EXHIBIT 10.19
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of February 6, 2001, by and between
MOUNTAIN COMPRESSED AIR, INC., a Texas corporation ("Borrower"), and XXXXX FARGO
BANK TEXAS, NATIONAL ASSOCIATION ("Bank").
RECITALS
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Borrower has requested that Bank extend or continue credit to Borrower
as described below, and Bank has agreed to provide such credit to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
CREDIT TERMS
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SECTION 1.1 LINE OF CREDIT.
(a) LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including January 31, 2002, not to exceed at any time the aggregate
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00)
("Line of Credit"), the proceeds of which shall be used to support working
capital, issue letters of credit (with a $100,000.00 sublimit), and general
corporate purposes. Borrower's obligation to repay advances under the Line of
Credit shall be evidenced by a promissory note substantially in the form of
EXHIBIT A attached hereto ("Line of Credit Note"), all terms of which are
incorporated herein by this reference.
(b) LIMITATION ON BORROWINGS. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of $500,000.00 when combined with the undrawn Letters
of Credit (as hereinafter defined). All borrowings under the Line of Credit
shall be in amounts of at least $10,000. There will be no minimum amount
required on borrowings under the Line of Credit if borrowed through Bank's
credit sweep product.
(c) LIMITATION ON BORROWINGS. OUTSTANDING BORROWINGS UNDER THE LINE OF
CREDIT, TO A maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of seventy-five percent (75%) of Borrower's eligible
accounts receivable. All of the foregoing shall be determined by Bank upon
receipt and review of all collateral reports required hereunder and such other
documents and collateral information as Bank may from time to time require.
Borrower acknowledges that said borrowing base was established by Bank with the
understanding that, among other items, the aggregate of all returns, rebates,
discounts, credits and allowances for the immediately preceding three (3) months
at all times shall be less than five percent (5%) of Borrower's gross sales for
said period. If such dilution of Borrower's accounts for the immediately
preceding three (3) months at any time exceeds five percent (5%) of Borrower's
gross sales for said period, or if there at any time exists any other matters,
events, conditions or contingencies which Bank reasonably believes may affect
payment of any portion of Borrower's accounts, Bank, in its sole discretion, may
reduce the foregoing advance rate against eligible accounts receivable to a
percentage appropriate to reflect such additional dilution and/or establish
additional reserves against Borrower's eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is more than sixty (60) days past due or
ninety (90) days from the invoice date;
(ii) that portion of any account for which there exists any
right of setoff, defense or discount (except regular discounts allowed
in the ordinary course of business to promote prompt payment) or for
which any defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state
or municipal government or of the United States government or any
political subdivision thereof (except accounts which represent
obligations of the United States government and for which the
assignment provisions of the Federal Assignment of Claims Act, as
amended or recodified from time to time, have been complied with to
Bank's satisfaction);
(iv) any account which represents an obligation of an account
debtor located in a foreign country, except to the extent any such
account, in Bank's determination, is supported by a letter of credit or
insured under a policy of foreign credit insurance, in each case in
form, substance and issued by a party acceptable to Bank;
(v) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account, which represents interim or
progress xxxxxxxx or retention rights on the part of the account
debtor;
(vii) any account which represents an obligation of any
account debtor when twenty percent (20%) or more of Borrower's accounts
from such account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor
which represents the amount by which Borrower's total accounts from
said account debtor exceeds twenty-five percent (25%) of Borrower's
total accounts;
(ix) any account in which services have not been rendered or
goods have not been shipped;
(x) any account deemed ineligible by Bank when Bank, in its
sole discretion, deems the creditworthiness or financial condition of
the account debtor, or the industry in which the account debtor is
engaged, to be unsatisfactory.
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(d) LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue or cause
an affiliate to issue standby letters of credit for the account of Borrower for
bonding or security deposit purposes (each, a "Letter of Credit" and
collectively, "Letters of Credit"); provided however, that the aggregate undrawn
amount of all outstanding Letters of Credit shall not at any time exceed One
Hundred Thousand and 00/100 Dollars ($100,000.00). The form and substance of
each Letter of Credit shall be subject to approval by Bank, in its sole
discretion. Each Letter of Credit shall be issued for a term not to exceed three
hundred sixty-five (365) days, as designated by Borrower; provided however, that
no Letter of Credit shall have an expiration date subsequent to the maturity
date of the Line of Credit. The undrawn amount of all Letters of Credit shall be
reserved under the Line of Credit and shall not be available for borrowings
thereunder. Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit agreements, applications and any related
documents required by Bank in connection with the issuance thereof. Each draft
paid under a Letter of Credit shall be deemed an advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however, that
if advances under the Line of Credit are not available, for any reason, at the
time any draft is paid, then Borrower shall immediately pay to Bank the full
amount of such draft, together with interest thereon from the date such draft is
paid to the date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit. In such event Borrower
agrees that Bank, in its sole discretion, may debit any account maintained by
Borrower with Bank for the amount of any such draft. If Borrower does not pay to
Bank the sums due for such draft, the unpaid amount thereof shall bear interest
equal to the Base Rate (as defined in the Line of Credit Note) plus two percent
(2%) for each day from and including the date such draft was paid by Bank to the
date of repayment by Borrower. Upon any Event of Default and upon the request of
Bank, the Borrower shall deposit in the Cash Collateral Account an amount in
cash equal to the aggregate undrawn amount of all outstanding Letters of Credit
as of such date.
(e) BORROWING, REPAYMENT AND PREPAYMENT. Borrower may from time to time
during the term of the Line of Credit borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the limitations, terms
and conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. Borrower may prepay principal on the Line of Credit without penalty on
one (1) business day's advance notice. Prepayments of the Line of Credit will be
at least $100,000. There will be no minimum amount required on prepayments of
the Line of Credit if paid through Bank's credit sweep product. Notwithstanding
any other provision contained herein, if the Line of Credit should be refinanced
in such a manner whereby Bank is no longer the lender hereunder, any prepayment
shall include a prepayment fee in an amount equal to one percent (1%) of the
outstanding principal balance on the Line of Credit plus all interest accrued to
the prepayment date plus all other fees and expenses due hereunder. On the due
date, all payments of principal, interest, expenses, or other fees due and
payable by the Borrower to the Bank will be automatically debited from an
established checking account of the Borrower maintained at the Bank. Any
overdraft created in such checking account as a result of such payments will be
considered to be a failure to make payments when due and an Event of Default.
(f) CASH COLLATERAL ACCOUNT. Borrower shall maintain with Bank, and
Borrower hereby grants to Bank a security interest in, a non-interest bearing
deposit account over which Borrower shall have no control ("Cash Collateral
Account") and into which the proceeds of all Borrower's accounts and other
rights to payment in which Bank has a security interest shall be deposited
immediately upon their receipt by Borrower in the Event of Default. Bank shall,
and Borrower hereby authorizes Bank to, apply all such proceeds immediately upon
their receipt by Bank as a principal reduction on the Line of Credit, and the
balance, if any, as an interest reduction on the Line of Credit.
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SECTION 1.2 TERM LOAN.
(a) TERM LOAN. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make a loan to Borrower in the principal amount of Three
Million Five Hundred Fifty Thousand and 00/100 Dollars ($3,550,000.00) ("Term
Loan"), the proceeds of which shall be used to finance the initial purchase of
fixed assets of Mountain Air Drilling Service Co., Inc., a Colorado corporation
(the "Seller"). Advances on the combined face value of the Term Loan and the
Delayed Draw Term Loan will not exceed seventy-five percent (75%) of the "as
improved" orderly liquidation value ("OLV") of the existing fixed assets being
purchased from the Seller plus the planned upgrades as determined by an
independent qualified appraiser engaged and approved by Bank and paid for by
Borrower. Borrower's obligation to repay the Term Loan shall be evidenced by a
promissory note substantially in the form of EXHIBIT B attached hereto ("Term
Note"), all terms of which are incorporated herein by this reference.
(b) REPAYMENT. Principal and interest on the Term Loan shall be repaid
in accordance with the provisions of the Term Note.
(c) OPTIONAL PREPAYMENT. If the Term Loan bears interest at the Base
Rate (as defined in the Term Note), then Borrower may prepay the Term Loan
without penalty on one (1) business day's advance notice. Such prepayments of
the Term Loan will be at least $100,000. If the Term Loan bears interest at
LIBOR (as defined in the Term Note), then Borrower may prepay the Term Loan
without penalty (except as provided in the Term Note) on three (3) business
days' advance notice. Such prepayments of the Term Loan will be at least
$500,000 and a multiple of $100,000. All prepayments will include interest
accrued to the prepayment date and all other fees and expenses due. All
prepayments will be applied in the inverse order of payments due on the Term
Loan. Notwithstanding any other provision contained herein, if the Term Loan
should be refinanced in such a manner whereby Bank is no longer the lender
hereunder, any prepayment shall include a prepayment fee in an amount equal to
one percent (1%) of the outstanding principal balance on the Term Loan plus all
interest accrued to the prepayment date plus all other fees and expenses due
hereunder.
(d) MANDATORY PREPAYMENT. Beginning May 31, 2002, Borrower will make an
annual principal payment on June 30th of each year (in addition to any scheduled
quarterly principal payment as provided in the Term Note) equal to fifty percent
(50%) of Borrower's prior fiscal year Free Cash Flow. "Free Cash Flow" is
defined herein as EBITDA (hereafter defined) less the sum of (i) interest
payments, (ii) scheduled quarterly principal payments (as provided in the Term
Note and Delayed Draw Term Note, as hereinafter defined), (iii) taxes, (iv) the
Change in Adjusted Working Capital, and (v) unfinanced capital expenditures.
"Change in Adjusting Working Capital" is defined herein as the Adjusted Working
Capital at the most recent fiscal year end less the Adjusted Working Capital of
the previous fiscal year end. "Adjusted Working Capital" is defined herein as
current assets less cash and marketable securities less current liabilities less
interest-bearing debt or obligations that are classified as current liabilities
(as all such terms are defined under generally accepted accounting principles).
All prepayments will be applied in the inverse order of payments due on the Term
Loan.
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SECTION 1.3 DELAYED DRAW TERM LOAN.
(a) DELAYED DRAW. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including the last day of May, 2001, not to exceed the aggregate
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00)
("Delayed Draw Term Loan"), the proceeds of which shall be used to finance the
planned upgrade of currently owned equipment, and which shall be converted on
the last day of May, 2001, to a term loan, as described more fully below and in
the Delayed Draw Term Note. Advances on the Delayed Draw Term Loan are not to
exceed one hundred percent (100%) on invoices on the planned purchases of
Gardener Denver Model MDY Boosters, with CAT D353 diesel engines and
miscellaneous parts and labors. In addition, advances on the combined face value
of the Term Loan and the Delayed Draw Term Loan shall not exceed seventy-five
percent (75%) of the "as improved" OLV of the existing fixed assets being
purchased from the Seller plus the planned upgrades as determined by an
independent qualified appraiser engaged and approved by Bank at the expense of
Borrower, whether or not the Delayed Draw Term Loan actually closes or any
future advances are actually made. Borrower's obligation to repay advances under
the Delayed Draw Term Loan shall be evidenced by a promissory note substantially
in the form of EXHIBIT C attached hereto ("Delayed Draw Term Note"), all terms
of which are incorporated herein by this reference.
(b) LIMITATION ON BORROWINGS. Notwithstanding any other provision of
this Agreement, the aggregate amount of all outstanding borrowings under the
Delayed Draw Term Loan shall not at any time exceed a maximum of Five Hundred
Thousand and 00/100 Dollars ($500,000.00). If the Delayed Draw Term Loan bears
interest at the Base Rate (as defined in the Delayed Draw Term Note), then
borrowings under the Delayed Draw Term Loan shall be in amounts of at least
$10,000. If the Delayed Draw Term Loan bears interest at LIBOR (as defined in
the Delayed Draw Term Note), then borrowings under the Delayed Draw Term Loan
shall be in amounts and multiples of at least $100,000.
(c) BORROWING AND REPAYMENT. Borrower may from time to time during the
period in which Bank will make advances under the Delayed Draw Term Loan borrow
and partially or wholly repay (subject to prepayment provisions contained herein
and in the Delayed Draw Term Note) its outstanding borrowings, provided that
amounts repaid may not be reborrowed, subject to all the limitations, terms and
conditions contained herein; provided however, that the total outstanding
borrowings under the Delayed Draw Term Loan shall not at any time exceed the
maximum principal amount available thereunder, as set forth above. All unpaid
interest on the Delayed Draw Term Note as of the last day of May shall be paid
on such date. The outstanding principal balance and interest of the Delayed Draw
Term Loan shall be due and payable in full on January 31, 2004; provided,
however, that so long as Borrower is in compliance on said date with all terms
and conditions contained herein and in any other documents evidencing the
Delayed Draw Term Loan, Bank agrees to restructure repayment of said outstanding
principal balance so that principal and interest shall be due and payable in
eleven (11) installments of principal plus interest each, the first ten (10) of
which shall be in the principal amount equal to five percent (5%) of the
outstanding principal balance on the Delayed Draw Term Note at the end of the
business day on May 31, 2001, plus interest each, with the first such
installment being due and payable on the last day of August, 2001, the next nine
such installments being paid on the last day of November, February, May, and
August thereafter, and the eleventh (11th) and final installment, if not sooner
paid, shall be due and payable on January 31, 2004, in amount equal to the
entire balance of principal and interest then due and owing on said Delayed Draw
Term Note.
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(d) PREPAYMENT. If the Delayed Draw Term Loan bears interest at the
Base Rate (as defined in the Delayed Draw Term Note), then Borrower may prepay
the Delayed Draw Term Loan without penalty on one (1) business day's advance
notice. Such prepayments of the Delayed Draw Term Loan will be at least
$100,000. If the Delayed Draw Term Loan bears interest at LIBOR (as defined in
the Delayed Draw Term Note), then Borrower may prepay the Delayed Draw Term Loan
without penalty (except as provided in the Delayed Draw Term Note) on three (3)
business days' notice. Such prepayments of the Delayed Draw Term Loan will be at
least $500,000 and a multiple of $100,000. All prepayments will include interest
accrued to the prepayment date and all other fees and expenses due. All
prepayments will be applied in the inverse order of payments due on the Delayed
Draw Term Loan. Notwithstanding any other provision contained herein, if the
Delayed Draw Term Loan should be refinanced in such a manner whereby Bank is no
longer the lender hereunder, any prepayment shall include a prepayment fee in an
amount equal to one percent (1%) of the outstanding principal balance on the
Delayed Draw Term Loan plus all interest accrued to the prepayment date plus all
other fees and expenses due hereunder.
SECTION 1.4 INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Line of Credit
shall bear interest at the rate of interest set forth in the Line of Credit
Note. The outstanding principal balance of the Term Loan shall bear interest at
the rate of interest set forth in the Term Note. The outstanding principal
balance of the Delayed Draw Term Loan shall bear interest at the rate of
interest set forth in the Delayed Draw Term Note.
(b) COMPUTATION AND PAYMENT. Interest shall be computed on the basis of
a 360-day year, actual days elapsed, unless such calculation would result in a
usurious rate, in which case interest shall be computed on the basis of a
365/366-day year, as the case may be, actual days elapsed. Interest shall be
payable at the times and place set forth in each promissory note or other
instrument required hereby.
(c) COMMITMENT FEE. Borrower shall pay to Bank a non-refundable
commitment fee equal to $45,500, which fee shall be due and payable in full
contemporaneously herewith.
(d) UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
one-half of one percent (1/2%) per annum (computed on the basis of a 360-day
year, actual days elapsed) on the average daily unused amount of the Line of
Credit and shall be due and payable by Borrower in arrears within ten (10) days
after each billing is sent by Bank.
(e) LETTER OF CREDIT FEES. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit and on each anniversary date thereafter equal
to the same percent as the then existing LIBOR margin of the face amount
thereof, (ii) fees upon the payment or negotiation of each draft under any
Letter of Credit equal to the greater of one-fourth percent (1/4%) of the amount
of such draft or $250.00, and (iii) fees upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity, including, without limitation, amendment fees of $130 per amendment,
and courier fees of $25.00 each.
SECTION 1.5 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest, and fees due under each credit subject hereto by
charging Borrower's deposit account number 4496857319 with Bank, or any other
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
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SECTION 1.6 COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto and
all of Borrower's obligation hereunder and all other Loan Documents executed
herewith, as same may be amended, modified, restated, extended and/or rearranged
from time to time (collectively the "Indebtedness"), Borrower hereby grants to
Bank security interests of first priority in all Borrower's assets. All of the
foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements, deeds of trust and other documents as Bank
shall require, all in form and substance satisfactory to Bank. Borrower shall
reimburse Bank immediately upon demand for all reasonable costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits,
title insurance, and attorneys' fees.
SECTION 1.7 GUARANTIES. All Indebtedness of Borrower to Bank hereunder
shall be guaranteed jointly and severally by OilQuip Rentals, Inc., a Delaware
corporation ("OilQuip"), Xxxxxxx Xxxxxxxxxxxx and Xxxxx Xxxxxxxxxxxx, as
evidenced by and subject to the terms of guaranties in form and substance
satisfactory to Bank.
SECTION 1.8 SUBORDINATION OF DEBT. All obligations of Borrower to
Seller, including, without limitation, that certain $2,200,000 unsecured
promissory note dated as of even date herewith (the "Seller Note"), shall be
subordinated in right of repayment to all obligations of Borrower to Bank
including, without limitation, the Indebtedness, as evidenced by and subject to
the terms of subordination agreements in form and substance satisfactory to
Bank. All obligations of Borrower to Xxxxx Fargo Energy Capital, Inc.,
including, without limitation, that certain $2,000,000 secured promissory note
dated as of even date herewith (the "Energy Capital Note") shall be subordinated
in right of payment to all obligations of Borrower to Bank including, without
limitation, the Indebtedness, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Texas, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in New Mexico, Utah, Colorado, and all other
jurisdictions in which such qualification or licensing is required or in which
the failure to so qualify or to be so licensed could have a material adverse
effect on Borrower.
SECTION 2.2 AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
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SECTION 2.3 NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4 LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5 CORRECTNESS OF FINANCIAL STATEMENT. The pro forma financial
statement of Borrower has been prepared by the chief financial officer of
Borrower after doing the required due diligence for Borrower to represent and
warrant herein that such statement is complete and correct and presents fairly
the financial condition and projections of Borrower for the period therein
stated. The balance sheet of Borrower dated February 6, 2001, a true copy of
which has been delivered by Borrower to Bank prior to the date hereof, (a) is
complete and correct and presents fairly the financial condition of Borrower,
(b) discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of such balance sheet there has been no material adverse change
in the financial condition of Borrower, nor has Borrower mortgaged, pledged,
granted a security interest in or otherwise encumbered any of its assets or
properties except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7 NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9 ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
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SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance, which
compliance could not reasonably be expected to have a material adverse effect
(as such term is used in Section 3.1(c) hereof), with all applicable federal or
state environmental, hazardous waste, health and safety statutes, and any rules
or regulations adopted pursuant thereto, which govern or affect any of
Borrower's operations and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. None of the operations of Borrower is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into
the environment.
SECTION 2.12 REAL PROPERTY. The Borrower has no real property.
SECTION 2.13 NO CONSENT. The Borrower's execution, delivery and
performance of each of the Loan Documents, including this Agreement, to which
the Borrower is a party do not require the consent or approval of any other
person or entity which has not been obtained, including, without limitation, any
regulatory authority or governmental body of the United States of America or any
state thereof or any political subdivision of the United States of America or
any state thereof.
SECTION 2.14 QUALIFIED COMMERCIAL LOAN. This loan is a Qualified
Commercial Loan as defined in Chapter 306 of the Texas Finance Code. This loan
is not secured by real property and is not a loan for the purpose of financing a
business licensed by the Motor Vehicle Board of the Texas Department of
Transportation under Section 4.01(a), Texas Motor Vehicle Commission (Article
4413(36), Vernon's Texas Civil Statutes). Borrower has been advised by Lender to
seek advice of an attorney and an accountant in connection with this Qualified
Commercial Loan and Borrower has had the opportunity to seek the advice of an
attorney and accountant of Borrower's choice in connection with this Qualified
Commercial Loan.
ARTICLE III
CONDITIONS
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SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
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(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, such documents as Bank may require including, without
limitation, each of the documents described on EXHIBIT D attached hereto.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower or any such guarantor.
(d) INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance covering all real
property collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific hazards
affecting any such real property as may be required by governmental regulation
or Bank, and all containing provisions that such policies cannot be cancelled
without thirty (30) days' prior written notice to Bank.
(e) APPRAISALS. Bank shall have obtained, at Borrower's cost, an
appraisal of all collateral required hereby, and all improvements thereon,
issued by an appraiser acceptable to Bank and in form, substance and reflecting
values satisfactory to Bank, in its discretion.
SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) COMPLIANCE. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist. No
material adverse change (as such term is used in Section 3.1(c) hereto) shall
have occurred since February 6, 2001.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
10
SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3 FINANCIAL STATEMENTS. Provide or cause to be provided to
Bank all of the following, in form and detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year,
an audited financial statement of Borrower, prepared by a recognized independent
accounting firm acceptable to Bank, to include consolidated balance sheets and
consolidated statements of income, retained earnings and cash flow, in
accordance with generally accepted accounting principles, together with an
unqualified opinion and such firm's covenant compliance calculations, certified
by a senior financial officer;
(b) not later than 45 days after and as of the end of each calendar
quarter, a financial statement of Borrower, prepared by Borrower, to include
consolidated balance sheets and consolidated statements of income, retained
earnings and cash flow, in accordance with generally accepted accounting
principles, together with covenant compliance calculations, certified by a
senior financial officer;
(c) not later than 25 days after and as of the end of each calendar
month, a borrowing base certificate attached hereto as Schedule I, an aged
listing of accounts receivable and accounts payable, and a reconciliation of
accounts, and not later than 25 days after and as of each calendar month, a list
of the names and addresses of all Borrower's account debtors; all of which
Borrower shall deliver to Xxxxx Fargo Wholesale Services, 0000 Xxxxxxxx Xx., 0xx
Xxxxx, XXX X0000-000, Xxxxxx, XX 00000;
(d) not later than 45 days after and as of the end of each calendar
quarter, a financial statement of OilQuip, prepared by and certified by a senior
financial officer of OilQuip, to include consolidated balance sheets and
consolidated statements of income, retained earnings and cash flow, in
accordance with generally accepted accounting principles;
(e) not later than 90 days after each calendar year, the financial
statements of Xxxxxxx Xxxxxxxxxxxx and Xxxxx Xxxxxxxxxxxx, signed and certified
to the Bank on Bank's form and such individuals' income tax returns for such
year;
(f) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of a senior financial
officer of Borrower that said financial statements are accurate, showing the
calculations confirming Borrower's compliance with all financial covenants and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default;
(g) not later than ninety (90) days after and as of the end of each
fiscal year, a reviewed financial statement of OilQuip, prepared by a recognized
independent accounting firm acceptable to Bank, to include consolidated balance
sheets and consolidated statements of income, retained earnings and cash flow,
in accordance with generally accepted accounting principles; and
11
(h) from time to time such other information as Bank may reasonably
request.
SECTION 4.4 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5 INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request Schedules setting forth all
insurance then in effect.
SECTION 4.6 FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of all
litigation pending or threatened against Borrower with claims in excess of
$25,000.00 in the aggregate.
SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Tangible Net Worth not at any time less than eighty-five percent
(85%) of Tangible Net Worth as of the date hereof (plus seventy-five percent
(75%) of cumulative net income after the date hereof, excluding any fiscal
quarters in which net income is negative), plus one hundred percent (100%) of
equity offerings after the date hereof, with "Tangible Net Worth" defined herein
as the aggregate of total stockholders' equity plus the Seller Note less any
intangible assets.
(b) Fixed Charge Coverage Ratio not less than 1.1 to 1.0 for the twelve
(12) month period ending on the last day of each fiscal quarter, beginning with
the fiscal quarter ending March 31, 2001, with "EBITDA" defined herein as net
income plus interest charges, plus taxes, plus depreciation, amortization and
non-cash charges on a trailing twelve (12) month basis and with "Fixed Charge
Coverage Ratio" defined herein as (i) EBITDA plus applicable operating lease
payments less unfinanced capital expenditures divided by (ii) the aggregate of
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total interest charges (excluding any applicable paid-in-kind ("PIK") charges),
scheduled principal payments, operating lease payments, cash dividends paid, and
paid taxes for the same period. Through the September 30, 2001, compliance date,
EBITDA and these charges, excluding unfinanced capital expenditures, will be
annualized.
(c) Total Funded Debt to EBITDA Ratio not more than 3.25 to 1.0 through
December 31, 2001; 2.50 to 1.0 through December 31, 2002; and 2.0 to 1.0
thereafter, with "Total Funded Debt to EBITDA Ratio" defined as Total Funded
Debt divided by the twelve (12) trailing months EBITDA. "Total Funded Debt" is
defined herein as all interest-bearing obligations of Borrower, whether secured
or unsecured, senior or subordinated, excluding the Seller Note. Through the
September 30, 2001, compliance date, EBITDA will be annualized to calculate the
Total Funded Debt to EBITDA Ratio.
SECTION 4.10 NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $250,000.00.
ARTICLE V
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2 CAPITAL EXPENDITURES. Make any additional investment in
fixed assets in any fiscal year in excess of an aggregate of $500,000.00.
SECTION 5.3 LEASE EXPENDITURES. Incur with respect to any personal
property operating lease expense in any fiscal year in excess of an aggregate of
$750,000, including operating lease payments related to that certain
sale/leaseback transaction of even date herewith between Borrower and Xxxxx
Fargo Equipment Finance, Inc.
SECTION 5.4 OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
and (b) any other liabilities of Borrower existing as of, and disclosed to Bank
on SCHEDULE 5.4 attached hereto.
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SECTION 5.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.6 GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.7 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof.
SECTION 5.8 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.9 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except any of the foregoing in favor of
Bank, Xxxxx Fargo Energy Capital, Inc. (which shall only be a second lien behind
Bank's lien) or Xxxxx Fargo Equipment Finance, Inc. (which shall only be a third
lien behind Bank's lien) or which is existing as of, and disclosed to Bank in
writing prior to, the date hereof.
SECTION 5.10 SALES AND LEASEBACKS. Enter into any arrangement, directly
or indirectly, with any person whereby Borrower shall sell or transfer any of
its property, whether now owned or hereafter acquired, and whereby Borrower
shall then or thereafter rent or lease as lessee such property or any part
thereof or other property which Borrower intends to use for substantially the
same purpose or purposes as the property is sold or transferred (except for that
certain sale/leaseback transaction of even date herewith between Borrower and
Xxxxx Fargo Equipment Finance, Inc.
SECTION 5.11 NATURE OF BUSINESS. Allow any material change to be made
in the character of Borrower's business as an oilfield service provider.
SECTION 5.12 LIMITATION ON LEASES. Create, incur, assume or permit to
exist any obligation for the payment of rent or hire of property of any kind
whatsoever under leases or lease agreements which would cause the aggregate
amount of all payments made by Borrower pursuant to all such leases or lease
agreements to exceed $50,000.00 in any twelve (12) month period.
SECTION 5.13 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any affiliate of Borrower unless such
transactions are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it to Borrower than Borrower would obtain
in a comparable arm's-length transaction with a person not an affiliate.
14
ARTICLE VI
EVENTS OF DEFAULT
-----------------
SECTION 6.1 The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any guarantor
hereunder has incurred any debt or other liability to any person or entity,
including Bank.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder. Notwithstanding the foregoing,
there shall not be an Event of Default upon the filing of notices of judgment
lien, the recording of abstracts of judgment, or the entries of judgment against
Borrower or any guarantor hereunder if the aggregate amount of all such
judgments is less than $50,000 and such judgments are released within sixty (60)
days of the filing, recording or entry of such judgment.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder, or Borrower or any such guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
15
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The death or incapacity of Borrower or any guarantor hereunder. The
dissolution or liquidation of Borrower or any guarantor hereunder; or Borrower
or any such guarantor, or any of its their directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such guarantor.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of
stockholders' equity in Borrower.
(j) The sale, transfer, hypothecation, assignment or encumbrance,
whether voluntary, involuntary or by operation of law, without Bank's prior
written consent, of all or any part of or interest in any real property
collateral required hereby.
(k) An event which is a material adverse change (as such term is used
in Section 3.1(c) hereof) shall have occurred and is continuing.
(l) The determination by any court that any provision of any Loan
Document is invalid.
SECTION 6.2 REMEDIES. Upon (a) the occurrence of any Event of Default
under subsection 6.1(f) above, all Indebtedness including all principal and
accrued and unpaid interest outstanding under each of the Loan Documents shall
become automatically due and payable and the obligation, if any, of Bank to
extend any further credit under any of the Loan Documents shall immediately
cease and terminate; (b) the occurrence of any other Event of Default, all
Indebtedness including all principal and accrued interest outstanding under each
of the Loan Documents, any term thereof to the contrary notwithstanding, shall
at Bank's option and without notice become immediately due and payable without
presentment, demand, or any notices of any kind, including without limitation
notice of nonperformance, notice of protest, protest, notice of dishonor, notice
of intention to accelerate or notice of acceleration, all of which are hereby
expressly waived by each Borrower, and the obligation, if any, of Bank to extend
any further credit under any of the Loan Documents shall immediately cease and
terminate. Upon acceleration of the Indebtedness, Bank shall have all rights,
powers and remedies available under each of the Loan Documents, or accorded by
law, including without limitation the right to resort to any or all security for
any credit subject hereto and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1 NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
16
SECTION 7.2 NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: MOUNTAIN COMPRESSED AIR, INC.
0000 Xxxxxxxx Xxxx.
Xxxxx Xxxxxxxx, XX 00000
BANK: XXXXX FARGO BANK TEXAS, NATIONAL ASSOCIATION
0000 Xxxxxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees), expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Bank's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights
and/or the collection of any amounts which become due to Bank under any of the
Loan Documents, (c) the prosecution or defense of any action in any way related
to any of the Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity, (d) the
performance, prior to the date hereof and after an Event of Default, of an asset
appraisal by an independent qualified appraiser approved by Bank; and (e) up to
two (2) collateral audits performed by Bank per fiscal year with respect to the
collateral or any other matters relating to the loans provided for in this
Agreement and/or Borrower's compliance with the terms and provisions of this
Agreement; PROVIDED, HOWEVER, Borrower's out-of-pocket cost and expense under
this subsection (e) shall be limited to $3,500 per collateral audit.
SECTION 7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder.
17
SECTION 7.5 AMENDMENT. This Agreement may be amended or modified only
in writing signed by each party hereto.
SECTION 7.6 NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action-
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7 TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8 SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
SECTION 7.11 SAVINGS CLAUSE. It is the intention of the parties to
comply strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "Maximum Rate"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with any Loan Documents, or in any communication by or
any other person to Borrower or any other person, or in the event that all or
part of the principal or interest hereof or thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved or received on the amount of principal actually outstanding from time
to time under the Loan Documents shall exceed the Maximum Rate, then in such
event it is agreed that: (i) the provisions of this Paragraph shall govern and
control; (ii) neither Borrower nor any other person or entity now or hereafter
liable for the payment of any Loan Documents shall be obligated to pay the
amount of such interest to the extent it is in excess of the Maximum Rate; (iii)
any such excess interest which is or has been received by Bank, notwithstanding
this paragraph, shall be credited against the then unpaid principal balance
hereof or thereof, or if any of the Loan Documents has been or would be paid in
full by such credit, refunded to Borrower; and (iv) the provisions of each of
the Loan Documents, and any other communication to Borrower, shall immediately
be deemed reformed and such excess interest reduced, without the necessity of
executing any other document, to the Maximum Rate. The right to accelerate the
maturity of the Loan Documents does not include the right to accelerate, collect
or charge unearned interest, but only such interest that has otherwise accrued
as of the date of acceleration. Without limiting the foregoing, all calculations
of the rate of interest contracted for, charged, taken, reserved or received in
18
connection with any of the Loan Documents which are made for the purpose of
determining whether such rate exceeds the Maximum Rate shall be made to the
extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of such Loan Documents, including
all prior and subsequent renewals and extensions hereof or thereof, all interest
at any time contracted for, charged, taken, reserved or received by Bank. The
terms of this Paragraph shall be deemed to be incorporated into each of the
other Loan Documents.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
SECTION 7.12 RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any
time and from time to time, without notice, which is hereby expressly waived by
each Borrower, and whether or not Bank shall have declared any credit subject
hereto to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower's obligations
and liabilities under the Loan Documents (whether matured or unmatured, fixed or
contingent, liquidated or unliquidated), any and all amounts owing by Bank to
Borrower (whether payable in U.S. dollars or any other currency, whether matured
or unmatured, and in the case of deposits, whether general or special (except
trust and escrow accounts), time or demand and however evidenced), and (b)
pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as Bank, in its sole discretion, may elect. Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank and with any other financial institution to secure the payment of all
obligations and liabilities of Borrower to Bank under the Loan Documents.
SECTION 7.13 BUSINESS PURPOSE. Borrower represents and warrants that
each credit subject hereto is for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal, family
or household use.
SECTION 7.14 ARBITRATION.
(a) ARBITRATION. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in Texas selected by the American Arbitration Association ("AAA"); (ii)
be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
19
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
(c) NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in Sections (i), (ii) and (iii) of this paragraph.
(d) ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(e) DISCOVERY. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
20
(g) PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
SECTION 7.15 ASSIGNMENTS AND PARTICIPATIONS.
(a) Borrower may not assign its rights or obligations hereunder or
under the Notes or any Letters of Credit without the prior consent of Bank.
Should Borrower attempt to assign its rights hereunder, Bank's obligations
hereunder will immediately cease and Bank shall be entitled to all commitment
fees, up-front fees, documentation fees, appraisal fees, audit fees, and due
diligence fees referred to herein.
(b) Bank may, upon the written consent of Borrower, if no Event of
Default has occurred and is continuing (which consent will not be unreasonably
withheld), assign to one or more assignees all or a portion of its rights and
obligations under this Agreement. Borrower's consent will not be required if the
assignment is to an affiliate of Bank. Any such assignment will become effective
upon the execution and delivery to Bank of an Assignment Agreement (the
"Assignment") and the consent of Borrower, if required. Promptly after receipt
of an executed Assignment, Bank shall send to Borrower a copy of such executed
Assignment. Upon receipt of such executed Assignment, Borrower, will, at its own
expense, execute and deliver new notes to the assignor and/or assignee, as
appropriate, in accordance with their respective interests as they appear. Upon
the effectiveness of any assignment pursuant to this Section, the assignee will
have all the rights and interests of Bank under this Agreement and the other
Loan Documents. The assignor shall be relieved of its obligations hereunder to
the extent of such assignment.
(c) Bank may transfer, grant or assign participations in all or any
part of Bank's interests hereunder pursuant to this Section to any person,
PROVIDED that: (i) Bank shall remain "Bank" for all purposes of this Agreement;
and (ii) no participant under any such participation shall have rights to
approve any amendment to or waiver of any of the Loan Documents except to the
extent such amendment or waiver would (x) forgive any principal owing on any
obligations or extend the final maturity of the commitments or loans, (y) reduce
the interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of the
commitments or loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the obligations or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of the
commitments or loans or Letters of Credit in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the Loan Documents (the
participant's rights against Bank in respect of such participation to be those
set forth in the agreement with Bank creating such participation), and all
amounts payable by Borrower hereunder shall be determined as if Bank had not
sold such participation, PROVIDED that such participant shall be entitled to be
indemnified under Section 7.16 hereof.
21
(d) Bank may furnish any information concerning Borrower in the
possession of Bank from time to time to assignees and participants (including
prospective assignees and participants).
SECTION 7.16 INDEMNIFICATION. Borrower agrees:
(a) to indemnify Bank, each assignee or participant hereunder, each of
their Affiliates and each of their officers, directors, employees,
representatives, agents, attorneys, accountants and experts ("INDEMNIFIED
PARTIES") from, hold each of them harmless against and promptly upon demand pay
or reimburse each of them for, the Indemnity Matters (hereafter defined) which
may be incurred by or asserted against or involve any of them (whether or not
any of them is designated a party thereto) as a result of, arising out of or in
any way related to (i) any actual or proposed use by Borrower of the proceeds of
any of the Loans or Letters of Credit, (ii) the execution, delivery and
performance of the Loan Documents, (iii) the operations of the business of
Borrower, (iv) the failure of Borrower to comply with the terms of any Loan
Document or this Agreement, or with any applicable law, (v) any inaccuracy of
any representation or any breach of any warranty of Borrower or any Guarantor
set forth in any of the Loan Documents, (vi) the issuance, execution and
delivery or transfer of or payment or failure to pay under any Letter of Credit,
or (vii) the payment of a drawing under any Letter of Credit notwithstanding the
non-compliance, non-delivery or other improper presentation of the manually
executed draft(s) and certification(s), (viii) any assertion that any
Indemnified Party was not entitled to receive the proceeds received pursuant to
the Loan Documents or (ix) any other aspect of the Loan Documents, including,
without limitation, the reasonable fees and disbursements of counsel and all
other expenses incurred in connection with investigating, defending or preparing
to defend any such action, suit, proceeding (including any investigations,
litigation or inquiries) or claim and including all Indemnity Matters arising by
reason of the ordinary negligence of any Indemnified Party, but excluding all
Indemnity Matters arising solely by reason of claims between the Bank or any
assignee or participant, or any such party's shareholders against Bank or any
assignee or participant or by reason of the gross negligence or willful
misconduct on the part of the Indemnified Party. "Indemnity Matters" shall mean
any and all actions, suits, proceedings (including any investigations,
litigation or inquiries), claims, demands and causes of action made or
threatened against a person and, in connection therewith, all losses,
liabilities, damages (including, without limitation, consequential damages) or
reasonable costs and expenses of any kind or nature whatsoever incurred by such
person whether caused by the sole or concurrent negligence of such person
seeking indemnification.
SECTION 7.17 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
BANK IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
22
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
MOUNTAIN COMPRESSED AIR, INC. XXXXX FARGO BANK TEXAS,
NATIONAL ASSOCIATION
By: /s/ XXXXXXX X. XXXXXXXXXXXX By: /s/ XXXX X. XXXX
---------------------------- ------------------
Name: Xxxxxxx X. Xxxxxxxxxxxx Name: Xxxx X. Xxxx
Title: Chairman and Chief Executive Officer Title: Vice President
23
EXHIBIT "A"
EXHIBIT A
LINE OF CREDIT
REVOLVING LINE OF CREDIT NOTE
$500,000.00 Houston, Texas
February 6, 2001
FOR VALUE RECEIVED, the undersigned MOUNTAIN COMPRESSED AIR, INC., a
Texas corporation ("Borrower"), promises to pay to the order of XXXXX FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, 3rd Floor,
Houston, Texas, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Five Hundred Thousand and No/100 Dollars ($500,000.00), or
so much thereof as may be advanced and be outstanding, with interest thereon, to
be computed on each advance from the date of its disbursement as set forth
herein.
INTEREST:
(a) INTEREST. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
on the last day of each April, July, October, and January of each year,
commencing on the first such day after the date of this Note and on maturity
hereof.
(c) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to two
percent (2%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
A-1
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on January 31, 2002.
(b) ADVANCES. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) _____________________ or ___________________, any one acting alone, who are
authorized to request advances and direct the disposition of any advances until
written notice of the revocation of such authority is received by the holder at
the office designated above, or (ii) any person, with respect to advances
deposited to the credit of any deposit account of any Borrower, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower. The amount and
date of each advance requested hereunder shall be designated by an authorized
representative's execution of a Borrowing Request to be received by the Bank at
least one (1) Business Day prior to the date of such loan, which date shall be a
Business Day. Each advance requested hereunder shall be made at the office of
the Bank, and shall be funded prior to 2:00 p.m. Houston time on the day so
requested in immediately available funds in the amount so requested.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges
when due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor
of this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
A-2
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.
(e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.
(f) Any sale or transfer of all or a substantial or material part of
the assets of any Borrower or Third Party Obligor other than in the ordinary
course of its business.
(g) Any violation or breach of any provision of, or any defined event
of default under, any addendum to this Note or any other promissory note or any
credit agreement (including without limitation that certain Credit Agreement
dated as of even date herewith between Borrower and the Bank), guaranty,
security agreement, deed of trust, mortgage, pledge agreement, subordination
agreement, or other document executed in connection with or securing this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
XXXXXX COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN XXXXXX COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
A-3
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN XXXXXX
COUNTY, TEXAS.
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
A-4
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
(f) CERTAIN TRI-PARTY ACCOUNTS. Borrower and Bank agree that Chapter
346 of the Texas Finance Code (which regulates certain revolving credit accounts
and revolving triparty accounts) shall not apply to any revolving loan accounts
created under this Note or maintained in connection herewith.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
MOUNTAIN COMPRESSED AIR, INC.
By: /S/ XXXXXXX X. XXXXXXXXXXXX
-------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and CEO
A-5
EXHIBIT "B"
EXHIBIT B
TERM NOTE
TERM NOTE
$3,550,000.00 Houston, Texas
February 6, 2001
FOR VALUE RECEIVED, the undersigned MOUNTAIN COMPRESSED AIR, INC., a
Texas corporation ("Borrower"), promises to pay to the order of XXXXX FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, 3rd Floor,
Houston, Texas, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Three Million Five Hundred Fifty Thousand and No/100
Dollars ($3,550,000.00), with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) " Base Rate" means the higher of (a) Prime Rate per annum in effect
on that day, and (b) Federal Fund Rate in effect on that day as announced by the
Federal Reserve Bank of New York, plus 0.5% per annum
(b) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(c) "Credit Agreement" means that certain Credit Agreement between Bank
and Borrower of even date herewith.
(d) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one, two, three or six months, as designated by Borrower, during
which all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than Five Hundred Thousand and
No/100 Dollars ($500,000.00) and in multiples of One Hundred Thousand and No/100
Dollars ($100,000.00) thereafter; and provided further, that no Fixed Rate Term
shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(e) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
----------------------------------------------
100% - LIBOR Reserve Percentage
B-1
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate,
with the understanding that such rate is quoted by Bank for the purpose
of calculating effective rates of interest for loans making reference
thereto, on the first day of a Fixed Rate Term for delivery of funds on
said date for a period of time approximately equal to the number of
days in such Fixed Rate Term and in an amount approximately equal to
the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S.
dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for "Eurocurrency Liabilities" (as defined in Regulation
D of the Federal Reserve Board, as amended), adjusted by Bank for
expected changes in such reserve percentage during the applicable Fixed
Rate Term.
(f) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
(g) "Total Funded Debt" shall have the meaning ascribed to it in the
Credit Agreement.
INTEREST:
(a) INTEREST. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
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rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Prime Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.
(c) TAXES AND REGULATORY COSTS. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to two
percent (2%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWINGS:
(a) Borrower may from time to time from the date of this Note up to and
including January 31, 2004, borrow and partially or wholly repay its outstanding
borrowings, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that amounts repaid may not be reborrowed; and provided further, that
the total borrowings under this Note shall not exceed the principal amount
stated above. The unpaid principal balance of this obligation at any time shall
be the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder.
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(b) All Base Rate borrowings shall be in amounts of at least Ten
Thousand and No/100 Dollars ($10,000.00), and all LIBOR borrowings shall be in
amounts of at least Five Hundred Thousand and No/100 Dollars ($500,000.00) and
in multiples of One Hundred Thousand and No/100 Dollars ($100,000.00)
thereafter.
(c) The amount and date of each Base Rate borrowing shall be designated
by an authorized representative of the Borrower requesting such borrowing in
form and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least one (1) Business Day
prior to the date of such loan, which date shall be a Business Day. Each Base
Rate loan shall be made at the office of the Bank and shall be funded prior to
2:00 p.m. Houston time, on the day so requested and immediately available fund
in the amount so requested.
(d) The amount and date of each LIBOR borrowing shall be designated by
an authorized representative of the Borrower requesting such borrowing in form
and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least three (3) Business Days
prior to the date of such loan, which date shall be a Business Day. Each LIBOR
loan shall be made at the office of the Bank and shall be funded prior to 2:00
p.m. Houston time, on the day so requested and immediately available fund in the
amount so requested.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. Principal shall be payable on the last day of each
April, July, October and January (each a "Quarterly Date") in installments of
One Hundred Forty-Seven Thousand Nine Hundred Sixteen and 67/100 Dollars
($147,916.67) each, commencing on the first Quarterly Date after the date of
this Note, and upon maturity hereof.
(b) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Base Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
(c) PREPAYMENT.
BASE RATE. Borrower may prepay this Note provided that all
terms in the Credit Agreement and herein are complied with (including
the payment of any prepayment penalties required in the Credit
Agreement). As provided herein, Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to the
Base Rate at any time and in the minimum amount of One Hundred Thousand
and No/100 Dollars ($100,000.00); PROVIDED, HOWEVER, that if the
outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire
outstanding principal hereof.
B-4
LIBOR. Borrower may prepay this Note provided that all terms
in the Credit Agreement and herein are complied with (including the
payment of any prepayment penalties required in the Credit Agreement).
As provided herein, Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to LIBOR at any
time and in the minimum amount of Five Hundred Thousand and No/100
Dollars ($500,000.00) and in One Hundred Thousand and No/100 Dollars
($100,000.00) multiples thereafter); PROVIDED, HOWEVER, that if the
outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire
outstanding principal balance thereof. In consideration of Bank
providing this prepayment option to Borrower, or if any such portion of
this Note shall become due and payable at any time prior to the last
day of the Fixed Rate Term applicable thereto, Borrower shall pay to
Bank immediately upon demand a fee which is the sum of the discounted
monthly differences for each month from the month of prepayment through
the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued
each month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of the Fixed
Rate Term applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the
amount of interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term at LIBOR
in effect on the date of prepayment for new loans made for such term
and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater
than zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
In addition, if Borrower makes an optional or required prepayment of a
LIBOR loan before the end of the related interest period, or fails to borrow,
convert, or extend a LIBOR loan after giving notice thereof, of if a LIBOR loan
is converted to Base Rate Loan as a result of certain changes and circumstances,
Borrower will reimburse Bank for any related funding losses and losses of
anticipated earnings.
All prepayments of principal on this Note, whether such prepayment is
in relation to a Base Rate option or a LIBOR option shall be applied first to
reduce the balloon payment due upon maturity hereof, if applicable, and second
to reduce the most remote of the principal installment or installments then
unpaid.
B-5
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges
when due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor
of this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.
(e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.
(f) Any sale or transfer of all or a substantial or material part of
the assets of any Borrower or Third Party Obligor other than in the ordinary
course of its business.
(g) Any violation or breach of any provision of, or any defined event
of default under, any addendum to this Note or any other promissory note or any
credit (including, without limitation, the Credit Agreement) agreement,
guaranty, security agreement, deed of trust, mortgage or other document executed
in connection with or securing this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
B-6
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
XXXXXX COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN XXXXXX COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN XXXXXX
COUNTY, TEXAS.
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
B-7
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
B-8
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
MOUNTAIN COMPRESSED AIR, INC.
By: /S/ XXXXXXX X. XXXXXXXXXXXX
--------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and CEO
B-9
EXHIBIT "C"
EXHIBIT C
DELAYED DRAW NOTE
DELAYED DRAW TERM NOTE
$500,000.00 Houston, Texas
February 6, 2001
FOR VALUE RECEIVED, the undersigned MOUNTAIN COMPRESSED AIR INC., a
Texas corporation ("Borrower") promises to pay to the order of XXXXX FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, 3rd Floor,
Houston, Texas, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Five Hundred Thousand and No/100 Dollars ($500,000.00),
with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) " Base Rate" means the higher of (a) Prime Rate per annum in effect
on that day, and (b) Federal Fund Rate in effect on that day as announced by the
Federal Reserve Bank of New York, plus 0.5% per annum
(b) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(c) "Credit Agreement" means that certain Credit Agreement between Bank
and Borrower of even date herewith.
(d) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one, two, three or six months, as designated by Borrower, during
which all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than Five Hundred Thousand and
No/100 Dollars ($500,000.00) and in multiples of One Hundred Thousand and No/100
Dollars ($100,000.00) thereafter; and provided further, that no Fixed Rate Term
shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(e) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:
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LIBOR = Base LIBOR
----------------------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(f) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
(g) Total Funded Debt shall have the meaning ascribed to it in the
Credit Agreement.
INTEREST:
(a) INTEREST. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
C-2
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Prime Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.
(c) TAXES AND REGULATORY COSTS. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to four
percent (2%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
C-3
BORROWINGS:
(a) Borrower may from time to time from the date of this Note up to and
including January 31, 2004, borrow and partially or wholly repay its outstanding
borrowings, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that amounts repaid may not be reborrowed; and provided further, that
the total borrowings under this Note shall not exceed the principal amount
stated above. The unpaid principal balance of this obligation at any time shall
be the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder.
(b) All Base Rate borrowings shall be in amounts of at least Ten
Thousand and No/100 Dollars ($10,000.00), and all LIBOR borrowings shall be in
amounts of at least One Hundred Thousand and No/100 Dollars ($100,000.00) or any
multiple thereof.
(c) The amount and date of each Base Rate borrowing shall be designated
by an authorized representative of the Borrower requesting such borrowing in
form and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least one (1) Business Day
prior to the date of such loan, which date shall be a Business Day. Each Base
Rate loan shall be made at the office of the Bank and shall be funded prior to
2:00 p.m. Houston time, on the day so requested and immediately available fund
in the amount so requested.
(d) The amount and date of each LIBOR borrowing shall be designated by
an authorized representative of the Borrower requesting such borrowing in form
and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least three (3) Business Days
prior to the date of such loan, which date shall be a Business Day. Each LIBOR
loan shall be made at the office of the Bank and shall be funded prior to 2:00
p.m. Houston time, on the day so requested and immediately available fund in the
amount so requested.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. Principal shall be payable as provided in the Credit
Agreement.
(b) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Base Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
(c) PREPAYMENT.
C-4
BASE RATE.
----------
BASE RATE. Borrower may prepay this Note provided that all
terms in the Credit Agreement and herein are complied with (including
the payment of any prepayment penalties required in the Credit
Agreement). As provided herein, Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to the
Base Rate at any time and in the minimum amount of One Hundred Thousand
and No/100 Dollars ($100,000.00); PROVIDED, HOWEVER, that if the
outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire
outstanding principal hereof.
LIBOR. Borrower may prepay this Note provided that all terms
in the Credit Agreement and herein are complied with (including the
payment of any prepayment penalties required in the Credit Agreement).
As provided herein, Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to LIBOR at any
time and in the minimum amount of One Hundred Thousand and No/100
Dollars ($100,000.00) and in One Hundred Thousand and No/100 Dollars
($100,000.00) multiples thereafter); PROVIDED, HOWEVER, that if the
outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire
outstanding principal balance thereof. In consideration of Bank
providing this prepayment option to Borrower, or if any such portion of
this Note shall become due and payable at any time prior to the last
day of the Fixed Rate Term applicable thereto, Borrower shall pay to
Bank immediately upon demand a fee which is the sum of the discounted
monthly differences for each month from the month of prepayment through
the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of
the Fixed Rate Term applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term
at LIBOR in effect on the date of prepayment for new loans
made for such term and in a principal amount equal to the
amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
C-5
In addition, if Borrower makes an optional or required prepayment of a
LIBOR loan before the end of the related interest period, or fails to borrow,
convert, or extend a LIBOR loan after giving notice thereof, of if a LIBOR loan
is converted to Base Rate Loan as a result of certain changes and circumstances,
Borrower will reimburse Bank for any related funding losses and losses of
anticipated earnings.
All prepayments of principal shall be applied on the most remote
principal installment or installments then unpaid.
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges
when due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor
of this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.
(e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.
(f) Any sale or transfer of all or a substantial or material part of
the assets of any Borrower or Third Party Obligor other than in the ordinary
course of its business.
C-6
(g) Any violation or breach of any provision of, or any defined event
of default under, any addendum to this Note or any other promissory note or any
credit (including, without limitation, the Credit Agreement) agreement,
guaranty, security agreement, deed of trust, mortgage or other document executed
in connection with or securing this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
XXXXXX COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN XXXXXX COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN XXXXXX
COUNTY, TEXAS.
C-7
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
C-8
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
MOUNTAIN COMPRESSED AIR, INC.
By: /S/ XXXXXXX X. XXXXXXXXXXXX
-------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and Chief Executive Officer
C-9
EXHIBIT "D"
SECURITY AGREEMENT
1. GRANT OF SECURITY INTEREST. For valuable consideration, the
undersigned MOUNTAIN COMPRESSED AIR, INC., a Texas corporation ("Debtor"),
hereby grants and transfers to XXXXX FARGO BANK TEXAS, NATIONAL ASSOCIATION
("Bank") a security interest in all of the property of Debtor, including,
without limitation, the property set forth in EXHIBIT A hereto, further
described as follows (collectively, the "Collateral"), but EXCLUDING the
property set forth in EXHIBIT B hereto:
(a) all accounts, deposit accounts, contract rights, chattel paper,
instruments, documents, general intangibles and other rights to payment of every
kind now existing or at any time hereafter arising;
(b) all inventory, goods held for sale or lease or to be furnished
under contracts for service, or goods so leased or furnished, raw materials,
component parts, work in process and other materials used or consumed in
Debtor's business, now or at any time hereafter owned or acquired by Debtor,
wherever located, and all products thereof, whether in the possession of Debtor,
any warehousemen, any bailee or any other person, or in process of delivery, and
whether located at Debtor's places of business or elsewhere;
(c) all warehouse receipts, bills of sale, bills of lading and other
documents of every kind (whether or not negotiable) in which Debtor now has or
at any time hereafter acquires any interest, and all additions and accessions
thereto, whether in the possession or custody of Debtor, any bailee or any other
person for any purpose;
(d) all money and property heretofore, now or hereafter delivered to or
deposited with Bank or otherwise coming into the possession, custody or control
of Bank (or any agent or bailee of Bank) in any manner or for any purpose
whatsoever during the existence of this Agreement and whether held in a general
or special account or deposit for safekeeping or otherwise;
(e) all right, title and interest of Debtor under licenses, guaranties,
warranties, management agreements, marketing or sales agreements, escrow
contracts, indemnity agreements, insurance policies, service agreements,
maintenance agreements and other similar contracts of every kind in which Debtor
now has or at any time hereafter shall have an interest;
(f) all Debtor's goods, tools, machinery, furnishings, furniture and
other equipment and fixtures of every kind now existing or hereafter acquired,
and improvements, replacements, accessions and additions thereto, whether
located on any property owned or leased by Debtor or elsewhere, including
without limitation, any of the foregoing now or at any time hereafter located at
or installed on the land or in the improvements at any of the real property
owned or leased by Debtor, and all such goods after they have been severed and
removed from any of said real property;
(g) All now existing or hereafter acquired general intangibles of every
kind and nature, all permits, regulatory approvals, copyrights, patents,
trademarks, service marks, trade names, mask works, goodwill, licenses and all
other intellectual property owned by Debtor or used in Debtor's business; and
D-1
(h) all Debtor's motor vehicles, trailers, mobile homes, boats, other
rolling stock and related equipment of every kind now existing or hereafter
acquired and all additions and accessories thereto, whether located on any
property owned or leased by Debtor or elsewhere; together with whatever is
receivable or received when any of the foregoing or the proceeds thereof are
sold, leased, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including without limitation, all
rights to payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with respect to any
cause of action affecting or relating to any of the foregoing (collectively,
"Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment
and performance of: (a) all present and future Indebtedness of Debtor to Bank;
(b) all obligations of Debtor and rights of Bank under this Agreement; and (c)
all present and future obligations of Debtor to Bank of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, heretofore, now
or hereafter made, incurred or created, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent, including,
without limitation, all obligations of Debtor to Bank under letter of credit
agreements and applications, liquidated or unliquidated, determined or
undetermined, and whether Debtor may be liable individually or jointly with
others, or whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable including, without limitation, that certain (i) Term Note dated of
even date herewith in the original principal amount of $3,550,000.00; (ii)
Delayed Draw Term Note dated of even date herewith in the original principal
amount of $500,000.00; and (iii) Revolving Line of Credit Note dated of even
date herewith in the original principal amount of $500,000.00; all executed by
Debtor and payable to the order of Bank (collectively, the "Notes") pursuant to
that certain Credit Agreement dated of even date herewith between Debtor and
Bank (the "Credit Agreement); and all renewals, extensions, rearrangements,
amendments, modifications, and/or increases of any of the aforesaid.
3. TERMINATION. This Agreement will terminate upon the performance of
all obligations of Debtor to Bank including, without limitation, the payment of
all Indebtedness of Debtor to Bank, and the termination of all commitments of
Bank to extend credit to Debtor, existing at the time Bank receives written
notice from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans
hereunder. Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account over which
Debtor shall have no control, and the same shall, for all purposes, be deemed
Collateral hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Bank that: (a) Debtor is the owner and has possession or control of the
Collateral and Proceeds; (b) Debtor has the right to grant a security interest
in the Collateral and Proceeds; (c) all Collateral and Proceeds are genuine,
free from liens, adverse claims, setoffs, default, prepayment, defenses and
conditions precedent of any kind or character, except the lien created hereby in
favor of Bank (which shall be a first lien), any lien created in favor of Xxxxx
Fargo Energy Capital, Inc. (which shall be a second lien behind Bank's lien),
any lien created in favor of Xxxxx Fargo Equipment Finance, Inc. (which shall be
D-2
a third lien behind Bank's lien), or as otherwise agreed to by Bank, or as
heretofore disclosed by Debtor to Bank, in writing; (d) all statements contained
herein and, where applicable, in the Collateral are true and complete in all
material respects; (e) no financing statement covering any of the Collateral or
Proceeds, and naming any secured party other than Bank, Xxxxx Fargo Energy
Capital, Inc. or Xxxxx Fargo Equipment Finance, Inc., is on file in any public
office; (f) where Collateral consists of rights to payment, all persons
appearing to be obligated on the Collateral and Proceeds have authority and
capacity to contract and are bound as they appear to be, all property subject to
chattel paper has been properly registered and filed in compliance with law and
to perfect the interest of Debtor in such property, and all such Collateral and
Proceeds comply with all applicable laws concerning form, content and manner of
preparation and execution, including where applicable Federal Reserve Regulation
Z and any State consumer credit laws; (g) where the Collateral consists of
equipment, Debtor is not in the business of selling goods of the kind included
within such Collateral, and Debtor acknowledges that no sale of any such
Collateral, including without limitation, any such Collateral which Debtor may
deem to be surplus, has been consented to or acquiesced in by Bank, except as
specifically set forth in writing by Bank; and (h) none of the Collateral at
this time constitutes fixtures and in the event it should in the future, should
Debtor acquire fixtures, at least thirty (30) days prior thereto, Debtor shall
notify Bank thereof, furnish Bank with a description of said fixtures, furnish
Bank with a description of the real estate to which the fixtures are attached,
and execute all such documents as may be required by Bank to properly perfect
Bank's first priority security interest therein.
6. COVENANTS OF DEBTOR.
(a) Debtor agrees in general: (i) to pay Indebtedness secured hereby
when due; (ii) to indemnify Bank against all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto; (iii)
to pay all costs and expenses, including reasonable attorneys' fees, incurred by
Bank in the perfection and preservation of the Collateral or Bank's interest
therein and/or the realization, enforcement and exercise of Bank's rights,
powers and remedies hereunder; (iv) to permit Bank to exercise its powers; (v)
to execute and deliver such documents as Bank deems necessary to create, perfect
and continue the security interests contemplated hereby; and (vi) not to change
its chief place of business or the places where Debtor keeps any of the
Collateral or Debtor's records concerning the Collateral and Proceeds without
first giving Bank written notice of the address to which Debtor is moving same.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless
Bank agrees otherwise in writing: (i) where applicable, to insure the Collateral
with Bank as loss payee, in form, substance and amounts, under agreements,
against risks and liabilities, and with insurance companies satisfactory to
Bank; (ii) where applicable, to operate the Collateral in accordance with all
applicable statutes, rules and regulations relating to the use and control
thereof, and not to use any Collateral for any unlawful purpose or in any way
that would void any insurance required to be carried in connection therewith;
(iii) not to remove the Collateral from Debtor's premises, except (A) for
deliveries to buyers in the ordinary course of Debtor's business and (B)
Collateral which consists of mobile goods as defined in the Texas Business and
Commerce Code, the New Mexico Uniform Commercial Code, the Colorado Uniform
Commercial Code, or the Utah Uniform Commercial Code, in which case Debtor
agrees not to remove or permit the removal of such Collateral from its state of
domicile for a period in excess of thirty (30) calendar days; (iv) to pay when
D-3
due all license fees, registration fees and other charges in connection with any
Collateral; (v) not to permit any lien on the Collateral or Proceeds, including
without limitation, liens arising from repairs to or storage of the Collateral,
except in favor of Bank, Xxxxx Fargo Energy Capital, Inc. (which shall be a
second lien behind Bank's lien), or Xxxxx Fargo Equipment Finance, Inc. (which
shall be a third lien behind Bank's lien); (vi) not to sell, hypothecate or
dispose of, nor permit the transfer by operation of law of, any of the
Collateral or Proceeds or any interest therein, except sales of inventory to
buyers in the ordinary course of Debtor's business; (vii) to permit Bank to
inspect the Collateral at any time; (viii) to keep, in accordance with generally
accepted accounting principles, complete and accurate records regarding all
Collateral and Proceeds, and to permit Bank to inspect the same and make copies
thereof at any reasonable time; (ix) if requested by Bank, to receive and use
reasonable diligence to collect Collateral consisting of accounts and other
rights to payment and Proceeds, in trust and as the property of Bank, and to
immediately endorse as appropriate and deliver such Collateral and Proceeds to
Bank daily in the exact form in which they are received together with a
collection report in form satisfactory to Bank; (x) not to commingle Collateral
or Proceeds, or collections thereunder, with other property; (xi) to give only
normal allowances and credits and to advise Bank thereof immediately in writing
if they affect any rights to payment or Proceeds in any material respect; (xii)
from time to time, when requested by Bank, to prepare and deliver a schedule of
all Collateral and Proceeds subject to this Agreement and to assign in writing
and deliver to Bank all accounts, contracts, leases and other chattel paper,
instruments, documents and other evidences thereof; (xiii) in the event Bank
elects to receive payments of rights to payment or Proceeds hereunder, to pay
all expenses incurred by Bank in connection therewith, including expenses of
accounting, correspondence, collection efforts, reporting to account or contract
debtors, filing, recording, record keeping and expenses incidental thereto; and
(xiv) to provide any service and do any other acts which may be necessary to
maintain, preserve and protect all Collateral and, as appropriate and
applicable, to keep all Collateral in good and saleable condition, to deal with
the Collateral in accordance with the standards and practices adhered to
generally by users and manufacturers of like property, and to keep all
Collateral and Proceeds free and clear of all defenses, rights of offset and
counterclaims.
7. POWERS OF BANK. Debtor appoints Bank its true attorney in fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank's officers and employees, or any of them, whether or not Debtor
is in default: (a) to perform any obligation of Debtor hereunder in Debtor's
name or otherwise; (b) to give notice to account debtors or others of Bank's
rights in the Collateral and Proceeds, to enforce the same and make extension
agreements with respect thereto; (c) to release persons liable on Collateral or
Proceeds and to give receipts and acquittances and compromise disputes in
connection therewith; (d) to release security; (e) to resort to security in any
order; (f) to prepare, execute, file, record or deliver notes, assignments,
schedules, designation statements, financing statements, continuation
statements, termination statements, statements of assignment, applications for
registration or like papers to perfect, preserve or release Bank's interest in
the Collateral and Proceeds; (g) to receive, open and read mail addressed to
Debtor; (h) to take cash, instruments for the payment of money and other
property to which Bank is entitled; (i) to verify facts concerning the
Collateral and Proceeds by inquiry of obligors thereon, or otherwise, in its own
name or a fictitious name; (j) to endorse, collect, deliver and receive payment
under instruments for the payment of money constituting or relating to Proceeds;
D-4
(k) to prepare, adjust, execute, deliver and receive payment under insurance
claims, and to collect and receive payment of and endorse any instrument in
payment of loss or returned premiums or any other insurance refund or return,
and to apply such amounts received by Bank, at Bank's sole option, toward
repayment of the Indebtedness or, where appropriate, replacement of the
Collateral; (l) to exercise all rights, powers and remedies which Debtor would
have, but for this Agreement, with respect to all Collateral and Proceeds
subject hereto; (m) to enter onto Debtor's premises in inspecting the
Collateral; (n) to make withdrawals from and to close deposit accounts or other
accounts with any financial institution, wherever located, into which Proceeds
may have been deposited, and to apply funds so withdrawn to payment of the
Indebtedness; (o) to preserve or release the interest evidenced by chattel paper
to which Bank is entitled hereunder and to endorse and deliver evidences of
title incidental thereto; and (p) to do all acts and things and execute all
documents in the name of Debtor or otherwise, deemed by Bank as necessary,
proper and convenient in connection with the preservation, perfection or
enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 15 hereof, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any of the Indebtedness, or any obligation, or any
defined event of default, under (i) any contract or instrument evidencing any
Indebtedness, including without limitation, the Notes, or (ii) any other
agreement between Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness,
including without limitation the Credit Agreement; (b) any representation or
warranty made by Debtor herein shall prove to be incorrect, false or misleading
in any material respect when made; (c) Debtor shall fail to observe or perform
any obligation or agreement contained herein; (d) any attachment or like levy on
any property of Debtor; and (e) Bank, in good faith, believes any or all of the
Collateral and/or Proceeds to be in danger of misuse, dissipation, commingling,
loss, theft, damage or destruction, or otherwise in jeopardy or unsatisfactory
in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall
have the right to declare immediately due and payable all or any Indebtedness
secured hereby and to terminate any commitments to make loans or otherwise
extend credit to Debtor. Bank shall have all other rights, powers, privileges
and remedies granted to a secured party upon default under the Texas Business
and Commerce Code (with respect to Collateral located within the State of
Texas), the Utah Uniform Commercial Code (with respect to Collateral located
within the State of Utah), the Colorado Uniform Commercial Code (with respect to
Collateral located within the State of Colorado), and/or the New Mexico Uniform
Commercial Code (with respect to Collateral located within the State of New
Mexico) or as otherwise provided by law, including without limitation, the right
to contact all persons obligated to Debtor on any Collateral or Proceeds and to
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instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank. All rights, powers, privileges and remedies of Bank shall be cumulative.
No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such right,
power, privilege or remedy; nor shall any single or partial exercise of any such
right, power, privilege or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power, privilege
or remedy. Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing. It is agreed that public or private sales, for cash or on credit, to a
wholesaler or retailer or investor, or user of property of the types subject to
this Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks of
such sales. While an Event of Default exists: (a) Debtor will deliver to Bank
from time to time, as requested by Bank, current lists of all Collateral and
Proceeds; (b) Debtor will not dispose of any of the Collateral or Proceeds
except on terms approved by Bank; (c) at Bank's request, Debtor will assemble
and deliver all Collateral and Proceeds, and books and records pertaining
thereto, to Bank at a reasonably convenient place designated by Bank; and (d)
Bank may, without notice to Debtor, enter onto Debtor's premises and take
possession of the Collateral. With respect to any sale by Bank of any Collateral
subject to this Agreement, Debtor hereby expressly grants to Bank the right to
sell such Collateral using any or all of Debtor's trademarks, trade names, trade
name rights and/or proprietary labels or marks.
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or
any part of the Indebtedness, Bank may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred, Bank shall retain all
rights, powers, privileges and remedies herein given. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by Bank to the payment of expenses incurred by Bank in connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid
in full and all commitments by Bank to extend credit to Debtor have been
terminated, the power of sale and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be exercised
by Bank at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.
13. MISCELLANEOUS. (a) Debtor hereby waives any right (i) to require
Bank to make any presentment or demand, or give any notices of any kind,
including without limitation any notice of nonpayment or nonperformance,
protest, notice of protest, notice of dishonor, notice of the intention to
accelerate or notice of acceleration hereunder, (ii) to direct the application
of payments or security for any Indebtedness of Debtor, or indebtedness of
customers of Debtor, or (iii) to require proceedings against others or to
require exhaustion of security; and (b) Debtor hereby consents to extensions,
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forbearances or alterations of the terms of Indebtedness, the release or
substitution of security, and the release of any guarantors. Until all
Indebtedness shall have been paid in full, Debtor shall not have any right of
subrogation or contribution, and Debtor hereby waives any benefit of or right to
participate in any of the Collateral or Proceeds or any other security now or
hereafter held by Bank. Unless otherwise prohibited by law, any requirement of
reasonable notice to Debtor with respect to the sale or other disposition of
Collateral shall be met if such notice is given pursuant to the requirements of
Section 14 hereof at least 5 days before the date of any public sale or the date
after which any private sale or other disposition will be made.
14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in any
other loan documents entered into between Debtor and Bank and to Debtor at the
address of its chief executive office (or personal residence, if applicable)
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon
the earlier of the date of receipt or three (3) days after deposit in the U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel), incurred by Bank in exercising any right, power, privilege or remedy
conferred by this Agreement or in the enforcement thereof, whether incurred at
the trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to Debtor or in
any way affecting any of the Collateral or Bank's ability to exercise any of its
rights or remedies with respect thereto. All of the foregoing shall be paid by
Debtor from the date of demand to the date paid in full with interest at the
maximum rate permitted by applicable law.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Bank and Debtor.
17. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
18. GOVERNING LAW. Unless otherwise provided herein, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas.
19. SUBMISSION TO JURISDICTION.
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(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT SHALL
BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, DEBTOR HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF THE COLLATERAL, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. DEBTOR HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE BANK FROM OBTAINING JURISDICTION OVER DEBTOR IN ANY COURT OTHERWISE
HAVING JURISDICTION.
(b) DEBTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO DEBTOR AT
ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF BANK TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST DEBTOR OR THE COLLATERAL IN ANY OTHER JURISDICTION.
18. WAIVER OF JURY TRIAL. To the fullest extent permitted by applicable
law, Debtor hereby irrevocably and expressly waives all right to a trial by jury
in any action, proceeding, or counterclaim (whether based upon contract, tort or
otherwise) arising out of or relating to this agreement or the transactions
contemplated thereby or the actions of Bank in the negotiation, administration
or enforcement thereof.
Debtor warrants that its chief executive office is located at the
following address: 0000 Xxxxxxxx Xxxx., Xxxxx Xxxxxxxx, XX 00000.
Debtor warrants that the Collateral (except goods in transit) is
located or domiciled at the following additional addresses: 0000 Xxxx Xxxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx, 00000.
IN WITNESS WHEREOF, this Agreement has been duly executed as of
February 6, 2001.
MOUNTAIN COMPRESSED AIR, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and Chief Executive Officer
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Exhibit "A"
[A LIST OF ASSETS BEING PURCHASED AT CLOSING
IMMEDIATELY FOLLOWS THIS PAGE]
Exhibit "B"
[A LIST OF ASSETS BEING FINANCED BY XXXXX FARGO EQUIPMENT FINANCE, INC.
LEASING COMPANY IMMEDIATELY FOLLOWS THIS PAGE]
SCHEDULE 5.4
1. Liabilities of Borrower to Xxxxx Fargo Energy Capital, Inc. pursuant to that
certain Credit Agreement dated as of February 6, 2001;
2. Liabilities of Borrower to Xxxxx Fargo Equipment Finance, Inc. pursuant to
that certain Master Lease dated as of January 31, 2001; and
3. Liabilities of Borrower pursuant to that certain Asset Purchase Agreement
dated as of February 6, 2001.
