EXHIBIT 10.24
SEVENTH AMENDMENT TO LOAN AGREEMENT
This Seventh Amendment to Loan Agreement (this "Amendment"), dated as
of September 30, 2002, is made and entered into by and among Natural Gas
Services Group, Inc., a Colorado corporation ("Borrower"), Rotary Gas Systems,
Inc., a Texas corporation, NGE Leasing, Inc., a Texas corporation, and Great
Lakes Compression, Inc., a Colorado corporation (collectively, the "Guarantors")
and Western National Bank, a national banking association ("Lender").
WITNESSETH:
WHEREAS, Borrower and Lender entered into that certain Loan Agreement,
dated as of September 15, 1999, as amended by that certain First Amendment and
Waiver to Loan Agreement, dated as of March 9, 2001, as further amended by that
certain Second Amendment to Loan Agreement, dated as of March 20, 2001, as
further amended by that certain Third Amendment and Waiver to Loan Agreement,
dated as of July 25, 2001, as further amended by that certain Fourth Amendment
to Loan Agreement, dated as of December 12, 2001, as further amended by that
certain Fifth Amendment to Loan Agreement, dated as of April 3, 2002, and as
further amended by that certain Sixth Amendment to Loan Agreement, dated as of
May 6, 2002 (said Loan Agreement, as so amended, the "Agreement"), providing
for, among other things, loans to Borrower evidenced by (i) that certain
Revolving Line of Credit Promissory Note, dated April 3, 2002, in the original
principal amount of $750,000.00, (ii) that certain Consolidated Term Promissory
Note, dated April 3, 2002, in the original principal amount of $2,146,660.93,
and (iii) that certain Multiple Advance Term Promissory Note, dated April 3,
2002, in the original principal amount of $1,853,340.00.
WHEREAS, Borrower has requested that Lender provide an additional term
loan to Borrower in the amount of $3,500,000.00;
WHEREAS, Borrower desires to amend the Agreement to provide for (i) the
additional term loan and (ii) the other matters set forth herein;
WHEREAS, the Lender is agreeable to the Borrower's requests but only
upon and subject to the terms and provisions which are hereinafter specified.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS.
In addition to the terms defined in this Amendment, all terms defined
in the Agreement, and not otherwise defined herein, shall have the meaning given
them in the Agreement when used herein.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT.
2.1 Amendment to Definitions. The definition of "Guarantors" and
"Notes" contained in Section 1.1 of the Agreement are amended to read as
follows:
"Guarantors" means Rotary Gas Systems, Inc., NGE Leasing, Inc.
and Great Lakes Compression, Inc.
"Notes" means the Consolidated Term Promissory Note, the
Multiple Advance Term Promissory Note, the Revolving Line of
Credit Promissory Note and the Term Promissory Note, as
further described in Section 2.1 of this Agreement, as any of
the same may be renewed, extended, increased or otherwise
modified from time to time.
2.2 Term Loans. Section 2.1(a) of the Agreement is amended to read in
it entirety as follows:
The Borrower shall execute and deliver to the Lender the
Consolidated Term Promissory Note in the form of Exhibit A-3
hereto in the original principal amount of $2,146,660.93 (the
"Consolidated Term Promissory
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Note"). Principal and interest on the Consolidated Term
Promissory Note will be payable at the rate, in the manner and
on the dates specified therein.
The Borrower shall also execute and deliver to the Lender the
Multiple Advance Term Promissory Note in the form of Exhibit
A-4 hereto in the original principal amount of $1,853,340.00
(the "Multiple Advance Term Promissory Note"). Subject to and
upon the terms and conditions of this Agreement and the
Multiple Advance Term Promissory Note, the Borrower may, at
any time and from time to time until maturity of the Multiple
Advance Term Promissory Note, request one or more Advances and
borrow (without the ability to reborrow amounts prepaid under
the Multiple Advance Term Promissory Note) under the Multiple
Advance Term Promissory Note; provided, however, the
cumulative aggregate principal amount of all Advances under
the Multiple Advance Term Promissory Note shall not exceed
$1,853,340.00. The Multiple Advance Term Promissory Note,
including the loans evidenced thereby, is a multiple advance
term loan facility and shall not be construed as a revolving
line of credit as reborrowings are not permitted. Principal
and interest on the Multiple Advance Term Promissory Note will
be payable at the rate, in the manner and on the dates
specified therein.
The Borrower shall also execute and deliver to the Lender the
Term Promissory Note in the form of Exhibit A-5 hereto in the
original principal amount of $3,500,000.00 (the "Term
Promissory Note"). Principal and interest on the Term
Promissory Note will be payable at the rate, in the manner and
on the dates specified therein.
2.3 Order of Application. Section 2.6 of the Agreement is amended to
read in full as follows:
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2.6 Order of Application. Except as otherwise provided in the
Loan Papers, all payments and prepayments on the Obligations,
including proceeds from the exercise of any Rights of Lender
under the Loan Papers, shall be applied to the Obligations in
the following order: (i) first, to reasonable expenses for
which Lender shall not have been reimbursed under the Loan
Papers and then to all amounts to which Lender is entitled to
indemnification under the Loan Papers; (ii) to the accrued
interest on the Note being paid or prepaid; (iii) to the
principal of the Note being paid or prepaid and, with regard
to the Consolidated Term Promissory Note and the Term
Promissory Note, applied upon installments of most remote
maturity; and (iv) to the remaining Obligations.
2.4 Purpose of Loan. Section 4.11(a) of the Agreement is amended to
read in full as follows:
(a) with respect to loans made pursuant to and evidenced by
the Consolidated Term Promissory Note, in renewal,
rearrangement and consolidation of (i) that certain Term
Promissory Note, dated September 15, 1999, in the original
principal amount of $1,500,000.00, (ii) that certain Term B
Promissory Note, dated March 9, 2001, in the original
principal amount of $700,000.00 and (iii) that certain Term C
Promissory Note, dated December 12, 2001, in the original
principal amount of $750,000.00; with respect to loans made
pursuant to and evidenced by the Multiple Advance Term
Promissory Note, for the purchase of equipment to be used in
the construction of natural gas compressors and for purchasing
natural gas compressors; and with respect to loans made
pursuant to and evidenced by the Term Promissory Note, solely
for the payment of indebtedness owed by the Borrower to
Dominion Michigan Petroleum Services, Inc.
2.5 Subsidiaries. Section 4.18 of the Agreement is amended to read in
full as follows:
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4.18 Subsidiaries. The following constitute all the
Subsidiaries of the Borrower at September 24, 2002:
NGE Leasing, Inc.
Rotary Gas Systems, Inc.
Great Lakes Compression, Inc.
Each Subsidiary listed above is wholly-owned by the Borrower.,
In addition to the above Subsidiaries, the Borrower owns a
non-controlling 50% interest in a joint venture, Hy-Bon Rotary
Compression, LLC.
2.6 Financial Statements and Other Information. Sections 5.1(a) and
5.1(b) of the Agreement are amended to read in full as follows:
(a) as soon as available, but in any event not later than 90
days after the end of each fiscal year of the Borrower, a copy
of the audited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such year and
the related consolidated statements of income and changes in
cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported
on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the
audit, by Xxxx + Associates LLP or other independent certified
public accounting firm of recognized standing acceptable to
the Lender;
(b) as soon as available, but in any event not later than 45
days after the end of each month, the unaudited consolidated
balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such month and the related
unaudited consolidated statements of income and changes in
cash flows of the Borrower and its consolidated Subsidiaries
for such month and for the period from the beginning of the
most recent fiscal year to
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the end of such month, certified by the chief financial
officer of the Borrower (subject to normal year-end audit
adjustments);
A new subparagraph (l) is also added to Section 5.1 of the Agreement
which reads in full as follows:
(l) As soon as available and in any event within 15 days after
the filing thereof with the U.S. Internal Revenue Service, a
complete and correct copy of each federal income tax return,
together with all schedules, attachments and exhibits thereto,
filed by the Borrower with the U.S. Internal Revenue Service.
2.7 Consolidated Current Ratio. Section 6.1(a) of the Agreement is
amended to read in full as follows:
(a) Consolidated Current Ratio. Permit the Consolidated
Current Ratio, as defined herein and calculated pursuant to
Exhibit L hereto, to be less than 1.5 to 1.0 as of October 31,
2002 and as of the end of each month after October 31, 2002.
2.8 Consolidated Tangible Net Worth. Section 6.1(b) of the Agreement is
amended to read in full as follows:
(b) Consolidated Tangible Net Worth Ratio. Permit the
Consolidated Tangible Net Worth, as defined herein and
calculated pursuant to Exhibit M hereto, to be less than
$11,500,000.00 as of October 31, 2002 and as of the end of
each month after October 31, 2002.
2.9 Consolidated Debt to Consolidated Tangible Net Worth Ratio. Section
6.1(d) of the Agreement is amended to read in full as follows:
(d) Consolidated Debt to Consolidated Tangible Net Worth
Ratio. Permit the ratio of (i) Consolidated Debt to (ii)
Consolidated Tangible Net Worth, as such terms are
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defined herein and calculated pursuant to Exhibit O hereof, to
be more than 1.00 to 1.00 as of October 31, 2002 and as of the
end of each month after October 31, 2002.
2.10 Events of Default. A new subparagraph (m) is added to Section 7.1
of the Agreement which reads in full as follows:
(m) if, at any time, the then existing President of the
Borrower or the then existing Chief Executive Officer (if
there shall be one) of the Borrower ceases, for any reason, to
hold such office and a replacement for such officer acceptable
to Lender is not appointed within 120 days thereafter.
2.11 New Exhibit. There is added to the Agreement a new Exhibit A-5
which is identical to Exhibit A-5 attached to this Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Amendment, Borrower hereby
represents and warrants to the Lender as follows:
(a) Borrower has the corporate power, authority and legal right (i) to
make and deliver this Amendment and the Term Promissory Note; (ii) to perform
its obligations under the Notes and the Agreement, as amended hereby; and (iii)
Borrower has taken all action necessary to authorize the execution and delivery
of the Term Promissory Note, this Amendment and the performance of the
Agreement, as amended hereby.
(b) This Amendment and the Term Promissory Note have been duly executed
and delivered on behalf of Borrower by its duly authorized officer, and this
Amendment and the Term Promissory Note each constitute a legal, valid and
binding obligation of Borrower, enforceable in accordance with its terms, except
as the enforceability thereof may be limited by applicable bankruptcy,
reorganization,
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insolvency, moratorium or other laws affecting creditors' rights generally and
by general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(c) The execution, delivery and performance by Borrower of this
Amendment and the transactions contemplated hereby do not violate or constitute
a default under any provision of applicable law or any agreement binding upon
Borrower or the Subsidiaries of Borrower or result in the creation or imposition
of any Lien upon any of the assets of Borrower or the Subsidiaries of Borrower,
except Liens expressly permitted by the Agreement.
(d) the representations and warranties contained in Article IV of the
Agreement are true and correct on and as of the date hereof as though made on
and as of the hereof.
(e) The state organizational numbers and federal tax identification
numbers for the Borrower and each Subsidiary are as follows:
State Federal Tax
Organizational Identification
Number Number
-------------- --------------
Natural Gas Services Group, Inc. 19981223954 00-0000000
NGE Leasing, Inc. 0138732700 00-0000000
Rotary Gas Systems, Inc. 0000000000 00-0000000
Great Lakes Compression, Inc. 20011027485 00-0000000
Hy-Bon Rotary Compression, LLC 0706734622 00-0000000
(f) no Event of Default has occurred and is continuing (before and
after giving effect to this Amendment).
SECTION 4. RATIFICATION OF SECURITY DOCUMENTS.
Borrower and each Guarantor hereby (a) ratify and confirm in all
respects (i) each pledge agreement, security agreement, guaranty agreement and
each other
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agreement (as any of the same have been amended or restated) to which it is a
party, and (b) acknowledge, understand and agree that (i) all such pledge
agreements, security agreements, guaranty agreements and other agreements are
and shall continue to remain in full force and effect in accordance with the
terms thereof, as previously amended or as any of the same are amended in
connection with this Amendment, and that (ii) payment of the Consolidated Term
Promissory Note, the Multiple Advance Term Promissory Note, the Revolving Line
of Credit Promissory Note and the Term Promissory Note is secured by all such
agreements. The amendments contemplated hereby shall not limit or impair any
Bank Liens securing the Obligations, each of which are hereby ratified, affirmed
and extended to secure the Obligations as renewed and consolidated and increased
pursuant hereto.
SECTION 5. CONDITIONS PRECEDENT.
This Amendment and the Lender's commitment to make additional loans to
the Borrower evidenced by the Term Promissory Note shall be effective only upon
satisfaction of the following conditions precedent:
(a) Lender shall have received counterparts of this Amendment duly
executed and delivered by the Borrower and Guarantors;
(b) Lender shall have received the Term Promissory Note in the form of
Exhibit A-5 hereto, executed and delivered by a duly authorized officer of
Borrower;
(c) no Event of Default shall have occurred and be continuing as of the
date of this Amendment, both before and after giving effect to this Amendment;
(d) Lender shall have received a copy of the resolutions, in form and
substance satisfactory to Lender, of the Board of Directors of Borrower
authorizing (i) the execution, delivery and performance of this Amendment, the
Term Promissory Note and the other Loan Papers to be entered into in connection
herewith to which it is a party, and (ii) the borrowings contemplated hereby,
certified by its Secretary or Assistant Secretary, which certificate shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded as of the date of such certificate and shall be in form and
substance satisfactory to Lender;
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(e) Lender shall have received a copy of the resolutions, in form and
substance satisfactory to Lender, of the Board of Directors of Rotary Gas
Systems, Inc. authorizing the execution, delivery and performance of this
Amendment, the Guaranty ( as defined in paragraph (h) below) and the other Loan
Papers to be entered into in connection herewith to which it is a party,
certified by its Secretary or Assistant Secretary, which certificate shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded as of the date of such certificate and shall be in form and
substance satisfactory to Lender; and
(f) Lender shall have received a copy of the resolutions, in form and
substance satisfactory to Lender, of the Board of Directors of NGE Leasing, Inc.
authorizing the execution, delivery and performance of this Amendment, the
Guaranty ( as defined in paragraph (h) below) and the other Loan Papers to be
entered into in connection herewith to which it is a party, certified by its
Secretary or Assistant Secretary, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate and shall be in form and substance
satisfactory to Lender;
(g) Lender shall have received a copy of the resolutions, in form and
substance satisfactory to Lender, of the Board of Directors of Great Lakes
Compression, Inc. authorizing the execution, delivery and performance of this
Amendment, the Guaranty ( as defined in paragraph (h) below) and the other Loan
Papers to be entered into in connection herewith to which it is a party,
certified by its Secretary or Assistant Secretary, which certificate shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded as of the date of such certificate and shall be in form and
substance satisfactory to Lender;
(h) Borrower's registration statement on Form SB-2, No. 333-88314 (the
"Registration Statement"), filed by Borrower with the Securities and Exchange
Commission ("SEC") shall have become effective under and in accordance with the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
thereunder, and evidence thereof satisfactory to Lender in its sole discretion
shall have been delivered to Lender;
(i) the net proceeds to the Borrower from the sale of its securities
pursuant to the Registration Statement shall not be less than $7,000,000.00;
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(j) Xxxxx X. Xxxxxx shall have executed and delivered to the Lender an
assignment of life insurance policy or policies on his life in the face amount
of not less than $1,000,000.00, together with the proceeds thereof, in form and
substance satisfactory to the Lender and issued by an insurance company or
companies acceptable to the Lender in its sole discretion;
(k) Lender shall have received from each of Rotary Gas Systems, Inc.,
NGE Leasing, Inc. and Great Lakes Compression, Inc. a Guaranty Agreement (the
"Guaranty") in form and substance satisfactory to Lender in its sole discretion;
(l) Lender shall have received from each of Rotary Gas Systems, Inc.,
NGE Leasing, Inc. and Borrower, a Second Amended and Restated Security Agreement
in form and substance satisfactory to Lender in its sole discretion;
(m) Lender shall have received from Great Lakes Compression, Inc. a
Security Agreement in form and substance satisfactory to Lender in its sole
discretion;
(n) Lender shall have received from Borrower a Second Amended and
Restated Stock Pledge Agreement granting and conveying to the Lender Bank Liens
in and to all of the outstanding shares of capital stock of Rotary Gas Systems,
Inc.; a First Amended and Restated Stock Pledge Agreement granting and conveying
to the Lender Bank Liens in and to all of the outstanding shares of capital
stock of NGE Leasing, Inc.; and a Stock Pledge Agreement granting and conveying
to the Lender Bank Liens in and to all of the outstanding shares of capital
stock of Great Lakes Compression, Inc.;
(o) Lender shall have received from Borrower a Pledge Agreement
granting and conveying to the Lender Bank Liens in and to all membership
interests in Hy-Bon Rotary Compression, LLC owned by Borrower;
(p) Dominion Michigan Petroleum Services, Inc. or any of its affiliates
claiming a Lien in any of the assets or shares of stock of Great Lakes
Compression, Inc. shall have released, by instruments in form and substance
satisfactory to Lender in its sole discretion, (A) all Liens they may have or
claim in, to or on (i) any assets or property owned by Great Lakes Compression,
Inc. and (ii) any shares of capital stock issued by Great Lakes Compression,
Inc., and (B) Borrower from each and any
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guaranty executed and delivered by Borrower to Great Lakes Compression, Inc., a
Michigan corporation.
(q) Lender shall have received a copy of the charter documents of Great
Lakes Compression, Inc. and all amendments thereto, certified by the appropriate
official of its state of organization, and a copy of the bylaws of Great Lakes
Compression, Inc.
(r) Lender shall have received the fees required by Section 14 of this
Amendment; and
(s) Lender shall have received such other agreements, opinions,
documents and instruments as Lender may require in its sole discretion.
Lender, in its sole discretion, may (but shall not be obligated to)
fund loans to the Borrower notwithstanding the fact that one or more of the
foregoing conditions have not been satisfied, have not occurred or do not exist,
but such action by Lender shall not be deemed to be a waiver of the requirement
that any such condition be satisfied, have occurred and/or exist as a condition
precedent to any future disbursements by Lender pursuant to this Amendment, the
Agreement or any of the other Loan Papers.
SECTION 6. NO OTHER AMENDMENTS; RATIFICATION OF LOAN PAPERS.
Except as expressly amended and modified by this Amendment, all of the
provisions and covenants of the Agreement, all exhibits thereto and all other
Loan Papers (as any of the same have been amended) are and shall continue to
remain in full force and effect in accordance with the terms thereof and are
hereby ratified and confirmed by Borrower, the Subsidiaries parties hereto and
the Guarantors as of the date of this Amendment as if the Agreement and such
other Loan Papers were reexecuted as of the date of this Amendment.
SECTION 7. NO ADDITIONAL COMMITMENTS.
Borrower and Guarantors understand, acknowledge and agree that Lender
has not made any commitments, and has no obligation, to renew, extend,
refinance, increase or otherwise modify any of the Notes after the respective
maturity date of each such Note.
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SECTION 8. RELEASE.
The Borrower and Guarantors hereby release the Lender and its officers,
directors, shareholders, agents, employees, attorneys, agents and
representatives (collectively, the "Released Parties") from any and all (i)
damages, claims, liabilities, causes of action, contracts or controversies of
any type, kind, nature, description or character; (ii) debts, accounts, sums of
money, compensation, losses, costs or expense; (iii) breaches of contract, duty
or any other type of relationship;(iv) acts of omission, negligence, misfeasance
or malfeasance; and (v) commitments or promises of any type made prior to the
date hereof (the matters described in the preceding clauses (i) through (v),
inclusive, being herein called the "Claims", whether or not the Claims are now
known, unknown, or unforeseen, or are liquidated or unliquidated, which in any
manner arise out of, or relate to, the Notes, this Amendment, the Agreement or
otherwise arising out of facts or events existing or occurring prior to the date
hereof; including, without limitation, any Claims of the Borrower relating to:
(a) the negotiation of the terms of the Term Promissory Note, this Amendment or
the Agreement; or (b) any action or inaction of any of the Released Parties with
respect to the Notes, this Amendment or the Agreement.
SECTION 9. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
SECTION 10. GLOBAL AMENDMENT OF LOAN PAPERS.
All of the Loan Papers are hereby modified wherever necessary, and even
though not specifically addressed herein, so as to conform to the amendments to
the Agreement as set forth herein, and Borrower, the Subsidiaries and Guarantors
covenant to observe, comply with and perform each of the terms and provisions of
the Loan Papers to which they are parties, as modified hereby. Each Loan Paper
to which Borrower and the Subsidiaries or any Guarantor is a party is hereby
amended so that any reference in each such Loan Paper to the Agreement shall
mean a reference to the Agreement as amended hereby.
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SECTION 11. COUNTERPARTS.
This Amendment may be executed by one or more of the parties hereto in
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
SECTION 12. FINAL AGREEMENT.
THE AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND THE OTHER LOAN PAPERS
REPRESENT THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 13. DISCHARGE OF CERTAIN GUARANTORS.
As soon as practicable after each and all of the conditions precedent
set forth in Section 5 of this Amendment have been fully and completely
satisfied, Lender will release and discharge each of Xxxxxxx X. Xxxxxxxx, Xxxxx
X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, CAV-RDV, LTD., Xxxxxxx X. Xxxxx and Diamente
Investments, L.P. from any and all liabilities and obligations arising out of
their respective Limited Guaranty's executed and delivered to the Lender in
connection with the Agreement.
SECTION 14. COMMITMENT AND ARRANGEMENT FEE.
The Borrower shall pay to the Lender a one-time nonrefundable
commitment and arrangement fee in the amount of $17,500.00.
SECTION 15. WAIVER.
The Lender hereby waives Borrower's non-compliance with Section 6.1(a)
of the Agreement until September 29, 2002.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date and year first above written.
BORROWER:
NATURAL GAS SERVICES GROUP, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx, President
LENDER:
WESTERN NATIONAL BANK
By: /s/ XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx, Executive
Vice President
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GUARANTORS:
ROTARY GAS SYSTEMS, INC.
By:
-------------------------------------
Xxxxx X. Xxxxxx, President
NGE LEASING, INC.
By:
-------------------------------------
Xxxxxxx X. Xxxxxxxx, President
GREAT LAKES COMPRESSION, INC.
By:
-------------------------------------
Xxxxxx X. Xxxxxxx, President
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EXHIBIT A-5
TERM PROMISSORY NOTE
$3,500,000.00 September 30, 2002
FOR VALUE RECEIVED, in the manner, on the dates and in the amounts
herein stipulated, NATURAL GAS SERVICES GROUP, INC., a Colorado corporation
("Borrower"), hereby promises and agrees to pay to the order of WESTERN NATIONAL
BANK, a national banking association ("Lender"), in Midland, Midland County,
Texas, the principal sum of THREE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($3,500,000.00) in lawful money of the United States of America, which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment, together with interest on the unpaid principal amount
hereof from time to time outstanding until maturity at a rate per annum which
shall from day to day be equal to the lesser of (a) one percent (1.00%) over the
Prime Rate (the "Established Rate") in effect from day to day (calculated on the
basis of actual days elapsed, but computed as if each calendar year consisted of
360 days) or (b) the Highest Lawful Rate. Each change in the rate of interest
charged under this Term Promissory Note (this "Note") shall, subject to the
terms hereof, become effective, without notice to Borrower, upon the effective
date of each change in the Prime Rate or the Highest Lawful Rate, as the case
may be. Notwithstanding the foregoing, if at any time the Established Rate
exceeds the Highest Lawful Rate, the rate of interest on this Note shall be
limited to the Highest Lawful Rate, but any subsequent reductions in the
Established Rate shall not reduce the rate of interest hereon below the Highest
Lawful Rate until the total amount of interest accrued hereon approximately
equals the amount of interest which would have accrued hereon if the Established
Rate had at all times been in effect. In the event that at maturity (stated or
by acceleration), or at final payment of this Note, the total amount of interest
paid or accrued hereon is less than the amount of interest which would have
accrued if the Established Rate had at all times been in effect, then, at such
time and to the extent permitted by applicable laws, Borrower shall pay to
Lender an amount equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Established Rate had at all times been
in effect or the amount of interest which would have accrued if the Highest
Lawful Rate had at all times been in effect, and (b) the amount of interest
actually paid or accrued on this Note. Interest calculations may be made ten
days prior to any interest installment due date under this Note, in which event,
if there is an adjustment in the interest rate in accordance with the terms
hereof during such ten-day period, then Borrower shall subsequently, on demand,
pay to Lender any underpayment, or Lender shall pay to Borrower, any
overpayment, as the case may be, as a result of any adjustment during such
ten-day period.
This Note is the Term Promissory Note referred to in the Loan
Agreement, dated as of September 15, 1999, as amended by that certain First
Amendment and Waiver to Loan Agreement, dated as of March 9, 2001, as further
amended by that certain Second Amendment to Loan Agreement, dated as of March
20, 2001, as further amended by that certain Third Amendment and Waiver to Loan
Agreement, dated as of July 25, 2001, as further amended by that certain Fourth
Amendment to Loan Agreement, dated as of December 12, 2001, as further amended
by that certain Fifth Amendment to Loan Agreement, dated as of April 3, 2002, as
further amended by that certain Sixth Amendment to Loan Agreement, dated as of
May 6, 2002, and as further amended by that certain Seventh Amendment to Loan
Agreement dated as of September 30, 2002 (said Loan Agreement, as amended, and
as the same may be further amended, supplemented or otherwise modified from time
to time, the "Loan Agreement"), by and between Borrower and Lender, and is
subject to the terms and conditions thereof. Reference is made to the Loan
Agreement for provisions for the disbursement of funds hereunder and for a
further statement of the rights, remedies, powers, privileges, benefits, duties
and obligations of Borrower and Lender under the Loan Agreement and this Note.
Terms used herein which are defined in the Loan Agreement shall have such
defined meanings unless otherwise defined herein. The holder of this Note shall
be entitled to the benefits of the Loan Agreement.
The principal of this Note shall be due and payable (a) in fifty-nine
consecutive monthly installments of $58,333.00 each, with the first such
installment being due and payable on November 15, 2002, and a like installment
being due and payable on the fifteenth day of each succeeding month to and
including September 15, 2007; and (b) one final installment in an amount equal
to all remaining unpaid principal and accrued and unpaid interest on this Note
shall be due and payable on October 15, 2007. Interest, computed on the unpaid
balance of this Note, shall be due and payable as it accrues, on the same dates
as, but in addition to, the installments of principal. All payments and
prepayments shall be applied first to accrued and unpaid interest, and the
balance to principal. Partial prepayments of principal shall be applied to the
installments of principal thereof in the inverse order of their maturity. All of
the past due principal and accrued interest hereunder shall, at the option of
Lender, bear interest from maturity (stated or by acceleration) until paid at a
rate per annum equal to the Highest Lawful Rate.
This Note is secured as provided in the Loan Agreement and in the other
Loan Papers, to which reference is hereby made for a description of the
properties and assets in which a lien and security interest has been granted,
the nature and extent of the security,
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the terms and conditions upon which the liens and security interests were
granted and the rights of the holder of this Note with respect thereto.
Time is of the essence of this Note. Upon the occurrence of any one or
more of the Events of Default specified in the Loan Agreement, all amounts then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided therein.
Borrower and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of protest, notice
of dishonor, notice of intent to accelerate and notice of acceleration), demand,
presentment for payment, protest, diligence in collecting or bringing suit and
the filing of suit for the purpose of fixing liability, and consent that the
time of payment hereof may be extended and re-extended from time to time without
notice to them or any of them, and each agrees that his, her or its liability on
or with respect to this Note shall not be affected, diminished or impaired by
any (a) release of any security at any time existing for this Note, (b)
substitution for any security at any time existing for this Note, or (c) failure
to perfect (or to maintain perfection of) any lien on or security interest in
any such security, in each case in whole or in part, with or without notice,
before or after maturity.
It is the intention of Borrower and Lender that Lender shall conform
strictly to usury laws applicable to it. Accordingly, if the transactions
contemplated by the Loan Agreement and this Note would be usurious as to Lender
under laws applicable to it (including the laws of the United States of America
and the State of
Texas or any other jurisdiction whose laws may be mandatorily
applicable to Lender notwithstanding the other provisions of the Loan Agreement
and this Note), then, in that event, notwithstanding anything to the contrary in
this Note, the Loan Agreement or any other Loan Paper or other agreement entered
into in connection with or as security for this Note, (i) the aggregate of all
consideration which is contracted for, taken, reserved, charged or received by
Lender under this Note, the Loan Agreement or any other Loan Paper or agreement
entered into in connection with or as security for this Note shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be credited by Lender on the principal amount of the Obligations to
Lender (or, to the extent that the principal amount of the Obligations shall
have been or would thereby be paid in full, refunded by Lender to the Borrower);
and (ii) in the event that the maturity of this Note is accelerated by reason of
an Event of Default under the Loan Agreement or otherwise, or in the event of
any prepayment, then such consideration that constitutes interest under law
applicable to Lender may never include more than the maximum amount allowed by
such applicable law, and excess interest, if any, provided for in this Note, the
Loan Agreement or otherwise shall be cancelled automatically by Lender as of the
date of such
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acceleration of prepayment and, if theretofore paid, shall be credited by Lender
on the principal amount of the Obligations (or, to the extent that the principal
amount of such Obligations shall have been or would thereby be paid in full,
refunded by Lender to the Borrower).
To the extent that
Texas Finance Code Section 303.002 is relevant to
Lender for the purposes of determining the Highest Lawful Rate, the applicable
rate ceiling under such provisions shall be determined by the indicated (weekly)
rate ceiling from time to time in effect, subject to Lender's right subsequently
to change such method in accordance with applicable law. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Papers, it
is not the intention of the Lender to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
This Note is performable and payable in the County of Midland, State of
Texas, and shall be construed in accordance with, and governed by, the laws of
the State of
Texas; provided, however, that the laws pertaining to allowable
rates of interest may, from time to time, be governed by the laws of the United
States of America.
NATURAL GAS SERVICES GROUP, INC.
By:
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Xxxxx X. Xxxxxx, President
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