SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
The Securities Exchange Act of 1934.
June 27, 1996
Date of Report
(Date of earliest event reported)
INTERLINE RESOURCES CORPORATION
(Exact name of Registrant as specified in its charter)
Utah 0-18995 87-0461653
State of Incorporation Commission File No. IRS Employer
Identification No.
160 West Canyon Crest
Alpine, UT 84004
(Address of principal executive offices)
(801) 756-3031
(Registrant's telephone number)
<PAGE>
Item 5. Other Events
On May 15, 1996, Interline Resources Corporation (the
"Company") entered into a Note and Warrant Purchase Agreement,
Amended Pledge Agreement and related agreements with Maurice D.
Sabbah ("Sabbah"). The principal provisions of theses Agreements
are as follows
Sabbah has agreed to loan the Company $2,500,000 (the
"Loan"). The Loan is evidenced by a Senior Secured Note due
January 15, 1998. The unpaid principal amount of the Loan bears
interest at the rate of 9.25% per annum. Sabbah had previously
lent $250,000 to the Company in 1994 and $1,500,000 in February
1996. In consideration of the May 15, 1996 Loan, the Company has
agreed to secure all three of such loans by pledging to Sabbah
100% of the issued and outstanding shares of the common stock of
the following entities, all of which are wholly-owned
subsidiaries of the Company: (1) Interline Energy Services, Inc.;
(2) Gagon Brothers Mechanical Contractors, Inc.; (3) NRG Fuels,
Inc.; and (4) Interline Crude Gathering Company.
The use of proceeds of the Loan were agreed upon by the
Company and Sabbah and included the repayment of indebtedness of
the Company.
The Company is required to prepay the Loan when and if it
sells capital assets.
In addition to standard default clauses, the Company will be
deemed to be in default on the Loan unless it has entered into
definitive agreements to sell two re-refining units by December
31, 1996 and an additional two units by June 30, 1997.
Sabbah may, after August 15, 1996, convert the Loan into
shares of the Company's common stock at the lesser of $3.12 per
share or 80% of the average closing price for shares of the
Company's common stock for five consecutive trading days
preceding the date of conversion. The shares issued in the
conversion will carry registration rights.
The Company has agreed to use all proceeds of future debt or
equity financings (including any proceeds from the sale of the
Company's shares to Quaker State Resources pursuant to certain
agreements with Quaker State Resources), to repay all or a
portion of the loan.
The Loan is guaranteed by the Company's subsidiary,
Interlines Energy Services, Inc.
In consideration of Sabbah entering into the Note and
Warrant Purchase Agreement, the Company has agreed to expand its
Board from four persons to five persons, three of which shall be
Sabbah, Freddy H. Robinson and Alan Gressel. In order to induce
Sabbah to enter into the Note and Warrant Purchase Agreement,
Michael Williams, president and chairman of the company, has
agreed to vote all of his shares of the Company's common stock in
favor of Sabbah, Freddy H. Robinson and Alan Gressel as directors
of the Company.
As additional consideration for Sabbah making the Loan to
the Company, the Company has issued him a Warrant to purchase up
to 250,000 shares of the Company's common stock at the price of
$3.90 per share. the Warrant expires December 31, 1999. The
shares of the Company's common stock issuable upon the exercise
of the Warrant carry the same registration rights as the shares
issuable upon the conversion of the Loan.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: June 27, 1996
INTERLINE RESOURCES CORPORATION
By: /s/ Michael R. Williams
Michael R. Williams
President
Chief Executive Officer
<PAGE>
EXHIBITS
<PAGE>
___________________________________________________
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
____________________________________________________
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.
Table of Contents
Article I Authorization and Issuance of Note and Warrant 1
1.1 Authorization 1
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
1.3 Old Notes 2
Article II Representations and Warranties of Company 2
2.1 Organization 3
2.2 Authorization 3
2.3 Capitalization 3
2.4 No Contravention 3
2.5 Litigation 4
2.6 Financials 4
2.7 Consents 4
2.8 Proceeds of Note 4
2.9 ERISA 5
2.10 Income Tax Returns 5
2.11 Investment Company 5
2.12 Principal Executive Office 5
2.13 No Solicitation 5
2.14 SEC Filings 5
2.15 Obligations to Register 6
2.16 Compliance With Environmental Laws 6
2.17 Disclosure 6
2.18 Solvency 6
Article III The Loans and the Note 6
3.1 Commitment to Make the Loans 6
3.2 Method of Borrowing 7
3.3 Use of Proceeds 7
3.4 Note 7
3.5 Conditions to Loans 8
3.6 Payment 8
3.7 Limitation On Interest 8
3.8 Optional Prepayment 8
3.9 Mandatory Prepayment 9
Article IV Affirmative Covenants of Company 9
4.1 Preservation of Franchises and Existence 9
4.2 Payment of Taxes and Other Charges 9
4.3 Commission and Stock Exchange Filings 9
4.4 Notice of Certain Events 10
4.5 Compliance With Laws 10
4.6 Securities Act Registration Statements 10
4.7 Use of Proceeds of New Financings 10
Article V Negative Covenants 11
5.1 Authorized Shares 11
5.2 Indebtedness 11
5.3 Liens 11
5.4 Dividend Payments 11
5.5 Transactions With Affiliates 11
5.6 Limitations on Capital Expenditures 11
5.7 No Mergers, Etc 12
5.8 Liabilities 12
5.9 Representations and Warranties 12
5.10 Employment Arrangements 12
5.11 Negotiations and Agreements 12
Article VI Events of Default and Remedies 12
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
6.2 Acceleration Of Maturity 14
6.3 Other Remedies 14
6.4 Conduct No Waiver, Collection Expenses 14
6.5 Remedies Cumulative 15
6.6 Cooperation By The Company 15
Article VII Conversion Right 15
7.1 Conversion Privilege 15
7.2 Manner of Conversion 15
(a) Conversion of Note 15
(b) Accrued Interest 16
7.3 Delivery of Stock Certificates 16
7.4 Covenant to Reserve Shares for Conversion 16
7.5 Compliance with Governmental Requirements 16
7.6 Special Agreements of the Company 16
7.7 Notifications by the Company 16
7.8 No Dilution 17
Article VIII Registration and Transfer of Restricted Shares 18
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
8.2 Incidental Registration 19
(a) Right to Include Restricted Shares 19
(b) Priority in Incidental Registrations 19
(c) Expenses 19
8.3 Registration Procedures 20
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
9.1 Amendments and Waivers 24
9.2 Integration 25
9.3 Successors and Assigns 25
9.4 Reliance On and Survival Of Various
Provisions 25
9.5 Notices and Other Communications 25
9.6 Governing Law 25
9.7 Table of Contents and Headings 25
9.8 Counterparts 25
9.9 Expenses 26
Article X Definitions 26
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
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.
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 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."
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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).
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.
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.
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
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 Commitment is not revolving in
nature, and amounts borrowed under this Section 3.1 and repaid or
prepaid may not be reborrowed.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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:
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.
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 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.
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.
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).
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.
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.
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 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.
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.
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.
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.
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
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 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 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.
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
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.
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.
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.
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.
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
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.)
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 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.
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.
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.
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.
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.
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;
(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.
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
(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
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 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 8.1, any securities of the Company other than the
Restricted Shares.
(b) Registration Statement Form
. A registration requested pursuant to this 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 8.1.
(d) Effective Registration Statement
. A registration requested pursuant to this 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 8.1
is deemed not to have been effected or (ii) the registration
requested pursuant to this 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 8.1, except if the
registration did not become effective or remain effective solely
as a result of bad faith actions of the Purchaser.
(e) Selection of Underwriters
. If a requested registration pursuant to this 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.
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 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 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 8.1
and (ii) if a registration requested pursuant to this 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
8.2 shall relieve the Company of its obligation to effect
registration upon the request under 8.1 herein.
(b) Priority in Incidental Registrations
. If a registration pursuant to this 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
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 8.2, provided, 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 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 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.
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 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 appropriate period
mentioned in clause (b) of this 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 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 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 8.3, and, if so
directed by the Company, such 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 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 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 8.3.
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 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.
(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 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 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 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 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.
(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 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
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.
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.
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.
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.
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 9.5.
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.
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.
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 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.
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.
"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 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), (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 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.
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.
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.
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>
EXHIBIT B
109089
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.
WARRANT TO PURCHASE 250,000 SHARES OF
COMMON STOCK.
INTERLINE RESOURCES CORPORATION
$3.90 Warrant
This certifies that, for value received, Maurice D.
Sabbah is entitled, subject to the terms set forth below, to
purchase from INTERLINE RESOURCES CORPORATION, a Utah
corporation (the "Company"), 250,000 (two hundred fifty
thousand) fully paid and nonassessable shares of the Company's
Common Stock, $.005 par value, at any time or from time to time
but not later than the close of business on December 31, 1999,
at the initial exercise price (the "Exercise Price") of $3.90
per Share payable in lawful money of the United States of
America or by application of all or a portion of the principal
amount on a dollar-for-dollar basis of a 9-1/4% senior secured
note of the Company, dated the date hereof, payable to Maurice
D. Sabbah (the "Note"), or any combination of cash and
principal amount of the Note having a value equal to the
Exercise Price upon surrender of this Warrant and payment of
the Exercise Price. The term "Shares" refers to shares of the
Company's Common Stock. The Exercise Price and number of
Shares purchasable upon exercise of this Warrant are subject to
adjustment from time to time upon the occurrence of certain
events set forth herein.
SECTION 1. Duration and Exercise of Warrants. The
rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional
Share) by the surrender of this Warrant, accompanied by the
Exercise Form annexed hereto duly executed, to the Company at
the office of the Company in Alpine, Utah (or such other office
or agency of the Company as it may designate by notice in
writing to the holder hereof at the address of such holder
appearing on the books of the Company) on any business day on
or after the date hereof and from time to time but not later
than the close of business on December 31, 1999, and upon the
payment to the Company, for the account of the Company, by cash
or by check or bank draft, or by the application of all or a
portion of the principal amount of the Note (which shall be
deemed to have a value equal to such principal amount), or any
combination of cash, check or bank draft and principal amount
of Note, of the Exercise Price for the number of Shares so
purchased in lawful money of the United States of America. (If
the entire principal amount of the Note is to be applied to the
payment of the Exercise Price, then the Note shall be delivered
to the Company and the Company shall deliver to the holder of
the Note a check in the amount of accrued but unpaid interest
on the principal balance of the Note through the date of
purchase of Shares upon exercise of this Warrant. If only a
portion of the principal amount of the Note is to be applied,
then the principal balance of the Note shall be reduced on the
loan repayment schedule annexed thereto to reflect such
application.) The Company agrees that the Shares so purchased
shall be deemed to be issued to the holder hereof as the record
owner of such Shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made
for such Shares as aforesaid. Certificates for the Shares so
purchased shall be delivered to the holder within a reasonable
time and a new Warrant representing the number of Shares, if
any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof within
such time, at no expense to the holder. Shares purchased upon
the exercise of this Warrant may not be sold, assigned,
pledged, hypothecated, encumbered or in any other manner
transferred or disposed of, in whole or in part, except in
compliance with all applicable United States Federal and State
securities laws. Each certificate representing Shares issued
pursuant to this Warrant shall be stamped or otherwise
imprinted with the legend: "The shares 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." To the extent this Warrant is not
exercised prior to the close of business on December 31, 1999,
this Warrant shall cease to be exercisable and shall become
void and all rights of the holder hereunder shall cease.
SECTION 2. Payment of Taxes. The Company will pay
all documentary stamp taxes attributable to the initial
issuance of Shares upon the exercise of this Warrant; provided,
however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant or any certificates for
Shares in a name other than that of the registered holder of
this Warrant and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 3. Reservation of Shares. The Company will
at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued
Shares or its authorized and issued Shares held in its
treasury, for the purpose of enabling it to satisfy any
obligation to issue Shares upon exercise of this Warrant the
full number of Shares deliverable upon the exercise of this
Warrant.
The Company covenants that, before taking any action
which would cause an adjustment pursuant to Section 5 reducing
the Exercise Price below the then par value (if any) of the
Shares issuable upon exercise of this Warrant, the Company will
take any corporate action which may, in the opinion of its
counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally
issue fully paid and nonassessable Shares at the Exercise Price
as so adjusted.
SECTION 4. Exchange of Warrant. This Warrant may not
be sold, assigned, pledged, hypothecated, encumbered or in any
other manner transferred or disposed of, in whole or in part,
except in compliance with all applicable United States Federal
and State securities laws and with the terms and conditions of
the Agreement. This Warrant is exchangeable, without expense,
at the option of the holder, for other Warrants of like tenor
of different denominations entitling the holder thereof to
purchase in the aggregate the same number of Shares purchasable
hereunder, and may be divided or combined, without expense,
with other Warrants which carry the same rights, upon
presentation hereof at the office at which this Warrant is to
be surrendered upon exercise hereof, together with a written
notice signed by the holder hereof specifying the denominations
in which new Warrants are to be issued. Unless the context
otherwise requires, the term "Warrant" as used herein includes
this Warrant and any other Warrant or Warrants which may be
issued pursuant to the provisions of this Warrant whether upon
partial exercise, division, combination, exchange or otherwise.
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant,
and, in the case of loss, theft or destruction, upon receipt by
the Company of such bond or indemnification as the Company may
reasonably require, and, in case of such mutilation, upon
surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant of like tenor.
SECTION 5. Adjustment of Exercise Price and Number of
Shares Purchasable. The Exercise Price and the number of
Shares purchasable upon the exercise of this Warrant are
subject to adjustment from time to time upon the occurrence of
the events enumerated in this Section 5.
(a) In case the Company shall at any time after
the date of this Warrant (i) declare a dividend on the
outstanding Shares in Shares, (ii) subdivide the outstanding
Shares, (iii) combine the outstanding Shares into a smaller
number of shares, or (iv) issue any Shares by reclassification
of the outstanding Shares (including any such reclassification
in connection with a consolidation or merger in which the
Company is the continuing corporation), the Exercise Price in
effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the
holder of this Warrant shall be entitled to receive the
aggregate number of Shares which, if such Warrant had been
exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification
(i.e., the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to such record date
or effective date by a fraction, the numerator of which is the
total number of Shares outstanding immediately prior to such
date and the denominator of which is the total number of Shares
outstanding immediately after the payment of such stock
dividend or the date following the effectiveness of such
subdivision, combination, or reclassification becomes
effective, as the case may be ). Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) The Company and its subsidiaries shall not
(i) make any payment or distribution (whether in cash,
property, securities or otherwise) in respect of capital stock
of the Company or any of its subsidiaries, whether by dividend,
repurchase, redemption, reclassification or otherwise (except
for dividends in the form of Shares) or (ii) issue or agree to
issue to third parties, other than ratably to all holders of
Common Stock, shares, rights, options, or warrants to acquire
Shares, or securities convertible into Shares, unless the sales
price, option or exercise price, or conversion price, as the
case may be, is at least equal to the Exercise Price, as it may
be adjusted hereunder.
(c) All calculations under this Section 5 shall
be made to the nearest cent or to the nearest one-hundredth of
a Share, as the case may be.
(d) In any case in which this Section 5 shall
require that an adjustment in the Exercise Price be made
effective as of a record date for a specified event, if this
Warrant shall be exercised after such record date the Company
may elect to defer until the occurrence of such event the
issuing to the holder of this Warrant the Shares and other
capital stock of the Company, if any, issuable upon such
exercise over and above the Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis
of the Exercise Price in effect prior to such adjustment,
provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(e) Upon each adjustment of the Exercise Price
as a result of the calculations made in subsection (a) of this
Section 5, this Warrant shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of Shares
(calculated to be the nearest hundredth) obtained by (A)
multiplying the number of Shares purchasable upon exercise of
this Warrant prior to the adjustment of the number of Shares by
the Exercise Price in effect prior to adjustment of the
Exercise Price and (B) dividing the product so obtained by the
Exercise Price in effect after such adjustment of the Exercise
Price.
(f) In case of any capital reorganization of the
Company, or of any reclassification of the outstanding Shares,
or in case of the consolidation of the Company with or the
merger of the Company into any other corporation (other than a
consolidation or merger in which the Company is the continuing
corporation) or of the sale of the properties and assets of the
Company as, or substantially as, an entirety to any other
corporation, this Warrant shall after such capital
reorganization, reclassification of Shares, consolidation,
merger or sale be exerciseable, upon the terms and conditions
specified herein, for the number of shares of stock or other
securities or cash or other property to which a holder of the
number of Shares (at the time of such capital reorganization,
reclassification of Shares, consolidation, merger or sale)
purchasable upon exercise of this Warrant would have been
entitled upon such capital reorganization, reclassification of
Shares, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 5 with
respect to the rights and interests thereafter of the holder of
this Warrant shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of
stock or other securities or property thereafter deliverable on
the exercise of this Warrant to provide protection against
dilution for events subsequent to the effective date of such
transaction. The subdivision or combination of Shares at any
time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the Shares of
the Company for the purposes of this paragraph. The Company
shall not effect any such consolidation, merger or sale, unless
prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting
from such consolidation or merger or the corporation purchasing
such assets or other appropriate corporation or entity shall
assume, by written instrument, the obligation to deliver to the
holder of this Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase and the other obligations of
the Company hereunder. This provision shall similarly apply to
successive consolidations, mergers, sales or transfers.
SECTION 6. Fractional Shares. No fractional Shares
or scrip representing fractional Shares shall be issued upon
the exercise of this Warrant. With respect to any fraction of
a Share called for upon exercise hereof the Company shall pay
to the holder of this Warrant an amount in cash equal to such
fraction multiplied by the current market price per Share on
the last business day prior to the exercise of this Warrant.
SECTION 7. Notices to Warrantholder. Upon any
adjustment of the Exercise Price pursuant to Section 5, the
Company within 20 days thereafter shall cause to be given to
the holder of this Warrant at his address appearing on the
books of the Company written notice of such adjustment by
certified mail, return receipt requested, postage prepaid.
Where appropriate, such notice may be given in advance and
included as part of the notice required to be mailed under the
provisions of this Section 7.
In case, during the period from the date hereof until
December 31, 1999:
(a) of any consolidation or merger to which
the Company is a party and for which approval of any
shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of
the Company substantially as an entirety, or of any
reclassification or change of outstanding Shares
issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par
value, or from no par value to par value, or as a
result of a subdivision or combination); or
(b) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
or
(c) the Company proposes to take any action
(other than actions of the character described in
Section 5 (a)) which would require an adjustment of
the Exercise Price pursuant to Section 5;
then the Company shall cause to be given to the holder of this
Warrant at his address appearing on the books of the Company,
at least 20 days prior to the applicable record date
hereinafter specified, by certified mail, return receipt
requested, postage prepaid, a written notice stating the date
on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders
of record shall be entitled to exchange their Shares for
securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up.
Nothing contained in this Warrant shall be construed
as conferring upon the holder hereof the right to vote or to
consent or to receive notice as shareholder in respect of the
meetings of shareholders or the election of Directors of the
Company or any other matter, or any rights whatsoever as
shareholder of the Company.
SECTION 8. Registered Holder as Owner. Until this
Warrant is transferred on the books of the Company, the Company
may treat the registered holder hereof as the absolute owner
hereof for all purposes, notwithstanding any notice to the
contrary.
SECTION 9. Governing Law. This Warrant shall be
construed (both as to validity and performance) and enforced in
accordance with and governed by the laws of the State of North
Carolina, without giving effect to the principles of conflict
of laws thereof.
SECTION 10. Benefits of this Warrant. Nothing in
this Warrant shall be construed to give to any person or
corporation other than the Company, and the registered holder
of this Warrant any legal or equitable right, remedy or claim
hereunder.
IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed by its duly authorized officers.
INTERLINE RESOURCES CORPORATION
By:
[Seal]
Attest:
Dated: May 15, 1996
<PAGE>
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant, to purchase .........
Shares and herewith tenders payment (by cash, check, principal
amount of Note, or any combination thereof) for such Shares to
the order of INTERLINE RESOURCES CORPORATION in the aggregate
amount of $........ in accordance with the terms hereof. If
said number of Shares is less than all of the Shares
purchasable hereunder, the undersigned requests that a new
Warrant representing the remaining balance of the Shares be
registered in the name of the undersigned and that such Warrant
be delivered to ................ whose address is
............................................
Signature ..................
Date ...............
<PAGE>
109020
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (this "Amended
and Restated Pledge Agreement"), dated as of May 15, 1996, made
by INTERLINE RESOURCES CORPORATION, a Utah corporation (the
"Company") and INTERLINE ENERGY SERVICES, INC., a Wyoming
corporation ("IESI" and, together with the Company, the
"Pledgors") in favor of MAURICE D. SABBAH (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to a Note and Warrant Purchase Agreement,
dated as of the date hereof (as amended, supplemented, amended
and restated, restructured or otherwise modified from time to
time, the "Note Purchase Agreement"), between the Company and the
Lender, the Lender has purchased the Company's $2,500,000
principal amount 9-1/4% Senior Secured Note Due January 15, 1998
(the "Note ") and a Warrant to purchase up to 250,000 shares of
common stock of the Company at an initial exercise price of $3.90
per share (the "Warrant");
WHEREAS, pursuant to a Note Purchase Agreement, dated as of
February 29, 1996 (as amended, supplemented, amended and
restated, restructured or otherwise modified from time to time,
the "1996 Note Purchase Agreement"), between the Company and the
Lender, the Lender has purchased the Company's $1,500,000
principal amount 6% Senior Secured Note Due August 29, 1996 (the
"1996 Note");
WHEREAS, pursuant to a Note Purchase Agreement, dated as of
June 30, 1994 (as amended, supplemented, amended and restated,
restructured or otherwise modified from time to time, the "1994
Note Purchase Agreement" and, together with the 1996 Note
Purchase Agreement, the "Old Note Purchase Agreements"), the
Lender purchased the Company's $250,000 principal amount 10%
Senior Convertible Note Due June 30, 1996 (the "1994 Note" and,
together with the 1996 Note, the "Old Notes");
WHEREAS, in connection with the purchase of the 1996 Note
pursuant to the terms of the 1996 Note Purchase Agreement, the
Company entered into a Pledge Agreement, dated as of August 29,
1996 (the "Old Pledge Agreement") in favor of the Lender pursuant
to which the Company pledged all of the shares of capital stock
of each of IESI and Gagon Brothers Mechanical Contractors, Inc.
to secure the obligations of the Company under the Old Note
Purchase Agreements and the Old Notes;
WHEREAS, as a condition precedent to the purchase of the
Note and the Warrant, IESI has executed and delivered to the
Lender a Guaranty, dated the date hereof (the "Guaranty") with
respect to the obligations of the Company under this Amended and
Restated Pledge Agreement, the Note, the Warrant, the Note
Purchase Agreement, the Old Notes, the Old Note Purchase
Agreements and the other Loan Documents (as defined in Section
1.1);
WHEREAS, as a condition precedent to the purchase of the
Note and the Warrant, the Pledgors are required to amend and
restate the Old Pledge Agreement in its entirety on the terms and
conditions set forth in this Amended and Restated Pledge
Agreement;
WHEREAS, the Pledgors have duly authorized the execution,
delivery and performance of this Amended and Restated Pledge
Agreement; and
WHEREAS, it is in the best interests of the Pledgors to
execute this Amended and Restated Pledge Agreement inasmuch as
the Pledgors will derive substantial direct and indirect benefits
from the purchase and sale of the Note and the Warrant pursuant
to the Note Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration the
receipt of which is hereby acknowledged, and in order to induce
the Lender to purchase the Note and the Warrant from the Company
pursuant to the Note Purchase Agreement, the Pledgors agree, for
the benefit of the Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS
. The following terms (whether or not underscored) when
used in this Amended and Restated Pledge Agreement, including its
preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural
forms thereof):
"Amended and Restated Credit Agreement" is defined in the
preamble.
"Collateral" is defined in Section 2.1.
"Company" is defined in the preamble.
"Distributions" means all stock dividends, liquidating
dividends, shares of stock resulting from (or in connection with
the exercise of) stock splits, reclassifications, warrants,
options, non-cash dividends, mergers or consolidations, and all
other distributions (whether similar or dissimilar to the
foregoing) on or with respect to any Pledged Shares or other
shares of capital stock constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares or other Pledged Property.
"Guaranty" is defined in the fifth recital.
"IESI" is defined in the preamble.
"Lender" is defined in the preamble.
"Loan Documents" collectively, means this Amended and
Restated Pledge Agreement, the Note Purchase Agreement, the Note,
the Warrant, the Guaranty, the Old Note Purchase Agreements, the
Old Notes and each other agreement, certificate, document or
instrument delivered in connection with this Amended and Restated
Pledge Agreement, and such other agreements, whether or not
specifically mentioned herein or therein.
"Note " is defined in the first recital.
"Note Purchase Agreement" is defined in the first recital.
"Obligations" means all obligations (monetary or otherwise,
whether absolute or contingent, matured or unmatured, direct or
indirect, choate or inchoate, sole, joint, several or joint and
several, due or to become due, heretofore or hereafter contracted
or acquired) of the Pledgors arising under or in connection with
this Amended and Restated Pledge Agreement, the Note, the
Warrant, the Guaranty, the Old Notes and each other Loan Document
including (i) all obligations for principal or interest under the
Note and the Old Notes, whether incurred on the date hereof,
(ii) all other obligations of each Pledgor, either incurred on or
after costs, indemnification or otherwise, arising hereunder or
under any other Loan Document, (iii) all out-of-pocket costs and
expenses, including attorneys' fees and legal expenses, incurred
by the Lender to the extent set forth in the Note Purchase
Agreement and the Old Note Purchase Agreements in connection with
such Indebtedness, obligations and liabilities, and
(iv) following the occurrence and during the continuance of an
Event of Default, all advances made by the Lender for the
maintenance, protection, preservation or enforcement of, or
realization upon, the collateral in which the Lender has been
granted a security interest pursuant to a Loan Document (or any
portion thereof).
"Old Note Purchase Agreements" is defined in the third
recital.
"Old Notes" is defined in the third recital.
"Old Pledge Agreement" is defined in the fourth recital.
"Pledged Property" means all Pledged Shares, and all other
pledged shares of capital stock, all other securities, all
assignments of any amounts due or to become due, all other
instruments which are now being delivered by the Pledgors to the
Lender or may from time to time hereafter be delivered by the
Pledgors to the Lender for the purposes of pledge under this
Amended and Restated Pledge Agreement, and all proceeds of any of
the foregoing.
"Pledged Share Issuer" means each Person from time to time
identified on Attachment I hereto as the issuer of the Pledged
Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any
Pledged Share Issuer which are delivered or required to be
delivered from time to time by the Pledgor to the Lender as
Pledged Property hereunder.
"Pledgors" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in clause (a) of Section 5.2.
"Subsidiary" means, 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.
"U.C.C." means the Uniform Commercial Code as in effect in
the State of New York or, as the context may require, in any
other jurisdiction the laws of which may apply to all or a
portion of the Collateral in which a security interest is granted
hereunder.
"Warrant" is defined in the first recital.
"1994 Note" is defined in the third recital.
"1994 Note Purchase Agreement" is defined in the third
recital.
"1996 Note" is defined in the second recital.
"1996 Note Purchase Agreement" is defined in the second
recital.
SECTION 1.2. NOTE PURCHASE AGREEMENT DEFINITIONS
. Unless otherwise defined herein or the context otherwise
requires, terms used in this Amended and Restated Pledge
Agreement, including its preamble and recitals, have the meanings
provided in the Note Purchase Agreement.
SECTION 1.3. U.C.C. DEFINITIONS
. Unless otherwise defined herein or in the Note Purchase
Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Amended and
Restated Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST
. The Pledgors hereby pledge, hypothecate, assign, charge,
mortgage, deliver, and transfer to the Lender and hereby grant to
the Lender a continuing security interest in all of their
respective right, title and interest in and to all of the
following property (the "Collateral"):
(a) all issued and outstanding shares of capital
stock of each Pledged Share Issuer identified on
Attachment I hereto;
(b) all other Pledged Property, whether now or
hereafter delivered to the Lender in connection with
this Amended and Restated Pledge Agreement;
(c) all Dividends and Distributions (subject to
the restriction on Dividends and Distributions
contained in the Note Purchase Agreement) and other
payments and rights with respect to any Pledged
Property; and
(d) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR OBLIGATIONS
. This Amended and Restated Pledge Agreement and the
Collateral granted herewith secure the payment and performance in
full of all Obligations of the Pledgors now or hereafter existing
under this Amended and Restated Pledge Agreement and each other
Loan Document to which any Pledgor is now or may become a party,
whether for principal, interest, costs, fees, expenses, or
otherwise (all such obligations of each Pledgor being the
"Secured Obligations").
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY
. All certificates or instruments representing or
evidencing any Collateral, including all Pledged Shares shall be
delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and
shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank, all in form and substance
satisfactory to the Lender.
The Pledgors shall deliver or shall cause to be delivered
promptly, but in any event within five Business Days following
issuance, in pledge hereunder to the Lender, any and all
additional shares of capital stock of a Pledged Share Issuer
issued to such Pledgor and all other Pledged Property issued,
distributed or otherwise delivered to or acquired by such Pledgor
in respect of such Pledged Share Issuer's Pledged Shares.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES
. Subject to the restriction on Dividends contained in the
Note Purchase Agreement, in the event that any Dividend is to be
paid on any Pledged Share at a time when no Event of Default has
occurred and is continuing or would result from the payment of
such Dividend or the making of such payment, such Dividend or
payment may be paid directly to the Pledgors. If any such Event
of Default has occurred and is continuing, then any such Dividend
or payment shall be paid directly to the Lender.
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE
AND OLD NOTE
. This Amended and Restated Pledge Agreement shall create a
continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment
in full of all Secured Obligations;
(b) be binding upon each Pledgor and its
successors, transferees and assigns; and
(c) inure, together with the rights and remedies
of the Lender hereunder, to the benefit of the Lender.
Without limiting the foregoing clause (c), the Lender may assign
or otherwise transfer (in whole or in part) the Note or either
Old Note held by it to any other Person or entity, and such other
Person or entity shall thereupon become vested with all the
rights and benefits in respect thereof granted to the Lender
under any Loan Document (including this Amended and Restated
Pledge Agreement) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer. Upon the payment in
full of all Secured Obligations, the security interest granted
herein shall terminate and all rights to the Collateral shall
revert to the Pledgors. Upon any such termination, the Lender
will, at the sole expense of the Pledgors, deliver to the
Pledgors, without any representations, warranties or recourse of
any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares of the Pledgors,
together with all other Collateral of the Pledgors held by the
Lender hereunder, and execute and deliver to the Pledgors such
documents as the Pledgors shall reasonably request to evidence
such termination.
SECTION 2.6. SECURITY INTEREST ABSOLUTE
. All rights of the Lender and the security interests
granted to the Lender hereunder, and all obligations of the
Pledgors hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of the
Note Purchase Agreement or any other Loan Document or
any instrument or document relating thereto;
(b) the failure of the Lender:
(i) to assert any claim or demand or to enforce any right
or remedy against the Pledgors or any other Person
under the provisions of the Note Purchase Agreement or
any other Loan Document or otherwise; or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any of the
Secured Obligations;
(c) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Secured Obligations or any other extension, compromise
or renewal of any of the Secured Obligations;
(d) any reduction, limitation, impairment or
termination of any of the Secured Obligations for any
reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be
subject to (and the Pledgors hereby waive any right to
or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or
occurrence affecting, any of the Secured Obligations or
otherwise;
(e) any amendment to, rescission, waiver, or
other modification of, or any consent to departure
from, any of the terms of the Note Purchase Agreement
or any other Loan Document or any instrument or
document relating thereto;
(f) any addition, exchange, release, surrender or
nonperfection of any collateral (including the
Collateral), or any amendment to or waiver or release
of or addition to or consent to departure from any
guaranty, for any of the Secured Obligations; or
(g) any other circumstances which might otherwise
constitute a defense (other than the defense of payment
in full of the Secured Obligations) available to, or a
legal or equitable discharge of, the Pledgors, any
surety or any guarantor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. WARRANTIES, ETC.
The Pledgors jointly and severally represent and warrant
to the Lender, as at the date of each pledge and delivery
hereunder (including any pledge and delivery of Pledged Property
from and after the date hereof) by the Pledgors to the Lender of
any Collateral, as set forth in this Article:
SECTION 3.1.1. BUSINESSES CONDUCTED BY PLEDGED SHARE
ISSUERS; FINANCIAL CONDITION AND NET BOOK VALUE
. (a) The oil and gas operations of Pledgor described in
Item 1 of Pledgor's Form 10-KSB for the fiscal year ended
December 31, 1994 (the "Pledgor Form 10-K") are conducted
principally by IESI through its wholly owned subsidiaries NRG
Fuels, Inc., a Wyoming corporation ("NRG"), and Interline Crude
Gathering Company, a Wyoming corporation ("ICGC"). The
construction operations of Pledgor described in Item 1 of the
Pledgor Form 10-K are conducted principally by Gagon Brothers
Mechanical Contractors, Inc.
(b) The financial condition of each Pledged Share Issuer
does not differ in any material respect from that reflected in
the unaudited financial information for such Pledged Share Issuer
previously delivered by the Pledgor to the Lender.
(c) The aggregate net book value of the Pledged Share
Issuers, (i) as of the date hereof, is not less than $6.5 million
and (ii) until the payment in full of all of the Secured
Obligations, will be not less than $5.0 million.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC.
The Pledgors are the legal and beneficial owners of, and
have good and valid title to (and has full right and authority to
pledge and assign) such Collateral, free and clear of all Liens,
except the Lien granted pursuant hereto in favor of the Lender.
SECTION 3.1.3. VALID SECURITY INTEREST
. The delivery by the Pledgors of such Collateral to the
Lender is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations, and no filing or other action
will be necessary to perfect or protect such security interest.
All the Pledged Shares issued by any Pledged Share Issuer are
"certificated securities" as that term is defined in Section 8-
102 of the U.C.C.
SECTION 3.1.4. AS TO PLEDGED SHARES
. In the case of any Pledged Shares of the Pledgors
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable,
and constitute all of the issued and outstanding shares of
Capital Stock of each Pledged Share Issuer set forth on
Attachment I hereto.
SECTION 3.1.5. AUTHORIZATION, APPROVAL, ETC.
This Amended and Restated Pledge Agreement has been duly
authorized, executed and delivered by each of the Pledgors, and
constitutes a legal, valid and binding obligation of each of the
Pledgors, enforceable against each of the Pledgors in accordance
with its terms. No authorization, approval, or other action by,
and no notice or filing with, any governmental authority,
regulatory body or any other Person is required either:
(a) for the pledge by the Pledgors of any
Collateral pursuant to this Amended and Restated Pledge
Agreement or for the due execution, delivery and
performance of this Amended and Restated Pledge
Agreement by the Pledgor; or
(b) for the exercise by the Lender of the voting
or other rights provided for in this Amended and
Restated Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection
with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities
generally, of the remedies in respect of the Collateral
pursuant to this Amended and Restated Pledge Agreement.
SECTION 3.1.6. COMPLIANCE WITH LAWS
. The Pledgors and each of the Pledged Share Issuers are in
compliance with the requirements of all applicable laws, rules,
regulations and orders of every governmental authority, the non-
compliance with which would reasonably be expected to have a
material adverse effect on the business, properties, assets,
operations or financial condition of the Company and its
Subsidiaries taken as a whole or the value of the Collateral as a
whole or the worth of the Collateral as a whole as collateral
security.
SECTION 3.1.7. NO CONTRAVENTION
. The execution, delivery and performance by the Pledgors
of this Amended and Restated Pledge Agreement and the other Loan
Documents and compliance by the Pledgors 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 either of the Pledgors or any of
their properties, or contravene the provisions of, or constitute
a default (or event of default) with or without the passage of
time, by either of the Pledgors under, or result in the creation
of any Lien upon the property of either of the Pledgors under
their respective certificates of incorporation or by-laws or any
material indenture, mortgage, contract or other agreement or
instrument to which either of the Pledgors is a party, or by
which either of the Pledgors or any of their property is bound or
affected.
ARTICLE IV
COVENANTS
SECTION 4.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC.
The Pledgors will not sell, assign, transfer, pledge, or
encumber in any other manner the Collateral (except in favor of
the Lender hereunder). The Pledgors will warrant and defend the
right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons
whomsoever. The Pledgors agree that at any time, and from time
to time, at the expense of the Pledgors, the Pledgors will
promptly execute and deliver all further instruments, and take
all further action, that may be necessary or desirable, or that
the Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted
hereby or to enable the Lender to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.
SECTION 4.2. STOCK POWERS, ETC.
The Pledgors agree that all Pledged Shares (and all other
shares of capital stock constituting Collateral) delivered by the
Pledgors pursuant to this Amended and Restated Pledge Agreement
will be accompanied by duly executed, undated blank stock powers,
or other equivalent instruments of transfer acceptable to the
Lender. The Pledgors will, from time to time upon the request of
the Lender, promptly deliver to the Lender such stock powers,
instruments, and similar documents, satisfactory in form and
substance to the Lender, with respect to the Collateral as the
Lender may reasonably request and will, from time to time upon
the request of the Lender after the occurrence and during the
continuance of any Event of Default, promptly transfer any
Pledged Shares or other shares of common stock constituting
Collateral into the name of any nominee designated by the Lender.
SECTION 4.3. CONTINUOUS PLEDGE
. Subject to Section 2.4, the Pledgors will, at all times,
keep pledged to the Lender pursuant hereto all Pledged Shares and
all other shares of capital stock constituting Collateral, all
Dividends and Distributions (subject to the restriction on
Dividends and Distributions contained in the Note Purchase
Agreement) with respect thereto, and all other Collateral and
other securities, instruments, proceeds, and rights from time to
time received by or distributable to such Pledgors in respect of
any Collateral.
SECTION 4.4. VOTING RIGHTS; DIVIDENDS, ETC.
The Pledgors agree:
(a) after any Event of Default shall have
occurred and be continuing, promptly upon receipt of
notice thereof by the Pledgors and without any request
therefor by the Lender, to deliver (properly endorsed
where required hereby or requested by the Lender) to
the Lender all Dividends and Distributions (subject to
the restriction on Dividends and Distributions
contained in the Note Purchase Agreement), all other
cash payments, and all proceeds of the Collateral, all
of which shall be held by the Lender as additional
Collateral for use in accordance with Section 5.4; and
(b) after any Event of Default shall have
occurred and be continuing and the Lender has notified
the Pledgors of the Lender's intention to exercise its
voting power under this clause (b)
(i) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental
rights of ownership with respect to any Pledged Shares
or other shares of capital stock constituting
Collateral and the Pledgors hereby grant the Lender an
irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such
other Collateral; and
(ii) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to
allow the Lender to exercise such voting power.
All Dividends and Distributions, (subject to the restriction on
Dividends and Distributions contained in the Note Purchase
Agreement), cash payments, and proceeds at any time and from time
to time held by any Pledgor but which such Pledgor is then
obligated to deliver to the Lender, shall, until delivery to the
Lender, be held by such Pledgor separate and apart from its other
property in trust for the Lender. The Lender agrees that unless
an Event of Default shall have occurred and be continuing and the
Lender shall have given the notice referred to in clause (b) of
this Section 4.4, each Pledgor shall have the exclusive voting
power with respect to any shares of capital stock (including any
of the Pledged Shares) constituting Collateral pledged by such
Pledgor hereunder and the Lender shall, upon the written request
of such Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by such
Pledgor which are necessary to allow such Pledgor to exercise
voting power with respect to any such share of capital stock
(including any of the Pledged Shares) constituting Collateral;
provided, however, that no vote shall be cast, or consent,
waiver, or ratification given, or action taken by such Pledgor
that would impair any Collateral or be inconsistent with or
violate any provision of the Note Purchase Agreement or any other
Loan Document (including this Amended and Restated Pledge
Agreement).
SECTION 4.5. ADDITIONAL UNDERTAKINGS
. Each Pledgor agrees that it will not, without the prior
written consent of the Lender, not to be unreasonably withheld,
take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any
obligation of the maker of any instrument constituting
Collateral.
SECTION 4.6. MAINTENANCE OF NET BOOK VALUE
. From and after the date hereof until all of the Secured
Obligations are repaid in full, the aggregate net book value of
the Pledged Share Issuers shall not be less than $5.0 million.
ARTICLE V
REMEDIES
SECTION 5.1. CERTAIN REMEDIES
. If any Event of Default shall have occurred and be
continuing:
(a) The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it
(including those under Section 2.4 hereof), all the
rights and remedies of a secured party on default under
the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may, without notice
except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or
private sale, at any of the Lender's offices or
elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Lender may deem
commercially reasonable. The Lender may, to the extent
permitted by Section 9-504 of the U.C.C., be the
purchaser of any of the Collateral so sold and the
obligations of the Pledgors to the Lender may be
applied as a credit against the purchase price. The
Pledgors agree that, to the extent notice of sale shall
be required by law, at least ten days' prior notice to
the Pledgors of the time and place of any public sale
or the time after which any private sale is to be made
shall constitute reasonable notification. The Lender
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time
to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be
made at the time and place to which it was so
adjourned. Upon any such sale the Lender shall have
the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each
purchaser (including the Lender) at any such sale shall
hold the Collateral so sold absolutely free from any
claim or right of whatsoever kind, including any equity
or right of redemption of any Pledgor, and each Pledgor
hereby specifically waives, to the extent it may
lawfully do so, all rights of redemption, stay or
appraisal which it has or may have under any rule of
law or statute now existing or hereafter adopted.
(b) The Lender may:
(i) transfer all or any part of the Collateral into the
name of the Lender or its nominee, with or without
disclosing that such Collateral is subject to the lien
and security interest hereunder;
(ii) notify the parties obligated on any of the Collateral
to make payment to the Lender of any amount due or to
become due thereunder;
(iii) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange
all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the
original period) any obligations of any nature of any
party with respect thereto;
(iv) endorse any checks, drafts, or other writings in the
name of the Pledgor thereof to allow collection of such
Collateral;
(v) take control of any proceeds of the Collateral; and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to
all or any of the Collateral.
SECTION 5.2. SECURITIES LAWS
. If the Lender shall determine to exercise its right to
sell all or any of the Collateral pursuant to Section 5.1, the
Pledgors agrees that, upon request of the Lender, the Pledgor
will, at its own expense:
(a) execute and deliver, and cause each issuer of
the Collateral contemplated to be sold and the
directors and officers thereof to execute and deliver,
all such instruments and documents, and do or cause to
be done all such other acts and things, as may be
necessary or, in the opinion of the Lender, advisable
to register such Collateral under the provisions of the
Securities Act of 1933, as amended (the "Securities
Act"), and to use its best efforts to cause the
registration statement relating thereto to become
effective and to remain effective for such period as
prospectuses are required by law to be furnished, and
to make all amendments and supplements thereto and to
the related prospectus which, in the opinion of the
Lender, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the
Collateral under the state securities or "blue sky"
laws and to obtain all necessary governmental approvals
for the sale of the Collateral, as requested by the
Lender;
(c) cause each such issuer to make available to
its security holders, as soon as practicable, an
earnings statement that will satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158
thereunder; and
(d) do or use its best efforts to do or cause to
be done all such other acts and things as may be
necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with
applicable law.
The Pledgors further acknowledge the impossibility of
ascertaining the amount of damages that would be suffered by the
Lender by reason of the failure by the Pledgors to perform any of
the covenants contained in this Section and, consequently, agree
that, if any Pledgors shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the
Lender) of the Collateral on the date the Lender shall have
demanded compliance with this Section, and full amount of any
such payments shall be applied in accordance with Section 5.4.
SECTION 5.3. COMPLIANCE WITH RESTRICTIONS
. The Pledgors agree that in any sale of any of the
Collateral whenever any Event of Default shall have occurred and
be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may
be advised by counsel is necessary to avoid any violation of
applicable law (including compliance with such procedures as may
restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are
purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral), or to
obtain any required approval of the sale or of the purchaser by
any governmental regulatory authority or official, and the
Pledgors further agree that such compliance shall not result in
such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Lender be liable
nor accountable to the Pledgors for any discount allowed by the
reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 5.4. APPLICATION OF COLLATERAL PROCEEDS
. If any Event of Default shall have occurred and be
continuing, all cash proceeds received by the Lender in respect
of any sale of, collection from, or other realization upon, all
or any part of the Collateral may, in the discretion of the
Lender, be held by the Lender as additional collateral security
for, or then or at any time thereafter be applied (after payment
of any amounts payable to the Lender pursuant to Section 5.5) in
whole or in part by the Lender against, all or any part of the
Secured Obligations. Any surplus of such cash or cash proceeds
held by the Lender and remaining after payment in full of all the
Secured Obligations, shall be paid over to the Pledgors or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 5.5. INDEMNITY AND EXPENSES
. The Pledgors hereby jointly and severally indemnify and
hold harmless the Lender from and against any and all claims,
losses, and liabilities arising out of or resulting from this
Amended and Restated Pledge Agreement (including enforcement of
this Amended and Restated Pledge Agreement), except claims,
losses, or liabilities resulting from the Lender's gross
negligence or willful misconduct. Upon demand, the Pledgors will
pay to the Lender the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel
and of any experts and agents, which the Lender may incur in
connection with:
(a) this Amended and Restated Pledge Agreement,
the Note Purchase Agreement and each other Loan
Document or any instrument or document relating
thereto;
(b) the custody, preservation, use, or operation
of, or the sale of, collection from, or other
realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the
rights of the Lender hereunder;
(d) the failure by the Pledgors to perform or
observe any of the provisions hereof; or
(e) the advancing of any funds pursuant to
Section 6.3 hereof.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. AMENDMENTS, ETC.
No amendment to or waiver of any provision of this Amended
and Restated Pledge Agreement nor consent to any departure by the
Pledgors herefrom shall in any event be effective unless the same
shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 6.2. PROTECTION OF COLLATERAL
. The Lender may from time to time, at its option, perform
any act which the Pledgors agree hereunder to perform and which
the Pledgors shall fail to perform after being requested in
writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of
any Event of Default) and the Lender may from time to time take
any other action which the Lender reasonably deems necessary for
the maintenance, preservation or protection of any of the
Collateral or of its security interest therein, it being
understood and agreed that in each such case all costs and
expenses incurred by the Lender in connection therewith shall be
payable by the Pledgors pursuant to Section 5.5.
SECTION 6.3. ADDRESSES FOR NOTICES
. All notices and other communications provided for
hereunder shall be in writing and mailed or delivered to the
Pledgors or the Lender at their respective addresses, and with
copies to such additional parties, as specified in the Note
Purchase Agreement (which with respect to the Pledgors shall be
the address of the Company specified therein) or, with respect to
the Pledgors or the Lender, at such other address as shall be
designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. Any
notice so delivered shall be deemed given when received.
SECTION 6.4. SECTION CAPTIONS
. Section captions used in this Amended and Restated Pledge
Agreement are for convenience of reference only, and shall not
affect the construction of this Amended and Restated Pledge
Agreement.
SECTION 6.5. COUNTERPARTS
. This Amended and Restated Pledge Agreement may be
executed by the parties hereto in several counterparts, and
additional Persons may become Pledgors under this Agreement by
executing a counterpart of this Amended and Restated Pledge
Agreement, each of which shall be deemed to be an original and
all of which shall constitute together but one and the same
agreement.
SECTION 6.6
. Governing Law, Entire Agreement, etc.
THIS AMENDED AND RESTATED PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NORTH CAROLINA, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NORTH CAROLINA. THIS AMENDED AND RESTATED PLEDGE AGREEMENT AND
THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.
SECTION 6.7. WAIVER OF JURY TRIAL
. EACH PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AMENDED AND RESTATED PLEDGE
AGREEMENT. EACH PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THE NOTE PURCHASE AGREEMENT.
SECTION 6.8. FORUM SELECTION AND CONSENT TO JURISDICTION
. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS AMENDED AND RESTATED PLEDGE AGREEMENT
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF NORTH CAROLINA OR IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA. EACH PLEDGOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF
THE COURTS OF THE STATE OF NORTH CAROLINA AND OF THE UNITED
STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO SUCH PLEDGOR'S
RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS
NOT EXPRESSLY WAIVED IN THIS SECTION 6.8. EACH PLEDGOR HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NORTH CAROLINA. EACH PLEDGOR HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
PLEDGORS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE PLEDGORS HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AMENDED
AND RESTATED PLEDGE AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Amended and Restated Pledge Agreement as of
the day and year first above written.
INTERLINE RESOURCES CORPORATION
By:______________________________
INTERLINE ENERGY SERVICES, INC.
By:______________________________
_________________________________
Maurice D. Sabbah
ATTACHMENT I
to
Pledge
Agreement
Pledged Shares
Common Stock
Issued % of
Jurisdict and No. of Outstandi
Pledged Share Issuer ion of Outstandi Shares ng Shares
Incorpora ng Shares Pledged Pledged
tion
Interline Energy Wyoming 500 500 100
Services, Inc.
Gagon Brothers Utah 7004 7004 100
Mechanical
Contractors, Inc.
NRG Fuels, Inc. Wyoming 500 500 100
Interline Crude Wyoming 500 500 100
Gathering Company
<PAGE>
108922
GUARANTY
THIS GUARANTY (the "Guaranty"), dated as of May 15,
1996, made by INTERLINE ENERGY SERVICES INC., a Wyoming
Corporation (the "Guarantor"), in favor of Maurice D. Sabbah (the
"Lender").
W I T N E S S E T H:
WHEREAS, pursuant to a Note and Warrant Purchase
Agreement, dated as of the date hereof (as amended, supplemented,
amended and restated, restructured or otherwise modified from
time to time, the "Note Purchase Agreement"), between Interline
Resources Corporation, a Utah corporation (the "Company"), and
the Lender, the Lender has purchased the Company's $2,500,000
principal amount 9-1/4% Senior Secured Note Due January 15, 1998
(the "Note ") and a Warrant to purchase up to 250,000 shares of
common stock of the Company at an initial exercise price of $3.90
per share (the "Warrant");
WHEREAS, pursuant to a Note Purchase Agreement, dated
as of February 29, 1996 (as amended, supplemented, amended and
restated, restructured or otherwise modified from time to time,
the "1996 Note Purchase Agreement"), between the Company and the
Lender, the Lender has purchased the Company's $1,500,000
principal amount 6% Senior Secured Note Due August 29, 1996 (the
"1996 Note");
WHEREAS, pursuant to a Note Purchase Agreement, dated
as of June 30, 1994 (as amended, supplemented, amended and
restated, restructured or otherwise modified from time to time,
the "1994 Note Purchase Agreement" and, together with the 1996
Note Purchase Agreement, the "Old Note Purchase Agreements"), the
Lender purchased the Company's $250,000 principal amount 10%
Senior Convertible Note Due June 30, 1996 (the "1994 Note" and,
together with the 1996 Note, the "Old Notes");
WHEREAS, as a condition precedent to the purchase of
the Note and the Warrant, the Guarantor is required to execute
and deliver to the Lender this Guaranty;
WHEREAS, the Guarantor has duly authorized the
execution, delivery and performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor
to execute this Guaranty inasmuch as the Guarantor will derive
substantial direct and indirect benefits from the purchase and
sale of the Note and the Warrant pursuant to the Note Purchase
Agreement;
NOW, THEREFORE, for good and valuable consideration the
receipt of which is hereby acknowledged, and in order to induce
the Lender to purchase the Note and the Warrant from the Company
pursuant to the Note Purchase Agreement, the Pledgors agree, for
the benefit of the Lender, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms
(whether or not underscored) when used in this Guaranty,
including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the
singular and the plural forms thereof):
"Loan Documents" shall mean, collectively, the Note
Purchase Agreement, the Note, the Warrant, the Old Note Purchase
Agreements, the Old Notes, the Amended and Restated Pledge
Agreement and each other agreement, certificate, document or
instrument delivered in connection with this Guaranty, and such
other agreements, whether or not specifically mentioned herein or
therein.
"Obligations" shall mean all obligations (monetary or
otherwise, whether absolute or contingent, matured or unmatured,
direct or indirect, choate or inchoate, sole, joint, several or
joint and several, due or to become due, heretofore or hereafter
contracted or acquired) of the Company arising under or in
connection with the Note, the Old Notes and each other Loan
Document, including (i) all obligations for principal or interest
under the Note and the Old Notes, whether incurred on the date
hereof, (ii) all other obligations of the Company, either
incurred on or after costs, indemnification or otherwise, arising
hereunder or under any other Loan Document, (iii) all out-of-
pocket costs and expenses, including attorneys' fees and legal
expenses, incurred by the Lender to the extent set forth in the
Note Purchase Agreement and the Old Note Purchase Agreements in
connection with such Indebtedness, obligations and liabilities,
and (iv) following the occurrence and during the continuance of
an Event of Default, all advances made by the Lender for the
maintenance, protection, preservation or enforcement of, or
realization upon, the collateral in which the Lender has been
granted a security interest pursuant to a Loan Document (or any
portion thereof).
SECTION 1.2 Note Purchase Agreement Definitions.
Unless otherwise defined herein or the context otherwise
requires, terms used in this Guaranty, including its preamble and
recitals, have the meanings provided in the Note Purchase
Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby
absolutely, unconditionally and irrevocably
2.1.1. GUARANTEES THE FULL AND
PUNCTUAL PAYMENT WHEN DUE, WHETHER AT STATED
MATURITY, BY REQUIRED PREPAYMENT,
DECLARATION, ACCELERATION, DEMAND OR
OTHERWISE, OF ALL OBLIGATIONS, WHETHER FOR
PRINCIPAL, INTEREST, FEES, EXPENSES OR
OTHERWISE (INCLUDING ALL SUCH AMOUNTS WHICH
WOULD BECOME DUE BUT FOR THE OPERATION OF THE
AUTOMATIC STAY UNDER SECTION 362(A) OF THE
UNITED STATES BANKRUPTCY CODE, 11 U.S.C.
362(A)), AND THE OPERATION OF SECTIONS
502(B) AND 506(B) OF THE UNITED STATES
BANKRUPTCY CODE, 11 U.S.C. 502(B) AND
506(B); AND
2.1.2. INDEMNIFIES AND HOLDS HARMLESS
LENDER FOR ANY AND ALL COSTS AND EXPENSES
(INCLUDING REASONABLE ATTORNEY'S FEES AND
EXPENSES) INCURRED BY LENDER, IN ENFORCING
ANY RIGHTS UNDER THIS GUARANTY.
provided, however, that the Guarantor shall be liable under this
Guaranty for the maximum amount of such liability that can be
hereby incurred without rendering this Guaranty, as it relates to
the Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any
greater amount. This Guaranty constitutes a guaranty of payment
when due and not of collection, and the Guarantor specifically
agrees that it shall not be necessary or require that Lender
claim or demand or enforce any remedy whatsoever against the
Company before or as a condition to the obligations of the
Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor
agrees that, in the event of the dissolution or insolvency of the
Company or the Guarantor, or the inability or failure of the
Company or the Guarantor to pay debts as they become due, or an
assignment by the Company or the Guarantor for the benefit of
creditors, or the commencement of any case or proceeding in
respect to the Company or the Guarantor under any bankruptcy,
insolvency or similar laws, and if such even shall occur at a
time when any of the Obligations may not then be due and payable,
the Guarantor will pay to the Lender forthwith the full amount
which would be payable hereunder by the Guarantor if all such
Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty
shall in all respects be a continuing, absolute, unconditional
and irrevocable guaranty of payment, and shall remain in full
force and effect until all Obligations have been paid in full,
all obligations of the Guarantor hereunder shall have been paid
in full and all Commitments shall have terminated. The Guarantor
guarantees that the Obligations will be paid strictly in
accordance with the terms of the Note Purchase Agreement and each
other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
Lender with respect thereto. The liability of the Guarantor
under this Guaranty shall be absolute, unconditional and
irrevocable irrespective of:
(a) any lack of validity, legality or
enforceability of the Note Purchase Agreement, the
Note, the Old Notes, the Old Note Purchase Agreements
or any other Loan Document;
(b) the failure of Lender
(i) to assert any claim or demand or to enforce any right
or remedy against the Company or any other person
(including any other guarantor) under the provisions of
the Note Purchase Agreement, the Note, the Old Note
Purchase Agreements, the Old Notes, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any of the
Obligations;
(c) any changes in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other extension, compromise or
renewal of any Obligation;
(d) any reduction, limitation, impairment or
termination of the Obligations for any reason,
including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to
(and the Guarantor hereby waives any right to or claim
of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence
affecting, the Obligations or otherwise;
(e) any amendment to, rescission, waiver, or
other modification of, or any consent to departure
form, any of the terms of the Note Purchase Agreement,
the Note, the Old Note Purchase Agreement, the Old
Notes or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to
or waiver or release or addition of, or consent to
departure from, any other guaranty, held by Lender; or
(g) any other circumstance which might otherwise
constitute a defense available to, or a legal or
equitable discharge of, the Company, any surety or any
guarantor.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice
with respect to any of the Obligations and this Guaranty and any
requirement that Lender protect, secure, perfect or insure any
security interest or Lien, or any property subject thereto, or
exhaust any right or take any action against the Company or any
other person (including any other guarantor) or entity or any
collateral securing the obligations of the Company.
SECTION 2.6. Subrogation, etc. The Guarantor will not
exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made thereunder
or otherwise, until the prior payment, in full and in cash, of
all Obligations. Any amount paid to the Guarantor on account of
any such subrogation rights prior to the payment in full of all
Obligations shall be held in trust for the benefit of the Lender
and shall immediately be paid to the Lender and credited and
applied against the Obligations, whether matured or unmatured, in
accordance with the terms of the Note Purchase Agreement.
SECTION 2.7. Successors, Transferees and Assigns;
Transfers of Notes, etc. This Guaranty shall:
(a) be binding upon the Guarantor, and its
successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by
the Lender or his assigns.
Without limiting the generality of clause (b), Lender may assign
or otherwise transfer (in whole or in part) the Note or the Old
Notes held by Lender to any other person or entity, and such
other Person or entity shall thereupon become vested with all
rights and benefits in respect thereof granted to Lender under
any Loan Document (including this Guaranty) or otherwise.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The
Guarantor hereby represents and warrants to the Lender that:
SECTION 3.1.1. Organization. The Guarantor is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Wyoming, 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 business as now
conducted, except where the failure to so qualify 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 Guaranty.
SECTION 3.1.2. Authorization, Approval, etc.. This
Guaranty has been duly authorized, executed and delivered by the
Guarantor, and constitutes a legal, valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance
with its terms. No authorization, approval, or other action by,
and no notice or filing with, any governmental authority,
regulatory body or any other Person is required for the due
execution, delivery and performance of this Guaranty.
SECTION 3.1.3. Compliance with Laws. The Guarantor is
in compliance with the requirements of all applicable laws,
rules, regulations and orders of every governmental authority,
the non-compliance with which would reasonably be expected to
have a material adverse effect on its properties, business or
condition (financial or otherwise).
SECTION 3.1.4. No Contravention. The execution,
delivery and performance by the Guarantor of this Guaranty and
compliance by the Guarantor with all of the provisions hereof 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
Guarantor 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 Guarantor under, or result in the
creation of any Lien upon the property of the Guarantor under its
certificate of incorporation or by-laws or any material
indenture, mortgage, contract or other agreement or instrument to
which the Guarantor is a party, or by which the Guarantor or any
of its property is bound or affected.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Addresses for Notices. All notices and
other communications provided for hereunder shall be in writing
and mailed or delivered to the Pledgors or the Lender at their
respective addresses, and with copies to such additional parties,
as specified in the Note Purchase Agreement (which with respect
to the Pledgors shall be the address of the Company specified
therein) or, with respect to the Pledgors or the Lender, at such
other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms
of this Section. Any notice so delivered shall be deemed given
when received.
SECTION 4.2. Section Captions. Section captions used
in this Guaranty are for convenience of reference only, and shall
not affect the construction of this Guaranty.
SECTION 4.3. Governing Law, Entire Agreement, etc.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NORTH CAROLINA. THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 4.4. Waiver of Jury Trial. THE GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THE NOTE PURCHASE AGREEMENT.
SECTION 4.5. Forum Selection and Consent to
Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTY SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NORTH
CAROLINA OR IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE
DISTRICT OF NORTH CAROLINA. THE GUARANTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF
THE STATE OF NORTH CAROLINA AND OF THE UNITED STATES DISTRICT
COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA FOR THE PURPOSE
OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH
SUCH LITIGATION, SUBJECT TO SUCH PLEDGOR'S RIGHT TO CONTEST SUCH
JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT EXPRESSLY WAIVED
IN THIS SECTION 4.5. THE GUARANTOR HEREBY IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR
BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NORTH
CAROLINA. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PLEDGORS
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY
IN WITNESS WHEREOF, the Guarantor has caused this
Guaranty to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.
INTERLINE ENERGY SERVICES, INC.
By:
Title:
Address:
Attention:
Telex:
Telecopy:
LOAN AND REPAYMENT
SCHEDULE TO SENIOR SECURED NOTE
Accrued
Interest
to be
Amount Added to Aggregate
Amount of Outstandi Principal Notation
of Loan Date Principal ng Balance Made By
Paid Principal
Balance
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
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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
