Exhibit 10.03
LOAN AGREEMENT
by and among
Mid-Power Service Corporation ("MP Service")
and Mid-Power Resource Corporation ("MP Resource"),
together Borrowers,
and
SCRS Investors, LLC,
as Lender,
dated as of May 9, 2002
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the ninth day of May,
2002, by and between Mid-Power Service Corporation, a Nevada corporation, and
Mid-Power Resource Corporation, a Nevada corporation (each a Borrower and
together "Borrowers") and SCRS Investors, LLC, a Delaware limited liability
company ("Lender").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender loan to Borrowers the
principal amount of twenty-five million, five hundred thousand dollars
($25,500,000); and
WHEREAS, Lender has agreed to loan such amount to Borrowers, subject to
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOAN
1.1 Amount of Loan. Subject to the terms and conditions hereinafter set
forth, Lender hereby agrees to loan to Borrowers an aggregate principal amount
of $25,500,000 (the "Loan") on the terms and subject to the conditions
hereinafter set forth.
1.2 Disbursement Schedule. Lender shall disburse the principal amount
borrowed by Borrowers as follows:
(a) five million, five hundred thousand dollars effective
May 9, 2002;
(b) ten million dollars effective December 9, 2002; and
(c) ten million dollars effective June 1, 2003.
1.3 Interest. Borrowers shall pay interest on the outstanding and
unpaid principal amount disbursed of the Loan at the rate of ten percent (10%)
per annum. Interest on the Loan shall accrue on the monies disbursed from the
issuance date of the Loan and shall be computed on the basis of a 365- or
366-day year, as the case may be, and the actual number of days elapsed
(including the first day, but excluding the last day) during the period for
which such interest is payable.
1.4 Promissory Note. The Loan to be made to Borrowers hereunder shall
be evidenced by a promissory note, in substantially the form of Exhibit A hereto
(the "Promissory Note").
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1.5 Repayment of the Loan.
(a) The Loan shall be repayable, with interest at 10% per
annum on the amount actually advanced from and after the date of such
respective advances, in 20 consecutive equal quarterly payments of
principal and interest, commencing on the last day of December 2007 and
continuing on the last day of each calendar quarter thereafter, until
December 31, 2012, at which time all unpaid principal and accrued but
unpaid interest shall be paid in full, all as more particularly set
forth in the Promissory Note.
(b) Lender is hereby authorized at any time and from time to
time, without notice to Borrowers, to set-off and apply any and all
amounts at any time held and any indebtedness at any time owing by
Lender to or for the account of Borrowers against any and all
obligations of Borrowers now or hereafter existing under this Agreement
or the Promissory Note.
1.6 Prepayments. Borrowers shall have the right to prepay from time to
time, in whole or in part, and without premium or penalty, the outstanding
principal balance of the Loan, together with accrued interest thereon to the
date of such prepayment.
1.7 Additional Consideration for the Loan. As additional consideration
for the Loan, within ten days after the execution of this Agreement MP Service
shall issue and deliver to Lender 340,000 shares of restricted common stock of
MP Service. Lender acknowledges that such shares constitute "restricted
securities", as that term is defined under the Securities Act of 1933, as
amended, and must be held for investment. Lender will execute and deliver to MP
Service an investment letter confirming the foregoing and such additional
representations as are usual and customary in order to provide MP Service with a
reasonable factual basis for issuing such shares in reliance on exemptions from
registration under the Securities Act.
ARTICLE II
CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to make the Loan to Borrowers is subject to
the condition precedent that Lender shall have received, on or before the date
of this Agreement, each of the following, in form and substance satisfactory to
Lender:
2.1 The Promissory Note. The Promissory Note duly executed by
Borrowers.
2.2 Security Agreement. As security for the repayment of Lender's Loan
to Borrowers, execution and deliver to and in favor of Lender of:
(a) a Security Agreement, substantially in the form of Exhibit
B hereto, duly executed by Borrowers and granting to Lender a lien on
and security interest in the personal property of MP Resources,
including those associated with the gas properties located in Carbon
and Emery Counties, Utah, and commonly referred to by the parties as
the Clear Creek property, and any and all receivables by Borrowers from
the Clear Creek property;
(b) one or more UCC-1 Financing Statements, in form suitable
for filing in the applicable jurisdictions, duly executed by MP
Resources; and
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(c) a Deed of Trust and Security Agreement, substantially in
the form of Exhibit C hereto, duly executed by Borrowers and granting
to Lender a lien on and security interest in the interests of MP
Resources in the Clear Creek gas real property located in Carbon and
Emery Counties, Utah, together with any and all accounts receivable of
MP Resources from the Clear Creek property.
2.3 Additional Documentation. Such other documents, instruments,
certificates and opinions as Lender may reasonably request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWERS
In order to induce Lender to enter into this Agreement and to make the
Loan contemplated hereunder, each Borrower represents and warrants to Lender as
follows:
3.1 Due Organization; Authority of Borrowers. Each Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Nevada, and each Borrower is qualified to do business and in
good standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on the business, operations and financial condition of
Borrowers and their subsidiaries, taken as a whole. Each Borrower has all
requisite power and authority to own, operate and lease its properties and
assets and to carry on its business as currently conducted, and to execute,
deliver and perform this Agreement and each of the other documents, agreements
and instruments to be executed and delivered by it in accordance with or
pursuant to this Agreement (collectively, the "Borrower Related Agreements").
The execution, delivery and performance of this Agreement and the Borrower
Related Agreements have been duly and validly authorized by all necessary
corporate action on the part of each Borrower. This Agreement and the Borrower
Related Agreements have been duly executed and delivered by each Borrower which
is a party thereto and each constitutes the legal, valid and binding obligation
of each Borrower, enforceable in accordance with its terms against each
Borrower, subject to the laws of general application from time to time in effect
affecting creditors' rights and to the exercise of judicial discretion in
accordance with general equitable principles.
3.2 No Restrictions against Performance. Neither the execution,
delivery nor performance of this Agreement or the Borrower Related Agreements,
nor the consummation of the transactions contemplated hereby or thereby will,
with or without the giving of notice or the passage of time, or both, violate
any provisions of, conflict with, result in a breach of, constitute a default
under, or result in the creation or imposition of any Lien (as defined below) or
condition under (a) the articles of incorporation or bylaws of either Borrower;
(b) any federal, state or local law, statute, ordinance, regulation or rule that
is applicable to either Borrower; (c) any contract, indenture, instrument,
agreement, mortgage, lease, right or other obligation or restriction to which
either Borrower is a party or by which either Borrower is or may be bound; or
(d) any order, judgment, writ, injunction, decree, license, franchise, permit or
other authorization relating to or which affects the consummation of the
transactions contemplated hereby of any governmental authority or by which
either Borrower is or may be bound. The execution and delivery of this Agreement
and the Borrower Related Agreements and the performance by each Borrower of the
transactions contemplated hereby and thereby will not constitute an act of
bankruptcy, preference, insolvency or fraudulent conveyance under any bankruptcy
act or other law for the protection of debtors or creditors. As used herein, the
term "Lien" means all liens, liabilities, claims, security interests, mortgages,
pledges, agreements, obligations, restrictions or other encumbrances of any
nature whatsoever, whether absolute, legal, equitable, accrued, contingent or
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otherwise, including, without limitation, any rights of first refusal or any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
3.3 Third-Party and Governmental Consents. No approval, consent,
waiver, order or authorization of, or registration, qualification, declaration
or filing with, or notice to any governmental authority or other third party is
required on the part of Borrowers, or either of them, in connection with the
execution of this Agreement or the Borrower Related Agreements or the
consummation of the transactions contemplated hereby or thereby.
3.4 Compliance with Laws. Each Borrower has conducted and currently is
conducting its business in compliance, in all material respects, with all
applicable federal and state domestic and foreign laws, rules, regulations,
judgments, orders and other legal requirements (including, but not limited to,
those relating to environmental, safety and labor matters).
3.5 Litigation. There are no claims, actions, suits, summonses, notices
of violation, proceedings, investigations, or judicial or administrative
actions, suits or proceedings pending or threatened against or relating to
Borrowers, or either of them, this Agreement, or the transactions contemplated
hereby, before any governmental authority, and neither Borrower has any
knowledge of any facts or circumstances that may give rise to any of the
foregoing nor any reason to believe there is a valid basis for any such claim,
action, suit, summons, notice of violation, proceeding or investigation. Neither
Borrower is the subject of any order, judgment, decree, injunction or
stipulation of any governmental authority.
3.6 No Defaults. Neither Borrower is in breach or default under any
contract, indenture, instrument, agreement, mortgage, lease, right or other
obligation or restriction to which either Borrower is a party or by which either
Borrower is or may be bound, nor have there been any assertions of such breach
or default. No condition or event has occurred that, with the giving of notice
or the passage of time, or both, would constitute a breach or default by
Borrowers, or either of them, under any of the foregoing.
3.7 No Event of Default. After giving effect to the transactions
contemplated by this Agreement, no condition or event exists or will exist that
constitutes or would constitute, after the giving of notice or the passage of
time, or both, an Event of Default (as hereinafter defined).
3.8 Location of Chief Executive Offices. The chief executive office and
principal place of business of Borrowers are located at 3800 Howard Hughes
Parkway, Suite 860, Las Vegas, Nevada 89109.
3.9 Title to Clear Creek Property. Borrowers have received
representations that Borrowers will have good, valid, marketable, legal and
beneficial title to, and will be the lawful owners of, the Clear Creek property,
free and clear of all Liens.
3.10 Sufficiency of Assets. The properties and assets comprising the
Clear Creek property include all machinery, equipment, tangible personal
property, leases, rights-of-way and compliance with environmental regulations
necessary for the production of gas reserves upon the completion of necessary
additional drilling and related development, and the installation of required
gas, production, gathering, processing and transportation facilities.
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ARTICLE IV
COVENANTS
Each Borrower agrees to the following terms, so long as Borrowers shall
be indebted to Lender pursuant to this Agreement and the Promissory Note.
4.1 Maintenance of Existence. Each Borrower shall preserve and maintain
its existence and good standing in the state of Nevada and, if required, its
qualification and good standing as a foreign corporation in the state of Utah.
4.2 Sale, Consolidation or Merger. Neither Borrower will, directly or
indirectly, sell, assign, lease or otherwise dispose of all or any significant
portion of its assets to, or merge or consolidate with or into, or enter into
any similar transaction with, any person or entity other than Lender or an
affiliate of Lender or Red Star, Inc.
4.3 No Transfer of or Liens on the Clear Creek Property. Except for a
transfer to Lender or an affiliate of Lender, Mid-Power Resource Corporation
will maintain good, valid, marketable, legal and beneficial title to, and will
remain the lawful owner of, the Clear Creek property. Mid-Power Resource
Corporation will not, directly or indirectly, sell, assign, transfer or
otherwise dispose of, or create, incur, assume or suffer to exist any Lien on,
all or any part of the Clear Creek property, all except (a) to Lender or an
affiliate of Lender; (b) any sale, assignment, lease, transfer or other
disposition or encumbrance of the Collateral (a "disposition"), other than (i)
dispositions of property in the ordinary course of business (which does not
include the disposition of major items of equipment, except to the extent such
items of equipment are replaced by equivalent property), (ii) dispositions of
property that is replaced by equivalent property, (iii) dispositions of property
that is no longer useful in Debtor's operations; or (iv) for "Permitted Security
Interests." When used herein, "Permitted Security Interest" means (w) any
security interest arising by operation of law in the ordinary course of business
and securing amounts not more than 90 days overdue; (x) security interests
expressly permitted in writing by Lender; (y) easements, rights-of-way,
servitudes, permits, surface leases and other rights affecting the surface that
do not interfere with the use, operation, value or unrestricted alienability of
the affected property and do not interfere with the ability of the Lender to
enforce any rights under the Promissory Note or any Borrower Related Agreements
nor in any way materially and adversely affecting the ongoing interests of
Borrowers; and (z) purchase money security interests securing amounts no greater
than $1,000,000 incurred in the ordinary course of business.
4.4 Impairment of Security Interest. Borrowers will not, directly or
indirectly, take or fail to take any action that would in any manner impair the
value or enforceability of Lender's security interest in the Clear Creek
property.
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) Borrowers shall fail to pay, as and when due, any
principal of or accrued interest on the Loan within five days after the
date on which such payment is due;
(b) Borrowers shall fail to comply with any material provision
of this Agreement, the Promissory Note, any of the security agreements
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executed in connection herewith, or any of the other Borrower Related
Agreements, which failure shall remain uncured for a period of 30 days
or more after receipt by Borrowers of notice thereof;
(c) any representation or warranty made by Borrowers in this
Agreement, the Promissory Note, any of the security agreements executed
in connection herewith, or any of the other Borrower Related
Agreements, shall fail to be true and correct in all material respects;
(d) Borrowers, or either of them, shall make an assignment for
the benefit of creditors;
(e) an order, judgment or decree shall be entered adjudicating
Borrowers, or either of them, bankrupt or insolvent; or
(f) Borrowers shall commence proceedings under any bankruptcy
or insolvency laws, or a third party shall commence such proceedings
against Borrowers, or either of them, and such proceedings shall not be
dismissed within 90 days after commencement.
5.2 Remedies. Upon the occurrence of an Event of Default, or at any
time thereafter that an Event of Default shall be continuing, Lender may, at its
option (a) be relieved of any obligation to make further advances to Borrowers;
(b) declare the unpaid principal balance of the Promissory Note, together with
interest accrued thereon, to be immediately due and payable, and proceed to
enforce payment of the same; (c) exercise any of the remedies provided for under
this Agreement or any of the security agreements executed by Borrowers in
connection herewith; or (d) exercise any remedies available to Lender under
applicable law.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. Each party to this Agreement shall pay its own expenses
(including, without limitation, the fees and expenses of its agents,
representatives, counsel and accountants) incidental to the negotiation,
drafting and performance of this Agreement.
6.2 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement, the Promissory Note nor any of the
other Borrower Related Agreements may be assigned without the prior written
consent of Lender.
6.3 Waiver. No provision of this Agreement shall be deemed waived by
course of conduct, including the act of closing, unless such waiver is made in a
writing signed by Lender stating that it is intended specifically to modify this
Agreement, nor shall any course of conduct operate or be construed as a waiver
of any subsequent breach of this Agreement, whether of a similar or dissimilar
nature.
6.4 Entire Agreement. This Agreement and the Borrower Related
Agreements supersede any other agreement, whether written or oral, that may have
been made or entered into by the parties hereto (or by any director, officer,
agent or other representative of such parties) relating to the matters
contemplated hereby or thereby. This Agreement and the Borrower Related
Agreements constitute the entire agreement by and among the parties hereto and
thereto and there are no agreements or commitments except as expressly set forth
herein or therein. No party hereto has executed this Agreement in reliance upon
any representations, warranties, covenants or agreements not expressly included
herein or therein
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6.5 Further Assurances. Each of the parties hereto agrees to execute
all further documents and instruments and to take or cause to be taken all
reasonable actions that are necessary or appropriate to complete the
transactions contemplated by this Agreement and the Borrower Related Agreements.
6.6 Notices. All notices, demands, requests and other communications
hereunder shall be in writing and shall be delivered by hand, or sent by
certified or registered United States mail, postage prepaid and return receipt
requested, or by prepaid nationally recognized overnight express service or by
fax. Notices shall be sent to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice; provided that
such notice shall be effective only upon receipt thereof):
If to Borrowers: 3800 Howard Hughes Parkway, Suite 860
Las Vegas, Nevada 89109
If to Lender: 3800 Howard Hughes Parkway, Suite 860
Las Vegas, Nevada 89109
All such notices shall be deemed to have been received on the date of delivery
if delivered by hand or by confirmed fax, one day after the date of mailing if
given by overnight express service, and four days after the date of mailing if
given by certified or registered U.S. mail.
6.7 Amendments, Supplements, etc. This Agreement may be amended or
modified only by a written instrument executed by all parties hereto that states
specifically that it is intended to amend or modify this Agreement.
6.8 Severability. In the event that any provision contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein
and, in lieu of each such illegal, invalid or unenforceable provision, there
shall be added automatically, as a part of this Agreement, a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible but still be legal, valid and enforceable.
6.9 Applicable Law and Jurisdiction. This Agreement and the legal
relations between the parties hereto shall be governed by and construed in
accordance with the substantive laws of the state of Nevada, without giving
effect to the principles of conflicts of law thereof.
6.10 Titles and Headings. Titles and headings to sections hereof are
inserted for convenience of reference only and are not intended to be a part of,
or to affect the meaning or interpretation of, this Agreement.
6.11 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Delivery of the
executed signature pages by facsimile transmission shall constitute effective
and binding execution and delivery of this Agreement.
6.12 No Third-Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
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6.13 Relationship of the Parties. Nothing in this Agreement or the
Related Agreements shall be construed to create a joint venture, partnership or
any other similar arrangement between or among the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LENDER:
SCRS Investors, LLC
By: /s/ James W. Scott
-------------------------------
Name: James W. Scott
Title: Managing Member
BORROWERS:
Mid-Power Service Corporation
By: /s/ James W. Scott
-------------------------------
Name: James W. Scott
Title: President
Scrs.loan.agrmt.050902.2
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STATE OF NEVADA )
: ss.
COUNTY OF CLARK )
I, a notary of said county and state, do certify that James W. Scott,
who signed the instrument above bearing the date of May 9, 2002, on behalf of
Mid-Power Service Corporation, a Nevada corporation, has this day in my said
county, before me, acknowledged the said instrument to be the act and deed of
said company.
IN WITNESS WHEREOF, I have hereunder set my hand and official seal in
the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June,
2002.
/s/ Susana D. McGee
-------------------------------
Notary Public
Printed Name: Susana D. McGee
Address of Notary Public:
3800 Howard Hughes Pkway
Ste 860
Las Vegas, NV 89109
My Commission Expires: Nov. 15, 2005
Mid-Power Resource Corporation
By: /s/ James W. Scott
----------------------------
Name: James W. Scott
Title: President
STATE OF NEVADA )
: ss.
COUNTY OF CLARK )
I, a notary of said county and state, do certify that James W. Scott,
who signed the instrument above bearing the date of May 9, 2002, on behalf of
Mid-Power Resource Corporation, a Nevada corporation, has this day in my said
county, before me, acknowledged the said instrument to be the act and deed of
said company.
IN WITNESS WHEREOF, I have hereunder set my hand and official seal in
the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June,
2002.
/s/ Susana D. McGee
-------------------------------
Notary Public
Printed Name: Susana D. McGee
Address of Notary Public:
3800 Howard Hughes Pkway
Ste 860
Las Vegas, NV 89109
My Commission Expires: Nov. 15, 2005
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