EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
EIGHTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
EIGHTH AMENDMENT, dated as of February 28, 2005 (the "Amendment"), to the Loan and Security Agreement dated as of April 13, 2001, as amended by the First Amendment dated as of August 3, 2001, the Second Amendment dated as of May 24, 2002, the Third Amendment dated as of November 18, 2002, the Fourth Amendment dated as of March 3, 2003, the Fifth Amendment dated as of December 31, 2003, the Sixth Amendment dated as of June 29, 2004 and the Seventh Amendment dated as of September 15, 2004 (the "Loan Agreement"), by and among (i) LSB INDUSTRIES, INC., a Delaware corporation (the "Parent"), THERMACLIME, INC., an Oklahoma corporation formerly known as ClimaChem, Inc. ("ThermaClime"), and each of the Subsidiaries of ThermaClime identified on the signature pages thereof (such Subsidiaries, together with ThermaClime, each a "Borrower", and collectively, the "Borrowers"), (ii) the lenders identified on the signature pages thereof (each a "Lender" and collectively the "Lenders") and (iii) XXXXX FARGO FOOTHILL, INC., a California corporation formerly known as Foothill Capital Corporation, as the arranger and administrative agent for the Lenders (the "Agent").
WHEREAS, the Borrowers desire to (i) extend the term of the Loan Agreement until April 13, 2009, (ii) to insert a line of credit pursuant to which the Borrowers may be able to receive loans from the Lenders to finance the Borrowers' capital expenditures and (iii) amend certain other terms and conditions of the Loan Agreement hereafter set forth.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto hereby agree as follows:
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Capitalized Terms. All capitalized terms used in this Amendment (including, without limitation, in the recitals hereto) and not otherwise defined shall have their respective meanings set forth in the Loan Agreement.
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Definitions in the Loan Agreement. Section 1.1 of the Loan Agreement is hereby amended as follows:
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The definition of the term "Applicable Prepayment Premium" is hereby amended in its entirety to read as follows:
"'Applicable Prepayment Premium' means, as of any date of determination, an amount equal to (a) during the period of time from and after the Closing Date up to the date that is the fifth anniversary of the Closing Date, 3% times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination, (b) during the period of time from and including the date that is the fifth anniversary of the Closing Date up to the date that is the sixth anniversary of the Closing Date, 2% times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination, and (c) during the period of time from and including the date that is the sixth anniversary of the Closing Date up to the date that is the seventh anniversary of the Closing Date, 1% times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination; and (d) during the period of time from and including the date that is the seventh anniversary of the Closing Date and prior to the Maturity Date, 0% times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination."
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The definition of the term "Base Rate Margin" is hereby amended by deleting the number "2" and inserting the number "0.75" in lieu thereof.
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The definition of the term "Borrowing" is hereby amended in its entirety to read as follows:
"'Borrowing' means a borrowing hereunder of Advances made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance, or a Term Loan, as the case may be."
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A definition of the term "Capital Assets" is hereby inserted, in appropriate alphabetical order, to read as follows:
"'Capital Assets' has the meaning set forth in Section 2.2."
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The definition of the term "Capital Lease Obligation" is hereby amended in its entirety to read as follows:
"'Capitalized Lease Obligation' means any Indebtedness represented by obligations under a Capital Lease, but excluding all Indebtedness under any operating lease that is entered into between any Borrower and any of its Subsidiaries, as lessee, and any "related party" (as defined in paragraph 5 of Financial Accounting Standards Board Statement No. 13, "Accounting for leases (FAS13)") or Affiliate of such lessee, as lessor, that is required to be treated as capital lease obligations under GAAP, pursuant to FAS 13, as amended from time to time."
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The definition of the term "Dilution" is hereby amended in its entirety to read as follows:
"'Dilution' means, as of any date of determination, a percentage, based upon the experience of the immediately prior 90 days, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Accounts during such period, by (b) Borrowers' xxxxxxxx during such period plus the Dollar amount of clause (a)."
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The definition of the term "EBITDA" is hereby amended in its entirety to read as follows:
"'EBITDA' means, with respect to any fiscal period, the result of (i) ThermaClime's and its Subsidiaries consolidated net earnings (or loss), minus (ii) the aggregate amount of all extraordinary gains of ThermaClime and its Subsidiaries for such period, plus (iii) the aggregate amount of (a) all extraordinary losses, interest expense, income taxes, and depreciation and amortization of ThermaClime and its Subsidiaries for such period and (b) other non-operating, non-cash, one time charges of ThermaClime and its Subsidiaries for such period, all as determined in accordance with GAAP."
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A definition of the term "Eighth Amendment Effective Date" is hereby inserted, in appropriate alphabetical order, to read as follows:
"'Eighth Amendment Effective Date' means the date on which all of the conditions precedent to the effectiveness of Eighth Amendment to Loan Agreement dated as of February 28, 2005, by and among the Borrowers, the Lenders and the Agent have been fulfilled or waived."
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Paragraph (a) of the definition of the term "Eligible Accounts" is hereby amended in its entirety to read as follows:
"(a) Accounts that the Account Debtor has failed to pay within 120 days of original invoice date or Accounts which are more than 60 days past due,"
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Paragraph (i) of the definition of the term "Eligible Accounts" is hereby amended in its entirety to read as follows:
"(i) Accounts with respect to an Account Debtor whose total obligations owing to Borrowers exceed 10% (or, in the case of Carrier Corporation and Orica USA Inc., 20%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage,"
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A definition of the term "Hard Cost" is hereby inserted, in appropriate alphabetical order, to read as follows:
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Clause (c) of the definition of the term "Indebtedness" is hereby amended in its entirety to read as follows:
"(c) all Capitalized Lease Obligations,"
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The definition of the term "LIBOR Rate Margin" is hereby amended by deleting the number "4.50" and inserting the number "2.00" in lieu thereof.
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The definition of the term "Term Loan Amount" is hereby amended in its entirety to read as follows:
"'Term Loan Amount' means $7,500,000."
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The definition of the term "Term Loan Priority Collateral" is hereby amended in its entirety to read as follows:
"'Term Loan Priority Collateral' means all Capital Assets acquired by a Borrower with proceeds of the Term Loan."
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Section 2.1(a) of the Loan Agreement is hereby amended in its entirety to read as follows:
"(a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender with a Revolver Commitment agrees (severally, not jointly or jointly and severally) to make advances ("Advances") to Borrowers in an amount at any one time outstanding not to exceed such Lender's Pro Rata Share of an amount equal to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit Usage or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing Base," as of any date of determination, shall mean the result of the following for all Borrowers:
(A) the lesser of
(1) 85% of the amount of Eligible Accounts of such Borrowers, less the amount, if any, of the sum of the Dilution Reserve, and
(2) an amount equal to such Borrowers' Collections with respect to Accounts for the immediately preceding 75 day period, plus
(B) the lowest of
(1) $20,000,000, and
(2) the sum of
(x) the lesser of (i) 70% of the value of such Borrowers' Eligible Inventory, and (ii) 80% of the Net Orderly Liquidation Value of such Borrowers' Eligible Inventory, plus
(y) the lesser of (i) 60% (or, in the case of Climate Control Raw Inventory, 65%) of the value of such Borrowers' Eligible Raw Inventory, and (ii) 80% of the Net Orderly Liquidation Value of such Borrowers' Eligible Raw Inventory, minus
(C) the sum of (i) the Bank Product Reserve, and (ii) the aggregate amount of reserves, if any, established by Agent under Section 2.1(b)."
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Section 2.1(c) of the Loan Agreement is hereby amended by deleting the words "Inventory Reserves" and "Interest Reserve".
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Section 2.1(f) of the Loan Agreement is hereby amended by deleting the number "1,000,000" and inserting the number "2,000,000" in lieu thereof.
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- Letter of Credit Fee. Section 2.6(b) of the Loan Agreement is hereby amended by deleting "2.75%" and inserting "1.00%" in lieu thereof.
- Default Rate. Section 2.6(c) of the Loan Agreement is hereby amended by deleting the number "4" in subsections (i) and (ii) and, in each instance, inserting the number "2" in lieu thereof.
- Credit Payments; Float Charge. Section 2.8 of the Loan Agreement is hereby amended in its entirety to read as follows:
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Audit, Appraisal, and Valuation Charges. Section 2.11(c) of the Loan Agreement is hereby amended in its entirety to read as follows:
"(c) For the separate account of each member of the Lender Group, audit, appraisal, and valuation fees and charges as follows, (i) a fee of $850 per day, per auditor, plus out-of-pocket expenses for each financial audit of a Borrower performed by personnel employed by Agent and each Lender that accompanies Agent's personnel in connection with such financial audit conducted by Agent, (ii) if implemented, for the sole account of the Agent, a one time charge of $3,000 plus out-of-pocket expenses for expenses for the establishment of electronic collateral reporting systems, (iii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral consisting of Inventory and Capital Assets performed by personnel employed by Agent, provided, that, in the absence of a continuing Event of Default, the Borrowers shall not be obligated to pay for more than one (1) appraisal in any 12 month period, and (iv) the actual charges paid or incurred by the Agent (and, subject to clause (i) above, each Lender) if it elects to employ the services of one or more third Persons to perform financial audits of Borrowers, to appraise the Collateral, or any portion thereof, or to assess a Borrower's business valuation."
- Letter of Credit. Section 2.12(a)(i) of the Loan Agreement is hereby amended in its entirety to read as follows:
"(i) the Letter of Credit Usage would exceed the Borrowing Base less the amount of outstanding Advances, or"
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Term. Section 3.4 of the Loan Agreement is hereby amended by deleting the date "April 13, 2005" and inserting the date "April 13, 2009" in lieu thereof.
- Financial Covenants. Section 7.20 of the Loan Agreement is hereby amended as follows:
- Minimum EBITDA. Section 7.20(a)(i) is hereby amended in its entirety to read as follows:
"(i) Minimum EBITDA. EBITDA, measured on a fiscal quarter-end basis, of not less than the required amount set forth in the following table for the applicable period set forth opposite thereto;
Applicable Amount
Applicable Period
$16,138,353
For the 12 month period ending March 31, 2005
$17,746,116
For the 12 month period ending June 30, 2005
$13,699,825
For the 12 month period ending September 30, 2005
$16,035,278
For the 12 month period ending December 31, 2005
Borrowers' EBITDA for the 12 month period ending each fiscal quarter after December 31, 2005 shall not be less than the greater of (x) $16,035,278 and (y) 85% of Borrowers' projected EBITDA for such period as set forth in the Projections delivered to Agent in accordance with Section 6.3(c), which Projections are in form and substance acceptable to Agent; provided, that if Agent and Borrowers cannot agree on the EBITDA covenant number based upon Borrowers' projected EBITDA, for purposes of this Section 7.20(a)(i), Borrowers' EBITDA for such 12 month period shall be determined by Agent in its Permitted Discretion and shall not be less than $16,035,278."
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Capital Expenditures. Section 7.20(b)(i) is hereby amended in its entirety to read as follows:
"(i) Capital Expenditures. Capital expenditures, measured on a fiscal quarter-end basis, in excess of $11,240,000 for the trailing twelve (12) month period, excluding up to $4,500,000 of capital expenditures made by Borrowers during the 2005 fiscal year to repair and replace equipment damaged directly or indirectly by a fire at the El Dorado Nitric Acid Plant but only to the extent such capital expenditures are paid for from insurance proceeds."
- Minimum EBITDA. Section 7.20(a)(i) is hereby amended in its entirety to read as follows:
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Lenders' Commitment Schedule. Schedule C-1 to the Loan Agreement is hereby amended in its entirety to read as set forth in Annex I to this Amendment.
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Schedule T-1. Schedule T-1 to the Loan Agreement is hereby eliminated in its entirety.
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counterparts of this Amendment duly executed by the Borrowers, the Agent and the Lenders; and
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an amendment to the Fee Letter duly executed by the Borrowers and the Agent; and
- such other agreements, instruments, approvals, opinions and other documents as the Agent may reasonably request from the Borrowers.
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Continued Effectiveness of the Loan Agreement. Except as otherwise expressly provided herein, the Loan Agreement and the other Loan Documents are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, except that on and after the Eighth Amendment Effective Date (i) all references in the Loan Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended by this Amendment, and (ii) all references in the other Loan Documents to which any Borrower is a party to the "Loan Agreement", "thereto", "thereof", "thereunder" or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended by this Amendment. Except as expressly provided herein, the execution, delivery and effectiveness of this Amendment shall not operate as an amendment of any right, power or remedy of the Lender under the Loan Agreement or any other Loan Document, nor constitute an amendment of any provision of the Loan Agreement or any other Loan Document.
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Governing Law. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York.
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Amendment as Loan Document. Each Borrower hereby acknowledges and agrees that this Amendment constitutes a "Loan Document" under the Loan Agreement. Accordingly, it shall be an Event of Default under the Loan Agreement (i) if any representation or warranty made by a Borrower under or in connection with this Amendment shall have been untrue, false or misleading in any material respect when made or (ii) if Borrowers fail to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in this Amendment.
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Waiver of Jury Trial. EACH BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered as of the date first above written.
Borrowers:
THERMACLIME, INC. (formerly known as ClimaChem, Inc.), an Oklahoma corporation
By: ______________________________________
Title:
CHEROKEE NITROGEN COMPANY,
a Oklahoma corporation
By: ______________________________________
Title:
CLIMATE MASTER, INC.,
a Delaware corporation
By: ______________________________________
Title:
CLIMATECRAFT, INC.,
an Oklahoma corporation
By: ______________________________________
Title:
CLIMACOOL, CORP.,
an Oklahoma corporation
By: ______________________________________
Title:
INTERNATIONAL ENVIRONMENTAL CORPORATION, an Oklahoma corporation
By: ______________________________________
Title:
ACP INTERNATIONAL, LIMITED,
an Oklahoma corporation
By: ______________________________________
Title:
KOAX CORP., an Oklahoma corporation
By: ______________________________________
Title:
LSB CHEMICAL CORP.,
an Oklahoma corporation
By: ______________________________________
Title:
XPEDIAIR, INC.,
an Oklahoma corporation
By: ______________________________________
Title:
EL DORADO CHEMICAL COMPANY,
an Oklahoma corporation
By: ______________________________________
Title:
CHEMEX I CORP.,
an Oklahoma corporation
By: ______________________________________
Title:
TRISON CONSTRUCTION, INC.,
an Oklahoma corporation
By: ______________________________________
Title:
CHEMEX II CORP.,
an Oklahoma corporation
By: ______________________________________
Title:
Agent and Lender:
XXXXX FARGO FOOTHILL, INC.,
a California corporation
By: ______________________________________
Title:
Lender:
CONGRESS FINANCIAL CORPORATION (SOUTHWEST),
a Texas corporation
By: ______________________________________
Title:
ANNEX I
Schedule C-1
Commitments
Lender |
Revolver Commitment |
Term Loan |
Total Commitment |
Xxxxx Fargo Foothill, Inc. |
$30,000,000 |
$4,500,000 |
$30,000,000 |
Congress Financial Corporation (Southwest) |
$20,000,000 |
$3,000,000 |
$20,000,000 |
All Lenders |
$50,000,000 |
$7,500,000 |
$50,000,000 |
* The Term Loan Commitment is a sub-facility of the Revolver Commitment.