clause 3.6(a) hereof and all moneys which
may be payable by 'and any other person in respect of damage to or
loss of the Equipment and the Customer hereby appoints GE Capital its
attorney to recover and/or compromise in its and their names any claim
for loss or damage under those insurances or otherwise and to give
effectual releases and receipts for the same and hereby irrevocably
authorizes GE Capital to appropriate any insurance or other moneys
received by it as its option towards repair and/or restoration of the
Equipment or towards any moneys due or payable by the Customer
hereunder or on any other account whatsoever.
(e) The Customer shall notify GE Capital in writing within twenty four
(24) hours immediately following any loss or damage to the Equipment
howsoever caused or after the occurrence of any event which could or
might lead to a claim under any insurance effected in respect of the
Equipment.
(f) In the event of any total or substantial loss or destruction of any
Equipment, GE Capital may by notice in writing to the Customer
terminate this Agreement with respect to that Equipment and the
Customer shall within seven (7) days of such notice of termination pay
to GE Capital an amount equal to whichever is the greater of:
(i) an amount equal to the amount specified as liquidated damages
pursuant to Clause 3.17 as if such loss or destruction of that
Equipment were a breach of an essential term of this Agreement;
or
(ii) the value of the Equipment immediately prior to such loss or
destruction, such value being certified by a dealer or licensed
valuer in similar or like goods to that Equipment as selected by
GE Capital.
PROVIDED THAT GE Capital shall give credit to the Customer for any
insurance moneys or proceeds of salvage received by it if and when
received but only to the extent of the aforesaid amount.
3.8 INDEMNITIES
(a) The Customer shall to the extent permitted by law indemnify GE
Capital, its representatives and authorized sub-contractors and any
assignee of GE Capital from and against any and all losses, damages,
injuries, claims, liabilities, demands and expenses, including
reasonable
10
<PAGE>
legal fees and expenses and claims for loss of profits and/or economic
damage, of any nature arising out of the installation, maintenance,
removal, use, repair, condition, storage or operation of the Equipment
or any part thereof.
(b) The Customer shall to the extent permitted by law indemnify GE
Capital. its representatives and authorized sub-contractors ana any
assignee of GE Capital fro *in and against all losses, damages,
claims, penalties, liabilities and expenses of any nature caused by,
to, or in respect of the Equipment including (without limitation):
(i) loss by seizure under distress for rent, execution or other
legal process; an d
(ii) loss, destruction or damage to the Equipment by fire, accident
or any other cause whatsoever; and
(iii) any claims arising out of the use, operation or keeping of the
Equipment
(c) The indemnities referred to herein shall continue in full force and
effect notwithstanding the termination of this Agreement or any
Supplement with respect to any Equipment.
3.9 OWNERSHIP
Subject to Clause 2.6, the Equipment is, and shall at all times be and
remain, the property of GE Capital or a related company of GE Capital. The
Customer shall have no right, title and interest therein or thereto except
as expressly set forth herein.
3.10 AFFIXATION TO REALTY
Except to the extent necessary to enable the proper use of the Equipment,
the Customer shall not cause or permit the Equipment to be affixed to any
real property or improvements thereon and it is expressly agreed that the
Equipment is, and shall at all times be and remain, personal property
notwithstanding that the Equipment or any part thereof may now be or
hereafter become, in any manner, affixed or attached to real property or
any improvements thereon and it shall not thereby become or be deemed to
become a fixture.
11
<PAGE>
3.11 ACKNOWLEDGMENT OF GE CAPITAL'S INTEREST
The Customer shall not install, use or place the Equipment or cause or
suffer it to be installed, used or placed, upon any premises held or
occupied by it as lessee, under-lessee or licensee or which are the subject
of any mortgage or charge unless the Customer shall first deliver to GE
Capital an acknowledgement in writing signed by the owner of the premises
and/or the mortgagee or chargee, as the case may be, that the Equipment is
and shall remain the property of GE Capital and shall not be or become
landlord's fixtures or a part of the land or subject to any such mortgage
or charge notwithstanding that the Equipment may be affixed to the land in
any manner whatsoever and that GE Capital may at any time enter on 6e
premises and detach and remove such of the Equipment as shall be on the
premises.
3.12 LIENS OVER EQUIPMENT
The Customer shall not suffer any encumbrance, charge or lien of any kind
to arise or remain on the Equipment arising or resulting from any act of
the Customer except:-
(a) a repairer's lien in which event the Customer shall take the necessary
steps to have it removed or satisfied forthwith provided however that
if GE Capital so determines it may remove or satisfy the lien at its
cost and the Customer shall indemnify GE Capital therefore; and
(b) such lien or charge as may arise by law in respect of unpaid rates,
taxes, fees or duties of any kind whatsoever in which event the
Customer shall forthwith pay the same so that the Equipment will be
free of any lien or charge.
3.13 ASSIGNMENT AND SUB-CONTRACTORS
The Customer shall not to the extent that such a restriction is permitted
by law, without the prior written consent of GE Capital, assign this
Agreement or any of its rights hereunder. GE Capital may assign this
Agreement or any of its rights hereunder and may sell, assign, pledge,
mortgage, charge or otherwise dispose of or deal with the Equipment or any
part thereof or its interest therein or any part thereof. GE Capital may,
in its absolute discretion, sub-contract any of its obligations under this
Agreement.
12
<PAGE>
3.14 ESSENTIAL TERMS
The Customer and GE Capital expressly agree and declare that the Customer's
covenants and obligations contained or implied in:
(a) Clause 2.4 to pay the Periodic Payments specified in any Supplement in
the amounts and at the times specified in that Supplement and to pay
the same punctually;
(b) Clause 3.1 as to the use of the Equipment;
(c) Clause 3.7 to insure the Equipment; and
(d) Clause 3.19 to surrender the Equipment and pay the moneys referred to
therein punctually are essential terms of this Agreement and that the
breach, non-observance or non-performance of any one or more of such
covenants or obligations shall be deemed to be a breach of an
essential term of this Agreement by the Customer PROVIDED THAT the
presence of this Clause in this Agreement shall not mean or be
construed as meaning that there are no other essential terms in this
Agreement.
3.15 DEFAULT
In the event that:
(i) the Customer defaults in the payment of any Periodic Payment or
other sum payable hereunder; or
(ii) the Customer defaults in the observance or performance of any of
the other essential terms referred to in Clause 3.14 hereof, or
(iii) the Customer defaults in the observance or performance of any
other term of condition herein and such default is not remedied
within thirty (30) days after notice thereof to the Customer by
GE Capital; or
(iv) without the prior written consent of GE Capital, whose consent
will not be unreasonably withheld, effective control of the
Customer is altered to any material extent from that subsisting
at the date of this agreement. For the purposes of this clause
effective control" of the Customer means:-
(a) control of the composition of the Board of Directors of
the Customer; or
13
<PAGE>
(b) control of more than half of the voting power of the
Customer; or
(c) control of more than half of the issued capital of the
Customer excluding any part of it which carries no right
to participate beyond a specified amount in the
distribution of either profit or capital.
(v) where the Customer is a partnership, there is, without the prior
written consent of GE Capital any change in the composition of
the partnership except where such change arises as a result of
death or disability of a partner.
THEN in any such event GE Capital, without prejudice to any other
right or remedy of GE Capital herein contained or implied or at
general law (including the rights of GE Capital under Clause 117 when
the event is also a breach of an essential term of this Agreement),
may at its option to the extent permitted by law and after satisfying
any conditions required by law:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Customer of the applicable
covenants and terms of this Agreement or to recover damages for the
breach thereof-, and/or (b) by notice in writing to the Customer,
terminate this Agreement with respect to all or any part of the
Equipment hired hereunder, whereupon all the interest of the Customer
in such Equipment (hereinafter referred to as Relevant Equipment")
shall cease (but the Customer shall remain liable hereinafter
provided) and in such event the Customer shall provided GE Capital has
complied with the requirements under any applicable law forthwith
return the Relevant Equipment to GE Capital at such place nominated by
GE Capital.
3.16 RIGHTS OF TERMINATION
Without prejudice to any other rights and remedies of GE Capital hereunder
or at general law, in the event of the termination of this Agreement
pursuant to Clause 3.15(b), GE Capital may to the extent permitted by law:
(i) retain all Periodic Payments and other moneys heretofore paid by
the Customer; and
(ii) provided GE Capital has complied with the requirements under any
applicable law re-hire, re-
14
<PAGE>
licence or lease or rent all or any part of the Relevant
Equipment for such consideration upon such terms as GE Capital
thinks fit, or, at its absolute discretion, sell all or any part
of the Equipment at public or private sale upon terms as GE
Capital thinks fit.
3.17 LIQUIDATED DAMAGES
(a) Where the Customer breaches or fails to observe or perform an
essential term of this Agreement and GE Capital terminates this
Agreement with respect to any Equipment under Clause 3.15(b) or by
virtue of its rights and remedies at general law, then in addition to
and without prejudice to any other right or remedy of GE Capital
herein contained or implied or at general law, the Customer shall pay
to GE Capital forthwith upon such termination as and by way of
liquidated damages an amount equal to the Net Amount Payable.
(b) The parties acknowledge that GE Capital is not entitled to recover any
sum (whether under a judgment or order or otherwise) which would
together with:
(i) the value of the Equipment at the time of GE Capital taking
possession thereof; and
(ii) the amount paid or provided, whether by cash or other
consideration, by or on behalf of the Customer under the
Agreement, amount to more than the Net Amount Payable in respect
of the Equipment.
For the purposes of this Agreement:
(a) the Net Amount Payable shall be the total amount payable less the
statutory rebates for terms charges, insurance, and maintenance; and
(b) the value of any Equipment at the time of GE Capital taking possession
thereof shall be:
(i) the best price which could be reasonably obtained by GE Capital
at that time; or
(ii) if the Customer has introduced a person who has purchased the
Equipment for cash. the amount paid by such person, less,
(iii) the reasonable costs incurred by GE Capital of and incidental to
his taking possession of the Equipment;
15
<PAGE>
(iv) any amount properly expended by GE Capital on the storage,
repair, or maintenance of the Equipment; and
(v) (whether or not the Equipment have subsequently been sold or
disposed of by GE Capital) the reasonable expenses of selling or
otherwise disposing of the Equipment.
3.18 OTHER TERMINATION PROVISIONS
(a) GE Capital may to the extent permitted by law ship the Relevant
Equipment to any location it desires in order to effect a re-hire, re-
licence, leasing, renting or sale.
(b) In addition to the foregoing, GE Capital shall to the extent permitted
by law be entitled to recover from the Customer any and all damages
which GE Capital shall sustain by reason of any breach by the Customer
of any of the covenants and terms of this Agreement, together with a
reasonable sum for legal fees (including fees on a solicitor and
client basis) and such expenses as shall be expended or incurred in
the seizure, hire, lease, licence, rental or sale of the Equipment.
(c) The Customer hereby authorizes GE Capital to the extent permitted by
law to enter any premises occupied by the Customer during ordinary
business hours for the purpose of exercising its rights under Clauses
3.16, 3.17 and 3.18.
(d) The rights and remedies herein provided in favour of GE Capital in the
event of default shall not be deemed to be exclusive, but shall be
cumulative and shall be in addition to all other remedies available to
GE Capital at law, in equity or in bankruptcy.
(e) GE Capital may from time to time, and on such conditions as it thinks
fit, waive its rights arising under Clauses 3.15, 3.16, 3.17 and 3.18
or otherwise, but no such waiver shall affect its rights under those
Clauses or otherwise in respect of any further continuing or recurring
default, breach or event and the taking of possession of the Relevant
Equipment by GE Capital shall not constitute a waiver of any claim of
GE Capital for liquidated Damages.
(f) The Customer acknowledges that the amount referred to in Clause 3.17
as Liquidated Damages has been assessed as a reasonable pre-estimate
for loss of profit and other costs and losses incurred by GE Capital
as a result of an
16
<PAGE>
early termination of this Agreement with respect to the Relevant
Equipment and the establishment costs associated with this Agreement.
(g) Notwithstanding any termination of this Agreement (for breach of an
essential term or otherwise) or the repudiation of this Agreement by
the Customer and the acceptance thereof by GE Capital, the provisions
of Clauses 3.15, 3.16, 3.17 and 3.18 shall continue as remedies
available to be exercised by GE Capital. This Clause shall not limit
the generality of any other Clause which would otherwise survive the
termination of this Agreement.
3.19 SURRENDER
(a) Upon the Expiry Date of any Equipment, the Customer shall, if it has
not elected to purchase that Equipment under Clause 2.6, at its own
cost assemble that Equipment at a place designated in writing by GE
Capital and surrender possession of that Equipment to GE Capital.
(b) If the Customer fails to so surrender possession of any Equipment in
accordance with Clauses 3.19(a) and (b), GE Capital may repossess the
same and for this purpose may exercise the rights and powers referred
to in Clauses 3.15(b), 3.18(b), (c), (d) and (e).
3.20 LIMITATION OF WARRANTIES AND LIABILITY
(a) To the extent permitted by law, all warranties, representations,
promises, conditions or statements regarding any Equipment or services
to be supplied or performed hereunder, either express or implied,
including, without limiting the generality of the foregoing,
warranties, representations, promises, conditions or statements as to
the suitability or fitness of any Equipment or services for any
particular application, other than those expressly referred to herein,
are hereby expressly excluded.
(b) To the extent permitted by law, GE Capital shall under no
circumstances be liable in any way whatsoever to the Customer nor
shall the Customer have any remedy, in respect of any claim (whether
contractual, tortious, statutory or otherwise) for any form of
damages, losses, costs, injury or harm sustained or incurred by the
Customer in consequence of or resulting directly or indirectly out of
the supply, performance or use of any Equipment or in any other goods
or services supplied hereunder or by any third party or out of any
breach,
17
<PAGE>
default, fault or negligence of GE Capital m" or in connection with
this Agreement or otherwise.
(c) Without limiting the generality of Clause 3.20(b) hereof, but subject
to Clause 3.20(d) hereof to the extent permitted by law, the Customer
agrees that GE Capital shall not be liable in respect of any claim of
the Customer ("whether contractual, tortious, statutory, or otherwise)
for any special, incidental, indirect, or consequential damages or for
any loss of profits, revenue or data even if GE Capital should have
been advised of the possibility of such potential loss or damage. The
Customer is solely responsible to the extent permitted by law for the
protection and backup of all data and software used in conjunction
with the Equipment.
(d) The terms and conditions in this Agreement that exclude or limit GE
Capital liability shall apply only to the extent permitted by law.
Provisions of the Trade Practices Act, 1974 (as amended) and other
statutes from time to time in force in Australia may apply warranties
or conditions or impose obligations upon GE Capital which cannot be
excluded, restricted or modified or cannot be excluded, restricted or
modified except to a limited extent. This Agreement shall be read and
construed subject to any such statutory provisions. If any such
statutory provisions apply, then to the extent to which GE Capital is
entitled to do so, its liability under those statutory provisions
shall be limited at its option to:
(i) in the case of the supply of goods:
(A) the replacement of the goods or the supply of equivalent
goods; or
(B) the payment of the cost of replacing the goods or of
acquiring equivalent goods; or
(C) the payment of the cost of having the goods repaired; or
(D) the repair of the goods; or
(E) the refunding to the Customer of the price or fees paid in
respect of the goods giving arise to the liability; and
(ii) in the case of services:
(A) the supplying of the services again;
(B) the payment of the cost of having the
18
<PAGE>
services performed again; or
(C) the refunding to the Customer of any sums paid in respect of
such services.
3.21 DELAYS
GE Capital shall make every effort to perform its obligations to the
Customer on time, but shall not be liable for the consequences of any
delays in performance caused by any event beyond its reasonable control,
including acts of God, war, fire, flood, strike or labour dispute, riot or
civil commotion, sabotage or any act of omission of the Customer or of a
third party.
3.22 LEGAL NOTICE
Unless otherwise provided in this Agreement, any notice required or
permitted to be given hereunder to the parties hereto will be deemed to
have been duly given if in writing and delivered in person or sent by
telegram or telex or mailed by first-class, registered or certified mail,
postage prepaid and addressed to the Customer, or GE Capital, as the case
may be, at its address set forth herein.
3.23 CERTIFICATE
A statement in writing signed by an Officer of GE Capital of an amount due
or owing hereunder as at the date mentioned in such statement and/or as to
any other matter or thing concerning or touching the subject matter of this
Agreement shall, in the absence of manifest error to the extent permitted
by law, be conclusive evidence that such amount is due or owing hereunder
and/or of all such matters or things as are therein set forth.
3.24 WAIVER
(a) No time, indulgence or waiver of its rights under this Agreement
granted or purported to be granted by GE Capital shall prejudice or
effect GE Capital's interest or rights hereunder or constitute a
waiver or release of any breach hereof by the Customer unless made
expressly by notice in writing from GE Capital to the Customer and
then only in respect to the specific breach referred to.
(b) Any failure by GE Capital to insist upon strict performance of any of
the terms and conditions of this Agreement or any delay by GE Capital
in exercising any of its rights and remedies shall not constitute a
waiver or variation of such terms and conditions or a waiver of any
19
<PAGE>
default of the remedy therefore.
3.25 SEVERABILITY
If any of the provisions of this Agreement are or shall become
unenforceable, void, voidable or illegal then any such term or provision
shall be of no force or effect whatsoever and shall be severed and be
deemed to have formed no part hereof ab initio and the other provisions of
this Agreement shall continue in full force and effect.
3.26 BLANK SPACES
The Customer herein irrevocably authorizes GE Capital to complete any blank
spaces appearing in this Agreement or in any Supplement.
3.27 ALTERATIONS
Subject to the obligations of the Customer under Clause 3.4, the Customer
shall not make or permit to be made any alterations to the Equipment or
affix or install or permit to be affixed or installed any accessories.
equipment or device thereon or thereto without the prior written consent of
GE Capital and all parts, accessories, equipment or devices which are
affixed to or installed upon or in the Equipment shall be deemed to be part
of the whole and be the property of GE Capital and subject to all of the
terms and conditions of this Agreement.
3.28 THE RIGHTS OF GE CAPITAL
If the Customer fails to carry out any of the provisions of this Agreement,
GE Capital may without prejudice to any of its other rights or remedies do
all things and pay all money necessary to make good such default to the
satisfaction of GE Capital and any moneys so paid shall to the extent
permitted by law be reimbursed to GE Capital upon demand. The Customer
acknowledges that to the extent permitted by law GE Capital is at liberty
to pay any broker or dealer or any other person who may have introduced the
Customer to GE Capital or whom otherwise may have been concerned in
arranging this Agreement a commission or otherwise confer a benefit upon
such person in respect of any such referral or arrangements.
3.29 MISCELLANEOUS
(a) The Customer acknowledges that it has read this Agreement (including
the terms and conditions set out on each page thereof), understands it
and agrees to be bound by it and further agrees that it is the
complete and exclusive
20
<PAGE>
statement of the Agreement between the parties which supersedes all
proposals, oral or written. and all other representations,
communications and prior agreements between the parties relating to
the subject matter of this Agreement.
(b) GE Capital may, upon 30 days' prior written notice, modify the terms
and conditions of this Agreement provided that such modifications
shall not only be applicable to Supplements accepted by GE Capital
following the 30 day period but otherwise, except for the foregoing,
the terms of this Agreement may not be amended, modified or rescinded
except by a written instrument signed by all parties, provided that
any such instrument shall only be binding upon GE Capital when signed
on its behalf by an Officer of GE Capital at its Head Office.
(c) The terms and conditions contained in this Agreement shall prevail
notwithstanding any variance with the terms and conditions of any
order or other documentation submitted by the Customer.
(d) This Agreement shall be construed in accordance with and be governed
by the laws in force in State of Western Australia and the parties
hereby submit to the non-exclusive jurisdiction of the Courts of that
State.
(e) Subject to the Customer's observing and performing all its covenants
and obligations hereunder, GE Capital shall ensure that Customef s
quiet possession of the Equipment hired hereunder is not disturbed by
GE Capital or any person claiming through or under GE Capital.
(f) Clause headings are for ease of reference only and shall not affect
the construction of this Agreement.
(g) When two or more parties are named in the Schedule to this Agreement
as the Customer, all covenants, agreements, conditions and obligations
contained herein shall bind those parties and any two or greater
number of them jointly and each of them severally.
(h) Any gender shall include every other gender and the singular shall
include the plural and vice versa.
(i) Notwithstanding any other provision in this Agreement:
(i) this Agreement is to be read and construed subject to any
applicable law; and
(ii) to the extent that the Customer has rights under
21
<PAGE>
any applicable law this Agreement is to be read and construed
subject to those rights.
(j) Terms defined in the Hire Purchase Act 1959 (Western Australia) shall
have the same meaning when used in this agreement.
22
<PAGE>
IN WITNESS WHEREOF the parties to this Agreement have hereunto set their hands
and seals on the respective dates indicated below:-
THE COMMON SEAL of )
TOTAL ENERGY SYSTEMS LIMITED )
(A.C.N. 010 876 150 )
was hereunto affixed on the 14/th/ )
day of November , 1994 )
by the authority of a resolution )
of the Board of Directors )
in the presence of: )
) ________________________
Director
___________________________________
Director/Secretary
ACCEPTED for and behalf of GE Capital Australia Limited by its duly authorized
Officer on the 21/st/ day of November, 1994.
_______________________________________
Authorized Officer
SCHEDULE
Name Of The Customer: TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
Address Or Registered Office: 3RD FLOOR, 172 EDWARD STREET
State Or Territory Of Incorporation: BRISBANE QLD 4000
23
<PAGE>
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
S U P P L E M E N T
-------------------
________________________________________________________________________________
CE0714S1 PREPARED 01/11/1994
This Supplement shall be read in conjunction with and subject to the Master
Commercial Hire Purchase Agreement Number:
CE0714 DATED 21/11/1994
________________________________________________________________________________
Customer TOTAL ENERGY SYSTEMS LIMITED
Name: (A.C.N. 010 876 150)
Address: 3/RD/ FLOOR, 172 EDWARD STREET
BRISBANE QLD 4000
________________________________________________________________________________
EQUIPMENT DESCRIPTION
________________________________________________________________________________
LOCATION: PICADILLY STREET
GOVERNMENT EXPLOSIVE MAGAZINE
KALGOORLIE WA 6430
Invoice Total Energy Systems Limited
- ------- ----------------------------
One (1) only Isuzu FVZ 1400 Medium Cab Chassis with:
10,000.00 litre stainless steel tank, Acid Add Tank and
Pumps, Water injection systems, Rexroth Hydraulic System 3"
Two Stage Stainless Steel Mono Pump
Engine Number: 626582
Vin Number: JALFUZ13MN3600054
<PAGE>
* PERIOD OF COMMERCIAL HIRE PURCHASE AGREEMENT:
SIXTY (60) MONTHS
* Commencement Date: 15/TH/ DAY OF NOVEMBER 1997
* COMMERCIAL HIRE PURCHASE SUMMARY:
Proposed Customer: TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
3RD FLOOR, 172 EDWARD STREET
BRISBANE QLD 4000
Owner: GE Capital Australia Limited
(A.C.N. 008 562 534)
Level 2, 88 Walker Street
North Sydney NSW 2060
Dealer: Total Energy Systems Limited
(A.C.N. 010 876 150)
3/rd/ Floor, 172 Edward Street
BRISBANE QLD 4000
Guarantor: LSB INDUSTRIES, INC
16 SOUTH PENNSYLVANIA
OKLAHOMA CITY
OKLAHOMA 73107
UNITED STATES OF AMERICA
Guarantor:
Short description of Goods: ISUZU FVZ 1400 MEDIUM CAB AND CHASSIS
New/Secondhand
Year: 1993 Model: FVZ 1400 MEDIUM
Colour: WHITE
Instalments:
SIXTY (60) PERIODIC PAYMENTS OF $3,664.00 PAYABLE MONTHLY IN
2
<PAGE>
ADVANCE COMMENCING FROM 15/TH/ NOVEMBER 1994.
3
<PAGE>
To: GE Capital Australia Limited
PO Box 10169
North Sydney NSW 2059
Being: 60 payments of $3,664.00
------- ---------
-- payments of ----
------- ---------
1 final payment of $8,562.00
------- ---------
* INSTALLATION SITE:
The equipment listed on this Supplement will be located/installed at:
PICCADILLY STREET
GOVERNMENT EXPLOSIVES MAGAZINE
KALGOORLIE WA 6430
* OTHER INFORMATION:
CASH PRICE: $171,245.56
-------------
Less Deposit:
(a) Money -----
-------------
(b) Other-Trade-In Allowance -----
-------------
RESIDUE:
Add: Maintenance -----
-------------
Freight -----
-------------
Vehicle Registration Fees -----
-------------
Insurance -----
-------------
Agreement Registration Fees -----
-------------
Stamp Duty -----
AMOUNT FINANCED:
-------------
Add: Terms Charges $ 57,156.44
-------------
(Percentage Rate 11.93%)
Balance originally payable under
the agreement $171,245.56
-------------
Add: Deposit above -----
-------------
TOTAL AMOUNT PAYABLE:
(Including Deposit) $228,402.00
-------------
The customer is reminded that terms charges may differ from one hire-purchase
credit provider to another and it will be in the customer's best interests to
make enquiries to satisfy itself that
4
<PAGE>
it is receiving the best deal in terms charges.
Duly executed for and on behalf of:
TOTAL ENERGY SYSTEMS LIMITED
----------------------------------
(A.C.N. 010 876 150)
----------------------------------
By its duly authorized officer:
/s/ Stephen T. Gordon
----------------------------------
Please print name: Stephen T. Gordon
----------------------------------
Title: Director - Financial Controller
----------------------------------
Date: 14/11/94
----------------------------------
ACCEPTED for and behalf of GE Capital Australia Limited by its duly Authorized
Officer on the 21/st/ day of November 1994.
__________________________________
Authorized Officer
GE Capital Australia Limited (A.C.N. 008 562 534),
a company incorporated in the Australian Capital
Territory and having its registered office at:
88 Walker Street, North Sydney in the
State of New South Wales.
5
<PAGE>
EXHIBIT 10.44
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
QUEENSLAND
BETWEEN
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
AND
TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
<PAGE>
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
MASTER
COMMERCIAL HIRE PURCHASE AGREEMENT
QUEENSLAND
NOTE: This Master Commercial Hire Purchase Agreement can only be used:
1.) in Queensland: AND 2.) if the Customer is a corporation OR, if the Customer
is a natural person, where the Equipment (other than a commercial vehicle
or farm machinery) to be hired and/or licensed has a cash price of more
than $40,000.
The Master Commercial Hire Purchase Agreement cannot be used if the Equipment is
a commercial vehicle or farm machinery.
<PAGE>
MASTER COMMERCIAL HIRE PURCHASE AGREEMENT
Agreement Number: CE0713
THIS AGREEMENT is made
BETWEEN GE CAPITAL AUSTRALIA LIMITED (A.C.N. 008 562 534), a company
incorporated in the Australian Capital Territory and having its
principal office at 88 Walker Street, North Sydney in the State of New
South Wales, of the one part ("GE Capital")
AND THE PARTY OR PARTIES named and described in the Schedule hereto, of
the other part ("Customer").
PART 1 - PRELIMINARY
1.1 DEFINITIONS
In this Agreement unless the context otherwise requires:
"ACCEPTANCE DATE" means, in relation to any Equipment, the date that the
Supplement for that Equipment is accepted by GE Capital;
"CUSTOMER" means the party or parties described in the Schedule to this
Agreement as the Customer (and where more than one reference to "Customer"
is a reference to them jointly, each of them severally, and to any two or
more of them jointly) and, in the case of an individual, his executors and
administrators and, in the case of a company, its successors;
"EQUIPMENT" means the goods specified in Supplements to this Agreement;
"EXPIRY DATE" means, in relation to any Equipment, the last day of the
Payment Period of the Supplement in which that Equipment is specified or
such other later date as GE Capital agrees to in writing;
"GE CAPITAL" means GE Capital Australia Limited and its successors and
assigns.
"INSTALLATION SITE" means the installation site of any Equipment as
specified by the Customer in a Supplement;
"OFFICER" means a duly authorised representative of GE
2
<PAGE>
Capital;
"PAYMENT PERIOD" means the period during which the Customer shall make
Periodic Payments as set out in Clause 2.4 hereof;
"PERIODIC PAYMENTS" means the payments referred to in a Supplement.
"SUPPLEMENT" means a supplement to this Agreement which refers to this
agreement and which has been signed by the Customer and accepted by GE
Capital;
"SUPPLY AGREEMENT" means the agreement for the supply of Equipment between
the Customer and the original supplier.
1.2 FORMATION OF AGREEMENT
This Agreement and any Supplement shall not bind GE Capital unless and
until it has been accepted and signed on behalf of GE Capital by an Officer
of GE Capital at its Head Office in Sydney. The signing of this Agreement
and of any Supplement on behalf of GE Capital shall of itself and without
notice thereof to the Customer constitute an acceptance creating a contract
between GE Capital and the Customer. Such acceptance shall be evidenced by
the return to the Customer in the case of this Agreement of an
acknowledgment copy of this Agreement and in the case of any Supplement, an
acknowledgment copy of such Supplement, signed by an Officer of GE Capital.
1.3 TERM OF AGREEMENT
This Agreement shall be effective and bind the Customer from the date from
which it is signed on behalf of GE Capital and shall continue, unless
sooner terminated in accordance with this Agreement, in full force and
effect until all the Customer's obligations hereunder and under any
Supplement are fulfilled.
1.4 SUPPLEMENTS
This Agreement shall be read in conjunction with any Supplement, which
shall be construed as an integral part of this Agreement. The Customer
agrees that a Supplement shall be effective and bind the Customer from the
date on which it is accepted by GE Capital and that the Customer shall be
obliged to take delivery of and take on hire and/or take on licence the
Equipment specified in the Supplement and observe and perform its
obligations contained herein with respect to that Equipment as from the
date of such acceptance including, without limiting the generality of the
foregoing, its
3
<PAGE>
obligations to insure the Equipment from the date that Equipment is
delivered to the Customer.
PART 11 - DELIVERY AND METHOD OF PAYMENT
2.1 HIRE AND/OR LICENCE
In accordance with the terms and conditions of this Agreement, GE Capital
agrees, at the Customer's request from time to time, to:
(a) acquire Hardware specified in a Supplement and to hire that Hardware
to the Customer; and
(b) acquire Software specified in a Supplement and to licence that
Software to the Customer.
2.2 COMMENCEMENT OF HIRE AND/OR LICENCE
The hire of any Hardware and/or the licence of any Software specified in a
Supplement shall commence immediately on the date of the delivery of that
Hardware and/or Software to the Customer and shall continue, subject to
Clause 2.6, and subject to the Customer exercising its rights under any
applicable laws until the last day of the Payment Period of that
Supplement.
2.3 DELIVERY
(a) The Customer shall arrange for delivery of the Equipment specified in
a Supplement to the Customer's Installation Site and ensure that the
Equipment is installed and made ready for operation in accordance with
the manufacturer's specifications, all at no cost to GE Capital.
(b) The Customer agrees that to the extent permitted by law GE Capital
shall have no responsibility to the Customer for or arising out of any
delay in delivery of any Equipment. The Customer and not GE Capital
shall to the extent permitted by law bear the risk of damage to the
Equipment incurred in the course of delivery.
(c) GE Capital does not at any time make any representation or warranty
that the premises in which the Equipment is to be installed are in a
condition suitable for the delivery, installation or operation of the
Equipment.
2.4 PERIODIC PAYMENTS
(a) A Supplement shall specify a payment period (hereinafter called the
"Payment Period") which shall commence on the first day of the month
following the last Acceptance Date
4
<PAGE>
to occur with respect to the Equipment specified in that Supplement
and shall continue for the number of complete calendar months
specified in that Supplement.
(b) The Customer shall pay to GE Capital the Periodic Payments specified
in a Supplement in advance as follows:
(i) the first Periodic Payments shall be paid on the first day of the
Payment Period; and
(ii) the remaining Periodic Payments shall be paid on the first day of
each and every month (or such other periodic period as may be
specified in that Supplement) during the Payment Period of that
Supplement.
(c) The Periodic Payments specified in a Supplement shall be paid in
Australian dollars to GE Capital at its address specified above or at
such other place as GE Capital may direct.
(d) The Periodic Payments payable in respect of Equipment supplied under
Supplements from time to time shall be calculated by reference to GE
Capital's costs of funds current at the time of acceptance by GE
Capital of such Supplement.
(e) The Customer shall pay any other moneys payable under this Agreement
directly to GE Capital.
2.5 OVERDUE MONEYS
If any Periodic Payment or other moneys payable hereunder remain unpaid for
more than ten (10) days after the due date for payment thereof, the
Customer shall pay interest on those moneys calculated on a daily basis at
the rate equal to the aggregate of the 90 Days Bank Bill Swap Reference
Rate as published in the Australian Financial Review on the date on which
the Overdue Moneys first become payable and 4% per annum from and after
such due date until payment of such moneys in full to GE Capital. The
Customer acknowledges that such interest is a genuine pre-estimate of GE
Capital's cost of funding such overdue moneys and is not a penalty.
2.6 OPTION TO PURCHASE HARDWARE
If the Customer is not in breach of any term of this Agreement and no event
of default as specified in Clause 3.15 has occurred that it is continuing,
the Customer may, at any time elect to purchase the Hardware specified in
that Supplement by:
5
<PAGE>
(a) giving fourteen (14) days prior written notice to GE Capital; and
(b) where the Customer elects to purchase that Hardware during the Payment
Period of that Supplement - paying to GE Capital an amount equal to
the Net Balance Due.
Upon receipt by GE Capital of all such moneys, GE Capital shall sell that
Equipment to the Customer PROVIDED THAT unless and until the Customer makes
such election, GE Capital shall retain full title and property to and in
that Hardware and the Customer shall be bailee of the Hardware only to use
the same subject to the terms and conditions contained herein. The Customer
expressly agrees and acknowledges that the option to purchase contained in
this Clause shall not extend or apply to any Software whatsoever.
For the purposes of this Agreement the Net Balance Due shall be the balance
originally payable under the Agreement less any amounts (other than the
deposit) paid or provided, whether by cash or other consideration, by or on
behalf of the Customer under the Agreement and less -
(a) The statutory rebate for terms charges;
(b) If the Customer requires any contract for insurance to be cancelled,
the statutory rebate for insurance; and
(c) If the Customer requires any contract for maintenance to be cancelled,
the statutory rebate for maintenance.
PART III GENERAL TERMS AND CONDITIONS
3.1 USE OF EQUIPMENT
The Customer agrees that the Equipment shall be used in a proper and
skilful manner by properly trained and competent persons in compliance with
the manufacturer's requirements, recommendations and instruction manuals
and with all laws, rules and regulations of the jurisdiction wherein the
Equipment is located from time to time. The Customer shall pay all costs,
expenses, fees and charges incurred in connection with the use and
operation of the Equipment including but not limited to supplies, fittings
and accessories.
3.2 CONTROL OF EQUIPMENT
The Customer shall at all times retain possession and control of the
Equipment and shall not to the extent permitted by law, without the prior
written consent of GE Capital, sell, assign,
6
<PAGE>
pledge, lease, mortgage, charge, let or hire, part with possession of or
otherwise dispose of or deal with the Equipment or any part thereof or its
interest therein or any part thereof, or remove any item of Equipment from
the Installation Site and the Customer shall not agree, attempt, offer or
purport to do any such things.
3.3 REGISTRATION AND INSURANCE OF MOTOR VEHICLES OR PRESCRIBED GOODS
(a) If the Equipment is a motor vehicle, the Customer shall have and keep
at its own cost the same duly registered at all times as required by
any relevant law in the name of the Customer as if it were the owner
and have and keep the same insured against third party risk to the
extent required by law by a policy insuring to the benefit of both
parties hereto.
(b) If the Equipment consists of goods to which a register of security
interest or encumbrances applies in the relevant State of Territory,
the interests of GE Capital shall be registered in the appropriate
register as owner of the Equipment.
(c) If the Equipment consists of goods GE Capital's title to which may be
defeated by a subsequent bona fide purchaser of the goods for value
without notice of GE Capital's interest, the Customer shall ensure
that the goods are sufficiently identified, marked and displayed so as
to put third parties on notice of the ownership of GE Capital in the
goods. GE Capital may at anytime affix such identifying plates or
marks on or to the goods and will at all reasonable times be given
access to the goods for such purposes. The Customer shall indemnify GE
Capital to the full value of the Equipment should GE Capital's
interest and title to the Equipment be lost through the Customer's
breach of this provision.
3.4 MAINTENANCE AND REPAIRS
(a) The Customer agrees that the Equipment shall be maintained in a proper
and skillful manner by properly trained and competent persons in
compliance with the manufacturer's requirements, recommendations and
instruction manuals and with all laws, rules and regulations of the
jurisdiction wherein the Equipment is located from time to time. The
Customer shall pay all costs, expenses, fees and charges incurred in
connection with maintenance of the Equipment.
(b) The Customer shall keep the Equipment in proper and
7
<PAGE>
secure premises and shall at all times, at its own expense, keep the
Equipment in proper working order and in as good condition and repair
as when delivered (reasonable wear and tear expected) and shall, if
the Equipment shall be or become in any way out of order or in need of
repair, have the same repaired by skilled and competent persons.
(c) The Customer shall permit GE Capital subject to any restriction in any
law to enter upon the premises whereon the Equipment may or is
supposed to be during the normal business hours of the Customer
provided reasonable notice (except in an emergency where no notice
shall be required) it is first given to the Customer for the purpose
of inspecting and testing the condition thereof or examining the state
of repair thereof and GE Capital may serve upon the Customer a notice
in writing of any defect or damage for the repair or replacement of
which the Customer may be responsible hereunder requiring the Customer
within a reasonable time to repair or replace the same. The Customer
shall to the extent permitted by law at all times comply with the
reasonable requirements of GE Capital as to the repair, renewal or
replacement of any Equipment in respect of which the Customer is
liable. In the event of the Customer failing to carry out the
requirements of GE Capital it shall be lawful but not obligatory for
GE Capital to enter upon such premises with workmen and others and ill
necessary materials for the purposes of carrying out such
requirements. The Customer shall reimburse GE Capital on demand for
all costs reasonably incurred by GE Capital pursuant to this Clause.
(d) The Customer shall notify GE Capital in writing immediately if any
defect or fault (except those of a trivial nature) occurs in the
Equipment or if any repairs (except those of a trivial nature) become
necessary for the satisfactory working of the Equipment.
3.5 TAXES, STAMP DUTY AND COSTS
The Customer agrees to pay and indemnify GE Capital to the extent permitted
by law against any and all taxes, costs, fees, duties (Including stamp
duty, if any, except where the payment of such stamp duty by the Customer
is prohibited by law) or levies now or hereafter imposed or paid or payable
by GE Capital or payable by the Customer, in respect of this Agreement, any
of the matters contained herein, the Equipment, any Supplement, Periodic
Payments or the receipt by GE Capital of any moneys hereunder, together
with any penalties or fines in respect of late payment or non-payment
thereof and the
8
<PAGE>
Customer shall also pay all other costs, expenses and outgoings (including
legal costs on a solicitor and client basis) incurred by GE Capital in
relation to this Agreement or in the exercise or attempted exercise of any
rights or powers conferred on GE Capital hereunder or by the general law.
3.6 RISK
(a) The Customer shall bear all risk of loss of, damage to or destruction
of the Equipment from date of delivery to the Customer's premises
until the Equipment is returned to GE Capital whether or not the
Equipment is covered by insurance.
(b) The Customer assumes to the extent permitted by law all risks and
liability for the Equipment and for the use, operation, maintenance,
repair and storage thereof (including but not limited to loss of
profits, loss of revenue, consequential damage, inconvenience or loss
of use for any period of time) and for injuries to or deaths of
persons and damage to property however arising from or incidental to
such use, operation, maintenance, repair or storage whether such
injuries to or deaths of persons be of agents or employees of the
Customer or of third parties or such damage to property be of the
Customer or of third parties.
3.7 INSURANCE
(a) The Customer shall at its own cost and in the name of GE Capital and
the Customer for their respective rights and interests keep the
Equipment insured for an amount not less than the full insurable value
thereof with some reputable insurance company in Australia in such
form and subject to such conditions and covering all such risks as GE
Capital may from time to time require, and, in the absence of any
nomination, against loss or damage occasioned by fire, accident,
theft, windstorm, malicious act, storm, tempest, explosion, rain,
water, flood, earthquake and lightning. In addition, the Customer
shall at its own cost take out and maintain insurances against public
risk liability and other risks which a reasonably prudent
businessperson would insure against.
The Customer shall deliver such insurances to GE Capital upon demand
and shall duly and punctually pay all premiums necessary for effecting
and keeping such insurances in force and shall furnish to GE Capital
upon demand such certificates or other satisfactory evidence of the
maintenance of the insurances required hereunder.
9
<PAGE>
(b) The Customer shall keep the Equipment insured from the date it is
delivered to the Customer until the same is returned to GE Capital in
accordance with this Agreement.
(c) The Customer shall not do or permit or suffer any act, matter or thing
whereby such insurances may be prejudicially affected or invalidated.
(d) GE Capital shall be entitled to receive all moneys payable under the
insurances referred to in Clause 3.6(a) hereof and all moneys which
may be payable by and any other person in respect of damage to or loss
of the Equipment and the Customer hereby appoints GE Capital its
attorney to recover and/or compromise in its and their names any claim
for loss or damage under those insurances or otherwise and to give
effectual releases and receipts for the same and hereby irrevocably
authorises GE Capital to appropriate any insurance or other moneys
received by it as its option towards repair and/or restoration of the
Equipment or towards any moneys due or payable by the Customer
hereunder or on any other account whatsoever.
(e) The Customer shall notify GE Capital in writing within twenty four
(24) hours immediately following any loss or damage to the Equipment
howsoever caused or after the occurrence of any event which could or
might lead to a claim under any insurance effected in respect of the
Equipment.
(f) In the event of any total or substantial loss or destruction of any
Equipment, GE Capital may by notice in writing to the Customer
terminate this Agreement with respect to that Equipment and the
Customer shall within seven (7) days of such notice of termination pay
to GE Capital an amount equal to whichever is the greater of:
(i) an amount equal to the amount specified as liquidated damages
pursuant to Clause 3.17 as if such loss or destruction of that
Equipment were a breach of an essential term of this Agreement;
or
(ii) the value of the Equipment immediately prior to such loss or
destruction, such value being certified by a dealer or licensed
valuer in similar or like goods to that Equipment as selected by
GE Capital.
PROVIDED THAT GE Capital shall give credit to the Customer for any
insurance moneys or proceeds of salvage received by it if and when
received but only to the extent of the aforesaid amount.
10
<PAGE>
3.8 INDEMNITIES
(a) The Customer shall to the extent permitted by law indemnify GE
Capital, its representatives and authorised sub-contractors and any
assignee of GE Capital from and against any and all losses, damages,
injuries, claims, liabilities, demands and expenses, including
reasonable legal fees and expenses and claims for loss of profits
and/or economic damage, of any nature arising out of the installation,
maintenance, removal, use, repair, condition, storage or operation of
the Equipment or any part thereof.
(b) The Customer shall to the extent permitted by law indemnify GE
Capital, its representatives and authorised sub-contractors and any
assignee of GE Capital from and against all losses, damages, claims,
penalties, liabilities and expenses of any nature caused by, to, or in
respect of the Equipment including (without limitation):
(i) loss by seizure under distress for rent, execution or other
legal process; and
(ii) loss, destruction or damage to the Equipment by fire, accident
or any other cause whatsoever; and
(iii) any claims arising out of the use, operation or keeping of the
Equipment
(c) The indemnities referred to herein shall continue in full force and
effect notwithstanding the termination of this Agreement or any
Supplement with respect to any Equipment.
3.9 OWNERSHIP
Subject to Clause 2.6, the Equipment is, and shall at all times be and
remain, the property of GE Capital or a related company of GE Capital. The
Customer shall have no right, title and interest therein or thereto except
as expressly set forth herein.
3.10 AFFIXATION TO REALTY
Except to the extent necessary to enable the proper use of the Equipment,
the Customer shall not cause or permit the Equipment to be affixed to any
real property or improvements thereon and it is expressly agreed that the
Equipment is, and shall at all times be and remain, personal property
notwithstanding that the Equipment or any part thereof may now
11
<PAGE>
be or hereafter become, in any manner, affixed or attached to real property
or any improvements thereon and it shall not thereby become or be deemed to
become a fixture.
3.11 ACKNOWLEDGMENT OF GE CAPITAL'S INTEREST
The Customer shall not install, use or place the Equipment or cause or
suffer it to be installed, used or placed, upon any premises held or
occupied by it as lessee, under lessee or licensee or which are the subject
of any mortgage or charge unless the Customer shall first deliver to GE
Capital an acknowledgement in writing signed by the owner of the premises
and/or the mortgagee or chargee, as the case may be, that the Equipment is
and shall remain the property of GE Capital and shall not be or become
landlord's fixtures or a part of the land or subject to any such mortgage
or charge notwithstanding that the Equipment may be affixed to the land in
any manner whatsoever and that GE Capital may at any time enter on the
premises and detach and remove such of the Equipment as shall be on the
premises.
3.12 LIENS OVER EQUIPMENT
The Customer shall not suffer any encumbrance. charge or lien of any kind
to arise or remain on the Equipment arising or resulting from any act of
the Customer except:-
(a) a repairer's lien in which event the Customer shall take the necessary
steps to have it removed or satisfied forthwith provided however that
if GE Capital so determines it may remove or satisfy the lien at its
cost and the Customer shall indemnify GE Capital therefore; and
(b) such lien or charge as may arise by law in respect of unpaid rates,
taxes, fees or duties of any kind whatsoever in which event the
Customer shall forthwith pay the same so that the Equipment will be
free of any lien or charge.
3.13 ASSIGNMENT AND SUB-CONTRACTORS
The Customer shall not to the extent that such a restriction is permitted
by law, without the prior written consent of GE Capital, assign this
Agreement or any of its rights hereunder. GE Capital may assign this
Agreement or any of its rights hereunder and may sell, assign, pledge,
mortgage, charge or otherwise dispose of or deal with the Equipment or any
part thereof or its interest therein or any part thereof. GE Capital may,
in its absolute discretion, sub-contract any of its obligations under this
Agreement.
12
<PAGE>
3.14 ESSENTIAL TERMS
The Customer and GE Capital expressly agree and declare that the Customer's
covenants and obligations contained or implied in:
(a) Clause 2.4 to pay the Periodic Payments specified in any Supplement in
the amounts and at the times specified in that Supplement and to pay
the same punctually;
(b) Clause 3.1 as to the use of the Equipment;
(c) Clause 3.7 to insure the Equipment; and
(d) Clause 3.19 to surrender the Equipment and pay the moneys referred to
therein punctually are essential terms of this Agreement and that the
breach, non-observance or non-performance of any one or more of such
covenants or obligations shall be deemed to be a breach of an
essential term of this Agreement by the Customer PROVIDED THAT the
presence of this Clause in this Agreement shall not mean or be
construed as meaning that there are no other essential terms in this
Agreement.
3.15 DEFAULT
In the event that:
(i) the Customer defaults in the payment of any Periodic Payment or
other sum payable hereunder; or
(ii) the Customer defaults in the observance or performance of any of the
other essential terms referred to in Clause 3.14 hereof-, or
(iii) the Customer defaults in the observance or performance of any other
term of condition herein and such default is not remedied within
thirty (30) days after notice thereof to the Customer by GE Capital;
or
(iv) without the prior written consent of GE Capital, whose consent will
not not be unreasonably withheld, effective control of the Customer
is altered to any material extent from that subsisting at the date
of this agreement. For the purposes of this clause effective
control" of the Customer means:-
(a) control of the composition of the Board of Directors of the
Customer; or
(b) control of more than half of the voting power of the Customer;
or
13
<PAGE>
(c) control of more than half of the issued capital of the Customer
excluding any part of it which carries no right to participate
beyond a specified amount in the distribution of either profit or
capital.
(v) where the Customer is a partnership, there is, without the prior
written consent of GE Capital any change in the composition of the
partnership except where such change arises as a result of death or
disability of a partner.
THEN in any such event GE Capital, without prejudice to any other right or
remedy of GE Capital herein contained or implied or at general law
(including the rights of GE Capital under Clause 3.17 when the event is
also a breach of an essential term of this Agreement), may at its option to
the extent permitted by law and after satisfying any conditions required by
law:
(a) proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by the Customer of the applicable
covenants and terms of this Agreement or to recover damages for the
breach thereof; and/or
(b) by notice in writing to the Customer, terminate this Agreement with
respect to all or any part of the Equipment hired and/or licenced
hereunder, whereupon all the interest of the Customer in such
Equipment (hereinafter referred to as Relevant Equipment") shall cease
(but the Customer shall remain liable hereinafter provided) and in
such event the Customer shall provided GE Capital has complied with
the requirements under any applicable law forthwith return the
Relevant Equipment to GE Capital at such place nominated by GE
Capital.
3.16 RIGHTS OF TERMINATION
Without prejudice to any other rights. and remedies of GE Capital hereunder
or at general law, in the event of the termination of this Agreement
pursuant to Clause 3.15(b), GE Capital may to the extent permitted by law:
(i) retain all Periodic Payments and other moneys heretofore paid by
the Customer; and
(ii) provided GE Capital has complied with the requirements under any
applicable law re-hire, re-licence or lease or rent all or any
part of the Relevant Equipment for such consideration upon such
terms as GE Capital thinks fit, or, at its absolute
14
<PAGE>
discretion, sell all or any part of the Equipment at public or
private sale upon terms as GE Capital thinks fit.
3.17 LIQUIDATED DAMAGES
(a) Where the Customer breaches or fails to observe or perform an
essential term of this Agreement and GE Capital terminates this
Agreement with respect to any Equipment under Clause 3.15(b) or by
virtue of its rights and remedies at general law, then in addition to
and without prejudice to any other right or remedy of GE Capital
herein contained or implied or at general law, the Customer shall pay
to GE Capital forthwith upon such termination as and by way of
liquidated damages an amount equal to the Net Amount Payable.
(b) The parties acknowledge that GE Capital is not entitled to recover any
sum (whether under a judgment or order or otherwise) which would
together with:
(i) the value of the Equipment at the time of GE Capital taking
possession thereof; and
(ii) the amount paid or provided, whether by cash or other
consideration, by or on behalf of the Customer under the
Agreement, amount to more than the Net Amount Payable in respect
of the Equipment.
For the purposes of this Agreement:
(a) the Net Amount Payable shall be the total amount payable less the
statutory rebates for terms charges, insurance, and maintenance; and
(b) the value of any Equipment at the time of GE Capital taking possession
thereof shall be:
(i) the best price which could be reasonably obtained by GE Capital
at that time; or
(ii) if the Customer has introduced a person who has purchased the
Equipment for cash, the amount paid by such person,
less;
(iii) the reasonable costs incurred by GE Capital of and incidental
to his taking possession of the Equipment;
15
<PAGE>
(iv) any amount properly expended by GE Capital on the storage,
repair, or maintenance of the Equipment; and
(v) (whether or not the Equipment have subsequently been sold or
disposed of by GE Capital) the reasonable expenses of selling
or otherwise disposing of the Equipment.
3.18 OTHER TERMINATION PROVISIONS
(a) GE Capital may to the extent permitted by law ship the Relevant
Equipment to any location it desires in order to effect a re-hire,
re-licence, leasing, renting or sale.
(b) In addition to the foregoing, GE Capital shall to the extent permitted
by law be entitled to recover from the Customer any and all damages
which GE Capital shall sustain by reason of any breach by the Customer
of any of the covenants and terms of this Agreement, together with a
reasonable sum for legal fees (including fees on a solicitor and
client basis) and such expenses as shall be expended or incurred in
the seizure, hire, lease, licence, rental or sale of the Equipment.
(c) Without limiting Clause (b) above the Customer, agrees to pay or
reimburse GE Capital on demand for the costs, charges and expenses of
GE Capital in connection with the contemplated or actual enforcement,
or preservation of any rights under this Agreement (including, without
limitation, any legal fees on a full indemnity basis or solicitor and
own client basis, whichever is the higher).
(d) The Customer hereby authorizes GE Capital to the extent permitted by
law to enter any premises occupied by the Customer during ordinary
business hours for the purpose of exercising its rights under Clauses
3.16, 3.17 and 3.18.
(e) The rights and remedies herein provided in favour of GE Capital in the
event of default shall not be deemed to be exclusive, but shall be
cumulative and shall be in addition to all other remedies available to
GE Capital at law, in equity or in bankruptcy.
(f) GE Capital may from time to time. and on such conditions as it thinks
fit, waive its rights arising under Clauses 3.15, 3.16, 3.17 and 3.18
or otherwise, but no such waiver shall affect its rights under those
Clauses or otherwise in respect of any further continuing or recurring
default, breach or event and the taking of
16
<PAGE>
possession of the Relevant Equipment by GE Capital shall not
constitute a waiver of any claim of GE Capital for liquidated Damages.
(g) The Customer acknowledges that the amount referred to in Clause 3.17
as Liquidated Damages has been assessed as a reasonable pre-estimate
for loss of profit and other costs and losses incurred by GE Capital
as a result of an early termination of this Agreement with respect to
the Relevant Equipment and the establishment costs associated with
this Agreement.
(h) Notwithstanding any termination of this Agreement (for breach of an
essential term or otherwise) or the repudiation of this Agreement by
the Customer and the acceptance thereof by GE Capital, the provisions
of Clauses 3.15, 3.16, 3.17 and 3.18 shall continue as remedies
available to be exercised by GE Capital. This Clause shall not limit
the generality of any other Clause which would otherwise survive the
termination of this Agreement.
3.19 SURRENDER
(a) Upon the Expiry Date of any Equipment which constitutes Hardware, the
Customer shall, if it has not elected to purchase that Hardware under
Clause 2.6, at its own cost assemble that Hardware at a place
designated in writing by GE Capital and surrender possession of that
Hardware to GE Capital.
(b) Upon the Expiry Date of any Equipment which constitutes Software, the
Customer shall, unless otherwise agreed by GE Capital, at its own cost
assemble that Software at a place designated in writing by GE Capital
and surrender possession of that Software to GE Capital.
(c) If the Customer fails to so surrender possession of any Equipment in
accordance with Clauses 3.19(a) and (b), GE Capital may repossess the
same and for this purpose may exercise the rights and powers referred
to in Clauses 3.15(b), 3.18(b), (c), (d) and (e).
3.20 LIMITATION OF WARRANTIES AND LIABILITY
(a) To the extent permitted by law, all warranties, representations,
promises, conditions or statements regarding any Hardware, materials,
Equipment, Software or services to be supplied or performed hereunder,
either express or implied, including, without limiting the generality
of the foregoing, warranties, representations,
17
<PAGE>
promises, conditions or statements as to the suitability or fitness of
any Hardware, materials, Software or services for any particular
application, other than those expressly referred to herein, are hereby
expressly excluded.
(b) To the extent permitted by law, GE Capital shall under no
circumstances be liable in any way whatsoever to the Customer nor
shall the Customer have any remedy, in respect of any claim (whether
contractual, tortious, statutory or otherwise) for any form of
damages, losses, costs, injury or harm sustained or incurred by the
Customer in consequence of or resulting directly or indirectly out of
the supply, performance or use of any Equipment or in any other goods
or services supplied hereunder or by any third party or out of any
breach, default, fault or negligence of GE Capital in or in connection
with this Agreement or otherwise.
(c) Without limiting the generality of Clause 3.20(b) hereof, but subject
to Clause 3.20(d) hereof to the extent permitted by law, the Customer
agrees that GE Capital shall not be liable in respect of any claim of
the Customer (whether contractual, tortious, statutory, or otherwise)
for any special, incidental, indirect, or consequential damages or for
any loss of profits, revenue or data even if GE Capital should have
been advised of the possibility of such potential loss or damage. The
Customer is solely responsible to the extent permitted by law for the
protection and backup of all data and software used in conjunction
with the Equipment.
(d) The terms and conditions in this Agreement that exclude or limit GE
Capital liability shall apply only to the extent permitted by law.
Provisions of the Trade Practices Act, 1974 (as amended) and other
statutes from time to time in force in Australia may apply warranties
or conditions or impose obligations upon GE Capital which cannot be
excluded, restricted or modified or cannot be excluded, restricted or
modified except to a limited extent. This Agreement shall be read and
construed subject to any such statutory provisions. If any such
statutory provisions apply, then to the extent to which GE Capital is
entitled to do so, its liability under those statutory provisions
shall be limited at its option to:
(a) in the case of the supply of goods:
(i) the replacement of the goods or the supply of equivalent
goods; or
18
<PAGE>
(ii) the payment of the cost of replacing the goods or of
acquiring equivalent goods; or
(iii) the payment of the cost of having the goods repaired; or
(iv) the repair of the goods; or
(v) the refunding to the Customer of the price or fees paid in
respect of the goods giving arise to the liability; and
(b) in the case of services:
(i) the supplying of the services again;
(ii) the payment of the cost of having the services performed
again; or
(iii) the refunding to the Customer of any sums paid in respect
of such services.
3.21 DELAYS
GE Capital shall make every effort to perform its obligations to the
Customer on time, but shall not be liable for the consequences of any
delays in performance caused by any event beyond its reasonable control,
including acts of God, war, fire, flood, strike or labour dispute, riot or
civil commotion, sabotage or any act of omission of the Customer or of a
third party.
3.22 LEGAL NOTICE
Unless otherwise provided in this Agreement, any notice required or
permitted to be given hereunder to the parties hereto will be deemed to
have been duly given if in writing and delivered in person or sent by
telegram or telex or mailed by first-class, registered or certified mail,
postage prepaid and addressed to the Customer, or GE Capital, as the case
may be, at its address set forth herein.
3.23 CERTIFICATE
A statement in writing signed by an Officer of GE Capital of an amount due
or owing hereunder as at the date mentioned in such statement and/or as to
any other matter or thing concerning or touching the subject matter of this
Agreement shall, in the absence of manifest error to the extent permitted
by law, be conclusive evidence that such amount is due or owing hereunder
and/or of afi such matters or things as
19
<PAGE>
are therein set forth.
3.24 WAIVER
(a) No time, indulgence or waiver of its rights under this Agreement
granted or purported to be granted by GE Capital shall prejudice or
effect GE Capital's interest or rights hereunder or constitute a
waiver or release of any breach hereof by the Customer unless made
expressly by notice in writing from GE Capital to the Customer and
then only in respect to the specific breach referred to.
(b) Any failure by GE Capital to insist upon strict performance of any of
the terms and conditions of this Agreement or any delay by GE Capital
in exercising any of its rights and remedies shall not constitute a
waiver or variation of such terms and conditions or a waiver of any
default of the remedy therefore.
3.25 SEVERABILITY
If any of the provisions of this Agreement are or shall become
unenforceable, void, voidable or illegal then any such term or provision
shall be of no force or effect whatsoever and shall be severed and be
deemed to have formed no part hereof ab initio and the other provisions of
this Agreement shall continue in full force and effect.
3.26 BLANK SPACES
The Customer herein irrevocably authorises GE Capital to complete any blank
spaces appearing in this Agreement or in any Supplement.
3.27 ALTERATIONS
Subject to the obligations of the Customer under Clause 3.4, the Customer
shall not make or permit to be made any alterations to the Equipment or
affix or install or permit to be affixed or installed any accessories,
equipment or device thereon or thereto without the prior written consent of
GE Capital and all parts, accessories, equipment or devices which are
affixed to or installed upon or in the Equipment shall be deemed to be part
of the whole and be the property of GE Capital and subject to all of the
terms and conditions of this Agreement.
3.28 THE RIGHTS OF GE CAPITAL
If the Customer fails to carry out any of the provisions of this Agreement,
GE Capital may without prejudice to any of its
20
<PAGE>
other rights or remedies do all things and pay all money necessary to make
good such default to the satisfaction of GE Capital and any moneys so paid
shall to the extent permitted by law be reimbursed to GE Capital upon
demand. The Customer acknowledges that to the extent permitted by law GE
Capital is at liberty to pay any broker or dealer or any other person who
may have introduced the Customer to GE Capital or whom otherwise may have
been concerned in arranging this Agreement a commission or otherwise confer
a benefit upon such person in respect of any such referral or arrangements.
3.29 MISCELLANEOUS
(a) The Customer acknowledges that it has read this Agreement (including
the terms and conditions set out on each page thereof), understands it
and agrees to be bound by it and further agrees that it is the
complete and exclusive statement of the Agreement between the parties
which supersedes all proposals, oral or written, and all other
representations, communications and prior agreements between the
parties relating to the subject matter of this Agreement.
(b) GE Capital may, upon 30 days' prior written notice, modify the terms
and conditions of this Agreement provided that such modifications
shall not only be applicable to Supplements accepted by GE Capital
following the 30.day period but otherwise, except for the foregoing,
the terms of this Agreement may not be amended, modified or rescinded
except by a written instrument signed by all parties, provided that
any such instrument shall only be binding upon GE Capital when signed
on its behalf by an Officer of GE Capital at its Head Office.
(c) The terms and conditions contained in this Agreement shall prevail
notwithstanding any variance with the terms and conditions of any
order or other documentation submitted by the Customer.
(d) This Agreement shall be construed in accordance with and be governed
by the laws in force in State of Queensland and the parties hereby
submit to the non-exclusive jurisdiction of the Courts of that State.
(e) Subject to the Customer's observing and performing all its covenants
and obligations hereunder, GE Capital shall ensure that Customer's
quiet possession of the Equipment hired and/or licensed hereunder is
not disturbed by GE Capital or any person claiming through or under GE
Capital.
21
<PAGE>
(f) Clause headings are for ease of reference only and shall not affect
the construction of this Agreement.
(g) When two or more parties are named in the Schedule to this Agreement
as the Customer, all covenants, agreements, conditions and obligations
contained herein shall bind those parties and any two or greater
number of them jointly and each of them severally.
(h) Any gender shall include every other gender and the singular shall
include the plural and vice versa.
(i) Notwithstanding any other provision in this Agreement:
(i) this Agreement is to be read and construed subject to any
applicable law; and
(ii) to the extent that the Customer has rights under any applicable
law this Agreement is to be read and construed subject to those
rights.
22
<PAGE>
IN WITNESS WHEREOF the parties to this Agreement have hereunto set their hands
and seals on the respective dates indicated below:-
THE COMMON SEAL of )
TOTAL ENERGY SYSTEMS LIMITED )
(A.C.N. 010 876 150) )
was hereunto affixed on the )
14/th/ day of November 1994 )
by the authority of a )
resolution of the Board of )
Directors in the presence of: ) ____________________________________________
Director
____________________________
Director/Secretary
ACCEPTED for and behalf of GE Capital Australia Limited by its duly authorized
Officer on the 21/st/ day of November 1994.
____________________________________________
Authorized Officer
SCHEDULE
Name Of The Customer: TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
Address Or Registered Office: 3RD FLOOR, 172 EDWARD STREET
State Or Territory Of Incorporation: BRISBANE QLD 4000
23
<PAGE>
GE CAPITAL AUSTRALIA LIMITED
(A.C.N. 008 562 534)
S U P P L E M E N T
-------------------
________________________________________________________________________________
CEO713S1 PREPARED 28/10/1994
This Supplement shall be read in conjunction with and subject to the Master
Commercial Hire Purchase Agreement Number:
CEO713 DATED 21/11/1994
________________________________________________________________________________
Customer TOTAL ENERGY SYSTEMS LIMITED
Name: (A.C.N. 010 876 150)
Address: 3/RD/ FLOOR, 172 EDWARD STREET
BRISBANE QLD 4000
________________________________________________________________________________
EQUIPMENT DESCRIPTION
_______________________________________________________________________________
Location: Peak Downs Highway
PEAK DOWNS VIA DYSART QLD 4745
Invoice Total Energy Systems Limited
- ------- ----------------------------
One (1) only Volvo Prime Mover Cab and Chassis including:
SR1700 Gear Box, Flame Proff Exhaust, Air Conditioning, BGT20TR
Suspension, 390 Litre Fuel Tank, 12000 Litre Stainless Steel Tank
mounted on Aluminium Deck and a Stainless Steel Subframe, Water
Tank, Two Hose Reels with Drives and Rotary Joints, Crosslinker
Tank including pump lines and filter, Drinking Water Tank Mono
Pumps, Hydraulic Tanks, Valves and Pipework, Electronic
Proportional Control Assembly, Controllers and Software.
Model: FL10 6x4 320 HP
Engine Number: T0102FL\255\259048
Chassis Number: YV5F2CCD7PD562073
<PAGE>
* COMMENCEMENT DATE: 15/th/ day of November 1994
* PAYMENT PERIOD: SIXTY (60) Calendar months
* PERIODIC PAYMENTS:
60 periodic payment of $8,848.00
PAYABLE: MONTHLY IN ADVANCE.
TO BE FOLLOWED BY:
1 payment of $20,996.00
PAYABLE: on the last working day of the 60/th/ month.
BY: 4:00 p.m. on the due date for payment
TO: GE CAPITAL AUSTRALIA LIMITED
P.O. BOX 1069
NORTH SYDNEY NSW 2060
* INSTALLATION SITE:
The equipment listed on this supplement will be located/installed at:
PEAK DOWNS HIGHWAY
PEAK DOWNS VIA
DYSART QLD 4745
OTHER INFORMATION:
CASH PRICE 419,922.57
----------
Less Deposit
(a) Money 0.00
----------
(b) Other - Trade In Allowance 0.00
----------
2
<PAGE>
Total Difference 419,922.57
----------
OTHER CHARGES
Add: Maintenance 0.00
----------
Freight 0.00
----------
Vehicle Registration Fees 0.00
----------
Insurance 0.00
----------
Stamp Duty 0.00
----------
Total Other Charges 0.00
----------
AMOUNT FINANCED
Add: Terms Charges 131,953.43
----------
Total Difference above 419,922.57
----------
Total Other Charges above 0.00
----------
TOTAL AMOUNT PAYABLE 551,876.00
----------
(Including Deposit)
Duly executed for and
on behalf of: TOTAL ENERGY SYSTEMS LIMITED
(A.C.N. 010 876 150)
By its duly authorized officer: /s/ Stephen T. Gordon
---------------------
Please print name: Stephen T. Gordon
-----------------
Title: Director - Financial Controller
-------------------------------
Date: 14/11/94
--------
ACCEPTED for and behalf of GE Capital Australia Limited by its duly Authorized
Officer on the 21/st/ day of November 1994.
___________________________
GE Capital Australia Limited (A.C.N. 008 562 534),
a company incorporated in the Australian Capital
Territory and having its registered office at:
88 Walker Street, North Sydney in
the State of New South Wales.
3
<PAGE>
EXHIBIT 12.1
ClimaChem, Inc.
Ratio of Earnings to Fixed Charges
For purposes of these computations, "earnings" represent net income before
income taxes plus fixed charges, less capitalized interest plus amortization of
interest capitalized in prior periods. "Fixed charges" consist of interest
expense, including amortization of debt issuance costs, capitalized interest and
the portion of rental expense which the Company believes is representative of
the interest component of rental expense.
<TABLE>
<CAPTION>
Nine months
ended
Year ended December 31, September 30,
-----------------------------------------------------
1992 1993 1994 1995 1996 (1) 1997 (1)
--------- -------- ------ -------- ------------ -----------
(In Thousands, Except Ratios)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes $12,906 $13,470 $ 9,388 $11,154 $ 8,421 $ 4,602
Interest expense 6,464 5,949 6,021 7,056 6,068 6,457
Amortization of debt issuance 118 129 129 129 179 130
costs
Interest portion of rental expense 907 592 1,117 1,074 1,471 1,505
Current period amortization of 73 73 73 73 100 214
interest capitalized in prior
periods
------- ------- ------- ------- ------- --------
Earnings $20,468 $20,213 $16,728 $19,486 $16,239 $ 12,908
======= ======= ======= ======= ======= ========
Fixed Charges:
Interest expense $ 6,464 $ 5,949 $ 6,021 $ 7,056 $ 6,068 $ 6,457
Capitalized interest - - 491 1,357 2,405 1,113
Amortization of debt issuance 118 129 129 129 179 130
costs
Interest portion of rental expense 907 592 1,117 1,074 1,471 1,505
------- ------- ------- ------- ------- --------
Fixed Charges $ 7,489 $ 6,670 $ 7,758 $ 9,616 $10,123 $ 9,205
======= ======= ======= ======= ======= ========
Ratio of Earnings to Fixed Charges 2.7x 3.0x 2.2x 2.0x 1.6x 1.4x
======= ======= ======= ======= ======= ========
</TABLE>
(1) The Company has not presented Pro Forma Ratio of Earnings to Fixed Charges
for these periods inasmuch as such amounts do not differ from the
historical amounts by greater than 10%.
<PAGE>
EXHIBIT 21.1
Subsidiaries of ClimaChem, Inc.
-------------------------------
APR Corporation
CHP Corporation
Climate Master, Inc.
Climate Mate Inc.
DSN Corporation
El Dorado Chemical Company
El Dorado Nitrogen Company
International Environmental Corporation
KOAX Corp.
LSB Chemical Corp.
Northwest Financial Corporation
Slurry Explosive Corporation
The Environmental Group, Inc.
The Environmental Group International Limited
Total Energy Systems Limited
T.E.S. Mining Services Pty. Ltd.
Total Energy Systems (NZ) Limited
Universal Tech Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated November 21, 1997, except as it relates to paragraphs
(A) and (C) of Note 6, as to which the date is November 26, 1997, in the
Registration Statement (Form S-4) and related Prospectus of ClimaChem, Inc. for
the registration of $105,000,000 of its 10 3/4% Senior Notes, Series B, due
2007.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
January 22, 1998
<PAGE>
EXHIBIT 25.1
Registration No. 33-60067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A. F/K/A BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
Jon Beacham
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
CLIMACHEM, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<CAPTION>
Oklahoma 73-1528549
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
<S> <C> <C>
APR Corporation Oklahoma 73-1415062
CHP Corporation Oklahoma 73-1094496
Climate Master, Inc. Delaware 93-0857025
Climate Mate, Inc. Canada N/A
DSN Corporation Oklahoma 73-1456545
El Dorado Chemical Company Oklahoma 73-1183488
International Environmental Corporation Oklahoma 73-0754306
KOAX Corp. Oklahoma 73-1284158
LSB Chemical Corp. Oklahoma 73-1207958
Northwest Financial Corporation Oklahoma 73-1131584
Slurry Explosive Corporation Oklahoma 73-1330903
The Environmental Group, Inc. Oklahoma 73-1431586
The Environmental Group International England N/A
Ltd.
Total Energy Systems Limited(1) Australia N/A
T.E.S. Mining Services Pty. (1) Australia N/A
Total Energy Systems (NZ) Ltd. (1) New Zealand N/A
Universal Tech Corporation Oklahoma 73-1364261
(Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
16 South Pennsylvania 73107
Oklahoma City, Oklahoma (Zip Code)
</TABLE>
(Address of principal executive
office)
10 3/4 % SENIOR NOTES DUE 2007
(Title of the Indenture securities)
<PAGE>
(1) The address and telephone number of the principal executive officers of
Total Energy Systems Limited and its subsidiaries, T.E.S. Mining Services Pty.
Ltd. and Total Energy Systems (NZ), Ltd., are Irvieta House, Level 9, 172
Edwards Street, Brisbane, Queensland, Australia 4000; 617-3-221-4406.
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. IF THE OBLIGOR IS AN AFFILIATE
OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY
AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 1997, published pursuant to the requirements of the Comptroller of the
Company, see Exhibit 7 to Form T-1, filed in connection with Form S-4 relating
to National Energy Group, Inc.10 3/4% Senior Notes due 2006, Securities and
Exchange Commission File No. 333-38075.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on January 20, 1998.
Bank One, NA
By: /s/ Jon Beacham
------------------------
Jon Beacham
Authorized Signer
<PAGE>
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
-----------------------
For the purpose of organizing an association to carry on the business
of banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
-----
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus,
------
County of Franklin, State of Ohio. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
-----
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to-time by resolution of the shareholders at any annual or
special meeting thereof, provided, however, that the Board of Directors, by
resolution of a majority thereof, shall be authorized to increase the
number of its members by not more than two between regular meetings of the
shareholders. Each Director, during the full term of his directorship,
shall own, as qualifying shares, the minimum number of shares of either
this Association or of its parent bank holding company in accordance with
the provisions of applicable law. Unless otherwise provided by the laws of
the United States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by action of the
Board of Directors.
-4-
<PAGE>
FOURTH. The annual meeting of the shareholders for the election of
------
Directors and the transaction of whatever other business may be brought
before said meeting shall be held at the main office of this Association or
such other place as the Board of Directors may designate, on the day of
each year specified therefor in the By-Laws, but if no election is held on
that day, it may be held on any subsequent business day according to the
provisions of law; and all elections shall be held according to such lawful
regulations as may be prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association
-----
shall be 2,073,750 shares of common stock of the par value of Ten Dollars
($10) each; but said capital stock may be increased or decreased from time-
to-time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription
to any share of any class of stock of this Association, whether now or
hereafter authorized or to any obligations convertible into stock of this
Association, issued or sold, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors, in its discretion, may
from time-to-time determine and at such price as the Board of Directors may
from time-to-time fix.
This Association, at any time and from time-to-time, may
authorize and issue debt obligations, whether or not subordinated, without
the approval of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members
-----
President of the Association, who shall be Chairman of the Board, unless
the Board appoints another director to be the Chairman. The Board of
Directors shall have the power to appoint one or more Vice Presidents and
to appoint a Secretary and such other officers and employees as may be
required to transact the business of this Association.
-5-
<PAGE>
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to
be paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the
capital of this Association shall be made; to manage and administer the
business and affairs of this Association; to make all By-Laws that it may
be lawful for them to make; and generally to do and perform all acts that
it may be legal for a Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
-------
location of the main office to any other place within the limits of the
City of Columbus, Ohio, without the approval of the shareholders but
subject to the approval of the Comptroller of the Currency; and shall have
the power to establish or change the location of any branch or branches of
this Association to any other location, without the approval of the
shareholders but subject to the approval of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue
------
until terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or
-----
more shareholders owning, in the aggregate, not less than 10 percent of the
stock of this Association, may call a special meeting of shareholders at
any time. Unless otherwise provided by the laws of the United States, a
notice of the time, place and purpose of every annual and special meeting
of the shareholders shall be given by first-class mail, postage prepaid,
mailed at least ten days prior to the date of such meeting to each
shareholder of record at his address as shown upon the books of this
Association.
-6-
<PAGE>
TENTH. Every person who is or was a Director, officer or employee of
-----
the Association or of any other corporation which he served as a Director,
officer or employee at the request of the Association as part of his
regularly assigned duties may be indemnified by the Association in
accordance with the provisions of this paragraph against all liability
(including, without limitation, judgments, fines, penalties and
settlements) and all reasonable expenses (including, without limitation,
attorneys' fees and investigative expenses) that may be incurred or paid by
him in connection with any claim, action, suit or proceeding, whether
civil, criminal or administrative (all referred to hereafter in this
paragraphs as "Claims") or in connection with any appeal relating thereto
in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer
or employee of the Association or such other corporation, or by reason of
any action taken or omitted by him in his capacity as such Director,
officer or employee, whether or not he continues to be such at the time
such liability or expenses are incurred, provided that nothing contained in
this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification
is sought, such indemnification in such instance is permissible under
applicable law and regulations, including published rulings of the
Comptroller of the Currency or other appropriate supervisory or regulatory
authority, and provided further that there shall be no indemnification of
directors, officers, or employees against expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by
an appropriate regulatory agency which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action
by an individual or individuals in the form of payments to the Association.
Every person who may be indemnified under the provisions of this paragraph
and who has been wholly successful on the merits with respect to any Claim
shall be entitled to indemnification as of right. Except as provided in the
preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting
of
-7-
<PAGE>
Directors who are not parties to such Claim shall find or if independent
legal counsel (who may be the regular counsel of the Association) selected
by the Board of Directors or Executive Committee whether or not a
disinterested quorum exists shall render their opinion that in view of all
of the circumstances then surrounding the Claim, such indemnification is
equitable and in the best interests of the Association. Among the
circumstances to be taken into consideration in arriving at such a finding
or opinion is the existence or non-existence of a contract of insurance or
indemnity under which the Association would be wholly or partially
reimbursed for such indemnification, but the existence or non-existence of
such insurance is not the sole circumstance to be considered nor shall it
be wholly determinative of whether such indemnification shall be made. In
addition to such finding or opinion, no indemnification under this
paragraph shall be made unless the Board of Directors or the Executive
Committee acting by a quorum consisting of Directors who are not parties to
such Claim shall find or if independent legal counsel (who may be the
regular counsel of the Association) selected by the Board of Directors or
Executive Committee whether or not a disinterested quorum exists shall
render their opinion that the Director, officer or employee acted in good
faith in what he reasonably believed to be the best interests of the
Association or such other corporation and further in the case of any
criminal action or proceeding, that the Director, officer or employee
reasonably believed his conduct to be lawful. Determination of any Claim
by judgment adverse to a Director, officer or employee by settlement with
or without Court approval or conviction upon a plea of guilty or of
nolocontendere or its equivalent shall not create a presumption that a
--------------
Director, officer or employee failed to meet the standards of conduct set
forth in this paragraph. Expenses incurred with respect to any Claim may
be advanced by the Association prior to the final disposition thereof upon
receipt of an undertaking satisfactory to the Association by or on behalf
of the recipient to repay such amount unless it is ultimately determined
that he is entitled to indemnification under this paragraph. The rights of
indemnification provided in this paragraph shall be in addition to any
rights to which any Director, officer or employee may otherwise be entitled
by contract or as a matter of law.
-8-
<PAGE>
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon
the right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular
--------
or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of this Association, unless the vote of
the holders of a greater amount of stock is required by law, and in that
case by the vote of the holders of such greater amount.
-9-
<PAGE>
Exhibit 4
BY-LAWS
-------
OF
--
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
----------------------------------------
ARTICLE I
---------
MEETING OF SHAREHOLDERS
-----------------------
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the
-----------------------------
Shareholders of the Bank for the election of Directors and for the
transaction of such business as may properly come before the meeting shall
be held at its main banking house, or other convenient place duly
authorized by the Board of Directors, on the third Monday of January of
each year, or on the next succeeding banking day, if the day fixed falls on
a legal holiday. If from any cause, an election of directors is not made
on the day fixed for the regular meeting of shareholders or, in the event
of a legal holiday, on the next succeeding banking day, the Board of
Directors shall order the election to be held on some subsequent day, as
soon thereafter as practicable, according to the provisions of law; and
notice thereof shall be given in the manner herein provided for the annual
meeting. Notice of such annual meeting shall be given by or under the
direction of the Secretary or such other officer as may be designated by
the Chief Executive Officer by first-class mail, postage prepaid, to all
shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date
fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of
-------------------------------
this Bank may be called at any time by the Board of Directors or by any
three or more shareholders owning, in the aggregate, not less than ten
percent of the stock of this Bank. The notice of any special meeting of
the shareholders called by the Board of Directors, stating the time, place
and purpose of the meeting, shall be given by or under the direction of the
Secretary, or such other officer as is designated by the Chief Executive
Officer, by first-class mail, postage prepaid, to all shareholders of
-10-
<PAGE>
record of the Bank at their respective addresses as shown upon the books of
the Bank, mailed not less than ten days prior to the date fixed for such
meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors
-------------------------------------------------
may designate a person to be the Secretary of the meetings of shareholders.
In the absence of a presiding officer, as designated in these By-Laws, the
Board of Directors may designate a person to act as the presiding officer.
In the event the Board of Directors fails to designate a person to preside
at a meeting of shareholders and a Secretary of such meeting, the
shareholders present or represented shall elect a person to preside and a
person to serve as Secretary of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the directors-
elect of their election and to meet forthwith for the organization of the
new board.
The minutes of the meeting shall be signed by the presiding officer
and the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as
---------------------------------
many as three shareholders to be judges of the election, who shall hold and
conduct the same, and who shall, after the election has been held, notify,
in writing over their signatures, the secretary of the shareholders'
meeting of the result thereof and the names of the Directors elected;
provided, however, that upon failure for any reason of any judge or judges
of election, so appointed by the directors, to serve, the presiding officer
of the meeting shall appoint other shareholders or their proxies to fill
the vacancies. The judges of election at the request of the chairman of
the
-11-
<PAGE>
meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary
of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
----------------------
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as
many persons as there are Directors to be elected, or to cumulate such
shares as provided by Federal Law. In deciding all other questions at
meetings of shareholders, each shareholder shall be entitled to one vote on
each share of stock of record in his name. Shareholders may vote by proxy
duly authorized in writing. All proxies used at the annual meeting shall
be secured for that meeting only, or any adjournment thereof, and shall be
dated, and if not dated by the shareholder, shall be dated as of the date
of receipt thereof. No officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of
---------------------
the capital stock of the Bank, eligible to be voted, present either in
person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of shareholders, but shareholders present at any
meeting and constituting less than a quorum may, without further notice,
adjourn the meeting from time to time until a quorum is obtained. A
majority of the votes cast shall decide every question or matter submitted
to the shareholders at any meeting, unless otherwise provided by law or by
the Articles of Association.
-12-
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
-------------------------------------
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION
and shall be employed either in the position of Chief Executive Officer or
active leadership within his or her business, professional or community
interest which shall be located within the geographic area in which the
Bank operates, or as an executive officer of the Bank. A director shall
not be eligible for nomination and re-election as a director of the Bank if
such person's executive or leadership position within his or her business,
professional or community interests which qualifies such person as a
director of Bank terminates. The age of 70 is the mandatory retirement age
as a director of the Bank. When a person's eligibility as director of the
Bank terminates, whether because of change in share ownership, position,
residency or age, within 30 days after such termination, such person shall
submit his resignation as a director to be effective at the pleasure of the
Board provided, however, that in no event shall such person be nominated or
elected as a director. Provided, however, following a person's retirement
or resignation as a director because of the age limitations herein set
forth with respect to election or re-election as a director, such person
may, in special or unusual circumstances, and at the discretion of the
Board, be elected by the directors as a Director Emeritus of the Bank for a
limited period of time. A Director Emeritus shall have the right to
participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
-----------------------------
prescribed by law. No person elected a director may exercise any of the
powers of his office until he has taken the oath of such office.
-13-
<PAGE>
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office
----------------------------------------
until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to his
prior death, resignation, or removal from office. Whenever any vacancy
shall occur among the directors, the remaining directors shall constitute
the directors of the Bank until such vacancy is filled by the remaining
directors, and any director so appointed shall hold office for the
unexpired term of his or her successor. Notwithstanding the foregoing,
each director shall hold office and serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
-----------------------------------
holders shall meet for organization of the new board at the time fixed by
the presiding officer of the annual meeting. If at the time fixed for such
meeting there is no quorum present, the Directors in attendance may adjourn
from time to time until a quorum is obtained. A majority of the number of
Directors elected by the shareholders shall constitute a quorum for the
transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
-------------------------------
Directors shall be held on the third Monday of each calendar month
excluding March and July, which meeting will be held at 4:00 p.m. When any
regular meeting of the Board falls on a holiday, the meeting shall be held
on such other day as the Board may previously designate or should the Board
fail to so designate, on such day as the Chairman of the Board of President
may fix. Whenever a quorum is not present, the directors in attendance
shall adjourn the meeting to a time not later than the date fixed by the
Bylaws for the next succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of
-------------------------------
Directors shall be held at the call of the Chairman of the Board or
President, or at the request of two or more Directors. Any special meeting
may be held at such place in Franklin County, Ohio, and at such time as may
be fixed in the call. Written or oral notice shall be given to each
Director not later than the day next preceding the day on which special
meeting is to be held, which notice may be waived in writing.
-14-
<PAGE>
The presence of a Director at any meeting of the Board shall be deemed a
waiver of notice thereof by him. Whenever a quorum is not present the
Directors in attendance shall adjourn the special meeting from day to day
until a quorum is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a
---------------------
quorum at any meeting, except when otherwise provided by law; but a lesser
number may adjourn any meeting, from time-to-time, and the meeting may be
held, as adjourned, without further notice. When, however, less than a
quorum as herein defined, but at least one-third and not less than two of
the authorized number of Directors are present at a meeting of the
Directors, business of the Bank may be transacted and matters before the
Board approved or disapproved by the unanimous vote of the Directors
present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
---------------------------
receive such fees for, and transportation expenses incident to, attendance
at Board and Board Committee Meetings and such fees for service as a
Director irrespective of meeting attendance as from time to time are fixed
by resolution of the Board; provided, however, that payment hereunder shall
not be made to a Director for meetings attended and/or Board service which
are not for the Bank's sole benefit and which are concurrent and
duplicative with meetings attended or board service for an affiliate of the
Bank for which the Director receives payment; and provided further, that
payment hereunder shall not be made in the case of any Director in the
regular employment of the Bank or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of
----------------------------------
the Board of Directors known as the Executive Committee which shall possess
and exercise, when the Board is not in session, all powers of the Board
that may lawfully be delegated. The Executive Committee shall also
exercise the powers of the Board of Directors in accordance with the
Provisions of the "Employees Retirement Plan" and the "Agreement and
Declaration of Trust" as the same now
-15-
<PAGE>
exist or may be amended hereafter. The Executive Committee shall consist
of not fewer than four board members, including the Chairman of the Board
and President of the Bank, one of whom, as hereinafter required by these
By-laws, shall be the Chief Executive Officer. The other members of the
Committee shall be appointed by the Chairman of the Board or by the
President, with the approval of the Board and shall continue as members of
the Executive Committee until their successors are appointed, provided,
however, that any member of the Executive Committee may be removed by the
Board upon a majority vote thereof at any regular or special meeting of the
Board. The Chairman or President shall fill any vacancy in the Committee
by the appointment of another Director, subject to the approval of the
Board of Directors. The regular meetings of the Executive Committee shall
be held on a regular basis as scheduled by the Board of Directors. Special
meetings of the Executive Committee shall be held at the call of the
Chairman or President or any two members thereof at such time or times as
may be designated. In the event of the absence of any member or members of
the Committee, the presiding member may appoint a member or members of the
Board to fill the place or places of such absent member or members to serve
during such absence. Not fewer than three members of the Committee must be
present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank
and, provided further, that if, at any meeting at which the Chairman of the
Board and President are both present, Committee members who are not
officers are not in the majority, then the Chairman of the Board or
President, which ever of such officers is not also the Chief Executive
Officer, shall not be eligible to vote at such meeting and shall not be
recognized for purposes of determining if a quorum is present at such
meeting. When neither the Chairman of the Board nor President are present,
the Committee shall appoint a presiding officer. The Executive Committee
shall keep a record of its proceedings and report its proceedings and the
action taken by it to the Board of Directors.
-16-
<PAGE>
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
------------------------------------------------------------------------
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of
which shall be, at least once in each calendar year, to review, develop and
recommend policies and programs related to the Bank's Community
Reinvestment Act Compliance and regulatory compliance with all existing
statutes, rules and regulations affecting the Bank under state and federal
law. Such Committee shall provide and promptly make a full report of such
review of current Bank policies with regard to Community Reinvestment Act
and regulatory compliance in writing to the Board, with recommendations, if
any, which may be necessary to correct any unsatisfactory conditions. Such
Committee may, in its discretion, in fulfilling its duties, utilize the
Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation
and Banc One Corporation and may engage outside Community Reinvestment Act
experts, as approved by the Board, to review, develop and recommend
policies and programs as herein required. The Community Reinvestment Act
and regulatory compliance policies and procedures established and the
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The
Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer
than three members of the Committee, a majority of whom are not officers of
the Bank, must be present to constitute a quorum. The Chairman of the
Board or President of the Bank, whichever is not the Chief Executive
Officer, shall be an ex officio member of the Community Reinvestment Act
and Compliance Policy Committee. The Community Reinvestment Act and
Compliance Policy Committee, whose chairman shall be appointed by the
Board, shall keep a record of its proceedings and report its proceedings
and the action taken by it to the Board of Directors.
-17-
<PAGE>
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
- -------------------------------
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
- -------------------------------
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
-18-
<PAGE>
ARTICLE III
-----------
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
----------------------------------------
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
- --------------------------------------------
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or more
Vice Chairmen, one or more Vice Presidents (which may include one or
more Executive Vice Presidents and/or Senior Vice Presidents) and one
or more Assistant Secretaries, all of whom shall be elected by the
Board. All other officers may be elected by the Board or appointed in
writing by the Chief Executive Officer. The salaries of all officers
elected by the Board shall be fixed by the Board. The Board from time-
to-time shall designate the President or Chairman of the Board to
serve as the Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be elected
by the Board from their own number. The President and Chairman of the
Board shall be re-elected by the Board annually at the organizational
meeting of the Board of Directors following the Annual Meeting of
Shareholders. Such officers as the Board shall elect from their own
number shall hold office from the date of their election as officers
until the organization meeting of the Board of Directors following the
next Annual Meeting of Shareholders, provided, however, that such
officers may be relieved of their duties at any time by action of the
Board in which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are members
of the Board, all officers, whether elected or appointed, shall hold
office at the pleasure of the Board. Except as otherwise limited by
law or these By-laws, the Board assigns to Chief Executive Officer
and/or his
-19-
<PAGE>
designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff and
other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by the
Board, officers appointed by the Chief Executive Officer, and such
other persons in the employment of the Bank who, pursuant to written
appointment and authorization by a duly authorized officer of the
Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of the
Board and/or President and at the same time also hold the office of
Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of the
Bank, to the extent that such officer is authorized in writing by the
Chief Executive Officer, may appoint persons other than officers who
are in the employment of the Bank to serve in management positions and
in connection therewith, the appointing officer may assign such title,
salary, responsibilities and functions as are deemed appropriate by
him, provided, however, that nothing contained herein shall be
construed as placing any limitation on the authority of the Chief
Executive Officer as provided in this and other sections of these By-
Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
- --------------------------------------
shall have general and active management of the business of the Bank and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. Except as otherwise prescribed or limited by these By-Laws, the Chief
Executive Officer shall have full right, authority and power to control all
personnel, including elected and appointed officers, of the Bank, to employ or
direct the
-20-
<PAGE>
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem proper.
The Chief Executive Officer shall perform all duties incident to his office and
such other and further duties, as may, from time-to-time, be required of him by
the Board of Directors or the shareholders. The specification of authority in
these By-Laws wherever and to whomever granted shall not be construed to limit
in any manner the general powers of delegation granted to the Chief Executive
Officer in conducting the business of the Bank. The Chief Executive Officer or,
in his absence, the Chairman of the Board or President of the Bank, as
designated by the Chief Executive Officer, shall preside at all meetings of
shareholders and meetings of the Board. In the absence of the Chief Executive
Officer, such officer as is designated by the Chief Executive Officer shall be
vested with all the powers and perform all the duties of the Chief Executive
Officer as defined by these By-Laws. When designating an officer to serve in his
absence, the Chief Executive Officer shall select an officer who is a member of
the Board of Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
- ------------------------------------------------------
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attorneys;
to sign and give any notice required to be given; to demand payment and/or to
declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement
-21-
<PAGE>
of any right or obligation; to adjust, settle and compromise all claims of every
kind and description in favor of or against the Bank, and to give receipts,
releases and discharges therefor; to borrow money and in connection therewith to
make, execute and deliver notes, bonds or other evidences of indebtedness; to
pledge or hypothecate any securities or any stocks, bonds, notes or any property
real or personal held or owned by the Bank, or to rediscount any notes or other
obligations held or owned by the Bank, to employ or direct the employment of all
personnel, including elected and appointed officers, and the dismissal of them
at pleasure, and in furtherance of and in addition to the powers hereinabove set
forth to do all such acts and to take all such proceedings as in his judgment
are necessary and incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
- ------------------------
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer being a member of the Bank's management staff
who is also a person in charge of and responsible for any department within the
Bank and any other officer to the extent such officer is so designated and
authorized by the Chief Executive Officer, the Chairman of the Board, the
President, or any other officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within
-22-
<PAGE>
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or on
behalf of the Bank; to execute promissory notes or other instruments evidencing
debt of the Bank; to execute instruments pledging or releasing securities for
public funds, documents submitting public fund bids on behalf of the Bank and
public fund contracts; to purchase and acquire any real or personal property
including loan portfolios and to execute and deliver such agreements, contracts
or other papers or documents as may be appropriate in the circumstances; to
execute any indemnity and fidelity bonds, proxies or other papers or documents
of like or different character necessary, desirable or incidental to the conduct
of its banking business; to execute and deliver settlement agreements or other
papers or documents as may be appropriate in connection with a dismissal
authorized by Section 3.01(c) of these By-laws; to execute agreements,
instruments, documents, contracts or other papers of like or difference
character necessary, desirable or incidental to the conduct of its banking
business; and to execute and deliver partial releases from and discharges or
assignments of mortgages, financing statements and assignments or surrender of
insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any officer
being a member of the Bank's management staff who is also a person in charge of
and responsible for any department within the Bank, and any other officer of the
Bank so designated and authorized by the Chief Executive Officer, Chairman of
the
-23-
<PAGE>
Board, President or any officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired by
or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
- -------------------------------
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
-24-
<PAGE>
ARTICLE IV
----------
TRUST DEPARTMENT
----------------
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
- -------------------------------
this Bank under the provisions of Federal Law and Regulations of the Comptroller
of the Currency, there shall be maintained a separate Trust Department of the
Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
- -----------------------------------------
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall consist
of the Chairman of the Board who shall be Chairman of the Committee, the
President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion, appoint
members of the Board to fill the place of such absent members to serve during
such absence. Three members of the Committee shall constitute a quorum. Any
member of the Committee may be removed by the Board by a majority vote at any
regular or special meeting of the Board. The Committee shall meet at such times
as it may determine or at the call of the Chairman, or President or any two
members thereof.
The Trust Management Committee, under the general direction of the Board of
Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
-25-
<PAGE>
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Committee
- ------------------------------------------
known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be active
officers of the Bank. Two members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable audits
of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law, Regulations
of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to what
action, if any, may be necessary to correct any unsatisfactory condition. A
report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
- -------------------------
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
-26-
<PAGE>
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
- ----------------------------------
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
- --------------------------------
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify the
character or class of investments to be made and does not vest in the Bank any
discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real property
or personal property and to purchase and acquire any real or personal property
and to execute and deliver such agreements, contracts, or other papers and
documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute and
deliver partial releases from
-27-
<PAGE>
any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute and
deliver settlement agreements or other papers or documents as may be appropriate
in connection with a dismissal authorized by Section 3.01(c) of these By-laws;
provided that the signature of any such person shall be attested in each case by
any officer of the Trust Department or by any other person who is specifically
authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any officer
of the Trust Department and such other officers of the trust affiliate of the
Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department, or any
other person or corporation as is specifically authorized by the Chief Executive
Officer, the President or the officer in charge of the Trust Department, are
hereby authorized on behalf of this Bank, to sign any and all pleadings and
papers in probate and other court proceedings, to execute any indemnity and
fidelity bonds, trust agreements, proxies or other papers or documents of like
or different character necessary, desirable or incidental to the appointment of
the Bank in any fiduciary capacity and the conduct of its business in any
fiduciary capacity; also to foreclose any mortgage, to execute and deliver
receipts for payments of principal, interest, dividends, rents, fees and
payments of every kind and description paid to the Bank; to sign receipts for
property acquired or entrusted to the Bank; also to sign stock or bond
certificates on behalf of this Bank in any fiduciary capacity and on behalf of
this Bank as transfer agent or registrar; to guarantee the genuineness of
signatures on assignments of stocks, bonds or other securities, and to
authenticate bonds, debentures, land or lease trust certificates or other forms
of security issued pursuant to any indenture under which this Bank now or
hereafter is acting as
-28-
<PAGE>
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money executed
by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
- ------------------------------
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law applicable
to such fiduciary account. In the case of shares of stock which are held by a
nominee of the Bank, such shares may be voted by such person(s) authorized by
such nominee.
-29-
<PAGE>
ARTICLE V
---------
STOCKS AND STOCK CERTIFICATES
-----------------------------
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
- ---------------------------------
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
- ---------------------------------------
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.
-30-
<PAGE>
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such dividends
or to be treated as shareholders for such other purpose.
-31-
<PAGE>
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 6.01. SEAL. The impression made below is an impression of the seal
- -------------------
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
- ----------------------------
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
- --------------------------
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of the
Board of Directors shall be recorded in the minute book of the Bank. The minutes
of each such meeting shall be signed by the presiding Officer and attested by
the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
- -----------------------------------
majority of the Directors.
-32-
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
-------
The undersigned, designated to act as Trustee under the Indenture for ClimaChem,
Inc. described in the attached Statement of Eligibility and Qualification, does
hereby consent that reports of examinations by Federal, State, Territorial, or
District Authorities may be furnished by such authorities to the Commission upon
the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: January 20, 1998
By: /s/ Jon Beacham
-------------------------------
Jon Beacham
Authorized Signer
-33-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,843
<SECURITIES> 0
<RECEIVABLES> 41,325
<ALLOWANCES> 1,511
<INVENTORY> 36,533
<CURRENT-ASSETS> 87,800
<PP&E> 133,993
<DEPRECIATION> 50,492
<TOTAL-ASSETS> 182,241
<CURRENT-LIABILITIES> 47,100
<BONDS> 93,331
0
0
<COMMON> 1
<OTHER-SE> 32,462
<TOTAL-LIABILITY-AND-EQUITY> 182,241
<SALES> 200,369
<TOTAL-REVENUES> 200,878
<CGS> 161,685
<TOTAL-COSTS> 161,685
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,587
<INCOME-PRETAX> 4,602
<INCOME-TAX> 1,821
<INCOME-CONTINUING> 2,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,781
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
10 3/4% SENIOR NOTES DUE 2007
OF
CLIMACHEM, INC.
PURSUANT TO PROSPECTUS DATED ____________, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON ________________,
1998 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY CLIMACHEM, INC.
TO: BANK ONE, NA (THE "EXCHANGE AGENT")
BY REGISTERED OR CERTIFIED MAIL:
Bank One, NA
P. O. Box 710184
Columbus, Ohio 43271-0184
Attn: Corporate Trust Operations
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
Bank One, NA
235 West Schrock Road
Westerville, Ohio 43081-0184
Attn: Corporate Trust Operations OHI-6184
BY HAND BEFORE 4:30 P.M.:
Bank One, NA OR First Chicago Trust Company of New York
235 West Schrock Road 14 Wall Street, 8/th/ Floor
Westerville, Ohio 43081-0184 New York, New York 10005
Attn: Lower Level Corporate Attn: Corporate Trust Operations
Trust Window
BY FACSIMILE: (614) 248-9887
Attn: Corporate Trust Operations
Confirm by telephone: (800) 346-5153
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Please read carefully the instructions accompanying this Letter of Transmittal
before completing this Letter of Transmittal.
The undersigned acknowledges receipt and review of the Prospectus, dated
_____________, 1998 (the "Prospectus") of ClimaChem, Inc. (the "Company") and
this related Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000 principal
amount of its 10 3/4% Series B Senior Notes due 2007 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement, for each $1,000
principal amount of its outstanding 10 3/4% Senior Notes due 2007 (the "Old
Notes"), of which $105,000,000 principal amount is outstanding.
The term "Expiration Date" means 5:00 p.m., New York City time, on
________________, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term will mean the latest date and time to
which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Old Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder. Capitalized terms used but not defined
herein have the respective meanings set forth in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Old Notes if (a)
certificates representing the Old Notes are to be physically delivered to the
Exchange Agent, (b) tender of the Old Notes is to be made by book entry transfer
to the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer-Procedures for Tendering" by any financial
institution that is a participant in the Book-Entry Transfer Facility and whose
name appears on a security position listing as the owner of Old Notes (such
participants acting on behalf of holders, are referred to herein, together with
such holders, as "Authorized Holders") or (c) tender of the Old Notes is to be
made according to the guaranteed delivery procedures described in the Prospectus
under the capition "The Exchange Offer-Guaranteed Delivery Procedures." See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Act.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:______________________________________
Account Number:_________________________________________________
Transaction Code Number:__________________________________________
Principal Amount of Tendered Old Notes:______________________________
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(a) time will not permit this Letter of Transmittal, certificates representing
Old Notes or other required document to reach the Exchange Agent prior to the
Expiration Date or (b) the procedures for book-entry transfer cannot be
completed prior to the Expiration Date, such Holders may effect a tender of such
Old Notes in accordance with guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer-Guaranteed Delivery
Procedures." See Instruction 2 below.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Authorized Holder(s):______________________________
Window Ticket No. (if any):________________________________________
Date of Execution of Notice
of Guaranteed Delivery:____________________________________________
Name of Eligible Institution
that Guaranteed Delivery:___________________________________________
If Delivered by Book-Entry Transfer,
the Account Number:_______________________________________________
Transaction Code Number:___________________________________________
-2-
<PAGE>
[_] CHECK HERE IF YOU AREA BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE OLD NOTES.
Name:__________________________________________________________
Address:_________________________________________________________
________________________________________________________________
Attention:________________________________________________________
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the certificate numbers and principal
amount of Old Notes should be listed on a separate signed schedule affixed
hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES.
BOX 1
DESCRIPTION OF OLD NOTES*
<TABLE>
<CAPTION>
Names and Addresses of Aggregate Principal Principal Amount
Registered Holder(s) Certificate Amount Represented Tendered, if Less
(Please fill in, if blank) Number(s) by Certificate(s) Than All**
- -------------------------- --------- ------------------- -----------------
<S> <C> <C> <C>
- -------------------------- --------- ------------------- -----------------
- -------------------------- --------- ------------------- -----------------
- -------------------------- --------- ------------------- -----------------
Total: _________________
</TABLE>
* Need not be completed if Old Notes are tendered by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," a Holder
will be deemed to have tendered the entire aggregate principal amount indicated
in the column labeled "Aggregate Principal Amount Represented by
Certificate(s)." The minimum tender is $1,000 in principal amount of Old Notes.
All other tenders must be in integral multiples of $1,000.
-3-
<PAGE>
BOX 2
SPECIAL REGISTRATION
INSTRUCTIONS
(See Instructions 4,5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name_________________________________________________________________________
(Please Print)
Address_______________________________________________________________________
______________________________________________________________________________
(Include Zip Code)
______________________________________________________________________________
(Tax Identification or Social Security Number)
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Deliver certificate(s) to:
Name___________________________________________________________________________
(Please Print)
Address________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security Number)
BOX 4
BROKER-DEALER STATUS
[_] Check this box if the Beneficial Owner of the Old Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF
TRANSMITTAL TO DAVID M. SHEAR, GENERAL COUNSEL OF THE COMPANY, VIA
FACSIMILE: (405) 236-1209.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
-4-
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to ClimaChem, Inc. (the "Company"), the principal
amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
the full power of substitution to (a) present such Old Notes and all evidences
of transfer and authenticity to, or transfer ownership of, such Old Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (b) deliver certificates for such Old Notes to the
Company and deliver all accompanying evidences of transfer and authenticity to,
or upon the order of, the Company and (c) present such Old Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good, valid and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims, when the same are acquired
by the Company. The undersigned hereby further represents that any New Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is the undersigned, that neither the undersigned nor any
other such person has any arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule 405
under the Securities Act of 1933, as amended, of the Company. In addition, the
undersigned and any such person acknowledge that (a) any person participating in
the Exchange Offer for the purpose of distributing the New Notes must, in the
absence of an exemption therefrom, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the New Notes and cannot rely on the position of the Staff of the
Securities and Exchange Commission enunciated in no-action letters and (b)
failure to comply with such requirements in such instance could result in the
undersigned or such person incurring liability under the Securities Act for
which the undersigned or such person is not indemnified by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the assignment, transfer and purchase of the Old Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in and does not intend to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it will
deliver a Prospectus in connection with any resale of such New Notes, however,
by so acknowledging and by delivering a Prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" the meaning of the Securities Act.
Unless otherwise notified in accordance with the instructions set forth in Box 4
under "Broker-Dealer Status," the Company will assume that the undersigned is
not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
If any Old Notes tendered herewith are not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned promptly after the Expiration Date, without expense, to
the undersigned at the address shown below or to a different address as may be
indicated herein in Box 3 under "Special Delivery Instructions."
-5-
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal will survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal will be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates (or electronic transfers) for Old Notes not
tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless
otherwise indicated in Box 3 under "Special Delivery Instructions," please send
the certificates, if any, representing the New Notes issued in exchange for the
Old Notes accepted for exchange and any certificates for Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event that
both "Special Registration Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange in the name(s) of, and return
any certificates for Old Notes not tendered or not exchanged to, the person(s)
so indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available or (b) who cannot deliver the Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2 regarding the
completion of this Letter of Transmittal printed below.
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Old Notes or by a participant in the Book-Entry
Transfer Facility, exactly as such participant's name appears on a security
position listing as the owner of the Old Notes, or by person(s) authorized to
become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Old Notes to which this Letter of Transmittal relate are held
of record by two or more joint holders, then all such holders must sign this
Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X_____________________________________________________ _________________
Date
X_____________________________________________________ _________________
Date
Area Code and Telephone Number:_________________________________
-6-
<PAGE>
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (a) set forth his or her full
title below and (b) submit evidence satisfactory to the Company of such person's
authority so to act. See Instruction 5 regarding the completion of this Letter
of Transmittal printed below.
Name(s):_______________________________________________________________________
(Please Print)
Capacity:______________________________________________________________________
Address:_______________________________________________________________________
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible
Institution:___________________________________________________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
_______________________________________________________________________________
(Address, Include Zip Code)
_______________________________________________________________________________
(Area Code and Telephone Number)
Dated:___________________________________________________________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITION
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD NOTES
OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Old Notes
(or a confirmation of book-entry transfer into the Exchange Agent's account with
the Book-Entry Transfer Facility for tendered Old Notes transferred
electronically), as well as a properly completed and duly executed copy of this
Letter of Transmittal (or facsimile thereof), a Substitute Form W-9 (or
facsimile thereof) and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. The method of delivery of certificates for
Old Notes and all other required documents is at the election and sole risk of
the tendering holder and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holder may wish to use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. Neither the Company nor the Exchange Agent is under an obligation to
notify any tendering holder of the Company's acceptance of tendered Old Notes
prior to the completion of the Exchange Offer.
-7-
<PAGE>
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available and who cannot deliver
their certificates for Old Notes (or comply with the procedures for book-entry
transfer prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Old Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(a) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States (an "Eligible
Institution");
(b) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail, or hand delivery) setting forth the name and
address of the holder, the certificate number or numbers of the
tendered Old Notes, and the principal amount of tendered Old Notes and
stating that the tender is being made thereby and guaranteeing that,
within five New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with
the tendered Old Notes (or a confirmation of book-entry transfer into
the Exchange Agent's account with the Book-Entry Transfer Facility for
Old Notes transferred electronically) and any other required documents
will be deposited by the Eligible Institution with the Exchange Agent;
and
(c) such properly completed and executed Letter of Transmittal and
certificates representing the tendered Old Notes in proper form for
transfer (or a confirmation of book-entry transfer into the Exchange
Agent's account with the Book-Entry Transfer Facility for Old Notes
transferred electronically) must be received by the Exchange Agent
within five New York Stock Exchange trading days after the Expiration
Date.
Any Holder who wishes to tender Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Old Notes prior to the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by a Holder
who attempted to use the guaranteed delivery person.
3. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered holder and who wishes to tender should arrange with such holder to
execute and deliver this Letter of Transmittal on such owner's behalf or must,
prior to completing and executing this Letter of Transmittal and delivering such
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Notes is tendered, the tendering holder should fill in
the principal amount tendered in the column labeled "Principal Amount Tendered"
of the box entitled "Description of Old Notes" (Box 1) above. The entire
principal amount of Old Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire principal amount
of Old Notes is not tendered, Old Notes for the principal amount of Old Notes
not tendered and New Notes exchanged for any Old Notes tendered will be sent to
the Holder at his or her registered address (or transferred to the account of
the Book-Entry Facility designated above), unless a different address (or
account) is provided in the appropriate box on this Letter of Transmittal, as
soon as practicable following the Expiration Date.
-8-
<PAGE>
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Old Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Old Notes
without alteration, enlargement, or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Old Notes.
If any of the tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Old Notes are held in different names on several Old Notes, it will be necessary
to complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Old Notes are held.
If this Letter of Transmittal is signed by the registered holder or
Authorized Holder, and New Notes are to be issued and any untendered or
unaccepted principal amount of Old Notes are to be reissued or returned to the
registered holder or Authorized Holder, then, the registered holder or
Authorized Holder need not and should not endorse any tendered Old Notes nor
provide a separate bond power. In any other case (including if this Letter of
Transmittal is not signed by the Authorized Holder), the registered holder or
Authorized Holder must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
holder(s) appear(s) on such Old Notes, and, with respect to a participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Old Notes, exactly as the name(s) of the participant(s)
appear(s) on such security position listings), with the signature(s) on the
endorsement or bond power guaranteed by an Eligible Institution unless such
certificates or bond powers are signed by an Eligible Institution.
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the Company
of their authority to so act must be submitted with this Letter of Transmittal.
No medallion signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Old Notes tendered
herewith (or by a participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of the Tendered Notes) and
the issuance of New Notes (and any Old Notes not tendered or not accepted) are
to be issued directly to such registered holder(s) (or, if signed by a
participant in the Book-Entry Transfer Facility, any New Notes or Old Notes not
tendered or not accepted are to be deposited to such participant's account at
such Book-Entry Transfer Facility) and neither the "Special Delivery
Instructions" (Box 3) nor the "Special Registration Instructions" (Box 2) has
been completed, or (ii) such Old Notes are tendered for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box, the name and address (or account at the
Book-Entry Transfer Facility) in which the New Notes and/or substitute Old Notes
for principal amounts not tendered or not accepted for exchange are to be sent
(or deposited), if different from the name and address or account of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the employer identification number or social security number of the person
named must also be indicated and the indicated and the tendering holders should
complete the applicable box.
If no such instructions are given, the New Notes (and any Old Notes not
tendered or not accepted) will be issued in the name of and sent to the
Authorized Holder of the Old Notes or deposited at such Authorized Holders'
account at the Book-Entry Transfer Facility.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Old Notes to it or its order pursuant to
the Exchange Offer. If, however, a
-9-
<PAGE>
transfer tax is imposed for any reason other than the transfer and sale of Old
Notes to the Company or its order pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
on any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption from taxes therefrom is not
submitted with this Letter of Transmittal, the amount of transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a
holder of any Old Notes which are accepted for exchange must provide the Company
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders (including,
among other, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (a) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report a interest or dividends or (b) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Old Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for information on which
TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Old Notes
will be determined by the Company, in its sole discretion, which determination
will be final and binding. The Company reserves the right to reject any and all
Old Notes not validly tendered or any Old Notes, the Company's acceptance of
which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Old Notes as to any ineligibility of any
holder who seeks to tender Old Notes in the Exchange Offer. The interpretation
of the terms and conditions of the Exchange Offer (includes this Letter of
Transmittal and the instructions hereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes,
but shall not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Exchange Offer in the case
of any tendered Old Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OLD NOTES. Any tendering holder
whose Old Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated above for further instruction.
-10-
<PAGE>
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the first address specified on page one of
this Agreement. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN OF
OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Old Notes when, as and if the Company
has given written and oral notice thereof to the Exchange Agent. If any
tendered Old Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Old Notes will be returned, without expense, to the
undersigned at the address shown above (or credited to the undersigned's account
at the Book-Entry Transfer Facility designated above) or at a different address
as may be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
_______________________________________________________________________________
PAYOR'S NAME: CLIMACHEM, INC.
Substitute Form W-9 Department of the Treasury
Internal Revenue Service
_______________________________________________________________________________
Part 1-- PLEASE PROVIDE YOUR TAXPAYER Social Security Number
IDENTIFICATION NUMBER ("TIN") or TIN
IN THE BOX AT RIGHT AND CERTIFY
BY SIGNING AND DATING BELOW _____/_____/_____
______________________________________________________________________________
Part 2-- Check the box if you are NOT subject to
backup withholding under the provisions
of section 3408(a)(1)(C) of the Internal
Revenue Code because (1) you have not been
notified that you are subject to backup with-
holding as a result of failure to report all interest
of dividends or (2) the Internal Revenue Service
has notified you that you are no longer subject to
backup withholding. [_]
______________________________________________________________________________
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
-11-
<PAGE>
Part 3--
______________________________________________________________________________
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.)
______________________________________________________________________________
SIGNATURE DATE Awaiting TIN --> [ ]
______________________________________________________________________________
Address
______________________________________________________________________________
PAYER'S REQUEST City, State and ZIP Code
FOR TAXPAYER ___________________________________________________________
IDENTIFICATION List account number(s) here (optional)
NUMBER (TIN) _____________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
-12-
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
CLIMACHEM, INC.
10 3/4% SENIOR NOTES DUE 2007
This form must be used by a holder of 10 3/4% Senior Notes due 2007 (the
"Old Notes") of ClimaChem, Inc. (the "Company"), who wishes to tender Old Notes
to the Exchange Agent pursuant to the guaranteed delivery procedures described
in "The Exchange Offer-Guaranteed Delivery Procedures" of the Prospectus, dated
_______________, 1998 (the "Prospectus"), and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Old Notes pursuant to
such guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
________________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: BANK ONE, NA (THE "EXCHANGE AGENT")
BY REGISTERED OR CERTIFIED MAIL:
Bank One, NA
P. O. Box 710184
Columbus, Ohio 43271-0184
Attn: Corporate Trust Operations
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.:
Bank One, NA
235 West Schrock Road
Westerville, Ohio 43081-0184
Attn: Corporate Trust Operations OHI-6184
BY HAND BEFORE 4:30 P.M.:
Bank One, NA OR First Chicago TrustCompany of New York
235 West Schrock Road 14 Wall Street, 8/th/ Floor
Westerville, Ohio 43081-0184 New York, New York 10005
Attn: Lower Level Corporate Attn: Corporate Trust Operations
Trust Window
BY FACSIMILE: (614) 248-9887
Attn: Corporate Trust Operations
Confirm by telephone: (800) 346-5153
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
<PAGE>
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE
NUMBER(S) (IF KNOWN)
OF OLD NOTES OR
ACCOUNT NUMBER AT
THE BOOK-ENTRY AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- --------------------- ------------------ ------------------
_____________________ __________________ __________________
_____________________ __________________ __________________
_____________________ __________________ __________________
_____________________ __________________ __________________
PLEASE SIGN AND COMPLETE
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
X_____________________________________________ ___________________________
X_____________________________________________ ___________________________
Signature(s) of Owner(s) or Authorized Signatory Date
Area Code and Telephone Number: ______________________________________________
Must be signed by the registered holder(s) of Old Notes exactly as their
name(s) appear on certificates for Old Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
the person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):___________________________________________________________________
Capacity:___________________________________________________________________
Address(es):________________________________________________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States,
hereby guarantees that the certificates representing the principal amount of Old
Notes tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedures set forth in the Prospectus
under "The Exchange Offer-Guaranteed Delivery Procedures," together with a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantee and any other documents
required by the Letter of Transmittal, will be received by the Exchange
-2-
<PAGE>
Agent at the address set forth above, no later than five New York Stock Exchange
Trading days after the Expiration Date.
________________________________ ________________________________
Name of Firm Authorized Signature
________________________________ ________________________________
Address Title
________________________________ Name:___________________________
(Please Type or Print)
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In
all cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a participant of the Book-
Entry Transfer Facility whose name appears on a security position listing as the
owner of Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown
on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
-3-
<PAGE>
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT
FROM BENEFICIAL OWNER
OF
CLIMACHEM, INC.
10 3/4% SENIOR NOTES DUE 2007
To: Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
________,1998 (the "Prospectus"), of ClimaChem, Inc. (the "Company"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that together
constitute the Company's offer (the "Exchange Offer"). Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 10 3/4% Senior Notes due 2007 (the "Old
Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT): $____________ of the 10 3/4% Senior Notes
due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$_____________________
[_] NOT TO TENDER any Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (fill in state)
___________, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospects delivery requirements of the Securities Act
of 1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in no-
action letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer," and (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Act, of the Company; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE
INSTRUCTIONS TO DAVID M. SHEAR, GENERAL COUNSEL OF THE COMPANY, VIA
FACSIMILE: (405) 236-1209.
<PAGE>
________________________________________________________________________________
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name (PLEASE PRINT):____________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Telephone number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
________________________________________________________________________________
-2-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501 (a), or an
individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality
thereof.
- A registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described
in section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section
1441.
- Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid
in money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
- Payments of interest not generally subject to backup withholding
include the following:
- Payments of interest and obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payor.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations
- Payments made to a nominee.
-3-
<PAGE>
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041 A(a),
6045, and 6050A. PRIVACY ACT NOTICE--Section 6109 requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers to
payors who must report the payments to the IRS. The IRS uses the number for
identification purposes. Payors must be given the numbers whether or not
recipients are required to file tax returns. Payors must generally withhold 20%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payor. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Certifications or affirmations
may subject you to criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-4-
<PAGE>
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR--
Social Security numbers have nine digits separated by two hyphens: e.g. 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: e.g. 00-0000000. The table below will help determine the number to give
the Payor.
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER
1. For an individual account The individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the account or,
account) if joint funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the
only contributor, the minor(1)
6. Account in the name of The ward, minor, or incompetent
guardian or committee for a person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee )
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do not furnish the
identifying number of the personal
representative or trustee unless the
legal entity itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
-5-
<PAGE>
15. Account with the Department of The public safety
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish the
ward's, minor's or incompetent person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
-6-
<PAGE>
EXHIBIT 99.4
EXCHANGE AGENT AGREEMENT
------------------------
THIS EXCHANGE AGENT AGREEMENT (the "Agreement") is made and entered into
this ___ day of February, 1998, between CLIMACHEM, INC., an Oklahoma corporation
(the "Company"), and BANK ONE, NA, a national banking association incorporated
and existing under the laws of the United States ("Exchange Agent").
W I T N E S S E T H:
WHEREAS, on November 26, 1997, the Company issued an aggregate $105,000,000
of its 10 3/4% Senior Notes due 2007 (the "Old Notes") pursuant to the terms and
conditions of the certain Indenture, dated November 26, 1997, between the
Company, the Guarantors named therein and Bank One, NA, as Trustee (the
"Indenture");
WHEREAS, the Company is undertaking an offer to exchange (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in the
prospectus (the "Prospectus") contained in ClimaChem's Registration Statement
(as defined) captioned "The Exchange Offer" attached as Exhibit "A" and letter
of transmittal (the "Letter of Transmittal") substantially in the form of
Exhibit "B" attached hereto, its 10 3/4% Series B Senior Notes due 2007 (the
"New Notes") for an equal principal amount of its Old Notes;
WHEREAS, the Exchange Offer will commence as soon as practicable after the
Company's Registration Statement on Form S-4 (the "Registration Statement")
relating to the Exchange Offer is declared effective under the Securities Act of
1933, as amended, as certified in writing to Exchange Agent by the Company (the
"Effective Time");
WHEREAS, capitalized terms used in this Agreement without definition have
the respective meetings set forth in the Registration Statement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Appointment of Exchange Agent. The Company hereby appoints Exchange Agent
-----------------------------
to serve as exchange agent in connection with the Exchange Offer, and Exchange
Agent hereby accepts such appointment and agrees to serve as exchange agent in
accordance with the terms and conditions of this Agreement and the Letter of
Transmittal.
2. Mailing to Holders of the Old Notes. Immediately upon receipt of
-----------------------------------
certification from the Company as to the Effective Time and copies of the
Prospectus and Letter of Transmittal, Exchange Agent will mail to each holder of
the Old Notes (a "Holder") (a) a Letter of Transmittal, (b) a Prospectus, and
(c) a return envelope for use in effecting the surrender of the Old Notes in
exchange for the New Notes. Upon request by a Holder who wishes to tender Old
Notes according to the guaranteed delivery procedures set forth in the
Prospectus, Exchange Agent will promptly send to such Holder a Notice of
Guaranteed Delivery (the "Notice of Guaranteed Delivery"), substantially in the
form of Exhibit "C" attached hereto.
<PAGE>
2.1 Delivery to Exchange Agent. Copies of the Prospectus, Letter of
--------------------------
Transmittal and Notice of Guaranteed Delivery will be furnished to
Exchange Agent by the Company in sufficient quantities such that
Exchange Agent may give copies of such documents to any person so
requesting.
2.2 Holder's Mailing Addresses. Exchange Agent, in its capacity as
--------------------------
transfer agent and registrar of the Old Notes, possesses a list
(including mailing addresses) of the Holders of the Old Notes.
3. Receipt of Documents. From and after the Effective Time, the Company
--------------------
authorizes and directs Exchange Agent to accept (a) Letters of Transmittal, duly
executed in accordance with the instructions thereto, and any requisite
collateral documents from Holders of the Old Notes and (b) surrendered Old Notes
to which such Letters of Transmittal relate. Exchange Agent is authorized to
request from any person tendering Old Notes such additional documents as the
Exchange Agent or the Company deems appropriate.
4. Defects in Tender. Exchange Agent will examine the Old Notes, the Letters
-----------------
of Transmittal and the other documents delivered to Exchange Agent in connection
with tenders of Old Notes to ascertain whether such instruments and documents
are completed and executed in accordance with the instructions set forth in the
Letter of Transmittal. If (a) any Letter of Transmittal is not properly
completed or executed, (b) the Old Notes accompanying any Letter of Transmittal
are not in proper form for transfer, or (c) any other irregularity in connection
with any tender of any Old Notes exists, Exchange Agent will, subject to the
terms and conditions of the Exchange Offer, cause such action to be taken as is
necessary to correct such irregularity. Except as provided in this paragraph 4,
determination of all questions as to the validity, form and eligibility
(including timeliness of receipt) of any Old Notes tendered or delivered will be
determined by Exchange Agent on behalf of the Company. The Exchange Agent will
not be under any duty to give notification of defects in such tenders and will
not incur any liability for failure to give such notification. The Company
reserves the absolute right to reject any or all tenders of any particular Old
Notes determined by the Company not to be in proper form or the acceptance or
exchange of which may, in the opinion of the Company, not be lawful or in proper
form, and to waive any of the conditions of the Exchange Offer or any defect or
irregularity in the tender of any Old Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer will be final and binding.
5. Exchange of the Old Notes. Promptly after the Expiration Date (as defined
-------------------------
in the Prospectus), upon surrender of the Old Notes in accordance with the
Letter of Transmittal, Exchange Agent is hereby directed to deliver or cause to
be delivered as promptly as possible to the Holders of the surrendered Old
Notes, in accordance with this Agreement and the terms of the Exchange Offer,
the amount of the New Notes to which such Holders of the surrendered Old Notes
are entitled. Notwithstanding any provision in this Agreement to the contrary,
prior to accepting any Old Notes in exchange for New Notes, Exchange Agent will
(a) provide a copy of the Letter of Transmittal relating to such Old Notes or
such other exchange documents that indicate the jurisdiction of residence of the
holder of such Old Notes to Conner & Winters, A Professional Corporation, 211
-2-
<PAGE>
North Robinson, Suite 1700, Oklahoma City, Oklahoma 73102, Attention: Irwin H.
Steinhorn ("Company Counsel"), in order to permit the Company to ensure that the
exchange can be consummated in accordance with the laws of such jurisdiction,
including the securities laws of such jurisdiction, and (b) receive confirmation
from the Company that the exchange can be completed in such jurisdiction. The
principal amount of the New Notes to be delivered to a Holder shall equal the
principal amount of the Old Notes surrendered.
6. Issuance and Delivery of New Notes. Promptly after the consummation of the
----------------------------------
Exchange Offer, Exchange Agent will request from the registrar and transfer
agent for the New Notes the appropriate amount of New Notes to be issued in
connection with such New Notes. The New Notes will be mailed by Exchange Agent,
in accordance with the instructions contained in the Letter of Transmittal, by
first class or registered mail, and under coverage of the Exchange Agent's
blanket surety bond for first class or registered mail losses protecting the
Company from loss or liability arising out of the non-receipt or nondelivery of
such New Notes or the replacement thereof. Issuance of the New Notes for
accepted Old Notes pursuant to the Exchange Offer will be made only after
deposit with Exchange Agent of the Old Notes, the Letter of Transmittal and any
other required documents. Exchange Agent will follow and act upon such
instructions in connection with the Exchange Offer which may be given to
Exchange Agent by the Company or such other persons as the Company may authorize
by written notice to Exchange Agent.
7. Application of the New Notes. The New Notes and any other property (the
----------------------------
"Property") to be deposited with, or received by Exchange Agent from the Company
pursuant to this Agreement constitute a special, segregated account, held solely
for the benefit of the Company and Holders tendering Old Notes. The Property
shall not be commingled with the securities, money, assets or property of
Exchange Agent or any other person, firm or corporation. Exchange Agent hereby
waives any and all rights of lien (including banker's lien), attachment or set-
off whatsoever, if any, against the Property, whether such rights arise by
reason of statutory or common law, by contract or otherwise except to the extent
set forth in the Indenture with respect to the Old Notes and the New Notes.
8. Reports. On each business day after receipt of the first Letter of
-------
Transmittal, and up to and including the Expiration Date, Exchange Agent shall
advise by telephone, not later than 5:00 p.m., Eastern Standard Time, Company
Counsel, and such other persons as they may direct, of the principal amount of
the Old Notes which have been duly tendered on such day, stating (a) the
principal amount of the Old Notes tendered pursuant to the Depository Trust
Company's Automated Tender Offer Program, as described in the Prospectus, (b)
the principal amount of the Old Notes tendered about which Exchange Agent has
questions concerning the validity and (c) the aggregate principal amount of the
Old Notes tendered and not withdrawn through the time of such telephone call.
Promptly thereafter (by the next day), Exchange Agent will confirm such advice
to each of the above persons in writing, to be transmitted by telefacsimile,
overnight courier or other special form of delivery. Exchange Agent will also
inform them, upon request made from time to time, of such other information as
such persons may request.
-3-
<PAGE>
9. Discrepancies. Exchange Agent shall endeavor to reconcile any
-------------
discrepancies between the amount of the Old Notes claimed to be owned by a
surrendering holder of the Old Notes and the amount of the Old Notes indicated
on the books of the Company as of the record date (as defined in the section of
the Prospectus captioned "The Exchange Offer"). If, based upon reliable
documentation, Exchange Agent determines that the Old Notes with respect to
which such discrepancy exists are valid Old Notes, then Exchange Agent shall
deliver the New Notes provided for herein to the holder surrendering such Old
Notes. In the case of any question about whether the Old Notes are valid Old
Notes, Exchange Agent will be entitled to received instructions from the
Company.
10. Old Notes and Other Names. If an New Note is to be registered in a name
-------------------------
other than that of the record holder of a surrendered Old Note, conditions to
the issuance thereof are that (a) the Old Note so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Exchange Agent any transfer or other taxes
required by reason of the registration of such New Note in any name other than
that of the holder of the Old Notes surrendered, or otherwise required, or shall
establish to Exchange Agent's satisfaction that such tax has been paid or is not
payable, and (b) the record holder deliver such other documents and instruments
as Company counsel or Exchange Agent shall require. If the Letter of
Transmittal is signed by a person other than the registered holder of the Old
Note tendered in proper form for transfer or the New Note is to be issued (or
any untendered principal amount of the Old Note is to be reissued) to a person
other than the registered holder of the tendered Old Note, the registered holder
must either properly endorse the Old Note tendered or transmit a properly
completed separate bond power with the Letter of Transmittal, with the signature
on the endorsement or bond power guaranteed by an Eligible Institution (as
defined in the Letter of Transmittal). In addition, such registered holder
and/or such other person will deliver such other documents and instruments as
Company Counsel or Exchange Agent shall require, in which case the New Note will
be mailed to such assignee or transferee at the address so required.
11. Partial Tenders. If, pursuant to the Exchange Offer, a Holder tenders less
---------------
than all of the principal amount of Old Notes submitted to Exchange Agent,
Exchange Agent will, promptly after the Expiration Date, return, or cause the
registrar to return, an Old Note for the principal amount not being tendered to,
or in accordance with the instructions of, such Holder who has made a partial
tender of Old Notes deposited with Exchange Agent.
12. Withdrawals. If a tendering Holder withdraws tendered Old Notes pursuant
-----------
to the terms of the Exchange Offer, Exchange Agent will, as promptly as
practicable after proper notification of such withdrawal, return such Old Notes
to, or in accordance with the instructions of, such Holder, and such Old Notes
will no longer be considered properly tendered. All questions as to the form
and validity of notices of withdrawal, including timeliness of receipt, shall be
determined by the Company, in its sole discretion, which determination will be
final and binding.
13. Rejection of Tenders. If, pursuant to the Exchange Offer, the Company does
--------------------
not accept for Exchange all of the Old Notes tendered by a Holder of Old Notes,
Exchange Agent will, promptly
-4-
<PAGE>
after the Expiration Date, return or cause to be returned the Old Notes not
accepted to, or in accordance with the instructions of, such holder of Old
Notes, together with a letter or notice furnished by the Company, in form
satisfactory to Exchange Agent, explaining why the tendered Old Notes are being
returned.
14. Lost Certificates. If a Holder of the Old Notes reports the loss or
-----------------
destruction of any Old Note, Exchange Agent will obtain from such Holder an
affidavit and any other representation that Exchange Agent may require with
reference to the circumstances of such loss or destruction. The Company or
Exchange Agent may require, as a condition precedent to delivering a New Note to
such Holder, that such Holder deliver to the Company a bond or other security in
such reasonable sum as the Company may direct as indemnity against any claim
that may be made against Exchange Agent or the Company with respect to the Old
Note alleged to have been lost or destroyed.
15. Cancellation of Exchanged Old Notes. Exchange Agent is authorized and
-----------------------------------
directed to cancel, in accordance with the procedures set forth in the
Indenture, all Old Notes received by Exchange Agent upon delivering the New
Notes to tendering holders of the Old Notes as provided herein.
16. Requests for Information. Exchange Agent will accept and comply with
------------------------
telephone and mail requests for information concerning the proper surrender of
the Old Notes. Upon request by an person, Exchange Agent shall furnish to such
person copies of the Prospectus, any supplements to the Prospectus, the Letter
of Transmittal and the other materials referred to in the Prospectus as being
available to Holders of Old Notes. The Company will provide Exchange Agent with
copies of such documents upon request by Exchange Agent.
17. Tax Matters. Exchange Agent shall comply with applicable requirements of
-----------
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder in connection with the Exchange Offer and will file with the Internal
Revenue Service all reports and other information required to be filed with the
Internal Revenue Service in connection with the Exchange Offer. If Exchange
Agent has questions with respect to any such information, it will so notify, and
request direction from, the Company.
18. Reports. Within five days after the Expiration Date, Exchange Agent shall
-------
furnish the Company a final report showing the disposition of the New Notes.
19. Fees. The Company will pay to Exchange Agent for services rendered under
----
the Agreement, $1,000, plus $100 per Letter of Transmittal mailed by Exchange
Agent pursuant to paragraph 2 hereof, plus reasonable out of pocket expenses,
including counsel fees and disbursements.
20. Miscellaneous. As Exchange Agent hereunder, Exchange Agent (a) will have
-------------
no duties or obligations other than those specifically set forth in this
Agreement; (b) will make no representation and will have no responsibility as to
the validity or genuineness of the Exchange Offer; (c) will not be obligated to
take any legal action hereunder which might by Exchange Agent's judgment involve
any expense or liability unless Exchange Agent shall have been furnished with
reasonable indemnity;
-5-
<PAGE>
(d) may rely on and shall be protected in acting in good faith upon any
certificate, instrument, opinion, notice, instruction, letter, telegram or other
document, or any security, delivered to Exchange Agent and believed by Exchange
Agent to be genuine and to have signed by the proper party or parties; (e) may
rely on and shall be protected in acting in good faith upon the written
instructions of the Chief Financial Officer or President of the Company or such
other employees and representatives as the Company may hereafter designate in
writing; (f) will not be liable for any claim, loss, liability or expense,
incurred without Exchange Agent's negligence or willful misconduct, arising out
of or in connection with the administration of Exchange Agent's duties
hereunder; and (g) may consult with counsel reasonably satisfactory to the
Company, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by Exchange Agent hereunder in good faith and in accordance with the opinion of
such counsel.
21. Further Assurances. The Company agrees that it will perform, execute,
------------------
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by Exchange Agent for the carrying out or performing by
Exchange Agent of the provisions of this Agreement.
22. INDEMNIFICATION. THE COMPANY COVENANTS AND AGREES TO INDEMNIFY EXCHANGE
---------------
AGENT AND HOLD EXCHANGE AGENT HARMLESS AGAINST ANY CLAIM, LOSSES, LIABILITY OR
EXPENSE (INCLUDING REASONABLE COUNSEL FEES AND DISBURSEMENTS) INCURRED WITHOUT
NEGLIGENCE OR WILLFUL MISCONDUCT ON EXCHANGE AGENT'S PART ARISING OUT OF OR IN
CONNECTION WITH THE ADMINISTRATION OF EXCHANGE AGENT'S DUTIES HEREUNDER,
INCLUDING THE COSTS AND EXPENSES OF DEFENDING ITSELF AGAINST ANY CLAIM OR
LIABILITY AND INCLUDING BUT NOT LIMITED TO ANY NEGLIGENT ACT (EXCLUDING ANY
NEGLIGENT ACT) OF EXCHANGE AGENT.
23. Applicable Law. This Agreement and appointment of Exchange Agent as
--------------
Exchange Agent will be construed and enforced in accordance with the laws of the
State of Oklahoma, and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successor and assigns of the parties
hereto.
24. Notices. Notices or demands authorized by this Agreement will be
-------
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with Exchange Agent) as
follows:
If to the Company: ClimaChem, Inc.
16 South Pennsylvania
Oklahoma City, Oklahoma 73107
Attention: David M. Shear, Esquire
-6-
<PAGE>
with a copy to: Conner & Winters
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102
Attention: Irwin H. Steinhorn, Esquire
If to Exchange Agent: Bank One, NA
235 West Schrock Road
Westerville, Ohio 473271-0184
Attention: Ms. Laura Marsch
Corporate Trust Operations
with a copy to: BankOne, N.A.
100 East Broad Street
Columbus, Ohio 73271-0181
Attention: Mr. Jon Beacham
Corporate Trust Operations
Any notice or demand authorized by this Agreement to be given or made by the
Company or Exchange Agent to or on a Holder of the Old Notes shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the Company's
books.
25. Change of Exchange Agent. Except as otherwise provided in the Indenture,
------------------------
Exchange Agent may resign and be discharged from its duties under this Agreement
by giving to the Company notice in writing, by first-class mail, postage
prepaid, specifying a date when such resignation shall take effect. If Exchange
Agent resigns or becomes incapable of acting as Exchange Agent and the Company
fails to appoint a new Exchange Agent within a period of 30 days after is has
been notified in writing of such resignation or incapacity by Exchange Agent,
the Company shall become the Exchange Agent and any holder of the Old Notes may
apply to any court of competent jurisdiction for the appointment of a successor
to Exchange Agent. Pending the appointment of a successor to Exchange Agent,
either by the Company of by such a court, the duties of the Exchange Agent shall
be carried out by the Company. After appointment, the successor Exchange Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Exchange Agent without the further act or deed;
but the Exchange Agent shall deliver and transfer to the successor Exchange
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose.
26. Term. This Agreement shall terminate, except for Sections 19, 22, and 26
----
hereof, 30 days after the Expiration Date; provided, however, that the term of
this Agreement may be extended at the request of the Company and the agreement
of Exchange Agent. Any portion of the New Notes which remain undistributed to
the Holders of the Old Notes after the Expiration Date shall be marked, canceled
and delivered to the Company upon demand, and any Holders of unsurrendered Old
Notes shall thereafter have no right to exchange their Old Notes for New Notes.
-7-
<PAGE>
27. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and such counterparts together shall
constitute one and the same instrument.
28. Indenture; Controls. This Agreement will be construed and interpreted in
-------------------
accordance with the terms of the Indenture. If any term or provision of this
Agreement is inconsistent with, or contrary to, the terms or provisions of the
Indenture, the terms and provisions of the Indenture will control.
IN WITNESS WHEREOF, the Company and the Exchange Agent have caused this
Agreement to be signed by their respective officers thereunto authorized as of
the date first written above.
CLIMACHEM, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
BANK ONE, NA
By:____________________________________
Name:__________________________________
Title:_________________________________
-8-
