EXHIBIT 10(q)
LOAN AGREEMENT
BY AND BETWEEN
TEXAS OIL & CHEMICAL CO. II, INC.,
A TEXAS CORPORATION
AND
SOUTH HAMPTON REFINING COMPANY,
A TEXAS CORPORATION
AS BORROWERS
AND
THE CATALYST FUND, LTD.,
A TEXAS LIMITED PARTNERSHIP,
AND
SOUTHWEST/CATALYST CAPITAL, LTD.,
A TEXAS Limited Partnership,
AS LENDERS
TABLE OF CONTENTS
SECTION 1. ADDITIONAL DEFINITIONS AND INTERPRETATION ........................... 1
1.1 Terms Defined.......................................................... 1
1.2 Accounting Principles.................................................. 8
1.3 Directly or Indirectly................................................. 8
1 4 Knowledge.............................................................. 8
1.5 References............................................................. 9
1.6 Compliance with Usury Law.............................................. 9
SECTION 2. REPRESENTATIONS AND WARRANTIES OF BORROWER........................... 10
2.1 Organization........................................................... 10
2.2 Capitalization......................................................... 10
2.3 Authorization and Enforceability....................................... 11
2.4 Financial Statements................................................... 11
2.5 Business............................................................... 11
2.6 Pending Litigation..................................................... 12
2 7 Compliance with Law and Other Instruments.............................. 12
2.8 No Defaults.......... ................................................. 12
2.9 Governmental Consents; Offering of Note................................ 12
2.10 Taxes.................................................................. 13
2.11 Use of Proceeds........................................................ 13
2.12 Insurance Coverage..................................................... 13
2.13 Properties............................................................. 13
2.14 Restrictions on Borrower............................................... 14
2.15 ERISA Matters.......................................................... 14
2.17 Brokers and Finders.................................................... 14
2.18 Disclosure............................................................. 15
2.19 Permits, Leases and Contracts.......................................... 15
2.20 Receipt of Reasonably Equivalent Value; No Insolvency.................. 15
2.21 Affiliate Transactions................................................. 15
2.22 Location of Collateral................................................. 15
2.23 Small Business Concern................................................. 15
2.24 Senior Lender Documents................................................ 16
2 25 Penreco PA............................................................. 16
2.26 Hedgine Contracts.................................... . ............... 16
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2.27 Hedging Supplies....................................................... 16
2.28 AADC Loan Agreements and Obligations................................... 16
2.29 Coin................................................................... 16
SECTION 3. LENDER LOAN.......................................................... 16
3.1 Lender Loan............................................................ 16
3.2 Lender's Conditions.................................................... 16
3.3 Investment............................................................. 19
3.4 Expenses............................................................... 19
SECTION 4. PAYMENTS............................................................. 19
4.1 Direct Payment......................................................... 19
4.2 Mandatory Repayments................................................... 19
4.3 Voluntary Prepayment................................................... 20
4.4 Application of Payments................................................ 20
4.5 Interest............................................................... 20
SECTION 5. CERTAIN PROVISIONS REGARDING THE LENDER NOTE ........................ 20
5.1 Transfer of Lender Note................................................ 20
5.2 Replacement of Lender Note............................................. 21
SECTION 6. BORROWER'S BUSINESS COVENANTS........................................ 21
6.1 Payment of Lender Note, Etc............................................ 21
6.2 Use of Proceeds........................................................ 21
6.3 Business......,,,...................................................... 21
6.4 Maintenance of Existence and Status.................................... 21
6.5 Payment of Taxes and Claims............................................ 21
6.6 Sale or Transfer of Assets, Merger, etc................................ 22
6.7 Debt .................................................................. 22
6.8 Liens and Encumbrances................................................. 22
6.9 Borrower's Financial Covenants......................................... 23
6.10 Distributions.......................................................... 24
6.11 Compliance with Laws................................................... 24
6.12 ERISA Compliance....................................................... 25
6.13 Transactions with Affiliates........................................... 25
6.14 Board of Directors..................................................... 25
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6.15 Insurance.............................................................. 25
6.16 Additional Prohibitions................................................ 26
6.17 Senior Debt............................................................ 27
6.18 AADC Loan from Shareholders............................................ 27
6.19 Maintenance of Hedged Supplies......................................... 27
6.20 Additional Real Estate................................................. 28
SECTION 7. INFORMATION AS TO BORROWER........................................... 28
7.1 Financial and Business Information..................................... 28
7.2 Inspection............................................................. 31
7.3 Confidentiality........................................................ 31
SECTION 8. EVENTS OF DEFAULT.................................................... 32
8.1 Nature of Events....................................................... 32
8.2 Default Remedies....................................................... 34
8.3 Annulment of Acceleration of Lender Note............................... 34
8.4 Joint and Several Liability............................................ 34
SECTION 9. MISCELLANEOUS........................................................ 34
9.1 Notices................................................................ 34
9.2 Survival............................................................... 35
9.3 Successors and Assigns................................................. 35
9.4 Amendment and Waiver................................................... 35
9.5 Governing Law.......................................................... 35
9.6 Severability........................................................... 35
9 7 Entire Agreement: Supersedure.......................................... 36
9.8 Multiple Counterparts.................................................. 36
9.9 Arbitration............................................................ 36
9.10 Attorney's Fees........................................................ 37
9.11 Drafting............................................................... 37
9 12 Lender's Consent....................................................... 37
9.13 Cooperation.................... ....................................... 37
9.14 Interpretation......................................................... 37
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SCHEDULES
2.1 States in which Qualified to do Business
2.2(a) Ownership of Stock
2.2(b) Subsidiaries and Affiliates
2.4 Financial Statement Disclosures; Noncurrent Debt
2.5 Business and Real Estate
2.6 Pending Litigation
2.15 ERISA Matters
2.19 Permits, Leases and Contracts
2.21 Affiliate Transactions
2.22 Collateral Outside of Texas
2.26 Hedging Contracts
2.28 Summary of AADC Loan Agreements and Obligations
3.2(j) Insurance
6.16(a) Remuneration of Key Management
7.1(a)(iv) Monthly Statement Template
EXHIBITS
A Example of Fixed Charge Ratio
B Penreco Processing Agreement
C Martin Operating Partnership, L.P. Credit and Supply Agreement
D Amegy Bank Purchase and Sale Agreement/Security Agreement
E Coral Energy Hedging Agreement
F. AADC Loan Agreements and Obligations
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into effective
as of this 30th day of June, 2005, (the "Execution Date"), by and among TEXAS
OIL & CHEMICAL CO. II, INC., a Texas corporation, and SOUTH HAMPTON REFINING
COMPANY, a Texas corporation (collectively called "Borrower"), and THE CATALYST
FUND, LTD., a Texas limited partnership, and SOUTHWEST/CATALYST CAPITAL, LTD., a
Texas limited partnership (collectively called "Lender").
WITNESSETH:
WHEREAS, Borrower desires to borrow the amount of TWO MILLION AND No/100
DOLLARS ($2,000,000.00) in up to three draws from Lender (the "Lender Loan") as
described in Section 3.1 hereto primarily for the purpose of paying for part of
the costs related to the buildout of the tolling facility and related
infrastructure described in the Penreco PA; and
WHEREAS, Lender is further willing to and Borrower desires that Lender
provide business counsel and advice to Borrower from time to time to assist
Borrower in its business strategies and growth plans as more fully described in
that certain Consulting Agreement of even date herewith between Borrower and
Lender; provided that under no circumstances shall Borrower be required to
follow the counsel and advice of Lender nor shall Lender be deemed to have
controlled the business activities of Borrower;
NOW, THEREFORE, in consideration of the premises, the provisions hereof,
and the mutual benefits to be derived therefrom, Lender and Borrower agree as
follows:
SECTION 1. ADDITIONAL DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED. As used in this Agreement, the following terms have the
respective meanings set forth below or set forth in this Section or paragraph
following such term:
1933 ACT - the Securities Act of 1933, as amended, and any successor
statute.
AADC - Arabian American Development Company, a Delaware corporation
and the parent corporation of ASRC.
AADC LOAN AGREEMENTS AND OBLIGATIONS - those certain obligations
described in Section 2.28 hereof.
AADC PLEDGE AGREEMENT - That certain pledge agreement dated May 15,
2001, securing the AADC Loan Agreements and Obligations.
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ACCOUNTS RECEIVABLE - all of Borrower's accounts receivable,
instruments, contract rights, chattel paper, documents, general
intangibles, book debts and all amounts due to Borrower from a factor,
arising from Borrower's sale of goods or rendition of services in the
ordinary course of Borrower's business, whether now existing or
hereinafter created, and all returned, reclaimed, refused or repossessed
goods, and all books and records pertaining to the foregoing and the cash
and non-cash proceeds resulting therefrom and all security and guarantees
therefor.
AFFILIATE - with respect to a Person, any other Person that directly
or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person; provided,
however, that neither Lender nor any affiliate thereof shall be deemed to
be an Affiliate of Borrower or its Subsidiaries. The term "control" as
used in the foregoing sentence means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise.
AMEGY - Amegy Bank, N.A..
ASRC- American Shield Refining Company, a Delaware corporation, and
the parent corporation of TOCC.
ASSIGNMENT OF LIFE INSURANCE POLICY - The Assignment of Life
Insurance Policy delivered pursuant to Section 6.15(d).
BORROWER - TOCC and SHR.
BUSINESS - the business of Borrower as described in Section 2.5.
BUSINESS DAY - each Monday, Tuesday, Wednesday, Thursday, or Friday
that is not a day on which banking institutions in the State of Texas are
authorized or obligated by law to close.
CARTER - Nicholas N. Carter, the President and C.E.O. of TOCC and
SHR.
CFL - The Catalyst Fund, Ltd.
CHANGE IN CONTROL - when (i) any "person" (as such term is used in
Section 13(d) of the Exchange Act) becomes a beneficial owner, directly or
indirectly, of Securities of Borrower representing more than 50% of the
combined voting power of Borrower's then outstanding Securities; (ii)
individuals who were directors, managers or general partners of Borrower
immediately prior to a meeting of the shareholders, members or partners of
Borrower involving a contest for the election of directors, managers or
general partners do not constitute a majority of the directors, managers
or general partners following such election; (iii) the shareholders,
members or partners of Borrower approve the dissolution or liquidation
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of Borrower; (iv) the shareholders, members or partners of Borrower
approve an agreement to merge or consolidate, or otherwise reorganize,
with or into one or more entities which are not Subsidiaries, as a result
of which less than 50% of the outstanding voting securities or partnership
interests of the surviving or resulting entity are, or are to be, owned by
former shareholders, members or partners of Borrower (excluding from the
term "former shareholders, members or partners" a shareholder, member or
partner who is, or as a result of the transaction in question becomes, an
Affiliate of any party to such merger, consolidation or reorganization);
or (v) the shareholders, members or partners of Borrower approve the sale
of substantially all of Borrower's business and/or assets to a Person that
is not a Subsidiary.
CODE - the Internal Revenue Code of 1986, as amended, and any
successor statute.
COIN - Productus Quimicos Coin, a Mexican corporation and wholly
owned subsidiary of TOCC.
COLLATERAL - all Property of Borrower, as described in the Security
Agreement securing Borrower's obligations under the Subject Documents, and
the key man life insurance policy referred to in Section 6.15.
COMMON STOCK - all issued and outstanding shares of common stock of
the Borrower and all such common stock issued hereafter prior to the
payment in full of the Lender Note by Borrower.
CONSULTING AGREEMENT - the agreement of even date herewith between
Lender and Borrower wherein Lender agrees to provide business counsel and
advice to Borrower in exchange for the remuneration described therein.
CURRENT ASSETS - the aggregate amount of all assets which would, in
accordance with GAAP, properly be defined as "current assets," including
all cash, those Customers' Accounts Receivables and other receivables due
within twelve (12) months from their statement date (net of any
appropriate reserves for collectability), inventory, deposits, marketable
securities, and prepaid expenses to be consumed within twelve (12) months
from their statement date.
CURRENT LIABILITIES - the aggregate amount of all liabilities which
would, in accordance with GAAP, properly be defined, classified and
recorded as "current liabilities," including all amounts due or to become
due for payment on or before twelve (12) months from their statement date
and excluding all amounts due or to become due for payment after twelve
(12) months from their statement date.
CURRENT RATIO - the ratio of Current Assets to Current Liabilities.
CUSTOMERS - the account debtors obligated on the Accounts
Receivable.
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DEBT - with respect to any Person, without duplication, all
obligations required by GAAP to be classified upon such Person's balance
sheet as liabilities, including amounts due Lender.
DEFAULT - an event or condition the occurrence of which, with the
lapse of time or the giving of notice or both, would become an Event of
Default.
DEFAULT RATE - a rate of interest equal to 18% per annum.
DISTRIBUTION - except as otherwise contemplated by this Agreement,
any dividend or other distribution on account of shares of Common Stock,
partnership interests, membership interests, or other equity interests in
Borrower; any acquisition by Borrower of shares of Common Stock,
membership interests, partnership interests or other equity interests in
Borrower or of warrants, rights, or other options to purchase shares of
Common Stock, membership interests, partnership interests or other equity
interests in Borrower; or any loan or advance (excluding advances to
employees for expenses to be reimbursed) to a shareholder, member, partner
or other direct or indirect holder of an equity interest in Borrower.
EBIDA - when determined, the following, calculated on a consolidated
basis for Borrower in accordance with GAAP (in each case, for the most
recently completed twelve (12) month period):
(a) net income (excluding extraordinary gains and losses),
plus
(b) interest expense (including that portion of any lease
payment under a lease or sublease that has been (or under GAAP
should be) capitalized on a balance sheet which would be treated as
interest under GAAP and all fees, charges and other costs paid in
connection with the factoring of Accounts Receivable), plus
(c) non-cash operating charges, such as depreciation and
amortization expense.
ENVIRONMENTAL LAWS - all federal, regional, state, county or local
laws, statutes, ordinances, decisional law, rules, regulations, codes,
orders, decrees, directives and judgments relating to pollution, damage to
or protection of the environment, releases or threatened releases of
hazardous substances into the environment, or the use, manufacture,
processing, distribution, treatment, storage, generation, disposal,
transport or handling of hazardous substances, including without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq. Hazardous substances shall
mean any pollutants, toxic substances, hazardous wastes or hazardous
substances defined in or regulated under any applicable Environmental Law.
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ERISA - the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE - any Person described in section 4001 (b)(l) of
ERISA with respect to Borrower or any Subsidiary, excluding, however,
Lender and Persons that would not be ERISA Affiliates of Borrower or any
Subsidiary but for the fact that Lender or any transferee(s) thereof are
owners of equity Securities in Borrower.
EVENT OF DEFAULT - as defined in Section 8.1.
EXCHANGE ACT - the Securities Exchange Act of 1934, as amended and
any successor statutes.
EXECUTION DATE - the date on which this Agreement becomes executed
by both Borrower and Lender.
FIXED CHARGE RATIO - the ratio of [historical EBIDA for the previous
four quarters, less capital expenditures authorized herein (excluding
capital expenditures made in 2004 and 2005 for SHR's de-bottlenecking
project and those also made in connection with the Penreco PA), and less
operating income or losses and less losses related to the foreclosure by
Mexican based lenders against the assets of Coin] to [current maturities
on long-term debt, plus current 12 month scheduled payments on capital
leases, plus budgeted capital expenditures, plus Distributions authorized
herein, plus scheduled interest expense for term debt on a prospective
basis for the ensuing four quarters, plus interest expense on revolving
debt and/or all fees, charges, and other costs paid in connection with the
factoring of Accounts Receivable that are equal to the amounts used in the
numerator], all as determined on a "rolling or trailing four (4) quarter
basis." All items in the first set of brackets shall constitute the
numerator and all of the items in the second set of brackets shall
constitute the denominator for purposes of calculating this ratio. Exhibit
"A" attached hereto contains an example of the manner in which the Fixed
Charge Ratio is determined.
FORCE MAJEURE - acts of God, strikes, lock-outs, industrial
disturbances, acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, storms,
floods, wash-outs, tornadoes, hurricanes, windstorms, arrest and restraint
of rulers and people, civil disturbances, boycotts, explosions, breakage
or accident to machinery or equipment, and any other causes similar to
those above, which are not within the reasonable control of the party
claiming force majeure, and which by the exercise of due diligence such
party is unable to overcome.
FUNDED DEBT - when determined, the following, calculated for
Borrower in accordance with GAAP: (a) all obligations for borrowed money
(whether as a direct obligor on a promissory note, a reimbursement obligor
on a letter of credit, a guarantor or otherwise, and including amounts of
Accounts Receivable sold with recourse pursuant to factoring
5
agreements), plus (but without duplication) (b) all lease or sublease
obligations that have been (or under GAAP should be) capitalized on a
balance sheet.
GAAP- generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board that are applicable from time
to time.
GUARANTY AGREEMENT - that certain agreement of even date herewith
executed by GSPLC, guaranteeing the performance of Borrower under this
Agreement, the Lender Note, and the Subject Documents.
GSPLC - Gulf State Pipe Line Company, Inc., a Texas corporation, and
a wholly owned subsidiary of SHR.
HEDGING CONTRACTS - contracts entitling and obligating TOCC to
prospectively purchase or sell, as the case may be, certain volumes (e.g.,
barrels or MCF) of raw materials (i.e., feedstocks), or fuel (i.e.,
natural gas) used in its business from financially reliable counter
parties, the only such counter party at the present being Coral Energy, an
affiliate of Shell Oil Company.
HEDGED SUPPLIES - all raw materials and/or fuel to be used by
Borrower in its business that are acquired or sold, as the case may be,
prospectively pursuant to Hedging Contracts.
LENDER LOAN - the loan from Lender to Borrower contemplated herein
and evidenced by the Lender Note.
LENDER NOTE - that certain promissory note of even date herewith
executed by Borrower in the original principal sum of $2,000,000.00, and
delivered to Lender evidencing the Lender Loan and bearing interest at the
rate of 12.0% per annum.
LIEN - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on law, statute, or contract, and including, without
limitation, the security interest or lien arising from a mortgage,
encumbrance, pledge, conditional sale, or trust receipt or a lease,
consignment or bailment for security purposes (it being understood that an
operating lease does not constitute a Lien).
MARTIN - Martin Operating Partnership, LP, a Delaware limited
partnership.
MATERIAL EFFECT - any material and adverse effect on or change in
the business, Properties, operations or financial position of Borrower,
taken as a whole, or the ability of Borrower to perform its obligations
under this Agreement, the Lender Note, or any of the other Subject
Documents.
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OFFICER'S CERTIFICATE - a certificate signed by (a) the Chairman of
the Board, the President, or the Chief Executive Officer of Borrower, and
(b) the Chief Financial Officer or Chief Accounting Officer of Borrower.
ORGANIZATIONAL DOCUMENTS - with respect to a limited partnership,
its partnership agreement and certificate of limited partnership; with
respect to a corporation, its articles or certificate of incorporation and
bylaws; with respect to a limited liability company, its articles of
organization and operating agreement/regulations; with respect to a
Person, any other organizational documents of such Person; and in each
case including all amendments thereto and restatements thereof.
PENRECO PA - that certain Processing Agreement dated January 28,
2005, by and between SHR and Penreco, a Texas general partnership
comprised of Conoco/Phillips and M.E. Zuckerman & Co., Inc., a copy of
which is attached hereto as Exhibit "B."
PERSON - any individual, partnership, corporation, limited liability
company, trust, unincorporated organization, or other legal entity, or any
government or agency or political subdivision thereof.
PROPERTY OR PROPERTIES - any assets, whether real, personal or
mixed, or tangible or intangible, or any interest therein.
SBA DOCUMENTS - SBA Form 480, SBA Form 652, SBA Form 1031, SBA Form
722, SBA Form 793, and any other documents required by the Small Business
Administration to be executed.
SECURITY - the meaning given such term in Section 2(1) of the 1933
Act.
SECURITY AGREEMENTS - the Commercial Security Agreements of even
date herewith delivered pursuant to Section 3.2(g), as amended from time
to time as permitted thereby.
SENIOR DEBT - the obligations of Borrower described in the Senior
Lender Documents.
SENIOR LENDERS - Martin and Amegy.
SENIOR LENDER DOCUMENTS - The Martin Operating Partnership, L.P.,
Credit and Security Agreement, a copy of which is attached hereto as
Exhibit "C" and the Amegy Bank Purchase and Sale Agreement/Security
Agreement, a copy which is attached hereto as Exhibit "D."
SHR - South Hampton Refining Company, a Texas corporation.
STOCK PLEDGE AGREEMENTS - the Stock Pledge Agreements described in
Section 3.2(o).
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STT- Silsbee Trading and Transportation Inc., a Texas corporation
wholly owned by Carter.
SUBJECT DOCUMENTS - any of this Agreement (and all attached
Schedules and Exhibits), the Lender Note, the Security Agreement, the
Consulting Agreement, the relevant SBA documents, the Guaranty Agreement,
the Stock Pledge Agreements, UCC Financing Statements, the Deed of Trust
described in Section 3.2(s) hereof, the Agreement Not to Compete described
in Section 3.2(p) hereof, and the other documents, instruments, and
certificates delivered or to be delivered by Borrower or any of its
Affiliates pursuant to the foregoing or in connection with the
transactions contemplated thereby, as amended from time to time as
permitted thereby.
SUBSIDIARY - any corporation, limited liability company, or other
entity (other than a partnership or joint venture) of which Borrower owns,
directly or indirectly, 50% or more of the voting power or in which
Borrower has a 50% or greater economic interest or, with respect to which,
in accordance with GAAP, the financial statements of such corporation,
limited liability company or other entity are required to be consolidated
with the financial statements of Borrower, or any partnership or joint
venture with respect to which Borrower is or has liability as a partner
(other than solely as a limited partner) and that is controlled or managed
by Borrower, and with respect to which, in accordance with GAAP, the
financial statements of such partnership or joint venture are required to
be consolidated with the financial statements of Borrower, but expressly
excluding arrangements that exist as a partnership only for tax purposes.
SWCC - Southwest/Catalyst Capital, Ltd
TANGIBLE NET WORTH - as of any date, Borrower's net worth on a
consolidated basis, excluding all intangible assets, as reflected on
Borrower's balance sheet required to be provided under Section 7.
TOCC - Texas Oil Chemical Co., II, Inc., a Texas corporation, and a
wholly owned subsidiary of ASRC.
1.2 ACCOUNTING PRINCIPLES. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP at the
time of effect, to the extent applicable.
1.3 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers
to action to be taken by any Person, or where such Person is prohibited from
taking such action, such provision shall be applicable whether such action is
taken directly or indirectly by such Person.
1.4 KNOWLEDGE. Except as specifically provided otherwise, any statement in
this Agreement or any Subject Document that is expressed in terms of the
knowledge or awareness of
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Borrower or any other Person, is intended to and shall be deemed to mean the
actual present knowledge of any officer of Borrower or such other Person or the
knowledge such officer or other Person should have after diligent inquiry
exercising best efforts, including inquiry of the responsible employees,
officers, and directors of Borrower, legal counsel and accountants of Borrower,
and Borrower's Affiliates.
1.5 REFERENCES. Unless otherwise expressly provided, all references to
"Schedules " and "Exhibits" are to the Schedules and Exhibits attached hereto,
each of which is made a part hereof for all purposes.
1.6 COMPLIANCE WITH USURY LAW. It is expressly stipulated and agreed to be
the intention of Borrower and Lender to comply at all times with applicable law
governing the maximum rate or amount of interest payable on or in connection
with the Lender Note. Accordingly, if any of the transactions contemplated by or
in connection with the Subject Documents or any other document or instrument
would be usurious under applicable law now or hereafter governing the interest
payable hereunder (including applicable United States federal law or applicable
state law, to the extent not preempted by United States federal law), then in
that event, notwithstanding anything to the contrary in the Subject Documents or
otherwise, it is agreed as follows: (a) the aggregate of all consideration that
constitutes interest under applicable law that is contracted for, charged,
taken, reserved, or received under the Lender Note or any of the other Subject
Documents or otherwise in connection with the Lender Note with respect thereto
under no circumstances shall exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited on such Lender Note by the
holder thereof (or if such shall have been paid in full, refunded to the
Borrower); and (b) in the event that maturity of the Lender Note is accelerated
by reason of an election by the holder thereof resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment
or conversion, then such consideration that constitutes interest may never
include more than the maximum amount allowed by applicable law, and excess
interest, if any, provided for in such Lender Note or otherwise shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore prepaid, shall be credited on such Lender Note (or if such Lender
Note shall have been paid in full, refunded to Borrower), and the provisions of
such Lender Note and any other Subject Documents or other document or instrument
shall immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced accordingly, without the necessity of the
execution of any new document, so as to comply with the then applicable law.
Determination of the rate of interest for purposes of determining whether this
transaction is usurious under any applicable laws, to the full extent permitted
by applicable law, shall be made by amortizing, prorating, allocating, and
spreading throughout the full stated term hereof until payment in full, all sums
at any time contracted for, charged, taken, reserved, or received from Borrower
for the use, forbearance, or detention of money in connection herewith. To the
extent that Chapter 303 of the Texas Finance Code is relevant to Lender for the
purpose of determining the maximum rate of interest permitted by applicable law,
Lender hereby elects to determine the applicable rate ceiling under such Chapter
by the weekly ceiling from time to time in effect, subject to Lender's right
subsequently to change such method in accordance with applicable law.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender all of the following as of the
date hereof and AADC represents and warrants with Borrower the information
described in Sections 2.2(c) and 2.28:
2.1 ORGANIZATION.
(a) TOCC is a corporation duly formed, validly existing and in good
standing under the laws of the State of Texas and has all requisite corporate
power and authority to own and operate its Properties, to conduct its business
as such business now is, or presently is proposed to be, conducted, and to enter
into this Agreement and the other Subject Documents to which it is, or is to
become, a party and the transactions contemplated thereby and is duly qualified
to do business in each other jurisdiction where the character of its Properties
or business there conducted makes such qualification necessary, unless the
failure to so qualify would not have a Material Effect. The states in which TOCC
is qualified to do business are listed on Schedule 2.1.
(b) SHR is a corporation duly formed, validly existing and in good
standing under the laws of the State of Texas and has all requisite corporate
power and authority to own and operate its Properties, to conduct its business
as such business now is, or presently is proposed to be, conducted, and to enter
into this Agreement and the other Subject Documents to which it is, or is to
become, a party and the transactions contemplated thereby and is duly qualified
to do business in each other jurisdiction where the character of its Properties
or business there conducted makes such qualification necessary, unless the
failure to so qualify would not have a Material Effect. The states in which SHR
is qualified to do business are listed on Schedule 2.1.
2.2 CAPITALIZATION.
(a) Upon execution hereof, the ownership of the capital stock of Borrower
shall be as specified on Schedule 2.2(a) attached hereto. No warrants, options
or any other agreements are outstanding that would permit any other party to
acquire any ownership interest in TOCC, SHR or GSPLC, except as provided in
Section 2.2(c) below.
(b) Except as disclosed on Schedule 2.2(b), Borrower does not own any
Subsidiaries or have any Affiliates, nor does it own an equity or ownership
interest in any corporation, partnership, limited liability company, trust,
unincorporated organization or other legal entity. There are no agreements or
understandings that may require Borrower to issue additional shares of common
stock or other equity Securities or to purchase any shares of common stock or
other equity Security of Borrower or any other Security convertible into any of
the foregoing.
(c) ASCR has pledged its shares of stock of TOCC to secure the debt of
AADC under the AADC Loan Agreements and Obligations and AADC is currently in
compliance with all of the terms and conditions of the AADC Loan Agreements and
Obligations.
10
2.3 AUTHORIZATION AND ENFORCEABILITY. Borrower has all necessary corporate
power and authority (whether under its Organizational Documents, applicable law,
or otherwise) to execute and deliver this Agreement, the Lender Note, and the
other Subject Documents and to perform all of its obligations hereunder and
thereunder. The execution, delivery, and performance of this Agreement, the
Lender Note, and the other Subject Documents by Borrower have been duly
authorized by all requisite corporate action on the part of Borrower. This
Agreement has been duly executed and delivered by Borrower and constitutes, with
the Lender Note and other Subject Documents when executed and delivered in
accordance with the terms of this Agreement, a valid and binding obligation of
Borrower, enforceable against Borrower in accordance with their terms, except
for the effect of bankruptcy, insolvency, moratorium, and other similar laws
affecting creditors' rights generally and of general equitable principles
(regardless of whether arising in a proceeding in equity or law).
2.4 FINANCIAL STATEMENTS. The balance sheets, the statements of operations
and retained earnings, and the statements of cash flows of Borrower, presented
on a consolidated basis, dated December 31, 2003, December 31, 2004, and April
30, 2005, fairly present in all material respects, in accordance with GAAP
applied on a consistent basis except as disclosed in the notes thereto or as
disclosed on Schedule 2.4, the financial position and the results of operations
of Borrower as at the dates and for the periods therein set forth, subject to
changes resulting from year end adjustments as consistently applied by the
Borrower in prior years. To the best of Borrower's Knowledge, no material
changes or adjustments need to be made to the interim balance sheet and the
statements of operations and retained earnings, and cash flows dated April 30,
2005, except normal year-end closing adjustments. Except as disclosed to Lender
in any Schedule hereto or as otherwise disclosed in connection with this
transaction, there are no Debts, liabilities or obligations, whether absolute,
accrued, contingent or otherwise, of the Borrower as of the Execution Date that
are not fully reflected in the April 30, 2005, balance sheet or the notes
thereto, and that are reasonably likely, in one case or in the aggregate, to
have a Material Effect, and, since such dates there has been no Material Effect.
Except as otherwise disclosed to Lender, to the Knowledge of Borrower, there has
been no occurrence or other event or condition that might reasonably be expected
to result in a Material Effect after the date hereof. With respect to Debt in
the ordinary course of business, Borrower is current on all such Debt, except as
disclosed to the Lender on Schedule 2.4.
2.5 BUSINESS. SHR is in the business principally of owning and operating a
specialty petrochemical products manufacturing facility, which is one of the
largest manufacturers of pentanes in the United States, and related operations
as previously described to Lender by Borrower. TOCC is the sole shareholder of
SHR and is not actively operating a business, but it is actively involved in
holding company matters as they relate to its subsidiaries. All real estate
owned by Borrower is described on Schedule 2.5. Borrower has one leased
location. Schedule 2.5 sets forth for such leased location (i) the identity of
the owner, (ii) the business address, and (iii) a summary of the lease terms,
amount of rent and an estimate of the cost to Borrower of occupancy by year.
Borrower is not in default under the lease covering said leased location and all
rental payments due thereunder are current.
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2.6 PENDING LITIGATION. Except as disclosed on Schedule 2.6. there is no
action, suit, proceeding, arbitration, investigation, or material dispute
pending against or with Borrower or GSPLC or, to the Knowledge of Borrower: (i)
threatened against Borrower, or (ii) affecting any of Borrower's Properties or
GSPLC's Properties, or (iii) pending or threatened against any officer,
director, or shareholder of Borrower, in his capacity as such, or relating to
his activities with Borrower, that would reasonably be expected to result in a
Material Effect. Except as disclosed in Schedule 2.6, Borrower is not in default
with respect to any order of any court, other governmental agency, or
arbitrator.
2.7 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. To Borrower's Knowledge:
(i) the business and operations of Borrower and GSPLC have been and are being
conducted in accordance with all judgments, orders, and decrees and all laws,
rules, and regulations to which they or their Properties are subject, including
all Environment Laws, (ii) Borrower and GSPLC have obtained all licenses,
permits, franchises, and other governmental authorizations required in
connection with the ownership of their Properties or the conduct of their
business except, in each case, where the failure to so comply or obtain would
not have a Material Effect, (iii) Borrower and GSPLC have performed in all
material respects all obligations they are required to perform to date and are
not in violation of or in default under any of their Organizational Documents or
any loan agreement, promissory note, mortgage, lease, contract, commitment, or
agreement to which they are a party or by which they or any of their Properties
may be bound, (iv) no event or condition has occurred and is continuing that
constitutes, or, with the giving of notice or passage of time, or both, would
constitute a violation or default by it under any of the foregoing except, in
each case, where failure to so perform or not be in violation or default or
where the occurrence of any such event or condition would not have a Material
Effect, and (v) all reports and filings required to be made by Borrower and its
Affiliates with the Securities and Exchange Commission and all state securities
commissions with which Borrower has registered its securities have been made by
Borrower and Borrower is not in violation of any federal or state securities
laws or regulations.
2.8 NO DEFAULTS. No condition or event has occurred and is continuing that
constitutes a Default or an Event of Default.
2.9 GOVERNMENTAL CONSENTS; OFFERING OF NOTE. To Borrower's Knowledge, the
execution, delivery, and performance by Borrower of this Agreement, the Lender
Note and the other Subject Documents, and the use of the proceeds of the Lender
Note, with or without the giving of notice or the passage of time or both, will
not (i) violate any provision of any law, rule, regulation, judgment, order, or
decree of any court, other governmental agency, or arbitrator to which Borrower
or GSPLC or any of their respective Properties is subject, or any provision of
its Organizational Documents, or (ii) result in the breach of or constitute a
default under any indenture, contract, or other agreement, document, or
instrument to which Borrower or GSPLC are parties or by which they or any of
their Properties may be bound, except where any such breach or default would not
have a Material Effect or (iii) result in the creation or imposition of any Lien
of any nature whatsoever upon any Properties of Borrower or GSPLC. No consent,
authorization, approval, permit, or order of, or declaration to or filing with,
any court, governmental agency, or arbitrator is or will be required by Borrower
or GSPLC in connection with the execution, delivery, and performance of this
Agreement
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and the other Subject Documents by Borrower or GSPLC or the offer, issuance,
sale, or delivery of the Lender Note. None of Borrower, its Affiliates, and any
Persons acting on behalf of any of them has, directly or indirectly, sold or
offered for sale, or solicited any offers to buy, the Lender Note, or otherwise
approached or negotiated with any Person, so as to subject the offer or sale of
the Lender Note to the provisions of Section 5 of the 1933 Act or to comparable
registration provisions of any applicable state securities laws.
2.10 TAXES. Borrower and GSPLC and its Affiliates (i.e., "Taxpayers") have
prepared and duly and timely filed with the appropriate governmental agencies
all federal, state, and local income, franchise, real and personal property,
excise, severance, payroll, and other tax returns and reports required to be
filed, except where failure to so file would not have a Material Effect and,
except as permitted by Section 6.5, has paid all taxes shown to be due thereon.
Taxpayers have made timely estimated payments of federal and state income tax
liabilities through the Execution Date. Taxpayers have not executed or filed
with the Internal Revenue Service any agreement extending the period for
assessment and collection of any federal tax or is not a party to any action or
proceeding by any governmental authority for assessment and collection of taxes,
and no claim for assessment and collection of taxes that has been asserted
against Taxpayers remains unpaid. Taxpayers have provided Lender with copies of
its consolidated federal tax return for the fiscal year ended December 31, 2003,
and agrees to provide a copy of the 12/31/2004 federal tax return upon its
timely filing.
2.11 USE OF PROCEEDS. Simultaneous with the execution hereof, Borrower
will use the proceeds of the Lender Note solely for the purposes of (i) paying
for part of the costs of the buildout of the tolling facility and related
infrastructure as required and described in the Penreco PA, and (ii) for closing
costs. No such proceeds shall be used in violation of any law, rule, regulation,
judgment, order, or decree of any court, other governmental agency, or
arbitrator, and no Default or Event of Default shall exist immediately following
the use of such proceeds on account of such use. None of the transactions
contemplated by this Agreement or any other Subject Document will violate or
result in violation of Section 7 of the Exchange Act or any regulation issued
pursuant thereto, including, without limitation, Regulations U (12 C.F.R.
Section 221, as amended), T (12 C.F.R. Section 220, as amended), and X (12
C.F.R. Section 224, as amended) of the Board of Governors of the Federal Reserve
System, or any law or regulation concerning foreign investment, and Borrower
neither owns nor intends to carry or purchase with the proceeds any "margin
security" within the meaning of said Regulation U or X, including margin
securities originally issued by it.
2.12 INSURANCE COVERAGE. Borrower maintains all the insurance required to
be maintained by it to satisfy Borrower's obligations under Section 6.15. All
required premiums currently due as to all insurance policies maintained by
Borrower have been paid and all such policies are in full force and effect. The
insurance coverage maintained by Borrower, including business interruption
insurance, has been obtained by Borrower in such amounts as similar assets are
customarily insured by companies of established reputation which own similar
assets and engage in a similar business as Borrower.
2.13 PROPERTIES. Borrower and GSPLC have sufficient rights to use
(pursuant to leases, easements, license, ownership, or otherwise) all Properties
they are now using in their businesses, in
13
each case free and clear of any Lien not permitted by Section 6.8, including
interests in trademarks and trade names, and technology and other know-how.
Borrower and GSPLC have good title to each item of the Collateral set forth in
the Security Agreement free and clear of any Lien not permitted by Section 6.8.
2.14 RESTRICTIONS ON BORROWER. Borrower is not: (a) a party to any
contract or agreement, or subject to any corporate or other restriction, that
could reasonably be expected to have a Material Effect, (b) a party to any
material contract or agreement that restricts the right or ability of Borrower
to incur Debt, other than this Agreement, the other Subject Documents, and all
agreements with Senior Lenders pertaining to Senior Debt, and except for the
Liens granted to the Lender and Senior Lenders, Borrower has not agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any Lien upon any Property of Borrower, whether now owned or
hereafter acquired.
2.15 ERISA MATTERS. Except as disclosed on Schedule 2.15:
(a) neither Borrower nor any ERISA Affiliate sponsors, maintains, or
contributes to, or has at any time in the six-year period preceding the date
hereof sponsored, maintained, or contributed to, any "employee pension benefit
plan," as such term is defined in Section 3(2) of ERISA, that is intended to be
qualified under sections 401 and 501 of the Code; and without limiting the scope
of the foregoing, neither Borrower nor any ERISA Affiliate sponsors, maintains,
or contributes to, or has at any time in the six-year period preceding the date
hereof sponsored, maintained, or contributed to, (i) any employee pension
benefit plan that is subject to title IV of ERISA or (ii) any "multiemployer
plan" as such term is defined in Section 3(37) or 4001(a)(3) of ERISA;
(b) no act or transaction has occurred that could result in imposition on
Borrower or any ERISA Affiliate (either directly or indirectly by reason of any
indemnification or hold-harmless agreement) of a tax or penalty imposed pursuant
to Section 4975 of the Code or Section 502 of ERISA;
(c) neither Borrower nor any ERISA Affiliate sponsors, maintains, or
contributes to any "employee welfare benefit plan" as such term is defined in
Section 3(1) of ERISA, or to any other plan which provides benefits to former
employees thereof, that may not be terminated by such Borrower in its sole
discretion at any time without any material liability to it; and
(d) Borrower is not delinquent with respect to the funding of any plans
subject to ERISA.
2.16 [THIS SECTION HAS BEEN INTENTIONALLY LEFT BLANK]
2.17 BROKERS AND FINDERS. No Person has any right, interest, or valid
claim against Lender, Borrower, or any Affiliate of Borrower because of any
agreement, undertaking, act or omission of Borrower or any Affiliate of Borrower
or other Person acting on behalf of Borrower or
14
any Affiliate of Borrower for any commission, fee, or other compensation as a
result of the transactions contemplated by this Agreement or the Subject
Documents.
2.18 DISCLOSURE. The information furnished in writing by or on behalf of
Borrower or any Affiliate of Borrower to Lender pursuant to or in connection
with this Agreement or the transactions contemplated hereby, which information
addresses or otherwise relates to the subject matter hereof or of any of the
other Subject Documents, taken as a whole, does not contain any untrue statement
of a material fact or fail to disclose any material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances under which they are made and taking into account any update
thereof; provided, however, that in the case of projections, Borrower represents
and warrants only the factual information serving as a basis for such
projections and not the assumptions and estimates therein. There is no fact or
circumstance of which Borrower has Knowledge that is not disclosed to Lender in
writing that would have a Material Effect.
2.19 PERMITS, LEASES AND CONTRACTS. A list of all permits, leases and
contracts to which Borrower is a party as of the Execution Date hereof which
require payments by Borrower, in excess of $50,000 on an annual basis other than
the Subject Documents and other than purchase and sale orders in the ordinary
course of business, is set forth on Schedule 2.19.
2.20 RECEIPT OF REASONABLY EQUIVALENT VALUE; NO INSOLVENCY. Borrower has
received reasonably equivalent value in exchange for its obligations under this
Agreement and the other Subject Documents to which Borrower may be a party.
Borrower is not insolvent nor will Borrower become insolvent as a result of the
transactions contemplated by this Agreement and the other Subject Documents.
2.21 AFFILIATE TRANSACTIONS. Except as disclosed on Schedule 2.21 hereto,
Borrower is not a party to any transaction (including, without limitation, the
purchase, sale, lease or exchange of Property or the rendering of any service)
with any Affiliate, employee, consultant, advisor, director, officer or
shareholder of Borrower or of any Affiliate of Borrower. Each transaction
disclosed on Schedule 2.21 was made in the ordinary course of business and upon
fair and reasonable terms no less favorable to Borrower than it could have
obtained in a comparable arm's-length transaction with a Person not an
Affiliate, employee, consultant, advisor, director, officer or shareholder.
2.22 LOCATION OF COLLATERAL. There is no Collateral under the Security
Agreements that are located outside of the State of Texas except as disclosed on
Schedule 2.22.
2.23 SMALL BUSINESS CONCERN. The information to be included in the forms
referred to in Section 3.2(1) hereof, when such forms are executed by Borrower,
will be accurate and complete in all respects. Borrower acknowledges that Lender
is relying upon the information being provided in such forms to determine
whether Borrower, together with its "AFFILIATES "(as that term is defined in
Title 13, United States Code of Federal Regulations Section 121.401) is a "SMALL
BUSINESS" or "SMALLER ENTERPRISE" within the meaning of Sections 107.700 and
107.710 of Title 13 of the United States Code of Federal Regulations.
15
2.24 SENIOR LENDER DOCUMENTS. The copies of the Senior Lender Documents
attached hereto as Exhibits "C" and "D" are true, accurate and complete copies
of the Senior Lender Documents now in effect.
2.25 PENRECO PA. The copy of the Penreco PA attached hereto as Exhibit "B"
is a true, accurate and complete copy of the Penreco PA.
2.26 HEDGING CONTRACTS. Schedule 2.26 contains a complete and accurate
description of all Hedging Contracts in effect on the Execution Date, including
a description of all Hedged Supplies. Exhibit "E" is a true and correct copy of
one of the current Hedging Contracts with Coral Energy.
2.27 HEDGED SUPPLIES. As part of its ordinary course of business, Borrower
secures forward contract positions for some or all of its projected requirements
for Hedged Supplies for periods of as much as six to nine months in the future.
2.28 AADC LOAN AGREEMENTS AND OBLIGATIONS. The copies of the agreements
attached hereto as Exhibit "F" are true and accurate copies of all obligations
for which the equity interests in TOCC are pledged pursuant to the AADC Pledge
Agreement and as outlined in Section 2.28. Under the AADC Loan Agreements and
Obligations, AADC is indebted to two individuals who are shareholders of AADC,
Hatem El-Khalidi and Sheikh Fahad Al-Athel, in the gross aggregate principal
amount of $1,567,000.00, as more fully described on Schedule 2.28. Additionally,
as of May 31, 2005, the amount of unpaid but accrued interest on said
indebtedness was $237,500.00.
2.29 COIN. On May 19, 2005, the assets of COIN were foreclosed by Mexican
based lenders. On June 15, 2005, TOCC conveyed all of the stock of COIN to a
third party who is not an Affiliate of TOCC. Accordingly, TOCC holds no
ownership interest in the assets or stock of COIN. TOCC, SHR, and none of their
Affiliates have any material liabilities in connection with TOCC's prior
ownership of COIN, whether fixed or contingent, including liability for
obligations of COIN.
SECTION 3. LENDER LOAN
3.1 LENDER LOAN. Subject to the terms and conditions herein, Lender agrees
to make the Lender Loan to Borrower. $1,200,000.00 shall be funded on the
Execution Date. The balance of the Lender Loan shall be funded in no more than
two installments within 5 days after written request by Borrower in an amount
not to exceed $800,000 in total is given to Lender. If such written requests are
not received by Lender on or before September 1, 2005, then Lender shall not be
obligated to fund the unfunded portion of the Lender Loan and the principal of
this Lender Note shall be reduced accordingly and the principal payments
described in Section 4.2(b) shall be reduced proportionately.
3.2 LENDER'S CONDITIONS. Lender's obligation to make the Lender Loan
pursuant to Section 3.1 shall be subject to the satisfaction or waiver by it in
writing of the following conditions precedent:
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(a) REPRESENTATIONS AND WARRANTIES TRUE - each of the representations and
warranties made by Borrower in this Agreement, any other Subject Document, or
any certificate delivered pursuant hereto or thereto shall be true and complete
as of the Execution Date;
(b) COMPLIANCE WITH THIS AGREEMENT - Borrower shall have performed and
complied with all agreements and conditions on its part required to be performed
or complied with pursuant to this Agreement and the other Subject Documents on
or before the Execution Date;
(c) NO MATERIAL EFFECT - no event shall have occurred and no condition
shall exist that has resulted or, in Lender's good-faith judgment, will result
in a Material Effect;
(d) OFFICERS' CERTIFICATES - Lender shall have received Officers'
Certificates from Borrower dated the Execution Date, in a form mutually
acceptable to Borrower and Lender, certifying that (i) the conditions specified
in Section 3.2(a), (b) and (c) have been fulfilled, and (ii) no event has
occurred and no condition exists that has resulted in or, in such officers'
good-faith judgment, will result in a Material Effect;
(e) SECRETARY'S CERTIFICATES - the Secretary of Borrower shall have
delivered to Lender (i) certified copies of Borrower's Organizational Documents
and of resolutions of Borrower's board of directors and, if required, by its
shareholders authorizing Borrower's execution, delivery, and performance of this
Agreement, the Lender Note, and the other Subject Documents to which it is or is
to become a party, which resolutions shall provide that they may be relied upon
by Lender, and (ii) a certificate of incumbency dated the Execution Date with
respect to each individual executing this Agreement, the Lender Note, or any
other Subject Document on Borrower's behalf;
(f) LENDER NOTE - Borrower shall have executed and delivered to Lender the
Lender Note dated the Execution Date;
(g) SECURITY AGREEMENTS AND FINANCING STATEMENTS - SHR and GSPLC shall
have executed and delivered to Lender the Security Agreements, together with all
registrations required to be noted to perfect the Liens created pursuant
thereto;
(h) OPINION OF COUNSEL - Germer Gertz, L.L.P., counsel for Borrower, shall
have delivered to Lender an opinion in form and substance reasonably
satisfactory to Lender and Lender's counsel;
(i) PROCEEDINGS SATISFACTORY - all proceedings taken in connection with
the issuance of the Lender Note and the execution and delivery of all Subject
Documents shall be reasonably satisfactory to Lender and Lender's counsel, and
Lender and Lender's counsel shall have received copies of such closing documents
as they may reasonably request in connection therewith, all in form and
substance satisfactory to Lender and Lender's counsel;
(j) INSURANCE - Borrower shall have delivered to Lender on the Execution
Date (i) a certificate from its insurance broker for the relevant coverages and
a summary of all other insurance
17
maintained by Borrower and GSPLC with respect to their Properties and businesses
including, without limitation, liability, worker's compensation, health and
medical, business interruption, property and casualty insurance, such
certificate and summary to be set forth as part of Schedule 3.2(j) attached
hereto, (ii) evidence satisfactory to Lender that it has secured or is in the
process of securing to be able to comply with Section 6.15(d), the "key man"
life insurance policy required by Section 6.15(d), and (iii) the Assignment of
Life Insurance Policy;
(k) DUE DILIGENCE FEE - Lender shall have received from Borrower on or
before the Execution Date a total due diligence fee of two percent (2%) of the
Lender Loan, such amount being equal to Forty Thousand and No/100 Dollars
($40,000.00), $10,000.00 of which Lender has previously received, and $30,000.00
of which shall be due and payable on the Execution Date; Lender may withhold
such fee and its legal expenses described in Section 3.4 from the Lender Loan
proceeds;
(l) SBA DOCUMENTS - Borrower shall deliver to Lender on the Execution Date
all of the SBA Documents executed by Borrower as required;
(m) CONSULTING AGREEMENT - Borrower shall have executed and delivered to
Lender the Consulting Agreement;
(n) GUARANTY AGREEMENT - Borrower shall have delivered the Guaranty
Agreement executed by GSPLC;
(o) STOCK PLEDGE AGREEMENTS -TOCC and SHR shall have executed and
delivered to Lender the Stock Pledge Agreements, Irrevocable Proxies, and equity
transfer powers (in blank) covering all of the equity interests of SHR, and
GSPLC;
(p) AGREEMENT NOT TO COMPETE - Carter shall have entered into an agreement
with SHR, TOCC, ASCR and AADC not to compete in the businesses in which SHR is
now engaged within the markets in which Borrower and the Affiliates are now
engaged until the earlier to occur of the expiration of (i) two years after
termination of employment or (ii) the date on which Borrower's obligations under
the Lender Note and the Subject Documents have been paid in full in
consideration of the agreement by SHR, TOCC, ASCR and AADC to jointly and
severally pay Carter an amount equal to one-half of his salary at the time his
employment terminates on a monthly basis during the period in which such
non-competition agreement is in effect. The Lender has the right to waive
Carter's non-competition agreement, in which case payments to Carter shall
cease;
(q) CERTIFICATES OF EXISTENCE AND GOOD STANDING - Borrower shall have
provided an original Certificate of Existence and Certificate of Good Standing
for Borrower and GSPLC.
(r) CONSENT OF AMEGY AND MARTIN - Borrower shall have provided to Lender
(i) the written consent of Amegy to the terms hereof and to the subordination of
its security interest in all assets other than Borrower's Accounts Receivable to
the security interests described in the Security Agreement between SHR and
Lender and (ii) the written consent of Martin to the terms hereof and
18
the subordination of its security interest in Borrowers assets to Lender's
security interest in the Penreco PA and TOCC's stock in SHR, and Martin's
recognition of Lender's prior interest in the Assignment of Life Insurance
Policy.
(s) DEED OF TRUST - Borrower shall have provided to Lender a Deed of Trust
that is subordinated to the deed of trust in favor of Martin.
3.3 INVESTMENT. Lender represents to Borrower that it is an "accredited
investor," as such term is defined in Rule 501 of Regulation D under the 1933
Act and that it is acquiring the Lender Note for its own account for the purpose
of investment and not with a view to resale or distribution thereof in violation
of any securities law, and Lender has no present intention of selling or
distributing the Lender Note in violation of any securities law. It is
understood that, in making its representations and warranties in Section 2.9,
Borrower is relying, to the extent applicable, upon the representations in this
Section 3.3.
3.4 EXPENSES. Borrower shall pay on the Execution Date (a) all reasonable
fees and expenses of Page, Murphree, Byerly & Hansen, P. L. L. C., Lender's
counsel, in connection with the negotiation, preparation, delivery and execution
of the Subject Documents and any subsequent related amendment, waiver, consent
or UCC continuation or amendment statement, and (b) after an Event of Default,
all reasonable out-of-pocket costs, fees and expenses of Lender paid or incurred
by Lender in connection with the enforcement of the obligations of the Borrower
arising under the Subject Documents (including, but not limited to, reasonable
attorneys' fees, expenses and court costs).
SECTION 4. PAYMENTS
4.1 DIRECT PAYMENT. Borrower shall pay all amounts payable with respect to
the Lender Note (without any presentment of such Lender Note and without any
notation of such payment being made thereon, subject to the provisions of
Section 8) in immediately available funds, for credit prior to the close of
business, Houston time on the date such payment is due. Lender agrees that in
the event it shall sell or transfer the Lender Note in accordance with the
provisions of Section 5, prior to delivering such Lender Note to the purchaser
or transferee, it shall make a notation thereon of all principal, if any, paid
on such Lender Note and will also note thereon the date to which interest has
been paid on such Lender Note, and (b) it promptly shall notify Borrower in
writing of the name and address of the transferee of such Lender Note; provided,
however, that failure to comply with the preceding provisions of this sentence
shall not relieve Borrower of its obligations to make payments under such Lender
Note as and when the same become due.
4.2 MANDATORY REPAYMENTS. Borrower shall repay principal and interest on
the Lender Note, subject to the other provisions of this Section 4, as follows:
(a) Beginning on August 1, 2005, and on or before the 1st day (or if such
day is not a Business Day, the first Business Day thereafter) of each calendar
month thereafter through and including the month prior to the month in which
principal payments commence in 4.2(b) below, Borrower shall make installments of
accrued but unpaid interest.
19
(b) Beginning on the earlier to occur of (i) the first day of the month
following the 90th day after the date on which Borrower places its upgraded
tolling facility into production under the Penreco PA, or (ii) January 1, 2006,
and on the first day of each third month thereafter (or if such day is not a
Business Day, the first Business Day thereafter), Borrower shall make twenty
(20) payments of principal, each in the amount of $100,000.00, plus accrued
interest. Borrower agrees to notify Lender that its upgraded tolling facility
has been placed into production under the Penreco PA within three days after
such occurrence.
4.3 VOLUNTARY PREPAYMENT. Borrower shall not be permitted to prepay any
part of the Lender Note during the first year after the Execution Date.
Thereafter, as of any Business Day, but only if Borrower shall have notified
Lender specifying the date therefor at least three days before such date,
Borrower may prepay all or part of the principal amount outstanding under the
Lender Note; provided, however, that in connection with any prepayment following
the first anniversary date of the Execution Date, Borrower shall pay Lender a
prepayment fee equal to three percent (3%) of the amount prepaid during the
second year after the Execution Date, two percent (2%) of the amount prepaid
during the third year after the Execution Date, and one percent (1%) of the
amount prepaid during the fourth year after the Execution Date. Any prepayment
of principal must be in the amount of at least $50,000.00. After the fourth
anniversary of the Execution Date, Borrower may from time to time prepay all or
part of the principal amount outstanding under the Lender Note, so long as such
payment is at least $50,000.00 and proper notice is given, without penalty or
premium of any kind, but with accrued interest to the date of prepayment on the
amount so prepaid. Any prepayments of principal shall be applied to the
principal installments due on the Lender Note in inverse order of their
maturities.
4.4 APPLICATION OF PAYMENTS. All payments received in respect of the
Lender Note, this Agreement, or the Subject Documents shall be applied first to
the unpaid costs and expenses for which Borrower is liable to Lender under the
Subject Documents and for which Borrower has been billed by Lender, next to
interest on the Lender Note, and next to principal on the Lender Note.
4.5 INTEREST. Interest on the Lender Note shall be twelve (12%) per annum
and shall be computed on a daily basis consisting of a 360-day year. Interest on
obligations of Borrower pursuant to this Agreement (other than obligations of
Borrower pursuant to the Lender Note) shall bear interest if not paid when due
at the Default Rate.
SECTION 5. CERTAIN PROVISIONS REGARDING THE LENDER NOTE
5.1 TRANSFER OF LENDER NOTE. Following any transfer of the Lender Note or
interest therein by Lender, or any merger or other change in Lender's name or
identity, upon surrender of such Lender Note at the address of Borrower
described in Section 9.1, Borrower, at the request of Lender and at Lender's
expense, shall execute and deliver a new note or notes in exchange therefor in
an aggregate principal amount equal to the unpaid principal amount of the
surrendered Lender Note. Each such new note shall be payable to such Person as
Lender may request and shall be a note
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substantially in the form of the Lender Note, as applicable, and dated the date
upon which the Lender Note was surrendered.
5.2 REPLACEMENT OF LENDER NOTE. Upon receipt by Borrower of evidence
reasonably satisfactory to it of the ownership of the Lender Note and that such
Lender Note has been lost, stolen, destroyed, or mutilated and (i) in the case
of loss, theft or destruction, of indemnity reasonably satisfactory to Borrower,
or (ii) in the case of mutilation, upon surrender thereof, Borrower at Lender's
expense, will execute and deliver in lieu thereof a new note in the form and the
denomination of, issued in the name of Lender, and dated the date of such lost,
stolen, destroyed, or mutilated Lender Note, which former Lender Note shall be
deemed canceled. Every new note issued pursuant to this Section 5.2 in lieu of
any destroyed, lost, stolen, or mutilated Lender Note shall constitute an
original contractual obligation of Borrower, and Lender shall be entitled to all
the benefits of this Agreement; provided, however that Lender shall indemnify
and hold harmless Borrower from any liability that might arise from issuance of
a replacement Lender Note.
SECTION 6. BORROWER'S BUSINESS COVENANTS
Borrower covenants that on and after the date hereof and as long
thereafter as any of the indebtedness or obligations evidenced by the Lender
Note or any of the other Subject Documents is outstanding:
6.1 PAYMENT OF LENDER NOTE, ETC. Borrower shall punctually pay or cause to
be paid the principal and interest to become due in respect of the Lender Note
according to the terms thereof. Borrower shall perform its respective
obligations under all other Subject Documents to which it is or becomes a party.
6.2 USE OF PROCEEDS. Borrower shall use the proceeds of the Lender Note
for the purposes described in Section 2.11. No proceeds from the Lender Note
shall be used for any purpose other than those described in Section 2.11 without
the prior written consent of Lender, such consent not to be unreasonably
withheld or delayed.
6.3 BUSINESS. Without the prior written consent of Lender, Borrower shall
not engage in any business other than the activities described in Section 2.5.
6.4 MAINTENANCE OF EXISTENCE AND STATUS. Borrower shall (a) do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate or other applicable existence, (b) qualify or register as a foreign
corporation, limited partnership or other entity, as applicable, in each
jurisdiction in which the nature of its Properties or business makes such
qualification necessary, and (c) cause the representations and warranties in
Section 2.1 to remain true and correct.
6.5 PAYMENT OF TAXES AND CLAIMS. Borrower shall pay as they become due,
and in all cases before they become delinquent:
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(a) all relevant taxes, assessments, and governmental charges or levies
imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like Persons that, if unpaid, might result in
the creation of a Lien upon its Property; provided, however, that any of the
foregoing items need not be paid (i) while being contested in good faith and by
appropriate proceedings or while levy and execution thereon have been stayed,
and so long as adequate book reserves or other action required by GAAP have been
established with respect thereto, (ii) payment thereof is covered in full
(subject to the customary deductible) by insurance, or (iii) so long as the
failure to pay timely any such items, singly or in the aggregate, does not have
a Material Effect.
6.6 SALE OR TRANSFER OF ASSETS, MERGER, ETC. (a) Borrower shall not sell,
lease, transfer, or otherwise dispose of any of its Properties without the prior
written consent of Lender except for (i) sales of goods in the ordinary course
of business, (ii) sales, discounts or transfers of delinquent accounts
receivable in the ordinary course of business for purposes of collection, (iii)
occasional sales of nonmaterial assets for consideration not less than fair
market value, (iv) dispositions of assets that are obsolete or have negligible
fair market value, (v) sales of equipment for fair and adequate consideration
(but if replacement equipment is necessary for the proper operation of the
business of the Borrower, the Borrower must promptly replace the sold
equipment), and (vi) transfers or dispositions that do not exceed the amount of
$100,000 in aggregate per annum and that do not have a Material Effect.
(b) Without the prior written consent of Lender, Borrower shall not sell
all or substantially all of its Properties or consolidate with or merge into any
other Person or permit GSPLC to do so.
(c) Lender shall have the right to condition its consent under this
Section 6.6 to having the Lender Note paid in full and the obligations of
Borrower under the Consulting Agreement being satisfied.
6.7 DEBT. Without the prior written consent of Lender, Borrower shall not
have or incur any Debt other than (a) the indebtedness evidenced by the Lender
Note; (b) obligations to financial institutions arising out of the endorsement
and deposit of checks; (c) current liabilities incurred in the ordinary course
of business; (d) Debt incurred or existing by virtue of changes, from and after
the date of this Agreement, in any requirements of GAAP; (e) Senior Debt, and
(f) provided that no Default or Event of Default has occurred and is continuing
at the time of incurrence thereof, purchase money Debt for equipment and
vehicles not to exceed $150,000 in any calendar year.
6.8 LIENS AND ENCUMBRANCES. Borrower shall not cause, permit, or agree or
consent to cause in the future (upon the happening of a contingency or
otherwise), any of its Property, whether now owned or hereafter acquired, to be
subject to a Lien, except:
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(a) Liens securing taxes, assessments, or governmental charges or levies
or the claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords, and other like Persons, provided the payment thereof is not at the
time required by Section 6.5;
(b) Liens incurred or deposits made in the ordinary course of business (i)
in connection with workers' compensation, unemployment insurance, social
security, and other like laws or (ii) to secure the performance of letters of
credit, bids, tenders, contracts, leases, statutory obligations, surety, appeal,
and performance bonds, and other similar obligations not incurred in connection
with the borrowing of money, or the obtaining of advances, or the payment of the
deferred purchase price of Property; but only to the extent in each such case
Borrower is in substantial compliance with the material obligations relating to
the foregoing;
(c) attachments, judgments, and other similar Liens arising in connection
with court proceedings, including, without limitation, adverse judgments on
appeal provided the execution or other enforcement of such Liens is effectively
stayed within 60 days after the entry thereof and the claims secured thereby are
being contested in good faith and by appropriate proceedings, or as long as
adequate book reserves or other action required by GAAP have been established
with respect thereto, or payment thereof is covered in full (subject to the
customary deductible) by insurance;
(d) Liens securing the Lender Note and other obligations under the Subject
Documents;
(e) purchase money Liens on equipment and vehicles related to permitted
Debt as described in Section 6.7 herein, not to exceed $150,000 in any calendar
year;
(f) other Liens that arise by operation of law;
(g) with respect to any particular trade vendor of any Borrower, Liens on
inventory supplied by that certain trade vendor securing amounts owed to that
trade vendor that arise in the ordinary course of business;
(h) encumbrances and restrictions on the use of real property which do not
materially impair the use thereof;
(i) any interest or title of a lessor in assets being leased to Borrower;
and,
(j) Liens securing the Senior Debt.
6.9 BORROWER'S FINANCIAL COVENANTS. (a) Borrower's consolidated EBIDA, as
calculated from amounts reflected on Borrower's unaudited income statements with
respect to the covenants as of each six month period ending June 30th and
December 31st and audited as to all fiscal year covenants prepared in accordance
with GAAP for the periods indicated below shall, at a minimum, be as follows:
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DATE EBIDA
- --------------------------------- ----------
Full Year Ended December 31, 2005 $5,000,000
Six Months Ended June 30, 2006 $2,250,000
Six Months Ended December 31, 2006 $2,250,000
Total: Fiscal Year 2006 $4,500,000
Such amounts and values stated above for the six month period ended
December 31, 2006, shall remain the benchmark for all six month periods
thereafter until all of Borrower's obligations to Lender arising out of or
relating to this Agreement are fully extinguished.
(b) Borrower's Fixed Charge Ratio, measured quarterly on a consolidated
basis beginning with the quarter ending June 30, 2005, shall not be less than
1.4 for such quarter and for all quarters ending thereafter.
(c) Borrower's Current Ratio, measured quarterly on a consolidated basis
beginning with the quarter ending June 30, 2005, shall not be less than 1.15.
(d) Borrower's ratio of Funded Debt to Tangible Net Worth, measured
quarterly on a consolidated basis beginning with the month ending June 30, 2005,
must be no greater than the following:
Date Ratio
- -------------------------------------- -----
From Execution Date through 12/30/2005 5.5:1
1/1/2006 through 12/31/2006 5.0:1
1/1/2007 through 12/31/2007 4.0:1
1/1/2008 and thereafter 3.5:1
6.10 DISTRIBUTIONS. Borrower may not declare, make or permit (or incur any
liability to make, declare or permit) any Distribution in excess of (a) $50,000
in the aggregate during any calendar month, and (b) on or about year end 2005, a
one time dividend in the amount of $320,000 to enable AARD to bring current its
lease obligation on the Al Masane project in Saudi Arabia, without the prior
written consent of Lender. No Distributions may be made by Borrower after the
occurrence of an Event of Default. Seller may withhold its consent under this
Section for any reason in its sole discretion.
6.11 COMPLIANCE WITH LAWS. Borrower shall conduct its business and
affairs and maintain its Properties in compliance with all applicable laws,
rules, regulations, judgments, orders, and decrees (including Environmental
Laws) the failure to comply with which would have a Material Effect.
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6.12 ERISA COMPLIANCE. Borrower shall not, and shall not permit any ERISA
Affiliate to:
(a) engage in any "prohibited transaction," as such term is defined in
section 406 of ERISA or section 4975 of the Code;
(b) sponsor, maintain, or contribute to any "employee pension benefit
plan," as such term is defined in section 3(2) of ERISA, that is subject to
title IV of ERISA;
(c) contribute to or assume an obligation to contribute to any
"multi-employer plan," as such term is defined in section 3(37) or 4001(a)(4) of
ERISA; or
(d) acquire an interest in a Person that causes such Person to become an
ERISA Affiliate if such Person sponsors, maintains, or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any multiemployer pension plan or (ii) any
employee pension benefit plan that is subject to title IV of ERISA.
6.13 TRANSACTIONS WITH AFFILIATES. Except for (a) transactions in the
ordinary course of business with Borrower's Subsidiaries and Affiliates
disclosed herein, (b) loans or advances not exceeding $100,000.00 in the
aggregate for employee tuition reimbursement programs and/or other employee
advance agreements, and which are consistent with Borrower's past practices, and
(c) the lease agreement with STT described on Schedule 2.21 under which Borrower
agrees not to pay STT more than $60,000.00 per month without the prior written
consent of Lender, Borrower shall not enter into any transaction (including the
purchase, sale, lease, or exchange of Property or the rendering of any service),
or amend or extend any existing contractual arrangement, with any Affiliate,
employee, consultant, advisor, director, officer or shareholder of Borrower or
of any Affiliate of Borrower without the prior written consent of Lender. For
all such transactions described in (a), (b), and (c) above and other
transactions that Lender approves, Borrower agrees to provide Lender with a
monthly written report reflecting the amount of money and other consideration
exchanged by the parties to such transactions, which shall be due within 30 days
after the close of the applicable month. Borrower will not change or alter, in
any material manner, any of the terms of the agreement between Borrower and STT
described in Schedule 2.21 without the prior written consent of Lender.
6.14 BOARD OF DIRECTORS. For so long as the Lender Note or any other
obligation herein of Borrower to Lender remains outstanding, Borrower shall
provide Lender copies of all material correspondence between it and its board
member and copies of all minutes at the same time it provides same to its board
members.
6.15 INSURANCE.
(a) PROPERTY. Borrower will maintain insurance in full force and effect
with insurance companies of recognized standing (i) on all of its properties of
an insurable nature in the manner and amounts and against the casualties and
contingencies indicated on Schedule 3.2(j) and (ii) for business interruption as
described on Schedule 3.2(j);
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(b) GENERAL LIABILITY, WORKER'S COMPENSATION, HEALTH, MEDICAL, ETC.
Borrower shall also maintain in full force and effect with insurance companies
of recognized standing (or, as to workers' compensation or similar insurance,
with an insurance fund authorized by the jurisdiction in which it operates) the
insurance coverages described on Schedule 3.2(j), including general liability,
worker's compensation, health, medical and automobile insurance, and will
acquire such other insurance as Borrower or Lender hereafter discover is
customarily maintained by similar companies in the industry;
(c) "KEY MAN"LIFE INSURANCE. Within 30 days after the Execution Date
Borrower will (i) obtain and deliver to Lender a "key man" life insurance policy
covering Carter in an amount of at least $2,000,000.00, and (ii) collaterally
assign this policy to Lender pursuant to that certain Assignment of Life
Insurance Policy as collateral under terms reasonably acceptable to Lender and
providing that any proceeds paid thereunder to the Lender be applied to the
payment of the Lender Note, and shall have a guaranteed renewal such that
coverage is in effect for a period of at least 78 months from the Execution
Date.
The Borrower shall cause such policies to remain in full force and effect
until the obligations of the Borrower under the Subject Documents have been paid
in full and shall promptly notify Lender if any such policy is canceled.
Additionally, at reasonable intervals and from time to time, Borrower will
furnish evidence of all insurance required by this Section 6.15 to Lender upon
reasonable request by Lender.
6.16 ADDITIONAL PROHIBITIONS. Borrower shall not, without the prior
written consent of Lender:
(a) increase the aggregate existing base remuneration of key management as
described on Schedule 6.16(a) by an amount in excess of five percent (5%) per
annum;
(b) acquire, or enter into any contracts contemplating the acquisition of
a majority of the assets and Properties or ownership interest of any Person or a
merger with any Person, excluding any such acquisitions that do not exceed
$500,000 in the aggregate per annum;
(c) except for any renewal of Borrower's existing real property leases or
a comparable real property lease at fair market value, and any renewal or
replacement of the existing Hedging Contracts in compliance with Section 6.19
below, enter into any material contract, lease or agreement (including without
limitation, any financing, or operating lease, or any lease of real property),
providing for the payment by Borrower, in each case, of amounts in excess of
$100,000 during any year;
(d) cause or make capital expenditures (excluding expenditures in
subparagraph (b) above, the 2004 and 2005 expenditures for the de-bottlenecking
project of TOCC, and the capital expenditures in connection with the Penreco PA)
greater than $500,000 in the aggregate during any calendar year;
26
(e) change or alter the locations or nature of any of its business; or
(f) materially alter any of the terms and conditions of the Senior Debt or
of the Penreco PA, or increase the maximum indebtedness available to Borrower
under the Senior Lender Documents, except that Borrower is permitted to increase
the amount of the Senior Debt to Amergy to $9,500,000.00; or
(g) alter or amend any of Borrower's Organizational Documents, except that
SHR shall have the right to change its name;
(h) release any Person from a noncompetition agreement in favor of
Borrower or fail to take reasonable action to prevent or stop any Person from
engaging in conduct that violates a noncompetition agreement in favor of
Borrower;
(i) file in an office of public records a UCC-3 form or other document
releasing or terminating a security interest in favor of Lender covering any
Collateral unless and until all obligations of Borrower contained herein and in
the Subject Documents have been satisfied; or
(j) file in an office of public records a UCC-3 or other document amending
a UCC Financing Statement.
6.17 SENIOR DEBT. Borrower shall punctually pay or cause to be paid the
principal and interest to become due in respect of the Senior Debt according to
the terms thereof. Borrower shall perform all of its obligations under the
Senior Lender Documents.
6.18 AADC LOAN FROM SHAREHOLDERS. AADC shall immediately report to Lender
in writing any default by AADC under the AADC Loan Agreements and Obligations.
AADC will not allow any material changes in the terms and conditions of the AADC
Loan Agreements and Obligations or any new loans or advances by AADC or any
Affiliate of AADC which are secured by the AADC Pledge Agreement, without the
prior written consent of Lender.
6.19 MAINTENANCE OF HEDGED SUPPLIES. Borrower agrees that TOCC will
maintain its Hedged Supplies in a manner consistent with past hedging practices.
Borrower agrees to materially maintain its existing hedging practices subject to
the prior notice provision below in this paragraph. Borrower agrees to update
Schedule 2.26 on a monthly basis and to provide Lender with a copy of each
updated Schedule no later than the 20th day after the end of the applicable
month. Borrower further agrees that the terms and provisions of its Hedging
Contracts entered hereafter shall substantially be the same as those contained
in Exhibit "E". However, if Borrower believes in good faith that a material
change in its hedging practices will be in the best interest of Borrower, then
Borrower agrees to notify Lender 15 days in advance in writing of any plan
involving such material change in its hedging practices, including (a) a
detailed description of the change, and its predictable and likely impact on
operations, accounting, and financial results, and (b) its rationale for the
contemplated change, and thereafter Borrower shall be permitted to implement
such change.
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6.20 ADDITIONAL REAL ESTATE. SHR currently owns a 25 acre tract of land
that includes a railroad spur that is not covered by the Deed of Trust described
in Section 3.2(s) hereof (the "Additional Tract"). SHR agrees that it will not
permit any liens to be placed against the Additional Tract or any other real
property it hereafter acquires without the prior written consent of Lender. On
or before January 1, 2006, SHR will execute and deliver to Lender a deed of
trust covering the Additional Tract and any other real property it acquires
prior to said date, said deed of trust being in similar form to the Deed of
Trust described in Section 3.2(s) hereof. In the event that Borrower acquires
real property thereafter, Borrower agrees to execute another deed of trust
covering said real property in favor of Lender that is similar in form to the
Deed of Trust described in Section 3.2(s) hereof and deliver same to Lender
immediately after such acquisition.
SECTION 7. INFORMATION AS TO BORROWER
With respect to all reports and financial information required to be
presented to Lender in this Section, references to Borrower shall include GSPLC,
and all such information shall be presented on a consolidated basis. Borrower
(and AADC with respect to Sections 7.1 (b)(iii) and 7.1 (k)) covenants that on
and after the date hereof and as long thereafter as any of the indebtedness
evidenced by the Lender Note or any other Subject Document is outstanding:
7.1 FINANCIAL AND BUSINESS INFORMATION. Borrower shall deliver, or shall
cause to be delivered, to Lender, in such quantities as it reasonably may
request:
(a) MONTHLY STATEMENTS - promptly after preparation and in any event on or
before the 25th day after the last day of each calendar month:
(i) the balance sheet of Borrower as at the end of such month,
(ii) the statements of operations and of cash flows of Borrower for
such month and for the portion of the fiscal year ending with such month,
(iii) certification by the President of Borrower that Borrower is in
compliance with the financial covenants contained in Section 6.9, along
with all calculations related thereto;
(iv) a copy of Carter's monthly memorandum to the Board regarding
the prior month's business results or a one or two page written summary
analysis in memorandum form generally following the template attached
hereto as Schedule 7.1(a)(iv), prepared by Borrower's management of the
results of Borrower's business and analysis of any variances from budget
and any significant developments relating thereto, during the previous
month; and
(v) promptly, such additional information concerning the business
and operations of Borrower as Lender may reasonably request (but only if
any disclosure of such information
28
will not constitute waiver of any attorney-client privilege) that is not
otherwise required to be kept confidential in accordance with any
agreement or applicable law;
all in reasonable detail and certified as presented fairly in all material
respects, in accordance with GAAP, subject to changes resulting from year-end
adjustments, by the Chief Executive Officer and Chief Financial Officer of
Borrower;
(b) Quarterly Statements - promptly after preparation and in any event on
or before the 30th day (except as provided in (vi) below) after each calendar
quarter:
(i) the EBIDA for Borrower for the most recently completed four
fiscal quarters setting forth in comparative form the figures for the
corresponding periods in the previous fiscal year and for the
corresponding periods in Borrower's originally prepared budget, all in
reasonable detail and certified as presented fairly in all material
respects, in accordance with GAAP, subject to changes resulting from
year-end adjustments, by the Chief Executive Officer and Chief Financial
Officer of Borrower;
(ii) a certificate of compliance with respect to the covenants of
Borrower contained in Section 6 hereof executed by an officer of Borrower,
and with respect to the Fixed Charge Ratio it must be in a format similar
to that found on Exhibit A; and
(iii) a copy of all filings by AADC with the Securities Exchange
Commission on or before the 5th day after such filing occurs.
(c) Annual Statements - promptly after preparation and in any event on or
before the 125th day thereafter:
(i) an audited balance sheet of Borrower as at the end of such year,
and
(ii) audited statements of operations and cash flow of Borrower for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by an
opinion on such statements of independent certified public accountants of
recognized standing selected by Borrower, which opinion shall state that
(x) except as expressly set forth in such opinion, such financial
statements of Borrower and the Subsidiaries fairly present in all material
respects the financial condition and results of operations and cash flow
of Borrower in accordance with GAAP (except for changes in application in
which such accountants concur), and (y) the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as they considered necessary in the circumstances;
(d) Projections - on or before January 1 of each year, commencing with the
year beginning January 1, 2006, updated and detailed one-year financial
projections prepared by Borrower's management setting forth the projected
general sales volume, income and expenses and a
29
budget of large expenses or capital items Borrower plans to incur, and covenant
compliance determinations as applicable for both the Senior Debt and the Lender
Loan for Borrower's business for the next year, on a quarterly basis prepared on
a basis consistent with the 2005 budget format;
(e) REPORTS AND ANNOUNCEMENTS - (i) promptly upon its becoming available,
and in any event within fifteen (15) days of filing or receipt, as applicable,
copies of each regular or periodic report and any registration statement,
prospectus, or material written communication in respect thereof filed by
Borrower with, or received by Borrower in connection therewith from, any
securities exchange or the Securities and Exchange Commission, state securities
agency, or any successor agency, or (ii) promptly after issuance, a copy of any
press release intended for distribution by multiple media sources;
(f) ERISA - promptly upon becoming aware of the occurrence of any
"reportable event," as such term is defined in section 4043 of ERISA, or
"prohibited transaction," as such term is defined in section 406 of ERISA or
section 4975 of the Code, in either case in connection with any employee pension
benefit plan or trust created thereunder with respect to Borrower or any ERISA
Affiliate, a written notice specifying the nature thereof, what action is being
taken or is proposed to be taken with respect thereto and, when known, any
action taken by the Internal Revenue Service, the Department of Labor, or the
Pension Benefit Guaranty Corporation with respect thereto;
(g) NOTICE OF DEFAULT OR EVENT OF DEFAULT - as soon as practicable, but in
any event on or before the fifth (5th) Business Day after becoming aware of the
existence of a Default or an Event of Default, a written notice specifying the
nature and period of existence thereof and what action is being taken or is
proposed to be taken with respect thereto;
(h) BANKRUPTCY EVENT - immediately following, but in any event on or
before the third (3rd) Business Day, the occurrence of an event of the type
described in Section 8.1(g), (h), or (i), a written notice specifying such event
and its status; and
(i) REQUESTED INFORMATION - promptly following request, such other data
and information respecting the business affairs, assets and liabilities of
Borrower and its Subsidiaries and Affiliates not otherwise required to be kept
confidential in accordance with any agreement or applicable law (but only if any
disclosure of such information will not constitute a waiver of any
attorney-client privilege) as from time to time reasonably may be requested by
Lender.
(j) NOTICE OF CLAIMED DEFAULT - as soon as practicable, but in any event
on or before the third Business Day after becoming aware that the holder of any
evidence of Debt or Security of Borrower or any Subsidiary other than Lender has
given notice or taken any other action with respect to a claimed default or
incipient default, a written notice specifying the notice given or action taken
by such Person and the nature of the claimed default or incipient default and
what action is being taken or is proposed to be taken with respect thereto;
30
(k) MINUTES - as soon as available, minutes of the meetings of Borrower's
shareholders and Board of Directors and any subcommittees thereof (including
copies of all written consents in lieu of meetings), and copies of all minutes
of AADC Board meetings.
7.2 INSPECTION. Upon reasonable notice and at reasonable intervals and at
the Lender's expense, Borrower shall allow Lender or Lender's representative
during business hours or at other reasonable times to inspect any of its
Properties, to review reports, files, and other records not otherwise required
to be kept confidential in accordance with any agreement or applicable law (but
only if any disclosure of such information by Borrower will not constitute
waiver of any attorney-client privilege) and to make and take away copies, and
subject to Section 7.3, to discuss, from time to time, any of its affairs,
conditions, and finances with its directors, officers, employees with management
duties and certified public accountants.
7.3 CONFIDENTIALITY. From and after the date of this Agreement, Lender
shall hold confidential all information, unless specifically identified by
Borrower as public, heretofore or hereafter obtained in connection with this
Agreement or any Subject Document, or obtained pursuant to the requirements of
this Agreement or any Subject Document (the "Information"); provided, however,
that Lender may make disclosure reasonably required (i) in connection with the
enforcement of Lender's rights under this Agreement and the Subject Documents,
or otherwise in connection with litigation involving Lender's rights under this
Agreement and the Subject Documents (and subject to customary protective
orders); provided, however, that in any such case the Information shall only be
transmitted or disclosed to attorneys and accountants and other advisors of
Lender who "need to know" the Information and who are informed of the
confidential nature of the Information and agree in writing to keep such
Information confidential as set forth in this Section 7.3, (ii) in accordance
with such Lender's customary procedures for handling confidential information of
this nature and in accordance with safe and sound financial practices, to inform
Lender's partners and their advisors from time to time of the nature of
Borrower's business, key personnel, capital structure, and pertinent financial
information about the Borrower's performance, and other relevant data typically
disclosed by Lender to such Persons; provided, that they are informed of the
confidential nature of such information, (iii) in connection with an assignment
of the Lender Note as allowed under this Agreement; provided, however, that on
or about the date of any such disclosure to any prospective assignee notice
thereof shall be given Borrower, and also provided further that prior to any
such disclosure, each assignee or prospective assignee shall have agreed to be
bound by the provisions of this Section 7.3, and (iv) by any governmental
authority having jurisdiction over Lender or by any applicable rule of law;
provided, however, that in such event Lender shall use its reasonable efforts to
provide Borrower with five (5) Business Days prior written notice of such
disclosure so that Borrower may seek a protective order or other appropriate
remedy, and provided, further, that in the event such protective order or other
remedy is not obtained, or Lender is unable to give Borrower prior notice Lender
will furnish the Information legally required to be provided to such
governmental authority. In no event shall Lender be obligated or required to
return any materials furnished by Borrower; provided, however, each prospective
assignee shall be required to agree that if it does not become an assignee it
shall return upon Borrower's written request all materials furnished to it by
Lender in connection with this Agreement; provided, moreover, that Lender shall
give Borrower prompt written notice of each prospective assignee from whom
Lender does not promptly request
31
such return of materials so that Borrower may make a request if it chooses.
Nothing in this Section 7.3 shall abrogate any Person's obligations regarding
non-public information under any applicable law.
SECTION 8. EVENTS OF DEFAULT
8.1 NATURE OF EVENTS. An "Event of Default" shall exist if any of the
following occurs and is continuing:
(a) PAYMENTS - Borrower fails to make any payment to Lender (whether
principal, interest, or otherwise) on the Lender Note within five Business Days
after the date on which such payment is due;
(b) PARTICULAR COVENANT DEFAULTS - Borrower fails to perform or comply
with Sections 6.3, 6.4, 6.5, 6.7, 6.11, 6.12, or 6.13 hereof or any of the other
Subject Documents, and such failure remains continuing and uncured for thirty
(30) days after the occurrence of Borrower's failure;
(c) OTHER COVENANT DEFAULTS - except as provided in Section 8.1 (a) or
Section 8.1(b), Borrower, ASRC, AADC or GSPLC fails fully and punctually to
perform or comply with any covenant in this Agreement or the other Subject
Documents to which they are or become a party;
(d) REPRESENTATIONS OR WARRANTIES - any material representation, or other
statement by Borrower or any Affiliate or Subsidiary of Borrower in this
Agreement or any other Subject Document is materially false or misleading as of
the date made;
(e) DEFAULT ON SENIOR DEBT - an event of default has occurred and is
continuing beyond any period of cure with respect to the Senior Debt or any of
the Senior Lender Documents;
(f) DEFAULT ON INDEBTEDNESS - an event of default has occurred and is
continuing with respect to (i) any Debt permitted to be incurred by Borrower
pursuant to Section 6.7, or any other Debt (other than Senior Debt or trade
accounts payable arising in the ordinary course of business) of Borrower or any
portion thereof, equal to or exceeding $50,000 singly or in the aggregate;
provided, however, that no Event of Default shall exist under this Section
8.1(f) if Borrower is contesting in good faith the right of the holder of such
Debt to accelerate the payment of the Debt and has established adequate reserves
therefor, or (ii) the AADC Loan Agreements and Obligations;
(g) INVOLUNTARY BANKRUPTCY PROCEEDING - a receiver, liquidator, custodian,
or trustee of Borrower, or of any material Property thereof is appointed by
court order and such order remains in effect on the ninetieth (90th) day after
its entry; or a petition is filed, a case is commenced, or relief is ordered
against Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed with (90) days of such
filing, commencement, or order;
32
(h) VOLUNTARY PETITIONS - Borrower files a petition commencing a case in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition or the commencement of any case against
it under any such law;
(i) ASSIGNMENTS FOR BENEFIT OF CREDITORS - Borrower makes an assignment
for the benefit of its creditors, or consents to the appointment of a receiver,
trustee, custodian, or liquidator thereof, or of all or any material portion of
the Property of any of them;
(j) UNDISCHARGED FINAL JUDGMENTS - any final judgment or judgments for the
payment of money or any warrant of sequestration against any assets of Borrower
having a value, in each case, aggregating in excess of $50,000 is or are
outstanding against Borrower and such judgments remain outstanding on the
ninetieth (90th) day after entry and have not been discharged in full or stayed,
or made the subject of pending appeal;
(k) COLLATERAL - except as permitted by Section 6.6, Borrower ceases to
own good and indefeasible title to a material portion of the Collateral for any
reason, or more than $50,000 of the Collateral shall become subject to a Lien
that is prior to Liens in favor of Lender and not permitted by Section 6.8;
(1) DISSOLUTION - a dissolution of Borrower occurs;
(m) CHANGE IN CONTROL - a Change in Control of Borrower or GSPLC occurs;
or,
(n) CRIMINAL CONDUCT AND STATUTORY LIABILITY - The indictment or
conviction of Borrower or any Affiliate of Borrower or any officer or any
director of Borrower for a crime or criminal conduct, or the commission by an
officer or director of Borrower of an act or omission which is expressly
prohibited by state or federal statute.
(o) ENVIRONMENTAL AND OSHA LIABILITY - The occurrence of a final judgment,
fine, or assessment against Borrower or any Affiliate of Borrower in connection
with the violation of any Environmental Laws or the Occupational Safety and
Health Act of 1970 that is in excess of $250,000 singly or in the aggregate.
(p) TERMINATION OF CARTER'S EMPLOYMENT - The termination of Carter's
employment with SHR for any reason whatsoever, whether voluntarily or
involuntarily, and including termination as a result of Carter's death or
disability.
(q) SEC PENALTY OR FINE - The assessment of a penalty or fine by the
Securities Exchange Commission against AADC or any of its Affiliates or any
officers or directors of any of said entities in excess of $25,000.00.
33
8.2 DEFAULT REMEDIES. If an Event of Default exists, Lender may exercise
any right, power, or remedy permitted by law and shall have, in particular,
without limiting the generality of the foregoing, the right to declare the
entire principal and all interest accrued on the Lender Note to be, and, upon
Lender's sending notice to Borrower of said declaration, the Lender Note shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest, or other notice of any kind, all of which are hereby expressly waived.
Immediately upon receipt of any such notice, Borrower shall pay to Lender the
entire principal of and interest accrued on the Lender Note. Lender agrees that
it will not exercise its rights under the Irrevocable Proxies described in
Section 3.2(o) unless and until an Event of Default exists.
8.3 ANNULMENT OF ACCELERATION OF LENDER NOTE. If A declaration is made
pursuant to Section 8.2 by Lender, then and in every such case such declaration
and the consequences thereof may be rescinded and annulled by (and only by)
Lender by written instrument; provided, however, that no such rescission and
annulment shall extend to or affect any subsequent Default or Event of Default
or impair any right consequent thereon.
8.4 JOINT AND SEVERAL LIABILITY. All liabilities and obligations of
Borrower hereunder and under the Subject Documents shall be joint and several. A
breach of this Agreement or any of the Subject Documents by one Borrower shall
be deemed to be a breach by the other Borrower.
SECTION 9. MISCELLANEOUS
9.1 NOTICES. (a) Except as otherwise provided herein or in the Subject
Documents, all communications under the Subject Documents shall be in writing to
the following addresses : (i) if to Lender, at the following addresses or such
other address as Lender shall have furnished Borrower by notice on or before the
fifth (5th) Business Day prior thereto:
The Catalyst Fund, Ltd. and
Southwest/Catalyst Capital, Ltd.
Two Riverway, Suite 1710
Houston, Texas 77056
Attention: Rick Herrman / Ron Nixon
with a copy to: Page, Murphree, Byerly & Hansen, P. L. L. C.
Two Riverway, Suite 1700
Houston, Texas 77056
Attn: James Byerly
(ii) if to Borrower, at the following address or such other address
as Borrower may have furnished by notice to Lender on or before the fifth
(5th) Business Day prior thereto:
Texas Oil & Chemical Co. II, Inc.
P.O. Box 1636
Silsbee, Texas 77656
34
Attn: Nicholas N. Carter
South Hampton Refining Company
7752 FM 418
Silsbee, Texas 77656
Attn: Nicholas N. Carter
with a copy to: Germer Gertz, L.L.P.
P.O. Box 4915
Beaumont, Texas 77704
Attn: Guy Goodson
(b) Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, shall be deemed to be received on the third
Business Day after so mailed, and if delivered by personal delivery (including
by courier) upon delivery during normal business hours.
9.2 SURVIVAL. Each representation, warranty, or covenant made by Borrower
in this Agreement or any other Subject Documents shall survive the Execution
Date and the delivery of the documents and instruments described in Section 3.2,
regardless of any investigation made by Lender or on its behalf. All obligations
of Borrower hereunder shall survive the Execution Date and shall terminate only
upon the later to occur of (i) the payment of the Lender Note, or (ii) the
fulfillment of all of Borrower's obligations under the Consulting Agreement. At
the Execution Date, Lender has no actual knowledge of an Event of Default by
Borrower.
9.3 SUCCESSORS AND ASSIGNS. Borrower may not assign any of its rights or
delegate any of its duties to any Person without prior written consent of
Lender. This Agreement shall be binding upon the successors and assigns of each
of the parties and, except as expressly set forth in this Section 9.3, shall
inure to the benefit of the successors and permitted assigns of each of the
parties. The provisions of this Agreement are intended to be for the benefit of
all Persons constituting Lender, from time to time, in accordance with the terms
of this Agreement.
9.4 AMENDMENT AND WAIVER. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with and only with the
written consent of Borrower and Lender.
9.5 GOVERNING LAW. THIS AGREEMENT, THE LENDER NOTE, THE OTHER SUBJECT
DOCUMENTS, AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO, AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER, INCLUDING MATTERS OF
CONSTRUCTION, VALIDITY, AND PERFORMANCE, SHALL BE GOVERNED BY AND INTERPRETED,
CONSTRUED, APPLIED, AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF
TEXAS AND THE UNITED STATES WITHOUT REFERENCE TO THE LAW OF ANOTHER
JURISDICTION.
9.6 SEVERABILITY. If any provision in this Agreement or the Lender Note is
rendered or declared illegal, invalid, or unenforceable by reason of any rule of
law, public policy, or final judicial
35
decision, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner adverse to
Borrower or Lender. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, Borrower and Lender shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties hereto as closely as possible to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
9.7 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement and the other Subject
Documents constitute the entire agreement of the parties and the Affiliates with
respect to the matters contained herein and therein and supersede all prior
contracts and agreements with respect thereto, whether written or oral. THIS
WRITTEN LOAN AGREEMENT AND THE OTHER SUBJECT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9.8 MULTIPLE COUNTERPARTS. The parties may execute more than one
counterpart of this Agreement, each of which shall be an original but all of
which together shall constitute one and the same instrument.
9.9 ARBITRATION. Any controversy or claim between or among the parties
hereto, including but not limited to those arising out of or relating to this
Agreement or any Subject Documents, including any claim based on or arising from
an alleged tort, shall be determined by binding arbitration to be held in Harris
County, Texas, in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), the rules of practice and procedure for
the arbitration of commercial disputes of the American Arbitration Association
("AAA"), and the "Special Rules" set forth below. In the event of any
inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any party to this
Agreement may bring an action, including a summary or expedited proceeding, to
compel arbitration of any controversy or claim to which this Agreement applies
in any court having jurisdiction over such action.
(a) SPECIAL RULES. Prior to the initiation of any arbitration the Parties
agree to submit all claims to mediation to be conducted by a mediator in good
standing with the AAA. Upon submission of a dispute to the AAA, the Borrower and
Lender shall each submit to the rules and regulations of the AAA for the
purposes of conducting such mediation.
(b) RESERVATION OF RIGHTS. Nothing in this Section 9.9 shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
or repose and any waivers contained in this Agreement; or (ii) be a waiver by
Lender of the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the right of any party (A) to
exercise self help remedies such as (but not limited to) offset, or (B) to
nonjudicially foreclose against any real or personal property collateral, or (C)
to obtain from a court provisional or ancillary remedies such as
36
(but not limited to) injunctive relief, writ of possession or the appointment of
a receiver, or (iv) except for limiting the right of judicial foreclosure, limit
the right of any party to enforce its rights under any Subject Document with
respect to matters as to which there is no legal dispute. Any party may exercise
such self help rights, nonjudicially foreclose upon such property, or obtain
such provisional or ancillary remedies before, during or after the pendency of
any arbitration proceeding brought pursuant to this Agreement. Neither the
exercise of self help remedies or any nonjudicial foreclosure, nor the
institution or maintenance of an action for provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the controversy or claim occasioning
resort to such remedies. Any attorney-client privilege and other protection
against disclosure of confidential information, including, without limitation,
any protection afforded the work-product of any attorney, that could otherwise
be claimed by any party shall be available to and may be claimed by any such
party in any arbitration proceeding. No party waives any attorney-client
privilege or any other protection against disclosure of confidential information
by reason of anything contained in or done pursuant to or in connection with
this Section 9.9.
9.10 ATTORNEY'S FEES. If any litigation or arbitration proceeding is
instituted to enforce or interpret the provisions of this Agreement or the
transactions described herein, the prevailing party in such action shall be
entitled to recover its reasonable attorneys' fees from the other party hereto.
9.11 DRAFTING. Both parties hereto acknowledge that each party was
actively involved in the negotiation and drafting of this Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Agreement shall be construed in favor or against either party hereto
because one is deemed to be the author thereof.
9.12 LENDER'S CONSENT. Except as expressly provided to the contrary
herein, whenever the consent of Lender is required herein before Borrower can
take action, Lender cannot withhold such consent unreasonably, unless and until
an Event of Default has occurred and Lender has elected to declare the entire
balance of the Lender Note due under Section 8.2.
9.13 COOPERATION. Borrower and Lender shall each deliver or cause to be
delivered to the other after the Closing Date such additional instruments as the
other party may reasonably request for the purpose of carrying out this
Agreement.
9.14 INTERPRETATION. The headings and titles contained in this Agreement
are for convenience only and shall not be deemed part of this Agreement or be
given any effect in interpreting this Agreement. Unless otherwise provided
herein, all references herein to one gender shall include the others. Whenever
the words "include," "includes," or "including" are used herein, they will be
deemed to be followed by the words "without limitation." When applicable,
singular words shall include the plural and vice versa.
[Signature page following]
37
EXECUTED as of the date first above written.
BORROWER:
TEXAS OIL CHEMICAL CO. II, INC.
By: /s/ Nicholas N. Carter
--------------------------
Nicholas N. Carter, President
SOUTH HAMPTON REFINING
COMPANY
By: /s/ Nicholas N. Carter
-------------------------
Nicholas N. Carter, President
LENDER:
THE CATALYST FUND, LTD.
By: RDR Management I, Inc., its general
partner
By: /s/ [ILLEGIBLE]
-----------------------
SOUTHWEST/CATALYST CAPITAL,
LTD.
By: SWC Management, Inc.,
its general partner
By: /s/ [ILLEGIBLE]
--------------------
The undersigned joins in the execution of this Agreement only with respect
to its obligations contained in Sections 2, 6.18, 7 and 9.9 hereof.
ARABIAN AMERICAN DEVELOPMENT COMPANY
By: /s/ Nicholas N. Carter
--------------------------
Nicholas N. Carter
Title: Secretary/Treasurer
38