LOAN AGREEMENT
THIS AGREEMENT is made and entered into by and between CROWN
ASPHALT PRODUCTS COMPANY, a Utah corporation (hereinafter called "BORROWER") and
COMMUNITY FIRST NATIONAL BANK, a national banking association (hereinafter
called "LENDER") and CROWN ENERGY CORPORATION, a Utah corporation, (hereinafter
called the "GUARANTOR").
WHEREAS the Borrower has requested the Lender to make available to
the Borrower a secured term loan of $1,800,000.00, which the Borrower will use
to purchase certain equipment and property from S & L Industrial, a Wyoming
corporation, and the Lender is willing to extend such credit upon the terms and
conditions of this Loan Agreement.
NOW, THEREFORE, for and in consideration of the foregoing and
the mutual covenants hereinafter contained, the Lender and Borrower agree as
follows:
1. THE LOAN. Upon and subject to the terms and conditions of
this Loan Agreement, the Lender will make a term loan (the "LOAN") to the
Borrower in the amount of $1,800,000.00, which loan shall bear interest at the
rate of Prime, as published in the Wall Street Journal, plus 1% per annum,
adjusted monthly and paid by the Borrower pursuant to the terms of a Promissory
Note (the "NOTE") dated of even date herewith from the Borrower to the Lender,
which Note, by this reference, is incorporated herein and made a part hereof.
For purposes of this agreement, including all other agreements executed in
connection herewith or which refer to this agreement, the term "Indebtedness"
shall mean the principal balance of the Loan, together with interest, late fees,
costs, attorney's fees and all other sums assessable and due under the terms of
this agreement, including the Note and the Collateral Documents.
2. LOAN FEES. The Borrower agrees to pay the following fees in
connection with this loan:
a) Any loan origination or guarantee fees as are provided for in the
letter of commitment.
b) All costs incurred by Lender in connection with the chosing of the
Loan, including but not limited to title insurance premiums,
filing fees, recording fees, Lender's legal fees and other costs
incurred by Lender.
3. COLLATERAL. The repayment of the Loan and all extensions
and renewals thereof, and the performance of all obligations of Borrower
hereunder, including the obligations under the Promissory Note, shall be
secured by the following:
a) A first lien on the asphalt terminal, blending and emulsion
facility including all buildings, storage tanks and improvements
referred to above, to be more fully described in a security
agreement (the "SECURITY AGREEMENT") from Borrower to Lender
perfected by a U.C.C.- 1 Financing Statement and Fixture Filing to
be filed with the public officials deemed necessary by Lender.
Although Borrower will be leasing the land on which said
collateral will be located, the lease shall provide that such
collateral does not become the property of the landlord when it is
placed on the land, and it may be removed therefrom by Borrower,
or by Lender upon a loan default.
b) A lien, evidenced by a blanket security agreement (also know as
the "SECURITY AGREEMENT") on all furniture, supplies, inventory,
equipment, machinery, fixtures, accounts, accounts receivable,
contract rights, instruments, documents, chattel paper, chases in
action, intellectual property and general intangibles presently or
hereafter owned by Borrower, and perfected by a blanket U.C.C.- 1
Financing Statement to be filed with the public officials deemed
necessary by Lender. The lien shall be a first lien with respect
to all such property other than the accounts receivable and the
inventory. With respect to the accounts receivable and the
inventory, the lien shall be second only to a revolving line of
credit in the sum not to exceed $3,000,000 (the "Line Limit"). The
Borrower shall give the Lender written notice each quarter
identifying the lender on the line of credit and stating the
average balance of the line of credit over that quarter. If the
lender on the line of credit changes, the Borrower shall give the
prior written notice of such change. The level of borrowing
against the accounts receivable and the inventory shall not be
greater than the Line Limit without the prior written consent of
the Lender, which consent will not be unreasonably withheld.
c) An assignment (the "LEASE ASSIGNMENT") of all of Borrower's right,
title and interest in and to the lease between the Union Pacific
Railroad Company (or related entity) as Lessor, and the Borrower,
as Lessee, (hereafter the "U.P. LEASE") covering the land (the
"REAL PROPERTY") where the Borrower's emulsion plant is located,
as more fully described in the Assignment.
The Security Agreements and Lease Assignment shall collectively
be known as the "COLLATERAL DOCUMENTS." The property secured by
or otherwise subject to the Collateral Documents shall be
collectively known as the "COLLATERAL".
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LOAN AGREEMENT
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All loans from the lender to the Borrower, now or hereafter shall be, and
hereby are agreed to be, cross-collateralized, whereby all of the Collateral
shall secure all of the Borrower's obligations to Lender under each and all
loans, and all future advanced thereunder, as well as any renewals,
modifications or substitutions of all loans made by Lender to Borrower.
4. GUARANTY. As an inducement to Lender to enter this
agreement on the terms and conditions set forth herein, and for good and
valuable consideration, which consideration includes benefits accruing to the
Guarantor as a result of this agreement between Lender and Borrower, and
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the undersigned guarantor (hereinafter called the
"GUARANTOR"), will unconditionally, jointly and severally guarantee to Lender
that Borrower will fully and promptly and faithfully perform, pay and
discharge all its present and future obligations and covenants under this
agreement including, without limitation, the Note and the Collateral
Documents according to the terms of a separate Guaranty agreement to be
executed and delivered by the Guarantor to the Lender.
5. EVENTS OF DEFAULT. Time shall be considered of the essence
concerning this agreement, including the Note and the Collateral Documents and
all of their provisions, and the occurrence of any one or more of the following
shall constitute an "EVENT OF DEFAULT":
a) If any payment due or to be made under the terms of this Loan
Agreement, or the Note or any Collateral Document is not paid
within 10 days of the date such payment is due;
b) There shall exist a default for a period of more than 30 days in
the performance or observance of any other obligation, covenant,
or liability contained in this Loan Agreement, the Note, or any of
the Collateral Documents;
c) The Guarantor shall fail to carry out any of the terms or
conditions of its guarantee.
d) Any action is taken by any governmental entity which materially
and adversely affects the Borrower's business.
e) Any warranty or representation made or furnished to Lender by or
on behalf of Borrower proves to have been false in any material
respect when made or furnished.
f) Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
other law for the relief of debtors shall be instituted by or
against Borrower
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LOAN AGREEMENT
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(except for an involuntary petition against Borrower, which shall
not constitute an Event of Default if such petition is vacated or
dismissed within 30 days after filing thereof), or any order,
judgment or decree shall be entered against Borrower decreeing its
dissolution.
g) Dissolution or termination of the existence of Borrower or
Guarantor as corporations.
h) The Lender reasonably and in good xxxxx xxxxx itself to be
insecure, or determines that the prospect of payment, performance,
or observance of any of the obligations, indebtedness, or
liabilities of the Borrower to it is materially impaired.
6. REMEDIES. Upon an Event of Default, Lender may, at its
option, exercise any one or more of the following remedies.
a) Accelerate the remaining balance of the indebtedness due under
this agreement, including the Note, and demand immediate payment
of the same, together with all accrued interest, late charges, and
other amounts recoverable by Lender under this agreement.
b) Exercise any and every right and remedy under the Collateral
Documents.
c) Exercise any and all other rights or remedies allowed at law or in
equity.
7. BORROWER'S COVENANTS. In order to induce Lender to enter
into this loan agreement, and to make the loan set forth herein, borrower and
Guarantor represent and warrant to Lender, and covenant and agree with Lender
for so long as any obligation or indebtedness owed to Lender hereunder remains
unpaid, as follows:
a) ENTITY EXISTENCE AND STANDING OF BORROWER. Borrower is and shall
remain a limited liability company duly formed, validly existing,
and in good standing under the law of the State of Wyoming, with
all requisite authority to conduct its business in any other state
in which it conducts business. The Borrower shall not be dissolved
as provided under the terms of the Wyoming statutes governing the
creation and existence of limited liability companies.
b) CORPORATE EXISTENCE AND STANDING OF GUARANTOR. The Guarantor shall
remain a corporation duly formed, validly existing, and in good
standing under the law of the state of its creation, with all
requisite
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LOAN AGREEMENT
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authority to conduct its business in any other state in which it
conducts business.
c) COMPLIANCE WITH LAWS. The Borrower and the Guarantor will promptly
comply with all laws, rules, regulations, ordinances, codes,
decrees, and orders applicable to the operation of its business.
d) U.P. LEASE. The Borrower shall keep the U.P. Lease in existence
and out of default, and such lease shall not be amended, modified
or terminated without the prior written consent to the Lender.
e) OTHER LIEN. There are no other liens, security interests, or
mortgages against any of the property given as Collateral other
than as disclosed in this agreement.
f) FINANCIAL STATEMENTS. Any financial statements and other financial
information provided to Lender in connection with this loan, or
hereinafter provided to Lender is and will be true and accurate in
all material respects and fairly represent the financial condition
of the party providing such financial information, all in
accordance with generally accepted accounting principles applied
on a consistent basis.
g) LEGAL PROCEEDINGS. There is and shall be no pending or threatened
action or proceeding affecting either Borrower or the Guarantor(s)
which may have any material adverse effect upon the financial
condition or operation of Borrower or the Guarantor(s).
h) TITLE. Except to the extent the paragraph 2.6 of the Security
Agreement makes allowance for the Borrower to contest liens
against the Collateral, the Borrower has and will maintain good
title to the all Collateral pledged to secure this loan free and
clear of all liens, encumbrances, and security interests except as
disclosed in the Collateral Documents. Borrower will defend and
indemnify the Lender against claims, judgments, costs, and
expenses and attorney's fees resulting from a breach of this
warranty.
i) TAXES. Borrower has filed and paid, and will continue to file and
pay or provide evidence to Lender of an extension), all state and
federal taxes, including, without limitation, all state sales
taxes as well as federal form 1120, 940 and 941 returns and
related taxes.
j) OWNERSHIP TRANSFERS AND DISTRIBUTION. Borrower will not issue any
additional stock, and the Guarantor will not assign or transfer
any of its stock in the Borrower without the prior written notice
to the Lender. The Guarantor shall own not less than 60% of the
Borrower at
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LOAN AGREEMENT
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all times, and the Lender may require any person or company
owning more than a 10% interest in the Borrower to provide a
proportionate guaranty of the Loan.
k) DISTRIBUTIONS OF INCOME. The Borrower's debt service requirements
ratio (hereinafter defined as net operating income revenue less
all expenses, plus depreciation and interest divided by the annual
debt service requirement) shall be at least 2.5 before dividends
and 1.25 after dividends. Borrower will not pay any dividends or
make any other distributions of profits or capital to its owners
if such distributions would cause the debt service requirements
ratio to be out of compliance with the requirements of this
paragraph. Notwithstanding the foregoing, no dividends shall be
paid (even if such dividends would otherwise be allowed under the
debt service requirements ratio) without 15 days prior written
notice to the Lender's. Such notice shall state the amount of
dividends or other distributions to be paid and what the
Borrower's debt service requirements ratio will be after such
payments are made. Further, the Borrower shall not, under any
circumstances, pay any dividends or make any other distributions
of profits or capital to its owners if the Borrower is in default
of this Loan Agreement.
l) NO CAPITAL EXPENDITURES. Borrower agrees that it shall make no
capital expenditures of any kind whatsoever in excess of $15,000
per calendar year without prior written notice to Lender.
Additionally, within 30 days after the end of each year of this
Loan, the Borrower shall provide the Lender with a detailed list
of capital expenditures incurred during the year. The list shall
include a detailed description of the capital items acquired
(including makes, models, year, serial numbers, etc.), the cost of
such items, and the location of such items, whether the purchase
of such items was financed and if so the details of the financing
and such other information as the Lender may reasonably request.
The Borrower will also execute such additional security agreements
and financing statements as the Lender require in order to create
and perfect alien against such additional capital items.
m) NO DISPOSITION OF ASSETS. The Borrower shall not sell, assign,
dispose of, grant a security interest in or otherwise assign any
of the Collateral other than in accordance with the terms and
provisions of the Security Agreement.
8. GOVERNING LAW. The terms and obligations of this agreement
shall be governed by the laws of the State of Wyoming, and Borrower hereby
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LOAN AGREEMENT
PAGE 6
consents to personal jurisdiction in Wyoming in the event of any litigation
by Lender under this agreement.
9. LENDER'S CONSENTS. Whenever the Lender's consent is
required for any action by the Borrower, the Lender agrees that it will
respond to the Borrower's request with reasonable promptness, and will not
unreasonably withhold consent to any reasonable requests of the Borrower.
10. FINANCIAL INFORMATION. Throughout the life of the Loan,
Borrower shall be required to furnish lender with the following financial
information on Borrower and the Guarantor:
a) Annual audited financial statements of Borrower and the Guarantor
in a form satisfactory to Lender, showing all items of income
expense of the operation such entity's businesses, to be delivered
to Lender within 120 days of the close of each operating year of
the Borrower and Guarantor;
b) Quarterly 10Q report for the Guarantor within 40 days of the end
of each quarterly period;
c) Monthly in-house-prepared balance sheets and income statements for
Borrower and the Guarantor within 30 days of the end of each
calendar month;
d) A complete copy of the annual tax returns by April 15 of each year
for the Borrower and the Guarantor. If an extension is obtained, a
copy of the extension shall be provided by April 15 and a complete
copy of the tax returns shall be provided at the time of filing
with the IRS.
e) A pro-forma income and expense statement for each upcoming year at
least 90 days prior to the fiscal year end.
11. INSPECTIONS AND AUDITS. Borrower and Guarantor agree that
Lender may inspect the Borrower's and Guarantor's business operations and/or
audit the books of Borrower, Guarantor, or their successors, at any time as
Lender deems necessary during normal business hours.
12. SEVERABILITY. In case any one or more of the provisions
contained in this agreement should be invalid, illegal, or unenforceable in
any respect, the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
13. FURTHER ASSURANCES. Borrower and the Guarantor shall take
such further action as may be reasonably requested by Lender to effect the
purpose
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LOAN AGREEMENT
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of this agreement, including, without limitation, the execution and
delivery of any other documents as may be necessary to effect the intent of this
agreement.
14. BINDING EFFECT. The promises of the parties in this
agreement shall bind the respective heirs, administrators, personal
representatives, successors, and assigns.
15. NOTICES. Any notice to be given under this agreement shall
be deemed given when placed in the United States Mail, postage prepaid with
return receipt, addressed as follows:
Community First National Crown Asphalt Products Crown Energy
Bank Company Corporation
000 Xxxxx Xxxxxxx 000 Xxxxx Xxxxx Street, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxx 00000 Xxxxx 000 Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000 Xxxx Xxxx Xxxx, Xxxx 00000
16. ATTORNEY'S FEES AND OTHER COSTS. In the event of a default
or breach of this agreement, or the Note or any of the Collateral Documents by
the either party, the defaulting party agrees to pay and be responsible for all
reasonable attorney's fees and/or costs of collection or enforcement incurred by
the non-defaulting party as a result of such default, including, without
limitation, any attorneys fees incurred in the giving of any notice as a result
of any such breach or default, and further including, without limitation, any
attorneys fees incurred by Lender in taking possession of and foreclosing
against the Collateral. The non-defaulting party shall be entitled to recover
its attorney's fees and costs whether or not it actually files litigation
against the defaulting party.
17. APPLICATION OF PAYMENTS. All sums paid by Borrower to
Lender or collected by Lender for application to the liabilities and obligations
of Borrower under this agreement will be first applied to any costs, expenses,
and fees, including attorney's fees, which may be owing under the terms of this
agreement, and then to any interest or late fees which may be due and owing
pursuant to the terms of this agreement, and then to reduce the principal
balance owing.
18. LATE PAYMENTS. It is specifically agreed that late payments
accepted by Lender will not operate to change or modify any of the due dates or
other payments due from Borrower to Lender. The Borrower shall be entitled to
recover such late fees as are provided for in the Note.
Remainder of page left intentionally blank
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19. NO ASSIGNMENT. This agreement is not assignable by
Borrower.
Effective this 12th day of May, 1999.
BORROWER: LENDER:
Crown Asphalt Products Company, a Community First National Bank, a
Utah corporation national banking association
By: /s/ Xxx Xxxxxx By: /s/ [ILLEGIBLE]
---------------------------------- ----------------------------------
Title: President Title: Sr. V.P.
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GUARANTOR:
Crown Energy Corporation, a Utah
corporation
By: /s/ Xxx Xxxxxx
-----------------------------------
Title: President
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LOAN AGREEMENT
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