EXHIBIT 4(l)
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made
and entered into as of October 31, 1996, by and among CARBONIC
RESERVES, a Nevada corporation (hereinafter referred to as the
"Borrower"), THE XXXXX COMPANY, an Oklahoma corporation
(hereinafter referred to as the "Guarantor"), and LIBERTY BANK AND
TRUST COMPANY OF OKLAHOMA CITY, NATIONAL ASSOCIATION (hereinafter
referred to as the "Bank").
RECITALS
A. The Borrower, the Guarantor and the Bank are parties to
that certain Loan Agreement dated as of May 19, 1995, as amended by
that certain First Amendment dated November 13, 1995, as further amended by that
certain Second Amendment dated March 12, 1996, and as further amended by that
certain Third Amendment dated April 30, 1996 (said Loan Agreement, as
amended, is hereinafter referred to as the "Existing Loan
Agreement"), pursuant to which the Bank has established a revolving
loan facility in favor of the Borrower in the principal amount not
to exceed $750,000.00.
B. The Guarantor has guaranteed the Borrower's payment and
performance of all liabilities, obligations and indebtedness
arising under or in connection with the Existing Loan Agreement
pursuant to the terms and provisions of that certain Guaranty
Agreement dated May 19, 1995 (the "Existing Guaranty").
C. The Borrower has requested that the maximum principal
amount available for borrowing under the revolving loan facility be
increased to $1,250,000.00.
D. The Bank is willing to increase the revolving loan
facility on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, the Guarantor and the Bank hereby agree
to amend and restate the Existing Loan Agreement in its entirety,
effective as of the Effective Date (as hereinafter defined), to
read as follows:
1. DEFINITIONS. As used in this Agreement:
1.1 Terms Defined Above. The terms "Borrower," "Guarantor,"
"Bank," "Existing Loan Agreement" and "Existing Guaranty" have the
respective meanings set forth above.
1.2 Certain Definitions. As used herein, the following terms
have the meanings indicated below (unless the context otherwise
requires):
"Affiliate" means, with respect to any Person, any other
Person who, directly or indirectly, controls or is controlled
by or is under common control with such Person. For purposes
of this definition, a Person has "control" over another Person
if such Person has the ability to exercise a controlling
influence over the management and policies of the other Person
or if such Person directly or beneficially owns five percent
(5%) or more of the equity interest in the other Person. With
respect to the Borrower, the term "Affiliate" includes (i) the
Guarantor and (ii) each officer and director of the Borrower.
"Agreement," and such terms as "herein," "hereof,"
"hereto," "hereby," "hereunder" and the like shall mean and
refer to this Loan Agreement, together with any and all
exhibits and schedules attached hereto, and any and all
supplements, modifications or amendments hereto.
"Applicable Margin" means the margin (expressed as
percentage basis points) used in determining the interest rate
applicable to the Revolving Note, as provided in Section
2.5.1. The Applicable Margin shall be determined as of each
Quarterly Calculation Date for the following fiscal quarter
based upon the Borrower's Cash Flow Coverage Ratio calculated
as of such Quarterly Calculation Date in accordance with the
table set forth below. For the period commencing on the
Effective Date and ending on December 31, 1996, the Applicable
Margin shall be 100 basis points (1.00%).
Cash Flow Coverage Ratio Applicable Margin
------------------------ -----------------
Greater than or equal to 1.25:1.00,
but less than or equal to 1.50:1.00 150 basis points (1.50%)
Greater than 1.50:1.00, but less than
or equal to 2.00:1.00 125 basis points (1.25%)
Greater than 2.00:1.00 100 basis points (1.00%)
"Borrowing Base" means, as of any date of calculation, an
amount equal to the sum of (i) ninety percent (90%) of
Eligible Insured Receivables as of such date plus (ii) sixty
percent (60%) of Eligible Uninsured Receivables as of such
date; provided, however, that in no event shall the amount
determined under clause (ii) be greater than seventy-five
percent (75%) of the amount determined under clause (i).
"Borrowing Base Certificate" means a written certificate
in the form of Exhibit "D" attached hereto
"Business Day" means that portion of any day, other than
a Saturday, Sunday or legal holiday for commercial banks under
the laws of the State of Oklahoma, during which the Bank is
open for substantially all of its normal banking functions.
"Capital Expenditure" means any payment for any fixed
assets or improvements, or for replacements, substitutions or
additions thereto, which are required to be capitalized under
GAAP.
"Cash Flow Coverage Ratio," as of any Quarterly
Calculation Date, means the fraction whose numerator is equal
to the following:
(i) the net income of the Borrower for the four (4)
fiscal quarters ending on such Quarterly
Calculation Date, excluding Affiliate interest
expense; plus
(ii) the Borrower's depreciation and amortization
expense and other noncash expenses for the four (4)
fiscal quarters ending on such Quarterly
Calculation Date;
and whose denominator is equal to the following:
(i) the current maturities of the Borrower's long-term
Debt (including capitalized lease obligations, but
excluding for purposes of this calculation any
payment made by the Borrower in respect of any
Clean-Down Period in order to comply with the
requirements of Section 2.7.2) during the four (4)
fiscal quarters immediately following such
Quarterly Calculation Date; plus
(ii) the total redemptions payable by the Borrower on
the outstanding shares of Preferred Stock during
the four (4) fiscal quarters immediately following
such Quarterly Calculation Date.
"Clean-Down Period" has the meaning set forth in
Subsection 2.7.2 hereof.
"Collateral" means (i) all of the Borrower's Receivables,
(ii) all of the Borrower's rights with respect to Credit
Insurance covering any of the Receivables, (iii) all books,
documents, records, files, ledger cards, electronic data
processing materials and other general intangibles relating to
the Borrower's Receivables, and (iv) all Proceeds of the
foregoing.
"Commitment Period" means the period beginning on the
Effective Date and ending one Business Day prior to the
Maturity Date.
"Compliance Certificate" means a written certificate in
the form of Exhibit "E" attached hereto.
"Contingent Debt" means, as to any Person, any contingent
liabilities, obligations or indebtedness, including (i)
obligations under guaranties (direct or indirect) or similar
undertakings to assure payment of Debt of other Persons, (ii)
obligations to purchase or otherwise acquire Debt of other
Persons (including obligations to repurchase Receivables
previously transferred or assigned by the Borrower to other
Persons), (iii) obligations to indemnify other Persons against
liabilities or losses arising under certain contingencies, and
(iv) warranty obligations and other contractually assumed
obligations not arising in the ordinary course of business.
"Credit Insurance" means a policy of credit insurance
which, among other things, (i) is issued by an Insurance
Provider selected by the Borrower and acceptable to the Bank,
(ii) names the Borrower as insured and the Bank as an
additional insured, (iii) insures each Receivable insured
thereunder against loss on account of nonpayment by the
account debtor when such Insured Receivable becomes three (3)
months past due or six (6) months after shipment date, and
(iv) provides for a cumulative deductible of not more than
$7,500.00 per year.
"Debt" means, as to any Person, (i) all obligations of
such Person which, in accordance with GAAP, would be shown on
its balance sheet as a liability (including obligations for
borrowed money and for the deferred purchase price of property
or services, and obligations evidenced by bonds, debentures,
notes or other similar instruments), (ii) all rental
obligations under leases required to be capitalized under
GAAP, and (iii) Debt of others secured by a Lien on any
Property of such Person, whether or not assumed.
"Default" means the occurrence of any event or the
existence of any circumstances which, but for the giving of
notice or the passage of time, or both, would constitute an
Event of Default.
"Disbursement Request" means a written request from the
Borrower for a Revolving Advance, substantially in the form of
Exhibit "C" attached hereto.
"Effective Date" means the date and time, as provided in
Subsection 4.1 hereof, on which this Agreement and the
increase in the Revolving Loan contemplated hereby become
effective.
"Eligible Insured Receivables" means, as of any
calculation date, the total unpaid balances of all Eligible
Receivables which are Insured Receivables.
"Eligible Receivable" means the face amount (net of
applicable discounts and allowances offered in the ordinary
course of business for prompt payment) of any Receivable (i)
which arises from a bona fide, outright sale of goods or
services in the ordinary course of the Borrower's business,
(ii) which is based upon a valid, enforceable and legally binding
order or contract, (iii) which is evidenced by an invoice or other
documentary evidence satisfactory to the Bank, (iv) as to
which the Bank has a perfected first priority Lien thereon,
and (v) which otherwise meets the criteria set forth in this
definition. The following shall be excluded from Eligible
Receivables:
(a) Any Receivable as to which the goods giving rise thereto
Receivable have not been shipped and delivered to and accepted by
the account debtor, or the services giving rise to such Receivable
have not been performed by the Borrower and accepted by the account
debtor, and any Receivable which otherwise does not represent a
final sale or which is contingent in any respect or for any reason;
(b) Any Receivable as to which the Borrower has
made any agreement with the account debtor for any
deduction therefrom, except for discounts or allowances
made in the ordinary course of business for prompt
payment, all of which discounts or allowances are
reflected in the calculation of the face value of such
Receivable;
(c) Any Receivable as to which the Borrower has
received notice that the account debtor claims right of
rejection or return, or as to which any return, rejection
or repossession of the goods sold has occurred;
(d) Any Receivable which is subject to any offset,
deduction, recoupment, defense to payment, dispute,
chargeback or counterclaim;
(e) Any Receivable arising from a sale on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval, promotional,
consignment, memorandum account or any other repurchase or return
basis;
(f) Any Receivable which is subject to any
assignment, adverse claim or Lien (except in favor of the
Bank);
(g) Any Receivable which is evidenced by, or as to
which the Borrower has received, a promissory note,
chattel paper, draft, check, trade acceptance or other
instrument in payment thereof;
(h) Any Receivable as to which the account debtor
is an Affiliate of the Borrower;
(i) Any Receivable as to which the account debtor
is the United States of America, any state or any
Governmental Authority;
(j) Any Receivable as to which the account debtor
has died or is the subject of dissolution, liquidation,
termination of existence, insolvency, business failure,
receivership, bankruptcy, readjustment of debt,
assignment for the benefit of creditors or similar
proceedings;
(k) Any Receivable as to which the Borrower has an
offsetting trade payable;
(l) Any Receivable arising from a sale made on a
C.O.D. basis;
(m) Any Receivable which remains unpaid for a
period in excess of thirty (30) days beyond the stated
due date or sixty (60) days beyond the original invoice
date;
(n) All Receivables which are due from any account
debtor who owes Receivables ten percent (10%) or more of
which remain unpaid for a period in excess of thirty (30)
days beyond the stated due date or sixty (60) days beyond
the original invoice date;
(o) That portion of the total Receivables owing on
any calculation date from an single account debtor or
related group of account debtors which is in excess of
twenty percent (20%) of the total of all outstanding
Receivables;
(p) Any Receivable which is not payable to the
Borrower;
(q) Any Receivable which is due from an account
debtor who is not located in the United States or which
is payable in a currency other than U.S. dollars; and
(r) Any other Receivable as to which the Bank has
made a determination, in the reasonable exercise of its
discretion, that the prospects for collection are
doubtful.
"Eligible Uninsured Receivables" means, as of any
calculation date, the total unpaid balances of all Eligible
Receivables which are Uninsured Receivables.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended and as in effect from time to time.
"Environmental Law" means any Law applicable to the Borrower's
business and operations or to its Properties that relates to (i) the
prevention, abatement, remediation or elimination of pollution, (ii)
occupational health and safety, sanitation or food standards, (iii)
the protection of the environment, (iv) the protection of individuals
or property from actual or potential exposure (or the effects of
exposure) to an actual or potential spill or release of a Hazardous
Substance, or (v) the manufacture, processing, production, gathering,
transportation, importation, use, treatment, storage or disposal of a
Hazardous Substance. The term "Environmental Law" includes the Clean
Air Act, the Compre-hensive Environmental, Response, Compensation, and
Liability Act of 1980, the Federal Water Pollution Control Act, the
Occupational Safety and Health Act of 1970, the Resource Conservation
and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Hazardous & Solid Waste Amendments Act
of 1984, the Superfund Amendments and Reauthorization Act of 1986,
the Hazardous Materials Transportation Act, any state Laws implementing
the foregoing federal Laws, and all other environmental conservation or
protection Laws.
"Event of Default" means the occurrence of any of the
events or the existence of any of the circumstances specified
in Section 8 hereof.
"Excess Cash Flow" means, with respect to each Quarterly
Calculation Date, the Borrower's net income (or net loss)
after tax (current portion) for the four (4) quarters ending
on such Quarterly Calculation Date, exclusive of Affiliate
interest expense, plus depreciation and amortization expense
and all other noncash expenses of the Borrower for the four
(4) quarters ending on such Quarterly Calculation Date, minus
the current maturities of the Borrower's long-term Debt
(inclusive of capitalized lease obligations) during the four
(4) fiscal quarters immediately following such Quarterly
Calculation Date, and minus redemptions paid or payable with
respect to shares of Preferred Stock during the four (4)
quarters ending on such Quarterly Calculation Date.
"GAAP" means generally accepted accounting principles in
effect from time to time, applied on a consistent basis
throughout the periods involved, as set forth in the opinions
of the Accounting Principles Board of the American Institute
of Certified Public Accountants and/or Statements of the
Financial Accounting Standards Board which may be applicable
as of any determination date.
"Governmental Authority" means any court or any
administrative or governmental department, commission, board,
bureau, authority, agency or body (domestic or foreign).
"Guaranty" means the Guaranty Agreement to be executed by
the Guarantor in favor of the Bank, substantially in the form
of Exhibit "B" attached hereto, to be executed by the Borrower
in favor of the Bank, as provided in Subsection 3.3 hereof.
"Hazardous Substance" means any substance, chemical, pollutant,
waste or other material (i) that consists, wholly or in part, of a
substance that is regulated as toxic or hazardous to human health or
the environment under any Environmental Law, or (ii) that exists
in a condition or under circumstances that constitute a violation
of an Environmental Law.
"Indebtedness" means all liabilities, obligations and
indebtedness of the Borrower to the Bank, of every kind and
description, now existing or hereafter incurred, direct or
indirect, absolute or contingent, due or to become due,
matured or unmatured, and whether or not of the same or a
similar class or character as the Revolving Loan and whether
or not currently contemplated by the Bank or the Borrower,
including (i) principal and interest due and to become due on
the Revolving Loan, (ii) all other liabilities, obligations
and indebtedness of the Borrower to the Bank arising out of or
relating to this Agreement, the Revolving Note, or any other
Loan Documents, (iii) costs and expenses incurred by the Bank,
as described in Subsection 6.13 hereof, and (iv) any
overdrafts by the Borrower on any deposit account maintained
with the Bank.
"Insurance Provider" means American Credit Indemnity
Company, whose home office is located in Baltimore, Maryland,
or such other issuer or underwriter of any policy of Credit
Insurance as shall be selected by the Borrower and approved by
the Bank.
"Insured Receivable" means any Receivable (i) which is
insured, subject to applicable policy limits, under one or
more policies of Credit Insurance, and (ii) as to which the
Borrower has remitted the applicable premium payment and
received confirmation thereof from the Insurance Provider.
"Law" means any law, requirement, statute, rule,
regulation, ordinance, decree, judgment or order of any
Governmental Authority, whether federal, state, regional or
local.
"Lien" means any mortgage, pledge, lien, security
interest, assignment, charge, restriction, claim, or other
encumbrance, whether statutory, consensual or otherwise, which
is granted, created or suffered to exist by any Person on any
of its Properties and which secures any Debt of such Person.
"Loan Documents" means this Agreement, the Revolving
Note, the Security Agreement, the Guaranty, and all other
instruments and documents executed or issued, or to be
executed or issued, in favor of the Bank pursuant hereto or in
connection with this Agreement and all amendments,
modifications, extensions and renewals of any of the
foregoing.
"Material Adverse Effect" means any circumstance or set
of events which (i) has or could reasonably be expected to
have any adverse effect whatsoever on the validity,
enforceability or performance of the Loan Documents, (ii) is
or could reasonably be expected to be material and adverse to
the financial condition or business operations of the
Borrower, (iii) is or could reasonably be expected to impair
the ability of the Borrower to fulfill its obligations under
the terms and conditions of the Loan Documents, or (iv) causes
or creates a Default.
"Maturity Date" means the earlier of (i) April 30, 1998
(or such later date as may be established from time to time by
the Bank pursuant to Subsection 2.11 hereof), or (ii) the date
on which the Revolving Note and all other Indebtedness is
accelerated pursuant to Subsection 9.2 hereof.
"Permit" means any permit, certificate, consent,
franchise, concession, license, authorization, approval,
filing, registration or notification from or with any
Governmental Authority or other Person.
"Permitted Liens" means the following Liens against any
Properties of the Borrower: (i) deposits to secure payment of
worker's compensation, unemployment insurance and other
similar benefits; (ii) Liens for property taxes not yet due;
(iii) statutory Liens against which there are established
reserves in conformity with GAAP and which (A) are being
contested in good faith by appropriate legal proceedings or
(B) arise in the ordinary course of business and secure
obligations which are not yet due and not in default; (iv)
existing Liens disclosed on Schedule I attached hereto, and
(v) Liens in favor of the Bank.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability
company, institution, entity, party, or Governmental
Authority.
"Preferred Stock" means shares of the Borrower's
Redeemable Preferred Stock, par value $1,000 per share.
"Prime Rate" means the index rate of interest recognized
from time to time by the Bank as the "national prime rate."
The Prime Rate is an index rate used by the Bank in pricing
loans and is not necessarily the lowest or best rate offered
by the Bank.
"Proceeds" means all proceeds of the Collateral,
including (i) all proceeds of any insurance (including Credit
Insurance), judgment, indemnity, warranty or guaranty payable
to or for the account of the Borrower with respect to all or
any portion of the Collateral, (ii) all proceeds in the form
of accounts, collections, contract rights, documents,
instruments, chattel paper or general intangibles relating in
whole or in part to the Collateral, and (iii) all payments, in
any form whatsoever, made or due and payable to or for the
account of the Borrower in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or
any portion of the Collateral by any Governmental Authority.
"Property" means any asset or property, whether real,
personal or mixed, tangible or intangible, whether now or at
any time hereafter owned, operated or leased.
"Quarterly Calculation Date" shall mean the last day of
each fiscal quarter during the term of this Agreement
beginning December 31, 1996.
"Receivables" means all accounts of the Borrower, of
every nature whatsoever, whether now existing or hereafter
arising, including all accounts receivable, contracts,
contract rights, and other right to payment for goods sold or
leased or for services rendered (whether or not it has been
earned by performance), together with all rights, interests
(including security interests), claims, remedies and benefits
relating thereto.
"Revolving Advance" means a cash loan from the Bank to
the Borrower under the Revolving Loan.
"Revolving Commitment" means the lesser of (i) the sum of
$1,250,000.00 (or such lower amount as may be established from
time to time by the Borrower pursuant to Subsection 2.12
hereof) and (ii) the Borrowing Base from time to time in
effect; provided, however, that during each Clean-Down Period,
the term "Revolving Commitment" means the lesser of (i) the
sum of $850,000.00 and (ii) the Borrowing Base from time to
time in effect during such Clean-Down Period.
"Revolving Loan" means the revolving loan facility
established by the Bank in favor of the Borrower under the
Existing Loan Agreement and to be continued and increased
pursuant to Subsection 2.1 hereof.
"Revolving Note" means the Amended and Restated
Promissory Note, substantially in the form of Exhibit "A"
attached hereto, to be executed by the Borrower in favor of
the Bank, as provided in Subsection 2.4 hereof.
"Security Agreement" means that certain Security
Agreement executed by the Borrower in favor of the Bank, as
more particularly described in Subsection 3.1 hereof.
"UCC" means the Uniform Commercial Code as in effect from
time to time in any state in which the Collateral is located.
"Uninsured Receivable" means any Receivable which is not
an Insured Receivable.
1.3 Accounting Terms. Accounting and financial terms used
herein and not otherwise defined with respect to the Borrower's
financial statements and financial position shall have the meanings
ascribed thereto pursuant to GAAP.
1.4 Terms Defined in UCC. Terms used herein that are defined
in Article 9 of the UCC (such as the terms "accounts," "chattel
paper," "contract rights," "general intangibles," "instruments" and
"proceeds") shall have the respective meanings set forth therein.
1.5 Construction. The following rules of construction shall
apply, unless elsewhere specifically indicated to the contrary: (a)
all terms defined herein in the singular shall include the plural,
as the context requires, and vice-versa; (b) pronouns stated in the
neuter gender shall include the masculine, the feminine and the
neuter genders; (c) the term "or" is not exclusive; (d) the term
"including" (or any form thereof) shall not be limiting or
exclusive; and (e) all references to this Agreement, the Revolving
Note, the Security Agreement, the Guaranty or any other Loan
Documents shall include any and all modifications, amendments or
supplements hereto or thereto, any and all renewals and extensions
hereof or thereof, and any and all replacements or substitutions
therefor.
2. LENDING AGREEMENT. Subject to the terms and conditions of
this Agreement and the Loan Documents, and in reliance upon the
representations and warranties contained herein and therein:
2.1 Revolving Loan. The Bank agrees to renew, extend and
increase the Revolving Loan established under the Existing Loan
Agreement and to make Revolving Advances thereunder to the Borrower
from time to time during the Commitment Period in an aggregate
amount at any time outstanding not to exceed the Revolving
Commitment. The Borrower may request Revolving Advances from time
to time under the Revolving Loan in accordance with the provisions
of Subsection 2.3 hereof, and may prepay and re-borrow on a
revolving basis; provided, however, that the aggregate principal
amount of all Revolving Advances at any time outstanding under the
Revolving Loan shall not exceed the lesser of (i) the Revolving
Commitment as in effect on such date, and (ii) the Borrowing Base
as in effect on such date. The Borrower acknowledges and agrees
that the principal balance outstanding under the Revolving Loan at
the close of business on the Effective Date was $649,979.25 and
that Borrower has no defense, counterclaim or offset with respect
to the Existing Loan Agreement or the Revolving Loan.
2.2 Use of Proceeds. The proceeds of each Revolving Advance
will be used by the Borrower for working capital purposes.
2.3 Borrowing Procedures. The Borrower may request a
Revolving Advance on any Business Day during the Commitment Period.
The Borrower shall make each request by giving the Bank written
notice (which may be sent via telefacsimile) in the form of a
properly completed and executed Disbursement Request stating the
amount of the requested Revolving Advance (which amount shall be at
least $5,000.00); provided, however, that the Borrower may give
oral notice by telephone if confirmed by a written notice (which
may be sent via telefacsimile) in the form of a properly completed
and executed Disbursement Request within three (3) Business Days
thereafter. Subject to the Borrower's satisfaction of all other
conditions precedent as set forth in Subsection 4.3 hereof, each
Revolving Advance will be made on the same Business Day on which
the Bank receives the Borrower's Disbursement Request, if the
Disbursement Request is received by 1:00 p.m., or on the following
Business Day, if it is received after 1:00 p.m. The Bank will make
each Revolving Advance by crediting the general operating account
maintained by the Borrower with the Bank.
2.4 Revolving Note. The Revolving Advances from time to time
outstanding under the Revolving Loan (including amounts advanced
under the Existing Loan Agreement) will be evidenced by the
Revolving Note, which shall be made and delivered by the Borrower
at or prior to the Effective Date. Notwithstanding the principal
amount stated on the face of the Revolving Note, the actual
principal due from the Borrower on account of the Revolving Note
will be the sum of all Revolving Advances from time to time made by
the Bank (including amounts advanced under the Existing Loan
Agreement), less all principal payments actually received by the
Bank in collected funds. Each Revolving Advance and each principal
payment under the Revolving Loan will be recorded by the Bank in
its books and records, and the unpaid principal balance so recorded
will be presumptive evidence of the principal amount owing under
the Revolving Note.
2.5 Interest.
2.5.1 Rate. The unpaid principal amount of the
Revolving Advances from time to time outstanding under the
Revolving Note will bear interest at a fluctuating rate per
annum equal to the Prime Rate, plus the Applicable Margin;
provided, however, that, upon the occurrence of any Event of
Default and until cured to the satisfaction of the Bank, the
unpaid principal amount of all Revolving Advances from time to
time outstanding under the Revolving Note will bear interest
at a fluctuating rate per annum equal to the Prime Rate (but
not less than the Prime Rate in effect on the date of the
occurrence of the Event of Default), plus five (5) percentage
points. The interest rate payable under the Revolving Note
will be adjusted as of the opening of business on the day of
each change in the Prime Rate and as of the first day of the
fiscal quarter following any change in the Applicable Margin.
2.5.2 Payment. Interest shall be due and payable
monthly in arrears on the last day of each calendar month
commencing November 30, 1996, and on the Maturity Date.
2.5.3 Computation of Interest. Interest on the
Revolving Advances outstanding under the Revolving Note shall
be computed on the basis of a year consisting of 360 days and
for the actual number of days elapsed.
2.6 Non-Use Fee. The Borrower will pay the Bank a "Non-Use
Fee" calculated at the rate of one half of one percent (0.5%) per
annum on the average daily unborrowed amount of the Revolving
Commitment, payable monthly in arrears on the first day of each
month beginning on December 1, 1996, with final payment being due
and payable on the Maturity Date. The calculation of the "Non-Use
Fee" will be based upon a year consisting of 360 days and for the
actual number of days elapsed.
2.7 Principal Payments.
2.7.1 Maturity. The entire outstanding principal
balance of the Revolving Note, together with all unpaid
interest accrued thereon, shall be due and payable in full on
the Maturity Date.
2.7.2 Clean-Down Periods. At least once during each
fiscal year of the Borrower, the Borrower shall designate a
period of thirty (30) consecutive calendar days as a "Clean-
Down Period." During each Clean-Down Period: (a) the aggregate
outstanding Revolving Advances shall not exceed the sum of
$850,000.00; and (b) the Borrower shall not request, and the
Bank shall not be obligated to make, any new Revolving
Advances if the making of such Revolving Advances would cause
the aggregate outstanding Revolving Advances to exceed
$850,000.00.
2.7.3 Mandatory Prepayments. If the principal balance
of the Revolving Advances outstanding under the Revolving Note
at any time exceeds the Borrowing Base then in effect, the
Borrower shall make an immediate mandatory prepayment of
principal on the Revolving Note in an amount equal to the
excess.
2.8 Optional Prepayment. The Borrower may, from time to time,
prepay the outstanding principal amount of the Revolving Note, in
whole or in part, without premium or penalty.
2.9 Making of Payments. All payments, including prepayments,
of principal or interest on the Revolving Note shall be made to the
Bank at its principal office in Oklahoma City, Oklahoma, on or
before 2:00 p.m., on the date due in immediately available funds.
Whenever a payment is due on a day other than a Business Day, the
due date shall be extended to the next succeeding Business Day and
interest (if any) shall accrue during such extension.
2.10 Maximum Lawful Interest Rate. It is not the intention of
the Bank or the Borrower to violate the Laws of any applicable
jurisdiction relating to usury or other restrictions on the maximum
lawful interest rate. The Loan Documents and all other agreements
between the Borrower and the Bank, whether now existing or
hereafter arising and whether written or oral, are hereby limited
so that in no event shall the interest paid or agreed to be paid to
the Bank for the use, forbearance or detention of money loaned, or
for the payment or performance of any covenant or obligation
contained herein or in any other Loan Document, exceed the maximum
amount permissible under applicable law. If from any circumstances
whatsoever fulfillment of any provision hereof or of any other Loan
Document, at the time the performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by
law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity. If from any such
circumstances the Bank shall ever receive anything of value deemed
interest under applicable law which would exceed interest at the
highest lawful rate, such excessive interest shall be applied to
the reduction of the principal amount owing hereunder, and not to
the payment of interest, or if such excessive interest exceeds any
unpaid balance of principal, such excess shall be refunded to the
Borrower. All sums paid or agreed to be paid to the Bank for the
use, forbearance or detention of monies included in the Loans
shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate of interest on
account of such indebtedness is uniform throughout the term
thereof. This Subsection 2.10 shall control every other provision
of the Loan Documents and all other agreements between the Bank and
the Borrower contemplated thereby.
2.11 Renewal and Extension. The parties anticipate that the
Bank may from time to time, in its sole and absolute discretion,
extend the Maturity Date (and thereby extend the Commitment Period)
upon request by the Borrower. The Bank shall not be obligated to
extend the Maturity Date at any time, and the Borrower acknowledges
that the Bank has not made any commitment, written or oral,
concerning extension of the Maturity Date. In the event the
Maturity Date is extended, the terms and provisions of this
Agreement will continue in full force and effect, except as may
otherwise be agreed in writing by the Borrower and the Bank.
2.12 Reduction of Revolving Commitment. The Borrower may at
any time or from time to time permanently reduce the amount of the
Revolving Commitment by giving notice of the amount of such
reduction to the Bank and prepaying the amount by which the
principal balance of the then outstanding Revolving Advances
exceeds the reduced amount of the Revolving Commitment. Further,
the Borrower may terminate the Revolving Commitment at any time by
giving notice of such termination to the Bank and paying the entire
principal balance of the Revolving Note and all unpaid interest,
fees and other charges accrued in respect of the Revolving Loan.
3. SECURITY. As security for the prompt payment and performance
of the Indebtedness, at all times during the term of this Agreement
and until the Indebtedness is paid and satisfied in full:
3.1 Collateral. The Borrower will maintain and continue in
favor of the Bank a valid and perfected security interest in and to
the Collateral, which security interest shall be first and prior to
all other Liens. In order to provide the Bank with a valid and
perfected, first priority security interest in the Collateral, the
Borrower acknowledges that it has previously delivered in favor of
the Bank that certain Security Agreement dated May 19, 1995, and
appropriate UCC financing statements covering the Collateral, all
of which are hereby ratified and re-affirmed in all respects as
security for payment and performance of the Indebtedness. From time
to time after the Effective Date, the Borrower will, upon the
request of the Bank, promptly execute and deliver, or cause to be
executed and delivered, to the Bank such additional security
agreements, instruments, assignments, financing statements and
other documents, and do such other acts and things with respect to
the Collateral, as the Bank may reasonably deem necessary or
advisable to protect or perfect its interest in the Collateral.
3.2 Negative Pledge. Until payment in full of the
Indebtedness, the Borrower agrees that, without the prior written
consent of the Bank, it will not (i) create, assume or suffer to
exist any Lien on any of its Properties, except for Permitted
Liens, (ii) sell, transfer, assign or factor any of its
Receivables, or permit any Person to have any ownership right or
participation interest in any of its Receivables, or (iii) sell,
transfer or otherwise dispose of all or any substantial portion of
its other Properties, whether pursuant to a single transaction or
a series of transactions. Notwithstanding the foregoing:
(a) the Borrower shall be permitted to collect its
Receivables and sell inventory, supplies and materials in the
ordinary course of business;
(b) the Borrower shall be permitted to transfer, sell or
otherwise dispose of Properties (other than Receivables) which
are no longer used or useful in its business, provided that
such sale, transfer or other disposition does not create a
Default or Event of Default under any other provision of this
Agreement;
(c) the Borrower shall be permitted to transfer to the
Insurance Provider for collection any past-due Receivables as
to which the Borrower has filed claims under any applicable
Credit Insurance; and
(d) the Borrower shall be permitted to grant purchase
money security interests in equipment acquired by the Borrower
after the Effective Date, provided that the Debt secured
thereby does not exceed the limitations set forth in
Subsection 7.3.1(iv) hereof.
3.3 Grant of Liens Upon Default. Upon the occurrence of any
Event of Default, or at any time thereafter during the continuation
of such Event of Default, the Bank may, at its option, require the
Borrower to grant valid and enforceable first priority Liens in
favor of the Bank in and to all of its Properties. Promptly upon
any such request, the Borrower shall execute and deliver to the
Bank such security agreements, financing statements, real estate
mortgages, deeds of trust and other collateral documents, in form
satisfactory to the Bank, as the Bank may request and as are
necessary in order to grant and convey to the Bank a first, prior
and perfected Lien in and to all of its Properties.
3.4 Guaranty. The Guarantor hereby absolutely and
unconditionally guarantees the Borrower's prompt payment and
performance of the Indebtedness and further agrees to execute and
deliver the Guaranty to the Bank. The Guarantor acknowledges and
agrees that its obligations under the Guaranty will be in
continuation and increase of its obligations under the Existing
Guaranty and that the Guaranty will supersede and replace the
Existing Guaranty.
4. CONDITIONS OF LENDING.
4.1 Effective Date. This Agreement shall be effective as of
October 31, 1996, subject to the Borrower's satisfaction of the
conditions precedent set forth in Subsection 4.2 hereof.
4.2 Conditions to Effectiveness. This Agreement and the
obligation of the Bank hereunder shall become effective only when
all of the following conditions precedent have been satisfied (to
the extent not previously satisfied):
4.2.1 Execution of Amended Loan Documents. The following
Loan Documents shall have been executed by the appropriate
parties thereto and delivered to the Bank, all in form and
substance satisfactory to the Bank:
(a) this Agreement;
(b) the Revolving Note; and
(c) the Guaranty.
4.2.2 Interest and Fees. All interest, fees and other
charges accrued under the Existing Loan Agreement to the
Effective Date shall have been paid to the Bank in full.
4.2.3 Perfection; Recordings and Filings. All actions
shall have been taken as are necessary or appropriate for the
Bank to acquire and perfect a first, prior and perfected
security interest in and to the Collateral, including the
filing of appropriate UCC-1 financing statements naming the
Borrower as debtor and the Bank as secured party and covering
the Collateral.
4.2.4 Lien Searches. The Bank shall have received
certified responses to UCC lien search requests reflecting
that there are no effective UCC financing statements on file
in any filing offices in the State of Texas or any other
states or jurisdictions in which the Borrower maintains any
place of business or owns any Properties naming the Borrower
as debtor and covering the Collateral, other than (i)
financing statements in favor of the Bank, and (ii) financing
statements relating to Permitted Liens.
4.2.5 Borrowing Base Certificate. The Bank shall have
received a properly completed Borrowing Base Certificate dated
as of the Effective Date.
4.2.6 Corporate Documents. The Bank shall have received
(i) a copy of the Articles or Certificate of Incorporation, as
amended, of the Borrower, certified as true and correct by the
Nevada Secretary of State, (ii) a copy of the Bylaws of the
Borrower, as amended, certified as true and correct by its
duly elected and acting corporate secretary, (iii) a good
standing certificate issued by the Nevada Secretary of State
certifying as to the Borrower's due incorporation and good
standing, and (iv) a certificate issued by the Secretary of
State or equivalent public official of each other state or
jurisdiction in which the Borrower does business or owns any
Properties, certifying as to its good standing as a foreign
corporation under the Laws of such state or jurisdiction.
4.2.7 Resolutions. The Bank shall have received a true
and correct copy of the resolutions adopted by the Board of
Directors of the Borrower duly authorizing the borrowings
contemplated hereunder and the execution, delivery and
performance of the Loan Documents to which it is a party.
4.2.8 Incumbency Certificates. The Bank shall have
received a certificate executed by the duly elected and acting
corporate secretary of the Borrower stating the names and
titles and containing specimen signatures of the officers
authorized to execute and deliver Loan Documents on behalf of
the Borrower as well as the officers authorized to submit
Disbursement Requests and to make telephonic requests for
Revolving Advances.
4.2.9 Insurance Policies. The Bank shall have received
copies of such insurance policies, or binders or certificates
of insurance, in form and substance satisfactory to the Bank,
evidencing that the Borrower has obtained and is maintaining
the minimum insurance coverages required by this Agreement.
4.2.10 Financial Statements. The Bank shall have
received copies of the financial statements referred to in
Subsection 5.6 hereof, and such financial statements shall be
satisfactory to the Bank.
4.2.11 Credit Insurance Policies. The Bank shall have
received copies of all policies of Credit Insurance (including
all endorsements thereto) in effect as of the Effective Date.
As to each of such policies, the Borrower shall have caused
endorsements to be issued with respect thereto in order to add
the Bank as an additional insured.
4.2.12 Other Matters. The Borrower shall have
provided the Bank with such reports, information, financial
statements, and other documents as the Bank has reasonably
requested to evidence the Borrower's compliance with the terms
and conditions of this Agreement and the Loan Documents.
4.2.13 Legal Matters. All legal matters incident to
the Loan Documents and the Revolving Loan shall be
satisfactory to the Bank and its counsel.
4.3 Conditions to Revolving Advances. The obligation of the
Bank to make any Revolving Advance on or after the Effective Date
is subject to the Borrower's satisfaction of the following
additional conditions precedent:
4.3.1 Disbursement Request. The Borrower shall have
submitted a properly executed Disbursement Request for such
Revolving Advance in accordance with the provisions of
Subsection 2.3 hereof.
4.3.2 Borrowing Base. The making of such Revolving
Advance shall not cause the total Revolving Advances
outstanding under the Revolving Note to exceed the Borrowing
Base then in effect.
4.3.3 Representations and Warranties. The
representations and warranties set forth herein and in the
other Loan Documents shall be true and accurate (except to the
extent any representations or warranties as to the financial
condition of the Borrower relate solely to an earlier
specified date).
4.3.4 No Defaults. There shall not have occurred and be
continuing any Default or Event of Default, and the Loan
Documents shall be in full force and effect.
4.3.5 No Violation. The making of such Revolving Advance
shall not cause the Bank to be in violation of any statute or
regulation or any order or decree of any Governmental
Authority.
5. REPRESENTATIONS AND WARRANTIES. In addition to the other
representations and warranties made herein, the Borrower and the
Guarantor jointly and severally represent and warrant to the Bank
as follows:
5.1 Existence and Capitalization. Each of the Borrower and
the Guarantor is a corporation, duly organized, validly existing
and in good standing under the Laws of the state of its organization,
is duly qualified or registered to conduct business and in good
standing under the Laws of all other states in which it does business,
and is duly authorized, qualified and licensed under all applicable Laws
to carry on its business as currently conducted and as contemplated to be
conducted. The Borrower's capital stock consists of 1,000,000 authorized
shares of common stock, par value $0.10 per share, of which 160,000 shares
are issued and outstanding, and 15,400 authorized shares of Preferred Stock,
of which 14,859 shares are issued and outstanding. The Guarantor is
the sole owner of 85.0% of the Borrower's outstanding shares of
common stock and all of the outstanding shares of Preferred Stock.
5.2 Authority. Each of the Borrower and the Guarantor has
full power and authority to execute, deliver and perform its
obligations under this Agreement and other Loan Documents to which
it is a party. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower or the
Guarantor is a party have been duly authorized by all necessary
corporate action on its behalf.
5.3 Validity and Binding Nature. The Loan Documents to which
the Borrower and the Guarantor, as the case may be, is a party
constitute (or upon execution and delivery will constitute) its
valid and legally binding obligations, enforceable in accordance
with their respective terms (subject to any applicable bankruptcy,
insolvency and similar Laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity).
5.4 Conflicting Agreements and Restrictions. Neither the
execution and delivery by the Borrower or the Guarantor of the Loan
Documents to which it is a party, nor fulfillment or compliance
with the terms and provisions thereof, will: (i) conflict with, or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of any
agreement, instrument, undertaking, judgment, decree, order, writ,
injunction, statute, law, rule or regulation to which it is subject
or by which its Properties are bound; (ii) result in the creation
or imposition of any Lien on any of its Properties pursuant to the
provisions of any mortgage, indenture, security agreement,
contract, undertaking or other agreement, except for security
interests created in favor of the Bank; or (iii) require any
authorization, consent, license, approval or authorization of or
other action by, or notice or declaration to, or registration with,
any Governmental Authority, or, to the extent that any such consent
or other action may be required, such consent or other action has
been validly procured or duly taken.
5.5 Actions and Proceedings; Contingent Debt. There is no
action, investigation or proceeding against the Borrower or the
Guarantor, pending or threatened, which questions the validity of
any of the Loan Documents or which is likely to have a Material
Adverse Effect. The Borrower does not have any material Contingent
Debt or contingent liabilities not provided for or disclosed in the
financial statements referred to in Subsection 5.6 hereof.
5.6 Financial Statements. The audited financial statements
of the Borrower for the fiscal year ended December 31, 1995, and
the unaudited interim financial statements of the Borrower for the
fiscal quarter ended September 30, 1996, copies of which have been
provided to the Bank, were prepared in conformity with GAAP (except
for the absence of footnotes and subject, however, to normal year-
end adjustments in the case of the financial statements for the
fiscal quarter ended September 30, 1996), and fairly present the
financial position of the Borrower as of the respective dates
thereof and for the periods stated. There has occurred no material
adverse change, either separately or in the aggregate, in the
financial position of the Borrower since September 30, 1996. The
Borrower does not have (i) any Debt which is not reflected in such
financial statements, but which, under GAAP, was required to be so
reflected, or (ii) any unusual or long-term commitments or any
unrealized or anticipated losses from any commitments which are not
reflected in such financial statements.
5.7 Ownership of Properties; Liens. The Borrower has good
title to all of its Receivables and has good title to or valid
leasehold interests in all of its other Properties, free and clear
of any Liens (other than Permitted Liens).
5.8 No Subsidiaries. The Borrower (i) does not own any
subsidiaries nor any stock in any other corporation, and (ii) is
not a partner or joint venturer in or equity owner of any
partnership, joint venture or other business association.
5.9 Permits. The Borrower has all Permits and has made all
filings, registrations and notifications with or to all
Governmental Authorities which are necessary for it to carry on its
business as now being conducted and as contemplated to be
conducted. All such Permits are valid and subsisting, and the
Borrower is in compliance with the terms of all such Permits.
5.10 No Defaults. Neither the Borrower nor the Guarantor is in
default of or in breach under any material contract, agreement or
instrument to which it is a party or by which it or any of its
Properties may be bound.
5.11 ERISA. Neither the Borrower nor the Guarantor maintains
any employee pension or other benefit plan or trust that is subject
to Title IV of ERISA.
5.12 No Violation of Applicable Law. Each of the Borrower and
the Guarantor is in compliance in all material respects with all
Laws relating to its business and operations in all states and
jurisdictions where it is currently doing business, including
Environmental Laws and Laws pertaining to equal employment
practices, labor relations and civil rights. The Borrower has not
received notice of any claimed violation of any Environmental Law
which has or is likely to have a Material Adverse Effect.
5.13 Compliance with Board Regulations. No part of the
proceeds of any Revolving Advance will be used, and no part of any
loan repaid or to be repaid with the proceeds of any Revolving
Advance was or will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or margin
stock within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System. The assets of the Borrower
do not include any margin securities or margin stock, and the
Borrower does not have any present intention of acquiring any
margin securities or margin stock.
5.14 Investment Company Act; Public Utility Holding Company
Act. The Borrower is not (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding
company," a "subsidiary company" thereof or an "affiliate" of a
"holding company" or of such a "subsidiary company," each within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.15 Solvency. Each of the Borrower and the Guarantor (i) is
solvent with saleable assets of a value that exceeds the amount of
its respective Debt, (ii) is able to and anticipates that it will
be able to meet its respective Debts as they mature, and (iii) has
adequate capital to conduct the business in which it is engaged.
5.16 Survival of Representations. All representations and
warranties made herein or in any other Loan Documents shall survive
the Effective Date, and any investigation at any time made by or
on behalf of the Bank shall not diminish its right to rely thereon.
All statements contained in any certificate or other instrument
delivered by or on behalf of the Borrower or the Guarantor under or
pursuant to this Agreement or any other Loan Documents or in
connection with the transactions contemplated hereby or thereby
shall constitute representations and warranties made hereunder.
6. AFFIRMATIVE COVENANTS. Until the Indebtedness has been paid
in full and all of the Bank's obligations hereunder have been
terminated, the Borrower and the Guarantor agree that, unless the
Bank shall otherwise consent in writing:
6.1 Financial Statements.
6.1.1 Annual Statements. Within ninety (90) days after
the end of each fiscal year of the Borrower, the Borrower will
furnish to the Bank a copy of its audited balance sheet as of
the end of such year and its audited statements of income,
retained earnings and cash flows for such fiscal year, each
prepared in conformity with GAAP and setting forth in each
case, in comparative form, corresponding figures from the
preceding fiscal year, all in reasonable detail and
satisfactory in scope to the Bank. Such audited financial
statements will be certified as to fairness of presentation,
compliance with GAAP and consistency by independent certified
public accountants of recognized standing selected by the
Borrower and acceptable to the Bank.
6.1.2 Monthly Statements. Within thirty (30) after the
end of each calendar month, the Borrower will furnish to the
Bank a copy of its unaudited interim financial statements
(including a balance sheet, statement of income and any other
information which may be requested by the Bank), prepared in
conformity with GAAP and, except for the absence of footnotes,
presented in a manner consistent with the audited financial
statements required under Subsection 6.1.1 hereof and
certified (subject to normal year-end adjustments) as to
fairness of presentation, compliance with GAAP and consistency
by the chief financial officer of the Borrower.
6.1.3 Guarantor Statements. Within ninety (90) days
after the end of each fiscal year of the Guarantor, the
Guarantor will furnish to the Bank a copy of its audited
consolidated balance sheet as of the end of such year and its
audited consolidated statements of income, retained earnings
and cash flows for such fiscal year, each prepared in
conformity with GAAP and setting forth in each case, in
comparative form, corresponding figures from the preceding
fiscal year, all in reasonable detail and satisfactory in
scope to the Bank. Such audited financial statements will be
certified as to fairness of presentation, compliance with GAAP
and consistency by independent certified public accountants of
recognized standing selected by the Guarantor and acceptable
to the Bank.
6.2 Reports.
6.2.1 Borrowing Base Certificates. Within thirty (30)
days after the end of each calendar month, the Borrower will
furnish to the Bank a completed Borrowing Base Certificate,
prepared as of the end of such month and certified by the
chief financial officer of the Borrower, showing the
Borrower's calculation (which shall not be binding on the
Bank) of its Eligible Insured Receivables and Eligible
Uninsured Receivables (stated separately), and the Borrowing
Base.
6.2.2 Compliance Certificates. Within thirty (30) after
the end of each calendar quarter, the Borrower will furnish to
the Bank a completed Compliance Certificate, signed by the
chief financial officer of the Borrower, (i) stating that no
Default or Event of Default has occurred and is then
continuing (or, if any Default or Event of Default has
occurred and is then continuing, setting forth the remedial
steps being taken by the Borrower), and (ii) demonstrating the
Borrower's compliance with the financial covenants set forth
in Subsection 7.8 hereof.
6.2.3 Aging Reports. Within thirty (30) days after the
end of each calendar quarter, the Borrower will furnish to the
Bank a completed aging report: (i) listing or identifying the
Receivables of the Borrower and the unpaid balance of each;
(ii) showing as to each Receivable, (A) the name of the
account debtor, (B) the total amount owing, (C) the status of
payments, (D) the current amount owing, (E) the amounts past
due in relation to the contractual due date (including the
aging thereof), and (F) whether such Receivable is an Insured
Receivable or an Uninsured Receivable.
6.3 Other Information and Notifications.
6.3.1 Financial Information. Within ten (10) days after
each request (or as soon thereafter as is practical under the
circumstances), the Borrower will furnish the Bank with such
other information concerning its business, operations and
financial condition as may be reasonably requested from time
to time by the Bank.
6.3.2 Credit Insurance. The Borrower will promptly notify
the Bank if any policy of Credit Insurance is cancelled or
terminated, of if the rating of the Insurance Provider, as
published by A.M. Best Company, falls below the level of "A,"
or if the Insurance Provider fails to pay any claims submitted
by the Borrower with respect to any Insured Receivable in
excess of $50,000.00.
6.3.2 Litigation. The Borrower will promptly notify the
Bank, but in any event within seven (7) days, after it knows
of any pending suit, action, investigation or administrative
proceeding against or affecting the Borrower or any of its
Properties, if the amount sued for or the value of the
Property involved (notwithstanding any insurance coverage
therefor) is $100,000.00 or more.
6.3.4 Notification of Liens. The Borrower will promptly
notify the Bank, but in any event within seven (7) days, after
it knows of the existence or asserted existence of any Lien on
any of its Properties (excluding only Permitted Liens).
6.3.5 Other Notifications. The Borrower will promptly
notify the Bank, but in any event within seven (7) days, after
it knows that any of the following has occurred: (i) a
Default or an Event of Default; (ii) any change in the assets,
liabilities, financial condition, business, operations,
affairs or circumstances of the Borrower which might have a
Material Adverse Effect; or (iii) any material change in the
accounting practices and procedures of the Borrower, including
a change in fiscal year.
6.4 Books and Records. The Borrower will maintain books and
records and administer a system of accounting in accordance with
sound business practices sufficient to permit the preparation of
financial statements in conformity with GAAP. The Bank will have
the right to examine and copy such books and records at its
expense, and to discuss the affairs, operations, finances and
accounts with the Borrower's officers, during normal business hours
and upon reasonable notice.
6.5 Field Audits; Inspection. The Borrower will permit the
Bank, at the Bank's sole expense, through its authorized agents and
representatives (who need not be employees of the Bank), to conduct
periodic field audits of the Borrower and to review the Borrower's
operations, books and records, accounts receivable methods and
controls, credit policies, charge-off policies, collection
procedures, compliance with applicable Laws, maintenance of Credit
Insurance, and other matters relating to the value and maintenance
of the Collateral and the Borrower's financial reporting.
6.6 Insurance.
6.6.1 Credit Insurance. The Borrower will maintain
Credit Insurance in full force and effect with an Insurer
Provider having a rating (as published by A.M. Best Company)
of least "A" with respect to each Receivable represented to
the Bank to be an Insured Receivable and will comply with all
terms and conditions set forth in each policy of Credit
Insurance covering any Insured Receivables.
6.6.2 Liability and Casualty Insurance. In addition to
the Credit Insurance referred to in Subsection 6.6.1 hereof,
the Borrower will maintain in full force and effect insurance
policies, in amounts and against risks consistent with
insurance coverage customarily or typically maintained by
similar businesses which are similarly situated. If requested,
the Borrower will furnish the Bank with copies of all
insurance policies in effect and evidence of premium payment
thereon.
6.7 Taxes; Other Liens. The Borrower will pay when due all
taxes, assessments, governmental charges or levies owing or payable
by it, and will pay when due all claims for labor, materials,
supplies, rent and other obligations which, if unpaid, might become
a Lien against its Properties, except to the extent any of the
foregoing are being diligently contested in good faith by
appropriate legal proceedings and against which there are
established adequate reserves in conformity with GAAP.
6.8 Existence. Each of the Borrower and the Guarantor will
maintain its existence as a corporation under the Laws of the state
of its incorporation and will be duly qualified or licensed to
conduct business and in good standing under the Laws of each state
or jurisdiction in which it does business.
6.9 Permits. The Borrower will maintain all Permits which
are necessary for it to carry on its business as now being
conducted or as contemplated to be conducted, or which, if not
obtained, would have a Material Adverse Effect.
6.10 Maintenance of Properties. The Borrower will maintain
all of its Properties in good and workable condition, repair and
appearance, normal wear and tear excepted.
6.11 Compliance with Laws. The Borrower will comply in all
material respects with all Laws applicable to its business and
operations or by which its Properties are bound or affected,
including Environmental Laws and Laws pertaining to equal
employment practices, labor relations and civil rights, except to
the extent that any of the foregoing are being diligently contested
in good faith by appropriate legal proceedings and against which
there are established adequate reserves in conformity with GAAP.
6.12 Further Assurances. The Borrower will, upon request,
cure or cause to be cured any defects or omissions in the execution
and delivery of, or the compliance with, the Loan Documents or the
conditions described in Section 4 hereof.
6.13 Reimbursement of Expenses. The Borrower will pay or
reimburse the Bank, either at the Effective Date (if applicable) or
within ten (10) days after the Bank presents a statement therefor,
for (i) all reasonable and customary out-of-pocket expenses
incurred by the Bank in connection with the negotiation and
preparation of this Agreement and the Loan Documents and the
consummation of the transactions herein contemplated, including
filing fees, recording costs, examinations of and certifications as
to public records, and reasonable attorneys' fees and expenses,
(ii) all reasonable and customary out-of-pocket expenses, including
attorneys' fees and expenses, incurred by the Bank in connection
with (A) any amendment, modification, interpretation, termination,
waiver or consent with respect to this Agreement or the other Loan
Documents, or (B) any action taken by the Bank to protect or defend
its security interest in the Collateral, and (iii) upon the
occurrence of any Event of Default, all amounts reasonably
expended, advanced or incurred by the Bank (A) to satisfy any
obligation of the Borrower under the Loan Documents, or (B) to
collect upon the Revolving Note or any other obligations included
in the Indebtedness, or (C) to enforce the rights of the Bank under
the Loan Documents or to collect, foreclose, or otherwise realize
upon the Collateral, which amounts will include all court costs,
attorneys' fees, fees of auditors and accountants, and
investigation expenses reasonably incurred by the Bank in
connection with any such matters.
6.14 Subordination. The Guarantor will at all times own and
control 100% of the outstanding shares of Preferred Stock. The
Guarantor hereby subordinates its rights to receive payment of
dividends on the outstanding shares of Preferred Stock and its
right to require redemption of outstanding shares of Preferred
Stock to the prior payment in full of the Indebtedness. The
Guarantor will not demand or receive payment of or dividends on or
redemption of any outstanding shares of Preferred Stock if (i) any
Default or Event of Default has occurred and is continuing as of
the date any such dividend or redemption is to be paid or made, or
(ii) the payment of such dividend or the making of such redemption
would create or give rise to a Default or Event of Default under
any other provision of this Agreement (including the financial
covenants set forth in Subsection 7.8 hereof).
7. NEGATIVE COVENANTS. Until the Indebtedness has been paid in
full and all of the Bank's obligations hereunder have been
terminated, each of the Borrower and the Guarantor agrees that,
unless the Bank shall otherwise consent in writing:
7.1 Changes in Structure.
7.1.1 Mergers, Consolidations and Reorganizations. The
Borrower will not: (i) merge or consolidate with any Person
(or enter into any merger or consolidation agreement or plan);
(ii) permit any such merger or consolidation with it; or (iii)
adopt or effect any plan of reorganization or
recapitalization.
7.1.2 Formation of Subsidiaries. The Borrower will not:
(i) form or acquire any subsidiaries or otherwise acquire any
stock in any other corporation; or (ii) become a partner or
joint venturer in or equity owner of any partnership, joint
venture or other business entity.
7.1.3 Changes in Nature of Business. The Borrower will
not: (i) discontinue its business or any material line of
business; (ii) make any material change in the nature of or
manner in which it conducts its business; or (iii) liquidate,
wind-up or dissolve.
7.2 Loans to and Transactions with Affiliates.
7.2.1 Loans. The Borrower will not make or suffer to
exist any loans, advances and other extensions of credit,
directly or indirectly, to or for the benefit of its
Affiliates, other than (i) intercompany receivables due from
Affiliates arising from normal trade activity consistent with
current practice, and (ii) advances of reasonable travel
expenses to employees of the Borrower in the ordinary course
of business.
7.2.2 Other Transactions. The Borrower will not enter
into any other transaction with any Affiliate, including any
purchase, sale or exchange of property or the rendering of any
services, except in the ordinary course of and pursuant to the
reasonable requirements of its business and upon fair and
reasonable terms no less favorable to it than would exist in
a comparable transaction with a Person other than an
Affiliate.
7.3 Restrictions on Debt.
7.3.1 Debt. The Borrower will not create, incur, become
obligated for, guarantee or suffer to exist any Debt, except
for: (i) the Indebtedness; (ii) currently outstanding Debt
reflected in the financial statements referred to in
Subsection 6.5 hereof or disclosed on Schedule II attached
hereto; (iii) current accounts payable arising in the ordinary
course of business which are not past due or in default and
which are not evidenced by any promissory note or other
instrument; and (iv) additional Debt not in excess of $200,000
incurred after the Effective Date.
7.3.2 Contingent Debt. The Borrower will not, directly
or indirectly, create, incur, become obligated for or suffer
to exist any Contingent Debt.
7.4 Restrictions on Dividends. The Borrower will not: (i)
declare, make or pay any dividends on shares of any class of its
capital stock, or set apart any sum of money or any assets for the
payment of dividends, or make any other distribution, by reduction
of capital or otherwise, in respect of any class of its capital
stock; (ii) purchase, redeem, retire, or otherwise acquire, either
directly or indirectly, any shares of any class of its capital
stock, or set apart any sum of money or any of its assets therefor,
or (iii) make any other type of payment or distribution of cash,
property or assets to or among any of its shareholders (in their
capacities as shareholders). Notwithstanding the foregoing, the
Borrower may declare and pay dividends on, and/or redeem shares of,
its currently outstanding Preferred Stock, provided that (A) no
Default or Event of Default has occurred and is continuing as of
the date any such dividend or redemption is to be paid or made, and
(B) the payment of such dividend or the making of such redemption
would not create or give rise to a Default or Event of Default
under any other provision of this Agreement (including the
financial covenants set forth in Subsection 7.8 hereof).
7.5 Insurance.
7.5.1 Credit Insurance. The Borrower will not: (i)
breach or fail to perform any term or condition of any policy
of Credit Insurance if such breach or failure could cause such
policy to be suspended, impaired or defeated with respect to
any Insured Receivables included in the Borrowing Base; (ii)
permit any event or circumstance to occur or exist which would
authorize or entitle the Insurance Provider to terminate or
cancel any policy of Credit Insurance issued by it, or to
refuse payment or coverage under any Credit Insurance, with
respect to any Insured Receivables included in the Borrowing
Base; or (iii) make or permit any material modification or
change in the terms or conditions of any Credit Insurance.
7.5.2 Other Insurance. The Borrower will not commit or
suffer to be committed any act whereby any insurance required
under Subsection 6.7 will or may be suspended, impaired or
defeated, nor suffer or permit its Properties to be used in a
manner not permitted under any insurance policy then in
effect.
7.6 Capital Expenditures. The Borrower will not incur
aggregate Capital Expenditures in any period of four consecutive
quarters ending on a Quarterly Calculation Date in excess of the
Borrower's Excess Cash Flow for the same period.
7.7 Sale-Leaseback Transactions. The Borrower will not make
or permit the occurrence of any sale, transfer or disposition of
any of its Properties followed by the Borrower's leasing or rental
of such Property, or any portion thereof, as lessee.
7.8 Financial Covenants.
7.8.1 Current Ratio. The Borrower will not permit its
current ratio (i.e., the ratio of its current assets to its
current liabilities) to be less than 1.00 to 1.00 (1.00:1.00)
at any time. For purposes of this Subsection 7.8.1, current
liabilities shall include the outstanding Revolving Advances,
but shall exclude (i) the current maturities of long-term
Debt, and (ii) Preferred Stock redemptions payable.
7.8.2 Tangible Net Worth. The Borrower will not at any
time permit its tangible net worth to be less than
$5,000,000.00.
7.8.3 Debt to Net Worth Ratio. The Borrower will not
permit the ratio of its total Debt to its tangible net worth
to exceed 0.85 to 1.00 (0.85:1.00) at any time.
7.8.4 Cash Flow Coverage Ratio. The Borrower will not
permit its Cash Flow Coverage Ratio, determined as of each
Quarterly Calculation Date, to be less than 1.25 to 1.00
(1.25:1.00).
8. EVENTS OF DEFAULT. The occurrence of any of the following
events or existence of any of the following circumstances, unless
waived in writing by the Bank, will constitute an "Event of
Default":
8.1 Nonpayment by Borrower. If the Borrower fails to pay any
principal of or interest on the Revolving Note as and when the same
becomes due and payable (whether at the stated due date, upon a
mandatory prepayment, or otherwise); or if the Borrower fails to
pay any installment of the Non-Use Fee or any other amount due and
payable to the Bank, under the terms of the Loan Documents or
otherwise, within five (5) days after the date such amount becomes
due and payable; or
8.2 Representations and Warranties. If any representation,
warranty, statement, certificate, schedule or report made or
furnished to the Bank by or on behalf of the Borrower or the
Guarantor proves to have been false or erroneous in any material
respect as of the date on which such warranty or representation was
made; or
8.3 Breach of Covenants. If (i) the Borrower or the Guarantor
fails to perform or observe any covenant or agreement contained in
Subsection 6.1, 6.2, 6.6, 6.7, 6.9, 6.10, 6.11 or 6.13 which is
applicable to it and such failure continues for thirty (30) days
after written notice thereof from the Bank to the Borrower or the
Guarantor, as the case may be, or (ii) the Borrower or the
Guarantor fails to perform or observe any covenant or agreement
contained in Subsection 6.3, 6.4, 6.5, 6.8, 6.12, 6.14, 7.1, 7.2,
7.3, 7.4, 7.5, 7.6, 7.7 or 7.8 which is applicable to it; or
8.4 Other Breach of Covenants. If the Borrower or the
Guarantor fails to perform or observe any covenants or agreements
contained in any other Loan Document to which it is a party and
such failure continues beyond the expiration of any applicable
grace period expressly stated therein; or
8.5 Insolvency. If the Borrower or the Guarantor (i) applies
for or consents to the appointment of a custodian, receiver,
trustee or liquidator for itself or any of its Properties, (ii)
admits in writing the inability to pay, or generally fails to pay,
its debts as they become due, (iii) makes a general assignment for
the benefit of creditors, (iv) commences any proceeding relating to
its bankruptcy, reorganization, liquidation, receivership,
conservatorship, insolvency, readjustment of debt, dissolution or
liquidation, or if action is taken for the purpose of effecting any
of the foregoing, (v) suffers any such appointment or commencement
of a proceeding as described in clause (i) or (iv) of this
Subsection 8.5, which appointment or proceeding is not terminated
or discharged within sixty (60) days, or (vi) becomes insolvent; or
8.6 Judgments. If the Borrower or the Guarantor has entered
against it by any court or binding arbitrator a final judgment or
award for an uninsured amount in excess of $500,000.00, or if the
Borrower or the Guarantor enters into a settlement agreement which
obligates the Borrower or the Guarantor to pay an uninsured amount
in excess of $500,000.00; or
8.7 Default on Other Debt. If the Borrower or the Guarantor
fails to pay any principal or interest on any Debt for borrowed
money as and when the same becomes due and payable and such failure
continues beyond the expiration of any applicable grace period
expressly provided, or if any default or event of default shall
occur under the terms of any agreement or other document governing
any such Debt which would entitle the holder or holders thereof to
accelerate the maturity thereof; or
8.8 Changes With Respect to Credit Insurance. If (i) any
policy of Credit Insurance covering any Insured Receivable is
terminated or cancelled, (ii) the rating of the Insurance Provider,
as published by A.M. Best Company, falls below the level of "A" and
the Borrower fails to obtain replacement Credit Insurance from
another Insurer Provider acceptable to the Bank within ninety (90)
days thereafter, or (iii) the Insurance Provider fails to pay
claims filed by the Borrower on account of the Insurance Provider's
insolvency or inability to pay; or
8.9 ERISA Noncompliance. If any employee pension or other
benefit plan or trust sponsored by the Borrower or the Guarantor or
maintained on behalf of employees of the Borrower incurs an
"accumulated funding deficiency" (as such term is defined in
Section 302(a)(2) of ERISA), whether or not waived by the Internal
Revenue Service, or if a "reportable event" (as such term is
defined in Section 4043(b) of ERISA) occurs with respect to any
such plan or trust as a result of which the Borrower could be
obligated to make payments to the Pension Benefit Guaranty
Corporation aggregating in excess of five percent (5%) of its
tangible net worth, or if in connection with the termination of any
such plan or trust, the Borrower incurs a liability to the Pension
Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of
ERISA.
9. REMEDIES UPON DEFAULT.
9.1 Termination of Revolving Commitment. Upon the occurrence
of any Event of Default specified in Subsection 8.5 hereof, the
Revolving Commitment and the obligation of the Bank hereunder to
make Revolving Advances will automatically be terminated. Upon the
occurrence of any other Event of Default, the Bank may, at its
option, without notice or demand, terminate the Revolving
Commitment and its obligation to make further Revolving Advances.
9.2 Acceleration of Indebtedness. Upon the occurrence of any
Event of Default specified in Subsection 8.5 hereof, the Revolving
Note and all other Indebtedness will become immediately due and
payable, without notice or demand. Upon the occurrence of any
other Event of Default, the Bank may, at its option, without notice
or demand, declare the Revolving Note and all other Indebtedness to
be immediately due and payable.
9.3 Remedies. Upon the occurrence and during the
continuation of any Event of Default, the Bank will be entitled to
exercise all remedies available to it under the Loan Documents or
otherwise under applicable law, including (i) exercising any and
all rights under the Security Agreement and the UCC with respect to
the Collateral, and (ii) commencing one or more actions against the
Borrower or the Guarantor and reducing the claims of the Bank to
judgment.
9.4 Cumulative Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right or remedy under
the Loan Documents will operate as a waiver thereof, nor will any
single or partial exercise by the Bank of any right thereunder
preclude any other or further right of exercise thereof or the
exercise of any other right. The remedies provided herein and in
the other Loan Documents are cumulative and not alternative.
9.5 Waiver of Default. The Bank may, by an instrument in
writing, waive any Default or Event of Default and any of the
consequences of such Default or Event of Default, but no such
waiver shall extend to any subsequent or other Default or Event of
Default or impair any consequence of such subsequent or other
Default or Event of Default.
9.6 Deposits; Setoff. Regardless of the adequacy of any
other collateral security held by the Bank, any deposits or other
sums credited by or due from the Bank to the Borrower will at all
times constitute collateral security for the Indebtedness and may
be set off against the Indebtedness at any time, whether or not the
Indebtedness has been declared immediately due and payable. The
rights granted by this Subsection 9.6 are in addition to the rights
of the Bank under any statutory banker's lien or the common law
right of set off. This Subsection 9.6 shall not apply to any
monies of which the Borrower is not the beneficial owner,
regardless of the name in which the money is deposited, or to any
monies which the Borrower is contractually obligated to spend in
whole or in part for the account of others, provided that the
Borrower has established special accounts or given the Bank written
notice that particular funds are beneficially owned by others or
are dedicated for particular expenditures. If the Borrower fails
to establish such special accounts and fails to give such notice,
the Bank may assume that funds on deposit to the account of the
Borrower belong solely to the named depositor and are subject to
this Subsection 9.6.
9.7 Application of Payments. During the continuation of any
Event of Default, all payments received by the Bank with respect to
the Indebtedness, whether from the Borrower, the Guarantor,
recoveries upon the Collateral, or otherwise, may be applied by the
Bank to any liabilities, obligations or indebtedness included in
the Indebtedness selected by the Bank in its sole and exclusive
discretion.
10. GENERAL PROVISIONS. It is further agreed as follows:
10.1 Participating Lender. The Borrower understands that,
although the Revolving Note and the other Loan Documents name the
Bank as the holder thereof, the Bank may from time to time sell one
or more participation interests in the Revolving Loan to one or
more other financial institutions. The Borrower agrees that,
subject to the terms of the agreements of participation, each
participating lender will be entitled to rely on the terms of this
Agreement and the other Loan Documents as fully as if such
participating lender had been named as the holder of the Revolving
Note and the other Loan Documents.
10.2 Hold Harmless. Except for a successful claim against the
Bank by the Borrower, the Borrower will indemnify and hold the Bank
and each participant in the Revolving Note harmless from all
liability, loss, damages or expense, including reasonable
attorney's fees, that the Bank or any such participant may incur in
good faith as a result of entering into the Loan Documents or
establishing the Revolving Loan, or in compliance with or in the
enforcement of the terms of the Loan Documents.
10.3 Notices. All notices, notifications, requests and
demands required or authorized hereunder shall be given in writing
or shall be served in person, delivered by overnight courier for
next day delivery or by certified mail, return receipt requested,
or transmitted by telefacsimile, addressed as follows:
If to the Borrower: Carbonic Reserves
00000 Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000
If to the Guarantor: The Xxxxx Company
0000 Xxxxx Xxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxx Xxx, Xx.
Fax: (000) 000-0000
If to the Bank: Liberty Bank and Trust Company
of Oklahoma City, N.A.
000 X. Xxxxxxxx
P.O. Box 25848
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx Xxxxxx
Fax: (000) 000-0000
or at such other address as any party hereto shall designate for
such purpose in a written notice to the other party hereto.
Notices served in person will be effective and deemed given when
delivered; notices sent by certified mail will be effective and
deemed given three (3) Business Days after being deposited in the
U.S. mail, postage prepaid; notices sent by overnight courier for
next day delivery will be effective and deemed given on the next
Business Day after being delivered to the courier service; and
notices transmitted by telefacsimile will be deemed given when
sent, as indicated by the sender's written confirmation of
transmission.
10.4 Applicable Law. This Agreement and all other Loan
Documents have been delivered to and accepted by the Bank in the
State of Oklahoma, are to be performed in the State of Oklahoma and
shall be deemed contracts made under the Laws of the State of
Oklahoma, and all rights and indebtedness hereunder, including
matters of construction, validity and performance, shall be
governed by the Laws of the State of Oklahoma.
10.5 Construction. Nothing in this Agreement shall be
construed to constitute the Bank as a joint venturer with the
Borrower or to constitute a partnership. The descriptive headings
of the Sections and Subsections of this Agreement are for
convenience only and shall not be used in the construction of the
content of this Agreement.
10.6 Binding Effect. This Agreement and the other Loan
Documents shall be binding on, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns;
provided, that without the prior, written consent of the Bank, the
Borrower will not assign or transfer any of its interest, rights or
obligations arising out of or relating to the Loan Documents.
10.7 Exhibits and Schedules. The exhibits and schedules
attached to this Agreement are incorporated herein for all purposes
and shall be considered a part of this Agreement.
10.8 Entire Agreement; Conflicting Provisions. This Agreement
constitutes the entire agreement of the parties hereto with respect
to the Revolving Loan and all matters arising out of or related
thereto, superseding the Existing Loan Agreement and all prior
negotiations, understandings or communications (written or oral).
In the event of any direct conflict between or among the provisions
of this Agreement and the provisions of any other Loan Documents,
the provisions of this Agreement shall control. All Loan Documents
executed pursuant to the Existing Loan Agreement shall continue in
full force and effect according to their original stated terms,
except to the extent that any Loan Document has been amended and/or
restated in connection with the execution and delivery of this
Agreement.
10.9 Waivers. No act, delay, omission or course of dealing
between or among the parties hereto will constitute a waiver of
their respective rights or remedies under this Agreement or the
other Loan Documents. No waiver, change, modification or discharge
of any of the rights and duties of the parties hereto will be
effective unless contained in a written instrument signed by the
party sought to be bound.
10.10 Jurisdiction and Venue. All actions or proceedings
with respect to this Agreement or any of the other Loan Documents
may be instituted in any state or federal court sitting in Oklahoma
County, Oklahoma, as the Bank may elect.
10.11 Counterpart Execution. This Agreement may be executed
in any number of counterparts, all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be duly executed in multiple counterparts, each of
which shall be considered an original, effective as of the
Effective Date.
CARBONIC RESERVES,
a Nevada corporation
XXXX XXX, XX.
Xxxx Xxx, Xx., Vice President
THE XXXXX COMPANY,
an Oklahoma corporation
XXXX XXX, XX.
Xxxx Xxx, Xx., President
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, NATIONAL ASSOCIATION
XXXX XXXXXXX XXXXXX
Xxxx Xxxxxxx Xxxxxx, Vice President
EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Note
Exhibit B - Form of Guaranty Agreement
Exhibit C - Form of Disbursement Request
Exhibit D - Form of Borrowing Base Certificate
Exhibit E - Form of Compliance Certificate
Schedule I - Existing Liens
Schedule II - Existing Debt
