Facility Letter - Bank of New Zealand, Level 7 and Total Energy Systems Ltd.
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.
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
----------------------------
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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
----------------------
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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
----------------------
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