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AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
XXXXXXX OIL, INC.
AND
NORWEST CREDTT, INC.
Dated as of December 8, 1997
[NORTH WEST LOGO]
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS .........................................................................1
Section 1.1 DEFINITIONS .........................................................................1
Section 1.2 CROSS REFERENCES ...................................................................12
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY ............................................12
Section 2.1 EXISTING ADVANCES ..................................................................12
Section 2.2 REVOLVING ADVANCES .................................................................12
Section 2.3 EXISTING LETTERS OF CREDIT .........................................................13
Section 2.4 LETTERS OF CREDIT ..................................................................13
Section 2.5 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT; OBLIGATION OF REIMBURSEMENT ......14
Section 2.6 SPECIAL ACCOUNT ....................................................................14
Section 2.7 OBLIGATIONS ABSOLUTE ...............................................................15
Section 2.8 INTEREST; DEFAULT INTEREST; PARTICIPATIONS; USURY ..................................15
Section 2.9 FEES ...............................................................................16
Section 2.10 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND PAYABLE ....................17
Section 2.11 CAPITAL ADEQUACY; INCREASED COSTS AND REDUCED RETURN ...............................17
Section 2.12 DISCRETIONARY NATURE OF THIS FACILITY; TERMINATION BY THE LENDER; AUTOMATIC
RENEWAL ..........................................................................................19
Section 2.13 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT FACILITY BY THE BORROWER ...........19
Section 2.14 TERMINATION PREPAYMENT FEES; WAIVER OF TERMINATION FEES ............................19
Section 2.15 MANDATORY PREPAYMENT ...............................................................20
Section 2.16 PAYMENT ............................................................................20
Section 2.17 PAYMENT ON NON-BANKING DAYS ........................................................20
Section 2.18 USE OF PROCEEDS ....................................................................21
Section 2.19 LIABILITY RECORDS ..................................................................21
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF ...............................................21
Section 3.1 GRANT OF SECURITY INTEREST .........................................................21
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS .................................21
Section 3.3 ASSIGNMENT OF INSURANCE ............................................................21
Section 3.4 OCCUPANCY ..........................................................................22
Section 3.5 LICENSE ............................................................................22
Section 3.6 FINANCING STATEMENT ................................................................22
Section 3.7 SETOFF .............................................................................23
ARTICLE IV CONDITIONS OF WILLINGNESS TO CONSIDER LENDING ......................................23
Section 4.1 CONDITIONS PRECEDENT TO LENDER'S WILLINGNESS TO CONSIDER MAKING THE INITIAL
REVOLVING ADVANCE AND THE INITIAL LETTER OF CREDIT..................................23
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT .........................26
ARTICLE V REPRESENTATIONS AND WARRANTIES .....................................................26
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER ...................................................26
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR AGREEMENTS ....................27
Section 5.3 LEGAL AGREEMENTS ...................................................................27
Section 5.4 SUBSIDIARIES .......................................................................28
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE .............................................28
Section 5.6 LITIGATION .........................................................................28
Section 5.7 REGULATION U .......................................................................28
Section 5.8 TAXES ..............................................................................28
Section 5.9 TITLES AND LIENS ...................................................................28
Section 5.10 PLANS ..............................................................................29
Section 5.11 DEFAULT ............................................................................29
Section 5.12 ENVIRONMENTAL MATTERS ..............................................................29
Section 5.13 SUBMISSIONS TO LENDER ..............................................................30
Section 5.14 FINANCING STATEMENTS ...............................................................30
Section 5.15 RIGHTS TO PAYMENT ..................................................................31
Section 5.16 FINANCIAL SOLVENCY .................................................................31
ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS ...................................................32
Section 6.1 REPORTING REQUIREMENTS .............................................................32
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION ......................................35
Section 6.3 LIEN WAIVERS .......................................................................35
Section 6.4 ACCOUNT VERIFICATION ...............................................................35
Section 6.5 COMPLIANCE WITH LAWS ...............................................................35
Section 6.6 PAYMENT OF TAXES AND OTHER CLAIMS ..................................................36
Section 6.7 MAINTENANCE OF PROPERTIES ..........................................................36
Section 6.8 INSURANCE ..........................................................................36
Section 6.9 PRESERVATION OF EXISTENCE ..........................................................37
Section 6.10 DELIVERY OF INSTRUMENTS, ETC .......................................................37
Section 6.11 COLLATERAL ACCOUNT .................................................................37
Section 6.12 LOCKBOX ............................................................................37
Section 6.13 PERFORMANCE BY THE LENDER ..........................................................38
Section 6.14 MINIMUM NET ........................................................................39
Section 6.15 MAXIMUM DEBT TO BOOK NET WORTH RATIO ...............................................39
Table of Contents -ii-
ARTICLE VII NEGATIVE COVENANTS .................................................................39
Section 7.1 LIENS ..............................................................................39
Section 7.2 INDEBTEDNESS .......................................................................40
Section 7.3 GUARANTIES .........................................................................40
Section 7.4 INVESTMENTS AND SUBSIDIARIES .......................................................40
Section 7.5 DIVIDENDS ..........................................................................41
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS .......................................41
Section 7.8 SALE AND LEASEBACK .................................................................42
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS .................................................42
Section 7.10 CAPITAL EXPENDITURES ...............................................................42
Section 7.11 ACCOUNTING .........................................................................42
Section 7.12 DISCOUNTS, ETC .....................................................................42
Section 7.13 DEFINED BENEFIT PENSION PLANS ......................................................42
Section 7.14 OTHER DEFAULTS .....................................................................42
Section 7.15 PLACE OF BUSINESS; NAME ............................................................42
Section 7.16 ORGANIZATIONAL DOCUMENTS ...........................................................42
Section 7.17 SALARIES ...........................................................................43
Section 7.18 CHANGE IN OWNERSHIP ................................................................43
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES. ............................................43
Section 8.1 EVENTS OF DEFAULT ..................................................................43
Section 8.2 RIGHTS AND REMEDIES ................................................................45
Section 8.3 CERTAIN NOTICES ....................................................................46
ARTICLE IX MISCELLANEOUS ......................................................................47
Section 9.1 RESTATEMENT OF OLD CREDIT DOCUMENTS ................................................47
Section 9.2 RELEASE ............................................................................47
Section 9.3 NO WAIVER; CUMULATIVE REMEDIES .....................................................47
Section 9.4 AMENDMENTS, ETC ....................................................................47
Section 9.5 ADDRESSES FOR NOTICES, ETC .........................................................47
Section 9.6 FURTHER DOCUMENTS ..................................................................48
Section 9.7 COLLATERAL .........................................................................48
Section 9.8 COSTS AND EXPENSES .................................................................49
Section 9.9 INDEMNITY ..........................................................................49
Section 9.10 PARTICIPANTS .......................................................................50
Section 9.11 EXECUTION IN COUNTERPARTS ..........................................................50
Section 9.12 BINDING EFFECT; ASSIGNMENT; COMPETE AGREEMENT; EXCHANGING INFORMATION ..............50
Section 9.13 SEVERABILITY OF PROVISIONS .........................................................50
Section 9.14 HEADINGS ...........................................................................51
Section 9.15 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL ...........................51
Section 9.16 NOT REPRESENTED BY COUNSEL .........................................................51
Table of Contents -iii-
Section 9.17 AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT .................................51
Table of Contents -iv-
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
Dated as of December 8, 1997
XXXXXXX OIL, INC., a North Dakota corporation (the "Borrower") , and
NORWEST CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article,and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Accounts Receivable Turnover" means the product of:
(a) the quotient of (i) the sum of the Accounts balance as of
each month-end during a rolling three-month period, divided
by (ii) sales for such three month period, times
(b) 30 days.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means Energy, Fabrication FGO, SPF
Superpumper and any other Person controlled by, controlling or under common
control with the Borrower or any of the Guarantors, including (without
limitation) any Subsidiary of the Borrower. For purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Credit and Security
Agreement, as amended, supplemented or restated, from time to time.
"Availability" means the difference of (i) the Borrowing Base and (ii)
the sum of (A) the outstanding principal balance of the Revolving Note and (B)
the L/C Amount.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from time to
time by Norwest Bank Minnesota, National Association as its "base rate" or, if
such bank ceases to announce a rate so designated, any similar successor rate
designated by the Lender.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity in the Borrower, determined in accordance with GAAP.
"Borrowing Base" means, at any time and subject to change from time to
time in the Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b) the Borrowing Power.
"Borrowing Power" means at any time and subject to change from time to
time in the Lender's sole discretion, the sum of:
(a) the Ordinary Borrowing Power, plus
(b) the Overadvance Component.
"Capital Expenditures" for a period means any expenditure of money for
the purchase or construction of assets, or for improvements or additions
thereto, which are capitalized on the Borrower's balance sheet.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on deposit in
any Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing; (ii)
proceeds of any and all of the foregoing; (iii) in the case of all tangible
goods, all accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
tangible goods; (v) all warehouse receipts, bills of lading
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and other documents of title now or hereafter covering such goods; and (vi) all
sums on deposit in the Special Account.
"Collateral Account" has the meaning given in Section 6.11.
"Consolidated Net Income" means, on a consolidated basis, the monthly
after-tax net income from continuing operations of the Borrower and its
Subsidiaries as determined in accordance with GAAP.
"Credit Facility" means the discretionary credit facility being made
available to the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet of that Person as at the
date as of which Debt is to be determined. For purposes of determining a
Person's aggregate Debt at any time, "Debt" shall also include the aggregate
payments required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.
"Debt to Book Net Worth Ratio" as of a given date means the ratio of
the Borrower's Debt to the Borrower's Book Net Worth.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which a Default or Event of Default has occurred and ending
on the date the Lender notifies the Borrower in writing that such Default or
Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to two percent (2%) over the
Floating Rate, which rate shall change when and as the Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(i) That portion of Accounts unpaid 60 days or more after the
invoice date or that portion of such dated Account which is unpaid or
more after the stated due date or 150 days past invoice date;
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(ii) That portion of Superpumper Accounts unpaid 15 days or more
after the invoice date;
(iii) That portion of Accounts owed by Superpumper exceeding the
Superpumper Cap; and
(iv) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(v) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(vi) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory to the Lender
that (A) the Lender has a first priority perfected security interest
and (B) such Accounts may be enforced by the Lender directly against
such unit of government under all applicable laws);
(vii) Accounts owed by an account debtor located outside the
United States or Canada which are not (A) backed by a bank letter of
credit naming the Lender as beneficiary or assigned to the Lender, in
the Lender's possession and acceptable to the Lender in all respects,
in its sole discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
(viii) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(ix) Accounts owed by a shareholder, Subsidiary, Affiliate,
officer or employee of the Borrower, except for Superpumper Accounts;
(x) Accounts not subject to a duly perfected security interest
in the Lender's favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender
including without limitation any payment or performance bond;
(xi) That portion of Accounts that has been restructured,
extended, amended or modified;
(xii) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xiii) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 10% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii),
(iv)or (xi) above;
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(xiv) Accounts arising out of the sale of Inventory acquired from
Interest Owners for which a Lien Waiver has not been obtained;
(xv) Accounts, or portions thereof, otherwise deemed ineligible
by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at the
lower of cost or market value as determined in accordance with GAAP;
provided, however, that the following shall not in any event be deemed
Eligible Inventory:
(i) Inventory that is: in-transit; located at any warehouse, job
site or other premises not approved by the Lender in writing; located
outside of the states, or localities, as applicable, in which the
Lender has filed financing statements to perfect a first priority
security interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other document of
title; on consignment from or to any Person or subject to any
bailment;
(ii) Supplies, packaging, maintenance parts or sample Inventory;
(iii) Work-in-process Inventory;
( iv) Inventory that is damaged, obsolete, slow moving or not
currently saleable in the normal course of the Borrower's operations;
(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the
vendor thereof,
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in writing to permit
the Lender to exercise its rights and remedies against such
Inventory;]
(viii) Inventory that is subject to a security interest in favor
of any Person other than the Lender, including but not limited to
shipments from Interest Owners for which the Borrower has not received
a Lien Waiver certifying that the total purchase price for such
shipment has been received;
(ix) Inventory stored in salt domes; and
(x) Inventory otherwise deemed ineligible by the Lender in its
sole discretion.
"Eligible Unbilled Accounts" means all Eligible Accounts for which the
Borrower has not yet delivered an invoice to the customer, excluding,
however, that portion of Eligible Accounts unbilled more than three (3)
days after delivery to the customer.
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"Energy" means Xxxxxxx Energy Services, LLC, a North Dakota limited
liability company.
"Energy Security Agreement" means the Security Agreement of even date
herewith, executed by Energy and delivered to the Lender.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Existing Revolving Advances" has the meaning specified in Section
2.1.
"Fabrication" means Fabrication Services Ltd. Liability Co.,a Colorado
limited liability company.
"FGO" means Xxxxxxx Gas & Oil, LLC, a North Dakota limited liability
company.
"FGO Security Agreement" means the Security Agreement of even date
herewith, executed by FGO and delivered to the Lender.
"FGO Pledge" means the Collateral Pledge Agreement of even date
herewith, executed by FGO and delivered to the Lender.
"Floating Rate" means an annual rate equal to the sum of the Base Rate
plus two and one-half of one percent (2 1/2%), which annual rate shall change
when and as the Base Rate changes; PROVIDED, HOWEVER that such `Floating Rate'
shall mean a rate equal to the Base Rate plus one percent (1%), effective as of
the date either of the following conditions is met, if the Borrower is able to,
prior to February 15, 1998, satisfy either of the following conditions: (i)
obtain subordinated debt in the amount of at least $1,500,000, or (ii) collect
in full on the debt owed to it by Dacotah Marketing Research LLC.
"Funding Date" has the meaning given in Section 2.2.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described
6
in Section 5.5, except for any change in accounting practices to the extent
that, due to a promulgation of the Financial Accounting Standards Board
changing or implementing any new accounting standard, the Borrower either (i)
is required to implement such change, or (ii) for future periods will be
required to and for the current period may in accordance with generally
accepted accounting principles implement such change, for its financial
statements to be in conformity with generally accepted accounting principles
(any such change is herein referred to as a "Required GAAP Change"), provided
that (1) the Borrower shall fully disclose in such financial statements any
such Required GAAP Change and the effects of the Required GAAP Change on the
Borrower's income, retained earnings or other accounts, as applicable, and (2)
the Borrower's financial covenants set forth in Sections 6.14, 6.15, and 7.10
shall be adjusted as necessary to reflect the effects of such Required GAAP
Change.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business.
"Guarantors" means the Individual Guarantor and the Organizational
Guarantors.
"Hazardous Substance" has the meaning given in Section 5.12.
"Individual Guarantor" means Xxxxxxx X. Xxxxxxx.
"Interest Owner" means the Persons identified from time to time in
writing from the Borrower to the Lender as interest owners in oil and gas sold
to the Borrower as first purchaser within the meaning of Texas Uniform
Commercial Code Section. 9.319 and the Oil and Gas Products Lien Act of New
Mexico, NMSA Sections. 48-9-1 ET SEA.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements, securities
accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and U.S. Government securities.
7
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of any
issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement.
"L/C Application" means (a) with respect to New Letters of Credit, an
application and agreement for letters of credit in a form acceptable to the
Issuer and the Lender; (b) with respect to Prior Letters of Credit, the existing
application and agreement for each Prior Letter of Credit.
"Letter of Credit" has the meaning specified in Section 2.4.
"Lien Waiver" has the meaning given in Section 6.3.
"Loan Documents" means this Agreement, the Note and the Security
Documents.
"Lockbox" has the meaning given in Section 6.12.
"Maturity Date" has the meaning given in Section 2.12.
"Maximum Line" means $12,000,000.
"Net Income" means, on an unconsolidated basis, the Borrower's monthly
after-tax net income from continuing operations as determined in accordance with
GAAP.
"Norwest ND" means Norwest Bank North Dakota, National Association.
"Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now or at
any time hereafter owe to the Lender, whether such debt, liability or obligation
now exists or is hereafter created or incurred, whether it arises in a
transaction involving the Lender alone or in a transaction involving other
creditors of the Borrower, and whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, the Obligation of Reimbursement and all
indebtedness of the Borrower arising under this Agreement, the Note, any L/C
Application completed by the Borrower, or any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or hereafter
entered into.
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"Obligation of Reimbursement" has the meaning given in Section 2.5(a).
"Old Credit Documents" means that certain Credit and Security
Agreement dated as of September 14, 1994, as amended by a First Amendment to
Credit and Security Agreement dated as of September 26, 1994, a Second Amendment
to Credit and Security Agreement dated as of March 28, 1995, a Third Amendment
to Credit and Security Agreement dated as of June 1, 1995, a Fourth Amendment to
Credit and Security Agreement dated as of July 24, 1996, a Fifth Amendment to
Credit and Security Agreement dated as of November 25, 1996, and a Sixth
Amendment to Credit and Security Agreement dated as of March 31, 1997.
"Old Revolving Note" means the Borrower's revolving promissory note
dated as of July 24, 1996, payable to the order of the Lender in the original
principal amount of $12,000,000.
"Ordinary Borrowing Power" means at any time and subject to change
from time to time in the Lender's sole discretion, the sum of:
(a) 85% of Eligible Accounts, plus
(b) the lesser of (i) 65% of Eligible Inventory or (ii) $3,000,000,
plus
(c) the lessor of (i) 70% of Eligible Unbilled Accounts or (ii)
$2,000,000.
"Organizational Guarantors" means Fabrication FGO, Energy, Superpumper
and SPF.
"Original Maturity Date" means December 15, 2000.
"Overadvance Amount" has the meaning as given in Section 2.8(b).
"Overadvance Component" means an amount equal to the difference
between the Maximum Line and the Ordinary Borrowing Power.
"Overadvance Floating Rate" means an annual rate equal to the sum of
the Floating Rate plus eleven percent (11%) which rate shall change when and as
the Floating Rate changes."
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
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"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the premises
legally described in Exhibit C attached hereto.
"Prior Letters of Credit" means the letters of credit issued prior to
the date of the Credit Agreement by Norwest ND for the account of the Borrower,
in favor of various parties, identified more specifically on Exhibit D attached
hereto.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.2.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A hereto
and any note or notes issued in substitution therefor, as the same may hereafter
be amended, supplemented or restated from time to time.
"Security Documents" means this Agreement, the Pledge Agreement, the
FGO Security Agreement, the FGO Pledge, the Energy Security Agreement, the
Guaranties of each of the Guarantors and any other document delivered to the
Lender from time to time to secure the Obligations, as the same may hereafter be
amended, supplemented or restated from time to time.
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"Security Interest" has the meaning given in Section 3.1.
"Special Account" means a specified cash collateral account maintained
by a financial institution acceptable to the Lender in connection with Letters
of Credit, as contemplated by Section 2.6.
"SPF" means SPF Energy, Inc., a North Dakota corporation, the Parent
of the Borrower.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Superpumper" means Superpumper, Inc., a North Dakota corporation.
"Superpumper Cap" means $1,000,000; provided, however, that such
amount shall decrease by $100,000 beginning on the six month anniversary of the
date hereof and continuing on each sixth month anniversary thereafter, until
such amount equals $500,000; FURTHER; PROVIDED, that the Lender may, in its sole
discretion, increase or decrease such "Supcrpumper Cap".
"Tax Expense" as of any date means state and federal income taxes
recorded by the Borrower for the year-to-date period ending on such date.
"Tax Reserve" means a reserve established for any tax liability
arising in connection with the acquisition or sale of petroleum products, amount
of which shall be determined at the discretion of the Lender, based on
historical and expected liability.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations .
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.15 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
11
Section 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE 11
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 EXISTING ADVANCES. The Lender has made various advances to
the Borrower (the "Existing Revolving Advances") as evidenced by the Old Credit
Documents. As of December 4, 1997, the outstanding principal balance of the
Existing Revolving Advances was $6,639,064.86. Upon execution and delivery of
this Agreement, the Existing Revolving Advances shall be deemed to be Revolving
Advances made pursuant to Section 2.2 and repayable in accordance with the
Revolving Note. To the extent the Revolving Note evidences the Existing
Revolving Advances, the Revolving Note shall be issued in substitution for and
replacement of but not in payment of the Old Credit Documents.
Section 2.2 REVOLVING ADVANCES. The Lender may, in its sole
discretion, make advances to the Borrower from time to time from the date all of
the conditions set forth in Section 4.1 are satisfied (the "Funding Date") to
the Termination Date, on the terms and subject to the conditions herein set
forth (the "Revolving Advances"). The Lender shall not consider any request for
a Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances under this Section 2.2
or otherwise would exceed the Borrowing Base less the L/C Amount. The Borrower's
obligation to pay the Revolving Advances shall be evidenced by the Revolving
Note and shall be secured by the Collateral as provided in Article III. Within
the limits set forth in this Section 2.2, the Borrower may request Revolving
Advances, prepay pursuant to Section 2.13 and request additional Revolving
Advances. The Borrower agrees to comply with the following procedures in
requesting Revolving Advances under this Section 2.2:
(a) The Borrower shall make each request for a Revolving Advance to
the Lender before 11:00 a.m. (Minneapolis time) of the day of the requested
Revolving Advance. Requests may be made in writing or by telephone,
specifying the date of the requested Revolving Advance and the amount
thereof. Each request shall be by (i) any officer of the Borrower; or (ii)
any person designated as the Borrower's agent by any officer of the
Borrower in a writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of the Borrower or such a
designated agent.
(b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall disburse the proceeds of the requested Revolving
Advance by crediting the same to the Borrower's demand deposit account
maintained with Norwest ND
12
unless the Lender and the Borrower shall agree in writing to another manner
of disbursement. Upon the Lender's request, the Borrower shall promptly
confirm each telephonic request for an Advance by executing and delivering
an appropriate confirmation certificate to the Lender. The Borrower shall
repay all Advances even if the Lender does not receive such confirmation
and even if the person requesting an Advance was not in fact authorized to
do so. Any request for an Advance, whether written or telephonic, shall be
deemed to be a representation by the Borrower that the conditions set forth
in Section 4.2 have been satisfied as of the time of the request.
Section 2.3 EXISTING LETTERS OF CREDIT. The Lender has caused the
Issuer to issue six (6) letters of credit which are presently outstanding (the
"Prior Letters of Credit"). The Borrower's obligations with respect to the Prior
Letters of Credit are evidenced by the Old Credit Documents. As of December 4,
1997, the aggregate amount available to be drawn under the Prior Letters of
Credit was $1,615,000. Upon execution and delivery of this Agreement, the Prior
Letters of Credit shall be deemed to be Letters of Credit issued pursuant to
Section 2.4.
Section 2.4 LETTERS OF CREDIT.
(a) The Lender has agreed to indemnify Norwest ND for any and all
charges assessed or losses incurred on any of the Prior Letters of Credit.
(b) The Lender may, in its sole discretion, cause an Issuer to issue,
from the Funding Date to the Termination Date, one or more irrevocable
standby or documentary letters of credit (each, a "New Letter of Credit",
and together with the Prior Letters of Credit, the "Letters of Credit")
for the Borrower's account. The Lender shall have no obligation to cause an
Issuer to issue any New Letter of Credit if the face amount of the New
Letter of Credit to be issued, would exceed the lesser of.
(i) $2,500,000 less the L/C Amount, or
(ii) the Borrowing Base less the sum of (i) all outstanding
and unpaid Revolving Advances and (ii) the L/C Amount.
Each New Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into by the Borrower and the Lender for the benefit
of the Issuer, completed in a manner satisfactory to the Lender and the
Issuer. The terms and conditions set forth in each such L/C Application
shall supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent, the
terms hereof shall control.
(c) No New Letter of Credit shall be issued with an expiry date later
than the Termination Date in effect as of the date of issuance.
13
(d) Any request to cause an Issuer to issue a New Letter of Credit
under this Section 2.4 shall be deemed to be a representation by the
Borrower that the conditions set forth in Section 4.2 have been satisfied
as of the date of the request.
Section 2.5 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT:
OBLIGATION OF REIMBURSEMENT. The Borrower acknowledges that the Lender, as
co-applicant on the New Letters of Credit or as indemnitor on the Prior Letters
of Credit, will be liable to the Issuer for reimbursement of any and all draws
under Letters of Credit and for all other amounts required to be paid under the
applicable L/C Application. Accordingly, the Borrower agrees to pay to the
Lender any and all amounts required to be paid under the applicable L/C
Application, when and as required to be paid thereby, and the amounts designated
below, when and as designated:
(a) The Borrower hereby agrees to pay the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn under
such Letter of Credit plus any and all reasonable charges and expenses that
the Issuer or the Lender may pay or incur relative to such draw and the
applicable L/C Application, plus interest on all such amounts, charges and
expenses as set forth below (the Borrower's obligation to pay all such
amounts is herein referred to as the "Obligation of Reimbursement").
(b) If a draft is submitted under a Letter of Credit when the Borrower
is unable, because a Default Period then exists or for any other reason, to
obtain a Revolving Advance to pay the Obligation of Reimbursement, the
Borrower shall pay to the Lender on demand and in immediately available
funds, the amount of the Obligation of Reimbursement together with
interest, accrued from the date of the draft until payment in full at the
Default Rate. Notwithstanding the Borrower's inability to obtain a
Revolving Advance for any reason, the Lender is irrevocably authorized, in
its sole discretion, to make a Revolving Advance in an amount sufficient to
discharge the Obligation of Reimbursement and all accrued but unpaid
interest thereon.
(c) The Borrower's obligation to pay any Revolving Advance made under
this Section 2.5, shall be evidenced by Revolving Note and shall bear
interest as provided in Section 2.8.
Section 2.6 SPECIAL ACCOUNT. If the Credit Facility is terminated for
any reason whatsoever while any Letter of Credit is outstanding, the Borrower
shall thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any financial
institution acceptable to the Lender. Any interest earned on amounts deposited
in the Special Account shall be credited to the Special Account. Amounts on
deposit in the Special Account may be applied by the Lender at any time or from
time to time
14
to the Obligations in the Lender's sole discretion, and shall not be subject to
withdrawal by the Borrower so long as the Lender maintains a security interest
therein. The Lender agrees to transfer any balance in the Special Account to
the Borrower at such time as the Lender is required to release its security
interest in the Special Account under applicable law.
Section 2.7 OBLIGATIONS ABSOLUTE. The Borrower's obligations arising
under Section 2.5 shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of Section 2.5, under all
circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
any other agreement or instrument relating to any Letter of Credit
(collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure from all or
any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), or other person or
entity, whether in connection with this Agreement, the transactions
contemplated herein or in the Related Documents or any unrelated
transactions;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under any
Letter of Credit against presentation of a draft or certificate which does
not strictly comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 2.8 INTEREST; DEFAULT INTEREST; PARTICIPATIONS; USURY.
Interest accruing on the Note shall be due and payable in arrears on the first
day of each month.
(a) REVOLVING NOTE. Except as set forth in Sections 2.8(c) and 2.8(e),
the outstanding principal balance of the Revolving Note shall bear interest
at the Floating Rate.
15
(b) OVERADVANCE INTEREST RATE. Except as set forth in Sections 2.8(c)
and 2.8(e), the outstanding principal balance of the Revolving Note that
exceeds the Ordinary Borrowing Power (such amount shall hereinafter be
called the "Overadvance Amount") shall bear interest at the Overadvance
Floating Rate. Such Overadvance Floating Rate shall be applied to any such
Overadvance Amounts effective as of December 1, 1997.
(c) DEFAULT INTEREST RATE. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights
and remedies, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(d) PARTICIPATIONS. If any Person shall acquire a participation in the
Advances under this Agreement, the Borrower shall be obligated to the
Lender to pay the full amount of all interest calculated under Section
2.8(a), along with all other fees, charges and other amounts due under this
Agreement, regardless if such Person elects to accept interest with respect
to its participation at a lower rate than the Floating Rate, or otherwise
elects to accept less than its prorata share of such fees, charges and
other amounts due under this Agreement.
(e) USURY. In any event no rate change stall be put into effect which
would result in a rate greater than the highest rate permitted by law.
Section 2.9 FEES.
(a) LETTER OF CREDIT FEES. The Borrower agrees to pay the Lender a fee
with respect to each Letter of Credit, if any, accruing on a daily basis
and computed at the annual rate of one and one-half percent (1.5%) of the
aggregate amount that may then be drawn on all issued and outstanding
Letters of Credit assuming compliance with all conditions for drawing
thereunder (the "Aggregate Face Amount"), from and including the date of
issuance of such Letter of Credit until such date as such Letter of Credit
shall terminate by its terms or be returned to the Lender, due and payable
monthly in arrears on the first day of each month and on the Termination
Date; PROVIDED, HOWEVER that during Default Periods, in the Lender's sole
discretion and without waiving any of its other rights and remedies, such
fee shall increase to three and one-half of one percent (3.5%) of the
Aggregate Face Amount. The foregoing fee shall be in addition to any and
all fees, commissions and charges of any issuer of a Letter of Credit with
respect to or in connection with such Letter of Credit.
(b) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower agrees to pay
the Lender, on written demand, the administrative fees charged by the
Issuer in connection
16
with the honoring of drafts under any Letter of Credit, amendments thereto,
transfers thereof and all other activity with respect to the Letters of
Credit at the then-current rates published by the Issuer for such services
rendered on behalf of customers of the Issuer generally.
(c) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees in connection with any audits or inspections conducted
by the Lender of any Collateral or the Borrower's operations or business at
the rates established from time to time by the Lender as its audit fees
(which fees are currently $62.50 per hour per auditor), together with all
actual out-of-pocket costs and expenses incurred in conducting any such
audit or inspection.
(d) OVERADVANCE FEES. Effective December 1, 1997, the Borrower hereby
agrees to pay the Lender a fee, due and payable on the first day of each
month, in the amount of $1,000 per day for each day that the Overadvance
Amount exceeds $1,500,000. Beginning February 15, 1998, such fee shall be
charged on Overadvance Amounts that exceed $750,000.
(e) ORIGINATION FEE. The Borrower hereby agrees to pay the Lender a
fully earned and non-refundable fee of $32,500, due and payable on January
15, 1998.
(f) REBATE OF PREVIOUS FEES. The Lender hereby agrees, upon execution
of this Agreement, to rebate to the Borrower, $110,887.97 of previously
collected fees. Such rebate shall be made by reducing the accrued interest
due to the Lender on the first day of the month following execution of this
Agreement. However, if the Borrower fails to, by February 15, 1998, (A)
obtain subordinated debt of at least $1,500,000, or (B) collect in full on
the debt owed to it by Dacotah Marketing Research LLC, then $78,387.97 of
the rebated fees shall be returned to the Lender. Such return of fees shall
be made to the Lender on June 30, 1998; PROVIDED, HOWEVER that such return
of fees by the Borrower to the Lender shall not be required if during the
period from February 1, 1998, to June 30, 1998, the Overadvance Amount was
at all times equal to zero.
Section 2.10 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date or
earlier prepayment in full.
Section 2.11 CAPITAL ADEQUACY: INCREASED COSTS AND REDUCED RETURN. If
any Related Lender determines at any time that its Return has been reduced as a
result of any Rule Change, such Related Lender may require the Borrower to pay
it the amount necessary to
17
restore its Return to what it would have been had there been no Rule Change. For
purposes of this Section 2.11:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy, or
the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules requiring financial institutions to maintain total capital in
amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.
(b) "L/C Rule" means any law, rule, regulation, guideline, directive,
requirement or request regarding letters of credit, or the interpretation
or administration thereof by any governmental or regulatory authority,
central bank or comparable agency, whether or not having the force of law,
that applies to any Related Lender. Such rules include rules imposing
taxes, duties or other similar charges, or mandating reserves, special
deposits or similar requirements against assets of, deposits with or for
the account of, or credit extended by any Related Lender, on letters of
credit.
(c) "Related Lender" includes (but is not limited to) the Lender, the
Issuer, any parent corporation of the Lender or the Issuer and any assignee
of any interest of the Lender hereunder and any participant in the loans
made hereunder,
(d) "Return", for any period, means the return as determined by a
Related Lender on the Advances and Letters of Credit based upon its total
capital requirements and a reasonable attribution formula that takes
account of the Capital Adequacy Rules and L/C Rules then in effect, costs
of issuing or maintaining any Letter of Credit and amounts received or
receivable under this Agreement or the Notes with respect to any Advance or
Letter of Credit. Return may be calculated for each calendar quarter and
for the shorter period between the end of a calendar quarter and the date
of termination in whole of this Agreement.
(e) "Rule Change" means any change in any Capital Adequacy Rule or L/C
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date are
scheduled to take place under the existing Capital Adequacy Rules or L/C
Rules or any increases in the capital that any Related Lender is required
to maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
Related Lender.
18
The Lender will promptly notify the Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle the Lender to
compensation pursuant to this Section 2.11. Certificates of any Related Lender
sent to the Borrower from time to time claiming compensation under this Section
2.11, stating the reason therefor and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to the Related Lender
hereunder to restore its Return shall be conclusive absent manifest error. In
determining such amounts, the Related Lender may use any reasonable averaging
and attribution methods.
Section 2.12 DISCRETIONARY NATURE OF THIS FACILITY; TERMINATION BY THE
LENDER; AUTOMATIC RENEWAL. This Agreement contains the terms and conditions upon
which the Lender presently expects to make Advances to and to cause the Issuer
to issue Letters of Credit for the account of the Borrower. Each Advance by the
Lender to the Borrower and each Letter of Credit issued for the Borrower's
account shall be in the Lender's sole discretion, and the Lender need not show
that an adverse change has occurred in the Borrower's condition, financial or
otherwise, or that any of the conditions of Article IV have not been met, in
order to refuse to make any requested Advance, cause the Issuer to issue any
Letter of Credit or to demand payment of the Obligations. The Lender may at any
time terminate the Credit Facility whereupon the Lender shall no longer consider
requests for Advances under this Agreement. Unless terminated by the Lender at
any time or by the Borrower pursuant to Section 2.13, the Credit Facility shall
remain in effect until the Original Maturity Date and, thereafter, shall
automatically renew for successive one year periods (the Original Maturity Date
and each anniversary date thereof which is at the end of any year for which the
Credit Facility has been automatically renewed, is herein referred to as a
"Maturity Date").
Section 2.13 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT FACILITY
BY THE BORROWER. Except as otherwise provided herein, the Borrower may prepay
the Revolving Advances in whole at any time or from time to time in part. The
Borrower may terminate the Credit Facility at any time if it (i) gives the
Lender at least 30 days' prior written notice and (ii) pays the Lender the
prepayment or reduction fees in accordance with Section 2.14. If the Borrower
terminates the revolving Credit Facility, all Obligations shall be immediately
due and payable. Upon termination of the Credit Facility and payment and
performance of all Obligations, the Lender shall release or terminate the
Security Interest and the Security Documents to which the Borrower is entitled
by law.
Section 2.14 TERMINATION PREPAYMENT FEES; WAIVER OF TERMINATION FEES.
(a) TERMINATION FEES. If the Credit Facility is terminated for any
reason as of a date other than the Maturity Date the Borrower shall pay the
Lender a fee in an amount equal to one percent (1%) of the Maximum Line.
If the Credit Facility is terminated for any reason prior to December 15,
1998, the Borrower shall pay an additional fee in the amount of $78,387.97.
19
(b) WAIVER OF TERMINATION FEES. The Borrower will not be required to
pay the line reduction or termination fees otherwise due under this Section
2.14 if:
(i) such reduction or termination is made because of refinancing
by the Lender or an affiliate of the Lender; or
(ii) such reduction or termination is made because of increased
cash flow from continuing operations; or
(iii) on or after December 15, 1999, the Borrower's operations
have expanded so that an increase in the Maximum Line is required to
provide adequate working capital, the Borrower has requested an
appropriate increase in the Maximum Line and the Lender has refused to
grant the Borrower's request, no Default Period exists at the time of
such request or when the Credit Facility is terminated and all
Obligations are paid and the Ordinary Borrowing Power would support
the increase in the Maximum Line at the advance rates in effect on the
Funding Date.
Section 2.15 MANDATORY PREPAYMENT. Without notice or demand, if the
sum of the outstanding principal balance of the Revolving Advances plus the L/C
Amount shall at any time exceed the Borrowing Base, the Borrower shall (i)
first, immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess; and (ii) if prepayment in full of the Revolving Advances
is insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any payment received by the Lender under this Section 2.15 or
under Section 2.13 may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.
Section 2.16 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations upon receipt
by the Lender. The Lender may hold all payments not constituting immediately
available funds for three (3) days before applying them to the Obligations.
Notwithstanding anything in Section 2.2, the Borrower hereby authorizes the
Lender, in its discretion at any time or from time to time without the
Borrower's request and even if the conditions set forth in Section 4.2 would not
be satisfied, to make a Revolving Advance in an amount equal to the portion of
the Obligations from time to time due and payable.
Section 2.17 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
20
Section 2.18 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances, and each Letter of Credit, if any, for ordinary working capital
purposes.
Section 2.19 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All entries
made on any such record shall be presumed correct until the Borrower establishes
the contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. In
addition to the Lender's rights under Section 6.11, with respect to any and all
rights to payment constituting Collateral, the Lender may at any time (whether
or not a Default Period then exists) notify any account debtor or other person
obligated to pay the amount due that such right to payment has been assigned or
transferred to the Lender for security and shall be paid directly to the Lender.
The Borrower will join in giving such notice if the Lender so requests. At any
time after the Borrower or the Lender gives such notice to an account debtor or
other obligor, the Lender may, but need not, in the Lender's name or in the
Borrower's name, (a) demand, xxx for, collect or receive any money or property
at any time payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor; and (b) as
the Borrower's agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to,
21
any and all policies of insurance now or at any time hereafter covering the
Collateral or any evidence thereof or any business records or valuable papers
pertaining thereto, and the Borrower hereby directs the issuer of any such
policy to pay all such monies directly to the Lender. At any time, whether or
not a Default Period then exists, the Lender may (but need not), in the Lender's
name or in the Borrower's name, execute and deliver proof of claim, receive all
such monies, endorse checks and other instruments representing payment of such
monies, and adjust, litigate, compromise or release any claim against the issuer
of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose
of goods that are Collateral and for other purposes that the Lender may in
good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations,
and (ii) final sale or disposition of all goods constituting Collateral and
delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to .pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any
rent or other compensation for the possession, occupancy or use of any of
the Premises, the Borrower shall reimburse the Lender promptly for the full
amount thereof. In addition, the Borrower will pay, or reimburse the Lender
for, all taxes, fees, duties, imposts, charges and expenses at any time
incurred by or imposed upon the Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this
Agreement or the provisions of this Section 3.4.
Section 3.5 LICENSE. The Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to
22
perfect the security interests granted hereby. For this purpose, the following
information is set forth:
Name and address of Debtor:
Xxxxxxx Oil, Inc.
X.X. Xxx 0000
Xxxxxx Xxxx 00 Xxxxx
Xxxxx, Xxxxx Xxxxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Norwest Credit, Inc.
Norwest Center
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Federal Tax Identification No. 00-0000000
Section 3.7 SETOFF. The Borrower agrees that the Lender may at any
time or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any Obligation, whether or not due. In addition,
each other Person holding a participating interest in any Obligations shall have
the right to appropriate or setoff any deposit or other liability then owed by
such Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrower the amount of such participating interest.
ARTICLE IV
CONDITIONS OF WILLINGNESS TO CONSIDER LENDING
Section 4.1 CONDITIONS PRECEDENT TO LENDER'S WILLINGNESS TO CONSIDER
MAKING THE INITIAL REVOLVING ADVANCE AND THE INITIAL LETTER OF CREDIT. The
Lender's willingness to consider making the initial Revolving Advance or to
cause to be issued the initial Letter of Credit hereunder shall be subject to
the condition precedent that the Lender shall have received all of the
following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
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(c) True and correct copies of all of the license and any sublicense
agreements pursuant to which the Borrower has the authority to sell
brand-name Inventory and License Agreements substantially in the form of
Exhibit __ hereto, executed by each licensor and sublicensor which is a
party to such license or sublicense agreements.
(d) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with a landlord's disclaimer
and consent with respect to each such lease.
(e) A true and correct copy of any and all mortgages pursuant to which
the Borrower has mortgaged the Premises, together with a mortgagee's
disclaimer and consent with respect to each such mortgage.
(f) A certificate of the Borrower's secretary or assistant secretary
certifying as to (i) the resolutions of the Borrower's directors and if
required, shareholders, authorizing the execution, delivery and performance
of the Loan Documents, (ii) the Borrower's articles of incorporation and
bylaws, and (iii) the signatures of the Borrower's officers or agents
authorized to execute and deliver the Loan Documents and other instruments,
agreements and certificates, including Advance requests, on the Borrower's
behalf
(g) A current certificate issued by the Secretary of State of North
Dakota, certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of North Dakota.
(h) Evidence that the Borrower is duly licensed or qualified to
transact business in North Dakota, Minnesota, Iowa, South Dakota, Nebraska,
Montana, Wyoming, Idaho, Colorado, Texas, New Mexico, Indiana, and all
other jurisdictions where the character of the property owned or leased or
the nature of the business transacted by it makes such licensing or
qualification necessary.
(i) A certificate of an officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article
V.
(j) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(k) A separate guaranty, properly executed by each Guarantor, pursuant
to which each Guarantor unconditionally guarantees the full and prompt
payment of all Obligations to the extent of each such guaranty.
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(l) A certificate of the secretary or assistant secretary of FGO
certifying as to (i) the resolutions of the directors and, if required,
shareholders, of that company authorizing the execution, delivery and
performance of the guaranty, the security agreement and the collateral
pledge agreement executed and delivered to the Lender by it; (ii) the
company's articles of incorporation and bylaws; and (iii) the signatures of
the officer or agents authorized to execute and deliver such guaranty on
behalf of such company.
(m) The FGO Security Agreement, duly executed by FGO.
(n) The FGO Pledge, duly executed by FGO, together with the original
certificates evidencing the stock covered thereby, blank assignments of
that stock duly executed by such person, and, where applicable, the
original option agreements giving any Person a right to purchase common
stock of the Borrower.
(o) A certificate of the secretary or assistant secretary of Energy
certifying as to (i) the resolutions of the directors and, if required,
shareholders, of that company authorizing the execution, delivery and
performance of the guaranty and the security agreement executed and
delivered to the Lender by it; (ii) the company's articles of incorporation
and bylaws; and (iii) the signatures of the officer or agents authorized to
execute and deliver such guaranty on behalf of such company.
(p) Current searches of appropriate filing offices showing that (i) no
state or federal tax or judgment liens have been filed and remain in effect
against Energy, (ii) no financing statements have been filed and remain in
effect against such company except financing statements acceptable to the
Lender in its sole discretion, and (iii) the Lender has duly filed all
financing statements necessary to perfect its security interests in the
property of such company, to the extent such security interests are capable
of being perfected by filing.
(q) The Energy Security Agreement, duly executed by Energy.
(r) A certificate of the secretary or assistant secretary of
Superpumper, Inc. certifying as to (i) the resolutions of the directors
and, if required, shareholders, of that company authorizing the execution,
delivery and performance of the guaranty executed and delivered to the
Lender by it; (ii) the company's articles of incorporation and bylaws; and
(iii) the signatures of the officer or agents authorized to execute and
deliver such guaranty on behalf of such company.
(s) A certificate of the secretary or assistant secretary of SPF
Energy, Inc. certifying as to (i) the resolutions of the directors and, if
required, shareholders, of that company authorizing the execution, delivery
and performance of the guaranty executed and delivered to the Lender by it;
(ii) the company's articles of incorporation and
25
bylaws; and (iii) the signatures of the officer or agents authorized to
execute and deliver such guaranty on behalf of such company.
(t) Current searches of appropriate filing offices showing that (i) no
state or federal tax or judgment liens have been filed and remain in effect
against SPF Energy, Inc., (ii) no financing statements have been filed and
remain in effect against such company except financing statements
acceptable to the Lender in its sole discretion, and (iii) the Lender has
duly filed all financing statements necessary to perfect its security
interests in the property of such company, to the extent such security
interests are capable of being perfected by filing.
(u) Payment of the fees and commissions due through the date of the
initial Advance or Letter of Credit under Section 2.9 and expenses incurred
by the Lender through such date and required to be paid by the Borrower
under Section 9.8, including all legal expenses incurred through the date
of this Agreement.
(v) Such other documents as the Lender in its sole discretion may
require.
(w) The Borrower shall assign, in a form acceptable to the Lender in
its sole discretion, the note issued to the Borrower by Dacotah Marketing
Research LLC to the Lender.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF
CREDIT. The Lender will not consider any request for an Advance or to issue any
Letter of Credit unless on such date:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance or issuance of Letter of
Credit as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Advance or the issuance of such Letter of Credit, as the case may be, which
constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. The
Borrower is a
26
corporation, duly organized, validly existing and in good standing under the
laws of the State of North Dakota and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. No dissolution or termination of the Borrower has
occurred, and no notice of dissolution or articles of termination have been
filed with respect to the Borrower. The Borrower has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 hereto. The Borrower's chief
executive office and principal place of business is located at the address set
forth in Schedule 5.1 hereto, and all of the Borrower's records relating to its
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set forth
in Schedule 5.1 hereto. The Borrower's tax identification number is correctly
set forth in Section 3.6 hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's shareholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation and bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 5.3 LEGAL AGREEMENTS.
(a) The Old Credit Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms. The Borrower has no claim, defense or offset
to enforcement of the Old Credit Documents.
27
(b) This Agreement constitutes and, upon due execution by the
Borrower, the other Loan Documents will constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4 hereto,
the Borrower has no Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender its audited financial statements for its
fiscal year ended December 31, 1996 and its unaudited financial statements for
the fiscal year-to-date period ended September 30, 1997, and those statements
fairly present the Borrower's financial condition on the dates thereof and the
results of its operations and cash flows for the periods then ended and were
prepared in accordance with generally accepted accounting principles. Since the
date of the most recent financial statements, there has been no material adverse
change in the Borrower's business, properties or condition (financial or
otherwise).
Section 5.6 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates.
Section 5.7 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 5.8 TAXES. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. The Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any Affiliate, as the case may be, are required to
be filed, and the Borrower and its Affiliates have paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.
Section 5.9 TITLES AND LIENS. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and
28
all proceeds thereof, free and clear of all mortgages, security interests, liens
and encumbrances, except for Permitted Liens. No financing statement naming the
Borrower as debtor is on file in any office except to perfect only Permitted
Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any of its Affiliates maintains or
has maintained any Plan. Neither the Borrower nor any Affiliate has received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA; or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may
become payable to participants or beneficiaries of any such Plan).
Section 5.11 DEFAULT. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present in, on or
under the Premises any Hazardous Substances, other than Inventory, in such
form or quantity as to create any liability or obligation for either the
Borrower or the Lender under common law of any jurisdiction or under any
Environmental Law.
29
(c) To the Borrower's best knowledge, no Hazardous Substances have
ever been stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Premises in such away as to create any such liability.
(d) To the Borrower's best knowledge, the Borrower has not disposed of
Hazardous Substances in such a manner as to create any liability under any
Environmental Law.
(e) There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises or the Borrower, alleging
liability under, violation of, or noncompliance with any Environmental Law
or any license, permit or other authorization issued pursuant thereto. To
the Borrower's best knowledge, no such matter is threatened or impending.
(f) To the Borrower's best knowledge, the Borrower's businesses are
and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations
required pursuant to any Environmental Law and necessary for the lawful and
efficient operation of such businesses are in the Borrower's possession and
are in full force and effect. No permit required under any Environmental
Law is scheduled to expire within 12 months and there is no threat that any
such permit will be withdrawn, terminated, limited or materially changed.
(g) To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
(h) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's businesses.
Section 5.13 SUBMISSIONS TO LENDER. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in
30
all Collateral and all other collateral described in the Security Documents
which is capable of being perfected by filing financing statements. None of
the Collateral or other collateral covered by the Security Documents is or
will become a fixture on real estate, unless a sufficient fixture filing is
in effect with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 FINANCIAL SOLVENCY. Both before and after giving effect
to the transactions contemplated in the Loan Documents, none of the Borrower or
its Affiliates:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of the Borrower
or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any
action with respect thereto, intends to, nor believes that it will, incur
debts beyond its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any
action with respect thereto, intends to hinder, delay or defraud either its
present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy or for
an arrangement or reorganization or similar proceeding under any law any
jurisdiction, nor, to the best knowledge of the Borrower, is the subject of
any actual, pending or threatened bankruptcy, insolvency or similar
proceedings under any law of any jurisdiction.
31
ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower and all Guarantors, the Borrower's
and each of the Guarantors' audited financial statements with the
unqualified opinion of independent certified public accountants selected by
the Borrower and acceptable to the Lender, which annual financial
statements shall include the Borrower's and each of the Guarantors' balance
sheets as at the end of such fiscal year and the related statements of the
Borrower's and each of the Guarantors' income, retained earnings and cash
flows for the fiscal year then ended, prepared, if the Lender so requests,
on a consolidating and consolidated basis to include any Affiliates, all in
reasonable detail and prepared in accordance with GAAP, together with (i)
copies of all management letters prepared by such accountants, (ii) a
report signed by such accountants stating that in making the investigations
necessary for said opinion they obtained no knowledge, except as
specifically stated, of any Default or Event of Default hereunder and all
relevant facts in reasonable detail to evidence, and the computations as
to, whether or not the Borrower is in compliance with the requirements set
forth in Sections 6.14, 6.15 and 7.10; and (iii) a certificate of the
Borrower's chief financial officer stating that such financial statements
have been prepared in accordance with GAAP, fairly represent the Borrower's
financial position and the results of its operations, and whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
(b) as soon as available and in any event within 30 days after the end
of each month, an unaudited/internal balance sheet and statements of income
and retained earnings of the Borrower, Energy, Fabrication, SPF, FGO and
Superpumper as at the end of and for such month and for the year to date
period then ended, prepared, if the Lender so requests, on a consolidating
and consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP, subject
to year-end audit adjustments; and accompanied by a certificate of the
Borrower's
32
Chief financial officer, substantially in the form of Exhibit B hereto
stating (i) that such financial statements have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly represent the
Borrower's financial position and the results of its operations, (ii)
whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder not theretofore reported and remedied and, if
so, stating in reasonable detail the facts with respect thereto, and (iii)
all relevant facts in reasonable detail to evidence, and the computations
as to, whether or not the Borrower is in compliance with the requirements
set forth in sections 6.14, 6.15 and 7.10;
(c) within 25 days after the end of each month or more frequently if
the Lender so requires, agings of the Borrower's accounts receivable and
its accounts payable, an inventory certification report, and a calculation
of the Borrower's Accounts, Eligible Accounts, Inventory and Eligible
Inventory as at the end of such month or shorter time period;
(d) within 3 days after the end of each Business Day, daily assignment
and collection reports for each Business Day;
(e) at least 30 days before the beginning of each fiscal year of the
Borrower, the projected balance sheets and income statements for each month
of such year, each in reasonable detail, representing the Borrower's good
faith projections and certified by the Borrower's chief financial officer
as being the most accurate projections available and identical to the
projections used by the Borrower for internal planning purposes, together
with such supporting schedules and information as the Lender may in its
discretion require;
(f) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower of the type described in Section 5.12 or
which seek a monetary recovery against the Borrower in excess of $50,000;
(g) as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement by
a responsible officer of the Borrower of the steps being taken by the
Borrower to cure the effect of such breach, default or event;
(h) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with respect
to any Plan has occurred, the statement of the Borrower's chief financial
officer setting forth details as
33
to such Reportable Event and the action which the Borrower proposes to
take with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(i) as soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to
any Plan under section 412(m) of the internal Revenue Code of 1986, as
amended, the statement of the Borrower's chief financial officer setting
forth details as to such failure and the action which the borrower proposes
to take with respect thereto, together with a copy of any notice of such
failure required to be provided to the Pension Benefit Guaranty
Corporation;
(j) promptly upon knowledge thereof, notice of (i) any disputes or
claims by the Borrower's customers exceeding $25,000; (ii) credit memos
exceeding $25,000; (iii) any goods returned to or recovered by the
borrower, exceeding $25,000; and (iv) any change in the persons
constituting the Borrower's offcers and directors;
(k) promptly upon knowledge thereof, notice of any loss of or material
damage to any Collateral or other collateral covered by the Security
Documents or of any substantial adverse change in any Collateral or such
other collateral or the prospect of payment thereof;
(1) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent
to its stockholders;
(m) promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(n) as soon as possible, and in any event by not later than April 30th
of each year, copies of the tax returns and all schedules thereto and an
updated personal financial statement of each owner of the Borrower and of
each Guarantor;
(o) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(p) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports, records
or information as the Lender may request.
34
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 LIEN WAIVERS. Whenever the Borrower purchases Collateral
in the form of oil or gas production from any Interest Owner, the Borrower will
obtain two duplicate original executed lien waivers, substantially in the form
of Exhibit E-I or Exhibit E-2, as appropriate, (a "Lien Waiver") from such
Interest Owner dated as of the date such oil or gas production is shipped to the
Borrower. Within five (5) Business Days of each such shipment, the Borrower will
deliver an original executed Lien Waiver to the Lender.
Section 6.4 ACCOUNT VERIFICATION. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
Section 6.5 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental
Laws and obtain and comply with all permits, licenses and similar approvals
required by any Environmental Laws, and will not generate, use, transport,
treat, store or dispose of any Hazardous Substances in such a manner as to
create any liability or obligation under the common law of any jurisdiction
or any Environmental Law.
35
Section 6.6 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower; provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.7 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided,
however, that nothing in this Section 6.7 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the Lender's judgment, desirable in the conduct
of the Borrower's business and not disadvantageous in any material respect
to the Lender.
(b) The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or
any interest therein.
(c) The Borrower will keep all Collateral and other collateral covered
by the Security Documents free and clear of all security interests, liens
and encumbrances except Permitted Liens.
Section 6.8 INSURANCE. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may reasonably
request, with any loss payable to the Lender to the extent of its interest, and
all policies of such insurance shall contain a lender's loss payable endorsement
for the Lender's benefit acceptable to the Lender. All policies of liability
insurance required hereunder shall name the Lender as an additional insured.
36
Section 6.9 PRESERVATION OF EXISTENCE. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.10 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.11 COLLATERAL ACCOUNT.
(a) The Lender may establish a collateral account (the "Collateral
Account") for the deposit of payments on Receivables.
(b) If the Collateral Account is so established, the Borrower shall
promptly deposit all payments on Receivables received by it into the
Collateral Account. Until so deposited or paid to the Lender, the Borrower
shall hold all payments on Receivables in trust for and as the property of
the Lender and shall not commingle such payments with any of its other
funds or property.
(c) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(d) All deposits in the Collateral Account shall constitute proceeds
ofCollateral and shall not constitute payment of the Obligations. The
Lender from time to time at its discretion may, after allowing two (2)
Banking Days, apply deposited funds in the Collateral Account to the
payment of the Obligations, in any order or manner of application
satisfactory to the Lender, by transferring such funds to the Lender's
general account.
(e) All items deposited in the Collateral Account shall be subject to
final payment. If any such item is returned uncollected, the Borrower will
immediately pay the Lender, or, for items deposited in the Collateral
Account, the bank maintaining such account, the amount of that item, or
such bank at its discretion may charge any uncollected item to the
Borrower's commercial account or other account. The Borrower shall be
liable as an endorser on all items deposited in the Collateral Account,
whether or not in fact endorsed by the Borrower.
Section 6.12 LOCKBOX. Upon the Lender's request, the Borrower will
irrevocably direct all present and future Account debtors and other Persons
obligated to make payments on Receivables to make such payments directly to a
special lockbox (the "Lockbox") to be under the Lender's control.
37
(a) After such request, all of the Borrower's invoices, account
statements and other written or oral communications directing, instructing,
demanding or requesting payment of any Receivable or any other amount
constituting Collateral shall conspicuously direct that all payments be
made to the Lockbox and shall include the Lockbox address. All payments
received in the Lockbox shall be processed to the Collateral Account.
(b) The Borrower agrees to deposit in the Collateral Account or, at the
Lender's option, to deliver to the Lender all collections on Receivables
and all other proceeds of Collateral, which the Borrower may receive
directly notwithstanding its direction to Account debtors and other
obligors to make payments to the Lockbox, immediately upon receipt thereof,
in the form received, except for the Borrower's endorsement when deemed
necessary. Until delivered to the Lender or deposited in the Collateral
Account, the Borrower shall hold all proceeds or collections of Collateral
in trust for and as the property of the Lender and shall not commingle them
with any other funds or property of the Borrower. All such collections
shall constitute proceeds of Collateral and shall not constitute payment of
any Obligation.
Section 6.13 PERFORMANCE BY THE LENDER. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.6, 6.8, 6.1 1 and 6.12
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other
38
agreements and writings required to be obtained, executed, delivered or
endorsed by the Borrower under this Section 6.13.
Section 6.14 MINIMUM NET INCOME. The Borrower will maintain, on a
rolling six month basis, its Net Income, determined as at the end of each month,
at an amount not less than $200,000. Beginning April 30, 1998, and continuing
thereafter, the Borrower will also maintain, on a rolling six month basis, its
Consolidated Net Income, determined as at the end of each month, at an amount
not less than $200,000.
Section 6.15 MAXIMUM DEBT TO BOOK NET WORTH RATIO. The Borrower will
maintain, during each period described below, the ratio of its Debt to its Book
Net Worth, on a consolidated basis, determined as at the end of each fiscal
quarter, at not more than the ratio set forth opposite such period:
MAXIMUM DEBT TO
---------------
PERIOD PERIOD BOOK NET WORTH RATIO
------ ---------------------------
1997 8.50 to 1.00
1998 8.00 to 1.00
1999 7.50 to 1.00
2000 7.00 to 1.00
Section 6.16 MAXIMUM ACCOUNTS RECEIVABLE TURNOVER. The Borrower will
maintain its Accounts Receivable Turnover, on an unconsolidated basis,
determined as at the end of each month, at not more than 25 days.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
Section 7.1 LIENS. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; EXCLUDING, HOWEVER from the operation of the foregoing,
the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
39
(b) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Schedule 7.1
hereto, securing indebtedness for borrowed money permitted under Section
7.2;
(c) the Security Interest and liens and security interests created by
the Security Documents; and
(d) purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of cost or
fair market value thereof and so long as no Default Period is then in
existence and none would exist immediately after such acquisition.
Section 7.2 INDEBTEDNESS. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance with
Section 7.1.
Section 7.3 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist
any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
40
(i) investments in direct obligations of the United States
of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less,
commercial paper issued by U.S. corporations rated "A-1" or "A-2" by
Standard & Poors Corporation or "P-I" or "P-2" by Xxxxx'x Investors
Service or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the Federal
Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by
the Federal Deposit Insurance Corporation);
(ii) investments in or loans to Subsidiaries or Affiliates
not exceeding at any time a combined total of $2,250,000, on a
consolidated and an unconsolidated basis, throughout the term of
this facility;
(iii) loans to Xxxxxxx X. Xxxxxxx not exceeding at any time
$375,000 throughout the term of this facility; and
(iv) travel advances or loans to the Borrower's officers
and employees not exceeding at any one time an aggregate of
$160,000.
(b) The borrower will not create or permit to exist any subsidiary,
other than the subsidiaries in existence on the date hereof and listed in
schedule 5.4.
Section 7.5 DIVIDENDS. The Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of the Borrower)
on any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distributions in respect thereof, either directly or indirectly; PROVIDED,
HOWEVER that the Borrower may declare and pay dividends on its preferred
stock in the amount of $75,000, in any fiscal year, and that such
declaration or payment would not cause a Default or Event of Default.
Section 7.6 SALE OR TRANSFER OF ASSETS: SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 CONSOLIDATION AND MERGER: ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
41
Section 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or
contract to incur Capital Expenditures of more than $400,000 in the aggregate
during any fiscal year.
Section 7.11 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 DISCOUNTS ETC. The Borrower will not, after notice from
the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether before or
after notice from the Lender) modify, amend, subordinate, cancel or terminate
the obligation of any account debtor or other obligor of the Borrower.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 OTHER DEFAULTS. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon the Borrower.
Section 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.16 ORGANIZATIONAL DOCUMENTS: S CORPORATION STATUS. The
Borrower will not amend its articles of incorporation and bylaws. The Borrower
will not become an S
42
Corporation within the meaning of the Internal Revenue Code of 1986, as
amended, or, if the Borrower already is such an S Corporation, it shall not
change or rescind its status as an S Corporation.
Section 7.17 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of Xxxxxxx X. Xxxxxxx or any member of his family, by more
than 10% in any one year, either individually or for all such persons in the
aggregate, or pay any such increase from any source other than profits earned in
the year of payment.
Section 7.18 CHANGE IN OWNERSHIP. The Borrower will not issue or sell
any stock of the Borrower so as to change the percentage of voting and
non-voting stock owned by each of the Borrower's shareholders, and the Borrower
will not permit or suffer to occur the sale, transfer, assignment, pledge or
other disposition of any or all of the issued and outstanding shares of stock of
the Borrower.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. Notwithstanding that the Lender may
demand immediate payment of the Obligations at any time, whether or not a
Default Period then exists, and without waiving or limiting in any respect the
Lender's right to so demand payment of the Obligations at any time, this
Agreement sets forth a non-exclusive list of certain critical events after the
occurrence of which the Lender expects that it would demand immediate payment of
the Obligations and exercise its remedies. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations on demand or on any
portion of the Obligations that otherwise becomes due and payable;
(b) Failure to pay when due any amount specified in Section 2.5
relating to the Borrower's Obligation of Reimbursement, or failure to pay
immediately when due or upon termination of the Credit Facility any amounts
required to be paid for deposit in the Special Account under Section 2.6
or;
(c) Default in the payment of any fees, commissions, costs or expenses
required to be paid by the Borrower under this Agreement;
(d) Default in the performance, or breach, of any covenant or agreement
of the Borrower contained in this Agreement;
43
(e) The Borrower or any Guarantor shall be or become insolvent, or
admit to writing its or his inability to pay its or his debts as they
mature, or make an assignment for the benefit of creditors; or the Borrower
or any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
the Borrower or such Guarantor, as the case may be; or the Borrower or any
Guarantor shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it or him under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower or any such Guarantor; or any judgment, writ, warrant
of attachment or execution or similar process shall be issued or levied
against a substantial part of the property of the Borrower or any
Guarantor;
(f) A petition shall be filed by or against the Borrower or any
Guarantor under the United States Bankruptcy Code naming the Borrower or
such Guarantor as debtor;
(g) Any representation or warranty made by the Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by
the Borrower (or any of its officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective;
(h) The rendering against the Borrower of a final judgment, decree or
order for the payment of money in excess of $50,000 and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of
30 consecutive days without a stay of execution;
(i) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower owed to any Person other than the Lender, or
under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any lease
of any of the Premises, and the expiration of the applicable period of
grace, if any, specified in such evidence of indebtedness, indenture, other
instrument or lease;
(j) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been
44
given to the Borrower by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer any
Plan; or the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or the Borrower shall have filed for a distress termination of any
Plan under Title IV of ERISA; or the Borrower shall have failed to make any
quarterly contribution required with respect to any Plan under Section
412(m) of the Internal Revenue Code of 1986, as amended, which the Lender
determines in good faith may by itself, or in combination with any such
failures that the Lender may determine are likely to occur in the future,
result in the imposition of a lien on the Borrower's assets in favor of the
Plan;
(k) An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or
other instrument or agreement securing any obligations of the Borrower
hereunder or under any note;
(1) The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, or sell all or substantially all of its assets, without
the Lender's prior written consent;
(m) The Borrower shall fail to pay, withhold, collect or remit any tax
or tax deficiency when assessed or due (other than any tax deficiency which
is being contested in good faith and by proper proceedings and for which it
shall have set aside on its books adequate reserves therefor) or notice of
any state or federal tax liens shall be filed or issued;
(n) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
(o) Any Guarantor shall repudiate, purport to revoke or fail to perform
any such Guarantor's obligations under such Guarantor's guaranty in favor
of the Lender, any individual Guarantor shall die or any other Guarantor
shall cease to exist;
(p) Any event or circumstance with respect to the Borrower shall occur
such that the Lender shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by the
Borrower under the Loan Documents is impaired or any material adverse
change in the business or financial condition of the Borrower shall occur;
or
(q) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender.
Section 8.2 RIGHTS AND REMEDIES. As provided in Section 2.12, the
Lender may, at any time, refuse to make any requested Advance, demand payment of
the Advances or
45
terminate the Credit Facility, whether or not a Default Period then exists. In
addition, during any Default Period, the Lender may exercise any or all of the
following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and
be forthwith due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which the Borrower hereby
expressly waives;
(b) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower to the
payment of the Obligations;
(c) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available
funds for deposit in the Special Account pursuant to Section 2.15 an amount
equal to the aggregate maximum amount available to be drawn under all
Letters of Credit then outstanding, assuming compliance with all conditions
for drawing thereunder;
(d) the Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC, including, without
limitation, the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby
expressly waives) and the right to sell, lease or otherwise dispose of any
or all of the Collateral, and, in connection therewith, the Borrower will
on demand assemble the Collateral and make it available to the Lender at a
place to be designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
(f) the Lender may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (e) or (f) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.5) at least ten calendar days before
the date of intended disposition or other action.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 RESTATEMENT OF OLD CREDIT DOCUMENTS. This Agreement is
executed for the purpose of amending and restating the Old Credit Documents.
Section 9.2 RELEASE. The Borrower, and each Guarantor by signing the
Acknowledgment and Agreement of Guarantors set forth below, each hereby
absolutely and unconditionally releases and forever discharges the Lender, the
Participants and any and all parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Agreement, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
Section 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 9.4 AMENDMENTS, ETC. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
the Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.5 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
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If to the Borrower:
Xxxxxxx Oil, Inc,
X.X. Xxx 0000
Xxxxxx Xxxx 00 Xxxxx
Xxxxx, Xxxxx Xxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
If to the Lender:
Norwest Credit, Inc.
Norwest Center
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopier: 612/341-2472
Attention: Xxxxxx X. Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given
on (a) the date received if personally delivered, (b) when deposited in the
mail if delivered by mail, (c) the date sent if sent by overnight courier, or
(d) the date of transmission if delivered by telecopy, except that notices or
requests to the Lender pursuant to any of the provisions of Article II shall
not be effective until received by the Lender.
Section 9.6 FURTHER DOCUMENTS. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion)
Section 9.7 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the
48
selection of the bailee or other third person, and the Lender need not otherwise
preserve, protect, insure or care for any Collateral. The Lender shall not be
obligated to preserve any rights the Borrower may have against prior parties, to
realize on the Collateral at all or in any particular manner or order or to
apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.8 COSTS AND EXPENSES. The Borrower agrees to pay on demand
all costs and expenses, including (without limitation) attorneys' fees, incurred
by the Lender in connection with the Obligations, this Agreement, the Loan
Documents, any Letters of Credit, and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
Section 9.9 INDEMNITY. In addition to the payment of expenses pursuant
to Section 9.8, the Borrower agrees to indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities:
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.5(b); and
(iii) any and all other liabilities, losses,
damages, penalties, judgments, suits, claims, costs and
expenses of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel)
in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such
Indemnitee shall be designated a party thereto, which may be
imposed on, incurred by or asserted against any such
Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan
Documents or the use or intended use of the proceeds of the
Advances.
If any investigative, judicial or administrative proceeding arising from any
of the foregoing is brought against any Indemnitee, upon such Indemnitee's
request, the Borrower, or counsel
49
designated by the Borrower and satisfactory to the Indemnitee, will resist and
defend such action, suit or proceeding to the extent and in the manner directed
by the Indemnitee, at the Borrower's sole costs and expense. Each Indemnitee
will use its best efforts to cooperate in the defense of any such action, suit
or proceeding. If the foregoing undertaking to indemnify, defend and hold
harmless may be held to be unenforceable because it violates any law or public
policy, the Borrower shall nevertheless make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Borrower's obligation under this Section
9.9 shall survive the termination of this Agreement and the discharge of the
Borrower's other obligations hereunder.
Section 9.10 PARTICIPANTS. The Lender and its participants, if any,
are not partners or joint venturers, and the Lender shall not have any liability
or responsibility for any obligation, act or omission of any of its
participants. All rights and powers. specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.11 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed) to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Section 9.12 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrower and its Affiliates, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.
Section 9.13 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
50
Section 9.14 HEADINGS. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 9.15 GOVERNING LAW: JURISDICTION, VENUE: WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court of Hennepin County,
Minnesota, or the United States District Court, District of Minnesota, Fourth
Division; and (iv) agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
Section 9.16 NOT REPRESENTED BY COUNSEL. The Borrower has elected not
to retain legal counsel in connection with the negotiation, preparation,
execution and delivery of the Loan Documents. The Borrower acknowledges that it
is familiar with instruments such as the loan Documents, has read the Loan
Documents and understands and agrees with their terms and is capable of
protecting its interest without the advice of counsel. The Borrower and further
acknowledges that it has not relied upon the Lender or the Lender's counsel in
understanding, negotiating, executing or delivering any of the loan Documents.
Section 9.17 AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT. This
Agreement amends, restates and supersedes in its entirety that certain Credit
and Security Agreement dated as of September 14, 1994, as amended from time to
time. All other Loan Documents remain in full force and effect
[SIGNATURE PAGE FOLLOWS]
51
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
NORWEST CREDIT, INC. XXXXXXX OIL, INC.
By /s/ Xxxxxx X. Xxxxxx By /s/ Xxxxxxx X. Xxxxxxx
-------------------- ----------------------
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxx
Its Vice President Its President
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT]
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS
The undersigned, each a guarantor of the indebtedness of Xxxxxxx Oil,
Inc. (the "Borrower") to Norwest Credit, Inc. (the "Lender") pursuant to a
separate Guaranty (each, a "Guaranty"), hereby (i) acknowledges receipt of the
foregoing Amended and Restated Credit and Security Agreement; (ii) consents to
the terms (including without limitation the release set forth in Section 9.2 of
the Amended and Restated Credit and Security Agreement) and execution thereof,
(iii) reaffirms his or its obligations to the Lender pursuant to the terms of
his or its Guaranty; and (iv) acknowledges that the Lender may amend, restate,
extend, renew or otherwise modify the Amended and Restated Credit and Security
Agreement and any indebtedness or agreement of the Borrower, or enter into any
agreement or extend additional or other credit accommodations, without notifying
or obtaining the consent of the undersigned and without impairing the liability
of the undersigned under his or its Guaranty for all of the Borrower's present
and future indebtedness to the Lender.
XXXXXXX GAS & OIL, LLC
/s/ Xxxxxxx X. Xxxxxxx By /s/ Xxxxxxx X. Xxxxxxx
------------------------ --------------------------
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
Its President
SUPERPUMPER, INC. XXXXXXX ENERGY SERVICES, LLC
By /s/ Xxxxxxx X. Xxxxxxx By /s/ Xxxxxxx X. Xxxxxxx
---------------------- --------------------------
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
Its President Its President
SPF ENERGY, INC. FABRICATION SERVICES LTD.
LIABILITY CO.
By /s/ Xxxxxxx X. Xxxxxxx By /s/ Xxxxxxx X. Xxxxxxx
------------------------ --------------------------
Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
Its President Its President
Exhibit B Compliance Certificate
Exhibit C Premises
Exhibit D Prior Letters of Credit
Exhibit E Forms of Lien Waivers
--------------------
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and Locations
of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Amended and Restated Credit
and Security Agreement
REVOLVING NOTE
$12,000,000 Minneapolis, Minnesota
December 8, 1997
For value received, the undersigned, XXXXXXX OIL, INC., a North Dakota
corporation (the "Borrower"), hereby promises to pay ON DEMAND, and if demand is
not sooner made, then as provided in the Credit Agreement (defined below), to
the order of NORWEST CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Minneapolis, Minnesota, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of America
and in immediately available funds, the principal sum of Twelve Million Dollars
($12,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to the Borrower under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement of even date herewith (as the same may hereafter be amended,
supplemented or restated from time to time, the "Credit Agreement") by and
between the Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This Note
may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things,. for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. To the extent this Note
evidences the Borrower's Obligation to pay Existing Revolving Advances, this
Note is issued in substitution for and replacement of but not in payment of the
Borrower's promissory note dated as of July 24, 1996, payable to the order of
the Lender in the original principal amount of $12,000,000. This Note is
secured, among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more
other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
XXXXXXX OIL, INC.
By
-----------------------------
Xxxxxxx X. Xxxxxxx
Its President
Exhibit B to Amended and Restated Credit
and Security Agreement
COMPLIANCE CERTIFICATE
TO: Xxxxxx X. Xxxxxx
Norwest Credit, Inc.
DATE: __________________, 199___
Subject: Xxxxxxx Oil, Inc.
Financial Statements
In accordance with our Amended and Restated Credit and
Security Agreement dated as-of December 8, 1997 (the "Credit Agreement"),
attached are the financial statements of Xxxxxxx Oil, Inc. (the "Borrower") as
of and for__________, 19____ (the "Reporting Date") and the year-to-date period
then ended (the "Current Financials"). All terms used in this certificate have
the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition and the results of its operations as of the
date thereof.
EVENTS OF DEFAULT. (Check one):
/ / The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the
Credit Agreement.
/ / The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement and
attached hereto is a statement of the facts with respect
to thereto.
I hereby certify to the Lender as follows:
/ / The Reporting Date does not xxxx the end of one of the
Borrower's fiscal quarters, hence l am completing only
paragraph __ below.
/ / The Reporting Date marks the end of one of the
Borrower's fiscal quarters, hence I am completing all
paragraphs below except paragraph___.
/ / The Reporting Date marks the end of the Borrower's
fiscal year, hence I am completing all paragraphs below.
FINANCIAL COVENANTS. I further hereby certify as follows:
1. MINIMUM NET INCOME. Pursuant to Section 6.14 of the Credit
Agreement, as of the Reporting Date, the Borrower's Net Income and
its Consolidated Net Income, was $_________and $ ________,
respectively, which / / satisfies / / does not satisfy the
requirement that such amounts each be not less than $200,000 on the
Reporting Date.
2. MAXIMUM DEBT TO BOOK NET WORTH RATIO. Pursuant to Section
6.15 of the Credit Agreement, as of the Reporting Date, the ratio of
the Borrower's Debt to its Book Net Worth was _____ to 1.00 which /
/ satisfies / / does not satisfy the requirement that such ratio be
no more than ____to 1.00 on the Reporting Date[ as set forth in
table below:
------------------------------------------------------------------------
PERIOD MAXIMUM DEBT TO
BOOK NET WORTH RATIO
-------- ----------------------------------
------------------------------------------------------------------------
1997 8.50 to 1.00
------------------------------------------------------------------------
1998 8.00 to 1.00
------------------------------------------------------------------------
1999 7.50 to 1.00
------------------------------------------------------------------------
2000 7.00 to 1.00
------------------------------------------------------------------------
3. MAXIMUM ACCOUNTS RECEIVABLE TURNOVER. Pursuant to Section
6.16 of the Credit Agreement, as of the Reporting Date, the
Borrower's Accounts Receivable Turnover was _____days which / /
satisfies / / does not satisfy the requirement that such amount be
no more than 25 days on the Reporting Date.
4. CAPITAL EXPENDITURES. Pursuant to Section 7.10 of the
Credit Agreement, for the year-to-date period ending on the
Reporting Date, the Borrower has expended or contracted to expend
during the fiscal year ended______,199_____, for Capital
Expenditures, $_______________ in the aggregate and at most
$___________in any one transaction, which / / satisfies / / does not
satisfy the requirement that such expenditures not exceed $400,000
in the aggregate during such year.
5. SALARIES. As of the Reporting Date, the Borrower / / is / /
is not in compliance with Section 7.17 of the Credit Agreement
concerning salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
XXXXXXX OIL, INC.
By
----------------------------------
Its Chief Financial Officer
