Exhibit 99.26 - Commercial Security Agreement (Bank of Union)

EX-99.26 12 union-security.htm COMMERCIAL SECURITY AGREEMENT (BANK OF UNION) Exhibit 99.26 - Commercial Security Agreement (Bank of Union)

COMMERCIAL SECURITY AGREEMENT

Principal $158,208.88	Loan Date 08-27-2001	Maturity 08-27-2002	Loan No. 83827	Call / Coll	Account 013205213	Officer JAS	Initials
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations.

Borrower:

Jack E. Golsen (SSN: ###-##-####)
16 South Pennsylvania
Oklahoma City, OK 73107

Lender:

THE BANK OF UNION
THE BANK OF UNION, EL RENO
2000 S. COUNTRY CLUB RD.
P.O. BOX 1010
EL RENO, OK 73036

THIS COMMERCIAL SECURITY AGREEMENT dated August 27, 2001, is made and executed between JACK E. GOLSEN ("Grantor") and THE BANK OF UNION ("Lender").

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means the following described property, whether now owned or hereafter acquired, whether now existing now or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment of the Indebtedness and performance of all other obligations under the Note and this Agreement:

          1,523,933 TOTAL SHARES OF LSB INDUSTRIES, INC. STOCK (533,333 SHARES OF PREFERRED
          "B" AND 990,600 SHARES OF COMMON) PLEDGED AS COLLATERAL ON JACK E. GOLSEN,
          GOLSEN PETROLEUM CORPORATION AND SBL CORPORATION NOTES; CASH VALUE LIFE
          INSURANCE; LOAN AGREEMENT

In addition, the word "Collateral" also includes all of the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located:

(A) All accessions, attachments, accessories, replacements and additions to any of the collateral described
herein, whether added now or later.

(B) All proceeds and produce of any of the property described in this Collateral section.

(C) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out
of a sale, lease, or other disposition of any of the property described in this Collateral section.

          (D)     All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any
          of the property described in this Collateral section, and sums due from a third party who has damaged or
          destroyed the Collateral or from that party's insurer, whether due to judgment, settlement or other process.

          (E)     All records and data relating to any of the property described in this Collateral section, whether in the
          form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right,
          title, and interest in and to all computer software required tu utilize, create, maintain, and process any such
          records or data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will not have, a nonpurchase money security interest in household goods, to the extent such a security interest would be prohibited by applicable law. In addition, if because of the type of any Property, Lender is required to give a notice of the right to cancel under Truth in Lending for the Indebtedness, then Lender will not have a security interest in such Collateral unless and until such a notice is given.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that:

          Perfection of Security Interest. Grantor agrees to execute financing statements and to take whatever other
          actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon
          request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting
          the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to
          Lender for possession by Lender.

          Notices to Lender. Grantor will promptly notify Lender in writing at Lender's address shown above (or
          such other addresses as Lender may designate from time to time) prior to any (1) change in Grantor's
          name; (2) change in Grantor's assumed business name(s); (3) change in the authorized signer(s); (4)
          change in Grantor's principal office address; (5) change in Grantor's principal residence; (6) conversion
          of Grantor to a new or different type of business entity; or (7) change in any other aspect of Grantor that
          directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor's name
          or principal residence will take effect until after Lender has received notice.

No Violation. The execution and delivery of this Agreement will not violate any law or agreement governing
Grantor or to which Grantor is a party.

          Enforceability of Collateral. To the extent the Collateral consists of accounts, chattel paper, or general
          intangibles, as defined by the Uniform Commercial Code, the Collateral is enforceable in accordance with its
          terms, is genuine, and fully complies with all applicable laws and regulations concerning form, content and
          manner of preparation and execution, and all persons appearing to be obligated on the Collateral have
          authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. There
          shall be no setoffs or counterclaims against any of the Collateral, and no agreement shall have been made
          under which any deductions or discounts maybe claimed concerning the Collateral except those disclosed
          to Lender in writing.

          Location of the Collateral. Except in the ordinary course of Grantor's business, Grantor agrees to keep the
          Collateral at Grantor's address shown above or at such other locations as are acceptable to Lender. Upon
          Lender's request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of real properties
          and Collateral locations relating to Grantor's operations, including without limitation, the following: (1) all
          real property Grantor owns or is purchasing; (2) all real property Grantor is renting or leasing; (3) all storage
          facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or may be located.

          Removal of the Collateral. Except in the ordinary course of Grantor's business, Grantor shall not remove the
          Collateral from its existing location without Lender's prior written consent. Grantor shall, whenever requested,
          advise Lender of the exact location of the Collateral.

          Transactions Involving Collateral. Except for Inventory sold or accounts collected in the ordinary course of
          Grantor's business, or as otherwise provided for in this Agreement, Grantor shall not sell, offer to sell, or
          otherwise transfer or dispose of the Collateral. Grantor shall not pledge, mortgage, encumber or otherwise permit
          the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest
          provided for in this Agreement, without the prior written consent of Lender. This includes security interests
          even if junior in right to the security interests granted under this Agreement. Unless waived by Lender, all
          proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall
          not be commingled with any other funds; provided, however, this requirement shall not constitute consent by
          Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds
          to Lender.

          Title. Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral,
           free and clear of all liens and encumbrances except for the lien of this Agreement. No financing statement
           covering any of the Collateral is on file in any public office other than those which reflect the security interest
           created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights
           in the Collateral against the claims and demands of all other persons.

          Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep and maintain, the
          Collateral in good order, repair and condition at all times while this Agreement remains in effect. Grantor further
          agrees to pay when due all claims for work done on, or services rendered or material furnished in connection
          with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral.

Inspection of Collateral. Lender and Lender's designated representatives and agents shall have the right at all
reasonable times to examine and inspect the Collateral wherever located.

          Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens upon the Collateral,
           its use or operation, upon this Agreement, upon any promissory note or notes evidencing the Indebtedness,
          or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest
          any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and
          so long as Lender's interest in the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
          subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
          a sufficient corporate surety bond or other security satisfactory to Lender in an amount

COMMERCIAL SECURITY AGREEMENT
Loan No. 83827 (Continued) Page 2
_______________________________________________________________________________________________

          adequate to provide for the discharge of the lien plus any interest, costs, attorneys' fees or other charges that
          could accrue as a result of foreclosure or sale of the Collateral. In any contest Grantor shall defend itself and
          Lender and shall satisfy any final adverse judgment before enforcement against the Collateral. Grantor shall
          name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Grantor
          further agrees to furnish Lender with evidence that such taxes, assessments, and governmental and other
          charges have been paid in full and in a timely manner. Grantor may withhold any such payment or may elect
          to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation
          to pay and so long as Lender's interest in the Collateral is not jeopardized.

          Compliance with Governmental Requirements. Grantor shall comply promptly with all laws, ordinances, rules
          and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership,
          production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance
          or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as
          Lender's interest in the Collateral, in Lender's opinion, is not jeopardized.

          Hazardous Substances. Grantor represents and warrants that the Collateral never has been, and never will be
          so long as this Agreement remains a lien on the Collateral, used in violation of any Environmental Laws or
          for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of
          any Hazardous Substance. The representations and warranties contained herein are based on Grantor's due
          diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any
          future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or
          other costs under any Environmental Laws, and (2) agrees to indemnity and hold harmless Lender against any
          and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to
          indemnity shall survive the payment of the Indebtedness and the satisfaction of this Agreement.

          Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance, including without
          limitation fire, theft and liability coverage together with such other insurance as Lender may require with
          respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued
          by a company or companies reasonably acceptable to lender. Grantor, upon request of Lender, will deliver to
          Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including
          stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written
          notice to Lender and not including any disclaimer of the insurer's liability for failure to give such a notice.
          Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not
          be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all
          policies covering assets in which Lender holds or is offered a security interest, Grantor will provide Lender
          with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or
          maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain
          such insurance as Lender deems appropriate, including if Lender so chooses "single interest insurance,"
          which will cover only Lender's interest in the Collateral.

          Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or damage to the
          Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty.
          All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by
          Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed
          Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
          for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the
          Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall
          pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their
          receipt and which Grantor has not committed to the repair or restoration of the Collateral shall be used to
          prepay the Indebtedness.

          Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment of insurance
          premiums, which reserves shall be created by monthly payments from Grantor of a sum estimated by Lender
          to be sufficient to produce, at least fifteen (15) days before the premium due date, amounts at least equal to
          the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are
          insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by
          Lender as a general deposit and shall constitute a non-interest-bearing account which Lender may satisfy
          by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not
          hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the
          insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall
          remain Grantor's sole responsibility.

          Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy
          of insurance showing such information as Lender may reasonably request including the following: (1) the
          name of the Insurer; (2) the risks incurred; (3) the amount of the policy; (4) the property insured; (5) the then
          current value on the basis of which insurance has been obtained and the manner of determining that value;
          and (6) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not
          more often than annually) have an independent appraiser satisfactory to Lender determine, as applicable,
          the cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the collateral by Lender is required by law to perfect lender's security interest in such Collateral. If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect or maintain any security interest given to secure the Indebtedness.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such encumbrances incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note or at the highest rate authorized by law, from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable Insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. If Lender is required by law to give Grantor notice before or after Lender makes an expenditure, Grantor agrees that notice sent by regular mail at least five (5) days before the expenditure is made or notice delivered two (2) days before the expenditure is made is sufficient, and that notice within sixty (60) days after the expenditure is made is reasonable.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

Payment Default. Grantor fails to make any payment when due under the Indebtedness.

         Other Defaults.  Grantor fails to comply with or to perform any other term, obligation, covenant or condition
         contained in this Agreement or in any of the Related Documents or to comply with or to perform any term,
         obligation, covenant or condition contained in any other agreement between Lender and Grantor.

          False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or
          on Grantor's behalf under this Agreement, the Note, or the Related Documents is false or misleading in
          any material respect, either now or at the time made or furnished or becomes false or misleading at any
          time thereafter.

          Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and
          effect (including failure of any collateral document to create a valid and perfected security interest or lien) at
          any time and for any reason.

          Death or Insolvency. The death of Grantor or the insolvency of Grantor, the appointment of a receiver
          for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor
          workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or
          against Grantor.

          Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by
           judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any
          governmental agency against any collateral securing the Indebtedness. This includes a garnishment
          of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of
          Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness
          of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender
          written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety
          bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole
          discretion, as being an adequate reserve or bond for the dispute.

          Events Affecting Guarantor. Any of the preceding events occurs with respect to guarantor, endorser, surety,
          or accommodation party of any of the Indebtedness or guarantor, endorser, surety, or accommodation party
          dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the
          Indebtedness.

Adverse Change. A material adverse change occurs in Grantor's financial condition, or Lender believes
the prospect of payment or performance of the Indebtedness is impaired.

COMMERCIAL SECURITY AGREEMENT
Loan No. 83827 (Continued) Page 3
_______________________________________________________________________________________________

Insecurity. Lender in good faith believes itself insecure.

          Cure Provisions.  If any default, other than a default in payment is curable and if Grantor has not been
          given a notice of a breach of the same provision of this Agreement within the preceding twelve (12)
          months, it may be cured (and no event of default will have occurred) if Grantor, after receiving written
          notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or
          (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems
          in Lender's sole discretion to be sufficient to cure the default and thereafter continues and
          completes all reasonable and necessary steps sufficient to produce compliance as soon as
          reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under the Oklahoma Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies:

          Accelerate Indebtedness.  Lender may declare the entire Indebtedness, including any prepayment penalty
          which Grantor would be required to pay, immediately due and payable, without notice of any kind to
          Grantor.

          Assemble Collateral.  Lender may require Grantor to deliver to Lender all or any portion of the Collateral
          and any and all certificates of title and other documents relating to the Collateral. Lender may require
          Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender.
          Lender also shall have full power to enter upon the property of Grantor to take possession of and
          remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time
          of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes
          reasonable efforts to return them to Grantor after repossession.

          Sell the Collateral.  Lender shall have full power to sell, lease, transfer, or otherwise dispose of the
          Collateral.  Unless the Collateral in whole or in part is perishable or threatens to decline speedily
          in value or is of a type customarily sold on a recognized market, Lender will give Grantor reasonable
          notice of the time and place of any public sale, or of the time after which any private sale or other
          disposition is to be made.  Notwithstanding any other provision of this Agreement, any require-
          ment of notice for this purpose shall be met if notice is mailed, postage prepaid, to the address of
          Grantor provided for in this Agreement at least ten (10) days before sale or other disposition or
          action. Lender shall be entitled to, and Grantor shall be liable for, all reasonable costs and
          expenditures incurred in realizing on Lender's security interest, including without limitation, all
          court costs, fees for sale, selling costs and reasonable attorneys' fees as set forth in the Note or
          in this Agreement. All such costs shall be secured by the security interest in the Collateral
          covered by this Agreement.

          Appoint Receiver. In any action by Lender for the foreclosure of this Agreement, whether by judicial
          foreclosure or power of sale, Lender shall be entitled to the appointment of a receiver upon any failure of
          Grantor to comply with any term, obligation, covenant, or condition contained in this Agreement, the Note,
          or any Related Documents.

          Collect Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect the payments,
          rents, income and revenues from the Collateral. Lender may at any time in Lender's discretion transfer any
          Collateral into Lender's own name or that of Lender's nominee and receive the payments, rents, income, and
          revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the
          Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of
          accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar
          property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
          the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these
          purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed
          to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts,
          money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of
          any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any Collateral to
          make payments directly to Lender.

          Obtain Deficiency.  If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment
          against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all
          amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liable for a
          deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.

          Other Rights and Remedies.  Lender s hall have all the rights and remedies of a secured creditor
          under the provisions of the Uniform Commercial Code, as may be amended from time to time. In
          addition, Lender shall have and may exercise any or all other rights and remedies it may have
          available at law, in equity, or otherwise.

          Election of Remedies.  Except as may be prohibited by applicable law, all of Lender's rights and remedies,
          whether evidenced by this Agreement, the Related Documents, or by any other writing, shall be cumulative
          and may be exercised singularly or concurrently.  Election by Lender to pursue any remedy shall not exclude
          pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation
          of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare
          a default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement.

          Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding
          and agreement of the parties as to the matters set forth in this Agreement. All prior and contemporaneous
          representations and discussions concerning such matters either are included in this document or do not
          constitute an aspect of the agreement of the parties. Except as may be specifically set forth in this Agreement,
          no conditions precedent or subsequent, of any kind whatsoever, exist with respect to Grantor's obligations
          under this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in
          writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

          Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's costs and expenses, including
          Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this
          Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the
          costs and expenses of such enforcement. Costs and expenses include Lenders' attorneys' fees and legal
          expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
          proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any
          anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional
          fees as may be directed by the court.

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be
used to interpret or define the provisions of this Agreement.

Governing Law. This Agreement will be governed by, construed and enforced in accordance with federal law
and the laws of the State of Oklahoma. This Agreement has been accepted by Lender in the State of Oklahoma.

          No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless
          such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising
          any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this
          Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance
          with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of
          dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's
          obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement,
          the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent
          instances where such consent is required and in all cases such consent may be granted or withheld in the sole
          discretion of Lender.

          Notices. To the extent permitted by applicable law, any notice required to be given under this Agreement
          shall be given in writing, and shall be effective when actually delivered, when actually received by
          telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight
          courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail
          postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may
          change its address for notices under this Agreement by giving formal written notice to the other parties,
          specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor
          agrees to keep Lender informed at all times of Grantor's current address. To the extent permitted by
          applicable law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to
          be notice given to all Grantors.

           Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the
           purpose of executing any documents necessary to perfect, amend, or to continue the security interest
           granted in this Agreement or to demand termination of filings of other secured parties. Lender may at any
           time, and without further authorization from Grantor, file a carbon, photographic or other reproduction
           of any financing statement or of this Agreement for use as a financing statement. Grantor will reimburse
           Lender for all expenses for the perfection and the continuation of the perfection of Lender's security
           interest in the Collateral.

          Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal,
          invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal,
          invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be
          considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be
          so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the
          illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality,
          validity or enforceability of any other provision of this Agreement.

          Successors and Assigns. Subject to any limitations stated in this Agreement or transfer of Grantor's interest,
          this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns.
          If ownership of the Collateral becomes vested in a person other than Grantor, Lender, without notice to

COMMERCIAL SECURITY AGREEMENT
Loan No. 83827 (Continued) Page 4
_______________________________________________________________________________________________

           Grantor, may deal with Grantor's successors with reference to this Agreement and the Indebtedness by
           way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability
           under the Indebtedness.

           Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor
           in this Agreement shall survive the execution and delivery of this Agreement, shall be continuing in nature,
           and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by any party against any other party.

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such term in the Uniform Commercial Code.

          Agreement. The word "Agreement" means this Commercial Security Agreement, as this Commercial Security
          Agreement may be amended or modified from time to time, together with all exhibits and schedules attached
          to this Commercial Security Agreement from time to time.

Borrower. The word "Borrower" means JACK E. GOLSEN, and all other persons and entities signing the
Notice in whatever capacity.

Collateral. The word "Collateral" means all of Grantor's right, title and interest in and to all of the Collateral
as described in the Collateral Description section of this Agreement.

Default. The word "Default" means the Default set forth in this Agreement in the section titled "Default".

          Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statues,
          regulations and ordinances relating to the protection of human health or the environment, including without
          limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as
          amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act
          of 1986, Pub. L. No. 99-4999 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
          et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
          state or federal laws, rules, or regulations adopted pursuant thereto.

Event of Default. The words "Event of Default" mean any of the events of default set forth in this
Agreement in the default section of this Agreement.

Grantor. The word "Grantor" means JACK E. GOLSEN.

Guaranty. The word "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation
party to Lender, including without limitation a guaranty of all or part of the Note.

          Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity,
          concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential
          hazard to human health or the environment when improperly used, treated, stored, disposed of, generated,
          manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very
          broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste
          as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes,
          without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

          Indebtedness. The word "Indebtedness" means the Indebtedness evidenced by the Note or Related
          Documents, including all principal and interest together with all other Indebtedness and costs and expenses
          for which Borrower is responsible under this Agreement or under any of the Related Documents.

Lender. The word "Lender" means THE BANK OF UNION, its successors and assigns.

          Note. The word "Note" means the Note executed by Grantor in the principal amount of $158,208.88 dated
          August 27, 2001, together with all renewals of, extensions of, modifications of, refinancings of,
          consolidations of, and substitutions for the note or credit agreement.

          Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan
          agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security
          deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter
          existing, executed in connection with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 27, 2001.

GRANTOR: X /s/ Jack E. Golsen Jack E. Golsen, Individually
LENDER: THE BANK OF UNION X Authorized Signer