UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 5)
INTERLINE RESOURCES CORPORATION
-------------------------------
(Name of Issuer)
Common Stock, $.005 par value
-----------------------------
(Title of Class of Securities)
458744109
---------
(CUSIP Number)
Maurice D. Sabbah
Fortress Re, Inc.
262 East Morehead Street
Burlington, North Carolina 27216
(910) 226-1144
----------------------
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
May 15, 1996
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the
statement [ ].
<PAGE>
CUSIP No. 458744109 13D
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Maurice D. Sabbah
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IF REQUIRED
PURSUANT TO ITEMS 2(a) OR 2(b) [ ]
- -----------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- -----------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
2,370,416
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NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
8 SHARED VOTING POWER
- -----------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
9 SOLE DISPOSITIVE POWER
2,370,416
- -----------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
10 SHARED DISPOSITIVE POWER
- -----------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
- -----------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES [X]
(see Item 5)
- -----------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
16.61%
- -----------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
This Amendment No. 5 amends and supplements the
statement on Schedule 13D filed by Maurice D. Sabbah and dated
June 17, 1994, as amended (the "Schedule 13D") with respect to
Common Stock, par value $.005 per share (the "Shares"), of
Interline Resources Corporation, a Utah corporation (the
"Company").
Unless otherwise defined, all capitalized terms used
herein shall have the meaning given such terms in the Schedule
13D.
Item 3 of the Schedule 13D is hereby amended to add
the following information:
Item 3. Source and Amount of Funds or Other Consideration.
- ------- --------------------------------------------------
The amounts to be loaned to the Company pursuant to
the May Note Purchase Agreement (as defined in Item 4) will be
obtained from personal funds of the Filing Person.
Item 4 of the Schedule 13D is hereby amended to add
the following information:
Item 4. Purpose of the Transaction.
- ------- ---------------------------
Pursuant to a Note and Warrant Purchase Agreement
dated as of May 15, 1996 between the Company and the Filing
Person (the "May Note Purchase Agreement"), the Filing Person
has agreed to lend up to $2,500,000 of his personal funds to the
Company. The Company's indebtedness to the Filing Person is
evidenced by a 9-1/4% Senior Secured Note due January 15, 1998
(the "May Secured Note") held by the Filing Person. The Filing
Person will have the right (but not the obligation) to convert
all or a portion of the unpaid principal amount of the May
Secured Note at any time after (i) August 15, 1996 and prior to
December 31, 1996 or (ii) the occurrence of an event of default
under the May Note Purchase Agreement into newly issued Shares
at a price equal to the lesser of (a) $3.12 per Share or (b) 80%
of the average closing price of the Shares for the five trading
days preceding the Filing Person's election to convert all or a
portion of the loan. The loans are secured by the stock of
certain subsidiaries of the Company. A copy of the May Note
Purchase Agreement (which includes, as an exhibit thereto, the
form of May Secured Note) is attached as an exhibit hereto and
the foregoing summary is qualified in its entirety by reference
thereto.
Pursuant to the May Note Purchase Agreement, the
Company issued to the Filing Person a warrant (the "Warrant") to
purchase an aggregate of 250,000 Shares at a purchase price of
$3.90 per Share, at any time or from time to time until December
31, 1999. The per Share price is subject to customary anti-
dilution adjustments.
<PAGE>
At the time the May Note Purchase Agreement was
executed, the Company also entered into an agreement with the
Filing Person pursuant to which the Company agreed to (i) change
the size of its Board of Directors to five, (ii) to secure the
resignations of two of the then members of the Board and (iii)
to appoint the Filing Person and Freddy H. Robinson to the Board
immediately and, within ninety days, to appoint to the Board
another person designated by the Filing Person who is reasonably
acceptable to the Company (collectively, the "Designees").
In addition, the Filing Person entered into an
agreement with Michael R. Williams, President of the Company,
pursuant to which Mr. Williams agreed to vote all Shares he owns
or has the power to vote in favor of the election of the
Designees at any annual or special meeting of stockholders of
the Company and not to vote or execute a written consent in
favor of the removal of the Designees or to agree to a change in
the size of the Company's Board of Directors. This agreement
terminates upon the earlier of the termination of the May Note
Purchase Agreement and August 1, 1999. (The Filing Person
disclaims beneficial ownership of any Shares owned by Mr.
Williams.)
The Filing Person intends to assess continually the
market for the Shares. Depending upon such continuing
assessment and future developments, including, but not limited
to, the Company's financial condition and results of operations,
the Filing Person may determine, from time to time or at any
time, to purchase additional Shares through open market or
privately negotiated purchases or to sell or otherwise dispose
of some or all of his Shares on the open market or in privately
negotiated transactions (subject to the restrictions on sales of
shares imposed by the Securities Act of 1933 and other relevant
provisions of the securities laws). In making such
determinations, the Filing Person will also consider other
business opportunities available to him, general economic
conditions and money and stock market conditions.
Except as set forth above, the Filing Person has no
present plans or proposals which relate to or would result in
any of the events set forth in paragraphs (a) through (j) of
this Item.
Item 5 of the Schedule 13D is hereby amended to add
the following information.
Item 5. Interest in Securities of the Issuer.
- ------- -------------------------------------
(a) The Filing Person currently beneficially owns an
aggregate of 2,370,416 Shares (including the 67,750 Shares
obtainable upon conversion of the Note and the 250,000 Shares
obtainable upon exercise of the Warrant, but excluding an
aggregate of 54,000 Shares owned by the Filing Person's wife,
daughter and any Shares which might be obtained upon conversion
of the Secured Note if it is not repaid by the Company on or
<PAGE>
before August 29, 1996, any Shares which might be obtained upon
conversion of the May Secured Note, and any Shares owned by Michael
R. Williams which are subject to the Voting Agreement) which
represent approximately 16.61% of the 14,268,802 Shares deemed to
be then outstanding, as computed in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, for purposes of Schedule
13D and based upon the 13,951,052 Shares represented by the Company
to be outstanding in the May Note Purchase Agreement. (As of
June 15, 1996, the Filing Person will be deemed to beneficially
own the at least 801,282 Shares obtainable upon conversion of
the May Secured Note by reason of Rule 13d-3(d)(1)(i). At that
time the Filing Person will beneficially own at least an aggregate
of 3,171,698 Shares, which will represent approximately 21.05% of
the 15,070,084 Shares deemed to be then outstanding, as computed
in accordance with Rule 13d-3.)
(b) The Filing Person has sole power to vote and to
direct the vote, and sole power to dispose and direct the
disposition of, all of his Shares and sole power to decide
whether to convert the Note and the May Secured Note.
(c) Except in connection with the May Note Purchase
Agreement and related matters, no transactions in securities of
the Company have been effected during the past sixty days.
(d) No person other than the Filing Person has the
right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, his Shares.
Item 7 of the Schedule 13D is hereby amended to add
the following information:
Item 7. Material to be Filed as Exhibits.
- ------- ---------------------------------
Note and Warrant Purchase Agreement Exhibit A
dated as of May 15, 1996
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth
in this statement is true, complete and correct.
/s/Maurice D. Sabbah
---------------------------
Maurice D. Sabbah
Date: May 21, 1996
<PAGE>
EXHIBIT A
---------
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INTERLINE RESOURCES CORPORATION
AND
MAURICE D. SABBAH
-----------------------------
$2,500,000
9-1/4% Senior Secured Note Due January 15, 1998
-----------------------------
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of May 15, 1996
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<PAGE>
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE
SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>
TABLE OF CONTENTS
Article I Authorization and Issuance of Note and Warrant.... 1
SECTION 1.1 Authorization........................ 1
SECTION 1.2 Issuance and Sale of Note and Warrant 1
(a) Sale of the Note and the Warrant 1
(b) Closing Date; Delivery of Note,
Warrant, Amended and Restated
Pledge Agreement and Guaranty.. 1
(c) The Purchaser's Representation. 1
SECTION 1.3 Old Notes........................... 2
Article II Representations and Warranties of Company....... 2
SECTION 2.1 Organization........................ 3
SECTION 2.2 Authorization....................... 3
SECTION 2.3 Capitalization...................... 3
SECTION 2.4 No Contravention.................... 3
SECTION 2.5 Litigation.......................... 4
SECTION 2.6 Financials.......................... 4
SECTION 2.7 Consents............................ 4
SECTION 2.8 Proceeds of Note.................... 4
SECTION 2.9 ERISA............................... 5
SECTION 2.10 Income Tax Returns.................. 5
SECTION 2.11 Investment Company.................. 5
SECTION 2.12 Principal Executive Office.......... 5
SECTION 2.13 No Solicitation..................... 5
SECTION 2.14 SEC Filings......................... 5
SECTION 2.15 Obligations to Register............. 6
SECTION 2.16 Compliance With Environmental Laws.. 6
SECTION 2.17 Disclosure.......................... 6
SECTION 2.18 Solvency............................ 6
Article III The Loans and the Note......................... 6
SECTION 3.1 Commitment to Make the Loans........ 6
SECTION 3.2 Method of Borrowing................. 7
SECTION 3.3 Use of Proceeds..................... 7
SECTION 3.4 Note................................ 7
SECTION 3.5 Conditions to Loans................. 8
SECTION 3.6 Payment............................. 8
SECTION 3.7 Limitation On Interest.............. 8
SECTION 3.8 Optional Prepayment................. 8
SECTION 3.9 Mandatory Prepayment................ 9
Article IV Affirmative Covenants of Company................ 9
SECTION 4.1 Preservation of Franchises and
Existence........................ 9
SECTION 4.2 Payment of Taxes and Other Charges.. 9
<PAGE>
SECTION 4.3 Commission and Stock Exchange Filings 9
SECTION 4.4 Notice of Certain Events............ 10
SECTION 4.5 Compliance With Laws................ 10
SECTION 4.6 Securities Act Registration
Statements....................... 10
SECTION 4.7 Use of Proceeds of New Financings... 10
Article V Negative Covenants.............................. 11
SECTION 5.1 Authorized Shares................... 11
SECTION 5.2 Indebtedness........................ 11
SECTION 5.3 Liens............................... 11
SECTION 5.4 Dividend Payments................... 11
SECTION 5.5 Transactions With Affiliates........ 11
SECTION 5.6 Limitations on Capital Expenditures 11
SECTION 5.7 No Mergers, Etc..................... 12
SECTION 5.8 Liabilities......................... 12
SECTION 5.9 Representations and Warranties...... 12
SECTION 5.10 Employment Arrangements............. 12
SECTION 5.11 Negotiations and Agreements......... 12
Article VI Events of Default and Remedies.................. 12
SECTION 6.1 Events Of Default.................... 12
(a) Nonpayment of the Note.......... 12
(b) Nonpayment of Old Notes......... 12
(c) Negative Covenants.............. 13
(d) Other Covenants................. 13
(e) Misrepresentations.............. 13
(f) Voluntary Bankruptcy and
Insolvency Proceedings........ 13
(g) Adjudication of Bankruptcy...... 13
(h) Breach of Stock Purchase
Agreement..................... 13
(i) Breach of Amended and Restated
Pledge Agreement.............. 13
(j) Breach of Old Note Purchase
Agreements.................... 14
(k) Sale of New Re-Refining Units... 14
SECTION 6.2 Acceleration Of Maturity............. 14
SECTION 6.3 Other Remedies....................... 14
SECTION 6.4 Conduct No Waiver, Collection
Expenses.......................... 14
SECTION 6.5 Remedies Cumulative.................. 15
SECTION 6.6 Cooperation By The Company........... 15
Article VII Conversion Right............................... 15
SECTION 7.1 Conversion Privilege................. 15
SECTION 7.2 Manner of Conversion................. 15
(a) Conversion of Note.............. 15
(b) Accrued Interest................ 16
SECTION 7.3 Delivery of Stock Certificates....... 16
SECTION 7.4 Covenant to Reserve Shares for
Conversion........................ 16
<PAGE>
SECTION 7.5 Compliance with Governmental
Requirements...................... 16
SECTION 7.6 Special Agreements of the Company.... 16
SECTION 7.7 Notifications by the Company......... 16
SECTION 7.8 No Dilution.......................... 17
Article VIII Registration and Transfer of Restricted Shares 18
SECTION 8.1 Registration on Request.............. 18
(a) Request by the Purchaser........ 18
(b) Registration Statement Form..... 18
(c) Expenses........................ 18
(d) Effective Registration Statement 18
(e) Selection of Underwriters....... 19
SECTION 8.2 Incidental Registration.............. 19
(a) Right to Include Restricted
Shares........................ 19
(b) Priority in Incidental
Registrations................. 19
(c) Expenses........................ 19
SECTION 8.3 Registration Procedures.............. 20
SECTION 8.4 Indemnification...................... 22
(a) Indemnification by the Company.. 22
(b) Indemnification by the Purchaser 23
(c) Notices of Claims............... 23
(d) Other Indemnification........... 23
(e) Rule 144........................ 24
(f) Holdback Agreement.............. 24
Article IX Miscellaneous................................... 24
SECTION 9.1 Amendments and Waivers............... 24
SECTION 9.2 Integration.......................... 25
SECTION 9.3 Successors and Assigns............... 25
SECTION 9.4 Reliance On and Survival Of Various
Provisions........................ 25
SECTION 9.5 Notices and Other Communications..... 25
SECTION 9.6 Governing Law........................ 25
SECTION 9.7 Table of Contents and Headings....... 25
SECTION 9.8 Counterparts......................... 25
SECTION 9.9 Expenses............................. 26
Article X Definitions..................................... 26
<PAGE>
EXHIBITS
EXHIBIT A Form of 9-1/4% Senior Secured Note
EXHIBIT B Form of Warrant
EXHIBIT C Form of Amended and Restated Pledge Agreement
EXHIBIT D Form of Guaranty
EXHIBIT E Form of Borrowing Request
EXHIBIT F Form of Borrowing Compliance Certificate
<PAGE>
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT, dated as of May 15,
1996 (this "Agreement"), between INTERLINE RESOURCES CORPORATION,
a Utah corporation (the "Company"), INTERLINE ENERGY SERVICES,
INC. and MAURICE D. SABBAH, an individual residing in the State
of North Carolina (the "Purchaser").
The Company and the Purchaser agree as follows:
ARTICLE I
AUTHORIZATION AND ISSUANCE OF NOTE AND WARRANT
SECTION 1.1 AUTHORIZATION. The Company has duly
authorized the issuance of (i) a 9-1/4% Senior Secured Note due
January 15, 1998 in the aggregate principal amount of $2,500,000
(the "Note") and (ii) a warrant (the "Warrant") to purchase up to
250,000 shares of Common Stock at an initial exercise price of
$3.90 per share. The Note and the Warrant shall be substantially
in the form of Exhibit A and Exhibit B hereto, respectively.
SECTION 1.2 ISSUANCE AND SALE OF NOTE AND WARRANT. (a)
Sale of the Note and the Warrant. Subject to the terms hereof,
the Company agrees to sell, and the Purchaser agrees to purchase,
on the Closing Date, the Note and the Warrant at a price equal to
100% of the principal amount of the Note, payable in immediately
available funds in accordance with Section 3.2.
(b) Closing Date; Delivery of Note, Warrant, Amended
and Restated Pledge Agreement and Guaranty. The date for the
purchase and sale of the Note and the Warrant hereunder shall be
May 15, 1996 (the "Closing Date"). Purchase and sale of the Note
shall occur on the Closing Date, at such place as the parties
hereto may designate. On the Closing Date, the Company will
deliver or cause to be delivered to the Purchaser, against
payment of the purchase price therefor, (i) the Note, duly
executed by the Company and dated the Closing Date, (ii) the
Warrant, duly executed by the Company and dated the Closing Date,
(iii) a duly executed Amended and Restated Pledge Agreement in
the form of Exhibit C hereto (the "Amended and Restated Pledge
Agreement"), (iv) a duly executed guaranty in the Form of Exhibit
D hereto (the "Guaranty") and (v) all other documents and
instruments required to be delivered hereunder or under the
documents referred to in clauses (i) through (iv) above.
(c) The Purchaser's Representation. The Purchaser
represents to the Company that he is acquiring each of the Note
and the Warrant (and the Common Stock issuable upon exercise of
the Warrant) for his own account for investment and not with a
view to any public distribution thereof and will not sell or
offer to sell the Note or the Warrant (or the Common Stock
issuable upon exercise of the Warrant) in violation of any of the
registration requirements of the Securities Act. The Purchaser
hereby consents to the imposition of legends
<PAGE>
substantially similar to the following on the Note and the
Warrant, respectively, and the Purchaser agrees to abide by the
restrictions contained therein:
"NEITHER THE DEBT REPRESENTED BY THIS NOTE,
NOR THE SHARES INTO WHICH THIS NOTE MAY BE
CONVERTED, HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS, AND
ACCORDINGLY, MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION UNDER SUCH
ACT AND SUCH LAWS OR PURSUANT TO AN EXEMPTION
THEREFROM."
"NEITHER THE SECURITIES REPRESENTED BY THIS
WARRANT, NOR THE SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT, HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED OR APPLICABLE STATE SECURITIES
LAWS, AND ACCORDINGLY, MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SUCH ACT AND SUCH LAWS OR
PURSUANT TO AN EXEMPTION THEREFROM."
SECTION 1.3 OLD NOTES. As an inducement to, and as
further consideration for, the Purchaser purchasing the Note,
each of the Company and Interline Energy Services, Inc., a
Wyoming corporation ("IES"), agrees to further secure and
collateralize (i) the full outstanding principal amount and
unpaid interest on the $250,000 10% Senior Convertible Note (the
"1994 Note") purchased by the Purchaser pursuant to a Note
Purchase Agreement dated as of June 30, 1994, as amended, (the
"1994 Note Purchase Agreement"), (ii) the full outstanding
principal amount and any unpaid interest on the $1,500,000 6%
Senior Secured Note (the "1996 Note" and, together with the 1994
Note, the "Old Notes") purchased by the Purchaser pursuant to a
Note Purchase Agreement dated as of February 29, 1996, as
amended, (the "1996 Note Purchase Agreement" and, together with
the 1994 Note Purchase Agreement, the "Old Note Purchase
Agreements") and (iii) the other obligations of the Company under
the Note Purchase Agreements and the Old Note Purchase Agreements
in each case as set forth in the Amended and Restated Pledge
Agreement. The Purchaser and the Company hereby agree that the
terms and conditions of the Old Notes shall remain unmodified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants as follows:
<PAGE>
SECTION 2.1 ORGANIZATION. The Company is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Utah, is duly licensed or qualified and in
good standing as a foreign corporation in each jurisdiction where
the character of its properties or the nature of its activities
makes such qualification necessary, except where the failure to
so qualify would not have a material adverse effect on its
properties, business or condition (financial or otherwise), and
has the corporate power and authority and all necessary licenses
and permits to carry on its present business as now conducted,
except where the failure to have any such licenses and permits
would not have a material adverse effect on its properties,
business or condition (financial or otherwise), and to enter into
and perform its obligations under this Agreement, the Note, the
Warrant and the Amended and Restated Pledge Agreement.
SECTION 2.2 AUTHORIZATION. The Agreement, the Note, the
Warrant and the Amended and Restated Pledge Agreement have each
been duly authorized, executed and delivered by the Company and
IES (in respect of this Agreement), and each of them constitutes
a legal, valid and binding obligation of the Company, enforceable
against the Company and IES (in respect of this Agreement) in
accordance with its terms.
SECTION 2.3 CAPITALIZATION. The authorized capital stock
of the Company consists solely of 100,000,000 shares of Common
Stock, $.005 par value, of which 13,951,052 shares are
outstanding, excluding the Conversion Shares, the Warrant Shares
and the shares of Common Stock issuable upon conversion of the
Old Notes, all of which outstanding shares have been duly
authorized and validly issued by the Company and are fully paid,
nonassessable and free of preemptive rights. No shares of Common
Stock are held on the date hereof in the treasury of the Company.
The issuance and sale of all such shares have been in full
compliance with all applicable federal and state securities laws.
Other than the Note, the Warrant and the Old Notes held by the
Purchaser and as set forth in Schedule 2.3, there are no
subscriptions, options, warrants or calls relating to the
issuance by the Company of any shares of its Common Stock,
including any right of conversion or exchange under any
outstanding security or other instrument. The Company is not
subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of Common Stock or any
security convertible into or exchangeable for any Common Stock.
The Common Stock is vested with all the voting rights in the
Company. The Conversion Shares and the Warrant Shares have been
duly authorized and reserved for issuance. When issued, the
Conversion Shares and the Warrant Shares will be fully paid and
nonassessable and free from preemptive rights.
SECTION 2.4 NO CONTRAVENTION. The execution, delivery
and performance by the Company of this Agreement, the Note, the
Warrant and the Amended and Restated Pledge Agreement and
compliance by the Company with all of the provisions hereof and
thereof do not and will not contravene any law or any order of
any court or governmental authority or agency applicable to or
binding on the Company or any of its properties, or contravene
the provisions of, or constitute a default (or event of default)
with or without the passage of time, by the Company under, or
result in the creation of any Lien upon the property of the
Company under its Certificate of Incorporation or by-laws or any
material indenture, mortgage, contract or other agreement or
instrument to which the Company is a party, or by which the
Company or any of its property is bound or affected.
<PAGE>
SECTION 2.5 LITIGATION. Except as disclosed in the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, there are no proceedings pending or, to the
knowledge of the Company, threatened against the Company or any
of its Subsidiaries in any court or before any governmental
authority or arbitration board or tribunal which, if adversely
determined, would reasonably be likely to have a material adverse
effect on the properties, business, profits or condition
(financial or otherwise) of the Company and its Subsidiaries,
taken as a whole, or impair the ability of the Company to perform
its obligations under this Agreement, the Note, the Warrant and
the Amended and Restated Pledge Agreement. The Company is not in
default with respect to any order of any court or governmental
authority or arbitration board or tribunal.
SECTION 2.6 FINANCIALS. The Company has provided to the
Purchaser the audited consolidated balance sheets and
consolidated statements of income and retained earnings and cash
flows of the Company and its Subsidiaries, for the fiscal years
ended December 31, 1992, 1993, 1994 and 1995 (collectively, the
"Financial Reports"). The Financial Reports were prepared in
conformity with generally accepted accounting principles, and
fairly present the consolidated financial position of the Company
and its Subsidiaries as of such date and the results of their
consolidated operations for the period then ended. The Company
has also provided to the Purchaser a preliminary draft of the
unaudited consolidated balance sheets, and consolidated statement
of operations of the Company and its Subsidiaries, for the fiscal
quarter ended March 31, 1996 (the "Quarterly Report"). The
Quarterly Report was prepared in accordance with generally
accepted accounting principles, and fairly presents the
consolidated financial position of the Company and its
Subsidiaries as of such date and the results of their
consolidated operations for the period then ended. Since March
31, 1996, there has been no material adverse change in such
financial condition or operations other than the conditions
relating to cash flow which have made the sale of the Note and
the Warrant necessary.
SECTION 2.7 CONSENTS. Neither the nature of the Company
or its businesses or properties, nor any relationship between the
Company and any other Person, nor any circumstances in connection
with the execution, delivery and performance of this Agreement,
the Note, the Warrant or the Amended and Restated Pledge
Agreement is such as to require a consent, approval or
authorization of any Person or governmental authority, or filing,
registration or qualification with, any governmental authority on
the part of the Company in connection with the execution,
delivery and performance of this Agreement, the Note, the Warrant
and the Amended and Restated Pledge Agreement.
SECTION 2.8 PROCEEDS OF NOTE. The proceeds from the sale
of the Note will be used for repayment of indebtedness of the
Company and its Subsidiaries in accordance with Section 3.3
hereof. None of the transactions contemplated by this Agreement
or the Note will result in a violation of Section 7 of the
Securities Exchange Act of 1934, or any regulations issued
pursuant thereto, including without limitation, Regulations G, T
and X of the Board of Governors of the Federal Reserve System, 12
C.F.R., Chapter 11. None of the proceeds from the sale of the
Note will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry)
any "security" within the meaning of such Act.
<PAGE>
SECTION 2.9 ERISA. The execution and delivery by the
Company of this Agreement, the Note, the Warrant and the Amended
and Restated Pledge Agreement and the issuance and sale on the
Closing Date of the Note and the Warrant will not involve any
transaction which is subject to the prohibitions of Section 406
of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Code.
SECTION 2.10 INCOME TAX RETURNS. Except as set forth on
Schedule 2.10, the Company has timely filed all United States
Federal income tax returns and all other material tax returns
which are required to be filed by it and has paid all taxes due
pursuant to such returns or pursuant to any assessment made
against the Company or any of its assets, and all other taxes,
fees or other charges imposed on the Company by any governmental
authority (other than taxes, fees or other charges the payment of
which is being contested in good faith by the Company) and no tax
liens have been filed and no claims are being asserted with
respect to any such taxes, fees or other charges which could
reasonably be expected to have a materially adverse effect on its
ability to perform its obligations under this Agreement, the
Note, the Warrant and the Amended and Restated Pledge Agreement.
SECTION 2.11 INVESTMENT COMPANY. Neither the Company nor
any of its Affiliates is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, or an "investment adviser" within
the meaning of the Investment Company Act of 1940.
SECTION 2.12 PRINCIPAL EXECUTIVE OFFICE. The principal
executive office and place of business of the Company is located
at 160 West Canyon Crest Drive, Alpine, Utah 84004. The Company
is engaged in the oil and gas industry, including natural gas
gathering, natural gas processing and oil well production and
various research and development projects involving the re-
refining of oil.
SECTION 2.13 NO SOLICITATION. Neither the Company nor
anyone acting on behalf of the Company will offer the Note, the
Warrant, the Guaranty or any part thereof or any similar security
for issue or sale to any prospective purchaser, or solicit any
offer to acquire any Note, any Warrant, any Guaranty or any part
thereof so as to bring the issuance and sale of the Note, the
Warrant or the Guaranty within the provisions of Section 5 of the
Securities Act.
SECTION 2.14 SEC FILINGS. The Company has filed all
forms, reports, and documents required to be filed with the
Commission since December 31, 1992, and has heretofore made
available to the Purchaser, in the form filed with the
Commission, (i) its Annual Report on Form 10-KSB for the fiscal
years ended December 31, 1992, 1993, 1994 and 1995, (ii) its
Quarterly Report on Form 10-QSB for the periods ended March 31,
1995, June 30, 1995 and September 30, 1995, (iii) all proxy
statements relating to the Company's meeting of stockholders
(whether annual or special) held since January 1, 1992, and (iv)
all other reports or registration statements (other than Reports
on Form 10-Q not referred to in clause (ii) above) filed by the
Company with the Commission since December 31, 1992
(collectively, the "SEC Reports"). The SEC Reports (i) were
prepared in all material respects in accordance with the
requirements of the Securities Act, or the Exchange Act, as the
case may be, and (ii) did not at the time they were
<PAGE>
filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 2.15 OBLIGATIONS TO REGISTER. The Company has not
agreed to register any securities under the Securities Act, other
than (i) pursuant to Article X of this Agreement or otherwise in
respect of securities held by the Purchaser or (ii) pursuant to
an agreement with any person who is a stockholder of the Company
on the date hereof (and no stockholder has registration rights on
terms more favorable to such stockholder than the rights of the
Purchaser pursuant to Article X of this Agreement).
SECTION 2.16 COMPLIANCE WITH ENVIRONMENTAL LAWS. The
Company and its Subsidiaries are in compliance with all
applicable statutes, rules, regulations and orders of all
governmental authorities relating to environmental protection and
pollution control, with respect to the conduct of their
respective businesses and the ownership of their respective
properties, except where such failure to comply will not
individually or in the aggregate have a material adverse effect
on the condition, financial or otherwise, of the Company and its
Subsidiaries on a consolidated basis.
SECTION 2.17 DISCLOSURE. This Agreement, the Note, the
Warrant, the Amended and Restated Pledge Agreement, the Guaranty
and all other documents, certificates, instruments, reports and
statements furnished to the Purchaser by or on behalf of the
Company in connection with the transactions contemplated hereby
and thereby, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and
therein not misleading. There is no fact known to the Company
which is having a material adverse effect, or which is reasonably
likely to have a material adverse effect during the twelve month
period commencing on the date hereof, on the business,
properties, operations or condition, financial or otherwise, of
the Company and its Subsidiaries on a consolidated basis, which
has not been set forth in this Agreement, the Note, the Warrant,
the Amended and Restated Pledge Agreement, the Guaranty or in the
other documents, instruments, certificates and statements
previously furnished in writing to the Purchaser by or on behalf
of the Company in connection with the transactions contemplated
hereby.
SECTION 2.18 SOLVENCY. As of the Closing Date, and after
taking into account the sale of the Note and the Warrant, the
Company and its Subsidiaries, taken as a whole, are Solvent.
ARTICLE III
THE LOANS AND THE NOTE
SECTION 3.1 COMMITMENT TO MAKE THE LOANS. Upon the terms
and subject to the conditions set forth in this Agreement, the
Purchaser agrees to make one or more loans (the "Loans") to the
Company during the period from the date hereof until the 75th day
hereafter, 1996 (the "Commitment Period") in the aggregate
maximum principal amount of $2,500,000 (the "Commitment"). Each
Loan shall be in the aggregate amount of not less than $500,000.
The
<PAGE>
Commitment is not revolving in nature, and amounts borrowed under
this Section 3.1 and repaid or prepaid may not be reborrowed.
SECTION 3.2 METHOD OF BORROWING. The Company shall give
the Purchaser notice in substantially the form attached hereto as
Exhibit E (the "Borrowing Request") not later than 11:00 A.M.
(Eastern Time) on the day which is at least five business days
before the date of a proposed borrowing hereunder specifying the
date on which it proposes to borrow (which shall be a business
day) accompanied by the Borrowing Compliance Certificate (as
defined in Section 3.3), including all attachments thereto,
evidencing satisfaction of the conditions to the making of such
Loan set forth in Section 3.5. The Purchaser shall (unless any
applicable condition specified in this Agreement has not been
satisfied) make the amount of the requested Loan available, in
federal or other immediately available funds not later than 2:00
P.M. (Eastern Time) on the date so specified to the Designated
Account.
SECTION 3.3 USE OF PROCEEDS. The proceeds of each Loan
shall be used exclusively for the repayment of Indebtedness of
the Company or its Subsidiaries evidenced by the invoices or
other documentation evidencing Indebtedness of the Company or any
of its Subsidiaries (the "Invoices") accompanying the borrowing
certificate relating to such Loan, which shall be in
substantially the form of Exhibit F hereto (the "Borrowing
Compliance Certificate"). In furtherance of the foregoing, prior
to the Closing the Purchaser shall open an account with a bank
selected by the Purchaser (the "Designated Account") and shall
cause each of the Purchaser, Freddy H. Robinson and Charles
Edelman (each a "Purchaser Signatory") to become authorized
signatories with respect to the Designated Account. From the
Closing Date until the date that the amount of Loans made
hereunder equals the Commitment Amount (the "Disbursement
Period"), all Invoices shall be paid by means of a Company check
which has been signed by a Purchaser Signatory and delivered by
or at the direction of the Purchaser.
SECTION 3.4 NOTE. All Loans made by the Purchaser
pursuant to this Agreement shall be evidenced by the Note. On or
prior to the date of the initial Loan, the Company shall deliver
to the Purchaser the Note, payable with interest to the order of
the Purchaser in the amount of the Commitment or such lesser
amount as may be advanced thereunder and remains unpaid. The
Purchaser shall, and is hereby authorized by the Company to, date
the schedule attached to the Note the date of any Loan and insert
the principal amount and endorse on such schedule an appropriate
notation evidencing interest accrued and added to the outstanding
principal balance and the date and amount of each repayment and
any other information provided for on such schedule; provided,
however, that the failure of the Purchaser to insert any such
date or amount or set forth repayments and other information on
such schedule shall not in any manner affect the obligation of
the Company to repay the related loan in accordance with the
terms of the Note and this Agreement. The Note shall mature on
January 15, 1998.
SECTION 3.5 CONDITIONS TO LOANS. The obligation of the
Purchaser to make each Loan is subject to the satisfaction, on
the date of each Loan, of the following conditions:
(i) receipt by the Purchaser of a duly executed
Borrowing Request;
<PAGE>
(ii) receipt by the Purchaser of a duly executed
Borrowing Compliance Certificate (including attachments) dated
the date of the Loan;
(iii) the fact that no Default has occurred and is
continuing or would result from such Loan;
(iv) the fact that the amount of the Loan does not
exceed the amount of Invoices then currently due and payable and
accompanying the Borrowing Compliance Certificate;
(v) the fact that the amount of such Loan does not,
together with all other Loans hereunder, exceed the Commitment;
(vi) the fact that the Company and its Subsidiaries,
taken as a whole, are Solvent; and
(vii) receipt by the Purchaser of Company checks
drawn on the designated account and payable in respect of each
Invoice, duly executed by a Company Signatory.
Upon the making of each Loan, the Company shall be deemed to have
remade as of such date each of the representations and warranties
set forth in Article II hereof.
All documents and opinions referred to in this Article III
shall be in form and substance satisfactory to the Purchaser and
its counsel.
SECTION 3.6 PAYMENT. The principal of and interest on
the Note shall be payable to the Purchaser c/o Fortress Re, Inc.,
262 East Morehead Street, in Burlington, North Carolina 27215, in
lawful money of the United States of America, against presentment
of the Note.
SECTION 3.7 LIMITATION ON INTEREST. No provision of this
Agreement or of the Note shall require the payment or permit the
collection of interest in excess of the maximum which is
permitted by law. If any such excess interest is provided for
herein or in the Note, or shall be adjudicated to be so provided
for, then the Company shall not be obligated to pay such interest
in excess of the maximum permitted by law, and the right to
demand payment of any such excess interest is hereby waived, any
other provisions in this Agreement or in the Note to the contrary
notwithstanding.
SECTION 3.8 OPTIONAL PREPAYMENT. The principal amount of
the Note outstanding from time to time shall be subject to
prepayment, at the option of the Company, in full but not in
part, without premium. Any prepayment shall be made together
with accrued and unpaid interest thereon to the prepayment date.
Notwithstanding the foregoing, at any time prior to December 31,
1996 or after the earlier of an Event of Default or January 15,
1998, the right of the Company to prepay or pay the Note, as the
case may be, shall be conditioned upon its giving written notice
to the Purchaser of prepayment or payment at least five business
days prior to the date upon which prepayment or payment may be
made and the Purchaser shall have the right to convert the Note
in accordance with Article VII during the period after notice is
given and prior to payment.
<PAGE>
SECTION 3.9 MANDATORY PREPAYMENT. All proceeds received
by the Company in respect of the sale of any capitalized asset of
the Company or any of its Subsidiaries (net of selling costs and
the amount of any indebtedness required to be repaid upon the
sale of such asset under the current terms of indebtedness
relating to such asset), within five business days of the receipt
of such proceeds, shall be applied first to the repayment of the
outstanding principal of, accrued interest on and any other
amounts payable in respect of the Old Notes or the Old Note
Purchase Agreements and, after the repayment in full of such
obligations, shall be applied to the repayment of the outstanding
principal of, accrued interest on and any other amounts payable
in respect of the Note or this Agreement. Notwithstanding the
foregoing, if at any time prior to December 31, 1996 or after the
earlier of an Event of Default or January 15, 1998 the Company
shall be required to make a mandatory prepayment hereunder, the
Company shall provide written notice to the Purchaser at least
five business days prior to the date upon which such mandatory
prepayment may be made and the Purchaser shall have the right to
convert the Note (or any Old Note) in accordance with Article VII
(or the applicable provisions of the Old Note Agreements, as the
case may be) during the period after notice is given and prior to
payment.
ARTICLE IV
AFFIRMATIVE COVENANTS OF COMPANY
The Company covenants and agrees that, from the date hereof
until the Note has been paid in full:
SECTION 4.1 PRESERVATION OF FRANCHISES AND EXISTENCE.
Except as otherwise permitted by this Agreement, the Company will
(i) maintain its corporate existence, rights and franchises in
full force and effect, and (ii) cause each of its Subsidiaries to
maintain its corporate existence, rights and franchises in full
force and effect.
SECTION 4.2 PAYMENT OF TAXES AND OTHER CHARGES. The
Company will pay, and will cause each of its Subsidiaries to pay,
when due (i) all taxes, assessments and other governmental
charges or levies imposed upon it or any of its properties or
income (including without limitation such as may arise under
Section 4062, 4063 or 4064 of ERISA or any similar provisions of
law), and (ii) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons which,
if unpaid, might result in the creation of a Lien upon any of its
properties.
SECTION 4.3 COMMISSION AND STOCK EXCHANGE FILINGS. As
soon as practicable prior to the filing or distribution thereof
(but in no event later than two business days prior to the
proposed date of the filing or distribution thereof), the Company
will deliver to the Purchaser a copy of (i) all regular or
periodic reports which the Company or any of its Subsidiaries
propose to file with the Commission or any national securities
exchange, and (ii) all reports, proxy statements and financial
statements proposed to be delivered or sent by the Company to its
stockholders or by any of its Subsidiaries to its stockholders
other than the Company.
<PAGE>
SECTION 4.4 NOTICE OF CERTAIN EVENTS. The Company agrees
to provide written notice to the Purchaser immediately upon the
occurrence of any event having a material adverse effect on the
Company's business or operations or upon the Purchaser's rights
under this Agreement or the Note.
SECTION 4.5 COMPLIANCE WITH LAWS. The Company will, and
will cause its Subsidiaries to, comply with all applicable
statutes, rules, regulations and orders of all governmental
authorities, with respect to the conduct of its business and the
ownership of its properties, if failure to so comply,
individually or in the aggregate, may have a material adverse
effect on the condition, financial or otherwise, of the Company
and its Subsidiaries on a consolidated basis.
SECTION 4.6 SECURITIES ACT REGISTRATION STATEMENTS. The
Company covenants that it will not file any registration
statement under the Securities Act or any comparable statement
under any similar federal statute then in force, covering any
public offering of debt or equity securities, unless the Company
shall first have given to the Purchaser notice thereof. The
Company covenants that it will give the Purchaser prior written
notice of the proposed filing of any registration statement
pursuant to the requirements of Section 12 of the Exchange Act
relating to any class of securities of the Company or any
application to register such securities.
SECTION 4.7 USE OF PROCEEDS OF NEW FINANCINGS. The
Company agrees that it shall use all proceeds (net of selling
costs) of any equity or debt financings by it or any of its
Subsidiaries (other than refinancings of existing indebtedness in
the amount of such indebtedness, and financings for capital
expenditures to the extent permitted by Section 5.6), within five
business days of the receipt of such proceeds, or, solely with
respect to the approximately $600,000 of proceeds receivable from
Q Lube, Inc. pursuant to existing agreements, within 90 calendar
days of the receipt of such proceeds from Q Lube, Inc., to prepay
the Note or to repay other Indebtedness of the Company to the
Purchaser, as the Purchaser may direct. None of the Company's
Subsidiaries shall sell or commit to issue any equity securities.
ARTICLE V
NEGATIVE COVENANTS
The Company covenants and agrees that, except as
contemplated by this Agreement, from the date hereof until the
Note has been paid in full:
SECTION 5.1 AUTHORIZED SHARES. The Company will maintain
a sufficient number of authorized and unissued shares of Common
Stock in order to issue at least 1,000,000 shares to the
Purchaser upon conversion of the Note in accordance with Article
VII hereof.
SECTION 5.2 INDEBTEDNESS. The Company will not, and will
not permit any of its Subsidiaries to, incur any Indebtedness,
exceeding $25,000 in the aggregate, other than
<PAGE>
Indebtedness which is junior to the Note and the Old Notes in
right of payment, or indebtedness to trade creditors or for
accounts payable incurred in the normal course of business.
SECTION 5.3 LIENS. The Company will not, and will not
permit its Subsidiaries to, create, incur or suffer to exist, any
Lien upon any of the property, real, personal or mixed, tangible
or intangible, of the Company or its Subsidiaries, which secures
Indebtedness, singly or in the aggregate, in an amount greater
than $25,000.
SECTION 5.4 DIVIDEND PAYMENTS. The Company will not, and
will cause each of IES, Gagon Brothers Mechanical Contractors,
Inc. ("Gagon"), NRG Fuels, Inc. ("NRG") and Interline Crude
Gathering Company ("ICGC") not to, declare or authorize or commit
to pay any dividends or other distributions on any equity
securities issued by the Company, IES, Gagon, NRG or ICGC whether
in cash, property, securities or otherwise, and whether by
dividend, repurchase, redemption, reclassification or otherwise
(except for dividends by the Company in the form of common
stock).
SECTION 5.5 TRANSACTIONS WITH AFFILIATES. The Company
will not, and will not permit any of its Subsidiaries to, (i)
make any loan or advance or otherwise extend credit to any of
their respective Affiliates, or (ii) enter into any other
transaction with any of their respective Affiliates, in each such
case, upon terms and conditions less favorable to the Company or
its Subsidiaries than the terms and conditions which would apply
in a similar transaction with a person other than such Affiliate;
provided, however, that the Company may advance funds to
Interline Hydrocarbon, Inc. in an aggregate amount (together with
all amounts advanced to Interline Hydrocarbon, Inc. from January
1, 1996 to the date hereof) not to exceed $1,100,000 . Neither
the Company nor any of its Subsidiaries will pay or commit to pay
cash compensation on an annualized basis to Michael Williams
aggregating more than the total cash amounts paid to Mr. Williams
during 1995.
SECTION 5.6 LIMITATIONS ON CAPITAL EXPENDITURES. Except
as set forth on Schedule 5.6, the Company and its Subsidiaries
shall not spend or commit to spend more than $25,000 in the
aggregate in respect of "Capital Expenditures" (other than
expenditures which the Company and its Subsidiaries, as of the
date hereof, are irrevocably contractually committed to make and
which are not avoidable without substantial monetary penalty).
As used herein, the term "Capital Expenditures" means any
expenditures which, in accordance with generally accepted
accounting principles, are not categorized as expenses and,
without limiting the foregoing, shall include any investments in
equity or debt securities or partnership interests and any
expenditures which must be amortized under generally accepted
accounting principles (including expenditures for plant,
equipment, additions or improvements thereto). The Company and
its Subsidiaries shall not alter in any way their business
practices in effect prior to the date hereof in order to convert
what in accordance with past practice would have resulted in
Capital Expenditures into an expense, such as rental or lease
fees for plant or equipment, or otherwise structure transactions
in order to circumvent the objectives of this Section.
SECTION 5.7 NO MERGERS, ETC. The Company will not,
and will not permit any of its Subsidiaries to (i) consolidate or
merge with any entity, (ii) issue, pledge or sell, or authorize
the
<PAGE>
issuance, pledge or sale of additional shares of capital stock or
other securities (including debt securities) of any class or
series, including, without limitation, securities exchangeable
for or convertible into capital stock or any calls, commitments,
rights, warrants or options to acquire any securities or capital
stock, (iii) sell, lease, or otherwise dispose of assets having a
value, singly or in the aggregate, in excess of $25,000, (iv)
liquidate or dissolve, or (iv) agree or otherwise commit to do
any of the foregoing.
SECTION 5.8 LIABILITIES; CONTRACTS. The Company will
not, and will not permit any Subsidiary to, pay, discharge or
satisfy any claims or liabilities, whether or not absolute,
accrued, contingent, determined or determinable except in
accordance with their terms as in effect on the date hereof or
waive modify or change any existing right, concession, license,
lease, contract, commitment or agreement, in each case relating
to the delivery of goods or performance of services in an amount
in excess of $25,000, or sell or otherwise dispose of any right
or privilege accruing to the Company and its Subsidiaries, in
each case relating to the delivery of goods or performance of
services having a value in excess of $25,000.
SECTION 5.9 REPRESENTATIONS AND WARRANTIES. The Company
will not, and will not permit any Subsidiary to, take any action
or fail to take any action that would cause any of the
representations and warranties contained in Article II to be
untrue at the date made or any future date or would result in any
of the conditions to the consummation of the transactions
contemplated hereby not being fulfilled.
SECTION 5.10 EMPLOYMENT ARRANGEMENTS. The Company will
not, and will not permit any Subsidiary to, increase the
compensation or benefits payable or to become payable to any
employee, or pay any benefit not required by any existing plan or
arrangement or grant any severance or termination pay to any
employee (except pursuant to existing agreements or policies), or
enter into or amend any employment agreement or establish, adopt,
enter into, or amend or fund any payments owing under, or
accelerate the vesting of any benefits under, any Company benefit
plan, except in each case to the extent required by applicable
law.
SECTION 5.11 NEGOTIATIONS AND AGREEMENTS. The Company
will not, and will not permit any Subsidiary to, negotiate with
respect to, or authorize or agree, in writing or otherwise, to
take, any of the actions specified in this Article V.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT. Each of the following
shall constitute an Event of Default under this Agreement:
(a) Nonpayment of the Note. If the Company fails to
pay (i) the principal on the Note when and as the same becomes
due and payable, whether at maturity thereof, or subject to
SECTION 6.3 hereof in accordance with a prepayment notice, or
otherwise, or (ii) the interest on the Note when and as the same
becomes due and payable; or
<PAGE>
(b) Nonpayment of Old Notes. If the Company fails to
pay (i) the principal on the Old Notes when the same becomes due
and payable, whether at maturity thereof, or upon acceleration
thereof, or (ii) the interest on the Old Notes when the same
becomes due and payable to the Purchaser under the Old Agreements
when the same becomes due and payable; or
(c) Negative Covenants. If the Company fails to
perform or observe any covenant contained in Article V and such
failure shall have continued for 10 business days, provided,
however, that if such failure is incapable of cure then the Event
of Default shall occur upon such failure; or
(d) Other Covenants. If the Company fails to perform
or observe any other of the covenants, conditions or agreements
on the part of the Company set forth in this Agreement, the Note
or the Amended and Restated Pledge Agreement, and such failure
shall have continued for 30 days, provided, however, that if such
failure is incapable of cure then the Event of Default shall
occur upon such failure; or
(e) Misrepresentations. If any representation,
warranty or statement made by the Company in this Agreement, the
Note, the Warrant, the Amended and Restated Pledge Agreement or
in any certificate or other instrument delivered to the Purchaser
pursuant to this Agreement, shall be incorrect in any material
respect as of the time when made; or
(f) Voluntary Bankruptcy and Insolvency Proceedings.
If the Company or any of its Subsidiaries shall file a petition
in bankruptcy or for reorganization or for an arrangement or any
composition, readjustment, liquidation, dissolution or similar
relief pursuant to Title 11 of the United States Code or under
any similar present or future federal law or the law of any other
jurisdiction or shall be adjudicated a bankrupt or insolvent, or
consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or any of its Subsidiaries or
for all or any substantial part of its property, or shall make a
general assignment for the benefit of its creditors, or shall
admit in writing its inability to pay its debts generally as they
become due, or shall take any corporate action in furtherance of
any of the foregoing; or
(g) Adjudication of Bankruptcy. If a petition or
answer shall be filed proposing the adjudication of the Company
or any of its Subsidiaries as bankrupt or its reorganization or
arrangement, or any composition, readjustment, liquidation,
dissolution or similar relief with respect to it pursuant to
Title 11 of the United States Code or under any similar present
or future federal law or the law of any other jurisdiction, and
the Company or any of its Subsidiaries, as the case may be, shall
consent to or acquiesce in the filing thereof, or such petition
or answer shall not be discharged or denied within 60 days after
the filing thereof; or
(h) Breach of Stock Purchase Agreement. If the
Company shall breach any of the obligations or covenants set
forth in the Common Stock Purchase and Sale Agreement dated as of
October 28, 1994 by and between the Company and the Purchaser
(other than the repayment prior to the date hereof by the Company
of a $90,000 loan from Michael Williams and of loans of
approximately $27,500 to two other officers); or
(i) Breach of Amended and Restated Pledge Agreement.
If either the Company or IES, Inc. shall breach any of the
obligations or covenants set forth in the Amended and Restated
Pledge Agreement dated as of the date hereof among the Company,
IES, Inc. and the Purchaser; or
(j) Breach of Old Note Purchase Agreements. If the
Company shall fail to perform or observe any of the obligations
or covenants set forth in the Old Note Purchase Agreements and
such failure shall have continued for 30 days, provided, however,
that if such failure is incapable of cure then the Event of
Default shall occur upon such failure; or
(k) Sale of New Re-Refining Units. If (i) during the
period commencing on the date hereof and ending on December 31,
1996, the Company shall not have entered into definitive
agreements on such terms and subject to such conditions as shall
be satisfactory to the Purchaser, for the sale by the Company of
at least two of the Company's oil re-refining units (each a
"Unit"), or (ii) during the period commencing on the date hereof
and ending on June 30, 1997 the Company shall not have entered
into definitive agreements on such terms and subject to such
conditions as shall be reasonably satisfactory to the Purchaser,
for the sale by the Company of a total of at least four Units.
SECTION 6.2 ACCELERATION OF MATURITY. If any Event of
Default shall be continuing, the Purchaser may, by notice to the
Company, declare the entire outstanding principal of the Note,
and all accrued and unpaid interest thereon, to be due and
payable immediately, and upon any declaration the entire
outstanding principal of the Note and said accrued and unpaid
interest shall become and be immediately due and payable, without
presentment, demand, protest or other notice whatsoever, all of
which are hereby expressly waived, anything in the Note or in
this Agreement to the contrary notwithstanding, provided that if
an Event of Default under clause (f) or (g) of SECTION 6.1 shall
have occurred, the outstanding principal of the Note, and all
accrued and unpaid interest thereon, shall immediately become due
and payable, without any declaration and without presentment,
demand, protest or other notice whatsoever, all of which are
hereby expressly waived, anything in the Note or this Agreement
to the contrary notwithstanding.
SECTION 6.3 OTHER REMEDIES. If any Event of Default
shall be continuing, the Purchaser may enforce its rights by suit
in equity, by action at law, or by any other appropriate
proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this
Agreement or in the Note or in aid of the exercise of any power
granted in this Agreement or in the Note and may enforce the
payment of the Note and any of its other legal or equitable
rights.
SECTION 6.4 CONDUCT NO WAIVER, COLLECTION EXPENSES. No
course of dealing on the part of the Purchaser, nor any delay or
failure on the part of the Purchaser to exercise any of its
rights, shall operate as a waiver of such right or otherwise
prejudice the Purchaser's rights, powers and remedies. If the
Company fails to pay, when due, the principal of, or the interest
on the Note, or if the Company fails to comply with any other
provision of this Agreement, the Company will pay to the
Purchaser, to the extent permitted by law, on demand,
<PAGE>
such further amounts as shall be sufficient to cover the costs
and expenses, including but not limited to reasonable attorneys'
fees, incurred by the Purchaser in collecting any sums due on the
Note or in otherwise enforcing any of his rights.
SECTION 6.5 REMEDIES CUMULATIVE. No right or remedy
conferred upon or reserved to the Purchaser under this Agreement
is intended to be exclusive of any other rights or remedy, and
every right and remedy shall be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
existing under applicable law. Every right and remedy given by
this Agreement or by applicable law to the Purchaser may be
exercised from time to time and as often as may be deemed
expedient by the Purchaser, as the case may be.
SECTION 6.6 COOPERATION BY THE COMPANY. To the extent
that it lawfully may, the Company agrees that it will not at any
time insist upon or plead, or in any manner whatever claim or
take any benefit or advantage of any applicable present or future
stay, extension or moratorium law, which may affect observance or
performance of the provisions of this Agreement, the Note or the
Amended and Restated Pledge Agreement; nor will it claim, take or
insist upon any benefit or advantage of any present or future law
providing for the valuation or appraisal of any security for the
Note prior to any sale or sales thereof which may be made under
or by virtue of any instrument governing the same; nor will it,
after any such sale or sales, claim or exercise any right, under
any applicable law, to redeem any portion of such security so
sold.
ARTICLE VII
CONVERSION RIGHT
SECTION 7.1 CONVERSION PRIVILEGE. The unpaid principal
amount of the Note may, at the election of the Purchaser, at any
time after August 15, 1996 and prior to December 31, 1996 or
after an Event of Default, be converted in whole or in part into
fully paid and nonassessable shares of Common Stock at the rate
of the lesser of $3.12 per share or 80% of the average closing
price for shares of the Common Stock for the five consecutive
trading days preceding the date of the Purchaser's written
election of conversion. (In any conversion, each dollar of
principal amount of the Note shall be applied on a dollar-for-
dollar basis against the conversion rate.)
SECTION 7.2 MANNER OF CONVERSION.
(a) Conversion of Note. At any time after August 15,
1996 and prior to December 31, 1996 or after an Event of Default,
the Note may be converted by the Purchaser by surrender of such
Note (except as provided in the last sentence of this paragraph),
with the notice of conversion affixed thereto duly executed by
the Purchaser, to the Company at its principal office at 160 West
Canyon Crest Drive, Alpine, Utah (or at such other office as the
Company shall designate to the Purchaser from time to time). The
conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the Note
shall have been so surrendered to the Company or the endorsement
referred to in the next sentence has been made, as the case may
be. If the Purchaser elects to convert less than all of the
Note, then the Note shall not be surrendered but the Purchaser
shall endorse an appropriate adjustment on the
<PAGE>
loan and repayment schedule attached to the Note reflecting as
the principal amount thereafter outstanding the principal amount
of the Note not converted into Common Stock.
(b) Accrued Interest. Within five days after the
conversion of the Note, the Company will pay to the Purchaser all
accrued and unpaid interest on the principal amount so converted
to and including the date of conversion, without any adjustment
of such interest in respect of any dividend or other distribution
payable on the Common Stock issued upon such conversion.
SECTION 7.3 DELIVERY OF STOCK CERTIFICATES. As promptly
as practicable after the conversion of the Note, and in any event
within five days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will
issue, authenticate and deliver the certificate or certificates
for the number of shares of Common Stock issuable upon such
conversion. All shares of the Common Stock which shall be so
deliverable shall be duly and validly issued and fully paid and
nonassessable. Each certificate shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND SUCH LAWS OR
PURSUANT TO AN EXEMPTION THEREFROM.
SECTION 7.4 COVENANT TO RESERVE SHARES FOR CONVERSION.
The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized
Common Stock and/or shares of its Common Stock then owned or held
by or for the account of the Company, solely for the purpose of
delivery upon conversion of the Note as provided in this Article
VII, 1,000,000 shares of Common Stock.
SECTION 7.5 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.
If any shares of Common Stock required to be reserved for
purposes of conversion of the Note hereunder require registration
with or approval of any governmental authority under any federal
or state law, or listing upon any national securities exchange,
before such shares may be issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to
cause such shares to be duly registered, approved or listed, as
the case may be.
SECTION 7.6 SPECIAL AGREEMENTS OF THE COMPANY. The
Company covenants and agrees that the Company will not, by
amendment of its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, issue
or sale of securities or otherwise, avoid or take any action
which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in carrying out all of the provisions of this Article VII.
SECTION 7.7 NOTIFICATIONS BY THE COMPANY. In case at any
time:
(a) the Company shall declare upon the Common Stock
any dividend or other distribution to the holders of the Common
Stock;
<PAGE>
(b) the Company shall make an offer for subscription
pro rata to the holders of the Common Stock of any additional
shares of stock of any class or other rights;
(c) the Board of Directors of the Company shall
authorize any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation of the Company or
merger of the Company with, or sale of all or substantially all
of its assets to, another person;
(d) the Board of Directors of the Company shall
authorize a voluntary dissolution, liquidation or winding-up of
the Company; or
(e) the Company shall become subject to involuntary
dissolution, liquidation or winding-up;
then, in any one or more of such cases, the Company shall give
notice to the Purchaser of the date on which (i) the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place or be voted upon by
stockholders of the Company, as the case may be. Such notice
shall also specify the date as of which the holders of record of
the stock shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, as the case may be.
Such notice shall be given not less than 30 and not more than 90
days prior to the action in question and not less than 30 and not
more than 90 days prior to the record date or the date on which
the Company's transfer books are closed in respect thereto, and
such notice shall state that the action in question or the record
date is subject to the effectiveness of a registration statement
under the Securities Act or to a favorable vote of stockholders,
if either is required.
SECTION 7.8 NO DILUTION. If the Company:
(a) (i) makes a distribution in respect of the Common Stock
in shares of Common Stock, (ii) subdivides the
outstanding shares of Common Stock or (iii) combines
the outstanding shares of Common Stock into a smaller
number of shares, in each case whether by
reclassification or recapitalization (including
reclassification or recapitalization by way of merger
or consolidation); or
(b) issues to holders of shares of Common Stock as a
dividend or distribution, (including by way of
reclassification or recapitalization), any right or
warrant to purchase shares of Common Stock, or any
security convertible into shares of Common Stock; or
(c) (i) issues, sells or exchanges shares of Common Stock
for a cash price less than the fair market value of
such Common Stock on the date of such issuance, sale or
exchange, or (ii) issues, sells or exchanges shares of
Common Stock for property or a combination of cash and
property; or
<PAGE>
(d) makes a distribution in respect of the Common Stock by
way of dividend, distribution, reclassification or
recapitalization (including by way of merger or
consolidation), or redeems or repurchases any Common
Stock;
then the Company shall promptly adjust the number of shares of
Common Stock to be received upon conversion hereunder so that the
fair market value of the shares to be received by the Purchaser
following any of the events described in (a)-(d) above and the
adjustment is equal to the fair market value of the shares that
would have been received by the Purchaser if conversion had taken
place immediately prior to such event and adjustment.
ARTICLE VIII
REGISTRATION AND TRANSFER OF RESTRICTED SHARES
SECTION 8.1 REGISTRATION ON REQUEST. (a) Request by the
Purchaser. Upon the written request of the Purchaser requesting
that the Company effect the registration under the Securities Act
of all or part of the Restricted Shares and specifying the
intended method of disposition thereof, the Company thereupon
will, as soon as practicable but in no event later than 120 days
after such request, effect the registration under the Securities
Act of the Restricted Shares which the Company has been so
requested to register. The Company shall be obligated to effect
only one registration upon request of the Purchaser pursuant to
this SECTION 8.1 and only during such time as a public market
exists. The Company shall not grant to any person the right to
request the Company to, nor shall the Company include in any
registration pursuant to this SECTION 8.1, any securities of the
Company other than the Restricted Shares.
(b) Registration Statement Form. A registration
requested pursuant to this SECTION 8.1 shall be effected by the
filing of a registration statement on Form S-1 or such other form
as may be available (other than a Form S-8), in the sole
discretion of the Company.
(c) Expenses. The Company will pay all Registration
Expenses in connection with registration requested pursuant to
this SECTION 8.1.
(d) Effective Registration Statement. A registration
requested pursuant to this SECTION 8.1 will not be deemed to have
been effected unless it has been declared effective by the
Commission; provided that if, after it has become effective, the
offering of Restricted Shares pursuant to such registration is
interfered with by any stop order, injunction or other order or
requirement of the Commission or any other governmental or
administrative agency or any court prevents or otherwise limits
the sale of Common Stock pursuant to the registration, such
registration will be deemed not to have been effected. If (i) a
registration requested pursuant to this SECTION 8.1 is deemed not
to have been effected or (ii) the registration requested pursuant
to this SECTION 8.1 does not remain effective for a period of at
least 180 days and less than all the registered shares were sold,
then the Company shall remain obligated to effect one
registration pursuant to this SECTION 8.1, except if the
registration did not become effective or remain effective solely
as a result of bad faith actions of the Purchaser.
<PAGE>
(e) Selection of Underwriters. If a requested
registration pursuant to this SECTION 8.1 involves an
underwritten offering, the Purchaser shall have the right but not
an obligation to designate the managing underwriter and the
Company shall have the right to approve the managing underwriter
designated by the Purchaser, which approval shall not be
unreasonably withheld.
SECTION 8.2 INCIDENTAL REGISTRATION. (a) Right to
Include Restricted Shares. If the Company at any time proposes
to register any of its securities under the Securities Act (other
than a registration on Form S-8 or any successor form and other
than in connection with a Rule 145(a) transaction and other than
pursuant to a registration under SECTION 8.1), whether or not for
sale for its own account, it will, each such time, give prompt
written notice, but in any event at least 20 days prior written
notice prior to registration, to the Purchaser, of its intention
to do so and of the Purchaser's rights under this SECTION 8.2.
Upon the written request of the Purchaser made within 10 business
days after the receipt of any such notice (which request shall
specify the intended number of Restricted Shares to be disposed
of by the Purchaser and the intended method of disposition
thereof), the Company will effect the registration under the
Securities Act of all Restricted Shares which the Company has
been so requested to register by the Purchaser, to the extent
requisite to permit the disposition (in accordance with such
intended methods thereof) of the Restricted Shares to be so
registered; provided, that (i) if, at any time after giving
written notice of its intention to register any securities and
prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine
for any reason not to register such securities, the Company must
give written notice of such determination to the Purchaser and,
thereupon, shall be relieved of its obligation to register any
Restricted Shares in connection with such registration (but not
from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights
of the Purchaser under SECTION 8.1 and (ii) if a registration
requested pursuant to this SECTION 8.2 shall involve an
underwritten public offering, the Purchaser may elect, in writing
at least 30 days prior to the effective date of the registration
statement filed in connection with such registration, not to
register any Restricted Shares in connection with such
registration. No registration effected under this SECTION 8.2
shall relieve the Company of its obligation to effect
registration upon the request under SECTION 8.1 herein.
(b) Priority in Incidental Registrations. If a
registration pursuant to this SECTION 8.2 involves an
underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of securities
requested to be included in such registration pursuant to this
SECTION 8.2 and pursuant to any other rights granted by the
Company to holders of its securities to request inclusion of any
such securities in such registration exceeds the number which can
be sold in an orderly manner in such offering, the Company shall
include in such registration, pro rata among the Purchaser on the
basis of the number of Restricted Shares requested by the
Purchaser to be included and all other holders of Common Stock of
the Company who have incidental registration rights and who have
requested that their shares be so included, the number of shares
so requested to be included which in the reasonable opinion of
such underwriter can be sold.
(c) Expenses. The Company will pay all Registration
Expenses in connection with registration of Restricted Shares
requested to be registered pursuant to this SECTION 8.2,
provided,
<PAGE>
however, that the Company shall not be obligated to pay
Registration Expenses in connection with more than two
registrations of Restricted Shares requested pursuant to SECTION
8.2 (not including any registrations in which the Company
determined not to register Restricted Shares). The Company shall
not have fulfilled its obligation to pay Registration Expenses in
connection with a registration requested pursuant to SECTION 8.2
if (i) the registration did not become effective or (ii) the
registration did not remain effective for a period of at least
120 days and less than all of the registered shares were sold,
unless the registration did not become effective or remain
effective solely as a result of bad faith actions of the
Purchaser.
SECTION 8.3 REGISTRATION PROCEDURES. If and whenever the
Company is required to effect or cause the registration of any
Restricted Shares under the Securities Act as provided in this
Agreement, the Company will, as expeditiously as possible:
(a) prepare and, in any event within 60 days after the
end of the period within which requests for registration may be
given to the Company, file with the Commission a registration
statement with respect to such Restricted Shares and, within 90
days after the date a request for registration was first given,
cause such registration statement to become effective, provided,
however, that the Company may discontinue any registration of its
securities which is being effected pursuant to SECTION 8.2 herein
at any time prior to the effective date of the registration
statement relating thereto;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period not in
excess of 120 days and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the
Purchaser set forth in such registration statement;
(c) furnish to the Purchaser such number of copies of
such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the
Securities Act, and such other documents as the Purchaser may
reasonably request in order to facilitate the disposition of the
Restricted Shares by the Purchaser;
(d) register or qualify such Restricted Shares covered
by such registration statement under such other securities or
blue sky laws of such jurisdictions which apply, and do any other
acts and things which may be necessary or advisable to enable the
Purchaser to consummate the disposition in such jurisdiction of
the Restricted Shares owned by the Purchaser;
(e) cause such Restricted Shares covered by such
registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the Purchaser to consummate the disposition of such
Restricted Shares;
(f) immediately notify the Purchaser, at any time when
a prospectus relating to the Restricted Shares is required to be
delivered under the Securities Act within the
<PAGE>
appropriate period mentioned in clause (b) of this SECTION 8.3,
of the Company becoming aware that the prospectus included in
such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing, and within five days prepare and
furnish to the Purchaser a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Restricted
Shares, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date
of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(h) to list such Restricted Shares on any securities
exchange on which the Common Stock is then listed, if such
Restricted Shares are not already so listed and if such listing
is then permitted under the rules of such exchange, and to
provide a transfer agent and registrar for such Restricted Shares
covered by such registration statement not later than the
effective date of such registration statement;
(i) in the case of a registration pursuant to SECTION
8.1, if requested by the Purchaser, enter into such agreements
(including an underwriting agreement in customary form) and take
such other actions as the Purchaser requests in order to expedite
or facilitate the disposition of such Restricted Shares;
(j) obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form and
covering matters of the type customarily covered by "cold
comfort" letters as the Purchaser shall reasonably request; and
(k) make available for inspection by the Purchaser, by
any underwriter participating in any disposition to be effected
pursuant to such registration statement and by any attorney,
accountant or other agent retained by the Purchaser or any such
underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due
diligence responsibility, and cause all of the Company's
officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration
statement.
The Purchaser agrees that upon receipt of any notice
from the Company of the happening of any event of the kind
described in clause (f) of this SECTION 8.3, such holder will
forthwith discontinue disposition of Restricted Shares pursuant
to the registration statement covering such Restricted Shares
until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by clause (f) of this SECTION
8.3, and, if so directed by the Company, such
<PAGE>
holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Restricted Shares
current at the time of receipt of the Company's notice. In the
event the Company shall give any such notice, the period
mentioned in clause (b) of this SECTION 8.3 shall be extended by
the number of days during the period from and including the date
of the giving of such notice pursuant to clause (f) of this
SECTION 8.3 to and including the date when each seller of
Restricted Shares covered by such registration statement shall
have received the copies of the supplemented or amended
prospectus contemplated by clause (f) of this SECTION 8.3.
SECTION 8.4 INDEMNIFICATION.
(a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the
Securities Act pursuant to SECTION 8.1 or 8.2, the Company agrees
to (i) indemnify and hold harmless, to the extent permitted by
law, the Purchaser, and any person who participates as an
underwriter in the offering or sale of the Restricted Shares
against any and all losses, claims, damages or liabilities, joint
or several, and expenses to which the Purchaser, or any such
underwriter may became subject under the Securities Act, common
law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (aa) any untrue statement or alleged
untrue statement contained in the registration statement or
amendment or supplement thereto under which such securities were
registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or
supplement thereto, or (bb) any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii)
reimburse the Purchaser or underwriter for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability,
action or proceeding; provided, that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in
such registration statement or amendment or supplement thereto or
in any such preliminary, final or summary prospectus in reliance
upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Purchaser
specifically stating that it is for use in the preparation
thereof; and provided, further, that the Company will not be
required to indemnify any person who participates as an
underwriter in the offering or sale of Restricted Shares or any
other person, if any, who controls such underwriter within the
meaning of the Securities Act to the extent that any such loss,
claim, damage or liability for which indemnification is claimed
results from such underwriter's failure to send or give a copy of
the final prospectus to the person asserting an untrue statement
or an alleged untrue statement or omission or alleged omission at
or prior to the written confirmation of such sale, if such
statement or omission was corrected in such final prospectus and
the Company has previously furnished copies thereof to such
underwriter. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of
the Purchaser or any underwriter and shall survive the transfer
of such securities by the Purchaser.
<PAGE>
(b) Indemnification by the Purchaser. The Company may
require, as a condition to including any Restricted Shares in any
registration statement filed in accordance with this Article
VIII, that the Company receive an undertaking reasonably
satisfactory to it from the Purchaser, to indemnify and hold
harmless (in the same manner and to the same extent as set forth
in this SECTION 8.4(b)) the Company, any directors, officers and
other controlling persons thereof, and all other prospective
sellers with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein,
or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Purchaser
specifically stating that it is for use in the preparation of
such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated
by reference into any of the foregoing. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the Company's
directors, officers or controlling persons and shall survive the
transfer of such securities by the Purchaser.
(c) Notices of Claims. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this SECTION 8.4, such
indemnified party will, if a claim in respect thereto is to be
made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this SECTION 8.4
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such
indemnified party's judgment a conflict of interest between such
indemnified and indemnifying parties exists in respect of such
claim, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified
party and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently
incurred in connection with the defense thereof. No indemnifying
party will consent to entry of any judgment or enter into any
settlement which does not include an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to all claims
asserted by the claimant or pleaded or which could have been
pleaded in the litigation by the plaintiff.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this SECTION 8.4
(with appropriate modifications) shall be given by the Company
and the Purchaser with respect to any required registration or
other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities
Act.
<PAGE>
(e) Rule 144. The Company covenants that it will file
the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the
Commission thereunder (or, if the Company is not then required to
file such reports, it will, upon the request of the Purchaser,
make publicly available other information), and it will take such
further action as the Purchaser may reasonably request, all to
the extent required from time to time to enable the Purchaser to
sell all or a portion of the Restricted Shares without
registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission.
Upon the request of any holder of Restricted Shares, the Company
will deliver to such holder a written statement as to whether it
has complied with such requirements.
(f) Holdback Agreement. (i) If any registration
pursuant to SECTION 8.1 shall be in connection with an
underwritten public offering, the Purchaser agrees by acquisition
of such Restricted Shares not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Restricted Shares, and shall not effect
any such public sale or distribution of any other equity security
of the Company or of any security convertible into or
exchangeable for any equity security, of the Company (in each
case, other than as part of such underwritten public offering)
within seven days before or 90 days after the effective date of
such registration, and the Company hereby also so agrees and
agrees to cause each other holder of at least 10% of the
aggregate number of the shares of Common Stock to so agree.
(ii) The Company agrees (aa) not to effect any
public sale or distribution of its equity securities (other than
any such sale or distribution of such securities in connection
with any merger or consolidation by the Company or any of its
Subsidiaries or the acquisition by the Company or any of its
Subsidiaries of the capital stock or substantially all of the
assets of any other person or in connection with an employee
stock option or other benefit plan), during the seven days prior
to, and during the 90-day period beginning on, the effective date
of any registration statement in which the Purchaser is
participating (except as part of such registration), and (bb)
that any agreement entered into after the date of this Agreement
pursuant to which the Company issues or agrees to issue any
privately placed equity securities, shall contain a provision
under which holders of such securities agree not to effect any
public sale or distribution of any such securities during such
period, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such registration, if
permitted).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS AND WAIVERS. This Agreement may
not be changed, modified or discharged orally, nor may any
waivers or consents be given orally hereunder, and every such
change, modification, discharge, waiver or consent shall be in
writing and signed by the person against which enforcement
thereof is sought.
<PAGE>
SECTION 9.2 INTEGRATION. This Agreement, the Warrant,
the Amended and Restated Pledge Agreement, the Note, the
Guaranty, the Old Note Purchase Agreements and the Old Notes
embody the entire agreement and understanding between the
Purchaser and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 9.3 SUCCESSORS AND ASSIGNS. All covenants,
agreements, statements, representations and warranties in this
Agreement or any certificate delivered pursuant hereto by or on
behalf of the Company or by or on behalf of the Purchaser shall
bind and inure to the benefit of the respective successors and
assigns of each party hereto.
SECTION 9.4 RELIANCE ON AND SURVIVAL OF VARIOUS
PROVISIONS. All covenants, agreements, statements,
representations and warranties made herein or in any certificate
delivered pursuant hereto (i) shall be deemed to be material and
to have been relied upon by the Purchaser, notwithstanding any
investigation heretofore or hereafter made by the Purchaser or on
the Purchaser's behalf, and (ii) shall survive the execution and
delivery of the Note and shall continue in full force and effect
so long as the Note is outstanding and unpaid provided that all
representations and warranties made herein or in any certificate
delivered hereto shall speak only as of the date made.
SECTION 9.5 NOTICES AND OTHER COMMUNICATIONS. All
notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered, or shall be sent by
certified or registered mail, return receipt requested, postage
prepaid and addressed (i) if to the Purchaser, c/o Fortress Re,
Inc., 292 East Morehead Street, Burlington, North Carolina 27215,
or to such other address as may have been furnished to the
Company by notice from the Purchaser, with copies to each of
Freddy H. Robinson, Bernard Robinson & Company, L.L.P., P.O. Box
19608, Greensboro, North Carolina, 27419 and Peter Golden, Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York,
New York, 10004-1980 or (ii) if to the Company, to 160 West
Canyon Crest Drive, Alpine, Utah 84004, or to such other address
as may have been furnished to the Purchaser. All notices shall
be deemed to have been given at the time of the delivery thereof
at the address of such persons for purposes of this SECTION 9.5.
SECTION 9.6 GOVERNING LAW. This Agreement and the Notes
shall be construed in accordance with and governed by the laws of
the State of North Carolina, without regard to its principles of
conflicts of law. If any action or proceeding shall be brought
by the Purchaser in order to enforce any right or remedy under
this Agreement or under the Note, the Company hereby consents and
will submit to the jurisdiction of any state or federal court of
competent jurisdiction sitting within the area comprising the
Middle District of North Carolina on the date of this Agreement.
SECTION 9.7 TABLE OF CONTENTS AND HEADINGS. The table of
contents and the headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify any
of the terms or provisions hereof.
SECTION 9.8 COUNTERPARTS. This Agreement may be signed
by each party hereto upon a separate copy in which event both of
said copies shall constitute a single counterpart of this
Agreement. This Agreement may be executed in two or more
counterparts, each of which shall
<PAGE>
be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one
such counterpart.
SECTION 9.9 EXPENSES. The Company agrees to reimburse
the Purchaser for up to $20,000 of his actual out-of-pocket
expenses incurred in connection with negotiating and drafting
this Agreement, the Note, the Warrant, the Guaranty and the
Amended and Restated Pledge Agreement (including the reasonable
fees and disbursements of his legal counsel and of his
accountant), which amount shall be payable by the Company at the
time the Note is repaid or converted.
ARTICLE X
DEFINITIONS
In addition to the terms defined elsewhere in this
Agreement, except as otherwise specified or as the context may
otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement and
shall include the singular as well as the plural:
"Affiliate" shall mean any person (other than the Company's
Subsidiaries or the Purchaser) which, directly or indirectly,
through one or more intermediaries, controls, is controlled by,
or is under common control with, the Company or any of its
Subsidiaries. The term "control" 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 stock, by contract or otherwise.
"Commission" shall mean the Securities and Exchange
Commission and any other similar or successor agency of the
federal government administering the Securities Act, the Exchange
Act, or the Trust Indenture Act.
"Common Stock" shall mean and include the Company's
authorized common stock, $.005 par value per share, and shall
also include any class of the capital stock of the Company
hereafter authorized which shall neither (i) be limited to a
fixed sum or a percentage of par value in respect of the rights
of the holders thereof to receive dividends and to participate in
the distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding-up of the Company, nor (ii)
be subject at any time to redemption by the Company, provided,
however, the Common Stock receivable upon conversion of the Note
shall include only shares of the capital stock of the Company
designated as common stock or shares of any class or classes of
the capital stock of the Company resulting from any
reclassification or reclassifications of such common stock which
are not limited to any such fixed sum or percentage of par value
and which are not subject to any such redemption.
"Conversion Shares" shall mean any Common Stock issued or
issuable upon conversion of the Note.
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Event of Default" shall mean each of the happenings or
circumstances enumerated in SECTION 6.1.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and any similar or successor federal statute,
and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Incur" (including the correlative terms "incurred",
"incurring", "incurs", and "incurrence"), when used with respect
to any Indebtedness, shall mean create, incur, assume, guarantee
or in any manner become liable in respect of (including, without
limitation, by operation of law), such Indebtedness.
"Indebtedness" of any Person shall mean and include, as of
any date as of which the amount thereof is to be determined, (i)
all items (other than capital items such as capital stock,
surplus and retained earnings, as well as reserves for taxes in
respect of income deferred to the future and other deferred
credits and reserves) which in accordance with generally accepted
accounting principles would be included in determining total
liabilities as shown on the liability side of a balance sheet of
such Person as of such date, (ii) all obligations which are
secured by any Lien existing on property owned by such Person
whether or not the obligations secured thereby shall have been
assumed by such Person, (iii) all obligations (other than
cancellation fees) of such Person to purchase any materials,
supplies or other property, or to obtain the services of any
Person, if the relevant contract or other related document
requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of
whether or not delivery of such materials, supplies or other
property is ever made or tendered or such services are ever
performed or tendered, (iv) all obligations of such Person to
advance or supply funds to, or to purchase property or services
from, any other Person in order to maintain the working capital,
net worth or any other balance sheet condition of such other
Person or to pay debts, dividends or expenses of such other
Person or to assure such other Person or any third party against
any liability or loss and (v) guaranties, endorsements and other
contingent obligations, direct or indirect, on the part of such
Person (other than endorsements of negotiable instruments for
collection in the ordinary course of business) for the payment,
discharge or satisfaction of Indebtedness of others of the
character described in clauses (i), (ii), (iii) and (iv) above,
including any agreement, contingent or otherwise, to (x) purchase
such Indebtedness of others, or (y) purchase or sell property or
services primarily to permit the debtor in respect of such
Indebtedness of others to avoid loss, or (z) supply funds to or
invest in any such debtor.
"Lien" shall mean: (i) any interest in property (whether
real, personal or mixed and whether tangible or intangible) which
secures an obligation owed to, or a claim by, a Person other than
the owner of such property, whether such interest is based on the
common law, statute or contract, including, without limitation,
any such interest arising from a mortgage, charge, pledge,
security agreement, conditional sale, trust receipt or deposit in
trust, or arising from a consignment or bailment given for
security purposes (other than a trust receipt or deposit given in
the ordinary course of business which does not secure any
obligation for borrowed money),
<PAGE>
(ii) any encumbrance upon such property which does not secure
such an obligation, and (iii) any exception to or defect in the
title to or ownership interest in such property, including
without limitation, reservations, rights of entry, possibilities
of reverter, encroachments, easements, rights of way, restrictive
covenants, licenses and profits a prendre. For purposes of this
Agreement, any Person shall be deemed to be the owner of any
property which it has acquired or holds subject to a lease or
conditional sale agreement or other arrangement pursuant to which
title to the property has been retained by or vested in some
other Person for security purposes.
"Person" shall include any individual, a corporation, an
association, a partnership, a trust or estate, a government and
any agency or political subdivision thereof, or any other entity.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance with Article VIII,
including, without limitation, (i) all Commission and stock
exchange or National Association of Securities Dealers, Inc.
registration, filing fees and listing expenses, (ii) all fees and
expenses of complying with securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of any Conversion
Shares), (iii) all printing, messenger and delivery expenses,
(iv) the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any
special audits and/or "cold comfort" letters required by or
incident to such performance and compliance, (v) the fees and
disbursements of counsel retained in connection with such
registration by the Purchaser, and (vi) any fees and
disbursements of underwriters customarily paid by issuers or
sellers of securities, including the fees and expenses of any
special experts retained in connection with the requested
registration, but excluding underwriting discounts, commissions,
insurance charges and transfer taxes, if any.
"Restricted Shares" shall mean (a) the Warrant, (b) the
Warrant Shares and (c) the Conversion Shares. As to any
particular Restricted Shares once issued, such securities shall
cease to be Restricted Shares when (i) a registration statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement,
(ii) such securities shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) such securities shall have been otherwise
transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the
Company and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act,
or (iv) such securities shall have ceased to be outstanding.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the
rules and regulations of the Commission thereunder, all as the
same may be in effect at the time.
"Solvent" shall mean with respect to any Person on a
particular date, on such date (i) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such
Person, (ii) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured, (iii) such Person does not
<PAGE>
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (iv) such Person is not engaged in
business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would
constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities
will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured
liability.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other business entity of which more
than 50% of the outstanding capital stock (or other ownership
interest) having ordinary voting power to elect a majority of the
board of directors, managers or other voting members of the
governing body of such entity (irrespective or whether at the
time capital stock (or other ownership interest) of any other
class or classes of such entity shall or might have voting power
upon the occurrence of any contingency) is at the time directly
or indirectly owned by such Person, or by one or more other
subsidiaries of such Person.
"Warrant Shares" shall mean any Common Stock issued or
issuable upon exercise of the Warrant.
<PAGE>
IN WITNESS WHEREOF, the Purchaser has executed and delivered
this Agreement and the Company has caused this Agreement to be
executed, sealed, and delivered by its officer thereunto duly
authorized.
INTERLINE RESOURCES CORPORATION
By
--------------------------------
Name: Michael R. Williams
Title: Chief Executive Officer and
President
-----------------------------------
Maurice D. Sabbah
[SEAL]
<PAGE>
EXHIBIT A
INTERLINE RESOURCES CORPORATION
9-1/4% SENIOR SECURED NOTE
DUE JANUARY 15, 1998
$2,500,000
FOR VALUE RECEIVED, the undersigned, INTERLINE RESOURCES
CORPORATION, a corporation organized and existing under the laws
of the State of Utah (herein called the "Company"), hereby
promises to pay to MAURICE D. SABBAH, an individual residing in
the State of North Carolina, the principal sum of TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS, or so much thereof as from time to
time may be advanced hereunder pursuant to the terms of that
certain Note and Warrant Purchase Agreement, dated the date
hereof between the Company and Maurice D. Sabbah (said Note and
Warrant Purchase Agreement as amended and modified from time to
time, the "Agreement") on January 15, 1998, together with simple
interest thereon (computed on the basis of a 360 day year of
twelve 30-day months), for each day from the date a Loan is made
until it becomes due and payable, at the rate of 9-1/4%, payable
semi-annually in arrears on each November 15, and May 15 during
the term of the Loans and on January 15, 1998 (each an "Interest
Payment Date"), commencing on November 15, 1996 (provided, that
any interest payment otherwise due and payable shall be deferred
on any Interest Payment Date and added to the principal amount of
this Note as of such date as provided below if (i) during the
semi-annual period immediately preceding November 15, 1996, the
Company has prepaid an aggregate principal amount of the Note
equal to $115,625, (ii) during the semi-annual period immediately
preceding May 15, 1997, the Company has prepaid an aggregate
principal amount of the Note equal to $231,250 and (iii) during
the semi-annual period immediately preceding November 15, 1997,
the Company has prepaid an aggregate principal amount of the Note
equal to $346,875) and to pay interest compounded daily at the
rate of 16% per annum on any overdue payment of principal of and
accrued but unpaid interest, until the same shall be paid in
full.
Payment of the principal of, and interest on, this Note
shall be made, in lawful money of the United States of America in
the manner and at the place provided in Article III of the
Agreement. Accrued interest at maturity shall be payable at the
same time principal is due and payable.
This Note is issued pursuant to the Agreement. This Note is
entitled to the benefits of, and is subject to the terms
contained in the Agreement. The provisions of the Agreement are
hereby incorporated in this Note to the same extent as if set
forth at length herein.
This Note is subject to prepayment pursuant to the terms and
conditions of Article III of the Agreement.
<PAGE>
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of this Note may
become or be declared due and payable in the manner and with the
effect provided in the Agreement.
At any time prior to December 31, 1996, or upon the
occurrence of certain events set forth in the Agreement, the
principal amount of this Note is convertible in whole or in part
into at least 801,282 shares of Common Stock of the Company, on
the conditions specified in Article VII of the Agreement, at the
option of the holder hereof, upon surrender or appropriate
endorsement hereof, and upon the giving of notice of conversion.
NEITHER THE DEBT REPRESENTED BY THIS NOTE, NOR THE
SHARES INTO WHICH THIS NOTE MAY BE CONVERTED, HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED OR APPLICABLE STATE SECURITIES LAWS,
AND ACCORDINGLY, MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND
SUCH LAWS OR PURSUANT TO AN EXEMPTION THEREFROM.
This Note evidences senior indebtedness of the Company, is
guaranteed to the extent provided in the Guaranty of Interline
Energy Services, Inc., dated the date hereof in favor of Maurice
D. Sabbah and is secured by the stock of certain subsidiaries of
the Company to the extent provided in the Amended and Restated
Pledge Agreement dated the date hereof between the Company,
Interline Energy Services, Inc. and Maurice D. Sabbah. This Note
will rank pari passu in right of payment with all other existing
and future senior indebtedness of the Company, and will rank
senior to all subordinated indebtedness of the Company.
Annexed hereto and made a part hereof is a schedule (the
"Loan and Repayment Schedule") on which shall be shown all Loans
made by the holder to the Company pursuant to the Agreement, all
accrued interest added to the outstanding principal balance
hereof, repayments of principal made by the Company to the holder
hereunder and other information provided for on such Loan and
Repayment Schedule. The Company hereby appoints the holder as
its agent to make an appropriate notation on the Loan and
Repayment Schedule (or on a continuation of such Loan and
Repayment Schedule) evidencing the date and the amount of each
Loan, the date and amount of accrued interest added to the
outstanding principal balance hereof, the date and amount of any
principal repayment made hereunder or other information provided
for on the Loan and Repayment Schedule. Such endorsement shall
constitute prima facie evidence of the accuracy of the
information set forth thereon; provided, however, that the
failure of the holder to make such a notation or any error in
such notation shall not affect the obligations of the Company to
repay this Note in accordance with its terms.
<PAGE>
Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding provided for in the
Agreement or be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to the principal, premium,
if any, and interest due and payable hereon, all costs of
collecting this Note, including reasonable attorneys' fees and
expenses.
IN WITNESS WHEREOF, INTERLINE RESOURCES CORPORATION, has
caused this Note to be dated May 15, 1996, and to be executed and
sealed on its behalf by its officer thereunto duly authorized.
INTERLINE RESOURCES CORPORATION
By: ---------------------------
Michael D. Williams,
Chief Executive Officer and
President
<PAGE>
LOAN AND REPAYMENT
SCHEDULE TO SENIOR SECURED NOTE
-------------------------------
Accrued
Interest to
Amount be Added to
of Outstanding Aggregate
Amount Principal Principal Principal Notation
of Loan Date Paid Balance Balance Made By
- --------- --------- --------- --------- --------- ---------
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NOTE: Additional pages of this Loan and Repayment Schedule to
Senior Secured Note may be attached to the Senior Secured Note by
the holder as may be necessary to record certain information
regarding each Loan.
<PAGE>
EXHIBIT E
FORM OF BORROWING REQUEST
-------------------------
[Date]
Maurice D. Sabbah
c/o Fortress Re, Inc.
Burlington, North Carolina 27215
RE: Note and Warrant Purchase Agreement (the
"Agreement"), dated as of May 15, 1996, between
the Company and the Purchaser (as defined therein)
Dear Sir:
Pursuant to Section 3.2 of the Agreement, the Company
gives notice of its intention to borrow the aggregate principal
amount of $ on , 1996. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed
thereto in the Agreement.
The Loan requested hereby shall be at the interest rate
stated in, and shall be subject to all of the terms and
conditions of, the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this
certificate to be executed as of the date first written above.
INTERLINE RESOURCES CORPORATION
By:
-------------------------
Name: Michael R. Williams
Title: Chief Executive
Officer and
President
<PAGE>
EXHIBIT F
FORM OF BORROWING COMPLIANCE CERTIFICATE
----------------------------------------
I, Michael R. Williams, hereby certify that I am the Chief
Executive Officer and President of Interline Resources
Corporation, a Utah corporation (the "Company"), and, pursuant to
the terms of Section 3.2 of that certain Note and Warrant
Purchase Agreement (the "Agreement"), dated as of May 15, 1996,
between the Company and Maurice D. Sabbah (capitalized terms used
herein and not otherwise defined shall have the meanings ascribed
thereto in the Agreement), I hereby certify further that, as of
the date hereof:
1. The representations and warranties set forth in Article
II of the Agreement are true and correct on the date hereof.
2. No Event of Default has occurred and is continuing or
would result from the requested Loan.
3. The Company is in compliance with the covenants set
forth in Articles IV and V of the Agreement.
4. The amount of the requested Loan does not exceed the
aggregate amount payable in respect of the attached Invoices.
The Indebtedness in respect of such Invoices has been incurred by
the Company or a Subsidiary of the Company in the ordinary course
of business consistent with past practice and is currently due
and payable by the Company or such Subsidiary.
INTERLINE RESOURCES CORPORATION
By:
--------------------------
Name: Michael R. Williams
Title: Chief Executive
Officer and
President
Dated: , 1996
-------- --
<PAGE>
