SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-10473
PRIDE COMPANIES, L.P.
(Name of registrant)
Delaware 75-2313597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1209 North Fourth Street, Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(915) 674-8000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Indicate the number of units outstanding of each of the
issuer's classes of units, as of the latest practicable date.
Class Outstanding at August 1, 1996
Convertible Preferred Units 4,700,000
Common Units 5,250,000<PAGE>
<TABLE>
PART I. Item 1. Financial Information
PRIDE COMPANIES, L.P.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except unit amounts)
<CAPTION>
June 30, December 31,
1996 1995
___________ ____________
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 706 $ 288
Accounts receivable, less allowance
for doubtful accounts 13,794 16,205
Inventories 16,079 14,248
Prepaid expenses 937 1,606
___________ ___________
Total current assets 31,516 32,347
Property, plant and equipment 135,810 137,778
Accumulated depreciation 33,791 32,941
___________ ___________
Property, plant and equipment - net 102,019 104,837
Other assets 1,117 1,122
___________ ___________
$ 134,652 $ 138,306
LIABILITIES AND PARTNERS' CAPITAL:
Current liabilities:
Accounts payable $ 35,317 $ 34,631
Accrued payroll and related benefits 1,787 1,568
Accrued taxes 3,300 3,797
Other accrued liabilities 3,060 2,807
Current portion of long-term debt 2,881 3,447
___________ ___________
Total current liabilities 46,345 46,250
Long-term debt, excluding current portion 50,488 53,053
Deferred income taxes 2,654 2,718
Other long-term liabilities - 272
Partners' capital:
Preferred units (4,700,000 units
authorized and outstanding) 17,346 17,739
Common units (5,250,000 units
authorized and outstanding) 17,584 18,022
General partners' interest 235 252
___________ ___________
Total partners' capital 35,165 36,013
___________ ___________
$ 134,652 $ 138,306
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per unit amounts)
<CAPTION>
Three Months Ended June 30,
1996 1995
______________ ___________
<S> <C> <C>
Revenues $ 154,422 $ 147,589
Cost of sales and operating expenses,
excluding depreciation 149,401 141,829
Marketing, general and
administrative expenses 2,527 2,740
Depreciation 1,755 1,746
____________ ___________
Operating income (loss) 739 1,274
Other income (expense):
Interest income 66 13
Interest expense (1,432) (1,663)
Credit and loan fees (756) 434
Other - net 8 (40)
____________ ___________
Income (loss) before income taxes (1,375) 18
Income tax expense (benefit) (19) (8)
____________ ___________
Net income (loss) $ (1,356) $ 26
General partners' interest $ (27) $ -
Net income (loss) allocable
to unitholders $ (1,329) $ 26
Net income (loss) per unit $ (0.13) $ .00
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per unit amounts)
<CAPTION>
Six Months Ended June 30,
1996 1995
______________ ___________
<S> <C> <C>
Revenues $ 304,786 $ 298,015
Cost of sales and operating expenses,
excluding depreciation 292,675 291,105
Marketing, general and
administrative expenses 5,094 5,496
Depreciation 3,520 3,514
____________ ___________
Operating income (loss) 3,497 (2,100)
Other income (expense):
Interest income 86 63
Interest expense (2,923) (3,323)
Credit and loan fees (1,561) (259)
Other - net 35 74
____________ ___________
Income (loss) before income taxes (866) (5,545)
Income tax expense (benefit) (18) (13)
____________ ___________
Net income (loss) $ (848) $ (5,532)
General partners' interest $ (17) $ (111)
Net income (loss) allocable
to unitholders $ (831) $ (5,421)
Net income (loss) per unit $ (0.08) $ (0.54)
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Six Months Ended June 30,
1996 1995
____________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (848) $ (5,532)
Adjustments to reconcile net
income (loss) to net cash provided
by (used in) operating activities:
Noncash charges (credits) to earnings:
Depreciation 3,520 3,514
(Gain) loss on sale of
property, plant and equipment (26) (1)
Deferred tax benefit (64) (55)
Cash provided by (used in) current
assets and current liabilities:
(Increase) decrease in accounts
receivable 2,411 (1,961)
(Increase) decrease in inventories (1,831) 5,130
(Increase) decrease in prepaid
expenses 669 634
Increase (decrease) in accounts
payable 686 (290)
Increase (decrease) in accrued
liabilities (25) (385)
____________ ___________
Total adjustments 5,340 6,586
____________ ___________
Net cash provided by (used in)
operating activities 4,492 1,054
Cash flows from investing activities:
Purchases of property, plant and
equipment (964) (555)
Proceeds from disposal of property,
plant and equipment 43 89
Other (18) 116
____________ ___________
Net cash provided by (used in)
investing activities (939) (350)
Cash flows from financing activities:
Proceeds from debt and credit
facilities 9,235 14,525
Payments on debt and credit
facilities (12,366) (15,165)
Other (4) (82)
____________ ___________
Net cash provided by (used in)
financing activities (3,135) (722)
____________ ___________
Net increase (decrease) in cash and
cash equivalents 418 (18)
Cash and cash equivalents at the
beginning of the period 288 35
____________ ___________
Cash and cash equivalents at the
end of the period $ 706 $ 17
See accompanying notes.
/TABLE
<PAGE>
PRIDE COMPANIES, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization
Pride Companies, L.P. (the "Partnership"), a Delaware limited
partnership, owns and operates a modern simplex petroleum refinery
facility located near Abilene, Texas (the "Refinery"), a crude oil
gathering business (the "Crude Gathering System") that gathers,
transports, and resells and redelivers crude oil in the Texas and
New Mexico markets, and certain integrated product pipeline
operations (the "Products System"). The Partnership's operations
are considered a single industry segment, the refining of crude oil
and the sale of the resulting petroleum products. The primary
purpose of the Crude Gathering System is to supply the Refinery
with crude oil at strategic locations for input into the Refinery.
The Crude Gathering System consists of a series of gathering lines
and a fleet of trucks which transport crude oil into third party
pipelines and into the system's primary asset, a common carrier
pipeline which delivers crude oil to and terminates at the
Refinery. The Products System consists of certain product
pipelines which originate at the Refinery and terminate at the
Partnership's marketing terminals.
Pride SGP ("Pride SGP" or the "Special General Partner")
serves as special general partner of the Partnership and owns a
0.1% general partner interest and the 5,250,000 common units
("Common Units"). Pride Refining, Inc. serves as the managing
general partner of the Partnership and owns a 1.9% general partner
interest (the "Managing General Partner").
2. Accounting Policies
The financial statements of the Partnership include all of its
majority owned subsidiaries including limited partnership interests
where the Partnership has significant control through related
parties. All intercompany transactions have been eliminated and
minority interest has been provided where applicable. The
financial statements included in this quarterly report on Form 10-Q
are unaudited and condensed and do not contain all information
required by generally accepted accounting principles to be included
in a full set of financial statements. In the opinion of
management, all material adjustments necessary to present fairly
the financial position, results of operations, and cash flows for
such periods have been included. Interim period results are not
necessarily indicative of the results to be achieved for the full
year. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
The financial statements of the Partnership presented in its
Annual Report on Form 10-K for the year ended December 31, 1995
include a summary of significant accounting policies that should be
read in conjunction with this quarterly report on Form 10-Q. The
Partnership has two subsidiaries that are corporations which are
separate taxable entities whose operations are subject to federal
income taxes.
Net Income (Loss) per Unit is calculated using the weighted
average number of Units outstanding during the period (4,700,000
convertible preferred units and 5,250,000 Common Units) divided
into the Partnership's net income (loss) after adjusting for
general partner allocations.
3. Related Party Transactions
In accordance with the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P. ("Partnership
Agreement"), the Managing General Partner conducts, directs and
exercises control over substantially all of the activities of the
Partnership. The Managing General Partner has a 1.9% interest in
the income and cash distributions of the Partnership, subject to
certain adjustments. Certain members of the management of the
Managing General Partner are also members of the management of
Pride SGP, which has a 0.1% general partner interest and a 51.7%
limited partner interest in the Partnership.
The Partnership has no directors or officers; however,
directors and officers of the Managing General Partner are employed
by the Partnership to function in this capacity. Compensation of
these persons and any other expenses incurred on behalf of the
Partnership by the Managing General Partner and Pride SGP are paid
by the Partnership.
Certain conflicts of interest, including potential non-arm's
length transactions, could arise as a result of the relationships
described above. The Board of Directors and management of the
Managing General Partner have a duty to manage the Partnership in
the best interests of the unitholders and consequently must
exercise good faith and integrity in handling the assets and
affairs of the Partnership.
4. Inventories
<TABLE>
<CAPTION>
Inventories are valued at the At At
lower of cost or market and June 30, December 31,
consist of: 1996 1995
(in thousands)
_____________________________ ___________ ___________
<S> <C> <C>
Crude oil $ 10,874 $ 10,981
Refined products and blending
materials 9,885 5,589
___________ ___________
20,759 16,570
LIFO reserve (5,754) (3,426)
___________ ___________
Petroleum inventories 15,005 13,144
Spare parts and supplies 1,074 1,104
___________ ___________
$ 16,079 $ 14,248
</TABLE>
The last-in/first-out (LIFO) inventory cost method is used for
crude oil and refined products and blending materials. The
weighted average inventory cost method is used for spare parts and
supplies.
5. Long-term Debt
On August 13, 1996, the Partnership's credit facility was
restated and amended to extend the maturity date to July 31, 1997.
Under this credit facility, the Partnership has a $6,500,000
standby letter of credit facility for general corporate purposes
and the purchase of crude oil and other refinery feedstocks
("Facility A") and a $45,000,000 standby letter of credit facility
for the purchase of crude oil ("Facility B"). The fee on
outstanding Facility A and Facility B standby letters of credit is
1 and 1/2% per annum. For the unused portion of the standby letter
of credit facility, the fee is one-half of 1% per annum. Though no
advances had been drawn under either the Facility A or Facility B
letter of credit facility, the Partnership did have approximately
$721,000 and $44.1 million, respectively, in outstanding standby
letters of credit as of June 30, 1996. The prior credit agreement
also provided an additional $8,000,000 standby letter of credit
facility for the purchase of crude oil and other refinery
feedstocks ("Special LC Facility"). The fee on outstanding Special
LC Facility standby letters of credit was 3% per annum. There was
no commitment fee for the unused portion of the Special LC
Facility. The Partnership had approximately $1.6 million
outstanding under the Special LC Facility as of June 30, 1996.
Under the restated and amended credit facility, the
Partnership has available to it a revolving line of credit of $8.0
million (the "Revolver") and a $45.0 million term loan (the "Term
Loan"). The amount available under the Revolver is subject to a
borrowing base which includes a reduction by the amount of letters
of credit issued under Facility A. Advances under the Revolver and
Term Loan bear interest at prime plus 2% and 3%, respectively,
payable monthly. The prime rate was 8.25% as of June 30, 1996.
The Term Loan is subject to a facility fee of 5% per annum
effective January 1, 1996 and payable at maturity which is July 31,
1997. Such fee will be cancelled on the completion of the equity
restructuring. The Partnership has pledged substantially all its
assets as collateral. In addition, the General Partners guaranteed
the facility and Pride SGP as guarantor has pledged its assets as
collateral for such loans. The Partnership may elect to prepay the
credit facilities without any prepayment penalty. The fee for the
unused portion of the Revolver is one-half of 1% per annum. At
June 30, 1996, the Partnership had no advances outstanding on the
Revolver; the balance outstanding on the Term Loan was $42.9
million. Under the new credit facility, the Partnership is
required to make scheduled principal payments of $120,000 each
month beginning September 5, 1996 plus quarterly principal payments
in the amount of 80% of excess cash, as defined in the credit
agreement, for the preceding quarter. Accordingly, the Partnership
has classified $1.8 million of the Term Loan as current as of
June 30, 1996.
Advances under the Revolver are subject to repayment on a
daily basis. Subject to the borrowing base, the Partnership may
borrow any amounts previously paid.
The facility also includes a $2.5 million uncommitted line of
credit ("Uncommitted Line"). Advances under the Uncommitted Line
are made solely at the lenders' discretion and bear interest at the
prime rate plus 4%. The Uncommitted Line must be completely paid
off for fifteen consecutive days each month. There were no
advances outstanding under the Uncommitted Line at June 30, 1996.
The amended credit facility also requires the Partnership to
pay a monthly fee of $10,000 and restricts the payment of
distributions to unitholders throughout the term of the amended
credit agreement. Future distributions will be dependent on
payment in full of bank debt, expiration of all liabilities for
letters of credit, and the termination of the credit agreement.
The Partnership has a nonrecourse loan from Diamond Shamrock
with an outstanding principal balance of $5.8 million at June 30,
1996, bearing interest at 8% per annum with monthly principal and
interest payments. The assets of Pride Borger, Inc., a wholly
owned subsidiary of the Partnership, which owns 50% of the Texas
Plains Pipeline System, are pledged as collateral. Pride Borger,
Inc. has also guaranteed the note. Monthly principal payments
are made to Diamond Shamrock based on the number of throughput
barrels for the prior month in the Texas Plains Pipeline System.
Current maturities are estimated to be $158,000 at June 30, 1996.
In 1996, the Partnership acquired the other 50% interest in the
Texas Plains System from Scurlock Permian.
Pride SGP has made unsecured loans to the Partnership in the
principal amount of $2.5 million bearing interest at prime plus 2%.
The loans mature July 31, 1997.
During 1995, the Partnership converted non-interest bearing
accounts payable to the United States Government related to pricing
adjustments which had been accrued since 1993 to a $2.4 million
installment loan. The principal balance was $1.8 million at June
30, 1996. The note bears interest based on the rate set by the
Secretary of the Treasury. This rate was 5.875% as of June 30,
1996. The note requires monthly payments of $84,000. The note
matures June 1, 1998. The Partnership has classified $922,000 of
the note as current as of June 30, 1996.
On January 9, 1995, the Partnership executed a note to a local
bank related to the renovation and refinancing of its
administrative offices in Abilene. Previously, the Partnership
leased additional office space from a third party. The note bears
interest at prime plus one-half of 1% and had an outstanding
principal balance of $381,000 at June 30, 1996. The note matures
January 9, 2000. The Partnership has classified $16,000 of the
note as current as of June 30, 1996.
6. Preferred and Common Units
At June 30, 1996, 4,700,000 Preferred Units were outstanding,
representing an approximate 46.3% limited partner interest in the
Partnership. The Preferred Units are cumulative, entitled to a
minimum quarterly distribution of $0.65 per unit through the
Initial Conversion Date which is the first day of the third
calendar quarter in which the payment of all cumulative arrearages
to Preferred Unitholders have been paid, and all arrearages must be
paid before the Common Unitholders may receive distributions. The
Preferred Units are convertible into Common Units on the Initial
Conversion Date. The Common Units are also cumulative and entitled
to a quarterly distribution of $0.65 per unit; however, no Common
Unit arrearages will be paid after the Initial Conversion Date, and
any such accumulated arrearages then existing will be cancelled.
The general partners are entitled to 2% of all distributions. At
June 30, 1996, cumulative arrearages were $13.00 per Common Unit
which totaled $68.3 million and $11.35 per Preferred Unit which
totaled $53.3 million.
Under the terms of the Partnership's credit agreement, the
bank restricted the payment of distributions to unitholders
throughout the term of the credit agreement. Future distributions
will be dependent on payment in full of the bank debt, expiration
of all liabilities for letters of credit, and the termination of
the credit agreement.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Overview
Pride Companies, L.P. is a Delaware limited partnership formed
on January 17, 1990, to acquire, own and operate a petroleum
refining business ("Refinery"), products pipeline business
("Products System"), and crude oil gathering business ("Crude
Gathering System").
The Crude Gathering System is the primary source of crude
supply for the Refinery, although some gathering is done for
others. It gathers crude at the wellhead and then buys and sells
crude oil so that it can deliver crude through its Crude Gathering
System to the Refinery. After the crude is processed into
petroleum products at the Refinery, it is marketed and if necessary
transported to the Partnership's terminals through the Products
System's pipelines.
The following is a discussion of the results of operations for
the Partnership. This discussion should be read in conjunction
with the financial statements included in this report.
General
The Partnership's operating results depend principally on the
rate of utilization of the Refinery, the margins between the prices
of its refined petroleum products and the cost of crude oil, the
volume throughput on the Products System, and the volume throughput
on and margins from the transportation and resale of crude oil from
its Crude Gathering System. Higher Refinery utilization allows the
Partnership to spread its fixed costs across more barrels, thereby
lowering the fixed costs per barrel of crude oil processed. The
refining business is highly competitive, and the Partnership's
margins are significantly impacted by general industry margins.
Industry margins are determined by a variety of regional, national,
and global trends, including oil prices, weather, and economic
conditions, among other things. The Refinery's JP-8 (a grade of
military aviation fuel) prices are influenced by these trends since
the pricing for JP-8 is based on Jet A, a kerosene-based product,
and the price of diesel and heating fuels affect the price of
kerosene.
In 1991, the Partnership completed construction of the
catalytic reformer unit ("CRU") that allows it to refine naphtha
into unleaded gasoline. Prior to construction of the CRU, almost
all naphtha went into the production of JP-4, a grade of military
jet fuel. The CRU provided the Partnership an alternative market
for its naphtha in the short-term and prepared it for the
conversion of the military fuel from JP-4 to JP-8 that was
effective in April 1994 for East and Gulf Coast bases. JP-8 is a
kerosene-based fuel and without the CRU the Partnership would not
have had a market for its naphtha. As a result of the CRU, the
Partnership has entered into sales and exchange agreements with
eight major oil companies.
When the diesel desulfurization unit ("DDU") went on line in
the third quarter of 1993, it marked the completion of a three-year
diversification process that allows the Partnership to refine more
valuable products and expand its markets. In addition to
completing the diversification process, the construction of the DDU
also met the challenge of present environmental regulations.
Federal law required the sulfur content in all diesel produced for
highway use to be reduced by October 1, 1993.
Margins in the Crude Gathering System are influenced by the
level of competition and the price of crude oil. When prices are
higher, crude oil can generally be resold at higher margins.
Additionally, transportation charges trend upward when higher crude
oil prices stimulate increased exploration and development.
Conversely, when crude oil prices decrease, margins on the resale
of crude oil as well as transportation charges tend to decrease.
In evaluating the financial performance of the Partnership,
management believes it is important to look at operating income,
excluding depreciation in addition to operating income which is
after depreciation. Operating income, excluding depreciation
measures the Partnership's ability to generate and sustain working
capital and ultimately cash flows from operations. However, such
measure is before debt service so it does not indicate the amount
available for distribution, reinvestment or other discretionary
uses. Gross revenues primarily reflect the level of crude oil
prices and are not necessarily an accurate reflection of the
Partnership's profitability. Also important to the evaluation of
the Refinery's performance are barrels of crude oil refined, gross
margin (revenue less cost of crude) per barrel, and operating
expense per barrel, excluding depreciation.
Second quarter 1996 compared to second quarter 1995
GENERAL -- Net loss for the second quarter of 1996 was $1.4
million compared to net income of $26,000 for the second quarter of
1995. The decline was primarily a result of increased credit and
loan fees of $1.2 million and weak refining margins during the
second quarter of 1996. Credit and loan fees increased due to
facility fees incurred in the second quarter of 1996. In the
second quarter of 1995, a facility fee was not required. In
addition, the Partnership had a one-time nonrecurring reversal of
facility fees of $683,000 related to periods prior to the second
quarter of 1995 as a result of an amendment to the then existing
credit agreement.
Operating income was $739,000 for the second quarter of 1996
compared to operating income of $1.3 million for the second quarter
of 1995. Operating income, excluding depreciation, for the second
quarter of 1996 decreased to $2.5 million from $3.0 million for the
second quarter of 1995 as a result of weak refining margins which
was partially offset by strong crude gathering margins.
The following table details the operating income (loss);
depreciation; and the operating income (loss), excluding
depreciation (in thousands), for the second quarter of 1996 and
1995.
<TABLE>
<CAPTION>
Operating
Income
Operating (Loss)
Income Excluding
(Loss) Deprec. Deprec.
_______ _______ ________
<S> <C> <C> <C>
Second Quarter 1996
Refinery and Products System $(3,269) $ 1,251 $ (2,018)
Crude Gathering System 4,008 504 4,512
_______ _______ ________
Total $ 739 $ 1,755 $ 2,494
Second Quarter 1995
Refinery and Products System $ 434 $ 1,231 $ 1,665
Crude Gathering System 840 515 1,355
_______ _______ ________
Total $ 1,274 $ 1,746 $ 3,020
</TABLE>
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery
and Products System was $3.3 million for the second quarter of 1996
compared to operating income of $434,000 for the second quarter of
1995. Depreciation expense for the Refinery and Products System
was approximately $1.3 million for the second quarter of 1996 and
$1.2 million for the second quarter of 1995. Operating loss,
excluding depreciation, of the Refinery and Products System was
$2.0 million for the second quarter of 1996 compared to operating
income, excluding depreciation, of $1.7 million for the second
quarter of 1995.
Operating loss of the Refinery was $3.5 million for the second
quarter of 1996 compared to $27,000 for the same period in 1995.
The decline was due to the higher cost of crude relative to the
posting price of crude in the second quarter of 1996. However,
this was mostly offset by the higher sales price for crude realized
by the Crude Gathering System on such sale to Refining.
Depreciation expense for the Refinery alone was $1.0 million for
both the second quarter of 1996 and the second quarter of 1995.
Operating loss, excluding depreciation, of the Refinery was $2.5
million for the second quarter of 1996 compared to operating
income, excluding depreciation, of $986,000 for the second quarter
of 1995.
Refinery gross margin per barrel was $0.57 for the second
quarter of 1996 versus $1.80 for the same period in 1995. Refinery
throughput averaged 31,352 BPD for the second quarter of 1996
versus 31,664 BPD for the same period in 1995. Operating expenses
per barrel, excluding depreciation, were $1.07 for the second
quarter of 1996 compared to $0.98 for the second quarter of 1995
due to higher utility costs and repair and maintenance in the
second quarter of 1996.
Operating income for the Products System was $262,000 for the
second quarter of 1996 compared to $461,000 for the second quarter
of 1995. Depreciation expense for the Products System was $220,000
for the second quarter of 1996 compared to $218,000 for the second
quarter of 1995. Operating income, excluding depreciation, for the
Products System decreased to $482,000 for the second quarter of
1996 from $679,000 for the same period in 1995 principally as a
result of decreased pipeline volumes to the Aledo and San Angelo
terminals in the second quarter of 1996. Total transportation
volumes were 12,806 BPD for the second quarter of 1996 compared to
16,078 BPD for the same period in 1995.
CRUDE GATHERING SYSTEM -- Operating income for the Crude
Gathering System was $4.0 million for the second quarter of 1996
compared to $840,000 for the same period in 1995 due to the higher
sales price of crude relative to the posting price of crude in the
second quarter of 1996 as mentioned above. Depreciation expense
for the Crude Gathering System decreased to $504,000 for the second
quarter of 1996 from $515,000 for the second quarter of 1995.
Operating income, excluding depreciation, for the Crude Gathering
System was $4.5 million for the second quarter of 1996 and $1.4
million for the second quarter of 1995. The net margin was $0.74
per barrel for the second quarter of 1996 versus $0.13 per barrel
for the same period in 1995. Due to the elimination of several
marginal contracts, the volume of crude oil gathered by the Crude
Gathering System decreased to 59,854 BPD for the second quarter of
1996 from 68,569 BPD for the second quarter of 1995.
First six months 1996 compared to first six months 1995
GENERAL -- Net loss for the first six months of 1996 was
$848,000 compared to net loss of $5.5 million for the first six
months of 1995. The improvement was primarily a result of stronger
refining and crude gathering margins during the first six months of
1996. This was partially offset by higher interest and credit and
loan fees of $1.3 million during the first six months of 1996 due
to facility fees of $694,000 and expenses of $378,000 related to
the restructuring and recapitalization of the Partnership's debt
and equity incurred during the first six months of 1996. Also, the
Partnership had a one-time nonrecurring reversal of an accrual for
facility fees of $234,000 for the first six months of 1995 for
periods prior to 1995.
Operating income was $3.5 million for the first six months of
1996 compared to an operating loss of $2.1 million for the first
six months of 1995. Operating income, excluding depreciation,
increased for the first six months of 1996 to $7.0 million from
$1.4 million for the first six months of 1995.
The table below details the operating income (loss);
depreciation; and the operating income (loss), excluding
depreciation by division (in thousands) for the first six months of
1996 and 1995.
<TABLE>
<CAPTION>
Operating
Income
Operating (Loss)
Income Excluding
(Loss) Deprec. Deprec.
_______ _______ ________
<S> <C> <C> <C>
First Six Months 1996
Refinery and Products System $(2,685) $ 2,500 $ (185)
Crude Gathering System 6,182 1,020 7,202
_______ _______ ________
Total $ 3,497 $ 3,520 $ 7,017
First Six Months 1995
Refinery and Products System $(3,603) $ 2,484 $ (1,119)
Crude Gathering System 1,503 1,030 2,533
_______ _______ ________
Total $(2,100) $ 3,514 $ 1,414
</TABLE>
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery
and Products System was $2.7 million for the first six months of
1996 compared to operating loss of $3.6 million for the first six
months of 1995. Depreciation expense for the Refinery and Products
System was $2.5 million for the first six months of 1996 and the
first six months of 1995. Operating loss, excluding depreciation,
of the Refinery and Products System was $185,000 for the first six
months of 1996 compared to operating loss, excluding depreciation,
of $1.1 million for the first six months of 1995.
Operating loss of the Refinery was $3.3 million for the first
six months of 1996 compared to $4.5 million for the first six
months of 1995. Refining margins increased for the first six
months of 1996 due to the colder winter experienced during the
first few months of 1996 as compared to the same period in 1995.
However, this was somewhat offset by the higher cost of crude
relative to the posting price of crude during the first six months
of 1996. Depreciation expense for the Refinery alone was
$2.1 million for the first six months of 1996 and $2.0 million for
the first six months of 1995. Operating loss, excluding
depreciation, of the Refinery was $1.2 million for the first six
months of 1996 compared to $2.4 million for the first six months of
1995.
Refinery gross margin per barrel was $1.30 for the first six
months of 1996 versus $1.11 for the same period in 1995. Refinery
throughput averaged 32,264 BPD during the first six months of 1996
versus 32,077 BPD for the same period in 1995. Operating expenses
per barrel, excluding depreciation, were $1.08 for the first six
months of 1996 versus $1.06 for the same period in 1995.
Operating income for the Products System was $610,000 for the
first six months of 1996 compared to $848,000 for the first six
months of 1995. Depreciation expense for the Products System was
$441,000 for the first six months of 1996 and $436,000 for the
first six months of 1995. Operating income, excluding
depreciation, for the Products System decreased to $1.1 million for
the first six months of 1996 from $1.3 million for the same period
in 1995 as a result of decreased volumes. Total transportation
volumes were 13,392 BPD for the first six months of 1996 compared
to 15,585 BPD for the same period in 1995.
CRUDE GATHERING SYSTEM -- Operating income for the Crude
Gathering System was $6.2 million for the first six months of 1996
compared to $1.5 million for the same period in 1995 due to the
higher sales price of crude relative to the posting price of crude
in the first six months of 1996. Depreciation expense for the
Crude Gathering System was $1.0 million for both the first six
months of 1996 and the first six months of 1995. Operating income,
excluding depreciation, for the Crude Gathering System was $7.2
million for the first six months of 1996 and $2.5 million for the
first six months of 1995. The net margin was $0.54 per barrel for
the first six months of 1996 compared to $0.12 per barrel for the
first six months of 1995. Due to the elimination of several
marginal contracts, the volume of crude oil gathered by the Crude
Gathering System decreased to 63,212 BPD for the first six months
of 1996 from 70,472 BPD for the first six months of 1995.
Factors and Trends Affecting Operating Results
A number of factors have affected the Partnership's operating
results, both indirectly and directly, such as environmental
compliance, other regulatory matters, industry trends and price of
crude oil, inventory prices, and seasonality and weather. The
Managing General Partner of the Partnership expects that such
conditions will continue to affect the Partnership's business to
varying degrees in the future. The order in which these factors
are discussed is not intended to represent their relative
significance.
ENVIRONMENTAL COMPLIANCE -- Increasing public and governmental
concern about air quality is expected to result in continued
regulation of air emissions. Regulations relating to carbon
monoxide and regulations on oxygen content in gasoline and sulfur
content in diesel fuel are expected to be increasingly important as
a means of improving air quality in urban areas. The Partnership
plans to spend approximately $675,000 in 1996, 1997 and 1998 on
several projects to maintain compliance with various other
environmental requirements including $400,000 for a sewer system
upgrade.
Effective January 1, 1995, the Clean Air Act Amendment of 1990
required that certain areas of the country use reformulated
gasoline ("RFG"). The Abilene and San Angelo market areas do not
require RFG. Collin, Dallas, Denton, and Tarrant Counties, which
comprise the Dallas-Fort Worth ("DFW") metroplex area, do require
RFG; however, the Partnership's Aledo terminal lies outside this
area and is allowed to supply conventional gasoline that is not
destined for sale in these four counties. In addition to the
requirement for RFG in certain areas, new but much less restrictive
regulations took effect that impose new quality standards for
conventional gasoline in the rest of the country. Management does
not anticipate that these have had or will have a material adverse
effect on the Partnership's operations.
In early 1993, the United States Environmental Protection
Agency ("EPA") filed an administrative complaint and compliance
order against the Partnership. The complaint initially proposed an
assessment of $553,000 in penalties and fulfillment of a compliance
order at an unspecified cost against the Partnership. The
principal violations alleged by the EPA include the failure to
properly monitor ground water and to implement a ground water
monitoring program. Management believes that it has complied or is
complying with the matter specified by the EPA and has filed an
answer to the complaint. On February 8, 1996, the Partnership
received a letter from the EPA offering to settle the complaint for
$405,000 in penalties plus fulfillment of the compliance order.
The Partnership will continue to vigorously contest the matter
until a more favorable settlement can be reached with the EPA.
OTHER REGULATORY REQUIREMENTS -- The Partnership is also
subject to the rules and regulations of Occupational Safety and
Health Administration, Texas Air Control Board, Texas Railroad
Commission, and Texas Water Commission.
INDUSTRY TRENDS AND PRICE OF CRUDE OIL -- Industry trends and
the price of crude oil will continue to affect the Partnership's
business. While refined products are generally sold at a margin
above crude oil prices, fluctuations in the price of crude oil can
have a significant short-term effect on refining margins because
there is usually a lag in the movement of product prices, both up
and down, in relation to the movement of crude oil prices. The
general level of crude oil prices can also have a significant
effect on the margins in the crude gathering business. Margins in
the Crude Gathering System generally tend to be influenced by
competition and the general price level of crude oil. When prices
are higher, crude oil can generally be resold at higher margins.
Additionally, transportation charges are slightly less competitive
when higher crude oil prices result in increased exploration and
development. Conversely, when crude oil prices decrease, margins
on the resale of crude oil and transportation charges generally
tend to decrease.
INVENTORY PRICES -- In 1993, the Partnership adopted the last-
in/first-out (LIFO) method of determining inventory values. This
change should minimize the effect of fluctuations in inventory
prices on earnings by matching current costs with current revenue.
The LIFO method is the predominant method used in the refining
industry.
SEASONALITY AND WEATHER -- Gasoline consumption is typically
highest in the United States in the summer months and lowest in the
winter months. As a result, margins for gasoline tend to be higher
in the summer months. Diesel consumption in the southern United
States is generally higher just prior to and during the winter
months when commercial trucking is routed on southern highways to
avoid severe weather conditions further north. Additionally,
diesel fuel prices tend to increase during the winter months when
refiners divert heating fuels to northern areas. During
unseasonably warm winters, as was experienced during 1995, diesel
prices do not trend up as in colder, longer winters. The
Refinery's JP-8 prices are influenced by these trends since the
pricing for JP-8 is based on Jet A, a kerosene based product, and
the price of diesel and heating fuels affect the price of kerosene.
OTHER FACTORS -- The Partnership has been awarded contracts
from the United States Government for the right to supply 106
million gallons of JP-8 to ten military installations in Texas for
the period from April 1, 1996 through March 31, 1997.
Financial Condition
Inflation
The Partnership's operations would be adversely impacted by
significant, sustained increases in crude oil and other energy
prices. Although the Partnership's operating costs are generally
impacted by inflation, the Managing General Partner does not expect
general inflationary trends to materially adversely impact the
Partnership's businesses.
Financial Resources and Liquidity
The Partnership's operations require substantial amounts of
working capital and open lines of credit which the Partnership
believes are currently adequate to provide funds to sustain
operations at present levels. The Partnership receives payments
from the United States Government, major oil companies, and other
customers within approximately 7 to 15 days from shipment in the
case of products sales and by the 20th of the following month in
the case of third-party crude oil sales and exchanges. The
Partnership maintains inventory in the amount of approximately 10
to 20 days of sales. The Partnership generally pays for crude oil
feedstock on the 20th of the month following the month in which it
is received. As a result, the Partnership's operating cycle is
such that it generally receives cash for the refined products on a
basis roughly equal to the average terms on which it pays for the
crude oil feedstock.
Letters of credit are an integral part of the operations of
the Crude Gathering System since the Partnership takes title to
both first purchased barrels and custom gathered barrels. On
August 13, 1996, the Partnership's credit facility was restated and
amended to extend the maturity date to July 31, 1997. Under this
credit facility, the Partnership has a $6,500,000 standby letter of
credit facility for general corporate purposes and the purchase of
crude oil and other refinery feedstocks ("Facility A") and a
$45,000,000 standby letter of credit facility for the purchase of
crude oil ("Facility B"). The fee on outstanding Facility A and
Facility B standby letters of credit is 1 and 1/2% per annum. For
the unused portion of the standby letter of credit facility, the
fee is one-half of 1% per annum. Though no advances had been drawn
under either the Facility A or Facility B letter of credit
facility, the Partnership did have approximately $721,000 and $44.1
million, respectively, in outstanding standby letters of credit as
of June 30, 1996. The prior agreement also provided an additional
$8,000,000 standby letter of credit facility for the purchase of
crude oil and other refinery feedstocks ("Special LC Facility").
The fee on outstanding Special LC Facility standby letters of
credit was 3% per annum. There was no commitment fee for the
unused portion of the Special LC Facility. The Partnership had
approximately $1.6 million outstanding under the Special LC
Facility as of June 30, 1996.
Under the restated and amended credit facility, the
Partnership has available to it a revolving line of credit of $8.0
million (the "Revolver") and a $45.0 million term loan (the "Term
Loan"). The amount available under the Revolver is subject to a
borrowing base which includes a reduction by the amount of letters
of credit issued under Facility A. Advances under the Revolver and
Term Loan bear interest at prime plus 2% and 3%, respectively,
payable monthly. The prime rate was 8.25% as of June 30, 1996.
The Term Loan is subject to a facility fee of 5% per annum
commencing January 1, 1996 and payable at maturity which is July
31, 1997. Such fee will be cancelled upon the completion of phase
two of the Partnership's restructuring plan (see below). The
Partnership has pledged substantially all its assets as collateral.
In addition, the General Partners guaranteed the facility and Pride
SGP as guarantor has pledged its assets as collateral for such
loans. The Partnership may elect to prepay the credit facilities
without any prepayment penalty. The fee for the unused portion of
the Revolver is one-half of 1% per annum. At June 30, 1996, the
Partnership had no advances outstanding on the Revolver; the
balance outstanding on the Term Loan was $42.9 million. The
Partnership is required to make scheduled principal payments of
$120,000 each month beginning September 5, 1996 plus quarterly
principal payments in the amount of 80% of excess cash, as defined
in the credit agreement, for the preceding quarter. Accordingly,
the Partnership has classified $1.8 million of the Term Loan as
current as of June 30, 1996.
Advances under the Revolver are subject to repayment on a
daily basis. Subject to the borrowing base, the Partnership may
borrow any amounts previously paid.
The facility also includes a $2.5 million uncommitted line of
credit ("Uncommitted Line"). Advances under the Uncommitted Line
are made solely at the lenders' discretion and bear interest at the
prime rate plus 4%. The Uncommitted Line must be completely paid
off for fifteen consecutive days each month. There were no
advances outstanding under the Uncommitted Line at June 30, 1996.
The amended credit facility also requires the Partnership to
pay a monthly fee of $10,000 and restricts the payment of
distributions to unitholders throughout the term of the amended
credit agreement. Future distributions will be dependent on
payment in full of bank debt, expiration of all liabilities for
letters of credit, and the termination of the credit agreement.
The Partnership has a nonrecourse loan from Diamond Shamrock
with an outstanding principal balance of $5.8 million at June 30,
1996, bearing interest at 8% per annum with monthly principal and
interest payments. The assets of Pride Borger, Inc., a wholly
owned subsidiary of the Partnership, which owns 50% of the Texas
Plains Pipeline System, are pledged as collateral. Pride Borger,
Inc. has also guaranteed the note. Monthly principal payments
are made to Diamond Shamrock based on the number of throughput
barrels for the prior month in the Texas Plains Pipeline System.
Current maturities are estimated to be $158,000 at June 30, 1996.
In 1996, the Partnership acquired the other 50% interest in the
Texas Plains System from Scurlock Permian.
Pride SGP has made unsecured loans to the Partnership in the
principal amount of $2.5 million bearing interest at prime plus 2%.
The loans mature July 31, 1997.
During 1995, the Partnership converted non-interest bearing
accounts payable to the United States Government related to pricing
adjustments which had been accrued since 1993 to a $2.4 million
installment loan. The principal balance was $1.8 million at
June 30, 1996. The note bears interest based on the rate set by
the Secretary of the Treasury. This rate was 5.875% as of June 30,
1996. The note requires monthly payments of $84,000. The note
matures June 1, 1998. The Partnership has classified $922,000 of
the note as current as of June 30, 1996.
On January 9, 1995, the Partnership executed a note to a local
bank related to the renovation and refinancing of its
administrative offices in Abilene. Prior to this, the Partnership
had to lease additional office space from a third party. The note
bears interest at prime plus one-half of 1% and had an outstanding
principal balance of $381,000 at June 30, 1996. The note matures
January 9, 2000. The Partnership has classified $16,000 of the
note as current as of June 30, 1996.
Cash flows have been and will continue to be significantly
affected by fluctuations in the cost and volume of crude oil and
refined products held in inventory and the timing of accounts
receivable collections. Cash flows are also affected by refining
margins and crude oil gathering margins.
The Partnership's operations have generated losses in each of
the last five years and current ratios of less than one to one in
each of the last three years. These conditions and financial
results were primarily a result of depressed refining margins along
with increasing depreciation expense and interest expense and
related fees. Crude gathering volumes have also decreased.
The Partnership's return to profitability and long-term
viability is dependent upon restructuring its credit facility,
increased volumes and/or improved profit margins, as well as
continued cost control initiatives. Management believes the
extension of the existing credit facility to July 31, 1997
sufficiently alleviates any short-term threats to the liquidity of
the Partnership. Though management has and will continue to pursue
options regarding increasing volumes and margins and reducing
costs, including limiting any significant capital expenditures,
these improvements will be gradual and, in many cases, will take
sustained periods of time to implement in order to achieve
profitability. The most significant and urgent need of the
Partnership is to effect a complete restructuring and
recapitalization of the Partnership's debt and equity. On August
13, 1996, the Partnership completed the first ("Phase 1") of
three phases which called for the execution of documents with the
Partnership's bank lenders. In phase two ("Phase 2"), the
Partnership will seek unitholder approval to convert the
outstanding preferred units into common units. If approved, the
preferred unitholders will own at least 95% of the outstanding
common units of the Partnership upon conversion and all preferred
and common unit arrearages will be cancelled. In addition, the
credit facility will automatically be extended to November 30,
1997, the term loan will be reduced to $25.0 million, three notes
will be created for the remaining portion of the previously
outstanding term loan, the interest rate on the debt will be
reduced, and the facility fee which is now required will be
cancelled. Phase three ("Phase 3") anticipates the refinancing of
the letter of credit line, the revolving line, and the term loan.
Upon completion of Phase 3, the banks will convert two of the notes
to equity. The third note, if not refinanced, can be converted to
equity at the banks' election. During the first six months of
1996, the Partnership expensed $378,000 related to this proposed
restructuring of its credit facility. This is in addition to the
$873,000 expensed for the year ended December 31, 1995.
The Partnership will be preparing proxy solicitation material
related to the second phase. The Partnership expects to send out
the material to unitholders in September or October of 1996. The
Managing General Partner is hopeful Phase 2 will be completed
during the fourth quarter of 1996 and Phase 3 will be completed in
either the fourth quarter of 1996 or first quarter of 1997. There
can be no assurance the Partnership will be able to complete each
of the phases outlined. If the Partnership fails to complete them,
it will have to pursue other means of effecting a restructuring and
recapitalization prior to the maturity of its credit facility on
July 31, 1997. If the Partnership is successful in completing the
restructuring and recapitalization of the Partnership, the Managing
General Partner believes it will enhance the Partnership's
financial strength, flexibility and future access to capital
markets as well as lowering interest expense.
Capital Expenditures
The Partnership incurred maintenance capital expenditures of
$559,000 for the second quarter of 1996.
Cash Distributions
At June 30, 1996, 4,700,000 Preferred Units were outstanding,
representing an approximate 46.3% limited partner interest in the
Partnership. The Preferred Units are cumulative, entitled to a
minimum quarterly distribution of $0.65 per unit through the
Initial Conversion Date which is the first day of the third
calendar quarter in which the payment of all cumulative arrearages
to Preferred Unitholders have been paid, and all arrearages must be
paid before the Common Unitholders may receive distributions. The
Preferred Units are convertible into Common Units on the Initial
Conversion Date. The Common Units are also cumulative and entitled
to a quarterly distribution of $0.65 per unit; however, no Common
Unit arrearages will be paid after the Initial Conversion Date, and
any such accumulated arrearages then existing will be cancelled.
The general partners are entitled to 2% of all distributions. At
June 30, 1996, cumulative arrearages were $13.00 per Common Unit
which totaled $68.3 million and $11.35 per Preferred Unit which
totaled $53.3 million.
Under the terms of the Partnership's credit agreement, the
bank restricted the payment of distributions to unitholders
throughout the term of the credit agreement. Future distributions
will be dependent on payment in full of the bank debt, expiration
of all liabilities for letters of credit, and the termination of
the credit agreement.
PART II. Other Information
Item 1. Legal Proceedings
In early 1993, the United States Environmental Protection
Agency ("EPA") filed an administrative complaint and compliance
order against the Partnership. The complaint initially proposed an
assessment of $553,000 in penalties and fulfillment of the
compliance order at an unspecified cost against the Partnership.
The principal violations alleged by the EPA include the failure to
properly monitor ground water and to implement a ground water
monitoring program. Management believes that it has complied or is
complying with the matters specified by the EPA and has filed an
answer to the complaint. On February 8, 1996, the Partnership
received a letter from the EPA offering to settle the complaint for
$405,000 in penalties plus fulfillment of the compliance order.
The Partnership will continue to vigorously contest the matter
until a more favorable settlement can be reached with the EPA.
The Partnership has filed a substantial claim against the
Defense Fuel Supply Center relating to erroneous pricing of fuel
purchased over a period of several years from the Partnership and
its predecessors. The ultimate outcome of this matter cannot
presently be determined.
The Partnership is involved in various claims and routine
litigation incidental to its business for which damages are sought.
Management believes that the outcome of all claims and litigation
is either adequately insured or will not have a material adverse
effect on the Partnership's financial position or results of
operations.
Item 2. Changes in Securities
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
4.1 Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.1 of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 (Commission File No. 1-
10473)).
4.2 Amended and Restated Agreement of Limited Partnership of
Pride Companies, L.P. (incorporated by reference to
Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.3 First Amendment to the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P.
(incorporated by reference to Exhibit 4.2 of the
Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 (Commission File No. 1-
10473)).
4.4 Deposit Agreement among the Partnership and the
Depository (incorporated by reference to Exhibit 4.1 of
the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (Commission File No.
1-10473)).
4.5 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.1 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.6 Form of Depositary Receipt for Preferred Units of Pride
Companies, L.P. (included as Exhibit A to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
4.7 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (included as Exhibit B to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
27 Financial Data Schedule for Second Quarter 1996 10Q.
28.1 Fifth Restated and Amended Credit Agreement dated
August 13, 1996, among the Partnership (Borrower), Pride
Refining, Inc., Pride SGP, Inc., Desulfur Partnership,
Pride Marketing of Texas (Cedar Wind), Inc., and Pride
Borger, Inc. (Guarantors), and NationsBank of Texas, N.A.
as agent, and NationsBank of Texas, N.A. and Bank One
Texas, N.A. as lenders.
28.2 Note Agreement dated August 13, 1996, among the
Partnership (Borrower), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas
(Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors),
and NationsBank of Texas, N.A. as agent, and NationsBank
of Texas, N.A. and Bank One Texas, N.A. as lenders.
b. Reports on Form 8-K:
None<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PRIDE COMPANIES, L.P.
By: Pride Refining, Inc.
as its Managing General Partner
(Registrant)
August 14, 1996 Brad Stephens
Date Brad Stephens
Chief Executive Officer
(Signing on behalf of Registrant)
August 14, 1996 George Percival
Date George Percival
Principal Financial Officer
(Signing as Principal Financial
Officer)
<PAGE>
PRIDE COMPANIES, L.P.
Exhibits to
Report to Form 10-Q
INDEX TO EXHIBITS
Exhibit Number
(Reference to
Item 601 of
Regulation S-K)
_________________
4.1 Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.1 of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 (Commission File No. 1-
10473)).
4.2 Amended and Restated Agreement of Limited Partnership of
Pride Companies, L.P. (incorporated by reference to
Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.3 First Amendment to the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P.
(incorporated by reference to Exhibit 4.2 of the
Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 (Commission File No. 1-
10473)).
4.4 Deposit Agreement among the Partnership and the
Depository (incorporated by reference to Exhibit 4.1 of
the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (Commission File No.
1-10473)).
4.5 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.1 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.6 Form of Depositary Receipt for Preferred Units of Pride
Companies, L.P. (included as Exhibit A to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
4.7 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (included as Exhibit B to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
27 Financial Data Schedule for Second Quarter 1996 10-Q.
28.1 Fifth Restated and Amended Credit Agreement dated
August 13, 1996, among the Partnership (Borrower), Pride
Refining, Inc., Pride SGP, Inc., Desulfur Partnership,
Pride Marketing of Texas (Cedar Wind), Inc., and Pride
Borger, Inc. (Guarantors), and NationsBank of Texas, N.A.
as agent, and NationsBank of Texas, N.A. and Bank One
Texas, N.A. as lenders.
28.2 Note Agreement dated August 13, 1996, among the
Partnership (Borrower), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas
(Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors),
and NationsBank of Texas, N.A. as agent, and NationsBank
of Texas, N.A. and Bank One Texas, N.A. as lenders.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 706
<SECURITIES> 0
<RECEIVABLES> 13,794
<ALLOWANCES> 0
<INVENTORY> 16,079
<CURRENT-ASSETS> 31,516
<PP&E> 135,810
<DEPRECIATION> 33,791
<TOTAL-ASSETS> 134,652
<CURRENT-LIABILITIES> 46,345
<BONDS> 50,488
0
17,346
<COMMON> 17,584
<OTHER-SE> 235
<TOTAL-LIABILITY-AND-EQUITY> 134,652
<SALES> 304,786
<TOTAL-REVENUES> 304,786
<CGS> 292,675
<TOTAL-COSTS> 292,675
<OTHER-EXPENSES> 3,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,923
<INCOME-PRETAX> (866)
<INCOME-TAX> (18)
<INCOME-CONTINUING> (848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (848)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
EXHIBIT 28.1
FIFTH RESTATED AND AMENDED
CREDIT AGREEMENT
among
PRIDE COMPANIES, L.P.,
as Borrower,
PRIDE REFINING, INC.,
PRIDE SGP, INC.,
DESULFUR PARTNERSHIP,
PRIDE MARKETING OF TEXAS (CEDAR WIND), INC., and
PRIDE BORGER, INC.
as Guarantors,
and
NATIONSBANK OF TEXAS, N.A.
as Agent and a Lender
and
BANK ONE, TEXAS, N.A.,
as a Lender
August 13, 1996
<PAGE>
FIFTH RESTATED AND AMENDED CREDIT AGREEMENT
This Fifth Restated and Amended Credit Agreement (the
"Agreement") is entered into as of the 13th day of August, 1996
("Effective Date"), by and among PRIDE COMPANIES, L.P., a Delaware
limited partnership ("Borrower"), PRIDE REFINING, INC., a Texas
corporation, PRIDE SGP, INC., a Texas corporation, DESULFUR
PARTNERSHIP, a Texas general partnership, PRIDE MARKETING OF TEXAS
(CEDAR WIND), INC., a Texas corporation, PRIDE BORGER, INC., a
Delaware corporation, NATIONSBANK OF TEXAS, N.A. (formerly known as
NCNB Texas National Bank), as the Agent for Lenders ("Agent"), and
NATIONSBANK OF TEXAS, N.A. (formerly known as NCNB Texas National
Bank) and BANK ONE, TEXAS, N.A. (successor to the interest of Team
Bank) (collectively, "Lenders" and individually, a "Lender").
BACKGROUND:
NCNB Texas National Bank and Borrower have previously
executed a certain Credit Agreement dated as of August 22, 1990,
and Borrower, the Agent and the Lenders have previously executed a
certain First Restated and Amended Credit Agreement dated as of
August 30, 1991, as amended, and a certain Second Restated and
Amended Credit Agreement dated as of December 14, 1992, as amended,
and a certain Third Restated and Amended Credit Agreement dated as
of April 16, 1993, as amended, and a certain Fourth Restated and
Amended Credit Agreement dated as of November 14, 1994, as amended
(collectively the "Original Credit Agreement"). Borrower has
requested certain amendments to the Original Credit Agreement and
Lenders are willing to make the loans and the letter of credit
facility available to Borrower, subject to the terms and conditions
hereof.
Pride Texas Plains, L.P. and Pride Texas Plains GP L.L.C.,
which were guarantors under the Original Credit Agreement, have
been dissolved and the assets and liabilities of Pride Texas
Plains, GP L.L.C. and Pride Texas Plains, L.P. have been assigned
to and assumed by Pride Borger.
AGREEMENT:
In consideration of the mutual promises herein contained and
for other valuable consideration, the parties hereto agree to
restate and amend the Original Credit Agreement as set forth below.
Except as provided herein to the contrary, all principal, interest,
fees, and expenses payable under the Original Credit Agreement
shall be payable on the payment dates herein for the account of the
Agent and/or the Lenders, as applicable. All outstanding principal
and letter of credit obligations under the Original Credit
Agreement are hereby renewed and shall be payable as set forth
herein.
ARTICLE I
DEFINITION OF TERMS
1.01. Definitions. For the purposes of this Agreement,
unless the context otherwise requires, the following terms shall
have the respective meanings assigned to them in this Article I or
in the section or recital referred to below:
"Acceleration" has the meaning specified in Section 8.02.
"Account" shall have the meaning given that term in Section
9.106 of the Texas Business and Commerce Code.
"Account Debtor" shall have the meaning given that term in
Section 9.106 of the Texas Business and Commerce Code.
"Adjusted Cash Proceeds" shall mean the remainder of (i) all
cash received by Borrower or any of its Subsidiaries outside the
ordinary course of business, including but not limited to
consideration for or in connection with the sale, lease, transfer
or other disposition of any assets or properties of Borrower but
excluding consideration received in connection with (a) the sale of
goods and services in the ordinary course of business, (b) the sale
or other disposition of any assets of Borrower which is sold for
fair consideration not in excess of $25,000 or in the aggregate not
in excess of $250,000 (provided that to the extent consideration
from any such excluded sale or disposition is added by the Borrower
to Adjusted Cash Proceeds, the amount of such consideration shall
not be counted under the $250,000 aggregate limitation) or (c)
Litigation Settlements or Equity Offerings minus (ii) any costs,
expenses and fees (including attorney's fees) actually paid by
Borrower out of such cash proceeds and which have not otherwise
been deducted in any period in the determination of Excess Cash.
For purposes of this definition the terms "Litigation Settlements"
and "Equity Offerings" have the meanings given them in Section
2.06(c).
"Adjusted Current Liabilities" shall mean current liabilities
of Borrower, determined in accordance with GAAP, but shall include
any and all outstanding amounts under the Revolving Notes not
otherwise included in current liabilities, but shall exclude (i)
any and all outstanding amounts under the Term Notes and (ii) any
Suspense Payables of Borrower.
"Adjusted Current Ratio" shall mean the quotient obtained by
dividing the Current Assets by the Adjusted Current Liabilities.
"Advance" shall mean any advance by Lenders to Borrower
pursuant to Article II hereof.
"Affiliate" of any Person shall mean any other Person
directly or indirectly, controlling, controlled by, or under common
control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person.
"Agency Fees" shall mean the amounts provided to be paid by
Borrower in Section 2.12(b).
"Agent" shall mean NationsBank of Texas, N.A. when acting on
behalf of the Lenders hereunder.
"Agreement" has the meaning specified in the introductory
paragraph hereof.
"Amendment Fee" has the meaning specified in Section 2.12(c)
hereof.
"Approved Eligible Receivables" shall mean Eligible
Receivables from any of the approved Persons as may be approved in
writing by Agent from time to time.
"Bank One" shall mean Bank One, Texas, N.A.
"Base Rate" shall mean the variable rate of interest
established from time to time by NationsBank of Texas, N.A. as its
"prime rate". Such rate is set by NationsBank of Texas, N.A. as a
general reference rate of interest, taking into account such
factors as it may deem appropriate, it being understood that many
of such bank's commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or the best rate
actually charged to any customer, that it may not correspond with
further increases or decreases in interest rates charged by other
lenders or market rates in general and that such bank may make
various commercial or other loans at rates of interest having no
relationship to such rate. Each change in the Base Rate shall
become effective without notice to Borrower automatically as of the
opening of business on the date of such change in the Base Rate.
"Borrower" shall mean Pride Companies, L.P., a Delaware
limited partnership, whose general partners are Pride Refining and
Pride SGP.
"Borrowing" shall mean a borrowing consisting of Advances
made on the same day.
"Borrowing Base" means the remainder of (A) minus (B) below
as of the date of determination:
(A) the sum of the following as of the date of
determination:
(i) an amount equal to one hundred percent
(100%) of Cash and Cash Equivalents; plus
(ii) an amount equal to one hundred percent
(100%) of the Net Government Accounts; plus
(iii) an amount equal to ninety percent (90%) of
the Approved Eligible Receivables; plus
(iv) an amount equal to eighty-five percent
(85%) of the Other Eligible Receivables; plus
(v) an amount equal to eighty-five percent
(85%) of Inventory valued at fair market value.
minus
(B) the sum of the following as of the date of
determination:
(i) Crude Purchase Accounts Payable; plus
(ii) Pipeline Negative Inventory Accrual; plus
(iii) Net Exchange Accounts Payable.
"Borrowing Base Certificate" has the meaning specified in
Section 2.10(e).
"Business Day" shall mean a day, other than Saturday or
Sunday, on which Agent is required or authorized to open for
business in Dallas, Texas.
"Calendar Quarter" means the period beginning on the 1st day
of January, April, July and October, during the term of this
Agreement and ending on the last day of the month preceding the
next Calendar Quarter.
"Capital Expenditure" shall mean any expenditure by a Person
for purchase of an asset which will be used in a year or years
subsequent to the year in which the expenditure is made and which
asset is properly classifiable in relevant financial statements of
such Person as equipment, real property or improvements, fixed
assets, or a similar type of capitalized asset in accordance with
GAAP as GAAP is determined on the Effective Date. For purposes of
this Agreement, Capital Expenditures excludes rentals and assets
leased whether pursuant to Capital Leases or other leases.
"Capital Lease" shall mean, as of any date, any lease of
property, real or personal, which would be capitalized on a balance
sheet of the lessee prepared as of such date in accordance with
GAAP, together with any other lease by such lessee which is in
substance a financing lease, including without limitation, any
lease under which (i) such lessee has or will have an option to
purchase the property subject thereto at a nominal amount or an
amount less than a reasonable estimate of the fair market value of
such property as of the date such lease is entered into, or (ii)
the term of the lease approximates or exceeds the expected useful
life of the property leased thereunder.
"Cash and Cash Equivalents" shall mean (i) the sum of: (a)
the available balances in Borrower's deposit accounts at Agent less
the amount of all checks or drafts drawn against such deposits
which have not been presented for payment and (b) the available
balances in Borrower's petty cash accounts at other financial
institutions (which amount shall not exceed $25,000) less the
amount of all checks or drafts drawn against such deposits which
have not been presented for payment, (ii) securities issued or
directly or indirectly and fully guaranteed by the United States
Government or an agency thereof, commercial paper rated A-1 by
Standard & Poors or P-1 by Moody's which is validly pledged to and
held by Agent, or such other investments as Agent shall approve in
writing, and (iii) time deposits, certificates of deposit of, or
Eurodollar investments at Agent, as each is reflected on Borrower's
financial statement prepared in accordance with GAAP.
"Cash Collateral" shall mean funds on deposit pledged to
secure the Obligation or any portion thereof.
"Cash Collateral Account" shall mean an account at Agent into
which Cash Collateral is held as security for the Obligation or any
portion thereof.
"CATS Agreement" shall mean the Credit Application Transfer
System Master Letter of Credit Agreement dated as of April 16,
1993, between Borrower and Agent.
"CATS Request" shall mean a letter of credit request
electronically transmitted to Agent pursuant to the CATS Agreement.
"Cedar Building" shall mean that certain office building of
the Related Persons located at 1209 N. 4th, Abilene, Texas.
"Certificate of Designations" shall mean the Certificate of
Designations of Series B Cumulative Convertible Preferred Units of
Pride Companies, L.P., in the form attached as Exhibit D to the
Note Agreement.
"Claim" has the meaning specified in Section 6.16.
"Collateral" shall mean property in which Liens are granted
to secure the Obligation, partially or fully, in the Collateral
Documents.
"Collateral Documents" shall mean all security agreements,
mortgages, deeds of trust, assignments, pledges, financing
statements, stock or bond powers, and other agreements, instruments
and documents, including any amendments thereto and extensions
thereof, which provide for the grant, perfection and/or
alienability of Liens in Collateral, which secure partially or
fully, directly or indirectly, the Obligation, whether executed
and/or delivered or filed prior to, contemporaneously with, or at
any time after the Effective Date.
"Collateral Monitoring Fees" shall mean the amounts payable
pursuant to Section 2.12(d).
"Common Units" shall mean a partnership interest in Borrower
representing a fractional part of the aggregate partnership
interests in Borrower and having the rights and obligations
specified with respect to Common Units in the Amended and Restated
Agreement of Limited Partnership of Borrower, as in effect on the
date of issuance of the Convertible Notes, after giving effect to
the amendment attached as Exhibit J to the Note Agreement.
"Commitment Fees" shall mean, collectively, the amounts
payable pursuant to Sections 2.03 and 3.04(b).
"Controlled Group" shall mean (i) the controlled group of
corporations as defined in Section 1563 of the United States
Internal Revenue Code of 1986, as amended, or (ii) the group of
trades or businesses under common control as defined in Section
414(c) of the United States Internal Revenue Code of 1986, as
amended, of which Borrower is a part or may become a part.
"Convertible Notes" shall mean the convertible promissory
notes issued by the Company pursuant to the Note Agreement.
"Crude Purchase Accounts Payable" means the accounts payable
of any Related Person outstanding as of the date of determination
arising from the purchase of crude oil and other refinery feed
stocks, but specifically excluding (i) accounts payable arising
under Exchange Transactions, (ii) any account payable which Lenders
have determined in their absolute discretion is not entitled to the
benefit of Letters of Credit and are otherwise not secured by any
setoff or Lien, and (iii) accounts payable for purchases of crude
oil and other refinery feed stocks which are supported by Facility
A Letters of Credit.
"Current Assets" shall mean current assets of Borrower
determined in accordance with GAAP.
"Current Liabilities" shall mean current liabilities of
Borrower, determined in accordance with GAAP, but shall include any
and all Suspense Payables and any and all outstanding amounts under
the Revolving Notes not otherwise included in current liabilities,
but shall exclude any and all outstanding amounts under the Term
Notes.
"Current Ratio" shall mean the quotient obtained by dividing
the Current Assets by the Current Liabilities.
"Debtor Laws" shall mean all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership,
insolvency, reorganization or similar laws from time to time in
effect affecting the rights of creditors generally.
"Default" shall mean any of the events specified in Section
8.01, regardless of whether there shall have occurred any passage
of time or giving of notice or both that would be necessary in
order to constitute such event an Event of Default.
"Default Rate" shall mean (a) with respect to the Term Loans,
a rate per annum equal to the lesser of (i) the Maximum Rate or
(ii) the sum of the Term Loan Interest Rate in effect from day to
day plus three percent (3%), and (b) with respect to the Revolving
Loan, a rate per annum equal to the lesser of (i) the Maximum Rate
or (ii) the sum of the Revolving Loan Interest Rate in effect from
day to day plus three percent (3%).
"Desulfur Partnership" means Desulfur Partnership, a Texas
general partnership
"Determining Lenders" shall mean all of the Lenders.
"DFSC Claim" shall mean all interests of Borrower arising
pursuant to that certain Proposal for Additional Compensation,
dated October 24, 1994, from Borrower to the Defense Fuel Supply
Center, including without limitation any certified claim Borrower
may submit in connection therewith after the Effective Date.
"D-S Note" shall mean that certain Promissory Note dated
November 30, 1994, made by Borrower to Diamond Shamrock Refining
and Marketing Company in the original principal amount of
$6,000,000.
"Distributions" shall mean cash distributions or any other
distributions on, or in respect of, any class of any Person's
capital stock or any Person's interest as a partner in any
partnership, and all funds, cash or other payments made in respect
of the redemption, repurchase or acquisition of any such capital
stock or interest.
"Dollars" and the sign "$" refer to currency of the United
States of America.
"EBITDAR" shall mean for any Calendar Quarter the net income
of Borrower for such Calendar Quarter determined in accordance with
GAAP plus the sum of (i) interest expense of Borrower for such
Calendar Quarter, (ii) all Fees and Expenses of Borrower for such
Calendar Quarter, but excluding the Amendment Fees, (iii)
depreciation, amortization and all other non-cash charges of
Borrower during such period to the extent deducted in determining
such net income and (iv) Rentals expense of Borrower during such
period minus (i) gains and other sources of earnings not involving
current receipt of cash by Borrower, to the extent included in
determining such net income and (ii) the amount of any Litigation
Settlement (as defined in Section 2.06(c)(ii)) applied by Borrower
to the Obligations in accordance with Section 2.06(c)(ii), during
such Calendar Quarter, to the extent included in determining such
net income, provided that for purposes of the calculation of
EBITDAR, Restructuring Fees that are capitalized shall not be
included in the determination of net income of Borrower.
"Effective Date" shall mean the date in the introductory
paragraph hereof.
"Eligible Receivables" shall mean, at the time of any
determination thereof, each Account as to which the following
requirements have been fulfilled to the reasonable satisfaction of
Agent:
(i) Borrower has lawful and absolute title to such
Account;
(ii) such Account is a valid, legally enforceable
obligation of an Account Debtor for goods or services
previously delivered or rendered to such Person;
(iii) there has been excluded from such Account any
portion that is subject to any dispute, offset, counterclaim
or other claim or defense on the part of the Account Debtor
or to any claim on the part of the Account Debtor denying
liability under such Account;
(iv) Borrower has the full and unqualified right to
assign and grant a security interest in such Account to Agent
as security for the Obligation;
(v) such Account is evidenced by (A) an invoice
rendered to the Account Debtor, or (B) chattel paper or by an
exchange or other written agreement, and such Account is not
evidenced by any promissory note or other instrument;
(vi) such Account is subject to a fully perfected first
priority security interest in favor of Agent pursuant to the
Loan Documents, prior to the rights of, and enforceable as
such against, any other Person except for the Interest
Owner's Liens;
(vii) such Account is not subject to any Lien in favor
of any Person other than the Liens of Agent pursuant to the
Loan Documents except for the Interest Owner's Liens;
(viii) such Account arose from a transaction in the
ordinary course of business of Borrower;
(ix) such Account is not outstanding more than 60 days
from the due date;
(x) such Account is not payable by an Account Debtor
with more than twenty percent (20%) of the aggregate Accounts
to Borrower that are more than 60 days past due from the due
date;
(xi) the Account Debtor in respect of such Account is
not (A) primarily conducting business in any jurisdiction
located outside the United States of America, (B) an
Affiliate of Borrower, (C) any governmental authority,
domestic or foreign, or (D) the subject of a proceeding under
any Debtor Laws, except for an Account arising from or
contract with a governmental authority for which Borrower has
complied with the provisions of the Security Agreement;
(xii) in the case of Accounts arising for Exchange
Transactions, there has been excluded from such Account the
amount of all offsets or accounts payable to the Account
Debtor under such Exchange Transaction; and
(xiii) such Account is not the obligation of an
Account Debtor that Agent determines in good faith that there
is a legitimate concern over the timing or collection of such
receivable.
"Environmental Laws" shall mean all federal, state and local
laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, and environmental matters
applicable to Borrower's business and facilities (whether or not
owned by it). Such laws and regulations include but are not
limited to the Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation and Liability
Act, Toxic Substances Control Act, Clean Water Act, Clean Air Act,
Comprehensive Environmental Response, Compensation and Liability
Information System, all state and federal superlien and
environmental cleanup programs, and the U.S. Department of
Transportation regulations.
"Equipment" shall have the meaning given that term in Section
9.109 of the Texas Business and Commerce Code.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, together with all regulations issued
pursuant thereto.
"Event of Default" has the meaning specified in Section 8.01.
"Exchange Transaction" shall mean a transaction in which
Borrower is obligated to deliver a stated quantum of crude oil or
hydrocarbon products in exchange for crude oil or hydrocarbon
products received by it.
"Excess Cash" shall mean for any Calendar Quarter eighty
percent (80%) of the Adjusted Income of Borrower. For purposes of
this definition, the term "Adjusted Income of Borrower" for any
Calendar Quarter means EBITDAR for such Calendar Quarter, minus
Fixed Charges for such period, minus Capital Expenditures permitted
by Section 7.06 hereof actually made during such period.
"Expenses" shall mean all expenses to be paid by Borrower
pursuant to Section 9.05, plus all amounts owing by Borrower under
the Loan Documents which are not included in the definitions of
Notes, Unpaid Drawings, and Fees or are not interest owing on the
Notes or any Unpaid Drawings.
"Facility Fee" has the meaning given it in Section 2.12(a).
"Facility A Letter of Credit" has the meaning given it in
Section 3.01.
"Facility A Letter of Credit Cap" shall mean $6,500,000.
"Facility B Letter of Credit" has the meaning given it in
Section 3.01.
"Facility B Letter of Credit Cap" shall mean $45,000,000.
"Fees" shall mean the Letter of Credit Fee, the Facility Fee,
the Commitment Fees, the Amendment Fees, the Agency Fees, and the
Collateral Monitoring Fee.
"Fixed Charges" shall mean for any Calendar Quarter the sum
of the following, to the extent the following are actually paid by
Borrower during such Calendar Quarter, (i) scheduled principal
payments on the Term Loans, (ii) interest payments on the Notes and
the Convertible Notes, (iii) Commitment Fees, (iv) Letter of Credit
Fees, (v) Collateral Monitoring Fees, (vi) Agency Fees, (vii)
Expenses, (viii) Rentals (to the extent cash payments are made
during such period), (ix) income taxes, (x) scheduled payments of
principal and interest permitted to be made on the Subordinated
Note, (xi) interest charges on premiums for all insurance, (xii)
scheduled payments of principal and interest permitted to be made
on the Government Note, (xiii) scheduled payments of principal and
interest permitted to be made on the D/S Note, (xiv) scheduled
payments permitted to be made on the Indebtedness of Borrower to
AKZO Chemical Inc., (xv) scheduled payments of principal and
interest permitted to be made on the $450,000 Note, (xvi) scheduled
payments of principal and interest on the Indebtedness incurred to
refinance the mortgage indebtedness on the Cedar Building and to
finance renovation and refurbishment of such building, (xvii) to
the extent capitalized by Borrower, Restructuring Fees, and (xviii)
without duplication, all other items of interest pertaining to the
Indebtedness permitted under Section 7.01.
"FLSA" has the meaning specified in Section 5.22.
"Funded Debt" shall mean any obligation for borrowed funds,
which under GAAP is shown as a liability, including but not limited
to borrowings from any bank, savings and loan, insurance company or
other financial institution.
"GAAP" shall mean the generally accepted accounting
principles, practices and procedures, consistently applied from
period to period, which were in use with respect to each Related
Person in its last fiscal year ended prior to the date of this
Agreement; provided, however, that, except as provided herein with
respect to the calculation of the Borrowing Base, Borrower's
Inventory shall be valued on a first in first out (FIFO) basis
rather than a last in first out (LIFO) basis. For purposes of all
computations hereunder, such accepted accounting principles,
practices and procedures shall not be changed. If changed for
purposes of any financial statement or presentation or other uses,
the effect and amount of such change will be clearly set out and
explained.
"Government Accounts" shall mean, at the time of
determination thereof, Accounts of the Borrower as to which the
following requirements have been fulfilled to the reasonable
satisfaction of Agent:
(i) such Accounts meet all of the requirements of
Eligible Receivables;
(ii) such Accounts are outstanding less than 60 days;
and
(iii) such Accounts are not otherwise included in the
calculation of the applicable Borrowing Base; and
(iv) the Account Debtor in respect of such Account is
the United States of America or an agency of the United
States of America and the Borrower has complied with the
provisions of the Security Agreement with respect to such
Account.
"Government Note" shall mean that certain promissory note
dated January 18, 1996 in the original principal amount of
$2,402,296.98, executed by Borrower and payable to Defense Finance
and Accounting Service - Columbus Center (DFAS - CO).
"Government Payable" shall mean the sum of the outstanding
principal balance as of the date of determination of the Government
Note plus any other similar accounts payable of Borrower owed to
the United States of America or an agency of the United States of
America as of the date of determination.
"Guarantors" shall mean, collectively, Pride Refining, Pride
SGP, Desulfur Partnership, Pride Marketing, Pride Borger, and each
other Person who now or hereafter executes a Guaranty in connection
herewith for the benefit of Agent and Lenders.
"Guaranty" of any Person shall mean any contract, agreement
or understanding of such Person pursuant to which such Person
guarantees, or in effect guarantees, any Indebtedness of any other
Person in any manner, whether directly or indirectly, including
without limitation agreements: (i) to purchase such Indebtedness or
any property constituting security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of such Indebtedness,
or (B) to maintain net worth or working capital or other balance
sheet conditions, or otherwise to advance or made available funds
for the purchase or payment of such Indebtedness, (iii) to purchase
property, securities or service primarily for the purpose of
assuring the holder of such Indebtedness of the ability of the
primary obligor to make payment of the Indebtedness, or (iv)
otherwise to assure the holder of the Indebtedness of the primary
obligor against loss in respect thereof; except that "Guaranty"
shall not include the endorsement by Borrower in the ordinary
course of business of negotiable instruments or documents for
deposit or collection.
"Guaranty Agreement" shall mean, collectively, the Restated
Guaranty Agreements executed by Pride Refining, Pride SGP, Desulfur
Partnership, Pride Marketing, and Pride Borger, each dated of even
date herewith, for the benefit of Agent, Lenders and holder of the
Convertible Notes in form satisfactory to Agent.
"Hazardous Substances" has the meaning specified in Section
5.25.
"Indebtedness" shall mean, with respect to any Person, all
indebtedness, obligations and liabilities of such Person, including
without limitation: (i) all "liabilities" which would be reflected
on a balance sheet of such Person, prepared in accordance with
GAAP, (ii) all obligations of such Person in respect of any
Guaranty, (iii) all obligations of such Person in respect of any
Capital Lease, (iv) all obligations, indebtedness and liabilities
secured by any Lien or any security interest on any property or
assets of such Person, (v) all reimbursement obligations with
respect to Letters of Credit.
"Indemnitees" has the meaning specified in Section 6.16.
"Interest Owner's Liens" shall mean the security interest
arising pursuant to Section 9.319 of the Texas Business and
Commerce Code.
"Interest Payment Date" shall mean the fifth of each Month,
beginning on September 5, 1996.
"International Department Office" shall mean 901 Main Street,
9th Floor, NationsBank Plaza, Dallas, Texas 75203, Attention:
International Letters of Credit.
"Inventory" shall mean Borrower's crude oil, other
hydrocarbons, refined products thereof, and proceeds thereof.
"Investment" in any Person shall mean any investment, whether
by means of purchase of any share or interest (including without
limitation an interest in profits or cash flow), loan, advance,
extension of credit, capital contribution or otherwise, in or to
such Person, the Guaranty of any Indebtedness of such Person, or
the subordination of any claim against such Person to other
Indebtedness of such Person.
"Lenders" shall mean NationsBank of Texas, N.A. and Bank One,
as stated in the introductory paragraph hereof.
"Letter of Credit" shall mean any Facility A Letter of Credit
or Facility B Letter of Credit issued, renewed or extended by Agent
pursuant to this Agreement or the Loan Documents, together with any
letter(s) of credit issued, renewed or extended by Agent pursuant
to the Original Credit Agreement.
"Letter of Credit Commitment Fee" shall mean the amounts
provided to be paid by Borrower in Section 3.04(b).
"Letter of Credit Facility" has the meaning specified in
Section 3.01.
"Letter of Credit Fees" shall mean the amounts provided to be
paid by Borrower in Section 3.04(a).
"Letter of Credit Repayment Obligations" at any time shall
mean the aggregate amount of the unfunded Letters of Credit.
"Letter of Credit Request" shall mean the request for Letters
of Credit which shall be in the form of Exhibit "E", properly
completed.
"Lien" shall mean any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention
arrangement, or any other interest in property designed to secure
the repayment of Indebtedness, whether arising by agreement or
under any statute or law, or otherwise.
"Loan Documents" shall mean this Agreement, the Notes
(including any renewals, extensions and refundings thereof), the
Collateral Documents, the Letter of Credit Requests, the CATS
Agreement, each Guaranty and any and all other or additional
agreements or documents (and with respect to this Agreement, and
such other agreements and documents, any amendments or supplements
thereto or modifications thereof) executed or delivered pursuant to
the terms of this Agreement.
"Maturity Date" shall mean the earlier to occur of July 31,
1997 or the date of any Acceleration, provided that beginning on
the Restructuring Trigger Date and at all times thereafter, the
term "Maturity Date" shall mean the earlier to occur of November
30, 1997 or the date of any Acceleration.
"Maximum Rate" shall mean, on any day, the highest
nonusurious rate of interest (if any) permitted by applicable law
on such day that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the
Indebtedness evidenced by the Notes under the laws which are
presently in effect of the United States of America and the State
of Texas applicable to the holders of the Notes and such
Indebtedness or, to the extent permitted by law, under such
applicable laws of the United States of America and the State of
Texas which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
Agent hereby notifies Borrower that, and discloses to Borrower
that, for purposes of Tex. Rev. Civ. Stat. Arm. Art. 5069-1.04, as
it may from time to time be amended, the "applicable rate ceiling"
shall be the "indicated rate" ceiling from time to time in effect
as limited by Art. 5069-1.04(b); provided, however, that to the
extent permitted by applicable law, Agent reserves the right to
change the "applicable rate ceiling" from time to time by further
notice and disclosure to Borrower; and, provided further, that the
"highest nonusurious rate of interest permitted by applicable law"
for purposes of this Agreement and the Notes shall not be limited
to the applicable rate ceiling under Art. 5069-1.04 if federal laws
or other state laws now or hereafter in effect and applicable to
this Agreement and the Notes (and the interest contracted for,
charged and collected hereunder or thereunder) shall permit a
higher rate of interest.
"Month" shall mean calendar month.
"NationsBank of Texas, N.A." shall mean NationsBank of Texas,
N.A., individually and not as Agent hereunder.
"Net Exchange Accounts Payable" means the sum, at the date of
determination, of each account payable under any Exchange
Transaction, if any, which Lenders have determined in their
absolute discretion, is in excess of the Eligible Receivable, if
any, of the same account party under such Exchange Transaction, and
which account payable is either entitled to the benefit of a Letter
of Credit or is otherwise secured by any setoff or Lien.
"Net Government Accounts" means, at the date of
determination, the remainder of (i) the aggregate amount of
Government Accounts, minus (ii) the aggregate amount of Government
Payables, but in no event less than zero.
"Note Agreement" shall mean that certain Note Agreement dated
of even date herewith among Borrower and Lenders.
"Notice of Borrowing" shall have the meaning specified in
Section 2.02(a) hereof.
"Notes" shall mean, collectively, the Revolving Notes, the
Term Notes, and the Uncommitted Line Notes.
"Obligation" means:
(i) all present and future indebtedness, obligations
and liabilities of Borrower to Agent or any Lender including,
but not limited to any indebtedness, obligations or
liabilities arising pursuant to this Agreement, regardless of
whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, joint, several, or joint
and several and including without limitation (A) the Letter
of Credit Repayment Obligations and the rights to Cash
Collateral in connection therewith, (B) Unpaid Drawings, (C)
the Notes, (D) interest on any part of the Obligation, (E)
Expenses, and (F) Fees;
(ii) without limitation of the foregoing, all present
and future indebtedness, obligations and liabilities of
Borrower to Agent or any Lender evidenced by or arising
pursuant to any of the Loan Documents;
(iii) all costs incurred by Agent or any Lender to
obtain, preserve, perfect and enforce the liens and security
interests securing payment of such indebtedness, liabilities
and obligations, and to maintain preserve and collect the
property in which Agent has been granted a Lien to secure
payment of the Revolving Loans, the Term Loans, the Letter of
Credit Facility, and the Uncommitted Lines or any part
thereof, including but not limited to, taxes, assessments,
insurance premiums, repairs, reasonable attorneys' fees and
legal expenses, rent, storage charges, advertising costs,
brokerage fees and expenses of sale; and
(iv) all renewals, extensions and modifications of the
indebtedness referred to in the foregoing clauses, or any
part thereof.
"Original Revolving Notes" shall mean, collectively, (i) that
certain promissory note, dated November 14, 1994, in the original
principal amount of $6,400,000, executed and delivered by Borrower
and payable to the order of NationsBank of Texas, N.A., and (ii)
that certain promissory note, dated November 14, 1994, in the
original principal amount of $1,600,000 executed and delivered by
Borrower and payable to the order of Bank One, together with any
renewals, modifications, extensions and increases thereof.
"Original Term Notes" shall mean, collectively, (i) that
certain promissory note, dated November 14, 1994, in the original
principal amount of $36,000,000, executed and delivered by Borrower
and payable to the order of NationsBank of Texas, N.A., and (ii)
that certain promissory note, dated November 14, 1994, in the
original principal amount of $9,000,000 executed and delivered by
Borrower and payable to the order of Bank One, together with any
renewals, modifications, extensions and increases thereof.
"Other Eligible Receivables" means Eligible Receivables other
than Approved Eligible Receivables, but specifically excluding
Accounts arising under Exchange Transactions.
"Payment Office" shall mean Agent's principal place of
business at 901 Main Street, 13th Floor, NationsBank Plaza, Dallas,
Texas 75202, Attention: Loan Operations, or such other place as
Agent may notify Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation,
and any successor to all or any of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Permitted Indebtedness" shall mean the Indebtedness
permitted in Section 7.01.
"Permitted Liens" shall mean: (i) Liens granted to Agent to
secure the Obligation, (ii) Liens described on Exhibit "F" attached
hereto, (iii) pledges or deposits made to secure payment of
worker's compensation insurance (or to participate in any fund in
connection with worker's compensation insurance), unemployment
insurance, pensions or social security programs, (iv) Liens imposed
by mandatory provisions of law such as for materialmen's,
mechanics', warehousemen's and other like Liens arising in the
ordinary course of business, securing Indebtedness whose payment is
not yet due, (v) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such Person's
income or profits or property, if the same are not yet due and
payable or if the same are being contested in good faith and as to
which adequate cash reserves in accordance with GAAP have been
provided, (vi) Liens arising from good faith deposits in connection
with tenders, leases, real estate bids or contracts (other than
contracts involving the borrowing of money) otherwise permitted
under this Agreement, pledges or deposits to secure public or
statutory obligations and deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar
charges, (vii) encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property,
provided that such items do not impair the use of such property for
the purposes intended, and none of which is violated by existing or
proposed structures or land use, or (viii) Liens arising pursuant
to any depository agreements between Borrower and Agent.
"Person" shall mean an individual, a corporation, a joint
venture, a general or limited partnership, a trust, an
unincorporated organization, limited liability company, a Tribunal
or other legally recognized entity.
"Pipeline Negative Inventory Accrual" means as of the date of
determination shortages in deliveries by Borrower of crude oil at
crude gathering pipeline injection locations from the delivery
obligations as nominated by Borrower under applicable contracts.
"Plan" shall mean an employee benefit plan or other plan
maintained by Borrower for employees of Borrower and covered by
Title IV of ERISA, or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code of 1986, as amended.
"Preferred Units" shall mean, collectively, the Series B
Units and the Series C Units.
"Pride Borger" shall mean Pride Borger, Inc., a Delaware
corporation.
"Pride Marketing" shall mean Pride Marketing of Texas (Cedar
Wind), Inc., a Texas corporation.
"Pride Refining" shall mean Pride Refining, Inc., a Texas
corporation.
"Pride SGP" shall mean Pride SGP, Inc., a Texas corporation.
"Process Agent" shall mean Brad Stephens, whose address is
1209 N. 4th, Abilene, Texas 79601.
"Pro Rata" and "Pro Rata Part" as to each Lender shall mean
its Specified Percentage.
"Purchase Money Security Interest" shall have the meaning set
forth in Section 9.107 of the Texas Business and Commerce Code.
"Redemption Price" shall have the meaning given it in the
Certificate of Designations for Series B Units.
"Refinery Deed of Trust" shall mean that certain Deed of
Trust (with Security Agreement and Assignment of Rents and Leases),
dated as of May 22, 1992, from Borrower and Pride Refining, Inc.,
to Marcia L. Bunnell, as Trustee, for the benefit of Agent, which
instrument is recorded in Book 21, Page 19 of the Deed of Trust
Records of Jones County, Texas, as same may have heretofore been,
may contemporaneously herewith be or may hereafter be, amended,
supplemented or otherwise modified.
"Related Persons" shall mean, collectively, Borrower and each
Guarantor.
"Rentals" of any Person shall mean, as of any date, the
aggregate amount of the obligations and liabilities (including
future obligations and liabilities not yet due and payable) of such
Person to make payments under all leases, subleases and similar
arrangements for the use of real, personal or mixed property.
"Reportable Event" has the meaning specified in Title IV of
ERISA.
"Required Holders" shall mean each of NationsBank of Texas,
N.A. and Bank One, Texas, N.A., so long as it is a holder of any
Note, regardless of the amount held, plus a holder or holders of at
least 51% of the aggregate principal amount of the Notes from time
to time outstanding.
"Restructuring Fees" shall mean fees and expenses incurred in
connection with the conversion by Lenders of Indebtedness to
preferred units of Borrower and in connection with the conversion
by the unitholders of the preferred units of Borrower into at least
95% of the Common Units outstanding as of such conversion and the
unitholders of the common units of Borrower into not more than 5%
of the Common Units outstanding as of such conversion.
"Restructuring Trigger Date" shall mean the date on which the
Partnership Amendment (as defined in the Note Agreement) has been
approved and adopted as the partnership agreement of the Borrower
as contemplated by the Note Agreement and all conditions precedent
to the issuance of the Convertible Notes have been satisfied;
provided that all of the foregoing conditions must have been
completed prior to November 15, 1996.
"Revolver Commitment" shall mean the aggregate maximum
obligation of each Lender to make Advances under this Agreement (as
such commitment may be reduced pursuant to Section 2.04 or at the
applicable Maturity Date) which obligation shall at no time exceed
$8,000,000.
"Revolving Loans" shall mean the obligations of Borrower to
each Lender pursuant to the Revolving Notes.
"Revolving Loan Interest Rate" shall mean (i) from the
Effective Date until but not including the Restructuring Trigger
Date, a rate per annum equal to the lesser of (x) the Base Rate
plus two percent (2%) or (y) the Maximum Rate and (ii) from and
including the Restructuring Trigger Date, a rate per annum equal to
the lesser of (x) the Base Rate plus one and one-half percent
(1.5%) or (y) the Maximum Rate.
"Revolving Notes" shall mean, collectively, the promissory
notes in the form of Exhibit A attached hereto, executed by
Borrower in favor of each Lender, in an original principal amount
equal to such Lender's Pro Rata Part of the Revolver Commitment,
together with any renewals, modifications, extensions and increases
thereof.
"Security Agreement" shall mean the Security Agreement, dated
December 14, 1992, as amended from time to time, executed by
Borrower in favor of the Agent.
"Series A Notes" shall mean the Convertible Senior Secured
Series A Promissory Notes of Borrower in the original aggregate
principal amount of $2,500,000 issued pursuant to the Note
Agreement and the unsecured promissory notes into which the same
may be converted in accordance with the Note Agreement.
"Series B Notes" shall mean the Convertible Senior Secured
Series B Promissory Notes of Borrower in the original aggregate
principal amount of up to $12,500,000 issued pursuant to the Note
Agreement.
"Series B Units" shall mean the Series B Cumulative
Convertible Preferred Units of Borrower into which the Series B
Notes may be converted.
"Series C Notes" shall mean the Convertible Senior Secured
Series C Promissory Notes of Borrower issued pursuant to the Note
Agreement.
"Series C Units" shall mean the Series C Cumulative
Convertible Preferred Units of Borrower into which the Series C
Notes may be converted.
"Specified Percentage" shall mean the following percentage
for each Lender:
NationsBank of Texas, N.A. 80%
Bank One 20%
"Stated Amount" shall mean the face amount of a Letter of
Credit or Letters of Credit.
"Stated Value" shall mean the Stated Value per Series B Unit
or Series C Unit, in each case $1,000 per unit.
"Subordinated Note" and "$450,000 Note" shall have the
meaning specified in Section 7.01.
"Subsidiary" shall mean, with respect to any Person, any
corporation, association, partnership, joint venture, or other
business or corporate entity, enterprise or organization which is
directly or indirectly (through one or more intermediaries)
controlled by or owned fifty percent or more by such Person.
"Suspense Payables" shall mean accounts payable of Borrower
to third parties attributable to the purchase of crude oil by
Borrower from such third parties, which accounts payable are not
being paid by Borrower in the ordinary course of Borrower's
business due to outstanding title, documentation or other causes
beyond the control of Borrower.
"Tangible Net Worth" shall mean Borrower's net worth
determined in accordance with GAAP minus the sum of (i) any surplus
resulting from any write-up of assets (other than any write-up of
assets as provided by GAAP and disclosed on financial statements
with respect to assets of any Person acquired in an acquisition by
any Related Person after the date of this Agreement which after the
date of acquisition are appraised by an independent third party
appraiser at a value in excess of the value given to such assets at
the time of acquisition), (ii) goodwill, including any amounts,
however designated, representing the excess of the purchase price
paid for assets or stock acquired over the book value assigned
thereto, (iii) treasury stock, (iv) patents, trademarks, service
marks, trade names, and copyrights, plus (v) other intangible
assets.
"Taxes" shall mean all taxes, assessments, fees or other
charges from time to time or at any time imposed by any Tribunal.
"Term Loan Interest Rate" shall mean (i) from the Effective
Date until but not including the Restructuring Trigger Date, a rate
per annum equal to the lesser of (x) the Base Rate plus three
percent (3.0%) or (y) the Maximum Rate, and (ii) from and including
the Restructuring Trigger Date, a rate per annum equal to the
lesser of (x) the Base Rate plus two percent (2.0%) or (y) the
Maximum Rate.
"Term Loans" shall mean, collectively, the obligations of
Borrower to each Lender pursuant to the Term Notes.
"Term Note" shall mean a promissory note in the form of
Exhibit "B" attached hereto, executed by Borrower in favor of each
Lender, in the original principal amount equal to such Lender's Pro
Rata part of the Term Loan, together with any renewals,
modifications, extensions and increases thereof. "Term Notes"
shall mean, collectively, the Term Note of both Lenders.
"Texas Plains Pipeline" means that certain pipeline system
consisting of a certain 10" crude oil and gas pipeline, operating
from Hawley, Texas to Borger, Texas, with a certain 6" crude
pipeline operation from McLean Station to Alan Reed Station, along
with selected portions of a gathering pipeline.
"Tribunal" means any state, commonwealth, federal, foreign,
territorial or other court or governmental department, commission
board, bureau, agency or instrumentality.
"Uncommitted Line Note" has the meaning specified in Section
2A.01. "Uncommitted Line Notes" means, collectively, each Lender's
Uncommitted Line Note.
"Unpaid Drawings" has the meaning specified in Section 3.05.
1.02. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
above-defined meanings when used in the Notes or any Loan
Documents, certificate, report or other document made or delivered
pursuant to this Agreement, unless the context shall otherwise
require.
(b) Defined terms used herein in the singular shall import
the plural and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement.
(d) Unless the context shall otherwise require, terms used
herein which are not otherwise defined and which are defined in the
Chapters 1 and/or 9 of the Texas Business & Commerce Code shall
have the meaning therein, and in the event of conflict between such
Chapters 1 and 9, Chapter 9 will prevail.
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING LOANS
AND THE TERM LOANS
2.01. The Advances.
(a) Revolving Loan. Each Lender agrees, severally and
not jointly, on the terms and conditions herein, to make its Pro
Rata Part of the Advances under the Revolver Commitment to Borrower
from time to time during the period from the Effective Date to, but
not including, the Maturity Date of such loan in an aggregate
principal amount not to exceed at any time outstanding the lesser
of (i) the Borrowing Base minus the sum of (x) the unfunded amount
of the outstanding Facility A Letters of Credit, and (y) the Unpaid
Drawings of all Facility A Letters of Credit or (ii) the Revolver
Commitment as such amount may be reduced pursuant to Section 2.04.
Each Advance under the Revolving Loan shall be in an
aggregate amount of $100,000 or an integral multiple thereof;
provided, however, that the initial outstanding principal balance
of the Revolving Note of each Lender shall constitute a renewal and
extension of the outstanding principal balances, as of the
Effective Date, of the Original Revolving Note of each such Lender.
Subject to the terms and provisions hereof, within the limits of
this Agreement, and to and including the Maturity Date, Borrower
may borrow, repay and reborrow Advances under the Revolving Loan.
Advances under the Revolving Loan shall be used by Borrower for
working capital and general corporate purposes, specifically
excluding Capital Expenditures.
(b) Term Loan. The outstanding principal balance of
the Term Note of each Lender shall constitute a renewal and
extension of the outstanding principal balance, as of the Effective
Date, of the Original Term Note of such Lender, being the amount
set forth for such Lender on the Term Loan Schedule (which is
attached to this Agreement). Borrower shall not be entitled to
reborrow, and the Lenders shall not be obligated to loan, any sums
that may be, or have been, repaid on the Term Loan.
Section 2A.01. Uncommitted Line.
(a) Making Special Advances. Lenders may elect, in
their sole discretion, to make advances ("Special Advances") from
time to time to Borrower upon a request by Borrower. Borrower must
give Agent at least one Business Day's prior written notice, or
telephonic notice promptly confirmed in writing, of any requested
Special Advance. Each request for a Special Advance must be in an
aggregate amount of $100,000 or an integral multiple thereof.
Notwithstanding any course of dealing between Borrower or any
Lender or any Prior Special Advance made by a Lender, and
notwithstanding anything contained in this Agreement or any other
Loan Document to the contrary, no Lender has any obligation or
commitment whatsoever to make any Special Advance to Borrower, and
any Special Advance made by a Lender shall be made solely in the
discretion of such Lender.
(b) Uncommitted Line Notes. The obligation of Borrower
to repay to each Lender the aggregate amount of the Special
Advances made by such Lender (such Lender's "Uncommitted Line"),
together with interest accruing in connection therewith, shall be
evidenced by a single promissory note (such Lender's "Uncommitted
Line Note") made by Borrower to the order of such Lender in the
form of Exhibit M with appropriate insertions. The principal
balance from time to time outstanding under each Lender's
Uncommitted Line shall bear interest at a rate per annum equal to
the lesser of (x) the Base Rate plus four percent (4%) or (y) the
Maximum Rate.
(c) Repayment. During a period of fifteen consecutive
days in each Month, beginning with the first Month in which a
Special Advance is made, Borrower shall not borrow under the
Uncommitted Line, and at the beginning of each such fifteen day
period, Borrower shall prepay in full the then outstanding
aggregate principal balance under each Lender's Uncommitted Line,
plus all interest then accrued and unpaid on the principal so
prepaid. The outstanding principal balance of each Lender's
Uncommitted Line, together with all accrued and unpaid interest
thereon, shall be due and payable in full on the Maturity Date.
2.02. Making the Advances.
(a) Notice. Each Borrowing shall be made by
telephonic notice to Agent not later than 11:00 a.m. (Dallas, Texas
time) on the date of such Borrowing, confirmed on the same day by
written notice confirming amounts of each of the Advances
comprising such Borrowing, the date of such Borrowing and whether
the Advance is a Revolving Loan or a Term Loan, ("Notice of
Borrowing"), in the form of Exhibit "C" attached hereto, from
Borrower to Agent. Subject to the other terms and conditions
hereof, Agent will make such funds available to Borrower on the
date of such Borrowing by, at Borrower's option (i) wiring such
funds to or for the account of Borrower at the direction of
Borrower or (ii) depositing such funds in Borrower's account with
Agent.
(b) Notice Irrevocable. Each Notice of Borrowing
shall be irrevocable and binding on Borrower.
2.03. Commitment Fees. Borrower agrees to pay to Agent a
Commitment Fee, to be divided among the Lenders on a Pro Rata
basis, on the average daily unused portion of the Revolver
Commitment from the Effective Date to and including the Maturity
Date at the rate of one-half of one percent (0.5%) per annum. For
purposes of this Section 2.03, the "unused portion of the Revolver
Commitment" shall be equal to the Revolver Commitment minus (x) all
outstanding Advances and (y) the Facility A Letter of Credit Cap.
All of such Commitment Fees shall be due and payable to Agent
monthly in arrears on the fifth day of each Month, commencing on
September 5, 1996 and continuing on the fifth day of each Month
thereafter until, and including, the Maturity Date.
2.04. Reduction and Termination.
(a) Mandatory Reduction. On the Maturity Date, the
Revolver Commitment shall be reduced to zero.
(b) Optional Reduction. Borrower shall have the
right, upon at least two (2) Business Days' written notice to
Agent, to reduce the unused portion of the Revolver Commitment
provided that each partial reduction shall be in an aggregate
amount of $100,000 or an integral multiple, thereof.
(c) Optional Termination. Borrower shall have the
right, upon at least five (5) Business Days' written notice to
Agent, to terminate the Revolver Commitment in whole.
2A.04. Blocked Account. Each Related Person shall
cause all Account Debtors to remit all payments, or shall cause all
checks, notes, drafts, instruments or other payments received by
such Related Person to be deposited, into a controlled access
(Agent only) account (the "Blocked Account") established by the
Related Persons with Agent. If any Related Person receives payment
of all or any portion of any Account, such Related Person shall
notify Agent immediately and shall hold all checks, notes, drafts,
instruments or other payments so received in trust for Agent and
shall either deposit such payments into the Blocked Account or
deliver to Agent such checks, notes, drafts, instruments or other
payments in the exact form received, together with any necessary
endorsement, without delay. Each Related Person shall notify all
Account Debtors and take other necessary or appropriate means to
insure that all Accounts shall be paid directly to the Blocked
Account. All invoices issued by any Related Person shall plainly
state on their face that amounts payable thereunder are payable
only to the Blocked Account. Immediately following the close of
business on each Business Day occurring from the 18th until and
including the 25th of each calendar month, Borrower shall provide
by telecopy to each Lender a copy of the on-line computer schedule
available to Borrower which reflects each wire transfer of funds
made into or out of the Blocked Account during such Business Day.
Borrower further agrees to specify the applicable Account Debtor
opposite to each wire transfer reflected on such schedule.
Borrower shall also furnish to each Lender, which so requests, as
soon as available, and in any event not later than the last
Business Day of each calendar month, copies of all wire
confirmations received by Borrower during such calendar month.
On each Business Day, Agent shall, without further
notice to or instructions or consent by Borrower, withdraw all
collected funds on deposit in the Blocked Account and apply such
amounts (i) first to accrued unpaid interest, and (ii) then to the
outstanding principal amount of the Uncommitted Line and (iii) then
to the outstanding principal amount of the Revolving Loans. Any
principal prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.
2.05. Repayment and Interest.
(a) Repayment. Borrower shall repay the outstanding
principal balances of the Revolving Loan and the Term Loan,
together with accrued interest from time to time outstanding on
such outstanding principal balances, as follows:
(i) Revolving Loans. All accrued and unpaid
interest on the Revolving Loans shall be due and payable on
the fifth day of each Month, commencing on September 5, 1996,
and continuing on the fifth day of each Month thereafter
until the Maturity Date. The outstanding principal balance
of the Revolving Loans, together with all accrued and unpaid
interest thereon, shall be due and payable in full on the
Maturity Date.
(ii) Term Loans. All accrued and unpaid
interest on the Term Loans shall be due and payable on the
fifth day of each Month, commencing on September 5, 1996, and
continuing on the fifth day of each Month thereafter until
the Maturity Date. The outstanding principal balance of the
Term Loans shall be due and payable in monthly installments
equal to $120,000. Such monthly installments shall be due
and payable on or before the fifth day of each Month,
commencing on September 5, 1996 and continuing on the fifth
day of each Month thereafter. In addition to, and not in
lieu of, the foregoing monthly installments, beginning on
December 5, 1996 and on each March 5, June 5, September 5,
and December 5 thereafter, Borrower shall make a payment
equal to the Excess Cash of Borrower calculated as of the
last day of the immediately preceding Calendar Quarter.
(b) Interest Rates. The Revolving Loans and the Term
Loans shall bear interest, and Borrower shall pay interest thereon,
at the following rates:
(i) Revolving Loans. The principal balance from
time to time outstanding under the Revolving Loans shall bear
interest at the Revolving Loan Interest Rate.
(ii) Term Loans. The principal balance from
time to time outstanding under the Term Loans shall bear
interest at the Term Loan Interest Rate.
(iii) Maximum Rate Interest Adjustments.
Notwithstanding the foregoing provisions of this Section
2.05(b), if the amount of interest payable hereunder on any
Interest Payment Date in respect of the immediately preceding
interest computation period would, if based solely upon the
Base Rate plus the applicable percentage increase, exceed the
maximum amount allowed by law, the amount of interest payable
on such interest payment date shall be automatically reduced
to the maximum amount allowed by law. If the amount of
interest payable hereunder in respect of any interest
computation period is reduced based upon the Maximum Rate or
the maximum amount of interest allowed by law and the amount
of interest payable hereunder in respect of any subsequent
interest computation period would be less than the maximum
amount allowed by law, then the amount of interest payable
hereunder in respect of such subsequent interest computation
period shall be automatically increased to such maximum
amount allowed by law, until such time as the interest that
would have been payable under the immediately preceding
sentence is fully paid.
(iv) Maturity. Each Advance and any other
amount becoming due hereunder, by acceleration or otherwise,
shall bear interest after maturity or date due at a rate per
annum equal to the Default Rate.
2.06. Prepayments.
(a) Optional Prepayments. Borrower may prepay,
without penalty, the Advances in whole or ratably in part. Each
such partial prepayment shall be in an aggregate principal amount
of not less than $100,000 and shall be applied to the outstanding
Advances in the inverse order in which such Advances were made. If
Agent so requests, Borrower shall also pay accrued interest to the
date of prepayment on the Advances being prepaid.
(b) Mandatory Prepayments.
(i) If at any time the outstanding principal
amount of the Revolving Loans exceeds the then-effective
Borrowing Base, minus (i) the unfunded amount of the
outstanding Facility A Letters of Credit and (ii) the Unpaid
Drawings of all Facility A Letters of Credit (such excess
being referred to herein as a "Borrowing Base Deficiency"),
then Borrower shall immediately make a mandatory prepayment
in the amount of such Borrowing Base Deficiency;
(ii) Borrower shall immediately prepay the
outstanding principal amount, if any, of the Revolving Loans
which at any time exceeds the Revolver Commitment as such
amount may be reduced pursuant to Section 2.04;
(iii) Prior to Restructuring Trigger Date,
Borrower shall immediately deliver the proceeds (net of
expenses), to the extent such proceeds are not included in
Borrower's net income for purposes of the calculation of
Excess Cash, to Agent from any of the following:
(1) issuance of additional common or preferred
units of Borrower;
(2) any placement of debt securities by Borrower
(but without waiving the requirements of Agent's
consent to the incurrence of Indebtedness in
violation of any Loan Document);
(3) any sale, assignment or other disposition of
any property, rights, assets or business of
Borrower or any Guarantor (but without waiving
the requirements of Agent's consent to any sale,
assignment or other disposition in violation of
any Loan Document), except (A) proceeds which are
less than $25,000 in the case of any single sale,
assignment or disposition or (B) proceeds of a
sale, assignment or disposition of tangible
personal property which are applied within 30
days of receipt to the acquisition of replacement
tangible personal property of similar use and
suitability;
(4) the Borrower's interest in any settlement,
award or other payment under the DFSC Claim; and
(5) any other sources of funds to Borrower other
than operating revenues.
All amounts received by Agent under this Section
2.06(b)(iii) shall be applied as follows: first, as a
prepayment of the outstanding principal amount of the
Term Loan; second, to the extent the Term Loan has been
repaid, as a prepayment of the outstanding principal
amount of the Revolving Loan; and third, to the extent
the Term Loan has been repaid and no Advances are
outstanding under the Revolving Loan, as a deposit to
the Cash Collateral Account as security for the Letter
of Credit Repayment Obligations. Each prepayment of
the Term Loan shall be applied to the regular
installment of principal due under the Term Notes in
the inverse order of their maturities. Notwithstanding
the foregoing, upon the occurrence of and during the
continuation of an Event of Default, payments received
by Agent shall be applied in such manner as the
Determining Lenders elect in their
sole discretion. Any amount of the Revolving Loan
prepaid under this Section 2.06(b)(iii) may not be
reborrowed, and the Revolving Commitment shall be
permanently reduced by the amount of any such payment.
(iv) The interest of Pride SGP or Pride Refining in
any settlement, award or other payment under the DFSC Claim
shall be delivered to Agent to be held as cash collateral to
secure the Obligations under a Security Agreement
satisfactory to Agent which creates, and maintains at all
times, a perfected first priority security interest in such
proceeds.
(c) Application of Funds by Borrower after the
Restructuring.
(i) After the Restructuring Trigger Date, all Adjusted
Cash Proceeds received by Borrower or any of its Subsidiaries
shall be applied (or converted into cash and then applied, if
applicable) by Borrower (1) first to the repayment of
principal and accrued interest outstanding under the Term
Loan, (2) then to the repayment of principal and accrued
interest outstanding under the Series A Notes (whether or not
then due) until all principal and accrued interest under the
Series A Notes has been paid, and (3) then to the repayment
of principal and accrued interest outstanding under the
Series B Notes (whether or not then due) or, if applicable,
to the redemption of outstanding Series B Units in accordance
with Section 6 of the Certificate of Designations; provided,
however, that if Determining Lenders under the Term Loan do
not require the application described in clause (1) of this
subparagraph, such funds shall be applied in the order
provided in clauses (2) and (3). Each prepayment of the Term
Loan shall be applied fifty percent (50%) to the regular
installments of principal due under the Term Loan in order of
their maturity and fifty percent (50%) to regular
installments of principal due under the Term Notes in the
inverse order of their maturities. The non-cash
consideration received by Borrower or any of its Subsidiaries
with respect to any transaction that is outside the ordinary
course of business (each a "Transaction", including but not
limited to consideration for or in connection with the sale,
lease, transfer or other disposition of any assets or
properties of
Borrower (other than the sale of goods and services in the
ordinary course of business), but excluding any Litigation
Settlements or Equity Offerings), shall not exceed twenty
percent (20%) of the aggregate consideration received by
Borrower or its Subsidiaries with respect to such
Transaction. Any non-cash consideration received by Borrower
or any of its Subsidiaries from any Transaction shall be
pledged by Borrower or such Subsidiary for the benefit of
Agent and Lenders, and upon the conversion of such
consideration to cash, the cash proceeds shall be applied as
set forth above in this Section 2.06(c)(i).
(ii) All consideration received by Borrower or any of
its Subsidiaries after the Restructuring Trigger Date in
connection with the resolution (by judgment or otherwise) or
settlement of any judicial, administrative or arbitral
proceeding ("Litigation Settlements") shall be applied (or
converted into cash and then applied, if applicable) by
Borrower (1) first to the repayment of principal and accrued
interest outstanding under the Series A Notes, (2) then, up
to a maximum of $5.0 million in the aggregate, to the
repayment of principal and interest outstanding under the
Series B notes (whether or not then due) or, if applicable,
to the redemption of outstanding Series B Units in accordance
with Section 6 of the Certificate of Designations, (3) then,
up to a maximum of $7.5 million in the aggregate, to the
repayment of principal and interest outstanding under the
Term Loan, and (4) then to the repayment of principal and
interest outstanding under the Series B Notes (whether or not
then due) or, if applicable, to
the redemption of remaining Series B Units in accordance with
Section 6 of the Certificate of Designations; provided,
however, that funds applied to the redemption of Series B
Units as provided in clauses (2) and (4) shall be so applied
with respect to the initial Stated Value of the Units being
redeemed and any portion of the Redemption Price of such
Units attributable to adjustments to Stated Value shall be
paid out of other funds of Borrower. Each prepayment of the
Term Loan shall be applied fifty percent (50%) to the regular
installments of principal due under the Term Loan in order of
their maturity and fifty percent (50%) to regular
installments of principal due under the Term Notes in the
inverse order of their maturities.
(iii) Except as provided in the next succeeding
sentence, all proceeds of public or private offerings of
equity securities (by Borrower ("Equity Offerings"),
including without limitation any Rights Offering, as defined
in Section 11 of the Certificate of Designations), shall
consist of cash and shall be applied to the reduction of Term
Loans or Series A Notes, or the redemption of outstanding
Series B Units in accordance with Section 6 of the
Certificate of Designations.
Borrower may use up to $4.5 million, in the aggregate of
proceeds of Equity Offerings for capital expenditures in
excess of normal maintenance capital expenditures if, out of
every dollar so applied, no more than sixty percent (60%) is
applied to such excess capital expenditures and at least
forty percent (40%) is applied first to the repayment of
principal and interest outstanding under the Series A Notes,
and second to the repayment of principal and interest
outstanding under the Series B Notes or, if applicable,
redemption of outstanding Series B Units in accordance with
Section 6 of the Certificate of Designations. Funds applied
to the redemption of Series B Units as provided in clause
(ii) of the preceding sentence shall be so applied with
respect to the initial Stated Value of the Units being
redeemed and any portion of the Redemption Price of such
Units attributable to adjustments to Stated Value shall be
paid out of other funds of Borrower.
2.07. Borrowing Base.
(a) Initial Borrowing Base. During the period from
the Effective Date until the first redetermination of the Borrowing
Base by Agent, the Borrowing Base shall be $8,000,000.
(b) Subsequent Determinations of Borrowing Base.
Promptly after receiving each Borrowing Base Certificate, Agent
shall, based upon such Borrowing Base Certificate and such other
information, reports and data available to Agent at the time in
question, redetermine the Borrowing Base to remain in effect until
the next such redetermination. In the event Agent has not received
an appropriately completed Borrowing Base Certificate (with all
attachments) within the time periods specified herein, Agent shall
have no obligation to redetermine the Borrowing Base nor shall
Lenders have any obligation to make any additional Advances until
such time as Agent shall have received such information.
2.08. Payments and Computations.
(a) Time of Payment. Borrower shall make each payment
hereunder and under the Notes not later than 11:30 A.M. (Dallas,
Texas time) on the day when due in lawful money of the United
States of America to Agent at its Payment Office in immediately
available funds. For purposes of determining the time of payment
only, receipt by Agent of a Federal Reserve reference number with
respect to a payment by Borrower will be deemed to be receipt by
Agent of such payment.
(b) Computation of Interest and Fees. All
computations of interest, as well as the computation of the
Commitment Fees, shall be made by Agent on the basis of a year of
365 or 366 days, as the case may be, in each case for the actual
number of days (including the first day but excluding the last day)
occurring in the period for which such interest or Commitment Fees
are payable.
c) Business Day Payment. Whenever any payment to be
made hereunder or under the Notes shall be stated to be due on a
day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest
and/or Commitment Fees, as the case may be.
2.09. Notation on Schedule. Each Lender shall, and is
hereby authorized by Borrower to, place appropriate notations on
the schedule to the Notes evidencing the date, amount and maturity
of each Advance and the amount of each payment of principal;
provided, however, the failure of any Lender to make any such
notation shall not limit or otherwise affect the obligations of
Borrower under the Notes or this Agreement.
2.10. Conditions to Advances. In addition to those matters
set forth in Article IV, the obligation of each Lender to make any
Advance under this Agreement shall be subject to the following
conditions precedent as of the date of making such Advance and
after taking into account the effect of making such Advance:
(a) No Default. No Default or Event of Default shall
exist and be continuing.
(b) Compliance with Agreement. Each Related Person
shall have performed and complied with all agreements and
conditions contained herein and in each of the Loan Documents which
are required to be performed or complied with by such Related
Person before or on the date hereof or the date required for such
compliance, as applicable.
(c) No Material Adverse Effect. No change that would
cause a material adverse effect on the business, financial
condition or prospects of any Related Person shall have occurred
since the date of the financial statements referenced in Section
5.06.
(d) Representations and Warranties. The
representations and warranties contained herein and in each of the
Loan Documents shall be true in all respects on the date hereof,
and the delivery of each Notice of Borrowing shall be deemed to be
a representation and warranty by Borrower that such Advance may be
made in accordance with, and will not violate the requirements of,
this Agreement.
(e) Borrowing Base Certificate. Borrower shall have
delivered to Agent the most recent Borrowing Base Certificate
pursuant to the requirements of Section 6.01(c).
2.11. Pro Rata Treatment. Except as provided in this
Agreement to the contrary, each payment received by Agent hereunder
for the account of Lenders, or either of them, on the Revolving
Notes, the Term Notes, or the Uncommitted Line Notes, as the case
may be, shall be distributed to each Lender entitled to share in
such payment Pro Rata; provided, however, in the event that any
Lender other than NationsBank of Texas, N.A. shall have failed to
make an Advance as contemplated under Section 2.01 hereof and
NationsBank of Texas, N.A. shall have made such Advance in
accordance with Section 2.01 hereof, payment received by Agent for
the account of such Lender or Lenders shall not be distributed to
such Lender or Lenders, but shall be distributed to NationsBank of
Texas, N.A. until such Advance(s) made by NationsBank of Texas,
N.A. shall have been repaid in full. Unless Agent shall have
received notice from Borrower prior to the date on which any
payment is due to Lenders hereunder that Borrower will not make
such payment in full, Agent may assume that Borrower has made such
payment in full to Agent on such date and Agent may, in reliance
upon such assumption, cause to be distributed to each Lender on
such date an amount equal to the amount then due such Lender. If,
and to the extent that, Borrower shall not have so made such
payment in full to Agent, each Lender shall repay to Agent
forthwith on demand such amount distributed to such Lender together
with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such
amount to Agent, at the rate applicable to such portion of the
applicable Revolving Loan or the applicable Term Loan.
From and after the Maturity Date, any and all foreclosure
proceeds or other collections by the Agent or either of the Lenders
from or with respect to any liquidation of any collateral securing
the Obligation shall be divided among the Lenders on a pro rata
basis.
2.12. Fees.
(a) Facility Fee. Borrower agrees to pay to Agent a
facility fee (the "Facility Fee"), to be divided among the Lenders
on a Pro Rata basis, on the earlier to occur of the Maturity Date
and the date of repayment of the Term Loans in full. The Facility
Fee shall be determined on a daily basis by applying a rate per
annum of five percent (5%) to the outstanding principal amount of
the Term Loans. The Lenders shall forgive the Facility Fee,
regardless of when such Facility Fee accrued, on the Restructuring
Trigger Date.
(b) Agency Fees. Borrower agrees to pay to the Agent
agency fees, to be retained exclusively by the Agent, as follows
during the term of this Agreement: $25,000 due and payable to the
Agent on each June 15 and December 15, beginning on December 15,
1996, and continuing regularly thereafter.
(c) Amendment Fee. Borrower agrees to pay to Agent an
amendment fee, to be divided among the Lenders on a Pro Rata basis
in the amount of $600,000 (less $200,000 previously paid by
Borrower). The amendment fee shall be due and payable on the
Effective Date. Any amount of amendment fee paid by Borrower shall
be credited against the amount of Facility Fee owed by Borrower
pursuant to the immediately preceding subparagraph (a).
(d) Monitoring Fee. Borrower agrees to pay to Agent
a monthly monitoring fee, to be retained exclusively by the Agent,
in the amount of $10,000, to be paid to Agent on the fifth day of
each Month.
2.13. Existing Collateral. Borrower and each Guarantor
hereby acknowledge, ratify and confirm that each and every security
agreement, mortgage, deed of trust, assignment, pledge, financing
statement, stock or bond power or other security document or
instrument heretofore executed by Borrower or such Guarantor in
favor of the Agent or either Lender, as security for the
obligations of Borrower or either Guarantor, or any of them, under
the Original Credit Agreement or otherwise (including, without
limitation, the Refinery Deed of Trust), do and shall also secure
(i) the Obligation and each all other or additional liabilities of
Borrower and each Guarantor, or any of them, hereunder or under the
Loan Documents and each part of the Obligation and such other
liabilities and any and all renewals, extensions, modifications and
amendments thereof or thereto and (ii) the Convertible Notes on a
pari passu basis for the ratable benefit of the Lenders and the
holders of the Convertible Notes.
ARTICLE III
LETTERS OF CREDIT
3.01. Letters of Credit.
(a) Commitment. Subject to and upon the terms and
conditions herein set forth, Borrower, at any time and from time to
time on or after the date hereof and prior to the applicable
Maturity Date, may request that Agent issue, renew or extend, and
Agent shall issue, renew or extend, for the account of Borrower one
or more irrevocable standby Letters of Credit (the "Letter of
Credit Facility"). Borrower reserves the right to cancel all or
any portion of the foregoing commitment to issue, renew or extend
Letters of Credit by giving five (5) days prior written notice to
Agent. Letters of Credit may be issued for the following purposes:
(i) to support obligations of Borrower for crude
purchases and arising under Borrower's Exchange Transactions
(each such Letter of Credit called a "Facility B Letter of
Credit") or
(ii) (A) to support obligations of Borrower in respect
of performance bonds, statutory bonds or premiums for
insurance policies, in each case arising in the ordinary
course of Borrower's business, or to support other
obligations of Borrower arising in the ordinary course of
Borrower's business other than obligations described in the
immediately preceding clause (i), provided that the unfunded
amount of all outstanding Letters of Credit for such purposes
and all Unpaid Drawings of all Letters of Credit for such
purposes does not exceed $2,500,000 at any time, or
(B) to support obligations of Borrower for
purchases of crude oil and other refinery feed stocks into
the refinery known as the Pride Refinery, located in Jones
County, Texas, and where, on the date of issuance of such
Letter or Credit, if such Letter of Credit were issued as a
Facility B Letter of Credit the outstanding Facility B
Letters of Credit plus Unpaid Drawings of all Facility B
Letters of Credit would exceed the then applicable Facility
B Letter of Credit Cap, provided that the unfunded amount of
all outstanding Letters of Credit for such purposes and all
Unpaid Drawings of all Letters of Credit for such purposes
does not exceed $4,000,000 at any time (each such Letter of
Credit under this clause (ii) called a "Facility A Letter of
Credit").
(b) Facility A Letter of Credit Conditions.
Notwithstanding the foregoing, Agent shall not be obligated to
issue, renew or extend a Facility A Letter of Credit:
(i) unless Agent has received either a properly
completed Letter of Credit Request executed by Borrower or a
CATS Request;
(ii) if a condition precedent under Section 3.02
or 4.01 shall not be met on such date;
(iii) if the Stated Amount of such Facility A
Letter of Credit, when added to the sum of the unfunded
amount of all outstanding Facility A Letters of Credit plus
Unpaid Drawings of all Facility A Letters of Credit at such
time would exceed the then-applicable Facility A Letter of
Credit Cap; or
(iv) if the Stated Amount of such Facility A
Letter of Credit, when added to the sum of the unfunded
amount of all outstanding Facility A Letters of Credit plus
Unpaid Drawings of all Facility A Letters of Credit at such
time would exceed the Borrowing Base minus the aggregate
outstanding Advances under the Revolving Loans.
(c) Facility B Letter of Credit Conditions.
Notwithstanding the foregoing, Agent shall not be obligated to
issue, renew or extend a Facility B Letter of Credit:
(i) unless Agent shall have received either a
properly completed Letter of Credit Request executed by
Borrower or a CATS Request;
(ii) if a condition precedent under Section 3.02
or 4.01 shall not be met on such date; or
(iii) if the Stated Amount of such Facility B
Letter of Credit, when added to the sum of the unfunded
amount of all outstanding Facility B Letters of Credit plus
Unpaid Drawings of all Facility B Letters of Credit at such
time would exceed the then applicable Facility B Letter of
Credit Cap.
3.02. Conditions to Letter of Credit Facility. The
obligation of Agent to issue, renew or extend any Letter of Credit
under this Agreement shall be subject to the following additional
conditions precedent as of the date of the issuance, renewal or
extension of such Letter of Credit and after taking into account
the effect of such Letter of Credit:
(a) No Default. No Default or Event of Default shall
exist and be continuing.
(b) Compliance with Agreement. Each Related Person
shall have performed and complied with all agreements and
conditions contained herein and in each of the Loan Documents which
are required to be performed or complied with by such Related
Person before or on the date hereof.
(c) No Material Adverse Effect. No change that would
cause a material adverse effect on the business, financial
condition or prospects of any Related Person shall have occurred
since the date of the financial statements referenced in Section
5.06.
(d) Representations and Warranties. The
representations and warranties contained herein and in each of the
Loan Documents shall be true in all respects on the date hereof,
and the making of each Letter of Credit Request shall be deemed to
be a representation and warranty by Borrower that such Letter of
Credit may be issued in accordance with, and will not violate the
requirements of this Agreement. Borrower shall use its best
efforts to provide Lenders a representation and warranty from the
beneficiary of such Letter of Credit that no Indebtedness of
Borrower to such beneficiary is past due. In addition, the chief
executive officer and chief financial officer of Borrower shall
each represent and warrant for the benefit of Agent and Lenders
that no Indebtedness of Borrower to the beneficiary of such Letter
of Credit is past due.
(e) Borrowing Base Certificate. Borrower shall have
delivered to Agent the most recent Borrowing Base Certificate
pursuant to the requirements of Section 6.01(c).
(f) Letter of Credit Request. Borrower shall have
delivered a duly executed Letter of Credit Request at least two (2)
Business Days prior to date the Letters of Credit are to be issued,
renewed or extended.
3.03. Terms of Letters of Credit:
(a) The Letters of Credit shall be in the form of
Forms "E-1", "E-2", "E-3", "E"-4, "E-5" and "E-6" in Exhibit "E"
(as Borrower shall select in the Notice of Borrowing), or such
other form as shall be acceptable to Agent, subject to the
conditions of this Agreement and properly completed, unless Agent
agrees otherwise.
(b) The expiry date of a Facility A Letter of Credit
shall not be later than the earlier of: (i) one year from the date
such Facility A Letter of Credit is issued or (ii) the Maturity
Date (as then known); provided that the expiry date of any Facility
A Letter of Credit issued for the benefit of the Texas Water
Commission shall not be later than October 31, 1997. The expiry
date of a Facility B Letter of Credit shall not be later than the
earlier of: (i) 90 days from the date such Facility B Letter of
Credit is issued or (ii) the Maturity Date (as then known).
(c) This Agreement and each Letter of Credit issued,
renewed or extended hereunder shall be supplemented by the
provisions (to the extent that such provisions are consistent with
the provisions of this Agreement) of the Uniform Customs and
Practices for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publication No. 500, and any subsequent
revisions thereof approved by a Congress of the International
Chamber of Commerce and adhered to by Agent.
(d) Notwithstanding the provisions of any application
and agreement for Letters of Credit or similar document which
Borrower may execute and deliver to Agent, the provisions of this
Agreement shall govern Letters of Credit issued, renewed or
extended hereunder.
(e) Agent may amend, renew, and extend any Letter of
Credit, upon receipt of the necessary instructions from Borrower as
Agent may require.
(f) Any Letter of Credit that was issued, renewed or
extended pursuant to the Original Credit Agreement shall constitute
a Letter of Credit for purposes of this Agreement, regardless of
whether same is renewed or extended under, or pursuant to, the
Letter of Credit Facility.
3.04. Fees.
(a) Issuance Fees. Borrower shall pay to Agent at
Agent's International Department Office, a letter of credit
issuance fee for each Letter of Credit that is issued and/or
outstanding from time to time hereunder in an amount equal to the
greater of: (i) $250.00 per Letter of Credit or (ii) one and one-
half percent (1.5%) per annum of the Stated Amount with respect to
each Letter of Credit.
(b) Letter of Credit Commitment Fee. Borrower agrees
to pay to Agent at the Payment Office a Letter of Credit Commitment
Fee, to be divided among the Lenders on a Pro Rata basis, equal to
the sum of (i) one-half of one percent (0.5%) per annum of an
amount equal to (x) the then-applicable Facility A Letter of Credit
Cap minus (y) the daily average amount of the unexpired and undrawn
Stated Amount of the Facility A Letters of Credit during the period
for which such Letter of Credit Commitment Fee is calculated, plus
(ii) one-half of one percent (0.5%) of an amount equal to (x) the
then-applicable Facility B Letter of Credit Cap minus (y) the daily
average amount of the unexpired and undrawn Stated Amount of the
Facility B Letters of Credit during the period for which such
Letter of Credit Commitment Fee is calculated.
(c) Payment Date. All accrued and unpaid Letter of
Credit Fees and Letter of Credit Commitment Fees shall be due and
payable in arrears on the fifteenth day of each Month, with any
outstanding balance to be due and payable in full on the Maturity
Date.
3.05. Agreement to Repay Letter of Credit Drawings.
(a) Borrower hereby agrees to reimburse Agent in
immediately available funds at the International Department Office,
for any payment made by Agent under any Letter of Credit (each such
amount so paid until reimbursed, an "Unpaid Drawing") on the date
of such payment, together with interest on the amount so paid by
Agent to the extent not reimbursed prior to 2:00 p.m. (Dallas,
Texas time) on the date of such payment, from and including the
date paid by Agent to but excluding the date reimbursement is made
as provided above, at a rate per annum equal to the lesser of: (i)
the Default Rate for Revolving Loans if not reimbursed by 2:00 p.m.
(Dallas, Texas time) on the third Business Day following any such
payment or (ii) the Maximum Rate, such interest to be payable on
demand.
(b) Borrower's obligations under this Section 3.05 to
reimburse Agent with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which Borrower may have or have
had against Agent, including, without limitation, any defense based
upon the failure of any drawing under a Letter of Credit to conform
to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing;
provided, however, that Borrower shall not be obligated to
reimburse Agent for any wrongful payment made by Agent under a
Letter of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of Agent.
3.06. Increased Costs. If at any time after the date
hereof, the introduction of or any change in any applicable law,
rule or regulation or in the interpretation or administration
thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any
Lender with any request or directive by any such authority (whether
or not having the force of law) shall either (i) impose, modify or
make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued, or participated in,
by such Lender or any participant, or (ii) impose on such Lender or
any participant any other conditions affecting this Agreement or
any Letter of Credit; and the result of any of the foregoing is to
increase the cost to such Lender or any participant of issuing,
maintaining or participating in any Letter of Credit, or reduce the
amount of any sum received or receivable by such Lender or any
participant hereunder or in respect of any participation with
respect to Letters of Credit, then, upon demand (which demand shall
be given by Agent promptly after it receives notice from such
Lender of such increased cost or reduction is applicable to Letters
of Credit to Borrower), Borrower shall pay to Agent such additional
amount or amounts as will compensate such Lender for such increased
cost or reduction. A certificate submitted to Agent and Borrower
by such Lender, setting forth in reasonable detail the basis for
the calculation of such additional amount or amounts necessary to
compensate such Lender or such participant as aforesaid shall be
conclusive and binding on Borrower absent manifest error.
3.07. Additional Terms. Borrower agrees that: (a) if
partial drawings are permitted in any Letter of Credit, Agent may
honor the drafts on qualified drawings without inquiry; (b) if
Borrower requests or consents to any extension of the maturity or
time for negotiation or presentation of drafts or documents, to any
increase in the aggregate amount of credit in any Letter of Credit,
or to any other modification of the terms of the Letter of Credit,
then this Agreement shall be binding on Borrower as to such
extension, increase, or other modification; and (c) Agent may
accept or pay any draft dated on or before the expiration of any
time limit expressed in the Letter of Credit regardless of when
drawn and when or whether negotiated, provided the other required
documents are dated prior to the expiration date of the Letter of
Credit and provided that the drawing is negotiated or presented on
or before the expiry date.
3.08. Other Conditions. Borrower agrees that Agent shall
not be responsible for (a) the validity, sufficiency or genuineness
of documents or of any endorsements thereon even if such documents
should in fact prove to be in any respect invalid, insufficient,
fraudulent or forged; (b)failure of any draft to bear any reference
or adequate reference to the Letter of Credit, or failure of
documents to accompany any draft negotiation, or failure of any
Person to note the amount of any draft on the reverse side of the
Letter of Credit or to surrender or take up the Letter of Credit or
to send forward documents apart from drafts as required by the
terms of the Letter of Credit, each of which provisions, if
contained in the Letter of Credit itself, it is agreed may be
waived by Agent; (c) errors, omissions, interruptions or delays in
transmissions or delivery of any message by mail, cable, telegram,
wireless or otherwise, whether or not they be in cipher; or (d)
errors in translation or errors in interpretation of technical
terms. Agent shall not be responsible for any act, error, neglect,
default, omission, insolvency or failure in business of any
correspondent or for any consequences arising from causes beyond
Agent's control. Borrower further agrees that any action taken or
omitted by Agent in connection with the Letter of Credit, if done
in good faith, shall be binding on Borrower and shall not put Agent
under any resulting liability to Borrower.
Agent shall not be liable for any failure by Agent or any one
else to pay or accept any draft under the Letter of Credit, or for
any loss or damage resulting from any declared or undeclared war,
censorship, law, control or restriction rightfully or wrongfully
exercised by any de facto or de jure domestic or foreign government
or agency thereof, or from any other cause beyond Agent's control;
and Borrower agrees to indemnify and hold Agent harmless from any
claim, loss, liability or expense arising by reason thereof. If
Borrower has included any language describing events or conditions
in any Letter of Credit Request or CATS Request that would not be
possible for Agent to verify from the documents required to be
presented under the Letter of Credit, Borrower understands that
Agent is in no position to make any verification of such events or
conditions and is therefore not responsible for verifying the
compliance with such requirements. Agent will make payment under
the Letter of Credit provided all other conditions are met.
Furthermore, if the term "Beneficiary" includes any successor of
the named Beneficiary by operation of law or otherwise, Agent shall
have no responsibility to determine that one who draws under the
Letter of Credit and represents himself to be a successor to the
named Beneficiary is in fact a duly authorized successor.
3.09. Presentation of Documents Without Drafts. If the
Letter of Credit issued by Agent will provide that the Letter of
Credit will be available by presentation to Agent of the documents
described in the Letter of Credit unaccompanied by drafts, Borrower
agrees that all references herein to drafts, documents relative to
drafts, and the presentation, acceptance for payment or payment of
drafts shall refer to documents presented for payment without
drafts, the presentation and acceptance thereof, and payment upon
such presentation, and that Borrower's obligations and Agent's
rights, privileges and remedies hereunder shall be the same as
though payments had been made upon presentation of drafts drawn
under the Letter of Credit accompanied by the said documents.
3.10. Renewal Provision. In the case of Agent's issuance,
renewal or extension on behalf of Borrower of a Letter of Credit
which renews automatically, Borrower hereby agrees that in the
event it does not want such Letter of Credit to be renewed, it will
request Agent in writing not to renew such Letter of Credit at
least thirty (30) days prior to the notification period specified
in the Letter of Credit. Borrower acknowledges that its failure to
make a timely request for the non-renewal of such Letter of Credit
may result in such Letter of Credit renewing automatically and
hereby agrees that in such event Borrower shall have no claim or
cause of action against Agent, or defense against payment under the
Letter of Credit, for Agent's renewal of such Letter of Credit.
3.11. Letters of Credit Participations.
(a) Immediately upon Agent's issuance, renewal or
extension of a Letter of Credit (and immediately upon execution and
delivery of this Agreement, with respect to any and all existing
Letters of Credit), Agent shall be deemed to have sold and
transferred to Lenders and Lenders shall be deemed irrevocably and
unconditionally to have purchased and received from Agent, without
recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Pro Rata Part of such Letter of Credit,
each substitute letter of credit, each drawing made thereunder and
the obligations of Borrower under this Agreement with respect
thereto, any security therefor or guaranty pertaining thereto.
(b) In determining whether to pay under any Letter of
Credit, Agent shall not have any obligation relative to Lenders
other than to confirm that any documents required to be delivered
under such Letter of Credit appear to have been delivered and that
they appear to comply on their face with the requirements of such
Letter of Credit. Any action taken or omitted to be taken by Agent
under or in connection with any Letter of Credit if taken or
omitted in the absence of gross negligence or willful misconduct,
shall not create for Agent any resulting liability to any Lender.
(c) In the event that Agent makes any payment under
any Letter of Credit and Borrower shall not have reimbursed such
amount in full to Agent pursuant to Section 3.05(a), Agent shall
promptly notify Lenders of such failure, and each Lender so
notified shall promptly and unconditionally pay to Agent, the
amount of such Lender's Pro Rata part of such unreimbursed payment
in Dollars and in same day funds. If Agent so notifies, prior to
11:00 a.m. (Dallas, Texas time) on any Business Day, any Lender
required to fund a payment under a Letter of Credit such Lender
shall make available to Agent for its account the amount of such
payment on such Business Day in same day funds. If and to the
extent such Lender shall not have so made its payment available to
Agent, such Lender agrees to pay to Agent, forthwith on demand such
amount, together with interest thereon for each day from such date
until the date such amount is paid to Agent at the Base Rate. The
failure of any Lender to make available to Agent any payment under
any Letter of Credit shall not relieve the other Lender of its
obligation hereunder to make available to Agent any payment under
any Letter of Credit on the date required, as specified above, but
no Lender shall be responsible for the failure of the other Lender
to make available to Agent any such payment.
(d) Whenever Agent receives a payment of a
reimbursement obligation from Borrower as to which Agent has
received any payments from Lenders pursuant to clause (c) above,
Agent shall promptly pay to each Lender which has paid its portion
thereof, in Dollars and in same day funds (if received prior to
11:00 a.m. (Dallas, Texas time) otherwise the next day), an amount
equal to such Lender's Pro Rata Part thereof.
(e) The obligations of Lenders to make payments to
Agent with respect to Letters of Credit shall be irrevocable and
not subject to any qualification or exception whatsoever and shall
be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation,
any of the following circumstances:
(i) any lack of validity or enforceability of
this Agreement or any of the Loan Documents;
(ii) the existence of any claim, setoff, defense
or other right which Borrower may have at any time against a
beneficiary named in a Letter of Credit, any transferee of
any Letter of Credit (or any Person for whom any such
transferee may be acting), Agent, any Lender, or any other
Person, whether in connection with this Agreement, any Letter
of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transaction
between Borrower and the beneficiary named in any such Letter
of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit proves to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any
of the Loan Documents; or
(v) the occurrence of any Default or Event of
Default.
ARTICLE IV
CONDITIONS PRECEDENT
4.01. Advances and Letters of Credit. The obligation of
each Lender to make an Advance hereunder and the obligation
hereunder of Agent to issue, renew or extend Letters of Credit is
subject to the condition precedent that, on or before the Effective
Date, Agent shall have received the following, each dated as of the
date hereof, in form and substance satisfactory to Agent:
(a) Notes. The duly executed Revolving Note and Term
Note for each Lender.
(b) Note Agreement. The duly executed Note Agreement
and each Securities Document (as defined therein) to be executed as
of the date hereof.
(c) Collateral Documents. Multiple counterparts of
the following, duly executed by the applicable party(ies) thereto:
(i) such supplements, amendments and/or
modifications of and to the existing Collateral Documents as
the Agent shall request, in form and substance acceptable to
the Agent, to reflect of record the execution of this
Agreement and the Notes and that such Collateral Documents
secure the Obligation and the Convertible Notes on a pari
passu basis for the ratable benefit of the Lenders and the
holders of the Convertible Notes.
(ii) a Restated Guaranty Agreement executed by
Pride Refining;
(iii) a Restated Guaranty Agreement executed by
Pride SGP;
(iv) a Restated Guaranty Agreement executed by
Pride Borger;
(v) a Restated Guaranty Agreement executed by
Pride Marketing;
(vi) a Restated Guaranty Agreement executed by
Desulfur Partnership;
(vii) such other or additional security
agreements, collateral pledges, financing statements, title
opinions, certificates, agreement and other documents as the
Agent shall request.
(d) Opinions of Counsel. Favorable opinions of legal
counsel for Borrower and each Guarantor, in such form as shall be
acceptable to Agent and Agent's counsel.
(e) Partner's Closing Certificates. A certificate
signed by the Chief Financial Officer of Pride Refining, as
managing general partner of Borrower, stating that (to the best
knowledge and belief of such Person, after reasonable and due
investigation and review of matters pertinent to the subject matter
of such certificate): (i) all of the representations and warranties
contained herein and the other Loan Documents are true and correct
as of the date hereof and (ii) no event has occurred and is
continuing, or would result from the execution of this Agreement,
which constitutes a Default or an Event of Default. (It is hereby
acknowledged that certain "Defaults" and "Events of Default" (as
defined in the Original Credit Agreement) have occurred under the
Original Credit Agreement, but that such Defaults and Events of
Default are being waived by Lenders in connection with the
execution of this Agreement and the other Loan Documents).
(f) Incumbency Certificates. A certificate of an
officer of Pride Refining, as managing general partner of Borrower
and an officer of each Guarantor which shall certify the names of
the Person authorized to sign each of the Loan Documents to be
executed by such Person and the other documents or certificates to
be delivered by such Person pursuant to the Loan Documents,
together with the true signatures of each such Person. Agent may
conclusively rely on the certificates until Agent shall receive a
further certificate of a partner of Borrower or an officer of a
Guarantor canceling or amending the prior certificate and
submitting the signatures of the persons named in such further
certificate.
(g) Resolutions. Resolutions of each Guarantor duly
adopted by the Board of Directors of each Guarantor in form and
content satisfactory to Agent and Agent's counsel.
(h) Corporate Certificates. A copy of the articles of
incorporation of each Guarantor and all amendments thereto,
certified by the corporate Secretary of the applicable Guarantor;
together with certificates of existence and good standing (or other
similar instruments) for such company issued by the Secretary of
State of the state of incorporation of such company, and
certificates of qualification and good standing (or other similar
instruments) for such company issued by the Secretary of State of
each of the states wherein such company is qualified to do business
as a foreign corporation, each dated within ten days of the
Effective Date.
(i) Shareholder Agreement. A copy of the shareholder
agreement of each Guarantor, and all amendments thereto, certified
by the Secretary or Assistant Secretary of such company as being
true, correct and complete as of the date of such certification.
(j) Partnership Agreement. A copy of the Partnership
Agreement and Certificate of Limited Partnership for Borrower and
all amendments thereto, certified by the Corporate Secretary of
Pride Refining, as the managing general partner of Borrower, and
certificates of qualification and good standing (or similar
instruments) for Borrower issued by the Secretary of State of the
state of formation of Borrower and of each of the states wherein
Borrower is qualified to do business, each dated within ten (10)
days of the Effective Date.
(k) Litigation. Certificates signed by an officer of
Pride Refining, as managing general partner of Borrower stating
that no litigation, investigation or proceeding before or by an
arbitrator or tribunal is continuing or threatened against such
party or any of their officers, directors, partners or affiliates
(i) with respect to this Agreement, the Notes, the Collateral
Documents, any other Loan Documents or any of the transactions
contemplated hereby or thereby, or (ii) which could have a material
adverse effect on Borrower, except as described in the certificate
and acceptable to Agent. Agent shall also receive either a summary
and analysis of all litigation in which such party or any of the
officers, directors, partners or affiliates are involved or an
opinion of counsel, in form and substance acceptable to Agent, to
the effect that no litigation in which such party is involved
would, in the event of an adverse determination, have a material
adverse effect.
(l) Insurance. Evidence satisfactory to Agent that
Borrower has obtained the insurance policies required by this
Agreement and the Collateral Documents.
(m) Interest Payment. Evidence satisfactory to Agent
that Borrower has paid all accrued and unpaid interest in full, as
of the Effective Date, under or pursuant to the Original Credit
Agreement.
(n) Fees and Expenses. Evidence satisfactory to Agent
that Borrower has paid all fees and expense provided herein to be
paid by Borrower, including, without limitation, the Amendment
Fees, and all fees and expenses of counsel to Agent and/or the
Lenders as of the Effective Date in connection with this Agreement
and/or the transactions contemplated hereby.
(o) Extended Maturities. Copies of all documents
pursuant to which the maturity dates of the Indebtedness of
Borrower to Pride SGP shall have been extended to a date occurring
after the Maturity Date.
(p) Additional Information. Such other information
and documents as may reasonably be required by Agent and Agent's
counsel.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce Lenders and Agent to enter into this Agreement,
each Related Person represents and warrants to Lenders and Agent
that:
5.01. Organization and Good Standing.
(a) Each Related Person which is a corporation or
partnership is duly organized and validly existing in good standing
under the laws of the state of its organization.
(b) Each Related Person is duly qualified as a foreign
corporation or partnership and in good standing in all states in
which it is doing business and has all corporate or partnership
power and authority to own its properties and assets and to
transact the business in which it is engaged and is or will be
qualified in those states wherein it proposes to transact business
in the future.
5.02. Authorization and Power.
(a) Each Related Person has full corporate or
partnership power and requisite authority to execute, deliver and
perform the Loan Documents to which it is a party. Each Related
Person is duly authorized to, and has taken all action necessary to
authorized such Related Person to execute, deliver and perform the
Loan Documents executed by such Related Person. Each Related
Person is and will continue to be duly authorized to perform the
Loan Documents executed by such Related Person.
(b) Each Related Person possesses all franchises,
certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, free
from burdensome restrictions, that (i) are necessary for the
ownership, maintenance and operations of its properties and assets,
and (ii) the loss of which could have a material adverse effect on
such Related Person's business, and such Related Person is not in
violation of any provision thereof.
5.03. No Conflicts or Consents. Neither the execution and
delivery of the Loan Documents, nor the consummation or any of the
transactions therein contemplated, nor compliance with the terms
and provisions thereof, will contravene or materially conflict with
any provision of law, statute or regulation to which any Related
Person is subject or any judgment, license, order or permit
applicable to any Related Person, or any indenture, loan agreement,
mortgage, deed of trust, or other agreement or instrument to which
any Related Person may be bound, or to which any Related Person may
be subject, or violate any provision of any Related Person's
articles or certificates of incorporation or certificate of limited
partnership or partnership agreement or bylaws. No consent,
approval, authorization or order of any Tribunal or third party is
required in connection with the execution and delivery by the
Related Persons of the Loan Documents or to consummate the
transactions contemplated hereby or thereby.
5.04. Enforceable Obligations. The Loan Documents have been
duly executed and delivered by each Related Person which is a party
thereto, and are the legal and binding obligations of such Related
Person, enforceable in accordance with their respective terms,
except as limited by Debtor Laws.
5.05. No Liens. Except for Permitted Liens, all of the
properties and assets of each Related Person are free and clear of
all Liens and other adverse claims of any nature, and each Related
Person has good and marketable title to such properties and assets.
5.06. Financial Condition. Borrower has delivered to Agent
copies of (i) the audited annual financial statements dated as of
December 31, 1995, and (ii) the unaudited quarterly financial
statements dated as of June 30, 1996 certified by Borrower that
such financial statements are true and correct, fairly represent
the financial condition of the Related Persons as at such date and
have been prepared in accordance with GAAP applied on a basis
consistent with that of prior periods. As of the Effective Date,
there are no obligations, liabilities or Indebtedness (including
contingent and indirect liabilities and obligations) of any Related
Person which are (separately or in the aggregate) material and are
not reflected in such financial statements and no changes having a
material adverse effect have occurred since the date of such
financial statements.
5.07. Full Disclosure. There is no material fact that the
Related Persons have not disclosed to Agent which could have a
material adverse effect on the properties, business, prospects or
condition (financial or otherwise) of Borrower or any other Related
Person. Neither the financial statements referenced in Section
5.06 hereof, nor any certificate or statement delivered herewith or
heretofore by any Related Person to Agent in connection with
negotiations of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary to,
keep the statements contained herein or therein from being
misleading.
5.08. No Default. No event has occurred and is continuing
which constitutes a Default or an Event of Default.
5.09. Material Agreements. No Related Person is in default
in any material respect under any contract, lease, loan agreement,
indenture, mortgage, security agreement or other material agreement
or obligation to which such Related Person is a party or by which
any of its properties is bound.
5.10. No Litigation. Except as disclosed to Agent pursuant
to Section 4.01(i), there are no actions, suits or legal,
equitable, arbitration or administrative proceedings pending, or to
the knowledge of any Related Person threatened, against such
Related Person that could, if adversely determined, have a material
adverse effect.
5.11. Burdensome Contracts. No Related Person is a party
to, or bound by, any contract which is a burdensome contract having
a material adverse effect.
5.12. Regulatory Defects. As of the date hereof, no Related
Person has been advised nor has actual knowledge of its failure to
comply with all applicable laws, rules, regulations, and all orders
of any Tribunal applicable to it or any of its property, business
or operations or transactions thereto would, if adversely
determined, have a material adverse effect.
5.13. Use of Proceeds; Margin Stock. The proceeds of the
Revolving Loans will be used by Borrower (i) to renew and extend
the principal amount outstanding under the Original Revolving Notes
and (ii) for working capital of Borrower. The Term Loans will be
a renewal and extension of the principal amount outstanding under
the Original Term Notes, as set forth on the Schedule 1. None of
such proceeds will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U, Regulation
X, or Regulation G, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry a
margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such
Regulation U, Regulation X, or Regulation G. Borrower is not
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stocks. Neither Borrower nor any
Person acting on behalf of Borrower has taken or will take any
action which might cause the Notes or any of the other Loan
Documents, including this Agreement, to violate Regulation U,
Regulation X, or Regulation G or any other regulations of the Board
of Governors of the Federal Reserve System or to violate Section 8
of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Borrower owns no margin stock except for
that described in the financial statements referred to in Section
5.06 hereof and, as of the date hereof, the aggregate value of all
margin stock owned by Borrower does not exceed 25% of the value of
all Borrower's assets.
5.14. No Financing of Corporate Takeovers. None of the
proceeds of the Revolving Loans or the Term Loans will be used to
acquire any security in any transaction which is subject to
Sections 13 or 14 of the Securities Exchange Act of 1934, including
particularly (but without limitation) Sections 13(d) and 14(d)
thereof.
5.15. Taxes. All tax returns required to be filed by any
Related Person in any jurisdiction have been filed or properly
extended and all taxes (including mortgage recording taxes),
assessments, fees and other governmental charges upon any Related
Person or upon any of its properties, income or franchises have
been paid prior to the time that such taxes could give rise to a
Lien thereon. There is no proposed tax assessment against any
Related Person, except as disclosed pursuant to Section 4.01(i).
5.16. Principal Office, Etc. The principal office, chief
executive office and principal place of business of each Related
Person is 1209 N. 4th, Abilene, Texas 79601. Each Related Person
maintains its principal records and books at such address.
5.17. ERISA. (a) No Reportable Event has occurred and is
continuing with respect to any Plan; (b)PBGC has not instituted
proceedings to terminate any Plan; (c) neither any Related Person,
any member of the Controlled Group, nor any duly-appointed
administrator of a Plan (i) has incurred any liability to PBGC with
respect to any Plan other than for premiums not yet due or payable,
or (ii) has instituted or intends to institute proceedings to
terminate any Plan under Sections 4041 or 4041A of ERISA or
withdraw from any Multi-Employer Pension Plan (as that term is
defined in Section 3(37) of ERISA); and (d) each Plan of each
Related Person has been maintained and funded in all material
respects in accordance with its terms and with all provisions of
ERISA applicable thereto.
5.18. Compliance with Law. Each Related Person is in
compliance with all laws, rules, regulations, orders and decrees
which are applicable to such Related Person, or its properties.
5.19. Government Relation. No Related Person is subject to
regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940 (as any
of the preceding acts have been amended), or any other law (other
than Regulation X) which regulates the incurring by such Related
Person of Indebtedness, including but not limited to laws relating
to common contract carriers or the sale of electricity, gas, steam,
water, or other public utility services.
5.20. Insider. No Related Person is, and no Person having
"control" (as that term is defined in 12 U.S.C. S375(b)(5) or in
regulations promulgated pursuant thereto) of any Related Person is,
an "executive officer," "director," or "principal shareholder" (as
those terms are defined in 12 U.S.C. S375(b) or in regulations
promulgated pursuant thereto) of Agent, of a bank holding company
of which any Lender is a subsidiary, or of any subsidiary of a bank
holding company of which any Lender is a subsidiary, or of any bank
at which any Lender maintains a correspondent account" (as such
term is defined in such statute or regulations), or of any bank
which maintains a correspondent account with any Lender.
5.21. Subsidiaries and Stock. Borrower does not own capital
stock or other ownership interests in any Person, except a 99%
ownership of Desulfur Partnership, 100% ownership of Pride
Marketing and 100% ownership of Pride Borger. Pride Refining does
not own capital stock or other ownership interests in any Person,
except a 1.9% general partnership interest in Borrower. Pride SGP
does not own capital stock or other ownership interests in any
Person; except a 0.1% general partnership interest and a 51.7%
common limited partnership interest in Borrower. Pride Marketing
does not own capital stock or other ownership interests in any
Person except a 1% general partnership interest in Desulfur
Partnership. Pride Borger does not own capital stock or other
ownership interests in any Person. Desulfur Partnership does not
own any capital stock or other ownership interest in any Person.
5.22. Fair Labor Standards Act. Each Related Person has
complied with, and will continue to comply with, the provisions of
the Fair Labor Standards Act of 1938, 29 U.S.C. S 200, et seq., as
amended from time to time (the "FLSA"), including specifically, but
without limitation, 29 U.S.C. S 215(a). This representation and
warranty, and each reconfirmation hereof, shall constitute written
assurance from each Related Person, given as of the date hereof and
as of the date of each reconfirmation, that each Related Person has
complied with the requirements of the FLSA, in general, and Section
215(a)(1), thereof, in particular.
5.23. Casualties. Neither the business nor the properties
of any Related Person is currently affected by any environmental
hazard, fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or
other casualty (whether or not covered by insurance), which could
have a material adverse effect.
5.24. Investment Company Act. No Related Person is an
"investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended, and is not
controlled by such a company.
5.25. Hazardous Substances.
(a) To the best of each Related Person's knowledge:
(i) all environmental permits, certificates, licenses, approvals,
registrations and authorizations required under all Environmental
Laws in connection with the business of such Related Person has
been obtained and (ii) such Related Person's business operations
are in compliance with all Environmental Laws.
(b) Except as disclosed on Exhibit "G", no unremedied
notice, citation, summons or order has been issued, no unremedied
complaint has been filed, no unremedied penalty has been assessed
and, to the best of each Related Person's knowledge, no
investigation or review is pending or threatened by any
governmental entity under any Environmental Law or with respect to
any generation, treatment, storage, recycling, transportation or
disposal of any hazardous or toxic or polluting substance or waste
(including petroleum products and radioactive materials) generated
or used ("Hazardous Substances") by such Related Person.
(c) Except as disclosed on Exhibit "G", no Related
Person has received any request for information, notice of claim,
demand or other notification that such Related Person is or may be
potentially responsible with respect to any investigation or clean-
up of any threatened or actual release of any Hazardous Substance
or any other violation of any Environmental Laws.
(d) Except as disclosed on Exhibit "G", there are no
underground storage tanks, active or abandoned, at any property now
owned, operated or leased by any Related Person.
(e) Except as set forth on Exhibit "G", no
environmental inspections, investigations, studies, audits, tests,
reviews or other analyses are currently being conducted in relation
to any property or business now owned, operated, or leased by any
Related Person, and each Related Person shall promptly forward a
copy to Agent of any such environmental inspections,
investigations, studies, tests, reviews or other analyses;
provided, that no Related Person makes any representation or
warranty with respect to environmental inspections, investigations,
studies, audits, tests, reviews or other analyses conducted by or
on behalf of Agent.
5.26. Collateral Documents; Description of Assets. The
existing Collateral Documents constitute perfected first priority
Liens upon all of the right, title and interest of each Related
Person in and to (i) the entire refinery known as the Pride
Refinery, located in Jones County, Texas, and all real and personal
property owned or used in connection therewith, subject only to
Permitted Liens and (ii) all of the properties described in Exhibit
"H" attached hereto and all real and personal property owned or
used in connection therewith, subject only to Permitted Liens.
5.27. Corporate Name. No Related Person has during the
preceding five years, been known as or used any other partnership,
corporate, fictitious or tradenames. Except as set forth on
Exhibit "I" attached hereto, no Related Person has been, during the
preceding five years, the survivor of a merger or consolidation or
acquired all or substantially all of the assets of any Person
5.28. Representations and Warranties. The delivery of any
document to Agent under the terms of this Agreement shall
constitute, without the necessity of specifically containing a
written statement, a representation and warranty by Borrower that
no Default or Event of Default exists and that all representations
and warranties contained in this Article V or in any other Loan
Document are true and correct on and as of such date.
5.29. Survival of Representations and Warranties. All
representations and warranties by the Related Persons herein shall
survive delivery of the Notes, and any investigation at any time
made by or on behalf of Agent or any Lender shall not diminish such
party's right to rely thereon.
5.30. Solvency. As of the Effective Date, no obligation
shall have been incurred by any Related Person pursuant to any Loan
Document with the intent to hinder, delay, disturb or defraud
creditors of any Related Person and no Related Person (i) shall be
insolvent (within the meaning of Section 101(29) of the Bankruptcy
Code of 1978, as amended, Section 2 or the Uniform Fraudulent
Transfer Act) or will become "insolvent" (after giving effect to
the transactions contemplated in any Loan Document)' as a result of
the incurrence of any such obligation; (ii) shall be engaged in any
business or transaction with unreasonably small capital (after
giving effect to the transactions contemplated in any Loan
Document); and (iii) shall be unable to perform its contingent
obligations and other commitments as they mature in the normal
course of business.
5.31. Schumacher Litigation. That certain litigation styled
Robert J. Schumacher, et al v. Ollie Bradford Stephens III, et al.,
Cause No. 4856-D, in the District Court, 350th Judicial District,
Taylor County, Texas has been settled and liquidated.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until payment in full of the Notes and the payment in full
and performance of the Obligation, the termination of this
Agreement and the expiration of all liability with respect to the
Letters of Credit, each Related Person agrees that (unless Agent
shall otherwise consent in writing) it will comply with the
following covenants:
6.01. Financial Statements, Reports and Documents. Borrower
shall deliver to Lenders one (1) copy of each of the following:
(a) Monthly Statements. The following described
monthly statements, reports, schedules and other information:
(i) as soon as available, and in any event
within thirty (30) days after the end of each Month, copies
of the consolidated balance sheet of Borrower as of the end
of such month, and statements of income and retained
earnings and changes in financial position and cash flows of
Borrower for that month and for the portion of the fiscal
year ending with such period, in each case setting forth in
comparative form the figures for the corresponding period of
the preceding fiscal year;
(ii) as soon as available, and in any event
within forty-five (45) days after the end of each Month, a
statement of the (a) refining throughputs, profit margins,
and cash flow; (b) crude oil gathering volumes, profit
margins, and cash flow related thereto, and (c) product
pipeline throughput, profit margins, and cash flow related
thereto;
(iii) as soon as available, and in any event
within forty-five (45) days after the end of each Month, a
schedule of accounts payable (trade and exchange), accounts
receivable (trade and exchange) and Suspense Payables and
outstanding Letters of Credit with respect to all of such
accounts payable and Suspense Payables, including (a) the
address for each Account Debtor and (b) a specific
description of the underlying contract with respect to, and
aging information with respect to, any account(s) receivable
from the United States of America or any federal or state
agency, board, department, commission, body, unit or
instrumentality;
(iv) as soon as available, and in any event
within thirty (30) days after the end of each Month, a
calculation of the financial covenants set forth in Section
6.02, the amount of each category of Indebtedness permitted
under Section 7.01 (except for 7.01(ii) or (iii)), the amount
of Rentals paid during the twelve month period then ending
per Section 7.14, and the amount of accrued amounts for Taxes
not then due, together with supporting backup information
with respect thereto;
(v) as soon as available, and in any event
within forty-five (45) days after the end of each Month, a
report with respect to the total Suspense Payables activity
for Borrower during such Month; and
(vi) as soon as available, and in any event
within forty-five (45) days after the end of each Month, a
refining net margin report containing the following
information for
such Month: (a) the volumes of various crude oil products
refined by Borrower and the average product prices associated
therewith, (b) the total volumes of crude oil feed stocks
obtained by Borrower and the average crude oil feed stock
prices associated therewith, and (c) the breakdown of the per
barrel amount paid by the refining division of Borrower to
its crude gathering division of (1) Borrower's posted price,
(2) the average bonus paid, (3) transportation costs, and
(4) any other amounts paid and to whom.
all in reasonable detail, with the certificate of the chief
financial officer of the Pride Refining, the managing general
partner of Borrower, that the foregoing calculations are true and
correct in all material respects to the best of his knowledge and
prepared in accordance with GAAP, subject to year-end audit
adjustments and stating that such officer has reviewed the
activities of Borrower during such period and that Borrower has
observed, performed and fulfilled each and every obligation and
covenant contained herein and is not in default under any of the
same or if any such default shall have occurred, specifying the
nature and status thereof, and in the form of Exhibit "J".
(b) Annual Statements. As soon as available after
each fiscal year end, and in any event within ninety (90) days
thereafter, copies of the consolidated balance sheet of Borrower as
of the close of such fiscal year and statements of income and
retained earnings and cash flows of Borrower for such fiscal year,
in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and accompanied by
an opinion thereon (which shall be without a "going concern" or
like qualification or exception) of Ernst & Young or of other
independent public accountants of recognized national standing
selected by Borrower and satisfactory to Agent, to the effect that
such consolidated financial statements have been prepared in
accordance with GAAP consistently maintained and applied (except
for changes in which such accountants concur) and that the
examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances.
(c) Weekly and Monthly Borrowing Base Certificates.
From and after the Effective Date, Borrower shall deliver to Agent
a current Borrowing Base Certificate, together with such supporting
documentation as Agent may request including but not limited to a
detailed breakdown of each component of the Borrowing Base (a
"Borrowing Base Certificate"), on or before Wednesday of each
calendar week. Each such Borrowing Base Certificate shall be in
the form of Exhibit "D". Such Borrowing Base Certificate shall be
based on current actual financial information as of the date of
delivery of same or on proforma financial information as of the
date of delivery of same to the extent current actual financial
information is not available. Additionally, Borrower shall deliver
to Agent a current Borrowing Base Certificate, together with such
supporting documentation as Agent may request including but not
limited to a detailed breakdown of each component of the Borrowing
Base, on or before the last day of each Month. Such Borrowing Base
Certificate shall be based on the current actual financial
information from the preceding Month end. Each such Borrowing Base
Certificate shall be in the form of Exhibit "D".
(d) Guarantor's Statements. As soon as available
after each fiscal year end, and in any event within 90 days
thereafter and as soon as available after each fiscal quarter end,
and in any event within 45 days thereafter, copies of the
consolidated and consolidating balance sheet of each Guarantor as
of the close of such fiscal year and statements of income and
retained earnings and changes in financial position of each
Guarantor for such fiscal year or quarter, in each case setting
forth in comparative form the figures for the preceding fiscal year
or quarter all in reasonable detail, certified by the chief
financial officer of such Guarantor
as being true and correct in all material respects to the best of
his knowledge as shall be required by Agent and prepared in
accordance with GAAP.
(e) Audit Reports. Promptly upon receipt thereof, one
copy of each written report submitted to Borrower by independent
accountants in any annual, quarterly or special audit made.
(f) SEC and Other Reports. Promptly upon its becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by Borrower to equity owners generally and of
each regular or periodic report, registration statement or
prospectus filed by Borrower with any securities exchange or the
Securities and Exchange Commission or any successor agency, and of
any order issued by any Tribunal in any proceeding to which
Borrower is a party.
(g) Accountants Certificates. Within the period
provided in paragraph (b) above, certificates of the accountants
who render an opinion with respect to such financial statements,
stating that they have reviewed this Agreement and stating further
whether, in making their audit, such accountants have become aware
of any condition or event which would constitute a Default or an
Event of Default under any of the terms or provisions of this
Agreement (insofar as any such terms or provisions pertain to
accounting matters) and, if any such condition or event then
exists, specifying the nature and period of existence thereof.
(h) Quarterly Statements. As soon as available, and
in any event within thirty (30) days after the end of each calendar
quarter, a report including a calculation of the Excess Cash of
Borrower as of the end of such calendar quarter.
(i) Other Information. Such other information
concerning the business, properties or financial condition of
Borrower as Agent shall reasonably request.
6.02. Financial Covenants.
(a) Current Ratio. Borrower shall maintain at all
times a Current Ratio of not less than 0.55 to 1.00. In accordance
with Section 6.01(a)(iv), Borrower shall deliver to Lenders a
calculation of the Current Ratio thirty (30) days after the end of
each Month.
(b) Adjusted Current Ratio. Borrower shall maintain
at all times an Adjusted Current Ratio of not less than 0.75 to
1.00. In accordance with Section 6.01(a)(iv), Borrower shall
deliver to Lenders a calculation of the Adjusted Current Ratio
thirty (30) days after the end of each Month.
(c) Tangible Net Worth. Borrower shall maintain at
all times a Tangible Net Worth of at least $29,776,000 which shall
be tested as of the end of each Month; provided that such amount
shall be increased, on a cumulative basis, by fifty percent (50%)
of the Borrower's net income after Taxes determined for each
Calendar Quarter.
(d) Fixed Charge Coverage. Borrower shall maintain a
Fixed Charge Coverage of at least .90 to 1.00 for the period
beginning January 1, 1996 and ending on the last day of each Month
thereafter until and including December 31, 1996. At any time
after December 31, 1996, Borrower shall maintain a Fixed Charge
Coverage of at least .90 to 1.00 for the then most recently ended
period of twelve (12) consecutive months. For purposes of this
Section 6.02(d), the term "Fixed Charge Coverage" shall mean for
any period EBITDAR for such period divided by the sum of (i) Fixed
Charges for such period plus (ii) Capital Expenditures permitted by
Section 7.06 hereof actually made during such period.
(e) Funded Debt. Borrower shall maintain its Funded
Debt (which for purposes of this clause (e), shall not include any
Indebtedness under this Agreement nor shall it include any
indebtedness of Borrower permitted by Section 7.01 of this
Agreement) at or below $1.00.
6.03. Payment of Taxes and Other Indebtedness. Each Related
Person shall pay and discharge (i) all taxes, assessments and
governmental charges of levies imposed upon it or upon its income
or profits, or upon any property belonging to it, that the failure
to pay would have a material adverse effect and (ii) all lawful
claims (including claims for labor, materials and supplies), which,
if unpaid, might give rise to a Lien upon any of its property,
provided, however, that no Related Person shall be required to pay
any such tax, assessment, charge or levy if and so long as the
amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and appropriate
accruals and cash reserves therefor have been established in
accordance with GAAP.
6.04. Maintenance of Existence and Rights; Conduct of
Business. Each Related Person shall preserve and maintain its
existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business, and
conduct its business in an orderly and efficient manner consistent
with good business practices and in accordance with all valid
regulations and orders of any Tribunal.
6.05. Notice of Default. Borrower shall furnish to Lenders
immediately upon becoming aware of the existence of any condition
or event which constitutes a Default or would become a Default or
an Event of Default, written notice specifying the nature and
period of existence thereof and the action which the Related
Persons are taking or propose to take with respect thereto.
6.06. Other Notices. Borrower shall promptly notify Lenders
of (i) any material adverse change in the financial condition of
any Related Person or their businesses, (ii) any default under any
material agreement, contract, or other instrument to which it is a
party or by which any of its properties are bound, or any
acceleration of the maturity of any Indebtedness owing by any
Related Person, (iii) any material adverse claim or contingent
obligation against or affecting Borrower or any subsidiary or any
of its properties, and (iv) the commencement of, and any material
determination in, any litigation with any third party or any
proceeding before any Tribunal affecting any Related Person.
6.07. Compliance with Loan Documents. Any and all covenants
and provisions of the Loan Documents shall be complied with by each
Person whose compliance is agreed to or required thereunder.
6.08. Compliance with Material Agreements. Each Related
Person shall comply in all material respects with all material
agreements, indentures, mortgages or documents binding on it or
affecting its properties or business.
6.09. Operations and Properties. Each Related Person shall
act prudently and in accordance with customary industry standards
in managing or operating its assets, properties, business and
investments. Each Related Person shall keep in good working order
and condition, ordinary wear and tear excepted, all of its assets
and properties which are necessary to the conduct of its business.
6.10. Books and Records; Access. Each Related Person shall
give any representative of Lenders access during all business hours
to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in the
possession of such Related Person and relating to its affairs, and
to inspect any of the properties of such Related Person. Each
Related Person shall maintain complete and accurate books and
records of its transactions in accordance with good accounting
practices. Agent shall have the right to send any representatives
of Lender or an audit firm acceptable to Agent to any Related
Person's place of business to examine its books and records and
inspect its properties from time to time during reasonable business
hours. The cost for such examination and inspection shall be
included in Expenses payable by Borrower.
6.11. Compliance with Law. Each Related Person shall comply
with all applicable laws, rules, regulations, and all orders of any
Tribunal applicable to it or any of its property, business
operations or transactions, a breach of which could have a material
adverse effect.
6.12. Insurance. Each Related Person shall maintain
worker's compensation insurance, liability insurance (including
environmental insurance) business interruption insurance and
insurance on its properties, assets and business, whether now owned
or hereafter acquired, with such insurance companies, against such
casualties, risks and contingencies, and in such types and amounts,
as are consistent with customary practices and standards of
companies engaged in similar business as such Related Person and as
shall be acceptable to the Agent. All of such casualty and
business interruption insurance of Borrower or Pride SGP shall name
Agent as loss payee for the benefit of Lenders. Prior to Default,
proceeds of insurance covering items of Inventory, Equipment and
fixed assets, if received prior to the Maturity Date shall be used,
if Borrower elects, to repair or replace the covered item in the
ordinary course of business, provided that the replacement of any
item having a replacement cost of $500,000 or more will require
Agent's consent. After Default, all proceeds of insurance shall be
paid to Agent to be applied to the Notes and Expenses (with such
applications being made first to Expenses and then to the Notes in
accordance with the provisions of Section 2.10 of this Agreement),
and any remaining balance of such proceeds of insurance shall be
deemed to be Cash Collateral. The insurance coverage previously
disclosed to Agent accurately reflects the Related Person's current
insurance coverage.
6.13. Authorizations and Approvals. Each Related Person
shall promptly obtain, from time to time at its own expense, all
such governmental licenses, authorizations, consents, permits and
approvals which may be required or necessary in their business or
with respect to their assets if the failure to obtain could have a
material adverse effect.
6.14. ERISA Compliance. Each Related Person shall (i) at
all times, make prompt payment of all contributions required under
all Plans and required to meet the minimum funding standard set
forth in ERISA with respect to its Plans, (ii) within thirty days
after the filing thereof, furnish to Agent copies of each annual
report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA, and the
regulations promulgated thereunder, in connection with each of its
Plans for each Plan year, (iii) notify Agent immediately of any
fact, including, but not limited to, any Reportable Event arising
in connection with any of its Plans, which might constitute grounds
for termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such Plan, together with a statement, if requested by Agent, as to
the reason therefor and the action, if any, proposed to be taken
with respect thereto, and (iv) furnish to Agent, upon its request,
such additional information concerning any of its Plans as may be
reasonably requested.
6.15. Further Assurances. Each Related Person shall make,
execute or endorse, and acknowledge and deliver or file or cause
the same to be done, all such vouchers, invoices, notices,
certifications and additional agreements, guaranties, undertakings,
conveyances, deeds of trust, mortgages, transfers, assignments,
financing statements or other assurances, and take any and all such
other action, as Agent may, from time to time, deem reasonably
necessary or proper in connection with any of the Loan Documents,
the obligations of such Related Person thereunder, or for better
assuring and confirming unto Agent all or any part of the security
for any of such obligations, or for granting to Agent any security
for the Obligation which Agent may request from time to time.
6.16. Indemnity by Related Person.
(a) Indemnification. Except as provided below, each
Related Person shall indemnify, save, and hold harmless Agent,
Lenders and their directors, officers, agents, attorneys, and
employees (collectively, the "Indemnitees") from and against: (i)
any and all claims, demands, actions, or causes of action (a
"Claim") that are asserted against any Indemnitee by any Person if
the Claim directly or indirectly relates to a Claim, that the
Person asserts or may assert against any Related Person, any
Affiliate of any Related Person or any officer, director or
shareholder of any Related Person, (ii) any and all Claims that are
asserted against any Indemnitee if the Claim directly or indirectly
relates to the Obligation, use of proceeds of the Notes, the
Letters of Credit, or the relationship of the Related Person, Agent
and Lenders under this Agreement or any transaction contemplated
pursuant to this Agreement, (iii) any administrative or
investigative proceeding by any Tribunal directly or indirectly
related to a Claim described in clauses (i) or (ii) above, and (iv)
any and all liabilities, losses, costs, or expenses (including
attorneys' fees and disbursements) that any indemnitee suffers or
incurs as a result of any of the foregoing. Subject only to the
limitation set forth in Section 6.16(b) below, THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS,
LIABILITIES, LOSSES, COSTS OR EXPENSES, ARISE, IN WHOLE OR IN PART,
UNDER ANY THEORY OF STRICT LIABILITY, OR ARE IN ANY WAY OR TO ANY
EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY AGENT OR ANY LENDER. Each Related Person
hereby releases all Claims it may have against any Indemnitee
arising pursuant to any action or inaction by such Indemnitee taken
or failed to be taken prior to this Agreement.
(b) Limitation. No Related Person shall have any
obligation under this Section to Agent or any Lender with respect
to any of the foregoing arising out of: (i) the gross negligence or
willful misconduct of any Lender, (ii) the breach by Agent or any
Lender of this Agreement or any part of this Agreement, and (iii)
the transfer or disposition of any Notes by any Lender.
(c) Notice. If any Claim is asserted against any
Indemnitee, such Indemnitee shall promptly notify the Related
Person, but the failure to so promptly notify the Related Person
shall not affect the Related Person's obligations under this
Section unless such failure materially prejudices the Related
Person's right to participate in the contest of such Claim as
hereinafter provided.
(d) Settlement. If requested by the Related Person in
writing and so long as no Default or Event of Default shall have
occurred and be continuing, such Indemnitee shall in good faith
contest the validity, applicability and amount of such Claim and
shall permit the Related Person to participate in such contest.
Any Indemnitee that proposes to settle or compromise any claim or
proceeding for which the Related Person may be liable for payment
of indemnity hereunder shall give the Related Person written notice
of the terms of such proposed settlement or compromise reasonably
in advance of settling or compromising such claim or proceeding and
shall obtain the Related Person's concurrence thereto.
(e) Counsel. Each Indemnitee is authorized to employ
counsel in enforcing its rights hereunder and in defending against
any Claim covered by this Section; provided, however, that each
Indemnitee shall endeavor, but shall not be obligated, in
connection with any matter covered by this Section which also
involves other Indemnitees, to use reasonable efforts to avoid
unnecessary duplication of effort by counsel for all Indemnitees.
(f) Survival. Any obligation or liability of the
Related Person to any Indemnitee under this Section shall survive
the expiration or termination of this Agreement and the repayment
of the Obligation.
6.17. Bank Accounts. Borrower shall maintain all of its
major operating accounts with Agent.
6.18. Ownership of Pride Refining. Each of Wayne Malone and
Brad Stephens shall continue to own the shares of Pride Refining
owned by each such Person on the Effective Date. Pride Refining
shall own and continue to own the shares of Pride Refining,
formerly owned by C. Alan Stevens on the Effective Date.
Additionally, the aggregate shares of Pride Refining owned by Wayne
Malone and Brad Stephens shall at all times equal or exceed the
controlling voting interest. Borrower shall continue to own 100%
of the corporate stock, and other indicia of ownership, of Pride
Marketing and Pride Borger.
6.19. Managing Partner. Pride Refining shall remain the
managing partner of Borrower.
6.20. Mandatory Prepayment/Cash Collateral. In the event
Borrower refinances or repays in full the Revolving Loans, Borrower
agrees to (i) immediately repay the Term Notes in full and (ii)
immediately deliver to Agent funds for deposit into a Cash
Collateral Account in the amount of the Letter of Credit Repayment
Obligations then outstanding, as security for the Obligation.
6.21. Additional Collateral. In order to further secure the
Obligation, upon request by Lender from time-to-time until the
Obligation is paid in full, each Related Person shall immediately
execute and deliver to the Agent, for the benefit of the Lenders,
such security agreements, collateral pledges, mortgages, deeds of
trust, financing statements and other or additional security or
collateral documents, in form and substance satisfactory to Agent
and counsel to Agent, as Agent shall request, covering such Related
Person's respective assets and properties, whether now owned or
hereafter acquired, as shall be acceptable, from time-to-time, to
Agent.
ARTICLE VII
NEGATIVE COVENANTS
Until payment in full of the Obligation, the termination of
this Agreement, and the expiration of all liabilities for Letters
of Credit, each Related Person agrees that (unless Agent shall
otherwise consent in writing) it will not violate the following
covenants:
7.01. Limitation on Indebtedness. Borrower shall not incur,
create, contract, waive, assume, have outstanding, guarantee or
otherwise be or become, directly or indirectly, liable in respect
of any Indebtedness, except (i) Indebtedness arising out of this
Agreement, (ii) current liabilities for taxes and assessments,
wages, employee benefits, general and administrative expenses not
otherwise prohibited herein, incurred in the ordinary course of
business, (iii) Indebtedness in respect of current accounts payable
(other than for borrowed funds or purchase money obligations)
accrued and incurred in the ordinary course of business, provided
that all such liabilities, accounts and claims shall be promptly
paid and discharged when due or in conformity with customary trade
terms, (iv) Indebtedness arising out of leases, provided the leases
do not result in liability for Rentals in excess of the amount
permitted in Section 7.14, (v) Indebtedness arising under the
depository agreement between Borrower and Agent, (vi) Indebtedness
of Borrower to Pride SGP pursuant to that certain promissory note,
dated March 26, 1993, in the original principal amount of
$2,000,000, executed by Borrower and payable to the order of Pride
SGP (the "Subordinated Note"), (vii) Indebtedness of Borrower to
AKZO Chemical Inc. pursuant to that certain supply agreement, dated
April 5, 1993, for the deferred payment of a catalyst, to the
extent of two remaining annual payments of $160,000 each,
(viii) Indebtedness incurred to (a) refinance the outstanding
principal balance of the mortgage indebtedness on the Cedar
Building of up to the amount of $200,000, and (b) finance
renovation and refurbishment of such building and expenses related
to relocation of Borrowers offices to such building, up to the
amount of $200,000; (ix) Indebtedness representing Purchase Money
not to exceed $250,000 in an aggregate amount outstanding at any
time, (x) Indebtedness of Borrower to Pride SGP in the original
principal amount of $450,000 representing an advance by Pride SGP
to Borrower in such amount, which Indebtedness has been
subordinated to the Indebtedness arising under this Agreement
pursuant to a subordination agreement in form and substance
satisfactory to Determining Lenders (the "$450,000 Note"), (xi)
Indebtedness of Borrower under the Government Note, and (xii) other
Indebtedness subordinated to the Obligations upon terms
satisfactory to Determining Lenders in their sole discretion.
Neither Pride Refining nor any Subsidiary of Borrower shall incur,
create, contract, assume, have outstanding, guarantee or otherwise
be or become, directly or indirectly, liable in respect to any
Indebtedness except Indebtedness of the type described in the
preceding clauses (i), (ii), (iii) and (iv) and Indebtedness of
Pride Borger to Diamond Shamrock Refining and Marketing Company
evidenced by the D-S Note.
7.02. Negative Pledge. Except for Permitted Liens, no
Related Person shall create, incur, permit or suffer to exist any
Lien upon any of its respective assets or properties, whether now
owned or hereafter acquired.
7.03. Restrictions on Distributions and Purchases of
Interests. No Related Person shall, directly or indirectly,
declare or make or incur any liability to make any Distributions,
nor shall any Related Person, directly or indirectly, purchase or
redeem or incur any liability to purchase or redeem any interest in
such Related Person, except that Distributions may be made without
limitation to Borrower, provided that after the Restructuring
Trigger Date, Pride SGP may make Distributions in an amount not to
exceed the Rentals received in cash by Pride SGP from Borrower with
respect to the Hearne Comyn Pipeline so long as (i) Brad Stephens,
E. Peter Corcoran, D. Wayne Malone and any other director or
officer of either Borrower or Pride Refining receiving such
Distributions loan to Pride SGP the amount of such Distributions
received by them which is in excess of the greater of (X) 30% of
such Distribution and (Y) the conversion tax rate then in effect,
(ii) such loans shall be expressly subordinated to the Obligations
and the Convertible Notes upon terms and conditions satisfactory to
Lenders in their sole and absolute discretion, and (iii) Pride SGP
shall pledge all funds representing such returned Distributions for
the benefit of the Lenders, Agent and the holders of the
Convertible Notes. To the extent any Distributions are declared or
made by any Related Person to any other Related Person, such
Distributions shall be delivered to Borrower, and Borrower shall
use all such funds to make a prepayment on the Advances.
7.04. Limitation on Investments. No Related Person shall
make or have outstanding any Investments in any Person, except for
(i) loans, advances and extensions of credit in the ordinary course
of business not to exceed, when aggregated with such loans,
advances and extensions of credit made by such Related Person or
other Related Persons, $100,000 outstanding at any time, (ii) the
partnership interests in Borrower owned by Pride SGP and Pride
Refining, respectively, on the Effective Date, and (iii) the
ownership interests of Borrower in Pride Marketing, Desulfur
Partnership and Pride Borger on the Effective Date.
7.05. Affiliate Transactions. No Related Person shall enter
into any transaction with, or pay any amount to, any Affiliate
except as described on Exhibit "L" and except for Indebtedness of
such Related Person to any such Affiliate to the extent that such
Indebtedness is permitted by Section 7.01 of this Agreement.
7.06. Limitations on Capital Expenditures. No Related
Person shall make any Capital Expenditure which in the aggregate is
in excess of (i) $2,600,000 for all Related Persons in the fiscal
year ending December 31, 1996 and (ii) $1,600,000 for all Related
Persons in the fiscal year ending December 31, 1997, provided that
any amount of Capital Expenditures permitted under this Section
7.06 which is not actually made by the Related Persons in any
fiscal year shall not be deemed to increase the permitted amount of
Capital Expenditures for the subsequent fiscal year. As of the end
of each Month, the Related Persons shall calculate the aggregate
amount of Capital Expenditures made by the Related Persons during
the fiscal year.
7.07. Limitation on Sale of Properties. No Related Person
shall (i) sell, assign, convey, exchange, lease or otherwise
dispose of any of its properties, rights, assets or business,
whether now owned or hereafter acquired, except inventory and
equipment in the ordinary course of its business and for a fair
consideration, or (ii) sell, assign or discount any Accounts.
7.08. Name, Fiscal Year and Accounting Method. No Related
Person shall change its name, fiscal year or method of accounting
except as required by GAAP provided, however, any Related Person
may change its name if such Related Person shall have given Agent
sixty days prior written notice of such name change and taken such
action as Agent deems necessary to continue the perfection of the
Liens securing payment of the Obligations.
7.09. Liquidation, Mergers, Consolidations and Dispositions
of Substantial Assets. No Related Person shall dissolve or
liquidate, or become a party to any merger or consolidation, or
acquire by purchase, lease or otherwise all or substantially all of
the assets or capital stock of any Person, or sell, transfer, lease
or otherwise dispose of all or any substantial part of its
property, assets or business.
7.10. Lines of Business. No Related Person shall directly
or indirectly engage in any business other than those in which it
is presently engaged, or discontinue any of its existing lines of
business or substantially alter its method of doing business.
7.11. No Amendments. Except in connection with the
Restructuring, Borrower shall not amend its certificate of limited
partnership or partnership agreement.
7.12. Purchase of Substantial Assets. No Related Person
shall purchase, lease or otherwise acquire all or substantially all
of the assets of any other Person.
7.13. Guaranties. No Related Person shall become or be
liable in respect of any Guaranty except for the Guaranty
Agreements.
7.14. Rentals. No Related Person shall become or be liable
to pay Rentals during any twelve month period which, when
aggregated with Rentals for which such Related Person or the other
Related Persons are liable to pay, exceed $4,000,000; provided that
(i) the Rentals accrued or paid by Borrower for the use of the
Hearne Comyn Pipeline and (ii) the Rentals payable by Borrower to
Desulfur Partnership for the use of a desulfurization unit shall
not be included in the aggregate amount of Rentals paid or payable
by the Related Persons. Until the Restructuring Trigger Date,
Pride SGP shall not accept, receive, collect or ask for, any
Rentals from Borrower, and Borrower shall not make any such
payment. After the Restructuring Trigger Date, Pride SGP may
accept, receive, collect or ask for, Rentals from Borrower in the
amounts set forth in, and pursuant to the terms of, the Pipeline
Agreement, and Borrower may make such payments, provided that at
the time of any such payment, (i) all scheduled payments of
interest and principal then due on the Term Loan and the
Convertible Notes and all cumulative distributions on all
outstanding Preferred Units have been paid (or contemporaneously
are declared and paid) in cash for all prior distribution periods,
(ii) such Rental payments shall be limited to six consecutive
monthly payments and (iii) the aggregate of such Rentals payments
shall not exceed $500,000. If Borrower shall have paid any
distributions on the Preferred Units in kind, the condition
specified in clause (i) of the immediately preceding sentence shall
not be deemed to be satisfied unless all Preferred Units issued in
payment of such distributions have been redeemed by Borrower for
cash. For purposes of this Section 7.14, the term "Pipeline
Agreement" shall mean that certain Pipeline Lease Agreement
effective as of March 29, 1990, between Pride SGP, as lessee, and
Borrower, as lessor, as amended by Amendment No. 1 to Pipeline
Lease Agreement and Amendment No. 2 to Pipeline Lease Agreement
each effective as of March 29, 1990.
7.15. Employment Agreement. No Related Person shall enter
into, or consent to the execution of, any employment agreement with
any officer or employee of such Related Person who is also a
director or a shareholder of such Related Person or any other
Related Person.
ARTICLE VIII
EVENTS OF DEFAULT
8.01. Events of Default. An "Event of Default" shall exist
if any one or more of the following events (herein collectively
called "Events of Default") shall occur and be continuing:
(a) Borrower shall fail to pay when due interest on
the Obligation, or any Fees or any Expenses and such default shall
continue for five (5) days ; or
(b) Borrower shall fail to pay any principal of the
Obligation, or any part thereof, when due; or
(c) any representation or warranty made under this
Agreement, or any of the other Loan Documents, or in any
certificate or statement furnished or made to Agent pursuant hereto
or in connection herewith or with the Obligation, shall prove to be
untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made; or
(d) default shall occur in the performance of any of
the covenants or agreements of the Related Persons contained in
Sections 6.01, 6.02, 6.03, 6.04, 6.11, 6.12, 6.13, 7.02, or 7.06,
or of comparable provisions in any of the other Loan Documents and
shall continue for fifteen (15) days after Borrower has knowledge
of such default; or
(e) default shall occur in the performance of
covenants and agreements of any Related Person herein or in the
other Loan Documents, which are not the subject of other clauses of
this Section 8.01; or
(f) default shall occur in the payment of any material
Indebtedness of any Related Person in excess of $500,000.00 (other
than the Obligation); default shall occur in respect of any note,
loan agreement or credit agreement relating to any such
Indebtedness and such default shall continue for more than the
period of grace, if any, specified therein (or if there is no such
grace period, for more than ten (10) days) or any such Indebtedness
shall become due before its stated maturity by acceleration of the
maturity thereof or shall become due by its terms and shall not be
paid or extended within ten (10) days; or
(g) any of the Loan Documents shall cease to be legal,
valid and binding agreements enforceable against the Person
executing the same in accordance with the respective terms thereof
or shall in any way be terminated or become or be declared
ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective Liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be
created thereby; or
(h) Any Related Person shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of such
Person's assets, (ii) file a voluntary petition in bankruptcy,
admit in writing that such Person is unable to pay such Person's
debts as they become due or generally not pay such Person's debts
as they become due, (iii) make a general assignment for the benefit
of creditors, (iv) file a petition or answer seeking reorganization
of an arrangement with creditors or to take advantage of any Debtor
Laws, (v) file an answer admitting the material allegations of, or
consent to, or default in answering, a petition filed against such
Person in any bankruptcy, reorganization or insolvency proceeding,
or (vi) take corporate action for the purpose of effecting any of
the foregoing; or
(i) An involuntary petition or complaint shall be
filed against any Related Person seeking bankruptcy or
reorganization or such Person or the appointment of a receiver,
custodian, trustee, intervenor or liquidator of such Person, or all
or substantially all of such Person's assets, and such petition or
complaint shall not have been dismissed within thirty (30) days of
the filing thereof; or an order, order for relief, judgment or
decree shall be entered by any court of competent jurisdiction or
other competent authority approving a petition or complaint seeking
reorganization of any Related Person or any subsidiary of any such
Persons or appointing a receiver, custodian, trustee, intervenor or
liquidator of such Person, or of all or substantially all of such
Person's assets; or
(j) any final judgment(s) for the payment of money in
excess of the sum of $100,000 in the aggregate shall be rendered
against any Related Person and such judgment or judgments shall not
be satisfied or discharged at least ten (10) days prior to the date
on which its assets could be lawfully sold to satisfy such
judgment; or
(k) both the following events shall occur: (i) either
(x) proceedings shall have been instituted to terminate, or a
notice of termination shall have been filed with respect to, any
Plan (other than a Multi-Employer Pension Plan as that term is
defined in Section 3(37) of ERISA) by any Related Person, any
member of the Controlled Group, PBGC or any representative of any
thereof, or any such Plan shall be terminated, in each case under
Section 4041 or 4042 of ERISA, or (y) a Reportable Event, the
occurrence of which would cause the imposition of a Lien under
Section 4068 of ERISA, shall have occurred with respect to any Plan
(other than a Multi-Employer Pension Plan as that term is defined
in Section 3(37) of ERISA) and be continuing for a period of sixty
(60) days; and (ii) the sum of the estimated liability to PBGC
under Section 4062 of ERISA and the currently payable obligations
of any Related Person to fund liabilities (in excess of amounts
required to be paid to satisfy the minimum finding standard of
Section 412 of the Code) under the Plan or Plans subject to such
event shall exceed ten percent (10%) of such Related Person's
Tangible Net Worth at such time; or
(l) any or all of the following events shall occur
with respect to any Multi-Employer Pension Plan (as that term is
defined in Section 3(37) of ERISA) to which any Related Person
contributes or contributed on behalf of its employees: (i) any
Related Person incurs a withdrawal liability under Section 4201 of
ERISA; or (ii) any such plan is "in reorganization" as that term is
defined in Section 4241 of ERISA; or (iii) any such Plan is
terminated under Section 4041A of ERISA and Agent determines in
good faith that the aggregate liability likely to be incurred by
Borrower, as a result of all or any of the events specified in
Subsections (i), (ii) and (iii) above occurring, shall have a
material adverse effect; or
(m) any default or event of default shall occur in
respect of the Note Agreement and such default or event of default
has not been cured or permanently waived prior to the expiration of
any applicable grace period.
8.02. Remedies Upon Event of Default. If an Event of
Default shall have occurred and be continuing, then Agent may
exercise any one or more of the following rights and remedies, and
any other remedies provided in any of the Loan Documents, as the
Required Holders in their sole discretion may deem necessary or
appropriate:
(a) terminate the obligations of Agent and the Lenders
hereunder, including the obligation to make any Advances or issue
any Letters of Credit;
(b) declare the Obligation, including without
limitation the Notes, to be forthwith due and payable
("Acceleration"), whereupon the same shall forthwith become due and
payable without presentment, demand, protest, notice of default,
notice of acceleration or of intention to accelerate or other
notice of any kind, all of which each Related Person hereby
expressly waives, anything contained herein or in the Notes to the
contrary notwithstanding;
(c) reduce any claim to judgment;
(d) (i) demand and Borrower shall immediately deliver
to Agent funds for deposit into a Cash Collateral Account in the
amount of the Letter of Credit Repayment Obligations then
outstanding, as security for the Obligation (ii) demand and
Borrower and Pride SGP shall each immediately deliver to Agent a
Lien in favor of Agent on all of the properties and assets of each
of Borrower and Pride SGP, in form and content acceptable to Agent
and Agent's counsel (a demand pursuant to this item (d) shall be
deemed an "Acceleration");
(e) exercise any right of offset;
(f) without notice of default or demand, pursue and
enforce any of Agent's rights and remedies under the Loan
Documents, or otherwise provided under or pursuant to any
applicable law or agreement; provided, however, that if any Event
of Default specified in Sections 8.01(h) or (i) shall occur, the
Obligation, including without limitation the Notes, shall thereupon
become due and payable concurrently therewith, and Borrower shall
be obligated to deliver to Agent funds for deposit into a Cash
Collateral Account in the amount of the Letter of Credit Repayment
Obligations then outstanding as security for the Obligation,
without any further action by Agent and without presentment,
demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind, all of which
each Related Person hereby expressly waives (such actions in this
provisions shall be deemed an "Acceleration"); and/or
(g) exercise any other remedy at law or in equity.
8.03. Performance by Agent. Should any Related Person fail
to perform any covenant, duty or agreement contained herein or in
any of the Loan Documents, Agent may perform or attempt to perform
such covenant, duty or agreement on behalf of such Related Person.
In such event, Borrower shall, at the request of Agent, promptly
pay any amount expended by Agent in such performance or attempted
performance to Agent at the Payment Office, together with interest
thereon at the Maximum Rate from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly understood
that Agent does not assume any liability or responsibility for the
performance of any duties of any Related Person hereunder or under
any of the Loan Documents or other control over the management and
affairs of any Related Person.
ARTICLE IX
MISCELLANEOUS
9.01. Strict Compliance. If any action or failure to act by
any Related Person violates any covenant or obligation of such
Related Person contained herein, then such violation shall not be
excused by the fact that such action or failure to act would
otherwise be required or permitted by any covenant or exception to
any covenant other than the covenant violated.
9.02. Modification. All modifications, consents, amendments
or waivers of any provision of any Loan Document, or consent to any
departure by any Related Person therefrom, shall be effective only
if the same shall be in writing and concurred in by the Determining
Lenders and then shall be effective only in the specific instance
and for the purpose for which given.
9.03. Accounting Terms and Reports. All accounting terms
not specifically defined in this Agreement shall be construed in
accordance with GAAP consistently applied on the basis used by
Borrower in prior years. All financial reports furnished by
Borrower and/or any Guarantor to Agent pursuant to this Agreement
shall be prepared in such form and such detail as shall be
satisfactory to Agent, shall be prepared on the same basis as those
prepared by Borrower or the applicable Guarantor in prior years and
shall be the same financial reports as those furnished to the
partners, employees and agents of Borrower or the applicable
Guarantor. All financial projections furnished by Borrower to
Agent pursuant to this Agreement shall be satisfactory to Agent and
shall be prepared on the same basis as the financial reports
furnished by Borrower to Agent.
9.04. Waiver. No failure to exercise, and no delay in
exercising, on the part of Agent or any Lender, any right hereunder
or under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The
rights of Agent or any Lender hereunder and under the Loan
Documents shall be in addition to all other rights provided by law.
No modification or waiver of any provision of this Agreement, the
Notes or any Loan Documents, nor consent to departure therefrom,
shall be effective unless in writing and no such consent or waiver
shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a wavier of the
right to take other action in the same, similar or other instances
without such notice or demand.
9.05. Payment of Expenses. Each Related Person agrees to
pay (a) all costs and expenses of Agent and each Lender (including,
without limitation, all reasonable attorneys' fees) incurred by any
party in connection with the administration, preservation and
enforcement of this Agreement, the Notes, and/or the other Loan
Documents, and (b) all reasonable costs and expenses of Agent and
each Lender (including without limitation reasonable fees and
expenses of legal counsel) in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Notes,
and the other Loan Documents and any and all amendments,
modifications, maintenance, and supplements thereof or thereto.
9.06. Notices. Any notices or other communications required
or permitted to be given by this Agreement or any other documents
and instruments referred to herein must be (i) given in writing
(the references to "in writing" elsewhere in this Agreement are for
emphasis and are not a way of limitation of the generality of the
requirement that notices or other communications shall be in
writing), (ii) be personally delivered or mailed by prepaid mail,
or by telex or telecopy delivered or transmitted to the party to
whom such notice or communication is directed, to the address of
such party as follows:
(a) Borrower: 1209 N. 4th
Abilene, Texas 79601
(Attention: Mr. Brad Stephens)
Telex No. 794888
Fax No. 915/676-8792; and
(b) Guarantors, 1209 N. 4th
or any of Abilene, Texas 79601
them: (Attention: Mr. Brad Stephens)
Telex No. 794888
Fax No. 915/676-8792; and
(c) Lender: to it, marked to the attention of its officer
and at its address or telex number or fax number shown below
its name on the signature page.
Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is mailed by
prepaid certified or registered mail, or personally delivered as
aforesaid or, if transmitted by telex or telecopy or fax machine,
on the day that such notice is transmitted as aforesaid, and
otherwise when actually received. Any party may, for purposes of
the Loan Documents, change its address, telex number, fax number or
the Person to whom a notice or other communication is marked to the
attention of, by giving notice of such change to the other parties
pursuant to this Section 9.06.
9.07. Governing Law. This Agreement has been prepared, is
being executed and delivered, and is intended to be performed in
the State of Texas, and the substantive laws of such state and the
applicable federal laws of the United States of America shall
govern the validity, construction, enforcement and interpretation
of this Agreement and all of the Loan Documents.
9.08. Choice of Forum; Consent to Service of Process and
Jurisdiction; Waiver of Jury Trial. Any suit, action or proceeding
against Borrower or any Guarantor with respect to this Agreement,
the Notes or any Loan Documents or any judgment entered by any
court in respect thereof, may be brought in the courts of the State
of Texas, County of Dallas, or in the United States courts located
in the State of Texas as Agent or a Lender in its respective sole
discretion may elect and Borrower and each Guarantor hereby submit
to the nonexclusive jurisdiction of such courts for the purpose of
any such suit, action or proceeding. Borrower and each Guarantor
hereby agree that service of all writs, process and summonses in
any such suit, action or proceeding brought in the State of Texas
may be brought upon the Process Agent, and Borrower and each
Guarantor hereby irrevocably appoint the Process Agent, as its true
and lawful attorney-in-fact in the name, place and stead of
Borrower and such Guarantor to accept such service of any and all
such writs, process and summonses, and agrees that the failure of
Process Agent to give any notice of such service of process to them
shall not impair or affect the validity of such service or of any
judgment based thereon. Borrower and each Guarantor hereby
irrevocably consent to the service of process in any suit, action
or proceeding in said court by the mailing thereof by Agent or a
Lender by registered or certified mail, postage prepaid, to the
Process Agent's address set forth above. Borrower and each
Guarantor hereby irrevocably waive any objections which it may now
or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any Loan
Document brought in the courts located in the State of Texas,
County of Dallas, and hereby further irrevocably waives any claim
that any such suit; action or proceeding brought in any such court
has been brought in an inconvenient forum. BORROWER, EACH
GUARANTOR, AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH ANY OF THEM ARE PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT, DUTY IMPOSED BY LAW OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS, OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER
ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR
AFTER THE PAYMENT OBSERVANCE AND PERFORMANCE IN FULL OF ANY
OBLIGATIONS OF BORROWER OR ANY GUARANTOR UNDER ANY OF THE LOAN
DOCUMENTS.
9.09. LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY
BORROWER OR ANY GUARANTOR AGAINST AGENT OR ANY LENDER OR THEIR
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF
ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED
ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH,
ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS
CONTEMPLATED AND RELATIONSHIPS ESTABLISHED BY THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH. BORROWER AND EACH GUARANTOR
HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE UPON SUCH CLAIM FOR ANY
SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR
SUSPECTED TO EXIST IN ITS FAVOR.
9.10. Invalid Provisions. If any provision of any Loan
Document is held to be illegal, invalid or unenforceable under
present or future laws during the term of this Agreement, such
provision shall be fully severable; such Loan Document shall be
construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part of such Loan Document; and the
remaining provisions of such Loan Document shall remain in full
force and effect and shall not be affected by the illegal, invalid
or unenforceable provisions or by its severance from such Loan
Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision there shall be added as part of such Loan
Document a provision mutually agreeable to Borrower or Guarantors,
as applicable, and Agent as similar in terms to such illegal,
invalid or unenforceable provisions as may be possible and still be
legal, valid and enforceable. In the event Borrower or Guarantors,
as applicable, and Agent are unable to agree upon a provision to be
added to the Loan Document within a period of ten Business Days
after a provision of the Loan Document is held to be illegal,
invalid or unenforceable there shall be added automatically to such
Loan Document such amendment as is needed to reform the Loan
Document so that it is legal, valid and enforceable and still meets
the general intended purpose of such Loan Document. In either
case, the effective date of the added provision shall be the date
upon which the prior provision was held to be illegal, invalid or
unenforceable.
9.11. Maximum Interest Rate. Regardless of any provision
contained in any of the Loan Documents, neither Agent nor any
Lender shall ever be entitled to receive, collect or apply as
interest on the Obligation or any portion thereof, any amount in
excess of interest calculated at the Maximum Rate, and, in the
event that Agent or any Lender ever receives, collects or applies
as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal
and treated hereunder as such; and, if the principal amount of the
Obligation is paid in full, any remaining excess shall forthwith be
paid to Borrower. In determining whether or not the interest paid
or payable on the Notes or any other portion of the Obligation
under any specific contingency exceeds interest calculated at the
Maximum Rate, Borrower, each Guarantor, Agent and each Lender
shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium
rather than as interest; (ii) exclude voluntary prepayments and the
effects thereof; and (iii) amortize, pro rate, allocate and spread
the total amount of interest throughout the entire contemplated
term of the Notes or other portion of the Obligation upon which the
interest is determined such that the interest does not exceed the
Maximum Rate; provided that, if the Notes or other portion of the
Obligation upon which the interest is determined are paid and
performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of
existence thereof exceeds interest calculated at the Maximum Rate,
Agent or each Lender shall refund to Borrower the amount of such
excess or credit the amount of such excess against the principal
amount of the Notes or other portion of the Obligation and, in such
event, neither Agent nor any Lender shall be subject to any
penalties provided by any laws for contracting for, charging,
taking, reserving or receiving interest in excess of interest
calculated at the Maximum Rate.
9.12. Confidentiality. Agent and each Lender agrees to hold
any confidential information which it may receive from any Related
Person pursuant to this Agreement in confidence, except for
disclosure to (i) other lenders and participants, (ii) legal
counsel, accountants, and other professional advisors, (iii)
regulatory officials, (iv) as required by law or legal process or
in connection with any legal proceeding, and (v) to another
financial institution in connection with a disposition or proposed
disposition of a Lender's interests hereunder or under the Notes.
9.13. Nonliability of Agent or Lenders. The relationship
between Borrower, the Guarantors and Agent and each Lender is, and
shall at all times remain, solely that of borrower, guarantor and
lender, and neither Agent nor any Lender undertakes or assumes any
responsibility or duty to Borrower or any Guarantor to review,
inspect, supervise, pass judgment upon, or inform Borrower or any
Guarantor of any matter in connection with any phase of the
business, operations, or condition, financial or otherwise of
Borrower or any Guarantor. Borrower and each Guarantor shall rely
entirely upon its own judgment with respect to such matters, and
any review, inspection, supervision, exercise of judgment, or
information supplied to Borrower or any Guarantor by Agent or any
Lender in connection with any such matter is for the protection of
Agent or such Lender, and neither Borrower nor any Guarantor nor
any third party is entitled to rely thereon.
9.14. Set-Off. Borrower and each Guarantor hereby grant to
Agent and each Lender the right of set-off without notice or demand
to or upon Borrower or Guarantors, or any of them, (any such notice
and/or demand being hereby waived by Borrower and each Guarantor)
to secure repayment of the Obligation and the performance by
Borrower of its agreement to transfer funds to Cash Collateral
Accounts as provided in Section 8.02, regardless of whether Agent
shall have made any demand therefor and whether all or any part of
the Obligations are or may be unmatured, upon any and all monies,
securities or other property of Borrower or any Guarantor and the
proceeds therefrom, now or hereafter held or received by or in
transit to Agent or any Lender or any of their agents, from or for
the account of Borrower or such Guarantor, whether for safe
keeping, custody, pledge, transmission, collection or otherwise,
and also upon any and all deposits (general or special) and credits
of Borrower or any Guarantor, and any and all claims of Borrower or
such Guarantor against Agent or any Lender at any time existing.
9.15. Guaranties of Subsidiaries. Each Subsidiary of each
Related Person now existing or created, acquired or coming into
existence after the Effective Date shall, promptly upon request by
Agent, execute and deliver to Agent an absolute and unconditional
guaranty of the timely repayment of the Obligation and the due and
punctual performance of the obligations of Borrower hereunder,
which guaranty shall be satisfactory to Agent in form and
substance. Each Related Person will cause each of its Subsidiaries
to deliver to Agent, simultaneously with its delivery of such a
guaranty, written evidence satisfactory to Agent and its counsel
that such Subsidiary has taken all corporate or partnership action
necessary to duly approve and authorize its execution, delivery and
performance of such guaranty and any other documents which it is
required to execute.
9.16. Notification of Account Debtors. Notwithstanding
anything to the contrary contained in this Agreement or in any
other Loan Document, Borrower and each Guarantor hereby agree that
the Agent and/or the Lenders, as applicable, may, in the sole and
complete discretion, at any time or from time to time, direct any
and all Account Debtors or other parties liable to Borrower or such
Guarantor on account of any contract, agreement, account
receivable, general intangible or other obligation to make payments
on account thereof directly to the Agent, for the account of the
Borrower or such Guarantor, as applicable, regardless of whether or
not a default, breach or Event of Default has occurred, or is
continuing, under this Agreement or under any other Loan Document.
Any such payments that are received directly by the Agent shall be
deposited in a Cash Collateral Account at NationsBank of Texas,
N.A. Neither Borrower nor any Guarantor shall have any right,
power or authority to transfer or withdraw funds from such Cash
Collateral Account; provided, however, that until the Borrower is
notified to the contrary by the Agent, the Agent shall transfer
available funds from such Cash Collateral Account to one or more of
Borrower's accounts at NationsBank of Texas, N.A. for use by
Borrower. Borrower and each Guarantor hereby (i) grants to the
Agent a security interest in each such Cash Collateral Account and
any and all funds contained therein or evidenced thereby, as
security for the Obligation and (ii) grants to Agent the express
right and authority to set off and offset the Obligation, or any
portion thereof, against each such Cash Collateral Account and any
or all funds contained therein or evidenced thereby.
9.17. Guarantor Waivers. Notwithstanding anything to the
contrary contained in this Agreement or in any other Loan Document,
each Guarantor hereby irrevocably waives, releases and relinquishes
any and all rights that it may now have or that it may hereafter
acquire with respect to Borrower or the property of Borrower by
virtue of (i) any payment made by such Guarantor with respect to
the obligations or liabilities of Borrower to the Agent and/or the
Lenders, whether such payment be made pursuant to any guaranty
agreement, the Guarantor's position as a general partner of
Borrower or otherwise or (ii) any property of such Guarantor that
may now or hereafter be pledged, mortgaged or otherwise encumbered
to secure the payment of any obligations or liabilities of Borrower
to the Agent and/or the Lenders.
9.18. Binding Effect. The Loan Documents shall be binding
upon and inure to the benefit of Borrower, each Guarantor, Agent
and each Lender and their successors, assigns and legal
representatives; provided, however, that Borrower may not, without
the prior written consent of Agent, assign any rights, powers,
duties or obligations thereunder.
9.19. Headings. Section headings are for convenience of
reference only and shall in no way affect the interpretation of
this Agreement.
9.20. Survival. All representations and warranties made by
any Related Person herein shall survive delivery of the Notes and
the issuance of any Letter of Credit.
9.21. Participations. Subject to the provisions hereof,
each Lender shall have the right to enter into one or more
participation agreements with any other Person with respect to the
Notes or the Letter of Credit Facility, with Borrower, but such
participation(s) shall not affect the rights and duties of Agent
hereunder vis-a-vis Borrower.
9.22. No Third Party Beneficiary. The parties do not intend
the benefits of this Agreement to inure to any third party, nor
shall this Agreement be construed to make or render Agent or any
Lender liable to any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by
Borrower or any Guarantor, or for debts or claims accruing to any
such Persons against Borrower or any Guarantor. Notwithstanding
anything contained herein or in the Notes, or in any other Loan
Document, or any conduct or course of conduct by any or all of the
parties hereto, before or after signing this Agreement or any other
Loan Document shall be construed as creating any right, claim or
cause of action against Agent or any Lender, or any of their
officers, directors, agents or employees, in favor of any
materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower or any Guarantor, nor to
any other Person other than Borrower or any Guarantor.
9.23. Multiple Counterparts. This Agreement may he executed
in any number of counterparts, all of which taken together shall
constitute one and the same agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
9.24. NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT,
TOGETHER WITH THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
9.25. Transfer of Interest. Any Lender may sell, transfer
or otherwise assign all or any portion of its rights and
obligations under this Agreement and any Loan Document at any time
and from time to time. Any such assignee shall be a party to and,
to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and
obligations of a Lender hereunder. If such assignment is approved
in writing by Borrower, the assigning party shall, to the extent of
such assignment, be released by Borrower and each Guarantor from
all liability hereunder and under all Loan Documents.
ARTICLE X
AGENT
10.01. Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes Agent to take such action on
its behalf and to exercise such powers under the Loan Documents as
are delegated to Agent by the terms thereof, together with such
powers as are reasonably incidental thereto. With respect to its
obligation to issue Letters of Credit and accept the Notes issued
to it, Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though
it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include agent in its capacity as a
Lender. Agent and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage
in any kind of business with, Borrower, each Guarantor, and any
Person which may do business with Borrower or either Guarantor, all
as if Agent were not Agent hereunder and without any duty to
account therefor to Lenders.
10.02. Note Holders. Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have
been filed with it, signed by such payee and in form satisfactory
to Agent.
10.03. Consultation with Counsel. Lenders agree that Agent
may consult with legal counsel selected by it and shall not be
liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
10.04. Documents. Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, enforceability,
genuineness or value of any of the Loan Documents or any other
instrument or document furnished pursuant thereto or in connection
therewith, and Agent shall be entitled to assume that the same are
valid, effective, enforceable and genuine and what they purport to
be.
10.05. Resignation of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign
at any time by giving written notice thereof to Lenders and
Borrower. Upon any such resignation, the Determining Lenders shall
have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Determining Lenders and shall
have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of Lenders, appoint a successor Agent. Upon
the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article X
shall continue in effect for its benefit in respect to any actions
taken or omitted to be taken by it while it was acting as Agent.
10.06. Responsibility of Agent. It is expressly understood
and agreed that the obligations of Agent under the Loan Documents
are only those expressly set forth in the Loan Documents and that
Agent shall be entitled to assume that no Default or Event of
Default has occurred and is continuing, unless Agent has actual
knowledge of such fact or has received notice from a Lender that
such Lender considers that a Default or an Event of Default has
occurred and is continuing and specifying the nature thereof.
Lenders recognize and agree, that for purposes hereof, Agent shall
not be required to determine independently whether the conditions
precedent described herein have been satisfied and, in making an
Advance or issuing a Letter of Credit, may rely fully upon
statements contained in the relevant Notice of Borrowing, Letter of
Credit Request or any other information from Borrower. Neither
Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it under or
in connection with the Loan Documents, except for its own gross
negligence or willful misconduct. Agent shall incur no liability
under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the
proper party or parties, or with respect to anything which it may
do or refrain from doing in the reasonable exercise of its
judgment, or which may seem to it to be necessary or desirable in
the premises.
Agent shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this
Agreement, or in any certificate or other document referred to or
provided for in, or received by any Lender under, this Agreement,
or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any document
referred to or provided for herein or for any failure by Borrower
to perform any of their obligations hereunder. Agent may employ
agents and attorneys-in-fact and shall not be answerable, except as
to money or securities received by it or its authorized agents, for
the negligence or misconduct of any such agent or attorneys-in-fact
selected by it with reasonable care.
The relationship between Agent and each Lender is only that
of agent and principal and has no fiduciary aspects, and Agent's
duties hereunder are acknowledged to be only ministerial and not
involving the exercise of discretion on its part. Nothing in this
Agreement or elsewhere contained shall be construed to impose on
Agent any duties or responsibilities other than those for which
express provision is herein made. In performing its duties and
functions hereunder, Agent does not assume and shall not be deemed
to have assumed, and hereby expressly disclaims, any obligation or
responsibility toward or any relationship of agency or trust with
or for Borrower. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or
collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting
or refraining from acting) upon the instructions of the Determining
Lenders and such instructions shall be binding upon all Lenders and
all holders of Notes; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal
liability or which is contrary to this Agreement or applicable law.
10.07. Notices of Event of Default. In the event that Agent
shall have acquired actual knowledge of any Event of Default or of
an event which, with the giving of notice or the lapse of time, or
both, would constitute an Event of Default, Agent shall promptly
give notice thereof to the other Lenders.
10.08. Independent Investigation. Each Lender severally
represents and warrants to Agent that it has made its own
independent investigation and assessment of the financial condition
and affairs of Borrower and each Guarantor in connection with the
making and continuation of its participation in this Agreement and
has not relied exclusively on any information provided to such
Lender by Agent or any other Lender in connection herewith. Each
Lender represents, warrants and undertakes to Agent and each other
Lender that it shall continue to make its own independent appraisal
of the creditworthiness of Borrower and each Guarantor while the
Notes are outstanding or its obligations hereunder are in force.
10.09. Indemnification. Lenders agree to indemnify Agent
(to the extent not reimbursed by Borrower), according to their Pro
Rata Part, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgment, suits, costs,
expenses, or disbursements or any kind or nature whatsoever (in
this section collectively called "liabilities and costs") which may
be imposed on, incurred by or asserted against Agent in any way
relating to or arising out of the Loan Documents or any action
taken or omitted by Agent under the Loan Documents THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARISE, IN WHOLE OR IN PART, UNDER ANY THEORY OF STRICT
LIABILITY, OR ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be liable for any portion of
such liabilities resulting from Agent's gross negligence or willful
misconduct.
10.10. Benefit of Article X. The agreements contained in
this Article X are solely for the benefit of Agent and Lenders, and
are not for the benefit of, or to be relied upon by, Borrower, any
Guarantor, or any third party.
10.11. Assumption as to Payments. Except as specifically
provided herein, unless Agent shall have received notice from
Borrower prior to the date on which any payment is due to Lenders
hereunder that Borrower will not make such payment in full, Agent
may assume that Borrower has made such payment in full to Agent on
such date and Agent may, in reliance upon such assumption, cause to
be distributed to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrower
shall not have so made such payment in full to Agent, each Lender
shall repay to Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such
Lender repays such amount to Agent, at the rate applicable to such
portion of the applicable Revolving Loan or the applicable Term
Loan.
10.12. Lender's Ability to Enforce the Loan Documents. Each
Lender hereby agrees that it shall not have any right or
responsibility to enforce the obligations of the Borrower, any
Guarantor or any other parties under the Loan Documents, and except
as expressly provided herein to the contrary, all rights pursuant
to the Loan Documents, or otherwise of Agent to secure payment of
the obligations of the Borrower and/or the Guarantors under the
Loan Documents shall be so held (and such rights shall be exercised
solely by and at the option of Agent, as directed in writing by the
Determining Lenders) for the ratable benefit of the Lenders.
10.13. Other Financings. Without limiting rights to which
any Lender otherwise is or may become entitled, such Lender shall
have no interest, by virtue of this Agreement or the Loan
Documents, in (a) any present or future loans from, letters of
credit issued by, or leasing or other financing transactions by,
any other Lender to, on behalf of, or with the Borrower or any
Guarantor (collectively referred to herein as the "Other
Financings") other than the obligation hereunder; (b) any present
or future guaranties by or for the account of the Borrower or any
Guarantor which are not contemplated by the Loan Documents; (c) any
present or future property taken as security for any such Other
Financings; or (d) any property now or hereafter in the possession
or control of any other Lender which may be or become security for
the obligations of the Borrower or any Guarantor arising under any
Loan Document by reason of the general description of indebtedness
secured or of property contained in any other agreements,
documents, or instruments related to any such Other Financings.
10.14. Duty of Care. Except for actions taken or omitted to
be taken by Agent which constitute gross negligence or willful
misconduct, Agent shall not be liable for any action taken or
omitted to be taken by it under the Agreement or any Loan Document
in good faith and believed by it be within the discretion or power
conferred upon it or them by this Agreement or any Loan Document,
or be responsible for the consequences of any error of judgment.
Unless indemnified by Lenders in accordance with their Pro Rata
Part to Agent's satisfaction against loss, cost, liability, and
expense, Agent shall be under no duty to enforce any rights,
remedies, powers, or privileges with respect to any of the
obligations of any Related Person under any of the Loan Documents
and shall not be compelled to do any act hereunder or thereunder or
to take any action toward the exercise or enforcement of the powers
created by this Agreement or any Loan Document, or to prosecute or
defend any suit in respect hereof or thereof. Agent shall not be
responsible in any manner to any Lender for (a) the effectiveness,
enforceability, genuineness, validity, or due execution of this
Agreement, any of the Loan Documents, and any other documents,
agreements, or instruments, (b) any representation, warranty,
document, certificate, report, or statement therein made or
furnished under or in connection with any of the Loan Documents,
(c) the adequacy of collateral, if any, for the obligations of any
Related Person under any of the Loan Documents, (d) the existence,
priority, or perfection of any lien or security interest, if any,
granted or purported to be granted in connection with any of the
Loan Documents, or (e) the observation of or compliance with any of
the terms, covenants, or conditions of the Loan Documents on the
part of any Related Person.
10.15. Amendments, Waivers, etc. Agent may enter into any
amendment or modification of, or may waive compliance with the
terms of, any Loan Document only with the written consent of the
Determining Lenders.
10.16. Lender's Representations. Each Lender represents and
warrants to Agent and the other Lenders that: (a) it is engaged in
the business of entering into commercial lending transactions
(including transactions of the nature contemplated herein) and can
bear the economic risk related to the same; and (b) it does not
consider the obligations hereunder to constitute the "purchase" or
"sale" of a "security" within the meaning of any federal or state
securities statute or law, or any rule or regulation under any of
the foregoing.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of day and year first above written.
BORROWER:
PRIDE COMPANIES, L.P., a Delaware limited partnership
By: PRIDE REFINING, INC., a Texas corporation,
Managing General Partner
By:
Brad Stephens
Chief Executive Officer
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
GUARANTORS:
PRIDE REFINING, INC.
By:
Brad Stephens
Chief Executive Officer
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
PRIDE SGP, INC.
By:
Brad Stephens
Chief Executive Officer
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
PRIDE MARKETING OF TEXAS (CEDAR WIND), INC.
By:
Brad Stephens
President
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas (Cedar Wind), Inc.,
its General Partner
By:
Brad Stephens
President
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
PRIDE BORGER, INC.
By:
Wayne Malone
President
1209 N. 4th
Abilene, Texas 79601
(915) 676-8792 (Fax)
AGENT:
NATIONSBANK OF TEXAS, N.A.
By:
Jay T. Wampler
Vice President
901 Main Street
66th Floor
Dallas, Texas 75202
(214) 508-0604 (Fax)
LENDERS:
NATIONSBANK OF TEXAS, N.A.
By:
Jay T. Wampler
Vice President
901 Main Street
66th Floor
Dallas, Texas 75202
(214) 508-0604 (Fax)
BANK ONE, TEXAS, N.A.
By:
Barbara D. Christian
Senior Vice President
1717 Main Street
Dallas, Texas 75201
(214) 240-2740 (FAX)
with a copy to:
Robert N. Rule, Jr., Esq.
Gardere & Wynne
1601 Elm Street, 26th Floor
Dallas, Texas 75201
(214) 999-4162 (FAX)
EXHIBIT 28.2
PRIDE COMPANIES, L.P.
PRIDE REFINING, INC.
PRIDE SGP, INC.
CONVERTIBLE SENIOR SECURED NOTES DUE NOVEMBER 30, 1997
_______________
NOTE AGREEMENT
_______________
Dated as of August 13, 1996
<PAGE>
PRIDE COMPANIES, L.P.
PRIDE REFINING, INC.
PRIDE SGP, INC.
1209 N. 4th
Abilene, Texas 79601
As of August 13, 1996
To Each of the Purchasers Named in the
Information Schedule Attached Hereto
Re: Convertible Notes
Ladies and Gentlemen:
The undersigned, Pride Companies, L.P., a Delaware limited
partnership (the "Company"), Pride Refining, Inc., a Texas
corporation ("Managing General Partner"), and Pride SGP, Inc., a
Texas corporation ("Special General Partner"), hereby agrees with
the purchasers named in the Information Schedule attached hereto
(the "Purchasers") as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUES OF NOTES.
1A. Authorization of Issues of Series A Notes. The Company
will authorize the issue of its Convertible Senior Secured Series
A Promissory Notes in the aggregate principal amount of
$2,500,000, to be dated the date of issue thereof, to mature
November 30, 1997, to bear interest on the unpaid balance thereof
from the date thereof until the principal thereof shall have
become due and payable at the Adjusted Base Rate and upon the
occurrence and during the continuation of an Event of Default at
the rate specified therein, and to be substantially in the form
of Exhibit A-1 attached hereto. The term "Series A Notes" as
used herein shall include each such Convertible Senior Secured
Series A Promissory Note delivered pursuant to any provision of
this Agreement and each such Convertible Senior Secured Series A
Promissory Note delivered in substitution or exchange for any
other Series A Note pursuant to any such provision.
1B. Authorization of Issues of Series B Notes. The Company
will authorize the issue of its Convertible Senior Secured Series
B Promissory Notes in an aggregate principal amount up to
$12,500,000, to be dated the date of issue thereof, to mature
November 30, 1997, to bear interest on the unpaid balance thereof
from the date thereof until the principal thereof shall have
become due and payable at the Adjusted Base Rate and upon the
occurrence and during the continuation of an Event of Default at
the rate specified therein, and to be substantially in the form
of Exhibit A-2 attached hereto. The term "Series B Notes" as
used herein shall include each such Convertible Senior Secured
Series B Promissory Note delivered pursuant to any provision of
this Agreement and each such Convertible Senior Secured Series B
Promissory Note delivered in substitution or exchange for any
other Series B Note pursuant to any such provision.
1C. Authorization of Issues of Series C Notes. The Company
will authorize the issue of its Convertible Senior Secured Series
C Promissory Notes in an aggregate principal amount of $5,000,000
to be dated the date of issue thereof, to mature November 30,
1997, to bear interest on the unpaid balance thereof from the
date thereof until the principal thereof shall have become due
and payable at the Adjusted Base Rate and upon the occurrence and
during the continuation of an Event of Default at the rate
specified therein, and to be substantially in the form of Exhibit
A-3 attached hereto. The term "Series C Notes" as used herein
shall include each such Convertible Senior Secured Series C
Promissory Note delivered pursuant to any provision of this
Agreement and each such Convertible Senior Secured Series C
Promissory Note delivered in substitution or exchange for any
other Series C Note pursuant to any such provision. The term
"Notes" as used herein shall collectively refer to the Series A
Notes, the Series B Notes, the Series C Notes and the Unsecured
Series A Notes. The term "Senior Secured Notes" as used herein
shall collectively refer to the Series A Notes, the Series B
Notes and the Series C Notes. Capitalized terms used herein have
the meanings specified in paragraph 11.
PARAGRAPH 2. ISSUANCE OF NOTES.
2A. Issuance of Notes. Subject to the terms and conditions
hereof, at the Closing, each Purchaser agrees to exchange the
Original Term Notes in a principal amount equal to such
Purchaser's proportionate share of the remainder of (x) the
outstanding principal amount of the Original Term Notes on the
Date of Closing minus (y) $25,000,000 (the "Exchange Amount") for
Notes in the same principal amount (the "Exchange"). The
Exchange shall be made first, for such Purchaser's proportional
share of Series A Notes up to the full amount of authorized
Series A Notes, then for such Purchaser's proportional share of
Series C Notes up to the full amount of authorized Series C Notes
and then for such Purchaser's proportional share of Series B
Notes up to the full amount of authorized Series B Notes.
Subject to the terms and conditions hereof, at the Closing, the
Company hereby agrees to issue to each Purchaser the Notes in
exchange for the Original Term Notes in the amounts provided in
this paragraph. If the amount of one or more series of Notes
authorized under paragraph 1 exceeds the amount issued under this
paragraph, the Company hereby agrees the excess authorized but
unissued Notes will not otherwise be sold or issued and the
authorization of such excess amount of Notes will be
automatically terminated. The $25,000,000 principal balance of
the Original Term Notes will remain subject to the Credit
Agreement.
2B. Closing. The Company will deliver to each Purchaser,
at the offices of Thompson & Knight, a Professional Corporation,
at 1700 Pacific Avenue, Suite 3300, Dallas, Texas 75201
("Counsel's Office"), one or more Series A Notes, Series B Notes
and Series C Notes registered in such Purchaser's name,
evidencing the aggregate principal amount of such Notes to be
issued to such Purchaser, on the date of closing, which shall be
any date upon which the Company and the Purchasers may mutually
agree, but in no event later than November 15, 1996 (the
"Closing" or the "Date of Closing"). At the Closing, each
Purchaser agrees to tender its Original Term Note in exchange for
a replacement promissory note issued to such Purchaser in the
principal amount reflecting its proportionate share of the
principal balance of the Original Term Notes not exchanged.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. Purchaser's Conditions at Closing. Each Purchaser's
obligation to make the Exchange is subject to the satisfaction,
on or before the Date of Closing, of the following conditions:
3A. Certain Documents as of the Date Hereof. Each
Purchaser shall have received the following, each dated the date
hereof:
(i) The Shareholder Agreement executed by Managing
General Partner and each shareholder of Managing General
Partner.
(ii) Executed originals of amendments or supplements
to the Collateral Documents, as more specifically described
on Schedule 1 attached hereto, in form and substance
satisfactory to Purchasers, to evidence that the Liens
granted thereunder secure the Senior Secured Notes.
(iii) An intercreditor agreement by and among the
lenders and agent under the Credit Agreement and the holders
of the Senior Secured Notes in the form attached hereto as
Exhibit H (the "Intercreditor Agreement").
(iv) The Pride SGP Agreement.
(v) Certified copies of the resolutions of the Board
of Directors of Managing General Partner, in its capacity as
managing general partner of the Company, approving this
Agreement, the Securities, the Certificate of Designations,
the Registration Rights Agreement, the other Securities
Documents and of all documents evidencing other necessary
partnership or corporate action and governmental approvals,
if any, with respect to this Agreement, the Securities, the
Certificate of Designations, the Shareholder Agreement, the
Registration Rights Agreement and the other Securities
Documents.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Managing General Partner certifying the
names and true signatures of the officers of the Managing
General Partner authorized to sign (on behalf of the
Company) this Agreement, the Notes, the Certificate of
Designations, the Shareholder Agreement, the Registration
Rights Agreement and the other Securities Documents to be
delivered hereunder.
(vii) A copy of the Partnership Agreement and
Certificate of Limited Partnership for the Company and all
amendments thereto, certified by the Corporate Secretary of
Managing General Partner and certificates of qualification
and good standing (or similar instruments) for the Company
issued by the Secretary of State of the state of formation
of the Company and of each of the states wherein the Company
is qualified, or required to be qualified, to do business,
each dated within ten (10) days of the Closing Date.
(viii) Documents similar to those specified in the
immediately preceding clauses (v), (vi) and (vii) for each
Related Person who is a party to any Securities Document
with respect to such Person and its execution of such
Securities Document.
(ix) A favorable opinion of counsel to the Company and
the other Related Persons, satisfactory to the Purchasers
and substantially in the form of Exhibit C attached hereto
and as to such other matters as the Purchasers may
reasonably request.
(x) Additional documents or certificates, in form and
substance satisfactory to Purchasers, with respect to legal
matters or corporate or other proceedings related to the
transactions contemplated hereby as the Purchasers may
reasonably request.
3B. Certain Documents as of the Date of Closing. Each
Purchaser shall have received the following, each dated the Date
of Closing:
(i) The Series A Notes, Series B Notes and Series C
Notes to be issued to such Purchaser.
(ii) A favorable opinion of Akin Gump Strauss Hauer &
Feld L.L.P., counsel to the Company and the other Related
Persons, satisfactory to the Purchasers and substantially in
the form of Exhibit C-1 attached hereto and as to such other
matters as the Purchasers may reasonably request.
(iii) Additional documents or certificates, in form
and substance satisfactory to Purchasers, with respect to
legal matters or corporate or other proceedings related to
the transactions contemplated hereby as the Purchasers may
reasonably request.
(iv) The executed Certificate of Designations, the
executed Warrants and the executed Registration Rights
Agreement.
(v) Certified copies of the resolutions of the Board
of Directors of Managing General Partner, in its capacity as
managing general partner of the Company, approving this
Agreement, the Securities, the Certificate of Designations,
the Registration Rights Agreement, the other Securities
Documents and of all documents evidencing other necessary
partnership or corporate action and governmental approvals,
if any, with respect to this Agreement, the Securities, the
Certificate of Designations, the Shareholder Agreement, the
Registration Rights Agreement and the other Securities
Documents.
(vi) A certificate of the Secretary or an Assistant
Secretary of the Managing General Partner certifying the
names and true signatures of the officers of the Managing
General Partner authorized to sign (on behalf of the
Company) this Agreement, the Notes, the Certificate of
Designations, the Shareholder Agreement, the Registration
Rights Agreement and the other Securities Documents to be
delivered hereunder.
(vii) A copy of the Partnership Agreement and
Certificate of Limited Partnership for the Company and all
amendments thereto, certified by the Corporate Secretary of
Managing General Partner and certificates of qualification
and good standing (or similar instruments) for the Company
issued by the Secretary of State of the state of formation
of the Company and of each of the states wherein the Company
is qualified , or required to be qualified, to do business,
each dated within ten (10) days of the Closing Date.
(viii) Documents similar to those specified in the
immediately preceding clauses (v), (vi) and (vii) for each
Related Person who is a party to any Securities Document
with respect to such Person and its execution of such
Securities Document.
(ix) Additional documents or certificates, in form and
substance satisfactory to Purchasers, with respect to legal
matters or corporate or other proceedings related to the
transactions contemplated hereby as the Purchasers may
reasonably request.
3C. No Litigation. As of the Date of Closing, there are no
actions, suits or legal, equitable, arbitration or administrative
proceedings pending, or to the knowledge of any Related Person
threatened, against the Company challenging or otherwise relating
to the transactions described herein or in the proxy statement or
any other filing required by the Securities and Exchange
Commission regarding Unitholder Approval.
3D. Partnership Agreement. The Company shall promptly
after the execution of this Agreement submit to the Purchasers
for their approval (which approval may be granted or denied in
the sole discretion of the Purchasers) a form of amendment and
restatement of the Partnership Agreement (the "Draft Partnership
Amendment") in order to amend and restate the Partnership
Agreement to give effect to the modified capital structure of the
Company proposed by the Managing General Partner and to the
Certificate of Designations. The Draft Partnership Amendment
shall (i) incorporate the Certificate of Designations as an
exhibit to the Partnership Agreement, (ii) contain all such other
amendments as are necessary to give effect to the relative
rights, powers and duties of the holders of the securities
described in the Certificate of Designations, (iii) shall contain
a statement that notwithstanding anything to the contrary
contained elsewhere in the Partnership Agreement, in the event
that any conflict exists between the Partnership Agreement on the
one hand and the Certificate of Designations on the other, the
terms of the Certificate of Designations shall control, (iv)
provide for the modified capital structure proposed by the
Managing General Partner, and (v) otherwise be satisfactory in
form and substance to the Purchasers in all respects, as
determined in the sole and absolute discretion of the Purchasers.
The modified capital structure proposed by the Managing General
Partner will change the Company's existing convertible preferred
units and existing common units into a single class of common
limited partner units with identical rights and privileges,
eliminate the existing contingent distribution preferences of the
general partners, eliminate the cumulative distribution arrearage
and provide for a reverse unit split of the existing common units
of Borrower then outstanding, which split shall result in the
unitholders of existing convertible preferred units of Borrower
owning approximately 95% of the Common Units as of the completion
of such modification and the unitholders of the existing common
units of Borrower owning approximately 5% of the Common Units as
of the completion of such modification. If the Purchasers and
the Company shall not reach an agreement, in writing, with
respect to the final form of the Partnership Amendment on or
prior to August 23, 1996, the Purchasers shall have no further
obligations under this Agreement. The Draft Partnership
Amendment approved by the Purchasers is herein called the
"Partnership Amendment". As of the Date of Closing, the
Partnership Agreement of the Company shall have been amended by
the form of the Partnership Amendment ultimately approved by the
Purchasers and the Company pursuant to this paragraph 3D.
3E. Representations and Warranties; No Default. The
representations and warranties contained in paragraph 8 shall be
true on and as of the Date of Closing; there shall exist on the
Date of Closing no Event of Default or Default; and the Company
shall have delivered to such Purchaser an Officer's Certificate,
dated the Date of Closing, to both such effects.
3F. Exchange Permitted by Applicable Laws. The Exchange on
the terms and conditions herein provided shall not violate any
applicable law or governmental regulation (including, without
limitation, Section 5 of the Securities Act or Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System) and
shall not subject such Purchaser to any tax, penalty, liability
or other onerous condition under or pursuant to any applicable
law or governmental regulation, and such Purchaser shall have
received such certificates or other evidence as it may request to
establish compliance with this condition.
3G. Legal Matters. Counsel for Purchasers, including any
special counsel for the Purchasers retained in connection with
the Exchange, shall be satisfied as to all legal matters relating
to the Exchange, and Purchasers shall have received from such
counsel favorable opinions as to such legal matters as they may
request.
3H. Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory
in substance and form to such Purchaser, and such Purchaser shall
have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
3I. Issuance of Notes to Other Purchaser. Each other
Purchaser shall have exchanged its Original Term Notes as
contemplated by Paragraph 2A.
3J. Interest on Original Term Notes. The Company shall
have paid all interest accrued on the Original Term Notes through
the Date of Closing.
3K. Unitholder Approval. Unitholder Approval shall have
been received.
3.1 Company's Conditions at Closing. The Company's
obligation to make the Exchange is subject to the satisfaction,
on or before the Date of Closing, of the following conditions:
3.1A Certain Documents as of the Date Hereof. The Company
shall have received the following, each dated as of the date
hereof:
(i) This Agreement.
(ii) The Intercreditor Agreement.
3.1B Exchange Permitted by Applicable Laws. The Exchange
on the terms and conditions herein provided shall not violate any
applicable law or governmental regulation (including without
limitation, Section 5 of the Securities Act) and shall not
subject the Company to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or
governmental regulation, and the Company shall have received such
certificates or other evidence as it may reasonably request to
establish compliance with this condition.
3.1C Unitholder Approval. Unitholder Approval shall have
been received.
PARAGRAPH 4. PREPAYMENTS.
4. Prepayments. The Notes shall be subject to required
prepayment only with respect to the required prepayments
specified in paragraph 4E and shall be subject to prepayment only
with respect to the optional prepayments specified in paragraph
4A.
4A. Optional Prepayment. Prior to the Refinancing Trigger
Date, the Notes are subject to prepayment, in whole at the option
of the Company, at 100% of the principal amount so prepaid plus
interest thereon to the prepayment date. Following the
Refinancing Trigger Date, the Unsecured Series A Notes shall be
subject to prepayment, in whole at any time or from time to time
in part (in multiples of $100,000), at the option of the Company,
at 100% of the principal amount so prepaid plus interest thereon
to the prepayment date, if any, with respect to each Unsecured
Series A Note.
4B. Notice of Optional Prepayment. The Company shall give
the holder of each Note to be prepaid pursuant to paragraph 4A
irrevocable written notice of any prepayment not less than 20
days and not more than 60 days prior to the prepayment date,
specifying such prepayment date and specifying the aggregate
principal amount of the Notes to be prepaid on such date,
identifying each Note held by such holder, and the principal
amount of each Note, to be prepaid on such date and stating that
such prepayment is to be made pursuant to paragraph 4A. Notice
of prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with
interest thereon to the prepayment date shall become due and
payable on such prepayment date. The Company shall, on or before
the day on which it gives written notice of any prepayment
pursuant to paragraph 4A, give telephonic notice of the principal
amount of the Notes to be prepaid and the prepayment date to each
Significant Holder which shall have designated a recipient for
such notices in the Information Schedule attached hereto or by
notice in writing to the Company.
4C. Partial Payments Pro Rata. Upon any partial prepayment
of the Notes pursuant to paragraph 4A or 4E, the principal amount
to be prepaid shall be applied pro rata to all outstanding Notes
(including, for the purpose of this paragraph 4C only, all Notes
prepaid or otherwise retired or purchased or otherwise acquired
by the Company or any of its Subsidiaries or Affiliates other
than by prepayment pursuant to paragraph 4A or 4E) according to
the respective unpaid principal amounts thereof.
4D. Retirement of Notes. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or
otherwise retire in whole or in part prior to their stated final
maturity (other than by prepayment pursuant to paragraph 4A or
upon acceleration of such final maturity pursuant to paragraph
7A), or purchase or otherwise acquire, directly or indirectly,
Notes held by any holder unless the Company or such Subsidiary or
Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same
proportion of the aggregate principal amount of Notes held by
each other holder of Notes at the time outstanding upon the same
terms and conditions. Any Notes so prepaid or otherwise retired
or purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates shall not be deemed to be outstanding
for any purpose under this Agreement.
4E. Required Prepayment of Notes. The Notes shall be
subject to prepayment as required by Section 2.06(c) of the
Credit Agreement (as incorporated herein by paragraph 5 below).
PARAGRAPH 5. COVENANTS AND AGREEMENTS.
5.A. SENIOR NOTE COVENANTS. So long as any Senior Secured
Note is outstanding and unpaid, the Company shall, and will cause
the other Related Persons to, at all times perform, comply with
and observe for the benefit of the holders of the Securities all
of the terms and provisions of Section 2.06(c), Article VI and
Article VII of the Credit Agreement (specifically including any
financial reporting requirements therein) which are applicable to
it or any Related Person, as the case may be, even though the
Company or such Related Person, as the case may be, may not be or
may cease to be a party thereto. For purposes hereof, Section
2.06(c), Article VI and Article VII of the Credit Agreement, all
defined terms used therein and all schedules and exhibits
referred to therein are hereby incorporated herein by reference
mutatis mutandis, with references therein to (i) Agent and
Lenders (each as defined in the Credit Agreement) being construed
as references to the holders of the Securities, (ii) Borrower and
Related Persons (each as defined in the Credit Agreement) being
construed as references to the Company and the Related Persons
(as defined herein), (iii) Default and Event of Default (each as
defined in the Credit Agreement) being construed as references to
a Default or Event of Default (each as defined herein), (iv)
Agreement (as defined in the Credit Agreement) being construed as
references to this Agreement (as defined herein), (v) Loan
Documents (as defined in the Credit Agreement) being construed as
references to Securities Documents (as defined herein) and (vi)
Obligations (as defined in the Credit Agreement) being construed
as references to the Securities. The covenants incorporated
herein by reference as in effect on the date of execution of this
Agreement shall be deemed to continue in effect for the benefit
of the holders of the Senior Secured Notes for so long as any
Securities remain outstanding, whether or not said provisions
otherwise remain in effect or are amended, restated or otherwise
modified, unless the Required Holders shall consent to such
amendment, restatement or other modification.
5.B. UNSECURED NOTE COVENANTS. So long as any Unsecured
Series A Note is outstanding and unpaid, the Company shall, and
will cause the other Related Persons to, at all times perform,
comply with and observe for the benefit of the holders of the
Unsecured Series A Notes all of the terms and provisions of
Section 4 of the Certificate of Designations (specifically
including any financial reporting requirements therein) which are
applicable to it or any Related Person, as the case may be. For
purposes hereof, Section 4 of the Certificate of Designations,
all defined terms used therein and all schedules and exhibits
referred to therein are hereby incorporated herein by reference
mutatis mutandis, with references therein to holders of Preferred
Units for purposes of delivery of documents or information or
giving waivers or approvals being construed as references to the
holders of the Unsecured Series A Notes. The covenants
incorporated herein by reference as in effect on the date of
execution of this Agreement shall be deemed to continue in effect
for the benefit of the holders of the Unsecured Series A Notes
for so long as any Unsecured Series A Notes remain outstanding,
whether or not said provisions otherwise remain in effect or are
amended, restated or otherwise modified, unless the Required
Holders shall consent to such amendment, restatement or other
modification.
PARAGRAPH 6. CONVERSION OF NOTES.
6A. Conversion of Notes on the Refinancing Trigger Date.
On the Refinancing Trigger Date:
(i) The Series A Notes will automatically convert to
convertible unsecured promissory notes with a maturity date
of the earlier of (1) ninety (90) days after the Refinanced
Debt Maturity Date or (2) three (3) years and three (3)
months from the Refinancing Trigger Date in an aggregate
amount equal to the outstanding amount of the Series A Notes
as of the Refinancing Trigger Date, to bear interest on the
unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the
Adjusted Base Rate and on overdue payments at the rate
specified therein, and to be substantially in the form of
Exhibit A-4 attached hereto. The term "Unsecured Series A
Notes" as used herein shall include each such Convertible
Unsecured Series A Promissory Note delivered pursuant to any
provision of this Agreement and each such Convertible
Unsecured Series A Promissory Note delivered in substitution
or exchange for any other Unsecured Series A Note pursuant
to any such provision.
The Company will deliver to each holder of a Series A
Note, at the offices of Counsel's Offices, one or more
Unsecured Series A Notes registered in such holder's name,
evidencing the amount of Series A Notes converted into
Unsecured Series A Notes on the Refinancing Trigger Date.
The Company shall also pay on the Refinancing Trigger Date
to each holder of a Series A Note all accrued but unpaid
interest on such Series A Note through the Refinancing
Trigger Date. Each holder of a Series A Note agrees to
surrender its Series A Note marked "ineffective" to the
Company immediately upon receipt by such holder of its
Unsecured Series A Note, provided that the failure by any
holder to so surrender its Series A Notes shall not release
the Company from any of its obligations hereunder.
(ii) The Series B Notes will automatically convert to
Series B Units, and the Company will deliver to each holder
of a Series B Note, at Counsel's Offices, Series B Units in
an aggregate Stated Value equal to the aggregate outstanding
principal balance of the Series B Notes held by such Person
as of the Refinancing Trigger Date. The Series B Units will
be governed by the terms of the Certificate of Designations
attached hereto as Exhibit D. The Company shall also pay to
each holder of a Series B Note all accrued but unpaid
interest on the Series B Notes of such holder through the
Refinancing Trigger Date, and such interest shall become due
on such date. Each holder of a Series B Note agrees to
surrender its Series B Notes to the Company immediately upon
receipt by such holder of its Series B Units, provided that
the failure by any holder to so surrender its Series B Notes
shall not release the Company from any of its obligations
hereunder.
(iii) The Series C Notes will automatically convert to
Series C Units, and the Company will issue to each holder of
a Series C Note, at Counsel's Offices, Series C Units in an
aggregate Stated Value equal to the aggregate outstanding
principal balance of the Series C Notes held by such Person
as of the Refinancing Trigger Date. The Series C Units will
be subject to the terms of the Certificate of Designations
attached hereto as Exhibit E. The Company shall also pay to
each holder of a Series C Note all accrued but unpaid
interest on the Series C Notes of such holder through the
Refinancing Trigger Date, and such interest shall become due
on such date. Each holder of a Series C Note agrees to
surrender its Series C Notes to the Company immediately upon
receipt by such holder of its Series C Units, provided that
the failure by any holder to so surrender its Series C Notes
shall not release the Company from any of its obligations
hereunder.
(iv) After the Refinancing Trigger Date, each Series B
Note and Series C Note shall be deemed to be null and void
except for the right to receive Series B Units and Series C
Units in accordance with the terms of this Agreement.
(v) Pursuant to the terms and conditions of the
Intercreditor Agreement, the Agent (as defined in the
Intercreditor Agreement) shall, at the Company's expense,
prepare and execute all necessary instruments to reflect and
effect the termination of all Collateral Documents and the
release of all Liens on the Collateral in respect of the
Notes, except with respect to obligations of Pride SGP under
the Pride SGP Agreement.
6B. Conversion of Notes at Holder's Option.
(i) Subject to and upon compliance with the provisions
of this paragraph 6, any holder of the Series A Notes shall
have the right, at such holder's option, at any time during
the Series A Conversion Period to convert all or any part of
the unpaid principal amount of such holder's Series A Notes
into Common Units at the Conversion Price. In order to
exercise such conversion privilege such holder shall
surrender the Series A Notes to be converted to the Company
with its written conversion request attached to such Series
A Notes duly executed by such holder (a "Conversion
Request") designating the principal amount of such Series A
Notes to be converted.
(ii) Subject to and upon compliance with the
provisions of this paragraph 6, any holder of the Series B
Notes shall have the right, at such holder's option, at any
time during the Series B Conversion Period to convert all or
any part of the unpaid principal amount of such holder's
Series B Notes into Common Units at the Conversion Price.
In order to exercise such conversion privilege such holder
shall surrender the Series B Notes to be converted to the
Company with its Conversion Request designating the
principal amount of such Series B Notes to be converted.
(iii) Subject to and upon compliance with the
provisions of this paragraph 6, any holder of the Series C
Notes shall have the right, at such holder's option, at any
time during the Series C Conversion Period to convert all or
any part of the unpaid principal amount of such holder's
Series C Notes into Common Units at the Conversion Price.
In order to exercise such conversion privilege such holder
shall surrender the Series C Notes to be converted to the
Company with its Conversion Request designating the
principal amount of such Series C Notes to be converted.
(iv) Subject to and upon compliance with the
provisions of this paragraph 6, any holder of the Unsecured
Series A Notes shall have the right, at such holder's
option, at any time during the Series A Conversion Period to
convert all or any part of the unpaid principal amount of
such holder's Unsecured Series A Notes into Common Units at
the Conversion Price. In order to exercise such conversion
privilege such holder shall surrender the Unsecured Series A
Notes to be converted to the Company with a Conversion
Request attached to such Unsecured Series A Notes duly
executed by such holder designating the principal amount of
such Unsecured Series A Notes to be converted.
(v) So long as the Company is required to incur
material expense for partnership accounting and asset
valuation in connection with a conversion under this Section
6B or under the Certificate of Designations, the frequency
of conversions under this Section 6B or under the
Certificate of Designations will be limited as follows:
(1) each holder of any Note or Preferred Unit may convert in
connection with a proposed sale of Common Units under the
Registration Rights Agreement; (2) each holder of any note
or Preferred Unit may convert if any other note or other
convertible security of the Company is being converted to
Common Units on such day (and the Company shall give prior
notice to each of the holders of the Notes and the holders
of the Preferred Units of any such conversion to the extent
reasonably practical); (3) in addition to clauses (1) and
(2), each Purchaser (together with all Assignees of such
Purchaser as provided below) may otherwise convert on one
day during any 90 day period and (4) in addition to clauses
(1), (2) and (3), each holder may convert upon payment to
the Company of the actual additional out-of-pocket expenses
for partnership accounting and asset valuation attributable
solely to such additional conversion. The Company shall
treat conversions as occurring on the same day if they are
in such close proximity in time to permit such treatment
under partnership accounting practices. In the event any
Purchaser sells, assigns or otherwise transfers any of its
Notes or Preferred Units to any other Person (such other
Person and any subsequent assignee of such Notes or
Preferred Units of such Purchaser herein called an
"Assignee"), no Assignee shall have separate, cumulative
rights under clause (3) to convert the transferred Note or
Preferred Units, and the transferring Purchaser may by
agreement provide for assignment, allocation and
coordination of the use of such limited frequency of
conversions under clause (3).
6C. Issuance of Certificates. As promptly as practicable
after (and in any event not later than 5 Business Days after) the
date on which a conversion of any Note is deemed effective in
accordance with the next succeeding sentence, the Company shall
issue and deliver to the holder effecting such conversion,
registered in such name or names as such holder may direct, a
certificate or certificates representing the number of Common
Units issuable upon the conversion of such Note (or specified
portion thereof) and upon such conversion such Note (or specified
portion thereof) shall immediately be cancelled. Such conversion
shall be deemed to have been effected as of the close of business
on the date on which such Conversion Request shall have been
delivered to the Company and such Note shall have been
surrendered, as aforesaid, and at such time such holder's rights
as holder of such Note (or specified portion thereof) shall
cease, and the Person or Persons whose name or names any
certificate or certificates for Common Units shall be issuable
upon such conversion shall be deemed to have become the holder or
holders of record of the Common Units represented thereby;
provided, however, that any such surrender on any date when the
unit transfer books of the Company are closed shall be deemed to
have been made, and shall be effective to terminate the rights of
the holder of the Note so surrendered for conversion and to
constitute the Person entitled to receive such Common Units as
the record holder thereof for all purposes, at the opening of
business on the next succeeding day on which such transfer books
are open and such conversion shall be at the Conversion Price in
effect at such time.
6D. Fractional Interests; Accrued Interest; Partial
Conversion. No fractional Common Units shall be issued upon
conversion of any Note. Upon the conversion of any Note, the
Company shall pay to the holder surrendering such Note the
interest on such Note or specified portion thereof surrendered
for conversion accrued to the date upon which such Note shall
have been surrendered for conversion. In the case of any Note
which is converted in part only, the Company shall, upon such
conversion, cause to be executed and delivered to or upon the
order of the holder surrendering such Note, at the expense of the
Company, a new Note or Notes (as requested) in principal amounts
equal to the unconverted portion of such Note and bearing
interest from the date to which interest has been paid on the
Note so surrendered or cause notation to be made on such Note of
the principal amount thereof so converted and the date of
conversion and return the same to such holder.
6E. Issue Tax. The issuance of certificates for Common
Units upon conversion of Notes shall be made without charge to
holders of the Notes for any issuance Tax in respect thereto,
provided that the Company shall not be required to pay any Tax
which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than
that of the holder converting such Note or Notes.
6F. Closing of Books. The Company will not at any time
close its transfer books against the transfer of any Note or of
any Common Unit issued or issuable upon the conversion of any
Note in any manner which interferes with the timely conversion of
such Note.
6G. Prohibition of Certain Actions. The Company will not,
by amendment of its Partnership Agreement or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed under this paragraph
6 by the Company or any of the terms of its Partnership Agreement
which are applicable to Common Units issuable upon conversion of
the Notes, but will at all times in good faith assist in the
carrying out of all of the provisions of this paragraph 6 and in
the taking of all such other action as may reasonably be
requested by any holder in order to protect the conversion
privilege and other rights of the Notes and of the Common Units
issuable upon conversion of the Notes against any impairment.
6H. Rights Offering. If the Company, at any time while any
of the Notes are outstanding, shall distribute pro rata to
holders of Common Units any warrants or other rights to purchase
additional Common Units (a "Rights Offering"), the holder of each
Note shall be entitled to all benefits, and shall be subject to
all limitations, of Section 11 of the Certificate of Designations
as if such holder had converted its Notes to Preferred Units
prior to such Rights Offering.
PARAGRAPH 7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or otherwise):
(i) the Company shall fail to pay when due interest on
any Note and such default shall continue for five (5) days;
or
(ii) the Company shall fail to pay any principal of
any Note, or any part thereof, when due; or
(iii) any representation or warranty made under this
Agreement, or any of the other Securities Documents, or in
any certificate or statement furnished or made to any
Purchaser pursuant hereto or in connection herewith or with
the Notes, shall prove to be untrue or inaccurate in any
material respect as of the date on which such representation
or warranty is made; or
(iv) while any Senior Secured Note is outstanding,
default shall occur in the performance of any of the
covenants or agreements of the Related Persons contained in
Sections 6.01, 6.02, 6.03, 6.04, 6.11, 6.12, 6.13, 7.02, or
7.06 of the Credit Agreement, or of comparable provisions in
any of the Securities Documents and shall continue for
fifteen (15) days after the Company has knowledge of such
default; or
(v) while any Senior Secured Note is outstanding,
default shall occur in the performance of covenants and
agreements of any Related Person under the Credit Agreement
or in the Securities Documents, which are not the subject of
other clauses of this paragraph 7A; or
(vi) default shall occur in the payment of any
material Indebtedness of any Related Person in excess of
$500,000.00 (other than the Notes); default shall occur in
respect of any note, loan agreement or credit agreement
relating to any such Indebtedness and such default shall
continue for more than the period of grace, if any,
specified therein (or if there is no such grace period, for
more than ten (10) days) or any such Indebtedness shall
become due before its stated maturity by acceleration of the
maturity thereof or shall become due by its terms and shall
not be paid or extended within ten (10) days; or
(vii) any of the Securities Documents (other than the
Intercreditor Agreement) shall cease to be legal, valid and
binding agreements enforceable against the Person executing
the same in accordance with the respective terms thereof or
shall in any way be terminated or become or be declared
ineffective or inoperative or shall in any way whatsoever
cease to give or provide the respective Liens, security
interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby (other than an
expiration or termination in accordance with their express
terms thereof); or
(viii) any Related Person shall (1) apply for or
consent to the appointment of a receiver, trustee,
custodian, intervenor or liquidator of itself or of all or a
substantial part of such Person's assets, (2) file a
voluntary petition in bankruptcy, admit in writing that such
Person is unable to pay such Person's debts as they become
due or generally not pay such Person's debts as they become
due, (3) make a general assignment for the benefit of
creditors, (4) file a petition or answer seeking
reorganization of an arrangement with creditors or to take
advantage of any Debtor Laws, (5) file an answer admitting
the material allegations of, or consent to, or default in
answering, a petition filed against such Person in any
bankruptcy, reorganization or insolvency proceeding, or (6)
take corporate action for the purpose of effecting any of
the foregoing; or
(ix) an involuntary petition or complaint shall be
filed against any Related Person seeking bankruptcy or
reorganization or such Person or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of
such Person, or all or substantially all of such Person's
assets, and such petition or complaint shall not have been
dismissed within thirty (30) days of the filing thereof; or
an order, order for relief, judgment or decree shall be
entered by any court of competent jurisdiction or other
competent authority approving a petition or complaint
seeking reorganization of any Related Person or any
subsidiary of any such Persons or appointing a receiver,
custodian, trustee, intervenor or liquidator of such Person,
or of all or substantially all of such Person's assets; or
(x) any final judgment(s) for the payment of money in
excess of the sum of $100,000 in the aggregate shall be
rendered against any Related Person and such judgment or
judgments shall not be satisfied or discharged at least ten
(10) days prior to the date on which its assets could be
lawfully sold to satisfy such judgment; or
(xi) while any Senior Secured Note is outstanding,
both the following events shall occur: (1) either (x)
proceedings shall have been instituted to terminate, or a
notice of termination shall have been filed with respect to,
any Plan (other than a Multi-Employer Pension Plan as that
term is defined in Section 3(37) of ERISA) by any Related
Person, any member of the Controlled Group, PBGC or any
representative of any thereof, or any such Plan shall be
terminated, in each case under Section 4041 or 4042 of
ERISA, or (y) a Reportable Event, the occurrence of which
would cause the imposition of a Lien under Section 4068 of
ERISA, shall have occurred with respect to any Plan (other
than a Multi-Employer Pension Plan as that term is defined
in Section 3(37) of ERISA) and be continuing for a period of
sixty (60) days; and (2) the sum of the estimated liability
to PBGC under Section 4062 of ERISA and the currently
payable obligations of any Related Person to fund
liabilities (in excess of amounts required to be paid to
satisfy the minimum finding standard of Section 412 of the
Code) under the Plan or Plans subject to such event shall
exceed ten percent (10%) of such Related Person's Tangible
Net Worth at such time; or
(xii) while any Senior Secured Note is outstanding,
any or all of the following events shall occur with respect
to any Multi-Employer Pension Plan (as that term is defined
in Section 3(37) of ERISA) to which any Related Person
contributes or contributed on behalf of its employees: (1)
any Related Person incurs a withdrawal liability under
Section 4201 of ERISA; or (2) any such plan is "in
reorganization" as that term is defined in Section 4241 of
ERISA; or (3) any such Plan is terminated under Section
4041A of ERISA and the Required Holders determine in good
faith that the aggregate liability likely to be incurred by
the Company, as a result of all or any of the events
specified in the immediately preceding clauses (1), (2) and
(3) occurring, shall have a material adverse effect; or
(xiii) any default or event of default shall occur in
respect of the Credit Agreement and such default or event of
default has not been cured or permanently waived prior to
the expiration of any applicable grace period.
then (a) if such event is an Event of Default specified in clause
(i) or (ii) of this paragraph 7A, any holder of any Note (other
than the Company or any other Related Person) may at its option,
by notice in writing to the Company, declare all of the Notes
held by such holder to be, and all of the Notes held by such
holder shall thereupon be and become, immediately due and payable
together with interest accrued thereon, without presentment,
demand, protest or notice of any kind (including, without
limitation, notice of intent to accelerate), all of which are
hereby waived by the Company, (b) if such event is an Event of
Default specified in clause (viii) or (ix) of this paragraph 7A
with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and
payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind (including,
without limitation, notice of intent to accelerate and notice of
acceleration of maturity), all of which are hereby waived by the
Company, and (c) if such event is any Event of Default other than
as specified in preceding clause (b), the Required Holder(s) may
at its or their option, by notice in writing to the Company,
declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together
with interest accrued thereon.
7B. Rescission of Acceleration. At any time after any or
all of the Notes shall have been declared immediately due and
payable pursuant to paragraph 7A, the Required Holder(s) may, by
notice in writing to the Company, rescind and annul such
declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes and the principal of any
Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue
principal, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all
Events of Default and Defaults, other than non-payment of amounts
which have become due solely by reason of such declaration, shall
have been cured or waived pursuant to paragraph 12C, and (iv) no
judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent
Event of Default or Default or impair any right arising
therefrom.
7C. Notice of Acceleration or Rescission. Whenever any
Note shall be declared immediately due and payable pursuant to
paragraph 7A or any such declaration shall be rescinded and
annulled pursuant to paragraph 7B, the Company shall forthwith
give written notice thereof to the holder of each Note at the
time outstanding.
7D. Other Remedies. If any Event of Default or Default
shall occur and be continuing, the Required Holders may proceed
to protect and enforce the rights under this Agreement and the
Notes by exercising such remedies as are available in respect
thereof under applicable law, either by suit in equity or by
action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid
of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is
intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law
or in equity or by statute or otherwise.
PARAGRAPH 8. REPRESENTATIONS AND WARRANTIES.
8. Representations and Warranties. The Company, Managing
General Partner and Special General Partner, jointly and
severally, represent and warrant as follows:
8A. Organization and Good Standing.
(i) Each Related Person which is a corporation or
partnership is duly organized and validly existing in good
standing under the laws of the state of its organization.
(ii) Each Related Person is duly qualified as a
foreign corporation or partnership and in good standing in
all states in which it is doing business and has all
corporate or partnership power and authority to own its
properties and assets and to transact the business in which
it is engaged and is or will be qualified in those states
wherein it proposes to transact business in the future.
8B. Authorization and Power.
(i) Each Related Person has full corporate or
partnership power and requisite authority to execute,
deliver and perform the Securities Documents to which it is
a party. Each Related Person is duly authorized to, and has
taken all action necessary to authorized such Related Person
to execute, deliver and perform the Securities Documents
executed by such Related Person. Each Related Person is and
will continue to be duly authorized to perform the
Securities Documents executed by such Related Person.
(ii) Each Related Person possesses all franchises,
certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that (1) are
necessary for the ownership, maintenance and operations of
its properties and assets, and (2) the loss of which could
have a material adverse effect on such Related Person's
business, and such Related Person is not in violation of any
provision thereof.
8C. No Conflicts or Consents. Subject to Unitholder
Approval, neither the execution and delivery of the Securities
Documents, nor the consummation of any of the transactions
therein contemplated (including without limitation the issuance
of the Securities), nor compliance with the terms and provisions
thereof, will contravene or materially conflict with any
provision of law, statute or regulation to which any Related
Person is subject or any judgment, license, order or permit
applicable to any Related Person, or any indenture, loan
agreement, mortgage, deed of trust, or other agreement or
instrument to which any Related Person may be bound, or to which
any Related Person may be subject, or violate any provision of
any Related Person's articles or certificates of incorporation,
certificates of limited partnership, partnership agreement or
bylaws. Except for the Unitholder Approval with respect to the
Certificate of Designations, no consent, approval, authorization
or order of any Tribunal or third party is required in connection
with the execution and delivery by the Related Persons of the
Securities Documents or to consummate the transactions
contemplated hereby or thereby.
8D. Enforceable Obligations. Subject to Unitholder
Approval, the Securities Documents have been duly executed and
delivered by each Related Person which is a party thereto, and
are the legal and binding obligations of such Related Person,
enforceable in accordance with their respective terms, except as
limited by Debtor Laws.
8E. No Liens. Except for Permitted Liens, all of the
properties and assets of each Related Person are free and clear
of all Liens and other adverse claims of any nature, and each
Related Person has good and marketable title to such properties
and assets.
8F. Financial Condition. The Company has delivered to each
Purchaser copies of (i) the audited annual financial statements
dated as of December 31, 1995, and (ii) the unaudited quarterly
financial statements dated as of June 30, 1996, certified by the
Company that such financial statements are true and correct,
fairly represent the financial condition of the Related Persons
as at such date and have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with that of prior periods. As of the Closing Date,
there are no obligations, liabilities or Indebtedness (including
contingent and indirect liabilities and obligations) of any
Related Person which are (separately or in the aggregate)
material and are not reflected in such financial statements and
no changes having a material adverse effect have occurred since
the date of such financial statements.
8G. Full Disclosure. There is no material fact that the
Related Persons have not disclosed to any Purchaser which could
have a material adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Company or
any other Related Person. Neither the financial statements
referenced in paragraph 8F hereof, nor any certificate or
statement delivered herewith or heretofore by any Related Person
to any Purchaser in connection with negotiations of this
Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary to, keep the
statements contained herein or therein from being misleading.
8H. No Default. No event has occurred and is continuing
which constitutes a Default or an Event of Default.
8I. Material Agreements. No Related Person is in default
in any material respect under any contract, lease, loan
agreement, indenture, mortgage, security agreement or other
material agreement or obligation to which such Related Person is
a party or by which any of its properties is bound.
8J. No Litigation. Except as disclosed pursuant to the
Credit Agreement prior to the date hereof, there are no actions,
suits or legal, equitable, arbitration or administrative
proceedings pending, or to the knowledge of any Related Person
threatened, against such Related Person that could, if adversely
determined, have a material adverse effect.
8K. Burdensome Contracts. No Related Person is a party to,
or bound by, any contract which is a burdensome contract having a
material adverse effect.
8L. Regulatory Defects. As of the Closing Date, no Related
Person has been advised nor has actual knowledge of its failure
to comply with all applicable laws, rules, regulations, and all
orders of any Tribunal applicable to it or any of its property,
business or operations or transactions thereto would, if
adversely determined, have a material adverse effect.
8M. Use of Proceeds; Margin Stocks. None of the proceeds
of the Notes will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U,
Regulation X, or Regulation G, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to
purchase or carry a margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the
meaning of such Regulation U, Regulation X, or Regulation G. The
Company is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stocks. Neither the
Company nor any Person acting on behalf of the Company has taken
or will take any action which might cause the Notes or any of the
other Securities Documents, including this Agreement, to violate
Regulation U, Regulation X, or Regulation G or any other
regulations of the Board of Governors of the Federal Reserve
System or to violate Section 8 of the Securities Exchange Act of
1934 or any rule or regulation thereunder, in each case as now in
effect or as the same may hereinafter be in effect. The Company
owns no margin stock except for that described in the financial
statements referred to in paragraph 8F hereof and, as of the date
hereof, the aggregate value of all margin stock owned by the
Company does not exceed 25% of the value of all the Company's
assets.
8N. Taxes. All tax returns required to be filed by any
Related Person in any jurisdiction have been filed or properly
extended and all taxes (including mortgage recording taxes),
assessments, fees and other governmental charges upon any Related
Person or upon any of its properties, income or franchises have
been paid prior to the time that such taxes could give rise to a
Lien thereon. There is no proposed tax assessment against any
Related Person, except as disclosed pursuant to the Credit
Agreement prior to the date hereof.
8O. Principal Office, Etc. The principal office, chief
executive office and principal place of business of each Related
Person is 1209 N. 4th, Abilene, Texas 79601. Each Related Person
maintains its principal records and books at such address.
8P. ERISA. (i) No Reportable Event has occurred and is
continuing with respect to any Plan; (ii)PBGC has not instituted
proceedings to terminate any Plan; (iii) neither any Related
Person, any member of the Controlled Group, nor any duly-
appointed administrator of a Plan (1) has incurred any liability
to PBGC with respect to any Plan other than for premiums not yet
due or payable, or (2) has instituted or intends to institute
proceedings to terminate any Plan under Sections 4041 or 4041A of
ERISA or withdraw from any Multi-Employer Pension Plan (as that
term is defined in Section 3(37) of ERISA); and (iv) each Plan of
each Related Person has been maintained and funded in all
material respects in accordance with its terms and with all
provisions of ERISA applicable thereto.
8Q. Compliance with Law. Each Related Person is in
compliance with all laws, rules, regulations, orders and decrees
which are applicable to such Related Person, or its properties.
8R. Government Relation. No Related Person is subject to
regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940 (as any
of the preceding acts have been amended), or any other law (other
than Regulation X) which regulates the incurring by such Related
Person of Indebtedness, including but not limited to laws
relating to common contract carriers or the sale of electricity,
gas, steam, water, or other public utility services.
8S. Insider. No Related Person is, and no Person having
"control" (as that term is defined in 12 U.S.C. S375(b)(5) or in
regulations promulgated pursuant thereto) of any Related Person
is, an "executive officer," "director," or "principal
shareholder" (as those terms are defined in 12 U.S.C. S375(b) or
in regulations promulgated pursuant thereto) of any Purchaser, of
a bank holding company of which any Purchaser is a subsidiary, or
of any subsidiary of a bank holding company of which any
Purchaser is a subsidiary, or of any bank at which any Purchaser
maintains a "correspondent account" (as such term is defined in
such statute or regulations), or of any bank which maintains a
correspondent account with any Purchaser.
8T. Subsidiaries and Stock. The Company does not own
capital stock or other ownership interests in any Person, except
99% ownership of Desulfur Partnership, 100% ownership of Pride
Marketing of Texas (Cedar Wind), Inc. and 100% ownership of Pride
Borger, Inc. Managing General Partner does not own capital stock
or other ownership interests in any Person, except a 1.9% general
partnership interest in the Company. Special General Partner
does not own capital stock or other ownership interests in any
Person, except a 0.1% general partnership interest and a 51.7%
common limited partnership interest in the Company. Pride
Marketing of Texas (Cedar Wind), Inc. does not own capital stock
or other ownership interests in any Person. Pride Borger, Inc.
does not own capital stock or other ownership interests in any
Person.
8U. Fair Labor Standards Act. Each Related Person has
complied with, and will continue to comply with, the provisions
of the Fair Labor Standards Act of 1938, 29 U.S.C. S 200, et
seq., as amended from time to time (the "FLSA"), including
specifically, but without limitation, 29 U.S.C. S 215(a). This
representation and warranty, and each reconfirmation hereof,
shall constitute written assurance from each Related Person,
given as of the date hereof and as of the date of each
reconfirmation, that each Related Person has complied with the
requirements of the FLSA, in general, and Section 215(a)(1),
thereof, in particular.
8V. Casualties. Neither the business nor the properties
of any Related Person is currently affected by any environmental
hazard, fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or
other casualty (whether or not covered by insurance), which could
have a material adverse effect.
8W. Investment Company Act. No Related Person is an
"investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, and is not
controlled by such a company.
8X. Hazardous Substances.
(i) To the best of each Related Person's knowledge:
(1) all environmental permits, certificates, licenses,
approvals, registrations and authorizations required under
all Environmental Laws in connection with the business of
such Related Person has been obtained and (2) such Related
Person's business operations are in compliance with all
Environmental Laws.
(ii) Except as disclosed on Exhibit G to the Credit
Agreement, no unremedied notice, citation, summons or order
has been issued, no unremedied complaint has been filed, no
unremedied penalty has been assessed and, to the best of
each Related Person's knowledge, no investigation or review
is pending or threatened by any governmental entity under
any Environmental Law or with respect to any generation,
treatment, storage, recycling, transportation or disposal of
any hazardous or toxic or polluting substance or waste
(including petroleum products and radioactive materials)
generated or used ("Hazardous Substances") by such Related
Person.
(iii) Except as disclosed on Exhibit G to the Credit
Agreement, no Related Person has received any request for
information, notice of claim, demand or other notification
that such Related Person is or may be potentially
responsible with respect to any investigation or clean-up of
any threatened or actual release of any Hazardous Substance
or any other violation of any Environmental Laws.
(iv) Except as disclosed on Exhibit G to the Credit
Agreement, there are no underground storage tanks, active or
abandoned, at any property now owned, operated or leased by
any Related Person.
(v) Except as disclosed on Exhibit G to the Credit
Agreement, no environmental inspections, investigations,
studies, audits, tests, reviews or other analyses are
currently being conducted in relation to any property or
business now owned, operated, or leased by any Related
Person, and each Related Person shall promptly forward a
copy to each Significant Holder of any such environmental
inspections, investigations, studies, tests, reviews or
other analyses; provided, that no Related Person makes any
representation or warranty with respect to environmental
inspections, investigations, studies, audits, tests, reviews
or other analyses conducted by or on behalf of any
Purchaser.
For purposes of this paragraph 8X, the term "Environmental Laws"
shall mean all federal, state and local laws, rules, regulations,
ordinances, and consent decrees relating to health, safety,
hazardous substances, and environmental matters applicable to the
Company's business and facilities (whether or not owned by it).
Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act, Comprehensive
Environmental Response, Compensation and Liability Act, Toxic
Substances Control Act, Clean Water Act, Clean Air Act,
Comprehensive Environmental Response, Compensation and Liability
Information System, all state and federal super lien and
environmental cleanup programs, and the U.S. Department of
Transportation regulations.
8Y. Collateral. The existing Collateral Documents
constitute perfected first priority Liens upon all of the right,
title and interest of each Related Person in and to (i) the
entire refinery known as the Pride Refinery, located in Jones
County, Texas, and all real and personal property owned or used
in connection therewith, subject only to Permitted Liens and (ii)
all of the properties described on Exhibit H to the Credit
Agreement and all real and personal property owned or used in
connection therewith, subject only to Permitted Liens.
8Z. Corporate Name. No Related Person has during the
preceding five years, been known as or used any other
partnership, corporate, fictitious or tradenames. Except as set
forth on Exhibit I to the Credit Agreement, no Related Person has
been, during the preceding five years, the survivor of a merger
or consolidation or acquired all or substantially all of the
assets of any Person
8AB. Representations and Warranties. The delivery of any
document to any Purchaser under the terms of this Agreement shall
constitute, without the necessity of specifically containing a
written statement, a representation and warranty by the Company
that no Default or Event of Default exists and that all
representations and warranties contained in this paragraph 8 or
in any other Securities Document are true and correct on and as
of such date.
8AC. Survival of Representations and Warranties. All
representations and warranties by the Related Persons herein
shall survive the issuance of the Notes and the other Securities
Documents, and any investigation at any time made by or on behalf
of any Purchaser or any other holder of any Security shall not
diminish such party's right to rely thereon.
8AD. Solvency. As of the Closing Date, no obligation
shall have been incurred by any Related Person pursuant to any
Securities Document with the intent to hinder, delay, disturb or
defraud creditors of any Related Person and no Related Person (i)
shall be insolvent (within the meaning of Section 101(29) of the
Bankruptcy Code of 1978, as amended, Section 2 of the Uniform
Fraudulent Transfer Act) or will become "insolvent" (after giving
effect to the transactions contemplated in any Loan Document)' as
a result of the incurrence of any such obligation; (ii) shall be
engaged in any business or transaction with unreasonably small
capital (after giving effect to the transactions contemplated in
any Securities Document); and (iii) shall be unable to perform
its contingent obligations and other commitments as they mature
in the normal course of business.
8AE. Offering of Securities. Neither the Company nor any
agent acting on its behalf has, directly or indirectly, offered
any Security or any similar security of the Company for sale to,
or solicited any offers to buy any Security or any similar
security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than
institutional investors, and neither the Company nor any agent
acting on its behalf has taken or will take any action which
would subject the issuance or sale of any Security to the
provisions of Section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8AF. Authorization of Issuance; Reservation of Units.
When issued and delivered pursuant to this Agreement, each of the
Common Units and the Preferred Units will have been duly
authorized, issued and delivered and will constitute valid and
legally binding obligations of the Company. When issued and
delivered pursuant to this Agreement, each of the Common Units
and the Preferred Units will be fully paid and without
requirement to make any additional capital contribution therefor.
During the period within which the Notes or the Preferred Units
may be converted into Common Units, the Company will not at any
time limit the number of Common Units that may be issued by the
Company or take any other action that would impair the Company's
ability to issue Common Units sufficient to permit the conversion
of all outstanding Notes or Preferred Units and the conversion,
exchange or exercise of all other securities and instruments
convertible or exchangeable into or exercisable for Common Units.
All Common Units which are issuable upon conversion of the Notes
or the Preferred Units will, when issued, be validly issued and
fully paid without requirement to make any additional capital
contribution therefor. The issuance of any of the Preferred
Units or Common Units will not violate the preemptive or similar
rights of any Person. The issuance of any of the Preferred Units
or Common Units will not be subject to any preemptive or similar
rights.
8AG. Outstanding Options, Warrants, Etc. Neither the
Company nor any Related Person has any outstanding options,
warrants, debentures or other securities or instruments
convertible into or exchangeable or exercisable for Common Units
or any other security of the Company or any Related Person, and
there are no contracts, commitments or arrangements pursuant to
which the Company or any Related Person is or may become bound to
issue or sell any Common Units or other securities.
8AH. Capitalization. (i) As of the date hereof, the
number of convertible preferred units of the Company is 4,700,000
units all of which are validly issued and outstanding and fully
paid, and the number of common units of the Company is 5,250,000,
all of which are validly issued and outstanding and fully paid.
The outstanding preferred and common units of the Company are not
subject to, nor were they issued in violation of, any preemptive
or similar rights of unitholders.
(ii) As of the Date of Closing, the number of Common Units
of the Company is the amount certified pursuant to a separate
certificate delivered by the Company to each Purchaser on the
Date of Closing, all of which are validly issued and outstanding
and fully paid and no other units representing partnership
interests in the Company are outstanding. The outstanding Common
Units of the Company are not subject to, nor were they issued in
violation of, any preemptive or similar rights.
PARAGRAPH 9. REPRESENTATIONS OF EACH PURCHASER.
9. Representations of Each Purchaser. Each Purchaser,
severally and not jointly, represents that it is not acquiring
the Notes to be issued to it hereunder with a view to or for sale
in connection with any distribution thereof within the meaning of
the Securities Act. Each Purchaser represents that it is an
"Accredited Investor", as defined in Regulation D promulgated
under the Securities Act. Each Purchaser confirms that it
understands the nature of, and risks attendant to, investments in
securities of the type contemplated by this Agreement. Each
Purchaser understands that securities contemplated by this
Agreement have not been registered under the securities laws of
any state or under the Securities Act, and are offered in
reliance on exemptions therefrom.
PARAGRAPH 10. DEFINITIONS.
10. Definitions. For the purpose of this Agreement, the
terms defined in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have
the meanings specified with respect thereto below (such meanings
to be equally applicable to both the singular and plural forms of
the terms defined):
10A. Other Terms.
"Adjusted Base Rate" shall mean a rate per annum equal to
the lesser of (x) the Base Rate plus one percent (1%) or (y) the
Maximum Rate.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common
control with, the Company, except a Subsidiary. A Person shall
be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract
or otherwise.
"Authorized Officer" shall mean the chief executive officer,
chief financial officer or any vice president of the Company
designated as an "Authorized Officer" of the Company in the
Information Schedule attached hereto or any vice president of the
Company designated as an "Authorized Officer" of the Company for
the purpose of this Agreement in an Officer's Certificate
executed by the Company's chief executive officer or chief
financial officer and delivered to the holders of the Securities.
Any action taken under this Agreement on behalf of the Company by
any individual who on or after the date of this Agreement shall
have been an Authorized Officer of the Company and whom any
holder of any Security in good faith believes to be an Authorized
Officer of the Company at the time of such action shall be
binding on the Company even though such individual shall have
ceased to be an Authorized Officer of the Company.
"Base Rate" shall mean the variable rate of interest
established from time to time by NationsBank of Texas, N.A. as
its "prime rate". Such rate is set by NationsBank of Texas, N.A.
as a general reference rate of interest, taking into account such
factors as it may deem appropriate, it being understood that many
of such bank's commercial or other loans are priced in relation
to such rate, that it is not necessarily the lowest or the best
rate actually charged to any customer, that it may not correspond
with further increases or decreases in interest rates charged by
other lenders or market rates in general and that such bank may
make various commercial or other loans at rates of interest
having no relationship to such rate. Each change in the Base
Rate shall become effective without notice to the Company
automatically as of the opening of business on the date of such
change in the Base Rate.
"Business Day" shall mean any day other than (i) a Saturday
or a Sunday, and (ii) a day on which commercial banks in Dallas,
Texas are required or authorized to be closed.
"Capital Lease" shall mean, as of any date, any lease of
property, real or personal, which would be capitalized on a
balance sheet of the lessee prepared as of such date in
accordance with generally accepted accounting principles,
together with any other lease by such lessee which is in
substance a financing lease, including without limitation, any
lease under which (i) such lessee has or will have an option to
purchase the property subject thereto at a nominal amount or an
amount less than a reasonable estimate of the fair market value
of such property as of the date such lease is entered into, or
(ii) the term of the lease approximates or exceeds the expected
useful life of the property leased thereunder.
"Certificate of Designations" shall mean, collectively, the
Certificate of Designations of Series B Cumulative Convertible
Preferred Units attached hereto as Exhibit D and the Certificate
of Designations of Series C Cumulative Convertible Preferred
Units attached hereto as Exhibit E.
"Closing" or "Date of Closing" shall have the meaning
specified in paragraph 2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean property in which Liens are granted
to secure the Senior Secured Notes.
"Collateral Documents" shall mean all documents listed on
Schedule 1 attached hereto, and all other security agreements,
mortgages, deeds of trust, assignments, pledges, financing
statements, stock or bond powers, and other agreements,
instruments and documents, including any amendments thereto and
extensions thereof, which provide for the grant, perfection
and/or alienability of Liens in Collateral, which secure
partially or fully, directly or indirectly, the Senior Secured
Notes, whether executed and/or delivered or filed prior to,
contemporaneously with, or at any time after the Closing Date.
"Common Units" shall mean a partnership interest in the
Company representing a fractional part of the aggregate
partnership interests in the Company and having the rights and
obligations specified with respect to Common Units in the
Partnership Amendment.
"Controlled Group" shall mean (i) the controlled group of
corporations as defined in Section 1563 of the Code, or (ii) the
group of trades or businesses under common control as defined in
Section 414(c) of the Code, of which the Company is a part or may
become a part.
"Conversion Price" shall mean, as of any date, the
conversion price per Common Unit determined for such date
pursuant to Exhibit B attached hereto.
"Credit Agreement" shall mean the Fifth Restated and Amended
Credit Agreement dated as of August 13, 1996, among the Company,
as borrower, Managing General Partner, Special General Partner,
Desulfur Partnership, Pride Marketing of Texas (Cedar Wind),
Inc., and Pride Borger, Inc., as guarantors, NationsBank of
Texas, N.A., as agent and NationsBank of Texas, N.A. and Bank
One, Texas, N.A., as lenders.
"Debtor Laws" shall mean all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement,
receivership, insolvency, reorganization or similar laws from
time to time in effect affecting the rights of creditors
generally.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, together with all regulations issued
pursuant thereto.
"Event of Default" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any
requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Guaranty" of any Person shall mean any contract, agreement
or understanding of such Person pursuant to which such Person
guarantees, or in effect guarantees, any Indebtedness of any
other Person in any manner, whether of any Person shall mean any
contract, agreement or understanding of such Person pursuant to
directly or indirectly, including without limitation agreements:
(i) to purchase such Indebtedness or any property constituting
security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of such Indebtedness, or (B) to maintain net
worth or working capital or other balance sheet conditions, or
otherwise to advance or made available funds for the purchase or
payment of such Indebtedness, (iii) to purchase property,
securities or service primarily for the purpose of assuring the
holder of such Indebtedness of the ability of the primary obligor
to make payment of the Indebtedness, or (iv) otherwise to assure
the holder of the Indebtedness of the primary obligor against
loss in respect thereof; except that "Guaranty" shall not include
the endorsement by the Company in the ordinary course of business
of negotiable instruments or documents for deposit or collection.
"Indebtedness" shall mean, with respect to any Person, all
indebtedness, obligations and liabilities of such Person,
including without limitation: (i) all "liabilities" which would
be reflected on a balance sheet of such Person, prepared in
accordance with generally accepted accounting principles, (ii)
all obligations of such Person in respect of any Guaranty, (iii)
all obligations of such Person in respect of any Capital Lease,
(iv) all obligations, indebtedness and liabilities secured by any
Lien or any security interest on any property or assets of such
Person, (v) all reimbursement obligations with respect to letters
of credit.
"Lien" shall mean any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention
arrangement, or any other interest in property designed to secure
the repayment of Indebtedness, whether arising by agreement or
under any statute or law, or otherwise.
"Maximum Rate" shall mean, on any day, the highest
nonusurious rate of interest (if any) permitted by applicable law
on such day that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the
Indebtedness evidenced by the Notes under the laws which are
presently in effect of the United States of America and the State
of Texas applicable to the holders of the Notes and such
Indebtedness or, to the extent permitted by law, under such
applicable laws of the United States of America and the State of
Texas which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
For purposes of Tex. Rev. Civ. Stat. Ann. Art. 5069-1.04, as it
may from time to time be amended, the "applicable rate ceiling"
shall be the "indicated rate" ceiling from time to time in effect
as limited by Art. 5069-1.04(b); provided, however, that to the
extent permitted by applicable law, Purchasers reserve the right
to change the "applicable rate ceiling" from time to time by
further notice and disclosure to the Company; and, provided
further, that the "highest nonusurious rate of interest permitted
by applicable law" for purposes of this Agreement and the Notes
shall not be limited to the applicable rate ceiling under Art.
5069-1.04 if federal laws or other state laws now or hereafter in
effect and applicable to this Agreement and the Notes (and the
interest contracted for, charged and collected hereunder or
thereunder) shall permit a higher rate of interest.
"Multiemployer Plan" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
"Notes" shall have the meaning specified in paragraph 1C.
"Officer's Certificate" shall mean a certificate signed in
the name of the Company by an Authorized Officer of the Company.
"Original Term Notes" shall mean, collectively, (i) that
certain promissory note dated August 13, 1996, in the original
principal amount of $33,841,480.80, executed and delivered by the
Company pursuant to the Credit Agreement and payable to the order
of NationsBank of Texas, N.A. and (ii) that certain promissory
note, dated August 13, 1996, in the original principal amount of
$8,460,370.20, executed and delivered by the Company pursuant to
the Credit Agreement and payable to the order of Bank One, Texas,
N.A., together with any renewals, modifications, and extensions
thereof.
"Partnership Agreement" shall mean that certain Amended and
Restated Agreement of Limited Partnership of Pride Companies,
L.P., effective as of March 29, 1990, as heretofore amended and
as hereafter amended by the Partnership Amendment.
"Partnership Amendment" shall have the meaning specified in
paragraph 3D.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
or any successor entity.
"Permitted Liens" shall mean: (i) Liens granted to secure
the Senior Secured Notes, (ii) Liens described on Exhibit F to
the Credit Agreement, (iii) pledges or deposits made to secure
payment of worker's compensation insurance (or to participate in
any fund in connection with worker's compensation insurance),
unemployment insurance, pensions or social security programs,
(iv) Liens imposed by mandatory provisions of law such as for
materialmen's, mechanics', warehousemen's and other like Liens
arising in the ordinary course of business, securing Indebtedness
whose payment is not yet due, (v) Liens for taxes, assessments
and governmental charges or levies imposed upon a Person or upon
such Person's income or profits or property, if the same are not
yet due and payable or if the same are being contested in good
faith and as to which adequate cash reserves in accordance with
generally accepted accounting principles have been provided, (vi)
Liens arising from good faith deposits in connection with
tenders, leases, real estate bids or contracts (other than
contracts involving the borrowing of money) otherwise permitted
under this Agreement, pledges or deposits to secure public or
statutory obligations and deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar
charges, (vii) encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property,
provided that such items do not impair the use of such property
for the purposes intended, and none of which is violated by
existing or proposed structures or land use, or (viii) Liens
arising pursuant to any depository agreements between the Company
and NationsBank of Texas, N.A.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, a limited
liability company, an unincorporated organization and a
government or any department or agency thereof.
"Plan" shall mean an employee benefit plan or other plan
maintained by the Company for employees of the Company and
covered by Title IV of ERISA, or subject to the minimum funding
standards under Section 412 of the Internal Revenue Code of 1986,
as amended.
"Preferred Units" shall mean, collectively, the Series B
Units and the Series C Units.
"Pride SGP Agreement" shall mean the Agreement and Guaranty
of Special General Partner for the benefit of the holders of the
Securities and the lenders under the Credit Agreement in the form
of Exhibit I attached hereto.
"Process Agent" shall mean Brad Stephens, whose address is
1209 N. 4th, Abilene, Texas 79601.
"Refinanced Debt Maturity Date" shall mean the scheduled
maturity date of the term loan set forth in the documents
executed by the Company and a third party lender in connection
with the refinancing of the obligations of the Company under the
Credit Agreement.
"Refinancing Trigger Date" shall mean the later of (i) the
date on which a third party lender refinances, or the Company has
otherwise repaid, all obligations (other than that portion of the
Original Term Notes renewed and extended by the Notes issued
hereunder) of the Company owing to Bank One, Texas, N.A. and
NationsBank of Texas, N.A., as lenders, under the Credit
Agreement and any and all commitments of such lenders thereunder
have been terminated and (ii) the date on which Special General
Partner shall have converted the obligations of the Company to
Special General Partner to Common Units or preferred units of the
Company subordinate to the Preferred Units in accordance with the
terms of the Pride SGP Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights and Transfer Restriction Agreement between the Company and
the Purchasers in the form of Exhibit F attached hereto.
"Related Persons" shall mean, collectively, the Company,
Managing General Partner, Special General Partner, Desulfur
Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and
Pride Borger, Inc.
"Reportable Event" shall have the meaning specified in the
Title IV of ERISA.
"Required Holder(s)" shall mean (i) when used in paragraph
7A, 7B, 7C or 7D each of NationsBank of Texas, N.A. and Bank One,
Texas, N.A., so long as it is a holder of any Note, regardless of
the amount held, plus holder or holders of at least 51% of the
aggregate principal amount of the Notes from time to time
outstanding or (ii) when used in any other provision of this
Agreement, the holder or holders of at least 100% of the
aggregate principal amount of the Notes from time to time
outstanding.
"Securities" shall mean, collectively, the Notes, the
Preferred Units issuable upon conversion of the Series B Notes
and the Series C Notes, and the Common Units issuable upon
conversion of any of the Preferred Units or Notes.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Documents" shall mean this Agreement, the
Securities, the Collateral Documents, the Intercreditor
Agreement, the Shareholder Agreement, the Certificate of
Designations, the Pride SGP Agreement, the Warrants, the
Registration Rights Agreement, and all other agreements,
certificates, documents, instruments and writings at any time
delivered in connection herewith or therewith.
"Series A Conversion Period" shall mean the period
commencing on the earlier to occur of (i) the date nine (9)
calendar months from the Refinancing Trigger Date or (ii)
December 31, 1997 and ending on the date on which all Series A
Notes or Unsecured Series A Notes have either been converted into
Common Units or paid in full. The Series A Conversion Period
shall also commence on any date on which the Company gives notice
of prepayment with respect to the Series A Notes or Unsecured
Series A Notes pursuant to paragraph 4B.
"Series A Notes" shall have the meaning specified in
paragraph 1A.
"Series B Conversion Period" shall mean the period
commencing on the earliest to occur of (i) the date eighteen (18)
calendar months from the Date of Closing or (ii) the date one
calendar year from the Refinancing Trigger Date or (iii) March
31, 1998 and ending on the date on which all Series B Notes have
either been converted into Common Units or paid in full. The
Series B Conversion Period shall also commence on any date on
which the Company gives notice of prepayment with respect to the
Series B Notes pursuant to paragraph 4B.
"Series B Notes" shall have the meaning specified in
paragraph 1B.
"Series B Units" shall mean the series of preferred limited
partnership units of the Company designated as "Series B
Cumulative Convertible Preferred Units."
"Series C Conversion Period" shall mean the period
commencing on the earlier to occur of (i) the date on which all
Series A Notes or Unsecured Series A Notes have been either paid
in full or converted to Common Units or (ii) the first day of the
Series A Conversion Period and ending on the date on which all
Series C Notes have either been converted into Common Units or
paid in full. The Series C Conversion Period shall also commence
on any date on which the Company gives notice of prepayment with
respect to the Series C Notes pursuant to paragraph 4B.
"Series C Notes" shall have the meaning specified in
paragraph 1C.
"Series C Units" shall mean the series of preferred limited
partnership units of the Company designated as "Series C
Cumulative Convertible Preferred Units."
"Shareholder Agreement" shall mean the Shareholder Agreement
of the Shareholders of Managing General Partner in the form
attached hereto as Exhibit G.
"Significant Holder" shall mean (i) each Purchaser, so long
as such Purchaser shall hold (or be committed under this
Agreement to purchase) any Note, or (ii) any other holder of at
least 5% of the aggregate principal amount of the Notes from time
to time outstanding.
"Stated Value" shall mean the Stated Value per Series B Unit
or Series C Unit, in each case $1,000 per unit.
"Subsidiary" shall mean, with respect to any Person, any
corporation, association, partnership, joint venture, or other
business or corporate entity, enterprise or organization which is
directly or indirectly (through one or more intermediaries)
controlled by or owned fifty percent or more by such Person.
"Tangible Net Worth" shall mean, with respect to any Person,
such Person's net worth determined in accordance with generally
accepted accounting principles minus the sum of (i) any surplus
resulting from any write-up of assets (other than any write-up of
assets as provided by generally accepted accounting principles
and disclosed on financial statements with respect to assets of
any Person acquired in an acquisition by any Related Person after
the date of this Agreement which after the date of acquisition
are appraised by an independent third party appraiser at a value
in excess of the value given to such assets at the time of
acquisition), (ii) goodwill, including any amounts, however
designated, representing the excess of the purchase price paid
for assets or stock acquired over the book value assigned
thereto, (iii) treasury stock, (iv) patents, trademarks, service
marks, trade names, and copyrights, plus (v) other intangible
assets.
"Taxes" shall mean all taxes, assessments, fees or other
charges from time to time or at any time imposed by any Tribunal.
"Term Loan" shall have the meaning given it in the Credit
Agreement.
"Transferee" shall mean any direct or indirect transferee of
all or any part of any Note purchased by any Purchaser under this
Agreement.
"Tribunal" shall mean any state, commonwealth, federal,
foreign, territorial or other court or governmental department,
commission board, bureau, agency or instrumentality.
"Unitholder Approval" shall mean (i) the approval of the
holders of the Company's convertible preferred limited partner
units and of the Company's common limited partner units to the
Partnership Amendment and (ii) such other approvals, consents or
actions required for the Securities and the Securities Documents.
"Unsecured Series A Note" shall have the meaning specified
in paragraph 6A.
"Warrants" means the warrant agreements in favor of each
Purchaser in the form attached hereto as Exhibit J.
10B. Accounting Principles, Terms and Determinations. All
references in this Agreement to "generally accepted accounting
principles" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time
of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall
be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished
hereunder shall be prepared, in accordance with generally
accepted accounting principles applied on a basis consistent with
the most recent audited consolidated financial statements of the
Company and its Subsidiaries delivered pursuant to paragraph 5
or, if no such statements have been so delivered, the most recent
audited financial statements referred to in clause paragraph 8F.
PARAGRAPH 11. SECURITY.
11A. The Security. The Senior Secured Notes will be
secured on a pari passu basis with the Obligation (as defined in
the Credit Agreement) by the Collateral Documents listed on
Schedule 1 attached hereto and any additional Collateral
Documents hereafter delivered by any Person and accepted by
Required Holders.
11B. Agreement to Deliver Security Documents. The Company
agrees to deliver and to cause each Related Person to deliver, to
further secure the Senior Secured Notes whenever requested by
Required Holders in their sole and absolute discretion, deeds of
trust, mortgages, chattel mortgages, security agreements,
financing statements and other Collateral Document in form and
substance satisfactory to Required Holders for the purpose of
granting, confirming, and perfecting first and prior liens in the
Collateral.
PARAGRAPH 12. MISCELLANEOUS.
12. Miscellaneous.
12A. Note Payments. The Company agrees that, so long as
any Purchaser shall hold any Note, it will make payments of
principal of and interest on such Note, which comply with the
terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, Dallas,
Texas time, on the date due) to the account or accounts of such
Purchaser, if any, as are specified in the Information Schedule
attached hereto, or, in the case of any Purchaser not named in
the Information Schedule or any Purchaser wishing to change the
account specified for it in the Information Schedule, or such
other account or accounts in the United States as such Purchaser
may from time to time designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the
place of payment. Each Purchaser agrees that, before disposing
of any Note, such Purchaser will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously
made thereon and of the date to which interest thereon has been
paid. The Company agrees to afford the benefits of this
paragraph 12A to any Transferee which shall have made the same
agreement as each Purchaser has made in this paragraph 12A.
12B. Expenses. The Company agrees to pay (a) all costs and
expenses of any Purchaser, any Transferee or any other holder of
any Security (including, without limitation, all reasonable
attorneys' fees) incurred by any party in connection with the
administration, preservation and enforcement of this Agreement,
the Securities, and/or the other Securities Documents, and (b)
all reasonable costs and expenses of each Purchaser, any
Transferee or any other holder of any Security (including without
limitation reasonable fees and expenses of legal counsel) in
connection with the negotiation, preparation, execution and
delivery of this Agreement, the Securities, and the other
Securities Documents and any and all amendments, modifications,
maintenance, and supplements thereof or thereto. The obligations
of the Company under this paragraph 12B shall survive the
transfer of any Security or portion thereof or interest therein
by any Purchaser, any Transferee or any other holder of any
Security and the payment of any Security.
12C. Consent to Amendments. This Agreement may be amended,
and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the
Company shall obtain the written consent to such amendment,
action or omission to act, of the Required Holder(s) except that,
without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement shall
change the maturity of any Note, or change or affect the
principal of, or change or affect the rate or time of payment of
interest on any Note, or affect the time, amount or allocation of
any prepayments, or change the proportion of the principal
amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Note at the
time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 12C, whether or not such Note shall
have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No
course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of
such Note. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it
may from time to time be amended or supplemented.
12D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes. The Notes are issuable as registered notes without
coupons in denominations of at least $100,000, except as may be
necessary to reflect any principal amount not evenly divisible by
$100,000. The Company shall keep at its principal office a
register in which the Company shall provide for the registration
of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of
the Company, the Company shall, at its expense, execute and
deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such
transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor
and of any authorized denominations, of a like aggregate
principal amount, upon surrender of the Note to be exchanged at
the principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the
exchange is entitled to receive. Each installment of principal
payable on each installment date upon each new Note issued upon
any such transfer or exchange shall be in the same proportion to
the unpaid principal amount of such new Note as the installment
of principal payable on such date on the Note surrendered for
registration of transfer or exchange bore to the unpaid principal
amount of such Note. No reference need be made in any such new
Note to any installment or installments of principal previously
due and paid upon the Note surrendered for registration of
transfer or exchange. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by
a written instrument of transfer duly executed, by the holder of
such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss, theft,
destruction or mutilation of such Note and, in the case of any
such loss, theft or destruction, upon receipt of such holder's
unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the
Company will make and deliver a new Note, of like tenor, in lieu
of the lost, stolen, destroyed or mutilated Note.
12E. Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, the Company may treat
the Person in whose name any Note is registered as the owner and
holder of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the
Company shall not be affected by notice to the contrary. Subject
to the preceding sentence, the holder of any Note may from time
to time grant participations in such Note to any Person on such
terms and conditions as may be determined by such holder in its
sole and absolute discretion.
12F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein
or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this
Agreement, the Notes, and the other Securities, the transfer by
any Purchaser of any Note, other Security, or portion thereof or
interest therein and the payment of any Security, and may be
relied upon by any Transferee or other holder of any Security,
regardless of any investigation made at any time by or on behalf
of any Purchaser, any Transferee or other holder of any Security.
So long as any Security is outstanding, the representations,
warranties and other provisions of this Agreement shall benefit
the holders of the Securities or any Transferee, whether or not
any other Securities remain outstanding. Subject to the
preceding sentences, this Agreement and the Notes embody the
entire agreement and understanding between the Purchasers and the
Company with respect to the subject matter hereof and supersede
all prior agreements and understandings relating to the subject
matter hereof.
12G. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto
(including, without limitation, any Transferee or other holder of
any Security) whether so expressed or not.
12H. Disclosure to Other Persons. The Company acknowledges
that the holder of any Security may deliver copies of any
financial statements and other documents delivered to such
holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in
connection with or pursuant to this Agreement to (i) such
holder's directors, officers, employees, agents and professional
consultants, (ii) any other holder of any Security, (iii) any
Person to which such holder offers to sell such Security or any
part thereof, (iv) any Person to which such holder sells or
offers to sell a participation in all or any part of such
Security, (v) any Person from which such holder offers to
purchase any security of the Company, (vi) any federal or state
regulatory authority having jurisdiction over such holder, or
(vii) any other Person to which such delivery or disclosure may
be necessary or appropriate (a) in compliance with any law, rule,
regulation or order applicable to such holder, (b) in response to
any subpoena or other legal process or informal investigative
demand, (c) in connection with any litigation to which such
holder is a party or (d) in order to protect the investment of
any holder in any Security.
12I. Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to
any Person listed in the Information Schedule attached hereto,
addressed to it at the address specified for such communications
in such Information Schedule, or at such other address as it
shall have specified in writing to the Person sending such
communication, and (ii) if to any other holder of any Note which
is not a Person listed in such Information Schedule, addressed to
such other holder at such address as such other holder shall have
specified in writing to the Person sending such communication,
or, if any such other holder shall not have so specified an
address, then addressed to such other holder in care of the last
holder of such Note which shall have so specified an address to
the Person sending such communication; provided, however, that
any such communication to the Company may also, at the option of
the Person sending such communication, be delivered by any other
means either to the Company at its address specified in the
Information Schedule or to any Authorized Officer of the Company.
Any telephonic communication pursuant to paragraph 4B shall be
effective to create any rights or obligations under this
Agreement only if an Authorized Officer of the party conveying
the information and of the party receiving the information are
parties to the telephone call.
12J. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any
payment of principal of or interest on any Note that is due on a
date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended
to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the
computation of the interest payable on such Business Day.
12K. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12L. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
12M. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken,
is by the terms of this Agreement required to be satisfactory to
any Purchaser or to the Required Holder(s), the determination of
such satisfaction shall be made by such Purchaser or the Required
Holder(s), as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such
determination.
12N. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAW OF THE STATE OF TEXAS. This Agreement
may not be changed orally, but (subject to the provisions of
paragraph 12C) only by an agreement in writing signed by the
party against whom enforcement of any waiver, change,
modification or discharge is sought.
12O. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but
all of which together shall constitute one instrument.
12P. Binding Agreement. When this Agreement is executed
and delivered by the Company and Purchasers, it shall become a
binding agreement between the Company and Purchasers.
12Q. Severalty of Obligations. The sales of Notes to the
Purchasers are to be several sales, and the obligations of the
Purchasers under this Agreement are several obligations. Except
as provided in paragraph 3F, no failure by any Purchaser to
perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations
hereunder, and no Purchaser shall be responsible for the
obligations of, or any action taken or omitted by, any other
Purchaser hereunder.
12R. Maximum Interest Payable. The Company, each Purchaser
and any other holders of the Notes specifically intend and agree
to limit contractually the amount of interest payable under this
Agreement, the Notes and all other instruments and agreements
related hereto and thereto to the maximum amount of interest
lawfully permitted to be charged under applicable law.
Therefore, none of the terms of this Agreement, the Notes or any
instrument pertaining to or relating to this Agreement or the
Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the Maximum Rate, and neither the
Company, any guarantor nor any other party liable or to become
liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall
ever be liable for interest in excess of the amount determined at
such Maximum Rate, and the provisions of this paragraph 12R shall
control over all other provisions of this Agreement, any Notes,
any guaranty or any other instrument pertaining to or relating to
the transactions herein contemplated. If any amount of interest
taken or received by any Purchaser or any holder of a Note shall
be in excess of said maximum amount of interest which, under
applicable law, could lawfully have been collected by such
Purchaser or such holder incident to such transactions, then such
excess shall be deemed to have been the result of a mathematical
error by all parties hereto and shall be refunded promptly by the
Person receiving such amount to the party paying such amount, or,
at the option of the recipient, credited ratably against the
unpaid principal amount of the Note or Notes held by such
Purchaser or such holder, respectively. All amounts paid or
agreed to be paid in connection with such transactions which
would under applicable law be deemed "interest" shall, to the
extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement
and the Notes. "Applicable law" as used in this paragraph means
that law in effect from time to time which permits the charging
and collection of the highest permissible lawful, nonusurious
rate of interest on the transactions herein contemplated
including laws of the State of Texas and of the United States of
America.
THIS WRITTEN NOTE AGREEMENT, THE NOTES AND THE OTHER
SECURITIES DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
12S. Indemnity. The Company agrees to indemnify and
reimburse each holder, upon demand, against and for any and all
liabilities, obligations, claims, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") which to any extent
(in whole or in part) may be imposed on, incurred by, or asserted
against such holder growing out of, resulting from, or in any
other way associated with this Agreement, the Securities, the
other Securities Documents or the transactions and events
(including the enforcement or defense thereof) at any time
associated herewith or therewith or contemplated herein or
therein. THE FOREGOING INDEMNIFICATION AND REIMBURSEMENT
OBLIGATIONS OF THE COMPANY SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS IN ANY WAY ARISE, IN WHOLE OR IN PART,
UNDER ANY THEORY OF STRICT LIABILITY, OR TO ANY EXTENT ARE
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF
ANY KIND BY SUCH HOLDER, PROVIDED THAT:
(i) Except as provided in the following clause (ii),
no holder shall be entitled under this section to receive
indemnification for (1) that portion of any final judgment
for liabilities and costs which portion, determined in
accordance with principles of comparative fault, is based
upon a finding that such holder has been grossly negligent
or has engaged in willful misconduct, or (2) the liabilities
and costs representing that portion of any out-of-court
settlement by a holder which has been allocated by the
parties to such settlement to a claim that such holder has
been grossly negligent or has engaged in willful misconduct.
(ii) Each holder shall be entitled under this section
to receive indemnification and reimbursement for any
liabilities and costs arising from a final judgment in favor
of an Outside Party to the effect that such holder is
somehow legally responsible (due to a theory of imputed
negligence or otherwise) for the negligence or other acts or
omissions of the Company or any of its Affiliates.
(iii) The Company shall (upon demand as the same are
incurred) indemnify and reimburse each holder for all costs,
expenses, and disbursements of any kind or nature whatsoever
(including reasonable fees of attorneys, accountants,
experts and advisors) which are incurred by such holder in
defending against any claim or allegation that such holder
has been grossly negligent or has engaged in willful
misconduct.
As used in this section: the term "holder" shall refer not only
to each Person who is the holder of any Security at the time in
question but also to any former holder of such Security (or of
any predecessor Security) and to each director, officer, agent,
attorney, employee, representative and affiliate of such present
or former holder, and the term "Outside Party" shall refer, with
respect to any holder, to any Person other than such holder, its
owners, and the regulatory authorities which exercise
jurisdiction over its ability to purchase promissory notes and
engage in transactions of the kind contemplated herein.
12T. Choice of Forum; Consent to Service of Process and
Jurisdiction; Waiver of Jury Trial. Any suit, action or
proceeding against the Company with respect to this Agreement,
the Securities or any Securities Documents or any judgment
entered by any court in respect thereof, may be brought in the
courts of the State of Texas, County of Dallas, or in the United
States courts located in the State of Texas as any holder of a
Security in its respective sole discretion may elect and the
Company hereby submits to the nonexclusive jurisdiction of such
courts for the purpose of any such suit, action or proceeding.
The Company hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the
State of Texas may be brought upon the Process Agent, and the
Company hereby irrevocably appoints the Process Agent, as its
true and lawful attorney-in-fact in the name, place and stead of
the Company to accept such service of any and all such writs,
process and summonses, and agrees that the failure of Process
Agent to give any notice of such service of process to them shall
not impair or affect the validity of such service or of any
judgment based thereon. The Company hereby irrevocably consents
to the service of process in any suit, action or proceeding in
said court by the mailing thereof by any holder of a Security by
registered or certified mail, postage prepaid, to the Process
Agent's address. The Company hereby irrevocably waives any
objections which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or
relating to this Agreement or any Securities Document brought in
the courts located in the State of Texas, County of Dallas, and
hereby further irrevocably waives any claim that any such suit;
action or proceeding brought in any such court has been brought
in an inconvenient forum. THE COMPANY AND EACH HOLDER OF ANY
SECURITY HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH ANY OF THEM ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT, DUTY IMPOSED BY
LAW OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER SECURITIES DOCUMENTS,
OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER ARISING OR
ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE
PAYMENT OBSERVANCE AND PERFORMANCE IN FULL OF ANY OBLIGATIONS OF
THE COMPANY UNDER ANY OF THE SECURITIES DOCUMENTS.
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterparts of this letter
and return the same to the Company, whereupon this letter shall
become a binding agreement among the Company and the Purchasers.
Very truly yours,
PRIDE COMPANIES, L.P.
By: Pride Refining, Inc.,
its managing general partner
By
Brad Stephens
Chief Executive Officer
PRIDE REFINING, INC.
By
Brad Stephens
Chief Executive Officer
PRIDE SGP, INC.
By
Title:
<PAGE>
The foregoing Agreement is hereby
accepted as of the date first
above date first above written.
NATIONSBANK OF TEXAS, N.A.
By
Jay T. Wampler
Vice President
BANK ONE, TEXAS, N.A.
By
Barbara D. Christian
Senior Vice President
