EXHIBIT 10.1
LOAN AGREEMENT
United Wellhead Services, Inc., hereinafter referred to as the "Borrower"
has had negotiations with Community National Bank hereinafter referred to as the
"Bank" for the purpose of establishing a $700,000.00 working capital line of
credit with the Bank.
The Bank is willing to establish said working capital line of credit upon
the terms, provisions, and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. GENERAL PROVISIONS: On the date hereof and for and period of one year
from the date hereof, Bank agrees, upon the terms, provisions and conditions
contained in this Loan Agreement, to lend to Borrower sums requested by Borrower
provided that said sums, when added to the unpaid principal balance of other
sums lent to Borrower pursuant to the terms hereof do not exceed the lesser of
the following amounts:
(a) an aggregate unpaid principal balance at any one time of $700,000.00
and
(b) the Borrower's Borrowing Base.
The Borrowing Base is defined as the sum of 75% of Borrower's accounts
receivable less than 60 days past due and 25% of Borrower's inventory less the
outstanding balance of the $50M capital loan executed simultaneously with the
aforementioned. At its option, Bank may reduce the Borrowing Base by eliminating
any or all accounts receivable; however, before Bank may reduce the Borrowing
Base by eliminating these accounts receivable, Bank must give Borrower written
notice of the specific accounts that Bank intends to eliminate from the
calculation of the Borrowing Base. The reduction in the Borrowing Base will be
effective 3 days after the Bank transacts such written notice.
Bank shall lend to Borrower an amount equal to the sum specified by the
Borrower, subject to the restrictions and conditions contained in this Loan
Agreement and the Promissory Note.
2. PROMISSORY NOTE: The working capital line of credit (the "Loan") shall
be evidenced by a draw type promissory note of the Borrower dated of even date
herewith in the face amount of $700,000.00 (the "Promissory Note"). Said
Promissory Note shall bear interest on advances from the date of each advance
until maturity at a variable rate equal to Wall Street Journal Prime Floating
daily, plus two percent. Said rate shall be subject to renegotiation as
compensating balances dictate. Accrued interest shall be payable monthly on the
1st day of each month, beginning February 1, 1997. And continuing monthly until
all principal and unpaid accrued interest become due and payable on the 16th day
of January, 1998.
3. COLLATERAL: Borrower agrees to grant Bank a first lien security interest
in all of its accounts receivable to secure payment of the indebtedness
evidenced by the Promissory Note and performance by Borrower of all the terms,
provisions and conditions of this Loan Agreement. Borrower agrees to execute and
deliver to Bank any and all documents (the "Security Documents") necessary to
create and perfect said security interest.
4. GUARANTEES: As further and additional security for the repayment of the
loans and the performance by Borrower of the terms, provisions and conditions of
this Loan Agreement, Xxxxxxx X. Xxxxxxxx, Xx Xxxxxx and Xxxxxx Xxxxxx
(collectively hereinafter referred to as the "Guarantors") hereby agree to
execute said promissory note as a Guarantor, by the terms of which each agrees
to guarantee the payment of the Promissory Note and the compliance by Borrower
with the terms, provisions and conditions of this Loan Agreement.
5. BORROWER'S REPRESENTATIONS: Borrower represents and warrants that:
(a) Financial Statements: The financial statements that have been furnished
to Bank reflect accurately the current status of operations of the Borrower as
of the respective dates of said statements.
(b) Litigation: There are no actions, suits, or proceedings pending or, to
the knowledge of its officers, directors and shareholders of Borrower threatened
against the Borrower, in any court or before any
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governmental department, agency or instrumentally, an adverse decision in which
might materially affect the ability of Borrower to perform its obligations under
this Loan Agreement, the Promissory Note and the Security Documents.
(c) Authority and Compliance: Borrower has full power and authority to
enter into this Agreement, and to make the borrowing hereunder, all of which
have been duly authorized by all proper and necessary corporate action. No
consent or approval of stockholders or of any public authority is required as a
condition to the validity of this Agreement or the Note, and Borrower is in
compliance with all laws and regulatory requirements to which it is subject.
(d) Binding Agreement: This Agreement constitutes, and the Promissory Note
when issued and delivered pursuant hereto for value received will constitute,
valid and legally binding obligations of Borrower in accordance with their
terms.
(e) No Conflicting Agreements: There are no charter, bylaw or stock
provisions of Borrower and no provisions of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting its property, which would
conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the Promissory Note.
6. CONDITIONS TO LOAN AND ADVANCE: The obligation of Bank to make the Loan
and advances hereunder is conditioned upon the following matters:
(a) Bank's approval of the advance based upon intended purpose and use of
funds.
(b) At the of the requested advance and at the time of disbursement of the
advance, Borrower shall not be in default under this Loan Agreement or the
Promissory Note.
(c) At the time of the requested advance and at the time of disbursement of
the advance, Borrower must have provided Bank a current Borrowing Base
Certificate, which reflects that the Borrowing Base exceeds the sum of the
additional advance required and the current unpaid principal balance of the
Promissory Note. The Borrowing Base Certificate shall be certified statement by
the President or Secretary of the Borrower setting forth the Borrowing Base and
supporting calculations as of the date of the certificate. (A form of said
Borrowing Base Certificate is attached hereto and made a part hereof as Exhibit
"B".)
(d) Inclusion of a receivable representing a concentration exceeding 30% of
the total value of the Borrowing Base for any one customer in the calculation of
the Borrowing Base will be subject to the Bank's approval. Community National
Bank agrees to entertain additional loan requests which will be subject to
further approval.
7. AFFIRMATIVE COVENANTS: So long as Borrower may borrow hereunder and
until payment in full of the Note and performance of all other obligations of
Borrower hereunder, Borrower will:
(a) Maintain the following balances sheet requirements in accordance with
generally accepted accounting principals:
1. Maintain Working Capital of not less than $400,000.00. Working
Capital is defined as current assets minus current liabilities.
2. Maintain a Minimum Tangible New Worth of not less than $750,000.00.
Net Worth is defined as total assets less total liabilities.
(b) Accounting: Maintain a system of accounting satisfactory to Bank and in
accordance with generally accepted accounting principles consistently applies,
and will permit Bank's officers or authorized representatives to visit and
inspect Borrower's books of account and other records at such reasonable times
and as often as Bank may desire, at the Bank's cost and expense. Unless written
notice of another location is given to Bank, Borrower's books and records will
be held at Borrower's place of business located at 000 Xxxxx Xxxxx Xxxxxxxx,
Xxxxxx Xxxxxxx, Xxxxx 00000.
(c) Monthly Financial Statements: Furnish to bank monthly financial
statements, to include balance sheet and profit and loss statement, and showing
all amounts for the past calendar month and for the
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calendar year to date, together with an officer's certificate of compliance with
this Agreement, within 30 days of the end of each such accounting period (see
attached Exhibit "A". Additionally, Borrower is required to provide a current
accounts receivable and account payable aging within the same 30 days.
(d) Borrowing Base Calculations: As soon as available and in any event
within 30 days after the end of each month, a calculation of the Borrowing Base
for the preceding month accompanied by a payment then due by Borrower or
Guarantors as may be required under such Borrowing Base Calculations. Such shall
be certified by an authorized officer of the corporation and shall be
accompanied by an officer's certificate stating Borrower is in compliance with
all terms and conditions of this Agreement (see Exhibit "B").
(e) Other: Promptly provide Bank with such additional information, reports
or statements reflecting its business operations and financial condition as Bank
may reasonably request from time to time.
(f) Insurance: Due to the nature of inventory, Borrower is not required to
maintain insurance on same.
(g) Corporate Existence and Compliance: Maintain its corporate existence in
good standing and comply with all laws, regulations and governmental
requirements to which it is subject.
(h) Adverse Conditions or Events: Promptly advise Bank in writing of any
conditions, event or act which comes to its attention that would or might
materially affect Borrower's financial condition, Bank's rights in or to the
Collateral under this Agreement or the loan documents, and any litigation filed
against Borrower.
(i) Taxes: Pay all taxes as the same become due and payable.
8. NEGATIVE COVENANTS: So long as Borrower may borrow hereunder and until
payment in full of the Note and performance of all other obligations of Borrower
hereunder, Borrower will not, without the prior written consent of Bank:
(a) Transfer Assets: Enter into any merger or consolidation, sell, lease,
assign or otherwise dispose of or transfer any assets except in the normal
course of its business.
(b) Liens: Knowingly grant, suffer or permit liens on or security interests
in Borrower's assets, excluding vehicle financing and insurance premium
financing.
(c) Loans: Make any loans, advances or investments to or in any joint
venture, corporation or other entity not consolidated with Borrower.
(d) Borrowing: Create, incur, assume or become liable in any manner for any
indebtedness other than that (I) to Bank, (II) normal trade debts incurred in
the ordinary course of Borrower's business, (III) the existing indebtedness.
(e) Violate Other Covenants: Violate or fail to comply with any covenants
or agreements regarding other debt which will or would with the passage of time
or upon demand cause the maturity of any other debt to be accelerated.
9. EVENTS OF DEFAULT: If one or more of the following events of default
shall occur, all outstanding principal plus unpaid interest shall be due and
payable immediately:
(a) Default shall be made in the payment of any installment of principal or
interest upon the Promissory Note when due and payable, whether at maturity or
otherwise and such default shall continue for 30 days; or
(b) After 3 days from written notice by Bank to Borrower that the unpaid
aggregate balance of the Promissory Note still exceeds Borrower's Borrowing
Base; or
(c) Default shall be made in the performance of any term, covenant or
agreement contained herein; or
(d) Any representation or warranty herein contained or in any financial
statement, certificate, report or opinion submitted to Bank in connection with
this loan or pursuant to the requirements of this Agreement shall prove to have
been incorrect in any material respect when made; or
(e) Any judgement against Borrower or any attachment or other levy against
the property of Borrower with respect to a claim remains unpaid, unstayed on
appeal, undischarged, for a period of 30 days; or
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(f) A Guarantor shall be the subject of voluntary or involuntary bankruptcy
proceedings, or there is a substantial change in ownership or control of
Borrower; or
(g) Borrower makes an assignment for the benefit of creditors, files a
petition in bankruptcy or is adjudicated insolvent or bankrupt.
10. NOTICES: All notices, demand and documents of any kind which one party
hereto may be required or may desire to serve upon another party hereunder may
be served by delivering the same to the part personally or by depositing such
notice, demand or document in the United States mail, postage prepaid, certified
mail, return receipt requested, and addressed to the other party at the address
shown herein or to such other address as may be furnished by written notice for
one party to the other pursuant hereto. Any communication shall be deemed
effectively given on the date of personal delivery or the third business day
following deposit in mail.
11. TERM OR AGREEMENT: This Loan Agreement shall be and remain in full
force and effect until the termination of all obligations of the Bank to make
advances hereunder to until the payment in full of the Promissory Note and the
performance by Borrower of all the terms, provisions and conditions of this Loan
Agreement, the Promissory Note and Security Documents, whichever is later.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of this 16th day of January, 1997.
BORROWER: BANK:
UNITED WELLHEAD SERVICES, INC. COMMUNITY NATIONAL BANK
by: /s/ Xxxxxxx X. Xxxxxxxx by: /s/ Xxx Xxxxxx
Xxxxxxx X. Xxxxxxxx Xxx Xxxxxx
Chairman of the Board Senior Vice President
UNITED WELLHEAD SERVICES, INC.
by: /s/ Xx Xxxxxx
Xx Xxxxxx
President
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