THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
Original Issue Date December 11, 2007 | $3,000,000 |
SENIOR SECURED REVOLVING PROMISSORY NOTE |
DUE DECEMBER 11, 2010 |
THIS NOTE is the duly authorized and issued Senior Secured Revolving Promissory Note of Continental Fuels, Inc.,
a Nevada corporation whose principal place of business is located at 9901 Interstate Highway 10 West, Suite 800, San Antonio,
TX 78230 (the “Company”), designated as its Senior Secured Revolving Promissory Note, due on December 11, 2010 (this
“Note”).
FOR VALUE RECEIVED, the Company pro mises to pay to Sheridan Asset Management, LLC or its assigns (the
“Holder”), the principal sum of (a) $3,000,000 (the “Commitment Amount”), or if less, (b) the aggregate unpaid principal amount
of all Advances made by the Holder to the undersigned pursuant to the Loan Agreement and the terms of this Note (“Principal
Amount”), together with accrued, unpaid interest thereon from time to time outstanding at the rates and on the dates hereinafter
described. This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined els ewhere in this Note: (a)
capitalized terms not otherwise defined herein have the meanings given to such terms in the Loan Agreement, and (b) the
following terms shall have the following meanings:
“Approved Accounts” means those customers of the Company or its Subsidiaries set forth on Schedule 1
attached hereto and any other customer subsequently approved by the Holder in its reasonable discretion.
“Available Cash” means, as of any date, the sum of all cash held in the Controlled Accounts after deducting
the sum of all of the Company’s accounts payable due within thirty days of such date.
“Borrowing Base Amount” means, as of any date that is a Business Day (“Calculation Day”), the sum of (a)
100% of all cash or cash equivalents held by the Company and each of its Subsidiaries in its Controlled Accounts at the
beginning of the Calculation Day, plus (b) 80% of the value of the Inventory of the Company and each of its Subsidiaries
determined at the end of the Business Day prior to the Calculation Day, plus (c) 90% of Eligible Accounts Receivables of the
Company and each of its Subsidiaries determined at the end the Business Day prior to the Calculation Day.
“Borrowing Base Certificate” means the Borr owing Base Certificate prepared by the Company and delivered
to the Holder in the form of Exhibit A attached hereto.
“Change of Control Transaction” means the occurrence after the date hereof, of any of (i) an acquisition after
the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 50% of the voting securities of the Company (other than UPDA or any of its Subsidiaries), (ii) a
replacement at one time or within a three-year period of more than one-half of the members of the Company’s board of directors
which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are members on the date hereof), or (iii) the execution
by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set
forth above in (i) or (ii).
“Collateral” shall have the meaning given to such term in the Security Agreement.
“Collateral Monitoring Fee” shall have the meaning set forth in Section 3(e).
“Controlled Account” means an account of a Loan Party maintained with a bank which has executed a
deposit account control agreement with the Holder which satisfies the requirements of Section 9-104(a)(2) of the UCC with
respect to such account as contemplated by S ection 4(f) of the Security Agreement.
“Default Interest” shall have the meaning set forth in Section 3(d) to this Note.
“EBITDA” means, for any period, Net Income for such period plus, to the extent deducted in determining
such Net Income, Interest Expense, taxes, depreciation, amortization and non-cash charges for such period.
“Eligible Accounts Receivable” means, as of any date of determination and without duplication, the
aggregate book value of the accounts receivable, purchased receiva bles, and obligations for payment from Approved Accounts
created or arising from the sale of inventory or the rendering of services in the ordinary course of business (“Receivables”),
owned by or owning to the Company or any of its wholly-owned Subsidiaries, net of allowances and reserves for doubtful or
uncollectible accounts and sales adjustments, consistent with such Person’s internal policies and in any event in accordance with
GAAP, but excluding, in any event, any Receivables (a) which are more than sixty (60) days past due, or (b) which are subject of
any Lien other than a Permitted Lien.
“Event of Default” shall have the meaning set forth in Section 7.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Geer” means Geer Tank Trucks, Inc., a Texas corporation.
"Interest Expense", as applied to the Company and its Subsidiarie s, means for any period, the amount of
interest paid or due on indebtedness by the Company and its Subsidiaries for such period, determined in accordance with GAAP.
“Inventory” means, as of any date of determination and without duplication, the lower of aggregate book
value (based on a FIFO, consistently applied) and fair market value of all raw materials and finished goods inventory owned by
the Company or any of its wholly-owned Subsidiaries less appropriate reserves, determined in accordance with GAAP but
excluding in any event (i) inventory which is (a) not subject to a perfected, first priority Lien in favor of the Holder to secure the
obligations of Company to Holder under this Note, or (b) sub ject to any other Lien that is not a Permitted Lien; (ii) inventory
which is not in good condition or fails to meet standards for sale or use imposed by governmental agencies, departments or
divisions having regulatory authority over such goods; (iii) inventory which is not useable or salable at prices approximating their
cost in the ordinary course of the business (including without duplication the amount of any reserves for obsolescence,
unsalability or decline in value); (iv) inventory located outside of the United States; and (v) inventory which fails to meet such
other specifications and requirements as may from time to time be established by the Holder in its reasonable discretion.
&nb sp; “Junior Subordinated Obligations” shall have the meaning set forth in the Subordination Agreement.
“Loan Agreement” means that certain Loan Agreement, dated as of December 11, 2007, by and among the
Company, the Holder, and the Guarantors party thereto, as amended, modified or supplemented from time to time in accordance
with its terms.
“Maturity Date” means December 11, 2010 or such earlier date as this Note is required to be repaid as
provided in this Note or the Termination Date.
"Net Income" means net income of the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
“Notice of Borrowing” means a notice of borrowing in the form of Exhibit B attached hereto.
“Original Issue Date” means the date of the first issuance of the Note regardless of the number of transfers of
the Note and regardless of the number of instruments which may be issued to evidence t he Note. The Original Issue Date is
sometimes referred to in this Note as the Closing Date.
"Out-Of-Formula Advance" means the amount by which (i) the then outstanding Advances, exceeds (ii) the
Borrowing Base Amount, subject to such restrictions on Advances as are set forth in this Note.
“Permitted Indebtedness” means (a) Junior Subordinated Obligations, and (b) indebtedness resulting from (i)
acquiring goods, supplies, or merchandise on normal trade credit; (ii) endorsing negotiable instruments received in the usual
course of business; (iii) obtaining surety bonds in the usual course of business; or (iv) liabilities, lines of credit and leases in
existence on the date of this Agreement disclosed in writing to the Holder or in the Company’s most recent financial statement;
excluding the outstanding indebtedness to Inter National Bank.
“Permitted Liens” means (a) liens and security interests in favor of the Holder; (b) liens for taxes not yet
due; (c)liens outstanding on the date of this Note disclosed in Schedule 2 attached hereto; (d) additional purchase money security
interests in assets acquired after the date of this Note.
“Unused Line Fee” shall have the meaning set forth in Section 3(e).
&nb sp; Section 2. Loan Agreement.
This Note is the Senior Secured Revolving Promissory Note referred to in, and is entitled to the benefits of, the Loan
Agreement. The Loan Agreement, among other things, provides for the making of revolving loans (the “Revolving Loan”) by
the Holder to the Company, in the U.S. Dollar amount set forth therein, the indebtedness of the Company resulting from such
Revolving Loan being evidenced by this Note. All obligations under this Note are secured by the Transaction Documents and
the Collateral and entitled to the benefits thereof.
Section 3. Advances; Payment of Principal and Interest.
a) Methods of Advances. Provided no Event of Default has occurred and is continuing, the Company
may request an Advance of no less than $500,000 after the first Advance provided by Holder to Company at Closing, by
delivering to the Holder’s Compliance and Collateral Monitoring Officer, Jeffery Saatchi at jsaatchi@sheridancapital.com, or
such other person as designated by the Holder from time to time, on any Business Day prior to 12:00 P.M., eastern standard time,
a written N otice of Borrowing, together with a completed and executed Borrowing Base Certificate, (which may be delivered in
electronic format) and such other collateral and back-up documentation as the Holder may from time to time require. Each
request for a Notice of Borrowing under this Note shall be made by Timothy Brink, or such other officer of the Company as to
which Holder and the Company shall agree, and, once received by Holder, shall be deemed irrevocable. Availability for
Advances shall be based upon the Borrowing Base Amount reflected on the Borrowing Base Certificate delivered with a Notice
of Borrowing. Provided that the requirements of this Section 3, and Section 2.4 of the Loan Agreement and any other condition
to making Advances set forth in any Transacti on Document are satisfied, Holder will advance monies which, together with the
principal amount outstanding under any and all other Advances shall not exceed the Commitment Amount in connection with a
Notice of Borrowing, within three (3) Business Days of such request.
a) Payment of Principal. The Company shall pay the outstanding Advances under the Loan, together
with any accrued and unpaid interest thereon, and any other sums due pursuant to the terms hereof, ON DEMAND after the
occurrence of an Event of Default or upon the Maturity Date. If any Out-Of-Formula Advance arises or exists under the Loan for
any reason whatsoever, including Eligible Accounts Receivable becoming ineligible, Borrower will repay such Out-Of-Formula
Advance immediately.
b) Interest Rate. The Company shall pay interest on the unpaid Principal Amount, from the Original
Issue Date until such principal amount shall be paid in full, at the rate of 20% per annum. Interest shall be computed daily based
on a year of 360 days and the actual days elapsed (including the first day but excluding the last day) in the period for which
interest is payable and shall be payable monthly in arrears on the first Business Day of each calendar month beginning on January
2, 2008, and on the Maturity Date, in cash.
c) Record of Advances. Holder will maintain in accordance with its usual practice a record
evidencing the indebtedness of the Company to it as a result of the Advances, including the amounts of principal, interest and
other amounts payable and paid to it from time to time under this Note and the Loan Agreement. The entries made by Holder in
such record shall constitute prima facie evidence of the existence and amounts of the Advances and other obligations therein
recorded; provided, however, that the failure of Holder to maintain such records, or any error therein, shall not in any manner
affect the obligations of the Company to repay or pay the Advances made by Holder, accrued interest thereon and the other
obligations of the Company to the Ho lder hereunder in accordance with the terms of Loan Agreement and this Note.
d) Default Interest. If an Event of Default has occurred that results in the eventual acceleration of this
Note, then default interest shall accrue on the unpaid principal amount of all Advances at a rate of 3% per annum from the
occurrence of such Event of Default in addition to the interest rate otherwise payable pursuant to Section 3(b) of this Note (or
such lower maximum amount of interest permitted to be charged under applicable law) (“Default Interest” ;).
e) Unused Line Fee and Collateral Monitoring Fee. The Company shall pay the Holder the following
fees: (i) an unused line fee (“Unused Line Fee”) equal to the amount determined for each month by taking the product of (x) the
monthly average of the positive difference between the Commitment Amount and the actual outstanding principal amount of all
Advances, computed daily, (y) multiplied by 10% and (z) divided by 12, which Unused Line Fee shall be payable on the first
Business Day of each calendar month beginning on January 1, 2008; and (ii) a collateral monitoring fee (“Collateral Monitoring
Fee”) of $5,000 each ca lendar quarter payable on the first day of the calendar month following the calendar quarter previously
monitored.
f) Optional Prepayments. The Company shall have the right to prepay the Advances, without
premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the
Company shall give the Holder prior to 12:00 noon (New York City time) at least two (2) Business Days’ prior written notice, of
its intent to prepay Advances, and the amount of such prepayment; (ii) the Company shall pay the accrued interest on the
Principal Amount outstanding on this Note through the date of repayment, and (iii) such prepayment shall be in an amount no
less than $250,000.
g) Mandatory Prepayments. In the event there shall be on any Business Day Available Cash in excess
of $1,500,000 (“Excess Cash”), the Company shall pay the Holder all of such Excess Cash, by wire transfer of immediately
available funds on or before the next Business Day, which payment shall be allocated in its entirety by the Holder to the
repayment of the then outstanding Principal Amount under this Note.
h) Optional Termination of this Note. So long as the cumulative amount of cash interest and the
Unused Line Fee paid under this Note, including on the date of such termination (“Termination Date”), shall be not less than
$1,000,000 (“Interest Threshold Amount”), the Company shall have the right to terminate this Note and repay, in cash, all, but
not less than all, of the amount outstanding under this Note, upon not less than ten (10) Business Days written notice to the
Holder by paying to the Holder, in immediately available funds, an amount equal to 100% of the then outstanding Principal
Amount thereof and all accrued and unpaid cash interest and other amounts, costs, expenses due in respect of this Note. If the
Termination Date occurs prior to the last day of a calendar month, Holder shall receive a full month of interest as though such
termination were made on the last day of such month. Notwithstanding the foregoing, if the Company has not paid the Interest
Threshold Amount, the Company may nonetheless terminate this Note by paying to the Holder the amount provided above, and
in addition, by also paying the Holder the difference between the cash interest paid by the Company by the Termination Date and
the Interest Thres hold Amount.
Section 4. Registration of Transfers and Exchanges.
a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of
notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
b) Reliance on Note Register. Prior to due presentment to the Company for transfer of this Note , the
Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the note register as
the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is
overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 5. Negative Covenants. Other than pursuant to the terms of or as contemplated in any Transaction
Document, so long as any portion of this Note is outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:
a) enter into, create, incur, assume or suffer to exist any indebtedness or liens of any kind (other than
Permitted Indebtedness and Permitted Liens) on or with respect to any of its property or assets now owned or hereafter acquired
or any interest thereon or any income or profits therefrom regardless of w hether each indebtedness or liens are senior to, pari
passu with or subordinated to in any respect, the Company’s obligations under this Note;
b) amend its certificate of incorporation, bylaws or its charter documents so as to adversely affect any
rights of the Holder;
c) repay, repurchase, redeem or offer to repay, repurchase or otherwise acquire or make any dividend
or distribution in respect of any of its Common Stock, or other equity securities other than such repayments, repurchases, offers,
acquisitions, dividends or distributions from the Company’s wholly-own ed Subsidiaries to the Company;
d) engage in any transactions with any officer, director, employee or any affiliate of the Company,
including any contract, agreement or other arrangement providing for the furnishing of services to or by (other than any
employment, compensation or indemnification agreements), providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity
in which any officer, director, or any such employee has a substantial interest or is an officer, dire ctor, trustee or partner, in each
case in excess of $10,000;
e) sell, transfer or otherwise dispose of any of its assets on terms where such assets may be leased to
or re-acquired or acquired by the Company or any of its Subsidiaries;
f) dispose, in a single transaction, or in a series of transactions all or a substantial part of its assets
other than cash, cash equivalents, inventory and obsolete and worn out equipment, in each case in the ordinary course of
business;
& nbsp; g) issue to any Person (other than the Company or any of its Subsidiaries) more than $250,000, in the
aggregate, (based on fair market value at the time of issuance) in Common Stock or securities exchangeable for, convertible into
or exercisable for Common Stock;
h) incur any expenditures, except in accordance with its schedule of required signatories for
expenditures, a copy of which is set forth on Schedule 1, which schedule shall not be amended without Lender’s prior consent;
i) (a) permit Timothy Brink to cease serving as Chief Executive Officer, or to otherwise cease to be
the principal operating officer with final decision making authority for the Company; or (b) fail to submit to Holder notice and a
present plan of repayment that is satisfactory to the Holder within sixty (60) days from the date Timothy Brink ceases to serve as
Chief Executive Officer, or to otherwise ceases to be the principal operating officer with final decision making authority for the
Company if such occurrence is a result of death, disability or termination for cause;
&n bsp; j) create any subsidiary (other than Geer) without the prior consent of the Holder;
k) consummate any merger or acquisition (other than Geer) except on terms satisfactory to Holder;
l) conduct business in any entity other than the Company or its Subsidiaries; or
m) transfer assets to a subsidiary that is not a Subsidiary.
Section 6. Other Covenants. So long as any portion of this Note is outstanding, the Company will or cause its
Subsidiaries to comply with the following covenants:
a) Financial Reporting. The Company shall comply with the reporting requirements of the Exchange
Act, shall timely file all annual, quarterly and other reports under the Exchange Act and shall provide such monthly financial
reports or other information as the Holder shall reasonably request. on reasonable notice.
b) Borrowing Base Certificate . The Company shall provide the Holder with a daily Borrowing Base
Certificate on each Business Day prior to 12:00 P.M.
c) Net Worth. As of the last day of each fiscal quarter of the Company, the Company’s and its
Subsidiaries’ total consolidated assets as of such fiscal quarter end shall exceed the Company’s and its Subsidiaries’ total
consolidated liabilities as of such fiscal quarter ends, in each case, determined in accordance with GAAP.
d) EBITDA. As of the last day of each fiscal quarter of the Company, EBITDA of the Company and
its Subsidiaries on a consolidated basis for the fiscal quarter then ended shall not be less than $500,000.
e) Cash Management. The Company shall cause all cash and cash equivalents of the Company to be
promptly deposited to and maintained in one or more Controlled Accounts until such cash and cash equivalents are disbursed as
permitted by the Loan Documents.
f) Operating Reporting. The Company shall provide Holder with monthly operating activity reports
for Geer and the Company, each of which shall be delivered to the Holder by no later than the 15th day of each calendar month
containing the following information for the prior calendar month and any other information the Holder may reasonably request
from time to time:
i for Geer: (i) the number of barrels sold of each of crude oil and condensate, (ii) major
equipment inventory changes, (iii) major investments/divestments, (iv) new clients acquired, (v) status of any account 90 days
past due and (vi) any material environmental issue affecting operating viability; and
ii for the Company: (i ) daily deliveries and off-takes in barrels by supplier or purchaser and
by product, (ii) leasehold or capital improvements to Brownsville facility, and (iii) any new contracts in development or
executed.
Section 7. Events of Default.
a) “Event of Default”, wherever used herein, means any one of the following events (whatever the
reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or governmenta l body):
i. any default in the payment of (A) the principal of this Note, or (B) cash interest
(including Default Interest) on this Note, as and when the same shall become due and payable (whether on the Maturity Date or
by acceleration or otherwise) which default, is not cured, within two (2) Business Days;
ii. failure to deliver the daily Borrowing Base Certificate which failure, is not cured, within
one (1) Business Day;
iii. the Company, any of its Subsidiaries or any Guarantor shall fail to observe or perform
any other covenant or agreement contained in this Note or any of the other Transaction Documents which failure is not cured, if
subject to cure, within thirty (30) calendar days;
iv. a default or event of default (subject to any grace or cure period provided for in the
applicable agreement, document or instrument) shall occur under any of the Transaction Documents;
v. any representation or warranty made herein, in any other Transaction Document, in any
written statement pursuant hereto or thereto, or in any other report, financial statement or certificate made or delivered to the
Holder or any other holder of Notes shall be untrue or incorrect in any material respect as of the date when made or deemed
made;
vi. (i) the Company, any of its Subsidiaries or any Guarantor shall commence, or there shall
be commenced against the Company, any such Subsidiar y or any Guarantor, a case or other similar proceeding under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto which remain undismissed for a
period of 60 days, or the Company, any Subsidiary or any Guarantor commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company, any Subsidiary thereof, or any Guarantor; (ii) the Company, any
Subsidiary thereof, or any Guarantor is adjudicated by a court of competent jurisdiction insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or (iii) the Company, a ny Subsidiary thereof, or any
Guarantor suffers any appointment of any custodian or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (iv) the Company, any Subsidiary thereof, or any Guarantor makes a general
assignment for the benefit of creditors; or (v) the Company, any Subsidiary or any Guarantor shall fail to pay, or shall state that it
is unable to pay, or shall be unable to pay, its debts generally as they become due; or (vi) the Company, any Subsidiary thereof,
or any Guarantor shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its
debts; or (vii) the Company, any Subsidiary thereof or any Guarantor shall by any act or failure to act expres sly indicate its
consent to, approval of or acquiescence in any of the foregoing; or (viii) any corporate or other action is taken by the Company,
any Subsidiary thereof or any Guarantor for the purpose of effecting any of the foregoing;
vii. the Company, any Subsidiary thereof, or any Guarantor shall default in any of its
obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or
money due under any long-term leasing or factoring arrangement of the Company in an amount exceeding $250,000, whether
such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the d ate on which it would otherwise become due and payable;
viii. the Company, any Subsidiary thereof, or any Guarantor shall have experienced a Material
Adverse Effect;
ix. the occurrence of any Change of Control Transaction; and
x. the Company shall fail to provide a key man insurance policy, satisfactory to the Holder,
for Timothy Brink by April 1, 2008.
b) Remedies Upon Event of Default. If any Event of Default occurs, the full principal amount of this
Note, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder’s
election, immediately due and payable in cash. The Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may
be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder
until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent thereon.
Section 8. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder
hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, facsimile number 914-285-0071, Attn: Timothy Brink, or such other
address or facsimile number as the Company may specify for such purposes by notice to be delivered in accordance with this
Section. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing
and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to the Holder at
1025 Westchester Avenue, Suite 311, White Plains, NY 10604, facsimile number (914) 285-0071, Attn: Christopher J.
Morrissey. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in
this Section prior to 5:30 p.m. (New York City time) on a Business Day, (ii) the date after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:30 p.m. (New
York City time) on such date or if the date of such transmission is not a Business Day, (iii) the second Business Day following
the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, accrued interest on, and other
amounts payable under, this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct
debt obligation of the Company.
c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for
a lost, stolen or destroyed Note, a new Note for the Principal Amount of this Note so mutilated, lost, stolen or destroyed but only
upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownershi p hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
d) Security Interest. This Note is a direct debt obligation of the Company, is guarantied by the
Guarantors pursuant to the Guaranties and, pursuant to the Security Agreement, is secured by a perfected security interest in all of
the assets of the Company and its Subsidiaries.
e) Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such New York
Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this
Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by
the other p arty for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
f) Waiver of a Breach. Any waiver by the Company or the Holder of a breach of any provision of this
Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other
provision of this Note or any provisions under any other Transaction Documents. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insis t upon strict adherence to that term or any other term of this Note or any terms under the Term
Note. Any waiver must be in writing.
g) Waiver of Presentment. The Company hereby waives presentation, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the Holder shall operate as a
waiver of such rights.
h) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this
Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
i) Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead
or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be
brought by the Holder in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company
under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default
interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest
allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate
applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.
If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Holder with
respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by the Holder to the unpaid
principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the
Holder’s election.
j) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding Business Day.
k) Headings. The headings contained herein are for convenience only, do not constitute a part of this
Note and shall not be deemed to limit or affect any of the provisions hereof.
l) Seniority. As of the Closing Date, no indebtedness or other equity of the Company, other than the
Loans pursuant to the Loan Agreement, is senior to, or pari passu with, this Note in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first
above indicated.
CONTINENTAL FUELS, INC.
|
By: __________________________________________ |
Name: |
Title: |
Exhibit A |
Borrowing Base Certificate |
| |
Continental Fuels, Inc |
ABL Line of Credit |
Daily Borrowing Certificate |
Certificate for the Day Ending on: _______________________(date)
| | Continental | Geer | Total |
Day-end Balance - Scorecard Sheet | | | |
Cash | | | |
| | | | |
Account Receivable | | | |
Ineligibles: A/R > 60 days | | | |
Ineligibles: New Unapproved Debtors | | XXXXXXXX | |
| | ___________ | ___________ | __________ |
Eligible Receivables | | | |
| | | | |
Inventory (FIFO) | | | |
Inventory Adjustments | | | |
| | ___________ | ___________ | ___________ |
Total Inventory | | | |
| | | | |
30 Day Payables | | | |
| | | | |
| | | | |
Borrowing Base Computation: | | | |
Cash @ 100% | | | |
Eligible Accounts Receivable @ 90% | | XXXXXXXX | |
Total Inventory @ 80% | | XXXXXXXX | |
| | ___________ | XXXXXXXX | ___________ |
Total Borrowing Base à | | XXXXXXXX | |
Less: Loan Drawn and Outstanding | | XXXXXXXX | |
| | ___________ | XXXXXXXX | ___________ |
Net Excess Revolver Availability | | XXXXXXXX | |
| | | | |
Excess Funding Computation: | | | |
Cash | | | |
Less: < 30 Day Payables | | | |
| | | | ___________ |
Excess Cash to be Repaid | XXXXXXXX | XXXXXXXX | |
This certificate has been represents true and representative statement of financial condition under the terms of Continental loan
agreements with Sheridan Asset Management.
Approved by: ______________________________
Name/Title
Exhibit B |
| |
Form Notice of Borrowing |
| |
Form of Notice of Borrowing |
[Date]
Sheridan Asset Management, LLC
1025 Westchester Avenue, Suite 311
White Plains, NY 10604
Ladies and Gentlemen:
The undersigned, CONTINENTAL FUELS, INC., a Nevada corporation (“Borrower”), refers to the Loan Agreement dated as of
December ___, 2007 (as from time to time amended, the “Loan Agreement,” the terms defined therein being used herein as
therein defined), between Borrower, Universal Property Development and Acquisition Corporation, a Nevada corporation,
Timothy Brink and you and hereby gives you notice, irrevocably, pursuant to Section 2.1 of the Loan Agreement, that the
undersigned hereby requests a borrowing under the Loan Agreement, and in that connection sets forth below the information
relating to such borrowing (the “Proposed Borrowing”) :
(i) The Business Day of the Proposed Borrowing is ___________ __, ____.
(ii) The amount of the Proposed Borrowing is $_____________.
(iii) The Borrowing Base Certificate attached hereto.
The undersigned hereby certifies that the statements set forth in Section 2.4 of the Loan Agreement are true on the date
hereof and will be true on the date of the Proposed Borrowing:
Very truly yours,
CONTINENTAL FUELS, INC.
By:______________________________
Name:_____________________________
Title:______________________________
Schedule 1 |
| |
Required Signatories for Expenditures |
For the Company:
i. Expenditures of up to $300,000 per day require prior written consent of Timothy Brink, Josh Crescenzi or
David Hinze.
ii. Expenditures between $300,000 and $500,000 per day require prior written consent of either Timothy Brink
or Josh Crescenzi and David Hinze.
iii. Expenditures of $500,000 and more per day require prior written consent of the Holder.
For Geer:
i. Expenditures of up to $100,000 per day require prior written consent of Lori Geer Smith.
ii. Expenditures of between $100,000 and $250,000 per day require prior written consent of both Lori Geer
Smith and David Hinze; and.
iii. Expenditures of $250,000 and more per day require prior written consent of the Holder.
Schedule 2 |
| |
Permitted Liens |
i. All liens disclosed to Holder pursuant to the lien search conducted in connection with the execution of the Loan Agreement.
ii. All liens otherwise publicly disclosed.
