CONSTRUCTION
LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT
(“Agreement”) is made by and between Private Capital
Group, Inc., a Utah corporation, together with its successors
and assigns, “Lender”), and NorthCut Refining, LLC,
a Wyoming limited liability company (“Borrower”),
who agree as follows:
ARTICLE 1 THE LOAN
1.1
General Information and Exhibits .
This Agreement includes the Exhibits listed below all of
which Exhibits are attached hereto and made a part hereof for
all purposes. Borrower and Lender agree that if any
Exhibit to be attached to this Agreement contains blanks, the
same shall be completed correctly and in accordance with this
Agreement prior to or at the time of the execution and delivery
thereof.
Exhibit “A”
-
Legal Description of the Land
Exhibit “B”
-
Basic Information
Exhibit “C”
-
Certain Conditions Precedent to the First
Advance
Exhibit “D”
-
Budget
Exhibit “E”
-
Plans
Exhibit “F”
-
Advances
Exhibit “F-1”
-
Draw Request
Exhibit “G”
-
Survey Requirements
Exhibit “H”
-
List of Required Bonds
Exhibit “I”
-
Collateral
Exhibit “J”
-
Pipelines
The Exhibits contain other terms, provisions and
conditions applicable to the Loan. This Agreement and the
other Loan Documents, which must be in form, detail and
substance satisfactory to Lender, evidence the agreements of
Borrower and Lender with respect to the Loan. Borrower
shall comply with all of the Loan Documents.
1.2
Definitions . Capitalized terms
used in this Agreement shall have the meanings assigned to them
below.
(a)
“ Advance Termination Date ”
means January 31, 2008.
(b)
“ Aggregate Cost ” means
Eleven Million Four Hundred Thirteen Thousand Eight Hundred
Fifty-Eight Dollars and Eighty-Two Cents ($11,413,858.82), as
set forth in the Budget.
(c)
“ Agreement ” has the meaning
set forth in the introductory paragraph of this Agreement, and
includes all exhibits attached hereto and referenced in Section
1.1.
(d)
“ Appraised Value ” means
Eighteen Million Dollars ($18,000,000).
(e)
“ Basic Information ” has the
meaning set forth in Exhibit “B” of this
Agreement.
(f)
“ Borrower ” has the meaning
set forth in the introductory paragraph of this Agreement.
(g)
“ Budget ” means the budget
and cost itemization for the Project attached as Exhibit
“D.”
(h)
“ Completion Date ” means six
(6) months from the date of Note execution.
(i)
“ Construction Commencement Date
” means August 1, 2007.
(j)
“ Construction Consultant ”
means the construction consultant, if any, engaged by Lender
with respect to the Project.
(k)
“ Deed of Trust ” means the
Deeds of Trust, Assignment of Rents and Leases, Security
Agreement and Financing Statement of even date herewith, from
the Borrower to a trustee for Lender’s benefit, securing
repayment of the Indebtedness and Borrower’s performance
of its other obligations to Lender under the Loan Documents, as
amended, modified, supplemented, restated and replaced from time
to time.
(l)
“ Default ” has the meaning
set forth in Section 4.1 of this Agreement.
(m)
“ Draw Request ” means a
properly completed and executed written application by Borrower
to Lender in the form of Exhibit “F-1” (or in
another form approved by Lender) setting forth the amount of
Loan proceeds desired, together with such schedules, affidavits,
releases, waivers, statements, invoices, bills and other
documents, certificates and information as Lender requires.
(n)
“ Environmental Agreement ”
means the Environmental Indemnity Agreement of even date
herewith by and among Borrower, Guarantor and Lender.
(o)
“ Excusable Delay ” means a
delay, not to exceed a total of ten (10) days, caused by
unusually adverse weather conditions which have not been taken
into account in the construction schedule, fire, earthquake or
other acts of God, strikes, lockouts, acts of public enemy,
riots or insurrections or any other unforeseen circumstances or
events beyond the control of Borrower (except financial
circumstances or events or matters which may be resolved by the
payment of money), and as to which Borrower notifies Lender in
writing within five (5) days after such occurrence; provided,
however, no Excusable Delay shall extend the Completion Date or
suspend or abate any obligation of Borrower or any Guarantor or
any other person to pay any money.
(p)
“ Financial Statements ”
means (i) for each reporting party other than an individual, a
balance sheet, income statement, statements of cash flow and
amounts and sources
of contingent liabilities, a reconciliation of
changes in equity and liquidity verification, and unless Lender
otherwise consents, consolidated and consolidating statements if
the reporting party is a holding company or a parent of a
subsidiary entity; and (ii) for each reporting party who is an
individual, a balance sheet, statements of amount and sources of
contingent liabilities, sources and uses of cash and liquidity
verification and, unless Lender otherwise consents, Financial
Statements for each entity owned or jointly owned by the
reporting party. For purposes of this definition and any
covenant requiring the delivery of Financial Statements, each
party for whom Financial Statements are required is a
“reporting party” and a specified period to which
the required Financial Statements relate is a “reporting
period.”
(q)
“ Guarantor ” means Interline
Resources Corporation, a Utah corporation, whether one or more,
and if more than one, each one individually or all
collectively.
(r)
“ Improvements ” means all
on-site and off-site improvements to the Land for an oil
refinery, to be constructed on the Land, together with all
fixtures, tenant improvements, and appurtenances now or later to
be located on the Land and/or in such improvements to the
existing Well Draw Gas Plant.
(s)
“ Indebtedness ” means any
and all indebtedness to Lender evidenced, governed or secured
by, or arising under, any of the Loan Documents.
(t)
“ Interline ” means Interline
Resources Corporation, a Utah corporation.
(u)
“ Intended Use ” means the
intended use of the Plant which is an operating refinery to
maintain all necessary criteria to qualify for non-road,
locomotive or marine (“NRLM”) diesel fuel small
refinery status with a baseline capacity of 2,000 barrels per
day of NRLM diesel fuel under 40 CFR Part 80 through May 31,
2014.
(v)
“ Land ” means the real
property described in Exhibit “A.”
(w)
“ Lender ” has the meaning
set forth in the introductory paragraph of this Agreement.
(x)
“ Loan ” means the loan by
Lender to Borrower, in the maximum amount of $11,500,000.
In the event the aggregate amount of the actual costs
incident to the Project are less than the aggregate amount
specified in the Budget, the maximum amount described above
shall be reduced by the difference between the aggregate amount
specified in the Budget and the aggregate amount of such actual
costs.
(y)
“ Loan Documents ” means this
Agreement (including all exhibits), the Deeds of Trust on the
Property, the Pipeline, the Note, the All Asset Security
Agreement, the Environmental Indemnity Agreement, the Guaranty
Agreement of Interline, Trust Deeds from Interline, financing
statements, the Budget, each Draw Request, any and all
documents, instruments or agreements executed and delivered to
evidence, secure or in connection with all Letters of Credit,
and such other documents evidencing, securing or pertaining to
the Loan as shall, from time to time, be executed and/or
delivered by Borrower, Guarantor, or any other party to Lender
pursuant to this Agreement, as they may be amended, modified,
restated, replaced and supplemented from time to time.
(z)
“ Note ” means the Promissory
Note dated of even date herewith executed by Borrower in the
maximum principal amount of the Loan, as amended, modified,
replaced, restated, extended or renewed from time to time.
(aa)
“ Obligations ” means all of
Borrower’s obligations to Lender under this Agreement or
any of the other Loan Documents.
(bb)
“Permits or Government Permits
” means all municipal, state and federal government
permits required to own and operate the Plant, property and
Pipelines for their Intended Uses.
(cc)
“ Permitted Changes ” means
changes to the Plans or Improvements, provided the cost of any
single change or extra does not exceed $100,000 and the
aggregate amount of all such changes and extras (whether
positive or negative) does not exceed $10,000.
(dd)
“ Plans ” means the plans and
specifications listed in Exhibit “E” and all
modifications thereof and additions thereto that are included as
part of the Plans in accordance with the terms of this
Agreement.
(ee)
“ Pipeline ” means the
pipelines described on Exhibit “J.”
(ff)
“ Plant ” means the
refineries existing and to be constructed on the Property.
(gg)
“ Project ” means the
construction of the Improvements, and if applicable, the leasing
and operation of the Improvements on the Property and the Well
Draw Gas Plant on the Property.
(hh)
“ Property ” means the Land,
the Improvements and all other property constituting the
“Deed of Trust Property,” as described in the Deed
of Trust, or subject to a right, lien or security interest to
secure the Loan pursuant to any other Loan Document.
(ii)
“ Survey ” means a survey of
the Property prepared in accordance with reasonable survey
practices.
(jj)
“ Stored Materials Advance Limit
” means $2,500,000.
(kk)
“ Title Insurance ” means the
loan policy or policies of title insurance issued to Lender by
in an amount equal to the maximum principal amount of the Loan,
insuring the validity and priority of the Deed of Trust
encumbering the Land and Improvements for the benefit of
Lender.
(ll)
“ Title Insurer ” means
Charger Title Insurance Agency, Orem, Utah.
1.3
Purpose . The proceeds of the Loan
shall be used by Borrower to pay (i) the cost of the
construction of the Improvements on the Land and (ii) other
fees, costs and expenses relating to the Property if and to the
extent that such costs are specifically provided for in the
Budget.
1.4
Commitment to Lend . Borrower
agrees to borrow from Lender, and Lender agrees to make advances
of Loan proceeds to Borrower, on the terms and subject to the
conditions set forth in this Agreement and Exhibit
“C” and Exhibit “F” attached
to this Agreement. Lender’s commitment to lend shall
expire and terminate (a) automatically on the Advance
Termination Date; (b) automatically if the Loan is prepaid in
full; and (c) automatically upon the occurrence of a Default.
The Loan is not revolving. Any amount repaid may not be
reborrowed.
1.5
Budget . Loan funds are allocated
to payment of the costs of the Project shown in the “Loan
Allocation” column of the Budget attached to this
Agreement as Exhibit “D.” Borrower
shall not amend the Budget, or otherwise reallocate Loan funds
from one Budget line item to another, without the prior written
approval of Lender. Notwithstanding, Borrower may amend
the Budget, or otherwise reallocate Loan funds from one Budget
line item to another if (i) the amount does not exceed the
lesser of two percent (2%) of a line item or $10,000, (ii)
Borrower promptly notifies Lender of the amendment, and (iii)
the aggregate amount of all amendments and reallocations,
without Lender approval, is less than $50,000. The Budget
has been prepared by Borrower, and Borrower represents to Lender
that the Budget includes all costs incident to the Loan and the
Project through the maturity date of the Loan (collectively, the
“Aggregate Cost”) after taking into account the
requirements of this Agreement, including “hard” and
“soft” costs, fees and expenses. Lender shall not be
required to make (a) any advance for any cost not set forth in
the Budget, (b) any advance from any line item in the Budget
that, when added to all prior advances from that line item,
would exceed the lesser of (i) the actual cost incurred by
Borrower for such line item, or (ii) the sum shown in the
“Loan Allocation” column in the Budget for such line
item, (c) any advance from any contingency line item unless
Lender consents to such advance in its sole discretion, or (d)
any advance to pay interest on the Loan if there is sufficient
undisbursed loan proceeds to pay such interest. Lender may make
advances from any line item in the Budget for purposes other
than those for which amounts are initially allocated to such
line item, or may change the relative amounts allocated to
particular line items in the Budget, all as Lender in its sole
discretion deems necessary or advisable.
1.6
Collateral . Borrower hereby
pledges a security interest to Lender in all of the Collateral
specifically identified on Exhibit “J.”
Lender is authorized, with Borrower’s power of
attorney, to execute any and all documents in Borrower’s
name to perfect a security interest in the Collateral described
on Exhibit “I.”
ARTICLE 2 ADDITIONAL COVENANTS AND
AGREEMENTS
2.1
Construction of the Improvements .
Borrower shall commence construction of the Improvements
on or before the Construction Commencement Date, and shall
prosecute the construction of the Improvements with diligence
and continuity, in a good and workmanlike manner, and in
accordance with sound building and engineering practices, all
applicable laws and governmental requirements, the Plans and the
Loan Documents. Borrower shall not permit cessation of
work for a period in excess of ten (10) days (whether or not
consecutive), except for Excusable Delays. Borrower shall
complete construction of the Improvements free and clear of all
liens (except liens created by the Loan Documents), and shall
obtain a certificate of occupancy and all other permits,
licenses and approvals from all applicable governmental
authorities required for the occupancy, use and operation of the
Improvements, in each case satisfactory to Lender, on or before
the Completion Date. Borrower shall promptly correct (a)
any material defect in the Improvements, (b) any material
departure from the Plans, law or governmental requirements, or
(c) any encroachment by any Improvements or structure on any
building setback line, easement, property line or restricted
area.
2.2
Plans and Changes . No construction
shall be undertaken on the Land except as shown in the Plans.
Borrower assumes full responsibility for the compliance of
the Plans and the Property with all laws, governmental
requirements and sound building and engineering practices.
No plans or specifications, or any changes thereto, shall
be included as part of the Plans until approved by Lender, its
Construction Consultant, if any, all applicable governmental
authorities, and all other parties required under the Loan
Documents. Without Lender’s prior written consent,
Borrower shall not change or modify the Plans, agree to any
change order, or allow any extras to any contractor or any
subcontractor, except that Borrower may make Permitted Changes
if: (a) Borrower notifies Lender in writing of the change or
extra with appropriate supporting documentation and information;
(b) the structural integrity, quality and standard of
workmanship of the Improvements is not impaired by such change
or extra; (c) no substantial change in function of the Plant is
effected by such change or extra; (d) no default in any
obligation to any person or violation of any law or governmental
requirement would result from such change or extra; (e) Borrower
covers any excess cost resulting from the change or extra,
unless Lender agrees in writing to advance money from the Loan
for the change; and (f) completion of the Improvements by the
Completion Date will not be affected. Lender shall not be
obligated to review a proposed change unless it has received all
documents necessary to review such change, including the change
order, cost estimates, plans and specifications, and evidence
that all required approvals other than that of Lender have been
obtained.
2.3
Contracts . Borrower has provided
to Lender true and correct copies of all material contacts.
Without Lender’s prior written approval as to
parties, terms, and all other matters, Borrower shall not, after
the closing of this Loan (a) enter into any material contract
(hereinafter defined) for the performance of any work or the
supplying of any labor, materials or services for the design or
construction of the Improvements, (b) enter into any management,
leasing, maintenance or other contract pertaining to the
Property not described in clause (a) that is not unconditionally
terminable by Borrower or any successor owner without penalty or
payment on not more than thirty (30) days notice to the other
party thereunder, or (c) modify, amend, or terminate any such
contracts. All such contracts shall provide that all
rights and liens of the applicable contractor, architect,
engineer, supplier, surveyor or other party and any right to
remove removable Improvements are subordinate to Lender’s
rights and liens, shall require all subcontracts and purchase
orders to contain a provision subordinating the
subcontractors’ and mechanics’ and
materialmen’s liens and any right to remove removable
Improvements to Lender’s rights and liens, and shall
provide that no change order shall be effective without the
prior written consent of Lender, except for change orders which
implement Permitted Changes. Borrower shall not default
under any contract, Borrower shall not permit any contract to
terminate by reason of any failure of Borrower to perform
thereunder, and Borrower shall promptly notify Lender of any
default thereunder. Borrower will deliver to Lender, upon
request of Lender, the names and addresses of all persons or
entities with whom each contractor has entered into a material
contract or intends to enter into a material contract for the
construction of the Improvements or for the furnishing of labor
or materials therefor. With respect to contracts for the
performance of any work or the supplying of any labor, materials
or services, a “material” contract is one which
exceeds $50,000 in total price.
2.4
Assignment of Contracts and Plans .
As additional security for the Obligations, Borrower
hereby transfers and assigns to Lender all of Borrower’s
right, title and interest, but not its liability, in, under, and
to all construction, architectural and design contracts, and the
Plans, and agrees that all of the same are covered by the
security agreement provisions of the Deed of Trust.
Borrower agrees to deliver to Lender from time to time
upon Lender’s request such consents to the foregoing
assignment from parties contracting with Borrower as Lender may
require. Neither this assignment nor any action by Lender shall
constitute an assumption by Lender of any obligation under any
contract or with respect to the Plans, Borrower hereby agrees to
perform all of its obligations under any contract, and Borrower
shall continue to be liable for all obligations of Borrower with
respect thereto. Lender shall have the right at any time
(but shall have no obligation) to take in its name or in the
name of Borrower such action as Lender may determine to be
necessary to cure any default under any contract or with respect
to the Plans or to protect the rights of Borrower or Lender with
respect thereto. As additional security for the
Obligations, Borrower irrevocably constitutes and appoints
Lender or any officer of Lender as Borrower’s
attorney-in-fact, which power of attorney forms a part of this
Agreement and is coupled with an interest and irrevocable, to
enforce in Borrower’s name or in Lender’s name all
rights of Borrower under any contract or with respect to the
Plans. Any authority under this foregoing power of
attorney may be exercised for Lender’s benefit and need
not be exercised for Borrower’s best interest.
Lender shall incur no liability if any action so taken by
it or on its behalf shall prove to be inadequate or invalid.
Borrower indemnifies and holds Lender harmless against and
from any loss, cost, liability or expense (including, but not
limited to, consultants’ fees and expenses and
attorneys’ fees and expenses) incurred in connection with
Borrower’s failure to perform such contracts or any action
taken by Lender. Lender may use the Plans for any purpose
relating to the Improvements. Borrower represents and
warrants to Lender that the copy of any contract furnished or to
be furnished to Lender is and shall be a true and complete copy
thereof, that the copies of the Plans delivered to Lender are
and shall be true and complete copies of the Plans, that there
have been no modifications thereof which are not fully set forth
in the copies delivered, and that Borrower’s interest
therein is not subject to any claim, setoff, or encumbrance.
2.5
Storage of Materials . Borrower
shall cause all materials supplied for, or intended to be
utilized in the construction of the Improvements, but not yet
affixed to or incorporated into the Improvements or the Land, to
be stored on the Land with adequate safeguards to prevent loss,
theft, damage or commingling with materials for other projects.
Borrower may order materials for delivery more than
forty-five (45) days prior to the scheduled incorporation of
such materials into the Improvements. Notwithstanding,
Borrower shall not request an advance of funds and Lender shall
not be required to advance funds for materials for delivery more
than forty-five (45) days prior to the scheduled incorporation
of such materials into the Improvements.
2.6
Construction Consultant . Lender
may retain the services of a Construction Consultant, whose
duties may include, among others, reviewing the Plans and any
proposed changes to the Plans, performing construction cost
analyses, observing work in place and reviewing Draw Requests.
The duties of Construction Consultant run solely to Lender, and
Construction Consultant shall have no obligations or
responsibilities whatsoever to Borrower, Borrower’s
architect, engineer, contractor or any of their agents or
employees. Unless prohibited by applicable law, all fees,
costs, and expenses of Construction Consultant shall be paid by
Borrower. Borrower shall cooperate with Construction
Consultant and will furnish to Construction Consultant such
information and other material as Construction Consultant
considers necessary or useful in performing its duties.
2.7
Inspection . Lender and its agents,
including Construction Consultant, may enter upon the Property
to inspect the Property, the Project and any materials at any
reasonable time, unless Lender deems such inspection is of an
emergency nature, in which event Borrower shall provide Lender
with immediate access to the Property. Borrower will
furnish to Lender and its agents, including Construction
Consultant, for inspection and copying, all Plans, shop
drawings, specifications, books and records, and other documents
and information that Lender may request from time to time.
2.8
Notice to Lender . Borrower shall
promptly within five (5) days after the occurrence of any of the
following events, notify Lender in writing thereof, specifying
in each case the action Borrower has taken or will take with
respect thereto: (a) any violation of any law or
governmental requirement; (b) any litigation, arbitration or
governmental investigation or proceeding instituted or
threatened against Borrower or any Guarantor or the Property,
and any material development therein; (c) any actual or
threatened condemnation of any portion of the Property, any
negotiations with respect to any such taking, or any loss of or
substantial damage to the Property; (d) any labor controversy
pending or threatened against Borrower or any contractor, and
any material development in any labor controversy; (e) any
notice received by Borrower with respect to the cancellation,
alteration or non-renewal of any insurance coverage maintained
with respect to the Property; (f) any failure by Borrower or any
contractor, subcontractor or supplier to perform any material
obligation under any construction contract, any event or
condition which would permit termination of a construction
contract or suspension of work thereunder, or any notice given
by Borrower or any contractor with respect to any of the
foregoing; (g) any lien filed against the Property or any stop
notice served on Borrower in connection with construction of the
Improvements; or (h) any required permit, license, certificate
or approval with respect to the Property lapses or ceases to be
in full force and effect.
2.9
Financial Statements . Borrower
shall deliver to Lender the Financial Statements and other
statements and information at the times and for the periods
described in (a) the Basic Information, Exhibit
“B,” and (b) any other Loan Document, and
Borrower shall deliver to Lender from time to time such
additional financial statements and information as Lender may at
any time request. Borrower will make all of its books, records
and accounts available to Lender and its representatives at the
Property upon request and will permit them to review and copy
the same. Borrower shall promptly notify Lender of any material
adverse change in the financial condition of Borrower and, if
known by Borrower, Guarantor, or in the construction progress of
the Improvements.
2.10
Other Information . Borrower shall
furnish to Lender from time to time upon Lender’s request
(i) copies of all subcontracts entered into by contractors or
subcontractors and the names and addresses of all persons or
entities with whom Borrower or any contractor has contracted or
intends to contract for the construction of the Improvements or
the furnishing of labor or materials in connection therewith;
(ii) copies of all contracts, bills of sale, statements,
receipts or other documents under which Borrower claims title to
any materials, fixtures or articles of personal property
incorporated or to be incorporated into the Improvements or
subject to the lien of the Deed of Trust; (iii) a list of all
unpaid bills for labor and materials with respect to
construction of the Improvements and copies of all invoices
therefor; (iv) budgets of Borrower and revisions thereof showing
the estimated costs and expenses to be incurred in connection
with the completion of construction of the Improvements; (v)
current or updated detailed Project schedules or construction
schedules; and (vi) such other information relating to Borrower,
Guarantor, the Improvements, the Property, or any indemnitor or
other person or party connected with Borrower, the Loan, the
construction of the Improvements or any security for the
Loan.
2.11
Reports and Testing . Borrower
shall (a) promptly deliver to Lender copies of all reports,
studies, inspections and tests made on the Land, the
Improvements or any materials to be incorporated into the
Improvements; (b) make such additional tests on the Land, the
Improvements or any materials to be incorporated into the
Improvements as Lender reasonably requires. Borrower shall
immediately notify Lender of any report, study, inspection or
test that indicates any adverse condition relating to the Land,
the Improvements or any such materials.
2.12
Appraisal . Lender may obtain from
time to time, an appraisal of all or any part of the Property
prepared in accordance with written instructions from Lender by
a third-party appraiser engaged directly by Lender. Each
such appraiser and appraisal shall be satisfactory to Lender
(including satisfaction of applicable regulatory requirements).
The cost of any such appraisal shall be borne by Borrower
if such appraisal is the first appraisal in any calendar year
and in all events if Lender obtains such appraisal after the
occurrence of a Default, and such cost is due and payable by
Borrower on demand and shall be secured by the Loan
Documents.
2.13
Payment of Withholding Taxes .
Borrower shall not use, or knowingly permit any contractor
or subcontractor to use, any portion of the proceeds of any Loan
advance to pay the wages of employees unless a portion of the
proceeds or other funds are also used to make timely payment to
or deposit with (a) the United States of all amounts of tax
required to be deducted and withheld with respect to such wages
under the Internal Revenue Code, and (b) any state and/or local
governmental authority or agency having jurisdiction of all
amounts of tax required to be deducted and withheld with respect
to such wages under any applicable state and/or local laws.
ARTICLE 3 REPRESENTATIONS AND
WARRANTIES
To induce Lender to make the Loan, Borrower
hereby represents and warrants to Lender that except as
otherwise disclosed to Lender in writing (a) Borrower has
complied with any and all laws and regulations concerning its
organization, existence and the transaction of its business, and
has the right and power to own the Property and to develop the
Improvements as contemplated in this Agreement and the other
Loan Documents; (b) Borrower is authorized to execute, deliver
and perform all of its obligations under the Loan Documents; (c)
the Loan Documents are valid and binding obligations of
Borrower; (d) Borrower is not in violation of any law,
regulation or ordinance, or any order of any court or
governmental authority, and no provision of the Loan Documents
violates any applicable law, any covenants or restrictions
affecting the Property, any order of any court or governmental
authority or any contract or agreement binding on Borrower or
the Property; (e) to the extent required by applicable law,
Borrower and Guarantor have filed all necessary tax returns and
reports and have paid all taxes and governmental charges thereby
shown to be owing; (f) the Plans are complete in all material
respects, contain all necessary detail and are adequate for
construction of the Improvements, are satisfactory to Borrower,
have been approved by all applicable governmental authorities,
have been accepted by each contractor, and comply with the Loan
Documents and all applicable laws, restrictive covenants, and
governmental requirements, rules, and regulations; (g) the Land
is not part of a larger tract of land owned by Borrower or any
of its affiliates or any Guarantor, is not otherwise included
under any unity of title or similar covenant with other lands
not encumbered by the Deed of Trust, and constitutes a separate
tax lot or lots with a separate tax assessment or assessments
for the Land and Improvements, independent of those for any
other lands or improvements; (h) the Land and Improvements
comply with all laws and governmental requirements, including
all subdivision and platting requirements, without reliance on
any adjoining or neighboring property; (i) the Plans do, and the
Improvements when constructed will, comply with all legal
requirements regarding access and facilities for handicapped or
disabled persons; (j) Borrower has not directly or indirectly
conveyed, assigned or otherwise disposed of or transferred (or
agreed to do so) any development rights, air rights or other
similar rights, privileges or attributes with respect to the
Property, including those arising under any zoning or land use
ordinance or other law or governmental requirement; (k) the
construction schedule for the Project is realistic and the
Completion Date is a reasonable estimate of the time required to
complete the Project; (l) the Financial Statements delivered to
Lender are true, correct, and complete in all material respects,
and there has been no material change of Borrower’s or
Guarantor’s financial condition from the financial
condition of Borrower or Guarantor (as the case may be)
indicated in such Financial Statements; (m) all utility services
necessary for the development of the Land and the construction
of the Improvements and the operation thereof for their intended
purpose are available at the boundaries of the Land, including
electric and natural gas facilities, telephone service, water
supply, storm and sanitary sewer facilities; (n) Borrower has
all rights of way necessary to access the Property and Plant for
its Intended Use as a refinery; (o) Borrower has all rights of
way and Government Permits to access, build and run the
Pipelines; and the existing Plant and the Plant under
construction for the Intended Use; (p) Borrower has
sufficient water rights and water to build and run the Property,
the Project and the Pipelines; (q) except as otherwise provided
for in the Loan Documents, the Borrower has made no contract or
arrangement of any kind the performance of which by the other
party thereto would give rise to a lien on the Property; (r) the
current and anticipated use of the Property complies with all
applicable zoning ordinances, regulations and restrictive
covenants affecting the Land without the existence of any
variance, non-complying use, nonconforming use or other special
exception, all use restrictions of any governmental authority
having jurisdiction have been satisfied, and no violation of any
law or regulation exists with respect thereto; (s) attached
hereto as Exhibit “H” is a list of all bonds
required in connection with completion of the Improvements, and
to the best of Borrower’s knowledge, no other bonds or
other security are currently required or will be required prior
to completion of the Improvements; and (t) the Borrower shall by
April 30, 2008 obtain all operating Permits to operate the Plant
for its Intended Use; (u) the Borrower shall by April 30, 2008
obtain and deliver a Phase I environmental report on the
Property in a form and from a company acceptable to Lender; (v)
take all action reasonably required to file for all operating
permits for the Plant’s Intended Use so the permits will
be issued by April 30, 2008; (x) Borrower has a written contract
with Interline Resources Corporation and its affiliates that it
has full access to all of Interline Resources Corporation and
its affiliates’ Pipelines and neither Borrower nor Lender
have any costs or expenses associated with the use of the
Pipelines; (y) on or before February 1, 2008, Borrower shall
cause Interline Resources Corporation to provide evidence of
good title, to the sole satisfaction of Lender, to the Pipeline
and cause Interline Resources Corporation to pledge the Pipeline
to Lender as security for Guaranty; (z) Borrower has obtained
the necessary Government Permits for constructing the Plant and
will by April 30, 2008 obtain the necessary Government Permits
for operating the Plant for its Intended Use and such Government
Permits will authorize operation of all equipment at the Plant
and enable the Plant to refine crude oil and/or condensates that
are reasonably available; (aa) the Plant will be capable of
producing saleable grades and quantities of naphthalene and
diesel (for nonroad engines) under the current construction
permits and operating permit(s) that will be obtained by April
30, 2008; (bb) Borrower will obtain all necessary safety,
environmental and operations training for personnel operating
the Plant; (cc) Borrower will generate and update all necessary
plans and protocols for emergency planning, prevention, response
and reporting requirements; (dd) Borrower will submit all
necessary reports and notifications to federal, state and local
authorities for normal operations as well as accidents and
emergencies at the Plant; (ee) Borrower has met and will
maintain all necessary criteria to qualify for
(“NRLM”) diesel fuel small refinery status with a
baseline capacity of 4,000 barrels per day of crude oil and/or
condensate under 40 C.F.R. Part 80 through May 31, 2014; (ff)
there is no pending or threatened litigation regarding
environmental conditions on the Land or at the Plant; (gg) the
Plant has adequate storage facilities and commercial outlets for
all products and by-products, including but not limited to,
naphthalene, diesel and reduced crude to continuously operate
the Plant at the baseline capacity for its Intended Use; (hh)
Borrower has necessary registrations, permits and management
plans for handling all waste materials generated at the Plant;
(ii) there are no conditions on the Land or at the Plant that
require remediation or notification of federal, state or local
authorities; (jj) Borrower will satisfy any financial assurances
required under the Government Permits; and (kk) the Land is not
subject to any environmental liens or institutional
controls.
ARTICLE 4 DEFAULT AND REMEDIES
4.1
Events of Default . The occurrence
of any one of the following shall be a default under this
Agreement (“Default”): (a) any of the Indebtedness
is not paid when due, whether on the scheduled due date or upon
acceleration, maturity or otherwise; (b) any covenant,
agreement, condition, representation or warranty in this
Agreement (other than covenants to pay the Indebtedness and
other than Defaults expressly listed in this Section 4.1) is not
fully and timely performed, observed or kept; (c) the occurrence
of a Default under any other Loan Document (taking into account
any applicable notice and cure period set forth in such Loan
Document); (d) construction of the Improvements ceases for more
than ten (10) days (whether or not consecutive) except for
Excusable Delays; (e) the construction of the Improvements, or
any materials for which an advance has been requested, fails to
comply with the Plans, the Loan Documents, any laws or
governmental requirements, or any applicable restrictive
covenants; (f) Borrower fails to satisfy any condition precedent
to the obligation of Lender to make an advance; (g) construction
of the Improvements is abandoned, Lender determines that
construction of the Improvements in accordance with this
Agreement will not be completed on or before the Completion
Date, or Borrower fails to complete construction of the
Improvements (and obtain all applicable permits, licenses,
certificates and approvals) in accordance with this Agreement on
or before the Completion Date; (h) any required permit, license,
certificate or approval with respect to the Property lapses or
ceases to be in full force and effect; (i) construction is
enjoined or Borrower or Lender is enjoined or prohibited from
performing any of its respective obligations under any of the
Loan Documents; (j) Borrower enters into any lease of part or
all of the Property which does not comply with the Loan
Documents; (k) a lien for the performance of work or the supply
of materials which is established against the Property, or any
stop notice served on Borrower, the general contractor or
Lender, remains unsatisfied or unbonded for a period of twenty
(20) days after the date of filing or service; (l) the
occurrence of any condition or situation which, in the sole
determination of Lender, constitutes a danger to or impairment
of the Property or the lien of the Deed of Trust, if such
condition or situation is not remedied within ten (10) days
after written notice to the Borrower thereof; (m) the entry of a
judgment against Borrower or any Guarantor or the issuance of
any attachment, sequestration, or similar writ levied upon any
of its property which is not discharged within a period of ten
(10) days; (n) Lender determines that a material adverse change
has occurred in the financial condition of Borrower or any
Guarantor or in the condition of the Property; (o) access to any
of the Pipelines or the use thereof is impaired, delayed or
denied; (p) any impairment of the use of the water wells for the
Property or any utility services of the Property; (q) the
insolvency of the Borrower or any Guarantor; (r) the
failure to use the Plant for its Intended Use or have the
Government permits to run and operate the plant for its Intended
Use or have the Government Permits to own and operate the Plant
for its Intended Use; and (s) a default occurs under any other
Loan Document which is not cured within any applicable notice
and cure period provided therein.
4.2
Remedies, Including Power of Attorney .
Upon a Default, Lender at its election may (but shall not
be obligated to), without notice, do any one or more of the
following: (a) terminate its commitment to lend and any
obligation to disburse any Borrower’s Deposit hereunder;
(b) terminate any obligation to extend any other credit to or
for the account of Borrower; (c) reduce any claim to judgment;
(d) exercise any and all rights and remedies afforded by this
Agreement, the other Loan Documents, law, equity or otherwise,
including obtaining appointment of a receiver (to which Borrower
hereby consents) and/or judicial or nonjudicial foreclosure
under the Deed of Trust; (e) in its own name or in the name of
Borrower, enter into possession of the Property, perform all
work necessary to complete construction of the Improvements
substantially in accordance with the Plans (as modified as
deemed necessary by Lender), the Loan Documents, and all
applicable laws, governmental requirements and restrictive
covenants, and continue to employ Borrower’s architect,
engineer and any contractor pursuant to the applicable contracts
or otherwise; or (f) set-off and apply, to the extent thereof
and to the maximum extent permitted by law, any and all
deposits, funds, or assets at any time held and any and all
other indebtedness at any time owing by Lender to or for the
credit or account of Borrower against any Indebtedness.
As additional security for the Obligations,
Borrower hereby appoints Lender or any officer of Lender as
Borrower’s attorney-in-fact, which power of attorney is
irrevocable and coupled with an interest, with full power of
substitution, to do any of the following in Borrower’s
name upon the occurrence of a Default: (i) use such sums
as are necessary, including any proceeds of the Loan, make such
changes or corrections in the Plans, and employ such architects,
engineers, and contractors as may be required, or as Lender may
otherwise consider desirable, for the purpose of completing
construction of the Improvements substantially in accordance
with the Plans (as modified as deemed necessary by Lender), the
Loan Documents, and all applicable laws, governmental
requirements and restrictive covenants; (ii) execute all
applications and certificates in the name of Borrower which may
be required for completion of construction of the Improvements;
(iii) endorse the name of Borrower on any checks or drafts
representing proceeds of any insurance policies, or other checks
or instruments payable to Borrower with respect to the Property;
(iv) do every act with respect to the construction of the
Improvements that Borrower may do; (v) prosecute or defend any
action or proceeding incident to the Property, (vi) pay, settle,
or compromise all bills and claims so as to clear title to the
Property; and (vii) take over and use all or any part of the
labor, materials, supplies and equipment contracted for, owned
by, or under the control of Borrower, whether or not previously
incorporated into the Improvements. Any authority
exercised under the foregoing power of attorney may be exercised
for Lender’s benefit and need not be exercised for
Borrower’s best interest. Any amounts expended by
Lender to construct or complete the Improvements or in
connection with the exercise of its remedies herein shall be
deemed to have been advanced to Borrower hereunder as a demand
obligation owing by Borrower to Lender and shall constitute a
portion of the Indebtedness, regardless of whether such amounts
exceed any limits for Indebtedness otherwise set forth herein.
Lender shall have no liability to Borrower for the
sufficiency or adequacy of any such actions taken by Lender.
No delay or omission of Lender to exercise any
right, power or remedy accruing upon the happening of a Default
shall impair any such right, power or remedy or shall be
construed to be a waiver of any such Default or any acquiescence
therein. No delay or omission on the part of Lender to
exercise any option for acceleration of the maturity of the
Indebtedness, or for foreclosure of the Deed of Trust following
any Default as aforesaid, or any other option granted to Lender
hereunder in any one or more instances, or the acceptances by
Lender of any partial payment on account of the Indebtedness,
shall constitute a waiver of any such Default, and each such
option shall remain continuously in full force and effect.
No remedy herein conferred upon or reserved to Lender is
intended to be exclusive of any other remedies provided for in
the Note or any of the other Loan Documents, and each and every
such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder, or under the Note or any of
the other Loan Documents, or now or hereafter existing at law or
in equity or by statute. Every right, power and remedy
given to Lender by this Agreement, the Note or any of the other
Loan Documents shall be concurrent, and may be pursued
separately, successively or together against Borrower, or the
Property or any part thereof, or any personal property granted
as security under the Loan Documents, and every right, power and
remedy given by this Agreement, the Note or any of the other
Loan Documents may be exercised from time to time as often as
may be deemed expedient by Lender.
ARTICLE 5 GENERAL TERMS AND CONDITIONS
5.1
Lender’s Consent . Except
where otherwise expressly provided in the Loan Documents, in any
instance where the approval, consent or the exercise of
Lender’s judgment is required, the granting or denial of
such approval or consent and the exercise of such judgment shall
be (a) within the sole discretion of Lender; (b) deemed to have
been given only by a specific writing intended for the purpose
given and executed by Lender; and (c) free from any limitation
or requirement of reasonableness. Notwithstanding any
approvals or consents by Lender, Lender has no obligation or
responsibility whatsoever for the adequacy, form or content of
the Plans, the Budget, any contract, any change order, any
lease, or any other matter incident to the Property or the
construction of the Improvements. Lender’s
acceptance of an assignment of the Plans shall not constitute
approval of the Plans. Any inspection or audit of the
Property or the books and records of Borrower, or the procuring
of documents and financial and other information, by or on
behalf of Lender shall be for Lender’s protection only,
and shall not constitute an assumption of responsibility to
Borrower or anyone else with regard to the condition,
construction, maintenance or operation of the Property, or
relieve Borrower of any of Borrower’s obligations.
Borrower has selected all surveyors, architects,
engineers, contractors, materialmen and all other persons or
entities furnishing services or materials to the Project.
Lender has no duty to supervise or to inspect the Property
or the construction of the Improvements nor any duty of care to
Borrower or any other person to protect against, or inform
Borrower or any other person of the existence of, negligent,
faulty, inadequate or defective design or construction of the
Improvements. Lender shall not be liable or responsible
for, and Borrower shall indemnify Lender for, from and against
any claim, action, loss or cost (including attorney’s fees
and costs) arising from or relating to (i) any defect in the
Property or the Improvements, (ii) the performance or default of
Borrower, Borrower’s surveyors, architects, engineers,
contractors, the Construction Consultant, or any other person,
(iii) any failure to construct, complete, protect or insure the
Improvements, (iv) the payment of costs of labor, materials, or
services supplied for the construction of the Improvements, or
(v) the performance of any obligation of Borrower whatsoever.
Nothing, including any advance or acceptance of any
document or instrument, shall be construed as a representation
or warranty, express or implied, to any party by Lender.
Inspection shall not constitute an acknowledgment or
representation by Lender or the Construction Consultant that
there has been or will be compliance with the Plans, the Loan
Documents, or applicable laws, governmental requirements and
restrictive covenants, or that the construction is free from
defective materials or workmanship. Inspection, whether or
not followed by notice of Default, shall not constitute a waiver
of any Default then existing, or a waiver of Lender’s
right thereafter to insist that the Improvements be constructed
in accordance with the Plans, the Loan Documents, and all
applicable laws, governmental requirements and restrictive
covenants. Lender’s failure to inspect shall not
constitute a waiver of any of Lender’s rights under the
Loan Documents or at law or in equity.
5.2
Miscellaneous . This Agreement may
be executed in several counterparts, all of which are identical,
and all of which counterparts together shall constitute one and
the same instrument. The Loan Documents are for the sole
benefit of Lender and Borrower and are not for the benefit of
any third party. A determination that any provision of
this Agreement is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the
determination that the application of any provision of this
Agreement to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of
such provision as it may apply to other persons, entities or
circumstances. Time shall be of the essence with respect
to Borrower’s obligations under the Loan Documents.
This Agreement, and its validity, enforcement and
interpretation, shall be governed by Utah law (without regard to
any conflict of laws principles) and applicable United States
federal law.
5.3
Notices . All notices, requests,
consents, demands and other communications required or which any
party desires to give under this Agreement or any other Loan
Document shall be in writing and, unless and to the extent
otherwise specifically provided in such other Loan Document or
specifically required by applicable law, shall be deemed
sufficiently given or furnished if delivered by personal
delivery, by courier, by registered or certified United States
mail, postage prepaid, or by facsimile (with a confirmatory
duplicate copy sent by first class United States mail),
addressed to the party to whom directed at the addresses set
forth at the end of this Agreement (unless changed by similar
notice in writing given by the particular party whose address is
to be changed). Any such notice or communication shall be deemed
to have been given either at the time of personal delivery or,
in the case of courier or mail, as of the date of first
attempted delivery at the address and in the manner provided
herein, or, in the case of facsimile, upon receipt; provided,
however, that service of a notice required by any applicable
statute or rule of court shall be considered complete when the
requirements of that statute are met. Notwithstanding the
foregoing, no notice of change of address shall be effective
except upon actual receipt. This Section shall not be
construed in any way to affect or impair any waiver of notice or
demand provided in any Loan Document or to require giving of
notice or demand to or upon any person in any situation or for
any reason.
5.4
Successors and Assigns . This
Agreement shall be binding upon Borrower, and Borrower’s
heirs, devisees, representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and
assigns; provided, however, that Borrower shall not assign,
transfer or encumber its rights or obligations under any Loan
Document, or any proceeds of the Loan, or its interest in the
Property without the prior written consent of Lender.
5.5
Sale/Assignment of Loan . Lender
may sell or offer to sell the Loan or interests therein to one
or more assignees or participants. Lender may disseminate
any information it now has or hereafter obtains pertaining to
the Loan, including any security for the Loan and credit or
other information on the Project, Borrower, any of
Borrower’s principals and any Guarantor, to any actual or
prospective assignee or participant to any regulatory body
having jurisdiction over Lender and to any other parties as
necessary or appropriate in Lender’s reasonable judgment.
Borrower shall execute, acknowledge, and deliver any and
all instruments reasonably requested by Lender in connection
therewith, and to the extent, if any, specified in any such
assignment or participation, such assignee(s) or participant(s)
shall have the rights and benefits with respect to the Loan
Documents as such person(s) would have if such person(s) were
Lender hereunder.
5.6
Modification or Termination . The
Loan Documents may only be modified or terminated by a written
instrument or instruments intended for that purpose and executed
by the party against which enforcement thereof is asserted.
This Agreement shall continue in full force and effect
until the Indebtedness is paid in full and all of Lender’s
obligations under this Agreement are terminated; and all
representations and warranties and all provisions herein for
indemnity of Lender (and any other provisions herein specified
to survive) shall survive payment in full of the Indebtedness
and any release or termination of this Agreement or of any other
Loan Documents.
5.7
Costs and Expenses . Without
limiting any Loan Document and to the extent not prohibited by
applicable laws, Borrower shall pay when due, shall reimburse to
Lender on demand and shall indemnify Lender from, all
out-of-pocket fees, costs, and expenses paid or incurred by
Lender in connection with the negotiation, preparation and
execution of this Agreement and the other Loan Documents (and
any amendments, approvals, consents, waivers and releases
requested, required, proposed or done from time to time), or in
connection with the disbursement, administration or collection
of the Loan or the enforcement of the obligations of Borrower or
the exercise of any right or remedy of Lender, including (a) all
fees and expenses of Lender’s in-house and outside legal
counsel; (b) fees and charges of each Construction Consultant,
if any, inspector and engineer; (c) appraisal, re-appraisal and
survey costs; (d) title insurance charges and premiums; (e)
title search or examination costs, including abstracts,
abstractors’ certificates and uniform commercial code
searches; (f) judgment and tax lien searches for Borrower and
each Guarantor; (g) escrow fees; (h) fees and costs of
environmental investigations site assessments and remediations;
(i) recordation taxes, documentary taxes, transfer taxes and
mortgage taxes; (j) filing and recording fees; and (k) loan
brokerage fees. Borrower shall pay all costs and expenses
incurred by Lender, including attorneys’ fees, if the
obligations or any part thereof are sought to be collected by or
through an attorney at law, whether or not involving probate,
appellate, administrative or bankruptcy proceedings.
Borrower shall pay all costs and expenses of complying
with the Loan Documents, whether or not such costs and expenses
are included in the Budget. Borrower’s obligations
under this Section shall survive the delivery of the Loan
Documents, the making of advances, the payment in full of the
obligations, the release or reconveyance of any of the Loan
Documents, the foreclosure of the Deed of Trust or conveyance in
lieu of foreclosure, any bankruptcy or other debtor relief
proceeding, and any other event whatsoever.
5.8
Further Assurances . Borrower will,
upon Lender’s request, (a) promptly correct any defect,
error or omission in any Loan Document; (b) execute,
acknowledge, deliver, procure, record or file such further
instruments and do such further acts as Lender deems necessary,
desirable or proper to carry out the purposes of the Loan
Documents and to identify and subject to the liens and
security
