EXHIBIT 10.3
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
JENS' OIL FIELD SERVICE, INC.,
AND
▇▇▇▇▇ FARGO CREDIT, INC.
Dated as of: February 1, 2002
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CREDIT AND SECURITY AGREEMENT
Dated as of February 1, 2002
JENS' OIL FIELD SERVICE, INC., a Texas corporation (the "Borrower") and
▇▇▇▇▇ FARGO CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree
as follows:
ARTICLE I
Definitions
Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including each and every right of the Borrower to
the payment of money, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes or
other liabilities, or otherwise arises under any contract or agreement,
whether such right to payment is created, generated or earned by the
Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment may be
evidenced, together with all other rights and interests (including all
Liens) which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or other obligor;
all including but not limited to all present and future accounts,
contract rights, loans and obligations receivable, chattel papers,
bonds, notes and other debt instruments, tax refunds and rights to
payment in the nature of general tangibles.
"Acquisition Documents" means the Stock Purchase Agreement of
even date herewith, by and between ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇▇▇▇,
and the Noncompetition Agreement, Employment Agreement, Security
Agreement, and Seller Note executed in connection therewith.
"Adjusted Working Capital" means current assets of the Borrower less the sum
of (i) cash, (ii) marketable securities, and (iii) current liabilities
(including the current portion of interest bearing debt).
"Advance" means a Revolving Advance, the Term Advance or the
Real Estate Advance.
"Affiliate" or "Affiliates" means ▇▇▇▇▇-▇▇▇▇▇▇▇▇, Strata,
Mountain Compressed Air, and any other Person controlled by, controlling
or under common control with the Borrower, including (without
limitation) any Subsidiary of the Borrower. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as further
amended, supplemented or restated from time to time.
"▇▇▇▇▇-▇▇▇▇▇▇▇▇" means ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Corporation, a Delaware
corporation.
"Applicable Law" means the law of the state designated in
Section 9.13 hereof as the state whose laws shall govern this Agreement,
or, if a court of competent jurisdiction determines that the law of any
other jurisdiction applies to the determination of whether the rate of
interest payable under this Agreement and the Notes is usurious, the law
of such jurisdiction.
"Availability" means the difference between (i) the Borrowing
Base, less (ii) the sum of (A) the outstanding principal balance of the
Revolving Note and (B) the L/C Amount.
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"Banking Day" means a day other than a Saturday, Sunday or other
day on which banks are generally not open for business in San Antonio,
Texas or Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from
time to time by ▇▇▇▇▇ Fargo Bank at its principal office in San
Francisco as its "prime rate", with the understanding that the "prime
rate" is one of ▇▇▇▇▇ Fargo's base rates (not necessarily the lowest of
such rates) and serves as the basis upon which effective rates of
interest are calculated for loans making reference thereto.
"Book Net Worth" of any Person means the aggregate of the common
and preferred stockholders' equity in such Person, determined in
accordance with GAAP, excluding all receivables from Affiliates.
"Borrowing Base" means, at any time and subject to change from
time to time in the Lender's sole discretion, the lesser of:
the Maximum Line; or
80% of Eligible Accounts.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital asset,
or for the lease of any other asset whether payable currently or in the
future.
"Change in Adjusted Working Capital" for any fiscal year means
the difference between the Borrower's Adjusted Working Capital as of the
last day of such fiscal year less the Borrower's Adjusted Working
Capital as of the last day of the immediately preceding fiscal year.
"Collateral" means all of the Borrower's Accounts, chattel
paper, deposit accounts, documents, Equipment, General Intangibles,
goods, instruments, Inventory, Investment Property, letter-of-credit
rights, letters of credit, all sums on deposit in any Collateral
Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing;
(ii) in the case of all goods, all accessions; (iii) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any goods; (iv) all warehouse
receipts, bills of lading and other documents of title now or hereafter
covering such goods; (v) all collateral subject to the Lien of any
Security Document; (vi) any money, or other assets of the Borrower that
now or hereafter come into the possession, custody, or control of the
Lender; (vii) all sums on deposit in the Special Account; (viii) the
Real Estate; and (ix) proceeds of any and all of the foregoing.
"Collateral Account" means the "Lender Account" as such term is
defined in the Lockbox Agreement.
"Commitment" means the Lender's commitment to make Advances to
or for the account of the Borrower pursuant to Article II.
"Contribution Agreement" means the Contribution Agreement of
even date herewith, by ▇▇▇▇▇-▇▇▇▇▇▇▇▇ for the benefit of the Lender.
"Credit Facility" means the credit facility being made available
to the Borrower by the Lender pursuant to Article II.
"Current Maturities of Long Term Debt" for any Person for any
period means the amount of such Person's long-term debt and capitalized
leases which became due during such period.
"Debt" means of a Person as of a given date, all items of
indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities as shown on the liabilities
side of a balance sheet for such Person and shall also include the
aggregate payments required to be made by such Person at any time under
any lease that is considered a capitalized lease under GAAP.
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"Debt Service Coverage Ratio" for any period means the ratio of
(i) the sum of (A) Funds From Operations and (B) Interest Expense minus
(C) Capital Expenditures to (ii) the sum of (A) Current Maturities of
Long Term Debt and (B) Interest Expense, each for such period.
"Deed of Trust" means that certain Combined Trust Deed, Security
Agreement, Assignment of Rents and Fixture Financing Statement, of even
date herewith, executed by the Borrower for the benefit of the Lender as
security for the Obligations.
"Default" means an event that, with giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first
day of any month during which a Default or Event of Default has occurred
and ending on the date the Lender notifies the Borrower in writing that
such Default or Event of Default has been cured or waived.
"Default Rate" means, with respect to Revolving Advances, an
annual rate equal to three percent (3%) over the Revolving Floating
Rate, which rate shall change when and as the Revolving Floating Rate
changes, and with respect to the Term Advance or the Real Estate
Advance, an annual rate equal to three percent (3%) over the Term
Floating Rate, which rate shall change when and as the Term Floating
Rate changes.
"EBITDA" means net income before interest, taxes, depreciation,
amortization, and extraordinary gains, as determined in accordance with
GAAP.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
That portion of Accounts unpaid 90 days or more after
the invoice date;
That portion of Accounts that is disputed or subject to
a claim of offset or a contra account;
That portion of Accounts for services not yet performed
by the Borrower, including quarterly and annual ▇▇▇▇▇▇▇▇ under
software maintenance agreements, and all Accounts not yet
billed;
Accounts owed by any unit of the United States
government (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government for which the Borrower has provided evidence
satisfactory to the Lender that (A) the Lender has a first
priority perfected security interest and (B) such Accounts may
be enforced by the Lender directly against such unit of
government under all applicable laws);
Accounts owed by any account debtor located outside the
United States and Canada that are not backed by a bank letter of
credit naming the Lender as beneficiary or assigned to the
Lender, in the Lender's possession or control, and with respect
to which a control agreement concerning the letter-of-credit
rights is in effect, and acceptable to the Lender in all
respects, in its sole discretion;
Accounts owed by an account debtor that is insolvent,
the subject of bankruptcy proceedings or has gone out of
business;
Accounts owed by a shareholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
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Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any lien,
security interest or claim in favor of any Person other than the
Lender including without limitation any payment or performance
bond;
That portion of Accounts that has been restructured,
extended, amended or modified;
That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 25% or more of the total amount
due under Accounts from such debtor is ineligible under clauses
(i), (ii) or (ix) above;
That portion of the aggregate Accounts of any account
debtor (including Affiliates thereof) that exceeds 15% of the
Borrower's aggregate Accounts; and
Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Energy Capital" means ▇▇▇▇▇ Fargo Energy Capital, Inc., a Texas
corporation.
"Energy Group" means ▇▇▇▇▇ Fargo Bank Texas, N.A.
"Environmental Law" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all present and future machinery, vehicles,
furniture, fixtures, manufacturing equipment, shop equipment, office and
recordkeeping equipment, parts, tools, supplies, and including
specifically (without limitation) the goods described in any equipment
schedule or list herewith or hereafter furnished to the Lender by the
Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning specified in Section 8.1.
"Free Cash Flow" for any fiscal year means EBITDA for such fiscal year
less the sum of (i) interest payments; (ii) scheduled principal payments
on the Term Note, the Real Estate Note and the Seller Note; (iii) taxes;
(iv) Changes in Adjusted Working Capital; and (v) unfinanced Capital
Expenditures, each for such fiscal year.
"Funding Date" has the meaning specified in Section 2.1.
"Funds From Operations" for a Person for a given period means
the sum of such Person's (i) Net Income, (ii) depreciation and
amortization, (iii) deferred income taxes, and (iv) other non-cash
items, each as determined for such period in accordance with GAAP.
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"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use the
Borrower's name, and the goodwill of the Borrower's business.
"Guarantors" means the Individual Guarantor and the
Organizational Guarantors.
"Hazardous Substance" has the meaning specified in Section 5.12.
"Individual Guarantor" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇.
"Intangible Assets" means all intangible assets as determined in
accordance with GAAP and including intellectual property rights,
goodwill, accounts due from Affiliates, Directors, Officers or
employees, prepaid expenses, deposits, deferred charges or treasury
stock or any securities or Debt of the Borrower or any other securities
unless the same are readily marketable in the United States or entitled
to be used as a credit against federal income tax liabilities,
non-compete agreements and any other assets designated from time to time
by the Lender, in its sole discretion.
"Interest Expense" of a Person means, for a fiscal year-to-date
period, such Person's total gross interest expense during such period
(excluding interest income), and shall in any event include, without
limitation (i) interest expensed (whether or not paid) on all Debt, (ii)
the amortization of debt discounts, (iii) the amortization of all fees
payable in connection with the incurrence of Debt to the extent included
in interest expense, and (iv) the portion of any capitalized lease
obligation allocable to interest expense.
"Inventory" of a Borrower means all of the Borrower's inventory,
as such term is defined in the UCC, whether now owned or hereafter
acquired, whether consisting of whole goods, spare parts or components,
supplies or materials, whether acquired, held or furnished for sale, for
lease or under service contracts or for manufacture or processing, and
wherever located.
"Issuer" means the issuer of any Letter of Credit.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"▇▇▇▇ ▇▇▇▇▇▇▇▇▇" means ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit for the Borrower's account
and (ii) the unpaid amount of the Obligation of Reimbursement for the
Borrower.
"L/C Application" means an application and agreement for letters
of credit in a form acceptable to the Issuer and the Lender.
"L/C Sublimit" means $200,000.
"Letter of Credit" has the meaning specified in Section 2.2.
"Loan Documents" means this Agreement, the Notes and the
Security Documents.
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"Lockbox" has the meaning given in the Lockbox and Collection
Account Agreement.
"Lockbox Agreement" means the Lockbox and Collection Account
Agreement by and among the Borrower, ▇▇▇▇▇ Fargo Bank, Regulus West, LLC
and the Lender, of even date herewith.
"Maturity Date" means February 1, 2005.
"Maximum Line" means $1,000,000.
"Mexican Equipment" means the equipment listed on Exhibit D.
"Mountain Compressed Air" means Mountain Compressed Air, Inc., a
Texas corporation.
"Net Income" means fiscal year-to-date after-tax net income from
continuing operations (after overhead allocations from ▇▇▇▇▇-▇▇▇▇▇▇▇▇,
if any), less any deferred income tax benefit, as determined in
accordance with GAAP.
"Non-Compete Note" means Borrower's promissory note, of even
date herewith, payable to the order of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the original
principal amount of $1,000,000.
"Note" means the Term Note, the Real Estate Note or the
Revolving Note; and "Notes" means the Term Note, the Real Estate Note
and the Revolving Note.
"Obligations" means each and every debt, liability and
obligation of every type and description which the Borrower may now or
at any time hereafter owe to the Lender (including, without limitation,
pursuant to that certain Guaranty of the obligations of Jens to the
Lender, of even date herewith, by the Borrower in favor of the Lender)
whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it arises in a transaction involving the
Lender alone or in a transaction involving other creditors of the
Borrower, and whether it is direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and
including specifically, but not limited to, the Obligation of
Reimbursement of the Borrower, all indebtedness of the Borrower arising
under this Agreement, any Note of the Borrower, any L/C Application
completed by the Borrower, or any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or
hereafter entered into.
"Obligation of Reimbursement" has the meaning given in Section
2.3(a).
"Organizational Guarantors" means ▇▇▇▇▇-▇▇▇▇▇▇▇▇ and Strata.
"Permitted Liens" has the meaning specified in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for either of the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in Exhibit C attached hereto.
"Real Estate" means that certain real estate of the Borrower
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, as more fully
described in the Deed of Trust.
"Real Estate Advance" has the meaning specified in Section
2.6(b).
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"Real Estate Note" means the Borrower's promissory note payable
to the order of the Lender in substantially the form of Exhibit A-3
hereto.
"Reportable Event" shall have the meaning assigned to that term
in Title IV of ERISA.
"Revolving Advance" means an advance to the Borrower by the
Lender pursuant to Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the sum
of the Base Rate plus one and one-half percent (1.5%), which annual rate
shall change when and as the Base Rate changes.
"Revolving Note" means the Borrower's promissory note payable to
the order of the Lender in substantially the form of Exhibit A-1.
"Security Documents" means this Agreement, any Collateral
Account Agreement, any Lockbox Agreement, any Deed of Trust and any
other document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, supplemented or
restated from time to time.
"Security Interest" has the meaning specified in Section 3.1.
"Seller Note" means the Borrower's promissory note, of even date
herewith, payable to the order of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the original
principal amount of $4,000,000.
"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Section 2.4.
"Strata" means Strata Directional Technology, Inc., a Texas
corporation.
"Strata Credit Agreement" means that certain Amended and
Restated Credit Agreement, of even date herewith, by and between Strata
and the Lender.
"Subsidiary" of the Borrower means any corporation of which more
than 50% of the outstanding shares of capital stock having general
voting power under ordinary circumstances to elect a majority of the
board of directors of such corporation, irrespective of whether or not
at the time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries of the Borrower, or by one or more other
Subsidiaries of the Borrower.
"Tangible Net Worth" means the difference between Book Net Worth
and Intangible Assets.
"Term Advance" has the meaning specified in Section 2.6(a).
"Term Floating Rate" means an annual rate equal to the sum of
the Base Rate plus one and one-half percent (1.5%), which annual rate
shall change when and as the Base Rate changes.
"Term Note" means the Borrower's promissory note payable to the
order of the Lender in substantially the form of Exhibit A-2.
"Termination Date" means the earliest of (i) the Maturity Date,
(ii) the date that the Borrower terminates the Credit Facilities, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
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Other Definitional Terms; Rules of Interpretation. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP. All terms defined in the UCC
and not otherwise defined herein have the meanings assigned to them in the UCC.
References to Articles, Sections, subsections, Exhibits, Schedules and the like,
are to Articles, Sections and subsections of, or Exhibits or Schedules attached
to, this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". Defined terms
include in the singular number the plural and in the plural number the singular.
Reference to any agreement (including the Loan Documents), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Loan Documents),
except where otherwise explicitly provided, and reference to any promissory note
includes any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor. Reference to any law, rule, regulation,
order, decree, requirement, policy, guideline, directive or interpretation means
as amended, modified, codified, replaced or reenacted, in whole or in part, and
in effect on the determination date, including rules and regulations promulgated
thereunder."
Amount and Terms of the Credit Facility
Revolving Advances. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make advances to the Borrower from time to time
from the date all of the conditions set forth in Section 4.1 are satisfied (the
"Funding Date") to the Termination Date, on the terms and subject to the
conditions herein set forth. The Lender shall have no obligation to make a
Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances would exceed the
Borrowing Base less the L/C Amount. The Borrower's obligation to repay the
Revolving Advances shall be evidenced by the Revolving Note. All Revolving
Advances shall be secured by the Collateral as provided in Article III. Within
the limits set forth in this Section 2.1, the Borrower may borrow, prepay
pursuant to Section 2.12 and reborrow. The Borrower agrees to comply with the
following procedures in requesting Revolving Advances under this Section 2.1:
Each request for a Revolving Advance shall be made before 11:00
a.m. (San Antonio time) of the day of the requested Revolving Advance. Requests
may be made in writing or by telephone, specifying the date of the requested
Revolving Advance and the amount thereof. Each request shall be by (i) any
authorized officer of the Borrower; or (ii) any person designated as the
Borrower's agent by any authorized officer of the Borrower in a writing
delivered to the Lender; or (iii) any person whom the Lender reasonably believes
to be an authorized officer of the Borrower or such a designated agent.
Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested Revolving
Advance by crediting the same to the Borrower's demand deposit account
maintained with ▇▇▇▇▇ Fargo unless the Lender and the Borrower shall agree in
writing to another manner of disbursement. Upon the Lender's request, the
Borrower shall promptly confirm each telephonic request for a Revolving Advance
by executing and delivering an appropriate confirmation certificate to the
Lender. The Borrower shall repay all Revolving Advances even if the Lender does
not receive such confirmation and even if the person requesting an Revolving
Advance was not in fact authorized to do so. Any request for a Revolving
Advance, whether written or telephonic, shall be deemed to be a representation
by the Borrower that the conditions set forth in Section 4.2 have been satisfied
as of the time of the request.
Letters of Credit.
The Lender agrees, on the terms and subject to the conditions
herein set forth, to cause an Issuer to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary letters of
credit (each, a "Letter of Credit") for the Borrower's account. The Lender shall
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have no obligation to cause an Issuer to issue any Letter of Credit for the
account of the Borrower if the face amount of the Letter of Credit to be issued
would exceed the lesser of: (i) the L/C Sublimit less the L/C Amount, or (ii)
Availability. Each Letter of Credit, if any, shall be issued pursuant to a
separate L/C Application entered into by the Borrower and the Lender for the
benefit of the Issuer, completed in a manner satisfactory to the Lender and the
Issuer. The terms and conditions set forth in each such L/C Application shall
supplement the terms and conditions hereof, but if the terms of any such L/C
Application and the terms of this Agreement are inconsistent, the terms hereof
shall control.
No Letter of Credit shall be issued with an expiry date later
than the Maturity Date in effect as of the date of issuance.
Any request to cause an Issuer to issue a Letter of Credit under
this Section 2.2 shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the date of the
request.
Payment of Amounts Drawn Under Letters of Credit; Obligation of
Reimbursement. The Borrower acknowledges that the Lender, as co-applicant, will
be liable to the Issuer for reimbursement of any and all draws under Letters of
Credit and for all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower agrees to pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:
The Borrower hereby agrees to pay the Lender on the day a draft
is honored under any Letter of Credit for the account of the Borrower a sum
equal to all amounts drawn under such Letter of Credit plus any and all
reasonable charges and expenses that the Issuer or the Lender may pay or incur
relative to such draw and the applicable L/C Application, plus interest on all
such amounts, charges and expenses as set forth below (the Borrower's obligation
to pay all such amounts is herein referred to as the Borrower's "Obligation of
Reimbursement").
If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period then exists or for any other
reason, to obtain a Revolving Advance to pay its Obligation of Reimbursement,
the Borrower shall pay to the Lender on demand and in immediately available
funds, the amount of the Obligation of Reimbursement together with interest,
accrued from the date of the draft until payment in full at the Default Rate.
Notwithstanding the Borrower's inability to obtain a Revolving Advance for any
reason, the Lender is irrevocably authorized, in its sole discretion, to make a
Revolving Advance in an amount sufficient to discharge the Obligation of
Reimbursement and all accrued but unpaid interest thereon.
The Borrower's obligation to pay any Revolving Advance made
under this Section 2.3, shall be evidenced by the Revolving Note and shall bear
interest as provided in Section 2.8.
Special Account. If the Credit Facility is terminated for any reason
whatsoever while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. Amounts on
deposit in the Special Account may be applied by the Lender at any time or from
time to time to the Obligations in the Lender's sole discretion, and shall not
be subject to withdrawal by the Borrower so long as the Lender maintains a
security interest therein. The Lender agrees to transfer any balance in the
Special Account to the Borrower at such time as the Lender is required to
release its security interest in the Special Account under applicable law.
Obligations Absolute. The Borrower's obligations arising under Section
2.3 shall be absolute, unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of Section 2.3, under all circumstances whatsoever,
including (without limitation) the following circumstances:
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any lack of validity or enforceability of any Letter of Credit
or any other agreement or instrument relating to any Letter of Credit
(collectively the "Related Documents");
any amendment or waiver of or any consent to departure from all
or any of the Related Documents;
the existence of any claim, setoff, defense or other right which
the Borrower may have at any time, against any beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom any such beneficiary
or any such transferee may be acting), or other person or entity, whether in
connection with this Agreement, the transactions contemplated herein or in the
Related Documents or any unrelated transactions;
any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
payment by or on behalf of the Issuer or the Lender under any
Letter of Credit against presentation of a draft or certificate which does not
strictly comply with the terms of such Letter of Credit; or
any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Term Advance; Real Estate Advance.
Term Advance. The Lender agrees, on the terms and subject to the
conditions herein set forth, to make a single advance to the Borrower on the
Funding Date in an amount equal to $4,042,396 (the "Term Advance"). The
Borrower's obligation to pay the Term Advance shall be evidenced by the Term
Note and shall be secured by the Collateral as provided in Article III. Upon
fulfillment of the applicable conditions set forth in Article IV, the Lender
shall deposit the proceeds of the Term Advance by crediting the same to the
Borrower's demand deposit account specified in Section 2.1(b) unless the Lender
and the Borrower shall agree in writing to another manner of disbursement.
Real Estate Advance. The Lender agrees on the terms and subject
to the conditions herein set forth to make a single advance to the Borrower on
the Funding Date in the amount of $532,000 (the "Real Estate Advance"). The
Borrower's obligation to pay the Real Estate Advance shall be evidenced by the
Real Estate Note and shall be secured by the Collateral as provided in Article
III. Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall deposit the proceeds of the requested Real Estate Advance by
crediting the same to the Borrower's demand deposit account specified in Section
2.1(b) unless the Lender and the Borrower shall agree in writing to another
manner of disbursement.
Payment of Term Note and Real Estate Note.
Term Note. The outstanding principal balance of the Term Note
shall be due and payable as follows:
In monthly installments commencing on March 1, 2002, and
continuing on the first day of each month thereafter, in an
amount equal to the greater of (1) $67,373.27 or (2) an amount
sufficient to fully amortize the remaining principal balance of
the Term Note over a period ending on February 1, 2007;
In addition to the foregoing, on June 30, 2003, and on
each June 30 thereafter, in an amount equal to 50% of the
Borrower's Free Cash Flow for the immediately preceding fiscal
year,
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which amount shall be applied by the Lender to the Obligations
in such order and in such amounts as the Lender, in its
discretion, may from time to time determine;
In addition to the foregoing, within 30 days of any
equity contribution to the Borrower, in an amount equal to 100%
of such equity contribution, which amount shall be applied by
the Lender to the Obligations in such order and in such amounts
as the Lender, in its discretion, may from time to time
determine; and
On the earlier of the Maturity Date or February 1, 2007,
the entire unpaid principal balance of the Term Note, and all
unpaid interest accrued thereon, shall in any event be due and
payable.
Real Estate Note. The outstanding principal balance of the Real
Estate Note shall be due and payable as follows:
In monthly installments commencing on March 1, 2002, and
on the first day of each month thereafter, in an amount equal to
the greater of (1) $14,777.78 or (2) an amount sufficient to
fully amortize the remaining principal balance of the Real
Estate Note over a period ending on February 1, 2005.
On the earlier of the Maturity Date or February 1, 2005,
the entire unpaid principal balance of the Real Estate Note, and
all unpaid interest accrued thereon, shall in any event be due
and payable.
Interest; Default Interest; Usury.
Revolving Note. Except as set forth in Sections 2.8(e) and
2.8(g) hereof, the outstanding principal balances of the Revolving Note shall
bear interest at the Revolving Floating Rate.
Term Note. Except as set forth in Sections 2.8(e) and 2.8(g)
hereof, the outstanding principal balances of the Term Note shall bear interest
at the Term Floating Rate.
Real Estate Note. Except as set forth in Sections 2.8(e) and
2.8(g) hereof, the outstanding principal balances of the Real Estate Note shall
bear interest at the Term Floating Rate.
Minimum Interest Charge. Notwithstanding the interest payable
pursuant to Sections 2.8(a), 2.8(b) and 2.8(c), the Borrower agrees to pay to
the Lender interest of not less than the following amounts: (i) $300,000 during
the calendar year ending December 31, 2002, (ii) $200,000 during the calendar
year ending December 31, 2003, and (ii) $150,000 during the calendar year ending
December 31, 2004 and each calendar year thereafter during the term of this
agreement (prorated for periods less than one year) (the "Minimum Interest
Charge"), and the Borrower shall pay any deficiency between the Minimum Interest
Charge and the amount of interest otherwise calculated under Sections 2.8(a),
2.8(b), 2.8(c) and 2.8(e) annually in arrears in the manner provided in Section
2.15.
Default Interest Rate. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Advances outstanding from time to time shall bear
interest at the Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.
Participations. If any Person shall acquire a participation in
the Advances under this Agreement, the Borrower shall be obligated to the Lender
to pay the full amount of all interest calculated under, along with all other
fees, charges and other amounts due under this Agreement, regardless if such
Person elects to accept interest with respect to its participation at a lower
rate than the Revolving Floating Rate or the Term Floating Rate, or otherwise
elects to accept less than its pro rata share of such fees, charges and other
amounts due under this Agreement.
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Maximum Rate.
Notwithstanding the other provisions of this Agreement
or of any Note regarding interest and rates of interest, it is
the intent of the Lender and the Borrower that the execution,
delivery and performance of all Loan Documents, the transactions
provided for therein and contemplated thereby, and all matters
incidental and related thereto and arising therefrom, shall
comply and conform strictly with any governing law from time to
time in effect, including usury laws. In furtherance thereof,
the Lender and the Borrower stipulate and agree that none of the
terms and provisions contained in, or pertaining to, the Loan
Documents shall ever be construed to create a contract to pay
for the use or forebearance or detention of money with interest
at a rate or in an amount in excess of the maximum amount of
interest permitted or allowed to be contracted for, charged,
received, taken or reserved under said laws (the "Maximum
Rate"). For purposes of each Loan Document, (x) "interest" shall
include the aggregate of all amounts which constitute or are
deemed to constitute interest under Applicable Law, that are
contracted for, chargeable, receivable (whether received or
deemed to have been received), taken or reserved under each such
document, and (y) all computations of the Maximum Rate will be
made on the basis of the actual number of days elapsed over a
365 or 366 day year, whichever is applicable. Neither the
Borrower nor any other Person shall ever be required to pay
unearned interest on, or with respect to any of, the Loan
Documents and shall never be required to pay interest on, or
with respect to any of, the Loan Documents at a rate or in an
amount in excess of the Maximum Rate, AND THE PROVISIONS OF THIS
PARAGRAPH SHALL CONTROL OVER ALL OTHER PROVISIONS OF THE LOAN
DOCUMENTS. If the effective rate or amount of interest which
would otherwise be payable under the Loan Documents would exceed
the Maximum Rate, or in the event the Lender or any holder of
any Note or other Obligation shall charge, contract for, take,
reserve or receive monies that are deemed to constitute interest
which would, in the absence of this provision, increase the
effective rate or amount of interest payable under the Loan
Documents to a rate or amount in excess of the Maximum Rate,
then the principal amount of such Note or other Obligation or
the amount of interest which would otherwise be payable
thereunder shall be payable at, or reduced to, as applicable,
the Maximum Rate, and all such monies so charged, contracted
for, received, taken or reserved that are deemed to constitute
interest in excess of the Maximum Rate shall be immediately
credited to such Note or Obligation or, if such Note or
Obligation has been paid in full, returned or credited to the
account of the Borrower upon such determination, and, in any
event, the Lender shall not be subject to any penalties provided
by any laws for contracting for, charging, taking, reserving or
receiving interest in excess of the Maximum Rate. All amounts
paid or agreed to be paid in connection with any Note or other
Obligation which would under Applicable Law be deemed "interest"
or if not so deemed, would be deemed an amount that would be
included in the calculation of the Maximum Rate shall, to the
extent necessary to prevent such amount from exceeding the
Maximum Rate and to the maximum extent not prohibited by
Applicable Law, be amortized, prorated, allocated and spread
through the full term of this Agreement or such Note or other
Obligation, as the case may be.
Notwithstanding the other provisions of this Agreement
or of any Note regarding interest and rates of interest, if at
any time or for any period the otherwise applicable rate or
amount of interest provided for herein or therein (without
reference to the Maximum Rate limitations of this Agreement)
with respect to any Note or other Obligation would exceed the
Maximum Rate then the amount and rate of interest on such Loan
or other Obligation shall be limited to the Maximum Rate at such
time or during such period, and at all times thereafter
(including periods during which any or all of such applicable
rate(s) of interest otherwise provided for herein would be less
than the Maximum Rate), the interest rate on such Note or other
Obligation shall (while such Note or Obligation remains
outstanding) continue and remain at (but shall not exceed) the
Maximum Rate until the total amount of interest accrued on such
Note or other Obligation equals the amount of interest which
would have accrued thereon if the applicable rate of interest
otherwise provided for herein (without reference to the Maximum
Rate limitation) had at all times been in effect; provided
further, that in no event shall the aggregate of all interest
charged, received, contracted for, payable or paid in connection
with the any Note or other Obligation exceed an amount equal to
interest on such Note or other Obligation during the period such
are outstanding,
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incurred or existing at the Maximum Rate, so long (and for such
periods) as the Maximum Rate shall be applicable to this
Agreement and the transaction contemplated hereby. If, at
maturity or final payment of any Note or other Obligation, as
applicable, the total amount of interest paid or accrued on such
Note or other Obligation under the foregoing provisions is less
than the total amount of interest which would have been paid or
accrued if the applicable contractual rate of interest provided
for herein (without limitation to the Maximum Rate) had at all
times been in effect, then the Borrower agrees, to the fullest
extent permitted by and in compliance with Applicable Law, to
pay an amount equal to the difference between (x) the lesser of
(A) the amount of interest which would have been paid or accrued
on such Note or other Obligation, as applicable, if the Maximum
Rate had at all times been in effect and (B) the amount of
interest which would have been paid or accrued on such Note or
other Obligation, as applicable, if a rate per annum equal to
the applicable contractual rate of interest provided for herein
(without limitation to the Maximum Rate) had at all times been
in effect, and (y) the amount of interest paid or accrued in
accordance with the other provisions of such Note or other
Obligation, as applicable.
Fees.
Closing Fee. Borrower hereby agrees to pay the Lender a fully
earned and non-refundable closing fee of $90,000, due and payable upon the
execution of this Agreement.
Unused Line Fee. For the purposes of this Section 2.9(b),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee at the
rate of one-half of one percent (0.5%) per annum on the average daily Unused
Amount from the date of this Agreement to and including the Termination Date,
due and payable monthly in arrears on the first day of the month and on the
Termination Date.
Letter of Credit Fees. The Borrower agrees to pay the Lender a
fee with respect to each Letter of Credit issued on account of the Borrower, if
any, accruing on a daily basis and computed at the annual rate of three and
one-half percent (3.5%) of the aggregate amount that may then be drawn on such
Letter of Credit assuming compliance with all conditions for drawing thereunder
(the "Aggregate Face Amount"), from and including the date of issuance of such
Letter of Credit until such date as such Letter of Credit shall terminate by its
terms or be returned to the Lender, due and payable monthly in arrears on the
first day of each month and on the Termination Date; provided, however that
during Default Periods, in the Lender's sole discretion and without waiving any
of its other rights and remedies, such fee shall increase to six and one-half
percent (6.5%) of the Aggregate Face Amount. The foregoing fee shall be in
addition to any and all fees, commissions and charges of any Issuer of a Letter
of Credit with respect to or in connection with such Letter of Credit.
Letter of Credit Administrative Fees. The Borrower agrees to pay
the Lender, on written demand, the administrative fees charged by the Issuer in
connection with the honoring of drafts under any Letter of Credit issued on
account of the Borrower, amendments thereto, transfers thereof and all other
activity with respect to such Letters of Credit at the then-current rates
published by the Issuer for such services rendered on behalf of customers of the
Issuer generally.
Audit Fees. The Borrower agrees to pay the Lender, on demand,
audit fees in connection with any audits or inspections conducted by the Lender
of any Collateral or the Borrower's operations or business at the rates
established from time to time by the Lender as its audit fees (which fees are
currently $750 per day per auditor, together with all actual out-of-pocket costs
and expenses incurred in conducting any such audit or inspection).
Computation of Interest and Fees; When Interest Due and Payable.
Interest accruing on the outstanding principal balance of the Advances and fees
hereunder outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of 360 days. Interest shall be payable in
arrears on the first day of each month and on the Termination Date.
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; Increased Costs and Reduced Return. If any Related
Lender determines at any time that its Return has been reduced as a result of
any Rule Change, the Borrower agrees to pay such Related Lender the amount
necessary to restore its Return to what it would have been had there been no
Rule Change. For purposes of this Section 2.11:
"Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the force of
law, that applies to any Related Lender. Such rules include rules requiring
financial institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters of
credit.
"L/C Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding letters of credit, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the force of
law, that applies to any Related Lender. Such rules include rules imposing
taxes, duties or other similar charges, or mandating reserves, special deposits
or similar requirements against assets of, deposits with or for the account of,
or credit extended by any Related Lender, on letters of credit.
"Return", for any period, means the return as determined by such
Related Lender on the Advances based upon its total capital requirements and a
reasonable attribution formula that takes account of the Capital Adequacy Rules
then in effect. Return may be calculated for each calendar quarter and for the
shorter period between the end of a calendar quarter and the date of termination
in whole of this Agreement.
"Rule Change" means any change in any Capital Adequacy Rule or
L/C Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date are
scheduled to take place under the existing Capital Adequacy Rules or L/C Rules
or any increases in the capital that any Related Lender is required to maintain
to the extent that the increases are required due to a regulatory authority's
assessment of the financial condition of such Related Lender.
"Related Lender" includes (but is not limited to) the Lender,
any parent corporation of the Lender and any assignee of any interest of the
Lender hereunder and any participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.11, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Voluntary Prepayment; Reduction of the Maximum Line; Termination of the
Credit Facility by the Borrower. Except as otherwise provided herein, the
Borrower may prepay the Advances in whole at any time or from time to time in
part. The Borrower may prepay the Term Advance (other than in accordance with
Section 2.7(a)) or the Real Estate Advance (other than in accordance with
Section 2.7(b)), terminate the Credit Facility or reduce the Maximum Line at any
time if it (i) gives the Lender at least 30 days' prior written notice and (ii)
pays the Lender the prepayment, termination or line reduction fee in accordance
with Section 2.13. Any prepayment of the Term Advance (other than in accordance
with Section 2.7(a)) or the Real Estate Advance (other than in accordance with
Section 2.7(b)) or reduction in a Maximum Line must be in an amount equal to
$100,000 or an integral multiple thereof. If the Borrower reduces the Maximum
Line to zero, all Obligations of the Borrower shall be immediately due and
payable. Upon termination of the Credit Facility and payment and performance of
all Obligations, the Lender shall release or terminate the Security Interest and
the Security Documents to which the Borrower is entitled by law.
Termination, Line Reduction and Prepayment Fees; Waiver of Termination,
Prepayment and Line Reduction Fees.
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Termination and Line Reduction Fees. Except as set forth in
subsection 2.13(c), if the Credit Facility is terminated for any reason
(including without limitation, upon termination or acceleration by the Lender)
as of a date other than the Maturity Date, or the Borrower reduces the Maximum
Line, the Borrower shall pay to the Lender a fee in an amount equal to a
percentage of the Maximum Line (or the amount of any such reduction, as the case
may be) as follows: (i) three percent (3.0%) if the termination or reduction
occurs on or before February 1, 2003, (ii) two percent (2.0%) if the termination
or reduction occurs after February 1, 2003 but on or before February 1, 2004,
and (iii) one percent (1.0%) if the termination or reduction occurs after
February 1, 2004 but on or before the Maturity Date.
Prepayment Fees. Except as set forth in subsection 2.13(c), if
any of the Term Note or the Real Estate Note is prepaid for any reason
(including without limitation, upon termination or acceleration by the Lender)
except in accordance with Sections 2.7(a) and 2.7(b), respectively, the Borrower
shall pay to the Lender a fee in an amount equal to a percentage of the amount
prepaid as follows: (i) three percent (3.0%) if the prepayment occurs on or
before February 1, 2003, (ii) two percent (2.0%) if the prepayment occurs after
February 1, 2003 but on or before February 1, 2004, and (iii) one percent (1.0%)
if the prepayment occurs after February 1, 2004 but on or before the Maturity
Date.
Waiver or Limitation of Termination, Line Reduction and
Prepayment Fees. A Borrower will not be required to pay the termination, line
reduction and prepayment fees otherwise due from it under this Section 2.13 if
such termination, line reduction or prepayment (i) is made because of
refinancing of the Borrower by an affiliate of the Lender, or (ii) results from
application by the Lender of insurance proceeds or condemnation proceeds to
prepay the Term Advance or the Real Estate Advance.
Mandatory Prepayment. Without notice or demand, if the outstanding
principal balance of the Revolving Advances made plus the L/C Amount shall at
any time exceed the Borrowing Base, the Borrower shall immediately prepay such
Advances to the extent necessary to eliminate such excess. Any payment received
by the Lender under this Section 2.14 or under Section 2.12 may be applied to
the Obligations of the Borrower, in such order and in such amounts as the
Lender, in its discretion, may from time to time determine.
Payment. All payments to the Lender shall be made in immediately
available funds and shall be applied to the Obligations one (1) Banking Day
after receipt by the Lender. The Lender may hold all payments not constituting
immediately available funds for three (3) additional days before applying them
to the obligations. Notwithstanding anything in Section 2.1, the Borrower hereby
authorizes the Lender, in its discretion at any time or from time to time
without the Borrower's request and even if the conditions set forth in Section
4.2 would not be satisfied, to make an Advance to the Borrower in an amount
equal to the portion of the Obligations from time to time due and payable.
Payment on Non-Banking Days. Whenever any payment to be made hereunder
shall be stated to be due on a day which is not a Banking Day, such payment may
be made on the next succeeding Banking Day, and such extension of time shall in
such case be included in the computation of interest on the Advances or the fees
hereunder, as the case may be.
Use of Proceeds.
The Borrower shall use the proceeds of Revolving Advances for
ordinary working capital purposes.
The Borrower shall use the proceeds of each of the Term Advance
and the Real Estate Advance to make a loan to ▇▇▇▇▇-▇▇▇▇▇▇▇▇ to enable it to
purchase 81% of the issued and outstanding stock of the Borrower from ▇▇▇▇
▇▇▇▇▇▇▇▇▇ simultaneously with the funding of the Term Advance.
Liability Records. The Lender shall maintain from time to time, at its
discretion, liability records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establish the contrary.
Upon the Lender's demand, the Borrower will admit and certify in writing the
exact principal balance of the Obligations that the Borrower then asserts to be
outstanding. Any billing statement or accounting rendered by the
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Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
Security Interest; Occupancy; Setoff
Grant of Security Interest. The Borrower hereby pledges, assigns and
grants to the Lender a security interest (collectively referred to as the
"Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Notification of Account Debtors and Other Obligors. The Lender may at
any time during any Default Period notify any account debtor or other person
obligated to pay the amount due that such right to payment has been assigned or
transferred to the Lender for security and shall be paid directly to the Lender.
The Borrower will join in giving such notice if the Lender so requests. At any
time after the Borrower or the Lender gives such notice to an account debtor or
other obligor, the Lender may, but need not, in the Lender's name or in the
Borrower's name, (a) demand, ▇▇▇ for, collect or receive any money or property
at any time payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor; and (b) as
the Borrower's agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Assignment of Insurance. As additional security for the payment and
performance of the Obligations, the Borrower hereby assigns to the Lender any
and all monies (including, without limitation, proceeds of insurance and refunds
of unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
Occupancy.
The Borrower hereby irrevocably grants to the Lender the right
to take possession of the Premises at any time during a Default Period.
The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender may in good
▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes.
The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such goods
to purchasers.
The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises, the Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the Lender for, all
taxes, fees, duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or the provisions of
this Section 3.4.
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License. The Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all trademarks,
franchises, trade names, copyrights and patents of the Borrower for the purpose
of selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.
Financing Statement. The Borrower authorizes the Lender to file from
time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
Jens' Oil Field Service, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Name and address of Secured Party:
▇▇▇▇▇ Fargo Credit, Inc.
▇▇ ▇.▇. ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Setoff. The Borrower agrees that the Lender may at any time or from time
to time during any Default Period, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrower by the
Lender, whether or not due, against any Obligation, whether or not due.
Conditions of Lending
Conditions Precedent to the Advances. The Lender's obligation to make
the initial Advances hereunder shall be subject to the condition precedent that
the Lender shall have received all of the following, each in form and substance
satisfactory to the Lender:
This Agreement, properly executed by the Borrower.
The Notes, properly executed by the Borrower.
Separate certificates of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's directors and,
if required, shareholders, authorizing the execution, delivery and performance
of the Loan Documents and the Borrower's guaranty of Jens' Obligations to the
Lender, (ii) the Borrower's articles of incorporation and bylaws, and (iii) the
signatures of the Borrower's officers or agents authorized to execute and
deliver the Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's behalf.
Current certificates issued by the Secretary of State of the
Borrower's state of incorporation, certifying that the Borrower is in compliance
with all applicable organizational requirements of such state.
The Lockbox Agreement, properly executed by the Borrower.
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A certificate of an officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article V.
The Combination Deed of Trust, Security Agreement, Assignment of
Rents and Leases and Fixture Financing Statement properly executed by the
Borrower.
A copy of a Commitment to issue a Title Insurance Policy with
respect to the Real Estate, issued in the name of Lender.
Individual Guaranty of the Obligations of each of the Borrower
and Strata, properly executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇.
A Waiver of Interest, properly executed by the spouse of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇.
A Corporate Guaranty of the Obligations of the Borrower duly
executed by Strata.
A Corporate Guaranty of the Obligations of each of the Borrower
and Strata by ▇▇▇▇▇-▇▇▇▇▇▇▇▇.
A Security Agreement, properly executed by ▇▇▇▇▇-▇▇▇▇▇▇▇▇.
A Collateral Pledge Agreement, properly executed by
▇▇▇▇▇-▇▇▇▇▇▇▇▇.
A Contribution Agreement, properly executed by ▇▇▇▇▇-▇▇▇▇▇▇▇▇.
A certificate of ▇▇▇▇▇-▇▇▇▇▇▇▇▇' Secretary or Assistant
Secretary certifying as to (i) the resolutions of ▇▇▇▇▇-▇▇▇▇▇▇▇▇' directors and,
if required, shareholders, authorizing the execution, delivery, performance of
▇▇▇▇▇-▇▇▇▇▇▇▇▇' guaranty of the Borrower's Obligations to the Lender, (ii)
▇▇▇▇▇-▇▇▇▇▇▇▇▇' articles of incorporation and bylaws, and (iii) the signatures
of ▇▇▇▇▇-▇▇▇▇▇▇▇▇' officers or agents authorized to execute and deliver the
Guaranty and other instruments, agreements and certificates, on the Guarantor's
behalf.
Current certificates issued by the Secretary of State of
▇▇▇▇▇-▇▇▇▇▇▇▇▇' state of incorporation, certifying that ▇▇▇▇▇-▇▇▇▇▇▇▇▇ is in
compliance with all applicable organizational requirements of such state.
Certificates evidencing the insurance coverages required
hereunder, covering domestic equipment, with all hazard insurance containing a
lender's loss payable endorsement in the Lender's favor and with all liability
insurance naming the Lender as an additional insured.
A Landlord's Consent and Agreement with respect to, and true and
correct copies of any leases by which the Borrower is leasing, each of the
Premises.
Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect against the
Borrower, (ii) no financing statements or assignments of patents, trademarks or
copyrights have been filed and remain in effect against the Borrower except
those financing statements and assignments of patents, trademarks or copyrights
relating to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of patents,
trademarks or copyrights satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.
A Subordination Agreement, properly executed by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
for the benefit of the Lender.
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Separate Intercreditor Agreements, properly executed, by and
between the Lender and each of Energy Capital and Energy Group.
An opinion of counsel to the Borrower and the Guarantors,
addressed to the Lender.
Evidence that the Borrower has placed not less than $1,000,000
into a deposit account in the name of the Lender for the benefit of the
Borrower, which funds shall be used to pay all or part of the purchase price
adjustment due to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ under the Acquisition Documents.
Payment of the fees and commissions due through the date of the
initial Advance under Section 2.9 and expenses incurred by the Lender through
such date and required to be paid by the Borrower under Section 9.6, including
all legal expenses incurred through the date of this Agreement.
Evidence that ▇▇▇▇▇-▇▇▇▇▇▇▇▇ has received a $3,000,000 loan from
Energy Capital, with terms and conditions satisfactory to Lender.
Evidence that Availability will be not less than $500,000 after
payment for (i) the Jens stock purchase, (ii) 60-day trade payables, (iii) book
overdrafts and (iv) closing costs.
Satisfaction of any and all conditions precedent to Lender's
obligation to make the initial advances under the Strata Credit Agreement.
Such other documents as the Lender in its sole discretion may
require.
Conditions Precedent to All Advances. The Lender's obligation to make
each Advance shall be subject to the further conditions precedent that on such
date:
the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of such
date, except to the extent that such representations and warranties relate
solely to an earlier date; and
no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default.
Post-Funding Conditions. On or before March 5, 2002, the Borrower shall
provide to the Lender the following, each in form and substance acceptable to
the Lender in its sole discretion:
Evidence that WFCI has a perfected, first-priority security
interest in the Mexican Equipment.
A survey of the Real Estate sufficient to allow a title
insurance company to endorse over survey-related exemptions from the Commitment
required under Section 4.1(h).
Evidence of credit insurance covering accounts receivable owing
from Materiales y Equipos.
Certificates evidencing the insurance coverages required
hereunder, covering the Mexican Equipment, with all hazard insurance containing
a lender's loss payable endorsement in the Lender's favor.
Failure to provide the items required in subsections 4.3(a) or (b) on or
before such date shall constitute an Event of Default. Failure to provide
the items required in subsections 4.3(c) or (d) on or before such date shall
result in a fee of $1,000 per day until such items are provided, and failure
to provide such items on or before April 5, 2002 shall constitute an Event
of Default hereunder.
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Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Corporate Existence and Power; Name; Chief Executive Office; Inventory
and Equipment Locations; Tax Identification Number. Borrower is a corporation
duly incorporated, validly existing and in good standing under the law of the
State of Texas, and Borrower is duly licensed or qualified to transact business
in all jurisdictions where the character of the property owned or leased or the
nature of the business transacted by it makes such licensing or qualification
necessary. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents. During
its existence, the Borrower has done business solely under the names set forth
in Schedule 5.1 hereto. The Borrower's chief executive office and principal
place of business is located at the address set forth in Schedule 5.1 hereto,
and all of the Borrower's records relating to its business or the Collateral are
kept at that location. All Inventory and Equipment is located at that location
or at one of the other locations set forth in Schedule 5.1 hereto. The
Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
Authorization of Borrowing; No Conflict as to Law or Agreements. The
execution, delivery and performance by the Borrower of the Loan Documents and
the Borrower's Guaranty and the borrowings from time to time hereunder have been
duly authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of Borrower's articles of incorporation or bylaws; (iv) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
or (v) result in, or require, the creation or imposition of any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance of any
nature (other than the Security Interest) upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower.
Legal Agreements. This Agreement constitutes and, upon due execution by
the Borrower, the other Loan Documents will constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
Subsidiaries. Except as set forth in Schedule 5.4 hereto, the Borrower
has no Subsidiary.
Financial Condition; No Adverse Change. The Borrower has heretofore
furnished to the Lender its compiled financial statements for the fiscal year
ended December 31, 2000 and its unaudited financial statements for the fiscal
year-to-date period ended November 30, 2001 and those statements fairly present
the Borrower's financial condition of on the dates thereof and the results of
their operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principles. Except as set forth on
Schedule 5.5, since the date of the most recent financial statements, there has
been no material adverse change in the business, properties or condition
(financial or otherwise) of the Borrower.
Litigation. There are no actions, suits or proceedings pending or, to
the Borrower's knowledge, threatened against or affecting the Borrower or any of
its Affiliates or the properties of the Borrower or any of its Affiliates before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to the
Borrower or any of its Affiliates, would have a material adverse effect on the
financial condition, properties or operations of the Borrower or any of its
Affiliates.
Regulation U. 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 of the Board of Governors of the Federal
98
Reserve System), and no part of the proceeds of any Advance 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.
Taxes. The Borrower and its Affiliates have paid or caused to be paid to
the proper authorities when due all federal, state and local taxes required to
be withheld by them. The Borrower and its Affiliates have filed all federal,
state and local tax returns which to the knowledge of the officers of the
Borrower or any such Affiliate, as the case may be, are required to be filed,
and the Borrower and its Affiliates have paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due;
provided, however, that the Borrower shall not be required to pay the contested
portion of any such tax, assessment, charge or claim whose amount,
applicability, or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Titles and Liens. The Borrower has good and absolute title to all
Collateral described in the collateral reports provided to the Lender and all
other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for
Permitted Liens. No financing statement naming the Borrower as debtor is on file
in any office except to perfect only Permitted Liens.
Plans. Except as disclosed to the Lender in writing prior to the date
hereof, neither the Borrower nor any of its Affiliates maintains or has
maintained any Plan. Neither the Borrower nor any such Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
Any accumulated funding deficiency within the meaning of ERISA;
or
Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may become
payable to participants or beneficiaries of any such Plan).
Default. The Borrower is in compliance with all provisions of all
agreements, instruments, decrees and orders to which it is a party or by which
it or its property is bound or affected, the breach or default of which could
have a material adverse effect on the Borrower's financial condition, properties
or operations.
Environmental Matters.
Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Environmental Law" means any federal, state, local or
other governmental statute, regulation, law or ordinance dealing
with the protection of human health and the environment.
"Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and
materials listed in, regulated by or identified in any
Environmental Law.
To the Borrower's best knowledge, there are not present in, on
or under the Premises any Hazardous Substances in such form or quantity as to
create any liability or obligation for either the Borrower or the Lender under
common law of any jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged, emitted
or released in, on or under the Premises in such a way as to create any such
liability.
To the Borrower's best knowledge, it has not disposed of
Hazardous Substances in such a manner as to create any liability under any
Environmental Law.
99
There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Borrower or, to the Borrower's best
knowledge, relating in any way to the Premises, alleging liability under,
violation of, or noncompliance with any Environmental Law or any license, permit
or other authorization issued pursuant thereto. To the Borrower's best
knowledge, no such matter is threatened or impending.
To the Borrower's best knowledge, its businesses are and have in
the past always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force and effect. No
permit required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
similar federal, state or local list, schedule, log, inventory or database.
The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents of which the
Borrower is aware, describing or relating in any way to the Premises or the
Borrower's businesses.
Submissions to Lender. All financial and other information provided to
the Lender by or on behalf of the Borrower in connection with the Borrower's
request for the credit facilities contemplated hereby is true and correct in all
material respects and, as to projections, valuations or proforma financial
statements, present a good faith opinion as to such projections, valuations and
proforma condition and results.
Financing Statements. The Borrower has provided to the Lender
authorization to file financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Rights to Payment. Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral or other
collateral covered by the Security Documents is (or, in the case of all future
Collateral or such other collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation, subject to no defense, setoff or
counterclaim, of the account debtor or other obligor named therein or in the
Borrower's records pertaining thereto as being obligated to pay such obligation.
Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facilities
shall remain outstanding, the Borrower agrees that it will comply with the
following requirements, unless the Lender shall otherwise consent in
writing:
Reporting Requirements. The Borrower will deliver, or cause to be
delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, the audited financial statements of
▇▇▇▇▇-▇▇▇▇▇▇▇▇ on a consolidated and consolidating basis, with the unqualified
opinion of independent certified public accountants selected by ▇▇▇▇▇-▇▇▇▇▇▇▇▇
and acceptable to the Lender, which annual financial statements shall include
the balance sheets of the Borrower as at the end of such fiscal year and the
related statements of Borrower's income, retained
100
earnings and cash flows for the fiscal year then ended, all in reasonable detail
and prepared in accordance with GAAP, together with (i) copies of all management
letters prepared by such accountants; (ii) a report signed by such accountants
stating that in making the investigations necessary for said opinion they
obtained no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.12, 6.13, 6.14, and 7.10; and (iii) a
certificate of the Borrower's authorized officer stating that such financial
statements have been prepared in accordance with GAAP and whether or not such
officer has knowledge of the occurrence of any Default or Event of Default
hereunder and, if so, stating in reasonable detail the facts with respect
thereto;
as soon as available and in any event within 20 days after the
end of each month, an unaudited/internal balance sheet and statements of income
and retained earnings of ▇▇▇▇▇-▇▇▇▇▇▇▇▇ as at the end of and for such month and
for the year to date period then ended, prepared on a consolidated and
consolidating basis, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments; and
accompanied by a certificate of the Borrower's authorized officer, substantially
in the form of Exhibit B hereto stating (i) that such financial statements have
been prepared in accordance with GAAP, subject to year-end audit adjustments,
(ii) whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and (iii) all
relevant facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set forth in
Sections 6.12, 6.13, 6.14, and 7.10, and including contract status reports in
detail acceptable to the Lender;
weekly, or more frequently if the Lender so requires, the
Borrower's sales, collection reports and deposit records;
within 15 days after the end of each month or more frequently if
the Lender so requires, agings of the Borrower's accounts receivable and its
accounts payable, an inventory certification report, receivables schedules, and
a calculation of the Borrower's Accounts, Eligible Accounts, and Inventory as at
the end of such month or shorter time period;
At least 30 days before the beginning of each fiscal year of the
Borrower, the Borrower will deliver to the Lender the projected balance sheets
and income statements for each month of such year, each in reasonable detail,
representing the Borrower's good faith projections and certified by the
Borrower's chief financial officer as being the most accurate projections
available and identical to the projections used by the Borrower for internal
planning purposes, together with a statement of underlying assumptions and such
supporting schedules and information as the Lender may in its discretion
require;
immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower of the type described in Section 5.12 or which
seek a monetary recovery against the Borrower in excess of $50,000;
as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default hereunder,
notice of such occurrence, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken by the Borrower to cure the
effect of such breach, default or event;
as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with respect to
any Plan has occurred, the statement of the Borrower's authorized officer
setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;
101
as soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of such authorized officer of the Borrower setting forth details as to
such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
promptly upon knowledge thereof, notice of (i) any disputes or
claims by any of the Borrower's customers exceeding $20,000 individually or
$50,000 in the aggregate during any fiscal year; (ii) credit memos; (iii) any
goods returned to or recovered by the Borrower; and (iv) any change in the
persons constituting the Borrower's officers and directors;
promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the Security
Documents or of any substantial adverse change in any Collateral or such other
collateral or the prospect of payment thereof;
within 5 days after their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders;
promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which could
materially and adversely affect the Borrower's business or its financial
condition; and
from time to time, with reasonable promptness, any and all
equipment schedules, copies of invoices to account debtors of Borrower in excess
of $75,000 (which amounts may be adjusted from time to time by the Lender in its
sole discretion), shipment documents and delivery receipts for goods sold, and
such other material, reports, records or information as the Lender may request.
Books and Records; Inspection and Examination. The Borrower will keep
accurate books of record and account for itself pertaining to the Collateral and
pertaining to the Borrower's business and financial condition and such other
matters as the Lender may from time to time request in which true and complete
entries will be made in accordance with GAAP and, upon the Lender's request,
will permit any officer, employee, attorney or accountant for the Lender to
audit, review, make extracts from or copy any and all corporate and financial
books and records of the Borrower at all times during ordinary business hours,
to send and discuss with account debtors and other obligors requests for
verification of amounts owed to the Borrower, and to discuss the Borrower's
affairs with any of its directors, officers, employees or agents. The Borrower
will permit the Lender, or its employees, accountants, attorneys or agents, to
examine and inspect any Collateral, other collateral covered by the Security
Documents or any other property of the Borrower at any time during ordinary
business hours.
Account Verification. The Lender may at any time and from time to time
send or require the Borrower to send requests for verification of accounts or
notices of assignment to account debtors and other obligors. The Lender may also
at any time and from time to time telephone account debtors and other obligors
to verify accounts.
Compliance with Laws.
The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and keep
the Collateral, and require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.
Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental Laws
and obtain and comply with all permits, licenses and similar approvals required
by any Environmental Laws, and will not generate, use, transport, treat, store
or dispose of any Hazardous Substances in such a manner as to create any
liability or obligation under the common law of any jurisdiction or any
Environmental Law.
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Payment of Taxes and Other Claims. The Borrower will pay or discharge,
when due, (a) all taxes, assessments and governmental charges levied or imposed
upon it or upon its income or profits, upon any properties belonging to it
(including, without limitation, the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien or charge upon any properties of
the Borrower; provided, that the Borrower shall not be required to pay any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which proper
reserves have been made.
Maintenance of Properties.
The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided, however, that nothing in this Section
6.6 shall prevent the Borrower from discontinuing the operation and maintenance
of any of its properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not disadvantageous in
any material respect to the Lender.
The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or any
interest therein.
The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security interests,
liens and encumbrances except Permitted Liens.
Insurance; Accounts Receivable Insurance. The Borrower will obtain and
at all times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times (a) keep all tangible Collateral, including without
limitation, all Mexican Equipment, insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of
motor vehicles) and such other risks and in such amounts as the Lender may
reasonably request, with any loss payable to the Lender to the extent of its
interest, and all policies of such insurance shall contain a lender's loss
payable endorsement for the Lender's benefit acceptable to the Lender, and (b)
maintain accounts receivable insurance in effect with respect to all Accounts
that are payable by Materials y Equipos. All policies of liability insurance
required hereunder shall name the Lender as an additional insured.
Preservation of Existence. The Borrower will preserve and maintain its
existence and all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business and shall conduct its business
in an orderly, efficient and regular manner.
Delivery of Instruments, etc. Upon request by the Lender, the Borrower
will promptly deliver to the Lender in pledge all instruments, documents and
chattel papers constituting Collateral, duly endorsed or assigned by the
Borrower.
Collateral Account.
The Borrower shall irrevocably direct all present and future
Account debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to the Lockbox. All of the Borrower's
invoices, account statements and other written or oral communications directing,
instructing, demanding or requesting payment of any Account or any other amount
constituting Collateral shall conspicuously direct that all payments be made to
the Lockbox and shall include the Lockbox address. All payments received in the
Lockbox shall be processed to the Collateral Account.
103
The Borrower agrees to deposit in its Collateral Account or, at
the Lender's option, to deliver to the Lender all collections on Accounts,
contract rights, chattel paper and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which the Borrower may
receive directly notwithstanding its direction to Account debtors and other
obligors to make payments to the Lockbox, immediately upon receipt thereof, in
the form received, except for the Borrower's endorsement when deemed necessary.
Until delivered to the Lender or deposited in a Collateral Account, all proceeds
or collections of Collateral shall be held in trust by the Borrower for and as
the property of the Lender and shall not be commingled with any funds or
property of the Borrower.
Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except after
full payment and discharge of all Obligations.
All deposits in the Collateral Account shall constitute proceeds
of Collateral and shall not constitute payment of the Obligations. The Lender
from time to time at its discretion after allowing one Banking Day (in addition
to the one Banking Day during which ▇▇▇▇▇ Fargo holds such funds) may apply
funds in the Collateral Account to the payment of the Obligations, in any order
or manner of application satisfactory to the Lender, by transferring such funds
to the Lender's general account.
All items deposited in the Collateral Account shall be subject
to final payment. If any such item is returned uncollected, the Borrower will
immediately pay the Lender, or, for items deposited in such Collateral Account,
the bank maintaining such account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the Borrower's commercial account
or other account. The Borrower shall be liable as an endorser on all items
deposited in the Collateral Account, whether or not in fact endorsed by the
Borrower.
Performance by the Lender. If the Borrower at any time fails to
perform or observe any of the foregoing covenants contained in this Article VI
or elsewhere herein, and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.5, 6.7 and 6.10, immediately
upon the occurrence of such failure, without notice or lapse of time), the
Lender may, but need not, perform or observe such covenant on behalf and in the
name, place and stead of the Borrower (or, at the Lender's option, in the
Lender's name) and may, but need not, take any and all other actions which the
Lender may reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations owed to account
debtors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the Lender
on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the highest rate of interest then
applicable to the advances made pursuant to Section 2.1(a). To facilitate the
Lender's performance or observance of such covenants, the Borrower hereby
irrevocably appoints the Lender, or the Lender's delegate, acting alone, as the
Borrower's attorney in fact (which appointment is coupled with an interest) with
the right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file in the name and on behalf of the Borrower any
and all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by the Borrower under
this Section 6.11.
Minimum Debt Service Coverage Ratio.
Borrower will maintain, as of each date set forth below, its
Debt Service Coverage Ratio, determined for the period beginning on February 1,
2002 and ending on such date, at not less than the amount set forth opposite
such date:
Minimum Debt Service
Date Coverage Ratio
-------------- ---------------------
March 31, 2002 1.5 to 1
104
Minimum Debt Service
Date Coverage Ratio
-------------- ---------------------
June 30, 2002 1.6 to 1
September 30, 2002 1.7 to 1
December 31, 2002 1.8 to 1
▇▇▇▇▇-▇▇▇▇▇▇▇▇ will maintain, as of each date set forth below, a
consolidated Debt Service Coverage Ratio, determined for the period beginning on
February 1, 2002 and ending on such date, at not less than the amount set forth
opposite such date:
Minimum Debt Service
Date Coverage Ratio
-------------- ---------------------
March 31, 2002 0.5 to 1
June 30, 2002 0.9 to 1
September 30, 2002 1.0 to 1
December 31, 2002 1.1 to 1
Minimum Period-to-Date Net Income. Borrower will achieve, as of each
date set forth below, Net Income, determined for the period beginning on
February 1, 2002 and ending on such date, at an amount not less than the amount
set forth opposite such date:
Minimum Period-to-Date Net
Date Income
----------------- --------------------------
February 28, 2002 ($130,000)
March 31, 2002 ($130,000)
April 30, 2002 ($130,000)
May 31, 2002 ($130,000)
June 30, 2002 ($100,000)
July 31, 2002 ($100,000)
August 31, 2002 ($100,000)
September 30, 2002 $0
October 31, 2002 $0
November 30, 2002 $0
December 31, 2002 $175,000
Minimum Monthly Net Income. Borrower will achieve, for each month, Net
Income at an amount not less than ($150,000).
New Covenants. On or before December 31, 2002, the Borrower and the
Lender shall agree on new covenant levels for Sections 6.12, 6.13, and 6.14, for
periods after December 31, 2002, but if the Borrower and the Lender do not
agree, the Lender may designate the required amounts in its sole discretion, and
failure by the Borrower to maintain the designated amounts shall constitute an
Event of Default hereunder. If the Lender elects to designate such amounts, the
required Debt Service Coverage Ratio shall be not less than 1.2 to 1, and the
required Net Income levels shall be at least sufficient to maintain Debt Service
Coverage Ratios of not less than 1.2 to 1, based on expected levels of Debt and
Capital Expenditures.
Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facilities
shall remain outstanding, the Borrower agrees that, without the Lender's
prior written consent:
105
Liens. The Borrower will not create, incur or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, assignment or transfer
upon or of any of its assets, now owned or hereafter acquired, to secure any
indebtedness; excluding, however, from the operation of the foregoing, the
following (collectively, the "Permitted Liens"):
in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents, covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the Borrower's business or operations as presently
conducted;
mortgages, deeds of trust, pledges, liens, security interests
and assignments in existence on the date hereof and listed in Schedule 7.1
hereto, securing indebtedness for borrowed money permitted under Section 7.2;
the Security Interest and liens and security interests created
by the Security Documents;
the security interest of Energy Capital in the Collateral;
the security interest of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in Equipment; and
purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of cost or fair
market value thereof, and so long as no Default Period is then in existence and
none would exist immediately after such acquisition.
Indebtedness. The Borrower will not incur, create, assume or permit to
exist any indebtedness or liability on account of deposits or advances or any
indebtedness for borrowed money or letters of credit issued on the Borrower's
behalf, or any other indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, except:
indebtedness arising hereunder;
indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto;
indebtedness relating to liens permitted in accordance with
Section 7.1; and
indebtedness to Strata that does not cause a default under the
Strata Credit Agreement, and indebtedness to ▇▇▇▇▇-▇▇▇▇▇▇▇▇ so long as
▇▇▇▇▇-▇▇▇▇▇▇▇▇' Tangible Net Worth was greater than $100,000 after such
indebtedness was incurred.
Guaranties. The Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business;
guaranty of the indebtedness of any Affiliate to the Lender; and
guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and listed in Schedule 7.2 hereto.
Investments and Subsidiaries.
The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment
106
or acquire any interest whatsoever in, any other Person, including specifically
but without limitation any partnership or joint venture, except:
investments in direct obligations of the United States
of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less,
commercial paper issued by U.S. corporations rated "A-1" or
"A-2" by Standard & Poors Corporation or "P-1" or "P-2" by
▇▇▇▇▇'▇ Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by
members of the Federal Reserve System having deposits in excess
of $100,000,000 (which certificates of deposit or bankers'
acceptances are fully insured by the Federal Deposit Insurance
Corporation);
travel advances or loans to the Borrower's officers and
employees not exceeding at any one time an aggregate of $25,000;
advances in the form of progress payments, prepaid rent
not exceeding three months or security deposits; and
so long as no Default Period exists or would exist
immediately thereafter, advances to Strata or to ▇▇▇▇▇-▇▇▇▇▇▇▇▇
not to exceed the difference between (A) the Borrower's Tangible
Net Worth on the date of such advance less (B) $100,000;
provided, however, that advances to ▇▇▇▇▇-▇▇▇▇▇▇▇▇ shall not
exceed $200,000 in the aggregate at any one time.
The Borrower will create or permit to exist any Subsidiary,
other than the Subsidiaries in existence on the date hereof and listed in
Schedule 5.4.
Dividends. The Borrower will not declare or pay any dividends (other
than dividends payable solely in stock of the Borrower) on any class of its
stock or make any payment on account of the purchase, redemption or other
retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly.
Sale or Transfer of Assets; Suspension of Business Operations. The
Borrower will not sell, lease, assign, transfer or otherwise dispose of (i) the
stock of any Subsidiary, (ii) all or a substantial part of its assets, or (iii)
any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than the sale of Inventory in
the ordinary course of business and will not liquidate, dissolve or suspend
business operations. No Borrower will in any manner transfer any property
without prior or present receipt of full and adequate consideration.
Consolidation and Merger; Asset Acquisitions. The Borrower will not
consolidate with or merge into any Person, or permit any other Person to merge
into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person.
Sale and Leaseback. The Borrower will not enter into any arrangement,
directly or indirectly, with any other Person whereby the Borrower shall sell or
transfer any real or personal property, whether now owned or hereafter acquired,
and then or thereafter rent or lease as lessee such property or any part thereof
or any other property which the Borrower intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
Restrictions on Nature of Business. The Borrower will not engage in any
line of business materially different from that presently engaged in by the
Borrower and will not purchase, lease or otherwise acquire assets not related to
its business.
Capital Expenditures. The Borrower will not incur or contract to incur
Capital Expenditures of more than $150,000 in the aggregate during any fiscal
year.
107
Accounting. The Borrower will not adopt any material change in
accounting principles other than as required by GAAP. The Borrower will not
adopt, permit or consent to any change in its fiscal year.
Discounts, etc. The Borrower will not grant any discount, credit or
allowance to any customer, except in the ordinary course of business, or at any
time following the occurrence of an Event of Default which is continuing,
modify, amend, subordinate, cancel or terminate the obligation of any account
debtor or other obligor.
Defined Benefit Pension Plans. The Borrower will not adopt, create,
assume or become a party to any defined benefit pension plan, unless disclosed
to the Lender pursuant to Section 5.10.
Other Defaults. The Borrower will not permit any breach, default or
event of default to occur under any note, loan agreement, indenture, lease,
mortgage, contract for deed, security agreement or other contractual obligation
binding upon the Borrower.
Place of Business; Name. The Borrower will not transfer its chief
executive office or principal place of business, or move, relocate, close or
sell any business location. The Borrower will not permit any tangible Collateral
or any records pertaining to the Collateral to be located in any state or area
in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. The Borrower will not change its name.
Organizational Documents; S Corporation Status. The Borrower will not
amend its certificate of incorporation, articles of incorporation or bylaws. The
Borrower will not become an S Corporation within the meaning of the Internal
Revenue Code.
Salaries. The Borrower will not pay excessive or unreasonable salaries,
bonuses, commissions, consultant fees or other compensation; or increase the
salary, bonus, commissions, consultant fees or other compensation of any
director, officer or consultant, or any member of their families, by more than
10% in any one year, either individually or for all such persons in the
aggregate, or pay any such increase from any source other than profits earned in
the year of payment.
Change in Ownership. The Borrower will not issue or sell any stock of
the Borrower so as to change the percentage of voting and non-voting stock owned
by each of the Borrower's shareholders so as to reduce the equity ownership of
▇▇▇▇▇-▇▇▇▇▇▇▇▇ in the Borrower to less than 81 percent, and the Borrower will
not permit or suffer to occur the sale, transfer, assignment, pledge or other
disposition of any or all of the issued and outstanding shares of stock of the
Borrower.
Location of Equipment. Except for the Mexican Equipment, the Borrower
will not move any Collateral outside of, or permit any Collateral to be located
outside of, the United States.
Events of Default, Rights and Remedies
Events of Default. "Event of Default", wherever used herein, means any
one of the following events:
Default in the payment of the Obligations of the Borrower when
they become due and payable;
Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
Default in the performance, or breach, of any covenant or
agreement in this Agreement;
The Borrower or any Guarantor shall be or become insolvent, or
admit in writing its or his inability to pay its or his debts as they mature, or
make an assignment for the benefit of creditors; or the
108
Borrower or any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or for all or any substantial part
of its property; or such receiver, trustee or similar officer shall be appointed
without the application or consent of the Borrower or any Guarantor as the case
may be; or the Borrower or any Guarantor shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it or him under the laws of any jurisdiction; or
any such proceeding shall be instituted (by petition, application or otherwise)
against either the Borrower or any Guarantor; or any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied against a
substantial part of the property of either the Borrower or any Guarantor;
A petition shall be filed by or against the Borrower or any
Guarantor under the United States Bankruptcy Code naming the Borrower or such
Guarantor as debtor;
Any representation or warranty made by the Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by the
Borrower (or any of its officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;
The rendering against the Borrower of a final judgment, decree
or order for the payment of money in excess of $50,000 and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of 30
consecutive days without a stay of execution;
A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower owed to any Person other than the Lender, or under
any indenture or other instrument under which any such evidence of indebtedness
has been issued or by which it is governed, or under any lease of any of the
Premises, and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness, indenture, other instrument or
lease;
Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer any
Plan, shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender; or a trustee shall
have been appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or the Borrower shall have filed for a distress termination of any Plan
under Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in good
faith may by itself, or in combination with any such failures that the Lender
may determine are likely to occur in the future, result in the imposition of a
lien on the Borrower's assets in favor of the Plan;
An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of the Borrower hereunder or
under any note evidencing any obligations of the Borrower hereunder;
The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the ordinary
course, or sell all or substantially all of its assets, without the Lender's
prior written consent;
The Borrower shall fail to pay, withhold, collect or remit any
tax or tax deficiency when assessed or due (other than any tax deficiency which
is being contested in good faith and by proper proceedings and for which it
shall have set aside on its books adequate reserves therefor) or notice of any
state or federal tax liens shall be filed or issued;
109
Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
Any Guarantor shall repudiate, purport to revoke or fail to
perform any such Guarantor's obligation under such Guarantor's guaranty in favor
of the Lender, any Individual Guarantor shall die (unless such Individual
Guarantor's estate shall promptly agree to substitute such Individual
Guarantor's heirs as substitute Individual Guarantors) or any other Guarantor
shall cease to exist;
Any event or circumstance with respect to the Borrower shall
occur such that the Lender shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by the Borrower
under the Loan Documents is impaired or any material adverse change in the
business or financial condition of the Borrower shall occur;
Any breach, default or event of default by or attributable to
any Affiliate under any agreement between such Affiliate and the Lender,
including, without limitation, any breach, default or event of default by Strata
under the Strata Credit Agreement; and
Any breach, default or event of default by the Borrower or any
Affiliate under any agreement between such person and Energy Capital or Energy
Group, or any successor or assignee thereof; provided, however, that the
financial covenant defaults caused by Mountain Compressed Air under Section 4.9
of each of the Credit Agreements between it and Energy Capital and Energy Group,
respectively, on or before January 31, 2002, shall not constitute Events of
Default under this Agreement so long as such defaults are waived on or before
February 14, 2002.
Rights and Remedies. During any Default Period, the Lender may exercise
any or all of the following rights and remedies:
the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which the Borrower
hereby expressly waives;
the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the Borrower to
the payment of the Obligations;
the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including,
without limitation, the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process (without a
prior hearing or notice thereof, which the Borrower hereby expressly waives) and
the right to sell, lease or otherwise dispose of any or all of the Collateral,
and, in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be designated by
the Lender which is reasonably convenient to both parties;
the Lender may exercise and enforce its rights and remedies
under the Loan Documents; and
the Lender may exercise any other rights and remedies available
to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Borrower's Obligations
shall be immediately due and payable automatically without presentment, demand,
protest or notice of any kind.
110
Certain Notices. If notice to the Borrower of any intended disposition
of Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in Section 9.3) at least ten calendar days before the date of
intended disposition or other action.
Miscellaneous
No Waiver; Cumulative Remedies. No failure or delay by the Lender in
exercising any right, power or remedy under the Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy under the Loan Documents. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
Amendments, etc. No amendment, modification, termination or waiver of
any provision of any Loan Document or consent to any departure by the Borrower
therefrom or any release of a Security Interest shall be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
Addresses for Notices, etc. Except as otherwise expressly provided
herein, all notices, requests, demands and other communications provided for
under the Loan Documents shall be in writing and shall be (a) personally
delivered, (b) sent by first class United States mail, (c) sent by overnight
courier of national reputation, or (d) transmitted by telecopy with electronic
confirmation, in each case addressed or telecopied to the party to whom notice
is being given at its address or telecopier number as set forth below:
If to the Borrower:
Jens' Oil Field Service, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
If to the Lender:
▇▇▇▇▇ Fargo Credit, Inc.
MAC T 5613-012
▇▇ ▇.▇. ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Further Documents. The Borrower will from time to time execute and
deliver or endorse any and all instruments, documents, conveyances, assignments,
security agreements, financing statements and other agreements and writings that
the Lender may reasonably request in order to secure, protect, perfect or
enforce the Security
111
Interest or the Lender's rights under the Loan Documents (but any failure to
request or assure that the Borrower executes, delivers or endorses any such item
shall not affect or impair the validity, sufficiency or enforceability of the
Loan Documents and the Security Interest, regardless of whether any such item
was or was not executed, delivered or endorsed in a similar context or on a
prior occasion).
Collateral. This Agreement does not contemplate a sale of accounts,
contract rights or chattel paper, and, as provided by law, the Borrower is
entitled to any surplus and shall remain liable for any deficiency. The Lender's
duty of care with respect to Collateral in its possession (as imposed by law)
shall be deemed fulfilled if it exercises reasonable care in physically keeping
such Collateral, or in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and the Lender need not otherwise preserve,
protect, insure or care for any Collateral. The Lender shall not be obligated to
preserve any rights the Borrower may have against prior parties, to realize on
the Collateral at all or in any particular manner or order or to apply any cash
proceeds of the Collateral in any particular order of application.
Costs and Expenses. The Borrower agrees to pay on demand all costs and
expenses, including (without limitation) attorneys' fees, incurred by the Lender
in connection with the Obligations, this Agreement, the Loan Documents, and any
other document or agreement related hereto or thereto, and the transactions
contemplated hereby, including without limitation all such costs, expenses and
fees incurred in connection with the negotiation, preparation, execution,
amendment, administration, performance, collection and enforcement of the
Obligations and all such documents and agreements and the creation, perfection,
protection, satisfaction, foreclosure or enforcement of the Security Interest.
Indemnity. In addition to the payment of expenses pursuant to Section
9.6, the Borrower agrees to indemnify, defend and hold harmless the Lender, and
any of its participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees, attorneys and agents of the foregoing (the
"Indemnitees") from and against any of the following (collectively, "Indemnified
Liabilities"):
any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
any claims, loss or damage to which any Indemnitee may
be subjected if any representation or warranty contained in
Section 5.12 proves to be incorrect in any respect or as a
result of any violation of the covenant contained in Section
6.4(b); and
any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection with
the foregoing and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by
or asserted against any such Indemnitee, in any manner related
to or arising out of or in connection with the making of the
Advances and the Loan Documents or the use or intended use of
the proceeds of the Advances, except to the extent caused by the
gross negligence or willful misconduct of such Indemnitee.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and reasonably satisfactory
to the Indemnitee, will resist and defend such action, suit or proceeding to the
extent and in the manner directed by the Indemnitee, at the Borrower's sole
costs and expense. Each Indemnitee will use its best efforts to cooperate in the
defense of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
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Participants. The Lender and its participants, if any, are not partners
or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Execution in Counterparts. This Agreement and other Loan Documents may
be executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
Binding Effect; Assignment; Complete Agreement; Exchanging Information.
The Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights thereunder or any
interest therein without the Lender's prior written consent. This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof. Without limiting the
Lender's right to share information regarding the Borrower and its Affiliates
with the Lender's participants, accountants, lawyers and other advisors, the
Lender, ▇▇▇▇▇ Fargo Corporation, and all direct and indirect subsidiaries of
▇▇▇▇▇ Fargo Corporation, may exchange any and all information they may have in
their possession regarding the Borrower and its Affiliates, and the Borrower
waives any right of confidentiality it may have with respect to such exchange of
such information.
Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Headings. Article and Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The Loan
Documents shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Minnesota. This Agreement shall
be governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Minnesota. The parties hereto hereby (i) consents
to the personal jurisdiction of the state and federal courts located in the
State of Minnesota in connection with any controversy related to this Agreement;
(ii) waive any argument that venue in any such forum is not convenient, (iii)
agree that any litigation initiated by the Lender or the Borrower in connection
with this Agreement or the other Loan Documents shall be venued in either the
District Court of the County of Hennepin, Minnesota, or the United States
District Court, District of Minnesota; and (iv) agrees that a final judgment in
any such suit, action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
▇▇▇▇▇ FARGO CREDIT, INC. JENS' OIL FIELD SERVICE, INC.
By By
--------------------------------- ----------------------------------
Name: Name:
Title: Title:
113