Note 11. Securities Financing Including Redeemable Preferred Stocks

Series E Redeemable Preferred

On September 19, 2016, we redeemed 70,232 shares of the Series E Redeemable Preferred (the “Series E Redemption”) for approximately $80 million, which includes $78.3 million for the liquidation preference of $1,000 per share, plus accumulated dividends (the “Liquidation Preference”) as shown in the table below and $1.7 million for the participation rights value associated with the Series E Redemption. The Series E Redemption was funded from a portion of the proceeds from the sale of our Climate Control Business. After the redemption, 139,768 shares of the Series E Redeemable Preferred remain outstanding.

The Series E Redeemable Preferred has a 14% annual dividend rate and a participating right in dividends and liquidating distributions equal to 303,646 shares of common stock as of September 30, 2016. Dividends accrue semi-annually in arrears and are compounded.

As discussed in Note 9, the embedded derivative, which includes certain contingent redemption features and the participation rights value, relating to the redemption of the Series E Redeemable Preferred has been bifurcated from the Series E Redeemable Preferred and recorded as a liability.

Series F Redeemable Preferred

As of September 30 2016, the Series F Redeemable Preferred has voting rights (the “Series F Voting Rights”) to vote as a single class on all matters which the common stock have the right to vote and is entitled to a number of votes equal to 456,225 shares of our common stock.

Note 11. Securities Financing Including Redeemable Preferred Stocks (continued)

Changes in our Series E and Series F Redeemable Preferred are as follows:

	Series E Redeemable Preferred						Series F Redeemable Preferred
	Shares			Amount			Shares		Amount
	(Dollars In Thousands)
Balance at December 31, 2015		210,000		$	177,272			1	$	—
Accretion relating to liquidation preference on preferred stock		—			11,475			—		—
Accretion for discount and issuance costs on preferred stock		—			5,145			—		—
Accumulated dividend		—			22,351			—		—
Redemption of preferred stock		(70,232	)		(70,232	)		—		—
Dividends paid		—			(8,028	)		—		—
Balance at September 30, 2016		139,768		$	137,983			1	$	—

Currently, the carrying value of the Series E Redeemable Preferred is being increased by periodic accretions using the interest method so that the carrying amount will equal the redemption value as of August 2, 2019, the earliest possible redemption date by the holder. However, this accretion could accelerate if the expected redemption date is earlier than August 2, 2019. Due to the redemption of the shares of Series E Redeemable Preferred discussed above, approximately $9.3 million of accelerated accretion (recorded to retained earnings) was recognized during the third quarter of 2016. For the three and nine months ended September 30, 2016, the accelerated accretion reduced basic and diluted earnings per share by $0.34 and $0.37, respectively.

Warrants

In conjunction with the issuance of the Series E and Series F Redeemable Preferred in December 2015 to LSB Funding LLC (the “Purchaser”), we issued warrants to the Purchaser to purchase 4,103,746 shares of common stock (the “Warrants”). Each warrant afforded the holder the opportunity to purchase one share of common stock at a warrant exercise price of $0.10. In May 2016, all of the Warrants were exercised by the holder in a cashless exercise resulting in the issuance of 4,103,746 shares of our common stock, of which 34,422 shares of common stock were surrendered (and we are holding such shares as treasury stock) by the holder in payment of the exercise price.

Registration Rights Agreement- Warrants

Pursuant to a registration rights agreement (the “Registration Rights Agreement-Warrants”) relating to the registered resale of the common stock issuable upon exercise of the Warrants and certain other common stock, we filed a registration statement, including amendments, to permit the public resale of registrable securities then outstanding. We are required to use commercially reasonable efforts to cause the registration statement to become effective as soon as practicable thereafter.

Furthermore, the registration statement must be declared effective by December 3, 2016. If the registration statement is not declared effective on or prior to December 3, 2016, the Purchaser is entitled to liquidated damages of 0.25% of the liquidated damages multiplier (the closing price of our common stock as of the date of the calculation multiplied by the number of our common stock issued or issuable upon the exercise of the Warrants and other issuance events, if applicable, and held by the Purchaser and as described in the agreement) for the first 30 day period immediately following such default and an additional 0.25% with respect to each subsequent 30 day period, up to a maximum increase of 1.00%. In no event will the aggregate of all liquidated damages exceed 3.0% of the aggregate purchase price (the closing price of our common stock as of the date of the calculation multiplied by the number of our common stock issued or issuable upon the exercise of the Warrants and other issuance events, if applicable).

If such liquidated damages cannot be paid in cash, because such action would constitute a default under a credit facility or other debt instrument, then payment consisting of as much cash as possible in compliance with the aforementioned conditions would be required. The balance of any compensatory liquidated damages would be paid in full in the form of the issuance of additional common stock.