Exhibit 10(w)
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of October 31, 2005 (this "Agreement"), is
between SOUTH HAMPTON RESOURCES, INC., a Texas corporation ("Borrower"), and
AMEGY BANK NATIONAL ASSOCIATION, a national banking association ("Lender").
RECITALS:
Borrower has requested that Lender extend credit to Borrower in the form of
revolving credit advances and letters of credit which shall not exceed an
aggregate principal amount of $6,000,000.00 at any time outstanding. Lender is
willing to make such extensions of credit to Borrower upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
Section 1.1. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Adjusted Tangible Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of Borrower and its Subsidiaries,
plus Subordinated Debt; provided, however, there shall be excluded
therefrom (a) any amount at which shares of capital stock of Borrower
appear as an asset on Borrower's or any Subsidiary's balance sheet, (b)
goodwill, including any amounts, however designated, that represent the
excess of the purchase price paid for assets or stock over the value
assigned thereto, (c) patents, trademarks, trade names, and copyrights, (d)
deferred expenses, (e) loans and advances to any stockholder, director,
officer or employee of Borrower or any Subsidiary or any Affiliate of
Borrower, (f) all other assets which are properly classified as intangible
assets, and (g) accounts, accounts receivable and other current receivables
from Affiliates of Borrower.
"Advance" means an advance of funds by Lender to Borrower pursuant to
Article II.
"Advance Request Form" means a certificate, in substantially the form
of Exhibit "D" hereto, properly completed and signed by Borrower requesting
an Advance.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls or is controlled by or is under common
control with such Person, including, (a) any Person which beneficially owns
or holds ten percent (10%) or more of any class of voting stock of such
Person or ten percent (10%) or more of the equity interest in such Person,
(b) any Person of which such Person beneficially owns or holds ten percent
(10%) or more of any class of voting shares or in which such Person
beneficially owns or holds ten percent (10%) or more of the equity
interests in such Person, and (c) any officer or director of such Person.
"Arbitration Agreement" means the Arbitration Agreement executed by
Borrower and Guarantor in substantially the form of Exhibit "G" hereto, as
the same may be amended, supplemented, or modified.
"Authorized Representative" means any officer or employee of Borrower
who has been designated in writing by Borrower to Lender to be an
Authorized Representative.
"Available Amount" means at any time, the amount equal to the lesser
of the Commitment or the Borrowing Base minus the sum of the outstanding
Advances plus the Letter of Credit Liabilities.
"Borrowing Base" means, at any particular time, an amount equal to
eighty percent (80%) of Eligible Accounts.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit "E" hereto, fully completed and executed by Borrower.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Capitalized Lease Obligations" means, for Borrower and its
Subsidiaries, on a consolidated basis, the obligations of Borrower and its
Subsidiaries to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property, which
obligations, in accordance with GAAP, are required to be classified and
accounted for as a capital lease on a balance sheet of any such Person.
"Catalyst" shall have the meaning given to such term in Section 8.1.
"Closing Date" means the date on which this Agreement has been
executed and delivered by the parties hereto and the conditions set forth
in Section 5.1 have been satisfied.
"Collateral" has the meaning specified in Section 4.1.
"Commitment" means the obligation of Lender to make Advances and issue
Letters of Credit hereunder in an aggregate principal amount at any time
outstanding up to but not exceeding $6,000,000.00.
"Current Assets" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as current assets on a consolidated
balance sheet of Borrower and its Subsidiaries; provided that the Available
Amount shall be added to and included in Current Assets.
"Current Liabilities" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as current liabilities on
a consolidated balance sheet of Borrower and its Subsidiaries; provided,
however, that the maturities of the indebtedness evidenced by the Note
shall not constitute Current Liabilities.
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
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"Debt" means for any Person (a) all indebtedness, whether or not
represented by bonds, debentures, notes, securities, or other evidences of
indebtedness, for the repayment of money borrowed, including, with respect
to Borrower, the indebtedness evidenced by the Note, the Letter of Credit
Liabilities and all other indebtedness of Borrower to Lender, (b) all
indebtedness representing deferred payment of the purchase price of
property or assets, (c) all indebtedness under any lease which, in
conformity with GAAP, is required to be capitalized for balance sheet
purposes, (d) all indebtedness under guaranties, endorsements, assumptions,
or other contingent obligations, in respect of, or to purchase or otherwise
acquire, indebtedness of others, (e) all indebtedness secured by a Lien
existing on property owned, subject to such Lien, whether or not the
indebtedness secured thereby shall have been assumed by the owner thereof,
and (f) any obligation to redeem or repurchase any of such Person's capital
stock, warrants, or stock equivalents.
"Default Rate" means the lesser of (a) the sum of the Prime Rate in
effect from day to day plus five percent (5.0%) or (b) the Maximum Rate.
"Dividend" means (a) any dividend, distribution or any other payment
or distribution (in cash, property or obligations) made by Borrower on
account of its capital stock, (b) any redemption, purchase, retirement or
other acquisition by Borrower of any of its capital stock, including any
purchase of treasury stock or other treasury obligations, or (c) the
establishment of any fund for any such distribution, dividend, payment or
acquisition.
"EBITDA" means for Borrower and its Subsidiaries, on a consolidated
basis for any period, the sum of (a) Net Income for such period, plus (b)
without duplication and to the extent deducted in determining such Net
Income (i) depreciation and amortization for such period, plus (ii)
Interest Expense for such period, plus (iii) Income Tax Expense for such
period, plus (iv) non-cash charges for such period.
"Eligible Accounts" means the aggregate of all accounts receivable of
Borrower that are acceptable to Lender in its sole discretion and satisfy
the following conditions: (a) are due and payable within sixty (60) days;
(b) have been outstanding less than ninety (90) days past the original date
of invoice; (c) have arisen in the ordinary course of business from
services performed by Borrower to or for the account debtor or the sale by
Borrower of goods in which Borrower had sole ownership where such goods
have been shipped or delivered to the account debtor; (d) represent
complete bona fide transactions which require no further act under any
circumstances on the part of Borrower to make such accounts receivable
payable by the account debtor; (e) the goods the sale of which gave rise to
such accounts receivable were shipped or delivered to the account debtor on
an absolute sale basis and not on consignment, a sale or return basis, a
guaranteed sale basis, a xxxx and hold basis, or on the basis of any
similar understanding; (f) the goods the sale of which gave rise to such
accounts receivable were not, at the time of sale thereof, subject to any
Lien, except the security interest in favor of Lender created by the Loan
Documents; (g) are not subject to any provisions prohibiting assignment or
requiring notice of or consent to such assignment; (h) are subject to a
perfected, first priority security interest in favor of Lender and are not
subject to any other Lien; (i) are not subject to setoff, counterclaim,
defense, allowance, dispute, or adjustment other than normal discounts for
prompt payment, and the goods of sale which gave rise to such accounts
receivable have not been returned, rejected, repossessed, lost, or damaged;
(j) the account debtor is not insolvent or the subject of any bankruptcy or
insolvency proceeding and has not made an assignment for the benefit of
creditors, suspended normal business operations,
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dissolved, liquidated, terminated its existence, ceased to pay its debts as
they become due, or suffered a receiver or trustee to be appointed for any
of its assets or affairs; (k) are not evidenced by chattel paper or any
instrument of any kind; (l) (i) are owed by a Person or Persons that are
citizens of or organized under the laws of the United States or any State
thereof, (ii) are owed by a Person listed on Xxxxxxx "X" xxxxxx, (xxx) are
owed by a Person that is a citizen of or organized under the laws of Canada
or any province thereof and the unsecured debt of such Person is rated at
least BBB- by Standard & Poor's Ratings Group ("S&P") or Baa3 by Xxxxx'x
Investors Service, Inc. ("Moody's"), or (iv) are owed by a Person that is a
citizen of or organized under the laws of Canada or any province thereof
and such Person is a Subsidiary of a Person whose unsecured debt is rated
at least BBB- by S&P or Baa3 by Moody's, and in any case, are not owed by
any Person organized under the laws of a jurisdiction located outside of
the United States of America or Canada; (m) if any accounts receivable are
owed by the United States of America or any department, agency, or
instrumentality thereof, the Federal Assignment of Claims Act shall have
been complied with; and (n) are not owed by an Affiliate of Borrower. No
account receivable owed by an account debtor to Borrower shall be included
as an Eligible Account if more than twenty percent (20%) of the balances
then outstanding on accounts receivable owed by such account debtor and its
Affiliates to Borrower have remained unpaid for more than eighty-nine (89)
days from the dates of their original invoices. The amount of any Eligible
Accounts owed by an account debtor to Borrower shall be reduced by the
amount of all "contra accounts" and other obligations owed by Borrower to
such account debtor. In the event that at any time the accounts receivable
from any account debtor and its Affiliates to Borrower exceed twenty
percent (20%) of the accounts receivable of Borrower, the accounts
receivable from such account debtor and its Affiliates shall not constitute
Eligible Accounts to the extent to which such accounts receivable exceed
twenty percent (20%) of the accounts receivable of Borrower.
"Environmental Laws" means any and all federal, state and local laws,
regulations, and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq.,the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651
et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., and all similar
laws, regulations, and requirements of any governmental authority or agency
having jurisdiction over Borrower or any Subsidiary or any of their
respective properties or assets, as such laws, regulations, and
requirements may be amended or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in Section 10.1.
"Excluded Items" shall have the meaning given to such term in Section
4.1.
"Field Audits" means audits, verifications and inspections of the
accounts receivable and inventory of Borrower, conducted by an independent
third Person selected by Lender.
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"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants or in
statements of the Financial Accounting Standards Board or their respective
successors and which are applicable in the circumstances as of the date in
question. Accounting principles are applied on a "consistent basis" when
the accounting principles observed in a current period are comparable in
all material respects to those accounting principles applied in a preceding
period.
"Guarantor" means Texas Oil & Chemical Co. II, Inc., a Texas
corporation, and its successors and assigns.
"Guaranty Agreement" means the Guaranty Agreement executed by
Guarantor in favor of Lender in substantially the form of Exhibit "C"
hereto, as the same may be amended, supplemented or modified from time to
time.
"Hazardous Substance" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"Income Tax Expense" means for Borrower and its Subsidiaries, on a
consolidated basis for any period, all state and federal income taxes paid
or due to be paid during such period.
"Interest Expense" means for Borrower and its Subsidiaries, on a
consolidated basis, for any period, the sum of all interest expense paid or
required by its terms to be paid during such period, as determined in
accordance with GAAP.
"Letter of Credit" means any letter of credit issued by Lender for the
account of Borrower pursuant to Article II.
"Letter of Credit Liabilities" means, at any time, the aggregate face
amounts of all outstanding Letters of Credit.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment, preference,
priority, or other encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or title retention agreement),
whether arising by contract, operation of law, or otherwise.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, deeds of trust, assignments, letters of credit,
guaranties, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, or any Obligated Party and
its Subsidiaries, taken as a whole, (b) the ability of Borrower to pay the
Obligations or the ability of Borrower or any Obligated Party to perform
its respective obligations under this Agreement or any of the other Loan
Documents, or (c) the validity or enforceability of this Agreement or
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any of the other Loan Documents, or the rights or remedies of Lender
hereunder or thereunder.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including Chapter 303 of the
Texas Finance Code (the "Code") (and as the same may be incorporated by
reference in other Texas statutes). To the extent that Chapter 303 of the
Code is relevant to Lender for the purposes of determining the Maximum
Rate, Lender elects to determine such applicable legal rate pursuant to the
"weekly ceiling," from time to time in effect, as referred to and defined
in Chapter 303 of the Code; subject, however, to the limitations on such
applicable ceiling referred to and defined in the Code, and further subject
to any right Lender may have subsequently, under applicable law, to change
the method of determining the Maximum Rate.
"Net Income" means, with respect to Borrower and its Subsidiaries for
any period, the consolidated net income (or loss) of Borrower and its
Subsidiaries for such period, calculated in accordance with GAAP.
"No Default Certificate" means a certificate in the form of Exhibit
"F" hereto, fully completed and executed by Borrower.
"Note" means the promissory note executed by Borrower payable to the
order of Lender, in substantially the form of Exhibit "A" hereto, and all
extensions, renewals, and modifications thereof and all substitutions
therefor.
"Obligated Party" means Guarantor and any other Person who is or
becomes party to any agreement pursuant to which such Person guarantees or
secures payment and performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to Lender, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of Borrower under this Agreement
and the other Loan Documents (including, without limitation, all of
Borrower's contingent reimbursement obligations in respect of Letters of
Credit), and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"Penreco Facility" means the separate processing facility owned and
operated by Borrower known as the Penreco Facility.
"Person" means any individual, corporation, limited liability company,
business trust, association, company, partnership, joint venture,
governmental authority, or other entity.
"Prime Rate" means that variable rate of interest per annum
established by Lender from time to time as its prime rate which shall vary
from time to time. Such rate is set by Lender as a general reference rate
of interest, taking into account such factors as Lender may deem
appropriate, it being understood that many of Lender's commercial or other
loans are priced to relation to such rate, that it is not necessarily the
lowest or best rate charged to any customer and that Lender may make
various commercial or other loans at rates of interest having no
relationship to such rate.
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"Ratio of Funded Debt to EBITDA" means, for Borrower and its
Subsidiaries on a consolidated basis, at any particular date, (a) Total
Funded Debt as of such date, divided by (b) EBITDA for the period ended as
of such date.
"Regulatory Change" means, with respect to Lender, any change after
the date of this Agreement in United States federal, state, or foreign laws
or regulations (including Regulation D of the Board of Governors of the
Federal Reserve System, or any interpretations, directives, or requests
applying to a class of banks including Lender) of or under any United
States federal or state, or any foreign, laws or regulations (whether or
not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Security Agreement" means the Security Agreement executed by Borrower
in favor of Lender in substantially the form of Exhibit "B" hereto, as the
same may be amended, supplemented or modified.
"Subordinated Debt" means Debt of Borrower and its Subsidiaries to any
other Person, the payment of which is subordinated to the payment of the
Obligation upon terms, and by a document, in form and substance
satisfactory to Lender in its sole discretion.
"Subsidiary" means any Person of which or in which the Borrower and
its other Subsidiaries own or control, directly or indirectly, fifty
percent (50%) or more of (a) the combined voting power of all classes
having general voting power under ordinary circumstances to elect a
majority of the directors or equivalent body of such Person, if it is a
corporation, (b) the capital interest or profits interest of such Person,
if it is a partnership, limited liability company, joint venture or similar
entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated association or organization.
"Tangible Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of Borrower and its Subsidiaries, plus
Subordinated Debt; provided, however, there shall be excluded therefrom (a)
any amount at which shares of capital stock of Borrower appear as an asset
on Borrower's or any Subsidiary's balance sheet, (b) goodwill, including
any amounts, however designated, that represent the excess of the purchase
price paid for assets or stock over the value assigned thereto, (c)
patents, trademarks, trade names, and copyrights, (d) deferred expenses,
(e) loans and advances to any stockholder, director, officer or employee of
Borrower or any Subsidiary or any Affiliate of Borrower, and (f) all other
assets which are properly classified as intangible assets.
"Termination Date" means 11:00 a.m., Houston, Texas time on October
31, 2007, or such earlier date on which the Commitment terminates as
provided in this Agreement.
"Total Funded Debt" means, at any time, for Borrower and its
Subsidiaries, on a consolidated basis, the sum of (a) all indebtedness for
borrowed money, whether or not evidenced by bonds, debentures, notes or
similar instruments, including the Note, (b) all Capitalized Lease
Obligations, (c) all obligations to pay the deferred purchase price of
property or services (but excluding trade accounts payable or trade notes
in the ordinary course of business that are not past due by more than 90
days), and (d) all indebtedness secured by a Lien on the property of
Borrower and its Subsidiaries.
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"Unmatured Event of Default" means the occurrence of an event or the
existence of a condition which, with the giving of notice or the passage of
time would constitute an Event of Default.
Section 1.2. Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the Uniform
Commercial Code as adopted by the State of Texas, unless otherwise defined
herein, shall have the meanings specified in the Uniform Commercial Code as
adopted by the State of Texas.
ARTICLE II.
Advances and Letters of Credit
Section 2.1. Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to make one or more Advances to Borrower from time to
time from the date hereof to and including the Termination Date in an aggregate
principal amount at any time outstanding up to but not exceeding the Commitment;
provided that the aggregate amount of all Advances at any time outstanding shall
not exceed the lesser of (a) the Commitment minus the outstanding Letter of
Credit Liabilities or (b) the Borrowing Base minus the outstanding Letter of
Credit Liabilities. Lender shall have no obligation to make any Advance if an
Event of Default or an Unmatured Event of Default has occurred and is
continuing. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, Borrower may borrow, repay, and reborrow
hereunder.
Section 2.2. The Note. The obligation of Borrower to repay the Advances
shall be evidenced by the Note executed by Borrower, payable to the order of
Lender, in the principal amount of the Commitment.
Section 2.3. Repayment of Advances. Borrower shall repay the unpaid
principal amount of all Advances on the earlier of (a) the Termination Date or
(b) such other dates on which the Advances are or may be required to be paid
pursuant to this Agreement.
Section 2.4. Interest. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate or (b) the sum of the Prime Rate in
effect from day to day plus one-fourth of one percent (.25%), and each change in
the rate of interest charged on the Advances shall become effective, without
notice to Borrower, on the effective date of each change in the Prime Rate or
the Maximum Rate, as the case may be; provided, however, if at any time the rate
of interest specified in clause (b) preceding shall exceed the Maximum Rate,
thereby causing the interest on the Advances to be limited to the Maximum Rate,
then any subsequent reduction in the Prime Rate shall not reduce the rate of
interest on the Advances below the Maximum Rate until the aggregate amount of
interest actually accrued on the Advances equals the amount of interest which
would have accrued on the Advances if the interest rate specified in clause (b)
preceding had at all times been in effect. Accrued and unpaid interest on the
Advances shall be payable on the first day of each month commencing on December
1, 2005, and on the Termination Date. If an Event of Default has occurred and is
continuing, all principal of the Advances shall bear interest at the Default
Rate.
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Section 2.5. Requests for Advances. Borrower shall give Lender notice of
each requested Advance by delivery to Lender of an Advance Request Form executed
by an Authorized Representative, properly completed and containing the
information required therein. Borrower may transmit Advance Request Forms by fax
or scanned electronic mail, provided that Borrower holds Lender harmless with
respect to actions taken by Lender based upon Advance Request Forms sent by fax
or scanned electronic mail. Prior to making any Advance, Lender may require that
Borrower deliver a Borrowing Base Certificate dated a recent date acceptable to
Lender. Assuming that each Advance Request Form or request for Advance is in
proper form, if Lender receives an Advance Request Form or request for Advance
prior to 1:00 p.m. on any Business Day, Lender will make the requested Advance
on the same Business Day, and if Lender receives an Advance Request Form or
request for Advance after 1:00 p.m., Lender will make the requested Advance on
the next Business Day.
Section 2.6. Use of Proceeds. The proceeds of Advances shall be used for
working capital purposes.
Section 2.7. Mandatory Prepayment. If at any time the outstanding principal
amount of the Advances plus the Letter of Credit Liabilities exceeds the
Borrowing Base, Borrower shall immediately prepay the outstanding Advances by
the amount of the excess plus accrued and unpaid interest on the amount so
prepaid or, if no (or insufficient) Advances are outstanding, Borrower shall
immediately pledge to Lender cash or cash equivalent investments in an amount
equal to the excess as security for the Obligations.
Section 2.8. Unused Commitment Fee; Reduction or Termination of Commitment.
Borrower agrees to pay to Lender a commitment fee on the average daily unused
portion of the Commitment, from and including the Closing Date to and including
the Termination Date, at the rate of one-fourth of one percent (.25%) per annum
based on a 365 day year and the actual number of days elapsed, payable monthly,
in arrears and on the Termination Date. For the purpose of calculating the
commitment fee hereunder, the Commitment shall be deemed utilized by the amount
of all outstanding Advances and Letter of Credit Liabilities. Borrower shall
have the right at any time to terminate in whole or from time to time to
irrevocably reduce in part the Commitment upon at least three (3) Business Days
prior notice to Lender specifying the effective date thereof, whether a
termination or reduction is being made, and the amount of any partial reduction;
provided, however, the Commitment shall never be reduced below an amount equal
to the outstanding Letter of Credit Liabilities. Simultaneously with giving such
notice, Borrower shall prepay the amount by which the unpaid principal amount of
the Advances plus the outstanding Letter of Credit Liabilities exceeds the
Commitment (after giving effect to such notice) plus accrued and unpaid interest
on the principal amount so prepaid. The Commitment may not be reinstated after
it has been terminated or reduced.
Section 2.9. Facility Fee. Borrower agrees to pay to Lender a facility fee
in the amount of (a) $18,000.00 on the Closing Date, and (b) $18,000.00 on
October 11, 2006. Such facility fee shall be fully earned when paid.
Section 2.10. Letters of Credit. Subject to the terms and conditions of
this Agreement, Lender agrees to issue one or more Letters of Credit for the
account of Borrower from time to time from the date hereof to and including the
Termination Date; provided, however, that the outstanding Letter of Credit
Liabilities shall not at any time exceed the least of (a) $500,000.00, (b) an
amount equal to the Commitment minus the outstanding Advances, or (c) the
Borrowing Base minus the outstanding Advances. Each Letter of Credit shall have
an expiration date which shall not be more than two (2) years from the date of
issuance of such Letter of Credit, shall have an expiration date which is at
least five (5) Business Days prior to
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the Termination Date, shall be payable in United States dollars, shall support a
transaction that is entered into in the ordinary course of Borrower's business,
and shall otherwise be satisfactory in form and substance to Lender. No Letter
of Credit shall require any payment by Lender to the beneficiary thereunder
pursuant to a drawing prior to the third Business Day following presentment of a
draft and any related documents to Lender.
Section 2.11. Procedure for Issuing Letters of Credit. Each Letter of
Credit shall be issued upon receipt by Lender of written notice from an
Authorized Representative requesting the issuance of such Letter of Credit,
which notice shall be received by Lender at least three (3) Business Days prior
to the requested date of issuance of such Letter of Credit. Such notice shall be
accompanied by Lender's standard application for issuance of Letters of Credit
(commercial or standby) as then in effect and such other documents and
instruments as Lender may require. Such notice and application (both front and
back sides) may be sent by fax, provided that Borrower holds Lender harmless
with respect to actions taken by Lender based upon notices and applications sent
by fax. Each request for a Letter of Credit shall constitute a representation by
Borrower to Lender as to each of the matters set forth in the Borrowing Base
Certificate, including representations that (a) the sum of (i) the outstanding
Advances plus (ii) the Letter of Credit Liabilities plus (iii) the face amount
of the requested Letter of Credit does not exceed the lesser of the Borrowing
Base or the Commitment, and (b) no Event of Default exists. Prior to Issuing any
Letter of Credit, Lender may request a Borrowing Base Certificate from Borrower
dated of a recent date acceptable to Lender evidencing that the statements
contained in the preceding sentence are correct.
Section 2.12. Payments Constitute Advances. Each payment by Lender pursuant
to a drawing under a Letter of Credit shall constitute and be deemed an Advance
by Lender to Borrower under the Note and this Agreement as of the day and time
such payment is made by Lender and in the amount of such payment.
Section 2.13. Letter of Credit Fees. Borrower shall pay to Lender a letter
of credit fee payable on the date each Letter of Credit is issued in an amount
equal to the greater of (a) one and one-fourth of one percent (1.25%) per annum
of the stated amount of such Letter of Credit for the period during which such
Letter of Credit will remain outstanding, based on a 360 day year and the actual
number of days elapsed, and (b) $350.00. In addition, Borrower shall pay to
Lender (a) at the time of issuance of any Letter of Credit, all out-of-pocket
costs incurred by Lender in connection with the issuance of such Letter of
Credit (b) upon the payment of any Letter of Credit, all applicable payment
fees, and (c) upon the amendment (including the extension) of any Letter of
Credit, all applicable amendment fees.
Section 2.14. Obligations Absolute. The obligations of Borrower under this
Agreement and the other Loan Documents, including without limitation the
obligation of Borrower to reimburse Lender for payment of drawings under any
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement and the other
Loan Documents under all circumstances, including (a) any lack of validity or
enforceability of any Letter of Credit or any other Loan Document, (b) the
existence of any claim, set-off, counterclaim, defense or other rights which
Borrower, any Obligated Party or any other Person may have at any time against
any beneficiary of any Letter of Credit, Lender, or any other Person, whether in
connection with this Agreement or any other Loan Document or any unrelated
transaction, (c) if any statement, draft or other document presented under any
Letter of Credit proves to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein is untrue or inaccurate in any respect
whatsoever, (d) payment by Lender under any Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit in a manner which is not material, (e) any amendment or
waiver of, or any consent to departure from, any
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Loan Document or (f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
Section 2.15. Limitation of Liability. Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. Neither Lender or any of its officers, employees
or directors shall have any responsibility or liability to Borrower or any other
Person for (a) the failure of any draft to bear any reference or adequate
reference to any Letter of Credit, or the failure of any documents to accompany
any draft at negotiation, or the failure of any Person to surrender or to take
up any Letter of Credit or to send documents apart from drafts as required by
the terms of any Letter of Credit, or the failure of any Person to note the
amount of any instrument on any Letter of Credit, each of which requirements, if
contained in any Letter of Credit itself, it is agreed may be waived by Lender,
(b) errors, omissions, interruptions or delays in transmission or delivery of
any messages, (c) the validity, sufficiency or genuineness of any draft or other
document, or any endorsement thereon, even if any such draft, document or
endorsement should in fact prove to be in any and all respects invalid,
insufficient, fraudulent or forged or any statement therein is untrue or
inaccurate in any respect, (d) the payment by the Lender to the beneficiary of
any Letter of Credit against presentation of any draft or other document that
does not comply with the terms of the Letter of Credit in a respect which is not
material or (e) any other circumstance whatsoever in making or failing to make
any payment under a Letter of Credit. Lender may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary. Notwithstanding the
foregoing, Lender shall be liable to Borrower to the extent of any direct, but
not consequential, damages suffered by Borrower which Borrower proves in a final
nonappealable judgment were caused by (i) Lender's willful misconduct or gross
negligence in determining whether documents presented under any Letter of Credit
complied with the terms thereof or (ii) Lender's willful failure to pay under
any Letter of Credit after presentation to it of documents strictly complying
with the terms and conditions of such Letter of Credit.
Section 2.16. Provisions Regarding Electronic Issuance of Letters of
Credit. Lender may adopt procedures pursuant to which Borrower may request the
issuance of Letters of Credit by electronic means and Lender may issue Letters
of Credit based on such electronic requests. Such procedures may include the
entering by Borrower into the Letter of Credit Applications electronically. All
the procedures, actions and documents referred to in the two preceding sentences
are referred to as "Electronic Applications". Borrower holds Lender harmless
with respect to actions taken by Lender based upon Electronic Applications.
Borrower further agrees to be bound by all the terms and provisions contained in
the Letter of Credit Applications, including, without limitation, the terms and
provisions of the Letter of Credit Applications contained on the reverse side of
the paper copies thereof, including the release and indemnification provisions
contained therein.
ARTICLE III.
Payments
Section 3.1. Method of Payment. All payments of principal, interest, and
other amounts to be made by Borrower under this Agreement, the Note or any other
Loan Documents shall be made to Lender at its designated office, without setoff,
deduction, or counterclaim in immediately available funds. Whenever any payment
under this Agreement, the Note or any other Loan Document shall be stated to be
due on a day that is not a Business Day, such payment may be made on the next
Business Day, and interest shall continue to accrue during such extension.
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Section 3.2. Voluntary Prepayment. Borrower may prepay the Note in whole at
any time or from time to time in part without premium or penalty but with
accrued interest to the date of prepayment on the amount so prepaid.
Section 3.3. Computation of Interest. Interest on the indebtedness
evidenced by the Note shall be computed on the basis of a year of 365 or 366
days, as the case may be.
Section 3.4. Additional Costs in Respect of Letters of Credit. If as a
result of any Regulatory Change there shall be imposed, modified, or deemed
applicable any tax, reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or Lender's Commitment to issue Letters of Credit hereunder,
and the result shall be to increase the cost to Lender of issuing or maintaining
any Letter of Credit or its Commitment to issue Letters of Credit hereunder or
reduce any amount receivable by Lender hereunder in respect of any Letter of
Credit (which increase in cost, or reduction in amount receivable, shall be the
result of Lender's reasonable allocation of the aggregate of such increases or
reductions resulting from such event), then, upon demand by Lender, Borrower
agrees to pay to Lender from time to time as specified by Lender, such
additional amounts as shall be sufficient to compensate Lender for such
increased costs or reductions in amount. A statement as to such increased costs
or reductions in amount incurred by Lender, submitted by Lender to Borrower,
shall be conclusive as to the amount thereof, provided that the determination
thereof is made on a reasonable basis.
ARTICLE IV.
Collateral
Section 4.1. Collateral. To secure full and complete payment and
performance of the Obligations, Borrower shall execute and deliver or cause to
be executed and delivered the documents described below covering the property
and collateral described therein and in this Section 4.1 (which, together with
any other property and collateral which may now or hereafter secure the
Obligations or any part thereof, is sometimes herein called the "Collateral"):
(a) Borrower shall grant to Lender a first priority security interest
in all of its accounts, accounts receivable, general intangibles, and all
chattel paper, documents, instruments, deposit accounts and investment
property, related thereto or arising therefrom, whether now owned or
hereafter acquired, and all products and proceeds thereof, pursuant to the
Security Agreement.
(b) Borrower shall execute and cause to be executed such further
documents and instruments as Lender, in its sole discretion, deems
necessary or desirable to evidence and perfect its liens and security
interests in the Collateral. Borrower authorizes, directs and permits
Lender to file Uniform Commercial Code financing statements with respect to
the Collateral in such jurisdictions as Lender may desire.
Notwithstanding the foregoing, the Collateral does not include (a) contract
rights and accounts and proceeds thereof arising solely from the Penreco
Facility, (b) the common stock of Gulf States Pipeline, Inc. owned by
Borrower and (c) a key man life insurance policy on the life of Xxxx
Xxxxxx. The items referred to in the preceding sentence are the "Excluded
Items".
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Section 4.2. Setoff. Upon the occurrence of an Event of Default, Lender
shall have the right to set off and apply against the Obligations in such a
manner as Lender may determine, at any time and without notice to Borrower, any
and all deposits (general or special, time or demand, provisional or final) or
other sums at any time credited by or owing from Lender to Borrower whether or
not the Obligations are then due. In addition to Lender's right of setoff and as
further security for the Obligations, Borrower hereby grants to Lender a
security interest in all deposits (general or special, time or demand,
provisional or final) and other accounts of Borrower now or hereafter on deposit
with or held by Lender and all other sums at any time credited by or owing from
Lender to Borrower. The rights and remedies of Lender hereunder are in addition
to other rights and remedies (including, without limitation, to the rights of
setoff) which Lender may have.
Section 4.3. Guaranty Agreement. Guarantor shall unconditionally and
irrevocably guarantee payment and performance of the Obligations by execution
and delivery of the Guaranty Agreement.
ARTICLE V.
Conditions Precedent
Section 5.1. Initial Extension of Credit. The obligation of Lender to make
the initial Advance or issue the initial Letter of Credit is subject to the
condition precedent that prior thereto Lender shall have received all of the
documents set forth below in form and substance satisfactory to Lender.
(a) Certificate - Borrower. A certificate of the Secretary of Borrower
or another officer of Borrower acceptable to Lender certifying (i)
resolutions of the board of directors of Borrower which authorize the
execution, delivery and performance by Borrower of this Agreement and the
other Loan Documents to which Borrower is or is to be a party, and (ii) the
names of the officers of Borrower authorized to sign this Agreement and
each of the other Loan Documents to which Borrower is or is to be a party
together with specimen signatures of such officers.
(b) Organizational Documents - Borrower. The articles of incorporation
and bylaws of Borrower certified by the Secretary of Borrower or another
officer of Borrower acceptable to Lender.
(c) Governmental Certificates - Borrower. Certificates of the
appropriate government officials of the state of incorporation of Borrower
as to the existence and good standing of Borrower.
(d) Certificate - Guarantor. A certificate of the Secretary of
Guarantor or another officer of Guarantor acceptable to Lender certifying
(i) resolutions of the Board of Directors of Guarantor which authorize the
execution, delivery and performance by Guarantor of the Guaranty Agreement
and the other Loan Documents to which Guarantor is or is to be a party, and
(ii) the names of the officers of Guarantor authorized to sign the Guaranty
Agreement and each of the other Loan Documents to which Guarantor is or is
to be party together with specimen signatures of such officers.
(e) Organizational Documents - Guarantor. The articles of
incorporation and bylaws of Guarantor certified by the Secretary of
Guarantor or another officer of Guarantor acceptable to Lender.
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(f) Governmental Certificates - Guarantor. Certificates of the
appropriate government officials of the state of incorporation of Guarantor
as to the existence and good standing of Guarantor.
(g) Note. The Note executed by Borrower.
(h) Security Agreement. The Security Agreement executed by Borrower.
(i) Financing Statements. Uniform Commercial Code financing statements
showing Borrower as debtor.
(j) Guaranty Agreement. The Guaranty Agreement executed by Guarantor.
(k) Arbitration Agreement. The Arbitration Agreement executed by
Borrower and Guarantor.
(l) Facility Fee. The facility fee referred to in Section 2.9.
(m) Insurance Policies. Copies of all insurance policies required by
Section 7.5, together with loss payable endorsements in favor of Lender
with respect to all insurance policies covering Collateral.
(n) UCC Search. A Uniform Commercial Code search showing all financing
statements and other documents or instruments on file against Borrower with
the office of the Secretary of State of Texas.
(o) Environmental Reports. Such environmental reports and other
analysis of environmental matters as Lender may request.
(p) Opinion of Counsel. An opinion of Xxxxxx & Xxxxx, L.L.P., legal
counsel to Borrower and Guarantor.
(q) Attorneys' Fees and Expenses. Evidence that the costs and expenses
(including reasonable attorneys' fees) referred to in Section 11.1, to the
extent incurred, have been paid in full by Borrower.
(r) Additional Documentation. Such additional approvals, opinions or
documents as Lender may reasonably request.
Section 5.2. All Extensions of Credit. The obligation of Lender to make any
Advance or issue any Letter of Credit (including the initial Advance and the
initial Letter of Credit) is subject to receipt by Lender of the items required
by Section 2.5 or 2.11, as applicable, and such additional approvals, opinions
or documents as Lender may reasonably request.
ARTICLE VI.
Representations and Warranties
To induce Lender to enter into this Agreement, Borrower represents and
warrants to Lender that:
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Section 6.1. Corporate Existence. Borrower, Guarantor and each Subsidiary
(a) are corporations duly organized, validly existing, and in good standing
under the laws of their respective jurisdictions of incorporation, (b) have all
requisite corporate power and authority to own their assets and carry on their
business as now being or as proposed to be conducted and (c) are qualified to do
business in all jurisdictions necessary and where failure to so qualify would
have a Material Adverse Effect. Borrower has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
other Loan Documents to which it is or may become a party.
Section 6.2. Financial Statements. Borrower has delivered to Lender
in-house financial statements of Guarantor and its Subsidiaries as at and for
the fiscal year ended December 31, 2004, and unaudited consolidated financial
statements of Guarantor and its Subsidiaries for the six (6) month period ended
June 30, 2005. Such financial statements are true and correct, have been
prepared in accordance with GAAP, and fairly and accurately present, on a
consolidated basis, the financial condition of Borrower, Guarantor and their
Subsidiaries as of the respective dates indicated therein and the results of
operations for the respective periods indicated therein. Neither Borrower,
Guarantor nor any of their Subsidiaries has any material contingent liabilities,
liabilities for taxes, material forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments not reflected in such
financial statements. There has been no Material Adverse Effect since the
effective date of the most recent financial statements referred to in this
Section.
Section 6.3. Corporate Action; No Breach. The execution, delivery, and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or may become a party have been duly authorized by all requisite
action on the part of Borrower and do not and will not violate or conflict with
the articles of incorporation or bylaws of Borrower or any law, rule or
regulation or any order, writ, injunction, or decree of any court, governmental
authority, or arbitrator, and do not and will not conflict with, result in a
breach of, or constitute a default under, or result in the imposition of any
Lien (except as provided in this Agreement) upon any of the revenues or assets
of Borrower or any Subsidiary pursuant to the provisions of any indenture,
mortgage, deed of trust, security agreement, franchise, permit, license, or
other instrument or agreement by which Borrower or any Subsidiary or any of
their respective properties is bound.
Section 6.4. Operation of Business. Borrower, Guarantor and each Subsidiary
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
tradenames, or rights thereto, to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted.
Section 6.5. Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any court, governmental authority, or
arbitrator pending, or to the knowledge of Borrower, threatened against or
affecting Borrower, Guarantor or any Subsidiary, that would, if adversely
determined, have a Material Adverse Effect. There are no outstanding judgments
against Borrower, Guarantor or any Subsidiary.
Section 6.6. Rights in Properties; Liens. Borrower, Guarantor and each
Subsidiary have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets and leasehold interests reflected in the financial statements
described in Section 6.2, and none of the properties, assets or leasehold
interests of Borrower, Guarantor or any Subsidiary is subject to any Lien,
except as permitted by this Agreement.
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Section 6.7. Enforceability. This Agreement constitutes, and the other Loan
Documents to which Borrower is party, when delivered, shall constitute the
legal, valid, and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditor's rights.
Section 6.8. Approvals. No authorization, approval, or consent of, and no
filing or registration with, any court, governmental authority, or third party
is or will be necessary for the execution, delivery, or performance by Borrower
of this Agreement and the other Loan Documents to which Borrower is or may
become a party or the validity or enforceability thereof.
Section 6.9. Debt. Borrower and its Subsidiaries have no Debt except Debt
to Lender and other Debt permitted pursuant to Section 8.1.
Section 6.10. Use of Proceeds; Margin Securities. None of Borrower,
Guarantor or any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T, U, or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.
Section 6.11. ERISA. Borrower, Guarantor and each Subsidiary have complied
with all applicable minimum funding requirements and all other applicable and
material requirements of ERISA, and there are no existing conditions that would
give rise to liability thereunder. No Reportable Event (as defined in Section
4043 of ERISA) has occurred in connection with any employee benefit plan that
might constitute grounds for the termination thereof by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer such plan.
Section 6.12. Taxes. Borrower, Guarantor and each Subsidiary have filed all
tax returns (federal, state, and local) required to be filed, including all
income, franchise, employment, property, and sales taxes, and have paid all of
their liabilities for taxes, assessments, governmental charges, and other levies
that are due and payable, and Borrower knows of no pending investigation of
Borrower, Guarantor or any Subsidiary by any taxing authority or of any pending
but unassessed tax liability of Borrower, Guarantor or any Subsidiary.
Section 6.13. Disclosure. There is no fact known to Borrower which has a
Material Adverse Effect, or which might in the future have a Material Adverse
Effect that has not been disclosed in writing to Lender.
Section 6.14. Subsidiaries. Borrower has no Subsidiaries other than Gulf
State Pipe Line Company, Inc. Borrower owns one hundred percent (100%) of the
issued and outstanding stock of such Subsidiary. Guarantor has no direct
Subsidiaries other than Borrower. Guarantor owns one hundred percent (100%) of
the issued and outstanding stock of Borrower.
Section 6.15. Compliance with Laws. None of Borrower, Guarantor or any
Subsidiary is in violation in any material respect of any law, rule, regulation,
order, or decree of any court, governmental authority, or arbitrator.
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Section 6.16. Compliance with Agreements. None of Borrower, Guarantor or
any Subsidiary is in violation in any material respect of any material document,
agreement, contract or instrument to which it is a party or by which it or its
properties are bound.
Section 6.17. Environmental Matters. Except as disclosed in Guarantors
audited financial statements dated December 31, 2004, Borrower, Guarantor and
each Subsidiary, and their respective properties, are in compliance with all
applicable Environmental Laws and none of Borrower, Guarantor or any Subsidiary
is subject to any liability or obligation for remedial action thereunder. There
is no pending or threatened investigation or inquiry by any governmental
authority of Borrower, Guarantor or any Subsidiary or any of their respective
properties pertaining to any Hazardous Substance. Except in the ordinary course
of business and in compliance with all Environmental Laws, there are no
Hazardous Substances located on or under any of the properties of Borrower,
Guarantor or any Subsidiary. Except in the ordinary course of business and in
compliance with all Environmental Laws, none of Borrower, Guarantor or any
Subsidiary has caused or permitted any Hazardous Substance to be disposed of on
or under or released from any of its properties. Borrower, Guarantor and each
Subsidiary have obtained all permits, licenses and authorizations which are
required under and by all Environmental Laws.
Section 6.18. Solvency. Borrower, Guarantor and their Subsidiaries, on an
individual and a consolidated basis, are not insolvent, Borrower's, Guarantor's
and their Subsidiaries' assets, on an individual and a consolidated basis,
exceed their liabilities, and Borrower will not be rendered insolvent by the
execution and performance of this Agreement and the Loan Documents.
Section 6.19. Investment Company Act. None of Borrower, Guarantor or any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
ARTICLE VII.
Affirmative Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the covenants set forth below, unless Lender shall otherwise
consent in writing.
Section 7.1. Reporting Requirements. Borrower will deliver to Lender:
(a) Annual Financial Statements - Guarantor. As soon as available, and
in any event within one hundred fifty (150) days after the end of each
fiscal year of Guarantor, beginning with the fiscal year ending December
31, 2005, a copy of the annual audited financial statements of Guarantor
and its Subsidiaries for such fiscal year containing, on a consolidated and
consolidating basis, balance sheets, statements of income, statements of
stockholders' equity and statements of cash flows as at the end of such
fiscal year and for the 12-month period then ended, in each case setting
forth in comparative form the figures for the preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and audited and
certified without qualification by independent certified public accountants
of recognized standing acceptable to Lender.
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(b) Quarterly Financial Statements - Guarantor. As soon as available,
and in any event within seventy-five (75) days after the end of the first
three quarters of each fiscal year of Guarantor, a copy of the financial
statements of Guarantor and its Subsidiaries as of the end of such fiscal
quarter and for the portion of the fiscal year then ended, containing, on a
consolidating basis, balance sheets, statements of income, statements of
stockholders' equity and cash flows in each case setting forth in
comparative form the figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and certified by an officer of
Guarantor acceptable to Lender to have been prepared in accordance with
GAAP and to fairly and accurately present the financial condition and
results of operations of Guarantor and its Subsidiaries, on a consolidating
basis, at the date and for the periods indicated therein.
(c) No Default Certificate. Concurrently with the delivery of each of
the financial statements referred to in Sections 7.1(a) and 7.1(b), a No
Default Certificate as of the date of such financial statements executed by
an officer of Borrower acceptable to Lender containing detailed
calculations of the covenants contained in Article IX.
(d) Borrowing Base Certificate. As soon as available, and in any event
within twenty-five (25) days after the end of each month of each fiscal
year of Borrower, a Borrowing Base Certificate as of the last day of such
month certified by an officer of Borrower acceptable to Lender.
(e) Monthly Accounts Receivable Reports. As soon as available, and in
any event within twenty-five (25) days after the end of each month of each
fiscal year of Borrower, accounts receivable reports for Borrower as of the
last day of such month certified by an officer of Borrower acceptable to
Lender, and showing all accounts receivable by customer name, amount owing
to Borrower and the age of the receivable.
(f) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, agency or instrumentality,
domestic or foreign, affecting Borrower, Guarantor or any Subsidiary which
could have a Material Adverse Effect.
(g) Judgments. Within five (5) days of the rendering thereof, notice
of any judgment against Borrower, Guarantor or any Subsidiary in an amount
which is more than $25,000.00.
(h) Notice of Default. As soon as possible and in any event within
five (5) days after the occurrence of each Event of Default and each event
which, with the giving of notice or lapse of time or both, would constitute
an Event of Default, a written notice setting forth the details of such
Event of Default and the action which Borrower has taken and proposes to
take with respect thereto.
(i) Notice of Material Adverse Effect. As soon as possible, an in any
event within five (5) days after Borrower becomes aware thereof, notice of
the occurrence of any event or the existence of any condition which might
reasonably be expected to have a Material Adverse Effect.
(j) General Information. Promptly, such other information concerning
Borrower, Guarantor or any Subsidiary as Lender may from time to time
reasonably request.
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Section 7.2. Maintenance of Existence; Conduct of Business. Borrower will
preserve and maintain, and will cause Guarantor and each Subsidiary to preserve
and maintain, its corporate existence and all of its leases, privileges,
licenses, permits, franchises, qualifications and rights that are necessary or
desirable in the ordinary conduct of its business.
Section 7.3. Maintenance of Properties. Borrower will maintain, and will
cause Guarantor and each Subsidiary to maintain, its assets and properties in
good condition and repair.
Section 7.4. Taxes and Claims. Borrower will pay or discharge, and will
cause Guarantor and each Subsidiary to pay or discharge, at or before maturity
or before becoming delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which, if
unpaid, might become a Lien upon any of its property; provided, however, that
none of Borrower, Guarantor or any Subsidiary shall be required to pay or
discharge any tax, levy, assessment, or governmental charge with respect to
which no Lien has been filed of record and which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
Section 7.5. Insurance. Borrower will maintain, and will cause Guarantor
and each Subsidiary to maintain, with financially sound and reputable insurance
companies workmen's compensation insurance, liability insurance, and insurance
on its property, assets and business at least in such amounts and against such
risks as are usually insured against by Persons engaged in similar businesses.
Each insurance policy covering Collateral shall name Lender as lender loss payee
and provide that such policy will not be cancelled without thirty (30) days
prior written notice to Lender.
Section 7.6. Inspection; Field Audits. At any reasonable time and from time
to time, Borrower will permit, and will cause Guarantor and each Subsidiary to
permit, representatives of the Lender:
(a) To examine and make copies of the books and records of, and visit
and inspect the properties or assets of Borrower, Guarantor and any
Subsidiary and to discuss the business, operations, and financial condition
of any such Persons with their respective officers and employees and with
their independent certified public accountants; and
(b) At the expense of Borrower, to conduct Field Audits once during
each fiscal year of Borrower.
Section 7.7. Keeping Books and Records. Borrower will maintain, and will
cause Guarantor and each Subsidiary to maintain, proper books of record and
account in which full, true, and correct entries in conformity with GAAP shall
be made of all dealings and transactions in relation to its business and
activities.
Section 7.8. Compliance with Laws. Borrower will comply, and will cause
Guarantor and each Subsidiary to comply, in all material respects with all
applicable laws, rules, regulations, and orders of any court, governmental
authority, or arbitrator.
Section 7.9. Compliance with Agreements. Borrower will comply, and will
cause Guarantor and each Subsidiary to comply, in all material respects with all
material agreements, contracts, and instruments binding on it or affecting its
properties or business.
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Section 7.10. Further Assurances. Borrower will execute and deliver, and
will cause Guarantor and each Subsidiary to execute and deliver, such further
instruments as may be requested by Lender to carry out the provisions and
purposes of this Agreement and the other Loan Documents and to preserve and
perfect the Liens of Lender in the Collateral.
Section 7.11. ERISA. Borrower will comply, and will cause Guarantor and
each Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
Section 7.12. Continuity of Operations. Borrower will continue to conduct,
and will cause each of its Subsidiaries to continue to conduct, its primary
businesses as conducted as of the Closing Date and to continue its operations in
such businesses.
ARTICLE VIII.
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
perform and observe the covenants set forth below, unless Lender shall otherwise
consent in writing.
Section 8.1. Debt. Borrower will not incur, create, assume or permit to
exist, and will not permit any Subsidiary to incur, create, assume, or permit to
exist, any Debt, except (a) Debt to Lender, (b) Debt (including equipment leases
and including Debt described in clause (a)) in an aggregate principal amount
which does not exceed $100,000.00, (c) Subordinated Debt, (d) Debt to The
Catalyst Fund, Ltd. and Southwest/Catalyst Capital, Ltd. ("Catalyst"), evidenced
by that certain promissory note in the original principal amount of
$2,000,000.00 dated June 30, 2005, (e) Debt to Silsbee Trading and
Transportation in the original principal amount of $164,523.00, (f) Debt to
Xxxxxx Operating Partnership, L.P. in the maximum principal amount of
$5,900,000.00, (g) Debt existing on the Closing Date which has been specifically
approved by Lender, and (h) current liabilities for taxes and assessments
incurred in the ordinary course of business.
Section 8.2. Limitation on Liens. Borrower will not incur, create, assume
or permit to exist, and will not permit any Subsidiary to incur, create, assume
or permit to exist, any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except (a) Liens in favor of Lender,
(b) purchase money Liens and Liens securing equipment leases securing Debt
permitted by Section 8.1(b), which Liens cover only the assets financed with the
Debt permitted by Section 8.1(b), (c) (i) Liens on the Excluded Items in favor
of Catalyst securing Debt permitted by Section 8.1(d) and (ii) subordinate liens
on other items of Collateral in favor of Catalyst securing Debt permitted by
Section 8.1(d), (d) encumbrances consisting of minor easements, zoning
restrictions or other restrictions on the use of real property that do not
(individually or in the aggregate) materially affect the value of the assets
encumbered thereby or materially impair the ability of Borrower or any
Subsidiary to use such assets in its business, and none of which is violated in
any material aspect by existing or proposed structures or land use, (e) Liens
for taxes, assessments or other governmental charges which are not delinquent or
which are being contested in good faith, for which adequate reserves have been
established and with respect to which no Lien has been filed of record;
provided, however, such Liens, together with Liens permitted pursuant to clause
(f) shall not at any time exceed an aggregate principal amount of $100,000.00,
(f) Liens of mechanics, materialmen, warehousemen, carriers or other similar
Liens; provided however, such Liens, together with Liens permitted pursuant to
clause (e) shall not at any time exceed an aggregate
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principal amount of $100,000.00 securing obligations that are not yet due and
are incurred in the ordinary course of business, and (g) Liens existing on the
Closing Date which have been specifically approved by Lender.
Section 8.3. Mergers, Acquisitions, Dissolutions and Disposition of Assets.
Borrower will not, and will not permit Guarantor or any Subsidiary to, (a)
become a party to a merger, consolidation, partnership or joint venture or
purchase or otherwise acquire all or a substantial part of the assets of any
Person or any shares or other evidence of beneficial ownership of any Person,
(b) dissolve or liquidate, (c) sell, lease, assign, transfer or otherwise
dispose of substantially all of its assets, except dispositions of plant
products (inventory) in the ordinary course of business, (d) create any new
Subsidiary, or (e) enter into any agreement to do any of the foregoing. Borrower
will not, and will not permit any Subsidiary to, sell, lease, assign, transfer
or otherwise dispose of any of its assets, except (a) sales of plant products
(inventory) in the ordinary course of business, and (b) sales of obsolete or
worn out equipment in the ordinary course of business.
Section 8.4. Restricted Payments; Debt Repayment. (a) Borrower will not
declare or pay any Dividend, if (i) at the time of paying such Divided, an Event
of Default or Unmatured Event of Default exists, or (ii) an Event of Default or
Unmatured Event of Default would arise as a result of paying such Dividend.
(b) Borrower will not repay any Debt except (i) Debt to Lender, (ii) Debt
described in Section 8.1(b), (d), (e), (f) and (h), and (iii) other Debt the
repayment of which has been specifically approved by Lender.
Section 8.5. Loans and Advances. Borrower will not make, and will not
permit Guarantor or any Subsidiary to make, any advance, loan or extension of
credit to any Person, including any employee, officer or director of Borrower,
Guarantor or any Subsidiary, except (a) loans and advances which exist on the
Closing Date and which have been specifically approved by Lender, (b) loans and
advances which do not exceed an aggregate principal amount of $100,000.00
outstanding at any time, and (c) loans and advances which have been specifically
approved by Lender prior to the funding thereof.
Section 8.6. Investments. Borrower will not make, and will not permit
Guarantor or any Subsidiary to make, any loan, extension of credit or capital
contribution to or investment in, or purchase, or permit Guarantor or any
Subsidiary to purchase, any stock, bonds, notes, debentures, or other securities
of any Person, except (a) readily marketable short term direct obligations of
the United States of America or obligations fully guaranteed by the United
States of America, (b) fully insured certificates of deposit with maturities of
one hundred eighty (180) days or less from the date of acquisition of Lender or
any commercial bank operating in the United States having capital and surplus in
excess of $150,000,000.00, (c) commercial paper of a domestic issuer if at the
time of purchase such paper is rated in one of the three highest rating
categories of Standard and Poor's Corporation or Xxxxx'x Investors Service,
investments in hydrocarbon commodity options which do not exceed an aggregate
amount of $150,000.00 at any time, and (d) investments made through Lender or
its Affiliates and approved by Lender.
Section 8.7. Compliance with Environmental Laws. Except in the ordinary
course of business and in accordance with all applicable Environmental Laws,
Borrower will not, and will not permit Guarantor or any Subsidiary to, (a) use
(or permit any tenant to use) any of their respective properties or assets for
the handling, processing, storage, transportation, or disposal of any Hazardous
Substance, (b) generate any Hazardous Substance, (c) conduct any activity which
is likely to cause a release or threatened release of any Hazardous Substance,
or (d)
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otherwise conduct any activity or use any of their respective properties or
assets in any manner that is likely to violate any Environmental Law.
Section 8.8. Accounting. Borrower will not make, and will not permit
Guarantor or any Subsidiary to make, any change in accounting treatment or
reporting practices, except as required by GAAP.
Section 8.9. Change of Business. Borrower will not enter into, or permit
any Subsidiary to enter into, any type of business which is materially different
from the business in which Borrower or such Subsidiary is presently engaged.
ARTICLE IX.
Financial Covenants
Borrower covenants and agrees that, as long as the Obligations or any part
thereof are outstanding or Lender has any Commitment hereunder, Borrower will
observe and perform the following financial covenants set forth below, unless
Lender shall otherwise consent in writing.
Section 9.1. Current Ratio. Borrower will at all times maintain a Current
Ratio of not less than 1.10 to 1.00. The Current Ratio shall be calculated and
tested quarterly as of the last day of each fiscal quarter of Borrower.
Section 9.2. Tangible Net Worth. Borrower will maintain Tangible Net Worth
in an amount not less than the sum of (a) $12,250,000.00 plus (b) fifty percent
(50%) of positive Net Income since June 30, 2005. For purposes of calculating
clause (b), Net Income shall be the sum of Net Income of Borrower for each
quarter since June 30, 2005; provided, however, that for any quarter for which
Net Income was less than zero, Net Income for such quarter shall be assumed to
be zero (and shall be calculated as zero for such quarter). Tangible Net Worth
shall be calculated and tested quarterly as of the last day of each fiscal
quarter of Borrower.
Section 9.3. Adjusted Tangible Net Worth. Borrower will maintain Adjusted
Tangible Net Worth in an amount not less than the sum of (a) $4,500,000.00 plus
(b) fifty percent (50%) of positive Net Income since June 30, 2005. For purposes
of calculating clause (b), Net Income shall be the sum of Net Income of Borrower
for each quarter since June 30, 2005; provided, however, that for any quarter
for which Net Income was less than zero, Net Income for such quarter shall be
assumed to be zero (and shall be calculated as zero for such quarter). Adjusted
Tangible Net Worth shall be calculated and tested quarterly as of the last day
of each fiscal quarter of Borrower.
Section 9.4. Ratio of Funded Debt to EBITDA. Borrower will at all times
maintain a Ratio of Funded Debt to EBITDA of not greater than 2.00 to 1.00. The
Ratio of Funded Debt to EBITDA shall be calculated and tested quarterly, as of
the last day of each fiscal quarter of Borrower, commencing with the fiscal
quarter ending December 31, 2005 on a cumulative basis for the four quarters
ended as of such date (a "rolling four quarter" basis).
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ARTICLE X.
Default
Section 10.1. Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) Borrower shall fail to pay when due the Obligations or any part
thereof.
(b) Any representation or warranty made or deemed made by Borrower or
any Obligated Party (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to
have been made.
(c) Borrower or any Obligated Party shall fail to perform, observe, or
comply with any covenant, agreement, or term contained in this Agreement or
any other Loan Document and such failure shall continue for a period of
seven (7) days.
(d) Borrower, any Subsidiary, or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against Borrower, any
Subsidiary, or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or a substantial part of its property, and such involuntary
proceeding shall remain undismissed and unstayed for a period of thirty
(30) days.
(f) Borrower, any Subsidiary, or any Obligated Party shall fail to
discharge within a period of thirty (30) days after the commencement
thereof any final, non-appealable attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount in excess of
$100,000.00 against any of its assets or properties.
(g) Borrower, any Subsidiary, or any Obligated Party shall fail to
satisfy and discharge promptly any final, non-appealable judgement or
judgements against it for the payment of money in an aggregate amount in
excess of $100,000.00.
(h) Borrower, any Subsidiary, or any Obligated Party shall fail to pay
when due any principal of or interest on any Debt (other than the
Obligations), or the maturity of any such Debt shall have been accelerated,
or any such Debt shall have been required to be prepaid prior to the stated
maturity thereof, or any event shall have occurred that permits (or, with
the giving of notice or lapse of time or both, would
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permit) any holder or holders of such Debt or any Person acting on behalf
of such holder or holders to accelerate the maturity thereof or require any
such prepayment.
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, any
Subsidiary, any Obligated Party or any of their respective shareholders, or
Borrower or any Obligated Party shall deny that it has any further
liability or obligation under any of the Loan Documents, or any lien or
security interest created by the Loan Documents shall for any reason cease
to be a valid, first priority perfected security interest in and lien upon
any of the Collateral purported to be covered thereby.
(j) A Material Adverse Effect shall have occurred.
(k) Guarantor shall fail to own at least one hundred percent (100%) of
the outstanding voting stock of Borrower.
(l) Borrower shall fail to comply with the provisions of Section 2.7
of this Agreement.
Section 10.2. Remedies Upon Default. If any Event of Default shall occur,
Lender may do any one or more of the following: (a) declare the outstanding
principal of and accrued and unpaid interest on the Note and the Obligations or
any part thereof to be immediately due and payable, and the same shall thereupon
become immediately due and payable, without notice, demand, presentment, notice
of dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by Borrower, (b) terminate the Commitment without notice
to Borrower, (c) foreclose or otherwise enforce any Lien granted to the Lender
to secure payment and performance of the Obligations, and (d) exercise any and
all rights and remedies afforded by the laws of the State of Texas or any other
jurisdiction by any of the Loan Documents, by equity or otherwise; provided,
however, that upon the occurrence of an Event of Default under Section 10.1(d)
or Section 10.1(e), the Commitment shall automatically terminate, and the
outstanding principal of and accrued and unpaid interest on the Note and the
other Obligations shall become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to demand, protest, or other formalities
of any kind, all of which are hereby expressly waived by Borrower.
Section 10.3. Performance by Lender. If Borrower shall fail to perform any
covenant, duty, or agreement contained in any of the Loan Documents, Lender may
perform or attempt to perform such covenant, duty, or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly pay
any amount expended by Lender in such performance or attempted performance to
Lender, together with interest thereon at the Default Rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly agreed
that Lender shall not have any liability or responsibility for the performance
of any obligation of Borrower under this Agreement or any other Loan Document.
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ARTICLE XI.
Miscellaneous
Section 11.1. Expenses of Lender. Borrower hereby agrees to pay Lender on
demand (a) all reasonable costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Agreement and the other
Loan Documents and any and all amendments, modifications, renewals, extensions,
and supplements thereof and thereto, including, without limitation, the fees and
expenses of Lender's legal counsel, (b) all reasonable costs and expenses
incurred by Lender in connection with the enforcement of this Agreement or any
other Loan Document, including, without limitation, the fees and expenses of
Lender's legal counsel, and (c) all other reasonable costs and expenses incurred
by Lender in connection with this Agreement or any other Loan Document,
including, without limitation, all costs, expenses, taxes, assessments, filing
fees, and other charges levied by an governmental authority or otherwise payable
in respect of this Agreement or any other Loan Document or in obtaining any
insurance policy, audit or appraisal in respect of the Collateral.
SECTION 11.2. INDEMNIFICATION. BORROWER HEREBY INDEMNIFIES LENDER AND EACH
AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) (COLLECTIVELY, "CLAIMS") TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR
RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION,
OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL
OR CLEANUP OF ANY HAZARDOUS SUBSTANCE LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY
OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY, (E) ANY ACT OR
OMISSION OF LENDER BASED UPON ANY FAX OR ELECTRONIC TRANSMISSION OR (F) ANY
MATTER RELATED TO ANY LETTER OF CREDIT, INCLUDING, WITH RESPECT TO ALL OF THE
ABOVE, ANY CLAIM WHICH ARISES AS A RESULT OF THE NEGLIGENCE OF LENDER; PROVIDED,
HOWEVER, THAT BORROWER'S INDEMNIFICATION OBLIGATIONS UNDER THIS SECTION 11.2
SHALL NOT APPLY TO THE EXTENT THAT THE CLAIMS ARISE AS A RESULT OF THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PERSON.
Section 11.3. Limitation of Liability. Neither Lender nor any affiliate,
officer, director, employee, attorney, or agent of Lender shall have any
liability with respect to, and Borrower hereby waives, releases, and agrees not
to xxx any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Borrower hereby waives, releases, and agrees not to
xxx Lender or any of Lender's affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
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Section 11.4. No Waiver; Cumulative Remedies. No failure on the part of
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. The rights and remedies
provided for in this Agreement and the other Loan Documents are cumulative and
not exclusive of any rights and remedies provided by law.
Section 11.5. Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without prior written consent of
Lender.
Section 11.6. Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them. Without prejudice to the
survival of any other obligation of Borrower hereunder, the obligations of
Borrower under Sections 11.1 and 11.2 shall survive repayment of the Note and
termination of the Commitment and the Letters of Credit.
Section 11.7. Amendment. The provisions of this Agreement and the other
Loan Documents to which Borrower is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
Section 11.8. Maximum Interest Rate. No provision of this Agreement or of
any other Loan Documents shall require the payment or the collection of interest
in excess of the maximum permitted by applicable law. If any excess of interest
in such respect is hereby provided for, or shall be adjudicated to be so
provided, in any other Loan Documents or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
Borrower nor the sureties, guarantors, successors, or assigns of Borrower shall
be obligated to pay the excess amount of such interest or any other excess sum
paid for the use, forbearance, or detention of sums loaned pursuant hereto. In
the event Lender ever receives, collects, or applies as interest any such sum,
such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by the Note; and, if the principal of the Note has
been paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, Borrower and Lender shall, to the extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Note so that interest for the entire term does not exceed the
Maximum Rate.
Section 11.9. Notices. (a) All notices and other communications provided
for in this Agreement and the other Loan Documents shall be in writing and may
(subject to paragraph (b) below) be telecopied (faxed), mailed by certified mail
return receipt requested, or delivered by hand or overnight courier service to
the intended recipient at the addresses specified below or at such other address
as shall be designated by any party listed below in a notice to the other
parties listed below given in accordance with this Section.
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If to Borrower: South Hampton Resources, Inc.
0000 XX 000
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to Guarantor: Texas Oil & Chemical Company II, Inc.
0000 XX 000
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to Lender: Amegy Bank National Association
Five Post Oak Park
0000 Xxxx Xxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, III
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy (fax), subject to
confirmation of receipt, when delivered if by hand or overnight courier service
or, in the case of a mailed notice, when duly deposited in the mails, in each
case given or addressed as aforesaid; provided, however, that notices to Lender
pursuant to Article II shall not be effective until received by Lender.
(b) Lender or Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. Unless Lender otherwise
prescribes, (i) notices and other communications sent to an e-mail address shall
be deemed received upon the sender's receipt of an acknowledgment from the
intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgment), provided, that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next Business Day for the recipient.
Section 11.10. Applicable Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Xxxxxx County, Texas and it shall be performable for
all purposes in Xxxxxx County, Texas. Except as provided in the Arbitration
Agreement, any action or proceeding against Borrower under or in connection with
any of the Loan Documents may be brought in any state or federal court in Xxxxxx
County, Texas, and Borrower hereby irrevocably submits to the nonexclusive
jurisdiction of such courts and waives any objection it may now or hereafter
have as to the venue of any such action or proceeding brought in any such court
or that any such court is an inconvenient forum. Borrower agrees that service of
process upon it may be made by certified or registered mail, return receipt
requested, at its office specified in this Agreement. Except as provided in the
Arbitration Agreement, nothing herein or in any of the
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other Loan Documents shall affect the right of Lender to serve process in any
other manner permitted by law or shall limit the right of Lender to bring any
action or proceeding against Borrower or with respect to any of its property in
courts in other jurisdictions. Except as provided in the Arbitration Agreement,
any action or proceeding by Borrower against Lender shall be brought only in a
court located in Xxxxxx County, Texas.
Section 11.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.12. Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 11.13. Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 11.14. Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Loan Documents or to the transactions contemplated hereby.
Section 11.15. Consent to Participations. Lender shall have the right at
any time and from time to time to sell or transfer one or more participation
interests in the Note and the indebtedness evidenced thereby to one or more
purchasers ("Purchasers"), whether related or unrelated to Lender. Lender may
provide to any one or more Purchasers or potential Purchasers any information,
financial statements, data or knowledge Lender may have about Borrower or about
any other matter relating to the Obligations, and Borrower waives any rights to
privacy it may have with respect to such matters. Borrower further waives any
and all notices of sale of participation interests and notices of repurchases of
participation interests. Borrower agrees that the owners of any participation
interests will be considered as the absolute owners of their interests in the
Obligations and will have all the rights granted under the participation
agreements or other agreements governing the sale of their participation
interests. Borrower waives all rights of offset or counterclaim that it may now
or later have against Lender or against any Purchaser and agrees that either
Lender or any Purchaser may enforce Borrower's obligations under the Loan
Documents irrespective of the failure or insolvency of any owner of any interest
in the Obligations. Borrower further agrees that any Purchaser may enforce its
interests irrespective of any claims or defenses that Borrower may have against
Lender.
Section 11.16. USA Patriot Act. Lender hereby notifies Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "Act"), it is required to obtain,
verify and record information that identifies Borrower, which information
includes the name and address of Borrower and other information that will allow
Lender to identify Borrower in accordance with the Act.
Section 11.17. Document Imaging. Borrower understands and agrees that (a)
Lender's document retention policy involves the imaging of executed loan
documents and the destruction of the paper originals, and (b) Borrower waives
any right that it may have to claim that the imaged copies of the Loan Documents
are not originals.
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SECTION 11.18. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
SOUTH HAMPTON RESOURCES, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
President
LENDER:
AMEGY BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx, III
Vice President
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