UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 6)
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)
July 19, 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 1 of 5 Pages
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CUSIP No. 458744109 13D Page 2 of 5 Pages
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Maurice D. Sabbah
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
PF
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 7 SOLE VOTING POWER
OF 2,370,416
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,370,416
PERSON
WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,370,416
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
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This Amendment No. 6 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.
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The amounts to be loaned to the Company pursuant to
the July 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 Purchase Agreement dated as of
July 19, 1996 between the Company and the Filing Person (the
"July Note Purchase Agreement"), the Filing Person has agreed to
lend up at $550,000 (and, in the Filing Person's sole
discretion, up to an additional $450,000) of his personal funds
to the Company. The Company's indebtedness to the Filing Person
is evidenced by a 9-1/2% Senior Secured Note due September 1,
1996 (the "July Secured Note") held by the Filing Person. The
loans are secured by the stock of certain subsidiaries of the
Company. A copy of the July Note Purchase Agreement (which
includes, as an exhibit thereto, the form of July Secured Note)
is attached as an exhibit hereto and the foregoing summary is
qualified in its entirety by reference thereto.
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.
3 of 5
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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
before August 29, 1996, any Shares which might be obtained upon
conversion of the May Secured Note, any Shares owned by
Michael R. Williams which are subject to the Voting Agreement,
and Shares obtainable upon conversion of the May Secured Note)
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 also
is 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). Since that time, the Filing Person has been
deemed to beneficially own at least an aggregate of 3,171,698
Shares, which represent approximately 21.05% of the 15,070,084
Shares deemed to be then outstanding, as computed in accordance
with Rule 13d-3.)
(b) 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.
Item 7 of the Schedule 13D is hereby amended to add
the following information:
Item 7. Material to be Filed as Exhibits.
- ------ --------------------------------
Note Purchase Agreement Exhibit A
dated as of July 19, 1996
4 of 5
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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: July 24, 1996
5 of 5
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<PAGE>
EXHIBIT A
---------
-------------------------------------------------------
INTERLINE RESOURCES CORPORATION
AND
MAURICE D. SABBAH
-----------------------------
$1,000,000
9-1/2% SENIOR SECURED NOTE DUE SEPTEMBER 1, 1996
-----------------------------
NOTE PURCHASE AGREEMENT
DATED AS OF JULY 19, 1996
-------------------------------------------------------
<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...................... 1
Section 1.1 Authorization.............................. 1
Section 1.2 Issuance and Sale of Note.................. 1
(a) Sale of the Note...................... 1
(b) Closing Date; Delivery of Note,
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............................... 2
Section 2.2 Authorization.............................. 2
Section 2.3 No Contravention........................... 3
Section 2.4 Litigation................................. 3
Section 2.5 Financials................................. 3
Section 2.6 Consents................................... 3
Section 2.7 Proceeds of Note........................... 4
Section 2.8 ERISA...................................... 4
Section 2.9 Income Tax Returns......................... 4
Section 2.10 Investment Company......................... 4
Section 2.11 Principal Executive Office................. 4
Section 2.12 No Solicitation............................ 4
Section 2.13 SEC Filings................................ 4
Section 2.14 Obligations to Register.................... 5
Section 2.15 Compliance With Environmental Laws......... 5
Section 2.16 Disclosure................................. 5
Section 2.17 Solvency................................... 5
Article III The Loans and the Note.................................. 6
Section 3.1 Commitment to Make the Loans............... 6
Section 3.2 Method of Borrowing........................ 6
Section 3.3 Use of Proceeds............................ 6
Section 3.4 Note....................................... 6
Section 3.5 Conditions to Loans........................ 7
Section 3.6 Payment.................................... 7
Section 3.7 Limitation On Interest..................... 7
Section 3.8 Optional Prepayment........................ 8
Section 3.9 Mandatory Prepayment....................... 8
Article IV Affirmative Covenants of Company........................ 8
Section 4.1 Preservation of Franchises and Existence... 8
Section 4.2 Payment of Taxes and Other Charges......... 8
Section 4.3 Commission and Stock Exchange Filings...... 8
Section 4.4 Notice of Certain Events................... 9
(i)
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Section 4.5 Compliance With Laws....................... 9
Section 4.6 Securities Act Registration Statements..... 9
Section 4.7 Use of Proceeds of New Financings.......... 9
Article V Negative Covenants...................................... 9
Section 5.1 Indebtedness............................... 9
Section 5.2 Liens...................................... 9
Section 5.3 Dividend Payments..........................10
Section 5.4 Transactions With Affiliates...............10
Section 5.5 Limitations on Capital Expenditures........10
Section 5.6 No Mergers, Etc............................10
Section 5.7 Liabilities; Contracts.....................11
Section 5.8 Representations and Warranties.............11
Section 5.9 Employment Arrangements....................11
Section 5.10 Negotiations and Agreements................11
Article VI Events of Default and Remedies..........................11
Section 6.1 Events Of Default..........................11
(a) Nonpayment of the Note................11
(b) Nonpayment of Old Notes...............11
(c) Negative Covenants....................12
(d) Other Covenants.......................12
(e) Misrepresentations....................12
(f) Voluntary Bankruptcy and Insolvency
Proceedings..........................12
(g) Adjudication of Bankruptcy............12
(h) Breach of Stock Purchase Agreement....12
(i) Breach of Pledge Agreement............12
(j) Breach of Old Note Purchase
Agreements...........................13
Section 6.2 Acceleration Of Maturity...................13
Section 6.3 Other Remedies.............................13
Section 6.4 Conduct No Waiver, Collection Expenses.....13
Section 6.5 Remedies Cumulative........................13
Section 6.6 Cooperation By The Company.................13
Article VII Miscellaneous...........................................14
Section 7.1 Amendments and Waivers.....................14
Section 7.2 Integration................................14
Section 7.3 Successors and Assigns.....................14
Section 7.4 Reliance On and Survival Of Various
Provisions................................14
Section 7.5 Notices and Other Communications...........17
Section 7.6 Governing Law..............................15
Section 7.7 Table of Contents and Headings.............15
Section 7.8 Counterparts...............................15
Section 7.9 Expenses...................................15
(ii)
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Article VIII Definitions.............................................15
EXHIBITS
EXHIBIT A Form of 9-1/2% Senior Secured Note
EXHIBIT B Form of Pledge Agreement
EXHIBIT C Form of Guaranty
EXHIBIT D Form of Borrowing Request
EXHIBIT E Form of Borrowing Compliance Certificate
(iii)
<PAGE>
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of July 19, 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
SECTION 1.1 AUTHORIZATION. The Company has duly
authorized the issuance of a 9-1/2% Senior Secured Note due
September 1, 1996 in the aggregate principal amount of
$1,000,000 (the "Note"). The Note shall be substantially in the
form of Exhibit A hereto.
SECTION 1.2 ISSUANCE AND SALE OF NOTE. (a) SALE OF
THE NOTE. Subject to the terms hereof, the Company agrees to
sell, and the Purchaser agrees to purchase, on the Closing Date,
the Note 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, PLEDGE AGREEMENT
AND GUARANTY. The date for the purchase and sale of the Note
hereunder shall be July 19, 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) a duly executed Pledge Agreement in the form of
Exhibit B hereto (the "Pledge Agreement"), (iii) a duly executed
guaranty in the Form of Exhibit C hereto (the "Guaranty") and
(iv) 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 the Note 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
in violation of any of the registration requirements of the
Securities Act. The Purchaser hereby consents to the imposition
of legends substantially similar to the following on the Note,
and the Purchaser agrees to abide by the restrictions contained
therein:
"THE DEBT REPRESENTED BY THIS NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, MAY NOT BE
SOLD,
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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, the
Company 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 unpaid interest on
the $2,500,000 9-1/4% Senior Secured Note (the "May 1996 Note")
purchased by the Purchaser pursuant to a Note and Warrant
Purchase Agreement dated as of May 15, 1996 (the "1996 Purchase
Agreement"), (iii) 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 and the May 1996
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 and the 1996 Purchase Agreement,
the "Old Note Purchase Agreements") and (iv) the other
obligations of the Company under this Agreement and the Old Note
Purchase Agreements in each case as set forth in the 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:
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 and
the Pledge Agreement.
SECTION 2.2 AUTHORIZATION. The Agreement, the Note and
the 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.
<PAGE>
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SECTION 2.3 NO CONTRAVENTION. The execution, delivery
and performance by the Company of this Agreement, the Note, and
the 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.
SECTION 2.4 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, and the 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 2.5 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 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.
SECTION 2.6 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, or the 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 and the Pledge Agreement.
SECTION 2.7 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
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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.
SECTION 2.8 ERISA. The execution and delivery by the
Company of this Agreement, the Note and the Pledge Agreement and
the issuance and sale on the Closing Date of the Note 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 2.9 INCOME TAX RETURNS. Except as set forth on
Schedule 2.9, 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
and the Pledge Agreement.
SECTION 2.10 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 2.11 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 2.12 NO SOLICITATION. Neither the Company nor
anyone acting on behalf of the Company will offer the Note, 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 Guaranty or any part thereof so as to bring
the issuance and sale of the Note or the Guaranty within the
provisions of Section 5 of the Securities Act.
SECTION 2.13 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,
1996, 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)
<PAGE>
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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 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 2.14 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 2.15 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 2.16 DISCLOSURE. This Agreement, the Note, the
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 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 2.17 SOLVENCY. As of the Closing Date, and after
taking into account the sale of the Note, 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
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"Loans") to the Company during the period from the date hereof
until August 10, 1996 (the "Commitment Period") in the aggregate
maximum principal amount of $550,000 (the "Commitment") and, in
the sole discretion of the Purchaser (without any obligation on
his part), an additional $450,000. Each Loan shall be in the
aggregate amount of not less than $50,000. The 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 D (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 E 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 (or such greater amount
agreed to by the Purchaser) (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
September 1, 1996.
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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;
(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 whole or in part,
without premium. Any prepayment shall be made together with
accrued and unpaid interest thereon to the prepayment date. Any
prepayment shall be made first in respect of the Note before any
of the Old Notes are repaid.
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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 Note or this Agreement 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 Old
Notes. Without limiting the foregoing, the proceeds of the
pending sale of well draw facilities to Western Gas Resources,
Inc. shall be used to repay the Note.
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.
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.
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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.
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 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 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 5.2 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 5.3 DIVIDEND PAYMENTS. The Company will not, and
will cause each of IES, Gagon Brothers Mechanical Contractors,
Inc. ("Gagon"), NRG Fuels, Inc. ("NRG"), Interline Hydrocarbon
Inc. ("IHI"), 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, IHI or ICGC whether in cash, property,
securities or otherwise,
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and whether by dividend, repurchase, redemption, reclassification
or otherwise (except for dividends by the Company in the form of
common stock).
SECTION 5.4 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 IHI in
an aggregate amount (together with all amounts advanced to IHI
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 5.5 LIMITATIONS ON CAPITAL EXPENDITURES. Except
as set forth on Schedule 5.5, 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 5.6 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 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 5.7 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
<PAGE>
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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 5.8 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 5.9 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 5.10 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
(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
<PAGE>
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Agreement, the Note or the 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 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 PLEDGE AGREEMENT. If either the Company
or IES, Inc. shall breach any of the obligations or covenants set
forth in the 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 or any
pledge agreement entered into in connection therewith 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.
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
<PAGE>
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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, 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.
<PAGE>
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1 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.
SECTION 7.2 INTEGRATION. This Agreement, the Pledge
Agreement, the Note, the Guaranty, the Old Note Purchase
Agreements, the Amended and Restated Pledge Agreement dated as of
May 15, 1996, 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 7.3 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 7.4 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 7.5 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 7.5.
SECTION 7.6 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
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jurisdiction sitting within the area comprising the Middle
District of North Carolina on the date of this Agreement.
SECTION 7.7 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 7.8 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 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 7.9 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 Guaranty and the 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.
ARTICLE VIII
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,
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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.
"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
<PAGE>
- 17 -
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), (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.
"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 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.
<PAGE>
- 18 -
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
9-1/2% SENIOR SECURED NOTE
DUE SEPTEMBER 1, 1996
$1,000,000
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 ONE MILLION
DOLLARS, or so much thereof as from time to time may be advanced
hereunder pursuant to the terms of that certain Note Purchase
Agreement, dated the date hereof between the Company and Maurice
D. Sabbah (said Note Purchase Agreement as amended and modified
from time to time, the "Agreement") on September 1, 1996,
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-
1/2%, payable in arrears on September 1, 1996 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.
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.
THE DEBT REPRESENTED BY THIS NOTE HAS 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
A-1
<PAGE>
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 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.
A-2
<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 July 19, 1996, and to be executed
and sealed on its behalf by its officer thereunto duly
authorized.
INTERLINE RESOURCES CORPORATION
By:
------------------------------
Michael R. Williams,
Chief Executive Officer and
President
A-3
<PAGE>
