LOAN AGREEMENT
This LOAN AGREEMENT is dated this 25th day of August, 1998, by and
between COLORADO WYOMING RESERVE COMPANY, a Wyoming corporation (the "Borrower")
and XXXXX X. XXXXX REVOCABLE TRUST U/D/T DATED JULY 28, 1994, a trust with the
trustee and beneficiary residing in Playa del Rey, California (the "Lender").
WHEREAS, Borrower presently has interests in the Collateral (defined
below) as more particularly described in that certain "Mortgage, Deed of Trust,
Security Agreement and Financing Statement" dated as of the date hereof between
Borrower and Lender (the "Mortgage");
WHEREAS, Borrower has applied to Lender for a loan (the "Loan") for
the purpose of providing working capital pending completion of a private
placement of the Company's securities; and
WHEREAS, the Loan will be evidenced and by a promissory note in the
original principal sum of One Hundred Twenty Thousand Dollars ($120,000.00) (the
"Note") in the form of Exhibit 1, and secured by the Mortgage and in the Form of
Exhibit 2, each of which shall be executed by Borrower in favor of Lender
concurrently herewith.
NOW THEREFORE, in consideration of the premises and covenants
contained herein and for other good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Agreement" means this Loan Agreement, including all exhibits.
"Closing" has the meaning set forth in Section 2.1
"Collateral" means all property in which Lender is granted a Lien
pursuant to the Mortgage.
"Common Stock" shall mean the Common Stock, par value $0.01 per
share, of Borrower.
"Due Date" means the Due Date of the Note as defined in the Note, as
such Due Date may be extended from time to time.
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"Governmental Agency" means (a) any government or municipality or
political subdivision of any government or municipality, (b) any
assessment, improvement, community facilities or other special taxing
district, (c) any governmental or quasi-governmental agency, authority,
board, bureau, commission, corporation, department, instrumentality or
public body, (d) any court, administrative tribunal, arbitrator, public
utility or regulatory body, or (e) any central bank or comparable
authority.
"Legal Opinion" means the opinion of Xxxxx, Xxxxxx & Xxxxxx
LLP, counsel to the Borrower to be delivered to Lender at the Closing in
the form of Exhibit 6. "Lien" means any lien, mortgage, deed of trust,
pledge, security interest or other charge or encumbrance.
"Loan Documents" shall mean this Agreement, the Note and the Mortgage
executed by Borrower and delivered to Lender in connection with the Loan.
"Material Adverse Effect" means a material adverse effect on, or a
material adverse change in, or a group of such effects on or changes in,
the operations, financial condition, results of operations, prospects,
assets or liabilities of Borrower.
"Person" means any person or entity, whether an individual, trustee,
corporation, partnership, joint stock company, trust, unincorporated
organization, bank, business association or firm, joint venture,
Governmental Agency or otherwise.
"Property" means the real property included in the Collateral.
Registration Rights Agreement means that certain Registration Rights
Agreement between Borrower and Lender to be entered into in
conjunction with the Loan in the form of Exhibit 3 hereto.
"SEC Documents" has the meaning set forth in Section 5.10.
"Warrant Agreement" shall mean that certain Warrant Agreement
governing the Warrants and dated the date hereof by and between the
Borrower and the Lender in the form of Exhibit 4.
"Warrants" shall mean the Warrants dated the date hereof to be issued
by Borrower to the Lender in the form of Exhibit A to the Warrant
Agreement.
"Warrant Shares" means the shares of Common Stock purchasable upon
exercise of the Warrants.
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ARTICLE II
LOAN
2.1 CLOSING. The closing of the transactions contemplated herein
shall occur as soon as reasonably practical on or after the date hereof as the
parties may agree at the offices of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx,
0000 Xxxxxxxx Xxxx., Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000 (the "Closing").
2.2 LOAN. On the basis of the covenants, agreements and
representations of Borrower contained herein and contained in the loan
application and other financial information heretofore sub mitted to Lender, if
any, and subject to the terms and conditions hereinafter set forth, Lender
agrees to lend to Borrower and Borrower agrees to borrow from Lender an amount
equal to $120,000.
2.3 INTEREST. The Loan shall bear interest at the rate set forth in
the Note which interest shall be due and payable as set forth therein.
2.4 SECURITY. Payment of the Note shall be secured by the Mortgage.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CLOSING DOCUMENTS FROM COMPANY. At or prior to the Closing,
Borrower shall duly execute and deliver the following to Lender, which shall be
in form, content and legal effect satisfactory to Lender:
(a) The Note.
(b) The Mortgage which shall establish a first Lien on the
Collateral.
(c) The Warrant Agreement.
(d) The Warrants.
(e) The Registration Rights Agreement.
(f) Any additional documents reasonably required by Lender,
including without limitation, UCC Financing Statements
to be filed with the Secretaries of State of Colorado
and Utah.
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3.2 CLOSING DOCUMENTS FROM OTHERS. At or prior to the Closing,
Borrower shall duly cause to be delivered to Lender the following, which shall
be in form, content and legal effect satisfactory to Lender:
(a) The Legal Opinion.
(b) Any additional documents reasonably required by Lender.
ARTICLE IV
DISBURSEMENT
4.1 DISBURSEMENT. Provided that all conditions of Closing have been
met, and subject to the other terms and conditions of this Article and of this
Agreement, Lender shall make the Loan subject to the following requirements:
(a) No Event of Default as defined in Article VIII hereof shal
exist; and
(b) Lender shall have received such additional assignments,
security agreements and other documents, which Lender determines are necessary
to perfect its security interest in the Collateral.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Borrower hereby unconditionally warrants and represents as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Wyoming and has all corporate power and authority required to
(a) carry on its business as presently conducted, and (b) enter into this
Agreement, the Note, Mortgage, Registration Rights Agreement and Warrant
Agreement, issue the Warrants and to consummate the transactions contemplated
hereby and thereby. Borrower is qualified to do business and is in good standing
in each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect
5.2 CAPITALIZATION. As of the date of this Agreement the
capitalization of Borrower is as follows:
(a) COMMON STOCK. A total of 75,000,000 authorized shares of
Common Stock, $0.01 par value per share, of which 2,491,694 shares are issued
and outstanding as of a date hereof. All of such outstanding shares are validly
issued, fully paid and non-assessable. No such outstanding shares were issued in
violation of any preemptive right.
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(b) OPTIONS, WARRANTS, RESERVED SHARES. Schedule 5.2(b)
attached hereto sets forth a summary description of all outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from Borrower of any shares of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the securities Company's capital stock. No shares of Borrower's
outstanding capital stock, or stock issuable upon exercise, conversion or
exchange of any outstanding options, warrants or rights, or other stock issuable
by Borrower, are subject to any rights of first refusal or other rights to
purchase such stock (whether in favor of Borrower or any other person), pursuant
to any agreement or commitment of Borrower.
5.3 DUE AUTHORIZATION. All corporate action on the part of
Borrower, its officers, directors and shareholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
Borrower under, this Agreement, the Note, Mortgage, Registration Rights
Agreement and Warrant Agreement, and the authorization, issuance, reservation
for issuance and delivery of the Warrants and the Warrant Shares has been taken
or will be taken prior to the Closing, and this Agreement constitutes, and the
Note, Mortgage, Registration Rights Agreement, Warrant Agreement and the
Warrants when executed and delivered, will constitute, valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as may be limited by (a) applicable bankruptcy,
insolvency, reorganization or others laws of general application relating to or
affecting the enforcement of creditors' rights generally, (b) the effect of
rules of law governing the availability of equitable remedies and (c) applicable
law affecting the indemnification provisions of the Registration Rights
Agreement.
5.4 VALID ISSUANCE OF WARRANT SHARES.
(a) The Warrant Shares have been duly and validly reserved for
issuance and, upon issuance, sale and delivery in accordance with the terms of
the Warrants for the consideration provided for therein, will be duly and
validly issued, fully paid and nonassessable.
(b Based in part on the representations made by the Lender in
Section 6 hereof, the Warrants and (assuming no change in applicable law and no
unlawful distribution of the Warrants by the Lender or other parties) the
Warrant Shares will be issued in full compliance with the registration and
prospectus delivery requirements of the Securities Act, or in compliance with
applicable exemptions therefrom, and the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
5.5 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
Borrower is required in connection with the consummation of the transactions
contemplated by this Agreement. except for the filing of such qualifications or
filings under the Securities Act and the regulations thereunder and all
applicable state securities laws as may be required in connection with issuance
of the Warrants. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing and will, in the case of filings, be
made within the time prescribed by law.
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5.6 NON-CONTRAVENTION. The execution, delivery and performance of
this Agreement, the Note, Mortgage, Registration Rights Agreement, Warrant
Agreement and the Warrants by Borrower, and the consummation by Borrower of the
transactions contemplated hereby and thereby, do not and will not (a) contravene
or conflict with the Certificate of Incorporation or Bylaws of Borrower; (b)
constitute a material violation of any provision of any federal, state, local or
foreign law binding upon or applicable to Borrower; or (c) constitute a default
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any material benefit to which Borrower is entitled under, or
result in the creation or imposition of any lien, claim or encumbrance on any
material assets of Borrower under any material contract to which Borrower is a
party or any material permit, license or similar right relating to Borrower or
by which Borrower may be bound or materially affected.
5.7 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending or threatened that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement, the
Note, Mortgage, Registration Rights Agreement, Warrant Agreement and the
Warrants
5.8 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. Borrower is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, both as amended, and except for any violations that would not, either
individually or in the aggregate, have a Material Adverse Effect. Borrower has
complied and is in compliance with all applicable statutes, laws, regulations
and executive orders of the United States of America and all states, foreign
countries or other governmental bodies and agencies having jurisdiction over
Borrower's business or properties and no default exists under any contract or
agreement to which Borrower is a party, except for failures to comply and
defaults that would not, either individually or in the aggregate, have a
Material Adverse Effect.
5.9 TITLE TO PROPERTY AND ASSETS. Except for the Collateral, the
properties and assets Borrower owns or leases, are owned or leased by Borrower,
free and clear of all mortgages, deeds of trust, liens, encumbrances and
security interests except for statutory liens for the payment of current taxes
that are not yet delinquent and liens, encumbrances and security interests which
arise in the ordinary course of business and which do not affect material
properties and assets of Borrower. The Collateral is leased by Borrower free and
clear of all mortgages, deeds of trust, liens, encumbrances and security
interests except for statutory liens for the payment of current taxes. With
respect to all property and assets it leases, including the Collateral, Borrower
is in compliance with such leases in all material respects.
5.10 SEC DOCUMENTS.
(a) Borrower has furnished to the Lender prior to the date
hereof copies of its fiscal 1997 Form 10-KSB filed with the Securities and
Exchange Commission on October 1, 1997 and all registration statements, reports
and proxy statements filed by Borrower with the Commission thereafter (such Form
10-KSB, and such other registration statements, reports and proxy statements,
are collectively referred to herein as the "SEC Documents"). Each of the SEC
Documents, as of the
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respective date thereof, does not, and each of the registration statements,
reports and proxy statements filed by Borrower with the Commission after the
date hereof and prior to the Closing will not, as of the date thereof, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Borrower is not a
party to any material contract, agreement or other arrangement required to be
filed as an exhibit to the SEC Documents that is not so filed.
(b) Borrower has provided the Lender with its audited
financial statements (the "Audited Financial Statements") for the fiscal year
ended June 30, 1997 and its unaudited financial statements (the "Unaudited
Financial Statements") for the nine months ended March 31, 1998 (the "Balance
Sheet Date"). Since March 31, 1997, Borrower has duly filed with the Commission
all registration statements, reports and proxy statements required to be filed
by it under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Securities Act of 1933 (the "Securities Act"). The audited and
unaudited consolidated financial statements of Borrower included in the SEC
Documents filed prior to the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
the consolidated financial position of Borrower and its consolidated
subsidiaries as at the date thereof and the consolidated results of their
operations and cash flows for the periods then ended, provided, however, that
the unaudited financial statements are subject to normal year end audit
adjustments and may not include all footnote disclosures required under GAAP and
may be condensed or summary statements.
(c) Except as and to the extent reflected or reserved against
in Borrower's Audited Financial Statements (including the notes thereto) or the
Unaudited Financial Statements, to the best knowledge of Borrower, Borrower has
no material liabilities (whether accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined or determinable) other than: (i)
liabilities incurred in the ordinary course of business since the Balance Sheet
Date that are consistent with Borrower's past practices, (ii) liabilities with
respect to agreements to which the Lender is a party, and (iii) other
liabilities that either individually or in the aggregate would not result in a
Material Adverse Effect.
5.11 ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since the
Balance Sheet Date, the business and operations of Borrower have been conducted
in the ordinary course consistent with past practice, and there has not been:
(a) any declaration setting aside or payment of any dividend
or other distribution of the assets of Borrower with respect to any shares of
capital stock of Borrower, or any repurchase, redemption or other acquisition by
Borrower or any subsidiary of Borrower of any outstanding shares of Borrower's
capital stock;
(b) any damage, destruction or loss, whether or not covered by
insurance, except for such occurrences that have not resulted, and are not
expected to result, in a Material Adverse Effect;
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(c) any waiver by Borrower of a valuable right or of a
material debt owed to it, except for such waivers that have not resulted, and
are not expected to result, in a Material Adverse Effect;
(d) any material change or amendment to, or any waiver of any
material rights under, a material contract or arrangement by which Borrower or
any of its assets or properties is bound or subject, except for changes,
amendments or waivers which are expressly provided for or disclosed in this
Agreement or that have not resulted, and are not expected to result, in a
Material Adverse Effect;
(e) any change by Borrower in its accounting principles,
methods or practices or in the manner it keeps its accounting books and records,
except any such change required by a change in GAAP; and
(f) to Borrower's knowledge, any other event or condition of
any character, except for such events and conditions that have not resulted, and
are not expected to result, in a Material Adverse Effect.
5.12 NO OFFSETS ON OTHER PROJECTS. Borrower has no claims, defenses
or offsets against Lender in connection with any other indebtedness owed by
Borrower to Lender, and should any such claims, defenses or offsets exist, they
are hereby waived in consideration of Lender making the Loan.
5.13 INDEBTEDNESS OF BORROWER. Borrower has no indebtedness other
than trade payables and certain loans from officers and directors of Borrower.
5.14 FULL DISCLOSURE. The information contained in this Agreement
and the Schedule of Exceptions with respect to the assets, results of
operations, and financial condition of Borrower and the transactions
contemplated by this Agreement, the Note, Mortgage, Registration Rights
Agreement, Warrant Agreement and the Warrants are true and complete in all
material respects and do not omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender hereby represents and warrants to Borrower, and agrees that:
6. AUTHORIZATION. All action on the part of the Lender, necessary
for the authorization, execution, delivery of and the performance of all
obligations of Lender under, this Agreement has been taken or will be taken
prior to the Closing. This Agreement constitutes and, when executed and
delivered, will constitute, the Lender's valid and legally binding obligations,
enforceable in accordance with the terms except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the
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enforcement of creditors' rights generally and (b) the effect of rules of law
governing the availability of equitable remedies. The Lender has full power and
authority to enter into this Agreement.
6.2 PURCHASE FOR INVESTMENT. The Warrants to be acquired by the
Lender hereunder will be acquired for investment and not with a view to the
public resale or distribution thereof within the meaning of the Securities Act.
The Lender also represents that it has not been formed for the specific purpose
of acquiring the Warrants.
6.3 DISCLOSURE OF INFORMATION. The Lender has received or has had
full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Warrants to be purchased by
the Lender under this Agreement. The Lender further has had an opportunity to
ask questions and receive answers from Borrower regarding the terms and
conditions of the offering of the Warrants and the Warrant Shares and to obtain
additional information (to the extent Borrower possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Lender or to which the Lender had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by Borrower in Section 5.
6.4 INVESTMENT EXPERIENCE. The Lender understands that the
acquisition of the Warrants involves substantial risk. The Lender has experience
as an investor in securities of companies and acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the Warrants
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of this investment in the Warrants
and protecting its own interests in connection with this investment.
6.5 ACCREDITED INVESTOR STATUS; LOCATION AND RESIDENCY. The Lender
is an "accredited investor" within the meaning of Regulation D promulgated under
the Securities Act. The Lender is located, and its sole trustee and beneficiary
reside in, the State of California.
6.6 RESTRICTED SECURITIES. The Lender understands that the
Warrants to be purchased by the Lender hereunder, and any Warrant Shares to be
purchased by the Lender upon exercise of the Warrants, are characterized as
"restricted securities" under the Securities Act inasmuch as they are being
acquired from Borrower in a transaction not involving a public offering and that
under the Securities Act and applicable regulations thereunder such securities
may be resold without registration under the Securities Act only in certain
limited circumstances. The Lender is familiar with Rule 144 of the SEC, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act. The Lender understands that Borrower is under no
obligation to register any of the securities sold hereunder except as provided
in the Registration Rights Agreement.
6.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Lender further agrees not to make any
disposition of all or any portion of the Warrants or the Warrant Shares unless
and until:
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(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) the Lender has notified Borrower of the proposed
disposition and has furnished Borrower with a statement of the
circumstances surrounding the proposed disposition, and the
Lender has furnished Borrower, at the expense of the Borrower,
with an opinion of counsel, reasonably satisfactory to
Borrower, that such disposition will not require registration
of such securities under the Securities Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section
6.7 no such registration statement or opinion of counsel will be required for
any transfer of any Warrants or any Warrant Shares in compliance with SEC Rule
144, Rule 144A or Rule 145(d), or any successor or additional similar rule, or
if such transfer otherwise is exempt, in the view of Borrower's legal counsel,
from the registration requirements of the Securities Act, provided that, in the
case of any transfer that is otherwise exempt, the transferee agrees in writing
to be subject to the terms of this Section 6.7 to the same extent as if the
transferee were the original Lender hereunder.
6.8 LEGENDS. Certificates evidencing the Warrant Shares, when
issued, will bear each of the legends set forth below and the Warrants will bear
the legends set forth in (i) and (ii) below:
(i) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.
(ii) Any legends required by any applicable state securities laws.
The legends set forth in Section 6.8 hereof will be removed by Borrower from any
certificate evidencing the Warrant Shares upon the effectiveness of a
registration statement under the Securities Act or upon delivery to Borrower of
an opinion by counsel, reasonably satisfactory to Borrower, that such security
may be freely transferred in a public sale without such a registration statement
being in effect and that such transfer will not jeopardize the exemption or
exemptions from registration pursuant to which Borrower issued the Warrants or
the Warrant Shares.
ARTICLE VII
ADDITIONAL COVENANTS OF BORROWER
In addition to the covenants of Borrower contained elsewhere herein,
and in the Note, the Mortgage and other Loan Documents, Borrower agrees as
follows:
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7.1 PROCEEDINGS. If any proceedings are filed seeking to enjoin or
otherwise prevent or declare invalid or unlawful the extraction of oil, gas or
other minerals on the Property or any portion thereof, Borrower will give prompt
written notice thereof to Lender and will cause such pro ceedings to be
vigorously contested in good faith and, in the event of an adverse ruling or
decision, prosecute all allowable appeals.
7.2 COMPLIANCE WITH APPLICABLE LAWS. All extraction of oil, gas or
other minerals on the Property shall be performed in material compliance with
all laws, rules, regulations and orders applicable to its business operations,
properties, assets, and services (including rules and regulations relating to
work-place safety and environmental clean-up) and all necessary permits,
licenses and other authorizations have been obtained for the extraction of oil,
gas or other minerals on the Property.
7.3 FURTHER DOCUMENTS. Borrower will, at the request of Lender,
execute, deliver and furnish such documents or take such further action as
Lender may reasonably deem necessary or desirable to evidence the Loan, or
perfect the security therefor.
7.4 RESTRICTIVE COVENANTS. Borrower shall not impose any
restrictive covenants or encumbrances upon the Property.
7.5 LIENS. If at any time an encumbrance, lien or charge is placed
or claimed upon the Property, Borrower shall satisfy and remove such
encumbrance, lien or charge by bonding or by other method satisfactory to
Lender.
7.6 NOTICES. Borrower shall comply and promptly furnish to Lender
true and complete copies of any notices pertaining to the Property by any
Governmental Agency. Borrower shall promptly notify Lender of any fire or other
casualty or any notice of taking or eminent domain pro ceeding affecting the
Property.
7.9 BOOKS AND RECORDS. Borrower shall keep, at its principal place
of business, the records and books of accounting relating to royalties received
on account of the extraction of oil, gas and other minerals from the Property.
Lender shall be entitled, at any reasonable time, to inspect the Property, all
records relating thereto, and the books and other financial records of Borrower
including, but not limited to, all permits, licenses, consents and approvals of
all Governmental Agencies having jurisdiction over Borrower and the Property.
Borrower shall cooperate with Lender in enabling Lender to accomplish such
inspection and permit Lender to make such copies as Lender may request.
7.10 DESIGNATION OF DIRECTOR. Lender will have the right to
designate one person to Borrower's board of directors and upon such designation
Borrower will appoint and thereafter nominate and use its best efforts to cause
the election of such person to its Board at any shareholder's meeting in which
directors are to be elected. Lender may vary its designee from time to time. All
benefits currently provided to other directors will be provided to this director
and the director will receive from Borrower warrants/options to purchase 100,000
shares of Borrower's Common Stock
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at $1.00 per share. All reasonable expenses of this board member will be
reimbursed by Borrower. At the request of the designated director, a director
liability insurance policy satisfactory to this director will be purchased and
kept in full force at Company expense.
7.11 RESTRICTIONS ON DERIVATIVE SECURITIES. Except for the Warrants
and options and warrants granted or sold in connection with the a private
placement of Borrower's securities seeking to raise up to $2,000,000 by October
31, 1998 and thereby repay the Note and options and warrants granted to the new
director designated by Lender pursuant to Section 7.10, Borrower shall not grant
or issue options, warrants, convertible securities or other rights to subscribe
for any shares of common stock or securities convertible to common stock to any
officer, director or other affiliate of the Company in excess of 50,000 shares
of common stock in the aggregate for a period of one year from the effective
date of the registration statement covering the Registrable Securities (as
defined in the Registration Rights Agreement). Borrower shall not pay cash
bonuses or loan holders funds for exercise of any outstanding options or
warrants of the Borrower.
7.12 RESTRICTION ON PAYMENT OF OTHER INDEBTEDNESS. Until repayment
of the Loan is made in full, Borrower shall make no payment of or on any
indebtedness of Borrower to any of its officers or directors, including the
indebtedness to its officers and directors mentioned in Section 5.13.
7.13 FILINGS. At Borrower's expense, Borrower will prepare and file
on Lenders behalf all necessary forms and documents, including Schedules 13D or
13G and Form 3s, 4s and 5s, that may required of Lender as a 5% or 10% or
greater beneficial owner of Borrower's Common Stock. At its expense, Borrower
will arrange for any necessary legal opinions permitting transfer of Borrower's
securities pursuant to Rule 144 when applicable.
ARTICLE VIII
DEFAULT
8.1 EVENTS OF DEFAULT. Any of the following shall constitute an
event of default ("Event of Default") hereunder:
(a) The failure of Borrower to make any payment required under
the Note.
(b) The false or misleading nature of any representation or
warranty of Borrower contained herein or in any representation to Lender
concerning the financial condition or credit standing of Borrower or the
reasonable determination by Lender of a material threat to its security by
reason of a material adverse change in the financial condition or credit
standing of Borrower;
(c) The failure of Borrower to fully perform any and all
covenants and agreements hereunder or under the Note, Mortgage, Registration
Rights Agreement, Warrant
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Agreement and the Warrants and such failure, if remedial, continues unremedied
for 15 days after notice thereof from the Lender;
(d) An event of default shall occur under the Note or
Mortgage.
8.2 ACCELERATION. Upon the occurrence of an Event of Default, the
entire unpaid balance of the Note including all accrued interest shall at the
option of Lender, become immediately due and payable and Lender shall have such
rights of enforcement as may be afforded hereunder or under the Note, Mortgage
and any of the other Loan Documents, and in law or equity.
ARTICLE IX
REMEDIES
9.1 REMEDIES ARE CUMULATIVE. All remedies of Lender provided for
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in the Note, the Mortgage or any of the other Loan Documents
or by law. The exercise of any rights of Lender hereunder shall not in any way
constitute a cure or waiver of a default hereunder or elsewhere, or invalidate
any act done pursuant to any notice of default, or prejudice Lender in the
exercise of any of its other rights hereunder or elsewhere unless, in the
exercise of said rights, Lender realizes all amounts owed to it hereunder and
under the Note.
9.2 RIGHT OF CONTEST. Borrower shall have the right to contest in
good faith any claim, demand, levy, or assessment by a third party, the
assertion of which would constitute a default here under. Any such contest shall
be prosecuted diligently and in a manner not prejudicial to Lender or the rights
of Lender hereunder. Upon demand by Lender, Borrower shall deposit funds with
Lender or obtain and record a bond satisfactory to Lender in an amount
sufficient to cover any amounts which may be owing in the event the contest may
be unsuccessful. Borrower shall make such deposit or obtain and record such
bond, as the case may be, within five (5) days after demand therefor and, if
made by payment of funds to Lender, the amount so deposited shall be disbursed
in accordance with the resolution of the contest to Borrower or the adverse
claimant.
ARTICLE X
MISCELLANEOUS
10.1 NO WAIVER. No waiver of any default or breach by Borrower
hereunder shall be implied from any omission by Lender to take action on account
of such default, and no express waiver shall affect any default other than the
default specified in the waiver and the waiver shall be operative only for the
time and to the extent therein stated. Waivers of any covenant, term or
condition contained herein shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by
Lender to or of any act by Borrower requiring further consent or approval shall
not be deemed to waive or render unnecessary the consent or approval to or of
any subsequent similar act.
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10.2 THIRD PARTIES BENEFITTED. Except with respect to the rights of
the director designated under Section 7.10 (which are intended to benefit, and
may be enforced directly by, such director, this Agreement is made and entered
into for the sole protection and benefit of Lender and Borrower.
10.3 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given (a) upon personal delivery to
the party notified, (b) one day after deposit with a nationally recognized air
courier service such as DHL or Federal Express for next day delivery, or (c) on
the day of facsimile transmission, with confirmed transmission, to the facsimile
number shown below (or to such other facsimile number as the party to be
notified may indicate by ten (10) days advance written notice to the other party
in the manner herein provided), provided that notice is also given under clauses
(a) or (b) above, in any such case addressed to the party to be notified at the
address indicated below for that party, or at such other address as that party
may indicate by ten (10) days advance written notice to the other party in the
manner herein provided.
If to Lender:
Xxxxx X. Xxxxx, Trustee
Xxxxx X. Xxxxx Revocable Trust u/d/t dated
July 28, 1994
0000 Xxxxxx Xxxxxx
Xxxxx xxx Xxx XX 00000
Facsimile:(000) 000-0000
If to Borrower:
COLORADO WYOMING RESERVE COMPANY
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxxxx, Xxxxxxxx 00000
Facsimile:(000) 000-0000
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Agreement and in the Note, Mortgage,
Registration Rights Agreement, Warrant Agreement and the Warrants and any of the
other Loan Documents shall survive the repayment of the Loan.
10.5 ATTORNEYS' FEES. In the event that an attorney be employed or
expense be incurred to compel payment of the Loan or any portion thereof or in
connection with any default here under or under the Note, Mortgage, Registration
Rights Agreement, Warrant Agreement, the Warrants or any other Loan Document,
whether or not any action or proceeding is commenced by Lender, Borrower
promises to pay all such reasonable expenses and attorneys' fees, including, but
not limited to, attorneys' fees incurred in any bankruptcy or judicial or
nonjudicial foreclosure proceedings.
10.6 ENTIRE AGREEMENT. Borrower agrees that the terms hereof, and
the Note, Mortgage, Registration Rights Agreement, Warrant Agreement, the
Warrants and the other Loan Documents, constitute the complete, exclusive and
final expression of its agreement relating to the
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specific subject matter hereof and thereof. In this regard, Borrower represents
and warrants that it intends the literal words of this Agreement and of the Loan
Documents, and that all prior or contemporaneous negotiations, drafts,
agreements, and other extrinsic communications shall have no significance or
evidentiary effect, and may not be used to contradict the terms hereof. Borrower
affirms that its counsel has been specifically advised Borrower concerning the
meaning of the provisions of this Agreement, including, but not limited to the
provisions of this Section 10.6.
10.7 AUTHORITY TO FILE NOTICES. Borrower irrevocably appoints,
designates, and authorizes Lender as its agent (said agency being coupled with
an interest) to file for record any notices of completion, cessation of labor,
or any other notice that Lender deems necessary or desirable to protect its
interest hereunder or under the Note, Mortgage, or any of the other Loan
Documents. Such authorization by Borrower shall not create any obligation on the
part of Lender.
10.8 EXPENSES. Borrower shall pay promptly all reasonable costs,
charges, and expenses incurred by Lender in connection with Loan including but
not limited to reasonable legal fees and expenses in connection with the
preparation of this Agreement, the Note, Mortgage, Registration Rights
Agreement, Warrant Agreement and the Warrants and Lenders travel and related
expenses of due diligence in connection with Borrower. All such fees and
expenses shall be paid at the Closing.
10.9 ACTIONS. Lender shall have the right to commence, appear in or
defend any action or proceeding purporting to affect the rights, duties, or
liabilities of the parties hereunder. In connection therewith, Lender may incur
and pay costs and expenses, including reasonable attorneys' fees. Borrower shall
pay to Lender on demand all such costs and expenses.
10.10 GOVERNING LAW AND JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State Colorado. All
judicial proceedings arising out of or relating to this Agreement may be brought
in any state or federal court of competent jurisdiction in the State of
California, and by execution and delivery of this Agreement, the Company accepts
for itself generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non convenience and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement.
10.11 HEIRS, SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors, assigns and personal
representatives of the parties hereto; provided, however, that Borrower shall
not assign its rights hereunder in whole or in part without the prior written
consent of Lender, which such consent may be granted or withheld in the sole and
absolute discretion of Lender. Any such assignment without said consent shall be
void. Lender shall have the right at any time and from time to time to assign to
others all or certain of its rights hereunder.
10.12 TIME. Time is of the essence of this Agreement, and each and
every provision hereof and in the Note, Mortgage, Registration Rights Agreement,
Warrant Agreement and the Warrants and any of the other Loan Documents in which
time is an element.
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10.13 JOINT VENTURER. Lender shall not be deemed to be a partner or
joint venturer with Borrower in connection with the Loan or any action taken
under this Agreement and Borrower shall indemnify, hold Lender harmless and
defend Lender from and against any and all loss, cost, damage, expense or
liability, including reasonable attorneys' fees, arising out of or resulting
from such a construction of the parties and their relationship or resulting from
any act or failure to act of Borrower, or from the negligence of Borrower with
respect to any activity contemplated herein, or under the in the Note, Mortgage
any of the other Loan Documents or other documents executed in connection
herewith. The provisions of this paragraph shall survive repayment of the Loan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
"Borrower"
COLORADO WYOMING RESERVE COMPANY
By: /s/ XXX X. XXXXXX
----------------------------------
Xxx X. Xxxxxx
Title: President
"Lender"
XXXXX X. XXXXX REVOCABLE TRUST U/D/T
DATED JULY 28, 1994
By: /s/ XXXXX X. XXXXX
----------------------------------
Xxxxx X. Xxxxx , Trustee
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