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Sample Business ContractsHome: Sample Business Contracts:
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of September 30, 1999 (this "Agreement"),
is between SOUTH HAMPTON REFINING CO., a Texas corporation ("Borrower"), and
SOUTHWEST BANK OF TEXAS, N.A., a national banking association ("Lender").
R E C I T A L S :
Borrower has requested that Lender extend credit to Borrower in the
form of revolving credit advances and letters of credit which shall not exceed
an aggregate principal amount of $2,250,000.00 at any time outstanding. Lender
is willing to make such extensions of credit to Borrower upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Advance" means an advance of funds by Lender to Borrower
pursuant to Article II.
"Advance Request Form" means a certificate, in substantially
the form of Exhibit "D" hereto, properly completed and signed by
Borrower requesting an Advance.
"Arbitration Agreement" means the Arbitration Agreement
executed by Borrower and Guarantor in substantially the form of Exhibit
"G" hereto, as the same may be amended, supplemented, or modified.
"Authorized Representative" means any officer or employee of
Borrower who has been designated in writing by Borrower to Lender to be
an Authorized Representative.
"Borrowing Base" means, at any particular time, an amount
equal to the sum of (a) eighty percent (80%) of
Eligible Accounts plus (b) the lesser of (i) fifty percent (50%) of
Eligible Inventory or (ii) $750,000.00.
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"Borrowing Base Certificate" means a certificate in the form
of Exhibit "E" hereto, fully completed and executed by Borrower.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capital Expenditures" means all expenditures for assets
which, in accordance with GAAP, are required to be capitalized and so
shown on the consolidated balance sheet of Guarantor and its
Subsidiaries.
"Closing Date" means the date on which this Agreement has been
executed and delivered by the parties hereto and the conditions set
forth in Section 5.1 have been satisfied.
"Collateral" has the meaning specified in Section 4.1.
"Commitment" means the obligation of Lender to make Advances
and issue Letters of Credit hereunder in an aggregate principal amount
at any time outstanding up to but not exceeding $2,250,000.00.
"Current Assets" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as current assets on
a consolidated balance sheet of Guarantor and its Subsidiaries.
"Current Liabilities" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as current
liabilities on a consolidated balance sheet of Guarantor and its
Subsidiaries; provided, however, that the maturities of the
indebtedness evidenced by the Note shall not constitute Current
Liabilities.
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
"Debt" means for any Person (a) all indebtedness, whether or
not represented by bonds, debentures, notes, securities, or other
evidences of indebtedness, for the repayment of money borrowed, (b) all
indebtedness representing deferred payment of the purchase price of
property or assets, (c) all indebtedness under any lease which, in
conformity with GAAP, is required to be capitalized for balance sheet
purposes, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contingent obligations, in respect of, or to
purchase or otherwise acquire, indebtedness of others, (e) all
indebtedness secured by a Lien existing on property owned, subject to
such Lien, whether or not the indebtedness secured
thereby shall have been assumed by the owner thereof, and (f) any
obligation to redeem or repurchase any of such Person's capital stock,
warrants, or stock equivalents.
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"Default Rate" means the lesser of (a) the sum of the Prime
Rate in effect from day to day plus five percent (5.0%) or (b) the
Maximum Rate.
"EBITDA" means for Guarantor and its Subsidiaries, on a
consolidated basis, the sum of (a) Net Income, plus (b) depreciation,
amortization and other non cash charges, plus (c) interest expense,
plus (d) taxes.
"Eligible Accounts" means the aggregate of all accounts
receivable of Borrower that are acceptable to Lender in its sole
discretion and satisfy the following conditions: (a) are due and
payable within sixty (60) days; (b) have been outstanding less than
ninety (90) days past the original date of invoice; (c) have arisen in
the ordinary course of business from services performed by Borrower to
or for the account debtor or the sale by Borrower of goods in which
Borrower had sole ownership where such goods have been shipped or
delivered to the account debtor; (d) represent complete bona fide
transactions which require no further act under any circumstances on
the part of Borrower to make such accounts receivable payable by the
account debtor; (e) the goods the sale of which gave rise to such
accounts receivable were shipped or delivered to the account debtor on
an absolute sale basis and not on consignment, a sale or return basis,
a guaranteed sale basis, a bill and hold basis, or on the basis of any
similar understanding; (f) the goods the sale of which gave rise to
such accounts receivable were not, at the time of sale thereof, subject
to any Lien, except the security interest in favor of Lender created by
the Loan Documents; (g) are not subject to any provisions prohibiting
assignment or requiring notice of or consent to such assignment; (h)
are subject to a perfected, first priority security interest in favor
of Lender and are not subject to any other Lien; (i) are not subject to
setoff, counterclaim, defense, allowance, dispute, or adjustment other
than normal discounts for prompt payment, and the goods of sale which
gave rise to such accounts receivable have not been returned, rejected,
repossessed, lost, or damaged; (j) the account debtor is not insolvent
or the subject of any bankruptcy or insolvency proceeding and has not
made an assignment for the benefit of creditors, suspended normal
business operations, dissolved, liquidated, terminated its existence,
ceased to pay its debts as they become due, or suffered a receiver or
trustee to be appointed for any of its assets or affairs; (k) are not
evidenced by chattel paper or any instrument of any kind; (l) (i)are
owed by a Person or Persons that are citizens of or organized under the
laws of the United States or any State thereof, (ii) are owed by a
Person listed on Exhibit "H"
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hereto, (iii) are owed by a Person that is a citizen of or organized
under the laws of Canada or any province thereof and the unsecured debt
of such Person is rated at least BBB- by Standard & Poor's Ratings
Group ("S&P") or Baa3 by Moody's Investors Service, Inc. ("Moody's"),
or (iv) are owed by a Person that is a citizen of or organized under
the laws of Canada or any province thereof and such Person is a
Subsidiary of a Person whose unsecured debt is rated at least BBB- by
S&P or Baa3 by Moody's, and in any case, are not owed by any Person
organized under the laws of a jurisdiction located outside of the
United States of America or Canada; (m) if any accounts receivable are
owed by the United States of America or any department, agency, or
instrumentality thereof, the Federal Assignment of Claims Act shall
have been complied with; and (n) are not owed by an affiliate of
Borrower. No account receivable owed by an account debtor to Borrower
shall be included as an Eligible Account if more than twenty percent
(20%) of the balances then outstanding on accounts receivable owed by
such account debtor and its affiliates to Borrower have remained unpaid
for more than eighty-nine (89) days from the dates of their original
invoices. The amount of any Eligible Accounts owed by an account debtor
to Borrower shall be reduced by the amount of all "contra accounts" and
other obligations owed by Borrower to such account debtor. In the event
that at any time the accounts receivable from any account debtor and
its affiliates to Borrower exceed twenty percent (20%) of the accounts
receivable of Borrower, the accounts receivable from such account
debtor and its affiliates shall not constitute Eligible Accounts to the
extent to which such accounts receivable exceed twenty percent (20%) of
the accounts receivable of Borrower.
"Eligible Inventory" means, at any time, all inventory of
natural gasoline and finished plant products then owned by (and in the
possession or under the control of) Borrower and held for sale or
disposition in the ordinary course of Borrower's business, in which
Lender has a perfected, first priority security interest, valued at the
lower of actual cost or fair market value. Eligible Inventory shall not
include (a) inventory that has been shipped or delivered to a customer
on consignment, a sale or return basis, or on the basis of any similar
understanding (b) inventory with respect to which a claim exists
disputing Borrower's title to or right to possession of such inventory,
(c) inventory that is not in good condition or does not comply with any
applicable laws, rules, or regulations or the standards imposed by any
governmental authority with respect to its manufacture, use, or sale,
and (d) inventory that Lender, in its sole discretion, has determined
to be unmarketable.
"Environmental Laws" means any and all federal, state and
local laws, regulations, and requirements pertaining to
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health, safety, or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601 et seq.,the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq., the Clean Water
Act, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., and all similar laws, regulations, and
requirements of any governmental authority or agency having
jurisdiction over Borrower or any Subsidiary or any of their respective
properties or assets, as such laws, regulations, and requirements may
be amended or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in Section 10.1.
"Field Audits" means audits, verifications and inspections of
the accounts receivable and inventory of Borrower, conducted by an
independent third Person selected by Lender.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants or in statements of the Financial Accounting Standards
Board or their respective successors and which are applicable in the
circumstances as of the date in question. Accounting principles are
applied on a "consistent basis" when the accounting principles observed
in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Guarantor" means Texas Oil & Chemical Co. II, Inc., a Texas
corporation, and its successors and assigns.
"Guaranty" means the Guaranty Agreement executed by Guarantor
in favor of Lender in substantially the form of Exhibit "C" hereto, as
the same may be amended, supplemented or modified from time to time.
"Hazardous Substance" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.
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"Letter of Credit" means any letter of credit issued by Lender
for the account of Borrower pursuant to Article II.
"Letter of Credit Liabilities" means, at any time, the
aggregate face amounts of all outstanding Letters of Credit.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement and all promissory
notes, security agreements, deeds of trust, assignments, letters of
credit, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents, and agreements may be
amended, modified, renewed, extended, or supplemented from time to
time.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property or condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole, or
any Obligated Party and its Subsidiaries, taken as a whole, (b) the
ability of Borrower to pay the Obligations or the ability of Borrower
or any Obligated Party to perform its respective obligations under this
Agreement or any of the other Loan Documents, or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents, or
the rights or remedies of Lender hereunder or thereunder.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including Chapter 303 of
the Texas Finance Code (the "Code") (and as the same may be
incorporated by reference in other Texas statutes). To the extent that
Chapter 303 of the Code is relevant to Lender for the purposes of
determining the Maximum Rate, Lender elects to determine such
applicable legal rate pursuant to the "weekly ceiling," from time to
time in effect, as referred to and defined in Chapter 303 of the Code;
subject, however, to the limitations on such applicable ceiling
referred to and defined in the Code, and further subject to any right
Lender may have subsequently, under applicable law, to change the
method of determining the Maximum Rate.
"Net Income" means, with respect to Guarantor and its
Subsidiaries for any period, the consolidated net income (or loss) of
Guarantor and its Subsidiaries for such period, calculated in
accordance with GAAP.
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"No Default Certificate" means a certificate in the form of
Exhibit "F" hereto, fully completed and executed by Borrower.
"Note" means the promissory note executed by Borrower payable
to the order of Lender, in substantially the form of Exhibit "A"
hereto, and all extensions, renewals, and modifications thereof and all
substitutions therefor.
"Obligated Party" means Guarantor and any other Person who is
or becomes party to any agreement pursuant to which such Person
guarantees or secures payment and performance of the Obligations or any
part thereof.
"Obligations" means all obligations, indebtedness, and
liabilities of Borrower to Lender, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligations, indebtedness, and
liabilities of Borrower under this Agreement and the other Loan
Documents (including, without limitation, all of Borrower's contingent
reimbursement obligations in respect of Letters of Credit), and all
interest accruing thereon and all attorneys' fees and other expenses
incurred in the enforcement or collection thereof.
"Person" means any individual, corporation, limited liability
company, business trust, association, company, partnership, joint
venture, governmental authority, or other entity.
"Prime Rate" means that variable rate of interest per annum
established by Lender from time to time as its prime rate which shall
vary from time to time. Such rate is set by Lender as a general
reference rate of interest, taking into account such factors as Lender
may deem appropriate, it being understood that many of Lender's
commercial or other loans are priced to relation to such rate, that it
is not necessarily the lowest or best rate charged to any customer and
that Lender may make various commercial or other loans at rates of
interest having no relationship to such rate.
"Regulatory Change" means, with respect to Lender, any change
after the date of this Agreement in United States federal, state, or
foreign laws or regulations (including Regulation D of the Board of
Governors of the Federal Reserve System, or any interpretations,
directives, or requests applying to a class of banks including Lender)
of or under any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
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"Security Agreement" means the Security Agreement executed by
Borrower in favor of Lender in substantially the form of Exhibit "B"
hereto, as the same may be amended, supplemented or modified.
"Subordinated Debt" means Debt of Guarantor and its
Subsidiaries, the payment of which is subordinated to the payment of
the Obligations upon terms, and by a document, in form and substance
satisfactory to Lender in its sole discretion.
"Subsidiary" means any Person of which or in which the
Borrower and its other Subsidiaries own or control, directly or
indirectly, fifty percent (50%) or more of (a) the combined voting
power of all classes having general voting power under ordinary
circumstances to elect a majority of the directors or equivalent body
of such Person, if it is a corporation, (b) the capital interest or
profits interest of such Person, if it is a partnership, limited
liability company, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or
other unincorporated association or organization.
"Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
stockholders' equity on a consolidated balance sheet of Guarantor and
its Subsidiaries, plus Subordinated Debt; provided, however, there
shall be excluded therefrom (a) any amount at which shares of capital
stock of Guarantor appear as an asset on Guarantor's or any
Subsidiary's balance sheet, (b) goodwill, including any amounts,
however designated, that represent the excess of the purchase price
paid for assets or stock over the value assigned thereto, (c) patents,
trademarks, trade names, and copyrights, (d) deferred expenses, (e)
loans and advances to any stockholder, director, officer, or employee
of Guarantor or any Subsidiary or any affiliate, and (f) all other
assets which are properly classified as intangible assets.
"Termination Date" means 11:00 a.m., Houston, Texas time on
May 31, 2001, or such earlier date on which the Commitment terminates
as provided in this Agreement.
"Unmatured Event of Default" means the occurrence of an event
or the existence of a condition which, with the giving of notice or the
passage of time would constitute an Event of Default.
Section 1.2. Other Definitional Provisions. All definitions contained
in this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import
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referring to this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise specified, all Article
and Section references pertain to this Agreement. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. Terms
used herein that are defined in the Uniform Commercial Code as adopted by the
State of Texas, unless otherwise defined herein, shall have the meanings
specified in the Uniform Commercial Code as adopted by the State of Texas.
ARTICLE II.
Advances and Letters of Credit
Section 2.1. Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to make one or more Advances to Borrower from time to
time from the date hereof to and including the Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the Commitment;
provided that the aggregate amount of all Advances at any time outstanding shall
not exceed the lesser of (a) the Commitment minus the outstanding Letter of
Credit Liabilities or (b) the Borrowing Base minus the outstanding Letter of
Credit Liabilities. Lender shall have no obligation to make any Advance if an
Event of Default or an Unmatured Event of Default has occurred and is
continuing. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, Borrower may borrow, repay, and reborrow
hereunder.
Section 2.2. The Note. The obligation of Borrower to repay the Advances
shall be evidenced by the Note executed by Borrower, payable to the order of
Lender, in the principal amount of the Commitment.
Section 2.3. Repayment of Advances. Borrower shall repay the unpaid
principal amount of all Advances on the earlier of (a) the Termination Date or
(b) such other dates on which the Advances are or may be required to be paid
pursuant to this Agreement.
Section 2.4. Interest. The unpaid principal amount of the Advances
shall bear interest prior to maturity at a varying rate per annum equal from day
to day to the lesser of (a) the Maximum Rate or (b) the sum of the Prime Rate in
effect from day to day plus one-half of one percent (.50%), and each change in
the rate of interest charged on the Advances shall become effective, without
notice to Borrower, on the effective date of each change in the Prime Rate or
the Maximum Rate, as the case may be; provided, however, if at any time the rate
of interest specified in clause (b) preceding shall exceed the Maximum Rate,
thereby causing the interest on the Advances to be limited to the Maximum Rate,
then any subsequent reduction in the Prime Rate shall not reduce the
rate of interest on the Advances below the Maximum Rate until the
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aggregate amount of interest actually accrued on the Advances equals the amount
of interest which would have accrued on the Advances if the interest rate
specified in clause (b) preceding had at all times been in effect. Accrued and
unpaid interest on the Advances shall be payable on the first day of each month
commencing on November 1, 1999, and on the earlier of the Termination Date or
any other date on which the principal amount of the Advances is paid (whether as
a result of optional or mandatory prepayment or acceleration). If an Event of
Default has occurred and is continuing, all principal of the Advances and all
past due interest thereon shall bear interest at the Default Rate.
Section 2.5. Requests for Advances. Borrower shall give Lender notice
of each requested Advance by delivery to Lender of an Advance Request Form
executed by an Authorized Representative, properly completed and containing the
information required therein. Borrower may transmit Advance Request Forms by
fax, provided that Borrower holds Lender harmless with respect to actions taken
by Lender based upon Advance Request Forms sent by fax. Prior to making any
Advance, Lender may require that Borrower deliver a Borrowing Base Certificate
dated a recent date acceptable to Lender. Assuming that each Advance Request
Form or request for Advance is in proper form, if Lender receives an Advance
Request Form or request for Advance prior to 1:00 p.m. on any Business Day,
Lender will make the requested Advance on the same Business Day, and if Lender
receives an Advance Request Form or request for Advance after 1:00 p.m., Lender
will make the requested Advance on the next Business Day.
Section 2.6. Use of Proceeds. The proceeds of Advances shall be used
for working capital purposes.
Section 2.7. Mandatory Prepayment. If at any time the outstanding
principal amount of the Advances plus the Letter of Credit Liabilities exceeds
the Borrowing Base, Borrower shall immediately prepay the outstanding Advances
by the amount of the excess plus accrued and unpaid interest on the amount so
prepaid or, if no (or insufficient) Advances are outstanding, Borrower shall
immediately pledge to Lender cash or cash equivalent investments in an amount
equal to the excess as security for the Obligations.
Section 2.8. Unused Commitment Fee; Reduction or Termination of
Commitment. Borrower agrees to pay to Lender a commitment fee on the average
daily unused portion of the Commitment, from and including the Closing Date to
and including the Termination Date, at the rate of one-fourth of one percent
(.25%) per annum based on a 365 day year and the actual number of days elapsed,
payable on the first day of each month, commencing on November 1, 1999, and on
the Termination Date. For the purpose of calculating the commitment fee
hereunder, the Commitment shall be deemed utilized by the amount of all
outstanding Advances and
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Letter of Credit Liabilities. Borrower shall have the right at any time to
terminate in whole or from time to time to irrevocably reduce in part the
Commitment upon at least three (3) Business Days prior notice to Lender
specifying the effective date thereof, whether a termination or reduction is
being made, and the amount of any partial reduction; provided, however, the
Commitment shall never be reduced below an amount equal to the outstanding
Letter of Credit Liabilities. Simultaneously with giving such notice, Borrower
shall prepay the amount by which the unpaid principal amount of the Advances
plus the outstanding Letter of Credit Liabilities exceeds the Commitment (after
giving effect to such notice) plus accrued and unpaid interest on the principal
amount so prepaid. The Commitment may not be reinstated after it has been
terminated or reduced.
Section 2.9. Facility Fee. Borrower agrees to pay to Lender a facility
fee in the amount of $11,250.00 on the Closing Date. Such facility fee shall be
fully earned when paid.
Section 2.10. Letters of Credit. Subject to the terms and conditions of
this Agreement, Lender agrees to issue one or more Letters of Credit for the
account of Borrower from time to time from the date hereof to and including the
Termination Date; provided, however, that the outstanding Letter of Credit
Liabilities shall not at any time exceed the least of (a) $500,000.00, (b) an
amount equal to the Commitment minus the outstanding Advances, or (c) the
Borrowing Base minus the outstanding Advances. Each Letter of Credit shall have
an expiration date which shall not be more than one hundred eighty (180) days
from the date of issuance of such Letter of Credit, shall have an expiration
date which is at least one (1) Business Day prior to the Termination Date, shall
be payable in United States dollars, shall support a transaction that is entered
into in the ordinary course of Borrower's business, and shall otherwise be
satisfactory in form and substance to Lender. No Letter of Credit shall require
any payment by Lender to the beneficiary thereunder pursuant to a drawing prior
to the third Business Day following presentment of a draft and any related
documents to Lender.
Section 2.11. Procedure for Issuing Letters of Credit. Each Letter of
Credit shall be issued upon receipt by Lender of written notice from an
Authorized Representative requesting the issuance of such Letter of Credit,
which notice shall be received by Lender at least three (3) Business Days prior
to the requested date of issuance of such Letter of Credit. Such notice shall be
accompanied by Lender's standard application for issuance of Letters of Credit
(commercial or standby) as then in effect and such other documents and
instruments as Lender may require. Such notice and application (both front and
back sides) may be sent by fax, provided that Borrower holds Lender harmless
with respect to actions taken by Lender based upon notices and applications sent
by fax. Each request for a Letter of Credit shall constitute a
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representation by Borrower to Lender as to each of the matters set forth in the
Borrowing Base Certificate, including representations that (a) the sum of (i)
the outstanding Advances plus (ii) the Letter of Credit Liabilities plus (iii)
the face amount of the requested Letter of Credit does not exceed the lesser of
the Borrowing Base or the Commitment, and (b) no Event of Default exists. Prior
to Issuing any Letter of Credit, Lender may request a Borrowing Base Certificate
from Borrower dated of a recent date acceptable to Lender evidencing that the
statements contained in the preceding sentence are correct.
Section 2.12. Payments Constitute Advances. Each payment by Lender
pursuant to a drawing under a Letter of Credit shall constitute and be deemed an
Advance by Lender to Borrower under the Note and this Agreement as of the day
and time such payment is made by Lender and in the amount of such payment.
Section 2.13. Letter of Credit Fees. Borrower shall pay to Lender a
letter of credit fee payable on the date each Letter of Credit is issued in an
amount equal to the greater of (a) one and one-fourth percent (1.25%) per annum
of the stated amount of such Letter of Credit for the period during which such
Letter of Credit will remain outstanding, based on a 360 day year and the actual
number of days elapsed, and (b) $300.00. In addition, Borrower shall pay to
Lender (a) at the time of issuance of any Letter of Credit, all out-of-pocket
costs incurred by Lender in connection with the issuance of such Letter of
Credit (b) upon the payment of any Letter of Credit, all applicable payment
fees, and (c) upon the amendment (including the extension) of any Letter of
Credit, all applicable amendment fees.
Section 2.14. Obligations Absolute. The obligations of Borrower under
this Agreement and the other Loan Documents, including without limitation the
obligation of Borrower to reimburse Lender for payment of drawings under any
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement and the other
Loan Documents under all circumstances, including (a) any lack of validity or
enforceability of any Letter of Credit or any other Loan Document, (b) the
existence of any claim, set-off, counterclaim, defense or other rights which
Borrower, any Obligated Party or any other Person may have at any time against
any beneficiary of any Letter of Credit, Lender, or any other Person, whether in
connection with this Agreement or any other Loan Document or any unrelated
transaction, (c) if any statement, draft or other document presented under any
Letter of Credit proves to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein is untrue or inaccurate in any respect
whatsoever, (d) payment by Lender under any Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit in a manner which is not material, (e) any amendment or
waiver of, or any
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consent to departure from, any Loan Document or (f) any other circumstance or
happening whatsoever, whether or not similar to any of the foregoing.
Section 2.15. Limitation of Liability. Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit with respect to
its use of such Letter of Credit. Neither Lender or any of its officers,
employees or directors shall have any responsibility or liability to Borrower or
any other Person for (a) the failure of any draft to bear any reference or
adequate reference to any Letter of Credit, or the failure of any documents to
accompany any draft at negotiation, or the failure of any Person to surrender or
to take up any Letter of Credit or to send documents apart from drafts as
required by the terms of any Letter of Credit, or the failure of any Person to
note the amount of any instrument on any Letter of Credit, each of which
requirements, if contained in any Letter of Credit itself, it is agreed may be
waived by Lender, (b) errors, omissions, interruptions or delays in transmission
or delivery of any messages, (c) the validity, sufficiency or genuineness of any
draft or other document, or any endorsement thereon, even if any such draft,
document or endorsement should in fact prove to be in any and all respects
invalid, insufficient, fraudulent or forged or any statement therein is untrue
or inaccurate in any respect, (d) the payment by the Lender to the beneficiary
of any Letter of Credit against presentation of any draft or other document that
does not comply with the terms of the Letter of Credit in a respect which is not
material or (e) any other circumstance whatsoever in making or failing to make
any payment under a Letter of Credit. Lender may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary. Notwithstanding the
foregoing, Lender shall be liable to Borrower to the extent of any direct, but
not consequential, damages suffered by Borrower which Borrower proves in a final
nonappealable judgment were caused by (i) Lender's willful misconduct or gross
negligence in determining whether documents presented under any Letter of Credit
complied with the terms thereof or (ii) Lender's willful failure to pay under
any Letter of Credit after presentation to it of documents strictly complying
with the terms and conditions of such Letter of Credit.
Section 2.16. Provisions Regarding Electronic Issuance of Letters of
Credit. Lender may adopt procedures pursuant to which Borrower may request the
issuance of Letters of Credit by electronic means and Lender may issue Letters
of Credit based on such electronic requests. Such procedures may include the
entering by Borrower into the Letter of Credit Applications electronically. All
the procedures, actions and documents referred to in the two preceding sentences
are referred to as "Electronic Applications". Borrower holds Lender harmless
with respect to actions taken by Lender based upon Electronic Applications.
Borrower further agrees
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to be bound by all the terms and provisions contained in the Letter of Credit
Applications, including, without limitation, the terms and provisions of the
Letter of Credit Applications contained on the reverse side of the paper copies
thereof, including the release and indemnification provisions contained therein.
ARTICLE III.
Payments
Section 3.1. Method of Payment. All payments of principal, interest,
and other amounts to be made by Borrower under this Agreement, the Note or any
other Loan Documents shall be made to Lender at its designated office, without
setoff, deduction, or counterclaim in immediately available funds. Whenever any
payment under this Agreement, the Note or any other Loan Document shall be
stated to be due on a day that is not a Business Day, such payment may be made
on the next Business Day, and interest shall continue to accrue during such
extension.
Section 3.2. Voluntary Prepayment. Borrower may prepay the Note in
whole at any time or from time to time in part without premium or penalty but
with accrued interest to the date of prepayment on the amount so prepaid.
Section 3.3. Computation of Interest. Interest on the indebtedness
evidenced by the Note shall be computed on the basis of a year of 360 days and
the actual number of day elapsed (including the first day but excluding the last
day) unless such calculation would result in a usurious rate, in which case
interest shall be calculated on the basis of a year of 365 or 366 days, as the
case may be.
Section 3.4. Additional Costs in Respect of Letters of Credit. If as a
result of any Regulatory Change there shall be imposed, modified, or deemed
applicable any tax, reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or Lender's Commitment to issue Letters of Credit hereunder,
and the result shall be to increase the cost to Lender of issuing or maintaining
any Letter of Credit or its Commitment to issue Letters of Credit hereunder or
reduce any amount receivable by Lender hereunder in respect of any Letter of
Credit (which increase in cost, or reduction in amount receivable, shall be the
result of Lender's reasonable allocation of the aggregate of such increases or
reductions resulting from such event), then, upon demand by Lender, Borrower
agrees to pay to Lender from time to time as specified by Lender, such
additional amounts as shall be sufficient to compensate Lender for such
increased costs or reductions in amount. A statement as to such increased costs
or reductions in amount incurred by Lender, submitted by Lender to
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Borrower, shall be conclusive as to the amount thereof, provided that the
determination thereof is made on a reasonable basis.
ARTICLE IV.
Collateral
Section 4.1. Collateral. To secure full and complete payment and
performance of the Obligations, Borrower shall execute and deliver or cause to
be executed and delivered the documents described below covering the property
and collateral described therein and in this Section 4.1 (which, together with
any other property and collateral which may now or hereafter secure the
Obligations or any part thereof, is sometimes herein called the "Collateral"):
(a) Borrower shall grant to Lender a first priority security
interest in all of its accounts receivable and inventory, and all
documents, instruments and general intangibles related thereto or
arising therefrom, whether now owned or hereafter acquired, and all
products and proceeds thereof, pursuant to the Security Agreement.
(b) Borrower shall execute and cause to be executed such
further documents and instruments, including without limitation,
Uniform Commercial Code financing statements, as Lender, in its sole
discretion, deems necessary or desirable to evidence and perfect its
liens and security interests in the Collateral.
Section 4.2. Setoff. Upon the occurrence of an Event of Default, Lender
shall have the right to set off and apply against the Obligations in such a
manner as Lender may determine, at any time and without notice to Borrower, any
and all deposits (general or special, time or demand, provisional or final) or
other sums at any time credited by or owing from Lender to Borrower whether or
not the Obligations are then due. In addition to Lender's right of setoff and as
further security for the Obligations, Borrower hereby grants to Lender a
security interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of Borrower now or hereafter on deposit
with or held by Lender and all other sums at any time credited by or owing from
Lender to Borrower. The rights and remedies of Lender hereunder are in addition
to other rights and remedies (including, without limitation, to the rights of
setoff) which Lender may have.
Section 4.3. Guaranty Agreement. Guarantor shall unconditionally and
irrevocably guarantee payment and performance of the Obligations by execution
and delivery of the Guaranty Agreement.
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ARTICLE V.
Conditions Precedent
Section 5.1. Initial Extension of Credit. The obligation of Lender to
make the initial Advance or issue the initial Letter of Credit is subject to the
condition precedent that prior thereto Lender shall have received all of the
documents set forth below in form and substance satisfactory to Lender.
(a) Certificate - Borrower. A certificate of the Secretary of
Borrower or another officer of Borrower acceptable to Lender certifying
(i) resolutions of the board of directors of Borrower which authorize
the execution, delivery and performance by Borrower of this Agreement
and the other Loan Documents to which Borrower is or is to be a party,
and (ii) the names of the officers of Borrower authorized to sign this
Agreement and each of the other Loan Documents to which Borrower is or
is to be a party together with specimen signatures of such officers.
(b) Organizational Documents - Borrower. The articles of
incorporation and bylaws of Borrower certified by the Secretary of
Borrower or another officer of Borrower acceptable to Lender.
(c) Governmental Certificates - Borrower. Certificates of the
appropriate government officials of the state of incorporation of
Borrower as to the existence and good standing of Borrower.
(d) Certificate - Guarantor. A certificate of the Secretary of
Guarantor or another officer of Guarantor acceptable to Lender
certifying (i) resolutions of the Board of Directors of Guarantor which
authorize the execution, delivery and performance by Guarantor of the
Guaranty and the other Loan Documents to which Guarantor is or is to be
a party, and (ii) the names of the officers of Guarantor authorized to
sign the Guaranty and each of the other Loan Documents to which
Guarantor is or is to be party together with specimen signatures of
such officers.
(e) Organizational Documents - Guarantor. The articles of
incorporation and bylaws of Guarantor certified by the Secretary of
Guarantor or another officer of Guarantor acceptable to Lender.
(f) Governmental Certificates - Guarantor. Certificates of the
appropriate government officials of the state of incorporation of
Guarantor as to the existence and good standing of Guarantor.
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(g) Note. The Note executed by Borrower.
(h) Security Agreement. The Security Agreement executed by
Borrower.
(i) Financing Statements. Uniform Commercial Code financing
statements executed by Borrower.
(j) Guaranty Agreement. The Guaranty Agreement executed by
Guarantor.
(k) Facility Fee. The facility fee referred to in Section 2.9.
(l) Insurance Policies. Copies of all insurance policies
required by Section 7.5, together with loss payable endorsements in
favor of Lender with respect to all insurance policies covering
Collateral.
(m) UCC Search. A Uniform Commercial Code search showing all
financing statements and other documents or instruments on file against
Borrower in Harris County, Texas and Hardin County, Texas and the
office of the Secretary of State of Texas.
(n) Field Audit. A Field Audit dated as of a current date.
(o) Environmental Reports. Such environmental reports and
other analysis of environmental matters as Lender may request.
(p) Opinion of Counsel. An opinion of Bernsen, Goodson, Mann &
Rothman, L.L.P., legal counsel to Borrower and Guarantor.
(q) Attorneys' Fees and Expenses. Evidence that the costs and
expenses (including reasonable attorneys' fees) referred to in Section
11.1, to the extent incurred, have been paid in full by Borrower.
(r) Additional Documentation. Such additional approvals,
opinions or documents as Lender may reasonably request.
Section 5.2. All Extensions of Credit. The obligation of Lender to make
any Advance or issue any Letter of Credit (including the initial Advance and the
initial Letter of Credit) is subject to receipt by Lender of the items required
by Section 2.5 or 2.11, as applicable, and such additional approvals, opinions
or documents as Lender may reasonably request.
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ARTICLE VI.
Representations and Warranties
To induce Lender to enter into this Agreement, Borrower represents and
warrants to Lender that:
Section 6.1. Corporate Existence. Borrower, Guarantor and each
Subsidiary (a) are corporations duly organized, validly existing, and in good
standing under the laws of their respective jurisdictions of incorporation, (b)
have all requisite corporate power and authority to own their assets and carry
on their business as now being or as proposed to be conducted and (c) are
qualified to do business in all jurisdictions necessary and where failure to so
qualify would have a Material Adverse Effect. Borrower has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the other Loan Documents to which it is or may become a party.
Section 6.2. Financial Statements. Borrower has delivered to Lender
audited consolidated financial statements of Guarantor and its Subsidiaries as
at and for the fiscal year ended December 31, 1998, and unaudited consolidated
financial statements of Guarantor and its Subsidiaries (including Borrower) for
the seven (7) month period ended July 31, 1999. Such financial statements are
true and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial condition of
Guarantor and its Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein. Neither
Guarantor nor any of its Subsidiaries has any material contingent liabilities,
liabilities for taxes, material forward or long-term commitments, or unrealized
or anticipated losses from any unfavorable commitments not reflected in such
financial statements. There has been no Material Adverse Effect since the
effective date of the most recent financial statements referred to in this
Section.
Section 6.3. Corporate Action; No Breach. The execution, delivery, and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or may become a party have been duly authorized by all requisite
action on the part of Borrower and do not and will not violate or conflict with
the articles of incorporation or bylaws of Borrower or any law, rule or
regulation or any order, writ, injunction, or decree of any court, governmental
authority, or arbitrator, and do not and will not conflict with, result in a
breach of, or constitute a default under, or result in the imposition of any
Lien (except as provided in this Agreement) upon any of the revenues or assets
of Borrower or any Subsidiary pursuant to the provisions of any indenture,
mortgage, deed of trust, security agreement, franchise, permit,
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license, or other instrument or agreement by which Borrower or any Subsidiary or
any of their respective properties is bound.
Section 6.4. Operation of Business. Borrower, Guarantor and each
Subsidiary possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted.
Section 6.5. Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any court, governmental authority, or
arbitrator pending, or to the knowledge of Borrower, threatened against or
affecting Borrower, Guarantor or any Subsidiary, that would, if adversely
determined, have a Material Adverse Effect. There are no outstanding judgments
against Borrower, Guarantor or any Subsidiary.
Section 6.6. Rights in Properties; Liens. Borrower, Guarantor and each
Subsidiary have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets and leasehold interests reflected in the financial statements
described in Section 6.2, and none of the properties, assets or leasehold
interests of Borrower, Guarantor or any Subsidiary is subject to any Lien,
except as permitted by this Agreement.
Section 6.7. Enforceability. This Agreement constitutes, and the other
Loan Documents to which Borrower is party, when delivered, shall constitute the
legal, valid, and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditor's rights.
Section 6.8. Approvals. No authorization, approval, or consent of, and
no filing or registration with, any court, governmental authority, or third
party is or will be necessary for the execution, delivery, or performance by
Borrower of this Agreement and the other Loan Documents to which Borrower is or
may become a party or the validity or enforceability thereof.
Section 6.9. Debt. Borrower and its Subsidiaries have no Debt except
Debt to Lender and other Debt permitted pursuant to Section 8.1.
Section 6.10. Use of Proceeds; Margin Securities. None of Borrower,
Guarantor or any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T, U, or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be
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used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying margin stock.
Section 6.11. ERISA. Borrower, Guarantor and each Subsidiary have
complied with all applicable minimum funding requirements and all other
applicable and material requirements of ERISA, and there are no existing
conditions that would give rise to liability thereunder. No Reportable Event (as
defined in Section 4043 of ERISA) has occurred in connection with any employee
benefit plan that might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer such plan.
Section 6.12. Taxes. Borrower, Guarantor and each Subsidiary have filed
all tax returns (federal, state, and local) required to be filed, including all
income, franchise, employment, property, and sales taxes, and have paid all of
their liabilities for taxes, assessments, governmental charges, and other levies
that are due and payable, and Borrower knows of no pending investigation of
Borrower, Guarantor or any Subsidiary by any taxing authority or of any pending
but unassessed tax liability of Borrower, Guarantor or any Subsidiary.
Section 6.13. Disclosure. There is no fact known to Borrower which has
a Material Adverse Effect, or which might in the future have a Material Adverse
Effect that has not been disclosed in writing to Lender.
Section 6.14. Subsidiaries. Borrower has no Subsidiaries other than
Gulf State Pipe Line Company, Inc. Borrower owns one hundred percent (100%) of
the issued and outstanding stock of such Subsidiary.
Section 6.15. Compliance with Laws. None of Borrower, Guarantor or any
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any court, governmental authority, or arbitrator.
Section 6.16. Compliance with Agreements. None of Borrower, Guarantor
or any Subsidiary is in violation in any material respect of any material
document, agreement, contract or instrument to which it is a party or by which
it or its properties are bound.
Section 6.17. Environmental Matters. Except as disclosed in Guarantors
audited financial statements dated December 31, 1998, (a) Borrower, Guarantor
and each Subsidiary, and their respective properties are in compliance with all
applicable Environmental Laws and none of Borrower, Guarantor or any Subsidiary
is subject to any liability or obligation for remedial action thereunder; (b)
there is no pending or threatened investigation or inquiry by any governmental
authority of Borrower, Guarantor or any Subsidiary, or
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any of their respective properties pertaining to any Hazardous Substance; (c)
except in the ordinary course of business and in compliance with all
Environmental Laws, there are no Hazardous Substances located on or under any of
the properties of Borrower, Guarantor or any Subsidiary; and (d) except in the
ordinary course of business and in compliance with all Environmental Laws, none
of Borrower, Guarantor or any Subsidiary has caused or permitted any Hazardous
Substance to be disposed of on or under or released from any of its properties.
Borrower, Guarantor and each Subsidiary have obtained all permits, licenses, and
authorizations which are required under and by all Environmental Laws.
Section 6.18. Year 2000. All material software, hardware and critical
systems used by Borrower, Guarantor and their Subsidiaries in the conduct of
Borrower's, Guarantor's and such Subsidiaries' business ("Borrower's Computer
Items") will record, store, process and present calendar dates falling on or
after January 1, 2000, and all information pertaining to such dates, in the same
manner and with the same functionality as Borrower's Computer Items record,
store, process and present calendar dates falling on or before December 31,
1999, and all information pertaining to such dates. Borrower's Computer Items
have all appropriate capability and compatibility for handling century-aware or
year 2000 compliant data. The data related user interface functions, data fields
and data related program instructions and functions of Borrower's Computer Items
include the indication of the century.
Section 6.19. Solvency. Borrower and its Subsidiaries, on a
consolidated basis, are not insolvent, Borrower's and its Subsidiaries' assets,
on a consolidated basis, exceed their liabilities, and Borrower will not be
rendered insolvent by the execution and performance of this Agreement and the
Loan Documents.
Section 6.20. Investment Company Act. None of Borrower, Guarantor or
any Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
ARTICLE VII.
Affirmative Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any Commitment hereunder, Borrower
will perform and observe the covenants set forth below, unless Lender shall
otherwise consent in writing.
Section 7.1. Reporting Requirements. Borrower will deliver to Lender:
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(a) Annual Financial Statements - Guarantor. As soon as
available, and in any event within one hundred fifty (150) days after
the end of each fiscal year of Borrower, beginning with the fiscal year
ending December 31, 1999, a copy of the annual audited financial
statements of Guarantor and its Subsidiaries for such fiscal year
containing, on a consolidated basis, balance sheets, statements of
income, statements of stockholders' equity and statements of cash flows
as at the end of such fiscal year and for the 12-month period then
ended, in each case setting forth in comparative form the figures for
the preceding fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and audited and certified without qualification
by independent certified public accountants of recognized standing
acceptable to Lender, and containing a footnote to the effect that at
least ninety-five percent (95%) of the reported financial results are
attributable to Borrower.
(b) Quarterly Financial Statements - Guarantor. As soon as
available, and in any event within seventy-five (75) days after the end
of each quarter of each fiscal year of Guarantor, a copy of the
financial statements of Guarantor and its Subsidiaries as of the end of
such fiscal quarter and for the portion of the fiscal year then ended,
containing, on a consolidated basis, balance sheets, statements of
income, statements of stockholders' equity and cash flows in each case
setting forth in comparative form the figures for the corresponding
period of the preceding fiscal year, all in reasonable detail and
certified by an officer of Guarantor acceptable to Lender to have been
prepared in accordance with GAAP and to fairly and accurately present
the financial condition and results of operations of Guarantor and its
Subsidiaries, on a consolidated basis, at the date and for the periods
indicated therein, and containing a footnote to the effect that at
least ninety-five percent (95%) of the reported financial results are
attributable to Borrower.
(c) No Default Certificate. Concurrently with the delivery of
each of the financial statements referred to in Sections 7.1(a) and
7.1(b), a No Default Certificate as of the date of such financial
statements executed by an officer of Borrower acceptable to Lender
containing detailed calculations of the covenants contained in Article
IX.
(d) Borrowing Base Certificate. As soon as available, and in
any event within five (5) days after the end of each month of each
fiscal year of Borrower, a Borrowing Base Certificate as of the last
day of such month certified by an officer of Borrower acceptable to
Lender.
(e) Monthly Accounts Receivable Reports. As soon as available,
and in any event within five (5) days after the end
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of each month of each fiscal year of Borrower, accounts receivable
reports for Borrower as of the last day of such month certified by an
officer of Borrower acceptable to Lender, and showing all accounts
receivable by customer name, amount owing to Borrower and the age of
the receivable.
(f) Inventory Report. As soon as available, and in any event
within five (5) days after the end of each month of each fiscal year of
Borrower, an inventory report as of the end of such month certified by
an officer of Borrower acceptable to Lender, and showing all inventory
by product type, volume and value.
(g) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any court
or governmental department, commission, board, agency or
instrumentality, domestic or foreign, affecting Borrower, Guarantor or
any Subsidiary which could have a Material Adverse Effect.
(h) Judgments. Within five (5) days of the rendering thereof,
notice of any judgment against Borrower, Guarantor or any Subsidiary in
an amount which is more than $25,000.00.
(i) Notice of Default. As soon as possible and in any event
within five (5) days after the occurrence of each Event of Default and
each event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default, a written notice setting forth
the details of such Event of Default or event and the action which
Borrower has taken and proposes to take with respect thereto.
(j) Notice of Material Adverse Effect. As soon as possible,
and in any event within five (5) days after Borrower becomes aware
thereof, notice of the occurrence of any event or the existence of any
condition which might reasonably be expected to have a Material Adverse
Effect.
(k) General Information. Promptly, such other information
concerning Borrower, Guarantor or any Subsidiary as Lender may from
time to time reasonably request.
Section 7.2. Maintenance of Existence; Conduct of Business. Borrower
will preserve and maintain, and will cause Guarantor and each Subsidiary to
preserve and maintain, its corporate existence and all of its leases,
privileges, licenses, permits, franchises, qualifications and rights that are
necessary or desirable in the ordinary conduct of its business.
Section 7.3. Maintenance of Properties. Borrower will maintain, and
will cause Guarantor and each Subsidiary to maintain, its assets and properties
in good condition and repair.
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Section 7.4. Taxes and Claims. Borrower will pay or discharge, and will
cause Guarantor and each Subsidiary to pay or discharge, at or before maturity
or before becoming delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which, if
unpaid, might become a Lien upon any of its property; provided, however, that
none of Borrower, Guarantor, or any Subsidiary shall be required to pay or
discharge any tax, levy, assessment, or governmental charge with respect to
which no Lien has been filed of record and which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
Section 7.5. Insurance. Borrower will maintain, and will cause
Guarantor and each Subsidiary to maintain, with financially sound and reputable
insurance companies workmen's compensation insurance, liability insurance, and
insurance on its property, assets and business at least in such amounts and
against such risks as are usually insured against by Persons engaged in similar
businesses. Each insurance policy covering Collateral shall name Lender as
lender loss payee and provide that such policy will not be cancelled without
thirty (30) days prior written notice to Lender.
Section 7.6. Inspection; Field Audits. At any reasonable time and from
time to time, Borrower will permit, and will cause Guarantor and each Subsidiary
to permit, representatives of the Lender:
(a) To examine and make copies of the books and records of,
and visit and inspect the properties or assets of Borrower, Guarantor
and any Subsidiary and to discuss the business, operations, and
financial condition of any such Persons with their respective officers
and employees and with their independent certified public accountants;
and
(b) At the expense of Borrower, to conduct Field Audits once
during each fiscal year of Borrower.
Section 7.7. Keeping Books and Records. Borrower will maintain, and
will cause Guarantor and each Subsidiary to maintain, proper books of record and
account in which full, true, and correct entries in conformity with GAAP shall
be made of all dealings and transactions in relation to its business and
activities.
Section 7.8. Compliance with Laws. Borrower will comply, and will cause
Guarantor and each Subsidiary to comply, in all material respects with all
applicable laws, rules, regulations, and orders of any court, governmental
authority, or arbitrator.
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Section 7.9. Compliance with Agreements. Borrower will comply, and will
cause Guarantor and each Subsidiary to comply, in all material respects with all
material agreements, contracts, and instruments binding on it or affecting its
properties or business.
Section 7.10. Further Assurances. Borrower will execute and deliver,
and will cause Guarantor and each Subsidiary to execute and deliver, such
further instruments as may be requested by Lender to carry out the provisions
and purposes of this Agreement and the other Loan Documents and to preserve and
perfect the Liens of Lender in the Collateral.
Section 7.11. ERISA. Borrower will comply, and will cause Guarantor and
each Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
Section 7.12. Continuity of Operations. Borrower will continue to
conduct, and will cause each of its Subsidiaries to continue to conduct, its
primary businesses as conducted as of the Closing Date and to continue its
operations in such businesses.
Section 7.13. Year 2000. Within thirty (30) days of any request
therefor by Lender, Borrower will deliver to Lender a statement from a Person
acceptable to Lender to the effect that Borrower's Computer Items comply with
the representations contained in Section 6.18.
ARTICLE VIII.
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any Commitment hereunder, Borrower
will perform and observe the covenants set forth below, unless Lender shall
otherwise consent in writing.
Section 8.1. Debt. Borrower will not incur, create, assume or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except (a) Debt to Lender, (b) Debt existing on the Closing
Date which has been specifically approved by Lender, (c) Debt incurred in
connection with obtaining insurance, (d) current liabilities for taxes and
assessments incurred in the ordinary course of business, and (e) long term debt
to fund plant expansion which has been specifically approved by Lender prior to
the incurrence thereof.
Section 8.2. Limitation on Liens. Borrower will not incur, create,
assume or permit to exist, and will not permit any Subsidiary to incur, create,
assume or permit to exist, any Lien upon any of its accounts receivable or
inventory, or any documents,
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instruments and general intangibles related thereto or arising therefrom,
whether now owned or hereafter acquired, except Liens in favor of Lender.
Section 8.3. Mergers, Acquisitions, Dissolutions and Disposition of
Assets. Borrower will not, and will not permit Guarantor or any Subsidiary to,
(a) become a party to a merger, consolidation, partnership or joint venture or
purchase or otherwise acquire all or a substantial part of the assets of any
Person or any shares or other evidence of beneficial ownership of any Person,
(b) dissolve or liquidate, (c) sell, lease, assign, transfer or otherwise
dispose of substantially all of its assets, except dispositions of plant
products (inventory) in the ordinary course of business, (d) create any new
Subsidiary, or (e) enter into any agreement to do any of the foregoing. Borrower
will not, and will not permit any Subsidiary to, sell, lease, assign, transfer
or otherwise dispose of any of its assets, except (a) sales of plant products
(inventory) in the ordinary course of business, and (b) sales of obsolete or
worn out equipment in the ordinary course of business.
Section 8.4. Restricted Payments. Borrower will not declare or pay any
dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, except for (a) dividends payable in
the form of common stock, and (b) if no Event of Default or Unmatured Event of
Default has occurred and is continuing, dividends payable in cash with respect
to any fiscal quarter of Borrower which do not, in the aggregate, exceed the
lesser of (i) $150,000.00 or (ii) fifty percent (50%) of EBITDA minus interest
expense for the quarter with respect to which such dividends are paid.
Section 8.5. Loans and Advances. Borrower will not make, and will not
permit Guarantor or any Subsidiary to make, any advance, loan or extension of
credit to any Person, including any employee, officer or director of Borrower,
Guarantor or any Subsidiary, except (a) loans and advances which exist on the
Closing Date and which have been specifically approved by Lender, (b) loans and
advances which do not exceed an aggregate principal amount of $100,000.00
outstanding at any time, and (c) loans and advances which have been specifically
approved by Lender prior to the funding thereof.
Section 8.6. Bonuses. Borrower will not pay, and will not permit
Guarantor or any Subsidiary to pay, to any Person any bonus or other form of
cash compensation in addition to salary, unless (a) such bonuses do not exceed
an aggregate amount of $200,000.00 with respect to any fiscal quarter of
Borrower, (b) immediately preceding the payment of any such bonus, no Event of
Default or Unmatured Event of Default exists, and (c) immediately following
the payment of any such bonus Borrower would be in compliance with
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Section 9.3 for the fiscal quarter with respect to which such bonus was paid and
no Event of Default or Unmatured Event of Default would arise as a result of the
payment of such bonus.
Section 8.7. Investments. Borrower will not make, and will not permit
Guarantor or any Subsidiary to make, any loan, extension of credit or capital
contribution to or investment in, or purchase, or permit Guarantor or any
Subsidiary to purchase, any stock, bonds, notes, debentures, or other securities
of any Person, except (a) readily marketable direct obligations of the United
States of America or obligations fully guaranteed by the United States of
America, (b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition of Lender or any commercial bank operating
in the United States having capital and surplus in excess of $150,000,000.00,
(c) commercial paper of a domestic issuer if at the time of purchase such paper
is rated in one of the two highest rating categories of Standard and Poor's
Corporation or Moody's Investors Service, (d) investments in hydrocarbon
commodity options which do not exceed an aggregate amount of $150,000.00 at any
time, and (e) investments made through Lender or its affiliates and approved by
Lender.
Section 8.8. Compliance with Environmental Laws. Except in the ordinary
course of business and in accordance with all applicable Environmental Laws,
Borrower will not, and will not permit Guarantor or any Subsidiary to, (a) use
(or permit any tenant to use) any of their respective properties or assets for
the handling, processing, storage, transportation, or disposal of any Hazardous
Substance, (b) generate any Hazardous Substance, (c) conduct any activity which
is likely to cause a release or threatened release of any Hazardous Substance,
or (d) otherwise conduct any activity or use any of their respective properties
or assets in any manner that is likely to violate any Environmental Law.
Section 8.9. Accounting. Borrower will not make, and will not permit
Guarantor or any Subsidiary to make, any change in accounting treatment or
reporting practices, except as required by GAAP.
Section 8.10. Change of Business. Borrower will not enter into, or
permit any Subsidiary to enter into, any type of business which is materially
different from the business in which Borrower or such Subsidiary is presently
engaged.
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ARTICLE IX.
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any Commitment hereunder, Borrower
will cause Guarantor to observe and perform the following financial covenants
set forth below, unless Lender shall otherwise consent in writing.
Section 9.1. Current Ratio. Guarantor will at all times maintain a
Current Ratio of not less than 1.10 to 1.00. The Current Ratio shall be
calculated and tested quarterly as of the last day of each fiscal quarter of
Guarantor.
Section 9.2. Tangible Net Worth. Guarantor will maintain Tangible Net
Worth (a) in an amount not less than $5,600,000.00 from the Closing Date through
September 29, 1999, and (b) as of the last day of each fiscal quarter of
Guarantor, commencing with the fiscal quarter ending on September 30, 1999, in
an amount not less than the sum of (i) $5,600,000.00 plus (ii) fifty percent
(50%) of Net Income of Guarantor subsequent to June 30, 1999. Tangible Net Worth
shall be calculated and tested quarterly as of the last day of each fiscal
quarter of Guarantor.
Section 9.3. EBITDA. Guarantor will at all times maintain EBITDA of not
less than $1,500,000.00. EBITDA shall be calculated and tested quarterly as of
the last day of each fiscal quarter of Guarantor, on a cumulative basis for the
four quarters ended as of such day.
Section 9.4. Capital Expenditures. Guarantor will not permit the
aggregate Capital Expenditures of Guarantor and its Subsidiaries to exceed
$2,000,000.00 during any fiscal year.
ARTICLE X.
Default
Section 10.1. Events of Default. Each of the following shall be deemed
an "Event of Default":
(a) Borrower shall fail to pay when due the Obligations or any
part thereof.
(b) Any representation or warranty made or deemed made by
Borrower or any Obligated Party (or any of their respective officers)
in any Loan Document or in any certificate, report, notice, or
financial statement furnished at any time in connection with this
Agreement shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
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(c) Borrower or any Obligated Party shall fail to perform,
observe, or comply with any covenant, agreement, or term contained in
this Agreement or any other Loan Document and such failure shall
continue for a period of seven (7) days.
(d) Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(e) An involuntary proceeding shall be commenced against
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or a substantial part of its
property, and such involuntary proceeding shall remain undismissed and
unstayed for a period of thirty (30) days.
(f) Borrower, any Subsidiary, or any Obligated Party shall
fail to discharge within a period of thirty (30) days after the
commencement thereof any final, non-appealable attachment,
sequestration, or similar proceeding or proceedings involving an
aggregate amount in excess of $100,000.00 against any of its assets or
properties.
(g) Borrower, any Subsidiary, or any Obligated Party shall
fail to satisfy and discharge promptly any final, non-appealable
judgement or judgements against it for the payment of money in an
aggregate amount in excess of $100,000.00.
(h) Borrower, any Subsidiary, or any Obligated Party shall
fail to pay when due any principal of or interest on any Debt (other
than the Obligations), or the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required to be prepaid
prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both,
would
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permit) any holder or holders of such Debt or any Person acting on
behalf of such holder or holders to accelerate the maturity thereof or
require any such prepayment.
(i) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or Borrower or any Obligated Party shall deny
that it has any further liability or obligation under any of the Loan
Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
(j) Guarantor shall fail to own at least one hundred
percent (100%) of the outstanding voting stock of Borrower.
Section 10.2. Remedies Upon Default. If any Event of Default shall
occur, Lender may do any one or more of the following: (a) declare the
outstanding principal of and accrued and unpaid interest on the Note and the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by Borrower, (b) terminate the
Commitment without notice to Borrower, (c) foreclose or otherwise enforce any
Lien granted to the Lender to secure payment and performance of the Obligations,
and (d) exercise any and all rights and remedies afforded by the laws of the
State of Texas or any other jurisdiction by any of the Loan Documents, by equity
or otherwise; provided, however, that upon the occurrence of an Event of Default
under Section 10.1(d) or Section 10.1(e), the Commitment shall automatically
terminate, and the outstanding principal of and accrued and unpaid interest on
the Note and the other Obligations shall become immediately due and payable
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by Borrower.
Section 10.3. Performance by Lender. If Borrower shall fail to perform
any covenant, duty, or agreement contained in any of the Loan Documents, Lender
may perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly pay
any amount expended by Lender in such performance or attempted performance to
Lender, together with interest thereon at the Default Rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly agreed
that Lender shall not have any
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liability or responsibility for the performance of any obligation of Borrower
under this Agreement or any other Loan Document.
ARTICLE XI.
Miscellaneous
Section 11.1. Expenses of Lender. Borrower hereby agrees to pay Lender
on demand (a) all reasonable costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Agreement and the other
Loan Documents and any and all amendments, modifications, renewals, extensions,
and supplements thereof and thereto, including, without limitation, the fees and
expenses of Lender's legal counsel, (b) all reasonable costs and expenses
incurred by Lender in connection with the enforcement of this Agreement or any
other Loan Document, including, without limitation, the fees and expenses of
Lender's legal counsel, and (c) all other reasonable costs and expenses incurred
by Lender in connection with this Agreement or any other Loan Document,
including, without limitation, all costs, expenses, taxes, assessments, filing
fees, and other charges levied by an governmental authority or otherwise payable
in respect of this Agreement or any other Loan Document or in obtaining any
insurance policy, audit or appraisal in respect of the Collateral.
SECTION 11.2. INDEMNIFICATION. BORROWER HEREBY INDEMNIFIES LENDER AND
EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) (COLLECTIVELY, "CLAIMS") TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR
RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION,
OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL,
REMOVAL, OR CLEANUP OF ANY HAZARDOUS SUBSTANCE LOCATED ON, ABOUT, WITHIN, OR
AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY, (E) ANY
ACT OR OMISSION OF LENDER BASED UPON ANY FAX OR ELECTRONIC TRANSMISSION, OR (F)
ANY MATTER RELATED TO ANY LETTER OF CREDIT, INCLUDING, WITH RESPECT TO ALL OF
THE ABOVE, ANY CLAIM WHICH ARISES AS A RESULT OF THE NEGLIGENCE OF LENDER;
PROVIDED, HOWEVER, THAT BORROWER'S INDEMNIFICATION OBLIGATIONS UNDER THIS
SECTION 11.2 SHALL NOT APPLY TO THE EXTENT THAT THE CLAIMS ARISE AS A RESULT OF
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER.
Section 11.3. Limitation of Liability. Neither Lender nor any
affiliate, officer, director, employee, attorney, or agent of Lender shall have
any liability with respect to, and Borrower
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hereby waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental, or consequential damages suffered or incurred
by Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. Borrower
hereby waives, releases, and agrees not to sue Lender or any of Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Section 11.4. No Waiver; Cumulative Remedies. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law.
Section 11.5. Successors and Assigns. This Agreement is binding upon
and shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without prior written consent of
Lender.
Section 11.6. Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them. Without prejudice to the
survival of any other obligation of Borrower hereunder, the obligations of
Borrower under Sections 11.1 and 11.2 shall survive repayment of the Note and
termination of the Commitment and the Letters of Credit.
Section 11.7. Amendment. The provisions of this Agreement and the other
Loan Documents to which Borrower is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
Section 11.8. Maximum Interest Rate. No provision of this Agreement or
of any other Loan Documents shall require the payment or the collection of
interest in excess of the maximum permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in
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any other Loan Documents or otherwise in connection with this loan transaction,
the provisions of this Section shall govern and prevail and neither Borrower nor
the sureties, guarantors, successors, or assigns of Borrower shall be obligated
to pay the excess amount of such interest or any other excess sum paid for the
use, forbearance, or detention of sums loaned pursuant hereto. In the event
Lender ever receives, collects, or applies as interest any such sum, such amount
which would be in excess of the maximum amount permitted by applicable law shall
be applied as a payment and reduction of the principal of the indebtedness
evidenced by the Note; and, if the principal of the Note has been paid in full,
any remaining excess shall forthwith be paid to Borrower. In determining whether
or not the interest paid or payable exceeds the Maximum Rate, Borrower and
Lender shall, to the extent permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by the Note so that interest for the entire term does not exceed the Maximum
Rate.
Section 11.9. Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents shall be in writing and may
be telexed, telecopied (faxed), mailed by certified mail return receipt
requested, or delivered to the intended recipient at the addresses specified
below or at such other address as shall be designated by any party listed below
in a notice to the other parties listed below given in accordance with this
Section.
If to Borrower: South Hampton Refining Co.
7752 FM 418
P.O. Box 1636
Silsbee, Texas 77656
Attention: Nick Carter
Telephone No.: 409-385-1400
Fax No.: 409-385-2453
If to Guarantor: Texas Oil and Chemical Company II, Inc.
7752 FM 418
P.O. Box 1636
Silsbee, Texas 77656
Attention: Nick Carter
Telephone No.: 409-385-1400
Fax No.: 409-385-2453
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If to Lender: Southwest Bank of Texas, N.A.
Five Post Oak Park
4400 Post Oak Parkway
Houston, Texas 77027
Attention: A. Stephen Kennedy
Telephone No.: 713-235-8870
Fax No.: 713-439-5925
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopy (fax), subject to confirmation of receipt, when personally delivered
or, in the case of a mailed notice, when duly deposited in the mails, in each
case given or addressed as aforesaid; provided, however, that notices to Lender
pursuant to Article II shall not be effective until received by Lender.
Section 11.10. Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement has been entered into in Harris County, Texas and it shall be
performable for all purposes in Harris County, Texas. Except as provided in the
Arbitration Agreement, any action or proceeding against Borrower under or in
connection with any of the Loan Documents may be brought in any state or federal
court in Harris County, Texas, and Borrower hereby irrevocably submits to the
nonexclusive jurisdiction of such courts and waives any objection it may now or
hereafter have as to the venue of any such action or proceeding brought in any
such court or that any such court is an inconvenient forum. Borrower agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its office specified in this Agreement. Except as provided
in the Arbitration Agreement, nothing herein or in any of the other Loan
Documents shall affect the right of Lender to serve process in any other manner
permitted by law or shall limit the right of Lender to bring any action or
proceeding against Borrower or with respect to any of its property in courts in
other jurisdictions. Except as provided in the Arbitration Agreement, any action
or proceeding by Borrower against Lender shall be brought only in a court
located in Harris County, Texas.
Section 11.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.12. Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
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Section 11.13. Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 11.14. Non-Application of Chapter 346 of Texas Finance Code.
The provisions of Chapter 346 of the Texas Finance Code are specifically
declared by the parties hereto not to be applicable to this Agreement or any of
the other Loan Documents or to the transactions contemplated hereby.
Section 11.15. Consent to Participations. Lender shall have the right
at any time and from time to time to sell or transfer one or more participation
interests in the Notes and the indebtedness evidenced thereby to one or more
purchasers ("Purchasers"), whether related or unrelated to Lender. Lender may
provide to any one or more Purchasers or potential Purchasers any information,
financial statements, data or knowledge Lender may have about Borrower or about
any other matter relating to the Obligations, and Borrower waives any rights to
privacy it may have with respect to such matters. Borrower further waives any
and all notices of sale of participation interests and notices of repurchases of
participation interests. Borrower agrees that the owners of any participation
interests will be considered as the absolute owners of their interests in the
Obligations and will have all the rights granted under the participation
agreements or other agreements governing the sale of their participation
interests. Borrower waives all rights of offset or counterclaim that it may now
or later have against Lender or against any Purchaser and agrees that either
Lender or any Purchaser may enforce Borrower's obligations under the Loan
Documents irrespective of the failure or insolvency of any owner of any interest
in the Obligations. Borrower further agrees that any Purchaser may enforce its
interests irrespective of any claims or defenses that Borrower may have against
Lender.
SECTION 11.16. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
SOUTH HAMPTON REFINING CO.
By:
--------------------------------
Nick Carter
President
LENDER:
SOUTHWEST BANK OF TEXAS, N.A.
By:
--------------------------------
A. Stephen Kennedy
Vice President
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<PAGE> 37
LIST OF EXHIBITS
Exhibits Document
-------- --------
A Note
B Security Agreement
C Guaranty
D Advance Request Form
E Borrowing Base Certificate
F No Default Certificate
G Arbitration Agreement
H Account Debtors
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<PAGE> 38
PROMISSORY NOTE
$2,250,000.00 Houston, Texas September 30, 1999
FOR VALUE RECEIVED, the undersigned, SOUTH HAMPTON REFINING CO., a
Texas corporation ("Maker"), hereby promises to pay to the order of SOUTHWEST
BANK OF TEXAS, N.A., a national banking association ("Payee"), at its offices at
Five Post Oak Park, 4400 Post Oak Parkway, Houston, Harris County, Texas, in
lawful money of the United States of America, the principal sum of TWO MILLION
TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($2,250,000.00), or so much
thereof as may be advanced and outstanding hereunder, together with interest on
the outstanding principal balance from day to day remaining, at a varying rate
per annum which shall from day to day be equal to the lesser of (a) the Maximum
Rate (hereinafter defined) or (b) the Prime Rate (hereinafter defined) of Payee
in effect from day to day plus one-half of one percent (.50%), and each change
in the rate of interest charged hereunder shall become effective, without notice
to Maker, on the effective date of each change in the Prime Rate or the Maximum
Rate, as the case may be; provided, however, if at any time the rate of interest
specified in clause (b) preceding shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Prime Rate shall not reduce the rate of interest hereon below
the Maximum Rate until the total amount of interest accrued hereon equals the
amount of interest which would have accrued hereon if the rate specified in
clause (b) preceding had at all times been in effect.
Principal of and interest on this Note shall be due and payable as
follows:
(a) Accrued and unpaid interest on this Note shall be payable
monthly, on the first (1st) day of each month commencing on November 1,
1999 and upon the maturity of this Note, however such maturity may be
brought about; and
(b) All outstanding principal of this Note and all accrued
interest thereon shall be due and payable on May 31, 2001.
Principal of this Note shall be subject to mandatory prepayment at the
times described in the Agreement (hereinafter defined). If an Event of Default
(hereinafter defined) has occurred and is existing, the principal hereof and any
past due interest hereon shall bear interest at the Default Rate (hereinafter
defined).
Interest on the indebtedness evidenced by this Note shall be computed
on the basis of a year of 360 days and the actual number
<PAGE> 39
of days elapsed (including the first day but excluding the last day) unless such
calculation would result in a usurious rate in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may be.
As used in this Note, the following terms shall have the respective
meanings indicated below:
"Agreement" means that certain Loan Agreement dated as of
September 30, 1999 between Maker and Payee, as the same may be amended
or modified from time to time.
"Default Rate" means the lesser of (a) the sum of the Prime
Rate plus five percent (5.0%), or (b) the Maximum Rate.
"Event of Default" shall have the meaning given to such term
in the Agreement.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including Chapter 303 of
the Texas Finance Code (the "Code")(and as the same may be incorporated
by reference in other Texas statutes). To the extent that Chapter 303
of the Code is relevant to any holder of this Note for the purposes of
determining the Maximum Rate, each such holder elects to determine such
applicable legal rate pursuant to the "weekly ceiling," from time to
time in effect, as referred to and defined in Chapter 303 of the Code;
subject, however, to the limitations on such applicable ceiling
referred to and defined in the Code, and further subject to any right
such holder may have subsequently, under applicable law, to change the
method of determining the Maximum Rate.
"Prime Rate" shall mean that variable rate of interest per
annum established by Payee from time to time as its prime rate which
shall vary from time to time. Such rate is set by Payee as a general
reference rate of interest, taking into account such factors as Payee
may deem appropriate, it being understood that many of Payee's
commercial or other loans are priced in relation to such rate, that it
is not necessarily the lowest or best rate charged to any customer and
that Payee may make various commercial or other loans at rates of
interest having no relationship to such rate.
This Note (a) is the Note provided for in the Agreement and (b) is
secured as provided in the Agreement. Maker may prepay the principal of this
Note upon the terms and conditions specified in the Agreement. Maker may borrow,
repay, and reborrow hereunder upon the terms and conditions specified in the
Agreement.
Notwithstanding anything to the contrary contained herein, no
provisions of this Note shall require the payment or permit the
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collection of interest in excess of the Maximum Rate. If any excess of interest
in such respect is herein provided for, or shall be adjudicated to be so
provided, in this Note or otherwise in connection with this loan transaction,
the provisions of this paragraph shall govern and prevail, and neither Maker nor
the sureties, guarantors, successors or assigns of Maker shall be obligated to
pay the excess amount of such interest, or any other excess sum paid for the
use, forbearance or detention of sums loaned pursuant hereto. If for any reason
interest in excess of the Maximum Rate shall be deemed charged, required or
permitted by any court of competent jurisdiction, any such excess shall be
applied as a payment and reduction of the principal of indebtedness evidenced by
this Note; and, if the principal amount hereof has been paid in full, any
remaining excess shall forthwith be paid to Maker. In determining whether or not
the interest paid or payable exceeds the Maximum Rate, Maker and Payee shall, to
the extent permitted by applicable law, (a) characterize any non-principal
payment as an expense, fee, or premium rather than as interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the entire contemplated term of the indebtedness evidenced by this
Note so that the interest for the entire term does not exceed the Maximum Rate.
If default occurs in the payment of principal or interest under this
Note, or upon the occurrence of any other Event of Default, as such term is
defined in the Agreement, the holder hereof may, at its option, (a) declare the
entire unpaid principal of and accrued interest on this Note immediately due and
payable without notice, demand or presentment, all of which are hereby waived,
and upon such declaration, the same shall become and shall be immediately due
and payable, (b) foreclose or otherwise enforce all liens or security interests
securing payment hereof, or any part hereof, (c) offset against this Note any
sum or sums owed by the holder hereof to Maker and (d) take any and all other
actions available to Payee under this Note, the Agreement, the Loan Documents
(as such term is defined in the Agreement) at law, in equity or otherwise.
Failure of the holder hereof to exercise any of the foregoing options shall not
constitute a waiver of the right to exercise the same upon the occurrence of a
subsequent Event of Default.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
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UNITED STATES OF AMERICA. THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
SOUTH HAMPTON REFINING CO.
By:
-----------------------------------------
Nick Carter
President
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of September 30, 1999 (this
"Agreement"), is by and between SOUTH HAMPTON REFINING CO., a Texas corporation
(the "Debtor") and SOUTHWEST BANK OF TEXAS, N.A., a national banking association
("Secured Party").
R E C I T A L S:
A. Debtor and Secured Party have entered into that certain Loan
Agreement dated as of September 30, 1999 (such Loan Agreement, as the same may
be amended or modified from time to time, is referred to herein as the "Loan
Agreement").
B. Secured Party has conditioned its obligations under the Loan
Agreement upon, among other things, the execution and delivery of this Agreement
by Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Security Interest
Section 1.01. Security Interest. Debtor hereby grants to Secured Party
a security interest in the following property, whether now owned or existing or
hereafter arising or acquired and wherever arising or located (such property
being hereinafter sometimes called the "Collateral"):
(a) all of its accounts, accounts receivable, contract rights and
general intangibles, and all instruments, documents, chattel paper and
funds on deposit with Secured Party arising therefrom, whether now
owned or hereafter acquired, including, without limitation, all lease
receivables and note receivables, all cash, notes, drafts and
acceptances arising therefrom, all returned and repossessed goods
arising from or relating to any such accounts, or other proceeds of
any sale, lease or other disposition of inventory, and all proceeds
(including insurance proceeds) and products thereof; and
(b) all of its inventory, whether now owned or hereafter
acquired, including, without limitation, all of its inventory of
natural gasoline and finished plant products and other tangible
personal property held for sale or lease or furnished or to be
furnished under contracts for service or used or consumed in Debtor's
trade or business and all additions,
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accessions, substitutions, attachments and replacements thereto and
all contracts with respect thereto and all documents of title
evidencing or representing any part thereof and all products and
proceeds (including insurance proceeds) thereof.
Section 1.02. Obligations. The Collateral shall secure the following
obligations, indebtedness, and liabilities (all such obligations, indebtedness,
and liabilities being hereinafter sometimes called the "Obligations"):
(a) the obligations and indebtedness of Debtor to Secured Party
evidenced by that certain promissory note in the original principal
amount of $2,250,000.00 dated September 30, 1999, executed by Debtor
and payable to the order of Secured Party;
(b) the obligations and indebtedness of Debtor to Secured Party
under the Loan Agreement;
(c) all future advances by Secured Party to Debtor;
(d) all costs and expenses, including, without limitation, all
attorneys' fees and legal expenses, incurred by Secured Party to
preserve and maintain the Collateral, collect the obligations herein
described, and enforce this Agreement;
(e) all other obligations, indebtedness, and liabilities of
Debtor to Secured Party, now existing or hereafter arising, regardless
of whether such obligations, indebtedness, and liabilities are
similar, dissimilar, related, unrelated, direct, indirect, fixed,
contingent, primary, secondary, joint, several, or joint and several;
and
(f) all extensions, renewals, and modifications of any of the
foregoing.
ARTICLE II
Representations and Warranties
To induce Secured Party to enter into this Agreement and the Loan
Agreement, Debtor represents and warrants to Secured Party that:
Section 2.01. Title. Except for the security interest granted herein,
Debtor owns, and with respect to Collateral acquired after the date hereof
Debtor will own, the Collateral free and clear of any lien, security interest,
or other encumbrance.
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Section 2.02. Accounts. Unless Debtor has given Secured Party written
notice to the contrary, whenever the security interest granted hereunder
attaches to an account, Debtor shall be deemed to have represented and warranted
to Secured Party as to each and all of its accounts that (a) each account is
genuine and is in all respects what it purports to be, (b) each account
represents the legal, valid, and binding obligation of the account debtor
evidencing indebtedness unpaid and owed by such account debtor arising out of
the performance of labor or services by Debtor or the sale or lease of goods by
Debtor, (c) the amount of each account represented as owing is the correct
amount actually and unconditionally owing except for normal trade discounts
granted in the ordinary course of business, and (d) no account is subject to any
offset, counterclaim, or other defense.
Section 2.03. Financing Statements. No financing statement, security
agreement, or other lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of
Secured Party.
Section 2.04. Principal Place of Business. The principal place of
business and chief executive office of Debtor, and the office where Debtor keeps
its books and records, is located at the address of Debtor listed in the Loan
Agreement.
Section 2.05. Location of Collateral. All inventory of Debtor is
located at 7752 FM 418, Silsbee, Texas and FM 92 North, Silsbee, Texas.
ARTICLE III
Covenants
Debtor covenants and agrees with Secured Party that until the
Obligations are paid and performed in full:
Section 3.01. Maintenance. Debtor shall not use or permit the
Collateral to be used in violation of any law or inconsistently with the terms
of any policy of insurance. Debtor shall not use or permit the Collateral to be
used in any manner or for any purpose that would impair the value of the
Collateral or expose the Collateral to unusual risk.
Section 3.02. Encumbrances. Debtor shall not create, permit, or suffer
to exist, and shall defend the Collateral against any lien, security interest,
or other encumbrance on the Collateral except the security interest of Secured
Party hereunder, and shall defend Debtor's rights in the Collateral and Secured
Party's security interest in the Collateral against the claims of all persons
and entities.
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Section 3.03. Modification of Collateral. Debtor shall do nothing to
impair the rights of Secured Party in the Collateral. Without the prior written
consent of Secured Party, Debtor shall not grant any extension of time for any
payment with respect to the Collateral, or compromise, compound, or settle any
of the Collateral, or release in whole or in part any person or entity liable
for payment with respect to the Collateral, or allow any credit or discount for
payment with respect to the Collateral other than normal trade discounts granted
in the ordinary course of business, or release any lien, security interest, or
assignment securing the Collateral, or otherwise amend or modify any of the
Collateral.
Section 3.04. Disposition of Collateral. Debtor shall not sell, lease,
or otherwise dispose of the Collateral or any part thereof without the prior
written consent of Secured Party, except Debtor may sell plant products
(inventory) in the ordinary course of business.
Section 3.05. Further Assurances. At any time and from time to time,
upon the request of Secured Party, and at the sole expense of Debtor, Debtor
shall promptly execute and deliver all such further instruments and documents
and take such further action as Secured Party may deem necessary or desirable to
preserve and perfect its security interest in the Collateral and carry out the
provisions and purposes of this Agreement, including, without limitation, the
execution and filing of such financing statements as Secured Party may require.
A carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Debtor shall promptly endorse and deliver to Secured Party all documents,
instruments, and chattel paper that it now owns or may hereafter acquire.
Section 3.06. Risk of Loss; Insurance. Debtor shall be responsible for
any loss of or damage to the Collateral. Debtor shall maintain insurance on the
Collateral as provided in the Loan Agreement.
Section 3.07. Inspection Rights. Debtor shall permit Secured Party and
its representatives to examine or inspect the Collateral wherever located and to
examine, inspect, and copy Debtor's books and records at any reasonable time |
