INTERCOMPANY CREDIT AGREEMENT
EXHIBIT 10.7
This INTERCOMPANY CREDIT AGREEMENT (this “Agreement”) by and between Apollo Resources International, Inc., a Utah corporation (“ARI”), and Earth Biofuels, Inc, a Delaware corporation (“EBF”), is effective as of January 1, 2006.
SECTION 1.01 DEFINITIONS. The following terms, as used herein, have the following meanings:
(a) “ADVANCE” means, an advance by ARI, as applicable, pursuant to Section 2.01 or 2.02, which shall include, without limitation, advances by ARI to EBF or on behalf of ARI and amounts owed by EBF and its Subsidiaries for fees, costs and expenses between the parties.
(b) “EBF BALANCE” means, with respect to an Interest Period, the net daily balance of funds owed by EBF to ARI as set forth in the intercompany account maintained by EBF pursuant to Section 2.05 hereof.
(c) “CODE” means, the Internal Revenue Code of 1986 as amended.
(d) “ARI BALANCE” means, with respect to an Interest Period, the net daily balance of funds owed by EBF to ARI as set forth in the intercompany account maintained by ARI pursuant to Section 2.05 hereof.
(e) “ERISA” means, the Employee Retirement Income Security Act of 1974, together with all amendments from time to time thereto.
(f) “ERISA AFFILIATE” means, any trade or business (whether or not incorporated) which is under common control with EBF within the meaning of the regulations promulgated under the Internal Revenue Code of 1986 as amended.
(g) “EVENT OF DEFAULT” means, any material default of the terms of this Agreement.
(h) “INDEBTEDNESS” means, with respect to any Person at any time, without duplication, all obligations of such Person which, in accordance with generally accepted accounting principles, consistently applied, should be classified as liabilities on a consolidated balance sheet of such Person prepared in accordance with generally accepted accounting principles, consistently applied, but in any event shall include: (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid or accrued, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than accounts payable on normal payment terms to suppliers incurred in the ordinary course of business), (f) all obligations of others secured by any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all capitalized lease obligations of such Person, (h) all obligations of any partnership or joint venture as to which such Person is or may become personally liable, (i) all guarantees by such Person of Indebtedness of others, and (j) all contingent obligations of such Person.
(i) “INTEREST PERIOD” means, the period commencing on the date of an Advance and ending on the date the Advance is paid.
(j) “INTEREST RATE” has the meaning ascribed to it in Section 2.02.
(k) “INVESTMENT” means, any investment in any Person, whether by means of share purchase, capital contribution, loan or otherwise; in determining from time to time the amount of Investments, share purchases and capital contributions shall be taken at the original cost thereof regardless of any subsequent appreciation or depreciation therein and loans shall be taken at the principal amount thereof remaining unpaid.
(l) “LIEN” means, any security interest, mortgage, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument, in, of, or on any of the assets or properties, now owned or hereafter acquired, of EBF or any Subsidiary, whether arising by agreement or operation of law.
(m) “PERSON” means, any natural person, corporation, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity.
(n) “SUBSIDIARY” means, any corporation a majority of the shares of the outstanding stock of which have ordinary voting power for the election of directors is owned by EBF, either directly or through one or more of its Subsidiaries.
ARTICLE II
ADVANCES AND CASH MANAGEMENT
(a) Subject to the other provisions of this Section 2.03, interest shall accrue on Advances at the rate (the “Interest Rate”) of seven per cent (7%). Interest shall be calculated on the basis of a 360 day year for the actual number of days elapsed. Interest payments for Interest Periods ending (i) prior to the termination of this Agreement shall be treated as Advances pursuant to Sections 2.01
and 2.02 herein, as applicable, on the first day of the following Interest Period and (ii) on the termination of this Agreement shall be payable immediately (each an “Interest Payment”).
(b) The interest payable by EBF under this Agreement shall be calculated by multiplying the Interest Rate by the EBF Balance for the applicable days in the Interest Period. The interest payable by ARI under this Agreement shall be calculated by multiplying the Interest Rate by ARI Balance for the applicable days in the Interest Period. The Interest Payment required to be made by each party is independent of the Interest Payment required to be paid by the other party, and interest may be paid by both EBF and ARI for any given Interest Period. EBF shall calculate the amount of interest payable by both EBF and ARI for each Interest Period and, upon request, shall provide notice thereof to ARI, together with supporting calculations.
(c) All calculations shall be performed by EBF.
applied to the reduction of the principal hereof and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal hereof such excess shall be refunded to the party deemed to have made such payment. All interest paid or agreed to be paid to either party shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full period until payment in full of the principal (including the period of any renewal or extension hereof) so that the interest hereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the parties.
ARTICLE III
COVENANTS OF EBF
Until the repayment of all Advances under this Agreement, EBF will:
SECTION 3.01 CORPORATE EXISTENCE. Maintain, and, except as provided in Section 3.7 hereof, cause each Subsidiary to maintain, (a) its corporate existence in good standing under the laws of the jurisdiction of its incorporation, (b) its right to transact business in each jurisdiction in which the character of the properties owned or leased by it or the business conducted by it makes such qualification necessary and the failure to so qualify would permanently preclude EBF or such Subsidiary from enforcing its rights with respect to any material assets or expose EBF or such Subsidiary to any material liability and (c) conduct and operate its business in a lawful manner as presently conducted.
SECTION 3.02 COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations and orders (including without limitation Regulation X of the Board of Governors of the Federal Reserve System), such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings and for which adequate reserves have been established.
SECTION 3.03 INSURANCE. Maintain, and cause each Subsidiary to maintain, in full force and effect insurance comparable to present policies in amounts and risks covered plus such additional insurance, if any, as may from time to time be required to provide coverage customarily maintained by similarly situated companies.
obligations hereunder. The provisions of this Section 4.01 shall survive any termination of this Agreement.
(a) after five years (5) by either party, upon 90 days’ notice to the other party, if ARI ceases to own, directly or indirectly, 50% or more of the outstanding stock of EBF;
(b) by either party, immediately upon notice to the other party, if (i) that other party makes a general assignment of all or substantially all of its assets for the benefit of its creditors; (ii) that other party applies for, consents to or acquiesces in the appointment of a receiver, trustee, custodian or liquidator for its business or all or substantially all of its assets; (iii) that other party files, or consents to or acquiesces in a petition seeking relief or reorganization under any bankruptcy or insolvency laws; or (iv) a petition seeking relief or reorganization under any bankruptcy or insolvency laws is filed against that other party and is not dismissed within 90 days after it was filed;
(c) by either party, immediately upon notice to the other party, if that other party’s material breach of this Agreement continues uncured or uncorrected for 30 days after both the nature of that breach and the necessary cure or correction has been agreed upon by the parties or otherwise determined by the dispute resolution procedure described in Section 3.01; provided that if the parties agree or it is determined by the dispute resolution procedure that the material breach is not capable of being cured or corrected, the termination shall be effective immediately upon notice;
(d) by either party, immediately upon notice to the other party, if it determines that performance of its rights or obligations under this Agreement is or becomes illegal;
(e) by either party, immediately upon notice to the other party, if payments made by the other party are subject to any deduction or withholding for or on account of any tax, unless the other party agrees to increase its payments such that, after all required deductions have been made, the party receives a net amount equal to the sum it would have received had no such deductions been made; or
(f) by either party, immediately upon notice to the other party, if it determines that its compliance with any law or regulation or any guideline or request from any central bank or governmental or regulatory authority would create a cost or increase the cost of providing credit under this Agreement, unless the other party agrees to pay amounts sufficient to indemnify for such cost or increase in cost.
SECTION 4.11 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Texas, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction.
APOLLO
RESOURCES
INTERNATIONAL, INC.
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By: |
/s/ XXXXXX X. XXXXXXXXXX, III |
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Xxxxxx X. XxXxxxxxxx, III |
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Chief Executive Officer |
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EARTH BIOFUELS, INC. |
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By: |
/s/ XXXXXX XXXXX |
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Name: Xxxxxx Xxxxx |
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Title: Chief Financial Officer |
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