EXHIBIT 4.1
CREDIT AGREEMENT
Dated as of December __, 1997
Between
INLAND REFINING, INC.
AS BORROWER
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and
BANQUE PARIBAS
AS LENDER
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TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms........................................ 1
1.2. Accounting Terms..................................... 24
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Loans............................................ 24
2.2. Making the Loans..................................... 24
2.3. Fees................................................. 24
2.4. Reduction of the Commitments......................... 25
2.5. Repayment............................................ 25
2.6. Mandatory Prepayments................................ 26
2.7. Optional Prepayments................................. 27
2.8. Interest............................................. 27
2.9. Increased Costs...................................... 28
2.10. Capital Adequacy..................................... 28
2.11. Payments and Computations............................ 28
2.12. Taxes................................................ 29
2.13. Letter of Credit Facility............................ 30
2.14. Cash Management System............................... 32
2.15. Nature of Obligations................................ 32
2.16. Use of Proceeds...................................... 34
ARTICLE III
CONDITIONS
3.1. Conditions to Effectiveness.......................... 34
3.2. Additional Conditions Precedent to
Effectiveness....................................... 37
3.3. Conditions Precedent to Each Credit
Extension........................................... 40
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law............. 40
4.2. Corporate Power; Authorization; Enforceable
Obligations......................................... 41
4.3. Taxes................................................ 42
4.4. Financial Matters.................................... 43
4.5. Litigation........................................... 43
4.6. Margin Regulations................................... 44
4.7. Ownership of Borrower; Subsidiaries.................. 44
4.8. ERISA................................................ 44
4.9. Investment Company Act............................... 45
4.10. Insurance............................................ 45
4.11. Environmental Protection............................. 45
4.12. Intellectual Property................................ 47
4.13. Title................................................ 47
4.14. Full Disclosure...................................... 51
4.15. No Burdensome Restrictions; No Defaults;
Contractual Obligations............................. 51
4.16. Acquisition Agreement................................ 52
ARTICLE V
FINANCIAL COVENANTS
5.1. Tangible Capital Base............................... 53
5.2. Working Capital..................................... 53
5.3. Ratio of Maximum Total Liabilities to
Tangible Capital Base.............................. 53
5.4. Capital Expenditures................................ 53
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Compliance with Laws, Etc............................ 53
6.2. Conduct of Business.................................. 53
6.3. Payment of Taxes, Etc................................ 54
6.4. Maintenance of Insurance............................. 54
6.5. Preservation of Corporate Existence, Etc............. 54
ii
6.6. Access............................................... 54
6.7. Keeping of Books..................................... 55
6.8. Maintenance of Properties, Etc....................... 55
6.9. Financial Statements................................. 55
6.10. Reporting Requirements............................... 57
6.11. Employee Plans....................................... 58
6.12. Environmental........................................ 59
6.13. Tax Refunds.......................................... 59
6.14. Fiscal Year.......................................... 59
6.15. Lockbox and Cash Management System................... 59
6.16. Position Limit....................................... 59
6.17. Additional Covenants................................. 59
6.18. Capital Injection.................................... 60
ARTICLE VII
NEGATIVE COVENANTS
7.1. Liens, Etc........................................... 60
7.2. Indebtedness......................................... 62
7.3. Restricted Payments.................................. 62
7.4. Mergers, Stock Issuances, Sale of
Assets, Etc......................................... 63
7.5. Investments in Other Persons......................... 63
7.6. Change in Nature of Business......................... 64
7.7. Transactions with Affiliates......................... 64
7.8. No Subsidiaries...................................... 65
7.9. Environmental........................................ 65
7.10. Bank Accounts........................................ 65
7.11. Accounting Changes................................... 65
7.12. No Speculative Transactions.......................... 65
7.13. Modification of Material Agreements.................. 65
7.14. Sound Note........................................... 66
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default.....................................66
8.2. Remedies..............................................69
8.3. Action in Respect of Letters of Credit................69
iii
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, Etc...................................... 71
9.2. Notices, Etc......................................... 71
9.3. No Waiver; Remedies.................................. 71
9.4. Costs; Expenses; Indemnities......................... 72
9.5. Right of Set-off..................................... 73
9.6. Binding Effect....................................... 74
9.7. Assignments and Participations....................... 74
9.8. Governing Law; Severability.......................... 75
9.9. Submission to Jurisdiction;
Service of Process................................... 75
9.10. Execution in Counterparts............................ 76
9.11. Entire Agreement..................................... 76
9.12. WAIVER OF JURY TRIAL................................. 76
iv
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Letter of Credit Application
Exhibit E - Form of Pledge Agreement
Exhibit F - Form of Deed of Trust
Exhibit G-1 -
Form of Opinion of Counsel for the Borrower for Resources and Production
Exhibit G-2.0 -
Form of Opinion of Local Counsel for the Borrower
Exhibit H -
[Intentionally Omitted]
Exhibit I -
Form of Security Agreement
Exhibit J -
Form of General Release
Exhibit K -
Form of Bailee Letter
Exhibit L - Assignment of Promissory Note
Exhibit M - SJCC Nondisturbance Agreement
Exhibit N - Resources/Production Capital Markets
Transaction Letter
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SCHEDULES
Schedule I - Pre-Approved Obligors
Schedule 2.16 - Approved Capital Expenditures
Schedule 4.5 - Pending Litigation
Schedule 4.7(b) - Subsidiaries
Schedule 4.8 - List of Plans
Schedule 4.11 - Environmental Protection
Schedule 4.13(a)(i) - Permitted Exceptions
Schedule 4.13(a)(ii)- Owned Real Estate
Schedule 4.13(b) - Leased Real Estate
Schedule 4.13(i) - Real Property Tax Bills
Schedule 7.1 - Existing Liens
Schedule 7.2 - Existing Indebtedness
Schedule 7.5 - Existing Investments
Schedule 7.11 - Permitted Bank Accounts
Schedule 9.2 - Address of the Borrower
vi
CREDIT AGREEMENT, dated as of December __, 1997, between INLAND
REFINING, INC., a Utah corporation (the "Borrower") and BANQUE PARIBAS, a French
banking corporation (the "Bank" or the "Lender").
W I T N E S S E T H:
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WHEREAS, the Borrower has requested that the Lender make loan advances
and issue letters of credit to the Borrower of up to $23,750,000 in aggregate
principal amount outstanding at any time, provided that the aggregate principal
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amount outstanding of the Loans (as defined below) shall not exceed $16,500,000
at any time on or prior to April 1, 1998 and $8,000,000 thereafter, in each
case, subject to Availability as hereinafter defined, for the purposes
hereinafter specified; and
WHEREAS, the Lender is willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following terms
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have the following meanings:
"Account" has the meaning specified in the Security Agreement.
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"Acquisition" means the acquisition by Borrower of the fixed and
-----------
related working capital assets of Crysen Refining, Inc. (other than the fixed
assets of the "Cowboy" facility, as defined in the Acquisition Agreement) and
the acquisition by the Borrower or an Affiliate of the Borrower or another third
party of the fixed and related working capital assets of Sound Refining, Inc.
(and the fixed assets
of the "Cowboy" facility) as provided for in the Acquisition Agreement.
"Acquisition Agreement" means the Asset Purchase and Sale Agreement
---------------------
among Borrower, Crysen Refining, Inc. and Sound Refining Inc. dated July 14,
1997, as amended from time to time.
"Administration Fee" has the meaning specified in Section 2.3(d).
------------------
"Affiliate" means, as to any Person, which, any Person directly or
---------
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" means the possession of
the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Credit Agreement, together with all Exhibits
---------
and Schedules hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"Approved Capital Expenditures" means Capital Expenditures made by the
-----------------------------
Borrower subject to the approval of the Bank and in amounts not to exceed those
set forth on Schedule 2.16.
"Asset Sale" means any sale or other disposition, or series of sales
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or other dispositions (including, without limitation, by merger or consolidation
or sale-leaseback, and whether by operation of law or otherwise), made on or
after the Effective Date by the Borrower or any of its Subsidiaries to any
Person of (i) any Stock of any of its Subsidiaries, or (ii) any assets or the
assets of any division of the Borrower or any of its Subsidiaries, except
Inventory sold in the ordinary course and consistent with good business and
prudent practice.
"Asset Sale Proceeds" means cash payments received by the Borrower
-------------------
(including, without limitation, any cash
2
payments received by way of deferred payment of principal pursuant to a note or
receivable or otherwise, but only as and when received) from any Asset Sale. For
the purposes of this definition, Asset Sale Proceeds shall be deemed to include,
without limitation, any award of compensation for any asset or property or group
thereof taken by condemnation or eminent domain or other similar action.
"Assignment of Promissory Note" means an agreement, in substantially
-----------------------------
the form of Exhibit L, executed by Borrower, and related to the Sound Note,
which shall include an Acknowledgment and Agreement to Assignment of Note,
executed by SJCC (as defined herein), as such agreements may be amended from
time to time.
"Availability" means, at any time, an amount equal to (a) the lower of
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(i) the then current Commitment of the Lender and (ii) the Borrowing Base at
such time, minus (b) the aggregate of the outstanding principal amount of the
-----
Loans and the outstanding Letter of Credit Obligations at such time.
"Bank" has the meaning specified in the preamble to this Agreement.
----
"Bankruptcy Code" means Title 11 of the United States Code, any
---------------
successor statute thereto or any similar United States federal or state law for
the relief of debtors.
"Blocked Account" has the meaning specified in Section 2.14.
---------------
"Borrower" has the meaning specified in the preamble to this
--------
Agreement.
"Borrowing" means a borrowing consisting of Loans made on the same day
---------
by the Bank according to its Commitments.
"Borrowing Base" means:
--------------
3
(a) at any date of determination prior to the Borrowing Base
Reduction Date, the sum of the following at such date:
(i) up to 100% of the Eligible Cash and Cash Equivalents; plus
----
(ii) up to 95% of the Pre-Approved Eligible Receivables; plus
----
(iii) up to 85% of Eligible Inventory; plus
----
(iv) up to 85% of Eligible Inventory Under Contract; plus
----
(v) up to 100% of the Fixed Asset Allocation, less
----
(x) 100% of open accounts payable, including product and excise
tax accruals; and
(y) such reserves as the Lender, in its sole discretion, deems
appropriate from time to time.
(b) at any date of determination on or after the Borrowing Base
Reduction Date, the sum of the following at such date:
(i) up to 100% of the Eligible Cash and Cash Equivalents; plus
----
(ii) up to 85% of the Pre-Approved Eligible Receivables; plus
----
(iii) up to 70% of Eligible Inventory; plus
----
(iv) up to 70% of Eligible Inventory Under Contract; plus
----
4
(v) up to 100% of the Capital Expenditures Portion, less
----
(x) 100% of open accounts payable, including product and excise
tax accruals; and
(y) such reserves as the Lender, in its sole discretion, deems
appropriate from time to time.
"Borrowing Base Certificate" means a certificate substantially in the
--------------------------
form of Exhibit C.
"Borrowing Base Reduction Date" means the earlier of (i) the date of
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the completion and execution of a Capital Markets Transaction if and only if
such Capital Markets Transaction is sufficient to repay in full the Fixed Asset
Allocation or (ii) April 1, 1998.
"Business Day" means a day of the year on which banks are not
------------
required authorized to close in New York City.
"Capital Expenditures" means, for any Person for any period, the
--------------------
aggregate of (i) all expenditures by such Person and its Subsidiaries, except
interest capitalized during construction, during such period for property, plant
or equipment, including, without limitation, renewals, improvements,
replacements and capitalized repairs, that would be reflected as additions to
property, plant or equipment on a consolidated balance sheet of such Person and
its Subsidiaries prepared in conformity with GAAP and (ii) the principal amount
of all Indebtedness incurred or assumed in connection with any such additions to
property, plant and equipment. For the purpose of this definition, the purchase
price of equipment which is acquired simultaneously with the trade-in of
existing equipment owned by such Person or any of its Subsidiaries or with
insurance proceeds shall be included in Capital Expenditures only to the extent
of the gross amount of such purchase price less the credit granted by the seller
of such equipment being traded in at such time or the amount of such proceeds,
as the case may be.
5
"Capital Expenditures Portion" means an amount determined by the
----------------------------
Bank, in its sole discretion but in no event greater than the lesser of (i)
$2,000,000, subject to the Capital Expenditures agreed upon by the Borrower and
Bank in any given Fiscal Quarter as set forth on Schedule 2.16 and (ii) the
amount available under the Reduction Schedule not to exceed the reasonable value
of real property and/or fixed assets of the Borrower in which the Bank has a
fully perfected first priority security interest and any notes due to the
Borrower secured by real property in which the Bank has assignment and
possession of the note and the underlying first priority mortgage.
"Capital Markets Transaction" means (i) any capital markets or
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financing transaction, including but not limited to secondary offerings, private
placements, rights offerings, note issuances of Resources or Production or any
of their respective Subsidiaries or (ii) any such capital markets or financing
transaction of an Affiliate of Resources other than as specified in clause (i)
wherein the proceeds thereof are injected (including, without limitation, as
capital or as a loan) into Resources or any of its Subsidiaries.
"Capitalized Lease" means, as to any Person, any lease of property by
-----------------
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
-----------------------------
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Cash Collateral Account" has the meaning specified in Section 8.3(a).
-----------------------
"Closing Date" means the earlier of (i) the date of the closing of the
------------
Acquisition Agreement or (ii) December 24, 1997.
6
"Closing Fee" has the meaning specified in Section 2.3(b).
-----------
"Code" means the Internal Revenue Code of 1986 (or any successor
----
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted under any of the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Pledge
--------------------
Agreement, the Deed of Trust, the Mortgages, the Assignment of Promissory Note,
the Blocked Account Letter and any other document executed and delivered by a
Loan Party granting a Lien in favor of the Bank on any of its property,
including the Sound Note, to secure payment of the Obligations.
"Commitment" means, the commitment of the Lender to make Loans and
----------
to issue Letters of Credit to the Borrowers pursuant to section 2.1 in the
aggregate principal amount outstanding not to exceed $23,750,000, provided that
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the aggregate principal amount outstanding of the Loans shall not exceed
$16,500,000 at any time on or prior to April 1, 1998 and $8,000,000 thereafter,
in each case subject to Availability, as such amount may be reduced or modified
pursuant to this Agreement.
"Commitment Fee" has the meaning specified in Section 2.3(a).
--------------
"Concentration Accounts" has the meaning specified in Section 2.14.
----------------------
"Consent" means the Consent Regarding Release of Trust Deed and
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Security Agreement, dated as of July 14, 1997, between Banque Paribas and
Inland, as amended from time to time.
7
"Contaminant" means any substance regulated or forming the basis of
-----------
liability under any Environmental Law, including, without limitation, any waste,
pollutant, hazardous substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, or any constituent of any
such substance or waste.
"Contract" means any contract, agreement, undertaking, indenture,
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note, bond, loan, instrument, lease, conditional sales contract, mortgage, deed
of trust, license, franchise, insurance policy, commitment or other arrangement
or agreement.
"Contractual Obligation" of any Person means any obligation,
----------------------
agreement, undertaking or similar provision of any security issued by such
Person or of any Contract (excluding a Loan Document) to which such Person is a
party or by which it or any of its property is bound or to which any of its
properties is subject.
"Deed of Trust" means the deed of trust, in substantially the form of
-------------
Exhibit F (covering the Borrower's refinery and property in ▇▇▇▇▇ Cross, Utah),
as such deed of trust may be further amended, supplemented or otherwise modified
from time to time.
"Default" means any event which with the passing of time or the
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giving of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any successor
---
thereto.
"Effective Date" means the first date on which all of the conditions
--------------
set forth in Section 3.1 are satisfied.
"Eligible Cash and Cash Equivalents" means all cash and cash
----------------------------------
equivalents of the Borrower on deposit in Permitted Bank Accounts.
"Eligible Inventory" means such of the Inventory of the Borrower as
------------------
constitutes Collateral in which the Bank
8
has a fully perfected exclusive and first priority security interest and, as the
Bank, in its discretion, deems eligible, excluding, without limitation:
(a) Inventory which is not owned by the Borrower free and clear of
security interests, Liens and encumbrances in favor of any Person other than the
Bank; or
(b) Inventory which has not been purchased by the Borrower for no
more than a fair consideration and, unless the Bank otherwise agrees in writing,
from a Person not an Affiliate of the Borrower; or
(c) Inventory which is not merchantable or is obsolete or obsolescent
or
(d) Inventory which is stored in facilities belonging to or under the
control of a third party unless such third party and the location of any such
facility has been approved by the Bank and such Inventory, (i) is covered by a
negotiable document duly and properly endorsed and delivered to the Bank or (ii)
it is covered by a non-negotiable document and either (A) such document is duly
issued in the name of the Bank and delivered to the Bank or (B) the Borrower has
notified such third party (x) of the Bank's security interest in the Inventory,
(y) has instructed such third party facility not to release such Inventory
without the Bank's prior written consent and (z) not to commingle such Inventory
and has instructed such third party to confirm, in writing, directly to the Bank
such third party's acknowledgment of the Bank's security interest and agreement
to follow the above instructions and such third party has so confirmed the
foregoing to the Bank in writing in form and substance acceptable to the Bank;
or
(e) Inventory which does not comply with all of the representations
and warranties with respect to such Inventory contained in this Agreement and in
any other Loan Documents delivered to the Bank; or
(f) Inventory which the Bank, in its discretion, otherwise deems
ineligible.
9
For the purpose of computing the Borrowing Base, Eligible Inventory shall be
valued at the lower of cost or market on a first in first out basis.
"Eligible Inventory Under Contract" means crude oil and petroleum
---------------------------------
products that: (i) the Borrower has contracted to purchase but have not yet been
delivered; and (ii) are not included in Eligible Inventory but would qualify as
Eligible Inventory upon delivery; and (iii) the Borrower's obligation to pay for
is supported by a Letter of Credit.
"Eligible Receivables" means the gross outstanding balance, less all
--------------------
finance charges, late fees and other fees which are unearned, sales, excise or
similar taxes, and credits or allowances granted, of those Accounts of the
Borrower arising out of sales of merchandise, goods or services in the ordinary
course of business, made by the Borrower to a Person which is approved by the
Bank and is not an Affiliate of the Borrower, which are not in dispute, and
which constitute Collateral in which the Bank has a fully perfected exclusive
and first priority security interest, and, if the account debtor is a
Governmental Authority, Borrower has assigned its rights to payment of such
account to the Bank pursuant to the Assignment of Claims Act of 1940, as
amended, in the case of a federal Governmental Authority, and pursuant to
applicable state law, if any, in the case of any other Governmental Authority,
and such assignment has been accepted and acknowledged by the appropriate
government officers provided, however, that an Account shall in no event be an
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Eligible Receivable if:
(a) such Account is past due according to the original terms of sale
or if the term of such Account is more than 30 days, except that if the account
------
dedtor on such Account is the Defense Fuel Supply Center then such Account may,
at any time, be past due no more than 60 days according to the original terms of
sale and, provided, that the original terms of sale were not more than 30 days
and such Account would otherwise be an Eligible Receivable; provided that,
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notwithstanding the preceding clauses in this
10
subsection, an Account of Crysen Refining, Inc. or of Sound Refining, Inc., that
is past due before March 1, 1998 shall be an Eligible Receivable.
(b) any representation and warranty contained in this Agreement or
any other Loan Document with respect either to Accounts or Eligible Receivables
in general or to such specific Account is not true and correct with respect to
such Account; or
(c) the account debtor on such Account has disputed liability or made
any claim with respect to any other Account due from such account debtor to the
Borrower; or
(d) the account debtor on such Account has filed a petition for
bankruptcy or any other relief under the Bankruptcy Code or any other law
relating to bankruptcy, insolvency, reorganization or relief of debtors; made an
assignment for the benefit of creditors; had filed against it any petition or
other application for relief under the Bankruptcy Code or any such other law;
has failed, suspended business operations, become insolvent, called a meeting of
its creditors for the purpose of obtaining any financial concession or
accommodation, or had or suffered a receiver or a trustee to be appointed for
all or a significant portion of its assets or affairs; or
(e) the account debtor on such Account or any of its Affiliates is
also a supplier to or creditor of the Borrower except that the Bank in its
discretion may determine that only the amount of the Account equal to the
Borrower's payable shall be ineligible; or
(f) the sale represented by such Account is to an account debtor
outside the continental United States, unless the sale is on letter of credit or
acceptance terms acceptable to the Bank, in its discretion; or
(g) the sale to such account debtor on such Account is on a ▇▇▇▇-on-
hold, guaranteed sale, sale-and-return, sale-on-approval or consignment basis;
or
11
(h) such Account is subject to a Lien in favor of any Person other
than the Bank; or
(i) such Account is subject to any deduction, offset, counterclaim,
return privilege or other conditions; or
(j) the sale represented by such Account is denominated in other than
United States dollars; or
(k) the Bank believes, in its discretion, that the collection of such
Account is insecure or that such Account may not be paid, or otherwise deems the
Account ineligible; or
(l) such Account is not evidenced by an invoice or other writing in
form acceptable to the Bank, in its discretion; or
(m) the Borrower, in order to be entitled to collect such Account, is
required to perform any additional service for, or perform or incur any
additional obligation to, the Person to whom or to which it was made; or
(n) the account debtor on such Account has not been notified in
writing, acknowledged by such account debtor, in form and substance satisfactory
to the Bank, to the effect that such Account has been assigned to the Bank and
that all remittances of such account debtor with respect to such Account are to
be deposited in the Blocked Account without offset or counterclaim; or
(o) Accounts of such account debtor represent more than 15% of the
Eligible Receivables at such time;
provided further, however, that any receivable (i) due to Crysen Refining, Inc
-------- ------- -------
and/or Sound Refining, Inc. and (ii) purchased by the Borrower shall not be an
Eligible Receivable on or after March 1, 1998.
"Environmental Laws" means all federal, state and local laws,
------------------
statutes, ordinances and regulations, now or
12
hereafter in effect, and in each case as amended or supplemented from time to
time, and any judicial or administrative interpretation thereof, including,
without limitation, any judicial or administrative order, consent decree or
judgment relating to the regulation and protection of human health, safety, the
environment or natural resources (including, without limitation, ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include but
are not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. (S) 9601 et seq.) ("CERCLA"); the
-- ---
Hazardous Materials Transportation Act, as amended (49 U.S.C. (S) 1801 et seq.)
-- ---
Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S)
136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C.
-- ---
(S) 6901 et seq.) ("RCRA"); the Toxic Substances Control Act, as amended (15
-- ---
U.S.C. (S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S) 7401 et
-- --- --
seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. (S) 1251
---
et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. (S) 651
-- ---
et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f et
-- --- --
seq.), and their state and local counterparts or equivalents and any transfer of
---
ownership notification or approval statute, including, without limitation, the
New Jersey Environmental Cleanup Responsibility Act (N.J. Stat. ▇▇▇. (S) 13:1K-6
et seq.) ("ECRA").
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"Environmental Liabilities and Costs" means, as to any Person, all
-----------------------------------
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including, without
limitation, any thereof arising under any Environmental Law, Permit, order or
agreement with any Governmental Authority or other Person,
13
and which relate to any environmental, health or safety condition, or a Release
or threatened Release, and result from the past, present or future operations
of, or ownership of property by, such Person or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
-----
any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with any Loan Party or any of its
Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) a Reportable Event with respect to a Title IV
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Plan or a Multiemployer Plan; (ii) the withdrawal of any Loan Party, any of its
Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer, as defined
in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of any
Loan Party, any of its Subsidiaries or any ERISA Affiliate from any
Multiemployer Plan; (iv) the filing of a notice of intent to terminate a Title
IV Plan or the treatment of a plan amendment as a termination under Section 4041
of ERISA; (v) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (vi) the failure to make any required
contribution to a Qualified Plan; (vii) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or Multiemployer Plan or the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA; (viii) a prohibited transaction (as described in Section 4975 of the Code
or Section 406 of ERISA) shall occur with respect to any Plan; or (ix) the
Borrower or
14
ERISA Affiliate shall request a minimum funding waiver from the IRS with respect
to any Pension Plan.
"Event of Default" has the meaning specified in Section 8.1.
----------------
"Fiscal Quarter" means each of the three month periods ending on the
--------------
last calendar day of March 31, June 30, September 30, and December 31.
"Fiscal Year" means the twelve month period ending on December 31.
-----------
"Fixed Asset Allocation" means an amount determined by the Bank, in
----------------------
its sole discretion but in no event greater than $2,000,000, of the reasonable
value of real property and/or fixed assets of the Borrower in which the Bank has
a fully perfected exclusive and first priority security interest and any notes
due to the Borrower secured by real property in which the Bank has assignment
and possession of the note and the underlying first priority mortgage; provided
--------
however, that in the event of any repayment or prepayment of the Fixed Asset
-------
Allocation, including without limitation, from payment on the Sound Note,
availability under this Fixed Asset Allocation shall be immediately and
permanently reduced by the amount repaid or prepaid.
"Fixed Asset Allocation/Capital Expenditures Portion Availability Fee"
--------------------------------------------------------------------
has the meaning specified in section 2.3(c).
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board.
"General Release" means the agreement, in substantially the form of
---------------
Exhibit J.
15
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance, material or waste which is
------------------
regulated by any Governmental Authority of the United States or other national
government, including, without limitation, any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Hedging Account" has the meaning specified in the Security Agreement
---------------
"Improvements" has the meaning specified in Section 4.13(d).
------------
"Indebtedness" of any Person means (i) all indebtedness of such Person
------------
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services, (ii) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (iv) all Capitalized
Lease Obligations of such Person, (v) all Indebtedness of others guarantied by
such Person, and (vi) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any Stock or Stock Equivalent of
such Person, valued, in the
16
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends.
"Indemnitee" has the meaning specified in Section 9.4.
----------
"Inventory" has the meaning specified in the Security Agreement.
---------
"Investment" has the meaning specified in Section 7.5.
----------
"IRS" means the Internal Revenue Service, or any successor thereto.
---
"Leases" means, with respect to the Borrower, all of those leasehold
------
estates in real property owned or hereafter acquired by the Borrower or any of
its Subsidiaries, as lessee, as such may be amended, supplemented or otherwise
modified from time to time to the extent permitted by this Agreement.
"Lending Office" means the address of the Bank as specified in and
--------------
subject to the conditions of Section 9.2.
"Letter of Credit" means, any letter of credit issued for the account
----------------
of the Borrower by the Bank pursuant to Section 2.13.
"Letter of Credit Obligations" means, at any time, all liabilities at
----------------------------
such time of the Borrower to the Bank with respect to Letters of Credit, whether
or not any such liability is contingent, and includes the sum of (i) the portion
of the Reimbursement Obligations at such time applicable to any Letter of Credit
and (ii) the Letter of Credit Undrawn Amounts at such time.
"Letter of Credit Request" has the meaning specified in Section
------------------------
2.13(c).
17
"Letter of Credit Undrawn Amounts" means, at any time, the aggregate
--------------------------------
undrawn face amount of all Letters of Credit outstanding at such time.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor.
"Loans" means a loan made pursuant to Section 2.1.
-----
"Loan Documents" means, collectively, this Agreement, the Note, the
--------------
Resources/Production Capital Markets Transaction Letter, any Nondisturbance
Agreement, and the Collateral Documents.
"Loan Party" means the Borrower; provided however that so long as
---------- -------- -------
Resources and/or Production has any Obligation to the Bank, including, without
limitation, under the Pledge Agreement and the Resources/Production Capital
Markets Transaction Letter, they shall constitute Loan Parties hereunder and
under the Loan Documents.
"Material Adverse Change" means a material adverse change in any of
-----------------------
(i) the condition (financial or otherwise), business, assets, performance,
prospects, projections, operations or properties of any Loan Party or any Loan
Party and its Subsidiaries taken as one enterprise, (ii) the legality, validity
or enforceability of any Loan Document, (iii) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, (iv) the ability of the
Borrower to repay the Obligations or of any Loan Party
18
to perform its obligations under any Loan Document, or (v) the rights and
remedies of the Bank under the Loan Documents.
"Material Adverse Effect" means an effect that could result in a
-----------------------
Material Adverse Change.
"Maximum Position Limits" means the limits set forth below as the
-----------------------
maximum position (defined as the maximum quantities, in U.S. barrels, which, at
a fixed price, Borrower either owns or has committed to own (a "long" position)
or has sold or committed to sell (a "short" position)) which Borrower may hold
at anytime:
(a) for crude oil and petroleum products, the maximum net open
position shall not exceed 100,000 barrels at any given time.
"Mortgages" means the mortgages or deeds of trust (including the
---------
Deed of Trust) made or required herein to be made by the Borrower in
substantially the form of Exhibit F-1 as such Mortgages may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, and to which any Loan Party, any of its Subsidiaries or any
ERISA Affiliate is making, is obligated to make, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Nondisturbance Agreement" shall mean an agreement, in form and
------------------------
substance acceptable to the Bank, including the SJCC Nondisturbance Agreement,
upon which the any bailee, warehousemen or other Person holding or storing
Collateral recognizes the Bank's Liens and agrees not to disturb the Bank's
Collateral.
"Note" means a promissory note of the Borrower payable to the order
----
of the Lender in a principal amount equal to the amount of such Lender's
Commitment, in substantially the form of Exhibit A, evidencing the
19
aggregate Indebtedness of the Borrower to such Lender resulting from the Loans
made by the Lender.
"Notice of Borrowing" has the meaning specified in Section 2.2.
-------------------
"Obligations" means the Loans, the Letter of Credit Obligations, and
-----------
all other advances, debts, liabilities, obligations, covenants and duties owing
by the Borrower or any Loan Party or any Indemnitee to the Bank, of every type
and description, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement or under any other
Loan Document or otherwise, whether or not for the payment of money, loan,
guaranty, indemnification, foreign exchange transaction or interest rate
contract or in any other manner, whether direct or indirect (including, without
limitation, those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
"Obligations" includes, without limitation, all interest, charges, expenses,
fees, attorneys' fees and disbursements and any other sum chargeable to the
Borrower under this Agreement or any other Loan Document.
"Other Taxes" has the meaning specified in Section 2.12(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Pension Plan" means an employee pension benefit plan, as defined in
------------
Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which any
Loan Party, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permit" means any permit, approval, authorization, license,
------
variance or permission required from a
20
Governmental Authority under an applicable law, rule, regulation or other
requirement of law.
"Permitted Bank Accounts" has the meaning specified in Section 7.10.
-----------------------
"Person" means an individual, partnership, corporation (including,
------
without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
----
ERISA, which any Loan Party, or any of its Subsidiaries maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any of them.
"Pledge Agreement" means an agreement, in substantially the form of
----------------
Exhibit E, executed by Resources, as such agreement may be amended, supplemented
or modified from time to time.
"Pre-Approved Eligible Receivables" shall mean any Eligible
---------------------------------
Receivable in which the Lender has a valid and exclusive first security
interest, from any entity listed on the schedule of pre-approved obligors
("Schedule I"); provided however, that to the extent the aggregate Eligible
-------- -------
Receivables from a single obligor listed on Schedule I exceeds the credit limit
allowed to such obligor, such excess shall be excluded from the calculation of
Pre-Approved Eligible Receivables.
"Prime Rate" means a fluctuating rate of interest per annum equal to
----------
the interest rate most recently publicly announced from time to time by The
Chase Manhattan Bank in New York, New York as its base rate or equivalent
commercial lending rate; provided, however, that if The Chase Manhattan Bank
-------- -------
shall cease to so announce its base rate, the fluctuating interest rate per
annum announced publicly by Citibank, N.A. in New York as its prime rate and if
Citibank, N.A. shall cease to so announce its prime rate,
21
then the highest rate published from time to time as the "Prime Rate" in The
Wall Street Journal.
"Production" means Inland Production Company.
----------
"Qualified Plan" means an employee pension benefit plan, as defined
--------------
in Section 3(2) of ERISA, which is intended to be tax-qualified under Section
401(a) of the Code, and which any Loan Party, any of its Subsidiaries or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Real Estate" means all of those plots, pieces or parcels of land now
-----------
owned or hereafter acquired by the Borrower or any of its Subsidiaries (the
"Land"), including, without limitation, those listed on Schedule 4.13(a)(ii) and
described in the Mortgages, together with the right, title and interest of the
Borrower, if any, in and to the streets, the land lying in the bed of any
streets, roads or avenues, opened or proposed, in front of, adjoining or
abutting the Land to the center line thereof, the air space and development
rights pertaining to the Land and the right to use such air space and
development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and any fixtures appurtenant thereto.
"Real Property" has the meaning specified in Section 4.13(c).
-------------
"Reimbursement Obligations" means all matured reimbursement or
-------------------------
repayment obligations of the Borrower to the Bank with respect to Letters of
Credit.
22
"Reduction Schedule" means for the period set forth below the Amount
------------------
Available set forth thereto, subject to the Approved Capital Expenditures budget
as set forth on Schedule 2.16:
Period: Amount Available:
4/1/98 - 6/30/98 $2,000,000
7/1/98 - 9/30/98 $1,333,334
10/1/98 - 12/30/98 $ 666,666
12/31/98 $ 0
"Related Documents" means, each Subordinated Debt Agreement, the
-----------------
Acquisition Agreement and each other document and instrument executed with
respect to the Subordinated Debt, the Acquisition and the equity of Resources in
the Borrower.
"Release" means, as to any Person, any release, spill, emission,
-------
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration, in each case of any Contaminant, into the indoor or outdoor
environment or into or out of any property owned by such Person, including,
without limitation, the movement of Contaminants through or in the air, soil,
surface water, ground water or property.
"Remedial Action" means all actions, including without limitation any
---------------
Capital Expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment, (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment, or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care; or (iv) bring facilities on any property owned, leased or
operated by the Borrower or any of its Subsidiaries into compliance with all
Environmental Laws and Environmental Permits.
23
"Reportable Event" means any of the events described in Section
----------------
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules and regulations, including,
without limitation, federal, state or local securities, antitrust and licensing
laws, any federal, state or local laws or regulations concerning physicians,
nurses and psychologists, all food, health and safety laws, and all applicable
trade laws and requirements, including, without limitation, all disclosure
requirements of Environmental Laws, ERISA and all orders, judgments, decrees or
other determinations of any Governmental Authority or arbitrator, applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Resources" means Inland Resources Inc.
---------
"Resources/Production" means Resources and Production collectively.
--------------------
"Resources/Production Capital Markets Transaction Letter" shall have
-------------------------------------------------------
the meaning set forth in Section 3.2(r) hereof.
"Responsible Officer" means, with respect to any Person, any of the
-------------------
principal executive officers of such Person.
"SJCC" means San Jacinto Carbon Company.
----
"SJCC Nondisturbance Agreement" shall have the meaning set forth in
-----------------------------
Section 3.2 hereof.
"Security Agreement" means an agreement in substantially the form of
------------------
Exhibit I, executed by the Borrower, as such agreement may be amended,
supplemented or modified from time to time.
24
"Solvent" means, with respect to any Person, that the value of the
-------
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Sound Note" means a promissory note of SJCC, the buyer of the fixed
----------
assets and real property of Sound Refining, Inc., payable to the order of the
Borrower evidencing the aggregate Indebtedness of SJCC to the Borrower resulting
from the assumption of Indebtedness by SJCC in the amount of the purchase price
of the fixed assets, which promissory note shall be amended and restated and
endorsed and delivered by Borrower to the order of the Bank. For purposes of
this Agreement, the definition of Sound Note shall include any collateral
documents for property securing the Sound Note.
"Specified Proceeds" means all (i) cash proceeds received by or on
------------------
behalf of the Borrower or Subsidiary of the Borrower received in respect of any
suit, action, litigation, investigation or proceeding, pending or threatened,
before any court, Governmental Authority or arbitrator, (ii) proceeds of any and
all tax refunds received by the Borrower and Subsidiary of the Borrower and
(iii) all life, casualty or other insurance proceeds received by the Borrower or
any Subsidiary of the Borrower.
"Stock" means shares of capital stock, beneficial or partnership
-----
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or
25
non-voting, and includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
-----------------
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.
"Subordinated Debt" means any debt subordinated to the Bank and
-----------------
subject to the approval of the Bank.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership or other business entity of which an aggregate of 50% or more of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors, managers, trustees or other controlling persons, is, at the time,
directly or indirectly, owned or controlled by such Person and/or one or more
Subsidiaries of such Person (irrespective of whether, at the time, Stock of any
other class or classes of such entity shall have or might have voting power by
reason of the happening of any contingency).
"Tangible Capital Base" means, as to any Person, the sum of its
---------------------
Tangible Net Worth plus any Subordinated Debt.
"Tangible Net Worth" means (i) total assets (including, without
------------------
limitation, the Sound Note but excluding any other promissory notes made in
favor of the Borrower (x) in an amount equal to the then outstanding amount
thereof and (y) only if there is no Default with respect to the Sound Note) less
(ii) total "liabilities" excluding (a) all Subordinated Debt and (b) any
promissory notes or any other evidence of Indebtedness of the Borrower, except
that there shall be excluded therefrom all intangible assets, including, but
without limitation, organizational expenses, patents, trademarks, copyrights,
goodwill, covenants not to compete, research and development costs, training
costs, treasury stock and all unamortized debt discount, and deferred charges.
For the purposes of this definition
26
"assets" and liabilities" shall be determined in accordance with Generally
Acceptable Accounting Principles.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
-------------
Person, and (ii) any Affiliate of such Person with which such Person files or is
eligible to file consolidated, combined or unitary tax returns.
"Taxes" has the meaning specified in Section 2.12(a).
-----
"Tax Return" has the meaning specified in Section 4.3.
----------
"Termination Date" means the earliest of (i) December 31, 1997, unless
----------------
the Effective Date occurs on or prior thereto, (ii) January 29, 1999, (iii) the
repayment in full of the Loans and (iv) the date of termination in whole of the
Commitments pursuant to Section 2.5 or 8.2 if prior to January 29, 1999.
"Title Insurance Policies" has the meaning specified in Section
------------------------
3.1(h)(i).
"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan,
-------------
which is covered by Title IV of ERISA.
"Unfunded Pension Liability" means, as to any Loan Party at any time,
--------------------------
the aggregate amount, if any, of the sum of (i) the amount by which the present
value of all accrued benefits under each Title IV Plan of such Loan Party, any
of its Subsidiaries or any ERISA Affiliate exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan, and (ii) for a period of five years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by any Loan Party, any of its Subsidiaries or any
ERISA Affiliate as a result of such transaction.
27
"Welfare Benefit Plan" means an employee welfare benefit plan, as
--------------------
defined in Section 3(1) of ERISA, to which any Loan Party or any of its
Subsidiaries maintains, contributes to, contributed to within the six year
period prior to the Effective Date, or has an obligation to contribute to, on
behalf of its former or active employees (or their beneficiaries).
"Withdrawal Liability" means, as to any Loan Party at any time, the
--------------------
aggregate amount of the liabilities of any Loan Party, any of its Subsidiaries
or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any increase in
contributions required to be made pursuant to Section 4243 of ERISA, with
respect to all Multiemployer Plans.
"▇▇▇▇▇ Cross Refinery" means the refinery of Crysen Refining, Inc.
--------------------
located in ▇▇▇▇▇ Cross, Utah to be acquired by the Borrower pursuant to the
Acquisition.
1.2. Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Loans. On the terms and subject to the conditions contained
---------
in this Agreement, the Bank agrees to make loans (each a "Loan") to the Borrower
from time to time on any Business Day during the period from the date hereof
until the Business Day immediately preceding the Termination Date in an
aggregate amount not to exceed at any time outstanding the Lender's Commitment;
provided, however, that at no time shall the Bank be obligated to make Loans in
-------- -------
an aggregate amount to exceed $16,500,000 outstanding at any time on or prior to
April 1, 1998 or $8,000,000 thereafter, including Loans (at any time) of an
aggregate amount not to exceed $2,000,000 either for the Fixed Asset Allocation
or Capital Expenditures Portion, provided further, however,
-------- ------- -------
28
that at no time shall the Bank be obligated to make a Loan to the Borrower in
excess of the Availability. All Loans and Letters of Credit shall be used solely
for the purposes provided for in Section 2.16 of this Agreement. Within the
limits of the Bank's Commitments, amounts repaid from time to time under the
Loans may be reborrowed under this Section 2.1 (except to the extent that such
reborrowing is not permitted as provided for in this Agreement). The Loans shall
be evidenced by the Note to the order of the Bank.
2.2. Making the Loans. (a) Each Loan shall be made on notice, given
----------------
by the Borrower to the Bank not later than 12:00 noon (New York City time) on
the Business Day of the proposed Loan borrowing. Each such notice (a "Notice of
Borrowing") shall be in substantially the form of Exhibit B and shall be
accompanied by the supporting documentation required thereby.
2.3. Fees. (a) The Borrower agrees to pay to the Bank a fee (the
----
"Commitment Fee") on the average daily unused portion of the Commitment from the
--------------
date hereof until the Termination Date at the rate of 1/2 of 1% per annum,
payable (i) monthly in arrears on the first Business Day of each month for the
preceding month, (ii) on the date of any reduction of the Commitment pursuant to
Section 2.4 and (iii) on the Termination Date.
(b) The Borrower agrees to pay to the Bank a fee (the "Closing Fee")
-----------
in an amount equal to $123,750, fully earned and nonrefundable, due and payable
within fifteen (15) days of the Closing Date.
(c) The Borrower agrees to pay to the Bank a fee (the "Fixed Asset
-----------
Allocation/Capital Expenditures Portion Availability Fee") in an amount equal to
--------------------------------------------------------
$30,000, fully earned and nonrefundable, due and payable within fifteen (15)
days of the Closing Date.
(d) The Borrower agrees to pay to the Bank a fee (the
"Administration Fee"), payable monthly in arrears on the first Business Day of
------------------
each month for the preceding month, in an amount equal to $5,000 per month,
provided that
29
such amount shall be reduced to $2,000 per month upon the full and permanent
repayment of all borrowings under the Fixed Asset Allocation and the Capital
Expenditures Portion.
2.4. Reduction of the Commitments. (a) The Borrower may, upon at
----------------------------
least three Business Days' prior written notice to the Bank, terminate in whole
or reduce in part the unused portions of the Commitment; provided, however, that
-------- -------
each partial reduction shall be in the aggregate amount of not less than
$1,000,000; or an integral multiple of $500,000 in excess thereof; provided,
--------
further that simultaneously with such reduction the Borrower shall make any
-------
repayments required pursuant to Section 2.5.
(b) Upon any mandatory prepayment pursuant to Section 2.6 hereof,
the Commitment shall automatically reduce by the principal amount of such
mandatory prepayment.
2.5. Repayment. (a) The Borrower shall repay on or prior to the
---------
Termination Date (i) the entire unpaid principal amount of the Loans and (ii)
any amounts drawn under a Letter of Credit; provided however, the entire unpaid
-------- -------
principal amount of the Loans together with accrued and unpaid interest,
charges, expenses and other fees, attributed to a borrowing of the Fixed Asset
Allocation shall, subject to any Mandatory Prepayments (provided for in Section
2.6), be repaid on or before April 1, 1998.
(b) All immediately available funds in the Concentration Account of
the Borrower shall be applied on the date on which they are first immediately
available, to any accrued but unpaid fees owing from the Borrower, next to the
accrued and unpaid interest on the Loans, and next, to the outstanding principal
amount of any outstanding Reimbursement Obligations of the Borrower, and next to
the Loans of the Borrower, and, if no Loans of the Borrower are then
outstanding, then such funds are to be used to cash collateralize the Letter of
Credit Obligations of the Borrower then outstanding. Notwithstanding anything to
the contrary contained herein, if an Event of Default has occurred and is
continuing, the Bank shall have the exclusive right to revise and reapply the
foregoing to any
30
of the Obligations in whatever order the Bank deems appropriate any and all
proceeds thereafter or theretofore received in or from the Concentration
Account.
2.6. Mandatory Prepayments. (a) The Borrower shall forthwith prepay
---------------------
the Loan, without premium or penalty, but without limiting the provisions of
Section 2.9, upon receipt by the Borrower or any Subsidiary of the Borrower of
Asset Sale Proceeds in an amount equal to such Asset Sale Proceeds, together
with accrued interest to the date of such prepayment on the principal amount
prepaid, except to the extent that the Bank in its discretion consents, in
writing, to the Borrower's reinvestment of all or a portion of such Asset Sale
Proceeds in the Borrower's business. The Borrower shall forthwith prepay any
amount arising from the payment of accounts receivables or the sale of inventory
related to the assets acquired from Sound Refining, Inc. and thereby permanently
reduce the Availability by such amount.
(b) If at any time either (i) the sum of the aggregate principal
amount of Loans made to the Borrower and Letter of Credit Obligations of the
Borrower outstanding at such time exceeds the then applicable Commitment
(including any sublimits on Loans as provided for in the definition of the
Commitment), (ii) the sum of the Loans made to the Borrower and the Letter of
Credit Obligations of the Borrower outstanding at such time exceeds the then
applicable Borrowing Base, or (iii) the sum of the Loans made to the Borrower
under the Capital Expenditures Portion outstanding at such time exceeds the then
applicable "Amount Available" as set forth in the Reduction Schedule, the
Borrower shall forthwith repay the Loans then outstanding in an amount equal to
such excess, together with accrued interest, and if no Loans are then
outstanding, the Borrower shall cash collateralize such excess by paying to the
Bank immediately available funds in the amount of such excess for deposit in the
Cash Collateral Account referred to in Section 8.3, which funds shall be
maintained in the Cash Collateral Account in accordance with the provisions of
Section 8.3 as long as and to the extent that the Letter of Credit Obligations
exceed the Commitments.
31
(c) The Borrower shall forthwith prepay any amount received from the
repayment of any note due to the Borrower including, without limitation, the
Sound Note, and such amount shall be applied first, to repay the Loans
attributed to a borrowing of the Fixed Asset Allocation or the Capital
Expenditures Portion and second, to prepay any outstanding Loans.
(d) Any proceeds from any Capital Markets Transaction will be used
as a mandatory prepayment and permanently reduce the Availability in the amount
of the prepayment (i) first to prepay the Fixed Asset Allocation, (ii) then to
prepay the amounts pursuant to Section 2.6(b) and (iii) finally, to prepay any
outstanding Loans under the Capital Expenditures Portion.
(e) The Borrower shall forthwith prepay the Loans, without premium
or penalty, but without limiting the provisions of Section 2.9, upon receipt of
Specified Proceeds in an amount equal to such Specified Proceeds, together with
accrued interest to the date of such prepayment on the principal amount prepaid.
(f) Amounts prepaid pursuant to this Section 2.6 and to Section 2.5
may not be reborrowed except for Loans relating to the Capital Expenditures
Portion to the extent of any "Amount Available" as set forth in the Reduction
Schedule.
2.7. Optional Prepayments. The Borrower may, at any time, upon at
--------------------
least one Business Day's prior notice to the Bank, prepay the outstanding
principal amount of the Loans, in whole or in part, without premium or penalty,
together with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid; provided however, that any such partial prepayment
-------- -------
shall be applied to accrued an unpaid fees owing by Borrower, next to accrued
and unpaid interest on the Loans, and next to the outstanding principal amount
of the Loans in reverse order of borrowing.
32
2.8. Interest. The Borrower shall pay interest on the unpaid
--------
principal amount of each Loan and Reimbursement Obligation from the date hereof
until the principal amount thereof shall be paid in full, at a rate per annum
equal at all times to the Prime Rate in effect from time to time, payable
monthly in arrears on the first day of each month for the preceding month and on
the date the Loans are paid in full, whether at maturity, by acceleration or
otherwise; provided that during the continuance of an Event of Default, the
--------
principal amount of the Obligations shall bear interest, payable on demand, at a
rate per annum at all times equal to 2% per annum above the Prime Rate in effect
from time to time.
2.9. Increased Costs. If, due to either (i) the introduction of or
---------------
any change in or in the interpretation of any law or regulation (other than any
change by way of imposition or increase of reserve requirements, or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase (other than a tax on the net income of Bank or franchise taxes
imposed on Bank) in the cost to the Bank of making, funding, issuing or
maintaining, any Loan or Letter of Credit or any reduction in any amount
receivable by the Bank hereunder or otherwise as a result of the Bank's
obligations under this Agreement then the Borrower agrees to pay from time to
time, upon demand by the Bank additional amounts sufficient to compensate the
Bank for such increased cost.
2.10. Capital Adequacy. If (i) the introduction of or any change in
----------------
or in the interpretation of any law or regulation, (ii) compliance with any law
or regulation, or (iii) compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and the Bank
reasonably determines that such amount is based upon the existence of the
Commitment, the Loans, Letters of Credit, or its other obligations hereunder,
and commitments in respect thereof then, upon demand by the Bank, the Borrower
33
shall pay to the Bank, from time to time as specified by the Bank, additional
amounts sufficient to compensate the Bank in the light of such circumstances. A
certificate as to such amounts submitted to the Borrower by the Bank shall be
conclusive and binding for all purposes absent manifest error.
2.11. Payments and Computations. (a) The Borrower agrees to make
-------------------------
each payment hereunder and under the Note not later than 12:00 noon (New York
City time) on the day when due, in United States Dollars, to the Bank at its
address referred to in Section 9.2 in immediately available funds without set-
off or counterclaim. Payment received by the Bank after 12:00 noon (New York
City time) shall be deemed to be received on the next Business Day.
(b) The Borrower hereby authorizes the Bank, if and to the extent
any payment owed to the Bank is not made when due hereunder or under any Loan or
Reimbursement Obligation held by the Bank, to charge from time to time against
any or all of the Borrower's accounts with the Bank any amount so due.
(c) All computations of interest and of fees shall be made by the
Bank on the basis of a year of 360 days for the actual number of days (including
the first day but excluding the last day) occurring in the period for which such
interest and fees are payable.
(d) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be.
2.12. Taxes. (a) Any and all payments by the Borrower under each
-----
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of the Bank, taxes measured by its
34
net income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which the Bank is organized or any political subdivision thereof, and
taxes measured by its net income, and franchise taxes imposed on it by the
jurisdiction of its Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Bank (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including, without limitation,
deductions applicable to additional sums payable under this Section 2.12) the
Bank receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law, and (iv) the Borrower shall
deliver to the Bank evidence of such payment to the relevant taxation or other
authority.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made under any Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower will indemnify the Bank for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12) paid by
the Bank and any liability (including, without limitation, for penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Bank makes
written demand therefor.
35
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Bank, at its address referred to in
Section 9.2, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.12 shall survive the payment in full of the Obligations.
2.13. Letter of Credit Facility. (a) On the terms and subject to the
-------------------------
conditions contained in this Agreement, the Bank shall issue one or more Letters
of Credit at the request of the Borrower for the account of the Borrower from
time to time during the period commencing on the Effective Date and ending 30
days prior to the Termination Date. The Letter of Credit Obligations shall be
evidenced by the Note.
(b) In no event shall:
(i) the amount of any requested Letter of Credit exceed the
Availability with respect to the Borrower; and
(ii) the expiration date of any Letter of Credit be more than
90 days after the date of issuance thereof, (unless otherwise agreed to by
the Lender) nor shall the expiration date of any Letter of Credit fall
after 30 Business Days preceding the Termination Date.
(c) In connection with the issuance of each Letter of Credit, the
Borrower shall give the Bank at least one Business Day's prior written notice (a
"Letter of Credit Request"), in substantially the form of Exhibit D, of the
requested issuance of such Letter of Credit. Such notice shall be irrevocable
and shall specify the stated amount of the Letter of Credit requested, the date
of issuance of such requested Letter of Credit (which day shall be a Business
Day), the date on which such Letter of Credit is to expire (which date shall be
a Business Day), the Person for whose
36
benefit the requested Letter of Credit is to be issued and such other documents
and information as may be required by the Bank from time to time. Such notice,
to be effective, must be received by the Bank not later than 12:00 noon (New
York City time) on the last Business Day on which notice can be given under the
immediately preceding sentence.
(d) Subject to the terms and conditions of this Section 2.13 and
provided that the applicable conditions set forth in Article III are satisfied,
the Bank shall, on the requested date, issue a Letter of Credit on behalf of the
Borrower in accordance with the Bank's usual and customary business practices.
(e) The Borrower shall pay to the Bank the amount of all
Reimbursement Obligations owing to the Bank under any Letter of Credit
immediately when due, irrespective of any claim, set-off, defense or other right
which the Borrower may have at any time against the Bank or any other Person.
The Borrower shall reimburse the Bank upon demand for all amounts which the Bank
pays under such Letter of Credit.
(f) Any action, inaction or omission on the part of the Bank or any
of its correspondents or agents, under or in connection with any Letter of
Credit or renewal or extension thereof or the related instruments, documents or
property, shall be binding upon the Borrower and shall not place the Bank or any
of its correspondents under any liability to the Borrower, in the absence of
gross negligence or willful misconduct by the Bank. The rights, powers,
privileges and immunities of the Bank and its correspondents specified in or
arising under this Agreement are in addition to any heretofore or at any time
hereafter otherwise created or arising, whether by statute, rule of law or
contract.
(g) The Borrower shall pay the following amounts with respect to
Letters of Credit issued by the Bank for the account of the Borrower:
(i) with respect to each Letter of Credit, an administrative
fee equal to 0.25% per quarter or
37
part thereof of the maximum amount available from time to time to be drawn
under such Letter of Credit, subject to a minimum of $750 per Letter of
Credit, payable upon the issuance of such Letter of Credit and calculated
on the basis of a 360-day year and the actual number of days elapsed; and
(ii) with respect to the issuance, amendment, renewal,
extension, increase or transfer of each Letter of Credit and each drawing
made thereunder, documentary, communication and processing charges in
accordance with the Bank's then current standard practices for such charges
in effect at time of issuance, amendment, renewal, extension, increase or
transfer, as the case may be.
2.14. Cash Management System. Commencing on the Effective Date and
----------------------
for so long as any Obligations are outstanding, the Borrower shall deposit on
the date of receipt thereof or cause to be deposited directly all cash, checks,
notes, drafts or other similar items of payment relating to or constituting
payments made by the Borrower's account debtors in respect of any and all
Accounts, and any and all funds received from any other source, into the lockbox
accounts established and maintained by the Borrower with ▇▇▇▇▇ Fargo Bank,
N.A./Regulus West LLC (each, a "Blocked Account"). All amounts deposited in each
Blocked Account, shall, no later than 12:00 noon on the same day as such funds
shall have been cleared, be deposited via wire transfer, in immediately
available funds, into the Borrower's concentration account in immediately
available funds directly to, Bankers Trust Company, New York, New York, A.B.A.
No. 021001033, for the account of: Banque Paribas New York ▇▇-▇▇▇-▇▇▇ for
further credit to Inland Refining Depositary Account No. 4311846828 (the
"Concentration Account").
---------------------
2.15. Nature of Obligations. The Borrower hereby agrees that it shall
---------------------
be liable for all Obligations and that such liability shall be absolute and
unconditional irrespective of:
38
(i) any lack of validity or enforceability of any provision
of this Agreement, any other Loan Document or any other agreement or
instrument relating to this Agreement or any other Loan Document, or
avoidance or subordination of any of the Obligations;
(ii) any change in the time, manner or place of payment of, or
in any other term of, or any increase in the amount of, all or any of the
Obligations, or any other amendment or waiver of any term of, or any
consent to departure from any requirement of, the Agreement, the Note or
any of the other Loan Documents;
(iii) any exchange, release or non-perfection of any Lien on
any collateral for, or any release or amendment or waiver of any term of
any other guaranty of, or any consent to departure from any requirement of
any other guaranty of, all or any of the Obligations;
(iv) the absence of any attempt to collect any of the
Obligations from the Borrower or from any Loan Party or any other guarantor
or any other action to enforce the same or the election of any remedy by
the Bank;
(v) any waiver, consent, extension, forbearance or granting
of any indulgence by the Bank with respect to any provision of this
Agreement or any other Loan Document;
(vi) the election by the Bank in any proceeding under chapter
11 of the Bankruptcy Code of the application of section 1111(b)(2) of the
Bankruptcy Code;
(vii) any borrowing or grant of a security interest by the
Borrower, as debtor-in-possession, under section 364 of the Bankruptcy
Code;
39
(viii) the disallowance, under section 502 of the Bankruptcy
Code, of all or any portion of the claims of the Bank for payment of any of
the Obligations; or
(ix) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a borrower or a guarantor.
2.16. Use of Proceeds. The Borrower agrees that:
---------------
(i) the Loans made to the Borrower shall be used solely for
the purchase of working capital assets (but not the fixed assets) of Crysen
Refining, Inc. and Sound Refining, Inc., for the payment of Assumed
Accounts Payables (as defined in the Acquisition Agreement), and to
facilitate the purchase and transportation of crude oil and refined
petroleum products for the ▇▇▇▇▇ Cross Refinery and to fund working capital
requirements of the Borrower at the ▇▇▇▇▇ Cross Refinery in the ordinary
course of business and consistent with good and prudent business practice
not to exceed the amounts set forth in the business and financial plan
delivered to the Bank pursuant to Section 6.17(b) and such other purposes
approved from time to time by the Bank; and
(ii) the Letters of Credit issued for the account of the
Borrower shall be used solely to secure payments (x) to suppliers of crude
oil and related petroleum products to the Borrower for the ▇▇▇▇▇ Cross
Refinery and (y) to state taxing authorities in lieu of the requirement of
maintaining a cash deposit as a required bond for the payment of product
excise taxes; and
(iii) Loans attributed to a borrowing of the Fixed Asset
Allocation may be used solely to fund a portion of the purchase price for
the working capital assets of Crysen Refining, Inc. and Sound Refining,
Inc. and may be used for Approved Capital Expenditures. Solely upon the
full and timely repayment of the
40
borrowings attributed to the Fixed Asset Allocation as specified in section
2.5, the Borrower may thereafter request borrowings attributed to the
Capital Expenditures Portion subject to all the other terms and conditions
of this Agreement, provided that, such Loans are used only for Approved
-------- ----
Capital Expenditures and subject to the Schedule of Capital Expenditures as
set forth in Schedule 2.16.
ARTICLE III
CONDITIONS
3.1. Conditions to Effectiveness. This Agreement shall become
---------------------------
effective only upon the Bank's receipt, on or prior to the Effective Date, of
the following, each dated the Effective Date unless otherwise indicated, in form
and substance satisfactory to the Bank:
(a) The Note duly executed by the Borrower.
(b) Certified copies of the resolutions of the Board of Directors of
each Loan Party approving each Loan Document and other documents related thereto
to which it is a party.
(c) A copy of the articles or certificate of incorporation of each
Loan Party certified as of a recent date by the Secretary of State of the state
of incorporation of such Loan Party, together with certificates of such official
attesting to the good standing of each such Loan Party, and a copy of the
certificate of incorporation and the By-Laws of each Loan Party certified as of
the Effective Date by the Secretary or an Assistant Secretary of such Loan
Party.
(d) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of each officer of such Loan
Party who has been authorized to execute and deliver any Loan Document or other
document required hereunder to be executed and delivered by or on behalf of such
Loan Party.
41
(e) The Pledge Agreement, duly executed by the parties thereto,
together with:
(i) certificates representing the Pledged Shares (as defined
in the Pledge Agreement) and undated stock powers for such certificates
executed in blank; and
(ii) acknowledgment copies of proper Financing Statements (Form
UCC-1) duly filed under the Uniform Commercial Code of all jurisdictions as
may be necessary or, in the opinion of the Bank, desirable to perfect the
Lien created by such Agreements.
(f) The Security Agreement, duly executed by the Borrower, together
with:
(i) acknowledgment copies of proper Financing Statements
(Form UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of the Bank, desirable
to perfect the Lien created by the Security Agreement; and
(ii) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing the Financing Statements
referred to in paragraph (i) above and all other effective financing
statements which name the Borrower (under its present name or any previous
name) as debtor and which are filed in the jurisdictions referred to in
said paragraph (i) above, together with copies of such other financing
statements (none of which shall cover the Collateral purported to be
covered by the Security Agreement except as otherwise permitted by the Loan
Documents).
(g) [Intentionally Omitted]
(h) Duly executed acknowledgment letters, from each bailee,
warehousemen or other Person holding or storing
42
Collateral, each in substantially the form of Exhibit K, as well as any required
Nondisturbance Agreements.
(i) Duly executed and acknowledged Mortgages, for each parcel of the
Borrower's Real Estate specified on Schedule 4.13(a)(ii) and each Lease
specified on Schedule 4.13(b), together with:
(i) title insurance policies (the "Title Insurance Policies")
issued by a title company acceptable to the Bank, in such form and amounts
as are acceptable to the Bank, insuring that each such Mortgage is a valid
first priority Lien on the Real Estate or Lease, respectively, subject only
to such exceptions to title as shall be acceptable to the Bank in its sole
discretion and containing such endorsements and affirmative insurance as
the Bank may require and as are obtainable in the applicable jurisdiction,
and true copies of each document, instrument or certificate required by the
terms of each such policy and or Mortgage, to be, or have been, filed,
recorded, executed or delivered in connection therewith;
(ii) opinions satisfactory to the Bank of local counsel
retained by the Borrower with respect to the validity and enforceability of
the Mortgage and such other matters as may be reasonably required by the
Bank; and
(iii) duly executed UCC-1 Financing Statements under the
applicable Uniform Commercial Code to be filed in connection with the
Security Agreement, in form and substance satisfactory to the Bank, to
perfect the Lien created by the Security Agreement; and
(iv) proof of payment of all title insurance premiums,
documentary, stamp or intangible taxes, recording fees and mortgage taxes
payable in connection with the recording of any of the Loan
43
Documents or the issuance of the Title Insurance Policies.
(j) Favorable opinions of counsel to the Borrower and to
Resources/Production, local Utah counsel, in substantially the form of Exhibits
G-1 and G-2 respectively, and as to such other matters as the Bank may
reasonably request, including any additional legal opinions of counsel to the
Borrower, Resources and Production.
(k) the Assignment of Promissory Note duly executed by all parties
thereto.
(l) Such additional documents, information and materials as the Bank
may reasonably request, including any additional legal opinions of counsel to
the Borrower, Resources and Production.
3.2. Additional Conditions Precedent to Effectiveness. The
------------------------------------------------
effectiveness of this Agreement is subject to the further conditions precedent
that:
(a) The Bank shall have received copies of the certificates of
insurance evidencing the insurance coverage on the Inventory and Equipment (as
such term is defined in the Security Agreement), together with the appropriate
endorsements that name the Bank as an additional insured or loss payee.
(b) The Bank shall have received evidence, satisfactory to it, that
any and all Federal, state and local tax Liens on any Collateral have been
terminated.
(c) All costs and accrued and unpaid interest, fees and expenses
required to be paid to the Bank on or before the Effective Date, including,
without limitation, those referred to in Sections 2.3 and 9.4, to the extent
then due and payable, shall have been paid.
(d) The Acquisition shall have closed, or will close simultaneously
with the closing of this Agreement, in a manner satisfactory to the Bank.
(e) In connection with the sale of the fixed assets and real
property of Sound Refining, Inc. to SJCC,
44
(i) SJCC shall assume the existing Indebtedness of $1,500,000 and duly execute
the amendment and restatement thereof constituting the Sound Note evidencing the
Indebtedness to the Borrower, (ii) there shall be a first priority lien in the
collateral in favor of the Borrower, (iii) the Sound Note shall be endorsed to
the order of the Bank and delivered to the Bank, (iv) such transaction and the
documents thereto shall be in form and substance satisfactory to the Bank, (v)
in no event shall the Indebtedness represented by the Sound Note mature later
than June 30, 1999 and (vi) there shall be a duly executed agreement in form and
substance acceptable to the Bank and in substantially the form of Exhibit M,
upon which the buyer recognizes the Bank's Liens and agrees not to disturb the
Bank's Collateral (the "SJCC Nondisturbance Agreement").
(f) The Borrower shall be adequately capitalized with cash equity
and Subordinated Debt, if any, in amounts satisfactory to the Bank and the Bank
shall be otherwise satisfied with the Borrower's capital structure; provided,
--------
however, that such cash equity shall equal at least $9,250,000 on the Closing
-------
Date. Such amount together with the proceeds of the Loan and any debt of the
Borrower which is fully subordinated to Borrower's Obligations under this
Agreement must be sufficient to pay (and such amount will be used to pay) the
purchase price of the fixed assets to be purchased under the Acquisition
Agreement, to pay the difference between the value of the working capital assets
purchased from Crysen Refining, Inc. and the Availability under the Borrowing
Base with respect to such assets, to pay liabilities assumed under the
Acquisition Agreement and to assure sufficient cash cushion for projected
business, including projected Capital Expenditures.
(g) A subordination agreement in form and substance satisfactory to
the Bank for any debt provided by Affiliates.
(h) The Bank shall have completed its due diligence review and
obtained internal, credit committee approvals with results satisfactory to the
Bank.
45
(i) There shall exist no claim, action, suit, investigation,
litigation or proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality which relates to this Agreement or
which the Bank shall determine has a reasonable likelihood of having a Material
Adverse Effect on the condition (financial or otherwise), operations, business,
properties or prospects of the Borrower.
(j) No Material Adverse Change shall have occurred with respect to
the Borrower, Resources or Production.
(k) All extensions of credit made by the Bank shall be in full
compliance with all applicable requirements of law, including Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System.
(l) After giving effect to any extensions of credit to be made on
the Closing Date under this Agreement, no Default or Event of Default exists
under any of the Loan Documents and on the Closing Date the representations and
warranties of the Borrower therein shall be true and correct in all material
respects.
(m) The General Release, duly executed by the Borrower, Resources
and Production, in substantially the form of Exhibit J, whereby the Borrower,
Resources and Production, shall have released, discharged and held harmless the
Bank and its affiliates, officers, directors, employees and agents from all
claims, actions, losses and liabilities arising out of or in connection with all
prior dealings among any of the fore-going parties and shall have agreed that
the Bank makes no representation or warranty with respect to, and has no
obligations regarding, the Acquisition.
(n) The Bank shall be satisfied with the Borrower's financial and
management plans, projections, and systems.
46
(o) An opening balance sheet (giving effect to the Acquisition and
this Agreement) showing "solvency" on actual market value and "going concern"
bases and showing adequate capitalization certified by Borrower's chief
executive officer and chief financial officer.
(p) All documentation relating to this Agreement shall be in form
and substance satisfactory to the Bank and its counsel.
(q) All conditions set forth in the Consent have been satisfied to
the satisfaction of the Bank or waived by the Bank, including, without
limitation, the delivery of the Environmental Agreement referred to therein.
(r) A letter to the Bank from Resources, in form and substance
acceptable to the Bank and in substantially the form of Exhibit N, relating to a
Capital Markets Transaction (the "Resources/Production Capital Markets
------------------------------------
Transaction Letter").
------------------
3.3. Conditions Precedent to Each Credit Extension. The effectiveness
---------------------------------------------
of this Agreement, and the making of each Loan and the issuance of each Letter
of Credit shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such Loan
or issuance of such Letter of Credit, before and after giving effect thereto and
to the application of the proceeds of such Loan or such Letter of Credit shall
constitute a representation and warranty by the Borrower that on the date of
such Loan or Letter of Credit such statements are true):
(i) The representations and warranties of the Borrower
contained in Article IV and of each Loan Party in the other Loan Documents
are correct on and as of such date as though made on and as of such date;
and
47
(ii) No Default or Event of Default exists or will result from
the Loans being made or Letter of Credit being issued on such date.
(b) The Bank shall have received evidence satisfactory to it of the
Borrower's compliance with the Maximum Position Limits.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower
represents and warrants to the Bank that:
4.1. Corporate Existence; Compliance with Law. Each of the Loan
----------------------------------------
Parties (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where such qualification is necessary, except for failures which in
the aggregate have no Material Adverse Effect; (iii) has all requisite corporate
power and authority and the legal right to own, pledge, mortgage and operate its
properties, to lease the property it operates under lease and to conduct its
business as now or currently proposed to be conducted; (iv) is in compliance
with its certificate of incorporation and by-laws; (v) is in compliance with all
other applicable laws, rules, regulations and other requirements of law except
for such non-compliances as in the aggregate have no Material Adverse Effect;
and (vi) has all necessary licenses, permits, consents or approvals from or by,
has made all necessary filings with, and has given all necessary notices to,
each Governmental Authority having jurisdiction, to the extent required for such
ownership, operation and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.
48
4.2. Corporate Power; Authorization; Enforceable Obligations. (a) The
-------------------------------------------------------
execution, delivery and performance by each of the Loan Parties of the Loan
Documents and the consummation of the transactions contemplated hereby:
(i) are within their respective corporate powers;
(ii) have been or, at the time of delivery thereof pursuant to
Article III, will have been duly authorized by all necessary corporate
action, including, without limitation, the consent of stockholders where
required;
(iii) do not and will not (A) contravene the Loan Parties
respective certificate of incorporation or by-laws or other comparable
governing documents, (B) violate any other applicable rule, law, regulation
or other requirement of law, or any order or decree of any Governmental
Authority or arbitrator, (C) conflict with or result in the breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any Contractual Obligation of the Loan Parties, or (D)
result in the creation or imposition of any Lien upon any of the property
of any of the Loan Parties, other than those in favor of the Bank pursuant
to the Collateral Documents; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any Governmental
Authority or any other Person.
(b) This Agreement has been, and each of the other Loan Documents
will have been upon delivery thereof pursuant to Section 3.1, duly executed and
delivered by each Loan Party thereto. This Agreement is, and the other Loan
Documents will be, when delivered hereunder, the legal, valid and binding
obligation of the Loan Parties, enforceable against them in accordance with
their terms.
49
(c) The Borrower is a newly formed entity which has done no prior
business and will have no liabilities (contingent or otherwise) on the Closing
Date other than this Agreement, and those liabilities of Crysen Refining, Inc.
and Sound Refining, Inc. to be assumed by the Borrower under the terms of the
Acquisition Agreement and any Subordinated Debt permitted by the Bank.
4.3. Taxes. All federal, state, local and foreign tax returns,
-----
reports and statements (collectively, the "Tax Returns") required to be filed by
each of the Loan Parties or any of their respective Tax Affiliates have been
filed with the appropriate governmental agencies in all jurisdictions in which
such Tax Returns are required to be filed, all such Tax Returns are true and
correct in all material respects, and all taxes, charges and other impositions
due and payable have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for non-payment
thereof, except where contested in good faith and by appropriate proceedings if
(i) adequate reserves therefor have been established on the books of such Loan
Party in conformity with GAAP and (ii) all such non-payments in the aggregate
have no Material Adverse Effect. Proper and accurate amounts have been withheld
by the Loan Parties and each of their respective Tax Affiliates from their
respective employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities. None of the Loan Parties or any
of their Tax Affiliates have (i) executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any charges;
(ii) agreed or been requested to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise; or (iii) any
obligation under any written tax sharing agreement other than that to which the
Bank has consented.
50
4.4. Financial Matters. (a) The consolidated balance sheet of the
-----------------
Loan Parties as at December 31, 1996, and the related consolidated statements of
income, retained earnings and cash flows of the Loan Parties for the fiscal year
then ended, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and the consolidated and consolidating
balance sheets of the Loan Parties as at September 30, 1997 and the related
consolidated statements of income, retained earnings and cash flows of the Loan
Parties for the nine (9) months then ended, certified by the chief financial
officer of each of the Loan Parties copies of which have been furnished to the
Bank, fairly present, subject, in the case of said balance sheets as at
September 30, 1997, and said statements of income, retained earnings and cash
flows for the nine (9) months then ended, to year-end audit adjustments, the
consolidated financial condition of the Loan Parties as at such dates and the
consolidated results of the operations of the Loan Parties for the period ended
on such dates, all in conformity with GAAP.
(b) Since July 1, 1997, there has been no Material Adverse Change and
there have been no events or developments that in the aggregate have had a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has at the
Closing Date any material obligation, contingent liability or liability for
taxes, long-term leases or unusual forward or long-term commitment which is not
reflected in the pro forma balance sheet at such date referred to in subsection
(d) below or in the notes thereto.
(d) The unaudited pro forma consolidated balance sheet of each of the
Loan Parties (the "Pro Forma Balance Sheet"), a copy of which has been delivered
to each Lender, has been prepared as of the Closing Date, reflects as of such
date, on a pro forma basis, the consolidated financial condition of each of the
Loan Parties, and the Projections and assumptions expressed therein were
reasonably based on the information available to the Acquisition and the
Borrower at the time so furnished.
51
(e) Each of the Loan Parties is, and on a consolidated basis the Loan
Parties are, before and after giving effect to the transaction contemplated by
the Acquisition Agreement and this Agreement, Solvent.
4.5. Litigation. Set forth on Schedule 4.5 are all pending or, to
----------
the knowledge of the Borrower, threatened actions, investigations or proceedings
affecting Borrower, or any of its Subsidiaries before any court, Governmental
Authority or arbitrator. None of the foregoing in the aggregate, if adversely
determined, would have a Material Adverse Effect.
4.6. Margin Regulations. The Borrower is not engaged in the business
------------------
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Loan will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock in contravention of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
4.7. Ownership of Borrower; Subsidiaries. (a) As of the Effective
-----------------------------------
Date, the authorized capital Stock of the Borrower consists of 1,000,000 shares
of common stock, $0.01 par value per share, of which 1,000 shares are issued and
outstanding. All of the outstanding capital stock of the Borrower has been
validly issued, is fully paid and nonassessable and is owned beneficially by
Resources, free and clear of all Liens other than the Lien granted to the Bank
under the Pledge Agreement. No authorized but unissued shares, no treasury
shares and, to the best knowledge of the Borrower, no other outstanding shares
of capital stock of the Borrower are subject to any option, warrant, right of
conversion or purchase or any similar right. There are no agreements or
understandings with respect to the voting, sale or transfer of any shares of
capital stock of the Borrower, or to the best knowledge of the Borrower, any
agreement restricting the transfer or hypothecation of any such shares.
52
(b) The Borrower does not and will not have any Subsidiaries. Set
forth on Schedule 4.7(b) hereto is a complete and accurate list showing, as of
the Effective Date, all Subsidiaries of the Loan Parties and, as to each such
Subsidiary, the jurisdiction of its incorporation, the number of shares of each
class of Stock authorized, the number outstanding on the date hereof and the
percentage of the outstanding shares of each such class owned (directly or
indirectly) by the Borrower, Resources or Production respectively.
4.8. ERISA. Schedule 4.8 separately identifies all Plans, all
-----
Qualified Plans, all Title IV Plans and all Welfare Benefit Plans that provide
retiree benefits (other than continuation coverage provided pursuant to Section
4980B of the Code). Each of Resources, Production, the Borrower, its
Subsidiaries and each of their respective ERISA Affiliates have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any materially adverse liability to the PBGC or any Plan or Multiemployer Plan
(other than to pay premiums to the PBGC in the ordinary course of business).
4.9. Investment Company Act. No Loan Party is an "investment
----------------------
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
4.10. Insurance. All policies of insurance of any kind or nature
---------
owned by or issued to each of the Loan Parties or any of their Subsidiaries,
including, without limitation, policies of life, fire, theft, product liability,
public liability, property damage, other casualty, employee fidelity, workers'
compensation and employee health and welfare insurance, are in full force and
effect and are of a nature and provide such coverage as is sufficient and as is
customarily carried by companies of the size and character of such Person. None
of the Loan
53
Parties or any of their Subsidiaries have been refused insurance for which it
applied or had any policy of insurance terminated (other than at its request).
4.11. Environmental Protection. Except as disclosed on Schedule 4.11:
------------------------
(a) The operations of the Loan Parties and each of their Subsidiaries
or tenants comply with all Environmental Laws other than such non-compliance the
consequences of which in the aggregate have no Material Adverse Effect;
(b) The Loan Parties and each of their Subsidiaries have obtained all
environmental, health and safety Permits necessary for their operations, and all
such Permits are in good standing and each of its Subsidiaries are in compliance
with the terms and conditions of such Permits other than such non-compliance the
consequences of which in the aggregate have no Material Adverse Effect;
(c) None of the Loan Parties or any of their Subsidiaries or any of
their respective currently or previously owned or leased property or operations
is subject to any threatened or outstanding order from or agreement with any
Governmental Authority or other Person or is subject to any judicial or docketed
administrative proceeding respecting (i) Environmental Laws, (ii) Remedial
Action or (iii) any Environmental Liabilities and Costs arising from a Release
or threatened Release, other than those the consequences of which in the
aggregate have no Material Adverse Effect;
(d) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the Loan
Parties or any of their respective Subsidiaries or tenants which may give rise
to any Environmental Liabilities and Costs other than those which in the
aggregate have no Material Adverse Effect;
54
(e) None of the Loan Parties or any of their Subsidiaries is an owner
or operator of a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
-- ----
the regulations thereunder or any state analog, except such facilities for which
required permits have been obtained. Each of the Loan Parties and each of their
Subsidiaries is in compliance with all applicable financial responsibility
requirements of all Environmental Laws, including, without limitation, those
contained in 40 C.F.R., parts 264 and 265, subpart H, and any state equivalents
except where failure to comply in the aggregate would not have a Material
Adverse Effect;
(f) None of the Loan Parties nor any of their Subsidiaries has filed
or failed to file any notice required under any applicable Environmental Law
reporting a Release except where such failure in the aggregate would not have a
Material Adverse Effect;
(g) There are no conditions or circumstances which may give rise to
any Environmental Liabilities and Costs arising from the operations of the Loan
Parties or any of their Subsidiaries, that have any reasonable likelihood of
exceeding $50,000 in the aggregate associated with any operations of or
ownership of property by the Loan Parties or any of their Subsidiaries;
(h) No Environmental Lien and no unrecorded Environmental Lien has
attached to any property of the Loan Parties or any of their Subsidiaries; and
(i) There is not now on or in the property owned, leased or operated
by any of the Loan Parties or any of their Subsidiaries (i) any underground
storage tanks or surface impoundments, (ii) any asbestos-containing material, or
(iii) any polychlorinated biphenyls ("PCBs") used in electrical or other
equipment.
4.12. Intellectual Property. As of the Effective Date, each of the
---------------------
Loan Parties and their respective Subsidiaries owns or licenses or otherwise has
the right to
55
use all material licenses, permits, patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, copyright
applications, franchises, authorizations and other intellectual property rights
that are necessary for the operations of their respective businesses, without
infringement upon or conflict with the rights of any other Person with respect
thereto, including, without limitation, all trade names associated with any
private label brands of each of the Loan Parties and any of their Subsidiaries.
4.13. Title. (a) Except as set forth on Schedule 4.13(a)(i), the
-----
Borrower owns good, clean and marketable fee simple absolute title to all of the
Real Estate purported to be owned by them, which Real Estate is at the date
hereof described in Schedule 4.13(a)(ii), and good, clean and marketable title
to, or valid leasehold interests in, all other properties and assets purported
to be owned by the such party, including, without limitation, valid leasehold
interests pursuant to the Leases and none of such properties and assets,
including, without limitation, the Real Estate and the Leases, is subject to any
Lien, except Liens granted to the Bank pursuant to the Loan Documents or
permitted thereunder. The Borrower has received all deeds, assignments, waivers,
consents, non-disturbance and recognition or similar agreements, bills of sale
and other documents, and have duly effected all recordings, filings and other
actions necessary to establish, protect and perfect the Borrower's right, title
and interest in and to all such property.
(b) All Leases at the date hereof of the Borrower or any of its
Subsidiaries are listed on Schedule 4.13(b), setting forth information regarding
the commencement date, termination date, renewal options (if any) and annual
base rents. Each Lease is valid and enforceable in accordance with its terms and
is in full force and effect. The Borrower has delivered to the Bank true and
complete copies of each of such Leases and all documents affecting the rights or
obligations of the Borrower or any of its Subsidiaries which is a party thereto,
including, without limitation, any non-disturbance and recognition agreements,
56
subordination agreements, attornment agreements and agreements regarding the
term or rental of any of the Leases. None of the Borrower or any of its
Subsidiaries nor, to the knowledge of the Borrower, any other party to any such
Lease is in default of its obligations thereunder or has delivered or received
any notice of default under any such lease, nor has any event occurred which,
with the giving of notice, the passage of time or both, would constitute a
default under any such lease, except for defaults which in the aggregate have no
Material Adverse Effect.
(c) None of the Borrower or and of its Subsidiaries owns or holds, or
is obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any Real
Estate or Leases (collectively, the "Real Property").
-------------
(d) All components of all improvements included within the Real
Property (collectively, "Improvements"), including, without limitation, the
------------
roofs and structural elements thereof and the heating, ventilation, air
conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water,
paving and parking equipment, systems and facilities included therein, are in
good working order and repair. All water, gas, electrical, steam, compressed
air, telecommunication, sanitary and storm sewage lines and systems and other
similar systems serving the Real Property are installed and operating and are
sufficient to enable the Real Property to continue to be used and operated in
the manner currently being used and operated, and the Borrower has no knowledge
of any factor or condition that could result in the termination or material
impairment of the furnishing thereof. No Improvement or portion thereof is
dependent for its access, operation or utility on any land, building or other
Improvement not included in the real property owned or leased by the Borrower.
(e) All Permits required to have been issued or appropriate to enable
all Real Property to be lawfully
57
occupied and used for all of the purposes for which they are currently occupied
and used have been lawfully issued and are in full force and effect, other than
those which in the aggregate have no Material Adverse Effect.
(f) None of the Borrower or any of its Subsidiaries has received any
notice, or has any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any Real Property or any part thereof, or any
proposed termination or impairment of any parking at any such Real Property or
of any sale or other disposition of any Real Property or any part thereof in
lieu of condemnation.
(g) No portion of any Real Property has suffered any material damage
by fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition. No portion of any Real Property is
located in a special flood hazard area as designated by any Federal Governmental
Authorities.
(h) As of the Effective Date, no party to any reciprocal easement
agreement affecting any of the Real Estate is in material default thereunder and
no event has occurred which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. The Borrower and any of its Subsidiaries
has notified the Bank of all such defaults occurring following the Effective
Date. All maintenance payments with respect to such reciprocal easement
agreements which were due and payable prior to the date hereof have been paid.
(i) Schedule 4.13(i) (as such Schedule may be amended by Borrower or
any of its Subsidiaries from time to time) is a true, correct and complete
listing of the real property tax bills for the Real Estate for the current tax
year and bills with respect to any special assessments affecting any of the Real
Estate. All real property taxes and special assessments with respect to the Real
Estate which were due and payable prior to the date hereof have, from and after
the Effective Date, been paid in full.
58
(j) The Real Property is in material compliance with all building,
fire, zoning and other ordinances and regulations applicable thereto.
(k) Except as set forth on Schedule 4.13(a)(i), the Real Property and
the present use and condition thereof do not violate, in any material respect,
any applicable deed restrictions or other covenants, restrictions or agreements,
site plan approvals, zoning or subdivision regulations or urban redevelopment
plans applicable thereto, as modified by any duly issued variances. Except as
set forth on Schedule 4.13(a)(i), no building or other improvement which is part
of any of the Real Property encroaches, in any material respect, upon any
property owned by any adjacent landowner or upon any real property interest held
by any other Person with respect to any of the Real Property.
(l) No notes or notices of violation of law or municipal ordinances
or of federal, state, county or municipal or other governmental agency
regulations, orders or requirements relating to any of the Real Property that
have not been completely cured have been entered or received by the Borrower or
any of its respective Subsidiaries, and neither the Borrower nor any of its
respective Subsidiaries has any reason to believe that any such note or notice
may or will be entered; provided, however, that the provisions of this
-------- -------
subsection (l) shall not be deemed to refer to any matter within the scope of
the representations made in Section 4.11.
(m) All water, sewer, gas, electricity or tele phone and other
utilities serving the Real Property are supplied directly to the Real Property
by facilities of public utilities.
(n) There are no actions or proceedings (zoning or otherwise) or
governmental investigations pending, or, to the knowledge of the Borrower or any
of its Subsidiaries, threatened against or relating to any of the Real Property,
nor, to the knowledge of the Borrower or any of its Subsidiaries, is there any
basis for such action;
59
provided, however, that the provisions of this subsection (n) shall not be
-------- -------
deemed to refer to any matter within the scope of the representations made in
Section 4.11.
(o) Except to the extent the Borrower or its Subsidiaries has
notified the Bank in writing, neither the Borrower or any of its Subsidiaries
has any knowledge of any federal, state, county or municipal plans to change any
highways or road systems in the vicinity of any of the Real Property or to
restrict or change access from any such highway or road to any of the Real
Property or of any pending or threatened condemnation of any of the Real
Property or any parts thereof or of any plans for improvements which might
result in a special assessment against any of the Real Property.
(p) The foundation, structure and roof of each building and
improvement comprising a part of the Real Property are sound in all material
respects.
4.14. Full Disclosure. (a) No written statement prepared or furnished
---------------
by or on behalf of any Loan Party or any of its Affiliates in connection with
any of the Loan Documents or the consummation of the transactions contemplated
thereby, and no financial statement delivered pursuant hereto or thereto,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(b) The pro forma consolidated statements of financial condition and
pro forma consolidated statements of operations of the Borrower delivered to the
Bank are the unaudited consolidated financial statements of the Borrower as of
the dates and for the periods specified therein, adjusted to give effect to
certain events and assumptions as set forth therein. Such pro forma financial
statements (including any related schedules and notes) have been prepared on the
basis of the statements and assumptions set forth therein all of which Borrower
believes to be reasonable.
60
4.15. No Burdensome Restrictions; No Defaults; Contractual
----------------------------------------------------
Obligations. (a) Neither the Borrower nor any of its Subsidiaries (i) is a party
-----------
to any Contractual Obligation the compliance with which would have a Material
Adverse Effect or the performance of which by any thereof, either
unconditionally or upon the happening of an event, will result in the creation
of a Lien (other than a Lien granted pursuant to a Loan Document) on the
property or assets of any thereof, or (ii) is subject to any charter or
corporate restriction which has a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidiaries is in default
under or with respect to any Contractual Obligation owed by it and, to the
knowledge of the Borrower, no other party is in default under or with respect to
any Contractual Obligation owed to the Borrower or to any of its Subsidiaries,
other than those defaults which in the aggregate have no Material Adverse
Effect.
(c) No Event of Default or Default has occurred and is continuing.
(d) There is no Requirement of Law the compliance with which by the
Borrower or any of its Subsidiaries would have a Material Adverse Effect.
(e) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to transfer its assets to the
Borrower or to declare or make any dividend payment or other distribution on
account of any shares of any class of its Stock or its ability to purchase,
redeem, or otherwise acquire for value or make any payment in respect of any
such shares or any shareholder rights.
4.16. Acquisition Agreement. (a) The text of the Acquisition
---------------------
Agreement and the schedules and exhibits thereto of which copies have been
delivered to Lender, are full and complete copies of all agreements between the
Borrower and the other parties thereto, and all transactions related thereto,
and there are no oral agreements or understandings or side agreements not
61
contained therein relating to or modifying the substance thereof, except such as
have been previously disclosed to Lender in writing.
(b) The Acquisition Agreement has been duly approved by the board of
directors of the Borrower and, based on the representations made to Borrower,
the other parties thereto. No further corporate action is required on the part
of either Borrower or, based on the representations made to Borrower, the other
parties thereto to approve the Acquisition Agreement. Any other conditions
necessary to the consummation of the transactions contemplated by the
Acquisition Agreement have been satisfied or will be satisfied simultaneously
with the execution and delivery of this Agreement.
(c) Simultaneously with the closing pursuant to this Agreement and
the advance to the Borrower of any portion of the Loan, the closing contemplated
under the Acquisition Agreement will be completed. The parties thereto have
delivered to each other all documents and instruments required to be delivered
at this time by the Acquisition Agreement.
(d) The purchase price to be paid to the Borrower under the
Acquisition Agreement is as stated in the Acquisition Agreement.
ARTICLE V
FINANCIAL COVENANTS
As long as any of the Obligations remain outstanding, unless the Bank
otherwise consents in writing, the Borrower agrees that:
5.1. Tangible Capital Base. The Borrower shall maintain, at all
---------------------
times, a Tangible Capital Base, plus capital contributions, plus 50% of net
---- ----
income in any Fiscal Quarter (without eliminating extraordinary or non-recurring
items of income and expense and also without giving effect to negative net
income) of not less than $7,500,000.
62
5.2. Working Capital. The Borrower shall maintain, at all times,
---------------
current assets in excess of current liabilities, each as determined under GAAP,
of not less than $1,000,000 from the Closing Date until September 30, 1998 and
$2,250,000 thereafter.
5.3. Ratio of Maximum Total Liabilities to Tangible Capital Base. The
-----------------------------------------------------------
Borrower shall maintain, at all times, a ratio of (a) Indebtedness (including
Reimbursement Obligations under fully cash-collateralized letters of credit
supporting the purchase of Inventory but excluding Subordinated Debt or any
potential obligations owed to Philips Petroleum under the MDDW processing
agreement) to Tangible Capital Base not in excess of 3.0 to 1.0 .
5.4. Capital Expenditures. The Borrower shall not make Capital
--------------------
Expenditures, including any lease obligations, in any Fiscal Year in excess of
the greater of (a) the sum of (i) net cash flow in any Fiscal Quarter and (ii)
capital contributions in any Fiscal Quarter and (b) Approved Capital
Expenditures, provided, however, that the Borrower may incur Capital
-------- -------
Expenditures of up to $668,000 in the first Fiscal Quarter of 1998, subject to
Availability under the Facility.
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as any of the Obligations remain outstanding and as long as
this Agreement has not been terminated, unless the Bank otherwise consents in
writing, each Borrower agrees with the Bank that:
6.1. Compliance with Laws, Etc. The Borrower shall comply, and shall
-------------------------
cause each of its Subsidiaries to comply, in all material respects with all
Requirements of Law, Contractual Obligations, commitments, instruments, licenses
and Permits.
6.2. Conduct of Business. The Borrower shall (a) conduct, and shall
-------------------
cause each of its Subsidiaries to
63
conduct, its business in the ordinary course and consistent with good business
and prudent practice and in a manner so as to be able to perform its obligations
under the Loan Documents and the Related Documents; (b) use, and cause each of
its Subsidiaries to use, its reasonable efforts, in the ordinary course and
consistent with good business and prudent practice, to preserve, and cause each
of its Subsidiaries to preserve, all registered patents, trademarks, trade
names, copyrights and service marks with respect to its business and (c) have
competent and skilled management who are capable of managing its business in the
ordinary course and consistent with good business and prudent practice.
6.3. Payment of Taxes, Etc. The Borrower shall pay and discharge,
---------------------
and shall cause each of its Subsidiaries to pay and discharge, before the same
shall become delinquent, all lawful governmental claims, taxes, assessments,
charges and levies, except where contested in good faith, by proper proceedings,
if adequate reserves therefor have been established on the books of the Borrower
or the appropriate Subsidiary in conformity with GAAP.
6.4. Maintenance of Insurance. (a) The Borrower shall maintain, and
------------------------
shall cause each of its Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower or any
Subsidiary operates and, in any event, all insurance required by any Collateral
Document. All such insurance shall name the Bank as an additional insured and
loss payee. The Borrower will furnish to the Bank from time to time such
information as may be requested as to such insurance.
6.5. Preservation of Corporate Existence, Etc. The Borrower shall
----------------------------------------
preserve and maintain, and shall cause its Subsidiaries to preserve and
maintain, its corporate existence, rights (charter and statutory) and
franchises.
64
6.6. Access. The Borrower shall, at any reasonable time and from
------
time to time, permit the Bank or any of its agents or representatives, to (a)
examine and make copies of and abstracts from the records and books of account
of the Borrower and its Subsidiaries, (b) visit the properties of the Borrower
and its Subsidiaries, (c) discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with any of their respective officers or
directors, and (d) communicate directly with the Borrower's independent
certified public accountants. The Borrower shall authorize its independent
certified public accountants to disclose to the Bank any and all financial
statements and other information of any kind, including, without limitation,
copies of any management letter, or the substance of any oral information that
such accountants may have with respect to the business, financial condition,
results of operations or other affairs of the Borrower or any of its
Subsidiaries.
6.7. Keeping of Books. The Borrower shall keep, and shall cause each
----------------
of its Subsidiaries to keep, proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Borrower and each such Subsidiary.
6.8. Maintenance of Properties, Etc. The Borrower shall maintain and
------------------------------
preserve, and shall cause each of its Subsidiaries to maintain and preserve, (i)
all of its properties which are used or useful or necessary in the conduct of
its business in good working order and condition, and (ii) all rights, permits,
franchises, licenses, approvals and privileges (including, without limitation,
all Permits) which are used or useful or necessary in the conduct of its
business; provided, however, that such Borrower shall not be deemed in default
-------- -------
of this Section 6.8 if all such failures in the aggregate have no Material
Adverse Effect.
6.9. Financial Statements. The Borrower shall furnish to the Bank:
--------------------
65
(a) as soon as available and in any event within 30 days after the
end of each calendar month, consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such calendar month and
consolidated and consolidating statements of income, retained earnings and cash
flow of Borrower and its Subsidiaries for the period commencing at the end of
the previous calendar month and ending with the end of such calendar month, all
prepared in conformity with GAAP and certified by the chief financial officer of
Borrower as fairly presenting the financial condition and results of operations
of Borrower and its Subsidiaries at such date and for such period, together with
(i) a certificate of said officer stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which the Borrower proposes to take with respect thereto and (ii) a written
discussion and analysis by the management of Borrower of the financial
statements furnished in respect of such calendar month;
(b) as soon as available and in any event within 30 days after the
end of each Fiscal Quarter of each Fiscal Year, consolidated and consolidating
balance sheets of the Borrower, and the Loan Parties and their respective
Subsidiaries as of the end of such quarter and consolidated and consolidating
statements of income, retained earnings and cash flow of Borrower, the Loan
Parties and their respective Subsidiaries for the period commencing at the end
of the previous Fiscal Year and ending with the end of such Fiscal Quarter, all
prepared in conformity with GAAP and certified by the chief financial officer of
Borrower, Resources and Production respectively as fairly presenting the
financial condition and results of operations of Borrower, the Loan Parties and
their respective Subsidiaries at such date and for such period, together with
(i) a certificate of said officer stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which the Borrower and/or any of the Loan Parties
66
proposes to take with respect thereto, and (ii) a written discussion and
analysis by the management of Borrower, Resources and Production of the
financial statements furnished in respect of such Fiscal Quarter;
(c) as soon as available and in any event within 90 days after the
end of each Fiscal Year, consolidated balance sheets of Resources and
unconsolidating balance sheets of its Subsidiaries as of the end of such year
and consolidated statements of income, retained earning and cash flow of
Resources and unconsolidating statements of income, retained earnings and cash
flow of its Subsidiaries for such Fiscal Year, all prepared in conformity with
GAAP and certified, in the case of such consolidated financial statements, in a
manner acceptable to the Bank by an independent public accountant of recognized
national standing acceptable to the Bank, together with (i) a certificate of
such accounting firm (x) stating that in the course of the regular audit of the
business of Resources and its Subsidiaries, such audit was conducted by such
accounting firm in accordance with generally accepted auditing standards and (y)
as to the absence of Defaults or Events of Default; and (ii) a written
discussion and analysis by the management of Resources of the financial
statements furnished in respect of such Fiscal Year;
(d) as soon as available and in any event within 30 days prior to the
end of each Fiscal Year an annual business and financial plan of the Borrower
and financial projections, in form and substance satisfactory to the Bank,
updated within 10 days after the end of each Fiscal Quarter;
(e) if issued, at the request of the Bank, promptly upon receipt, a
copy of each management letter provided to the Borrower by its independent
certified public accountants; and
(f) by Tuesday of each week, or more frequently if requested by the
Bank, and in any event as of each of the first three Fridays of the month (with
certain adjustments) and as of the last business day of each month,
67
and in all cases within two business days of the applicable reporting date, a
Borrowing Base Certificate as of end of the immediately preceding week (or such
other date), executed by the chief financial officer of the Borrower together
with such supporting documentation as the Bank may in its discretion require, in
form and substance satisfactory to the Bank, including, but not limited to,
details of Inventory, Accounts, receivables, aging schedules, and accounts
payable for the Borrower.
6.10. Reporting Requirements. Borrower shall furnish to the Bank:
----------------------
(a) promptly and in any event within 30 days after Resources, any of
its Subsidiaries or any ERISA Affiliate knows or has reason to know that any
ERISA Event has occurred or is threatened, a written statement of the chief
financial officer or other appropriate officer of Borrower describing such ERISA
Event or waiver request and the action, if any, which the Borrower, its
Subsidiaries and ERISA Affiliates propose to take with respect thereto and a
copy of any notice filed with the PBGC or the IRS pertaining thereto;
(b) promptly and in any event within 2 Business Days after receipt
thereof, a copy of any adverse notice, determination letter, ruling or opinion
Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the PBGC,
DOL or IRS with respect to any Qualified Plan and, at the request of the Bank, a
copy of any favorable notice, determination letter, ruling or opinion with
respect thereto from any such Governmental Authority;
(c) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting Borrower or any of its Subsidiaries;
(d) promptly and in any event within two Business Days after the
Borrower becomes aware of the existence of (i) any Default or Event of Default,
(ii) any breach or non-performance of, or any default under, any contractual
68
obligation which is material to the business, prospects, operations or financial
condition of Borrower or any of its Subsidiaries, or (iii) any Material Adverse
Change, telephonic or telegraphic notice in reasonable detail specifying the
nature of the Default, Event of Default, breach, non-performance, default,
event, development or circumstance, including, without limitation, the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five days;
(e) upon the request of the Bank, copies of all federal, state and
local tax returns and reports filed by Borrower or any of its Subsidiaries;
(f) promptly and in any event within 30 days after Borrower or any
Subsidiary of Borrower knows or has reason to know of any litigation,
investigation, or other proceeding instituted or threatened against the Borrower
or any Subsidiary of the Borrower or any of its properties; and
(g) such other information respecting the business, properties,
condition, financial or otherwise, or operations of Borrower or any of its
Subsidiaries as the Bank may from time to time reasonably request.
6.11. Employee Plans. With respect to other than a Multiemployer
--------------
Plan, for each Qualified Plan hereafter adopted or maintained by Borrower, any
of its Subsidiaries or any ERISA Affiliate, Borrower shall (i) at the request of
the Bank, seek, and cause such of its Subsidiaries and ERISA Affiliates to seek,
and receive determination letters from the IRS to the effect that such Qualified
Plan is qualified within the meaning of Section 401(a) of the Code; and (ii)
from and after the adoption of any such Qualified Plan, cause such plan to be
qualified within the meaning of Section 401(a) of the Code and to be
administered in all material respects in accordance with the requirements of
ERISA and Section 401(a) of the Code.
6.12. Environmental. (a) Borrower shall, at its cost, upon receipt of
-------------
any notification or otherwise
69
obtaining knowledge of any Release or other event that could result in Borrower
and its Subsidiaries incurring Environmental Liabilities and Costs in excess of
$50,000 take such remedial, investigational or other action as required by
Environmental Laws, as any Governmental Authority requires or as is appropriate
and consistent with good and prudent business practice.
(b) At the request of the Bank, the Borrower shall retain an
environmental consultant, acceptable to the Bank, who shall prepare a written
report of an investigation addressing any significant environmental, health and
safety violations, hazards or liabilities to which the Borrower may be subject,
which report shall demonstrate, to the satisfaction of the Bank, that Borrower
and its Subsidiaries and their operations are in compliance in all material
respects with all applicable Environmental Laws and are not subject to any
material Environmental Liabilities and Costs.
6.13. Tax Refunds. Promptly and in any event within 30 days after
-----------
the Borrower knows or has reason to know that it is entitled to receive a tax
refund, such Borrower shall assign its right to such tax refund to the Bank
pursuant to the Assignment of Claims Act of 1940, as amended or similar state
statute and file a form of assignment with the appropriate taxing authority with
the tax return in question.
6.14. Fiscal Year. The Borrower shall maintain as its Fiscal Year
-----------
the twelve month period ending on December 31 of each year.
6.15. Lockbox and Cash Management System. Borrower shall maintain a
----------------------------------
cash management system satisfactory to the Bank, including, without limitation,
the maintenance of the Blocked Account and the direct deposit therein of all
funds owing to, and cash of, the Borrower.
70
6.16. Position Limit. Borrower shall conduct its business so as to
--------------
comply, at all times, with the Maximum Position Limits.
6.17. Additional Covenants. (a) Borrower hereby covenants and
--------------------
agrees to deliver to the Bank, as soon as available and in any event within 60
days after the Effective Date, current ALTA surveys and surveyor's certification
as to all Real Estate and all land covered by a Lease in respect of which the
Deed of Trust and Mortgage is delivered, each in form and substance satisfactory
to the Bank.
(b) Borrower hereby covenants and agrees to deliver to the Bank, as
soon as possible and in any event within 60 days after the Effective Date:
(i) a business and financial plan of Borrower and its
Subsidiaries in form and substance satisfactory to the
Bank; and
(ii) financial projections covering the Fiscal Year ending
December 31, 1998, in form and substance satisfactory to
the Bank.
6.18. Capital Injection. In the event of a Capital Markets
-----------------
Transaction, the proceeds must be contributed to the Borrower, in accordance
with the requirement of the Resources/Production Capital Markets Transaction
Letter as a capital injection by Resources or by an Affiliate of the Borrower
and such proceeds shall be used as a mandatory prepayment and permanently reduce
the Availability (except to the extent expressly provided for in this Agreement
with respect to the Capital Expenditures Portion) in the amount of the
prepayment (i) first to prepay the Fixed Asset Allocation, (ii) then to prepay
the amounts pursuant to Section 2.6(b) and (iii) finally, to prepay any
outstanding loans under the Capital Expenditures Portion.
71
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations remain outstanding and as long as
this Agreement has not been terminated, the Borrower agrees with the Bank that:
7.1. Liens, Etc. The Borrower shall not create or suffer to exist,
----------
and shall not permit any of its Subsidiaries to create or suffer to exist, any
Lien upon or with respect to any of its or such Subsidiary's properties, whether
now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, except for:
(a) Liens created pursuant to the Collateral Documents;
(b) Any Lien securing the renewal, extension or refunding of any
Indebtedness or other obligation secured by any Lien permitted by subsections
(g) or (h) of this Section 7.1 without any increase in the amount secured
thereby or in the assets subject to such Lien;
(c) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons incurred by
the Borrower or any of its Subsidiaries in the ordinary course of business which
secure its obligations to such Person; provided, however, that (i) the Borrower
-------- -------
or such Subsidiary is not in default with respect to such payment obligation to
such Person and (ii) the Borrower or such Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof;
(d) Liens (excluding Environmental Liens) securing taxes, assessments
or governmental charges or levies; provided, however, that neither the Borrower
-------- -------
nor any of its Subsidiaries is in default in respect of any payment obligation
with respect thereto;
72
(e) Liens incurred or pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions and other social security benefits;
(f) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of the Borrower or any of its Subsidiaries or impair,
in any material manner, the use of such property for the purposes for which such
property is held by the Borrower or any such Subsidiary;
(g) Liens existing on the date of this Agreement and disclosed on
Schedule 7.1;
(h) Liens to secure Capitalized Lease Obligations if the incurrence
of such Indebtedness is permitted by Section 7.2(iv); provided, however, that:
-------- -------
(i) any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including,
without limitation, the cost of construction) of the property subject thereto,
(ii) the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost, (iii) such Lien does not extend to or cover any other
property other than such item of property and any improvements on such item and
(iv) the aggregate principal amount of Indebtedness of all of the Borrower
secured by the Liens referred to in this clause (h) shall not exceed $50,000 in
the aggregate at any time outstanding.
7.2. Indebtedness. The Borrower shall not create or suffer to
------------
exist, or permit any of its Subsidiaries to create or suffer to exist, any
Indebtedness except:
(i) the Obligations;
(ii) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or claims for labor, materials,
inventory,
73
services, supplies and rentals incurred, or for goods or services
purchased, in the ordinary course of business and consistent with good
business and prudent practice;
(iii) Indebtedness of the Borrower or any of its Subsidiaries
under Capitalized Lease Obligations; provided, however, that the aggregate
-------- -------
amount of Capitalized Lease Obligations incurred under this clause (iv) by
the Borrower and its Subsidiaries shall not exceed $50,000 at any time
outstanding;
(iv) Indebtedness of the Borrower or any of its Subsidiaries
outstanding on the Effective Date and disclosed on Schedule 7.2.
7.3. Restricted Payments. The Borrower shall not and shall not
-------------------
permit any of its Subsidiaries, without the prior consent of the Bank, to (i)
declare or make any dividend payment or other distribution or repurchase or
redemption of assets, properties, cash, rights, obligations or securities
(including options or warrants) on account or in respect of any of its Stock or
other security convertible, exchangeable or exercisable into its Stock other
than dividends paid to the Borrower or any wholly owned Subsidiary of the
Borrower by any wholly owned Subsidiary of the Borrower and (ii) purchase,
redeem, prepay, defease, amend or otherwise acquire for value or make any
payment on account or in respect of any principal amount of Indebtedness for
borrowed money, now or hereafter outstanding, except payments on the
Obligations.
7.4. Mergers, Stock Issuances, Sale of Assets, Etc. (a) The Borrower
---------------------------------------------
shall not, and shall not permit any of its Subsidiaries to, unless permitted by
this Agreement, (i) merge with any Person, (ii) consolidate with any Person,
(iii) divest or acquire all or substantially all of the Stock or other security
convertible, exchangeable or exercisable into the Stock of any Person, (iv)
divest or acquire all or substantially all of the assets of any Person or all or
substantially all of the assets constituting the business of a division, branch
or other
74
unit of any Person, or (v) enter into any joint venture or partnership with any
Person.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, issue or transfer any of its Stock or Stock Equivalents.
(c) The Borrower shall not, and shall not permit any of its
Subsidiaries to, unless permitted by this Agreement, effect an Asset Sale of any
of its assets or any interest therein to any Person, or permit or suffer any
other Person to acquire any interest in any of the assets of the Borrower or any
such Subsidiary, except the sale or disposition of inventory in the ordinary
course of business or equipment or motor vehicles which have become obsolete or
are replaced in the ordinary course of business.
7.5. Investments in Other Persons. The Borrower shall not,
----------------------------
directly or indirectly, make or maintain, or permit any of its Subsidiaries to
make or maintain, any loan or advance to any Person or own, purchase or
otherwise acquire, or permit any of its Subsidiaries to own, purchase or
otherwise acquire, any Stock, or other security convertible, exchangeable or
exercisable into Stock, other equity interest, obligations or other securities
of, or any assets constituting the purchase of a business or line of business,
or make or maintain, or permit any of its Subsidiaries to make or maintain, any
capital contribution to, or otherwise invest in, any Person (any such
transaction being an "Investment"), except:
(i) Investments in accounts, contract rights and chattel paper
(each as defined in the Uniform Commercial Code), notes receivable and
similar items arising or acquired in the ordinary course and consistent
with good business and prudent practice of the Borrower;
(ii) Investments in Subsidiaries of the Borrower in the
ordinary course and consistent with good business and prudent practice of
the Borrower and its Subsidiaries existing on the date hereof;
75
(iii) Investments to SJCC in the form of a loan to be made for
the acquisition of the fixed assets of Sound Refining, Inc. to occur and
close simultaneously with the closing of this Agreement; provided that such
-------- ----
a loan (i) is secured by all of the assets acquired by the proceeds of said
loan and (ii) shall constitute Collateral of the Bank pursuant to the
Security Agreement; or
(iv) Investments existing on the date hereof and set forth on
Schedule 7.5.
7.6. Change in Nature of Business. The Borrower shall not make, and
----------------------------
shall not permit any of its Subsidiaries to make, any material change in the
nature or conduct of its business as carried on at the date hereof.
7.7. Transactions with Affiliates. The Borrower shall not, and shall
----------------------------
not permit any of its Subsidiaries to, do any of the following without the prior
written consent of the Bank or unless otherwise permitted in this Agreement: (i)
make any Investment in an Affiliate of the Borrower other than an Investment
permitted by clause (i) of Section 7.5 in a wholly-owned Subsidiary of the
Borrower; (ii) transfer, sell, lease, assign or otherwise dispose of any asset
to any Affiliate of the Borrower, including any Subsidiary of the Borrower;
(iii) merge into or consolidate with or purchase or acquire assets from any
Affiliate of the Borrower or of any Subsidiary of the Borrower, other than a
wholly-owned Subsidiary of the Borrower; (iv) repay any Indebtedness to any
Affiliate of the Borrower; or (v) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate of the Borrower (including,
without limitation, employment contracts or contracts involving the payment of
management or consulting fees, guaranties and assumptions of obligations of any
such Affiliate) except for (A) transactions in the ordinary course of business
on a basis no less favorable to the Borrower or such Subsidiary as would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate, (B) salaries and other employee compensation and benefits to officers
or
76
directors of the Borrower or any of its Subsidiaries commensurate with current
compensation and benefit levels and (C) purchase of crude oil feedstocks from
Affiliates in arm's length transactions.
7.8. No Subsidiaries. The Borrower shall not incorporate or
---------------
otherwise organize any Subsidiary.
7.9. Environmental. The Borrower shall not, and shall not permit
-------------
any of its Subsidiaries, any lessee or any other Person to, dispose of any
Contaminant in violation of any Environmental Law by placing it in or on the
ground or waters of any property owned or leased by the Borrower or any of its
Subsidiaries; provided, however, that the Borrower shall not be deemed in
-------- -------
violation of this Section 7.9 if, as the consequence of all such disposal, the
Borrower and its Subsidiaries would not incur Environmental Liabilities and
Costs in excess of $50,000 in the aggregate.
7.10. Bank Accounts. The Borrower shall maintain no bank account
-------------
other than those provided for in Section 2.14, the Bank Accounts (as defined in
the Security Agreement) and those listed on Schedule 7.11 for the purposes
listed thereon (the bank accounts listed on Schedule 7.11 being, the "Permitted
---------
Bank Accounts"); provided, however, that the Permitted Bank Accounts other than
------------- -------- -------
those bank accounts either maintained with the Bank, referred to in Section 2.14
or for which the Borrower has granted a security interest in such account in
favor of the Bank, shall at no time contain in the aggregate funds in excess of
$100,000.
7.11. Accounting Changes. The Borrower shall not make, nor permit
------------------
any of its Subsidiaries to make, any change in accounting treatment and
reporting practices or tax reporting treatment, except as required by GAAP or
law and disclosed to the Bank in writing.
7.12. No Speculative Transactions. The Borrower shall not engage
---------------------------
in any speculative transaction or, without the prior consent of the Bank, in any
other transaction
77
involving commodity options, swaps, forward contracts or futures contracts.
7.13. Modification of Material Agreements. The Borrower shall not,
-----------------------------------
nor shall it permit any of its Subsidiaries to, alter, amend, modify, rescind,
terminate or waive any of their respective rights under, any of its material
contractual obligations; provided, however, that in the event of any breach or
-------- -------
event of default by a Person other than a Borrower or any of its Subsidiaries,
the Borrower shall promptly notify the Bank of any such breach or event of
default and take all such action as may be reasonably necessary in order to
endeavor to avoid having such breach or event of default have a Material Adverse
Effect.
7.14. Sound Note. Without the prior written consent of the Bank, the
----------
Borrower shall not alter, amend, modify, rescind, terminate or waive any of its
respective rights under the Sound Note and shall not forgive in whole or in part
any obligations due thereunder. Borrower shall promptly notify the Bank of any
breach or event of default under or related to the Sound Note and Borrower shall
take such action as may be requested by the Bank in connection with any such
breach or event of default; provided however that the Bank shall not require the
-------- -------
Borrower to take title to any real property that is securing the Sound Note.
ARTICLE VII
EVENTS OF DEFAULT
8.1. Events of Default. Each of the following events shall be an
-----------------
Event of Default:
(a) The Borrower shall fail to pay any principal (including, without
limitation, mandatory prepayments of principal) of, or interest on, any Loan,
any fee, any other amount due hereunder or under the other Loan Documents or any
other Obligation when the same becomes due and payable; or
78
(b) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or by any Loan Party (or any of its officers) in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Articles V or VII or Sections 6.1, 6.3, 6.4,
6.6, 6.10, 6.13, 6.14, 6.15, 6.16, 6.17 or 6.18 or any other Loan Document or
(ii) or any other term, covenant or agreement contained in Article VI (exclusive
of the Sections listed in clause (i) hereof but including Section 6.17) if such
failure under this clause (ii) shall remain unremedied for 30 days after the
earlier of the date on which (A) a Responsible Officer of the Borrower becomes
aware of such failure or (B) written notice thereof shall have been given to the
Borrower by the Bank; or
(d) Resources or any of its Subsidiaries (including Borrower) shall
fail to pay any principal of or premium or interest on any Indebtedness of
Resources or any of its Subsidiaries (including Borrower), when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) after the expiration of any applicable grace
or cure periods provided for in the underlying original agreement (which cure or
grace periods shall not include waivers or modifications agreed to that are not
provided for in the underlying original agreement) and whether or not the
failure to make such payment is waived by the obligee (provided however that the
-------- -------
failure to make such payment referred to in this section shall require an unpaid
balance in excess of $100,000 with respect to Resources or any of its
Subsidiaries (other than Borrower)); or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Indebtedness,
if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall become or be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), or Resources or
79
any of its Subsidiaries (other than Borrower) shall be required to repurchase or
offer to repurchase such Indebtedness, prior to the stated maturity thereof; or
(e) Resources or any of its Subsidiaries (including Borrower) shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors, or any proceeding shall be instituted by or against
Resources or any of its Subsidiaries (including Borrower) or, if such party is
not an individual, any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a custodian,
receiver, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceedings instituted against
Resources or any of its Subsidiaries (including Borrower) (but not instituted by
it), either such proceedings shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or Resources or any of its
Subsidiaries (including Borrower) shall take any corporate action to authorize
any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in the aggregate
in excess of $100,000 to the extent not fully covered by insurance and as to
which the insurance company has accepted liability shall be rendered against any
Loan Party or, if the Loan Party is not an individual, any of its Subsidiaries;
or
(g) An ERISA Event shall occur which, in the determination of the
Bank, has a reasonable possibility of
80
a liability, deficiency or waiver request of the Borrower or, in the case of any
ERISA Affiliate in excess of $100,000, whether or not assessed; or
(h) Any provision of any Collateral Document or any Loan Document
after delivery thereof under Section 3.1 shall for any reason cease to be valid
and binding on any Loan Party thereto, or any Loan Party shall so state in
writing; or
(i) Any Collateral Document after delivery thereof pursuant to
Section 3.1 shall, for any reason, cease to create a valid Lien on any of the
Collateral purported to be covered thereby, or such Lien shall cease to be a
perfected and first priority Lien, or any Loan Party shall so state in writing;
or
(j) There shall have occurred an "ownership change" (within the
meaning of Section 382 of the Code) of Borrower or Production; or
(k) There shall occur a Material Adverse Change or an event which
would have a Material Adverse Effect; or
(l) The Borrower or any of its Subsidiaries shall have entered into
any consent or settlement decree or agreement or similar arrangement with an
Governmental Authority or any judgment, order, decree or similar action shall
have been entered against the Borrower or any of its Subsidiaries, in either
case based on or arising from the violation of or pursuant to any Environmental
Law, or the generation, storage, transportation, treatment, disposal or Release
of any Hazardous Material and, in connection with all the foregoing, the
Borrower and its Subsidiaries are likely to incur Environmental Liabilities and
Costs in excess of $250,000.
8.2. Remedies. If there shall occur and be continuing any Event of
--------
Default, the Bank (i) may by notice to the Borrower declare the obligation of
the Bank to make Loans and issue Letters of Credit to be terminated, whereupon
the same shall forthwith terminate and (ii) may
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by notice to the Borrower, declare the Loans, Reimbursement Obligations, all
interest thereon and all other amounts and Obligations payable under this
Agreement and any of the other Loan Documents to be forthwith due and payable,
whereupon the Note, all such interest and all such amounts and Obligations shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that upon the occurrence of the Event of Default
-------- -------
specified in subparagraph (e) above, (A) the obligation of the Bank to make
Loans and to issue Letters of Credit shall automatically be terminated and (B)
the Loans, Reimbursement Obligations, all such interest and all such amounts and
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. In addition to the remedies set forth above,
the Bank may exercise any remedies provided for by the Collateral Documents in
accordance with the terms thereof or any other remedies provided by applicable
law.
8.3. Action in Respect of Letters of Credit. (a) Upon the
--------------------------------------
Termination Date, the Borrower shall pay to the Bank in immediately available
funds at the Bank's office specified in the Note, for deposit in a special non-
interest-bearing cash collateral account (the "Cash Collateral Account") to be
maintained with and in the name of the Bank at such place as shall be designated
by the Bank, an amount equal to 101% of the outstanding Letter of Credit
Obligations.
(b) The Borrower hereby pledges, and grants to the Bank a Lien on all
of its right, title and interest in and to all funds held in the Cash Collateral
Account from time to time, and all proceeds thereof, as security for the payment
of all amounts due and to become due from the Borrower to the Bank under the
Loan Documents.
(c) Upon the occurrence of an Event of Default and during the
continuance of such Event of Default, the
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Bank may, from time to time after funds are deposited in the Cash Collateral
Account, apply funds then held in the Cash Collateral Account to the payment of
any amounts, in such order as the Bank may elect, as shall have become or shall
become due and payable by the Borrower to the Bank in respect of any Obligations
then due and payable.
(d) Neither the Borrower nor any Person claiming on behalf of or
through it shall have any right to withdraw any of the funds held in the Cash
Collateral Account.
(e) The Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in the Cash Collateral Account or any funds held therein
or (ii) create or permit to exist any Lien upon or with respect to the Cash
Collateral Account or any funds held therein, except as provided in or
contemplated by this Agreement.
(f) Upon the occurrence of a Default or an Event of Default, the Bank
may also exercise, in its discretion, in respect of the Cash Collateral Account,
in addition to the other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon default
under the Uniform Commercial Code in effect in the State of New York at that
time, and the Bank may, without notice except as specified below, sell the Cash
Collateral Account or any part thereof in one or more sales, at public or
private sale, at any of the Bank's offices or elsewhere, for cash, or credit or
for future delivery, and upon such other terms as the Bank may deem commercially
reasonable. The Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Borrower of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Bank shall not be obligated to
make any sale of the Cash Collateral Account, regardless of notice of sale
having been given. The Bank may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
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(g) Any cash held in the Cash Collateral Account, and all cash
proceeds received by the Bank in respect of any sale of, collection from or
other realization upon all or any part of the Cash Collateral Account, may, in
the discretion of the Bank, then or at any time thereafter be applied in whole
or in part by the Bank against all or any part of the other Obligations in such
order as the Bank shall elect. Any surplus of such cash or cash proceeds held by
the Bank and remaining after the indefeasible cash payment in full of all of the
Obligations shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive such surplus.
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement nor consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Bank, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.2. Notices, Etc. All notices and other communications provided
------------
for hereunder shall be in writing (including, without limitation, telegraphic,
telex, telecopy or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered by hand, if to the Borrower, at its address set
forth on Schedule 9.2, with a copy to Resources at its address set forth on
Schedule 9.2; if to the Bank, at its address at The Equitable Tower, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Zali Win; or, as to the Borrower or the Bank,
at such other address as shall be designated by such party in a written notice
to the other parties and, as to each other party, at such other address as shall
be designated by such party in a written notice to the Borrower and the Bank.
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be
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effective when deposited in the mails, delivered to the telegraph company,
confirmed by telex answerback, telecopied with confirmation of receipt,
delivered to the cable company or delivered by hand to the addressee or its
agent, respectively, except that notices and communications to the Bank pursuant
to Article II shall not be effective until received by the Bank.
9.3. No Waiver; Remedies. No failure on the part of the Bank to
-------------------
exercise, and no delay in exercising, any right hereunder or under any Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
9.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay
----------------------------
on demand, after full use of the $50,000 retainer previously paid by Borrower,
(i) all costs and expenses of the Bank in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, each of the other Loan Documents and each of the other documents to
be delivered hereunder and thereunder, and the funding of the loans, including,
without limitation, the fees and out-of-pocket expenses of counsel, accountants,
appraisers, consultants or industry experts retained by the Bank with respect
thereto and with respect to advising it as to its rights and responsibilities
under this Agreement and the other Loan Documents, whether or not the Closing
Date occurs and (ii) all costs and expenses of the Bank (including, without
limitation, the fees and out-of-pocket expenses of counsel, accountants,
appraisers, consultants or industry experts retained by the Bank) in connection
with the waiver or enforcement (whether through negotiation, legal proceedings
or otherwise) of any of the Bank's rights or remedies under this Agreement and
the other Loan Documents.
(b) The Borrower agrees to indemnify and hold harmless the Bank and
its Affiliates, and the directors,
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officers, employees, agents, attorneys, consultants and advisors of or to any of
the foregoing (including, without limitation, those retained in connection with
the satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (each of the foregoing being an "Indemnitee") from and against any
and all claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, disbursements and expenses of any kind or nature
(including, without limitation, fees and disbursements of counsel to any such
Indemnitee) which may be imposed on, incurred by or asserted against any such
Indemnitee in connection with or arising out of any investigation, litigation or
proceeding, whether or not any such Indemnitee is a party thereto, whether
direct, indirect, or consequential and whether based on any federal, state or
local law or other statutory regulation, securities or commercial law or
regulation, or under common law or in equity, or on contract, tort or otherwise,
in any manner relating to or arising out of this Agreement, any other Loan
Document, any Obligation, or any act, event or transaction related or attendant
to any thereof, including, without limitation, (i) all Environmental Liabilities
and Costs arising from or connected with the past, present or future operations
of the Borrower or any of its Subsidiaries involving any property subject to a
Collateral Document, or damage to real or personal property or natural resources
or harm or injury alleged to have resulted from any Release of Contaminants on,
upon or into such property or any contiguous real estate; (ii) any costs or
liabilities incurred in connection with any Remedial Action concerning the
Borrower or any of its Subsidiaries; (iii) any costs or liabilities incurred in
connection with any Environmental Lien; (iv) any costs or liabilities incurred
in connection with any other matter under any Environmental Law, including,
without limitation, CERCLA and applicable state property transfer laws, whether,
with respect to any of the foregoing, such Indemnitee is a mortgagee pursuant to
any leasehold mortgage, a mortgagee in possession, the successor in interest to
the Borrower or any of its Subsidiaries, or the owner, lessee or operator of any
property of the Borrower or any of its Subsidiaries by
86
virtue of foreclosure, (collectively, the "Indemnified Matters"); provided,
--------
however, that the Borrower shall not have any obligation under this Section
-------
9.4(b) to an Indemnitee with respect to any Indemnified Matter caused by or
resulting from the gross negligence or willful misconduct of that Indemnitee, as
determined by a court of competent jurisdiction in a final non-appealable
judgment or order.
(c) The Borrower agrees that the obligation to pay all of the Bank's
charges and expenses pursuant to this Agreement (including without limitation,
pursuant to Section 9.4(a)) or any other Loan Document and that any
indemnification or other protection provided to any Indemnitee pursuant to this
Agreement (including, without limitation, pursuant to Sections 9.4(b)) or any
other Loan Document shall (i) survive payment of the Obligations and termination
of this Agreement (ii) inure to the benefit of any Person who was at any time an
Indemnitee under this Agreement or any other Loan Document.
9.5. Right of Set-off. Upon the occurrence and during the
----------------
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower against any and all of the
Obligations now or hereafter existing whether or not the Bank shall have made
any demand under this Agreement or the Note or any other Loan Document and
although such Obligations may be unmatured. The Bank agrees to promptly notify
such Borrower after any such set-off and application made by the Bank; provided,
--------
however, that the failure to give such notice shall not affect the validity of
-------
such set-off and application. The rights of the Bank under this Section are in
addition to the other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
87
9.6. Binding Effect. This Agreement shall become effective when it
--------------
shall have been executed by the Borrower and the Bank and thereafter shall be
binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not have any
right to assign its rights hereunder or any interest herein without the prior
written consent of the Bank.
9.7. Assignments and Participations. (a) The Bank may sell,
------------------------------
transfer or assign to one or more other financial institutions all or a portion
of the Loans, Reimbursement Obligations and the Note and a commensurate portion
of its rights and obligations hereunder and under the other Loan Documents. Upon
the effectiveness of any assignment, (A) the assignee shall become a party
hereto and, to the extent that rights and obligations under the Loan Documents
have been assigned to such assignee, have the rights and obligations of the Bank
hereunder and thereunder, and (B) the assignor thereunder shall, to the extent
that rights and obligations under this Agreement have been assigned by it,
relinquish its rights (except those which survive the payment in full of the
Obligations) and be released from its obligations under the Loan Documents.
(b) Upon an assignment by the Bank, the Bank shall give prompt notice
thereof to the Borrower. Upon an assignment by the Bank, the Borrower also
agrees to issue one or more new Notes and to cooperate in amending, to the
extent necessary, this Agreement and the other Loan Documents.
(c) The Bank may sell participations to one or more banks or other
Persons in or to all or a portion of its rights and obligations under the Loan
Documents (including, without limitation, all or a portion of the Loans owing to
it and the Note held by it). The terms of such participation shall not, in any
event, require the participant's consent to any amendments, waivers or other
modifications of any provision of any Loan Documents, the consent to any
departure by any Loan Party therefrom, or to
88
the exercising or refraining from exercising any powers or rights which the Bank
may have under or in respect of the Loan Documents (including, without
limitation, the right to enforce the obligations of the Loan Parties), except if
any such amendment, waiver or other modification or consent would (i) reduce the
amount, or postpone any date fixed for, any amount (whether of principal,
interest or fees) payable to such participant under the Loan Documents, to which
such participant would otherwise be entitled under such participation or (ii)
result in the release of all or substantially all of the Collateral other than
in accordance with the Collateral Documents. In the event of the sale of any
participation by the Bank, (i) the Bank's obligations under the Loan Documents
(including, without limitation, the Loans owing to it) shall remain unchanged,
(ii) the Bank shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the Bank shall remain the holder of
the Note and Obligations for all purposes of this Agreement, and (iv) the
Borrower shall continue to deal solely and directly with the Bank in connection
with the Bank's rights and obligations under this Agreement.
(d) Each participant shall be entitled to the benefits of Sections
2.8, 2.9 and 2.11 as if it were the Bank.
9.8. Governing Law; Severability. This Agreement and the Note and
---------------------------
the rights and obligations of the parties hereto and thereto shall be governed
by the internal law of the State of New York. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
9.9. Submission to Jurisdiction; Service of Process. (a) Any legal
----------------------------------------------
action or proceeding with respect to this Agreement or the Note or any document
related
89
thereto may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, the Borrower hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The parties hereto hereby irrevocably waive any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which any of them may now or hereafter have
----- --- ----------
to the bringing of any such action or proceeding in such respective
jurisdictions.
(b) The Borrower irrevocably consents to the service of process of
any of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Borrower
at its address provided herein.
(c) Nothing contained in this Section 9.9 shall affect the right of
the Bank to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against the Borrower in any other jurisdiction.
9.10. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
9.11. Entire Agreement. This Agreement, together with all of the
----------------
other Loan Documents and all certificates and documents delivered hereunder or
thereunder, embodies the entire agreement of the parties and supersedes all
prior agreements and understandings, whether oral or written, relating to the
subject matter hereof.
9.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY
--------------------
RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
90
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR ACTION OF ANY PARTY HERETO.
91
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.
INLAND REFINING INC.
By:________________________________
Name:
Title:
BANQUE PARIBAS
By:________________________________
Name:
Title:
By:________________________________
Name
Title:
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