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LOAN AGREEMENT
dated as of
October 29, 1999
By and Between
EMERGING ALPHA CORPORATION
and
HIBERNIA NATIONAL BANK
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LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of October 29, 1999, by and among EMERGING
ALPHA CORPORATION, a Delaware corporation ("Borrower"), and HIBERNIA NATIONAL
BANK, a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has applied to Bank for a term loan in an amount of
$2,800,000.00 to finance its acquisition of all outstanding and issued shares of
stock of Gas ▇▇▇▇, Inc., and to refinance existing debt owed by Gas ▇▇▇▇, Inc.
to certain of its creditors; and,
WHEREAS, Bank has agreed to provide such requested credit facility to the
Borrower pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the Borrower and Bank do hereby covenant and agree as follows, to-wit:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Defined Terms. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Agreement" shall mean this Loan Agreement, as the same may from time to
time be amended, modified or supplemented and in effect.
"Assignment of Leases" shall mean an assignment to be granted by Gas ▇▇▇▇
to Bank of all right, title and interest in and to its leases of
compressors to its customers, and all proceeds thereof, as the same may
from time to time be amended, modified or supplemented and in effect.
"Bank" shall mean Hibernia National Bank, a national banking association.
"Borrower" shall mean Emerging Alpha Corporation, a Delaware corporation
which intends to change its name to Compresco, Inc., together with its
successors and assigns.
"Business Day" shall mean a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of Louisiana or a
day on which national banks are authorized to be closed in New Orleans,
Louisiana.
"Cash Flow" shall mean, for any period, the earnings of such Person(s)
before interest, taxes, depreciation and amortization.
"Collateral" shall mean any interest in any kind of property or assets
pledged, mortgaged or otherwise subject to an Encumbrance in favor of Bank
pursuant to the Collateral Documents.
"Collateral Documents" shall collectively refer to the Assignment of
Leases, the Security Agreements, the Stock Pledge, the Securities Account
Pledge, all related financing statements required by Bank, and any and all
other documents in which an Encumbrance is created on any property of the
Borrower or of any third person to secure payment of the Indebtedness of
Borrower or any part thereof.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" shall mean a
Subsidiary or Subsidiaries, respectively, of Borrower, whose financial
statements are prepared on a consolidated basis with those of Borrower in
accordance with GAAP, and shall specifically include Gas ▇▇▇▇.
"Current Assets" shall mean the assets of Borrower and its Consolidated
Subsidiaries treated as current assets in accordance with GAAP.
"Current Liabilities" shall mean all liabilities of Borrower and its
Consolidated Subsidiaries treated as current liabilities in accordance with
GAAP, including without limitation, all obligations payable on demand or
within one year after the date on which the determination is made, and
final maturities and sinking funds payments required to be made within one
year after the date on which the determination is made, but excluding all
such liabilities or obligations which are renewable or extendible at the
option of such Person to a date more than one year from the date of
determination.
"Current Ratio" shall mean, at any time, the ratio of Current Assets to
Current Liabilities.
"Debt" shall mean any and all amounts and/or liabilities owing from time to
time by Borrower (and of its Consolidated Subsidiaries, if the context may
so require) to any Person, including the Bank, direct or indirect,
liquidated or contingent, now existing or hereafter arising, including
without limitation (i) indebtedness for borrowed money; (ii) the amounts of
all standby and commercial letters of credit and bankers acceptances,
matured or unmatured, issued on behalf of such Person; (iii) guaranties by
such Person of the obligations of any other Person, whether direct or
indirect, whether by agreement to purchase the indebtedness of any other
Person or by agreement for the furnishing of funds to any other Person
through the purchase or lease of goods, supplies or services (or by way of
stock purchase, capital contribution, advance or loan) for the purpose of
paying or discharging the indebtedness of any other Person, or otherwise;
(iv) the present value of all obligations of such Person for the payment of
rent or hire of property of any kind (real or personal) under leases or
lease agreements required to be capitalized under GAAP, and
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(v) trade payables incurred in the ordinary course of business or otherwise
by such Person.
"Debt Service Coverage Ratio" shall mean, for any twelve-month period
ending on the date of determination of same, the ratio of (1) the earnings
of Borrower and its Consolidated Subsidiaries before interest, taxes,
depreciation and amortization during such period to (2) the amount of
interest expense and current maturities of long-term indebtedness of
Borrower and its Consolidated Subsidiaries during such period.
"Default" shall mean an event which with the giving of notice or the lapse
of time (or both) would constitute an Event of Default hereunder.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Encumbrances" shall mean individually, collectively and interchangeably
any and all presently existing and/or future mortgages, liens, privileges,
servitudes, rights-of-way and other contractual and/or statutory security
interests and rights of every nature and kind that, now and/or in the
future may affect the property of Borrower or any Collateral or any part or
parts thereof.
"Environmental Laws" shall mean 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. 99-499 ("▇▇▇▇"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., the
Louisiana Environmental Affairs Act, La. R.S. 30:2001 et seq., or other
applicable Governmental Requirements or regulations adopted pursuant to any
of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Equipment" shall mean all machinery, equipment, furniture and fixtures,
now owned or hereafter acquired by Borrower and/or Gas ▇▇▇▇, or in which
Borrower and/or Gas ▇▇▇▇ now has or hereafter may acquire any right, title
or interest, and any and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components,
parts, products, equipment and accessories installed therein or affixed
thereto, including, but not limited to, all equipment as defined in ss.
9-109(2) of the UCC, and all fixtures as defined in ss. 9-313(1)(a) of the
UCC.
"Event of Default" shall mean individually, collectively and
interchangeably any of the Events of Default set forth below in Section
10.1 hereof.
"Funded Debt" shall mean, at any time, the sum of all interest-bearing Debt
of Borrower and its Consolidated Subsidiaries.
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"Funded Debt to Cash Flow Ratio" shall mean, as of the end of each fiscal
quarter of Borrower and its Consolidated Subsidiaries, the ratio of (1) the
amount of Funded Debt of Borrower and its Consolidated Subsidiaries at the
end of such fiscal quarter, to (2) the amount of Cash Flow of Borrower and
its Consolidated Subsidiaries for the immediately preceding twelve-month
period ending as of the end of the such fiscal quarter.
"GAAP" shall mean, at any time, accounting principles generally accepted in
the United States as then in effect.
"Gas ▇▇▇▇" shall mean Gas ▇▇▇▇, Inc., an Oklahoma corporation, together
with its successors and assigns.
"General Intangibles" shall mean all general intangibles, as defined in
ss.9-106 of the UCC, of the Borrower and/or Gas ▇▇▇▇, whether now owned or
hereafter acquired, and shall include, without limitation (i) all
contractual rights and obligations or indebtedness owing to Borrower and/or
Gas ▇▇▇▇ (other than Receivables) from whatever source; (ii) all things and
actions, rights represented by judgments and claims arising out of tort and
other claims related to the Collateral, including the right to assert and
otherwise be the proper party of interest to commence and prosecute
actions; (iii) all goodwill, patents, patent licenses, trademarks,
trademark licenses, trade names, service marks, trade secrets, rights and
intellectual property, copyrights, permits and licenses; (iv) all rights or
claims in respect of refunds for taxes paid; and (v) all deposit accounts
of Borrower and/or Gas ▇▇▇▇.
"Governmental Requirement" shall mean any applicable state, federal or
local law, statute, ordinance, code, rule, regulation, order or decree.
"Guaranties" shall mean that certain Commercial Guaranty of ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, III, dated of even date herewith, that certain unlimited in solido
guaranty to be provided by Gas ▇▇▇▇ pursuant to the terms of Section 6.2
hereof, and any other guaranties of any Person which guarantee payment of
any part of the Indebtedness, as any of such guaranties may be amended and
from time to time in effect.
"Guarantors" shall mean ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, III, Gas ▇▇▇▇, and any other
Persons who may from time to time guarantee payment of any part of the
Indebtedness.
"Indebtedness" shall mean, at any time, the indebtedness of Borrower
evidenced by the Term Note executed by Borrower pursuant to this Agreement,
in principal, interest, costs, expenses and reasonable attorneys' fees and
all other fees and charges, together with all commitment fees and other
indebtedness and costs and expenses for which Borrower is responsible under
this Agreement or under any of the Related Documents. In addition, the word
"Indebtedness" also includes any and all other loans, extensions of credit,
obligations, debts and liabilities, plus interest thereon, of Borrower that
may now and in the future be owed to or incurred in favor of Bank, as well
as all claims by Bank against Borrower, whether existing now or later;
whether they are voluntary or involuntary, due or to become due, direct or
indirect or by way of assignment, determined or
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undetermined, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others, of every nature
and kind whatsoever, in principal, interest, costs, expenses and reasonable
attorneys' fees and all other fees and charges; whether Borrower may be
obligated as principal obligor, guarantor, surety, accommodation party or
otherwise.
"Inventory" shall mean all inventory, as defined in ss.9-109(4) of the UCC,
of Borrower and/or Gas ▇▇▇▇, whether now owned or hereafter acquired by
Borrower and/or Gas ▇▇▇▇, wherever located, and shall include all of
Borrower's and Gas Jack's raw materials, work in process, finished goods,
merchandise, parts and supplies, of every kind and description, and goods
held for sale or lease or furnished under contracts of service in which
Borrower and/or Gas ▇▇▇▇ now has or hereafter acquires any right, whether
held by Borrower and/or Gas ▇▇▇▇ or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of the custody or possession of Borrower or Gas ▇▇▇▇ and
all returns on Receivables.
"Investment Property" shall all investment property of Borrower and/or Gas
▇▇▇▇, whether now owned or hereafter acquired, consisting of certificated
and uncertificated securities, securities entitlements, securities
accounts, commodity contracts and commodity accounts (as each of said items
are defined in ss. 9-115 of the UCC and in La. R. S. 10:8-102).
"▇▇▇▇▇▇" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇▇ (Social Security No. ###-##-####), his
successors, heirs, legatees and assigns.
"Loan Documents" shall mean this Agreement, the Term Note, the Collateral
Documents and any other Related Documents.
"Lockbox Account" shall have the meaning ascribed to such term in Section
8.15 hereof.
"Material Adverse Change" shall mean, with respect to Borrower or Gas ▇▇▇▇,
an event which causes a material adverse effect on the business, assets,
operations or condition (financial or otherwise) of either such entities,
or which otherwise changes in a materially adverse way any other facts,
circumstances or conditions which Bank has relied upon or utilized in
making the Term Loan Commitment hereunder.
"Maturity Date" shall mean the earlier to occur of (a) October 29, 2004, or
(b) the date of the earlier acceleration of the Term Loan by Bank pursuant
to Article X hereof.
"Permitted Encumbrances" shall have the meaning ascribed to such term in
Section 9.4 hereof.
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"Person" shall mean an individual or a corporation, partnership, trust,
joint venture, incorporated or unincorporated association, joint stock
company, government, or an agency or political subdivision thereof, or
other entity of any kind.
"Purchase Agreement" shall mean that certain Stock Purchase Agreement dated
as of October 29, 1999, by and among Borrower and the Estate of Ran ▇▇▇▇▇,
Jr., Art ▇. ▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Discovery Fund I-90 Limited Partnership, Discovery Fund II-90 Limited
Partnership, Discovery Fund III-90 Limited Partnership, and Citicap, Inc.
"Receivables" shall mean, with respect to Borrower and/or Gas ▇▇▇▇, all
accounts (as such term is defined in ss.9-106 of the UCC) of Borrower
and/or Gas ▇▇▇▇, and shall include all trade accounts, other receivables,
or other rights to payment for goods sold or leased by or services rendered
by Borrower and/or Gas ▇▇▇▇(or a third party grantor acceptable to Bank).
"Related Documents" shall mean and include individually, collectively,
interchangeably and without limitation all promissory notes, credit
agreements, loan agreements, guaranties, security agreements, mortgages,
collateral mortgages, deeds of trust, and all other instruments and
documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
"Security Agreements" shall mean, collectively, (i) that certain Commercial
Security Agreement dated of even date herewith by Borrower in favor of
Bank, affecting, without limitation, all of Borrower's Receivables,
Inventory, Investment Property, Equipment, General Intangibles and deposit
accounts and other funds on deposit with Bank, as the same may be amended
or modified from time to time, and (ii) that certain Commercial Security
Agreement to be executed by Gas ▇▇▇▇ in favor of Bank pursuant to the terms
hereof, affecting, without limitation, all of Gas Jack's Receivables,
Inventory, Investment Property, Equipment, General Intangibles and deposit
accounts and other funds on deposit with Bank, as the same may be amended
or modified from time to time.
"Securities Account Pledge" shall mean that certain Investment Property
Security Agreement October 8, 1999, by ▇▇▇▇▇▇ in favor of Bank affecting,
among other property described therein, all of ▇▇▇▇▇▇'▇ rights in and to
that certain investment account no. ▇▇▇▇▇▇▇▇▇ maintained by ▇▇▇▇▇▇ with
Hibernia Investment Securities, Inc., as the same may be amended or
modified from time to time.
"Solvent" shall mean, when used with respect to any Person on a particular
day, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including without limitation,
contingent liabilities, of such person, (ii) the present fair salable value
of the assets of such person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the ordinary course of business, (iv)
such Person does not intend to, and does not believe that
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it will, incur debts and liabilities beyond such Person's ability to pay as
such debts and liabilities mature, and (v) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in
the industry in which such person is engaged. In computing the amount of
contingent liabilities at any time, it is intended that such liabilities
will be computed at the amount which, in light of all of the facts and
circumstances existing at such time, represents the amount that can be
reasonably expected to become an actual or matured liability.
"Subsidiaries" shall mean at any date, with respect to any Person, all the
corporations of which such Person at such date, directly or indirectly,
owns 50% or more of the outstanding capital stock (excluding directors'
qualifying shares), and "Subsidiary" means any one of the Subsidiaries.
"Stock Pledge" shall mean that certain pledge and security agreement to be
executed and delivered by Borrower in favor of Bank pursuant to the terms
hereof, affecting all outstanding shares of stock of Gas ▇▇▇▇ acquired
pursuant to the Purchase Agreement, as the same may be amended or modified
from time to time.
"Tangible Net Worth" shall mean, at any time, the amount of the total
assets of Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis, excluding intangible assets (i.e., patents, copyrights,
trademarks, trade names, franchises, goodwill, organizational expenses, and
similar intangible expenses, but including leaseholds and leasehold
improvements), less the amount of the total liabilities of Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis.
"Term Loan Commitment" means the agreement by Bank to make the Term Loan in
accordance with the provisions of Article II hereof.
"Term Loan" shall mean the loan made by Bank under the Term Note to
Borrower in accordance with and subject to the terms of the Term Loan
Commitment.
"Term Note" shall mean that certain promissory note made by Borrower dated
of even date herewith, payable to the order of Bank in principal amount of
$2,800,000.00, as said Term Note is more fully described in Section 2.2
hereof, together with any and all extensions, renewals, modifications and
substitutions therefor.
"UCC" shall mean the Uniform Commercial Code, Commercial Laws-Secured
Transactions (La. R.S. 10:9-101 et seq.) in the State of Louisiana, as
amended from time to time, provided that if by reason of mandatory
provisions of law, the perfection or effect of perfection or non-perfection
of the Bank's Encumbrances against the Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State
of Louisiana, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction.
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Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
GAAP.
ARTICLE II
THE TERM LOAN
Section 2.1. The Term Loan. Subject to the terms, conditions and provisions
of this Agreement, Bank agrees to make a term loan to Borrower in an amount of
$2,800,000.00 (the "Term Loan"), the proceeds of which shall be used exclusively
by Borrower to finance part of its cost of the acquisition of all outstanding
and issued shares of stock of Gas ▇▇▇▇ pursuant to the terms of the Purchase
Agreement, and to refinance existing indebtedness of Gas ▇▇▇▇ owed to UMB
Oklahoma Bank.
Section 2.2. The Term Note. Borrower's indebtedness to Bank pursuant to the
Term Loan shall be evidenced by the Term Note. The Term Note shall bear interest
at a fixed rate of 8.8% per annum from its date until paid in full, with
interest payable monthly on the last day of each month commencing November 30,
1999, and on the day of each month thereafter this Note is paid in full. The
principal amount outstanding under the Term Note shall be payable in 59
installments in the amount of $46,666.67 each, commencing November 30, 1999, and
continuing on the same day of each month thereafter through and including
September 30, 2004, plus a final installment due on the Maturity Date, at which
time all outstanding principal and accrued interest under the Term Note shall be
due and payable in full
Section 2.3. Prepayment of Term Loan. Borrower may prepay the Term Loan in
whole or in part at any time provided that any prepayment of principal be
accompanied by the payment of accrued simple interest and any unpaid late
charges due under the Term Note through the date of prepayment. All prepayments
of principal shall be applied to installments of principal due in an inverse
order of maturity. Any partial prepayments under the Term Loan will not relieve
the Borrower of its obligation to make regularly scheduled payments under the
above payment schedule. Such prepayments will instead reduce the principal
balance due, and the Borrower may be required to make fewer payments under the
Term Note. Amounts prepaid under the Term Note may not be reborrowed.
Section 2.4. Use of Proceeds. Borrower shall use the proceeds of the Term
Loan solely for the purposes described in Section 2.1 hereof.
ARTICLE III
[Intentionally left blank]
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ARTICLE IV
CERTAIN GENERAL PROVISIONS
Section 4.1. Payments to Bank. All payments of principal, interest,
commitment fees and any other amounts due hereunder or under any of the other
Related Documents shall be made to the Bank at the Bank's office at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location that
the Bank may from time to time designate in writing to Borrower, in each case in
immediately available funds.
Section 4.2. No Offset, etc. All payments by Borrower hereunder and under
any of the other Related Documents shall be made without setoff or counterclaim
and free and clear of and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory loans, restrictions
or conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other authority
therein unless Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon Borrower with respect to any
amount payable by it hereunder or under any of the other Loan Documents,
Borrower will pay to the Bank, on the date on which such amount is due and
payable hereunder or under such other Related Document, such additional amount
as shall be necessary to enable the Bank to receive the same net amount which
Bank would have received on such due date had no such obligation been imposed
upon Borrower. Borrower will deliver promptly to the Bank certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by Borrower hereunder or under such other Loan Documents.
Section 4.3. Computations. All computations of interest on the Term Loan
and of commitment or other fees shall be assessed utilizing a 360-day daily
interest factor over the number of days in an actual calendar year (365 days or
366 days in a leap year). Bank shall determine each interest rate applicable to
the Term Loans in accordance with this Agreement, and Bank's determination of
same shall be conclusive in the absence of manifest error. Except as otherwise
provided herein, whenever a payment hereunder or under any of the other Related
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Term Loan as
reflected on the Bank's books and records from time to time shall be prima facie
evidence of the amounts so outstanding.
Section 4.4. Additional Costs, etc. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to the Bank
9
by any central bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(1) subject the Bank to any tax, levy, impost, duty, charge, fee, deduction
or withholding of any nature with respect to this Agreement, the other
Related Documents or the Indebtedness (other than taxes based upon or
measured by the revenue, income or profits of the Bank), or
(2) materially change the basis of taxation (except for changes in taxes on
revenue, income or profits) of payments to the Bank of the principal of or
the interest on the Indebtedness of any other amounts payable to the Bank
under this Agreement or the other Related Documents, or
(3) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or commitments of an
office of the Bank, or
(4) impose on the Bank any other conditions or requirements with respect to
this Loan Agreement, the other Related Documents, the Indebtedness, or any
class of loans of which the Indebtedness forms a part, and the result of
any of the foregoing is
(i) to increase the cost to the Bank of making, funding, issuing,
renewing, extending or maintaining the Indebtedness, or
(ii) to reduce the amount of principal, interest or other amount
payable to the Bank hereunder on account of such the Indebtedness, or
(iii) to require the Bank to make any payment or to forego any
interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by the Bank from
Borrower hereunder,
then, and in each such case, Borrower will, upon demand made by the Bank at any
time and from time to time and as often as the occasion therefor may arise, pay
to the Bank such additional amounts as will be sufficient to compensate the Bank
for such additional cost, reduction, payment or foregoing interest or others
sum.
Section 4.5. Capital Adequacy. If after the date hereof the Bank reasonably
determines that (a) the adoption of or change in any law, governmental rule,
regulations, policy guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by the Bank or any
corporation controlling the Bank with any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law) of any
such entity regarding
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capital adequacy, has the effect of reducing the return on the Bank's Term Loan
to a level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's then existing
policies with respect to capital adequacy and assuming full utilization of such
entity's capital) by any amount deemed by the Bank to be material, then the Bank
may notify Borrower of such fact. Borrower agrees to pay the Bank for the amount
of such reduction in the return on capital as and when such reduction is
determined upon presentation by the Bank of a certification in accordance with
paragraph Section 4.6.
Section 4.6. Certificate; Optional Right of Prepayment. Bank shall provide
Borrower with a certificate setting forth any additional amounts which it
declares to be payable pursuant to Sections 4.4 and 4.5 hereof, and a complete
explanation of such amounts which are due, and each such certificate shall be
conclusive, absent manifest error, that such amounts are due and owing. Borrower
shall have the right, at any time within 90 days of receipt of any such
certificate, to prepay the Term Loan (subject to any and all prepayment
penalties, if any, under the terms of this Agreement) without being obligated to
pay any such additional costs set forth in such certificate, after which Bank
shall promptly terminate, discharge and release of record (at Borrower's
expense) all of its Encumbrances affecting the Collateral and return all
Collateral to Borrower.
Section 4.7. Commitment Fee for the Term Loan. In addition to the other
fees and expenses described in Section 11.4 hereof, the Borrower has paid or
shall pay upon the execution of this Agreement the remaining balance due on the
Bank's total commitment fee in the amount of $28,000.00 for the Term Loan
Commitment.
ARTICLE V
SECURITY FOR THE INDEBTEDNESS
Section 5.1. Security. The Indebtedness shall be secured by the following:
(a) the Assignment of Leases;
(b) the Security Agreements;
(c) the Guaranties;
(d) the Stock Pledge;
(e) the Securities Account Pledge; and,
(f) such other Collateral Documents now or hereafter granted by any Person
as security for any part of the Indebtedness.
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Section 5.2. Agreement to Release Securities Account Pledge. Bank hereby
agrees that in the event that the shareholders of Borrower contribute an
additional $1 million in equity subsequent to the date hereof, and Borrower
thereafter applies as much of such additional equity as may be required to pay
all then outstanding revolving loans which Bank has committed to extend to
Borrower and Gas ▇▇▇▇ as co-borrowers, Bank agrees, provided no Default or Event
of Default then exists, to release the Securities Accounts Pledge and any claim
or Encumbrance to the funds and/or securities contained therein.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1. Conditions Precedent to the Term Loan. The obligation of Bank
to make the Term Loan hereunder shall be subject to the satisfaction and the
continued satisfaction of the following conditions precedent:
(a) Borrower shall have executed and delivered to Bank this Agreement, the
Collateral Documents, the Term Note and all other documents required by this
Agreement, all in form and substance and in such number of counterparts as may
be required by Bank;
(b) ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, III, shall have executed and delivered to Bank his
unlimited in solido Guaranty of the Indebtedness and all other present and
future Debt of Borrower to Bank;
(c) The representations and warranties of Borrower and Guarantors as set
forth herein, or any Related Document furnished to Bank in connection herewith,
shall be and remain true and correct;
(d) Bank shall have received a favorable legal opinion of counsel to
Borrower and Guarantors, in scope and substance satisfactory to Bank;
(e) Bank shall have received certified resolutions of Borrower authorizing
the Term Loan and the execution and delivery of all documents contemplated
hereby;
(f) Bank shall have received all fees, charges and expenses which are due
and payable as specified in this Agreement or any Related Document;
(g) No Default or Event of Default shall exist or shall result from the
making of the Term Loan;
(h) Borrower shall have provided Bank with all financial statements,
reports and certificates required by this Agreement;
12
(i) Bank's counsel shall have reviewed the corporate structure and articles
of incorporation of Borrower, and shall be satisfied with the validity, due
authorization and enforceability of all Related Documents;
(j) There shall have been no change to the corporate structure and
ownership of Borrower than from what has been previously represented to Bank;
(k) Bank shall have received evidence acceptable to Bank and its counsel
that its Encumbrances affecting the Collateral shall have a first priority
position, subject only to Permitted Encumbrances, upon the funding of the Term
Loan and the cancellation of certain liens held by UMB Oklahoma Bank against
assets of Gas ▇▇▇▇ contemporaneously with the payment of the loans of Gas ▇▇▇▇
from the proceeds of the Term Loan;
(l) Bank shall have received evidence that all other policies of insurance
required by this Agreement and the Collateral Documents are in full force and
effect;
(m) Bank, at its option and for its sole benefit, shall have conducted an
audit of each Borrower's payment records, ledger sheets, and computer tapes or
disks kept to record payment information, and of Borrower's other books,
records, and operations, and Bank shall be satisfied as to their condition;
(n) ▇▇▇▇▇▇ shall have granted the Securities Account Pledge to Bank, the
securities account affected by the Securities Account Pledge shall have been
established by ▇▇▇▇▇▇ with the purchase or deposit of securities or cash therein
with an aggregate market value of not less than $1 million, and ▇▇▇▇▇▇, Hibernia
Investment Securities, Inc., and Bank shall have entered into an account control
agreement on terms and conditions acceptable to Bank which provide Bank with
"control" over such securities account within the meaning of the UCC; and,
(o) There shall have occurred no Material Adverse Change.
Section 6.2. Conditions Subsequent to the Term Loan. The obligation of Bank
to allow the Term Loan hereunder to remain outstanding shall be subject to the
satisfaction of the following conditions within two (2) Business Days of the
funding of the Term Loan:
(a) Gas ▇▇▇▇ shall have executed and delivered to Bank its unlimited in
solido Guaranty of the Indebtedness, and all other present and future Debt of
Borrower to Bank, as well as its Security Agreement affecting all of its present
and future Receivables, Inventory, Investment Property, Equipment, General
Intangibles and deposit accounts and other funds on deposit with Bank and the
Assignment of Leases in form and substance satisfactory to Bank;
(b) Bank shall have received certified resolutions of Gas ▇▇▇▇ authorizing
its Guaranty, Assignment of Leases and Security Agreement;
(c) Bank shall have received a favorable legal opinion of counsel to Gas
▇▇▇▇ with respect to the enforceability and binding effect of Gas Jack's
Guaranty, Assignment of Leases and Security Agreement, in scope and substance
satisfactory to Bank;
13
(d) Bank shall have received evidence acceptable to Bank and its counsel
that its Encumbrances affecting the Collateral owned by Gas ▇▇▇▇ shall have a
first priority position, subject only to Permitted Encumbrances; and,
(e) Borrower shall have executed and delivered the Stock Pledge and shall
have delivered all outstanding and issued shares of stock of Gas ▇▇▇▇ acquired
pursuant to the Purchase Agreement to Bank, together with stock powers and Reg U
statements which Bank may reasonably require.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank as follows:
Section 7.1. Corporate Authority. Borrower is a corporation duly created,
validly existing and in good standing under the laws of the State of Delaware,
and is duly qualified and in good standing as a foreign corporation in all other
jurisdictions where the failure to qualify would have an adverse effect upon its
ability to perform its obligations under this Agreement and all Related
Documents. Borrower has the power to enter into this Agreement, issue the Term
Note, mortgage and grant security interests in the Collateral in the manner and
for the purpose contemplated by the Collateral Documents. Borrower has the
corporate power to perform their obligations hereunder and under this Agreement
and of the Related Documents. The making and performance by Borrower of this
Agreement and of the Related Documents have been duly authorized by all
necessary corporate action (including all necessary shareholder action), and do
not and will not violate any provision of any law, rule, regulation, order,
writ, judgment, decree, determination or award presently in effect having
applicability to Borrower or the articles of incorporation of Borrower. The
making and performance by Borrower of this Agreement and the Related Documents
do not and will not result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement or instrument to
which Borrower is a party or by which it may be bound or affected, or result in,
or require, the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any nature (other than
as contemplated this Agreement and by the Related Documents) upon or with
respect to any of the properties now owned or hereafter acquired by Borrower,
and Borrower is not in default under or in violation of any such order, writ,
judgment, decree, determination, award, indenture, agreement or instrument. This
Agreement and each of the Related Documents to which Borrower is a party
constitutes legal, valid and binding obligations of Borrower, enforceable in
accordance with its terms, except to the extent that the enforceability of such
instruments may be subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or the effect of general equity principles.
14
Section 7.2. Financial Statements. The balance sheet of Borrower at the
date thereof, and the related statements of income and retained earnings for the
periods covered thereby, copies of which have been delivered to Bank, are
complete and correct and fairly present the financial condition of Borrower as
of the date or dates thereof. Each of said financial statements were prepared in
conformity with GAAP applied on a basis consistent with the preceding year. No
Material Adverse Change has occurred since said dates in the financial position
or in the results of operations of Borrower in its business taken as a whole.
Section 7.3. Title to Collateral. Borrower has good and marketable title to
the Collateral in which it has or shall grant Bank an Encumbrance as security
for the Indebtedness, free and clear of all Encumbrances other than Permitted
Encumbrances. The Collateral Documents constitute legal, valid and perfected
first Encumbrances on the property interests covered thereby, subject only to
Permitted Encumbrances.
Section 7.4. Litigation. Other than as has been disclosed previously to
Bank in writing, there are no material legal actions, suits or proceedings
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower or any of its properties before any court or administrative agency
(federal, state or local), which, if determined adversely to Borrower, would
constitute a Material Adverse Change, and there are no judgments or decrees
affecting Borrower or its properties (including, without limitation, the
Collateral) which are or may become an Encumbrance against such properties.
Section 7.5. Approvals. No authorization, consent, approval or formal
exemption of, nor any filing or registration with, any governmental body or
regulatory authority (federal, state or local), and no vote, consent or approval
of the shareholders of Borrower is or will be required in connection with the
execution and delivery by Borrower of the Related Documents or the performance
by Borrower of its obligations hereunder and under the other Related Documents.
Section 7.6. Licenses. Borrower possesses adequate franchises, licenses and
permits to own its properties and to carry on its business as presently
conducted.
Section 7.7. Adverse Agreements. Borrower is not a party to any agreement
or instrument, or subject to any charter or other restriction, materially and
adversely affecting its business, properties, assets, or operations or its
condition (financial or otherwise), and Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party,
which default would constitute a Material Adverse Change.
Section 7.8. Default or Event of Default. No Default or Event of Default
hereunder has occurred or is continuing or will occur as a result of the giving
effect hereto.
Section 7.9. Employee Benefit Plans. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event (as
defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has
not withdrawn from any such plan or initiated steps to do so, and (iii) no steps
have been taken to terminate any such plan.
15
Section 7.10. Investment Company Act. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
Section 7.11. Public Utility Holding Company Act. Borrower is not a
"holding company," or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.12. Regulations G, T and U. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulations G, T and U of the Board of Governors of the Federal Reserve System),
and none of the proceeds of the Term Loan will be used for the purpose of
purchasing or carrying such margin stock.
Section 7.13. Location of Borrower's Offices, Records and Inventory and
Equipment. The chief place of business of Borrower, and the office where
Borrower keeps its records concerning the Collateral, and the present locations
of Borrower's Inventory (other than Inventory out on lease) and Equipment, are
as follows:
Place of Business/Records Location Inventory and Equipment Locations
---------------------------------- ---------------------------------
Borrower -
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(no presently owned Inventory)
Section 7.14. Information. All information heretofore or contemporaneously
herewith furnished by Borrower to Bank for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Bank will be, true and
accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
Section 7.15. Environmental Matters. Except as may have been disclosed in
writing to Bank prior to the date hereof, no properties of Borrower has ever
been, and ever will be so long as this Agreement remains in effect, used for the
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance, as those terms are defined in the
Environmental Laws, except in compliance with such Environmental Laws. Except as
may have been disclosed in writing by Borrower to Bank, Borrower represents and
warrants that it is in compliance with all Environmental Laws affecting it and
its properties.
Section 7.16. Solvency of Borrower. Borrower is, and after consummation of
the transactions contemplated by this Agreement (including the making of the
Term Loan), and after giving effect to all obligations incurred by Borrower in
connection herewith, will be, Solvent.
16
Section 7.17. Year 2000 Compliance. Borrower represents and warrants that
all material systems used in the conduct of its business will have appropriate
capabilities and compatibility to handle calendar dates falling on or after
January 1, 2000, and all information pertaining to such calendar dates. Upon
reasonable request, Borrower agrees to provide to Bank documentation
satisfactory to Bank to establish that its systems and software are year 2000
compliant, or that Borrower is in the process of implementing a plan to ensure
that its systems and software will be 2000 compliant before December 31, 1999.
Section 7.18. Survival of Representations and Warranties. Borrower
understands and agrees that Bank is relying upon the above representations and
warranties in making the Term Loan to Borrower. Borrower further agrees that the
foregoing representations and warranties shall be continuing in nature and shall
remain in full force and effect until such time as the Indebtedness shall be
paid in full, or until this Agreement shall be terminated, whichever is the last
to occur.
ARTICLE VIII
AFFIRMATIVE COVENANTS
In addition to the covenants contained in the Collateral Documents, which
covenants are hereby ratified and confirmed by Borrower, Borrower covenants and
agrees as follows:
Section 8.1. Financial Statements. Borrower will furnish or cause to
be furnished to Bank:
(a) within forty-five (45) days following the end of each fiscal quarter
of Borrower, financial statements consisting of a balance sheet of
Borrower and Gas ▇▇▇▇ as of the end of such fiscal quarter, and
statements of income and statements of cash flow of Borrower and Gas
▇▇▇▇ for such fiscal quarter and for the fiscal year through such
fiscal quarter, all certified by the chief financial officer of
Borrower or Gas ▇▇▇▇, as the case may be, as having been prepared in
accordance with GAAP consistently applied;
(b) within forty-five (45) days following the end of each fiscal quarter
of Borrower, the consolidated and consolidating financial statements
of Borrower and its Consolidated Subsidiaries consisting of a balance
sheet as of the end of such fiscal quarter, and statements of income
and statements of cash flow of Borrower and its Consolidated
Subsidiaries for such fiscal quarter and for the fiscal year through
such fiscal quarter, all certified by the chief financial officer of
Borrower as having been prepared in accordance with GAAP consistently
applied, together with the 10-Q or equivalent report submitted by
Borrower to the Securities and Exchange Commission for such period;
17
(c) as soon as available and in any event within ninety (90) days
following the close of each fiscal year of Borrower, unqualified
audited consolidated and consolidating financial statements of
Borrower and its Consolidated Subsidiaries consisting of a balance
sheet as of the end of such fiscal year and statements of income, and
statement of cash flow for such fiscal year, setting forth in each
case in comparative form the corresponding figures for the preceding
fiscal year, certified by independent public accountants of recognized
standing acceptable to Bank, together with the 10-K or equivalent
report submitted by Borrower to the Securities and Exchange Commission
for such period;
(d) within fifteen days (15) of the filing of same, copies of all Forms
1120 and all schedules and attachments thereto as submitted annually
to the Internal Revenue Service by Borrower and its Consolidated
Subsidiaries;
(e) with each set of quarterly financial reports submitted in accordance
with paragraph (a) above, a compliance certificate signed by the chief
financial officer of each Borrower, certifying that said officer has
reviewed this Agreement and to the best of his or her knowledge no
Default or Event of Default has occurred, or if such Default or Event
of Default has occurred, specifying the nature and extent thereof, and
that all financial covenants in this Agreement have been met, and
providing a computation of all financial covenants contained herein;
(f) as soon as available and in any event within thirty (30) days
following the end of each calendar year, the personal financial
statements of ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, III, signed by ▇▇. ▇▇▇▇▇▇ and
submitted pursuant to fully completed forms of personal financial
statements provided by Bank, together with his federal tax returns and
all schedules thereto, within fifteen (15) days of the filing of same;
(g) on a bi-annual basis, commencing on the second anniversary date of the
date of this Agreement, a third-party collateral appraisal prepared by
MB Valuation Services or other reputable appraisal service firm
approved by Bank, which is addressed to Bank;
(h) within 15 days of receipt of same, copies of all statements received
by ▇▇▇▇▇▇ from Hibernia Investment Securities, Inc. regarding the
securities account subject to the Securities Account Pledge; and,
(i) such other necessary financial information concerning Borrower and
Guarantors as Bank may reasonably request from time to time.
Section 8.2. Notice of Default; Litigation; ERISA Matters. Borrower will
give written notice to Bank as soon as reasonably possible and in no event more
than five (5) Business Days of (i) the occurrence of any Default or Event of
Default hereunder of which it has knowledge, (ii) the filing of any actions,
suits or proceedings against Borrower in any court or before any governmental
authority or tribunal of which it has knowledge which could cause a Material
Adverse Change with respect to Borrower, (iii) the occurrence of a reportable
event
18
under, or the institution of steps by Borrower to withdraw from, or the
institution of any steps to terminate, any employee benefit plan as to which
Borrower may have liability, or (iv) the occurrence of any other action, event
or condition of any nature of which Borrower has knowledge which may cause, or
lead to, or result in, any Material Adverse Change.
Section 8.3. Maintenance of Corporate Existence, Properties and Liens.
Borrower will (i) continue to engage in the business presently being operated by
it; (ii) maintain its corporate existence and good standing in each jurisdiction
in which it is required to be qualified; (iii) keep and maintain all franchises,
licenses and properties necessary in the conduct of its business in good order
and condition; (iv) duly observe and conform to all material requirements of any
governmental authorities relative to the conduct of its business or the
operation of its properties or assets; and, (v) maintain in favor of Bank a
first perfected lien and security interest in the Collateral, subject only to
other Permitted Encumbrances.
Section 8.4. Collateral Schedules and Locations. As often as Bank shall
reasonably require, Borrower shall deliver to Bank schedules of such Collateral,
including such information as Bank may require, including without limitation
names and addresses of account debtors and agings of Receivables and General
Intangibles and the location of all Inventory.
Section 8.5. Taxes. Borrower shall pay or cause to be paid when due, all
taxes, local and special assessments, and governmental and other charges of
every type and description, that may from time to time be imposed, assessed and
levied against it and its properties. Borrower further agree to furnish Bank
with evidence that such taxes, assessments, and governmental and other charges
due by the Borrower have been paid in full and in a timely manner. Borrower may
withhold any such payment or elect to contest any lien if Borrower is in good
faith conducting an appropriate proceeding to contest the obligation to pay and
so long as Bank's interest in the Collateral is not jeopardized.
Section 8.6. Required Insurance. Borrower shall maintain insurance with
insurance companies in such amounts and against such risks as is usually carried
by owners of similar businesses and properties in the same general areas in
which each of them operates, and as shall be reasonably satisfactory to Bank,
such insurance to include appropriate liability, hazard, business interruption,
workmens' compensation coverages as Bank may require, naming Bank as loss payee
and/or additional insured, as appropriate. With respect to the Collateral,
Borrower agrees to provide Bank with the types of insurance coverages required
by the Collateral Documents affecting such Collateral.
Borrower agrees to provide Bank with originals or certified copies of such
policies of insurance. Borrower further agrees to promptly furnish Bank with
copies of all renewal notices and, if requested by Bank, with copies of receipts
for paid premium. Borrower shall provide Bank with originals or certified copies
of all renewal or replacement policies of insurance no later than fifteen (15)
days before any such existing policy or policies should expire. If Borrower's
insurance policies required hereunder and renewals thereof are held by another
person, Borrower agree to supply original or certified copies of the same to
Bank within the time periods required above.
19
Section 8.7. Performance of Loan Documents. Borrower shall duly and
punctually pay and perform its obligations under the Term Note, under this
Agreement and under each of the Related Documents, in accordance with the terms
hereof and thereof.
Section 8.8. Compliance with Environmental Laws. Borrower shall comply with
and shall cause all of its employees, agents, invitees or sublessees to comply
with all Environmental Laws with respect to the disposal of industrial refuse or
waste, and/or the discharge, procession, treatment, removal, transportation,
storage and handling of hazardous or toxic wastes and substances, and pay
immediately when due the cost of removal of any such waste or substances from,
and keep its properties free of any lien imposed pursuant to any such laws,
rules, regulations or orders.
Borrower shall give notice to Bank as soon as reasonably possible and in no
event more than five (5) days after it receives any compliance orders,
environmental citations, or other notices from any governmental entity relating
to any environmental condition relating to its properties or elsewhere for which
it may have legal responsibility with a full description thereof. Borrower
agrees to take any and all reasonable steps, and to perform any and all
reasonable actions necessary or appropriate to promptly comply with any such
citations, compliance orders or Environmental Laws requiring Borrower to remove,
treat or dispose of such hazardous materials, wastes or conditions at the sole
expense of Borrower, to provide Bank with satisfactory evidence of such
compliance; provided, however, that nothing contained herein shall preclude
Borrower from contesting any such compliance orders or citations if such contest
is made in good faith, appropriate reserves are established for the payment for
the cost of compliance therewith, and Bank's security interest in any such
property affected thereby (or the priority thereof) is not jeopardized.
Regardless of whether any Event of Default hereunder shall have occurred
and be continuing, Borrower (i) releases and waives any present or future claims
against Bank for indemnity or contribution in the event Borrower becomes liable
for remediation costs under and Environmental Laws, and (ii) agrees to defend,
indemnify and hold harmless Bank from any and all liabilities (including strict
liability), actions, demands, penalties, losses, costs or expenses (including,
without limitation, reasonable attorneys fees and remedial costs), suits,
administrative orders, agency demand letters, costs of any settlement or
judgment and claims of any and every kind whatsoever which may now or in the
future (whether before or after the termination of this Agreement) be paid,
incurred, or suffered by, or asserted against Bank by any person or entity or
governmental agency for, 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 or onto the property of Borrower of any hazardous
materials, wastes or conditions regulated by any Environmental Laws,
contamination resulting therefrom, or arising out of, or resulting from, the
environmental condition of such property or the applicability of any
Environmental Laws relating to hazardous materials (including, without
limitation, CERCLA or any so called federal, state or local "super fund" or
"super lien" laws, statute, ordinance, code, rule, regulation, order or decree)
regardless of whether or not caused by or within the control of Bank. The
covenants and indemnities contained in this Section 8.8 shall survive
termination of this Agreement.
20
Section 8.9. Further Assurances. Borrower will, at any time and from time
to time, execute and deliver such further instruments and take such further
action as may reasonably be requested by Bank, in order to cure any defects in
the execution and delivery of, or to comply with or accomplish the covenants and
agreements contained in this Agreement or the Collateral Documents.
Section 8.10. Financial Covenants. Borrower shall comply with the following
covenants and ratios:
(a) Borrower and its Consolidated Subsidiaries shall maintain a ratio of
Current Ratio of not less than 1.10 to 1.00 as of the end of each
fiscal quarter.
(b) Borrower and its Consolidated Subsidiaries shall maintain a Tangible
Net Worth of not less than $2,750,447.00 plus 50% of the net income of
Borrower and its Consolidated Subsidiaries (with no deduction for net
losses) derived after 12/31/98.
(c) Borrower and its Consolidated Subsidiaries shall maintain a Funded
Debt to Cash Flow Ratio of (i) less than or equal to 4.0 to 1.0 as of
the end of each fiscal quarter through 12/31/00, (ii) less than or
equal to 3.5 to 1.0 as of the end of each fiscal quarter thereafter
through 12/31/01, and (iii) less than or equal to 3.0 to 1.0 as of the
end of each fiscal quarter thereafter.
(d) Borrower and its Consolidated Subsidiaries shall maintain a Debt
Service Coverage Ratio of (i) greater than 1.0 to 1.0 as of the end of
each fiscal quarter through 12/31/00 (provided, however, that for the
period ending 12/31/00 only, the Debt Service Coverage Ratio shall be
based on the current quarter's annualized interest expense), (ii)
greater than or equal to 1.2 to 1.0 as of the end of each fiscal
quarter thereafter through 12/31/01, and (iii) greater than or equal
to 1.50 to 1.0 as of the end of each fiscal quarter thereafter.
Section 8.11. Operations. Borrower shall conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including compliance with all
minimum funding standards and other requirements of ERISA of 1974, and other
laws applicable to any employee benefit plans which it may have, and at all time
shall remain a "going concern" as defined by its auditors.
Section 8.12. Change of Location. Borrower shall, within ten (10) Business
Days prior to any such addition or change, notify Bank in writing of any
proposed additions to or changes in the location of the Collateral (other than
leased Inventory) or of the location of its chief executive office.
Section 8.13. Employee Benefit Plans. So long as this Agreement remains in
effect, Borrower will maintain each employee benefit plan as to which it may
have any liability, in compliance with all applicable requirements of law and
regulations.
21
Section 8.14. Field Audits; Other Information. Borrower shall allow Bank's
employees and agents access to its books and records and properties during
normal business hours to perform field audits from time to time. Borrower will
provide Bank with such other information as Bank may reasonably request from
time to time.
Section 8.15 Pledged Securities Account. Borrower shall cause ▇▇▇▇▇▇ to at
all time maintain sufficient cash or securities in the securities account
subject to the Securities Account Pledge so as to maintain the account with a
market value of not less than $1 million.
Section 8.16. Deposit and Operating Accounts. Borrower shall maintain all
of its primary deposit and operating accounts with Bank so long as any of the
Indebtedness remains outstanding.
ARTICLE IX
NEGATIVE COVENANTS
In addition to the negative covenants contained in the Collateral
Documents, which covenants are hereby ratified and confirmed by Borrower,
Borrower covenants and agrees as follows:
Section 9.1. Limitations on Fundamental Changes. Borrower shall not change
the nature of its business or its name (other than the presently anticipated
name change of Borrower to Compresco, Inc.), grant credit terms to its customers
on terms different than those presently granted to customers, or form any
subsidiary without the prior written consent of the Bank, nor shall it enter
into any transaction of merger or consolidation, nor liquidate or dissolve
itself (nor suffer any liquidation or dissolution).
Section 9.2. Disposition of Assets. Borrower shall not convey, sell, lease,
assign, transfer or otherwise dispose of, any of its property, business or
assets whether now owned or hereafter acquired except for (i) inventory and
compressors sold to customers in the ordinary course of business, (ii) property
disposed of in the ordinary course of business, provided that, if such property
is to be replaced, the net cash proceeds of each such transaction are applied to
obtain a replacement item or items within 30 days of the disposition thereof, or
(iii) other dispositions of property whose fair market value does not exceed
$50,000.00 in the aggregate during each fiscal year.
Section 9.3. Restricted Payments. Borrower shall not declare or pay (or set
aside reserves for payment of) any dividends or distributions or redeem, retire,
or repurchase any shares of its capital stock, make any shareholder/affiliate
loans, pay excessive shareholder compensation or enter into any similar
transactions with the shareholders of Borrower and their related interests
without the prior written consent of the Bank.
22
Section 9.4. Encumbrances. Borrower shall not create, incur, assume or
permit to exist any Encumbrances on any of its property now owned or hereafter
acquired, except for the following (hereinafter referred to as the "Permitted
Encumbrances"):
(a) Encumbrances for taxes, assessments, or other governmental charges not
yet due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserves
as shall be required by GAAP shall have been made therefor.
(b) Encumbrances of landlords, vendors, carriers, warehousemen, mechanics,
laborers and materialmen arising by law in the ordinary course of
business for sums either not yet due or being contested in good faith
by appropriate action promptly initiated and diligently conducted, if
such reserve as shall be required by generally accepted accounting
principles shall have been made therefor.
(c) Inchoate liens arising under ERISA to secure the contingent
liabilities, if any, permitted by this Agreement.
(d) The pledge of the Collateral and any other liens in favor of the Bank
to secure the Indebtedness of the Borrower to the Bank.
(e) Liens which, as of the date hereof, have been disclosed to and
approved by Bank in writing.
Section 9.5. Debts, Guaranties and Other Obligations. Borrower will not
incur, create, assume or in any manner become or be liable in respect of any
indebtedness, direct or contingent, except for:
(a) The Indebtedness to the Bank under this Agreement;
(b) Trade payables or non-material operating leases from time to time
incurred in the ordinary course of business; and,
(c) Taxes, assessments or other government charges which are not yet due
or are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles shall have been
made therefor.
Section 9.6. Changes in Control and Management. Borrower shall not allow
any change in the control of the Borrowers ("control" for the purposes hereof
shall mean the power, direct or indirect, (i) to vote 51% or more of the
securities having ordinary voting power for the election of directors of
Borrower, or (ii) to direct or cause the direction of the management and
policies of Borrower whether by contract or otherwise) from the ownership
structure of Borrower which exists as of the date hereof (which ownership is as
has been represented to Bank by Borrower), nor shall it allow any change in its
executive management which exists as of the date hereof without the prior
written consent of Bank.
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Section 9.7. Other Agreements. Borrower will not enter into any agreement
containing any provision which would be violated or breached by the performance
of their obligations hereunder or under any instrument or document delivered or
to be delivered by them hereunder or in connection herewith.
Section 9.8. Transactions with Affiliates. Borrower will not enter into any
agreement with any affiliate except to the extent that such agreements are
commercially reasonable which provide for terms which would normally be
obtainable in an arm's length transaction with an unrelated third party. To the
extent any inter-company loans are permitted hereunder, they shall be
subordinated in payment to the Indebtedness.
ARTICLE X
EVENTS OF DEFAULT
Section 10.1. Events of Default. The occurrence of any one or more of the
following shall constitute an Event of Default:
Default under the Indebtedness. Should Borrower default in the payment of
principal or interest under the Indebtedness.
Default under this Agreement. Should Borrower violate or fail to comply
fully with any of the terms and conditions of, or default under, this Agreement,
and such default not be cured within thirty days of the occurrence thereof
(provided, however, that no cure period shall be available for a default in the
obligation to comply with negative covenants contained herein or to maintain
insurance coverages required hereby).
Default Under Other Agreements. Should any event of default occur or exist
under any of the Related Documents or should Borrower, any Guarantor or ▇▇▇▇▇▇
violate, or fail to comply fully with, any terms and conditions of any of the
Collateral Documents or Related Documents, and such default not be cured within
thirty days of the occurrence thereof (provided, however, that no cure period
shall be available for a default in the obligation to comply with negative
covenants contained therein or to maintain insurance coverages affecting the
Collateral required thereby).
Other Defaults in Favor of Bank. Should Borrower or any Guarantor default
under any other loan, extension of credit, security agreement, or other
obligation in favor of Bank and fail to cure same in accordance with any
applicable cure periods.
Default in Favor of Third Parties. Should Borrower or any Guarantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person that
may materially affect any of the Collateral, or the ability of Borrower or any
such Guarantor to perform its obligations under this
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Agreement, or any Related Document, or pertaining to the Indebtedness and fail
to cure same in accordance with any applicable cure periods.
Insolvency. The following occurrences, in addition to the failure or
suspension of Borrower or any corporate Guarantor, shall constitute an Event of
Default hereunder:
(a) Filing by Borrower or any Guarantor of a voluntary petition or any
answer seeking reorganization, arrangement, readjustment of its debts
or for any other relief under any applicable bankruptcy act or law, or
under any other insolvency act or law, now or hereafter existing, or
any action by Borrower or any Guarantor consenting to, approving of,
or acquiescing in, any such petition or proceeding; the application by
Borrower or any Guarantor for, or the appointment by consent or
acquiescence of, a receiver or trustee of Borrower or of any Guarantor
for all or a substantial part of its property; the making by Borrower
or by any Guarantor of an assignment for the benefit of creditors; the
inability of Borrower or any Guarantor or the admission by Borrower or
any Guarantor in writing, of its inability to pay its debts as they
mature (the term "acquiescence" means the failure to file a petition
or motion in opposition to such petition or proceeding or to vacate or
discharge any order, judgment or decree providing for such appointment
within sixty (60) days after the appointment of a receiver or
trustee); or
(b) Filing of an involuntary petition against Borrower or any Guarantor in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under any applicable bankruptcy act or
law, or under any other insolvency act or law, now or hereafter
existing and such petition remains undismissed or unanswered for a
period of sixty (60) days from such filing; or the insolvency
appointment of a receiver or trustee of Borrower or of any Guarantor
for all or a substantial part of its property and such appointment
remains unvacated or unopposed for a period of sixty (60) days from
such appointment, execution or similar process against any substantial
part of the property of Borrower or of any Guarantor and such warrant
remains unbonded or undismissed for a period of sixty (60) days from
notice to Borrower or such Guarantor of its issuance.
Dissolution Proceedings. Should proceedings for the dissolution or
appointment of a liquidator of Borrower or any corporate Guarantor be commenced.
Death or Incapacity of Individual Guarantors. Should any individual
Guarantor die or become incapacitated or interdicted.
False Statements. Should any representation or warranty of Borrower or any
Guarantor made in connection with the Indebtedness prove to be incorrect or
misleading in any material respect when made or reaffirmed.
Material Adverse Change. Should a Material Adverse Change with respect to
Borrower or any Guarantor occur at any time and not be cured within ten days of
the occurrence thereof.
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Upon the occurrence of an Event of Default, all commitments of Bank under
this Agreement will terminate immediately, and, at Bank's option, the Term Note
and all Indebtedness of Borrower will become immediately due and payable, all
without notice of any kind to Borrower, except that in the case of type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional.
Upon the occurrence of an Event of Default, Bank may proceed to realize
upon the Collateral under the terms of the Collateral Documents and exercise any
other rights which it has by law or contract (which rights shall be cumulative
in nature).
Section 10.2. Waivers by Borrower. Except as otherwise provided for in this
Agreement and by applicable law, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Bank on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Bank may do in this regard, (ii) all rights to
notice and a hearing prior to Bank's taking possession or control of, or to
Bank's replevy, attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing Bank to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Each Borrower acknowledges that it has been advised by counsel of its
choice with respect to this Agreement, the other Collateral Documents, and the
transactions evidenced by this Agreement and other Collateral Documents.
ARTICLE XI
MISCELLANEOUS
Section 11.1. No Waiver; Modification in Writing. No failure or delay on
the part of Bank in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. No amendment,
modification or waiver of any provision of this Agreement or of the Term Note,
nor consent to any departure by Borrower therefrom, shall in any event be
effective unless the same shall be in writing signed by or on behalf of Bank and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances.
Section 11.2. Payment on Non-Business Day. Whenever any payment to be made
hereunder or on account of the Term Note shall be scheduled to become due on a
day which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such
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extension of time shall in such case be included in computing interest and fees
payable hereunder or on account of the Term Note.
Section 11.3. Addresses for Notices. All notices and communications
provided for hereunder shall be in writing and, shall be mailed, by certified
mail, return receipt requested, or delivered as set forth below unless any
person named below shall notify the others in writing of another address, in
which case notices and communications shall be mailed, by certified mail, return
receipt requested, or delivered to such other address.
If to Bank:
Hibernia National Bank
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Manager-Energy/Maritime Department
If to Borrower:
Emerging Alpha Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Section 11.4. Fees and Expenses. Borrower agrees to pay all fees, costs and
expenses of Bank in connection with the preparation, execution and delivery of
this Agreement, and all Related Documents to be executed in connection herewith
and subsequent modifications or amendments to any of the foregoing, including
without limitation, the reasonable fees and disbursements of counsel to Bank,
and to pay all costs and expenses of Bank in connection with the enforcement of
this Agreement, the Term Note or the other Related Documents, including
reasonable legal fees and disbursements arising in connection therewith.
Borrower agrees to pay all costs associated with the issuance of any insurance
coverages, appraisals and field examinations of Borrower's property which may be
required by this Agreement and any of the Related Documents. Borrower also
agrees to pay, and to save Bank harmless from any delay in paying stamp and
other similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement, the Term Note, the
other Related Documents, or any modification thereof.
Section 11.5. Security Interest and Right of Set-off. Bank shall have a
continuing security interest in, as well as the right to set-off the obligations
of Borrower hereunder against, all funds which Borrower may maintain on deposit
with Bank (with the exception of funds deposited in Borrower's accounts in trust
for third parties or funds deposited in pension accounts, IRA's, ▇▇▇▇▇ accounts
and All Saver Certificates), and Bank shall have a lien upon and a security
interest in all property of Borrower in Bank's possession or control which shall
secure the Indebtedness of Borrower.
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Section 11.6. Waiver of Marshaling. Borrower shall not at any time
hereafter assert any right under any law pertaining to marshaling (whether of
assets or liens) and Borrower expressly agrees that Bank may execute or
foreclose upon the Collateral in such order and manner as Bank, in its sole
discretion, deems appropriate.
Section 11.7. Governing Law. This Agreement and the Term Note shall be
deemed to be contracts made under the laws of the State of Louisiana and for all
purposes shall be construed in accordance with the laws of said State.
Section 11.8. Consent to Loan Participation. Borrower agrees and consents
to Bank's sale or transfer, whether now or later, of one or more participation
interests in the Indebtedness of the Borrower arising pursuant to this Agreement
to one or more purchasers, whether related or unrelated to Bank. Bank may
provide, without any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Bank may have about Borrower
or about any other matter relating to such Indebtedness, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interest will be
considered as the absolute owners of such interests in such Indebtedness.
Section 11.9. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a)
BORROWER AND BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH BORROWER AND BANK MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING
TO (i) THE TERM NOTE, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR
(iv) THE COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
BORROWER AND THE BANK, AND THE BORROWER AND THE BANK HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
BORROWER AND THE BANK EACH FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN
THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE
COURTS OF LOUISIANA AND THE FEDERAL COURTS IN LOUISIANA AND AGREES THAT ANY
ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE
TERM NOTE, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY
COURT HAVING SUBJECT MATTER JURISDICTION.
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Section 11.10. Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Section 11.11. Headings. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
EMERGING ALPHA CORPORATION
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
HIBERNIA NATIONAL BANK
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Printed Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
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