Exhibit 10.8
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT dated October 30, 1998, made by SABAL
Corp., a Nevada corporation having as its address 5830 McArdle, No. 14
Crossroads, Suite 203, Corpus Christi, Texas 78412 (the "Grantor"), in favor
of ExCal Energy Corporation, a Michigan corporation, as lender having as its
address State Route 2, P.O. Box 358, Chester, West Virginia 36034 (the
"Lender" or "Secured Party").
W I T N E S S E T H :
WHEREAS, the Grantor, SABAL CORP., and the Lender are parties to a
Term Loan Agreement, dated as of even date herewith and as may be amended or
otherwise modified from time to time, being hereinafter referred to as the
"Loan Agreement";
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to make
a term loan (the "Term Loan") to the Borrower in an aggregate principal
amount not to exceed $500,000 (the "Loan");
WHEREAS, it is a condition precedent to the making of the Loan by the
Lender pursuant to the Loan Agreement that the Grantor shall have executed
and delivered to the Lender a security agreement providing for the grant to
the Lender of a first priority security interest in the Property (as defined
in the Loan Agreement) of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lender to make and maintain the Loan
pursuant to the Loan Agreement, the Grantor hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS. Reference is hereby made to the Loan
Agreement for a statement of the terms thereof. All terms used in this
Agreement which are defined in the Loan Agreement or in Article 9 of the
Uniform Commercial Code (the "Code") currently in effect in the State of
Texas and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.
SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and assigns to the Lender, and grants to the Lender a continuing
first priority security interest in, all personal property, improvements,
furniture, fixtures, equipment (specifically excluding pipelines) of any kind
or character owned by Grantor, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, of every kind and
description, tangible or intangible and all proceeds derived therefrom (the
"Collateral"), including, without limitation, the following:
(a) all of Grantor's right title and interest in and to all
equipment of any kind including, without limitation, the equipment described
in Schedule I hereto; the building known as the Propane Refrigerant
Hydrocarbon Gas Recovery Plant having the address of 13020 Washburn
Road, Otter Lake, Michigan (the "Gas Plant"); all furniture, fixtures,
machinery, equipment, tools, all motor vehicles, tractors and other like
property (specifically excluding pipelines) (i) located at the Gas Plant or
(ii) located upon the leases described on Schedule II hereto (the "Leases"),
or (iii) located at Cross S Ranch Subdivision, Zavala County, Texas (the
"Texas Property") and whether now or hereafter existing and whether now owned
or hereafter acquired, together with all substitutes, replacements,
accessions and additions thereto, and all tools, parts, accessories and
attachments used in connection therewith (hereinafter collectively referred
to as the "EQUIPMENT");
(b) all of the Grantor's right, title and interest in and to
all inventory of any kind, (specifically excluding any oil and gas and
mineral reserves located at the Gas Plant or upon the Leases, and whether now
or hereafter existing and whether now owned or hereafter acquired, and all
accessions thereto and all proceeds and products thereof (any and all such
inventory, accessions and products being hereinafter referred to as the
"INVENTORY");
(c) all of Grantor's right, title and interest in and to:
(i) all accounts, contract rights, chattel paper, instruments, documents,
general intangibles and other rights or obligations of any kind, whether now
or hereafter existing and whether now owned or hereafter acquired, arising
out of or in connection with the sale of goods or the rendering of services
or otherwise; and (ii) all rights now or hereafter existing in and to all
security agreements, and other contracts, now or hereafter existing and
securing or otherwise relating to any such accounts, contract rights, chattel
paper, instruments, general intangibles or obligations (any and all such
accounts, contract rights, chattel paper, instruments, general intangibles
and obligations being hereinafter referred to as the "Receivables", and any
and all such security agreements, leases and other contracts being
hereinafter referred to as the "Related Contracts"); and
(d) all proceeds, revenue, chattel paper, promissory notes
and accounts receivable derived from the sale, exchange, transfer or
conveyance of oil gas reserves and minerals of any kind or character (the
"proceeds"). Notwithstanding the foregoing, in no instance shall such
security interest attach to the oil and gas reserves located at the Gas Plant
or the Leases.
(e) all proceeds and products of any and all of the
foregoing Collateral and, to the extent not otherwise included, all cash
payments for such products and all payments under insurance (whether or not
the Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral; in each case, howsoever the Grantor's
interest therein may arise or appear (whether by ownership, security
interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created
hereby in the Collateral constitutes continuing collateral security for all
of the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Loan
Agreement, the Note, the Production Payment, and the other Loan Documents; and
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(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Loan
Documents.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(a) The Grantor: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation as set forth on the first page hereof; and (ii) has all
requisite power and authority to execute, deliver and perform this Agreement.
(b) All Equipment and Inventory now existing is, and all
Equipment and Inventory hereafter existing will be, located at the address of
the Gas Plant, within the Area of Mutual Interest, or at Cross S Ranch
Subdivision, Zavala County, Texas all of which are specified in Schedule II
hereto. The Grantor's chief place of business and chief executive office,
the place where the Grantor keeps its records concerning Receivables and all
originals of all chattel paper which constitute Receivables are located at
the address specified therefor in Schedule II.
(c) Subject to the terms of that certain agreement between
Fleur-David Corporation and Grantor dated , (the
"Letter Agreement") the Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for the security interest created by this Agreement. No
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording or filing
office except (i) such as may have been filed in favor of the Lender relating
to this Agreement and (ii) such as may have been filed to perfect or protect
any security in favor of Tessenderlo Kerley, Inc., which is being released
contemporaneously herewith.
Grantor hereby covenants, represents, warrants and agrees that:
(d) The Collateral will not be misused, abused, wasted or
allowed to deteriorate, but shall be kept in good working order, condition
and repair, reasonable wear and tear from its sole use above excepted; and
all costs and expenses incurred in the repair, maintenance and preservation
of such Collateral shall be paid solely by Grantor;
(e) Grantor shall make all necessary renewals, replacements
and additions of Inventory as shall be necessary at all times adequately to
service its customers and properly and advantageously to carry on its
business in accordance with prudent business management;
(f) Grantor shall, at its sole cost and expense, defend the
Collateral against any claims of infringement and all other claims or demands
of any other party and all other liabilities of any nature whatsoever;
(g) The Collateral and the premises on which it is located
shall be insured by and at the expense of Grantor, at all times, and in the
amount of its full insurable value and against all
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expected risks to which it may be exposed, including fire and extended
coverage and those which Secured Party may reasonably designate with policies
satisfactory to Secured Party and payable to both Secured Party and Grantor
as their interests may appear. Grantor, at its cost and expense, shall also
maintain liability insurance in such amounts as Secured Party may from time
to time designate, with Grantor and Secured Party each being named as
insureds. All said policies shall provide thirty (30) days minimum advance
cancellation notice to Secured Party and duplicate policies (or certified
copies of original policies) shall be deposited with Secured Party. The
proceeds of such insurance may be applied by Secured Party, at its option,
either to reduce any indebtedness secured hereby or to repair and replace
such Collateral;
(h) Grantor shall duly and promptly pay and discharge, or
cause to be paid and discharged, (1) all taxes, assessments and governmental
charges or levies upon or against it or its profits, income, properties or
assets; and (ii) all lawful claims, whether for labor, materials, supplies,
services or anything else which might or could, if unpaid, become a lien or
charge upon the properties or assets of GRANTOR, unless and to the extent
only that the same are being diligently contested in good faith by
appropriate proceedings and appropriate bonds have been posted to release any
lien and reserves therefor have been established in accordance with generally
accepted accounting principles consistently applied;
(i) Grantor shall promptly furnish Secured Party with all
information concerning the Collateral, the performance and payment of
Grantor's obligations, liabilities and indebtedness hereunder and the
business, operations and financial condition of Grantor, as Secured Party may
reasonably request, and shall annually furnish balance sheets and statements
of income and surplus account for the preceding fiscal or calendar period, in
comparative form, all in reasonable detail and certified (without any
qualification or exception deemed material by Secured Party) by independent
certified public accountants acceptable to Secured Party;
(j) Grantor shall immediately notify Secured Party of any
act, condition, or event which, with the giving of notice or lapse of time,
or both, would constitute an event of default (and "Event of Default")
hereunder, including the existence of any material litigation, arbitration or
other legal proceedings involving or affecting Grantor;
(k) In addition to the foregoing, specifically with respect
to the Inventory:(i)
(i) If Secured Party requests, Grantor shall deliver
to Secured Party annually, within sixty (60) days after the end of each
fiscal year, an inventory report showing the status of Grantor's Inventory as
of the end of such fiscal year. Such report shall be certified by Grantor to
be true and correct and shall be signed and sworn to by the Grantor's
President. In addition, if Secured Party requests, similar inventory reports
as of other dates shall be submitted to Secured Party as often as reasonably
requested by Secured Party. If Secured Party so requests at reasonable
intervals, Grantor will from time to time deliver to Secured Party a report
of Inventory prepared from a physical count of inventory taken under the
supervision of, and certified by, a certified public accountant acceptable to
Secured Party;
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(ii) Secured Party shall have a security interest in
all proceeds of Grantor's Inventory, whether cash, negotiable instruments,
Accounts Receivable, chattel paper, or other proceeds. Upon a default by
Grantor under the Note, under this Security Agreement, or under the Lease, as
defined above, Secured Party shall have the right to demand that Grantor do
any one or more of the following: turn over to the Secured Party all
instruments and chattel paper received, with such endorsements and
assignments as may be necessary to transfer title thereof to Secured Party on
the day received; deposit daily all cash received in an account designated
for this purpose by Secured Party; mark with appropriate notation of
assignment to Secured Party all ledger accounts and other records showing
Accounts Receivable; and execute any documents which may be necessary to
transfer the title to Secured Party of any goods taken as proceeds of the
sale of Inventory covered by this Agreement. Failure of Secured Party to
demand performance of any of the above obligations of Grantor for any period
of time shall not be deemed a waiver of Secured Party's right to so demand at
any time that there exists any indebtedness from Grantor to Secured Party;
SECTION 5. (a) COVENANTS AS TO THE COLLATERAL. So long as any
of the Obligations (as such term is defined in clause (i) of Section 1.01 of
the Loan Agreement) shall remain outstanding, unless the Lender shall
otherwise consent in writing which may be withheld in Lender's sole and
absolute discretion.
(b) LOCATION OF EQUIPMENT AND INVENTORY. The Grantor will
keep the Equipment and Inventory (other than Inventory and used Equipment
sold in the ordinary course of business) at the location[s] specified
therefor in Section 4(b) hereof.
(c) CONDITION OF EQUIPMENT. The Grantor will cause the
Equipment to be maintained and preserved in good condition ordinary wear and
tear excepted.
(d) INSPECTION AND REPORTING. The Grantor shall permit
representatives of the Lender, upon reasonable notice and at any time during
normal business hours, to inspect and make abstracts from its books and
records pertaining to the Collateral, and permit representatives of the
Lender to be present at the Grantor's place of business to receive copies of
all communications and remittances relating to the Collateral, and to forward
copies of any notices or communications received or made by the Grantor with
respect to the Collateral, all in such manner as the Lender may require.
(e) TRANSFERS AND OTHER LIENS. The Grantor will not (i)
sell, assign (by operation of law or otherwise), exchange or otherwise
dispose of any of the Collateral (except for sales or other dispositions of
Inventory and used Equipment in the ordinary course of business).
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) The Grantor hereby authorizes the Lender to file,
without the signature of the Grantor, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral necessary to
preserve, extend, amend or perfect Lender's lien granted by this Agreement.
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(b) The Grantor hereby irrevocably appoints the Lender the
Grantor's attorney-in-fact and proxy, with full authority in the place and
stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Lender's discretion, to take any action and to execute any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation: (i) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any
Collateral, (ii) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) above
and (iii) to file any claims or take any action or institute any proceedings
which the Lender may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Lender with respect to
any Collateral.
(c) If the Grantor fails to perform any agreement contained
herein after the expiry of any applicable grace period, the Lender may itself
perform, or cause performance of, such agreement or obligation, and the
expenses of the Lender incurred in connection therewith shall be payable by
the Grantor pursuant to Section 8 hereof.
(d) The powers conferred on the Lender hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon
it to exercise any such powers including but not limited to those for the
safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder. Further, the Lender shall have no
duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
SECTION 7. REMEDIES UPON DEFAULT. If an Event of Default shall
have occurred and be continuing:
(a) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party on default
under the Code (whether or not the Code applies to the affected Collateral),
and also may: (i) upon demand require the immediate surrender to the Secured
Party of the actual possession of the Collateral, and the Secured Party may
thereafter enter and take possession of the Collateral and may exclude the
Grantor wholly therefrom; (ii) require the consent of the Grantor to the
appointment of a receiver or receivers of the Collateral and of all of the
earnings, revenues, rents, issues, profits, and such receiver to have all of
the powers and authority permitted by applicable law; (iii) require the
Grantor to, and the Grantor hereby agrees that it will, at its expense and
upon request of the Lender forthwith, assemble all or part of the Collateral
as directed by the Lender and make it available to the Lender at a place to
be designated by the Lender which is reasonably convenient to both parties;
and (iv) sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as Lender shall determine it hereby being expressly waived
by Grantor any rights to claim or assert that such sale was not conducted in
a manner deemed to be commercially reasonable. The Grantor agrees that, to
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the extent notice of sale shall be required by law, at least 10 days' notice
to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The Grantor hereby
waives any claims against the Lender arising by reason of the fact that the
price at which the Collateral may have been sold at a private sale was less
than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if the Lender accepts the
first offer received and does not offer the Collateral to more than one
offeree.
(b) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Lender is legally entitled, the Grantor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any Note for
interest on overdue principal thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees
of any attorneys employed by the Lender to collect such deficiency.
(c) The proceeds of any such sale, collection or realization
shall be applied in the following order: first to cost of sale, then to
attorney's fees, interest, principal, and the remainder to Grantor.
SECTION 8. EXPENSES. The Grantor will upon demand pay to the
Lender the amount of any and all costs and expenses, including the reasonable
fees and disbursements of the Lender's counsel and of any expert which the
Lender may incur in connection with (i) the exercise or enforcement of any of
the rights of the Lender hereunder; (ii) the failure by the Grantor to
perform or observe any of the provisions hereof; or (iii) the preservation by
Lender of the security interest conveyed hereunder.
SECTION 9. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied, with a copy
sent promptly thereafter by U.S. mail, return receipt requested or delivered, if
to the Borrower, at the following address:
Sabal Corp.
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5830 McArdle
No. 14 Crossroads, Suite 203
Corpus Christi, Texas 78412
Telephone No.: (512) 993-1458
Telecopy No.: (512) 993-1518
Jackson Walker L.L.P.
816 Congress Avenue, Suite 1600
Austin, Texas 78701
Attention: Wade Cooper
Telephone No.: (512) 494-2440
Telecopy No.: (512) 494-2442
and if to the Lender, to it at the following address:
ExCal Energy Corporation
c/o MTR Gaming Group, Inc.
Route 2 South
Chester, West Virginia 26034
Attention: Mr. Edson Arneault, President
Telephone No.: (304) 387-2400
Telecopy No.: (304) 387-1598
with copies to:
Ruben & Aronson, LLP3299 K Street, NW, Suite 403Washington, DC 20007Attention:
Robert Ruben, Esq.Telephone No.: (202) 965-3600Telecopy No.: (202) 965-3700
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with
the terms of this Section 8.01. All such notices and other communications
shall be effective (i) if mailed, when received or three days after mailing,
whichever first occurs, (ii) if telecopied, when transmitted, provided same
is on a Business Day and, if not, on the next Business Day, or (iii) if
delivered, upon delivery, provided same is on a Business Day and, if not, on
the next Business Day, except that notices to the Lender pursuant to Article
II hereof shall not be effective until received by the Lender.
SECTION 10. MISCELLANEOUS.
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(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Lender,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
(b) No failure on the part of the Lender to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Lender provided
herein and in the other Loan Documents are cumulative and concurrent and are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of the Lender under any Loan Document against any party thereto
are not conditional or contingent on any attempt by the Lender to exercise
any of its rights under any other Loan Document against such party or against
any other Person.
(c) 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 invalidity without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security
interest in the Collateral and shall: (i) remain in full force and effect
until the indefeasible payment in full or release of the Obligations (as such
term is defined in the Loan Agreement); and (ii) be binding on the Grantor
and its successors and assigns and shall inure, together with all rights and
remedies of the Lender hereunder, to the benefit of the Lender and its
respective successors, transferees and assigns. Without limiting the
generality of the foregoing, the Lender may assign or otherwise transfer any
Note or portion thereof held by it, and the Lender may assign or otherwise
transfer its rights under any other Loan Document to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Lender, herein or otherwise. None of the
rights or obligations of the Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
(e) Upon the satisfaction in full of the Obligations: (i)
this Agreement and the security interest created hereby shall terminate and
all rights to the Collateral shall revert to the Grantor; and (ii) the Lender
will, upon the Grantor's request and at the Grantor's expense, (A) return to
the Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and
deliver to the Grantor such documents as the Grantor shall reasonably request
to evidence such termination.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of Texas.
(g) Any legal action or proceeding with respect to this
Agreement or any document related thereto may be brought in the courts of the
State of Michigan and, by execution
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and delivery of this Agreement, the Grantor hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The Grantor hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based
on the grounds of FORUM NON CONVENIENS, which it may now or hereafter have
to the bringing of any such action or proceeding in such respective
jurisdictions and consents to the granting of such legal or equitable relief
as is deemed appropriate by the court.
(h) The Grantor irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to such Grantor at its address provided herein, such service to
become effective 30 days after such mailing.
(i) Nothing contained herein shall affect the right of the
Lender to serve process in any other manner permitted by law or commence
legal proceedings or otherwise proceed against the Grantor or any of the
Grantor's property in any other jurisdiction.
(j) THE GRANTOR WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
ATTEST: SABAL CORP.
By: /s/ Robert Landress
---------------------------------
/s/ Roger Landress Secretary Roger Landress, President
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